# Stochastic frontier models with dependent error components

*Murray D. Smith*

*Econometrics Journal*, 2008, vol. 11, issue 1, 172-192

**Abstract:**
of the stochastic frontier model are assumed to be independent random variables. By employing the copula approach to statistical modelling, the joint behaviour of U and V can be parametrized thereby allowing the data the opportunity to determine the adequacy of the independence assumption. In this context, three examples of the copula approach are given: the first is algebraic (the Logistic-Exponential stochastic frontier model with margins bound by the Farlie--Gumbel--Morgenstern copula), the second uses a cross-section of cost data sampled from the US electrical power industry and the third constructs a model for panel data that is then used to conduct a Monte Carlo exercise in which estimator bias is examined when the dependence structure is incorrectly ignored. Copyright Royal Economic Society 2007

**Date:** 2008

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**Persistent link:** https://EconPapers.repec.org/RePEc:ect:emjrnl:v:11:y:2008:i:1:p:172-192

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Econometrics Journal is currently edited by *Richard J. Smith*, *Oliver Linton*, *Pierre Perron*, *Jaap Abbring* and *Marius Ooms*

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