Modelling multi-output stochastic frontiers using copulas

Alessandro Carta and Mark Steel

Computational Statistics & Data Analysis, 2012, vol. 56, issue 11, 3757-3773

Abstract: The aim is to introduce a new econometric methodology for multi-output production frontiers. In the context of a system of frontier equations, a flexible multivariate distribution for the inefficiency error term is used. This multivariate distribution is constructed through a copula function which allows for separate modelling of the marginal inefficiency distributions and the dependence. Specific attention to the elicitation of a sensible (improper) prior is paid and simple sufficient conditions for posterior propriety are provided. Inference is conducted through a Markov chain Monte Carlo sampler. Bayes factors are used to compare various copula specifications in the empirical context of Dutch dairy farm data, with two outputs.

Keywords: Bayes factor; Dairy farms; Efficiency; Existence of posterior; Prior elicitation (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:56:y:2012:i:11:p:3757-3773

DOI: 10.1016/j.csda.2010.07.007

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