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Endogeneity in stochastic frontier models: Copula approach without external instruments

Kien Tran () and Mike Tsionas

Economics Letters, 2015, vol. 133, issue C, 85-88

Abstract: This papers considers an alternative estimation procedures for estimating stochastic frontier models with endogenous regressors when no external instruments are available. The approach we propose is based on copula function to directly model the correlation between the endogenous regressors and the composed errors. Estimation of model parameters is done using maximum likelihood. Monte Carlo simulations are used to assess and compare the finite sample performances of the proposed estimation procedures.

Keywords: Stochastic frontier model; Endogenous regressors; Copula function; Maximum likelihood (search for similar items in EconPapers)
JEL-codes: C13 C14 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.econlet.2015.05.026

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