Maximum likelihood estimation of the revenue function system with output-specific technical efficiency

Subal Kumbhakar and Hung-pin Lai

Economics Letters, 2016, vol. 138, issue C, 42-45

Abstract: In this paper we propose a non-radial and output-specific measure of technical efficiency which is new in a stochastic frontier model. We consider a multi-output multi-input transformation function formulation that incorporates output-specific technical efficiency (OSTE) in a revenue maximizing framework. Starting from the dual revenue function with OSTE, we develop the maximum likelihood method to estimate the parameters of the translog revenue-share system as well as predict OSTE components using some novel results from the closed skew-normal distribution.

Keywords: Transformation function; Stochastic frontier; Technical inefficiency; Closed skew-normal distribution (search for similar items in EconPapers)
JEL-codes: C30 D24 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:138:y:2016:i:c:p:42-45

DOI: 10.1016/j.econlet.2015.11.021

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