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On the estimation of zero-inefficiency stochastic frontier models with endogenous regressors

Kien Tran () and Mike Tsionas

Economics Letters, 2016, vol. 147, issue C, 19-22

Abstract: In this paper, we investigate endogeneity issues in the zero-inefficiency stochastic frontier (ZISF) models by mean of simultaneous equation setting. Specifically, we allow for one or more regressors to be correlated with the statistical noise. A modified limited information maximum likelihood (LIML) approach is used to estimate the parameters of the model. Moreover, the firm specific inefficiency score is also provided. Limited Monte Carlo simulations show that the proposed estimators perform well in finite sample.

Keywords: Endogeneity; Fully efficient firm; Limited information maximum likelihood; Firm specific inefficiency score; Zero-inefficiency stochastic frontier (search for similar items in EconPapers)
JEL-codes: C3 C5 C13 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.econlet.2016.08.014

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