Nonparametric instrumental variables estimation for efficiency frontier

Catherine Cazals, Frédérique Feve, Jean-Pierre Florens and Leopold Simar

Journal of Econometrics, 2016, vol. 190, issue 2, 349-359

Abstract: The paper investigates endogeneity issues in nonparametric frontier models. It considers a nonseparable model for a cost function C=φ(Y,U) where C and Y are the cost and the output, U is uniform in [0,1] and φ is increasing with respect to U. The cost frontier corresponds to U=0 and U can be interpreted as a normalized level of inefficiency. The endogeneity issue arises when Y is dependent of U. For identification and estimation, we use a nonparametric instrumental variables estimator of the model for fixed value U=α, and obtain an estimate of the α-quantile cost frontier φ(Y,α). This involves the solution of a non linear integral equation. If the true frontier φ(Y,0) is wanted, it is then estimated by estimating the bias correction φ(Y,0)−φ(Y,α) under additional regularity conditions. The procedure is illustrated through a simulated sample and with an empirical application to the efficiency of post offices.

Keywords: Endogeneity in frontier models; Instrumental variable quantile; Non linear integral equation; Landweber iteration; Tail index estimation (search for similar items in EconPapers)
JEL-codes: C14 C26 D24 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Non Parametric Instrumental Variables Estimation for Efficiency Frontier (2016)
Working Paper: Non Parametric Instrumental Variables Estimation for Efficiency Frontier (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:190:y:2016:i:2:p:349-359

DOI: 10.1016/j.jeconom.2015.06.010

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