When, where and how to estimate persistent and transient efficiency in stochastic frontier panel data models
Oleg Badunenko () and
Subal Kumbhakar ()
European Journal of Operational Research, 2016, vol. 255, issue 1, 272-287
In this paper we examine robustness of a recently developed panel data stochastic frontier model that allows for both persistent and transient (also known as long-run and short-run or time-invariant and time-varying) inefficiency along with random firm-effects (heterogeneity) and noise. We address some concerns that the practitioners might have about this model. First, given that there are two random time-invariant components (persistent inefficiency and firm-effects) the concern is whether the model can accurately identify them, and if so how precisely can the model estimate them? Second, there are two time-varying random components (transient inefficiency and noise), and the concern is whether the model can separate noise from transient inefficiency, and if so how precisely can the model estimate transient inefficiency? Third, how well are persistent and transient inefficiency estimated under different scenarios, viz., under different configurations of the variance parameters of the four random components? Given that the model is quite complex, relatively new and becoming quite popular in the panel efficiency literature, we feel that there is need for a detailed simulation study to examine when, where and how one can use this model with confidence to estimate persistent and transient inefficiency.
Keywords: (D) Production/Cost Function; Heterogeneity; Inefficiency; Closed-skew normal distribution; Simulated maximum likelihood (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:255:y:2016:i:1:p:272-287
Access Statistics for this article
European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati
More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().