Modified fixed effects estimation of technical inefficiency

Daniel Wikström ()
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Daniel Wikström: Dalarna University

Journal of Productivity Analysis, 2016, vol. 46, issue 1, No 6, 83-86

Abstract: Abstract We consider method-of-moments fixed effects (FE) estimation of technical inefficiency. When dealing with a large number of cross-sectional observations, N, it is possible to obtain consistent moment estimators of the inefficiency distribution. It is well known that the classical FE estimator may be seriously upward biased when N is large and T, the number of time observations, is small. The method-of-moments FE estimators do not suffer from this type of bias in large-N settings. The proposed methodology bridges classical FE and maximum likelihood estimation, leading to a reduction in bias without making the random effects assumption.

Keywords: Technical inefficiency; Fixed effects estimator; Method of moments (search for similar items in EconPapers)
JEL-codes: C13 C23 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s11123-016-0473-3

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