Stochastic frontier models with correlated effects

Giannis Karagiannis and Magnus Kellermann
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Magnus Kellermann: The Bavarian State Research Center for Agriculture

Journal of Productivity Analysis, 2019, vol. 51, issue 2, No 6, 175-187

Abstract: Abstract In this paper we provide several new specifications within the true random effects model as well as stochastic frontiers models estimated with GLS and MLE that enrich modeling choices when distinguishing between heterogeneity and efficiency. The main feature of the proposed specifications is that they enlarge the set of heterogeneity covariates beyond that of Mundlak’s adjustment terms to include environmental factors that are not under the control of producers but affect the operation conditions of the production units. These environmental factors may be time varying or time invariant and not all may be correlated with heterogeneity.

Keywords: Stochastic frontier models; Heterogeneity; Adjustment terms; Environmental factors (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11123-019-00551-y

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