Stochastic frontier models using the Generalized Exponential distribution

Alecos Papadopoulos

Journal of Productivity Analysis, 2021, vol. 55, issue 1, No 2, 15-29

Abstract: Abstract We present a new, single-parameter distributional specification for the one-sided error components in single-tier and two-tier stochastic frontier models. The distribution has its mode away from zero, and can represent cases where the most likely outcome is non-zero inefficiency. We present the necessary formulas for estimating production, cost and two-tier stochastic frontier models in logarithmic form. We pay particular attention to the use of the conditional mode as a predictor of individual inefficiency. We use simulations to assess the performance of existing models when the data include an inefficiency term with non-zero mode, and we also contrast the conditional mode to the conditional expectation as measures of individual (in)efficiency.

Keywords: Stochastic frontier analysis; Distribution mode; Conditional expectation; Two-tier stochastic frontier; D24; C46; C21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s11123-020-00591-9

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