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Estimation and efficiency evaluation of stochastic frontier models with interval dependent variables

Shih-Tang Hwu (), Tsu-Tan Fu () and Wen-Jen Tsay ()
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Shih-Tang Hwu: California State Polytechnic University
Tsu-Tan Fu: Soochow University

Journal of Productivity Analysis, 2021, vol. 56, issue 1, No 3, 33-44

Abstract: Abstract This paper considers the maximum likelihood estimation of a stochastic frontier production function with an interval outcome. We derive an analytical formula for calculating the likelihood function of interval stochastic frontier models. Monte Carlo experiments reveal that the finite sample performance of our method is promising even when the sample size is relatively moderate. We also provide an exact formula for evaluating technical efficiency with interval outcome and apply our method to measure information inefficiency in the labor market for newly graduated college students in Taiwan.

Keywords: Stochastic frontier analysis; Interval dependent variable; Technical efficiency; C13; C24 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11123-021-00609-w

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