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Estimation of long-run inefficiency levels: a dynamic frontier approach

Seung Ahn () and Robin Sickles

Econometric Reviews, 2000, vol. 19, issue 4, 461-492

Abstract: Cornwell, Schmidt, and Sickles (1990) and Kumbhakar (1990), among others, developed stochasticfrontier production models which allow firm specific inefficiency levels to change over time. These studies assumed arbitrary restrictions on the short-run dynamics of efficiency levels which have little theoretical justification. Further, the models are inappropriate for estimation of long-run efficiencies. We consider estimation of an alternative frontier model in which firmspecific technical inefficiency levels are autoregressive. This model is particularly useful to examine a potential dynamic link between technical innovations and production inefficiency levels. We apply our methodology to a panel of US airlines.

Keywords: panel data; long-run inefficiency; frontier production function; generalized method of moments (search for similar items in EconPapers)
Date: 2000
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Handle: RePEc:taf:emetrv:v:19:y:2000:i:4:p:461-492