Estimating Monotone Concave Stochastic Production Frontiers

Mike G. Tsionas

Journal of Business & Economic Statistics, 2022, vol. 40, issue 3, 1403-1414

Abstract: Recent research shows that the search for Bayesian estimation of concave production functions is a fruitful area of investigation. In this article, we use a flexible cost function that satisfies globally the monotonicity and curvature properties to estimate features of the production function. Specification of a globally monotone concave production function is a difficult task which is avoided here by using the first-order conditions for cost minimization from a globally monotone concave cost function. The problem of unavailable factor prices is bypassed by assuming structure for relative prices in the first-order conditions. The new technique is shown to perform well in a Monte Carlo experiment as well as in an empirical application to rice farming in India.

Date: 2022
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DOI: 10.1080/07350015.2021.1931240

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