Indirect inference estimation of stochastic production frontier models with skew-normal noise

Hung-pin Lai and Subal C. Kumbhakar ()
Additional contact information
Subal C. Kumbhakar: State University of New York at Binghamton

A chapter in Advances in Applied Econometrics, 2024, pp 309-331 from Springer

Abstract: Abstract In this paper we consider a stochastic frontier model in which both the noise and inefficiency components are asymmetric, viz., the noise term is skew normal and the inefficiency term is half-normal. This formulation avoids the criticism that skewness of the composite error term (sum of the noise and inefficiency) cannot be an indicator of inefficiency because skewness can also arise from the noise term. Our estimator of inefficiency does not depend on skewness of the one-sided error alone; it controls for skewness in the noise term as well. We further generalize the model by introducing determinants of skewness of the noise term as well as determinants of inefficiency. Additionally, we test hypotheses that the noise term is either symmetric (normal) or has a constant skewness parameter. Instead of using the standard ML method, we use the indirect inference (II) approach to estimate the parameters of the proposed model. Formulae for predicting (in)efficiency are also provided. Finally, we provide both simulation and empirical results using the II estimation approach to showcase workings of our model.

Keywords: Indirect inference estimation; Skew-normal error; Stochastic frontier model (search for similar items in EconPapers)
JEL-codes: C13 C15 D24 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Indirect inference estimation of stochastic production frontier models with skew-normal noise (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:adschp:978-3-031-48385-1_13

Ordering information: This item can be ordered from
http://www.springer.com/9783031483851

DOI: 10.1007/978-3-031-48385-1_13

Access Statistics for this chapter

More chapters in Advanced Studies in Theoretical and Applied Econometrics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().