The Two-Tier Stochastic Frontier Framework (2TSF): Measuring Frontiers Wherever They May Exist

Alecos Papadopoulos

A chapter in Advances in Efficiency and Productivity Analysis, 2021, pp 163-194 from Springer

Abstract: Abstract Stochastic frontier analysis (SFA) focuses mostly on measuring and analyzing matters of efficiency in production and in cost decisions, based on the conceptual and modeling device of a frontier, a boundary beyond which a firm can find itself only by chance, literally. But the existence of frontiers in human activity is a consequence of physical and of economic scarcity: the fact that resources are always less than what we would desire to have available in order to fulfill whatever needs and wants we are able to imagine (or cannot ignore no matter how hard we try). Scarcity creates restrictions, constraints, bounds, boundaries... frontiers. Therefore “frontier modeling” is not constrained to be a specialized tool for efficiency and productivity analysis but can be used as a general methodological approach to formulate and then study economic phenomena (and not only).

Date: 2021
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DOI: 10.1007/978-3-030-47106-4_8

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