THE “WRONG SKEWNESS” PROBLEM: A RE-SPECIFICATION OF STOCHASTIC FRONTIERS

Graziella Bonanno, Domenico De Giovanni () and Filippo Domma ()
Additional contact information
Filippo Domma: Dipartimento di Economia, Statistica e Finanza, Università della Calabria

No 201502, Working Papers from Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF

Abstract: In this paper, we study the so-called “wrong skewness” anomaly in Stochastic Frontiers (SF), which consists in the observed difference between the expected and estimated sign of the asymmetry of the composite error. We propose a more general and flexible specification of the SF model, introducing dependence between the two error components and asymmetry (positive or negative) of the random error. This re-specification allows us to decompose the third moment of the composite error in three components, namely: i) the asymmetry of the inefficiency term; ii) the asymmetry of the random error; and iii) the structure of dependence between the error components. This decomposition suggests that the “wrong skewness” anomaly is an ill-posed problem, because we cannot establish ex ante the expected sign of the asymmetry of the composite error. We report a relevant special case that allows us to estimate the three components of the asymmetry of the composite error and, consequently, to interpret the estimated sign. We present two empirical applications. In the first dataset, where the classic SF displays wrong skewness, estimation of our model rejects the dependence hypothesis, but accepts the asymmetry of the random error, thus justifying the sign of the skewness of the composite error. In the second dataset, where the classic SF does not display any anomaly, estimation of our model provides evidence of the presence of both dependence between the error components and asymmetry of the random error.

Keywords: Stochastic frontier models; Skewness; Generalised Logistic distribution; Dependence; Copula functions (search for similar items in EconPapers)
JEL-codes: C13 C18 C46 D24 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2015-04
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.ecostat.unical.it/RePEc/WorkingPapers/WP02_2015.pdf First version, 2015-04 (application/pdf)

Related works:
Journal Article: The ‘wrong skewness’ problem: a re-specification of stochastic frontiers (2017)
Working Paper: The “wrong skewness” problem: a re-specification of Stochastic Frontiers (2015)
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:clb:wpaper:201502

Access Statistics for this paper

More papers in Working Papers from Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania", Ponte Pietro Bucci, Cubo 0/C, I-87036 Arcavacata di Rende, CS, Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Giovanni Dodero ().