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Spatial Stochastic Frontier Models

Erniel Barrios and Rouselle Lavado ()

Microeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: The stochastic frontier model with heterogeneous technical efficiency explained by exogenous variables is augmented with a sparse spatial autoregressive component for a cross-section data, and a spatial-temporal component for a panel data. An estimation procedure that takes advantage of the additivity of the model is proposed, computational advantages over simultaneous maximum likelihood estimation of all parameters is exhibited. The technical efficiency estimates are comparable to existing models and estimation procedures based on maximum likelihood methods. A spatial or spatial-temporal component can improve estimates of technical efficiency in a production frontier that is usually biased downwards.

Keywords: stochastic frontier models; technical efficiency; spatial externalities; spatial-temporal model; backfitting (search for similar items in EconPapers)
JEL-codes: C01 (search for similar items in EconPapers)
Date: 2010-01
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