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An Alternative Specification for Technical Efficiency Effects in a Stochastic Frontier Production Function

Satya Paul () and Sriram Shanker

Crawford School Research Papers from Crawford School of Public Policy, The Australian National University

Abstract: This paper proposes an alternative specification for technical efficiency effects in a stochastic production frontier model. The proposed specification is distribution free and thus eschews one-sided error term present in almost all the existing inefficiency effects models. The efficiency effects are represented by the standard normal cumulative distribution function of exogenous variables which ensures the efficiency scores to lie in a unit interval. An empirical exercise based on widely used Philippines rice farming data set illustrates the simplicity and usefulness of the proposed model.

Keywords: Non-linear least squares; Standard normal cumulative distribution function; Technical efficiency (search for similar items in EconPapers)
JEL-codes: C51 D24 Q12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2017-02
New Economics Papers: this item is included in nep-ecm, nep-eff and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:een:crwfrp:1703

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