Accounting for Unobservables in Production Models: Management and Inefficiency

Antonio Alvarez, Carlos Arias () and William Greene

No 2005/07, Efficiency Series Papers from University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG)

Abstract: This paper explores the role of unobserved managerial ability in production and its relationship with technical efficiency. Previous analyses of managerial ability have been based on strong assumptions about its role in production or on the use of proxies. We avoid these limitations by introducing managerial ability as an unobserved random variable in a translog production function. The resulting empirical model can be estimated as a stochastic production frontier with random coefficients.

Keywords: Managerial ability; technical efficiency; production frontier; random coefficients model; maximum simulated likelihood (search for similar items in EconPapers)
Pages: 22
Date: 2005
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Citations: View citations in EconPapers (3)

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Working Paper: Accounting for unobservables in production models:management and inefficiency (2004)
Working Paper: Accounting For Unobservables In Production Models: Management And Inefficiency (2004)
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