On the distribution of estimated technical efficiency in stochastic frontier models

A-Tier
Journal: Journal of Econometrics
Year: 2009
Volume: 148
Issue: 1
Pages: 36-45

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We consider a stochastic frontier model with error [epsilon]=v-u, where v is normal and u is half normal. We derive the distribution of the usual estimate of u,E(u[epsilon]). We show that as the variance of v approaches zero, E(u[epsilon])-u converges to zero, while as the variance of v approaches infinity, E(u[epsilon]) converges to E(u). We graph the density of E(u[epsilon]) for intermediate cases. To show that E(u[epsilon]) is a shrinkage of u towards its mean, we derive and graph the distribution of E(u[epsilon]) conditional on u. We also consider the distribution of estimated inefficiency in the fixed-effects panel data setting.

Technical Details

RePEc Handle
repec:eee:econom:v:148:y:2009:i:1:p:36-45
Journal Field
Econometrics
Author Count
2
Added to Database
2026-01-29