A Note on the Assumed Distributions in Stochastic Frontier Models

Abstract:     
Stochastic frontier models all need an assumption on the distributional form of the efficiency component. Generally this efficiency component is assumed to be half normally, truncated normally, or exponentially distributed. This paper shows that the exponential distribution is, just like the half normal distribution, a special case of the truncated normal distribution. Moreover, this paper discusses the implications that this finding has on estimation and model selection.

Number of Pages in PDF File: 7

Keywords: Stochastic Frontier Analysis, distribution, exponential, truncated normal

JEL Classification: C52, D24

working papers series