The Spatial Efficiency Multiplier and Random Effects in Spatial Stochastic Frontier Models

43 Pages Posted: 23 Nov 2016

See all articles by Anthony Glass

Anthony Glass

Loughborough University - School of Business and Economics

Karligash Glass

Loughborough University - School of Business and Economics

Robin C. Sickles

Rice University - Department of Economics

Tom G. Weyman-Jones

Loughborough University - Department of Economics

Date Written: November 2016

Abstract

We extend the emerging literature on spatial frontier models in three respects. Firstly, we account for latent heterogeneity by developing a maximum likelihood random effects spatial autoregressive (SAR) stochastic frontier model. Secondly, to analyze the finite sample properties of a spatial stochastic frontier model we develop a Monte Carlo experimental methodology which we then apply. Thirdly, we introduce the concept of the spatial efficiency multiplier and show that the efficiency benchmark for a productive unit from the structural form of a spatial stochastic frontier model differs from the efficiency benchmark from the reduced form of the model.

Keywords: Stochastic frontier analysis (SFA); Spatial autoregression (SAR); Panel data; Random effects; Efficiency spillovers; Agriculture.

JEL Classification: C23, C51, D24, Q10.

Suggested Citation

Glass, Anthony and Glass Kenjegalieva, Karligash and Sickles, Robin C. and Weyman-Jones, Tom G., The Spatial Efficiency Multiplier and Random Effects in Spatial Stochastic Frontier Models (November 2016). Available at SSRN: https://ssrn.com/abstract=2873520 or http://dx.doi.org/10.2139/ssrn.2873520

Anthony Glass (Contact Author)

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

Karligash Glass Kenjegalieva

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

Robin C. Sickles

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States

Tom G. Weyman-Jones

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain

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