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

20 Pages Posted: 8 Feb 2017

See all articles by Satya Paul

Satya Paul

Amrita University - Centre for Economic Fragility and Governance

Sriram Shankar

Australian National University (ANU) - ANU Centre for Social Research and Methods

Date Written: February 7, 2017

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

JEL Classification: C51, D24, Q12

Suggested Citation

Paul, Satya and Shankar, Sriram, An Alternative Specification for Technical Efficiency Effects in a Stochastic Frontier Production Function (February 7, 2017). Crawford School Working Paper 1703, Crawford School of Public Policy, the Australian National University, Available at SSRN: https://ssrn.com/abstract=2913313 or http://dx.doi.org/10.2139/ssrn.2913313

Satya Paul

Amrita University - Centre for Economic Fragility and Governance ( email )

India

Sriram Shankar (Contact Author)

Australian National University (ANU) - ANU Centre for Social Research and Methods ( email )

Beryl Rawson Building (13)
Canberra, ACT 0200
Australia

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