Parametric and Semi-Parametric Estimation of the Effect of Firm Attributes on Efficiency: Electricity Generating Industry in India

Posted: 19 May 2005

See all articles by Madhu Khanna

Madhu Khanna

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Kusum Mundra

Department of Economics, Rutgers University, Newark

Aman Ullah

University of California, Riverside (UCR) - Department of Economics

Abstract

A stochastic frontier cost function is estimated using panel data for the electricity generating industry in India. The impact of distributional and functional form assumptions on technical inefficiency and the sources of inefficiency are investigated by using maximum likelihood, GLS and semi-parametric-GLS approaches and by incorporating firm-specific inefficiency effects in the cost function itself. Average inefficiency in the electricity generating industry in India is found to be high by all three methods. The estimate predicted by the maximum-likelihood approach is, however, lower than that predicted by the other two methods. This could be due to distributional assumptions made under the maximum likelihood method. Public ownership and low capacity utilization are found to be significant determinants of inefficiency in the electricity generating industry in India.

Keywords: Stochastic Frontier, Maximum Likelihood, Semi-parametric, efficiency, Panel Data, electiricty industry

Suggested Citation

Khanna, Madhu and Mundra, Kusum and Ullah, Aman, Parametric and Semi-Parametric Estimation of the Effect of Firm Attributes on Efficiency: Electricity Generating Industry in India. Journal of International Trade and Economic Development, Vol. 8, No. 4, pp. 419-436. Available at SSRN: https://ssrn.com/abstract=725823

Madhu Khanna (Contact Author)

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
Urbana, IL 61801
United States
217-333-5176 (Phone)
217-333-5502 (Fax)

Kusum Mundra

Department of Economics, Rutgers University, Newark ( email )

360 ML King Jr. Blvd.
Newark, NJ 07102
United States

HOME PAGE: http://kmundra.newark.rutgers.edu

Aman Ullah

University of California, Riverside (UCR) - Department of Economics ( email )

900 University Avenue
4136 Sproul Hall
Riverside, CA 92521
United States
909-787-5037, X1591 (Phone)

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