The Two-Tier Stochastic Frontier Framework (2TSF): Measuring Frontiers Wherever They May Exist

Posted: November 21, 2020 in Research, Research papers
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This survey has just been published in the collection Parmeter, C. F., & Sickles, R. C. (2020) Advances in Efficiency and Productivity Analysis. Springer. Naturally, it is based on my PhD, and it is a comprehensive survey of the state-of-the-art of the Two-tier Stochastic Frontier Framework, surveying theoretical foundations, estimation tools, and the large variety of application this modeling framework has been used for. Indicatively, it has been used to measure the impact of informational asymmetry in wage negotiations, in the house market, in the Health Services market, the impact of asymmetric bargaining power in International donors-recipients relationship but also in Tourist shopping, or to measure the effects of “optimism” and “pessimism” in self-reported quality of life. And may more, economic and not-so-economic situations.

Anywhere where we can perceive of opposing latent forces operating on the outcome, this model can be applied. This is why I use as its pet name the “noisy Tug-of-War” model -“noisy” because there is also a “noise” component in the composed error specification.

 

 

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