Stochastic frontier models using the Generalized Exponential distribution

Posted: November 24, 2020 in Research, Research papers
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UPDATE: The paper went on-line on February 2, 2021,

The paper “Stochastic frontier models using the Generalized Exponential distribution” has just been approved for publication in the Journal of Productivity Analysis.

Abstract: We present a new, single-parameter distributional specification for the one-sided error components in single-tier and two-tier stochastic frontier models. The distribution has its mode away from zero, and can represent cases where the most likely outcome is non-zero inefficiency. We present the necessary formulas for estimating production, cost and two-tier stochastic frontier models in logarithmic form. We pay particular attention to the use of the conditional mode as a predictor of individual inefficiency. We use simulations to assess the performance of existing models when the data include an inefficiency term with non-zero mode, and we also contrast the conditional mode to the conditional expectation as measures of individual (in)efficiency.

Download the pre-print here.


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