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Frontier Models and Efficiency Measurement Lab Session 3: Heterogeneity

William Greene Stern School of Business New York University. Frontier Models and Efficiency Measurement Lab Session 3: Heterogeneity. 0 Introduction 1 Efficiency Measurement 2 Frontier Functions 3 Stochastic Frontiers 4 Production and Cost 5 Heterogeneity 6 Model Extensions

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Frontier Models and Efficiency Measurement Lab Session 3: Heterogeneity

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  1. William Greene Stern School of Business New York University Frontier Models and Efficiency MeasurementLab Session 3: Heterogeneity 0 Introduction 1 Efficiency Measurement 2 Frontier Functions 3 Stochastic Frontiers 4 Production and Cost 5 Heterogeneity 6 Model Extensions 7 Panel Data 8 Applications

  2. WHO Data

  3. Heterogeneous Frontier Command FRONTIER [; COST] ; LHS = the variable ; RHS = ONE, the variables, the additional variables ; EFF = the new variable $ ε(i) = v(i) +/- u(i)

  4. Heterogeneous Frontier Model FRONTIER ; LHS = LDALE ; RHS = ONE,LHEXP,LHEXP2,LEDUC, VOICE,GEFF,LPOPDEN,TROPICS ; EFF = UI_WHO $

  5. Heteroscedasticity

  6. Effects of Environmental Variable on Efficiency ? Frontier cost function with environmental ? Variables, load factor, points served, stage ? Length. FRONTIER ; Cost ; Lhs = lc ; Rhs = one,…, loadfctr,log(points),log(stage) $ ? How does load factor affect efficiency? SIMULATE ; scenario: & loadfctr = .4(.025).95 ; plot $

  7. Efficiency Estimates|Load Factor

  8. Model Command for Heteroscedasticity

  9. Heterogeneity in the Mean of u(i)

  10. Nonparametric Frontier • Frontier with local  • Compute residuals then estimate  and  given the set of residuals from the nonparametric frontier • Compute efficiencies using residuals and  and 

  11. Parametric vs. Nonparametric

  12. Latent Class Model

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