William greene stern school of business new york university
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William Greene Stern School of Business New York University. Stochastic Frontier Models. 0Introduction 1 Efficiency Measurement 2 Frontier Functions 3 Stochastic Frontiers 4 Production and Cost 5 Heterogeneity 6 Model Extensions 7 Panel Data 8 Applications.

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Stochastic Frontier Models

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William greene stern school of business new york university

William Greene

Stern School of Business

New York University

Stochastic Frontier Models

0Introduction

1Efficiency Measurement

2Frontier Functions

3Stochastic Frontiers

4Production and Cost

5Heterogeneity

6Model Extensions

7Panel Data

8Applications


Deterministic frontier programming estimators

Deterministic Frontier: Programming Estimators


Estimating inefficiency

Estimating Inefficiency


Statistical problems with programming estimators

Statistical Problems with Programming Estimators

  • They do correspond to MLEs.

  • The likelihood functions are “irregular”

  • There are no known statistical properties – no estimable covariance matrix for estimators.

  • They might be “robust,” like LAD.

    • Noone knows for sure.

    • Never demonstrated.


An orthodox frontier model with a statistical basis

An Orthodox Frontier Modelwith a Statistical Basis


Extensions

Extensions

  • Cost frontiers, based on duality results:

    ln y = f(x) – u  ln C = g(y,w) + u’

    u > 0. u’ > 0. Economies of scale and

    allocative inefficiency blur the relationship.

  • Corrected and modified least squares estimators based on the deterministic frontiers are easily constructed.


Data envelopment analysis

Data Envelopment Analysis


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