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William Greene Stern School of Business New York University. Stochastic Frontier Models. 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.

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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

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

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.
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.
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