William Greene Stern School of Business New York University 0 Introduction 1 Efficiency Measurement 2 Frontier Functions 3 Stochastic Frontiers 4 Production and Cost 5 Heterogeneity ID: 290893
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Slide1
Stochastic Frontier Models
William GreeneStern School of BusinessNew York University
0 Introduction1 Efficiency Measurement2 Frontier Functions3 Stochastic Frontiers4 Production and Cost5 Heterogeneity6 Model Extensions7 Panel Data8 ApplicationsSlide2
Deterministic Frontier: Programming
EstimatorsSlide3
Estimating InefficiencySlide4
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.Slide5
An Orthodox Frontier Modelwith a Statistical BasisSlide6
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.Slide7
Data Envelopment Analysis