Document Type

Article

Date

8-1-2007

Embargo Period

12-2-2011

Keywords

tbd

Disciplines

Economics

Description/Abstract

Parametric stochastic frontier models yield firm-level conditional distributions of inefficiency that are truncated normal. Given these distributions, how should one assess and rank firm-level efficiency? This study compares the techniques of estimating a) the conditional mean of inefficiency and b) probabilities that firms are most or least efficient. Monte Carlo experiments suggest that the efficiency probabilities are more reliable in terms of mean absolute percent error when inefficiency has large variation across firms. Along the way we tackle some interesting problems associated with simulating and assessing estimator performance in the stochastic frontier environment.

Additional Information

This manuscript is from the Social Science Research Network, for more information see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1815366#280291

Source

Harvested from ssrn.com

Included in

Economics Commons

Share

COinS