Document Type

Article

Date

6-24-2010

Embargo Period

12-5-2012

Keywords

stochastic frontier model, relative efficiency measure, two-sided measure, bias, bootstrap confidence intervals

Disciplines

Economics

Description/Abstract

In the fixed-effects stochastic frontier model an efficiency measure relative to the best firm in the sample is universally employed. This paper considers a new measure relative to the worst firm in the sample. We find that estimates of this measure have smaller bias than those of the traditional measure when the sample consists of many firms near the efficient frontier. Moreover, a two-sided measure relative to both the best and the worst firms is proposed. Simulations suggest that the new measures may be preferred depending on the skewness of the inefficiency distribution and the scale of efficiency differences.

Source

local input

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

Included in

Economics Commons

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