Document Type

Working Paper

Date

2007

Embargo Period

6-28-2012

Keywords

Truncated normal, stochastic frontier, efficiency, multivariate probabilities.

Language

English

Disciplines

Econometrics

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 estimated (a) the conditional means 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

Harvest from RePEc at http://repec.org

Source

Metadata from RePEc

Included in

Econometrics Commons

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