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Full-Text Articles in Social and Behavioral Sciences
Alternative Technical Efficiency Measures: Skew, Bias And Scale, Qu Feng, William C. Horrace
Alternative Technical Efficiency Measures: Skew, Bias And Scale, Qu Feng, William C. Horrace
Economics - All Scholarship
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.
Fixed-Effect Estimation Of Technical Efficiency With Time-Invariant Dummies, Qu Feng, William C. Horrace
Fixed-Effect Estimation Of Technical Efficiency With Time-Invariant Dummies, Qu Feng, William C. Horrace
Economics - All Scholarship
“Within” estimation of the fixed-effect stochastic frontier model does not identify parameters on time-invariant explanatory variables. If time-invariant variables are important production inputs, then standard efficiency estimates are biased. This note details bias correction, when time-invariant inputs are dummy variables.