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Full-Text Articles in Social and Behavioral Sciences
The Conditional Mode In Parametric Frontier Models, William C. Horrace, Hyunseok Jung, Yi Yang
The Conditional Mode In Parametric Frontier Models, William C. Horrace, Hyunseok Jung, Yi Yang
Center for Policy Research
We survey formulations of the conditional mode estimator for technical inefficiency in parametric stochastic frontier models with normal errors and introduce new formulations for models with Laplace errors. We prove the conditional mode estimator converges pointwise to the true inefficiency value as the noise variance goes to zero. We also prove that the conditional mode estimator in the normal-exponential model achieves near-minimax optimality. Our minimax theorem implies that the worst-case risk occurs when many firms are nearly efficient, and the conditional mode estimator minimizes estimation risk in this case by estimating these small inefficiency firms as efficient. Unlike the conditional …
Density Deconvolution With Laplace Errors And Unknown Variance, Jun Cai, William C. Horrace, Christopher Parmeter
Density Deconvolution With Laplace Errors And Unknown Variance, Jun Cai, William C. Horrace, Christopher Parmeter
Center for Policy Research
We consider density deconvolution with zero-mean Laplace noise in the context of an error component regression model. We adapt the minimax deconvolution methods of Meister (2006) to allow estimation of the unknown noise variance. We propose a semi-uniformly consistent estimator for an ordinary-smooth target density and a modified “variance truncation device" for the unknown noise variance. We provide a simulation study and practical guidance for the choice of smoothness parameters of the ordinary-smooth target density. We apply restricted versions of our estimator to a stochastic frontier model of US banks and to a measurement error model of daily saturated fat …