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Stochastic frontier models with random coefficients

2002; Wiley; Volume: 17; Issue: 2 Linguagem: Inglês

10.1002/jae.637

1099-1255

Efthymios G. Tsionas,

Economic and Environmental Valuation

Abstract The paper proposes a stochastic frontier model with random coefficients to separate technical inefficiency from technological differences across firms, and free the frontier model from the restrictive assumption that all firms must share exactly the same technological possibilities. Inference procedures for the new model are developed based on Bayesian techniques, and computations are performed using Gibbs sampling with data augmentation to allow finite‐sample inference for underlying parameters and latent efficiencies. An empirical example illustrates the procedure. Copyright © 2002 John Wiley & Sons, Ltd.