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On the estimation of technical inefficiency in the stochastic frontier production function model

1982; Elsevier BV; Volume: 19; Issue: 2-3 Linguagem: Inglês

10.1016/0304-4076(82)90004-5

1872-6895

James M. Jondrow, C. A. Knox Lovell, Ivan S. Materov, Peter Schmidt,

Fiscal Policy and Economic Growth

The error term in the stochastic frontier model is of the form (v–u), where v is a normal error term representing pure randomness, and u is a non-negative error term representing technical inefficiency. The entire (v–u) is easily estimated for each observation, but a previously unsolved problem is how to separate it into its two components, v and u. This paper suggests a solution to this problem, by considering the expected value of u, conditional on (v–u). An explicit formula is given for the half-normal and exponential cases.