International Journal of Business and Economics Volume 10, No. 1 April, 2011

On the Distribution of Estimated Technical Efficiency in Stochastic Frontier Models: Revisited

Anup Kumar Bhandari

Centre for Development Studies, India

Abstract

Both theoretical and empirical literatures on the stochastic frontier production model have been substantially enriched since 1977. However, attempts to derive the distribution of the estimated one-sided error term, even under restricted assumptions, have only recently been provided. This study attempts to derive the distribution of the estimated one-sided inefficiency error and several important statistical properties under fairly general assumptions. We also derive the distribution of estimated technical efficiency and provide an empirical illustration.

Keywords：stochastic frontier, inefficiency error, estimated technical efficiency, leather industry.

JEL Classifications：C34, D24.

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