PanelDataNotes-21

PanelDataNotes-21 - Econometric Analysis of Panel Data...

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Econometric Analysis of Panel Data William Greene Department of Economics Stern School of Business
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Econometric Analysis of Panel Data 21. Stochastic Frontier Models And Efficiency Measurement
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Applications Banking Accounting Firms, Insurance Firms Health Care: Hospitals, Nursing Homes Higher Education Fishing Sports: Hockey, Baseball World Health Organization – World Health Industries: Railroads, Farming,  Several hundred applications in print since  2000
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Neoclassical Production
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Technical Efficiency , ) = Min { : L( )} 1. TE( y y θ θ x x
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Technical Inefficiency = Production parameters, “i” = firm i.
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Regression Basis
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Maintaining the Theory One Sided Residuals, u i  < 0 Deterministic Frontier Statistical Approach: Gamma Frontier.  Not  successful Nonstatistical Approach: Data Envelopment Analysis  based on linear programming – wildly successful.  Hundreds of applications; an industry with an army of  management consultants
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Gamma Frontier Greene (1980, 1993, 2003)
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The Stochastic Frontier Model
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Stochastic Frontier Disturbances
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Half Normal Model (ALS)
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Estimating the Stochastic Frontier OLS Slope estimator is unbaised and consistent Constant term is biased downward e’e/N estimates Var[ ε ]=Var[v]+Var[u]= σ v 2 σ u 2 [( π -2)/  π ] No estimates of the variance components Maximum Likelihood The usual properties Likelihood function has two modes: OLS with  λ =0 and ML with  λ >0. 
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Other Possible Distributions 1 u i i i 2 2 i v u v i v u u
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PanelDataNotes-21 - Econometric Analysis of Panel Data...

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