Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 22, No. 1, pp.5-27
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2009
Received 17 Nov 2008 Revised 28 Jan 2009

A Survey of Stochastic Frontier Models and Likely Future Developments

Christine Amsler ; Young Hoon Lee ; Peter Schmidt
Associate Professor, Department of Economics, Michigan State University, USA amsler@msu.edu
Professor, Department of Economics, Sogang University, Sinsu-dong #1, Mapo-gu, Seoul 121-742, Korea, Tel: +82-2-705-8772, Fax: +82-2-704-8599 yhnlee@sogang.ac.kr
Professor, Department of Economics, Michigan State University, USA, School of Economics, Yonsei University, Korea schmidtp@msu.edu

JEL Classification: C10, C 20, D24

Abstract

This paper summarizes the literature on stochastic frontier production function models. It covers the definition of technical efficiency, the basic cross-sectional stochastic frontier model, and the stochastic frontier model with panel data and time-invariant as well as time-varying technical inefficiency. It also discusses models in which technical inefficiency depends on explanatory variables. Finally, it discusses the problem of inference on the inefficiencies and makes some predictions about likely future developments in the field.

Keywords:

Stochastic frontiers, Production functions, Technical efficiency, Panel data, Efficiency measurement

Acknowledgments

The second author acknowledges that this research is financially supported by the 2008 Sogang University Research Fund (10045). Paper presented at the 16th Seoul Journal of Economics International Symposium held at Seoul National University, Seoul, 27 November 2008.

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