Journal article

A Semiparametric Stochastic Frontier Model with Correlated Effects

William Griffiths, Gholamreza Hajargasht

Advances in Econometrics | Jai Press Inc. | Published : 2019


We consider a semiparametric panel stochastic frontier model where one-sided firm effects representing inefficiencies are correlated with the regressors. A form of the Chamberlain-Mundlak device is used to relate the logarithm of the effects to the regressors resulting in a lognormal distribution for the effects. The function describing the technology is modeled nonparametrically using penalized splines. Both Bayesian and non-Bayesian approaches to estimation are considered, with an emphasis on Bayesian estimation. A Monte Carlo experiment is used to investigate the consequences of ignoring correlation between the effects and the regressors, and choosing the wrong functional form for the tec..

View full abstract

University of Melbourne Researchers