Endogeneity in Panel Stochastic Frontier Models: An Application to the Japanese Cotton Spinning Industry

Authors

Mustafa U. Karakaplan, Governors State University
Levent Kutlu, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

8-16-2017

Abstract

We present a panel stochastic frontier model that handles the endogeneity problem. This model can treat the endogeneity of both frontier and inefficiency variables. We apply our method to examine the technical efficiency of Japanese cotton spinning industry. Our results indicate that market concentration is endogenous, and when its endogeneity is properly handled, it has a larger negative impact on the technical efficiency of cotton spinning plants. We find that the exogenous model substantially overestimates efficiency in concentrated markets.

Comments

© 2017, Informa UK Limited, trading as Taylor & Francis Group. Original published version available at https://doi.org/10.1080/00036846.2017.1363861

Recommended Citation

Karakaplan, Mustafa U., and Levent Kutlu. “Endogeneity in Panel Stochastic Frontier Models: An Application to the Japanese Cotton Spinning Industry.” Applied Economics 49, no. 59 (August 16, 2017): 5935–39. https://doi.org/10.1080/00036846.2017.1363861.

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

First Page

5935

Last Page

5939

Publication Title

Journal of Applied Economics

DOI

10.1080/00036846.2017.1363861