Unknown Latent Structure and Inefficiency in Panel Stochastic Frontier Models

Authors

Levent Kutlu, The University of Texas Rio Grande ValleyFollow
Kien C. Tran, University of Lethbridge
Mike G. Tsionas, Lancaster University

Document Type

Article

Publication Date

7-25-2020

Abstract

This paper extends the fixed effect panel stochastic frontier models to allow group heterogeneity in the slope coefficients. We propose the first-difference penalized maximum likelihood (FDPML) and control function penalized maximum likelihood (CFPML) methods for classification and estimation of latent group structures in the frontier as well as inefficiency. Monte Carlo simulations show that the proposed approach performs well in finite samples. An empirical application is presented to show the advantages of data-determined identification of the heterogeneous group structures in practice.

Comments

Original published version available at https://doi.org/10.1007/s11123-020-00584-8

Recommended Citation

Kutlu, Levent, Kien C. Tran, and Mike G. Tsionas. “Unknown Latent Structure and Inefficiency in Panel Stochastic Frontier Models.” Journal of Productivity Analysis 54, no. 1 (July 25, 2020): 75–86. https://doi.org/10.1007/s11123-020-00584-8.

Publication Title

Journal of Productivity Analysis

DOI

10.1007/s11123-020-00584-8