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The wrong skewness problem in stochastic frontier analysis: a review

Author

Listed:
  • Alecos Papadopoulos

    (Athens University of Economics and Business)

  • Christopher F. Parmeter

    (University of Miami)

Abstract

We provide a review of the literature related to the “wrong skewness problem” in stochastic frontier analysis. We identify two distinct approaches, one treating the phenomenon as a signal from the data that the underlying structure has some special characteristics that allow inefficiency to co-exist with “wrong” skewness, the other treating it as a sample-failure problem. Each leads to different treatments, while siding with either raises certain methodological issues, and we explore them. We offer simulation evidence that the wrong skewness as a sample problem likely comes from how the noise component of the composite error term has been realized in the sample, which points towards a new way to handle the problem. We also investigate the issues that arise when attempting to use the unconstrained Normal-Half Normal (Skew Normal) likelihood.

Suggested Citation

  • Alecos Papadopoulos & Christopher F. Parmeter, 2024. "The wrong skewness problem in stochastic frontier analysis: a review," Journal of Productivity Analysis, Springer, vol. 61(2), pages 121-134, April.
    • Handle: RePEc:kap:jproda:v:61:y:2024:i:2:d:10.1007_s11123-023-00708-w
    DOI: 10.1007/s11123-023-00708-w
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    More about this item

    Keywords

    Stochastic frontier; Wrong skewness; Non-representative sample; Skew Normal; Data mining; Singular Information matrix;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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