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A copula-based approach to the simultaneous estimation of group and meta-frontiers by constrained maximum likelihood

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  • Alexandre Repkine

Abstract

type="main" xml:id="ajar12026-abs-0001"> Existing approaches to the meta-frontier estimation consist of two stages where the estimates of the local frontier parameters obtained in the first step are used to estimate meta-frontier parameters by means of a linear or quadratic minimisation procedure in the second. Since it was shown by Schmidt (Review of Economics and Statistics 58: 238) that the second step is equivalent to constrained maximisation of a likelihood function, we extend this idea and offer a copula-based approach to the estimation of the parameters of both meta- and group frontiers in a one-step setting. In this way, we ensure a single data-generating mechanism for the estimated parameters, expand the set of potential meta-frontiers and account for the fact that shocks to the individual production units may be correlated with shocks to the local technological environment as a whole. We apply our estimation methodology to a data set on the world agriculture and find that the deviations from the group frontiers are positively correlated with deviations from the meta-frontier, which is a conclusion that is impossible to reach without accounting for stochastic dependence between the two deviation types represented by a copula.

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  • Alexandre Repkine, 2014. "A copula-based approach to the simultaneous estimation of group and meta-frontiers by constrained maximum likelihood," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(1), pages 90-110, January.
    • Handle: RePEc:bla:ajarec:v:58:y:2014:i:1:p:90-110
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    File URL: http://hdl.handle.net/10.1111/ajar.2014.58.issue-1
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    Cited by:

    1. Roengchai Tansuchat, 2023. "A Copula-Based Meta-Stochastic Frontier Analysis for Comparing Traditional and HDPE Geomembranes Technology in Sea Salt Farming among Farmers in Phetchaburi, Thailand," Agriculture, MDPI, vol. 13(4), pages 1-23, March.
    2. Huang, Tai-Hsin & Chen, Kuan-Chen & Lin, Chung-I, 2018. "An extension from network DEA to copula-based network SFA: Evidence from the U.S. commercial banks in 2009," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 51-62.

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