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Closed-form solution for a bivariate distribution in stochastic frontier models with dependent errors

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  • Emilio Gómez-Déniz
  • Jorge Pérez-Rodríguez

Abstract

This paper proposes a bivariate continuous model based on normal–half normal distributions for testing the independence of idiosyncratic and inefficiency terms in the stochastic frontier model in a maximum likelihood framework. This model allows us to construct a closed-form of the marginal distribution of the composite error term dependent on a parameter which gives a flexible covariance structure (positive and negative correlations are possible), but also nests classical models utilised in stochastic frontier studies. In addition, we obtain the point estimator for technical efficiency using the Battese and Coelli (J Econom 38:387–399, 1988) expression. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Emilio Gómez-Déniz & Jorge Pérez-Rodríguez, 2015. "Closed-form solution for a bivariate distribution in stochastic frontier models with dependent errors," Journal of Productivity Analysis, Springer, vol. 43(2), pages 215-223, April.
    • Handle: RePEc:kap:jproda:v:43:y:2015:i:2:p:215-223
    DOI: 10.1007/s11123-014-0395-x
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    References listed on IDEAS

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    Cited by:

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    2. Stead, Alexander D. & Wheat, Phill & Greene, William H., 2023. "Robust maximum likelihood estimation of stochastic frontier models," European Journal of Operational Research, Elsevier, vol. 309(1), pages 188-201.

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    More about this item

    Keywords

    Technical and cost efficiencies; Stochastic frontier; Marginal distribution; Dependence; Sarmanov model; C01; C13; C21; C51;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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