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Measuring productivity and efficiency: a Kalman filter approach

Author

Listed:
  • Meryem Duygun

    (University of Leicester
    University of Nottingham)

  • Levent Kutlu

    (Antalya International University
    Georgia Institute of Technology)

  • Robin C. Sickles

    (Rice University)

Abstract

In the Kalman filter setting, one can model the inefficiency term of the standard stochastic frontier composed error as an unobserved state. In this study a panel data version of the local level model is used for estimating time-varying efficiencies of firms. We apply the Kalman filter to estimate average efficiencies of U.S. airlines and find that the technical efficiency of these carriers did not improve during the period 1999–2009. During this period the industry incurred substantial losses, and the efficiency gains from reorganized networks, code-sharing arrangements, and other best business practices apparently had already been realized.

Suggested Citation

  • Meryem Duygun & Levent Kutlu & Robin C. Sickles, 2016. "Measuring productivity and efficiency: a Kalman filter approach," Journal of Productivity Analysis, Springer, vol. 46(2), pages 155-167, December.
    • Handle: RePEc:kap:jproda:v:46:y:2016:i:2:d:10.1007_s11123-016-0477-z
    DOI: 10.1007/s11123-016-0477-z
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    Citations

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    Cited by:

    1. Levent Kutlu & Robin C. Sickles, 2017. "Measuring market power when firms price discriminate," Empirical Economics, Springer, vol. 53(1), pages 287-305, August.
    2. Levent Kutlu & Shasha Liu & Robin C. Sickles, 2022. "Cost, Revenue, and Profit Function Estimates," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 16, pages 641-679, Springer.
    3. Levent Kutlu, 2020. "Greenhouse Gas Emission Efficiencies of World Countries," IJERPH, MDPI, vol. 17(23), pages 1-11, November.
    4. Pavlos Almanidis & Mustafa U. Karakaplan & Levent Kutlu, 2019. "A dynamic stochastic frontier model with threshold effects: U.S. bank size and efficiency," Journal of Productivity Analysis, Springer, vol. 52(1), pages 69-84, December.
    5. Kutlu, Levent & Nair-Reichert, Usha, 2022. "Executive compensation and the potential for additional efficiency gains: Evidence from the Indian manufacturing sector," Economic Modelling, Elsevier, vol. 114(C).
    6. Levent Kutlu & Ran Wang, 2018. "Estimation of cost efficiency without cost data," Journal of Productivity Analysis, Springer, vol. 49(2), pages 137-151, June.
    7. Kutlu, Levent & Tran, Kien C. & Tsionas, Mike G., 2020. "A spatial stochastic frontier model with endogenous frontier and environmental variables," European Journal of Operational Research, Elsevier, vol. 286(1), pages 389-399.
    8. Mustafa U. Karakaplan & Levent Kutlu, 2019. "Estimating market power using a composed error model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 489-510, September.
    9. Kutlu, Levent, 2017. "A constrained state space approach for estimating firm efficiency," Economics Letters, Elsevier, vol. 152(C), pages 54-56.
    10. Kutlu, Levent, 2018. "A distribution-free stochastic frontier model with endogenous regressors," Economics Letters, Elsevier, vol. 163(C), pages 152-154.
    11. Kutlu, Levent, 2018. "Estimating efficiency in a spatial autoregressive stochastic frontier model," Economics Letters, Elsevier, vol. 163(C), pages 155-157.
    12. Mustafa U. Karakaplan & Levent Kutlu, 2019. "School district consolidation policies: endogenous cost inefficiency and saving reversals," Empirical Economics, Springer, vol. 56(5), pages 1729-1768, May.

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    More about this item

    Keywords

    Kalman filter; Panel data; Airline productivity;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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