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Estimation of the two-tiered stochastic frontier model with the scaling property

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  • Christopher F. Parmeter

    (University of Miami)

Abstract

The two-tiered stochastic frontier model has enjoyed success across a range of application domains where it is believed that incomplete information on both sides of the market leads to surplus which buyers and sellers can extract. Currently, this model is hindered by the fact that estimation relies on very restrictive distributional assumptions on the behavior of incomplete information on both sides of the market. However, this reliance on specific parametric distributional assumptions can be eschewed if the scaling property is invoked. The scaling property has been well studied in the stochastic frontier literature, but as of yet, has not been used in the two-tier frontier setting.

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  • Christopher F. Parmeter, 2018. "Estimation of the two-tiered stochastic frontier model with the scaling property," Journal of Productivity Analysis, Springer, vol. 49(1), pages 37-47, February.
    • Handle: RePEc:kap:jproda:v:49:y:2018:i:1:d:10.1007_s11123-017-0520-8
    DOI: 10.1007/s11123-017-0520-8
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    Cited by:

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    2. Shirong Zhao & Jeremy Losak, 2024. "Two-tiered stochastic frontier models: a Bayesian perspective," Journal of Productivity Analysis, Springer, vol. 61(2), pages 85-106, April.
    3. Alecos Papadopoulos, 2021. "Stochastic frontier models using the Generalized Exponential distribution," Journal of Productivity Analysis, Springer, vol. 55(1), pages 15-29, February.
    4. Jos L. T. Blanc & Alex A. S. van Heezik & Bas Blank, 2023. "Productivity and efficiency of central government departments: a mixed-effect model applied to Dutch data in the period 2012-2019," Public Sector Economics, Institute of Public Finance, vol. 47(3), pages 335-351.
    5. Alecos Papadopoulos, 2024. "The Nash Bargaining Two-tier Stochastic Frontier Model," Advances in Econometrics, in: Essays in Honor of Subal Kumbhakar, volume 46, pages 439-476, Emerald Group Publishing Limited.
    6. Hu, Zhiqiang & Pei, Kaibing, 2020. "Bi-directional R&D spillovers and operating performance: A two-tier stochastic frontier model," Economics Letters, Elsevier, vol. 195(C).
    7. Song, Wenfei & Han, Xianfeng, 2022. "The bilateral effects of foreign direct investment on green innovation efficiency: Evidence from 30 Chinese provinces," Energy, Elsevier, vol. 261(PB).
    8. Alecos Papadopoulos, 2021. "Measuring the effect of management on production: a two-tier stochastic frontier approach," Empirical Economics, Springer, vol. 60(6), pages 3011-3041, June.
    9. Aydede, Yigit & Dar, Atul A., 2022. "Native-born-immigrant wage gap revisited: The role of market imperfections in Canada," CLEF Working Paper Series 50, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    10. Wang, Mengjiao & Liu, Jianxu & Rahman, Sanzidur & Sun, Xiaoqi & Sriboonchitta, Songsak, 2023. "The effect of China’s outward foreign direct investment on carbon intensity of Belt and Road Initiative countries: A double-edged sword," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 792-808.
    11. Meng-Ying Wang & Li-Chen Chou, 2024. "Evaluating information asymmetry effects on hotel pricing: a comparative analysis before and during the COVID-19 pandemic in the Taiwan’s market," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.

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    More about this item

    Keywords

    Incomplete information; Nonlinear least squares; Heteroskedasticity; Identification;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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