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A Nonparametric Model of Frontiers

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  • Carlos Martins-FIlho
  • Feng Yao

Abstract

In this paper we propose a nonparametric regression frontier model that assumes no specific parametric family of densities for the unobserved stochastic component that represents efficiency in the model. Nonparametric estimation of the regression frontier is obtained using a local linear estimator that is shown to be consistent and $\sqrt{nh_n}$ asymptotically normal under standard assumptions. The estimator we propose envelops the data but is not inherently biased as Free Disposal Hull - FDH or Data Envelopment Analysis - DEA estimators. It is also more robust to extreme values than the aforementioned estimators. A Monte Carlo study is performed to provide preliminary evidence on the estimator's finite sample properties and to compare its performance to a bias corrected FDH estimato

Suggested Citation

  • Carlos Martins-FIlho & Feng Yao, 2004. "A Nonparametric Model of Frontiers," Econometric Society 2004 Latin American Meetings 102, Econometric Society.
    • Handle: RePEc:ecm:latm04:102
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    References listed on IDEAS

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    More about this item

    Keywords

    nonparametric regression frontier; local linear estimation; U statistics.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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