A stochastic frontier production function is defined for panel data on firms, in which the non-negative technical inefficiency effects are assumed to be a function of firm-specific variables and time. The inefficiency effects are assumed to be independently distributed as truncations of normal distributions with constant variance, but with means which are a linear function of observable variables. This panel data model is an extension of recently proposed models for inefficiency effects in stochastic frontiers for cross-sectional data. An empirical application of the model is obtained using up to ten years of data on paddy farmers from an Indian village. The null hypotheses, that the inefficiency effects are not stochastic or do not depend on the farmer-specific variables and time of observation, are rejected for these data.

https://pages.stern.nyu.edu/~wgreene/FrontierModeling/Reference-Papers/Battese-Coelli-1995.pdf

A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data

http://people.stern.nyu.edu/wgreene/FrontierModeling/Reference-Papers/JLMS-JE1982-EstimateIneff.pdf

On the estimation of technical inefficiency in the stochastic frontier production function model

Estimation and inference in two-stage, semi-parametric models of production processes

Frontier production functions are important for the prediction of technical efficiencies of individual firms in an industry. A stochastic frontier production function model for panel data is presented, for which the firm effects are an exponential function of time. The best predictor for the technical efficiency of an individual firm at a particular time period is presented for this time-varying model. An empirical example is presented using agricultural data for paddy farmers in a village in India.

https://www.une.edu.au/__data/assets/pdf_file/0018/24633/emetwp56.pdf

Julien van Den Broeck

Papers

Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error