In efficiency studies using the stochastic frontier approach, the main focus is to explain inefficiency in terms of some exogenous variables and computation of marginal effects of each of these determinants. Although inefficiency is estimated by its mean conditional on the composed error term (the Jondrow et al., 1982 estimator), the marginal effects are computed from the unconditional mean of inefficiency (Wang, 2002). In this paper we derive the marginal effects based on the Jondrow et al. estimator and use the bootstrap method to compute confidence intervals of the marginal effects.
Bibliographical noteNOTICE: this is the author’s version of a work that was accepted for publication in Economics letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Kumbhakar, SC & Sun, K, 'Derivation of marginal effects of determinants of technical inefficiency' Economics letters, vol. 120, no. 2 (2013) DOI http://dx.doi.org/10.1016/j.econlet.2013.04.041
- stochastic frontier model
- environmental variable