Alternative technical efficiency measures: Skew, bias and scale

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

In the fixed-effects stochastic frontier model an efficiency measure relative to the best firm in the sample is universally employed. This paper considers a new measure relative to the worst firm in the sample. We find that estimates of this measure have smaller bias than those of the traditional measure when the sample consists of many firms near the efficient frontier. Moreover, a two-sided measure relative to both the best and the worst firms is proposed. Simulations suggest that the new measures may be preferred depending on the skewness of the inefficiency distribution and the scale of efficiency differences.

Original languageEnglish (US)
Pages (from-to)253-268
Number of pages16
JournalJournal of Applied Econometrics
Volume27
Issue number2
DOIs
StatePublished - Mar 2012

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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