A practitioners guide to stochastic frontier analysis using stata subal c. No 201710, working papers from university of miami, department of economics. Kumbhakar is a distinguished research professor at the state university of new york, binghamton. The frontier program requires you to prepare two files for estimating stochastic frontier production and cost functions. Fixed and random effects in stochastic frontier models.
We highlight endogeneity issues, recent advances in generalized panel data stochastic frontier models, nonparametric estimation of the frontier, quantile estimation and distribution free methods. Horncastle stochastic frontier analysis using stata provides practitioners in academia and industry with a stepbystep guide on how to conduct efficiency. A practitioners guide tostochastic frontier analysis using stata this is a great books thati think are not only fun to read but also very educational. See wilson 1993 for an example and cazals, florens and simar 2002. Kumbhakar and others published stochastic frontier analysis. The density of a csnp,qdistribution includes a pdimensional pdf and a qdimensional cdf. Inefficiency, heterogeneity and spillover effects in.
Cambridge core statistics for econometrics, finance and insurance stochastic frontier analysis by subal c. Apractitioners guide to stochastic frontier analysis using stata subal c. The traditional models of stochastic frontiers have been extended such that firm specific. Kumbhakar, corresponding author, department of economics, state.
Subal kumbhakar, corresponding author, department of economics, state university of new york at binghamton. Stochastic frontier analysis sfa is a family of methods in this category developed by aigner et al. K85 2000 338 dc21 9931297 cip isbn 0 521 48184 8 hardback. Later, kumbhakar and lovell 2000 provide a further detailed explanation. Parametric methods, like stochastic frontier analysis sfa, thick frontier approach tfa and distribution free approach dfa. These methods originate from operations research and use linear programming to calculate an efficient deterministic frontier against which units are compared. Constant, increasing or nonincreasing returns to scale. Stochastic frontier analysis request pdf researchgate. A competent empirical application of stochastic frontier analysis sfa requires a clear understanding of both the production economics and the econometric theory behind the specified model side by side with adequate programming skills to write the necessary software codes. Subal kumbhakar and c lovell 2000 stochastic frontier analysis, cambridge. This book provides exceptional introductions to beginning and advanced topics in this area and stata examples using code written by the authors. The density of a csnp,qdistribution includes a pdimensional pdf and a q dimensional cdf. Stochastic frontier analysis subal c kumbhakar, c a knox lovell. A practitioners guide to stochastic frontier analysis using stata, cambridge books, cambridge university press, number 9781107029514.
How to use frontier program to estimate different types of efficiency models an application of sfa to indian banking if time permits references 1. Islamic banking caught attention due to its resilience to the significant shocks that hit the economy in late 2008. Subal kumbhakar, christopher parmeter and valentin zelenyuk. An application of stochastic frontier analysis subal c. The conventional panel data estimators assume that technical or cost inefficiency is time invariant. K 2000, stochastic frontier analysis, cambridge university press, u. Stochastic frontier data envelopment analysis limdep. Stochastic frontier analysis is one such technique to model producer behavior. Second, the fixed and random effects estimators force any time invariant cross unit heterogeneity into. Review every so often a book is written that pulls together a large subject matter in an accessible way, covering both theoretical and applied developments. Horncastle stochastic frontier analysis using stata provides practitioners in academia and industry with a stepbystep guide on how to conduct efficiency analysis using the stochastic frontier approach. Data were collected on a sample of 185 rice farmers in the departments of zou and collines. Lecture 4 day 3 stochastic frontier analysis ordinary. Stochastic cost inefficiency estimates and rankings of public.
The models reported in table 2 were also fitted sequentially, starting with the standard stochastic frontier model, followed by the model with a heterogeneity element and finally by the two spatial stochastic frontier models that capture spillover effects in the data. Kop stochastic frontier analysis av subal c kumbhakar, c a knox lovell pa. Kumbhakar, hungjen wang, alanhorncastle a practitioners guide to stochastic frontier analysisusing stata. Since these frontiers envelop rather than intersect the data, and since the authors continue to maintain the traditional econometric belief in the presence of external forces contributing to random statistical noise, the work is titled stochastic frontier analysis. Seale jr and others published stochastic frontier analysis find, read and cite. Observed and unobserved heterogeneity in stochastic frontier. Some documents adopt a twostep analysis method to solve this problem. Stochastic frontier, nonparametric, latent class, sample selection, panel data, closed skew normal. The user can specify the instruction file by an optional argument at the command line now. The analysis of technical change and inefficiency change with panel data is also discussed in detail. In the rst stage a stochastic frontier equation was estimated excluding the exogenous variables, typically by. In these crosssectional models, the parameters of the stochastic frontier and the determinants of ine.
Stochastic frontier analysis using stata provides practitioners in academia and industry with a stepbystep guide on how to conduct efficiency analysis using the stochastic frontier approach. Amazon advertising find, attract, and engage customers. Stochastic frontier analysis sfa is a family of methods in this category. The twotiered 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.
The approach explicitly recognises that production function represents technically maximum feasible output level for a given level of output. A practitioners guide to stochastic frontier analysis. Pdf on jan 1, 2008, christopher cornwell and others published stochastic frontier analysis and efficiency estimation find, read and cite all the research you need on researchgate. This research aims to evaluate the efficiency of a sample of 66 banks including both islamic and traditional banks in various countries ranging from egypt, pakistan, bangladesh, saudi arabia, kuwait, qatar, iraq, emirates, sudan, turkey, bahrain and jordan throughout 20092014. Stochastic frontier models and economic efficiency estimation william greene stern school of business, new york university 7 kleit, a. Mar 10, 2003 since these frontiers envelop rather than intersect the data, and since the authors continue to maintain the traditional econometric belief in the presence of external forces contributing to random statistical noise, the work is titled stochastic frontier analysis. Terrell, 2001, measuring potential efficiency gains from deregulation of electricity generation. Rouselle lavado and gabriel domingo 2015 public service spending. Stochastic frontier analysis using stata provides practitioners with a stepbystep guide on how to conduct efficiency analysis using the stochastic frontier approach. Other authors have acknowledged the sample selection issue in stochastic frontier studies. A practitioners guide to stochastic frontier analysis using stata by subal c. Efficiency and distributional impact lessons from asia, adb economics, working paper series, no. Received stochastic frontier analyses with panel data have relied on traditional fixed and random effects models.
Later, kumbhakar and lovell provide a further detailed explanation. Estimate the impact of thi load on technical e ciency i starting point. Stochastic cost inefficiency estimates and rankings of. Stochastic frontier analysis or sfa is one such technique to. More advanced material is covered in kumbhakar and lovell 2000. This paper tackles the problem of aggregate tfp measurement using stochastic frontier analysis. Stochastic frontier analysis it is a parametric technique that uses standard production function methodology. The stochastic frontier analysis model was developed by aigner, lovell, and. Stochastic frontier models and economic efficiency. He specializes in productivity and efficiency analysis, with particular emphasis on the theory and application of stochastic frontier sf models.
Knox lovell this book develops econometric techniques for the estimation of production, cost and profit frontiers, and for the estimation of the technical and economic efficiency with which producers approach these frontiers. Lecture 4 day 3 stochastic frontier analysis ordinary least. The authors explain in detail how to estimate production, cost, and profit efficiency and introduce the basic theory of each model in an accessible way. A practitioners guide to stochastic frontier analysis using stata ebook written by subal c. Kumbhakar and lovell 2000 provide a complete summary of both the theory and techniques used in stochastic frontier production, cost, and pro. Analysis in parallel with stochastic frontier estimation and analysis the only package available that has both of these methods in one program input and output oriented inefficiency retained in the data set for further analysis. Models for crosssectional and panel data are presented and discussed. Arne henningsen has slightly modified this computer program. Stochastic frontier models and efficiency analysis e5 e62. Horncastle oxera consulting llp, oxford, uk ig cambridge university press.
Download for offline reading, highlight, bookmark or take notes while you read a practitioners guide to stochastic frontier analysis using stata. Prasada rao school of economics the university of queensland, australia. In the rst stage a stochastic frontier equation was. Mar 14, 2016 a practitioners guide to stochastic frontier analysis using statakumbhakar 1. Stochastic frontier data envelopment analysis limdep nlogit. It deals with stochastic frontier production, cost and profit functions.
Kumbhakar binghamton university, ny hungjen wang national taiwan university alan p. This book develops econometric techniques for the estimation. An econometric approach find, read and cite all the research you need on researchgate. Frontier models, journal of applied statistics, 27, 779802 simar, l. Pdf stochastic frontier analysis and efficiency estimation. Handling endogeneity in stochastic frontier analysis, economics bulletin, accessecon, vol.
Modern textbook presentations of production economics typically treat producers as successful optimizers. Based on benchmarking, that is, a units performance is compared with a reference performance socalled efficient frontier. Horncastle provides an excellent introduction to stochastic frontier analysis. A computer program for stochastic frontier production and cost function estimation. The frontier program requires you to prepare two files. The benchmark stochastic production frontier model 5 3. The same forms are used for cross section and panel data forms. Pdf stochastic frontier analysis, kumbhakar, subal c. These contributions were framed in a cross sectional data framework.
A crosssectional production frontier model is given by. While we do not explicitly address outliers here, ours is the. Pdfbocker lampar sig inte for lasning pa sma skarmar, t ex mobiler. We propose extensions that circumvent two shortcomings of these approaches. Wilson 2002, nonparametric tests of return to scale, european journal of operational research, 9, 1152 wang, h. The bauerkumbhakar decomposition of tfp is applied to a smaller sample in order to evaluate the effects of changes in efficiency technical and allocative, scale effects, and technical change. Immensely helpful to the applied researcher, this book bridges the chasm between theory and practice, expanding the range of applications in which production frontier analysis.
Stochastic frontier analysis is a complete textbook on stochastic frontier models. Kumbhakar sc, lovell ck 2000 stochastic frontier analysis. Foundations and advances, cepa working papers series wp022018, school of economics, university of queensland, australia. Stochastic frontier analysis the extensive literature on sfa has been summarized comprehensively by kumbhakar and lovell, 2000. No 201710, working papers from university of miami, department of economics abstract. Stochastic frontier analysis using stata sage journals. Kumbhakar, hungjen wang, alanhorncastle a practitioners guide to stochastic frontier analysisusing stata by subal c. There is a good section on furthermore, there are some producers approach these frontiers. Stochastic frontier production method was used to analyze producers technical efficiency. The many theoretical and methodological contributions building upon those works are well documented in kumbhakar 2003, coelli, et al.
Lecture 4 day 3 stochastic frontier analysis free download as powerpoint presentation. Stochastic frontier analysis or sfa is one such technique to model producer behavior. Jan 26, 2015 a practitioners guide to stochastic frontier analysis using stata ebook written by subal c. Sequential modelling ensures that the models are nested and can be compared. A practitioners guide to stochastic frontier analysis using. We estimate a world production frontier for a sample of 75 countries over a long period. Outliers have been considered in the data envelopment analysis dea literature. Arne henningsen has slightly modified this computer program the user can specify the instruction file by an optional argument at the command line now. Stochastic frontier analysis miami herbert business.
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