Nonparametric, Stochastic Frontier Models with Multiple Inputs and Outputs

Leopold Simar and Paul Wilson

No 2021003, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: Stochastic frontier models along the lines of Aigner et al. (1977) are widely used to benchmark firms' performances in terms of efficiency. The models are typically fully-parametric, with functional form specifications for the frontier as well as both the noise and the inefficiency processes. Studies such as Kumbhakar et al. (2007) have attempted to relax some of the restrictions in parametric models, but so far all such approaches are limited to a univariate response variable. Some (e.g., Simar and Zelenyuk, 2011; Kuosmanen and Johnson, 2017) have proposed nonparametric estimation of directional distance functions to handle multiple inputs and outputs, raising issues of endogeneity that are either ignored or addressed by imposing restrictive and implausible assumptions. This paper extends nonparametric methods developed by Simar et al. (2017) and Hafner et al. (2018) to allow multiple inputs and outputs in an almost fullynonparametric framework while avoiding endogeneity problems. We discuss identification issues and properties of the resulting estimators, and examine their finite-sample performance through Monte-Carlo experiments. Practical implementation of the method is illustrated using data on U.S. commercial banks.

Keywords: stochastic frontier; nonparametric; efficiency (search for similar items in EconPapers)
JEL-codes: C01 C21 C40 C51 (search for similar items in EconPapers)
Pages: 40
Date: 2021-02-01
New Economics Papers: this item is included in nep-ecm, nep-eff and nep-ore
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://dial.uclouvain.be/pr/boreal/fr/object/bore ... tastream/PDF_03/view (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Nonparametric, Stochastic Frontier Models with Multiple Inputs and Outputs (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvad:2021003

Access Statistics for this paper

More papers in LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA) Voie du Roman Pays 20, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Nadja Peiffer ().