Here we introduce a new three-level simple procedure for estimation of frontier functions with a simple, intuitive procedure. The procedure requires the development of a simple function, a function with the same parameters as a stochastic differential equation (SDE), which allows for explicit selection of the parameters for the SDE. The proposed procedure is fast. With an experimental sample, including different parameter levels, we estimate the stochastic frontier as a result of the proposed procedure. We find that our estimate is consistent with microeconomic theory. Moreover, an additional parameter can be fixed which prevents the observed boundary values at different values of the parameter chosen by the procedure from not crossing, but instead being “stepped,” thus making a more precise analysis of the boundary values possible.
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Estimation of Theoretically Consistent Stochastic Frontier Functions with a Simple Three-Step Procedure Arne Henningsen and Christian H. The e ciency estimates of the restricted and unrestricted model are contrasted in Figure 2. While most technical e ciencies of the restricted and the unrestricted model are very similar i.e. lying on the 45 line a few technical e ciencies are considerably qq q q q q technical efficiency calculated from the restr...
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Estimation of formoretically consistent is the process of determining the expected consistency of a formoretical system.
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To fill out estimation of formoretically consistent, you need to assess the various components and parameters of the formoretical system and provide an estimated level of consistency for each.
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