h i g h l i g h t s• We propose a Copula approach for estimating endogenous stochastic frontier models.• We discuss the model identification strategy.• Maximum likelihood estimation procedure is proposed.• Monte Carlo results show that the proposed estimator performs well in finite sample. a b s t r a c tThis papers considers an alternative estimation procedures for estimating stochastic frontier models with endogenous regressors when no external instruments are available. The approach we propose is based on copula function to directly model the correlation between the endogenous regressors and the composed errors. Estimation of model parameters is done using maximum likelihood. Monte Carlo simulations are used to assess and compare the finite sample performances of the proposed estimation procedures.

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By examining the impact of capital regulation on bank risk-taking using a local estimation technique, we are able to quantify the heterogeneous response of banks towards this type of regulation in banking sectors of western-type economies. Subsequently, using this information on the bank-level responses to capital regulation, we examine the sources of heterogeneity. The findings suggest that the impact of capital regulation on bank risk is very heterogeneous across banks and the sources of this heterogeneity can be traced into both bank and industry characteristics, as well as into the macroeconomic conditions. Therefore, the present analysis has important implications on the way bank regulation is conducted, as it suggests that common capital regulatory umbrellas may not be sufficient to promote financial stability. On the basis of our findings, we contend that Basel guidelines may have to be reoriented towards more flexible, country-specific policy proposals that focus on the restraint of excess risk-taking by banks.

This paper examines the effect of functional form specification on the estimation of technical efficiency using a panel data set of 125 olive-growing farms in Greece for the period 1987–93. The generalized quadratic Box-Cox transformation is used to test the relative performance of alternative, widely used, functional forms and to examine the effect of prior choice on final efficiency estimates. Other than the functional specifications nested within the Box-Cox transformation, the comparative analysis includes the minflex Laurent translog and generalized Leontief that possess desirable approximation properties. The results indicate that technical efficiency measures are very sensitive to the choice of functional specification. Perhaps most importantly, the choice of functional form affects the identification of the factors affecting individual performance – the sources of technical inefficiency. The analysis also shows that while specification searches do narrow down the set of feasible alternatives, the identification of the most appropriate functional specification might not always be (statistically) feasible. Copyright Springer-Verlag Berlin Heidelberg 2003Key words: Stochastic frontiers, functional specifications, Box-Cox transformation, technical efficiency, Greek olive oil., JEL Classification System Numbers: C12, C13, C23, C52, Q12,

This paper examines and compares the technical efficiency measures of Ontario and New York dairy producers for the period 1992 to 1998. A nonparametric stochastic frontier model is introduced to estimate technical efficiency. The backfitting algorithm of Breiman and Friedman is used to estimate the frontier. Empirical results indicate that during the period of study, New York dairy farmers produced milk more efficiently than Ontario dairy producers, but the magnitude of the difference was small. The estimated mean technical efficiency for the former group is 0.602 as compared to 0.532 for the latter. The results also indicated that over time, dairy farms in both regions improved their level of technical efficiency. Furthermore, no correlation was found between farm size and estimated technical efficiency.

This paper uses the empirical characteristic function (ECF) procedure to estimate the parameters of mixtures of normal distributions. Since the characteristic function is uniformly bounded, the procedure gives estimates that are numerically stable. It is shown that, using Monte Carlo simulation, the finite sample properties of th ECF estimator are very good, even in the case where the popular maximum likelihood estimator fails to exist. An empirical application is illustrated using the monthl excess return of the Nyse value-weighted index.constrained Maximum-likelihood, empirical characteristic function, grid points, mixtures of normal distribution, moment generating function, Monte Carlo simulation,

In this article, we consider the estimation of semiparametric panel data smooth coefficient models. We propose a class of local generalized method of moments (LGMM) estimators that are simple and easy to implement in practice. We show that the proposed LGMM estimators are consistent and asymptotically normal. Monte Carlo simulations suggest that our proposed estimator performs quite well in finite samples. An empirical application using a large panel of U.K. firms is also presented.Local Generalized Method of Moments, Monte Carlo simulation, Semiparametric panel data model, Smooth coefficient,

This paper examines the effectiveness of advertising in the fast-growing Greek processed meats sector using an unbalanced panel data set of 34 firms during the period 1983–1997. In analysing the relationship between firms' sales and advertising this study differentiates between the type/content of the advertising message and the medium used to communicate it. Advertising expenditures are disaggregated into company and product campaigns in television, radio, and print media. Empirical results strongly reject the hypothesis of homogeneous consumer response to all kinds of advertising that is implicit in studies that aggregate advertising expenditures. The results also indicate an inefficient allocation of advertising resources by the firms of the sector; advertising in the least utilized print media was determined to be by far the most effective strategy during the study period.