Consistent Inference in Fixed-Effects Stochastic Frontier Models

Belotti, Federico; Ilardi, Giuseppe

doi:10.2139/ssrn.3066766

Cited by 38 publications

(22 citation statements)

References 134 publications

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“…The aforementioned likelihood‐based approaches can be easily combined with the simulated likelihood approach, which integrates out the random effects by simulation. On the other hand, if the fixed effects are included in the model, as in Belotti and Ilardi (), then one may need to apply either first differences or within transformations first to eliminate the fixed effects. We leave these extensions for the future.…”

Section: Resultsmentioning

confidence: 99%

Estimation of a dynamic stochastic frontier model using likelihood‐based approaches

Lai

Kumbhakar

2019

J of Applied Econometrics

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Summary This paper considers a panel stochastic production frontier model that allows the dynamic adjustment of technical inefficiency. In particular, we assume that inefficiency follows an AR(1) process. That is, the current year's inefficiency for a firm depends on its past inefficiency plus a transient inefficiency incurred in the current year. Interfirm variations in the transient inefficiency are explained by some firm‐specific covariates. We consider four likelihood‐based approaches to estimate the model: the full maximum likelihood, pairwise composite likelihood, marginal composite likelihood, and quasi‐maximum likelihood approaches. Moreover, we provide Monte Carlo simulation results to examine and compare the finite‐sample performances of the four above‐mentioned likelihood‐based estimators of the parameters. Finally, we provide an empirical application of a panel of 73 Finnish electricity distribution companies observed during 2008–2014 to illustrate the working of our proposed models.

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Section: Resultsmentioning

confidence: 99%

Estimation of a dynamic stochastic frontier model using likelihood‐based approaches

Lai

Kumbhakar

2019

J of Applied Econometrics

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“…One component is assumed to have a strictly nonnegative distribution and whilst the other component has a symmetric distribution. In the econometrics, the nonnegative element is often stated to as the inefficiency term and the factor in the symmetric distribution is termed idiosyncratic error (Belotti and Ilardi 2015;Chen et al 2014;Constantin and Iyer 2011).…”

Section: Empirical Methodologymentioning

confidence: 99%

Determinants of entrepreneurial capability (EC) environment in ASEAN-05 economies - a log-linear stochastic frontier analysis

2018

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The primary driver of this study is to find out key indicators of Entrepreneurial Capability milieu and test these components empirically in the Association with South East Asian Nations-05 economies. The purpose of this study is twofold. Firstly, it attempts to understand the determinants of Entrepreneurial Capability which identifies and endeavor commercial opportunities in the Association of South East Asian Nations 05 economies, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand. Secondly, using the theory and determinants of entrepreneurial capability in general, this study empirically tests the efficiency imperative coefficients of variables that have an impact on entrepreneurial perceived capabilities. This research applies recent consistent estimation of log linear transformation stochastic frontier model to find out time-variant changes of variables in the panel sample. Data and variables have collected from Global Entrepreneurship Monitor-2016 and World Competitiveness Yearbook-2016 during the years 2010-2016. The results suggest that Entrepreneurship as a Good Career Choice and Perceived Opportunities are two significant variables which can improve and have a positive influence on entrepreneurial capability while Fear of failure rate has a negative impact on the efficiency of entrepreneurial capability in the Association of South East Asian Nations-05 countries. Other important variables such as Intellectual Property Rights, University Education and Knowledge Transfer rate have a positive stimulus to the entrepreneurial capability environment in these economies. The findings of this study are important contributions to the entrepreneurship literature and help policymakers to rethink entrepreneurial capability settings of the Association of South East Asian Nations-05 countries to pursue an innovation-driven region in future.

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“…The fixed-effects stochastic frontier model assumes that unpredictable variables in a country may impact or bias the outcome variable. This method circumvents the possibility of bias by removing time invariant factors to assess the net effect of the predictors on the dependent variable (Belotti and Ilardi, 2015). Moreover, the new STATA command, "SFTFE", analyses the consistent estimation of the fixed-effects by enabling estimation of the fixed-effects SF models via three alternative estimators (Belotti and Ilardi, 2015;Chen et al, 2014).…”

Section: Data and Variable Selectionmentioning

confidence: 99%

“…This method circumvents the possibility of bias by removing time invariant factors to assess the net effect of the predictors on the dependent variable (Belotti and Ilardi, 2015). Moreover, the new STATA command, "SFTFE", analyses the consistent estimation of the fixed-effects by enabling estimation of the fixed-effects SF models via three alternative estimators (Belotti and Ilardi, 2015;Chen et al, 2014). Here, first-difference data transformation is treated to eliminate the fixed-effects, attaining consistency for both fixed-n (cross-section) and fixed-T (time) asymptotics.…”

Section: Data and Variable Selectionmentioning

confidence: 99%

Entrepreneurial capability (EC) environment in ASEAN-05 emerging economies

Afzal

Mansur

Manni

2018

APJIE

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Purpose The entrepreneurial capability (EC) environment refers to the general social and economic settings of a given local/regional entrepreneurship environment. The primary purpose of this study is to uncover key indicators of the EC milieu and test these components empirically within the context of the Association of South East Asian Nations (ASEAN)-5 economies to elucidate the current state of their EC environments, at the regional and national levels. To this end, the aim of this study is twofold. First, this work endeavors to explicate the determinants of EC, with aims of elucidating its association to commercial opportunities in (ASEAN)-5 economies, namely, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Next, this study applies the developed theory, including the identified determinants of EC to empirically test the efficiency and imperative coefficients of variables that have an impact on perceived entrepreneurial capabilities within a given environment. Design/methodology/approach This research applies two frontier models, namely, the consistent estimation of fixed-effects and linear transformation stochastic frontier models, to assess the coefficients of significant EC variables for the panel sample. Data corresponding to the assessed variables were retrieved from the databases of the Global Entrepreneurship Monitor (GEM) – 2016 and the World Competitiveness Yearbook (WCY) – 2016, for the period, 2010-2016. Findings The attained results suggest that factors corresponding to the variables “Entrepreneurship as a good career choice” and “perceived opportunities” have played a significantly positive role on the EC environment of ASEAN 05, although findings suggest both factors may still be improved upon. Conversely, the “fear of failure rate” factor was shown to have exerted a negative impact on the efficiency of the EC environment of ASEAN 05. Other important variables – such as intellectual property rights, university education and knowledge transfer rate – were shown to generate a positive impact on the EC environment of these economies. Originality/value This study makes an important contribution to the entrepreneurship literature and can stimulate policymakers to rethink the EC settings of ASEAN-05 in their pursuit of an innovation-driven region.

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Consistent Inference in Fixed-Effects Stochastic Frontier Models

Cited by 38 publications

References 134 publications

Estimation of a dynamic stochastic frontier model using likelihood‐based approaches

Estimation of a dynamic stochastic frontier model using likelihood‐based approaches

Determinants of entrepreneurial capability (EC) environment in ASEAN-05 economies - a log-linear stochastic frontier analysis

Entrepreneurial capability (EC) environment in ASEAN-05 emerging economies

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