Penalized sieve estimation of zero‐inefficiency stochastic frontiers
Jun Cai,
William C. Horrace,
Christopher F. Parmeter
Abstract:SummaryStochastic frontier models for cross‐sectional data typically assume that the one‐sided distribution of firm‐level inefficiency is continuous. However, it may be reasonable to hypothesize that inefficiency is continuous except for a discrete mass at zero capturing fully efficient firms (zero‐inefficiency). We propose a sieve‐type density estimator for such a mixture distribution in a nonparametric stochastic frontier setting under a unimodality‐at‐zero assumption. Consistency, rates of convergence and a… Show more
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