Spatial Panel Stochastic Frontier Model and Technical Efficiency Estimation
Stochastic frontier model is one of important methods for measuring technical efficiency.Generally,the model assumes that production units are independent of each other.However,spatial externalities play an important role in diffusing technical progress and points in space are co-related.By combining stochastic frontier production theory with spatial econometric analysis,we propose a spatial panel stochastic frontier model in which both of spatially lagged dependent variables and spatially autoregressive error terms are considered,at the same time,we relax the model assumptions that seem to be strong ones.Firstly,time-varying technical efficiency model is analyzed.Secondly,the consequence of heteroskedasticity in the technical inefficiency is investigated.Then,we consider some extensions that account for the latent cross unit heterogeneity.Explicit models for unmeasured cross unit heterogeneity are built into the stochastic frontier.Estimation methods for various kinds of reformulated models are presented.Finally,we focus on the estimation and comparison of technical efficiency measures.