Alternative random effects panel gamma SML estimation with heterogeneity in random and one-sided error

Saleem Shaik, Ashok Mishra

Research output: Contribution to journalArticle

Abstract

In this chapter, we utilize the residual concept of productivity measures defined in the context of normal-gamma stochastic frontier production model with heterogeneity to differentiate productivity and inefficiency measures. In particular, three alternative two-way random effects panel estimators of normal-gamma stochastic frontier model are proposed using simulated maximum likelihood estimation techniques. For the three alternative panel estimators, we use a generalized least squares procedure involving the estimation of variance components in the first stage and estimated variance-covariance matrix to transform the data. Empirical estimates indicate difference in the parameter coefficients of gamma distribution, production function, and heterogeneity function variables between pooled and the two alternative panel estimators. The difference between pooled and panel model suggests the need to account for spatial, temporal, and within residual variations as in Swamy-Arora estimator, and within residual variation in Amemiya estimator with panel framework. Finally, results from this study indicate that short- and long-run variations in financial exposure (solvency, liquidity, and efficiency) play an important role in explaining the variance of inefficiency and productivity.

Original languageEnglish (US)
Pages (from-to)299-322
Number of pages24
JournalAdvances in Econometrics
Volume26
DOIs
StatePublished - 2010
Externally publishedYes

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Estimator
Random effects
Productivity
Inefficiency
Liquidity
Production function
Solvency
Variance components
Stochastic frontier model
Generalized least squares
Gamma distribution
Maximum likelihood estimation
Coefficients
Short-run
Simulated maximum likelihood
Panel model
Covariance matrix
Stochastic production frontier

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Alternative random effects panel gamma SML estimation with heterogeneity in random and one-sided error. / Shaik, Saleem; Mishra, Ashok.

In: Advances in Econometrics, Vol. 26, 2010, p. 299-322.

Research output: Contribution to journalArticle

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