Parameter estimation of the spatial panel stochastic frontier model with random effects

ABSTRACT

This study has two objectives. First, it aims to construct a spatial panel stochastic frontier model with random effects based on the Cliff and Ord-type spatial panel model. Second, it proposes a parameter estimation method for this model. The method is based on a four-step procedure outlined by Kumbhakar and Heshmati (1995), which was modified by incorporating spatial autocorrelation.

KEYWORDS:

• Stochastic frontier model
• spatial panel
• random effects
• generalized spatial two-stage least squares

JEL CLASSIFICATION:

• C40
• C50
• C13

Acknowledgments

This study was funded by JSPS KAKENHI Grant Numbers 17K14738 and 18H03628.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Funding

This work was supported by the Japan Society for the Promotion of Science [17K14738,18H03628];