A spatial stochastic frontier model with endogenous frontier and environmental variables

Kutlu, Levent and Tran, Kien C. and Tsionas, Mike G. (2020) A spatial stochastic frontier model with endogenous frontier and environmental variables. European Journal of Operational Research, 286 (1). pp. 389-399. ISSN 0377-2217

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We propose a spatial autoregressive stochastic frontier model, which allows for the endogeneity in both the frontier and environmental variables (i.e., endogeneity due to correlation of inefficiency term and two-sided error term). The model parameters are estimated using a single-stage control function approach. Monte Carlo simulations show that our proposed model and approach perform well in finite samples. We employed our methodology to the Chinese chemicals firm data and found evidence for both spatial effects and endogeneity.

Item Type:
Journal Article
Journal or Publication Title:
European Journal of Operational Research
Additional Information:
This is the author’s version of a work that was accepted for publication in European Journal of Operational Research. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Operational Research, 286, 1, 2020 DOI: 10.1016/j.ejor.2020.03.020
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?? modelling and simulationmanagement science and operations researchinformation systems and management ??
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Deposited On:
02 Dec 2020 13:50
Last Modified:
05 Mar 2024 00:05