Constraints in models of production and cost via slack-based measures

Khan, Caroline and Tsionas, Mike G. (2021) Constraints in models of production and cost via slack-based measures. Empirical Economics. ISSN 0377-7332

[img]
Text (BLINDpaper_revised)
BLINDpaper_revised.pdf - Accepted Version
Available under License Creative Commons Attribution.

Download (682kB)

Abstract

In this paper, we propose the use of stochastic frontier models to impose theoretical regularity constraints (like monotonicity and concavity) on flexible functional forms. These constraints take the form of inequalities involving the data and the parameters of the model. We address a major concern when statistically endogenous variables are present in these inequalities. We present results with and without endogeneity in the inequality constraints. In the system case (e.g., cost-share equations) or more generally, in production function-first-order conditions case, we detect an econometric problem which we solve successfully. We provide an empirical application to US electric power generation plants during 1986–1997, previously used by several authors.

Item Type:
Journal Article
Journal or Publication Title:
Empirical Economics
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2600/2613
Subjects:
ID Code:
160655
Deposited By:
Deposited On:
07 Oct 2021 13:10
Refereed?:
Yes
Published?:
Published
Last Modified:
20 Oct 2021 06:12