![Pitfalls in the estimation of a cost function that ignores allocative inefficiency: A Monte Carlo analysis [An article from: Journal of Econometrics]](https://www.ebooknetworking.net/books/B00/0P6/bigB000P6OW2G.jpg)
Pitfalls in the estimation of a cost function that ignores allocative inefficiency: A Monte Carlo analysis [An article from: Journal of Econometrics]
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Book Details
Author(s)
S.C. Kumbhakar, H.J. Wang
Publisher
Elsevier
ISBN / ASIN
B000P6OW2G
ISBN-13
978B000P6OW20
Marketplace
France 🇫🇷
Description
This digital document is a journal article from Journal of Econometrics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
In the stochastic frontier literature, it is a widely held view that allocative inefficiency can be lumped together with technical inefficiency in the estimation of cost frontiers. Therefore, a one-sided error term in the cost function is believed to capture the cost of overall (technical plus allocative) inefficiency. In this paper we challenge that view through a detailed Monte Carlo investigation. The results show that failure to include the cost of allocative inefficiency explicitly in the cost function biases the estimates of: (i) the cost function parameters, (ii) returns to scale, (iii) input price elasticities, and (iv) cost-inefficiency.
Description:
In the stochastic frontier literature, it is a widely held view that allocative inefficiency can be lumped together with technical inefficiency in the estimation of cost frontiers. Therefore, a one-sided error term in the cost function is believed to capture the cost of overall (technical plus allocative) inefficiency. In this paper we challenge that view through a detailed Monte Carlo investigation. The results show that failure to include the cost of allocative inefficiency explicitly in the cost function biases the estimates of: (i) the cost function parameters, (ii) returns to scale, (iii) input price elasticities, and (iv) cost-inefficiency.
