A semi parametric approach to efficiency modelling with inefficiency heterogeneity

M. Wiper, H. Veiga, Y. Deng

We develop an approach to stochastic frontier analysis in the presence of inefficiency heterogeneity. Although we model the frontier parametrically, the inefficiency term is modeled using a Dirichlet process mixture of regressions through the origin. This structure means that different functional forms for the inefficiency term can be well modeled. Our approach is illustrated with various real and simulated examples.

Keywords: stochastic frontier analysis efficiency dirichlet process mixtures

C. Ausin Olivera, M. Kalli

J. M. Marín Diazaraque, E. Romero Ramos, H. Veiga