Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract:
This paper proposes a stochastic frontiermodel with three composed errors, and therefore
six error components. As in the metafrontier literature, firms belong to groups
with a group-specific frontier. A firm has a level of short-run and long-run inefficiency
relative to its group-specific frontier, as in existing models with two composed errors
and four error components. But now there is also a group-specific inefficiency, that
is, a shortfall of the group-specific frontier from the best practice metafrontier. The
paper shows how to estimate this model and how to extract predictions of the various
inefficiencies.
