THE STOCHASTIC FRONTIER MODEL OF TECHNICAL EFFICIENCY: AN APPLICATION

Abstract

A firm is technically efficient when it produces the maximum level of output for a given level of input on the assumption that technology is fixed. Although the above definition of technical efficiency has been around for decades, economists have, for the most part, been estimating average production functions (i.e. production functions that assume that all firms are technically efficient except for random noise), and then proceeding to make inferences regarding the potential of firms from this average production function.

Citation

RAWLINS, G. (1985), "THE STOCHASTIC FRONTIER MODEL OF TECHNICAL EFFICIENCY: AN APPLICATION", Studies in Economics and Finance, Vol. 9 No. 1, pp. 29-55. https://doi.org/10.1108/eb028652