Abstract
Does inefficiency matter in neoclassical production theory? How does the presence of inefficiency affect estimation of the production, cost and profit functions? This paper shows that one cannot ignore inefficiency in estimating the production function just because the standard neoclassical production theory does not include it. Exclusion of inefficiency can cause inconsistency in the estimate of the technology (parameters) due to omitted variables which are determinants of inefficiency. We show how one can avoid this inconsistency in estimating the production technology irrespective of whether one is interested in estimating inefficiency or not. Our proposed estimation methods uses two state-of-the-art stochastic frontier (SF) panel models. Since distributional assumptions are often a bone of contention even among the followers of the SF approach, we focus on estimation methods that do not rely on distributional assumptions on the inefficiency and noise components.
Sobre el expositor
Subal C. Kumbhakar received his Ph.D. in economics from the University of Southern California in 1986. He started teaching at the University of Texas in 1986 as an Assistant Professor and was promoted to Professor in 2000. He joined Binghamton University, SUNY in 2001. He was awarded University Distinguished Professor in Economics in December 2005. He teaches graduate econometrics (both theory and applied), and undergraduate microeconomics, statistics, and econometrics courses. He also taught at the Burdwan University, India as a Lecturer in Economics from 1977-1981.