A stochastic frontier model with structural breaks in efficiency and technology

Li, Guangjie ORCID: https://orcid.org/0000-0002-8977-4146 2015. A stochastic frontier model with structural breaks in efficiency and technology. Empirical Economics 49 (1) , pp. 131-159. 10.1007/s00181-014-0852-4

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Abstract

We have developed a stochastic frontier model with appropriate priors to estimate the locations and number of structural breaks for both production efficiency and technology, which experience different regime changes. We assume different units could have unknown common break dates. Although panel data with large cross-sectional size can help identify the break locations, it could render posterior simulation very inefficient. Hence, care must be taken to avoid such problems. We apply our method to study the world production over the period of 1960–2007 and find that the data support structural breaks in technology rather than in efficiency. For most countries under study, the most important source of growth is capital accumulation. The technology adopted by different countries shows signs of convergence. Changes of technology usually happen after economic crises to compensate for negative capital growth. Alternative modelling approach and priors are used for robustness check.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Springer
ISSN:	0377-7332
Last Modified:	27 Oct 2022 09:25
URI:	https://orca.cardiff.ac.uk/id/eprint/65671

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