The Econometric Approach to Efficiency Analysis

© Oxford University Press, 2013.This chapter provides an overview of techniques for econometric analysis of technical (production) and economic (cost) efficiency. The stochastic frontier model of Aigner, Lovell, and Schmidt (1977) is now the standard econometric platform for this type of analysis. The underlying models and econometric techniques that have been used in studying technical inefficiency in the stochastic frontier framework are surveyed, and some of the recent developments in econometric methodology are presented. Applications that illustrate some of the computations are presented in the final section