Estimation of stochastic frontier production functions with time-varying parameters and technical efficiencies using panel data from Indian villages

A stochastic frontier production function with time-varying technical efficiencies is estimated using panel data from ICRISAT's Village Level Studies in three Indian villages. Given the specifications of a linearized version of a Cobb-Douglas stochastic frontier production function with coefficients which are a linear function of time, the hypothesis that the traditional response function is an adequate representation of the data is accepted for only one of the three villages. The hypothesis of time-invariant technical inefficiencies is not rejected for one of the two villages for which significant technical inefficiencies exist. The hypothesis of time-invariant elasticities of the input variables is rejected for two of the three villages. Further, the hypothesis that hired and family labour are equally productive is accepted in only one of the three villages. The technical efficiencies of individual farms exhibited considerable variation in the two villages with either time-invariant or time-varying technical efficiencies