Confidence Statements for Efficiency Estimates from Stochastic Frontier Models

Abstract

This paper is an empirical study of the uncertainty associated with estimates from stochastic frontier models. We show how to construct confidence intervals for estimates of technical efficiency levels under different sets of assumptions ranging from the very strong to the relatively weak. We demonstrate empirically how the degree of uncertainty associated with these estimates relates to the strength of the assumptions made and to various features of the data.Confidence intervals, stochastic frontier models, efficiency measurement