Expected Efficiency Ranks from Parametric Stochastic Frontier Models

Abstract

In the stochastic frontier model we extend the multivariate probability statements of Horrace (2005) to calculate the conditional probability that a firm is any particular efficiency rank in the sample. From this we construct the conditional expected efficiency rank for each firm. Compared to the traditional ranked efficiency point estimates, firm-level conditional expected ranks are more informative about the degree of uncertainty of the ranking. The conditional expect ranks may be useful for empiricists. A Monte Carlo study and an empirical example are provided

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