Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204435 
Year of Publication: 
2019
Series/Report no.: 
IFRO Working Paper No. 2019/06
Publisher: 
University of Copenhagen, Department of Food and Resource Economics (IFRO), Copenhagen
Abstract: 
In this paper, we consider the stochastic ray production function that has been revived recently by Henningsen et al. (2017). We use a profit-maximizing framework to resolve endogeneity problems that are likely to arise, as in all distance functions, and we derive the system of equations after incorporating technical inefficiency. As technical inefficiency enters non-trivially into the system of equations and the Jacobian is highly complicated, we propose Monte Carlo methods of inference. We illustrate the new approach using US banking data and we also address the problems of missing prices and selection of ordering for outputs.
Subjects: 
Stochastic ray production frontier
Technical inefficiency
Profit maximization
Bayesian inference
JEL: 
C11
C13
D24
Document Type: 
Working Paper

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