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A Note on a Unified Approach to the Frontier Production Function Models With Correlated Non-Normal Error Components: The Case of Cross Section Data

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Abstract

This paper reviews the Stochastic Frontier Production Function (SFPF) Models with error components, termed as technical inefficiency error and noise variable in a cross section framework. It tries to unify all such models incorporating (i) truncation or non-normality of the technical inefficiency error term and (ii) correlation between the two error components. Allocative inefficiency error terms are also introduced and are assumed to be correlated among themselves. JEL Classification: C10

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