Abstract

CASTANO, Elkin  and  GALLON, Santiago. A solution for multicollinearity in stochastic frontier production function models. Lect. Econ. [online]. 2017, n.86, pp.9-24. ISSN 0120-2596.  https://doi.org/10.17533/udea.le.n86a01.

This paper considers the problem of collinearity among inputs in a stochastic frontier production model, an issue that has received little attention in the econometric literature. To address this problem, a principal-component-based solution is proposed, which allows carrying out a joint interpretation of technical efficiency and the technology parameters of the model. Applications of the method to simulated and real data show its usability and effective performance.

Keywords : stochastic frontier analysis; technical efficiency; productivity; multicollinearity; principal component estimation..

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