A survey of stochastic frontier models and likely future developments

Abstract

This paper summarizes the literature on stochastic frontier

production function models. It covers the definition of technical

efficiency, the basic cross-sectional stochastic frontier model, and

the stochastic frontier model with panel data and time-invariant

as well as time-varying technical inefficiency. It also discusses

models in which technical inefficiency depends on explanatory

variables. Finally, it discusses the problem of inference on the

inefficiencies and makes some predictions about likely future developments

in the field.