Estimation of long-run inefficiency levels: A dynamic frontier approach

Seung C. Ahn, David H. Good, Robin C. Sickles

Research output: Contribution to journalArticlepeer-review

69 Scopus citations


Cornwell, Schmidt, and Sickles (1990) and Kumbhakar (1990), among others, developed stochasticfrontier production models which allow firm specific inefficiency levels to change over time. These studies assumed arbitrary restrictions on the short-run dynamics of efficiency levels which have little theoretical justification. Further, the models are inappropriate for estimation of long-run efficiencies. We consider estimation of an alternative frontier model in which firmspecific technical inefficiency levels are autoregressive. This model is particularly useful to examine a potential dynamic link between technical innovations and production inefficiency levels. We apply our methodology to a panel of US airlines.

Original languageEnglish (US)
Pages (from-to)461-492
Number of pages32
JournalEconometric Reviews
Issue number4
StatePublished - 2000


  • Frontier production function
  • Generalized method of moments
  • Long-run inefficiency
  • Panel data

ASJC Scopus subject areas

  • Economics and Econometrics


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