Carta, Alessandro and Steel, Mark F. J. (2009) Modelling multi-output stochastic frontiers using copulas. Working Paper. Coventry: University of Warwick. Centre for Research in Statistical Methodology. (Working papers).

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Abstract

The aim of this work is to introduce a new econometric methodology for multi-output production frontiers. In the context of a system of frontier equations, we use a flexible multivariate distribution for the inefficiency error term. This multivariate distribution is constructed through a copula function which allows for separate modelling of the marginal inefficiency distributions and the dependence. We pay specific attention to the elicitation of a sensible (improper) prior and provide a simple sufficient condition for posterior propriety. Inference is conducted through a Markov chain Monte Carlo sampler. We use Bayes factors to compare various copula specifications in the empirical context of Dutch dairy farm data, with two outputs.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	Q Science > QA Mathematics
Divisions:	Faculty of Science > Statistics
Library of Congress Subject Headings (LCSH):	Production possibility curve, Copulas (Mathematical statistics), Dairy farms -- Holland -- Econometric models
Series Name:	Working papers
Publisher:	University of Warwick. Centre for Research in Statistical Methodology
Place of Publication:	Coventry
Date:	2009
Volume:	Vol.2009
Number:	No.27
Number of Pages:	27
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/35215

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