Center for Policy Research
Working Paper
Stationary Points for Parametric Stochastic Frontier Models
William C. Horrace & Ian A. Wright
C.P.R. Working Paper No. 196
October 2016
Abstract
The results of Waldman (1982) on the Normal-Half Normal stochastic frontier model are generalized using the theory of the Dirac delta (Dirac, 1930), and distribution-free conditions are established to ensure a stationary point in the likelihood as the variance of the inefficiency distribution goes to zero. Stability of the stationary point and "wrong skew" results are derived or simulated for common parametric assumptions on the model. Identification is discussed.