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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

William C. Horrace

William C. Horrace


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.

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