The Effect of Unobserved Heterogeneity in Stochastic Frontier Estimation: Comparison of Cross Section and Panel with Simulated Data for the Postal Sector
-
Catherine Cazals
In this paper, we examine the application of SFA method with time-invariant inefficiency and assess its estimation of inefficiency when applied to cross section and panel data. By using simulation methods, we look at the effect of unobserved heterogeneity on the estimates of inefficiency in both cross section and panel. In the presence of unobserved heterogeneity and significant variance in the inefficiency term, stochastic frontier estimation of inefficiency can be significantly different in panel and in cross section. This finding accords with analysis of actual data from the postal sector. We then suggest an estimation method for cost frontier when inefficiency is time-invariant and with unobserved heterogeneity.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Editorial Introduction
- Competition, Pricing and Universal Service in the Postal Sector: An Introduction
- Article
- Postal Service Pricing Incentives Following the Introduction of Price Cap Regulation
- The Effect of Flexible Pricing on Entry into the U.S. Letter Market
- Welfare and Pricing of Mail in a Communications Market
- Environmental Cost and Universal Service Obligations in the Postal Sector
- Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All
- What is an Unfair Burden? Compensating the Net Cost of Universal Service Provision
- The Universal Postal Service after the Lisbon Treaty: a True Step Forward?
- The Effect of Unobserved Heterogeneity in Stochastic Frontier Estimation: Comparison of Cross Section and Panel with Simulated Data for the Postal Sector
- Letter Traffic Demand in the UK: An Analysis by Product and Envelope Content Type
Articles in the same Issue
- Editorial Introduction
- Competition, Pricing and Universal Service in the Postal Sector: An Introduction
- Article
- Postal Service Pricing Incentives Following the Introduction of Price Cap Regulation
- The Effect of Flexible Pricing on Entry into the U.S. Letter Market
- Welfare and Pricing of Mail in a Communications Market
- Environmental Cost and Universal Service Obligations in the Postal Sector
- Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All
- What is an Unfair Burden? Compensating the Net Cost of Universal Service Provision
- The Universal Postal Service after the Lisbon Treaty: a True Step Forward?
- The Effect of Unobserved Heterogeneity in Stochastic Frontier Estimation: Comparison of Cross Section and Panel with Simulated Data for the Postal Sector
- Letter Traffic Demand in the UK: An Analysis by Product and Envelope Content Type
