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Horrace article on stationary points for parametric stochastic frontier models published in JB&ES

Jan 28, 2019

Stationary Points For Stochastic Frontier Models

William C. Horrace & Ian A. Wright

Journal of Business and Economic Statistics, January 2019

William C. Horrace

William C. Horrace

Stationary point results on the normal–half-normal stochastic frontier model are generalized using the theory of the Dirac delta, 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. The authors discuss identification and extensions to more general stochastic frontier models.