STOCHASTIC PRODUCTION FRONTIER: FRAMEWORK AND DEVELOPMENT
Stochastic Frontier Approach, Time-variant Technical Efficiency, Panel data
Abstract
This paper explores the framework and development of stochastic frontier Approach (SFA). The original idea of the SFA and its theoretical framework is discussed to provide a basic foundation of the approach. The development of SFA with more flexible distribution assumptions follows the pioneering model. Experts also
develop the time-variant technical efficiency models, in order to allow variation between times for a production unit. The most recent development is the panel data SFA, which includes the two-stage and the one-stage procedures.