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Journal of Productivity Analysis
Article . 2009 . Peer-reviewed
License: Springer TDM
Data sources: Crossref
SSRN Electronic Journal
Article . 2008 . Peer-reviewed
Data sources: Crossref
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A Stochastic Frontier Model with Correction for Sample Selection

Authors: William Greene;

A Stochastic Frontier Model with Correction for Sample Selection

Abstract

Heckman s (1979) sample selection model has been employed in three decades of applications of linear regression studies. The formal extension of the method to nonlinear models, however, is of more recentvintage. A generic solution for nonlinear models is proposed in Terza (1998). We have developed simulation based approach in Greene (2006). This paper builds on this framework to obtain a sample selection correction for the stochastic frontier model. We first show a surprisingly simple way to estimate the familiar normal-half normal stochastic frontier model (which has a closed form log likelihood) using maximum simulated likelihood. The next step is to extend the technique to a stochastic frontier modelwith sample selection. Here, the log likelihood does not exist in closed form, and has not previously been analyzed. We develop a simulation based estimation method for the stochastic frontier model. In an application that seems superficially obvious, the method is used to revisit the World Health Organization data [WHO (2000), Tandon et al. (2000)] where the sample partitioning is based on OECD membership. The original study pooled all 191 countries. The OECD members appear to be discretely different from therest of the sample. We examine the difference in a sample selection framework.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
196
Top 1%
Top 1%
Top 10%
bronze