Stochastic frontier models allow to analyse technical inefficiency in the framework of production functions. Production units (firms, regions, countries, etc.) are assumed to produce according to a common technology, and reach the frontier when they produce the maximum possible output for a given set of inputs. Inefficiencies can be due to structural problems or market imperfections and other factors which cause countries to produce below their maximum attainable output. Over time, production units can become less inefficient and catch up to the frontier. It is also possible that the frontier shifts, indicating technical progress. In addition, production units can move along the frontier by changing input quantities. Finally, there can be some combinations of these three effects. The stochastic frontier method allows to decompose growth into changes in input use, changes in technology and changes in efficiency, thus extending the widely used growth accounting method. … Stochastic Frontier Models google

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