Estimating Technical Efficiency through Reduced Rank Regression


In this paper we develop a statistical approach for verifying the possibility of substituting joint production frontier with single-output specification by means of Reduced Rank Regression (RRR) Our work introduces the multivariate model in the RRR framework which allows us to verify the unitary rank of the regression coefficient matrix. If the rank is one it is possible to express the production frontier in terms of aggregated output through an econometric model. Firm-specific efficiency is also measured.

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Keywords: Stochastic Frontier Analysis; Reduced Rank Regression

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