Template-type: ReDIF-Paper 1.0
Author-Name: Xu Guo
Author-Workplace-Name: School of Statistics, Beijing Normal University, Beijing.
Author-Name: Gao-Rong Li
Author-Workplace-Name:
 Beijing Institute for Scientific and Engineering Computing, Beijing University of Technology, Beijing.
Author-Name:
 Wing-Keung Wong
Author-Workplace-Name:
 Department of Finance and Big Data Research Center, Asia University Department of Economics and Finance, Hang Seng 
	Management College Department of Economics, Lingnan University.
Author-Name:
 Michael McAleer
Author-Workplace-Name:
 Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of 
	Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of 
	Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.
Title: Specification Testing of Production in a Stochastic Frontier Model
Abstract: Parametric production frontier functions are frequently used in stochastic frontier models, but there do not seem to be any empirical 
	test statistics for its plausibility. To bridge the gap in the literature, we develop two test statistics based on local smoothing and 
	an empirical process, respectively. Residual-based wild bootstrap versions of these two test statistics are also suggested. The 
	distributions of technical inefficiency and the noise term are not specified, which allows specification testing of the production 
	frontier function even under heteroscedasticity. Simulation studies and a real data example are presented to examine the finite sample 
	sizes and powers of the test statistics. The theory developed in this paper is useful for production mangers in their decisions on 
	production.
Classification-JEL: C0, C13, C14, D81.
Keywords: Production frontier function; Stochastic frontier model; Specification testing; Wild bootstrap; Smoothing process; Empirical process; 
	Simulations.
Length: 23 pages 
Creation-Date: 2017-10
Number: 2017-23
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1723.txt
File-URL: https://eprints.ucm.es/id/eprint/45180/1/1723.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1723