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Estimating Monotone Concave Stochastic Production Frontiers

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<mark>Journal publication date</mark>30/06/2022
<mark>Journal</mark>Journal of Business and Economic Statistics
Issue number3
Number of pages12
Pages (from-to)1403-1414
Publication StatusPublished
Early online date30/06/21
<mark>Original language</mark>English


Recent research shows that the search for Bayesian estimation of concave production functions is a fruitful area of investigation. In this article, we use a flexible cost function that satisfies globally the monotonicity and curvature properties to estimate features of the production function. Specification of a globally monotone concave production function is a difficult task which is avoided here by using the first-order conditions for cost minimization from a globally monotone concave cost function. The problem of unavailable factor prices is bypassed by assuming structure for relative prices in the first-order conditions. The new technique is shown to perform well in a Monte Carlo experiment as well as in an empirical application to rice farming in India.