"The Stochastic Frontier Model with Ordered Multiple Choices" (Job Market Paper)
(Revise and Resubmit at Journal of Productivity Analysis)
This paper develops the stochastic frontier model with multiple endogenous regimes to solve biased and inconsistent estimates due to sample selection bias. If we encompass heterogeneous observations into one regression equation, then the estimated parameters may be invalid. Moreover, if heterogeneous observations did not randomly fall into regression equations with reasonable coefficients, this statistically implies that sample selection bias exists. This paper extends the stochastic frontier model with two endogenous regimes to include multiple regimes and expand the empirical application. Based on the sample selection/regime-switching information, I derived the closed form of the likelihood function and the estimator of the technical efficiency index for the proposed model. Additionally, I rendered an estimate using the maximum likelihood estimation. In this empirical study, I analyzed the cost efficiency of doctoral-granting universities in the United States and applied this to the proposed model with three regimes. Evidence suggests that considering sample selection and the multiple-regime model is necessary when observations are heterogeneous.
"The Heckman Selection Model with Stochastic Frontier Analysis and Endogeneity"
This paper combines the double hurdle model and stochastic frontier model with ordered multiple choices, allowing for the two choices in the second selection stage to be expanded to multiple possible choices. By doing so, we can correct for the sample selection bias that may arise from a two-stage selection instead of a one-stage selection, and also take into account heterogeneous observations. For the proposed model, I derived the closed form of the likelihood function and the estimator of the technical efficiency index based on the sample selection information. In the empirical study, I studied the production efficiency of the labor market in the United States. Evidence suggests that considering a multiple-regime model in the second selection stage is necessary when observations are heterogeneous. Otherwise, the estimated production structure and technical efficiency indices are invalid.
Work in Progress
“The Impact of Higher Education Expansion on Worker’s Wage Efficiency: Extension and Application of the Stochastic Frontier Model”
“The Zero Inefficiency and Latent Class Stochastic Frontier Model and its Application”