New insights into the stochastic ray production frontier

Arne Henningsen; Matej Belin; Geraldine Henningsen

doi:10.1016/j.econlet.2017.04.006

New insights into the stochastic ray production frontier

Arne Henningsen, Matej Belin, Geraldine Henningsen

Sektion for Produktion, Markeder og Politik

Abstract

The stochastic ray production frontier was developed as an alternative to the traditional output distance function to model production processes with multiple inputs and multiple outputs. Its main advantage over the traditional approach is that it can be used when some output quantities of some observations are zero. In this paper, we briefly discuss – and partly refute – a few existing criticisms of the stochastic ray production frontier. Furthermore, we discuss some shortcomings of the stochastic ray production frontier that have not yet been addressed in the literature and that we consider more important than the existing criticisms: taking logarithms of the polar coordinate angles, non-invariance to units of measurement, and ordering of the outputs. We also give some practical advice on how to address the newly raised issues.

Originalsprog	Engelsk
Tidsskrift	Economics Letters
Vol/bind	156
Sider (fra-til)	18-21
Antal sider	4
ISSN	0165-1765
DOI	https://doi.org/10.1016/j.econlet.2017.04.006
Status	Udgivet - 1 jul. 2017

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10.1016/j.econlet.2017.04.006

Citationsformater

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abstract = "The stochastic ray production frontier was developed as an alternative to the traditional output distance function to model production processes with multiple inputs and multiple outputs. Its main advantage over the traditional approach is that it can be used when some output quantities of some observations are zero. In this paper, we briefly discuss – and partly refute – a few existing criticisms of the stochastic ray production frontier. Furthermore, we discuss some shortcomings of the stochastic ray production frontier that have not yet been addressed in the literature and that we consider more important than the existing criticisms: taking logarithms of the polar coordinate angles, non-invariance to units of measurement, and ordering of the outputs. We also give some practical advice on how to address the newly raised issues.",

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author = "Arne Henningsen and Matej Belin and Geraldine Henningsen",

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AB - The stochastic ray production frontier was developed as an alternative to the traditional output distance function to model production processes with multiple inputs and multiple outputs. Its main advantage over the traditional approach is that it can be used when some output quantities of some observations are zero. In this paper, we briefly discuss – and partly refute – a few existing criticisms of the stochastic ray production frontier. Furthermore, we discuss some shortcomings of the stochastic ray production frontier that have not yet been addressed in the literature and that we consider more important than the existing criticisms: taking logarithms of the polar coordinate angles, non-invariance to units of measurement, and ordering of the outputs. We also give some practical advice on how to address the newly raised issues.

KW - Stochastic ray production frontier

KW - Distance function

KW - Multiple outputs

KW - Primal approach

KW - Zero output quantities

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DO - 10.1016/j.econlet.2017.04.006

M3 - Journal article

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JO - Economics Letters

JF - Economics Letters

ER -

New insights into the stochastic ray production frontier

Abstract

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