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

Section for Production, Markets and Policy

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.

Original language	English
Journal	Economics Letters
Volume	156
Pages (from-to)	18-21
Number of pages	4
ISSN	0165-1765
DOIs	https://doi.org/10.1016/j.econlet.2017.04.006
Publication status	Published - 1 Jul 2017

Keywords

Stochastic ray production frontier
Distance function
Multiple outputs
Primal approach
Zero output quantities

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10.1016/j.econlet.2017.04.006

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title = "New insights into the stochastic ray production frontier",

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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N2 - 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.

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

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VL - 156

SP - 18

EP - 21

JO - Economics Letters

JF - Economics Letters

ER -

New insights into the stochastic ray production frontier

Abstract

Keywords

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