Modelling multi-output stochastic frontiers using copulas. (English) Zbl 1254.91532
Summary: Our aim is to introduce a new econometric methodology for multi-output production frontiers. In the context of a system of frontier equations, a flexible multivariate distribution for the inefficiency error term is used. This multivariate distribution is constructed through a copula function which allows for separate modelling of the marginal inefficiency distributions and the dependence. Specific attention to the elicitation of a sensible (improper) prior is paid and simple sufficient conditions for posterior propriety are provided. Inference is conducted through a Markov chain Monte Carlo sampler. Bayes factors are used to compare various copula specifications in the empirical context of Dutch dairy farm data, with two outputs.
MSC:
| 91B70 | Stochastic models in economics |
| 62P05 | Applications of statistics to actuarial sciences and financial mathematics |
| 91G60 | Numerical methods (including Monte Carlo methods) |
| 62F15 | Bayesian inference |
| 91B82 | Statistical methods; economic indices and measures |
| 60J22 | Computational methods in Markov chains |
| 91G70 | Statistical methods; risk measures |
| 62G05 | Nonparametric estimation |
| 62H05 | Characterization and structure theory for multivariate probability distributions; copulas |
| 62P20 | Applications of statistics to economics |
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