Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 433: A Comparison of Panel Data Models in estimating Technical Efficiency

Masoomeh Rashidghalam (), Almas Heshmati (), Ghader Dashti () and Esmail Pishbahar ()
Additional contact information
Masoomeh Rashidghalam: Department of Agricultural Economics,University of Tabriz, Tabriz, Iran
Almas Heshmati: Jönköping International Business School (JIBS), Centre of Excellence for Science and Innovation Studies (CESIS),& Department of Economics, Sogang University, Seoul, South Korea, Postal: P.O. Box 1026, , SE-551 11 , Jönköping, , Sweden
Ghader Dashti: Department of Agricultural Economics,University of Tabriz, Tabriz, Iran
Esmail Pishbahar: Department of Agricultural Economics,University of Tabriz, Tabriz, Iran

Abstract: The purpose of this paper is two-fold. First, it compares the performance of various panel data models in estimating technical efficiency in production. Second, it applies various stochastic frontier panel data models to estimate the technical efficiency of Iran’s cotton production and to provide empirical evidence on the sources of technical inefficiency of cotton production using 2000-2012 panel data from Iran's 13 cotton producing provinces. The results indicate that labor and seeds are determinants of cotton production. Further, an investigation of the sources of technical inefficiency reveals that inorganic fertilizers result in reducing technical efficiency. The mean technical efficiency according to most of the models is found to be around 80 per cent. The empirical results show evidence of variations in the distribution of estimated efficiency amongst the different models. We also find a large difference in technical efficiency levels between provinces, which shows that geography and management’s impacts on technical efficiency are quite different among the provinces.

Keywords: Technical efficiency; panel data modeling; time-variant; persistent inefficiency; individual heterogeneity; model comparison; cotton production; Iran.

JEL-codes: C23; D24; Q12

31 pages, April 6, 2016

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