A Spatial Autoregressive Production Frontier Model for Panel Data : With an Application to European Countries

In this paper we merge techniques from the efficiency literature with spatial econometric techniques. In particular, we combine calculation of efficiency from the unit speci c effects with the spatial lag model to develop a spatial autoregressive frontier model for panel data. Features of the modeling include time-varying efficiency and estimation of own and spillover returns to scale. The model is applied to production in European countries over the period 1995-2008. Among other things, we fi nd that production in the sample average country is characterized by increasing returns to scale when we allow for returns to scale spillovers and decreasing returns when these spillovers are ignored