Correcting for Measurement Error in a Stochastic Frontier Model: A Fishery Context

Using data from the Mid-Atlantic surfclam fishery, this study examines the effect of measurement error on the analysis of technical efficiency. After specifying a stochastic frontier model and estimating it under naive analysis, a measurement error correction technique known as Simulation Extrapolation (SIMEX) is used to obtain less biased estimates of technical efficiency and production parameters. The SIMEX estimates of the stochastic frontier model agree with economic theory and show that important relationships between technical efficiency and vessel characteristics are present, something the naive estimates do not. Both sets of estimates show regional variation in technical efficiency, possibly due to declining landings per-uniteffort, suggesting future fishery management should take this into account.