Does Accounting for Inefficiency Affect the Time-Varing Short and Long-Run Returns to Scale?

The returns to scale for nineteen South Asian countries are estimatedusing window and cumulative rolling stochastic frontier regression analysis.The stochastic frontier analysis accounts for technical inefficiency of Hicksnon-neutral technology production function in the estimation of the returnsto scale. The window rolling regression and cumulative rolling regressionallows the estimation of short and long run time-varying returns to scale,respectively. Empirical application to Asian agriculture sector using Foodand Agricultural Organization data from 1961-2008 indicates returns toscale are under (over) estimated by the traditional panel models in theshort (long) run time-varying estimation. The time-varying estimates ofreturns to scale indicate decreasing trend in the short run compared tolong run analysis.Keywords: Asian agriculture sector, stochastic frontier analysis, windowand cumulative time-varying input elasticities and returns to scale, one-wayfixed effect, 1961-2008.