Estimation and Efficiency Evaluation of Stochastic Frontier Models with Interval Dependent Variables

This paper considers the maximum likelihood estimation of a stochastic frontier production function with an interval outcome. We derive an analytical formula for calculating the likelihood function of the interval stochastic frontier models. Monte Carlo experiments reveal that the finite sample performance of our method is promising even though the sample size is relatively moderate. We also provide an exact formula for evaluating the technical efficiency with interval outcome. We apply our method to measure the information inefficiency in the labor market for newly graduated college students in Taiwan