This paper deals with estimation of a production technology where endogeneous choice of input and output variables is explicitly recognized. In particular, we assume that producers maximize return to the outlay (RO). For simplicity and tractability we start with a Cobb–Douglas transformation...

Cost efficiency of banks in 20 former socialist emerging economies is analyzed using a novel methodology - a latent class stochastic efficiency frontier model - that explicitly accounts for unobserved differences in technological regimes due to the heterogeneity of economic environments in which...

This paper examines the impact of regulatory reform on the performance of Spanish savings banks. To this end it uses panel data for the period 1986-1995 and a flexible variable profit function that incorporates time-varying technical efficiency. The focus is whether increased competition brought...

This study deals with modeling of production risk by means of a two-step procedure. In contrast to earlier studies of production risk, we do not immediately adopt restrictive functional forms for the risky production technology. We first test for the presence of production risk. If production...

In industries characterized by frequent innovation and high productivity growth, substantial variation in produced quantity and input use may occur, leading to increased costs. An effect that has received little attention is that inefficiency can exacerbate environmental impacts. This effect is...