Comparison Of Stochastic Frontier Approaches For Estimating National Efficiency: An Application To Sub-Saharan African Countries

Abstract

In this paper, we attempt to estimate pure national (technical) efficiency for 19 SSA countries over the 1960-2010 period. In doing this, we compare conventional stochastic frontier models for panel data with several recently developed models that seek to control for unobserved heterogeneity in the inefficiency component. We find that the ‘true’ random effects model that treats unobserved heterogeneity in our national dataset generates more reasonable efficiency estimates. Moreover, the results confirm that most SSA countries operate far from the efficient frontier.