A time-varying true individual effects model with endogenous regressors

Kutlu, Levent; Tran, Kien C.; Tsionas, Efthymios G.

doi:10.1016/j.jeconom.2019.01.014

Cited by 60 publications

(24 citation statements)

References 56 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The model has the following form:

{lnc}_{it} = f ((),, x_{italicit}, β) + v_{it} + u_{it},

u_{it} = G ((), t) \cdot u_{i}; G ((), t) = italicexp ([], - η ((), t - T_{i})),

u_{i} ~ N^{+} ((),, μ_{i}, σ_{u, i}^{2}) = u_{i} ~ N^{+} ((), ψ_{0} + z ´_{i} \cdot ψ, \exp ((), ω_{u 0} + z ´_{u, i} \cdot ω_{u})),

v_{it} ~ scriptN ((),, 0, σ_{v, italicit}^{2}) = scriptN ((),, 0, \exp ((), ω_{v 0} + z ´_{v, italicit} \cdot ω_{v})) .

We are aware that our methodology does not allow us to control the endogeneity previously mentioned that could exist between the turnout and the institutional efficiency, so that the estimate of the possible effect can only reflect a non‐causal relationship. Although Amsler, Prokhorov, and Schmidt () and Kutlu, Tran, and Tsionas () have developed econometric procedures that allow environmental variables to be endogenous in the sense that they are correlated with the specific inefficiency component, neither of these studies solved this problem in Battese and Coelli's () stochastic frontier model in a single step, which is the basis upon which we developed all the theoretical considerations that we have assumed.…”

Section: Methodsmentioning

confidence: 99%

Turnout, political strength, and cost efficiency in Spanish municipalities of the autonomous region of Galicia: Evidence from an alternative stochastic frontier approach

Buch-Gómez

Cabaleiro-Casal

2020

Papers in Regional Science

View full text Add to dashboard Cite

The scientific literature has used different theoretical arguments and methodological alternatives to attempt to demonstrate whether both electoral turnout and the strength of the incumbent majority influence the cost efficiency of municipal governments, reaching inconclusive results. We provide new arguments and employ a methodology that overcomes some of the limitations of the previous studies. Our research confirms a direct association between electoral turnout and municipal cost efficiency in the Spanish region of Galicia. Moreover, the strength of the incumbent majority has a significant negative effect on cost efficiency, contradicting the frequently used explanations that are based on government inaction or the common-pool problem. KEYWORDS cost efficiency, electoral turnout, municipalities, political strength, stochastic frontier JEL CLASSIFICATION

show abstract

“…The model has the following form:

{lnc}_{it} = f ((),, x_{italicit}, β) + v_{it} + u_{it},

u_{it} = G ((), t) \cdot u_{i}; G ((), t) = italicexp ([], - η ((), t - T_{i})),

u_{i} ~ N^{+} ((),, μ_{i}, σ_{u, i}^{2}) = u_{i} ~ N^{+} ((), ψ_{0} + z ´_{i} \cdot ψ, \exp ((), ω_{u 0} + z ´_{u, i} \cdot ω_{u})),

v_{it} ~ scriptN ((),, 0, σ_{v, italicit}^{2}) = scriptN ((),, 0, \exp ((), ω_{v 0} + z ´_{v, italicit} \cdot ω_{v})) .

Section: Methodsmentioning

confidence: 99%

Turnout, political strength, and cost efficiency in Spanish municipalities of the autonomous region of Galicia: Evidence from an alternative stochastic frontier approach

Buch-Gómez

Cabaleiro-Casal

2020

Papers in Regional Science

View full text Add to dashboard Cite

show abstract

“…The violation of this assumption may bias efficiency estimates. A generalization of true fixed effects model ofGreene (2005aGreene ( , 2005b to the endogeneity case as done byKutlu et al (2017) may overcome such difficulties in the panel data context.…”

mentioning

confidence: 99%

School district consolidation policies: endogenous cost inefficiency and saving reversals

Karakaplan

Kutlu

2017

Empir Econ

Self Cite

View full text Add to dashboard Cite

Some education policy studies suggest that consolidation of public school districts saves resources. However, endogeneity in cost models would result in incorrect estimates of the effects of consolidation. We use a new stochastic frontier methodology to examine district expenditures while handling endogeneity. Using the data from California, we find that the effects of student achievement and education market concentration on expenditure per pupil are substantially larger when endogeneity is handled. Our findings are robust to concerns such as instrumental variable adequacy and spatial interactions. Our consolidation simulations indicate that failure to address endogeneity can result in unrealistic expectations of savings.

show abstract

“…Amsler et al (2016Amsler et al ( , 2017 relax the conditional independence assumption for " s it andũ it by using a copula approach. Kutlu et al (2018) show by simulations that if the …rm-speci…c individual e¤ects are included in the model, even if " s it andũ it are correlated conditionally, the estimates are still reasonable. When it is di¢ cult to …nd instruments for endogenous variables, one may use the copula approach proposed by Tran and Tsionas (2015).…”

Section: Ptmentioning

confidence: 94%

“…In this setting, v it and u it terms are assumed to be independent, which can be a questionable assumption in a variety of settings. Similar to Kutlu (2010), Karakaplan and Kutlu (2017a, b), and Kutlu et al (2018), we use a limited information maximum likelihood based approach to handle the endogeneity issue that occurs when the two-sided error term is correlated with the regressors or u it . The approach solves the endogeneity issue by including a bias correction term in the model.…”

Section: Ptmentioning

confidence: 99%

“…If it is believed there is a mixture of e¢ cient and ine¢ cient …rms in the sample, it is possible to apply the model of Tran and Tsionas (2016). 20 Finally, one can disentangle …rm speci…c heterogeneity from ine¢ ciency by using variations of true-…xed e¤ects (or true-random e¤ects) model of Greene (2005aGreene ( , 2005b) that allow endogeneity as in Kutlu et al (2018). For example, in the airport and banking cost e¢ ciency contexts Kutlu et al (2018) and Kutlu and McCarthy (2017), respectively, illustrate that e¢ ciency estimates can be substantially di¤erent if productive unit heterogeneity is not controlled in the estimations.…”

Section: Ptmentioning

confidence: 99%

See 1 more Smart Citation

Estimation of cost efficiency without cost data

Kutlu

Wang²

2018

J Prod Anal

Self Cite

View full text Add to dashboard Cite

One of the advantages of conduct parameter games is that they enable estimation of market power without total cost data. In line with this, we develop a conduct parameter based model to estimate the …rm spe-ci…c "marginal cost e¢ ciency"and conduct without using total cost data. The marginal cost e¢ ciency is an alternative measure of e¢ ciency that is based on deadweight loss. We illustrate our methodology by estimating …rm-route-quarter speci…c conducts and marginal cost e¢ ciencies of U.S. airlines for Chicago based routes without using route-level total cost data.

show abstract

A time-varying true individual effects model with endogenous regressors

Cited by 60 publications

References 56 publications

Turnout, political strength, and cost efficiency in Spanish municipalities of the autonomous region of Galicia: Evidence from an alternative stochastic frontier approach

Turnout, political strength, and cost efficiency in Spanish municipalities of the autonomous region of Galicia: Evidence from an alternative stochastic frontier approach

School district consolidation policies: endogenous cost inefficiency and saving reversals

Estimation of cost efficiency without cost data

Contact Info

Product

Resources

About