Normal Half Normal Model for the Incorporation of exogenous factors on Efficiency analysis and its application

Abstract

Abstract-Present study focused on the effect of exogenous factors on the efficiency level of a firm. In this paper we have derived a model by assuming normal-half normal distribution for the error terms v and u .Parameter estimation was done using maximum likelihood estimates. In order to assess the impact of exogenous factors on the efficiencies of a firm the model is applied to a data of 155 maize farmers. Weather, Economic conditions of farmer, Market status and damages to the crop due to bird attack are considered as exogenous factors for the study. Results showed that damages had a significant effect on the efficiency of production output. Goodness of fit test showed that our model is fitted with baseline comparison values. Null hypothesis is rejected. Computational analysis was done using SEM in Stata.