A command to fit spatial stochastic frontier models with inefficiency spillovers

Abstract

The interdependence among decision-making units challenges the assumption of cross-sectional independence in traditional stochastic frontier models. Based on the seminal spatial Durbin specification for the frontier function, Galli (2023, Journal of the Royal Statistical Society, C ser., 72: 346-367) introduced inefficiency spillovers to measure neighborhood effects related to the inefficiency determinants. This article presents a new command, sfsd, that fits the comprehensive spatial stochastic frontier model that Galli (2023) proposed, accommodating various spatial and nonspatial specifications in both the frontier and the inefficiency equations. sfsd is the first command that includes different typologies of spatial spillovers in a stochastic frontier framework, facilitating the investigation of contemporary research topics such as agglomeration and technology diffusion at both the firm and the regional levels. The description, options, and illustrative examples for the command are outlined in this article.

Keywords

st0771 sfsd spatial stochastic frontier models spillover effects technical efficiency inefficiency spillovers

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