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    Investigating the impact of endogeneity on inefficiency estimates in the application of stochastic frontier analysis to nursing homes

    Access Status
    Fulltext not available
    Authors
    Mutter, R.
    Greene, William
    Spector, W.
    Rosko, M.
    Mukamel, D.
    Date
    2013
    Type
    Journal Article
    
    Metadata
    Show full item record
    Citation
    Mutter, R. and Greene, W. and Spector, W. and Rosko, M. and Mukamel, D. 2013. Investigating the impact of endogeneity on inefficiency estimates in the application of stochastic frontier analysis to nursing homes. Journal of Productivity Analysis. 39 (2): pp. 101-110.
    Source Title
    Journal of Productivity Analysis
    DOI
    10.1007/s11123-012-0277-z
    ISSN
    0895-562X
    School
    School of Economics and Finance
    URI
    http://hdl.handle.net/20.500.11937/13126
    Collection
    • Curtin Research Publications
    Abstract

    This paper examines the impact of an endogenous cost function variable on the inefficiency estimates generated by stochastic frontier analysis (SFA). The specific variable of interest in this application is endogenous quality in nursing homes. We simulate a dataset based on the characteristics of for-profit nursing homes in California, which we use to assess the impact on SFA-generated inefficiency estimates of an endogenous regressor under a variety of scenarios, including variations in the strength and direction of the endogeneity and whether the correlation is with the random noise or the inefficiency residual component of the error term. We compare each of these cases when quality is included and excluded from the cost equation. We provide evidence of the impact of endogeneity on inefficiency estimates yielded by SFA under these various scenarios and when the endogenous regressor is included and excluded from the model. © 2012 Springer Science+Business Media, LLC (outside the USA).

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