Journal of Productivity Analysis

, Volume 5, Issue 2, pp 171-180

First online:

Estimation of a non-neutral stochastic frontier production function

  • Clief J. HuangAffiliated withDepartment of Economics, Vanderbilt University
  • , Jin-Tan LiuAffiliated withDepartment and Graduate Institute of Economics, National Taiwan UniversityInstitute of Economics, Academia Sinica

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This article proposed a hybrid of a stochastic frontier regression. The proposed model and estimation differ from the conventional model of Aigner, Lovell, and Schmidt. The model combines a stochastic frontier regression and a truncated regression to estimate the production frontier with non-neutral shifting of the average production function. The truncated regression identifies the sources of efficiency. The article presents empirical evidence of non-neutral effects of the firm's characteristics—the age of the firms, the export ratio, and the R&D expenditure—on the frontier production function and production efficiency in the Taiwan's electronics industry.