Robust Efficiency Analysis: Addressing Heterogeneity in Input and Output Measurement Using Stochastic Frontier Analysis

This project focuses on the impact of input-output measurement heterogeneity on efficiency analysis using Stochastic Frontier Analysis (SFA). While SFA is widely used to evaluate efficiency, existing research often overlooks how different definitions and measurements of inputs (e.g., labor, capital) and outputs (e.g., production, revenue) can lead to inconsistent efficiency estimates. The first goal is to evaluate the robustness of SFA when input-output measurements differ. The second objective is to propose methods, to address this heterogeneity and improve efficiency estimates. The findings will offer more reliable insights into the effect of exogennous variables on efficiency and contribute to better policy recommendations. This project aims to refine efficiency analysis techniques and enhance evidence-based decision-making in economics.