We make an extensive simulation analysis in order to investigate the consequences of ignoring the potentially complex and data dependent effects of allocative inefficiency on the estimation of stochastic frontier panel data models. We compare five estimators in a variety of settings using various criteria to measure performance. All estimators give biased parameter estimates. Most of the time system estimators perform worse than single equation estimators. This result holds even when we try to approximate the allocative inefficiency.
Available at: http://works.bepress.com/levent_kutlu/2/