Semiparametric stochastic frontier models for clustered data

The mixed model approach to semiparametric regression is considered for stochastic frontier models, with focus on clustered data. Standard assumptions about the model component representing the inefficiency effect lead to a closed skew normal distribution for the response. Model parameters are estimated by a generalization of restricted maximum likelihood, and random effects are estimated by an orthodox best linear unbiased prediction procedure. The method is assessed by means of Monte Carlo studies, and illustrated by an empirical application on hospital productivity. (C) 2010 Elsevier B.V. All rights reserved.