Agglomeration effects and spatial spillovers in efficiency analysis: a distribution-free methodology

Levent Kutlu, Usha Nair-Reichert
2019 Figshare  
Technical efficiency estimates using standard stochastic frontier models do not include spillover effects, although the existence of such spillovers is well documented in the productivity literature. This paper proposes a regression-based, distribution-free estimation method applicable to both time-varying efficiency spatial stochastic frontier and fixed effects spatial autoregressive models, which is relatively easy to estimate. The empirical results from the Indian chemical industry
more » ... industry illustrate that ignoring spatial dependence may seriously distort estimates for efficiency rankings. The average overall spillover effect on a firm's efficiency is 7.20 percentage points, or an average positive spillover effect of US$4.9 million in sales revenue.
doi:10.6084/m9.figshare.7993007 fatcat:orub5p4lozca5n7bp2uxpp7ns4