Costs,Efficiency,and Heterogeneity in the Telephone Industry : Stochastic Cost Frontiers of Incumbent Local Exchange Carriers

概要

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Recent research suggests that there is significant and unobserved heterogeneity across incumbent local exchange carriers in producing telephone services, and controls for unobserved heterogeneity have a tremendous effect on measures of scale and subadditivity. But sources of unobserved heterogeneity are yet to be explored. Unobserved heterogeneity may be accounted for by heterogeneous technologies used by firms or by differences in cost inefficiency. This research looks into this issue by estimating cost functions with traditional specifications but incorporating controls for unobserved heterogeneity across firms. Specifically, I estimate a translog cost function with controls for unobserved heterogeneity using a stochastic frontier approach. This approach not only allows me to test the hypothesis regarding firms' potentially heterogeneous technologies, it also allows me to estimate cost inefficiency at the firm level over time. I find that incumbent local exchange carriers may have operated on parametrically different cost frontiers and, when unobserved heterogeneity is not controlled for, cost inefficiency estimates are much higher.
青森公立大学の論文
2003-03-20