Abstract
In this paper we merge techniques from the e¢ ciency literature with spatial econometric techniques. In particular, we combine calculation of e¢ ciency from the unit speci…c eects with the spatial autoregressive model to develop a spatial autoregressive frontier model for panel data. Features of the modeling include time-varying e¢ ciency and estimation of own and spillover returns to scale. The model is applied to aggregate production in European countries over the period 1995 2008. Among other things, we …nd that production in the sample average country is characterized by increasing returns to scale when we allow for returns to scale spillovers from other countries, and constant returns when these spillovers
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