The “wrong skewness” problem: Moment constrained maximum likelihood estimation of the stochastic frontier model

Abstract

Wrong skewness in the stochastic frontier model leads to many empirical and conceptual problems. A variety of approaches have been proposed to deal with this issue. Here we offer a solution based on moment constraints of the assumed density. • Offers alternative approach to wrong skewness. • Moment constrained maximum likelihood estimation. • Find new approach outperforms standard methods. • Application reveals important empirical differences.