Modelling spillover effects in spatial stochastic frontier analysis

In the last two decades, authors have begun to expand classical stochastic frontier (SF) models in order to include also some spatial components. Indeed, firms tend to concentrate in clusters, taking advantage of positive agglomeration externalities due to cooperation, shared ideas and emulation, resulting in increased productivity levels. Until now scholars have introduced spatial dependence into SF models following two different paths: evaluating global and local spatial spillover effects related to the frontier or considering spatial cross-sectional correlation in the inefficiency and/or in the error term. In this thesis, we extend the current literature on spatial SF models introducing two novel specifications for panel data. First, besides considering productivity and input spillovers, we introduce the possibility to evaluate the specific spatial effects arising from each inefficiency determinant through their spatial lags aiming to capture also knowledge spillovers. Second, we develop a very comprehensive spatial SF model that includes both frontier and error-based spillovers in order to consider four different sources of spatial dependence (i.e. productivity and input spillovers related to the frontier function and behavioural and environmental correlation associated with the two error terms). Finally, we test the finite sample properties of the two proposed spatial SF models through simulations, and we provide two empirical applications to the Italian accommodation and agricultural sectors. From a practical perspective, policymakers, based on results from these models, can rely on precise, detailed and distinct insights on the spillover effects affecting the productive performance of neighbouring spatial units obtaining interesting and relevant suggestions for policy decisions.