A note on the likelihood ratio test on the equality of group frontiers

- A likelihood ratio test on the equality of group production frontiers is proposed.
- The heterogeneity in the error distribution may exist and should be considered in the LR test.
- We reproduce the results of Rao et al. (2004) and also demonstrate our LR test for comparison.

The empirical applications of the metafrontier analysis have largely been popularized by the publications of Battese et al. (2004), and O'Donnell et al. (2008). Prior to the estimation of the metafrontier function, it is generally suggested to conduct a likelihood-ratio (LR) test to test if all group frontiers are the same. In this short note, we point out that although the null hypothesis of the suggested LR test restricts all frontiers to be the same for all groups, the heterogeneity in the error distribution may exist and should be considered. We propose a restricted LR test as an alternative procedure.