A panel data parametric frontier technique for measuring total-factor energy efficiency: An application to Japanese regions

Using the stochastic frontier analysis model, we estimate TFEE (total-factor energy efficiency) scores for 47 regions across Japan during the years 1996-2008. We extend the cross-sectional stochastic frontier model proposed by Zhou et al. (2012) to panel data models and add environmental variables. The results provide not only the TFEE scores, in which statistical noise is taken into account, but also the determinants of inefficiency. The three stochastic TFEE scores are compared with a TFEE score derived using data envelopment analysis. The four TFEE scores are highly correlated with one another. For the inefficiency estimates, higher manufacturing industry shares and wholesale and retail trade shares correspond to lower TFEE scores.