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SFA: negative export gap despite technical efficiency < 1 [ Reply ] By: Kathi Neuman on 2020-02-19 17:33

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Hi all, I am running an SFA, across 26 years and 72 countries. I estimate the model using the package in R. My y-variable are the exports of one country to another When I display the yhats, fitted values, is it correct to interpret them as the "potential exports"? So the exports which could be realized at the efficient frontier? I see that the fitted values are in 25% of the countries smaller than the actual exports. These are countries with a high technical efficiency score (0.5-0.8) but other countries with high TE (up to 0.7) have a positive gap. Could someone help me understand? Thank you!!