ABSTRACT
This chapter applies a Stochastic Frontier Analysis (SFA) approach to the European NUTS2 regions. It presents a short explanation of SFA methodology and its main assumptions. The chapter explores the production process under investigation in this contribution together with the dataset used in the analysis. It discusses the specific SFA models adopted in the application and the main results obtained. The empirical question is still whether aviation service provision influences gross domestic product (GDP) generation for European NUTS2 region. Air transport services provision (AT) is initially the unique variable considered as a factor characterising the production environment. AT is computed as the total scheduled seats by NUTS2 region. In a following step of the analysis, a measure of human capital (HC) quality and the unemployment ratio (UN) are incorporated into the analysis. Some work has been done on the treatment of endogenous variables in SFA framework.
