In this paper, we study the ‘wrong skewness phenomenon’ in stochastic frontiers (SF), which consists in the observed difference between the expected and estimated sign of the asymmetry of the composite error, and causes
the ‘wrong skewness problem’, for which the estimated inefficiency in the whole industry is zero. We propose a more general and flexible specification of the SF model, introducing dependences between the two error components
and asymmetry (positive or negative) of the random error. This re-specification allows us to decompose the third moment of the composite error into three components, namely: (i) the asymmetry of the inefficiency term; (ii) the
asymmetry of the random error; and (iii) the structure of dependence between the error components. This decomposition suggests that the wrong skewness anomaly is an illposed problem, because we cannot establish ex ante the expected sign of the asymmetry of the composite error. We report a relevant special case that allows us to estimate the three components of the asymmetry of the composite error and, consequently, to interpret the estimated sign. We present two empirical applications. In the first dataset, where the classic SF has the wrong skewness, an estimation of our model rejects the dependence hypothesis, but accepts the asymmetry of the random error, thus justifying the sign of the skewness of the composite error. More importantly, we estimate a non-zero inefficiency, thus solving the wrong skewness problem. In the second dataset, where the classic SF does not yield any anomaly, an estimation of our model provides evidence for the presence of dependence. In such situations, we show that there is a remarkable difference in the efficiency distribution between the classic SF and our class of models.
