where tr 2 = o.2 + %2, @(.) is the standard normal
cumulative distribution function, and A is a constant
which can be ignored. Following Jondrow et al.
(1982), we obtain estimates of ~.:t from the conditional mean of z It given the estimated residuals e/t.
These are given by
= - -
0"0"r
cr~+ trv ]
(7)
where 4,(.) is the standard normal density function.
The estimated value of 7 ft provides an estimate of
the random efficiency variation effect.