Efficiency in producing life satisfaction: A stochastic frontier analysis

We employ a semiparametric stochastic frontier model with ordinal outcomes to study efficiency in producing overall life satisfaction. Inefficiency is specified as an unknown function of discrete characteristics using a nonparametric Nadaraya–Watson estimator. A Bayesian procedure is developed to estimate latent variables and model parameters, including the bandwidths of the nonparametric component. The empirical analysis examines the role of the Big Five personality traits and individual resilience, showing that individuals who are more extraverted, agreeable, conscientious, and resilient, or less neurotic, tend to be more efficient in converting satisfaction across multiple life domains into overall life satisfaction.