# st: Problems Stochastic Frontier Analysis

 From erik.brouwer@nl.pwc.com To statalist@hsphsun2.harvard.edu Subject st: Problems Stochastic Frontier Analysis Date Tue, 3 Feb 2004 15:33:50 +0100

```Dear reader,

I have some trouble with performing a Stochastic Frontier Analysis in Stata
vs8.0. I hope you can help me out, the following is the problem:

The generated output from my Stata set-up gives comparable but different
output then my Limdep set-up (with same input):

the coefficients only differ by small percentages, this need not be a
problem
Stata gives an extreme big  t-value, which seems quiet akward
as Limdep gives inefficiency numbers between 0 and 1, but Stata gives
'u' and 'te' values with the same value as 'xb' and the fitted dependent
variable (lnTKhat) (with value around 14). Clearl;y this is not correct.
(Limdep: Inefficiency observation 1=.1651,  Stata: te obs 1 = 14,0888)

Can you please let me know what the problem is for giving wrong 'u' and
'te' values?

see the following log

frontier lnTK lnZT, d(e) cost;
Stoc. frontier normal/exponential model           Number of obs   =
15
Wald chi2(1)    =
1.115e+12
Log likelihood =  8.5130782                       Prob > chi2     =
0.0000

------------------------------------------------------------------------------
lnTK |      Coef.   Std. Err.      z    P>|z|     [95% Conf.
Interval]
-------------+----------------------------------------------------------------
lnZT |   1.244566   1.18e-06        .   0.000     1.244563
1.244568
_cons |  -4.327623   .0000181        .   0.000    -4.327659
-4.327588
-------------+----------------------------------------------------------------
/lnsig2v |  -39.73655   977.6138    -0.04   0.968    -1955.824
1876.351
/lnsig2u |  -3.135077   .5163978    -6.07   0.000    -4.147198
-2.122956
-------------+----------------------------------------------------------------
sigma_v |   2.35e-09   1.15e-06                             0
.
sigma_u |   .2085579   .0538494                      .1257324
.3459441
sigma2 |   .0434964   .0224614                     -.0005272
.08752
lambda |   8.87e+07   .0538494                      8.87e+07
8.87e+07
------------------------------------------------------------------------------
Likelihood-ratio test of sigma_u=0: chibar2(01) = 7.84   Prob>=chibar2 =
0.003

. predict lnTKhat;
(option xb assumed; fitted values)
. predict xb;
(option xb assumed; fitted values)
. predict u;
(option xb assumed; fitted values)
. predict te;
(option xb assumed; fitted values)
. list lnTK lnTKhat xb u te;

+------------------------------------------------------+
|     lnTK    lnTKhat         xb          u         te |
|------------------------------------------------------|
1. | 14.16382   14.00888   14.00888   14.00888   14.00888 |
2. | 14.32893   14.30058   14.30058   14.30058   14.30058 |
3. | 16.78383   16.78383   16.78383   16.78383   16.78383 |
4. | 13.81136   13.81136   13.81136   13.81136   13.81136 |
5. | 13.54609   13.30281   13.30281   13.30281   13.30281 |
etc

Thanks and regards,

Erik Brouwer
brouwer20@chello.nl

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