# RE: st: Problems Stochastic Frontier Analysis

 From erik.brouwer@nl.pwc.com To statalist@hsphsun2.harvard.edu Subject RE: st: Problems Stochastic Frontier Analysis Date Tue, 3 Feb 2004 17:43:54 +0100

```Dear David

thanks for your comment. It helps. But I have still a strange thing. If you
look at the z-values. You see very high values. Above 100.000. If I
estimate the same model specifications with Limdep I get normal z-values
(around 3). The coefficients in Limdep and Stata are almost the same. What
can explain  the enormous large z-values.

regards

erik brouwer

"David M. Drukker,
StataCorp"                      To: statalist@hsphsun2.harvard.edu
<ddrukker@stata.com>            cc:
Sent by:                        Subject:  RE: st: Problems Stochastic Frontier Analysis
owner-statalist@hsphsun2.
harvard.edu
03/02/2004 17:01

statalist

Eric Brouwer <erik.brouwer@nl.pwc.com> wrote that he was having trouble
performing Stochastic Frontier Analysis in Stata.

After the estimation command

. frontier lnTK lnZT, d(e) cost;

that produced

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

Eric typed

. 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)

He then noted that LnTKhat, xb, u, and te all had the same values.  The
problem is that Eric has not specified the options to predict for u and te.
He only gave the variables different names.

If Eric were to try

. frontier lnTK lnZT, d(e) cost;

. predict xb, xb

. predict u, u

. predict te, te

He should find that the new variables now contain the linear (xb)
predictions, the estimates of minus the natural log of the technical
efficiency via E[u_i|e_i], and estimates of the technical efficiency via
E[exp(-su_i)|e_i], respectively.

I would also like to suggest that Eric take a look at the manual entry for
the formulas that are used in computing xb, u, and te.

--David
ddrukker@stata.com

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