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Stata users,
I was running the frontier command for both a production and a cost function. While I understand that the option predict te retrieves the efficiency scores ranging between 0 and 1, when I was running the cost function I was a bit confused with the scores retrieved from the cost frontier. I got values ranging from close to 1 onwards, and I understand these need to be bound between 0 and 1. Am I right in assuming that the correct cost efficiency scores are just the inverse of the predicted efficiency scores from the predict te option? I suppose Stata is simply computing these scores in a similar way as for the production frontier, i.e. actual output/maximum output, so actual cost/maximum cost instead of maximum cost/actual cost?
Thanks in advance.
Dev
Dev Vencappa
School of Economics
University of Nottingham
University Park
Nottingham
NG7 2RD
U.K.
Tel : +44 (0)115 951 5608
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