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From |
"Scott Merryman" <smerryman@kc.rr.com> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
RE: st: option predict te for cost frontier in stata 8.2 |

Date |
Mon, 20 Jun 2005 07:25:41 -0500 |

Yes, I believe Stata calculates efficiency as TE_i= E(Y_i|U_i, X_i)/E(Y_i|U_i=0, X_i) where Y_i is the production or actual cost of the i-th firm. In a production frontier efficiency will range from 0 to 1 while efficiency in cost frontier will ranges from 1 to infinity. This is how Coelli defined efficiency (for instance, in "A Guide to FRONTIER Version 4.1" (1996)) However, Kumbhakar and Lovell (2000, "Stochastic Frontier Analysis") do define cost efficiency as CE_i= E(Y_i|U_i=0, X_i)/E(Y_i|U_i, X_i) Scott > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu [mailto:owner- > statalist@hsphsun2.harvard.edu] On Behalf Of Dev Vencappa > Sent: Sunday, June 19, 2005 7:58 PM > To: statalist@hsphsun2.harvard.edu > Subject: Re: st: option predict te for cost frontier in stata 8.2 > > > > > > Stata users, > I made a typo in the previous email which may have confused some users, > so I'm posting it again. > 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/minimum cost instead of > minimum cost/actual cost? > > Thanks in advance for any guidance on this. > > Dev > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**Re: st: option predict te for cost frontier in stata 8.2***From:*"Dev Vencappa" <lexdvv@nottingham.ac.uk>

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