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Re: st: xtfrontier fixed and random

From   "Rodrigo A. Alfaro" <>
To   <>
Subject   Re: st: xtfrontier fixed and random
Date   Wed, 7 Feb 2007 10:27:24 -0500


It would be good if you take a look of the first chapters of "Stochastic 
Frontier Analysis" Subal, C Kumbhakar, C Lovell (2004). I remember something 
called COLS that it seems like FE estimation. What Frontier (Coelli 
software) and -xtfrontier- does is RE. Also William Green has some paper in 
the area that could be downloaded at his webpage.


----- Original Message ----- 
From: <>
To: "Francesco D'Amico" <>
Cc: <>
Sent: Tuesday, February 06, 2007 10:28 AM
Subject: Re: st: xtfrontier fixed and random

Random effects is the default choice for the idiosyncratic error term (I 
have no idea about the fixed effects - i.e. if it is feasible to use dummies 
for the fixed effects or not). However, I suggest you to move to package 
Frontier 4.1 (or subsequent versions, if they exist) by Tim Coelli (you 
should find it at or something 
like that). It is a few hundred kilobytes, it is provided for free, it is 
easy-to-use, it has a small manual with some examples that are very useful 
and just a bit of the underlying statistics, and I regret to say that I 
found it to be better than Stata ('s official command for panels). In 
particular, Frontier 4.1 let you express the technical inefficiency term as 
a linear combination of some variables. INEXPLICABLY, Stata (just-updated, 
Intercooled, version 9.2) let you do this only for the cross-sectional 
command -frontier-, but not for the panel counterpart -xtfrontier-. In the 
latter command, the inefficiency term can be only a random variable with 
truncated-normal distribution, or a random variable with truncated-normal 
distribution multiplied by a specific function of time (exponential decay).

Please remember that, if you need not to be bound to use only 1 output 
measure (dependent variable), or a specific functional form for the 
production frontier, you may use data envelopment analysis (not available on 
Stata to my best knowledge, but a program, DEAP, should be provided on the 
same webpage). However, a major weakness of data envelopment analysis is 
that it is deterministic, i.e. it does not distinguish between technical 
inefficiency and noise. Moreover two-stage estimation (i.e., calculation of 
efficiency scores and regression of these scores against exogenous 
variables) is problematic.

At 02.33 06/02/2007 -0500, you wrote:
>I'm beginning to work with xtfrontier and i was wondering to know in
>which way i can impose a fixed-effects or a random-effects panel model.
>Thanks everybody.

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