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From |
Viktor Slavtchev <viktor.slavtchev@uni-jena.de> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: technical efficiency using -xtrc- |

Date |
Thu, 07 Feb 2008 09:27:29 +0100 |

Scott,

thank you very much for recommending -frontier-. I am already aware of -frontier-.

I just wanted to compare both alternative way to measure efficiency (-xtrc- and -frontier-). Just to see whether there are differences, whether the results are 'robust'.

best regards

viktor

Scott Merryman wrote:

Why are you using -xtrc- to estimate efficiency and not -frontier- or

-xtfrontier- ?

Scott

On Feb 4, 2008 2:48 AM, Viktor Slavtchev <viktor.slavtchev@uni-jena.de> wrote:

Dear all,*

I wish to estimate the technical efficiency at firm level in panel data.

The production function (Cobb-Douglas) is considered to have one output

and one input, y = a * x^beta

After taking logs of both sides I try to estimate the following equation:

y[i,t]=alpha[i] + beta[i]*x[i,t] + e[i,t].

The technical efficiency can be computed as:

TE[i,t]=exp(y[i,t] - y'[i,t]),

where y[i,t] is the firm's actual output (not the estimated).

y'[i,t] is the technical frontier computed considering the maximum

values for alpha and beta: y'[i,t]=max_i(alpha[i]) +

max_i(beta[i])*x[i,t] + e[i,t].

That is the firm's observed output is compared to the maximum possible

output, i.e. if the firm's production function would have the largest

possible intercept and the largest possible slope.

To estimate the alpha and beta I use -xtrc-. However, and that's my

problem, the interval for the estimates of both, alpha and beta is huge.

Considering the slope (beta), the values become in some cases even

negative. Given the huge variation in alpha and beta, the efficiency

measure appears in some cases implausible small.

Does anybody has more experience with estimating efficiency? Any help is

greatly appreciated.

Best regards,

viktor

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**Follow-Ups**:**Re: st: technical efficiency using -xtrc-***From:*"Scott Merryman" <scott.merryman@gmail.com>

**References**:**st: technical efficiency using -xtrc-***From:*Viktor Slavtchev <viktor.slavtchev@uni-jena.de>

**Re: st: technical efficiency using -xtrc-***From:*"Scott Merryman" <scott.merryman@gmail.com>

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