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st: Obtaining profit efficiency with constant added to the profit


From   "Yuki Takahashi" <g116013t@yamata.icu.ac.jp>
To   statalist@hsphsun2.harvard.edu
Subject   st: Obtaining profit efficiency with constant added to the profit
Date   Mon, 9 May 2011 17:47:28 +0900

Dear Stata Users


I would like to obtain profit efficiency using "frontier" command. I add
constant to the profit measure so that I do not lose observations with
negative profit.

Calculation of profit efficiency is (based on Berger and Mester (1997)):
Profit Efficiency = (exp(f)*exp(u)-constant)/(exp(f)*exp(u_max)-constant)
where f is production function, u is log of inefficiency term, and u_max
is log of inefficiency of the most efficient bank.

However, I could not calculate this, because I could not obtain
(prediction of) froduction function.

I would like to ask how to calculate profit efficiency using Stata.

PS: I know if I do not add constant to the profit, then I can obtain
profit efficiency by: te/te_max.

Thank you very much in advance for your kind advice.

Sincerely
Yuki Takahashi
International Christian University

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