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st: Stochastic Frontier Analysis, time-varying effects cost frontier


From   Alexander Lee <alex.lee.kotra@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Stochastic Frontier Analysis, time-varying effects cost frontier
Date   Sat, 11 May 2013 20:23:34 +0400

Dear Statalist members,

Having read previous posts on the Stochastic Frontier Analysis, I
still have questions regarding
its implementation, particularly the so-called Battese and Coeli
(1995) random time-varying effects
model is of interest to me.

My work includes a panel data on several firms, I attempt to explore
their cost efficiency,
change of the efficiency scores with time and the impact of the bank's
type on efficiency (ownership,
location, etc.). I do that with the -sfpanel command, realized in his
paper by Prof. F. Belotti. I do
not assume heteroscedasticity neither in the inefficiency term nor in
the error term.

I have some questions on that and would appreciate any insights:


1. When I implement a translog form of the frontier model, the
iterations won't converge

(BFGS stepping has contracted, resetting BFGS Hessian)


I believe that all the data is properly scaled and there is a larger
number of observations.

I have also tried to do this with -difficult option.


What could be a reason for this?

2. If I could estimate the Stochastic Frontier model, which includes
total costs as dependant
variable and input prices and outputs as regressors and obtain the
efficiency scores, I fail to
understand how the firm types should be accounted for in this
one-stage model? Should they simply
be included in the frontier model as new (dummy) variables? However in
the original 1995 paper I
could see that firms' effects are included in a separate Inefficiency
Model, does that mean that the
inefficiencies obtained from the frontier should be regressed on firm
types in a separate exercise?


Thank you,

Best regards
Alexander Lee
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