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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 * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/faqs/resources/statalist-faq/ * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier***From:*Federico Belotti <f.belotti@gmail.com>

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