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


From   Alexander <alex.lee.kotra@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier
Date   Thu, 16 May 2013 14:50:09 +0400

Dear Federico,

Thanks for your reply.

I have several firm types measures represented with several sets of
dummy variables

When trying to implement the -emean option, should I include all these
dummies all at once? Or should I run them separately?

If I do the former, STATA omits several dummies (one from each set)
because of collinearity and I am not sure as to how to interpret the
results.


Best regards,
Alex


On Mon, May 13, 2013 at 3:51 PM, Federico Belotti <f.belotti@gmail.com> wrote:
> Dear Alexander,
>
> my comments below
>
> On May 11, 2013, at 6:23 PM, Alexander Lee wrote:
>
>> 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?
>
> Did you impose linear homogeneity in inputs' prices? It is worth noting that such a flexible functional form could be very difficult to estimate, especially in a cost frontier framework.
>
>>
>> 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?
>
> -sfpanel- allows to estimate the Battese and Coelli (1995) model using the following syntax
>
> sfpanel c y p1 p2, cost model(bc95) emean(x1 x2)
>
> where the option -emean(x1 x2)- allows to simultaneously estimate the so-called inefficiency effects.
> Often, the inclusion of exogenous variables to model the mean of the inefficiency could help the identification of the inefficiency term itself (increasing the convergence rate).
>
> hth
> Federico
>>
>>
>> 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/
>
> --
> Federico Belotti, PhD
> Research Fellow
> Centre for Economics and International Studies
> University of Rome Tor Vergata
> tel/fax: +39 06 7259 5627
> e-mail: federico.belotti@uniroma2.it
> web: http://www.econometrics.it
>
>
> *
> *   For searches and help try:
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> *   http://www.ats.ucla.edu/stat/stata/
*
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