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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: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/faqs/resources/statalist-faq/ > * http://www.ats.ucla.edu/stat/stata/ * * 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:*Nick Cox <njcoxstata@gmail.com>

**References**:**st: Stochastic Frontier Analysis, time-varying effects cost frontier***From:*Alexander Lee <alex.lee.kotra@gmail.com>

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

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