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


From   Nick Cox <njcoxstata@gmail.com>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier
Date   Thu, 16 May 2013 11:57:22 +0100

The implication seems to be that Stata [sic] is being awkward or
difficult here, but it can hardly do otherwise.

The best answer, I think, is to include only those indicator variables
whose coefficients you want to talk about substantively. This can be
regarded as an example of a more general principle, not to use a model
you don't understand.

Nick
njcoxstata@gmail.com


On 16 May 2013 11:50, Alexander <alex.lee.kotra@gmail.com> wrote:
> 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:
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>>> *   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
>>
>>
>> *
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> *
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