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From |
Federico Belotti <f.belotti@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

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

Date |
Thu, 16 May 2013 13:17:09 +0200 |

While I perfectly agree with Nick, I would like to be sure that your problem is not the dummy variables trap. What do you mean for "...(one from each set)..."? Federico On May 16, 2013, at 12:57 PM, Nick Cox wrote: > 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: >>>> * 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/ > * > * 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/

**Follow-Ups**:**Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier***From:*Alexander <alex.lee.kotra@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>

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

**Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier***From:*Nick Cox <njcoxstata@gmail.com>

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