Re: st: Stochastic frontier model_ constraining coefficients

[Declan Curran <declan.curran@dcu.ie>]

Hi Scott,

Thank you for your detailed response. Much appreciated!

Best regards,

Declan


Scott Merryman wrote:
> In a translog production function, returns to scale involves more then
> just the coefficients on labor and capital.
>
> If the production function is written out as:
>
> Y = b0 + b1Labor + b2Capital + b3Time + .5[b4Capital^2 + b5Labor^2 + b6Time^2] +
> b7Capital*Labor + b8Capital*Time + b9Labor*Time + u_it - v_it
>
> where all output capital and labor are in logs.
>
> The elasticity of output with respect to capital and labor are:
>
> e_k = b2 + b4Capital + b7Labor + b8Time
>
> e_l = b1 + b5Labor + b7Capital + b9Time
>
>
>  e_k + e_l = Returns to Scale.  The translog production function may
> exhibit increasing returns for some input combinations and decreasing
> returns for others.
>
>
> Scott
>
>
> On Thu, Sep 16, 2010 at 3:03 PM,  <Declan.Curran@dcu.ie> wrote:
>   
> > Hello, I hope you can help me:
> >
> > I am running a time varying decay (panel) stochastic frontier model for a
> > translog production function. The model converges but my capital and labour
> > coefficients are -0.52 and 1.52, respectively (see output below). So, they
> > add to 1 (constant returns) but they are not between 0-1.
> >     
> *
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>   

--
Dr. Declan Curran
DCU Business School
Dublin City University
Dublin 9
Ireland 

Email: declan.curran@dcu.ie
Tel: +353 (0)1 7006952

*
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