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Re: st: Stochastic frontier model_ constraining coefficients

From   Declan Curran <>
Subject   Re: st: Stochastic frontier model_ constraining coefficients
Date   Fri, 17 Sep 2010 10:56:03 +0100

Hi Scott,

Thank you for your detailed response. Much appreciated!

Best regards,


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.


On Thu, Sep 16, 2010 at 3:03 PM,  <> 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.
*   For searches and help try:

Dr. Declan Curran
DCU Business School
Dublin City University
Dublin 9
Tel: +353 (0)1 7006952

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