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Re: st: stochastic frontier model with technical efficiency determining factors


From   Natalie Trapp <[email protected]>
To   [email protected]
Subject   Re: st: stochastic frontier model with technical efficiency determining factors
Date   Wed, 16 Feb 2011 11:07:44 +0100

Dear Prof. Hughes,

thank you very much for your kind reply.
I will try to write an extended version of xtfrontier suitable for the B&C 1995 model.

Kind regards,
Natalie

Am 15/02/2011 15:51, schrieb Gordon Hughes:
Nathalie,

In Stata you have to use -frontier- if you want to make the efficiency term a function of explanatory variables - this is referred to as the conditional means model. There is a cost to this because frontier does not offer a cluster option for estimating the variance-covariance matrix which is where the panel nature of the data would have an effect.

Outside Stata it is possible to carry out panel estimation of frontier models with conditional means using Limdep, since much of the literature on this approach originates from work by William Greene, the primary author of Limdep. For my own purposes, I wrote a script to estimate this type of model in gretl, which is an open source econometrics package.

Since any such generalisation is basically a matter of modifying the likelihood function, it would not be hugely difficult to write an extended version of -xtfrontier- to incorporate conditional means of the truncated normal distribution. However, I would warn that it can be very difficult to get such estimators to converge and they are often quite sensitive to the starting values.

Gordon Hughes
[email protected]

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