st: Technical efficiency

[Nabin Kafle <nkafle89@gmail.com>]

I want to calculate the technical efficiency from stochastic frontier.
I want to include the exogeneous variables time and price as directly
as a regressor i.e assume the exogenous variables affect the shape of
the production technology. Now after running the frontier command, i
can use "predict ...,te" to calculate the efficiency net of the
exogenous variable. How can I calculate the gross inefficiency?

"Coelli, T., Perelman, S., Romano, E., 1999. Accounting for
environmental influences in stochastic frontier models: with
application to international airlines. Journal of Productivity
Analysis 11, 251-273" describes a process of estimating the gross
efficiency.

One may also obtain measures of gross efficiency (i.e.,inclusive of
environmental influences) by re-evaluating the technical efficiency
predictors with summation(Az) replaced with max{summation(Az)} where A
is the constant and z is the environmental variable. Thus all firms
will be compared with the frontier associated with the most favourable
environment.

The predictor is TE=E[exp(u)|e]. Can you explain me how can I replace
"summation(Az)" with "max{summation(Az)}" in the predictor.


Thanks,
Nabin
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