where, Ψit = {(X4/N) it � (X4/N)it-1 }/ h ((X4/N)it-1)
where both X4 and N are firm-specific time varying variables
N is not in the main equation
X4 and N are highly correlated with Yit but their ratio is not
Ψit is a dynamic efficiency term
Can I use xtfrontier to estimate this production function model?
The concept of the model is similar to that used to estimate a production
function by Olley and Pakes (1996) "Olley, G.S., and Pakes, A. 1996. The
Dynamics of Productivity in the Telecommunications Equipment Industry.
Econometrica, 64 (6): 1263-1297.
Many researchers have used MATLAB to estimate such models.
