I think it would be better to take the ratio to the most efficient one...and then you will get the efficiencies ranging between [0,1]...the interpretation will be easy... as you will be having the efficiency scores relative to the most efficient ones....
You can check papers by Munir Ahmad, Boris E. Bravo-Ureta...
Actually I don't remember which of their paper talk about it... (try the one they attempted to use Fixed effect models)
Hope this will help,
Ahmed
-------------------------------
-------------------------------
Ahmed Al-Darwish
PhD Research Student
Department of Economics
University of Essex
Colchester , CO4 3SQ
Office# 0044 1206 87 4373
Mobile# 0044 7951799061
E-mail: [email protected] <mailto:[email protected]>
________________________________
From: [email protected] on behalf of Alexander Kalb
Sent: Thu 6/28/2007 7:04 AM
To: [email protected]
Subject: Antw: Re: st: xtfrontier
When I estimated my stochastic cost frontier I thought exactly the same.
But when I predicted the efficiency scores (with the command predict
efficiency, te), I got estimates lying between 1.439743 (most efficient)
and 6.81706 (most inefficient). The question now is, how one can
interpret this results, since the most efficient unit does not have the
number one (as expected) but the number 1.439743. You simply could
rescale the efficiency scores by substracting .439743 from all numbers
to get one unit with an efficiency score with 1. Then a unit with, say
an efficiency score of 1.20, can be interpreted as producing its output
with 20% above the efficient level. But I don't know if this is the
right way.
Alex
>>> "Scott Merryman" <[email protected]> 25.06.2007 16:11 >>>
I believe the measure of cost inefficiency will be be between one
(maximum efficiency) and infinity. It is measuring inefficiency as
the ratio of observed cost to minimum cost. Equivalently, the inverse,
which will be is less than or equal to one, could be used as a
measure cost of efficiency.
See also this thread:
http://www.stata.com/statalist/archive/2005-06/msg00578.html
Scott
On 6/20/07, Alexander Kalb <[email protected]> wrote:
> Dear Statalist-members,
>
> I estimated a time-varying panel data cost frontier model with the
> command "xtfrontier depvar [indepvars] [if] [in] [weight] , tvd".
After
> the estimation I wanted to get the efficiency scores with the
command
> "predict efficiency, te". Now I wonder why this estimates are not
> bounded above 1, because they range from 1.439743 to 6.81706. I
thought
> the most efficient unit should get a 1 and all other (more
inefficient)
> units should get a number higher than 1. Can anybody explain this to
> me?
>
> Thank you for your help,
> Alex
>
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