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Re: st: Stochastic frontier model_ constraining coefficients
From
Scott Merryman <[email protected]>
To
[email protected]
Subject
Re: st: Stochastic frontier model_ constraining coefficients
Date
Fri, 17 Sep 2010 04:43:01 -0500
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.
Scott
On Thu, Sep 16, 2010 at 3:03 PM, <[email protected]> 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.
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