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Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier
From
Alexander <[email protected]>
To
[email protected]
Subject
Re: st: Stochastic Frontier Analysis, time-varying effects cost frontier
Date
Thu, 16 May 2013 16:08:59 +0400
Yes, I do have a balanced panel data and dummies sum to 1 within a set
being perfectly collinear forming the trap, but I don't know if there
is another way of incorporating this in the model.
I have 3 sets of dummy variables.
The first one consists of 3 variables relating to size (e.g. small,
mid and large).
The second one consists of 4 variables relating to location.
The third one consists of 3 variables relating to corporate governance.
Therefore I have in total 10 dummy variables and I would like to
separately explore the effects of size, location and corporate
governance in the frontier (e.g. performance of small vs mid vs large
or performance of centrally-located vs non-centrally vs
remotely-located or advanced vs non-advanced corporate governance
practices).
Best regards,
Alex
On Thu, May 16, 2013 at 3:17 PM, Federico Belotti <[email protected]> wrote:
> While I perfectly agree with Nick, I would like to be sure that your problem is not the dummy variables trap. What do you mean for "...(one from each set)..."?
>
> Federico
>
> On May 16, 2013, at 12:57 PM, Nick Cox wrote:
>
>> The implication seems to be that Stata [sic] is being awkward or
>> difficult here, but it can hardly do otherwise.
>>
>> The best answer, I think, is to include only those indicator variables
>> whose coefficients you want to talk about substantively. This can be
>> regarded as an example of a more general principle, not to use a model
>> you don't understand.
>>
>> Nick
>> [email protected]
>>
>>
>> On 16 May 2013 11:50, Alexander <[email protected]> wrote:
>>> Dear Federico,
>>>
>>> Thanks for your reply.
>>>
>>> I have several firm types measures represented with several sets of
>>> dummy variables
>>>
>>> When trying to implement the -emean option, should I include all these
>>> dummies all at once? Or should I run them separately?
>>>
>>> If I do the former, STATA omits several dummies (one from each set)
>>> because of collinearity and I am not sure as to how to interpret the
>>> results.
>>>
>>>
>>> Best regards,
>>> Alex
>>>
>>>
>>> On Mon, May 13, 2013 at 3:51 PM, Federico Belotti <[email protected]> wrote:
>>>> Dear Alexander,
>>>>
>>>> my comments below
>>>>
>>>> On May 11, 2013, at 6:23 PM, Alexander Lee wrote:
>>>>
>>>>> Dear Statalist members,
>>>>>
>>>>> Having read previous posts on the Stochastic Frontier Analysis, I
>>>>> still have questions regarding
>>>>> its implementation, particularly the so-called Battese and Coeli
>>>>> (1995) random time-varying effects
>>>>> model is of interest to me.
>>>>>
>>>>> My work includes a panel data on several firms, I attempt to explore
>>>>> their cost efficiency,
>>>>> change of the efficiency scores with time and the impact of the bank's
>>>>> type on efficiency (ownership,
>>>>> location, etc.). I do that with the -sfpanel command, realized in his
>>>>> paper by Prof. F. Belotti. I do
>>>>> not assume heteroscedasticity neither in the inefficiency term nor in
>>>>> the error term.
>>>>>
>>>>> I have some questions on that and would appreciate any insights:
>>>>>
>>>>>
>>>>> 1. When I implement a translog form of the frontier model, the
>>>>> iterations won't converge
>>>>>
>>>>> (BFGS stepping has contracted, resetting BFGS Hessian)
>>>>>
>>>>>
>>>>> I believe that all the data is properly scaled and there is a larger
>>>>> number of observations.
>>>>>
>>>>> I have also tried to do this with -difficult option.
>>>>>
>>>>
>>>>>
>>>>> What could be a reason for this?
>>>>
>>>> Did you impose linear homogeneity in inputs' prices? It is worth noting that such a flexible functional form could be very difficult to estimate, especially in a cost frontier framework.
>>>>
>>>>>
>>>>> 2. If I could estimate the Stochastic Frontier model, which includes
>>>>> total costs as dependant
>>>>> variable and input prices and outputs as regressors and obtain the
>>>>> efficiency scores, I fail to
>>>>> understand how the firm types should be accounted for in this
>>>>> one-stage model? Should they simply
>>>>> be included in the frontier model as new (dummy) variables? However in
>>>>> the original 1995 paper I
>>>>> could see that firms' effects are included in a separate Inefficiency
>>>>> Model, does that mean that the
>>>>> inefficiencies obtained from the frontier should be regressed on firm
>>>>> types in a separate exercise?
>>>>
>>>> -sfpanel- allows to estimate the Battese and Coelli (1995) model using the following syntax
>>>>
>>>> sfpanel c y p1 p2, cost model(bc95) emean(x1 x2)
>>>>
>>>> where the option -emean(x1 x2)- allows to simultaneously estimate the so-called inefficiency effects.
>>>> Often, the inclusion of exogenous variables to model the mean of the inefficiency could help the identification of the inefficiency term itself (increasing the convergence rate).
>>>>
>>>> hth
>>>> Federico
>>>>>
>>>>>
>>>>> Thank you,
>>>>>
>>>>> Best regards
>>>>> Alexander Lee
>>>>> *
>>>>> * For searches and help try:
>>>>> * http://www.stata.com/help.cgi?search
>>>>> * http://www.stata.com/support/faqs/resources/statalist-faq/
>>>>> * http://www.ats.ucla.edu/stat/stata/
>>>>
>>>> --
>>>> Federico Belotti, PhD
>>>> Research Fellow
>>>> Centre for Economics and International Studies
>>>> University of Rome Tor Vergata
>>>> tel/fax: +39 06 7259 5627
>>>> e-mail: [email protected]
>>>> web: http://www.econometrics.it
>>>>
>>>>
>>>> *
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>>>> * http://www.ats.ucla.edu/stat/stata/
>>> *
>>> * For searches and help try:
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>> *
>> * For searches and help try:
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>> * http://www.ats.ucla.edu/stat/stata/
>
> --
> Federico Belotti, PhD
> Research Fellow
> Centre for Economics and International Studies
> University of Rome Tor Vergata
> tel/fax: +39 06 7259 5627
> e-mail: [email protected]
> web: http://www.econometrics.it
>
>
> *
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> * http://www.stata.com/help.cgi?search
> * http://www.stata.com/support/faqs/resources/statalist-faq/
> * http://www.ats.ucla.edu/stat/stata/
*
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