[Limdep Nlogit List] SFA based on Distance functions
Pavlos C. Symeou
p.symeou at gmail.com
Sun Mar 15 23:52:38 EST 2009
Dear Limdepers,
I want to conduct an efficiency analysis by estimating a translog
output-oriented production function for the sector of
telecommunications. Since, the production function does not support
multi-output specifications, I transform the production function into a
distance function, according to Coelli and Perelman (2001).
Specifically, the original production function would have the form "y =
βx + v - u", whilst the output oriented distance function has the form
"-y = βx + v + u"; that is, the output now appears with a negative sign
and the inefficiency term "u" is not deducted from the RHS but instead
is added. How do I model this in Limdep 9?
Namely, if I intended to estimate "y = βx + v - u" I would invoke the
following commands in Limdep 9:
FRONTIER ; LHS = Y; RHS = ONE, X $
Now, for the estimation of the distance function, should I have the
following commands?
FRONTIER ; LHS = -Y; RHS = ONE, X;
COST $
where Y appears in a negative form on the LHS and COST is invoked to
account for the positive sign of "u" on the RHS.
I look forward to hearing from you.
Best regards,
Pavlos
Reference:
Coelli, J. T. and Perelman, S. (2000). Technical Efficiency of European
Railways: A distance Function Approach. Applied Economics 32, 1967-1976.
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