Estimate of the elasticities of substitution of the ces and translog. The importance of a specific functional form is that it can be used in empirical work. Treating crops and livestock as two distinct outputs, this study utilizes standard results of neoclassical duality theory to. Introduction in this chapter, we will take an in depth look at the problems involved in choosing functional forms for estimating systems of consumer and producer demand functions and producer supply functions. Estimating a derived demand system from a translog cost. For the regression with a translog function, it is need to create a combination of the fundmental variables. Pdf stochastic frontier analysis using stata researchgate. Lie the translog, it is a flexible functional form, but it is compatible with a wider. The general form of the translog production function which is a second order taylor series approximation relating output as a function of combination of inputs is giving as follows christensen et. Some aspects of the translog production function estimation. Data and parameter estimates were previously stored in datasets est and klems in the example estimating a derived demand system from a translog cost function. The threeinput translog production function can be written in terms of logarithms as. Translog ii, developed from the 2006 version by prof.
My question is about the results that i got after i did a regression on the translog production function for panel data. The book is also useful to economists and businesspeople wanting to learn stata by using practical examples. The translog function form is widely applied in empirical studies for it is regarded as the second order approximation to the unknown function. All four functional forms, and the formulae used for parameter calibration, are described in the appendix.
Structural estimation of a flexible translog gravity model. An introduction to modern econometrics using stata stata press. Introduction flexible forms, such as the generalised leontief and the translog functional forms, can approximate an arbitrary function to the second order in a given point. Do not update the version that is installed on your machine.
In addition, we estimate the same totalcost equation using stateoftheart. Estimation of the model maximum likelihood estimation ml generalised least squares method gls method of. The most commonly used flexible form is the translog function defined by. What are the different methods for dealing with multicollinearity in a translog production function. Make as much fun of me as you want but please help me out too. The translog is a frequently used production function formulation that allows examination of production, cost, and e. An almost ideal demand system by angus deaton and john muellbauer ever since richard stone 1954 first estimated a system of demand equations derived explicitly from consumer theory, there has been a continuing search for alternative specifications and.
Learn about the ttest, the chi square test, the p value and more duration. They include the translog christensen, jorgenson, and lau, the generalized leontiefdiewert, and the. The translog cost function is valuable to researchers for empirical analysis in themodelling of indirect cost and profit functions. The restricted profit function and the application of the. The translog function is an attractive flexible function. The elasticities are evaluated at the sample means, so the means procedure is used to compute the sample mean cost shares and store this information in the dataset meanshares. An almost ideal demand system by angus deaton and john muellbauer ever since richard stone 1954 first estimated a system of demand equations derived explicitly from consumer theory, there has been a continuing search for alternative specifications and functional forms. The translog function form is widely applied in empirical. Stata 10 tutorial 6 page 1 of 20 pages stata 10 tutorial 6. If all population relationships were linear, all regressions could take the form we have been studying. The nnces form is flexible and globally regular, and belongs to a family of functional forms that have been widely employed in the applied general equilibrium literature. Treating crops and livestock as two distinct outputs, this study utilizes standard results of. This function has both linear and quadratic terms with the ability of using more than two factor inputs. Bergman department of economics, university of umea, s901 87 ume sweden received 12 october 1995.
Production economics 49 1997 249254 the restricted profit function and the application of the generalised leontief and the translog functional forms mats a. With of the functional form of the production technology. Multipleoutput production modeled with three functional. A practitioners guide to stochastic frontier analysis using statakum. Once you are ok with these, then you know that your results will make sense. Ray the translog cost function provides a convenient framework for analyzing u. Estimating a derived demand system from a translog cost function overview the transcendental logarithmic translog functional form can capture many of the attributes of a cost function that are implied by economic theory. The translog tl cost function christensen, et al, 1971 is the most widely used flexible functional form for cost function estimation and is. Michael carl, is a fine replacement and is freely available for the research community. Generally, an ebook can be downloaded in five minutes or less. The functional form employed in the empirical analysis is the. Testing functional form if want to compare goodness of fit of models in which the dependent variable is in logs or levels then cant just look at the r2. When i estimate the model using a cobbdouglas functional form, everything seems to be ok, however when i estimate a translog function i seem to run into a problems.
Functional form functional form a first point about functional form. Alternativerepresentations oftechnology the technology that is available to a. An introduction to modern econometrics using stata can serve as a supplementary text in both undergraduate and graduatelevel econometrics courses, and the books examples will help students quickly become proficient in stata. The basic idea behind testing for the appropriate functional form. Chapter 9 flexible functional forms vancouver school of. The restricted profit function and the application. Because the translog production function is much more general it has a flexible functional form permitting the partial elasticities of substitution between inputs to vary, i will use numerical analysis to obtain the cost functions associated with a given translog production function. Transcendental logarithmic cost function1 the purpose of the translog cost function is to identify a specific functional form for a cost function that embodies all of the assumptions and results of our cost minimization model.
Given that both the cobbdouglas and ces production functions are special cases of the translog, ideally the translog should be estimated first and the restrictions outlined above, tested. Cobbdouglas in log form translog a flexible functional form 2. This function can be approximated by second order taylor series christensen, et al. The functional form in 8 can be shown to be a special case of the translog. Translog the leading tool for analysing text production. Hi everyone, i need to estimate the following translog production function. To estimate the stochastic production frontier, an appropriate functional form is. User guides and examples also are provided when downloading the software.
Substitute the values of these parameters into the translog cost function, and estimate its remaining three parameters, c, cq, and dqq, using linear multiple regression. The functional form in 8 can be shown to be a special case of the translog function where b i,i b k,k 0. How to deal with multicollinearity in a translog production. Hey all, im estimating my translog cost function, with panel data for 33 different countries, 10 years on individual bank data. Pdf on the basis of the ces and translog production functions, this study compares the degrees of. We will attempt to find functional forms that are consistent with the restrictions on supply and. Quantitative techniques term 2 albert banalestanol. They include the translog christensen, jorgenson, and lau, the generalized leontiefdiewert, and the normalized quadratic lau. Start stata 9 from the windows start menu programs, f. When i model a translog production function, i run in the problem of manually having to modify the interaction terms any time i change the specification of the model. The transcendental logarithmic cost function looks like the. Before starting your tasks, make sure that the following windows are visible on your screen and choose their size so that they do not overlap. Introduction the estimation of rmscost functions in empirical io plays an important role in any empirical study of industry competition.
The origins of empirical analysis of microeconomic production structures can be more reasonably. Pdf some aspects of the translog production function estimation. Cobbdouglas, translog stochastic production function and. These are discussed, and a comparison is made between the translog and the generalised leontief functional form, with and without homogeneity of degree one in the fixed factors. The fourth section specifies and estimates the production function section 5.
A flaw of the functional form is in themodelling of zero output. Dear colleagues, does any of you know a way to automatically create interaction terms for n variables. The returns to scale for the translog function depends on the level of capital and labour. As explained in chapter 1, data on production costs at the level of individual rmmarketproduct is very rare, and for this reason costs. Checking for variance inflation factor vif and ensuring that it is less than 10 therefore, if vif 10, eliminate the variables in a stepwise way. Wales abstract in this paper we propose and estimate a new singleproduct cost function, the cestranslog. Translog transcendental logarithmic production function.
Recordings made with the 2006 version can be imported into translog ii, so old recordings can still be worked on in the new version. Measuring efficiency of governmental hospitals in palestine using. The mostgeneral are thosebased on correspondences and sets. Using greenes dataset, the code in stata should look like. Translog production function stata economics job market. Specification and estimation of a new cost function robert a. A flexible form must have certain properties, in order to represent a restricted profit function. So, the cobbdouglas production function form is presented in eq. We estimate a model and test the intercept to determine if it is significantly different than zero. Functional form and variable rescaling in simple linear regression models, and an introduction to multiple linear. Nov 24, 2016 the translog cost function is valuable to researchers for empirical analysis in themodelling of indirect cost and profit functions. Cobbdouglas function, translog function, and multioutput distance function were estimated using stata 12. Pdf this paper describes sfcross and sfpanel, two new stata commands for. Since the researcher never knows the true functional form, a number of plausible functional forms have been proposed in recent years.
Dear all, i am relatively new to stata and would like to know how to estimate the parameters of a translog production function with stata. I am in a very tight situation so i will be very very highly thankful. Choice of the empirical definition of zero in the translog. Often researchers desire to estimate the effects of some regressors on the dependent variable in a nonlinear fashion in the context of panel data without imposing a. Interaction terms for translog functional form stata. Hi, if anyone know from where i can get stata code to implement a translog production function then please let me know. The functional form employed in the empirical analysis is the following translog. Translog cost function posted 04092009 663 views i am having a problem writing the code for a translog cost function does anyone have any references to share.
Often researchers desire to estimate the effects of some regressors on the dependent variable in a nonlinear fashion in the context of panel data without imposing a specific functional form. Calculating elasticities from a translog cost function. Estimating a derived demand system from a translog cost function. The estimated coefficients of the translog production and cost functions will vary with the parameters sigma, nu, alpha, beta and gamma of the ces production function. Multipleoutput production modeled with three functional forms. The world is not flat things would be relatively simple if we could always presume that our first simplifying assumption in chapter five is true. Stata module to create new variables for a translog. In economics and econometrics, the cobbdouglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the amounts of two or more inputs particularly physical capital and labor and the amount of output that can be produced by those inputs.
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