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  • stochastic production function

    “Thus, we estimate a stochastic innovation production function: Latent opportunities affect the output proportionately, where ωi< 1 indicate unrealized opportunities. ωi= 1 indicates that the opportunities have been exploited. The usual error term affects the output qi. We assume that the innovation production function is linear in the logs of three inputs: internal R&D expenditure, external R&D expenditure and firm size measured by the number of employees. Innovation output is the turnover generated by new products. We then define ui= −ln (ωi) and yield: where ui≥ 0 implies that 0 < ωi≤ 1. With increasing ui the distance to the innovation production function increases, which indicates unrealized opportunities. qi = f (zi, ˇ)ωi exp (vi) (1)ln(qi) = ˇ0 + ˇ1 ln(z1i) + ˇ2 ln(z2i) + ˇ3 ln(z3i) + vi − ui (2)”

    Based on this explanation I want to ask how I can calculate w as the opportunity gap In STATA.

    Thank you in advance.

    Kind regards,

    Sibel Cetin