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  • New on SSC: -xtsfkk- module to estimate endogenous panel stochastic frontier models in the style of Karakaplan and Kutlu (2017)

    Special thanks to the Amazing Kit Baum, -xtsfkk- is now available on SSC. You can install -xtsfkk- from SSC by entering the following command in Stata:
    Code:
    ssc install xtsfkk
    xtsfkk fits endogenous panel stochastic production or cost frontier models following the methodology provided by Karakaplan and Kutlu (2017). xtsfkk provides estimators for the parameters of a linear model with a disturbance that is assumed to be a mixture of two components: a measure of inefficiency which is strictly nonnegative and a two-sided error term from a symmetric distribution. xtsfkk can handle endogenous variables in the frontier and/or the inefficiency, and the xtsfkk estimates outperform the standard xtfrontier estimates that ignore endogeneity. See Karakaplan and Kutlu (2017) for a detailed explanation of their methodology and empirical analyses.

    + Karakaplan, Mustafa U. and Kutlu, Levent (2017) "Endogeneity in Panel Stochastic Frontier Models." Applied Economics

    -xtsfkk- help file provides several examples and they can be viewed by typing the following command in Stata after installing the -xtsfkk- package:
    Code:
    help xtsfkk
    Below is an example of an -xtsfkk- output:
    Code:
    . use http://www.mukarakaplan.com/files/xtsfkkcost.dta, clear
    
    . xtset id t
           panel variable:  id (unbalanced)
            time variable:  t, 2011 to 2015, but with gaps
                    delta:  1 unit
    
    . xtsfkk y x1 z1, cost u(z2) en(z1 z2) i(iv1 iv2) compare nicely timer header
    
    
    4 Jan 2018 05:51:22
    
    
    ENDOGENOUS PANEL STOCHASTIC COST FRONTIER MODEL (Model EN)
    
    Dependent Variable: y
    
    Frontier Variables: Constant x1 z1
    
    U Variables: Constant z2
    
    W Variable: Constant
    
    Endogenous Variables: z1 z2
    
    Added Instruments: iv1 iv2
    
    Exogenous Variables: iv1 iv2 x1
    
    Panel Variable: id
    
    Time Variable: t
    
    
    initial:       log likelihood = -1103.6189
    rescale:       log likelihood = -1103.6189
    rescale eq:    log likelihood = -1103.6189
    Iteration 0:   log likelihood = -1103.6189  
    Iteration 1:   log likelihood = -1070.1439  (backed up)
    [...]
    Iteration 30:  log likelihood = -782.62356  
    
    
    Analyzing the exogenous comparison model (Model EX)...
    
    initial:       log likelihood =  -588.8592
    rescale:       log likelihood =  -588.8592
    rescale eq:    log likelihood =  -588.8592
    Iteration 0:   log likelihood =  -588.8592  
    [...]
    Iteration 19:  log likelihood = -302.44416  
    
    
    Table: Estimation Results
    ----------------------------------------------------------------
                                  Model EX             Model EN    
    ----------------------------------------------------------------
    Dep.var: y                                                      
    Constant                  0.391**   (0.129)    0.295*    (0.136)
    x1                        0.136*    (0.068)    0.494***  (0.092)
    z1                        0.963***  (0.047)    0.746***  (0.097)
    ----------------------------------------------------------------
    Dep.var: ln(σ²_u)                                              
    Constant                 -0.544*    (0.251)   -0.945***  (0.215)
    z2                        1.190***  (0.068)    1.131***  (0.063)
    ----------------------------------------------------------------
    Dep.var: ln(σ²_v)                                              
    Constant                 -1.503***  (0.097)                    
    ----------------------------------------------------------------
    Dep.var: ln(σ²_w)                                              
    Constant                                      -1.918***  (0.094)
    ----------------------------------------------------------------
    eta1 (z1)                                      0.421***  (0.109)
    eta2 (z2)                                      0.568***  (0.055)
    ----------------------------------------------------------------
    eta Endogeneity Test                          X2=138.68  p=0.000
    ----------------------------------------------------------------
    Observations                    300                   300        
    Log Likelihood                -302.44              -782.62      
    Mean Cost Efficiency           0.3625               0.4838      
    Median Cost Efficiency         0.3341               0.4976      
    ----------------------------------------------------------------
    Notes: Standard errors are in parentheses. Asterisks indicate
    significance at the 0.1% (***), 1% (**) and 5% (*) levels.
    ----------------------------------------------------------------
    
    Completed in 26 seconds.
    Last edited by Mustafa Ugur Karakaplan; 04 Jan 2018, 06:00.
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