Translog Cost Function Estimation

[Patrick Donkor]

Hello Everyone,
Please I have a problem with my lerner index output. I estimated the lerner index using translog cost function but some of the figures I got for the lerner index are more than 1 which is abnormal since lerner index figures are between 0 and 1 and so the problem might come from my computation of the marginal cost. I guess I've overestimated the marginal cost and so I want to cross check the computation of the MC again.

In view of that, I just need an explanation of the content of the Marginal Cost (MC) formula below:
MC = [ a(Q) + a(QQ)InQ + Σa(Qh)InW(hit) ] TC/Q

Or kindly find the attached screenshot of the equation and help me to specifically understand the content of or argument in the marginal cost estimation in equation 3.

My question is that, is it only the coefficients that I need to add within the square bracket and then multiple it by TC/Q? Or it is both the coefficients and the values of the variables like lnQ and InW(hit) and then multiply the result by TC/Q?

Please I would be very grateful for your response, thanks.

[Scott Merryman]

Or it is both the coefficients and the values of the variables like lnQ and InW(hit) and then multiply the result by TC/Q?

Yes. As MC varies over the indexes i and t, the values of W, Q, and TC, evaluated at i and t, would need to be used.

[Patrick Donkor]

Ok, thanks so much Scott Merryman