I am currently working on utilizing your “sfprim” STATA code by Kumbhakar, Wang and Horncastle (2015) to estimate output-oriented allocative and technical inefficiencies. I noticed that the “sfprim” command provides options for cost and profit, but not for revenue. However, I am facing a challenge as I have data and variables for the revenue function but not for cost or profit. Could you please offer me any guidance on how I can use” sfprim” for my revenue function?
To provide some context, I have three products, each with its respective price. I have information on total revenue, revenue share for each product, and the amount for one fixed input. Thus, I am interested in allocative inefficiency in terms of suboptimal output mix and technical inefficiency in terms of suboptimal output level. My initial approach was to employ the shadow price method outlined in Chapter 6 of Kumbhakar and Lovell (2003). I planned to use a translog revenue function and the nonlinear iterative generalized least square method. However, since I am unable to find sufficient guiding materials in this area, I decided to explore the primal approach to help me decompose between technical and allocative inefficiency.
My challenge now is that the primal approach command only offers options for cost or profit, not revenue. Do you have any tips on adapting a primal approach for revenue function? I’m considering using a negative revenue as the "Y"(dependent ) variable and running “sfprim” with the cost option. Would this be a viable solution?
Thank you, and I hope to receive your tips!
To provide some context, I have three products, each with its respective price. I have information on total revenue, revenue share for each product, and the amount for one fixed input. Thus, I am interested in allocative inefficiency in terms of suboptimal output mix and technical inefficiency in terms of suboptimal output level. My initial approach was to employ the shadow price method outlined in Chapter 6 of Kumbhakar and Lovell (2003). I planned to use a translog revenue function and the nonlinear iterative generalized least square method. However, since I am unable to find sufficient guiding materials in this area, I decided to explore the primal approach to help me decompose between technical and allocative inefficiency.
My challenge now is that the primal approach command only offers options for cost or profit, not revenue. Do you have any tips on adapting a primal approach for revenue function? I’m considering using a negative revenue as the "Y"(dependent ) variable and running “sfprim” with the cost option. Would this be a viable solution?
Thank you, and I hope to receive your tips!
