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Technical Change
Technical Change
LnOutputit = f(xit,zi,,t) + vit - uit.
LnCostit = c(xit,zi,,t) + vit + uit.
Independent of other factors, TC = f(..)/t
Change in output not explained by change in factors
or environment shift in production or cost function
Time shift the goal function.
Lnyit = xit + zi + t + vit - uit.
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v
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u2 1
2 , i , *i (1 i )( i ), *2i i v2
v 1 Ti
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u u 2
f (u ) 2 exp 2 , u 0
u 2u
E [u ] u
2
4
Var[u ] u2
2
ui u exp(hi )
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Rayleigh
Half Normal
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i 0
~ N ,
i 0
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Observable Heterogeneity
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v
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A True FE Model
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log
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R ( yit ( w wir ) x it )
wir draws from N[0,1].
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u
v
w
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uit
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Data
50 railway companies, Period 1985 to 1997
Unbalanced panel with number of periods (Ti) varying from 1 to 13
and with 45 companies with 12 or 13 years, resulting in 605
observations
Data source: Swiss federal transport office
Data set available at http://people.stern.nyu.edu/wgreene
Data set used in: Farsi, Filippini, Greene (2005), Efficiency and
measurement in network industries: application to the Swiss
railway companies, Journal of Regulatory Economics
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Model Specifications:
Special Cases and Extensions
Pitt and Lee
True Random Effects
Extended True Random Effects
Mundlak correction for the REM, group
means of time varying variables
Extended True Random Effects with
Heteroscedasticity in vit: v,it=vexp(zit)
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Efficiency Estimates
Data
Mundlak Specification
Suggests ei or wi may
be correlated with the
inputs.
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Efficiency Estimates
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Appendix A: Implementation
Customized version of NLOGIT 5/LIMDEP 10.
Both instructions exist in current version.
Modifications were:
For the generalized TRE, allow the random constant
term in the TRE model to have a second random
component that has a half normal distribution.
For the selection model, allow products of groups of
observations to appear as the contribution to the
simulated log likelihood
Now available from the author as an update to
LIMDEP or NLOGIT. To be released with the
next version.
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DISTANCE FUNCTION
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http://www.young-demography.org/docs/08_kriese_efficiency.pdf
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TOTAL FACTOR
PRODUCTIVITY
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