Its properties, its several interpretations and estimation problems a. Special production functions cobbdouglas, ces, ves, translog and their properties bse. Using translog production function, this paper calculates the elasticity of substitution between hydroelectricity, coal, gas. This function can be approximated by second order taylor series christensen, et al. Hi, if anyone know from where i can get stata code to implement a translog production function then please let me know. A multistage sampling method was used to select 30 mills in the study area and cost route approach used in data collection. How to use excel to estimate the cobbdouglas production function. How can i calculate the translog cost function for cross. Dear all, i am relatively new to stata and would like to know how to estimate the parameters of a translog production function with stata. In general, the translog form does not impose any a priori. The data i have is a balanced panel dataset across 9 years with 21 hospitals. However, the translog production function is not globally well behaved as it does not satisfy the above two conditions at all points in the input space. Checking for variance inflation factor vif and ensuring that it is less than 10 therefore, if. Douglas production function were very similar to the expected factor shares.
Estimation of technical efficiency in the translog. For the regression with a translog function, it is need to create a combination of the fundmental variables. The translog function allows for both positive and negative scale effects, that is, average cost can both decrease and increase across the range of the cost function. For simplicity lets say only k is endogenous, and lets assume a good instrument is the number of firms in the market nfirm.
What are the different methods for dealing with multicollinearity in a translog production function. This is a list of production functions that have been used in the economics literature. The translog function can be used not only in preferences but also in production and cost functions. Treating crops and livestock as two distinct outputs, this study utilizes standard results of neoclassical duality theory to. The translog production function is an approximation of the ces function by a secondorder taylor polynomial about, i. When derived demand systems are obtained from a cost function, it is possible to estimate several elasticities of substitution along with price elasticities. Estimation of a ces production function with factor augmenting technology should be of use here. I have another video that uses a cobbdouglas production. We illustrate these practical issues associated with applying each model through empirical examples using a set of quarterly u.
Translogii user is used to run a text production experiments a user reads, writes or translates a text. The translog function doesnt impose additivity and homogeneity, and hence constant elasticity of substitution. Structural estimation of a flexible translog gravity model. Calculating elasticities from a translog cost function overview elasticities of substitution are an important measure of production relationships. In this sense, the translog function can represent a production function that is not homogeneous. Ray the translog cost function provides a convenient framework for analyzing u. In the context of time series estimates of an aggregate production function for the us manufacturing sector the same result was found by berndt and christensen 1973, tables 4, 6, 7, when estimating the translog function from side conditions for profit maximization. Production functions are a key part of modelling national output and national income. This function has both linear and quadratic terms with the ability of using more than two factor inputs. Youn kim abstractthis paper examines existing methods of estimating the translog production function and provides a general received for publication december 15, 1989. Both the recent literature on production function identification and a considerable body of other empirical work on firm expansion assume a cobbdouglas production function. A cost function, such as the translog transcendental logarithmic production function, can be used to model how a firm combines inputs to produce outputs.
I am in a very tight situation so i will be very very highly thankful. If we can find sufficient number of points in the input space, where the restrictions are satisfied then the translog production function is considered as well behaved. For a firm with a single output production function, price elasticity is the percentage change in quantity demanded of an input with respect to a one percent change in the price of the input own price elasticity or of another input cross price elasticity. Seemingly unrelated regressions sur 1 examples demand for some commodities. An alternativetothecobbdouglasproduction function is the translog production function. I am not very familiar with its implications in consumer theory, but from the production point of view, ive seen it widely used. Translogii produces a log files which contains user activity data of the reading, writing and translation processes, and which can be evaluated by external tools see tprdb. Due to its properties, the translog production function can be used for. The empirical estimation of production and cost functions is a standard exercise in econometrics. How to use excel to estimate the cobbdouglas production. Some aspects of the translog production function estimation. We have taken the classical production function having two inputs, capital and labour. Translog production function stata economics job market.
The fact that on the basis of fairly wide studies there is an appreciable degree of uniformi. Of particular interest is the scale economy effect. For a much more extensive discussion of various types of production functions and their properties, their relationships and origin, see chambers 1988 and sickles and zelenyuk 2019, chapter 6. O northholland publishing company the translog function and the substitution of equipment, structures, and labor in u.
The translog function is an attractive flexible function. Welcome to translog ii, a software designed to record user activity data in the process of translation, as well as reading, writing, copying and editing. The estimates for the mills showed firm level technical efficiency mean of 70. On the estimation of production functions george e. Calculating elasticities from a translog cost function.
I have been estimating several sfa production functions using spaniel, mostly with success i think but have run into an issue when i attempted to estimate two using the kumbhakar 1990 model option. Cobbdouglas production functions is a functional relationship between input and out put. The translog function form is widely applied in empirical studies for it is regarded as the second order approximation to the unknown function. However, i am struggling with the interpreting of the function itself into eviews. Various tools for microeconomic analysis and microeconomic modelling, e. The transcendental logarithmic cost function looks like. The translog function and the substitution of equipment. Thus, y is a function of k, l, and all possible interactions kl, kk, ll. My question is about the results that i got after i did a regression on the translog production function for panel data. The name translog stands for transcendental logarithmic.
The ces was a natural extension of the cobbdouglas in that it permitted the elasticity of substitution to be something other than unity. A production function, such as the translog transcendental logarithmic production function, can be used to model how a firm combines inputs to produce outputs. This allowed douglas to argue that the findings provided strong support for marginal productivity theory the laws of production. The frontier production function or production frontier is an extension of the familiar regression model based on the theoretical premise that a production function, or its dual, the cost function, or the convex conjugate of the two, the profit. Cobb douglas production function and the marginal rate of technical. I am not interested in the estimation of the efficiency as suggested by the command xtfrontier but rather in the estimation of the elasticities of output with respect to my three inputs. This video shows how to calculate the elasticity of substitution from a constant elasticity of substitution production function ces.
How can i calculate the translog cost function for cross section data. The translog production function and variable returns to scale. The zeroobservation problem in production function analyses has been addressed in a number of different ways. Meller, the translog production function olsq and thus our. Make as much fun of me as you want but please help me out too. From a production function, we can derive the cost function, which describes the quantities of inputs needed, along with the cost, to produce. If the null hypothesis, when equals zero, is accepted, it will indicate that 2 x is zero, and thus the termxit can be taken out of the model, leaving a specification with parameters to be compatibly assessed by resorting to smallest normal differences. There is the arduous task of testing to see that your model satisfies certain assumptions of. As stated above, some empirical economists, seeking to estimate cobbdouglas or translog production functions, have confined their attention to only those farmers who have positive values of the key input or explanatory variables. Heineke in this paper we study the relationship between costs, input prices and activity levels in a sample of approximately thirty medium sized city police departments for the years 1968, 69, 71 and 73.1092 1284 282 711 1419 428 593 941 1545 394 1555 265 186 1193 777 105 529 1068 1081 984 244 121 1209 1138 1302 517 1131 450 127 1277 945 940 1391