The only parameter of the cost function that is not captured by the derived demand system is the intercept term which is not used in calculating price or substitution elasticities. I am not very familiar with its implications in consumer theory, but from the production point of view, ive seen it widely used. Various tools for microeconomic analysis and microeconomic modelling, e. Hi, if anyone know from where i can get stata code to implement a translog production function then please let me know. Practically, it was determined that if the eviews convergence criterion was. Translog the leading tool for analysing text production.
This paper examines the selection of data source and econometric technique for studies of banking efficiency using translog cost functions. The name translog stands for transcendental logarithmic. Structural estimation of a flexible translog gravity model. Estimating the translog cost function with insufficient. Moreover, only the cost shares in the system were estimated, that is, the total cost function was not included. Eviews uses the sample of observations specified in the estimation options dialog when estimating the parameters of the log likelihood. Pdf some aspects of the translog production function estimation. Checking for variance inflation factor vif and ensuring that it is less than 10 therefore, if vif 10, eliminate the variables in a stepwise way. However, i am struggling with the interpreting of the function itself into eviews. In addition to eviews you might want to consider using r, which has a package that makes this estimation relatively easy. Time invariant cost efficiency estimation method ml, gls. For the regression with a translog function, it is need to create a combination of the fundmental variables.
For the translog cost function, the price elasticities of demand are. The importance of a specific functional form is that it can be used in empirical work. Pdf econometric estimation of production technologies. The estimated coefficients of the translog production and cost functions will vary with the parameters sigma, nu, alpha, beta and gamma of the ces production function. Cost function approach for estimating derived demand for. Translogii supervisor is used to create a project file. The elasticity of costs with respect to output is the ratio of. Translog ii supervisor is used to create a project file. The multioutput translog production cost function scholar commons. One benefit of the translog form is that the system of factor demands gives nearly the same information as the cost function. My question is about the results that i got after i did a regression on the translog production function for panel data. The translog function form is widely applied in empirical studies for it is regarded as the second order approximation to the unknown function. As their predecessors, translog 2000 and translog 2006, also translogii consists of two main components.
Translog cost function or a normalized quadratic cost function. Translog production function stata economics job market. Taher bayero uniuersity, kano, nigeria received 27 august 1984 if the production technology is nonhomothetic, efficient estimation of the translog approximation requires joint estimation of the cost and. Input shares s i are obtained by applying shephards lemma 2. Translog ii is a program to record and study human reading and writing processes on a computer. The translog function doesnt impose additivity and homogeneity, and hence constant elasticity of substitution.
The next obvious step is to generate a function which allows. Transcendental logarithmic cost function1 the purpose of the translog cost function is to identify a specific functional form for a cost function that embodies all of the assumptions and results of our cost minimization model. Sep 28, 2015 what are the different methods for dealing with multicollinearity in a translog production function. View translog cost function research papers on academia. The translog cost function is commonly estimated with its cost minimizing input share equations in a seemingly unrelated equations sure regression zellner, 1962 and using maximum likelihood estimators. Purdue university, north carolina state university 14 march 2009 online at mpra paper no. A generalised example of a translog production function, where y is the output produced, and x n is the quantity of input n used in the production process, takes the form.
Substitute the values of these parameters into the translog cost function, and estimate its remaining three parameters, c, cq, and dqq, using linear multiple regression. The ces was a natural extension of the cobbdouglas in that it permitted the elasticity of substitution to be something other than unity. Hi everyone, i need to estimate the following translog production 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. What are the different methods for dealing with multicollinearity in a translog production function. A translog cost function analysis with implications for economic development patrick mccarthy school of economics georgia institute of technology final report submitted to georgia department of transportation georgia transportation instituteuniversity transportation center. Because the shares must add to 1, the restrictions on the parameters are. Technology can be represented by a production function, such as cobbdouglas and constant elasticity of substitution ces place a restriction on elasticity of substitution cobb and douglas 1928, arrow, et al. The translog production function and variable returns to scale. Estimating a derived demand system from a translog cost function. The elasticity of costs with respect to output is the ratio of marginal costs mc to average costs ac. The factor share equations for each input of the translog cost function are and where s is the factor share and x i is the quantity demanded for the ith factor input. Before logarithms are taken, the function is c da0y a y y 1 2 ayy lny yn.
Further, its use of cost function rather than profit function has precluded the provision of information on equally important farm output supply relationships. As an illustration of the process of estimating a system of equations in eviews, we estimate a translog cost function using data from berndt and. Stata module to create new variables for a translog. Basic regression analysis an equation formula in eviews is a mathematical. Translog cost function posted 04092009 663 views i am having a problem writing the code for a translog cost function does anyone have any references to share. Economics letters 17 1985 3445 341 northholland estimating the translog cost function with insufficient observations a. The translog cost function has four factors with three equations of the form. Simioni 1996 comparing fourier and translog spec i. The translog function is conceptually simple and imposes no a priori restrictions on elasticities of substitution and returns to scale. We examine the use of seemingly unrelated regression estimation for a cost function, as against estimation using ordinary least squares. Recordings made with the 2006 version can be imported into translog ii, so old recordings can still be worked on in the new version.
Because the translog production function is much more general it has a flexible functional form permitting the partial elasticities of substitution between inputs to vary, i will use numerical analysis to obtain the cost functions associated with a given translog production function. How to deal with multicollinearity in a translog production. A translog cost function of the integrated air freight. 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. Eviews evaluates each expression in the logl for every observation in the sample at current parameter values, using the by observation or by equation ordering. As an illustration of the process of estimating a system of equations in eviews, we estimate a translog cost function using data from berndt and wood 1975 as presented in greene 1997. Some aspects of the translog production function estimation.
Michael carl, is a fine replacement and is freely available for the research community. Evidence from an incomplete panel of french farmers. Pdf eviews 7 users guide ii nesrin eskiocak zubaroglu. I was estimating technical efficiency of tomato producing farms with translog production function. How can i calculate the translog cost function for cross section data. The translog function can be used not only in preferences but also in production and cost functions. This free software was originally designed by transgendercare. The translog function christensen, jorgenson, and lau, 1973 has become an integral tool for analyzing the production structure of many firms and industries. Taher bayero uniuersity, kano, nigeria received 27 august 1984 if the production technology is nonhomothetic, efficient estimation of the translog approximation requires joint. Translog transcendental logarithmic production function. Thus, y is a function of k, l, and all possible interactions kl, kk, ll.
In case of a total translog cost function in which the number of points served is not included, the eos are calculated as the inverse of the elasticity of costs with respect to output cy. This is a generalization of cobbdouglas cost function. I have attached a word document of my translog function and all the variables. It is an instrument to acquire objective, digital data of human translation processes. Translogii is a program to record and study human reading and writing processes on a computer. The translog cost function is frequently used in the banking literature, providing an estimation for the marginal cost of production for banks. Translog ii, developed from the 2006 version by prof. How can i calculate the translog cost function for cross. Theworldbank december20 abstract arkolakis, costinot and rodriguezclare 2012 show that many. The transcendental logarithmic cost function looks like the. Using the outputcost data of a chemical firm, the following total cost function was estimated using quadratic function.
As their predecessors, translog 2000 and translog 2006, also translog ii consists of two main components. Calculating elasticities from a translog cost function sas support. A translog cost estimation of capitallabour substitubility. The almost ideal and translog demand systems holt, matthew t. Estimating a derived demand system from a translog cost. Translog cost function overview the transcendental logarithmic translog functional form can capture many of the attributes of a cost function that are implied by economic theory. Although this is an excellent study, its farm coverage is extremely limited. I am in a very tight situation so i will be very very highly thankful.
1190 1206 1576 1533 465 218 1516 721 1082 835 741 863 1061 870 702 1629 1364 1362 1536 1626 472 124 564 232 695 1368 564 1367 995 456 1470 1402 745 1052 1160 368 839 1355 1027 941 94 801 302