Using the outputcost data of a chemical firm, the following total cost function was estimated using quadratic function. Recordings made with the 2006 version can be imported into translog ii, so old recordings can still be worked on in the new version. The translog function christensen, jorgenson, and lau, 1973 has become an integral tool for analyzing the production structure of many firms and industries. Translog the leading tool for analysing text production. I am not very familiar with its implications in consumer theory, but from the production point of view, ive seen it widely used. Make as much fun of me as you want but please help me out too. Various tools for microeconomic analysis and microeconomic modelling, e. For the translog cost function, the price elasticities of demand are. The ces was a natural extension of the cobbdouglas in that it permitted the elasticity of substitution to be something other than unity. 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. Before logarithms are taken, the function is c da0y a y y 1 2 ayy lny yn. Stata module to create new variables for a translog. Estimating the translog cost function with insufficient. Eviews uses the sample of observations specified in the estimation options dialog when estimating the parameters of the log likelihood.
Although this is an excellent study, its farm coverage is extremely limited. The translog cost function has four factors with three equations of the form. This is a generalization of cobbdouglas cost function. 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. The name translog stands for transcendental logarithmic. Translogii is a program to record and study human reading and writing processes on a computer. 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. Translog cost function or a normalized quadratic cost function. The translog function is conceptually simple and imposes no a priori restrictions on elasticities of substitution and returns to scale. Some aspects of the translog production function estimation. Michael carl, is a fine replacement and is freely available for the research community. Structural estimation of a flexible translog gravity model.
It is an instrument to acquire objective, digital data of human translation processes. The elasticity of costs with respect to output is the ratio of marginal costs mc to average costs ac. Estimating a derived demand system from a translog cost function. Translogii supervisor is used to create a project file. Further, its use of cost function rather than profit function has precluded the provision of information on equally important farm output supply relationships. 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. Sep 28, 2015 what are the different methods for dealing with multicollinearity in a translog production function. The translog function doesnt impose additivity and homogeneity, and hence constant elasticity of substitution. 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. Basic regression analysis an equation formula in eviews is a mathematical. The translog cost function is frequently used in the banking literature, providing an estimation for the marginal cost of production for banks. Pdf econometric estimation of production technologies. The elasticity of costs with respect to output is the ratio of. This paper examines the selection of data source and econometric technique for studies of banking efficiency using translog cost functions.
The almost ideal and translog demand systems holt, matthew t. Structural estimation of a flexible translog gravity model shawnw. Calculating elasticities from a translog cost function sas support. Purdue university, north carolina state university 14 march 2009 online at mpra paper no. 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. The translog function form is widely applied in empirical studies for it is regarded as the second order approximation to the unknown function. A translog cost function of the integrated air freight. 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. How to deal with multicollinearity in a translog production. This free software was originally designed by transgendercare. 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. Hi everyone, i need to estimate the following translog production function.
Thus, y is a function of k, l, and all possible interactions kl, kk, ll. Because the shares must add to 1, the restrictions on the parameters are. We examine the use of seemingly unrelated regression estimation for a cost function, as against estimation using ordinary least squares. The next obvious step is to generate a function which allows. Translog production function stata economics job market. For the regression with a translog function, it is need to create a combination of the fundmental variables. I have attached a word document of my translog function and all the variables. The multioutput translog production cost function scholar commons. 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. 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. 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. Pdf eviews 7 users guide ii nesrin eskiocak zubaroglu. I am in a very tight situation so i will be very very highly thankful.
This seminal paper plays a paramount role in the history of economics, since it was the first time that an aggregate production function was estimated econometrically and the results presented to the economics profession, although as levinsohn and petrin 2000 note, economists had been relat. 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. Taher bayero uniuersity, kano, nigeria received 27 august 1984 if the production technology is nonhomothetic, efficient estimation of the translog approximation requires joint. Economics letters 17 1985 3445 341 northholland estimating the translog cost function with insufficient observations a. The translog production function and variable returns to scale. Moreover, only the cost shares in the system were estimated, that is, the total cost function was not included. A translog cost estimation of capitallabour substitubility. 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. In addition to eviews you might want to consider using r, which has a package that makes this estimation relatively easy. View translog cost function research papers on academia. As their predecessors, translog 2000 and translog 2006, also translog ii consists of two main components.
Translog ii, developed from the 2006 version by prof. Input shares s i are obtained by applying shephards lemma 2. Simioni 1996 comparing fourier and translog spec i. 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. 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. Cost function approach for estimating derived demand for. Estimating a derived demand system from a translog cost. The importance of a specific functional form is that it can be used in empirical work. Evidence from an incomplete panel of french farmers. My question is about the results that i got after i did a regression on the translog production function for panel data. If the production function is cobbdouglas and constant returns to scale. 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.
How can i calculate the translog cost function for cross. 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. The translog function can be used not only in preferences but also in production and cost functions. The translog production function is an approximation of the ces function by a secondorder taylor polynomial about, i. How can i calculate the translog cost function for cross section data. 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.
Pdf some aspects of the translog production function estimation. As their predecessors, translog 2000 and translog 2006, also translogii consists of two main components. Theworldbank december20 abstract arkolakis, costinot and rodriguezclare 2012 show that many. I was estimating technical efficiency of tomato producing farms with translog production function. What are the different methods for dealing with multicollinearity in a translog production function. Translog ii is a program to record and study human reading and writing processes on a computer. Time invariant cost efficiency estimation method ml, gls.
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