1. Efficiency Measurement
William Greene
Stern School of Business
New York University

2. Lab Session 5
Panel Data

3. Group Size Variables for Unbalanced Panels
Farm
Milk
Cows
FarmPrds 1
23.3
10.7 3
10.6 25
9.4 2
19.6 11
22.2
24.7 4
25.4 12
25.3
13.5
26.1
14.5
55.4 22
63.5

4. Creating a Group Size Variable
Requires an ID variable (such as FARM)
(1) Set the full sample exactly as desired
(2) SETPANEL ; Group = the id variable ; Pds = the name you want limdep to use for the periods variable $
SETPANEL ; Group = farm ; pds = ti $

5. Application to Spanish Dairy Farms
N = 247 farms, T = 6 years ( )
Input
Units
Mean
Std. Dev.
Minimum
Maximum
Milk
Milk production (liters)
131,108
92,539
14,110
727,281
Cows
# of milking cows
2.12
11.27
4.5
82.3
Labor
# man-equivalent units
1.67
0.55
1.0
4.0
Land
Hectares of land devoted to pasture and crops.
12.99
6.17
2.0
45.1
Feed
Total amount of feedstuffs fed to dairy cows (tons)
57,941
47,981
3,924.14
376,732

6. Exploring a Panel Data Set: Dairy
REGRESS ; Lhs = YIT
; RHS = COBBDGLS
; PANEL $
; PANEL ; Het = Group $

7. Initiating a Panel Data Model

8. Nonlinear Panel Data Models
MODEL NAME ; Lhs = …
; RHS = …
; Panel
; … any other model parts … $
ALL PANEL DATA MODEL COMMANDS ARE THE SAME

9. Panel Data Frontier Model Commands
FRONTIER ; LHS = … [ ; COST ]
; RHS = …
[; EFF = …]
; Panel
; ... the rest of the model
; any other options $

10. Pitt and Lee Random Effects
FRONTIER ; LHS = … [ ; COST ]
; RHS = …
[; EFF = …]
; Panel
; any other options $
This is the default panel model.

11. Pitt and Lee Model

12. FRONTIER ; LHS = … [ ; COST ] ; RHS = … [; EFF = …] ; Panel
Pitt and Lee Random Effects with Heteroscedasticity and Time Invariant Inefficiency
FRONTIER ; LHS = … [ ; COST ]
; RHS = …
[; EFF = …]
; Panel
; HET ; HFU = …
; HFV = … $

13. FRONTIER ; LHS = … [ ; COST ] ; RHS = … [; EFF = …] ; Panel
Pitt and Lee Random Effects with Heteroscedasticity and Truncation Time Invariant Inefficiency
FRONTIER ; LHS = … [ ; COST ]
; RHS = …
[; EFF = …]
; Panel
; HET ; HFU = …
; HFV = …
; MODEL = T ; RH2 = One,… $

14. FRONTIER ; LHS = … [ ; COST ] ; RHS = … [; EFF = …] ; Panel
Pitt and Lee Random Effects with Heteroscedasticity Time Invariant Inefficiency
FRONTIER ; LHS = … [ ; COST ]
; RHS = …
[; EFF = …]
; Panel
; HET ; HFU = …
; HFV = … $

15. Schmidt and Sickles Fixed Effects
REGRESS ; LHS = … ; RHS = …
; PANEL
; PAR ; FIXED $
CREATE ; AI = ALPHAFE ( id ) $
CALC ; MAXAI = Max(AI) $
CREATE ; UI = MAXAI – AI $
(Use Minimum and AI – MINAI for cost)

16. True Random Effects Time Varying Inefficiency
FRONTIER ; LHS = … [ ; COST ] ; RHS = … $
FRONTIER ; LHS = … [ ; COST ] ; RHS = …
; Panel ; Halton (a good idea) ; PTS = number for the simulations
; RPM ; FCN = ONE (n)
; EFF = … $
Note, first and second FRONTIER commands are identical. This sets up the starting values.

17. True Fixed Effects Time Varying Inefficiency
FRONTIER ; LHS = … [ ; COST ] ; RHS = … $
FRONTIER ; LHS = … [ ; COST ] ; RHS = …
; Panel
; FEM
; EFF = … $
Note, first and second FRONTIER commands are identical. This sets up the starting values.

18. Battese and Coelli Time Varying Inefficiency
FRONTIER ; LHS = … [ ; COST ] ; RHS = …
; Panel
; MODEL = BC
; EFF = … $
This is the default specification, u(i,t) = exp[h(t-T)] |U(i)|
To use the extended specification, u(i,t)=exp[d’z(i)] |U(i)|
; Het
; HFU = variables

19. Other Models
There are many other panel models with time varying and time invariant inefficiency, heteroscedasticity, heterogeneity, etc.
Latent class,
Random parameters
Sample selection,
And so on….