Translog Model Research Articles

The network origins of trade comovement

I develop a production network model of the world economy that features Transcendental Logarithmic (a.k.a. translog) aggregators of varieties. This gives rise to variable substitution elasticities that consistent with the evidence are inversely related to the importer expenditure shares per exporter at the country-sector level. I quantify the model using data for 1970–2018 from 19 OECD economies and 30 sectors. Compared to the analogous constant elasticity version of the model, I find that the translog model amplifies international shock transmission between major trade partners and attenuates transmission elsewhere, which to an extent resolves the “trade comovement puzzle”.

Firm performance and markets: survival analysis of medium and large manufacturing enterprises in Indonesia

AbstractThis study identifies the effect of firm performance, especially efficiency, on firm survival. This study applies efficiency calculations using a translog model based on both time-invariant and time-varying production functions and the Ackerberg–Caves–Frazer (ACF) model to overcome the endogeneity problem in the estimation of the production function. The data used are firm-level data, which are medium and large manufacturing company censuses with an observation period from 1995 to 2015. This study used two estimation techniques: the Cox proportional hazard model and Poisson regression. I estimate the Cox regression with firm-level data, whereas the Poisson regression is estimated with aggregate data for 2-digit ISIC. Estimates at the aggregate 2-digit ISIC level are intended to not only see the effect of efficiency on companies that survive but also on companies that enter and exit. Firm-level evidence shows that a company’s efficiency reduces the hazard ratio or increases its survival time. Moreover, consistent with firm-level results, the aggregate-level estimation shows that efficiency increases the chances of survival and entry of companies into Indonesia and reduces the rate of company exit from the Indonesian market. This shows that a company's level of technical efficiency makes an important contribution to the survival of manufacturing companies in Indonesia.

Impact of China’s outward direct investment on economic efficiency

This paper examines the impact of China’s Outward Direct Investment (ODI) on the world economy in terms of economic efficiency and aims to provide insight for the host economies in strategizing their investment policies. This study employs Stochastic Frontier Approach (SFA) to estimate the impact of China’s ODI on the world for both developed and developing economies. The research encompassed a total of 156 nations for the period spanning from 2009 to 2017. The findings indicate that there is a 13.3% disparity in efficiency between industrialized and developing countries. The results further reveal that the China’s ODI to developing countries contributes to the reduction of inefficiency in both the Cobb-Douglass and Trans log models. Results for developed countries are mixed, with a significant contribution to inefficiency reduction in the Cobb-Douglass model only. Findings in this paper rebuke the general acceptance that ODI is good in everything for the host countries. Instead, ODI will be more beneficial to the host countries to reduce inefficiency if they are at a lower level of development than the home countries. The findings recommend China’s ODI to developing countries, while developed countries may still reap positive spillovers on efficiency with careful selection of the type of ODI from China to match their national economic development agenda.

A note on functional form specification in random coefficients stochastic frontier models

This study presents a random coefficients stochastic frontier model that can accommodate the flexible translog functional form without being computationally demanding and thus time consuming to estimate. This is achieved by restricting the second-order frontier parameters to be common to all firms. For comparison, random coefficients stochastic frontier models with Cobb–Douglas, semi-translog and translog specifications with all parameters being firm-specific are estimated. The models are applied to an unbalanced panel of German dairy farms, and Bayesian techniques are used for the estimation. The results suggest that the time needed for the sampler to complete in the proposed model reduces dramatically as opposed to a translog model where all parameters are firm-specific. The elasticities exhibit some differences, depending on the choice of functional form, whilst the efficiency scores are less affected. Bayes factors suggest that the proposed model fits the data best.

The role of green total factor productivity to farm-level performance: evidence from Norwegian dairy farms

In the economics literature, measuring the performance of a dairy farm with a total productivity index is common practice. Previous research, on the other hand, has been chastised for failing to account for agricultural emissions in their models when calculating resource use productivity. This study estimated green total factor productivity (GTFP) accounting for dairy farms' CH4 emission to the model. The study is based on unbalanced panel data from 692 specialized dairy farms from 1991 to 2020. To estimate GTFP and its components using multiple input–output environmental production technologies, a stochastic input distance function and a Translog model were used. The average annual growth rate of green production over the research period was 0. 032%. The main reason for the increase in GTFP was positive scale change contributions. Technological change (− 0.031% per year) and efficiency change (− 0.002% per year), on the other hand, had a detrimental effect on GTFP.

Selecting correct functional form in consumption function: Analysis of energy demand at household level.

In the estimation of demand functions for energy resources, parametric econometric models of energy demand are commonly used to predict future energy needs. The functional forms commonly assumed in parametric energy demand models include linear functional forms, log-linear forms, trans-log models, and an almost ideal demand system. It is frequently debated which is the "best" functional form to employ in order to accurately represent the underlying relationships between the demand for various energy resources and explanatory variables such as energy prices, income, and other demographic factors. The study has focused on developing proper non-nested tests to compare the two demand systems, the double log model and the LA-AIDS model. C-test is used to test the validity of using the two parametric functional forms in models of residential energy demand. Cross-sectional household-level data of the Pakistan Social and Living Standards Measurement (PSLM) 2013-14 and Asian Development Bank (ADB) Asia and Pacific 2018 are used. Results indicate that the LA-AIDS model is better than the double log model. The estimated elasticity of own prices, cross-prices, and income in terms of spending, family size, and equipment are particularly important to producers and policymakers in making investment and incentive choices. A significant part of the budget for families is for electricity, natural gas, firewood, and other fuels; smaller budget shares are set down to other items such as kerosene oil, cylinder gas, and diesel. Household per capita demand for energy resources will rise over the next decade; therefore, the government needs to make progress on developing energy-saving strategies. If not addressed the issue properly, we may face energy shortages and high energy import bills.

Impact of Information and Communication Technology on the Secondary Schools’ Efficiency in Barisal Division of Bangladesh: Teachers’ Preference and Perceptions

This study assess the efficiency and identify the factors causing responsible for school inefficiency of Barisal division in Bangladesh using stochastic frontier analysis. Multiple regression analysis was used to investigate the impact of teachers’ preference and use of ICT on their knowledge and motivated factors in teaching and learning. The determinants of factors affecting to secondary school efficiency were investigated by Tobit regression analysis. Through the likelihood-ratio test, Translog model was found an appropriate than Cobb-Douglas model. The number of students, the number of class rooms and teaching ability of the teachers had a positive and significant contribution to improve the efficiency. The ICT lab, teacher’s preference of ICT tools like multimedia projector used played a contributor role in increasing the school efficiency. The urban secondary schools performed better than the rural secondary schools. Barisal district was found comparatively better for urban secondary schools and Jhalokhati district was for rural secondary schools. Both medium and high level ICT teaching ability have positive and significant influence on the secondary school efficiency. Government should take necessary steps to improve the teaching and learning system in Barisal division by improving the teacher-student ratio, rural school and conventional teaching method in secondary school.

Investigating Yield Variability and Technical Efficiency of Smallholders Pineapple Production in Johor

This research investigates the efficiency of pineapple production in Malaysia using the stochastic frontier model with flexible risk features and a sample of 290 pineapple farms by smallholders in Johor. The results of the study indicate that the trans log model is the best match for the mean output function, while input factors, such as sucker, fertilizer, agrochemicals, labor, and hormones, have a positive effect on pineapple yield with rising returns to scale. The study also finds that fertilizers and hormones are risk increasing inputs, whilst sucker is classified as a risk decreasing input. The total farm-specific characteristics account for the difference in the mean technical efficiency, which is estimated to be 68.1%. The study shows that, on average, 31.9 percent of the potential output is wasted owing to technical inefficiency and production risks in inputs. However, the optimal production of pineapple is facilitated by the application of the best agricultural techniques.

Contribution of the Technical Efficiency of Public Health Programs to National Trends and Regional Disparities in Unintentional Childhood Injury in Japan.

To achieve the Sustainable Development Goals, strengthening investments in health service inputs has been widely emphasized, but less attention has been paid to tackling variation in the technical efficiency of services. In this study, we estimated the technical efficiency of local public health programs for the prevention of unintentional childhood injury and explored its contribution to national trend changes and regional health disparities in Japan. Efficiency scores were estimated based on the Cobb–Douglas and translog production functions using a true fixed effects model in a stochastic frontier analysis to account for unobserved time-invariant heterogeneity across prefectures. Using public data sources, we compiled panel data from 2001 to 2017 for all 47 prefectures in Japan. We treated disability-adjusted life years (DALYs) as the output, coverage rates of public health programs as inputs, and caregivers' capacity and environmental factors as constraints. To investigate the contribution of efficiency to trend changes and disparities in output, we calculated the predicted DALYs with several measures of inefficiency scores (2001 average, yearly average, and prefecture-year-specific estimates). In the translog model, mean efficiency increased from 0.62 in 2001 to 0.85 in 2017. The efficiency gaps among prefectures narrowed until 2007 and then remained constant until 2017. Holding inefficiency score constant, inputs and constraints contributed to improvements in average DALYs and widened regional gaps. Improved efficiency over the years further contributed to improvements in average DALYs. Efficiency improvement in low-output regions and stagnated improvement in high-output regions offset the trend of widening regional health disparities. Similar results were obtained with the Cobb–Douglas model. Our results demonstrated that assessing the inputs, constraints, output, and technical efficiency of public health programs could provide policy leverage relevant to region-specific conditions and performance to achieve health promotion and equity.

Private extension delivers productivity growth in pasture-based dairy farming in the Eastern Cape, 2012–2018

ABSTRACT This study presents a novel way to measure the contribution of private extension to farm productivity for club data. Club data refers to any convenience sample obtained from a study group, consulting firm, cooperative or producer organisation. The study develops a stochastic frontier production function model with the inefficiency effects of pasture-based dairy farming in the Eastern Cape, South Africa. The analysis for 2012–2018 involves 49 adopter farms, and controls for inter-calf period, nutrient use efficiency and the amount of extension contact. Results are robust to functional form specification and there is no evidence of frontier-shifting technical progress for the Cobb Douglas or translog model, but there is a clear productivity benefit to engaging with the private extension service provider working locally (adoption). Productivity rises at 0.91–1.06% p.a. over time and by 1.54–1.62% p.a. with each extra year of the extension. Large farms close to the private extension provider’s base of operations benefit most from being in the group. This case study is important because it documents productivity growth in the period since 2010 and puts the effect of extension on productivity growth back on the local research agenda.

Analysis of the Effect EXIM Bank Efficiency on Non-Oil Export

The Effect of EXIM Bank Efficiency on Non-Oil Export Abstract According to economic definition, Non-oil export is one of the most important indexes in economy development of each country especially in developing countries. Export import banks (EXIM) can affect the export financing of goods and services, if the bank can have cost efficiency. On the other hand, in this paper the efficiency of Iranian EXIM Bank is estimated by using Stochastic Frontier Analysis (SFA) method. Along with this purpose, On the basis of the results of final model, the output variable includes non-operating income, operating income as well as the input variable including impairment loan, provision of default and branches’ capital were significant in bank efficiency. Also, braches’ capital was one of the main input variables of the model that shows the importance of these variables in different branches of Export Development Bank. Whereas the bank is a specialty bank in non-oil exports section and its main capital is provided by the government, the role of the government in this performance is undeniable. Since the bank is a specialty bank in export domain, the effect of the bank’s efficiency on non-oil export of Iran was studied by using a linear regression. On the strength of the results , the efficiency of the bank in the under study period had an increasing trend. Also, based on the results, a significant correlation was found between the efficiency of Export Development Bank and non-oil exports in the under study period. Introduction Seven criteria for evaluating firm performance are: effectiveness, efficiency, productivity, quality, profitability and Profitability, quality of working life and creativity and innovation. The ratio of the amount of resources that are projected to achieve goals, objectives and activities Be used in proportion to the amount of resources actually used between productivity and the ratio or relationship between The amount of output produced by the firm using a certain amount of inputs is called productivity. Thus, improving the level of productivity is the result of producing more output using a fixed amount of input or producing a fixed amount of output using less input. Methodology The following steps have been taken in the research for fulfilling the research objectives: In the first step, in order to evaluate bank’s performance, the efficiency of various branches was measured using Stochastic Frontier Production Function. Accordingly, 27 branches with continuous activity during the past three years were selected as sample and their monthly efficiency was estimated. For measuring branches’ efficiency, bank’s expenses were considered as a function of input and output variables and then estimated using Frontier 4 software. Various inputs and outputs were fitted in the model and finally non-operating and operating incomes, as outputs, and impairment loan, provision of default and branches’ capital, as bank’s inputs, were identified. Bank efficiency using SFA model As mentioned above, econometric estimation of cost function requires selection of function form. The model was estimated in Cob Douglass and Translog models and research model was selected. Also, the model was estimated with different inputs and outputs. Only the final function form is entered here. General form of Cob Douglass and Translog functions are respectively as follows: is the total cost of ith bank, is output, is input price, is random error and is cost inefficiency. Keywords: EXIM Bank, Efficiency, Non Oil Export, exim bank performance – Stochastic Frontier Analysis Conclusion Whereas inputs aproved in the above model for estimating branches’ efficiency include branches’ capital, impairment loans and provision of default branches' facilities, five strategies are suggested for improving branches’ efficiency and developing non-oil exports. A) Increase of branches’ capital: branches’ capital of Export Development Bank is an exogenous variable as the bank is a governmental one and increase of branches’ capital requires direct governmental support. B) Decrease of impairment loans and provision of default: impairment loans and provision of default are two endogenous variables that are controlled by the bank and its ranches. c)The Central Bank is trying to reduce the restrictions of the rules and regulations related to commercial banks in Exim Bank Iran. d)Reduction and merger of loss-making branches that are unable to cover their costs due to the location and conditions of the branch. e)Increasing the productivity of human and physical capital by holding effective training courses and revising the recruitment and employment of manpower in a traditional way and using scientific methods to attract talented, specialized, motivated and interested manpower and etc.

INDONESIAN BANKING PERFORMANCE BASED ON BUKU

The improvement in the performance of Indonesian banking when the global economy is being hit by uncertainty is one of the best achievements. Acquiring profitability is accompanied by an increase in efficiency in using available resources to gain profit. This study aims to measure and analyze the performance of Indonesian banking based on Profit Efficiency. Profit Efficiency of a bank is analysed based on BUKU (Bank Umum Kelompok Usaha). The profit Efficiency is measured using the Sthocastic Frontier Analysis (SFA) Frontier 4.1 with the translog model of Alternative Profit Efficiency. The input variables used are: labor costs, physical capital costs and interest costs. The output variable used is the amount of credit and the amount of other productive assets. The model equation used is the Bank Activity Approach. The total sample was 19 commercial banks listed on the Indonesia Stock Exchange (IDX) and had financial reports from the year of 2010 to 2019. The results of banking Profit Efficiency measurement based on BUKU conclude that BUKU 2 indicated that each bank’s Profit Efficiency tends to be increasingly inefficient. BUKU 3 of profit efficiency of banks tends to be more efficient. BUKU 4 shows that banks in this group of Profit efficiency are increasingly efficient. This means that the greater the bank’s core capital, the more efficient it is in generating profits.

Performance of Translog and Cobb-Douglas models in the estimation of technical efficiency of Irish potato production in Plateau State, Nigeria

The study compared the performance of Cobb-Douglas and Translog frontier models in the analysis of technical efficiency in Irish potato production in Plateau State. A multistage sampling technique was employed to select 180 respondents for the study. Data were analyzed using stochastic frontier model in the Cobb-Douglas and the Translog functional forms. Results revealed that farm size and seed had positive and significant coefficients under the Cobb-Douglas model. However, estimated Translog model showed that, while farm size and labour had negative relationships with output, fertilizer had a positive relationship. The elasticity estimates from both frontier models show that Irish potato farmers were operating at an increasing return to scale. The mean technical efficiency estimates were 68% and 59% for Cobb-Douglas and Translog models respectively. Hypothesis testing showed that there was a significant difference in the technicalefficiency estimates between the Cobb-Douglas and Translog frontier models. The inefficiency estimates revealed that education, household size and extension reduced inefficiency while farming experience increased inefficiency under the Cobb-Douglas model. None of the socioeconomics variables analysed in the Translog model for inefficiency was significant. It is recommended that training of the farmers on the optimum rate of input utilization and combination should be organized. The Cobb-Douglas model provided better results, in terms of economic and statistical properties of the coefficients, and therefore recommended for the estimation of technical efficiency of Irish potato farms in the study area.
 Key words: Cobb-Douglas, performance, technical efficiency, translog

Dissections of input and output efficiency: A generalized stochastic frontier model

This paper considers a model that accommodates both output and input-specific inefficiency components (input slacks). We use a translog function to represent the underlying production technology in which the input slacks are generalized to have both deterministic (functions of exogenous variables) and stochastic components. Consequently, the composed error term becomes a nonlinear function of several error components, viz., a one-sided input slack vector (the dimension of which depends on the number of inputs), a one-sided output technical inefficiency and a two-sided random noise. Identification of two sets of one-sided errors is possible in a translog model because the vector of one-sided input slacks appears in additive form as well as interactively with the (log) inputs. Distributional assumptions on technical inefficiency and slacks also help in identification. Bayesian inference techniques are introduced, organized around Markov Chain Monte Carlo, especially the Gibbs sampler with data augmentation, to estimate these inefficiency components. For an empirical application we use a large unbalanced panel of the U.K. manufacturing firms. Slacks associated with labor and capital are found to be 2.35% and 10.74%, on average. Output (revenue) loss from technical inefficiency is, on average, 2.43%, while revenue loss from input slacks is, on average, 9.2%.

Capital-skill complementarity and biased technical change across US sectors

The goal of this paper is two-fold. First, we reexamine the evidence for the capital-skill complementarity (CSC) and the skill-biased technological change (SBTC) hypotheses at the sectoral level in the US economy for the period 1970–2005. Second, we quantify their effect on the evolution of the wage skill premium. To do so, we estimate a translog model with three production factors (skilled labor, unskilled labor, and capital) for different sets of industry aggregates suggested by the literature. At the aggregated level, we find that both CSC and SBTC explain a substantial part of the observed change in the skill premium. The CSC hypothesis also receives support across sectors, although SBTC often explains a larger part of the premium change. We also find that the relevance of CSC increases with the level of aggregation of the data. Besides, when we disaggregate capital into ICT and non-ICT, our results suggest that often ICT capital is not the primary source of CSC. However, ICT-CSC is the most important driver of the skill premium in specific sectors, such as financial and business services.

Work organization and job polarization

This paper contributes to the literature on job polarizaton, whereby mid-skill jobs disappear because of increased mechanization and digitization of routine tasks. While the recent empirical literature has focused on the relative importance of technical change and globalization as the main drivers of job polarization, the role of within firm organizational changes has remained unexplored. Our study contributes to filling this gap by investigating how technological and organizational changes affect the mix of jobs within the firm. To this end we merge two firm level surveys from Denmark and add registry data to gain detailed knowledge of changes in the firms’ occupational structure. We construct measures of work organization in line with previous research and using a translog model we show that changes in work organization are associated with polarization by substituting and complementing different skill groups, even in the absence of technological change and changes in offshoring. The results show not only that the organizational level is central to understanding possible trends towards job polarization, but also demonstrate that changes in work organization often co-occur with changes in technology and in offshoring behavior, leading to interactions effects between organizational change, and technology and offshoring on job polarization.

The marginal benefits of healthcare spending in the Netherlands: Estimating cost-effectiveness thresholds using a translog production function.

New technologies may displace existing, higher‐value care under a fixed budget. Countries aim to curtail adoption of low‐value technologies, for example, by installing cost‐effectiveness thresholds. Our objective is to estimate the opportunity cost of hospital care to identify a threshold value for the Netherlands. To this aim, we combine claims data, mortality data and quality of life questionnaires from 2012 to 2014 for 11,000 patient groups to obtain quality‐adjusted life‐year (QALY) outcomes and spending. Using a fixed effects translog model, we estimate that a 1% increase in hospital spending on average increases QALY outcomes by 0.2%. This implies a threshold of €73,600 per QALY, with 95% confidence intervals ranging from €53,000 to €94,000 per QALY. The results stipulate that new technologies with incremental cost effectiveness ratios exceeding the Dutch upper reference value of €80,000 may indeed displace more valuable care.

A Network Modelling Approach to Flight Delay Propagation: Some Empirical Evidence from China

This paper examines flight delay propagation in air transport networks. Delays add to additional costs, inefficiencies, and unsustainable development. An integrated flight-based susceptible-infected-susceptible (FSIS) model was developed to analyse the flight delay process from a network-based perspective. The probability of flight delay propagation was determined using a translog model. The model was applied to an airline network consisting of thirty-three routes involving three airlines. The results show that the propagation probability is network-related and varies across different routes. The variation is related to the flight frequencies at airports, route distances, scheduled buffer times, and the propagated delay time. Whereas buffer time has a greater impact on smaller airports, flight movement has a greater impact on larger airports. Having a better understanding of how delays happen can help the development of strategies to avoid them. This will lead to less costs, higher efficiencies, and more sustainable airport and airline development.

Scale and Scope Economies in Chinese Life Insurance Industry

Using the Translog model and the data of all life insurance companies in China from 2012 to 2015, this paper analyzes the scale effect and scope effect in China's life insurance market. In this paper, the premium income of various types of insurance as the output of the company, rent and wages as input elements, Commission and commission expenditure, business and management fees as the operating costs of insurance companies. The results show that both large & medium-sized life insurance companies have economies of scale, and the scale effect of small life insurance companies is significantly stronger than that of large & medium-sized life insurance companies. In terms of scope effect, it is difficult to draw a unified conclusion from the 2012-2015 year's model results. According to the results of the model in 2015, ordinary life insurance and health insurance, health insurance and other insurance have cost-complementary effects.

A Comparative Analysis of R.E.I.T.s, R.E.O.C.s and P.R.E.O.C.s Using a Stochastic Frontier Approach

Although the first real estate investment trust (R.E.I.T.) was created in 1960s, according to the latest data of 2018, only 13 out of 28 European countries had such systems on their stock-exchange. Many economists have published detailed studies stating the advantages of R.E.I.T.s, however, the developing part of Europe is still slow to react with legislative initiatives. This article extends the existing research on R.E.I.T. efficiencies and compares them to private real estate operating companies (P.R.E.O.C.s) as well as real estate operating companies (R.E.O.C.s) across the U.S., Canada and the European Union by using a stochastic frontier, panel-data models of translog cost functions while trying to identify whether a significant benefit arises from different corporate structures. The results confirm that out of 666 companies under consideration, all types of real estate (R.E.) firms achieve economies of scale. Furthermore, in the time period of 2014–2016, REITs on average were less reliant on short-term debt, they had a lower debt-to-equity ratio, were more efficient at managing costs in three stochastic translog models and partially in fourth, had a stronger economy of scale effect when their assets size increased, and remained competitively profitable though were outperformed in the profit and revenue area.