Handling Losses in Translog Profit Models
SOM Research Reports, Forthcoming
9 Pages Posted: 18 Feb 2007
In this paper, we compare standard approaches used to handle losses in logarithmic stochastic profit frontier models with a simple novel approach. We discuss discriminatory power, rank stability and precision of profit efficiency scores. Our new method enhances rank stability and discriminatory power, and improves the precision of profit efficiency scores.
Keywords: profit efficiency, stochastic frontier analysis, truncation and censoring
JEL Classification: G21, C24
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