I wish to perform stochastic frontier analysis to calculate inefficiency of firms, but for a unit output isoquant ( imp) now y'=1, k'=k/y and l'=l/k. Now, these values lie between 0 and 1 (including 0). If I take the logarithm of these values as we do in Cobb Douglas it had dependent variables as 0 and many -Inf values in the dependent variables. I used the functional form of Translog.

My question is how should I do the analysis so as to calculate inefficiency reliably and unit output is a necessary case here?


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.