Reference no: EM132382913

ECON5005 Production Economics and Efficiency Analysis Assignment - University of Western Australia, Australia

INSTRUCTIONS: In the same folder, there is a data file which has information on input and output levels for 27 producers observed over a period of ten production years. You have been asked to investigate the nature of the production function frontier that best describes the relationship between aggregate producer output and inputs (both variable and fixed) that are used by the producers, using stochastic frontier analysis method. The OLS estimates of a Cobb-Douglas and a translog production function are includes in a table at the end of this document along with the R code used to read in the data and to run the OLS regressions. For SFA, you are advised to use the frontier R package which allows you to use both time invariant and time variant panel data models (SFA) as well as crosssectional SFA models (pooled data models). Provide the results from your investigatin as a structured report that includes the following. Limit your report to between 3 and 4 pages including figures and tables. Include your R script as an appendix (the appendix pages are not included in the page limit). Further, limit your investigation to the Cobb-Douglas and translog type models.

(a) A description of the data using a summary table (including means, medians, standard deviations, etc.) and your observations about the data that you are about to analyse.

(b) A summary of the results from OLS models and what they teach us about the nature of the production technology, and how our undestanding of that technology changes when we employ more exible or more general forms, where exibility and generality might refer to the nature of the functional form, whether inefficiency is recognised or not, and the type of SFA model used (e.g. time-invariant versus time-variant, etc.). Target results for technology characteristics include elasticity and returns to scale estimates.

(c) Results from statistical tests comparing more general to restricted SFA models should be included as part of the discussion in relation to what models appear more suitable for the data, e.g. are translog models better than Cobb-Douglas ones, and are panel data SFA models better than pooled data SFA models?

(d) An appropriate interpretation of the results from the SFA model and a discussion of the efficiency estimates, together with desnity plots of efficiency level estimates and/or tables summarising the efficiency estimates from different models.

(e) Your observations about efficiency levels and trends (if any) across the sample farms, using the model that you think is most suited for the data.

PRESENTATION - All answers are to be presented in a single PDF document, that also has all your R scripts attached as an appendix. Figures and tables must be appropriately formatted and labeled sequentially as Figure 1, Figure 2, etc. Put figures and tables at an appropriate scale and refer to them in the main document.

Attachment:- Production Economics and Efficiency Analysis Assignment Files.rar