Appendix 1: Computer Software
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APPENDIX 1: COMPUTER SOFTWARE In this appendix we provide details on the computer software that is used in this book. Five computer programs are used: 1. SHAZAM - a general purpose econometrics package 2. LIMDEP - a general purpose econometrics package 3. DEAP - a data envelopment analysis (computer) program (Coelli, 1996b). 4. FRONTIER - a computer program for the estimation of stochastic frontier models (Coelli, 1996a). 5. TFPIP - a total factor productivity index (computer) program written by Tim Coelli. The SHAZAM and LIMDEP computer programs are a widely used econometrics software packages. They can be used to estimate a large number of econometric models. For further information on these computer programs, including information on how to purchase them, refer to the web sites: http://shazam.econ.ubcxa/ and http://www.limdepxom/ The remaining three computer programs (listed above) were written by Tim Coelli, specifically for the measurement of efficiency and/or productivity. Information on these three computer programs can be obtained from the Centre for Efficiency and Productivity Analysis (CEPA) web site: http://www.uq.edu. au/economics/cepa where copies of these programs (including manuals) may be downloaded free of charge. We now discuss the use of these latter three computer programs. 318 APPENDIX 1 DEAP Version 2.1: A Data Envelopment Analysis (Computer) Program This computer program has been written to conduct data envelopment analyses (DEA). The computer program can consider a variety of models. The three principal options are: 1. Standard CRS and VRS DEA models that involve the calculation of technical and scale efficiencies (where applicable). These methods are outlined in Chapter 6. 2. The extension of the above models to account for cost and allocative efficiencies. These methods are outlined in Section 7.2. 3. The application of Malmquist DEA methods to panel data to calculate indices of total factor productivity (TFP) change; technological change; technical efficiency change and scale efficiency change. These methods are discussed in Chapter 10. All methods are available in either an input or an output orientation (with the exception of the cost efficiencies option). The output from the program includes, where applicable, technical, scale, allocative and cost efficiency estimates; slacks; peers; targets; TFP and technological change indices. The DEAP computer program is written in Fortran (Lahey F77LEM/32) for IBM compatible PCs. It is a DOS program but can be easily run from WINDOWS using WINDOWS EXPLORER. The program involves a simple batch file system where the user creates a data file and a small file containing instructions. The user then starts the program by typing "DEAP" at the DOS prompt^ and is then prompted for the name of the instruction file. The program then executes these instructions and produces an output file which can be read using a text editor, such as NOTEPAD, or any program that can accept text files, such as WORD or EXCEL. The execution of DEAP Version 2.1 on PC generally involves five files: 1. The executable file, DEAP.EXE 2. The start-up file, DEAP.OOO 3. A data file (for example, called TEST-DTA.TXT) 4. An instruction file (for example, called TEST-INS.TXT) 5. An output file (for example, called TEST-OUT.TXT). The program can also be run by double-clicking on the DEAP.EXE file in WINDOWS EXPLORER. The use of WINDOWS EXPLORER is discussed at the end of this appendix. COMPUTER SOFTWARE 319 The executable file and the start-up file is supplied on the disk. The start-up file, DEAP.OOO, is a file that stores key parameter values that the user may or may not need to alter.^ The data and instruction files must be created by the user prior to execution. The output file is created by DEAP during execution. Examples of data, instruction and output files are listed in Chapters 6 and 7. Data file The program requires that the data be listed in a text file^ and expects the data to appear in a particular order. The data must be listed by observation (i.e., one row for each firm). There must be a column for each output and each input, with all outputs listed first and then all inputs listed (from left to right across the file). For example, for 40 observations on two outputs and two inputs there would be four columns of data (each of length 40) listed in the order: yl, y2, xl, x2. The cost efficiencies option requires that price information be supplied for the inputs. These price columns must be listed to the right of the input data columns and appear in the same order. That is, for three outputs and two inputs, the order for the columns must be: yl, y2, y3, xl, x2, wl, w2, where wl and w2 are input prices corresponding to input quantities, xl and x2. The Malmquist option is used with panel data. For example, for 30 firms observed in each of 4 years, all data for year 1 must be listed first, followed by the year 2 data listed underneath in the same order (of firms) and so on. Note that the panel must be "balanced", i.e., all firms must be observed in all time periods. A data file can be produced using any number of computer packages. For example: • using a text editor (such as NOTEPAD), • using a word processor (such as WORD) and saving the file in text format, • using a spreadsheet (such as EXCEL) and printing to a file, or • using a statistics package (such as SHAZAM or LIMDEP) and writing data to a file. Note that the data file should only contain numbers separated by spaces or tabs. It should not contain any column headings. ^ At present this file only contains two parameters. One is the value of a variable (EPS) used to test inequalities with zero and the other is a flag that can be used to suppress the printing of the firm-by-firm reports in the output file. This text file may be edited if the user wishes to alter this value. ^ All data, instruction and output files are (ASCII) text files. 320 APPENDIX 1 Instruction file The instruction file is a text file that is usually constructed using a text editor or a word processor. The easiest way to create a new instruction file is to edit one of the example instruction files that are supplied with the program and then save the edited file under a different file name. The best way to describe the structure of the instruction file is via examples. Refer to the examples in Chapters 6 and 7. Output file As noted earlier, the output file is a text file that is produced by DEAP when an instruction file is executed. The output file can be read using a text editor, such as NOTEPAD, or using a word processor, such as WORD. The output may also be imported into a spreadsheet program, such as EXCEL, to allow further manipulation into tables and graphs for subsequent inclusion into report documents. FRONTIER Version 4.1: A Computer Program for Stochastic Frontier Estimation The FRONTIER computer program is very similar in construction to the DEAP computer program. It has been written to provide maximum-likelihood estimates of the parameters of a number of stochastic frontier production and cost functions. The stochastic frontier models considered can accommodate (unbalanced) panel data and assume firm effects that are distributed as truncated normal random variables. The two primary model specifications considered in the program are: 1. The Battese and CoeUi (1992) time-varying inefficiencies specification, which is discussed in Section 10.5. 2. The Battese and Coelli (1995) model specification in which the inefficiency effects are directly influenced by a number of variables. This model is discussed in Section 10.6. The computer program also permits the estimation of other models that have appeared in the literature through the imposition of simple restrictions. Estimates of standard errors are also calculated, along with individual and mean efficiency estimates. The program can accommodate cross-sectional and panel data; time-varying and time-invariant inefficiency effects; cost and production functions; half-normal and truncated normal distributions; and functional forms which have a dependent variable in logged or original units. COMPUTER SOFTWARE 321 The execution of FRONTIER Version 4.1 on an IBM PC generally involves five files: 1. The executable file, FR0NT41 .EXE 2. The start-up file, FR0NT41.000 3. A data file (for example, called TEST-DTA.TXT) 4. An instruction file (for example, called TEST-INS.TXT) 5. An output file (for example, called TEST-OUT.TXT). The start-up file, FR0NT41.000, contains values for a number of key variables, such as the convergence criterion, printing flags and so on. This text file may be edited if the user wishes to alter any values. The data and instruction files must be created by the user prior to execution."* The output file is created by FRONTIER during execution. Examples of data, instruction and output files are presented in Chapter 9. The program requires that the data be stored in an text file and is quite particular about the order in which the data are listed. Each row of data should represent an observation. The columns must be presented in the following order: 1. firm number (an integer in the range 1 to N); 2. period number (an integer in the range 1 to T); 3. dependent variable; 4. regressor variables; and 5. variables influencing the inefficiency effects (if applicable). The observations can be listed in any order but the columns must be in the stated order.