Handling losses in translog profit models

Jaap W.B. Bos (1) , Michael Koetter (2)

1 U.S.E. - Utrecht School of Economics
2 International Economics and Business

In this paper, we compare standard approaches used to handle losses in logarithmic profit models with a simple novel approach. We estimate translog stochastic profit frontiers, and discuss discriminatory power, rank stability and the precision of profit efficiency scores. Contrary to existing methods, our approach does not result in a loss of observations. Our new method enhances rank stability and discriminatory power, and improves the precision of profit efficiency scores.

Mots clés: Social Sciences & Humanities

Jaap W.B. Bos, Michael Koetter. Handling losses in translog profit models. Applied Economics, 2009, 43 (3), pp.307. ⟨10.1080/00036840802570413⟩. ⟨hal-00582213⟩