options linesize=80; options pagesize=60; filename costs 'C:\Documents and Settings\jianl\Desktop\temp\data14_8.txt'; data costs; infile costs; input firm year cost output l_p l_shr k_p k_shr f_p f_shr; /* let's divide everything by fuel cost */ ln_fp = log(f_p); ln_t_lp = log(l_p) - ln_fp; ln_t_kp = log(k_p) - ln_fp; ln_t_C = log(cost) - ln_fp; ln_t_lp2 = ln_t_lp*ln_t_lp; ln_t_kp2 = ln_t_kp*ln_t_kp; i_lpkp = ln_t_lp*ln_t_kp; ln_Y = log(output); ln_Y2 = ln_Y*ln_Y; i_Ylp = ln_Y*ln_t_lp; i_Ykp = ln_Y*ln_t_kp; proc means; /* OLS regression for each of the three equations */ proc reg; model ln_t_C = ln_t_lp ln_t_kp ln_t_lp2 ln_t_kp2 i_lpkp ln_Y ln_Y2 i_Ylp i_Ykp; model l_shr = ln_t_lp ln_t_kp ln_Y; model k_shr = ln_t_lp ln_t_kp ln_Y; /* Estimation of the system of equations using SUR */ proc model; parms alpha beta_lp beta_kp delt_lp2 delt_kp2 delt_i gamm_Ylp gamm_Ykp beta_Y beta_Y2; exogenous ln_t_lp ln_t_kp ln_t_lp2 ln_t_kp2 i_lpkp ln_Y ln_Y2 i_Ylp i_Ykp; endogenous ln_t_C l_shr k_shr; eq.C = ln_t_C - (alpha + beta_lp*ln_t_lp + beta_kp*ln_t_kp + 0.5*delt_lp2*ln_t_lp2 + 0.5*delt_kp2*ln_t_kp2 + delt_i*i_lpkp + beta_Y*ln_Y + beta_Y2*ln_Y2 + gamm_Ylp*i_Ylp + gamm_Ykp*i_Ykp); eq.ls = l_shr - (beta_lp + delt_lp2*ln_t_lp + delt_i*ln_t_kp + gamm_Ylp*ln_Y); eq.ks = k_shr - (beta_kp + delt_kp2*ln_t_kp + delt_i*ln_t_lp + gamm_Ykp*ln_Y); fit C ls ks / SUR; fit C ls ks / FIML; /* Estimation of the restricted models */ proc model; parms alpha beta_lp beta_kp delt_lp2 delt_kp2 delt_i beta_Y beta_Y2; exogenous ln_t_lp ln_t_kp ln_t_lp2 ln_t_kp2 i_lpkp ln_Y ln_Y2 i_Ylp i_Ykp; endogenous ln_t_C l_shr k_shr; eq.C = ln_t_C - (alpha + beta_lp*ln_t_lp + beta_kp*ln_t_kp + 0.5*delt_lp2*ln_t_lp2 + 0.5*delt_kp2*ln_t_kp2 + delt_i*i_lpkp + beta_Y*ln_Y + beta_Y2*ln_Y2); eq.ls = l_shr - (beta_lp + delt_lp2*ln_t_lp + delt_i*ln_t_kp); eq.ks = k_shr - (beta_kp + delt_kp2*ln_t_kp + delt_i*ln_t_lp); fit C ls ks / SUR; fit C ls ks / FIML; run;