{smcl}
{* *! version 1.0.3 09jun2008}{...}
{cmd:help opreg}{right: ({browse "http://www.stata-journal.com/article.html?article=st0145":SJ8-2: st0145})}
{hline}

{title:Title}

{p2colset 5 14 16 2}{...}
{p2col :{hi:opreg} {hline 2}}Production function estimation using Olley and Pakes' technique{p_end}
{p2colreset}{...}


{title:Syntax}

{p 8 14 2}
{cmd:opreg} {depvar} {ifin}{cmd:,}
   {opt exit(varname)}
   {opt state(varlist)}
   {opt proxy(varname)}
   {opt free(varlist)}
   [{opt cvars(varlist)}
    {cmd:vce(bootstrap, }{it:{help bootstrap_options}}{cmd:)}
    {opt l:evel(#)}]
    

{synoptset 35 tabbed}{...}
{marker options}{...}
{synopthdr}
{synoptline}
{p2coldent:* {opt exit(varname)}}{it:varname} indicates a firm's exit{p_end}
{p2coldent:* {opt state(varlist)}}state variables appearing in production function{p_end}
{p2coldent:* {opt proxy(varname)}}variable to proxy for unobserved productivity{p_end}
{p2coldent:* {opt free(varlist)}}additional variables used in the second stage only{p_end}
{synopt :{opt cvars(varlist)}}additional variables used in both the first and second stages{p_end}
{synopt :{cmd:vce(bootstrap, }{it:{help bootstrap_options}}{cmd:)}}specify bootstrap options{p_end}
{synopt :{opt l:evel(#)}}set confidence level; default is {cmd:level(95)}{p_end}
{synoptline}
{p2colreset}{...}
{p 4 6 2}* {opt exit(varname)}, {opt state(varlist)}, {opt proxy(varname)},
 and {opt free(varlist)} are required.{p_end}
{p 4 6 2}A panel variable and a time variable must be specified by 
using {cmd:xtset}; see {manhelp xtset XT}.
      

{title:Description}

{pstd}
{cmd:opreg} estimates the production function in the presence of 
selection bias and simultaneity by using the three-stage algorithm 
described in Olley and Pakes (1996).


{title:Options}

{phang}
{cmd:exit(}{it:varname}{cmd:)} specifies a variable coded 0/1, where at 
time {it:t} for firm {it:i}, {it:varname_it} equals 1 if the firm exited
at the beginning of that period and zero otherwise.

{phang}
{cmd:state(}{it:varlist}{cmd:)} specifies up to two state variables.

{phang}
{cmd:proxy(}{it:varname}{cmd:)} specifies the proxy variable to be used in the
equation determining exit.

{phang}
{cmd:free(}{it:varlist}{cmd:)} specifies variable inputs that are not to be included in the exit equation.

{phang}
{cmd:cvars(}{it:varlist}{cmd:)} specifies variable inputs that are also
included in the exit equation.

{phang}
{cmd:vce(bootstrap, }{it:{help bootstrap_options}}{cmd:)} allows you to
specify options to control the bootstrap process.  The most commonly used
{it:bootstrap_options} is {opt reps(#)}, which control the number 
of replications performed.  The default is {opt reps(50)}.

{phang}
{opt level(#)}; see {manhelp estimation_options R}.


{title:Remarks}

{p 4 4 2}
The first and second stages use a second-degree polynomial expansion.  With one
state variable, the polynomial term is state^2 + proxy^2 + state*proxy.  With
two state variables, the polynomial term is state1^2 + state2^2 + proxy^2 +
state1*proxy + state2*proxy + state1*state2.


{title:Examples}

{p 4 8 2}{cmd:. opreg sales, exit(exit) state(stock) proxy(investment)}
         {cmd:free(material employment) cvars(sizedum2 sizedum3 time)}

{p 4 8 2}{cmd:. opreg sales, exit(exit) state(stock) proxy(investment)}
         {cmd:free(material employment) cvars(sizedum2 sizedum3 time)}
         {cmd:vce(bootstrap, reps(200))}

{p 4 4 2}
In either case, {cmd:opreg} would form the following equations:

{p 8 8 2}
exit = stock^2 + investment^2 + stock*investment + sizedum2 + sizedum3 + time

{p 4 4 2}
and

{p 8 8 2}
sales = stock + stock^2 + investment^2 + stock*investment + sizedum2 + sizedum3 + time + material + employment

{p 4 8 2}
The investment variable enters the second stage only through the polynomial
term.


{title:Acknowledgment}

{p 4 4 2}
The polynomial expansion is modeled on the subroutine {cmd:lp_srch} of the
command {cmd:levpet} by J. Levinsohn, A. Petrin, and B. Poi.


{title:Reference}

{p 4 8 2}
Olley, G. S., and A. Pakes. 1996. The dynamics of productivity in the 
telecommunications equipment industry. {it:Econometrica} 64: 1263-1297.


{title:Authors}

{phang}
Mahmut Yasar, Department of Economics, University of Texas at Arlington,
Arlington, TX. {browse "mailto:myasar@uta.edu":myasar@uta.edu}.

{phang}
Rafal Raciborski, Department of Political Science, Emory University, Atlanta,
GA.

{phang}
Brian Poi, StataCorp, College Station, TX.


{title:Also see}

{psee}
Article: {it:Stata Journal}, volume 8, number 2: {browse "http://www.stata-journal.com/article.html?article=st0145":st0145}
{p_end}