open banks91.gdt

# transformations
series cost = ln(VC)
series q1 = ln(Q1)
series q2 = ln(Q2)
series p1 = ln(P1)
series p2 = ln(P2)
series p3 = ln(P3)

# Cobb-Douglas cost function with homogeneity restrictions
# (for initialization)
series rcost = cost - p1
series rp2 = p2 - p1
series rp3 = p3 - p1

ols rcost const q1 q2 rp2 rp3

# Cobb-Douglas cost function with homogeneity restrictions 
# and inefficiency 

scalar b0 = $coeff(const)
scalar b1 = $coeff(q1)
scalar b2 = $coeff(q2)
scalar b3 = $coeff(rp2)
scalar b4 = $coeff(rp3)

scalar su = 0.1
scalar sv = 0.1

mle logl = ln(cnorm(e*lambda/ss)) - (ln(ss) + 0.5*(e/ss)^2)
  scalar ss = sqrt(su^2 + sv^2)
  scalar lambda = su/sv
  series e = rcost - b0*const - b1*q1 - b2*q2 - b3*rp2 - b4*rp3
  params b0 b1 b2 b3 b4 su sv
end mle