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<u>Table 4. Estimated cost function with data from 7 SEE countries</u>

||SU<br>All cou|R<br>ntries|SU<br>All cou|R<br>ntries|SF<br>All cou|A<br>ntries|All cou<br>SF|ntries<br>A|SF<br>All cou<br>(Clustere|A<br>ntries<br>d by industry)|(Clustere<br>SF<br>All co|d by country)<br>A<br>untries|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|_βY_|0.866|(0.025) ***|0.859|(0.027) ***|0.858|(0.031) ***|0.859|(0.031) ***|0.858|(0.037) ***|0.867|(0.014) ***|
|_βYY_|0.005|(0.004)|0.004|(0.004)|0.002|(0.004)|0.004|(0.004)|0.002|(0.004)|0.004|(0.004)|
|_βWL_|0.611|(0.015) ***|0.830|(0.022) ***|0.816|(0.032) ***|0.830|(0.032) ***|0.816|(0.061) ***|0.834|(0.034) ***|
|_βWE_|0.091|(0.017) ***|–0.047|(0.030)|–0.042|(0.060)|–0.047|(0.055)|–0.042|(0.131)|–0.053|(0.073)|
|_βWL WL_|–0.007|(0.006)|–0.130|(0.014) ***|–0.135|(0.021) ***|–0.130|(0.021) ***|–0.135|(0.020) ***|–0.126|(0.018) ***|
|_βWL WE_|0.132|(0.003) ***|0.202|(0.007) ***|0.225|(0.010) ***|0.202|(0.010) ***|0.225|(0.011) ***|0.203|(0.009) ***|
|_βWL WK_|–0.136|(0.003) ***|–0.147|(0.008) ***|–0.165|(0.012) ***|–0.147|(0.012) ***|–0.165|(0.015) ***|–0.149|(0.010) ***|
|_βWE WE_|0.070|(0.004) ***|0.049|(0.009) ***|0.048|(0.016) ***|0.049|(0.015) ***|0.048|(0.015) ***|0.047|(0.013) ***|
|_βWE WK_|0.010|(0.004) ***|0.016|(0.008) *|0.018|(0.013)|0.016|(0.012)|0.018|(0.008) **|0.017|(0.011)|
|_βYWL_|0.004|(0.002) *|0.009|(0.003) ***|0.010|(0.003) ***|0.009|(0.003) ***|0.010|(0.005) **|0.009|(0.003) ***|
|_βYWE_|–0.019|(0.002) ***|–0.030|(0.005) ***|–0.035|(0.007) ***|–0.030|(0.006) ***|–0.035|(0.013) ***|–0.029|(0.007) ***|
|_βZ_ _P_ 1|0.001|(0.001)|–0.000|(0.001)|–0.001|(0.001)|–0.000|(0.001)|–0.001|(0.001)|–0.000|(0.001)|
|_βZ P_ 2|0.014|(0.008) *|0.011|(0.009)|0.018|(0.009) *|0.011|(0.008)|0.018|(0.009) **|0.010|(0.005) **|
|_βZ P_ 1_Z P_ 1|–1.4E-6|(2.4E-6)|4.8E-7|(2.9E-6)|1.2E-6|(2.0E-6)|4.8E-7|(2.6E-6)|1.2E-6|(1.4E-6)|5.4E-7|(1.5E-6)|
|_βZ_ _P_ 1_Z_ _P_ 2|–3.6E-5|(4.0E-5)|6.4E-6|(4.3E-5)|4.0E-6|(2.7E-5)|6.4E-6|(2.8E-5)|4.0E-6|(1.3E-5)|7.0E-6|(4.3E-5)|
|_βZ_ _P_ 2_Z_ _P_ 2|4.3E-4|(5.0E-4)|4.7E-4|(5.2E-4)|2.7E-4|(4.1E-4)|4.7E-4|(3.9E-4)|2.7E-4|(3.9E-4)|4.9E-4|(3.1E-4)|
|_βY Z_ _P_ 1|–8.5E-6|(5.9E-5)|2.1E-5|(6.7E-5)|3.2E-5|(4.4E-5)|2.1E-5|(4.9E-5)|3.2E-5|(3.9E-5)|2.1E-5|(4.1E-5)|
|_βY Z P_ 2|–3.5E-4|(1.0E-3)|1.2E-3|(1.2E-3)|1.2E-3|(1.0E-3)|1.2E-3|(9.6E-4)|1.2E-3|(9.6E-4)|1.0E-3|(7.5E-4)|
|_βWL Z P_ 1|7.0E-5|(4.5E-5)|7.9E-5|(6.3E-5)|1.2E-4|(5.1E-5) **|7.9E-5|(5.4E-5)|1.2E-4|(4.8E-5) **|6.6E-5|(5.4E-5)|
|_βWL Z_ _P_ 2|–1.1E-3|(9.8E-4)|–2.2E-3|(1.3E-3) *|–2.1E-3|(1.2E-3) *|–2.2E-3|(1.1E-3) **|–2.1E-3|(7.3E-4) ***|–2.0E-3|(6.3E-4) ***|
|_βWE Z_ _P_ 1|9.5E-6|(5.4E-5)|–1.5E-5|(1.2E-4)|–6.3E-5|(1.2E-4)|–1.5E-5|(1.1E-4)|–6.3E-5|(1.6E-4)|–1.3E-5|(1.2E-4)|
|_βWE Z P_ 2|2.8E-3|(1.3E-3) **|6.9E-3|(2.7E-3) **|8.2E-3|(3.7E-3) **|6.9E-3|(3.3E-3) **|8.2E-3|(2.7E-3) ***|6.2E-3|(2.0E-3) ***|
|Construction|0.028|(0.060)|0.026|(0.063)|0.047|(0.054)|0.026|(0.051)|0.047|(0.043)|||
|Manufacturing|0.081|(0.056)|0.069|(0.060)|0.105|(0.049) **|0.069|(0.047)|0.105|(0.042) **|||
|Transport|–0.045|(0.061)|0.061|(0.065)|0.089|(0.063)|0.061|(0.059)|0.089|(0.045) **|||
|Trade|0.021|(0.058)|0.057|(0.061)|0.076|(0.051)|0.057|(0.048)|0.076|(0.038) **|||
|Real estate|–0.071|(0.062)|–0.062|(0.066)|–0.034|(0.059)|–0.062|(0.056)|–0.034|(0.044)|||
|Restaurant & hotel|0.005|(0.062)|0.027|(0.065)|0.038|(0.061)|0.027|(0.057)|0.038|(0.047)|||
|Other services|–0.046|(0.065)|0.007|(0.069)|0.020|(0.065)|0.007|(0.061)|0.020|(0.061)|||
|Constant|–0.355|(0.109) ***|–0.751|(0.118) ***|–0.521|(0.164) ***|–0.752|(0.165) ***|–0.521|(0.368)|–0.742|(0.145) ***|
|Obs.|990||990||990||990||990||990||
|Country fixed effects|No||Yes||No||Yes||No||No||
|Chi-square|||||||||||||
|Cost equation|84577.2||85290.3||97692.7||107266||||||
|Wage share equation|2388.6||2330.2||||||||||
|Energy cost share equa|t<br>9613.4||8464.9||||||||||

Note that the dependent variable is the logarithmic operating cost. The standard errors are shown in parentheses. *, ** and *** represent the 10%, 5% and 1% level significance, respectively.

<u>Table 5. Price elasticity of demand for production factor</u>

||Allcountr|ies|Excludi|ngA|lbania|
|---|---|---|---|---|---|
||SUR|SFA|SUR||SFA|
|_η LL_|–0.769<br>***|–1.468<br>***|–0.763|***|–1.492<br>***|
||(0.022)|(0.114)|(0.024)||(0.122)|
|_η EE_|–0.403<br>***|–0.366<br>**|–0.383|***|–0.307<br>*|
||(0.021)|(0.168)|(0.022)||(0.175)|
|_η KK_|–0.536<br>***|–0.277<br>***|–0.542|***|–0.273<br>***|
||(0.012)|(0.030)|(0.013)||(0.032)|

The standard errors are shown in parentheses. *, ** and *** represent the 10%, 5% and 1% level significance, respectively.

One potential concern may be that the estimation results might be sensitive to outliers, especially in the implied factor prices. With the observations beyond the conventional upper