performance contracting in after sales service supply chains performance based contracting is reshaping service support supply chains in capital intensive industries such as aerospace and defense known as power by the hour in the private sector and as performance based logistics pbl in defense contracting it aims to replace traditionally used fixed price and cost plus contracts to improve product availability and reduce the cost of ownership by tying a supplier s compensation to the output value of the product generated by the customer buyer to analyze implications of performance based relationships we introduce a multitask principal agent model to support resource allocation and use it to analyze commonly observed contracts in our model the customer principal faces a product availability requirement for the uptime of the end product the customer then offers contracts contingent on availability to n suppliers agents of the key subsystems used in the product who in turn exert cost reduction efforts and set spare parts inventory investment levels we show that the first best solution can be achieved if channel members are risk neutral when channel members are risk averse we find that the second best contract combines a fixed payment a cost sharing incentive and a performance incentive furthermore we study how these contracts evolve over the product deployment life cycle as uncertainty in support cost changes finally we illustrate the application of our model to a problem based on aircraft maintenance data and show how the allocation of performance requirements and contractual terms change under various environmental assumptions

the costs and benefits of foreign borrowing a survey of multi period models this article surveys the literature on multi period models of foreign borrowing to shed light on the issue of how much a country should borrow and under what circumstances there is a role for public intervention it identifies the essential structural elements of multi period models and draws out the ramifications of the alternative specifications adopted it discusses the insights and shortcomings of three classes of models non optimising optimising borrower and jointly optimising borrower and lender

information competition and markets one of the dominant characteristics of modern capitalist economies is the important role played by competition not the peculiar static form of pure price competition embodied in the arrow debreu model but rather a dynamic competition more akin to the kind of competition represented by sports contests and other races including patent races in recent years there have been several attempts to explain why firms often base the pay of their workers and managers on relative performance see for example edward lazear and sherwin rosen 1981 such compensation schemes become desirable when three conditions are satisfied a the input effort of workers managers must not be directly observable at least without cost thus firms must either expend resources to monitor inputs or devise reward structures in which compensation is a function of variables such as output or profits which are themselves functions of inputs but are less costly to observe b the relationship between input and output must be stochastic so that by observing output one cannot perfectly infer what the input was c finally the stochastic disturbances which affect the relationship between input and output of different firms must be correlated by looking at the performance of one worker relative to that of others one can make better inferences about his effort than one can make without using this information not only can competition provide a basis of comparison which enables the design of reward structures that can simultaneously provide a high level of incentives with relatively low level risk but compensation schemes based on relative performance have the further advantage of automatically adjusting incentives to changes in the economic environment we refer to this as built in flexibility in a first best world with perfect information concerning the nature of the technology but where it is still costly to monitor individuals activities the compensation scheme would vary from time to time as the environment changed such changes in the compensation scheme are costly to implement and the information required to do so is seldom available when a task is easier the individual s rewards for performing the task should be reduced if pay is based on relative performance although all individuals perform better when they exert the same level of effort their compensation is automatically adjusted thus teachers frequently grade on the curve and a significant fraction of the pay of successful salesmen often consists of bonuses based on relative performance

investment under uncertainty with price ceilings in oligopolies abstract we study the impact of price cap regulation on the level and timing of investment in an oligopolistic cournot industry facing stochastic demand we find that a price ceiling affects investment decisions in two mutually competing ways it makes the option to defer investment more valuable but at the same time it reduces the incentive for firms to strategically underinvest in order to raise prices we show that while sensible price cap regulation speeds up investment a low price cap can be a disincentive for investment there exists an optimal price cap independent of market concentration the competitive investment price trigger that maximizes investment incentives and in the long term increases industry installed capacity this optimal price cap becomes less effective and less robust as the market becomes more competitive and as demand volatility increases errors in estimation of the optimal price cap have asymmetric effects underestimation has more dire consequences than overestimation

can redistributive reform be achieved via market based voluntary land transfer schemes evidence and lessons from the philippines this article examines market led agrarian reform mlar and its variants in the form of voluntary land transfer schemes under the comprehensive agrarian reform program carp in the philippines analysis of mlar variants in the philippines offers a preview of what is likely to happen when the mlar model currently being pushed by the world bank is implemented in the real world not only do mlar and mlar like schemes fail to promote redistributive reform they also undermine potentially redistributive state led land reform policies

structural adjustment and the construction sector abstract this paper adds a construction sector to a dynamic dependent economy model equipped with consumer tradeables and non tradeables sectors the model is used to study the response of the production structure relative prices and the trade balance to a favorable terms of trade shock under the benchmark assumptions of perfect intersectoral factor mobility a perfect international capital market and no adjustment costs for realistic relative capital intensities the model predicts a boom in the construction and consumer non tradeables sectors a contraction of the tradeables sector and no relative price changes the implications of relaxing those benchmark assumptions are discussed separately

optimal capital accumulation and the allocation of investment between traded and nontraded sectors in oil producing countries how should oil exporting countries allocate revenues from the production of oil over capital accumulation and consumption how should investment be allocated over traded and nontraded sectors most oil exporting countries are confronted with the problem of maintaining or developing a nonoil traded goods sector because higher oil revenues lead to a high real exchange rate thereby pulling resources into the nontraded sector the so called dutch disease the optimal savings response and investment allocation to temporary and permanent increases in oil revenues are derived in this paper

premature deagriculturalisation land inequality and rural dependency in limpopo province south africa cross national regressions reveal abnormally low agricultural workforce shares given gnp in developing countries that had historically concentrated land into large capital intensive farms we argue that such deagriculturalisation was premature since its concomitant labour shedding has undesirable outcomes in a new south african survey a large proportion of rural households and working age persons was dependent relying for income almost wholly on either migrant remittances or pensions a separate group with less poverty and unemployment relied mainly on local including own farm income the group was heavily over represented in one of the three regions where many more households had significant land

competition and outsourcing with scale economies scale economies are commonplace in operations yet because of analytical challenges relatively little is known about how firms should compete in their presence this paper presents a model of competition between two firms that face scale economies i e each firm s cost per unit of demand is decreasing in demand a general framework is used which incorporates competition between two service providers with price and time sensitive demand a queuing game and competition between two retailers with fixed ordering costs and pricesensitive consumers an economic order quantity game reasonably general conditions are provided under which there exists at most one equilibrium with both firms participating in the market we demonstrate in the context of the queuing game that the lower cost firm in equilibrium may have a higher market share and a higher price an enviable situation we also allow each firm to outsource their production process to a supplier even if the supplier s technology is no better than the firms technology and the supplier is required to establish dedicated capacity so the supplier s scale can be no greater than either firm s scale we show that the firms strictly prefer to outsource we conclude that scale economies provide a strong motivation for outsourcing that has not previously been identified in the literature

does competition spur innovation the case of yardstick competition this paper investigates the effect of yardstick competition on firms incentives to invest in cost reducing innovations we show that an increase in the intensity of yardstick competition for which we provide a natural measure increases the incentives to innovate

the dutch disease a disease after all many third world oil producers are encountering serious problems in building up a diversified export base while west european oil and gas producers netherlands united kingdom are suffering a decline in their traded goods manufacturing sector induced by real wage pressures it is becoming increasingly clear that high but temporary oil revenues may be somewhat ora mixed blessing the quip of the economist notwithstanding the mechanism behind this unbalance is clear enough part of the oil revenues is spent on non traded goods which leads to a real appreciation i e a rise in the relative price of non traded goods in terms of traded goods this in turn draws resources out of the non oil traded sector into the non traded goods producing sector corden and neary 1982 van wijnbergen 1980 one may say that this is an efficient response to the increase in income from oil production the united kingdom mexico egypt simply should move into oil derived industries and non traded goods and forget about their manufacturing sector until oil reserves are exhausted however many developing countries are hesitant to take this advice after all the post world war ii success stories in economic development involve without exception countries that promoted their traded goods sector aggressively moreover it is a well established stylised fact that technological progress is faster in the traded non sheltered sectors of an economy than in the non traded sector balassa 1964 is an early reference considering the hypothesis that technological progress rather than taking place exogenously with the passage of time is a function of accumulated experience the concern of countries like egypt mexico or indonesia is much easier to understand since solow 1957 and denison 1962 it is known that capital accumulation explain only a small part of economic growth if most of economic growth is caused by learning by doing induced technologica

the social impact of social funds in jamaica a participatory econometric analysis of targeting collective action and participation in community driven development qualitative data from a case study of the jamaica social investment fund reveal that the social fund process is elite driven and decision making tends to be dominated by a small group of motivated individuals however there is broad based satisfaction with the outcome quantitative data from 500 households mirror these findings by showing that ex ante the social fund does not address the expressed needs of the majority of individuals in the majority of communities by the completion of the project however 80 per cent of the community expresses satisfaction with the outcome an analysis of the determinants of participation reveals that better educated and better networked individuals dominate the process propensity score analysis demonstrates that jsif has had a causal impact on improvements in trust and the capacity for collective action but these gains are greater for elites

chronic poverty in south africa incidence causes and policies abstract the purpose of this article is threefold first to summarize recent research that helps distinguish chronic from transitory poverty in south africa second to identify groups that are especially prone to chronic poverty in south africa and venture estimates as to how many such people there are and third to examine how an understanding of chronic poverty could enhance the fight against poverty generally the article makes the case that in taking the lead in the fight to eradicate poverty the government would be wise to disaggregate the poor according to those who are chronically and transitorily poor two policy areas are discussed in light of this recommendation namely the unemployment crisis and the prospects for future growth in the formal and informal sectors and rural land reform and the policy choices it presents the article begins with a brief historical sketch and an overview of socioeconomic policies since 1994

the food in security impact of land redistribution in south africa microeconometric evidence from national data summary the south african land reform program has been widely criticized for its slow pace as well as its apparent lack of contribution to poverty reduction no econometric evidence of the impact of land transfers has been provided to date and this paper attempts to fill this gap by considering the impact of receiving a land grant on households food insecurity propensity score matching and univariate probit estimates using two national household surveys indicate that on average land grant recipients are more food insecure than comparable non participants recursive bivariate probit estimates suggest that selection bias is not driving this result

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

south african land policy the legacy of history and current options abstract the highly dualistic farm structure of south africa and the low productivity of native african farmers have been the result of systematic distortions in land allocation output markets the provision of infrastructure agricultural credit and services the dualistic structure did not emerge because of genuine economies of scale in the large commercial sector other countries in latin america and africa that once supported a dualistic farm size structure through similar distortions have either implemented large scale land reforms or have experienced decades of peasant revolts and civil war the paper compares these international experiences to south africa and outlines judicial and market assisted approaches to south african land reform

inflation employment and the dutch disease in oil exporting countries a short run disequilibrium analysis the author uses nontraded goods and labor shortages in the gulf countries the decline of the traded goods sector in oil producers dutch disease and the absence of employment benefits of higher oil revenues in latin american oil producers higher oil revenues can be likened to a transfer putting pressure on non oil traded nt goods prices and drawing resources out of the t sector the slope of the wage indexation line determines whether classical unemployment or repressed inflation results various policy measures are analyzed 3 references 8 figures

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

the place of agricultural research in the development of sub saharan africa abstract outside sub saharan africa ssa agricultural research ar yields excellent returns why does ssa get so little from its major ar effort why do its ar scientists cost more yet produce less smallness of countries and research stations dispersion and high turnover make it hard to attain a critical mass of national ar scientists to remedy this they could concentrate on a few problems and crops yet they have neglected many of the most important e g cassava and overstressed export crops in other ways too european biases have distorted african ar socioeconomists moreover have entered research design too little and too late above all current domestic funds have been too scanty and unreliable to adequately support international and capital account ar efforts this lack of steady commitment illustrates ar s need for direction from clearer agricultural policy based on radically improved information and recognizing ssa s dramatic rise in labor land ratios guidelines for such policy are indicated within these a formalized and poverty oriented ar design system is suggested

endogenizing labor leisure choice investment and the relative price of non traded goods abstract in a dutch disease model we endogenize the capital stock and labor leisure choice offering more flexibility on the supply side than previous studies which endogenize the capital stock only our conclusions differ significantly from earlier models in that even when the non traded goods sector is capital intensive the capital stock in the new steady state does not necessarily increase

exploring poverty traps and social exclusion in south africa using qualitative and quantitative data abstract recent theoretical work hypothesises that a polarised society like south africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty to explore these ideas this paper employs a mix of quantitative and qualitative methods novel econometric analysis of asset dynamics over the 1993 98 period identifies a dynamic asset poverty threshold that signals that large numbers of south africans are indeed trapped without a pathway out of poverty qualitative analysis of this period and the period 1998 2001 more deeply examines patterns of mobility and confirms the continuation of this pattern of limited upward mobility and a low level poverty trap in addition the qualitative data permit a closer look at the specific role played by social relationships while finding ample evidence of active social capital and networks these are more helpful for non poor households for the poor social capital at best helps sta

signaling new product reliability with after sales service contracts prior studies on performance based contracting pbc for after sales services have highlighted its advantages over traditional resource based contracting rbc when products are established and their reliability is known to all parties we develop a game theoretic model to investigate how these insights are affected when the vendor is privately informed about the reliability of a newly developed product a novel feature of our model is the interaction between reliability signaling private information and the vendor s discretionary investment in spares inventory private action which arises naturally in the setting we consider we find that this interaction leads to contrasting equilibrium outcomes under the two contracts rbc induces the vendor to focus on inventory savings leading to underinvestment in spares whereas pbc induces the vendor to focus on reliability signaling achieved through overinvestment in inventory as a result neither contract is efficient we investigate two means to mitigate this inefficiency but either approach has caveats a making inventory verifiable removes the trade off between reliability signaling and inventory investment but results in diverging contract preferences between the vendor and the buyer b pooling inventories across multiple buyers saves inventory costs but it also hinders reliability signaling potentially exacerbating inefficiency this paper was accepted by yossi aviv operations management

procuring fast delivery sole sourcing with information asymmetry this paper studies a queuing model in which a buyer sources a good or service from a single supplier chosen from a pool of suppliers the buyer seeks to minimize the sum of her procurement and operating costs the latter of which depends on the suppliers lead time the selected supplier can regulate his lead time but faster lead times are costly although the buyer selects the supplier to source from possibly via an auction and dictates the contractual terms the buyers bargaining power is limited by asymmetric information the buyer only has an estimate of the suppliers costs while the suppliers know their costs precisely we identify a procurement mechanism that minimizes the buyers total cost procurement plus operating this mechanism is not simple it is a numerically derived nonlinear menu of contracts therefore we study several simpler mechanisms e g one that charges a late fee and one that specifies a fixed lead time requirement no menus no nonlinear functions we find that simple mechanisms are nearly optimal generally within 1 of optimal because asymmetric information conveys significant protection to the supplier i e the supplier is able to retain most of the benefit of having a lower cost renegotiation is another concern with the optimal mechanism because it does not minimize the supply chains cost the firms can be both better off if they throw away the contract and start over interestingly we find that the potential gain from renegotiation is relatively small with either the optimal or our simple mechanisms we conclude that our simple mechanisms are quite attractive along all relevant dimensions buyers performance supply chain performance simplicity and robustness to renegotiation

creating rural livelihoods some lessons for south africa from experience elsewhere abstract a development path for south africa that will create jobs and reduce poverty must include the encouragement of greater labor intensity in agriculture especially of smallholder farming which was suppressed under apartheid there is however widespread skepticism on both the left and the right about the prospects for more labor intensive farming but this skepticism is called into question by both theory and evidence of the advantages of small scale production in certain products and circumstances there are now numerous examples of this in many parts of the world the paper discusses the preconditions for the development of such farming in south africa including land reform and the need to reorient investment and supporting economic and technical services research training marketing credit from the privileged large scale white farms to the undercapitalized and neglected black smallholders

characteristics and performance of resettlement programs a review abstract this review suggests that settlement programs are too often designed with the assumption that all settlers will succeed this has led to centralized administration and rigid designs rather than decentralized approaches flexibility in implementation support for spontaneous settlement and reliance on settlers own investment capacity collective farms have failed cropland is best allocated to individual families and their land rights must be clearly defined as ownership or long term leases farm sizes have to be flexibly adjusted to skills availability of family labor and the capital assets of the families settlers should therefore be allowed to sell or rent their land to other beneficiaries if poor settlers are to succeed settlement cannot be based solely on credit finance and provision must be made for grant elements paternalistic constraints on crop choice technology marketing or labor market participation have usually not been enforceable or have had adverse effects

can yardstick competition reduce waiting times yardstick competition is a regulatory scheme for local monopolists e g hospitals where the monopolist s reimbursement is linked to performance relative to other equivalent monopolists this re

making negotiated land reform work initial experience from colombia brazil and south africa abstract the paper describes background initial experience and future challenges associated with a new negotiated approach to land reform this approach has emerged as following the end of the cold war and broad macroeconomic adjustment many countries face a second generation of reforms to address deep rooted structural problems and provide the basis for sustainable poverty reduction and economic growth it reviews possible theoretical links through credit market or political channels between asset ownership and economic performance program characteristics in each country as well as lessons for implementation and implications for monitoring and impact assessment are discussed

household returns to land transfers in south africa a q squared analysis abstract the south african land reform programme has been widely criticised for its slow pace as well as its apparent lack of contribution to poverty reduction however there is little systematic evidence of the impact of land transfers on their beneficiaries due to data scarcity this paper combines econometric evidence based on official household surveys with qualitative data collected specifically to triangulate and complement the econometric analysis the qualitative data analysis confirms the plausibility of the econometric finding that on average beneficiaries do not gain from participation and suggests that the main reason for the disappointing impact of participation is the incompatibility of consultant led land use plans to land grantees skills

collective agricultural production a solution for transition economies abstract the paper examines theoretical reasons and provides examples for productivity differences between agricultural service cooperatives and collectives service cooperatives can utilize economies of scale enhance competitiveness and provide technical information advantages that often outweighed problems of free riding low investment and excessive political intervention agricultural collectives while not adding substantial advantages are in addition associated with problems of supervision and effort supply tendencies to substitute casual workers or mechanization for regular members and low investment incentives while collective forms of organization in transition economies respond to high risk and market imperfections they do so inefficiently policies that create conditions for service cooperatives to compete may lead to large productivity gains

qualitative and mixed methods research in economics surprising growth promising future qualitative research in economics has traditionally been unimportant compared to quantitative work yet there has been a small explosion in use of quantitative approaches in the past 10 15 years including mixed methods projects which use qualitative and quantitative methods in combination this paper surveys the growing use of qualitative methods in economics and closely related fields aiming to provide economists with a useful roadmap through major sets of qualitative methods and how and why they are used we review the growing body of economic research using qualitative approaches emphasizing the gains from using qualitative or mixed methods over traditional closed ended approaches it is argued that although qualitative methods are often portrayed as less reliable less accurate less powerful and or less credible than quantitative methods in fact the two sets of methods have their own strengths and how much can be learned from one type of method or the other depends on specific issues that arise in studying the topic of interest the central message of the paper is that well done qualitative work can provide scientifically valuable and intellectually helpful ways of adding to the stock of economic knowledge especially when applied to research questions for which they are well suited