telecommunications in greece a study of production structure and natural monopoly issue until recently telecoms were everywhere large monopolies basically because their production was believed to have many natural monopoly attributes now new forces originated in technological evolution have set in to transform the monopoly regime but did natural monopoly attributes really exist the empirical evidence under consideration concerns hellenic telecom a complete study of the industry s production structure and a natural monopoly test are offered test s results are important for policy formation regarding market s degree of liberalization in greece given also the resemblance of current technology in different countries it is possible to claim a more general validity of the obtained results on production technology beyond the specific case studied

should developing countries use currency depreciation as a tool of balance of payments adjustment a review of the theory and evidence and a guide for the policy maker the use of currency depreciation as a means of strengthening the balance of payments has long been a contentious issue amongst developing countries especially in their negotiations with the imf this article reviews the various ways in which depreciation might exert its impact a study of the empirical evidence suggests that it may be both an effective and cost effective instrument in many developing countries even though exceptions do exist compared with alternative balance of payments policies use of the exchange rate emerges as possessing many advantages it is concluded that greater emphasis should be placed on the exchange rate in the context of imf programmes than has perhaps been the case in recent years

regulation and efficiency in transition the case of telecommunications in italy abstract in regulating the telecommunications industry the separation between network and retail functions which is designed to countervail the market power of incumbent operators is a relevant issue despite its importance little empirical research has addressed the effects of such a separation accordingly this paper provides insights into the consequences of the italian communications regulatory authority s agcom decision to impose this type of separation on the incumbent telecommunications operator telecom italia in particular the studied separation is between the firm s network related functions and those used for provision of its communication services the present research finds that the type of separation implemented by agcom allows a provider to maintain the advantages of operational scale in its network structure without dampening competition in the existing market for communications services the study also offers further empirical evidence on the advantages of a composite vs translog function in analyzing the multiproduct cost structure of a telecommunications operator

equipment investment and growth in developing countries abstract differences in equipment investment or equipment prices account for large variations in growth rates across countries an important task is to understand the economic mechanism underlying the equipment growth nexus and its policy implications in order to study this issue this paper develops a model in which growth is driven by the adoption of technologies that are embodied in equipment i show that this model can quantitatively account for the observed cross country relationships between equipment investment equipment prices and growth i find that the competitive equilibrium is characterized by inefficiently low levels of learning and too slow growth and study which policies are able to remedy this inefficiency

a test for subadditivity of the cost function with an application to the bell system stable url http links jstor org sici sici 0002 8282 28198409 2974 3a4 3c615 3aatfsot 3e2 0 co 3b2 rthe american economic review is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgmon jul 2 16 52 19 2007

estimating demand for local telephone service with asymmetric information and optional calling plans in this paper i study the theoretical and econometric implications of agents uncertainty concerning their future consumption when a monopolist offers them either a unique mandatory nonlinear tariff or a choice in advance from a menu of optional two part tariffs agents uncertainty is resolved through individual and privately known shocks to their types in such a situation the principal may screen agents according to their ex ante or ex post type by offering either a menu of optional tariffs or a standard nonlinear schedule the theoretical implications of the model are used to evaluate a tariff experiment run by south central bell in two cities in kentucky in 1986 the empirical approach explicitly accounts for the existence of informational asymmetries between local telephone users and the monopolist leading to different nested econometric specifications under symmetric and asymmetric information the empirical evidence suggests that there exists a significant asymmetry of information between consumers and the monopolist under both tariff regimes all expected welfare components failed to increase with the introduction of optional tariffs for the estimated value of the parameters copyright 2002 wiley blackwell

obsolescence input augmentation and growth accounting abstract the paper points to a serious conceptual inconsistency in conventional measures of capital used in most empirical work on economic growth when appropriate corrections are made it is found that plausible alternative values for the relative magnitude of obsolescence and physical decay imply very different rates of growth in capital this in turn leads to large differences in the fraction of growth in output attributed to input augmenting technical change as compared with the solow residual

decomposing learning by doing in new plants the paper examines learning by doing in the context of a production function in which the other arguments are labor human capital physical capital and vintage as a proxy for embodied technical c

measuring economies of diversification a frontier approach the purpose of this article is to improve the statistical analysis of multiproduct firm behavior specifically we are interested in modeling and estimating multiproduct technology focusing on size and product line variation thus we offer a new empirical technique that can be used to directly analyze issues such as subadditivity expansion path subadditivity economies of scope and economies of diversification although applied papers employ a wide variety of theoretical multiproduct cost concepts previous work uses nonfrontier estimation techniques we show how to introduce frontier approaches to multiproduct cost analysis that can be applied to any of these concepts and improve the statistical analysis specifically we introduce an empirical test using frontier techniques that allows for direct measures of economies of diversification at the firm specific level

an empirical analysis of scale and scope economies and technical change in an irish multiproduct banking firm abstract in contrast to most empirical investigations of the efficiency of multiproduct financial institutions which either estimate scale and scope economies with a given state of technology or only analyse technical change in the presence of overall scale economies this study estimates overall scale economies product specific scale economies and scope economies in the presence of both neutral and non neutral technical change also in contrast to most other empirical studies in this area standard errors are computed for all relevant statistics the findings indicate diseconomies of scope overall diseconomies of scale product specific economies are decreasing for investments and increasing for loans in addition to substantial neutral technical change biased technical change is labour and capital saving and deposits using in character

currency boards and debt traps evidence from argentina and relevance for estonia this paper analyses the november 2000 liquidity crisis that brought argentina near default on its foreign debt the main purpose of this paper is to assess whether this crisis may be taken as a warning signal for estonia given the similar exchange rate system shared by the two countries it seems that with a low level of public debt and a balanced budget estonia will not face a similar liquidity crisis as its latin american counterpart which remained heavily reliant on foreign borrowings but the substantial real exchangerate appreciation of the kroon under the currency board arrangement has resulted into serious external imbalances which will need to be corrected to avoid balance of payments pressure and reduce estonia s high dependency on the level of foreign direct investments

diversification diseconomies of scope and vertical contracting evidence from the taxicab industry this paper studies how firms reorganize following diversification proposing that firms use outsourcing or vertical disintegration to manage diseconomies of scope we also consider the origins of scope diseconomies showing how different underlying mechanisms generate contrasting predictions about the link between within firm task heterogeneity and the incentive to outsource following diversification we test these propositions using microdata on taxicab and limousine fleets from the economic census the results show that taxicab firms outsource by shifting the composition of their fleets toward owner operator drivers when they diversify into the limousine business the magnitude of the shift toward driver ownership is larger in less urban markets where the tasks performed by taxicab and limousine drivers are more similar these findings suggest that 1 firms use outsourcing to manage diseconomies of scope at a particular point in the value chain and 2 interagent conflicts can be an important source of scope diseconomies

aid and dutch disease in the south pacific and in other small island states abstract the impact of aid on the macro economy is ambiguous aid that increases expenditure may cause real exchange rate appreciation however if the capital stock in the traded goods sector rises then output might not contract and if investment in the non traded goods sector is relatively productive then real exchange rate appreciation could be avoided we examine aid inflows in 10 pacific island states and find them to produce a variety of outcomes applying our model to other small island states around the world we analyse the country specific characteristics that determine the macroeconomic impact of aid and draw policy conclusions

competition and productivity growth the case of the u s telephone industry i introduction there are few empirical studies on the relative performance of firms in competitive and monopolistic markets this contrasts with the large body of literature that compares the performance of privately owned and governmental firms one reason for the scarcity of studies of the former type is that competitive and monopolistic firms rarely coexist in the same industry and country 1 this makes it difficult to distinguish between industry and market structure effects on the other hand relying on intercountry comparisons as for example caves christensen and swanson 1981 do for u s and canadian railroads renders the analysis potentially sensitive to country effects the telephone industry in the united states offers one of the best opportunities for empirical analysis of the consequences of competition and monopoly some new entry in the long distance telephone market was allowed by the early 1960s while entry and competition in the local telephone market had yet to materialize by the beginning of the 1990s hence it is appropriate to focus on differences in performance between at t long lines and the regional monopolies 2 since there may be differences in initial conditions between the local service and long distance markets comparisons of performance should control for such differences both markets however clearly employ very similar technology this holding other relevant conditions constant should lead to similar changes in productivity to sharpen the analysis we focus on differences in the annual rate of productivity growth and not the level while local exchange carriers lecs still largely maintain their monopolistic position rapid technological advance in telecommunications is changing the established market structure in the local telephone industry the recent u s telecommunications act of 1996 was aimed at eliminating legal barriers that have suppressed technically feasible local competition certainly some competition in local telephone markets is under way is such competition socially justified and an appropriate objective of public policy the effect of competition on productivity growth holds at least part of the answer we need to know whether competitive markets are likely to raise efficiency in assessing how much effort should go into reducing entry barriers and increasing competition in the local telephone markets still another policy issue on which our study has a bearing is the relation of firm scale to costs for example in the context of recent mergers of regional telecommunication companies are reductions in costs and increases in productivity a plausible expectation competitive effects in the telephone industry have been examined mainly through aggregate time series data thus oum 1990 using chessler s competition index for long distance service concludes there have been positive effects of competition on productivity whereas crandall 1991 using a time dummy finds the results inconclusive 3 at the firm level denny fuss and waverman 1981 and kiss 1983 decompose total factor productivity tfp growth for bell canada through estimated cost functions nadiri and prucha 1989 measure productivity growth for the u s bell system with several alternative cost models but none of these careful firm level studies focuses on competitive effects ying and shin 1993 on the other hand do examine the spillover effect of the at t divestiture on cost saving by the regional companies their interesting study which shows positive spillover effects does not however permit strong conclusions because of the shortness of the period examined 1976 87 ii the state of competition in the u s telephone industry before the divestiture of at t the u s telephone industry consisted of several vertically integrated common carriers at t accounted for about 80 of industry revenues through a group of 22 operating companies plus the at t long lines

aid and growth in sub saharan africa the recent experience abstract this paper presents some quantitative evidence on the relationship between foreign aid and economic growth in the low income countries of sub saharan africa two key findings are presented first aid is positively and significantly correlated with investment and economic growth in africa second fix capital formation contributed to the rate of growth this result which emerges from analyzing time series data is somewhat surprising given the disappointing performance of african countries since the early 1970s

access costs and entry in the local telecommunications network a case for de averaged rates abstract the telecommunications bill passed by congress in february 1996 means that the present method of covering the cost of customer access to the local telecommunications network through non cost based access charges cannot be sustained over the long run however there is a belief that cost based rates at the local level would be prohibitively high and would threaten universal service objectives major tasks facing the federal communications commission and state regulators will be determining what the terms and charges for interconnection should be and who will bear the costs associated with universal service this work estimates a generalized translog cost function of access costs at the local level in order to address these issues the results of this study are that there are economies of scale in the provision of access to the local network and that these costs differ by geographical location one of the important findings of this study is that contrary to popular belief cost based rates at the local level would not be prohibitively high and would not threaten universal service objectives however given the existence of economies of scale pro competitive regulatory controls will be required that will restrain dominant carriers from abusing their market power and network owners from squeezing out new entrants

modelling cost structure the bell system revisited this paper analyses a recent public policy decision and the crucial role played by the choice of the functional form the break up of the bell system is indeed a classic case of anti trust settlement and constitutes one of the most prominent and controversial applications of microeconomics to public policy it is argued that demanding multi output cost properties such as economies of scope for this is the considerable robustness problem displayed by the tranlog cost functional form the reason for this is the considerable able to robustness problem displayed by the translog cost function which is the source underlying many of the expert disagreements it is suggested that the non robustness is due to what ils termed the flip flop property and it is shown that the available empirical evidence from the pre divestiture bell system supports this argument to obtain robust results we propose that the analysis is constrained to the proper region of the cost function we propose that the analysis is con

the role of fixed costs and cost complementarities in determining scope economies and the cost of narrow banking proposals narrow banking proposals would separate insured deposits from most types of bank lending using data from large u s banks the authors examine the extent to which narrow banking proposals are likely to result in increased production costs production costs will rise for nonjoint provision of deposit and loan services if there are cost complementarities in producing the two outputs jointly or if joint production enables banks to spread their fixed costs more effectively unlike standard cost function approaches the authors methods allow them to estimate the fixed cost and cost complementarity effects separately they find the net production cost consequences of narrow banking to be negligible copyright 1993 by university of chicago press

economies of diversification a generalization and decomposition of economies of scope abstract the paper investigates the benefits of diversification for a multi product firm it examines economies of diversification reflecting the cost reduction associated with producing outputs in an integrated firm compared to specialized firms the analysis applies under complete specialization as well as partial specialization when firms are not fully specialized and or when the specialization scheme does not cover all outputs it decomposes economies of diversification into four additive parts a part measuring complementarity among outputs a part reflecting economies of scale a part reflecting convexity and a part reflecting the role of fixed cost this new decomposition appears useful in investigating how scale effects complementarity effects and convexity effects can contribute to economies of scope in a multiproduct firm and helps generate valuable insights into the economics of specialization for multiproduct firms

price regulation of access to telecommunications networks abstract without access of networks to each other competition in the telecommunications sector would hardly have spread so quickly such mutual access is necessary for carriers to provide ubiquitous service and enable endusers to call and be called by anybody without subscribing to a system wide monopolist one way access concerns bottleneck inputs provided by an incumbent network to entrants while two way access concerns the interconnection between networks whereas one way access regulation is exclusively driven by containment of market power two way access is additionally affected by collusion possibilities among the numerous pricing rules discussed none clearly dominates this article provides a roadmap vis a vis the competing policy objectives for access price regulation

scale economies and cost complementarities in commercial banks on and off balance sheet activities abstract bank off balance sheet obs activities have grown dramatically and have become significantly important especially at large banks we investigate whether failure to incorporate obs products may lead to a misspecification problem models that exclude deposits from the output specification suggest economies of scale which vanish when deposits are included we find that inclusion of obs products has little effect on the scale economies measures with only a few exceptions the results provide no evidence of cost complementarities in joint production the tremendous growth of bank obs activities in the 1980s may be explained by the very small approximately zero pecuniary cost of these activities

regulatory bias in the price structure of local telephone service this article combines a discrete choice model of demand for residential local telephone access and an optimal price regulation model to estimate the welfare weights that state regulators implicitly place on consumers with different incomes and locations i find no evidence of a bias towards rural consumers on average but the relative weight on low income consumers in a geographic area can vary as a function of the proportions of rural and poor population and the political characteristics of the regulator i also measure the welfare consequences of deviating from total consumer surplus maximization and disconnecting prices from costs

the measurement of vertical economies and the efficient structure of the electric utility industry in this article the concept of multiproduct cost economies is modified to the case of production at vertically related stages to derive an explicit and general measure of economies of vertical integration the utility of this measure is then demonstrated by estimating the vertical cost structure of the electric utility industry and by carrying out the calculations necessary to determine the magnitude of vertical economies in this industry the results provide empirical evidence of the existence of significant economies of vertical integration between the generation and transmission distribution stages of electricity supply copyright 1991 by blackwell publishing ltd

the appropriateness of the poolability assumption for multiproduct technologies evidence from the english water and sewerage utilities abstract the empirical literature on the cost structure of multiproduct firms e g public utilities providing in combination gas water and electricity traditionally assumes a common technology across different products and stages of production letting the issue of poolability unexplored the appropriateness of this assumption is tested here by estimating a general cost function for samples of uk specialized and sewerage diversified water utilities the results show the existence of both aggregate scale economies and diseconomies of scope more interestingly the hypothesis that the two groups of water companies share the same technological parameters is rejected given the implications of this finding in terms of optimal industry configuration and possible restructuring policies e g mergers and or divestitures our test suggests caution in pooling samples when undertaking empirical studies on data which refer to multiproduct technologies

competition and allocative efficiency the case of the u s telephone industry this study investigates the effect of competition on the productive efficiency of the u s telephone industry taking into account the fact that the industry was subject to rate of return regulation it is shown that competition induces the incumbents to use capital inputs closer to the unconstrained optima thereby reducing the allocative inefficiency caused by the averch johnson effect this effect is in addition to the usual technical efficiency improvement induced by competition empirical results based on annual data for the u s telephone industry for the 1951 90 period suggested that competition improved the allocative efficiency of the incumbent firms which had been under a rate of return regulation until 1989 copyright 1995 by mit press

costly gains to breaking up lecs and the baby bells while the divestiture of at t was intended to produce benefits in the long distance market the evidence suggests it has created an unexpected side benefit in local telephone markets the authors results show that local exchange carriers have realized immediate cost savings in responding to competitive pressures since the breakup with the baby bells experiencing generally larger gains dynamically these productivity gains have increased over time at a relatively constant rate although gains of 3 5 percent of total cost are not that large the absolutely large costs of telephone companies imply significant cost savings of nearly 72 million for the representative firm copyright 1993 by mit press

nonparametric analysis of cost complementarities in the telecommunications industry the market structure of the telephone industry has been the focus of a large body of empirical research following the divestiture of at t in 1984 using data on local exchange carriers lecs i estimate the total cost function of lecs operating between 1988 and 1995 first i show that cost complementarities can be nonparametrically identi ed in many situations where economies of scope and subadditivity which were the focus of previous empirical research cannot be identi ed next i propose a feasible estimation model taking into account all the properties that a cost function needs to satisfy according to economic theory the telephone companies are treated as multi product rms producing two outputs local and toll calls the results support the assumption that cost complementarities exist in the production of these two outputs the amounts of complementarities are computed and shown to be bigger for small companies

product line deregulation and the cost structure of us savings and loan associations recent legislative actions restrict thrift powers which were broadened by deregulatory actions in the early 1980s using nationwide data for savings and loans s ls evidence is found that these restrictions may rise intermediation costs for s ls by limiting their ability to exploit economies of scope between mortgage related and other outputs in addition economies of scale for a wide size range of s ls are found evidence is also found to suggest that insolvent s ls have higher costs for the same level of outputs than solvent s ls

the natural monopoly test reconsidered an engineering process based approach to empirical analysis in telecommunications this paper suggests an extension of the traditional natural monopoly cost subadditivity test as it has been implemented in telecommunications we explore two dimensions of generalization that we believe are important when evaluating the relative performance of monopoly versus duopoly first by using a flexible engineering process model of the local exchange network we are able to generate market structure specific cost data which are used to estimate various duopolistic firm cost functions second we combine these cost functions which correspond to specific entry strategies with appropriate models of firm behavior to calculate market equilibria this allows us to perform in addition to a standard strictly cost based natural monopoly test a comparison of monopoly and duopoly on the basis of aggregate social welfare achieved under those alternative market structures our application of the methodology to a stylized local exchange market directs attention to a possible conflict between these alternative testing criteria and highlights the crucial impact of the nature of competitive entry on the social welfare performance of deregulated markets

testing for subadditivity of vertically integrated electric utilities the public policy debate over electric utility deregulation has a long history and generated a considerable amount of research much of this research focused on estimating the degree of scale economies in generation with little attention given to the effect vertical integration may have on cost structure the vertical integration issue is important because most observers consider the transmission and distribution stages to be natural monopolies according to joskow and schmalensee economics of integration if any would link the production stages together possibly extending natural monopoly conditions from transmission distribution to generation even if the latter exhibited no economies of scale 27 refs 5 tabs

the public accounting industry production function abstract a translog function is specified to represent the relation between revenue and human resource inputs in public accounting firms estimation of the model using a balanced panel of annual data for 64 large cpa firms for the period 1995 1999 indicates that increasing returns to scale prevail in the public accounting industry justifying recent merger and acquisition activities among accounting firms average marginal revenue product of partners increased monotonically from 1995 to 1998 decreased slightly in 1999 and was about nine times that of other professionals during 1995 1999 the public accounting industry exhibited continuing improvement in productivity over the 5 years

productivity growth in canadian telecommunications canadian telecommunications firms do not price proportionately to marginal cost the prices of toll services tend to be above marginal costs whereas the prices of basic local services are typically set below marginal costs by regulators in such circumstances estimates of tfp growth using the conventional tornqvist divisia formula which weights outputs by revenue shares in determining the rate of growth of aggregate output is theoretically incorrect and needs to be replaced by a formula which uses cost elasticity weights empirically the conventional tornqvist index yields a very distorted picture of efficiency gains in the two largest canadian telephone companies during the 1980s for bell canada i calculate the upward bias to be approximately 75 percent over the period 1980 89 and 80 percent over the period 1985 89 for b c tel a similar calculation yields an upward bias of 37 percent over the period 1980 89 and 48 percent over the period 1985 89

effect of network unbundling on retail prices evidence from the telecommunications act of 1996 abstractthis paper empirically examines the effects of network unbundling on retail prices in u s local telephone markets panel data for 7 604 wire centers in 43 states from 1996 to 2002 are used to estimate the price effects from the unbundling and entry promoting conditions of the telecommunications act results show that section 271 led to the rebalancing of prices between customer groups in which residential prices increased and the prices paid by small businesses decreased there is some rebalancing of prices between urban and rural regions with business prices decreasing by a larger amount in urban regions our results from all markets indicate that regulators responded rationally to competition by rebalancing prices to reduce cross subsidies

testing efficiency hypotheses in joint production a parametric approach n recent years a great deal of research has been directed to the modelling and measurement of technical and allocative efficiency in production with few exceptions this research has been restricted to single product firms however recent developments in duality theory have facilitated the extension of this research to multi product firms the main purpose of this paper is to develop a model of the multiproduct firm in which the possibilities of both technical and allocative inefficiency are incorporated in an econometrically useful way the first model we develop includes a nonneutral2 type of technical inefficiency and three distinguishable types of allocative inefficiency output mix input mix and scale each type of inefficiency is costly to the firm in the sense that each causes a reduction in profit beneath the maximum value attainable under full efficiency the cost of each type of inefficiency depends on the magnitude of the inefficiency and the structure of the underlying production technology in the second model we develop technical inefficiency remains nonneutral but allocative inefficiency is not generally decomposable into output mix input mix and scale components however both technical and allocative inefficiency remain costly to the firm the cost of each type of inefficiency depending on its magnitude and the structure of the underlying production technology we model the technology of a competitive profit maximizing multi product firm with the dual profit function this enables us to use hotelling s lemma to generate a system of profit maximizing output supply and input demand equations these equations are then modified to allow for the possibility of technical and three types of allocative inefficiency a virtue of using the profit function to represent production technology is that it permits a straightforward comparison of maximum profit under full efficiency with actual profit and with the profit that would result from any combination of the four types of inefficiency this enables us to allocate the cost of inefficiency to each of four components our model of inefficiency is parametric and is embedded in a generalized leontief profit function although any flexible specification of the profit function can be used the model is developed in sections ii iv estimation of the model is considered in section v an empirical example designed to illustrate the workings of the model is discussed in section vi section vii concludes

macro economic aspects of the effectiveness of foreign aid on the two gap model home goods disequilibrium and real exchange rate misalignment we construct an open economy disequilibrium model to assess the welfare effects of aid in different macroeconomic regimes aid is shown to have different effects in different unemployment regimes because it increases the social costs of wage price rigidities in the classical regime but decreases them in the keynesian unemployment regime a link is made with the two gap model but we highlight the role of real exchange rate misalignment failure to clear the nt goods market

labor market adjustment in small open economies the case of micronesia abstract the paper uses the bertram poirine four sector framework to examine the labor market effects of a decline in external aid in a small open island economy it provides empirical evidence drawn from the federated states of micronesia to reject the notion that aid supported public expenditure crowds out opportunities for indigenous private sector development instead the paper argues that the future development of small island economies will depend on their access to overseas job markets and the continuation of aid inflows and remittances

foreign aid economic structure and dependence abstract an inflow of foreign capital leads to structural changes in the economy by lowering the relative price of tradable to non tradable goods it induces a decline of the relative share of tradables in the country s production the effect on consumption shares is less obvious since price and income effects may tend to be offsetting the existence of foreign aid also establishes a dependence of the economy on the outside world estimates of the degree of such dependence through the use of national accounts aggregates would be biased by the afore mentioned effect on relative prices hence specifically estimates of time tends based on the use of current prices may lead to different conclusions from those which employ constant prices for comparison the inferences of this paper are derived in a simple two sector small country model the concreteness and probable relevance of the main propositions are then demonstrated by empirical illustrations

uncovering the link between a flexible exchange rate and fundamentals the case of central and eastern european economies this article examines the link between a nominal exchange rate and macrofundamentals in central and eastern european cee countries we use the model based on the monetary policy rule as a theoret

exchange rates trade liberalization and aid the sri lankan experience abstract in 1977 the sri lankan government embarked on an extensive program of liberalization an important element of which was devaluation to ensure a competitive real exchange rate the 1980s were however marked by an increasing divergence between the real and nominal exchange rates the depreciation of the latter not being matched by similar movements of the former this paper presents an econometric model of real exchange rate behavior in sri lanka among other things it is shown that increased aid inflows have made a significant contribution to the failure of the real exchange rate to match the depreciation in the nominal rate

unnatural monopolies in local telephone we attempt to overcome the serious data problems of past telecommunications cost studies by focusing on local exchange carriers lecs with enough degrees offreedom to yield precise estimates our global subadditivity tests show that the cost function is definitely not subadditive the results suggest that the benefits to breaking up the monopoly outputs of existing lecs substantially outweigh the potential losses in efficiency they also support permitting entry and increasing competition in local exchange markets furthermore given the competitive nature of long distance service it is doubtful that the predivestiture bell system was a natural monopoly

agricultural tradables and economic recovery in uganda the limitations of structural adjustment in practice abstract uganda s economic reform program has been widely regarded as a success story for structural adjustment nevertheless a large trade deficit persists shored up by inflows of aid and private remittances the poor performance of the agricultural tradables sector is presented as the key explanation for this trade imbalance two main reasons for this poor performance are found to be the failure to liberalize producer prices quickly and the failure to overcome early institutional resistance to reforms of marketing arrangements uganda s recovery is therefore much less impressive than it appears and the sustainability of the now heavily aid dependent economy must remain in serious doubt

measuring and decomposing economies of diversification an application to biogas fuelled cogeneration plants in austria abstract this paper investigates the existence and the degree of economies of diversification for small scaled renewable fuelled cogeneration systems using 2014 cross sectional data from 67 austrian biogas plants it is the first study applying the recently introduced concept of economies of diversification proposed by chavas and kim 2010 which is a generalization and decomposition of economies of scope economies of diversification are decomposed into three additive parts a part measuring complementarity among outputs a part reflecting economies of scale a part reflecting convexity in addition this paper extends the decomposition introduced by chavas and kim 2010 in such a way that the contribution of each input to economies of diversification and its components can be investigated the results indicate substantial cost savings from diversification for very small scaled plants 100 kwel most of the cost savings come from scale economies for larger plants 250 kwel positive complementarity and convexity effects are the main source of economies of diversification and outweigh the negative effect from scale diseconomies in addition to substantial fuel feedstock cost reductions significant costs saving effects from the jointness in labour and other inputs positively contribute to the complementarity effect while on average capital and labour costs positively contribute to economies of scale feedstock costs work in the direction of diseconomies of scale

aid the real exchange rate and why policy matters the cases of morocco and tunisia abstractevery form of foreign exchange inflow including aid can potentially cause real exchange rate appreciation with adverse consequences for the production of tradables dutch disease whether it does so depends on the policy response to the inflow this paper investigates the issue for morocco and tunisia over 1980 2009 we find that aid led to a real appreciation in morocco but had no effect on tunisia s real exchange rate this confirms the importance of the macroeconomic framework in which aid is provided and the key role for infrastructure and other supply side improvements in determining the final real economy impact of aid and other inflows

on the choice offunctional forms in agricultural production analysis empirical results obtained by an analyst may depend on prior choice of functional form three alternative parametric specifications of the cost function are considered these are generalized leontief translog and normalized quadratic functions performance of these functional forms is evaluated by allen elasticities of substitution biases in technical change and some theory based hypotheses all three parametric specifications yielded mixed results together empirical results reinforce the need for model specification searches

the macroeconomic impact of development aid a critical survey the early literature explained aid s macroeconomic impact in the context of the dual gap model showing a clear link between aid and growth many now believe that the empirical evidence shows there to be no such relationship this paper critically reviews the different theoretical perspectives the dual gap model the savings debate recipient fiscal response and aid as dutch disease and the empirical debates on aid savings and growth the basis for denying a relationship between aid and growth is shown to be weak though more recent areas of research offer promising directions for future work

demand for money in sri lanka during the post 1977 period a cointegration and error correction analysis this paper investigates the long run demand for money and short run dynamics of the long run money demand function for sri lanka during the post 1977 period while m1 is cointegrated with real income nominal interest rate short term foreign interest rate and real effective exchange rate m2 is not this suggests that monetary authorities should emphasize the narrow definition of money for monetary control the one year fixed deposits rate is cointegrated with m1 indicating the opportunity cost of holding money although the inflation rate is not cointegrated with m1 it seems to be an important determinant of the demand for m1 in the short run results also suggest that the short term foreign interest rate and the exchange rate can have important implications for the effectiveness of monetary policy monetary authorities must consider the response of domestic money demand to these external factors when formulating future monetary policies

disaggregated capital flows and developing countries competitiveness summary attracting capital and foreign exchange flows is crucial for developing countries yet these flows could lead to real exchange rate appreciation and may thus have detrimental effects on competitiveness jeopardizing exports and growth we investigate this dilemma by comparing the impact of six types of flows on real exchange rate behavior in a sample of 57 developing countries covering africa europe asia latin america and the middle east the results reveal that portfolio investments foreign borrowing aid and income lead to real exchange rate appreciation while remittances have disparate effects across regions foreign direct investments have no effect on the real exchange rate contributing to resolve the above dilemma

economies of diversification in the banking industry abstract this paper defines a new measure economies of diversification to examine the cost effect of product line expansion this measure is a special case of expansion path subadditivity and contains economies of scope as a special case a nonparametric frontier technique which isolates the effects of inefficiency and scale is used to measure economies of diversification applied to a set of 468 u s depository institutions operating in 1984 we find slight diseconomies of diversification diseconomies of diversification and inefficiency due to the overutilization of resources are found to be more important determinants of bank costs than is the failure to operate at optimal scale

structural reform of japanese electric power industry separation between generation and transmission distribution this study examines the cost structure of japanese electric power industry to investigate whether a structural reform on the industry really enhances a cost saving benefit to consumers a composite cost function model using a panel data set is used for this study the data set consists of nine electric power companies from 1990 to 2008 based upon the estimation results this study examines whether economies of scale and vertical economies exist in the industry then this study conducts a cost subadditivity test that is a necessary condition of natural monopoly the empirical results indicate that the electric power firms exhibit the status of economies of scale in their transmissions and distributions and the operation as a whole however they do not exhibit economies of scale in their generations thus the transmission operation by integration in a large area can improve its economic efficiency furthermore the industry should introduce more competition in both generation and wholesale power markets where more firms can participate in their power trades this study also empirically confirms that vertical economies have existed in the industry moreover this study confirms that all the estimates in the cost subadditivity test satisfy the necessary condition of natural monopoly where each estimate indicates cost saving in cost subadditivity the test does not guarantee a sufficient condition of natural monopoly however it clearly indicates that the functional separation between generation and transmission will increase total production cost in the industry the complete separation may result in a net loss of economic efficiency if a competition benefit does not exceed an expected economic loss consequently this study suggests that the industrial structure of future japanese electric power industry should be evaluated from not only an expected benefit by introducing competition but also an unbundling cost that occurs with a loss of vertical integration

foreign trade and economic development sri lanka s experience abstract in the nearly 40 years since independence sri lanka has gone through three major trade policy phases in the first following independence the economy was relatively open in the second which commenced in 1960 a trade regime biased against exports was initiated this continued until 1977 when a strong liberalization effort was made thus sri lanka provides an interesting story of an individual country s experience relating choice of a trade regime to resource allocation and growth a number of important lessons can be drawn from this experience

multiple output production and pricing in electric utilities empirical studies of the electric utility industry have generally focused on one of several issues such as the presence or absence of regulation induced input mix distortions the rules used to select regulated prices whether electricity is one output or several or the naturalness of the electric utility monopoly this paper contributes a method which permits simultaneous estimation of demand elasticities pricing rule parameters and marginal rates of transformation within one econometric model since firms make input and output decisions given the demand and regulatory conditions facing them the marginal rates of substitution and transformation are dependent on the demand elasticities of each consumer class and the prices permitted by regulators its purposes are two first i examine the appropriateness of a multiple output model of production is electricity one output or are the products sold to different consumers distinct outputs most but not all previous studies treat electricity as a homogeneous product 2 while this assumption may be justified for studies which deal strictly with generation of electricity joskow and schmalensee 27 54 5 observe3 that

rejoinder natural monopoly and the bell system response to charnes cooper and sueyoshi our study of the bell system cost function shows that it is possible to reject the hypothesis that at t was a natural monopoly our study is based on a regression analysis of a translog cost function estimated on 1947 1977 data charnes cooper and sueyoshi charnes a w w cooper t sueyoshi 1988 a goal programming constrained regression review of the bell system breakup management sci 34 1 26 claim that they reverse our conclusion when they use goal programming estimators of a translog cost function estimated on exactly the same data that we use this claim is false there is no basis for comparing our estimates with their estimates because they in fact use different data than we use and estimate a different cost function than we estimate moreover when goal programming estimates and regression estimates based on the same data and similar cost function specifications are compared they yield similar estimates and produce the same inference about natural monopoly

a composite cost function for multiproduct firms with an application to economies of scope in banking the composite cost function the authors propose combines a quadratic output structure with a log quadratic input price structure and is well suited for examining economies of scope subadditivity and other important properties of multiproduct firms to compare the composite model with an appropriate set of alternative functional forms they develop a parsimonious but general specification that nests the standard translog cost function the generalized translog cost function a separable quadratic cost function and the composite cost function an application to economies of scope in banking confirms the advantages of the composite model copyright 1992 by mit press

do large capital inflows hinder competitiveness the dutch disease in ethiopia this article investigates whether large inflows of foreign aid and remittances have had a damaging impact on the ethiopian real exchange rate rer we improve the current empirical literature by i compiling a unique quarterly dataset to provide a larger sample size and enable the modelling of important intra year dynamics which should lead to better model specifications ii providing a new empirical approach unobserved components uc to test the dutch disease hypothesis and iii using several cointegration approaches to further test the robustness of our conclusions our results suggest that there are two main long run determinants of the rer in ethiopia trade openness is found to be correlated with rer depreciations while a positive shock to the terms of trade tends to appreciate the rer foreign aid is not found to have a statistically significant impact while there is only weak evidence that remittances are associated with rer appreciations the lack of empirical support for the dutc

a natural monopoly in natural gas transmission abstract in this article we test for subadditivity in the cost structure associated with transporting natural gas by trans canada pipelines ltd and measure for possible cost savings from increased competition that could be realized by removing the monopoly status granted by the national energy board in measuring subadditivity we apply both the baumol et al contestable markets and the theory of industry structure 1982 and the evans and heckman am econ rev 764 1984 613 procedures our results show evidence of subadditivity in the cost structure and consequently the possible benefits from increased competition resulting from splitting up the monopoly could be offset by the sacrifice of scale efficiencies

goal programming regulation and generalised economies of scale and scope abstract in this paper a new class of goal programming models are employed to define economies of scale and scope first with reference to distribution models and then with reference to more general linear and nonlinear goal programming models applications to interregional production regulation and exchange are provided and in every case these models yield competitive results as special cases but in their general form the models and associated results correspond to appropriately regulated market conditions with regulation being determined inter alia by means of appropriate supply and or demand goal oriented taxes and subsidies

inflation and central bank independence conventional wisdom redux until recently there existed a broad consensus that an important institution for combating inflation is a central bank insulated from political influence this conventional wisdom has been challenged by among others campillo and miron 1997 who present evidence purporting to show that if an inflation regression equation is expanded to include not only their proxy for central bank independence cbi but other regressors as well then the negative correlation between inflation and cbi vanishes the present paper argues that allegations of the demise of this nexus should not be accepted uncritically this paper which reports the results of an analysis of covariance structures finds a strong negative relationship between inflation and cbi

standard incentive regulation hinders the integration of renewable energy generation the connection and distribution of growing decentralized electricity generation from renewable energy sources res e is leading tomassive investment needs besides investing in additional conventional assets e g cables grid operators can also invest in innovative smart solutions like local storage capacities or voltage regulation appliances which may be a more suitable way of integrating res e this paper investigates the influence of incentive regulation on the investment decision of grid operators to integrate res e we describe the technical and regulatory background explain the advantages of smart solutions and present an approach for comparing investment scenarios as an example we calculate the profitability of investments in a case study of the german electricity market we apply data envelopment analysis dea and stochastic frontier analysis sfa to show the influence of the investment alternatives on grid operator efficiency objectives we demonstrate that under current standard incentive regulation the grid operators gain profitability by avoiding investments and if they are forced to invest by not implementing smart solutions the results highlight the need to consider innovation in the regulation design further research should investigate specific instruments that can be used to account for innovation our brief discussion of such instruments provides a starting point

measuring economies of scope for cogeneration systems in korea a nonparametric approach this study empirically identifies the existence and the degree of economies of scope for cogeneration systems in korea we derive the index of economies of scope and estimate it by using a nonparametric approach of linear programming method based on the empirical results we explicitly present that there exist economies of scope for cogeneration in korea with total cost reduction of 13 1 in addition we show that the cost saving effects from the jointness in capital and labor are also significant in addition to that in fuel

positive prices in capm some equilibrium prices in capm may be negative because of nonmonotonicity of preferences we identify several sets of sufficient conditions for prices to be positive the central conditions impose bounds on the investors risk aversion these bounds do not need to hold globally but only in a relevant range of portfolios or combinations of mean and standard deviation the relevant range is specified on the basis of exogenous parameters and variables and it must contain any endogenously determined equilibrium the bounds on risk aversion ensure that the preferences for assets are sufficiently well behaved within the relevant range the two period mean variance capital asset pricing model capm has the peculiar property that preferences may not be monotone the expected return to an investor s portfolio increases as he holds more and more shares of the assets but so does the variance of return it may be that at some point the additional expected return gained from adding more shares to the portfolio is not sufficient to compensate for the increase in variance if so then the induced preferences for assets are not monotone nonmonotonicity of preferences in the mean variance model is analyzed in nielsen 1987 because portfolio preferences are not necessarily monotone equilibrium asset prices may be negative or zero in fact it is possible that the value of the market portfolio of risky assets is negative this is demonstrated in nielsen 1985 1990a and in two examples in the present paper when the capm is used as a model of the prices of stocks which in reality have limited liability it is of course disturbing that it may predict negative prices it can be seen as a symptom of the fact that mean variance preferences are not always a good approximation to reality this paper analyzes various conditions on the exogenous parameters which ensure that the preferences are sufficiently realistic to yield positive prices the exogenous parameters in question are the expectations variances and covariances of total returns the initial allocations of the assets endowments and the investors utility functions for mean and variance of return the analysis applies to the classical version of the capm with a riskless asset as developed by sharpe 1964 lintner 1965 and mossin 1966 as well as the capm with risky assets only which was introduced by black 1972 and has been much used in empirical work under the name the zero beta or two factor capm

telecommunications deregulation and subadditive costs are local telephone monopolies unnatural abstract in early 1996 congress passed the telecommunications law providing the foundation for the opening of regulated local telephone monopolies to competition one important premise for introducing competition into local telephone markets is that these markets are not or are no longer natural monopolies this paper reexamines the natural monopoly issue using a cost function that controls for firm heterogeneity our subadditivity tests suggest that local exchange carriers lecs costs are subadditive when there are controls for unobserved heterogeneity suggesting that local telephone markets are natural monopoly markets

decomposing technical change within the conventional neoclassical framework a distinction is sometimes made between productaugmenting and factor augmenting technical change a parallel distinction is commonly made between embodied and disembodied technical change with the former associated with factor and the latter with product augmentation disembodied change is commonly assumed to arise from increases in the stock of knowledge independently of the characteristics of the inputs used while embodied change relates to increases in the efficiency of inputs that is labor skills or the productivity of physical capital unfortunately this distinction is ambiguous changes in the efficiency of the inputs used are usually accompanied indeed made possible by increases in knowledge and conversely increases in the stock of knowledge often favor some inputs more than others including the capital goods of one vintage relative to those of another notwithstanding the ambiguity the concept of embodiment has intuitive appeal and this partly explains the focus on decomposing the sources of technical change that followed solow s 6 seminal paper but by the late 1960s a reader of the literature might have concluded that such decomposition was impossible for with merely time series data on inputs and output product augmenting and factor augmenting technical change are empirically indistinguishable in an important paper hall 3 showed that with data on used equipment prices and the interest rate embodied technical change and the deterioration function can in principle be calculated however the paucity of data on the price of used capital goods has allowed little progress in this direction the new longitudinal research database created by the u s bureau of the census now permits still another approach to the estimation of embodied technical change associated

the collapse of the mexican peso what have we learned the collapse of the mexican peso what have we learned in the first quarter of 1995 mexico found itself in the grip of an intense financial panic foreign investors fled the country despite very high interest rates an undervalued currency and financial indicators that pointed to long term solvency the fundamental conditions of the mexican economy cannot account for the extent of the crisis the crisis was not the result of irresponsible fiscal behaviour the crisis was due to unexpected shocks that occurred in 1994 the inadequate policy response to those shocks the increased vulnerability to panic and finally panic itself in the aftermath of the march assassination the exchange rate experienced a nominal devaluation of around 10 and interest rates increased by 7 percentage points however capital outflows continued the policy response was to maintain the exchange rate rule and to prevent further increases in interest rates interest rates were held down by expanding domestic credit and by converting short term peso denominated government liabilities cetes falling due into dollar denominated bonds tesobonos a fall in international reserves and an increase in short term dollar denominated debt resulted the government simply ended up illiquid and therefore financially vulnerable illiquidity exposed mexico to a self fulfilling panic jeffrey sachs aaron tornell and andres velasco

labour and capital saving technical change in telecommunications the australian telecommunications sector is being improved and extended through substantial recent investment in intelligent technology such as digital switching fibre optics satellite and cellular transmission and the internet these technologies are being progressively integrated with technology from the broadcasting computer and electronics industries providing a unified information infrastructure for information transmission and processing technological progress embodied in new equipment has the effect of increasing the efficiency of the factors of production such efficiency increases can be biased towards a particular factor for instance the impact of labour augmenting technical change is a decline in the cost of labour per unit of production when such biases are apparent the relativity between the costs of labour and capital per unit of production is changed in the longer term technical change can impact on the rate of employment growth and also on the rate of capital accumulation in th

a goal programming constrained regression review of the bell system breakup the recently implemented court decision to break up bell american telephone telegraph co to accord with u s anti trust laws represents a highly significant policy decision which is proving to be influential in other countries as well as the u s the telecommunication industry is of such size and importance that even relatively small economies that might be lost with bell s breakup as a natural monopoly could involve substantial welfare losses to consumers and producers studies commissioned by the u s justice department that approached this topic by econometric methods reported that the evidence failed to support the contention that bell was a natural monopoly here a goal programming constrained regression as developed in the management science literature uses the same functional form and the same data but nevertheless reverses the main findings of the econometric studies in every one of the 20 years covered this kind of difference in results obtained by two different methods of analysis poi

regulatory restructuring and incumbent price dynamics the case of u s local telephone markets prior to the telecommunications act of 1996 many u s states restructured their regulatory framework by replacing rate of return regulation with competition in both the local exchange service and local long distance markets and adopting price regulation price caps and price freezes using a panel data set of incumbent firm prices for three services i investigate whether price regulation and differences in entry conditions affect incumbent operators rate structures i find that competition has prompted a significant amount of rate rebalancing by reducing the amount of cross subsidization present in local telephone markets in addition the added flexibility of price cap regulation speeds the rate rebalance effects of competition

compact bidding languages and supplier selection for markets with economies of scale and scope preference elicitation is a fundamental problem in single unit combinatorial auctions but it becomes prohibitive even for small instances of multi unit combinatorial auctions the bidders cannot express their preferences exactly as this would take a huge number of bids typically leading to inefficient allocations hence markets with economies of scale and scope require more compact and yet expressive bidding languages in this thesis we propose an expressive bidding language allowing bidders to describe the characteristics of their cost functions bidders in these auctions can specify various discounts and markups and specify pricing rules as logical functions finding the optimal allocation given these pricing rules is a strongly np hard optimization problem and we propose a mixed integer program to solve it based on field data we introduce a multi item cost function and provide extensive computational experiments to explore the computational burden and the impact of different language features on the computational effort and total spend of the auctioneer in addition we explore characteristics of the knowledge representation of the bidding language

economies of scale and natural monopoly in the u s local telephone industry this paper shows that firm specific economies of scale or net overall economies are correlated with subadditivity both economies of scale and subadditivity are a decreasing function of firm size most firms are observed to be in the relatively flat portion of the long run average cost curve with pronounced economies of scale observable only at the low end of the scale economies of scope as reflected in cost complementarities do not appear to be a source of subadditivity the results are estimated using translog total cost functions and the fact that these cost functions include arguments for the quality of capital and of labor represents an innovation in methodology

multiproduct cost relationships for retail fertilizer plants volume cost relationships developed from the statistical analysis of accounting data have long provided useful information for evaluating firm efficiency french previous descriptive and statistical analyses of accounting data as well as economic engineering cost studies of retail fertilizer firms have focused on a single product line anderson and miller raikes and heubrock williams foster and simpson service o rourke or have simply summarized industry accounting data akridge and downey problems associated with using accounting data to estimate statistical cost functions include a the failure to handle satisfactorily multiproduct firm cost relationships

the bell system divestiture deregulation and the efficiency of the operating companies abstract a variety of casual evidence has been offered in measurement of the efficiencies and inefficiencies thought to flow from the bell system divestiture and accompanying state regulatory reforms to address several questions in this regard we estimate a regulated cost function for local exchange services using panel data on the divested bell operating companies bocs divestiture and regulatory reform are found to have produced significant efficiencies as of 1993 saving about 20 percent in cost relative to what would have obtained in the absence of these events more specifically to 1993 the divestiture yielded savings of 115 4 billion and state level regulatory reform yielded a slightly smaller 96 7 billion in savings both measured in 1993 dollars output augmentation factor bias and allowed rate of return effects contribute in identified ways to these overall results

cost structure and technological change of local public transport the kaohsiung city bus case this study has developed a translog cost function for the kaohsiung city bus kcb to analyse its cost structure and economic characteristics based on monthly data over the time period from january 1996 to december 2000 the empirical results reveal that economies of density in the provision of bus services in kaohsiung do prevail the estimated marginal cost which is less than the average cost but greater than the current bus fare indicates that the subsidy is necessary due to the existence of returns to density rtd the kcb could obtain cost saving benefits by extending its output scale the kcb production technology is also not neutral the effects of technological change on the kcb costs suggest that over the period 1996 2000 technological progress did lead to cost saving the pure productivity growth rate increased from 0 45 in 1998 to 3 in 2000

measuring embodied technical change in the us local telephone industry this study attempts to measure the rate of embodied technical change by using a short run variable cost function that contains arguments for labour and capital quality in this short run variable cost model the expansion of the amount of physical capital increases variable costs due to more maintenance outlays and then it leads to improvements in capital quality when a measure of competition is included as a proxy for organizational efficiency improvements in labour and capital quality explain more than two thirds of productivity growth the degree of returns to scale and the shadow cost of capital input in the embodiment cost model are presented as well the study is based on pooled time series and cross section data of eight us local exchange carriers

growth accounting when technical change is embodied in capital this paper revisits the hypothesis that technical change is embodied in capital it extends old results to make them more relevant to the contemporary debates about the adjustment of investment goods for quality change and about the role of embodied technical change as a source of economic growth it is shown that the failure to adjust capital for quality change has the effect of suppressing the quality effects into the conventional total factor productivity residual and it is found that approximately 20 percent of the residual growth of quality adjusted output could be attributed to embodied technical change copyright 1992 by american economic association