ipo underpricing and flotation methods in taiwan a stochastic frontier approach adopting stochastic frontier analysis this article studies the pricing model and underpricing phenomenon of the initial public offerings ipos in taiwan and further elucidates the potential impact of offering mechanisms on underpricing the sampling period is from 1996 to 2003 in which 647 ipos are selected empirical results suggest that issuing firms with greater earning potentials less risk or less asymmetric information have lower underpricing furthermore the variables included to explain underpricing are mostly significant especially the proxy variable for flotation method observed mean ipo underpricing is 20 59 in the sample period compared to 17 12 for the subgroup using the auction method this statistically significant difference implies that the introduction of the auction method can help reduce ipo underpricing

a dea estimation of a lower bound for firms allocative efficiency without information on price data abstract in this paper we estimate a lower bound for the sum of firms allocative efficiencies in the absence of information on prices for this purpose we only estimate technical efficiency at both the firm and the industry level using a directional distance function and choosing a relevant direction our result relies on the decomposition of overall inefficiency into technical and allocative inefficiency at both the firm and the industry level the convexity of a technology induces a transfer from both total technical inefficiency and part of allocative inefficiency at the firm level to technical inefficiency solely at the industry level the remaining firms allocative inefficiency could be counted at the industry level hence the difference between technical inefficiencies at both levels can be interpreted as a lower bound for the sum of allocative inefficiency in the industry we show how to implement this bound in a dea framework

on the estimation of hospital cost functions abstract data from 166 general hospitals in new york state 1981 is used to estimate a quadratic and logarithmic long run cost function both equations fit the data very well but give very different results the quadratic appears to confirm the commonly held view of a shallow u shaped average cost curve whereas the log function indicates significant economies of scale a total and average cost elasticity of 0 9 and 0 10 respectively using beds or patient days to measure output ramsey s reset test is used to discriminate between the two models and the quadratic is clearly rejected as a misspecification scale economies thus exist even where the usual quadratic suggests otherwise

productivity and efficiency with discrete variables and quadratic cost function abstract we propose an index of productivity based on a quadratic cost function and developed for discrete data including technical and allocative inefficiency jointly with technical change and returns to scale as determinants of total factor productivity this new index is applied to spanish stevedoring industry so as to identify the sources of change in the productivity of a multiproductive activity where some companies do not produce some of the outputs in this context the functional quadratic form and the productivity index proposed prove particularly useful

the structure of production technical change and productivity in a port the primary focus of this paper is the modelling and estimation of the structure of production technical change and total factor productivity tfp growth in a port special attention is given to the specification of technical change which is measured as the percent of containerization our findings indicate that technical change has been labour saving and capital using tfp has been growing from 1966 1983 at an annual average rate of 0 11 the main contribution to tfp growth has been containerization on the average 85 of the growth in tfp has been due to containerization and 15 of the growth has been due to economies of scale and output growth

the technical efficiency of vacuum pan sugar industry of india an application of a stochastic frontier production function using panel data abstract a stochastic production frontier method is used to examine technical efficiency among indian vacuum pan sugar factories over a five year period most factories are close to indian best practice in terms of technical efficiency smaller firms and firms with access to sweeter cane are likely to be more efficient than other firms while publicly owned firms are less efficient there are transitory positive effects of a long crushing season on technical efficiency

efficiency of infrastructure the case of container ports this paper gauges eciency in container ports using non parametric methods we estimate eciency frontiers based on information from 86 ports across the world three attractive features of the method are 1 it is based on an aggregated measure of eciency despite the existence of multiple inputs 2 it does not assume particular input output functional relationships and 3 it does not rely on a priori peer selection to construct the benchmark results show that the most inecient ports use inputs in excess of 20 to 40 percent since infrastructure costs represent about 40 percent of total maritime transport costs these could be reduced by 12 percent by moving from the inecient extreme of the distribution to the ecient one

exercise behavior valuation and the incentive effects of employee stock options abstract we use a large database on eso exercises to document characteristics of exercise behavior and calibrate a utility based model for measuring how differences in exercise behavior are manifested in option values and incentives option values and incentives computed from the model calibrations are compared to those computed from models used to value tradable options our analysis provides guidance to both academics and practitioners about how differences in exercise behavior and model choice affect measures of eso values and incentives and underscores the importance of gaining a thorough understanding of the underlying economic forces that affect the behavior of eso holders

technical efficiency shadow price and substitutability of chinese industrial so2 emissions a parametric approach abstract in china s transition process towards sustainable development fighting against the rising so2 emission has become a great and urgent challenge based on a parametric quadratic directional distance function this paper investigates the inefficiency level shadow price and substitution elasticity of chinese industrial so2 emission from 1998 to 2011 the results show a u shape for the technical inefficiency indicating an efficiency improvement before 2005 but it getting worse since then which is that the east area displays a declining trend while the west goes up and the middle follows the national pattern at the east middle west region level as of the shadow price and morishima elasticity both the national and regional levels hold an increasing trajectory the shadow price is continuously increased a lot during the whole period implying to control additional so2 emission become more costly the positive morishima substitution elasticity suggests there may exist the win win opportunities for so2 regulation moreover the large regional disparity highlights the needs to adopt a differentiated regional policy

sensitivity of willingness to pay estimates to bid design in dichotomous choice contingent valuation models this paper addresses the sensitivity of dichotomous choice contingent valuation method dc cvm based mean willingness to pay wtp estimates to the dc cvm sample design and to alternative measures of wtp this issue is examined both analytically and empirically the analysis of ten different dc cvm data sets revealed a sensitivity in estimated mean wtp to the sample design and to the measure chosen to calculate mean wtp

a parametric approach to efficiency measurement using a flexible profit function although the idea of measuring productive efficiency goes back to farrell 8 the econometric estimation of it began with aigner lovell and schmidt 1 and meeusen and van den broeck 17 in aigner lovell and schmidt 1 and meeusen and van den broeck 17 and their extensions which incorporate either cost minimizing or profit maximizing behavior efficiency is measured relative to a frontier an alternative to the frontier approach that started with hopper 10 and lau and yotopoulos 15 is to measure efficiency mostly allocative without estimating any frontier in the latter approach allocative inefficiency defined as the deviations of the first order conditions of profit maximization or cost minimization is modeled through shadow virtual prices which are parametric functions of observed prices the shadow price approach is extensively used in the literature on efficiency measurement because it has an advantage over the frontier approach which requires distributional assumptions on the error terms especially in cross sectional models in empirical studies on the efficiency of regulated utilities it has been argued that due to the presence of rate of return and other regulations these firms optimize with respect to shadow prices instead of observed prices these studies often fail to consider the possibility that the firms under question may be technically inefficient as well which can affect allocation of inputs 1 this issue is important in both cost minimization and profit maximization cases this paper uses a profit maximization framework and develops a generalized profit function approach that accommodates both technical and allocative inefficiencies in the context of a panel data model the relationship between production technical inefficiency loss of output due to technical inefficiency and profit technical inefficiency profit loss due to technical inefficiency is derived for a flexible production function presently it is believed that the derivation of this relationship is only possible for the self dual production functions we show that if the profit function is translog some popular approaches used in modeling technical and allocative inefficiency are incorrect in particular we show that i models that fail to include technical inefficiency and consider only allocative inefficiency yield biased and inconsistent parameter estimates ii if technical inefficiency is neglected the measure of technical change will be biased the generalized profit function developed here is capable of distinguishing between technical change and time varying technical inefficiency such a distinction is not possible if for example one uses

parametric efficiency tests economies of scale and input demand in u s electric power generation duality theory has been applied increasingly in recent years to study the structure of production a major advantage of using duality theory is that systems of input demand equations can be derived by simple differentiation facilitating the use of flexible functional forms also use of duality theory makes it possible to choose a representation of the technology which has desirable properties for estimation such as exogeneity of the regressors however the use of a dual representation of production structure is appropriate only if the corresponding maintained hypothesis concerning economic behavior e g cost minimization or profit maximization is valid the perceived advantages of the dual approach to studying production structure have led to some applications in which the maintained hypothesis concerning economic behavior is unlikely to be appropriate for example neoclassical cost functions have been used to study the characteristics of production in regulated industries despite an extensive theoretical literature indicating that a profit maximizing regulated firm would not minimize costs subject to market prices 2 in this paper we propose a generalized cost function that retains the principal advantages of the neoclassical cost function but does not require that cost minimization subject to market prices be imposed as a maintained hypothesis in our model firms are assumed to base their production decisions on unobservable shadow prices which reflect the effects of regulation on the effective prices of inputs parametric tests for cost minimization are obtained by expressing shadow prices as functions of market prices the generalized cost function is estimated with data for regulated electric utilities the parametric restrictions corresponding to cost minimizing behavior subject to market prices are rejected implying that the use of a neoclassical cost function is not appropriate in this application 3

using a generalized linear mixed model to analyze dichotomous choice contingent valuation data willingness to pay wtp responses from dichotomous choice contingent valuation studies are often modeled using logistic regression from which estimates of mean or median wtp are calculated however a great many factors influence an individual s wtp some of which may be unobserved hence the regression model may have inadequate explanatory power and parameter estimates may be biased and their significance overestimated the effects of this overdispersion are examined within a generalized linear mixed modeling framework and an example given using published data from cooper and loomis 1992

the substitutability of nuclear capital for thermal capital and the shadow price in the korean electric power industry as part of ongoing efforts to reduce co2 emissions by increasing the proportion of the energy mix relying on nuclear power it may be useful to substitute nuclear power for thermal power wherever possible thereby substantially reducing the need to use fossil fuels in order to evaluate the contribution of nuclear power to potential co2 reduction this study examines the substitutability of thermal capital and nuclear capital in the korean electric power industry by utilizing the input distance function additionally the unit costs of thermal capital and nuclear capital are compared in terms of their shadow prices which are defined as the opportunity costs inherent to one additional unit of capital increase deriving from a reduction in labor the empirical results presented herein indicate that nuclear capital is readily substituted for thermal capital but the substitutability of thermal capital for nuclear capital is relatively low the shadow price ratio of nuclear capital to thermal capital is estimated to be 15 9 on average showing an upward trend over the years from 1982 to 2010

are hospitals seasonally inefficient evidence from washington state efficiency measurement has been one of the most extensively explored areas of health services research over the past two decades despite this attention few studies have examined whether a provider s efficiency varies on a monthly quarterly or other sub annual basis this article presents an empirical study that looks for evidence of seasonal inefficiency using a quarterly panel of general acute care hospitals from washington state we find that hospital efficiency does vary over time however the nature of this dynamic inefficiency depends on the type of efficiency being measured our results suggest that technical and cost efficiency vary by quarter allocative and scale efficiency also vary on a quarterly basis but only if the data are jointly disaggregated by quarter and another firm specific factor such as size or operating status thus future research corporate decisions and government policies designed to improve the efficiency of hospital care need to account for seasonal trends in hospi

influence of policy operational and market conditions on seaport efficiency in newly emerging economies the case of vietnam located in southeast asia as one of the most dynamic economic regions in the world and close to north south shipping routes vietnam s seaports play a vital role in promoting its international trad

estimating a non minimum cost function for hospitals hospital costs have been rigorously scrutinized by economists and health policy experts for several decades despite the large volume of research two related problems persist first although theoretical models of hospital behavior such as 9 and 10 suggest systematic deviations from cost minimization there has been little attention given to modelling and measuring this inefficiency second because cost minimization is a questionable maintained hypothesis most hospital cost research has not used cost functions that are dual to production technology consequently the technological concepts of scale and factor substitution are obscured we address these twin problems by developing and estimating a long run cost function that allows for systematic allocative inefficiency the parameter estimates we present also provide information on the traditional production concepts of scale and factor substitution as well as information on the size and source of allocative inefficiency in u s hospitals hospital services clearly comprise a large industry short term hospital expenditures were 120 billion in 1984 for example the u s short term hospital sector has increased in relative size by a factor of 2 5 since 1960 so that short term hospital expenditures are now about 3 6 percent of the gnp in the united states while industry size alone probably justifies an empirical investigation into the production technology for hospital services we are also motivated by the relevance of our findings to several health policy issues measures of scale economies are crucial in forming public policies concerning entry exit and mergers in the hospital industry yet most studies have not actually estimated the technological concept of scale elasticities of factor substitution are also technological and economic concepts that should be of interest to health policy makers these measures indicate the extent to which cost increases can be avoided by substituting away from the factor whose price has increased hospital cost estimates that do not include factor

sources of investment inefficiency the case of fixed asset investment in china abstract this study attempts to measure the inefficiency associated with aggregate investment in a transitional economy the inefficiency is decomposed into allocative and technical inefficiency based on standard production theory allocative inefficiency is measured by the deviation of actual investment from the theoretically desired investment demand institutional factors are then identified as part of the driving force of the deviation the resulting model is applied to chinese provincial panel data the main findings are chinese investment demand is strongly receptive to expansionary fiscal policies and inter provincial network effects the tendency of over investment remains even with signs of increasing allocative efficiency and improving technical efficiency

targeting conservation investments in heterogeneous landscapes a distance function approach and application to watershed management to achieve an environmental objective at least cost decision makers must integrate information about spatially variable biophysical and economic conditions although the biophysical attributes that contribute to an environmental outcome are often known the way in which these attributes interact to produce the outcome is often unknown we introduce a nonparametric conservation targeting approach that relies on distance functions to cost efficiently allocate conservation funds we apply the approach empirically to the case of conservation contracting for water quality objectives the contract portfolios derived from the application have many desirable properties including intuitive appeal and robust performance across plausible parametric scoring measures

stochastic estimation of firm inefficiency using distance functions econometric estimation of allocative and technical efficiency has frequently been carried out using a shadow cost function and its associated share or demand equations since the problem is formulated in terms of shadow prices the effect of allocative inefficiency on input usage must be computed indirectly from input share or demand equations as an alternative approach we derive and estimate an input shadow distance system comprising the dual shadow input distance function and the price equations derived from the shadow cost minimization problem estimated shadow quantities provide direct estimates of the effect of allocative inefficiency on input usage one can also easily calculate firm and time varying technical inefficiency by decomposing the residuals we also compute returns to scale and the cost savings obtained by eliminating both types of inefficiency our approach is illustrated using a panel of u s railroads both the cost function and the distance function are valid representations of multioutput technologies the arguments of the cost function are output quantities and input prices while the arguments of the distance function are input and output quantities the input distance function measures the extent to which the firm is input efficient in producing a given set of outputs while the cost function assumes cost minimization by a firm which is input efficient the shadow cost function is a generalization of the cost function and depends on output quantities and shadow internal to the firm input prices rather than actual market input prices thus the shadow cost function assumes shadow cost minimization but not actual cost minimization this function has frequently been employed in fixed effects estimation of allocative efficiency ae and technical efficiency te an observed input vector is technically efficient if it is on the isoquant of the observed output vector an input vector is allocatively efficient if the radial contraction of the input vector to the isoquant is cost minimizing identification of parameters that measure ae can be achieved by the estimation of a shadow cost system comprising the actual cost equation and the share or input demand equations which are expressed in terms of shadow prices and output quantities shadow cost systems have been estimated by atkinson and halvorsen 1984 sickles good and johnson 1986 eakin and kniesner 1988 kumbhakar 1992 and atkinson and cornwell 1994 among others given panel data the deviation of shadow from actual input prices can be measured by price specific inefficiency parameters that may vary across firms and over time however the estimation of the effect of

a dual measure of economies of scope a derivative based measure of economies of scope is obtained by exploiting the duality between the shadow cost function and the input distance function this is a useful measure when the econometric estimation of a cost function is not viable

parametric tests of allocative efficiency in the manufacturing sectors of india and pakistan this paper estimates allocative inefficiency in the manufacturing sectors of india and pakistan based on an extension of the translog profit function approach we propose a new method to the estimation of allocative inefficiency in two countries or groups the model is estimated using pooled annual data from the large scale manufacturing sectors of india and pakistan over the period 1959 87 we find evidence of allocative inefficiencies in both countries specifically results reveal that manufacturing firms in the two countries over utilize capital and raw materials relative to labour and energy the magnitude of over utilization of capital is more severe in pakistan than in india we argue that these findings are hardly surprising given the structure of factor markets and past government policies in the two countries

economic inefficiency in a revenue setting the norwegian whitefish fishery the main focus in the inefficiency literature is on suboptimal input use and how this causes increased costs due to technical and allocative inefficiency production or cost functions are then typ

analysing the technical efficiency of the spanish football league first division with a random frontier model this article analyses technical efficiency of football clubs in the spanish football league division 1 primera liga from the seasons 1995 1996 to 2004 2005 with an unbalanced panel data the random frontier model is used allowing the identification of random variables in the cost frontier it is concluded that the price of capital investment the number of points won and attendance are heterogeneous variables therefore no common public policy aiming to improve efficiency can embrace all of the clubs so that policies by clusters are required

the calculation of shadow prices for industrial wastes using distance functions an analysis for spanish ceramic pavements firms abstract this paper deals with the calculation of shadow prices for two industrial wastes generated on their production processes by 18 firms belonging to the spanish ceramic pavements industry these prices are then used to calculate an extended productivity index which takes into consideration wastes going with the production of marketable goods we follow the methodological approach first proposed by fare et al the review of economics and statistics 75 1993 a negative correlation is found between absolute shadow prices and wastes production intensity reflecting a greater marginal cost of eliminating wastes for those firms using less contaminant production processes differences between a conventional labour productivity index and an extended productivity index are also statistically related to firms characteristics such as size previous investments in cleaner technologies and affiliation to a technological institute

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

evaluating the operational efficiency of major ports in the asia pacific region using data envelopment analysis in recent years as competition among international ports has intensified the impartial and objective evaluation of port operational efficiency has become increasingly important in enabling each individual port to understand its peculiar strengths and weaknesses as well as any immediate threats or opportunities that may affect its competitive environment this study applies ccr model bcc model and 3 stage dea model to evaluate the changes in efficiency that have taken place between 1998 and 2001 in 10 ports in the asia pacific region using cross period data the empirical results show that different model will lead to different result on average the efficiency estimated by 3 stage dea procedure is the highest while ccr efficiency is the lowest it should be noted that the efficiencies based on ccr and bcc model are somewhat lower than the 3 stage dea approaches because they do not take the environmental factors managerial inefficiency and statistical noises into account

exploring hospital production relationships with flexible functional forms this paper estimates a multiproduct variable cost function using data on a sample of california hospitals the results provide useful insights into the advantages and disadvantages of flexible functional forms for cost analysis the translog function appears to provide reasonable estimates of marginal costs when evaluated at or near the approximation point of the function the estimated function performs less satisfactorily however when evaluated outside this range the paper s results do not provide strong evidence of either ray scale economies or of weak cost complementarities there is some evidence however that the degree of scale economies may be underestimated

parametric estimation of technical and allocative inefficiency with panel data the error components approach to estimating allocative inefficiency imposes restrictive assumptions on the distributions of the errors and functional form the parametric approach does not require special assumptions about the error distribution or technology but typically assumes technical efficiency or restrictive functional forms the parametric approach also allows for systematic firm responses to shadow prices the authors generalize the parametric approach to a panel data setting and show that input and firm specific allocative inefficiency as well as firm specific technical inefficiency can be identified and estimated using a flexible functional form this is demonstrated empirically with an application to u s airlines copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effect of government corruption on the efficiency of us commercial airports abstract in this paper we argue that the cost of providing public goods is affected by local government corruption because bureaucrats have no strong incentives to pursue mandated tasks under a corrupt environment commercial airports in the united states are chosen to demonstrate such impacts of corruption we first develop a theory which predicts the impacts of corruption on productivity and variable input allocation of airports we then test the predictions by estimating a stochastic variable cost frontier model which incorporates both technical and allocative efficiency of airports the empirical evidence confirms the theoretical predictions by revealing the following 1 airports are less productive in more corrupt environments and 2 airports tend to use more contracting out to replace in house labor in more corrupt environments the findings can be applied to the context of other public goods and have important policy implications for reforming governance structure of public good provision

on the equivalence of two normalizations in estimating shadow cost functions abstract we show that the shadow cost system that normalizes one price divergence parameter to unity is equivalent to the balk system that equates input costs based on actual and shadow prices which is a simultaneous equation not a seemingly unrelated regression sur system

fiscal stress and the production of public safety a distance function approach abstract faced with increasing crime rates but nonincreasing budgets local governments are seeking cost saving means of providing public safety this paper investigates a bureaucracy s response to fiscal stress as well as its ability to efficiently substitute civilian for uniformed personnel exploiting duality theory a distance function is used to model technology retrieve information concerning substitutability and shadow prices of personnel and test for cost minimization morishima elasticities are adopted to allow for asymmetry in substitution between types of personnel it is found that the more adverse the public safety environment and budgetary condition the more efficiently resources are allocated

banking deregulation and allocative efficiency in pakistan abstractthis article examines the impact of deregulation policies on allocative efficiency of banks in pakistan it investigates whether deregulation has impacted the pattern of allocative efficiency of banks and explores which bank ownership segment has been more responsive it uses data from 1991 to 2005 and explicitly models allocative inefficiency by using the translog shadow cost share system empirical results show that overregulation and imperfect market structure hampers the ability of banks to make competitive decisions we find evidence of allocative inefficiency leading to over utilization of labour and deposits vis a vis operating cost empirical results for time varying allocative efficiency show declining levels of allocative inefficiency for state owned and private banks in post reform period deregulation policies induce state owned banks to decrease over utilization of labour relative to deposits and operating cost while private banks succeed in using operating cost closer to optimal leve

efficiency gains from port reform and the potential for yardstick competition lessons from mexico abstract this paper shows how measures of relative efficiency performance could promote yardstick competition between port infrastructure operators the illustration is based on a study of the efficiency effects of the mexican 1993 port reform it covers 1996 99 and relies on a stochastic production frontier to show that mexico s ports achieved 2 8 3 3 average annual efficiency gains since reform the port specific measures point to consistent leaders and laggards which would not all be identified by common partial productivity indicators this information could be built into an explicit incentive based regulatory regime aiming at promoting catch up by laggards

wealth and executive compensation using new data on the wealth of swedish ceos i show that higher wealth ceos receive stronger incentives since high wealth excluding own firm holdings implies low absolute risk aversion this is consistent with a risk aversion explanation to examine whether wealth is likely to proxy for power i use lagged wealth typically measured before the ceo was hired and the results remain for one of two incentive measures also the wealth incentive result is not stronger for ceos likely to face limited owner oversight finally wealth is unrelated to pay levels and is hence unlikely to proxy for skill the compensation of chief executives of large listed companies is often largely in the form of risky instruments such as shares and options since share prices are affected by many factors outside management control this exposes ceos to risk according to standard agency theory the risk inherent in incentive compensation should reduce optimal incentives looking across firms the evidence that volatile stock prices reduce incentives in actual compensation has been mixed see e g aggarwal and samwick 1999 core and guay 2001 and prendergast 2002 for different views the importance of risk for incentives is thus in dispute 1 this paper takes another look at ceo incentives exploiting variation in risk aversion rather than risk decreasing absolute risk aversion implies that a wealthy ceo is less risk averse than a similar same coefficient of relative risk aversion but less wealthy ceo wealth should therefore proxy for risk aversion wealth may also be related to ceo skill and power obviously using wealth variation empirically hinges on having adequate data on individual wealth i use swedish tax filings to construct a proxy of wealth in sweden tax authorities provide data on aggregate yearly income

the decomposition of cost efficiency and the canonical form of cost function and cost share equations abstract this article discusses the decomposition of cost efficiency into parts relating to input or output technical efficiency and input allocative efficiency it derives the canonical forms for the specification of cost function and cost share estimation equations in the presence of technical and allocative inefficiency and in doing so integrates some hitherto unrelated lines of research

the sensitivity of ceo wealth to equity risk an analysis of the magnitude and determinants abstract to control risk related incentive problems equity holders are expected to manage both the convexity and slope of the relation between firm performance and managers wealth i find stock options but not common stockholdings significantly increase the sensitivity of ceos wealth to equity risk cross sectionally this sensitivity is positively related to firms investment opportunities this result is consistent with managers receiving incentives to invest in risky projects when the potential loss from underinvestment in valuable risk increasing projects is greatest firms stock return volatility is positively related to the convexity provided to managers suggesting convex incentive schemes influence investing and financing decisions

efficiency in new zealand sheep and beef farming the impacts of regulatory reform in this study we consider the impacts of dramatic regulatory reform during the 1980s on the efficiency of farms in new zealand using unbalanced panel data a translog distance function representing the multiple output and input technology and incorporating nonneutral regulatory impacts is used for the analysis determinants of technical inefficiency including a regulatory variable a time term and a debt equity ratio are also incorporated in a one step model estimated by maximum likelihood stochastic production frontier methods we find evidence of regulatory induced changes in output composition toward beef and deer and away from wool and especially lamb but little associated technical inefficiency these patterns motivated investment in complementary capital land and beef deer livestock inputs firms that were more flexible in their adaptation toward these new mixes adjusted to regulatory changes with less upheaval so any existing inefficiency appears linked to debt equity levels

improved estimation of willingness to pay in dichotomous choice contingent valuation studies this paper uses recently developed statistical techniques to achieve improved parameter estimates from models ofdichotomoiis choice contingent valuation data random effects associated with bid amounts presented to respondents are modelled alongside the variance of individual responses to give a nested model which more truly reflects the structure of the data being analyzed quasi likelihood methods for estimating parameters in such hierarchical models are discussed and a simulation method for assessing goodness of fit is demonstrated however estimated parameters may still be biased and hence a parametric bootstrap technique is presented and compared to a delta method approximation jel q26

energy savings potential in china s industrial sector from the perspectives of factor price distortion and allocative inefficiency abstract china s industrial energy consumption accounted for 70 82 of national and 14 12 of world energy usage in 2011 in the context of energy scarcity and environmental pollution the industrial sector in china faces unsustainable growth problems by adopting the stochastic frontier analysis sfa framework this paper analyzes the factor allocative efficiency of china s industrial sector and estimates the energy savings potential from the perspective of allocative inefficiency this paper focuses on three issues the first is examining the factor allocative inefficiency of china s industrial sector the second is measuring factor price distortion by the shadow price model the third is estimating the energy savings potential in china s industrial sector during 2001 2009 major conclusions are thus drawn first factor prices of capital labor and energy are distorted in china due to government regulations moreover energy price is relatively low compared to capital price while is relatively high compared to labor price second the industry wide energy savings potential resulted from energy allocative inefficiency was about 9 71 during 2001 2009 the downward trend of energy savings potential implies the increasing energy allocative efficiency in china s industrial sector third a transparent and reasonable pricing mechanism is conducive to improving energy allocative efficiency

allocative inefficiency and its cost the case of spanish public hospitals in this paper we present a new empirical model based on an input distance function from which estimates of allocative inefficiency and its cost can be obtained the model avoids the greene problem which refers to the difficulty in practice of using a cost system to separate economic inefficiency into its technical and allocative components we also develop a procedure to calculate the cost of allocative inefficiency using a panel of spanish public hospitals to apply our methodology we find evidence of systematic allocative inefficiency in the employment of variable inputs since inputs are generally poor substitutes the cost of this allocative inefficiency is high

technical and allocative efficiency of irrigation water use in the guanzhong plain china due to increasing water scarcity accelerating industrialization and urbanization efficiency of irrigation water use in northern china needs urgent improvement based on a sample of 347 wheat growers in the guanzhong plain this paper simultaneously estimates a production function and its corresponding first order conditions for cost minimization to analyze efficiency of irrigation water use the main findings are that average technical allocative and overall economic efficiency are 0 35 0 86 and 0 80 respectively in a second stage analysis we find that farmers perception of water scarcity water price and irrigation infrastructure increase irrigation water allocative efficiency while land fragmentation decreases it we also show that farmers income loss due to higher water prices can be offset by increasing irrigation water use efficiency

efficiency of the swedish pork industry a farm level study using rotating panel data 1976 1988 abstract this paper investigates the issues of technical efficiency technical changes and bias in technical change in the swedish pork industry using rotating panel data we use a generalized cobb douglas model where the coefficients are linear functions of time this allows input elasticities to vary over time technical changes and bias in technical change are farm and time specific the model distinguishes farm heterogeneity from technical inefficiency we use a corrected least squares procedure to estimate the model the data consists of a rotating panel of 450 pork producing farms with a total number of 1506 observations during the period of 1976 1988 we compare the productive performance of farms by size of farm land and animal stock and over time the empirical results show among other things that technical change is found to be positive but rapidly declining during the period 1976 1980 turning into technical regress during the remaining period 1981 to 1988 the mean technical efficiency is found to be around 91

how efficient are african electricity companies evidence from the southern african countries this paper is a first attempt at documenting efficiency levels in africa s electricity firms their evolution and the sources of this evolution the analysis is based on a sample of 12 operators providing services in the 12 country members of the southern africa power pool we focus on the changes in total factor productivity tfp of the largest operators in each country between 1998 and 2005 we then rely on a data envelopment analysis dea decomposition to identify the sources of the changes in tfp the results suggest fairly comparable levels of efficiency in the region and performance levels and evolution quite independent of the degree of vertical integration the presence of a private actor or the main sources of energy supply the analysis suggest that although the companies have not made significant improvements during the period of analysis in using their capital and human assets they have done much better in adopting better technologies and better commercial practices no clear correlation could be associated with the adoption of reforms during the last decade and data limitations impede a more refined assessment of the impact of reforms on efficiency at this stage

economic inefficiency and environmental impact an application to aquaculture production abstract in industries characterized by frequent innovation and high productivity growth substantial variation in produced quantity and input use may occur leading to increased costs an effect that has received little attention is that inefficiency can exacerbate environmental impacts this effect is particularly important if environmentally damaging inputs are overused in addition to increasing firms costs such inefficiency can also increase the environmental impact of the firm s activity this makes the degree of inefficiency in an industry an issue for environmental regulators in this paper we estimate technical and allocative efficiency for a sample of norwegian salmon farmers our results show that both technical and allocative inefficiency on average are significant in explaining the level and variation in farm costs and that the main environmental impact due to inefficiency from the norwegian salmon aquaculture industry has its origin in technical inefficiency

welfare evaluations in contingent valuation experiments with discrete response data comment in the case of private goods individuals reveal their preferences in the market place no similar market mechanism exists in the case of public goods however one obvious possibility is to ask people about their maximal willingness to pay for public goods or government expenditure johansson 1987 1990 miller in some recent contingent market valuation studies people instead have been asked to accept or reject a specified amount of money for a change in the provision of a public good different subsamples are confronted with different bids the resulting yes and no responses usually are analyzed by logit or probit techniques e g johansson and kristrom this raises the question of how to compute the average willingness to pay when only yes and no responses are available this point was advanced by hanemann in his seminal 1984 paper on welfare evaluations with discrete responses see also hanemann 1987 however we believe a minor imperfection in hanemann s presentation may confuse and mislead practitioners hanemann s approach assumes that negative bids cannot occur but at the same time gives the impression that it also applies to models that allow for negative bids we also extend hanemann s discussion of the choice of money measure in cost benefit analysis

ceo stock option awards and the timing of corporate voluntary disclosures abstract we investigate whether ceos manage the timing of their voluntary disclosures around stock option awards we conjecture that ceos manage investors expectations around award dates by delaying good news and rushing forward bad news for a sample of 2 039 ceo option awards by 572 firms with fixed award schedules we document changes in share prices and analyst earnings forecasts around option awards that are consistent with our conjecture we also provide more direct evidence based on management earnings forecasts issued prior to award dates our findings suggest that ceos make opportunistic voluntary disclosure decisions that maximize their stock option compensation

on price efficiency in many instances a firm s observed production choices will not be consistent with profit maximization or cost minimization at market prices such firms are generally assumed to minimize cost with respect to shadow prices the authors extend this shadow cost function approach to allow for the identification of firm specific shadow prices using a piecewise linear representation of the reference technology they specify a linear program and interpret its solution as a set of shadow prices the authors derive farrell like measures of dual allocative technical and overall efficiency they close with an example illustrating the use of this technique copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

effects of the optimal port queuing pricing on arrival decisions for container ships when arriving at a busy port a container ship usually need to queue in anchorage waiting for a berth if the port establishes a toll scheme the ship may rationally adjust sailing speed and time to save the cost otherwise she has to pay for berthing on time consequently container ships arrival times at the port will be dispersed and the queuing situation can be decreased in this article an optimal step toll scheme by cost equilibrium approach is designed and all values of equilibrium queuing cost and operating cost under the scheme are obtained according to equilibrium results in this study we show container ships that pay the toll to berth a queuing port are those altered their original arrival times at the port before the toll established in addition those ships arrival time adjusting decisions from the nontoll to the optimal step toll cases can be well investigated before tolling a queuing port

estimating the value of employee stock option portfolios and their sensitivities to price and volatility the costs associated with compiling data on employee stock option portfolios is a substantial obstacle in investigating the impact of stock options on managerial incentives accounting choice financing decisions and the valuation of equity we present an accurate method of estimating option portfolio value and the sensitivities of option portfolio value to stock price and stock return volatility that is easily implemented using data from only the current year s proxy statement or annual report this method can be applied to either executive stock option portfolios or to firm wide option plans in broad samples of actual and simulated ceo option portfolios we show that these proxies capture more than 99 of the variation in option portfolio value and sensitivities sensitivity analysis indicates that the degree of bias in these proxies varies with option portfolio characteristics and is most severe in samples of ceos with a large proportion of out of the money options however the proxies explanatory power remains above 95 in all subsamples

firm and time varying technical and allocative efficiency an application to port cargo handling firms abstract in this paper we present an econometric model to calculate both the technical and the allocative efficiency in cargo handling firms in the port of las palmas spain to achieve these aims we estimate a system of equations consisting of a translog input distance function and cost shares equations using this procedure we can check the hypothesis in which given technology and prices terminal port inputs are not optimally allocated in the sense that costs are not minimized the main contribution of this paper is to apply an empirical model that allows the unbiased estimation of allocative inefficiency of input use in two ways an error components approach and a parametric approach we also avoid the greene problem and allow allocative inefficiency to be systematic both size and traffic mix are first shown to be sufficiently diverse as to allow for a reliable estimation of a representative flexible translog function

econometric efficiency analysis a policy oriented review abstract the econometric approach to the construction of production cost and other frontiers and the measurement of efficiency relative to these frontiers historically has had a strong policy orientation this distinguishes the approach from the mathematical programming approach which has had a managerial decision making orientation geared to solving allocation problems within the public or private organization in this paper i review the development of the econometric approach to efficiency analysis i then discuss a small number of empirical studies chosen to illustrate the application of the econometric approach to a collection of public policy issues for which the notion of efficiency measurement is of prime importance examples are drawn from the areas of 1 agricultural productivity 2 labor market efficiency and equity 3 the measurement of the standard of living 4 the establishment of quality of service standards and 5 the valuation of environmental disamenities

a stochastic frontier model of the productive efficiency of korean container terminals a central objective of port privatization and or deregulation policies is stimulating greater efficiency by engendering a more competitive market and commercial approach to management korea provides a prime example of a nation that is implementing such policies also its ports play a pivotal role in world shipping particularly in the ever burgeoning container market the success of these policies in increasing the productive efficiency of korean container terminals is assessed the uk container terminal sector provides a useful benchmark for comparison since privatization and deregulation have formed an integral part of uk port reforms for nearly 20 years and the effect on efficiency having had time to mature will be much easier to gauge the stochastic frontier model is justified as the chosen methodology for estimating productive efficiency levels and is applied to cross sectional data under a variety of distributional assumptions a panel data model is also estimated results are consistent and su

compensation incentives and the duality of risk aversion and riskiness the common folklore that giving options to agents will make them more willing to take risks is false in fact no incentive schedule will make all expected utility maximizers more or less risk averse this paper finds simple intuitive necessary and sufficient conditions under which incentive schedules make agents more or less risk averse the paper uses these to examine the incentive effects of some common structures such as puts and calls and it briefly explores the duality between a fee schedule that makes an agent more or less risk averse and gambles that increase or decrease risk with the growing interest in executive compensation and agency problems

consistency in performance rankings the peru water sector regulators can utilize a number of alternative methodologies for comparing firm efficiency but these approaches need to be robust to be accepted by stakeholders this study evaluates the consistency of water utility performance rankings for peruvian water utilities the results indicate that data envelopment analysis dea and stochastic frontier analysis sfa yield similar rankings in this case in addition the techniques have comparable success for identifying the best and worst performing utilities however these rankings based on sophisticated statistical techniques are not highly correlated with those developed by the peruvian water regulator sunass this result does not invalidate the performance rankings obtained by the regulator since those rankings are based on more dimensions of utility performance however they illustrate the importance of developing sound techniques for identifying weak utilities improvements in sector performance require that benchmarking be given greater attention t

input demands and inefficiency in u s agriculture markov chain monte carlo mcmc methods are used to estimate a seemingly unrelated regression sur system of input demand functions for u s agriculture our demand functions have flexible forms and allow for nonrandom technical inefficiency concavity constraints are imposed at individual data points and the distributions of measures of relative technical efficiency are constrained to the unit interval results are evaluated in terms of characteristics of the posterior distributions of parameters measures of relative technical efficiency and other nonlinear functions of the parameters

the relative efficiency of public and private firms in a regulated environment the case of u s electric utilities abstract the relative efficiency of privately owned and publicly owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation the estimation results indicate that the two types of firms are equally cost inefficient in the united states the average effect of inefficiency is to increase the cost of production by 2 4 percent holding output constant inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel

the effect of the normalisation of the shadow price vector on the cost function estimation abstract the shadow cost model can be estimated by adopting two different normalizations of the input price distortions however the normalization suggested by balk econ lett 55 1997 45 produces estimates not invariant to the choice of the shadow input price chosen as numeraire in order to obtain linear homogeneity of the cost function

a two stage translog marginal cost pricing approach for floridian hospital outputs since the passage of the affordable care act aca of 2010 issues still remain regarding the mandated purchase of insurance to ensure more universal coverage one such issue is the pricing of these insurance packages and whether or not the reimbursements will cover necessary services therefore policy concerns exist that increasing the number of insured individuals may not curtail costs conversely providers may not wish to treat patients covered by excessively frugal plans such as medicaid hence the trade offs between access and cost control in this article we present findings from a cost function and a productivity approach to determine the marginal cost of providing inpatient hospital care for hospitals operating in florida during 2005 using these methodological approaches we are able to use the marginal rate of transformation to determine the relative marginal costs while controlling for hospital technical and allocative inefficiency our work differs from earlier articles as we avoid the greene problem for cross sectional models through a two step approach by including both reimbursement rates under conditions of hospital efficiency we can ascertain payment schemes that should at least in theory cover necessary costs for patient care without leading to excessive input usage

the measurement and sources of technical inefficiency in the indonesian weaving industry production function models are estimated with a time series of cross section data on indonesian weaving establishments the sources of technical inefficiency are investigated three firm attributes are identified as being potentially related to firm efhciency tbey are firm ownership age and size the importance of these attributes as sources of inefficiency in the indonesian weaving industry is investigated and the implications of the find ings discussed

a firm specific analysis of economies of density in the u s railroad industry an understanding of the nature of costs of production is important in every regulated industry both for policy makers and firms policy makers may be interested in whether there are economies of scale in production and in whether there are technological aspects of an industry that will pose difficult problems if an industry is regulated regulators and firms may be interested in costs for ratemaking purposes and in decisions about the effects of introducing new services or discontinuing existing services historically most cost studies in regulated industries have used data drawn from a cross section of firms or from a combination of cross section and time

application of the distance function to nonmarket valuation of environmental goods and services an illustrative example abstract this paper develops and implements a unique formulation of a household production model in that technology is characterized as a distance function the properties of the distance function allow for the derivation of shadow prices for the inputs and outputs associated with household production which can be applied to the problem of valuing nonmarket goods or activities the approach requires only one input to or output of household production to bear a price the derivation of shadow prices for all other household inputs outputs follows from the properties of the distance function i demonstrate the approach using data on the waste management activities of a sample of households from marietta georgia and by calculating shadow prices for the nonmarket activity of recycling

feasible estimation of firm specific allocative inefficiency through bayesian numerical methods both the theoretical and empirical literature on the estimation of allocative and technical inefficiency has grown enormously to minimize aggregation bias ideally one should estimate firm and input specific parameters describing allocative inefficiency however identifying these parameters has often proven difficult for a panel of chilean hydroelectric power plants we obtain a full set of such parameters using gibbs sampling which draws sequentially from conditional generalized method of moments gmm estimates obtained via instrumental variables estimation we find an economically significant range of firm specific efficiency estimates with differing degrees of precision the standard gmm approach estimates virtually no allocative inefficiency for industry wide parameters copyright 2009 john wiley sons ltd

economic efficiency and frontier techniques abstract most of the literature related to the measurement of economic efficiency has based its analysis either on parametric or on non parametric frontier methods the choice of estimation method has been an issue of debate with some researchers preferring the parametric and others the non parametric approach the aim of this paper is to provide a critical and detailed review of both core frontier methods in our opinion no approach is strictly preferable to any other moreover a careful consideration of their main advantages and disadvantages of the data set utilized and of the intrinsic characteristics of the framework under analysis will help us in the correct implementation of these techniques recent developments in frontier techniques and economic efficiency measurement such as bayesian techniques bootstrapping duality theory and the analysis of sampling asymptotic properties are also considered in this paper

market structure and the role of consumer information in the physician services industry an empirical test abstract this paper applies panzar and rosse s 1987 econometric test of market structure to examine two long debated issues what is the market structure for physician services do more physicians in a market area raise the search cost of obtaining consumer information and increase prices satterthwaite 1979 1985 for primary care and general and family practice physicians the monopolistically competitive model prevailed over the competing hypotheses monopoly perfect competition and monopolistic competition characterized by consumer informational confusion although less conclusive there is some evidence to support the monopolistically competitive model for surgeons and the consumer informational confusion model for internal medicine physicians

a multilevel modelling approach to triple bounded dichotomous choice contingent valuation the use of dichotomous choice dc questions in the elicitation of willingness to pay wtp in contingent valuation studies is common practice at the present time recent research has shown that double bounded dc questions provide statistically superior results to single bounded questions given an appropriate sampling design this paper uses a relatively new multilevel modelling technique to analyze a triple bounded dc design which in addition includes an initial non monetary question on whether an individual accepts in principle a wtp some unspecified amount the theoretical basis of the multilevel model used is described and some of the possibilities of this potentially powerful and versatile technique are discussed the practical operation of the multilevel model is demonstrated using data from a contingent valuation study conducted in the norfolk broads england an internationally important wetland resource

does option compensation increase managerial risk appetite this paper solves the dynamic investment problem of a risk averse manager compensated with a call option on the assets he controls under the manager s optimal policy the option ends up either deep in or deep out of the money as the asset value goes to zero volatility goes to infinity however the option compensation does not strictly lead to greater risk seeking sometimes the manager s optimal volatility is less with the option than it would be if he were trading his own account furthermore giving the manager more options causes him to reduce volatility managers with convex compensation schemes play an important role in financial markets this paper solves for the optimal dynamic investment policy for a risk averse manager paid with a call option on the assets he controls the paper focuses on how the option compensation impacts the manager s appetite for risk when he cannot hedge the option position on one hand the convexity of the option makes the manager shun payoffs that are likely to be near the money under the optimal policy the manager either significantly outperforms his benchmark or else incurs severe losses furthermore in examples of optimal trading strategies asset volatility goes to infinity as asset value goes to zero yet option compensation does not strictly lead to greater risk seeking as asset value grows large or if the evaluation date is far away the manager moderates asset risk for example if the manager has constant relative risk aversion crra asset volatility converges to the merton constant as asset value goes to infinity in some situations the manager actually chooses a lower asset volatility than he would if he were investing on his own because the leverage inherent in his option magnifies his exposure to the asset volatility in addition with all constant or decreasing absolute risk averse utility functions from the hyperbolic absolute risk averse hara class giving the manager more options causes him to reduce asset volatility in the crra case for example the manager targets a fixed volatility for his personal

assessing the technical and allocative efficiency of hospital operations in greece and its resource allocation implications abstract in this paper we seek to develop a research framework concerning the assessment of the efficiency of public sector hospital operations public hospitals are increasingly under pressure to improve their operations both in terms of resources they use and also in terms of the quantity and quality of their outcomes the assessment of efficiency entails both the notions of technical and allocative efficiency as they yield complementary information about the management effectiveness of individual hospitals technical efficiency has a diagnostic purpose as it yields comparative information about the effectiveness with which individual units convert their input resources into outputs on the other hand allocative efficiency has a planning orientation since the objective of the assessment is to gauge efficiency improvements by means of resource reallocation a linear programming based model is proposed for assessing allocative efficiency in the light of uncertainty about the prices of input factors the empirical part of the paper is based on data from greek public hospitals results and policy implications are discussed based on data from 98 general hospitals based on information from 1992 it was found that significant inefficiencies are present in the operations of greek hospitals that account approximately for 100 mecu in 1992 prices

technical and allocative inefficiencies and factor elasticities of substitution an analysis of energy waste in iran s manufacturing ignoring technical and allocative inefficiencies or embedding one of them alone in a system of input demands may result in biased elasticities we consider a comprehensive model including technical inefficiency in input and output forms and allocative inefficiency and apply it to panel data from iran s manufacturing sector the results show that the presence of both inefficiencies affects the computed elasticities of demand and substitution moreover in spite of current waste of energy in iran s manufacturing the elimination of environmental constraints will prompt the manufacturing firms to increase the utilization of energy relative to both capital and labor

elasticity of substitution and technical efficiency evidence from the us electricity generation abstractthe implications of national or regional energy policies for technical efficiency and environmental outcomes in electricity generation depend on fossil fuel input substitution this study u

pre recession efficiencies and input allocation decisions of agricultural and critically insolvent banks abstractthe late 2000s economic recession is considered the longest economic downturn since the 1930s great depression declining real estate values ignited an increase in loan defaults and mortgage foreclosures that led to a surge of bank failures at a rate not experienced by the u s banking industry since the 1980s a total of 509 bank failures were recorded by the fdic from january 2007 december 2014 with nearly 60 of these failures occurring in 2009 and 2010 in contrast there were only 24 bank failures in the u s during the 7 year period prior to 2007 this study analyzed certain components of operating decisions made by banks that either survived or became critically insolvent during the late 2000s financial crisis using an input distance stochastic frontier function to estimate the technical efficiency te and allocative efficiency ae between agricultural banks and non agricultural banks this efficiency analysis was applied to a 7 year pre recession period and is designed to final out any