estimation of production technology when the objective is to maximize return to the outlay abstract this paper deals with estimation of production technology where endogeneous choice of input and output variables is explicitly recognized to address this endogeneity issue we assume that producers maximize return to the outlay we start from a flexible translog transformation function with a single output and multiple inputs and show how the first order conditions of maximizing return to the outlay can be used to come up with an estimating equation that does not suffer from the econometric endogeneity problem although the output and input variables are chosen endogenously this is because the regressors in this estimating equation are in ratio forms which are uncorrelated with the error term under the assumption that producers maximize return to the outlay the analysis is then extended to the multiple outputs and multiple inputs case with technical inefficiency although the estimating equations in both single and multiple output cases are neither production nor distance functions they can be estimated in a straightforward manner using the standard stochastic frontier technique without worrying about endogeneity of the regressors thus we provide a rationale for estimating the technology parameters consistently using an econometric model which requires data on only input and output quantities

measuring excess capital capacity in agricultural production we introduce the concept excess capital capacity and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production we also propose a two step estimation method that allows endogenous regressors in stochastic frontier models the first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors the second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it the empirical application to dutch cash crop farms found varying degrees of excess capital capacity the policy implications of excess capital capacity are discussed

stochastic convenience yield and the pricing of oil contingent claims this paper develops and empirically tests a two factor model for pricing financial and real assets contingent on the price of oil the factors are the spot price of oil and the instantaneous convenience yield the parameters of the model are estimated using weekly oil futures contract prices from january 1984 to november 1988 and the model s performance is assessed out of sample by valuing futures contracts over the period november 1988 to may 1989 finally the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time

environmental efficiency with multiple environmentally detrimental variables estimated with sfa and dea abstract the objective of this paper is to estimate comprehensive environmental efficiency measures for dutch dairy farms the environmental efficiency scores are based on the nitrogen surplus phosphate surplus and the total direct and indirect energy use of an unbalanced panel of dairy farms we define environmental efficiency as the ratio of minimum feasible to observed use of multiple environmentally detrimental inputs conditional on observed levels of output and the conventional inputs we compare two methods for the calculation of efficiency namely stochastic frontier analysis sfa and data envelopment analysis dea this paper reveals the strengths and weaknesses for estimating environmental efficiency of the methods applied both sfa and dea can estimate environmental efficiency scores the mean technical efficiency scores output oriented sfa 89 dea 78 and the mean comprehensive environmental efficiency scores sfa 80 dea 52 differ between the two methods sfa allows hypothesis testing and the monotonicity hypothesis is rejected for the specification including phosphate surplus dea can calculate environmental efficiency scores for all specifications because regularity is imposed in this method

who should buy long term bonds according to conventional wisdom long term bonds are appropriate for conservative long term investors this paper develops a model of optimal consumption and portfolio choice for infinite lived investors with recursive utility who face stochastic interest rates solves the model using an approximate analytical method and evaluates conventional wisdom as risk aversion increases the myopic component of risky asset demand disappears but the intertemporal hedging component does not conservative investors hold assets to hedge the risk that real interest rates will decline long term inflation indexed bonds are most suitable for this purpose but nominal bonds may also be used if inflation risk is low

technical and allocative efficiency in european banking this paper specifies an empirical framework for estimating both technical and allocative efficiency using the translog cost share system thus providing a solution to the issue known in the literature as the greene problem the model is applied to a large panel of european banks and the results are compared with those of a model that does not include an allocative inefficiency term and also with those obtained by using a consistent bayesian technique our results suggest that models which include only technical efficiency significantly overestimate it while parameter estimates from the model that includes both technical and allocative efficiency are very close to the ones obtained from the bayesian approach thus enhancing our confidence in the proposed methodology finally the fact that allocative efficiency of banks in our sample improves more than technical efficiency underlines the importance of including an allocative inefficiency component in parametric efficiency models

estimation of profit functions when profit is not maximum this paper deals with derivation and implications of profit functions when profit is not maximum due to the presence of either technical inefficiency or allocative inefficiency or both we show that input demand and output supply elasticities and returns to scale are in general affected by these inefficiencies we also show that the overall profit efficiency is not necessarily the product of technical and allocative efficiencies meaning that technical and allocative inefficiencies are not necessarily independent estimation techniques are developed for both cross sectional and panel data models working of the model is illustrated using a panel of 60 salmon farms copyright 2001 oxford university press

hyperbolic efficiency and return to the dollar abstract this paper after establishing the relations between hyperbolic graph measure of technical efficiency and the radial measures of technical efficiency shows that the dual cost and revenue interpretation of the hyperbolic efficiency measure is related to georgescu roegen s notion of return to the dollar n georgescu roegen in koopmans t ed activity analysis of production and allocation wiley new york 1951 pp 98 115 once this relation is established it leads to a derivation of an allocative efficiency index which measures the price distortions using data on observed costs and revenues without requiring information on prices

on the market impact of wind energy forecasts this paper presents an analysis of how day ahead electricity spot prices are affected by day ahead wind power forecasts demonstration of this relationship is given as a test case for the western danish price area of the nord pool s elspot market impact on the average price behaviour is investigated as well as that on the distributional properties of the price by using a non parametric regression model to assess the effects of wind power forecasts on the average behaviour the non linearities and time variations in the relationship are captured well and the effects are shown to be quite substantial furthermore by evaluating the distributional properties of the spot prices under different scenarios the impact of the wind power forecasts on the price distribution is proved to be considerable the conditional price distribution is moreover shown to be non gaussian this implies that forecasting models for electricity spot prices for which parameters are estimated by a least squares techniques will not have gaussian residuals hence the widespread assumption of gaussian residuals from electricity spot price models is shown to be inadequate for these model types the revealed effects are likely to be observable and qualitatively similar in other day ahead electricity markets significantly penetrated by wind power

comparison of extended mean reversion and time series models for electricity spot price simulation considering negative prices abstract this paper evaluates different financial price and time series models such as mean reversion autoregressive moving average arma integrated arma arima and general autoregressive conditional heteroscedasticity garch process usually applied for electricity price simulations however as these models are developed to describe the stochastic behaviour of electricity prices they are extended by a separate data treatment for the deterministic components trend daily weekly and annual cycles of electricity spot prices furthermore price jumps are considered and implemented within a regime switching model since 2008 market design allows for negative prices at the european energy exchange which also occurred for several hours in the last years up to now only a few financial and time series approaches exist which are able to capture negative prices this paper presents a new approach incorporating negative prices the evaluation of the different approaches presented points out that the mean reversion and the arma models deliver the lowest mean root square error between simulated and historical electricity spot prices gained from the european energy exchange these models posses also lower mean average errors than garch models hence they are more suitable to simulate well fitting price paths furthermore it is shown that the daily structure of historical price curves is better captured applying arma or arima processes instead of mean reversion or garch models another important outcome of the paper is that the regime switching approach and the consideration of negative prices via the new proposed approach lead to a significant improvement of the electricity price simulation

modeling undesirable factors in efficiency evaluation abstract data envelopment analysis dea measures the relative efficiency of decision making units dmus with multiple performance factors which are grouped into outputs and inputs once the efficient frontier is determined inefficient dmus can improve their performance to reach the efficient frontier by either increasing their current output levels or decreasing their current input levels however both desirable good and undesirable bad factors may be present for example if inefficiency exists in production processes where final products are manufactured with a production of wastes and pollutants the outputs of wastes and pollutants are undesirable and should be reduced to improve the performance using the classification invariance property we show that the standard dea model can be used to improve the performance via increasing the desirable outputs and decreasing the undesirable outputs the method can also be applied to situations when some inputs need to be increased to improve the performance the linearity and convexity of dea are preserved through our proposal

conditional funding costs of inflation indexed and conventional government bonds abstract this paper employs the predictability of monthly excess returns of uk conventional and index linked gilts to study the risk premiums of nominal and real bonds the estimates of a single latent variable model suggest that indexed gilts of medium and long maturities require half the risk compensation of conventional gilts the government can significantly reduce its long run borrowing costs through issuing inflation index linked debt however the inflation indexation of bonds with maturities less than 3 years does not significantly reduce their risk compensation membership in the exchange rate mechanism did not significantly change the risk compensation of conventional and indexed gilts

fuel poverty and well being a consumer theory and stochastic frontier approach abstract evidence and conventional wisdom suggest that general poverty has a negative effect on the well being of individuals however the mechanisms through which this effect occurs are not well understood through economic approach in this paper we analyse the influence of general and fuel poverty as well as the social dimension through peer comparison on the subjective well being of households we develop a novel approach to analyse fuel poverty and well being based on consumer theory individual preferences are modelled using indifference curves and a distance function where the preferences of individuals are affected by their poverty status we use the survey data from the official spanish life condition survey for 2013 which contains over 16 608 observations on household members the results show that both general and fuel poverty influence the reference indifference curve but that individuals also compare themselves with their peers the proposed model also allows us to corroborate how general and fuel poverty affect well being and how effective policies can be designed to improve social welfare

the impact of liberalization on the productive efficiency of indian commercial banks abstract we examine the productive efficiency of 70 indian commercial banks during the early stages 1986 1991 of the ongoing period of liberalization we use data envelopment analysis to calculate radial technical efficiency scores we then use stochastic frontier analysis to attribute variation in the calculated efficiency scores to three sources a temporal component an ownership component and a random noise component we find publicly owned indian banks to have been the most efficient followed by foreign owned banks and privately owned indian banks we also find a temporal improvement in the performance of foreign owned banks virtually no trend in the performance of privately owned indian banks and a temporal decline in the performance of publicly owned indian banks we attempt to explain these patterns in terms of the government s evolving regulatory policies

analysing wage differentials when workers maximize the return to human capital investment abstractthe analysis of the determinants of differences in wages across workers has traditionally relied on the estimation of average earnings functions in this article we propose a new theoretical model where it is the workers who decide the amount they wish to invest in human capital taking into account the costs of acquiring those skills for the purpose of maximizing earnings in this model both human capital and marginal productivity are likely to be influenced by the individual s unobserved characteristics such as ability or motivation potentially giving rise to endogeneity problems in this context the empirical implementation of our theoretical model allows us under certain assumptions to obtain consistent estimates even under the assumption of endogeneity we present an empirical application to the education sector using data from the spanish structure of earnings survey 2010 our results show that females and workers in the private education sector face more difficulties in achieving t

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

a combined modeling approach for wind power feed in and electricity spot prices abstract wind power generation and its impacts on electricity prices has strongly increased in the eu therefore appropriate mark to market evaluation of new investments in wind power and energy storage plants should consider the fluctuant generation of wind power and uncertain electricity prices which are affected by wind power feed in wpf to gain the input data for wpf and electricity prices simulation models such as econometric models can serve as a data basis this paper describes a combined modeling approach for the simulation of wpf series and electricity prices considering the impacts of wpf on prices based on an autoregressive approach thereby wpf series are firstly simulated for each hour of the year and integrated in the electricity price model to generate an hourly resolved price series for a year the model results demonstrate that the wpf model delivers satisfying wpf series and that the extended electricity price model considering wpf leads to a significant improvement of the electricity price simulation compared to a model version without wpf effects as the simulated series of wpf and electricity prices also contain the correlation between both series market evaluation of wind power technologies can be accurately done based on these series

microfoundations for stochastic frontiers the purpose of the paper is to propose microfoundations for stochastic frontier models previous work shows that a simple bayesian learning model supports gamma distributions for technical inefficiency in stochastic frontier models the conclusion depends on how the problem is formulated and what assumptions are made about the sampling process and the prior after the new formulation of the problem it turns out that the distribution of the one sided error component does not belong to a known family moreover we find that without specifying a utility function or even the cost inefficiency function the relative effectiveness of managerial input can be determined using only cost data and estimates of the returns to scale the point of this construction is that features of the inefficiency function u z can be recovered from the data based on the solid microfoundation of expected utility of profit maximization but the model does not make a prediction about the distribution

lower borrowing costs with inflation indexed bonds a trading rule based assessment abstract a simple trading rule invests in long term bonds or the risk free asset based on publicly observed economic variables the results indicate a predictable inflation risk premium for conventional bonds but no ex ante risk compensation for indexed bonds this suggests the government can achieve lower funding costs by issuing indexed debt

real interest rates and inflation an ex ante empirical analysis we develop a method of measuring ex ante real interest rates using prices of index and nominal bonds employing this method and newly available data we directly test the fisher hypothesis that the real rate of interest is independent of inflation expectations we find a negative correlation between ex ante real interest rates and expected inflation this contradicts the fisher hypothesis but is consistent with the theories of mundell and tobin darby and feldstein and stulz we also find that nominal interest rates include an inflation risk premium that is positively related to a proxy for inflation uncertainty

linear complementarity models of nash cournot competition in bilateral and poolco power markets two cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems lcps and a simple example is presented to illustrate their application the two models simulate bilateral markets the models include a congestion pricing scheme for transmission but other transmission pricing approaches can also be represented in this framework the two models differ from each other in that one has no arbitrage between nodes of the network while in the other model arbitragers erase any noncost based differences in price the latter bilateral model turns out to be equivalent to a cournot model of a poolco the models differ from other cournot market models in that they include both of kirchhoff s laws via a dc approximation can include arbitragers possess unique solutions and are readily solved by efficient lcp algorithms the key assumption that permits their formulation as lcps is that each producer naively assumes that its output will not affect transmission prices

estimating inflation risk premia using inflation linked bonds a review this paper provides an overview of studies that estimate the inflation risk premium using inflation linked bond ilb yields i categorize existing studies outline their research designs and compare their estimates for the inflation risk premium furthermore the importance of accounting for ilb illiquidity and an overview of existing ilb liquidity proxies are demonstrated a discussion of current literature developments such as the zero lower bound and an outline for future research directions conclude the paper

the allocative efficiency measure by means of a distance function the case of spanish public railways abstract this paper is an empirical application of the distance function to study the allocative efficiency of a regulated railway spanish firm renfe where the cost minimising hypothesis may be questioned besides and in contrast with other studies we include the possibility of the presence of persistent allocative inefficiency to achieve these aims we have estimated a system of equations for the inputs distance function and cost shares using annual data over the period 1955 95 using this procedure we have checked the presence of persistent allocative inefficiency in particular a systematic overutilisation of labour and underutilisation of capital moreover we have found some empirical evidence that since 1984 management contracts have improved the input allocation in spanish railways