strategic export policy with foreign direct investment and import substitution abstract the paper examines discretionary and strategic foreign direct investment fdi incentives in the export sector relative to a non interventionist policy the analysis is based on a two country model with both countries seeking to attract fdi countries differ in cost levels and in their levels of tariff protection on intermediate inputs a shift in the trade policy regime toward the strategic promotion of exports results in a decrease in fdi allocated to the low cost country when it has a low level of protection on intermediate inputs and an increase in fdi when it has a high level of protection on intermediates inputs furthermore even if fdi increases with export policy activism relative to non intervention welfare may be lower

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

one sided elasticities and technical efficiency in multi output production a theoretical framework one of the concepts that have sparked considerable interest in the theory of production and efficiency is that of returns to scale rts economics researchers typically define rts using the notion of elasticity considerable research activity on rts has also been observed by management science researchers who utilize the methodology of data envelopment analysis dea to gain insights on rts in this paper we present a theoretical framework that integrates existing economics and management science literature on rts and provides a solid foundation for research work in this area our framework defines discusses and proposes an approach to measure input and output oriented elasticities and one sided rts we demonstrate how the work done in dea is a special case of our framework and discuss the conditions under which the resulting two left hand and the two right hand elasticities can be equal future research directions are also discussed

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

the structure of technical efficiency it is common practice to decompose measures of efficiency into component measures of technical and allocative efficiency in this paper we show how and why to decompose a general measure of technical efficiency into component measures of purely technical efficiency congestion and scale efficiency and we investigate the properties of each measure we do so for a multiple output technology which satisfies a weak axiom system that does not include either constant returns to scale or strong input disposability

are economists traditional trade policy views still valid recent analysis of trade policies under imperfectly competitive market conditions as well as in situations where trade in high technology products is important have raised doubts whether economists should continue their traditional opposition to trade taxes and subsidies this paper evaluates the new theoretical arguments for interventionist trade policies by comparing them with the traditional arguments for and against free trade investigating the empirical evidence supporting the conditions assumed in the new models appraising the realism of the behavior assumptions of these models and the sensitivity of their conclusions to changes in these assumptions and considering the political economy implications of these conclusions the general conclusion is that there are serious practical difficulties with the interventionist arguments of the new trade theorists as they themselves recognize just as there are with such traditional arguments for trade intervention as the terms of trade case for protection however the new industrial organization approach to trade theory has already provided valuable insights into trade behavior in international markets and promises to provide many more as more realistic behavior models are developed this abstract was borrowed from another version of this item

the optimality of free trade science or religion ominous trends in america s international position and overall economic performance have generated increasing public dissatisfaction with the nation s laissez faire approach to trade recent academic research has meanwhile cast new doubt on the theoretical case for free trade especially where high technology industries are concerned as a consequence of these parallel developments much of both academic and public debate over appropriate trade policy now centers on the practical implications of the modeling approach known as the new trade theory some look to the new theory for a better understanding of trade policy s potential role in improving overall economic performance others seek theoretical justification of policies from which they themselves expect to benefit

assessing the relative efficiency of agricultural production units in the blackland prairie texas the way in which data envelopment analysis dea can be used to assess the relative technical efficiency of agricultural production units is illustrated two variants of the existing dea additive model introduced each eliminating earlier difficults encountered inapplication and theory these new models are demonstrated through application to agricultural data obtained from the blackland prairie texas

decomposing technical efficiency and scale elasticity in two stage network dea abstract the constant returns to scale assumption maintained by neoclassical theorists for justifying the black box structure of production technology in long run does not necessarily allow one to infer that there are no scale benefits available in its sub technologies most of real life production technologies are multi stage in nature and the sources of increasing returns lie in the sub technologies it is therefore imperative to estimate the scale economies of a firm not only for the network technology but also for the sub technologies to accomplish this two approaches are suggested in this contribution based on the premise concerning whether a network technology construct considers allocative inefficiency the first approach which is ours makes use of a single network technology for two interdependent sub technologies the second approach which is due to kao and hwang 2011 however assumes complete allocative efficiency by considering two independent sub technology frontiers one for each sub technology the distinction between these two approaches is important from a policy point of view since the network efficiencies revealed from these two approaches have distinctive causative factors that do not permit them to be used interchangeably

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

global and local scale characteristics in convex and nonconvex nonparametric technologies a first empirical exploration the purpose of this contribution is to empirically implement and supplement the proposals made by podinovski 2004b to explore the nature of both global and local returns to scale in nonconvex nonparametric technologies in particular we both propose a simplified method to compute the global returns to scale and employ some secondary data sets to investigate the frequency of the special case of global sub constant returns to scale furthermore when determining global returns to scale using both convex and nonconvex technologies we verify how often the resulting information is concordant or conflicting finally besides comparing the fdh and dea evolution of ray average productivity for some typical individual observations we introduce in the literature two original methods for the determination of local returns to scale in nonconvex technologies

on the determinants of local government performance a two stage nonparametric approach abstract this article analyzes the efficiency of local governments in the comunitat valenciana spain and their main explanatory variables the analysis is performed in two stages firstly efficiency is measured via nonparametric activity analysis techniques specifically we consider both data envelopment analysis dea and free disposable hull fdh techniques the second stage identifies some critical determinants of efficiency focusing on both political and fiscal policy variables in contrast to previous two stage research studies our approach performs the latter attempt via nonparametric smoothing techniques rather than econometric methods such as ols or tobit related techniques results show that efficiency scores especially under the nonconvexity assumption fdh are higher for large municipalities thus there is empirical evidence to suggest that resources may be better allocated by large municipalities however the inefficiency found is not entirely attributable to poor management as second stage analysis reveals both fiscal and political variables to be explicably related to municipality performance moreover the explanatory variables impact on efficiency is robust to the chosen technique either convex dea or nonconvex fdh

sovereign defaults by currency denomination abstract this paper explores the drivers of sovereign default in 100 countries over the period 1996 2012 we build a new data set of sovereign defaults and find that default events for local and foreign currency bonds are equally likely however governments default under different economic and financial conditions depending on the currency in which bonds are issued the explained variation in default probability rises from 43 to 62 when we account for differences in currency denomination we also provide evidence that global factors and market sentiment which are known to drive sovereign spreads do not help explain the probability of sovereign default hence these factors appear to affect the price of sovereign credit risk although not the risk itself

average cost efficiency and optimal scale sizes in non parametric analysis under fairly general assumptions requiring neither a differentiable frontier nor a constant returns to scale technology this paper introduces a new definition of an optimal scale size based on the minimization of unit costs the corresponding measure average cost efficiency combines scale and allocative efficiency and generalizes the measurement of scale economies in efficiency analysis while providing a performance criterion which is stricter than both cost efficiency and scale efficiency measurement the average cost efficiency is not reliant upon the uniformity of the firms input price vector and we supply procedures to compute it in both convex and non convex production technologies empirical illustration of the theoretical results is given with reference to large sets of production units

the tips treasury bond puzzle we show that the price of a treasury bond and an inflation swapped treasury inflation protected securities tips issue exactly replicating the cash flows of the treasury bond can differ by more than 20 per 100 notional treasury bonds are almost always overvalued relative to tips total tips treasury mispricing has exceeded 56 billion representing nearly 8 of the total amount of tips outstanding we find direct evidence that the mispricing narrows as additional capital flows into the markets this provides strong support for the slow moving capital explanation of arbitrage persistence

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

scale elasticity versus scale efficiency in banking in the early bank cost literature many of the studies found scale elasticities significantly different from unity as a result the authors suggested that changes in industry structure could produce cost savings through increased efficiency recent bank cost studies improved upon previous methodologies by utilizing flexible functional forms accounting for multiproduct production processes estimating scale measures at both the branch and firm level distinguishing between branch and unit bank technologies resulting from regulatory restrictions etc the typical finding from the recent studies is that relatively minor scale economies exist in banking since the scale elasticity measure differs little from a value of unity this reported finding is usually followed by a general statement that banks operate relatively efficiently with respect to the scale of production and that the potential cost gains from exploiting scale advantages via merger or growth activities appear to be relatively minor the implication from the conclusions drawn by the authors of numerous studies is that scale elasticity and scale efficiency are essentially synonymous the derivation of one automatically provides an accurate or approximate value for the other the purpose of this article is to bring attention to a common confusion in the literature between two relatively straightforward concepts scale elasticity and scale efficiency the bank production process is one of the most extensively researched aspects of bank behavior until recently however studies have not typically evaluated scale efficiency instead scale elasticity estimates have been used as a proxy for efficiency and elasticity measures close to 1 0 are taken to imply that scale inefficiency is trivial scale inefficiency is typically assumed to be linearly

returns to scale in different dea models abstract this paper discusses returns to scale rts in data envelopment analysis dea for each of the presently available types of models the bcc and ccr models are treated in input oriented forms while the multiplicative model is treated in output oriented form this distinction is not pertinent for the additive model which simultaneously maximizes outputs and minimizes inputs in the sense of a vector optimization quantitative estimates in the form of scale elasticities are treated in the context of multiplicative models but the bulk of the discussion is confined to qualitative characterizations such as whether rts is identified as increasing decreasing or constant this is discussed for each type of model and relations between the results for the different models are established the opening section describes and delimits approaches to be examined the concluding section outlines further opportunities for research

why do we have nominal government debt abstract we study the choice between nominal and indexed debt in a stochastic macroeconomic model with discretionary monetary and fiscal policy with distortionary taxes nominal debt provides valuable insurance against the budgetary effects of economic fluctuations we show that a welfare maximizing government always issues some nominal debt even though nominal debt increases inflation along the time consistent path of the economy the result is fairly robust with respect to changes in assumptions about policy constraints and about the macroeconomic setting

cost efficiency of electric grid utilities in china a comparison of estimates from sfa mle sfa bayes and stoned cnls with the purpose of estimating the range of cost efficiency levels of the power grid sector in china we assembled a data set including 23 provincial power grid companies spanning from 2005 to 2009 and conducted an empirical study based on the sfa mle sfa bayes and stoned cnls methodologies empirical results show that the average values of efficiency from different models vary from 0 85 to 0 92 depending especially on the assumptions underlying inefficiency content further results demonstrate that there is exogenous technical progress during the sample period and per capita gdp of the province is negatively related to the costs of the electric grid company located in the corresponding province we hope this empirical study will contribute to the debate on an efficiency based regulation scheme which was introduced to the chinese electric grid sector on a pilot base in 2014

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

nominal versus indexed debt a quantitative horse race abstract the main arguments in favor and against nominal and indexed debts are the incentive to default through inflation versus hedging against unforeseen shocks we model and calibrate these arguments to assess their quantitative importance we use a dynamic equilibrium model with tax distortion government outlays uncertainty and contingent debt service our framework also recognizes that contingent debt can be associated with incentive problems and lack of commitment thus the benefits of unexpected inflation are tempered by higher interest rates we obtain that costs from inflation more than offset the benefits from reducing tax distortions we further discuss sustainability of nominal debt in developing volatile countries

measuring and explaining scale efficiency with the parametric approach the case of greek tobacco growers estimates of technical and scale inefficiencies of tobacco farms in greece during the period 1991 1995 are obtained by using the parametric approach the degree of technical efficiency was found to be lower than the degree of scale efficiency and thus a greater portion of overall inefficiency is due to producing below the production frontier than to producing at an inefficient scale in addition the vast majority of farms in the sample exhibited suboptimal scale implying that output should be expanded to reach the optimal scale empirical results are provided to determine the impact of various socioeconomic demographic and geoclimatic indicators on technical and scale efficiency

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

inflation default and sovereign debt the role of denomination and ownership abstract emerging market governments hold mixed debt portfolios they borrow at home and abroad in both nominal and real terms this paper incorporates such a mixed debt structure into a theory of sovereign debt default and inflation the government optimally uses both default and inflation to balance its budget the portfolio structure affects the relative benefits of inflation default and incentives to accumulate debt a calibrated version of the model can account for key features of the mexican economy we use the model to study if portfolio shifts away from purely real and external debt contributed to emerging market disinflation in the mid 1990s we find that the answer depends on the distinction between ownership and denomination increasingly nominal debt is inflationary if held abroad but lowers inflation if held at home

why do emerging economies borrow short term the authors argue that emerging economies borrow short term due to the high risk premium charged by international capital markets on long term debt they first present a model where the debt maturity structure is the outcome of a risk sharing problem between the government and bondholders by issuing long term debt the government lowers the probability of a liquidity crisis transferring risk to bondholders in equilibrium this risk is reflected in a higher risk premium and borrowing cost therefore the government faces a tradeoff between safer long term borrowing and cheaper short term debt second the authors construct a new database of sovereign bond prices and issuance they show that emerging economies pay a positive term premium a higher risk premium on long term bonds than on short term bonds during crises the term premium increases with issuance shifting toward shorter maturities this suggests that changes in bondholders risk aversion are important to understand emerging market crises

alternative treatments of congestion in dea a rejoinder to cooper gu and li abstract this paper is a response to cooper w w b gu and s li comparisons and evaluations of alternative approaches to the treatment of congestion in dea european journal of operational research this issue who claim that the standard fgl procedure by fare grosskopf and lovell for dealing with congestion in dea can i fail to identify congestion when it is present and ii identify congestion when it is not present we clarify the notion of congestion and its relationship to structural efficiency and free disposability respectively to point out that the fgl approach was originally intended for measuring structural efficiency i e the influence of congestion on the efficiency of a particular production unit not for identifying occurrence of congestion in any feasible production vector moreover we point out that the result of cooper et al partially arises from ignorance of some key maintained assumptions underlying the fgl approach further we present some counter examples which demonstrate that the alternative approach advocated by cooper et al can equally fail in identification of congestion finally some remarks on the influence of sampling error and errors in variables on the two stage dea approaches are presented

inflation linked public debt in emerging economies abstract this study reports a set of stylized facts about inflation linked il public debt in emerging economies on average emerging economies issue 23 of their local currency lc public debt linked to inflation il debt issuance is countercyclical increases in periods of nominal exchange rate depreciations and substitutes foreign currency fc and non indexed local currency debt a two sector small open economy model of public debt composition can deliver the business cycle properties of il debt and shows that during crises amid nominal exchange rate depreciations il debt becomes cheaper to issue the study finds evidence of il rates decreasing in about half of the most recent crises in emerging economies finally the study compares il rates to fc and lc rates and concludes that for some countries il rates are below lc rates even after accounting for expected inflation