beyond gdp the quest for a measure of social welfare this paper critically examines the various approaches to the measurement of individual well being and social welfare that have been considered for the construction of alternatives to gdp special attention is devoted to recent developments in the analysis of sustainability in the study of happiness in the theory of social choice and fair allocation and in the capability approach it is suggested in the conclusion that although convergence toward a consensual approach is not impossible for the moment not one but three alternatives to gdp are worth developing jel i31 e23 e01

the growing supply of physicians has the market become more competitive the stock of u s physicians at any point in time is modeled as a weighted average of the supply that a perfect cartel would produce and that would prevail under perfect competition estimation of a system of stock and income equations over the post world war ii period shows that after holding constant demand and marginal cost conditions and accounting for gradual adjustment to changes in equilibrium the weighting parameter has moved toward the competitive extreme since 1965 this rise in the degree of competition is estimated to have increased physician stock by 6 20 and concomitantly decreased medical incomes by 19 45

allocative inefficiency and the capital energy controversy abstract the purpose of the paper is to estimate a system of input demands for greek manufacturing deviating from the standard practice of assuming strict cost minimization the study allows for the presence of price distortions and allocative inefficiency in the decision process this assumption affects parameter estimates and estimated elasticities materially and throws new light on the capital energy controversy in greek manufacturing

the substitutability of non fossil energy potential carbon emission reduction and energy shadow prices in china abstract the rapidly increasing consumption of energy and fossil fuel dominated energy structure have caused great pressure on energy security and carbon reduction policies in china and the chinese government has attempted to substitute fossil with non fossil energy to investigate the feasibility of replacing fossil energy with non fossil energy in china we apply an input distance function to estimate the substitutability of non fossil energy for fossil energy and compare shadow prices the result confirms the feasibility of substituting non fossil energy for fossil energy we then divide the non fossil energy into nuclear energy and renewable energy and find that nuclear energy is more suitable than renewable energy to substitute for fossil energy the shadow price ratio of non fossil to fossil energy is 268 41 on average in the study period the ratio experiences several fluctuations and shows a declining trend at the end of the study period implying that improving energy structure in china is very promising

a cost function of greek non ferrous metal industry abstract a translog cost function in the form of a third order series taylor expansion was used for the estimation of cost in the greek non ferrous metal industry which is based on an annual time series for the period 1969 1990 concerning the price of production factors the production volume and the total cost of production the estimated cost function permit us to have average and marginal cost curves of typical form for each time point also it is useful for projecting costs and the optimum scale of production under conditions which concern 1 i the development of prices production and product factors and 2 ii demand

utility maximization individual production and market equilibrium the theory of the utility maximizing owner operator firm has been well known for years because of income effects the firm s short run product supply curve can be negatively sloped and its input demand curve may be positively sloped what is not well known is whether these results hold for the industry in the long run with entry the answer to this question has serious policy implications consider for example the physicians services sector in the early 1960s 70 percent of physicians were practicing solo there was an excess demand for physician services and the ama was pretty much acting as a cartel through a variety of policies the federal government 1 increased the demand for medical services 2 induced medical schools to double their capacity in a decade and 3 heavily subsidized education entry costs for new doctors health policymakers were amazed to observe that during the 1970s the price of physician services rose faster than the overall cpi moreover the number of patients seen per week per physician fell during this period one reaction to this set of events was that due to asymetrical information physicians must have been inducing increases in the demand for their services we show that under increasing factor costs reductions in entry costs can lead to increases in market price this finding is not possible to reach by looking at the short run theory of the firm alone in addition the result does not require a negative sloped product supply curve or similar perverse results there are many other sectors primarily comprised of small firms that are owned and operated by the same individual farming homebuilding restaurants small stores hairdressers travel agencies and consulting firms many of these sectors have obtained special tax breaks and subsidies from the federal government to encourage increases in supply using the standard theory of the firm these policies seem plausible in both the short and long run in this paper we demonstrate that the efficacy of such policies are questionable when one considers the special nature of these firms in the long run the literature on the utility maximizing owner operator began with scitovsky 13 who argued that utility and profit maximization may not be equivalent in the short run in the most

household fuelwood demand and supply in nepal s tarai and mid hills choice between cash outlays and labor opportunity abstract subsistence households are a leading source of deforestation and their consumption of fuelwood in particular is important in many developing countries yet the empirical economic examinations of fuelwood consumption are sparse particularly for rural areas where the deforestation occurs and we would argue that forest policy is often designed without a good understanding of the potential responses of subsistence households to the new policy this paper addresses these issues with household evidence from the two major populated regions of nepal market prices labor opportunities the availability of substitutes and measure of access to the basic resource are the most reliable predictive variables for fuelwood consumption and production there are however regional differences and important distinctions between the elasticities of fuelwood collecting or purchasing households with respect to these predictive variables the difference between collecting and purchasing households is notable it recommends forestry policies that target the labor opportunity and the physical resource in regions where collecting households dominate and policies that affect the fuelwood market itself in regions where purchasing households are important a second interesting finding is that fuelwood is relatively scarcer prices are higher in the mid hills and both collecting and purchasing households in this region are beginning to respond to deforestation by using their own land for fuelwood production

multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

estimating the choice behavior of self employed business proprietors an application to dairy farmers the vast majority of business concerns operating in contemporary market oriented economies are owned and controlled by a single individual and perhaps family members yet little work has been performed in the area of estimating the choice behavior of self employed business proprietors particularly under conditions where production and consumption decisions are interdependent lau lin and yotopolous 16 barnum and squire 2 and others have developed models to analyze and estimate the complete choice behavior of farm households in developing nations these analyses invariably separate production and consumption decisions so that the sole link between the two sides of the model lies in the impact of farm profit on the household budget constraint this type of separability implicitly assumes the existence of perfect markets for all goods and inputs while this assumption may be a valid approximation for many farm households in developing economies it is not generally applicable to self employed proprietors especially those operating in more advanced economies 8 19 21 26 to my knowledge only two prior empirical studies have been performed which attempt to analyze the choice behavior of self employed business proprietors under conditions where production and consumption decisions are interdependent brown and lapan 4 employ aggregate u s time series data to estimate physician labor and output supply responses to changes in output price their estimation procedure centers on a single reduced form output supply equation parameter estimates are interpreted in the context of the theoretical framework assuming constant returns to scale technology and homothetic preferences they conclude that while the physician labor supply curve is backward bending the output supply curve is positively sloped lopez 19 formulates a model analyzing the interdependent production and labor supply decisions of households that own and operate a farm his framework integrates output input and labor supply choices and allows for differences in preferences between on farm and off farm work imposing constant returns to scale and using cross section canadian data aggregated by census division he jointly estimates output supply input demand on farm and off farm labor

occupier requirements in commercial real estate markets changes in the business environment associated with globalisation innovation in information and communications technologies and the drive towards more flexible production systems should be reflected in changes in occupational requirements for property although much research assumes that property as a derived demand will simply be supplied in response to changed demand in practice the institutional structure of the market can act as a constraint on the provision of appropriate space empirical research into new working practices and their impact on the property portfolio suggest that change is muted and gradual in part this reflects resistance to the adoption of working practices in part it reflects the inertia of a traditional model of property procurement however there is growing evidence of innovation in the nature of provision and more active and strategic management of the property resource research in this area as in many other areas of real estate is hampered by lack of reliable and a

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

the economic environment and public enterprise behaviour belgian railroads 1950 86 the purpose of this paper is to estimate the impact of variations in the economic environment on allocatively inefficient behaviour by public enterprises and to measure the implications of both allocative and technical inefficiency for the firm s costs and factor use empirical results for the belgian railroad company suggest the importance of unemployment and the pressure experienced by managers to reduce the deficit as explanatory variables of allocative inefficiency the implications of inefficiencies for factor use are found to be substantial although the associated costs are quite small

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

the policy environment and relative price efficiency of egyptian private sector manufacturing 1987 88 1995 96 we study the impact of policy and institutional constraints and reforms undertaken to remedy them on relative price efficiency and cost of the private manufacturing sector of egypt we undertake this study using a generalized cost function which subsumes the standard neoclassical cost function as a special case this approach allows us to assess the impact of such constraints which include labor market energy and financial sector ones on relative prices and the structure of production including factor demands shares and cost our findings indicate the presence of substantial distortions in relative prices and hence on cost due to the policy environment we also find improvements in relative price efficiency and cost performance as a result of policy reforms initiated to remove the constraints copyright 2007 john wiley sons ltd

factor demands cost functions and technology measurements for regulated in this paper we provide some missing elements to the theory of the regulated firm and discuss implications for econometric specification particular attention is paid to situations where capital is quasi fixed under rate of return regulation which may lead to serious specification and interpretation errors if the current theoretical basis is not adjusted we also extend the analysis to arbitrary types of regulation and indicate precisely how the differential of factor demands can be specified and what regularity conditions it must satisfy the exact formula for the calculation of marginal products returns to scale and technological change are derived

a full pricing analysis of the owner managed firm in this paper we set forth a basic analytical framework for the study of the owner managed firm which is based on the assumption that customer time is an important determinant of the optimal delivery of services earlier research done in this area has to a large extent ignored the importance of customer time in the production process 2 4 9 thus the basic trade off between the money price of the service and the opportunity cost of being serviced is ignored more recently recognition of the importance of the value of time required for the acquisition of a product has been forcefully posited in de vany and saving 7 and saving 10 the main objective of this paper is to investigate the optimal changes in the ownermanager s decision variables consumption of a composite good factor usage the supply of services and fees in response to parametric changes in such factors as non labor income prices the value of customers time and the full price of services in the main our comparative statics results yield the same implications as those obtained using standard neoclassical theory provided the revenue function of the firm is concave factors exhibit hicks allen technical complementarity and the waiting time function is quasi convex however we also obtain some new and interesting results for example we find that increasing the value of customer s time reduces aggregate consumption of the ownermanager generates a labor supply response consisting of a negative substitution effect and a positive income effect and increases the use of other factors of production we also find that unlike the standard neoclassical model even if the production function exhibits hicks allen technical complementarity the own price effects of inputs are ambiguous finally since in the full price model owner manager fees are endogenous we obtain some new and interesting results concerning the response of optimal fees to parameter changes our analysis is based on the hypothesis that the customer s opportunity cost of receiving treatment is the value placed on the time spent waiting in line to be serviced and

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

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

non minimum cost functions and the stochastic frontier on applications to health care providers by allowing firms to deviate from their optimal path for systematic reasons frontier estimators in the general literature have helped to inject more realism into econometric modelling of firms and now of hospitals and nursing homes as well unfortunately one such estimator the dea technique employed by kooreman does not allow for a stochastic error term in practice all random noise in the dea is lumped together with the true inefficiency making the resulting inefficiency scores suspect the stochastic frontier model has the advantage of disentangling the two sources of error for this reason i will address most of my comments to the papers in this issue by vitaliano and toren and by zuckerman et al that rely on maximum likelihood estimators mle another way to estimate the stochastic frontier is by using panel data techniques although the latter approach is not represented in this compendium it has certain advantages over mle which i will touch upon briefly i will also discuss other approaches that are derived more directly from economic theory that have not yet received much attention

the dependence of parametric efficiency tests on measures of the price of capital and capital stock for electric utilities this study tests whether various measures of the price of capital and capital stock will influence estimates of electric utility allocative efficiency parametric shadow values are estimated for fuel and capital prices and these values are tested against the hypothesis they are equal to unity the theoretically correct jorgenson type price for capital services results in rejecting the inefficiency hypothesis while a more simplified version of this price does not reject the efficiency hypothesis the exact measure of opportunity cost of capital discounted cash flow or capital asset price does not influence the efficiency conclusions copyright 1989 by blackwell publishing ltd

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

efficiency and vertical integration the case of mine mouth electric generating plants this paper tests four propositions regarding the efficiency of vertical arrangements 1 vertically integrated and nonintegrated firms allocate inputs with efficiency and 2 achieve equal technical efficiency 3 upstream transaction specific investments provide monopsony power and 4 monopsony behavior does not differ by vertical arrangement a behavioral cost function for mine mouth generating plants is estimated the findings include significant differences in the allocative efficiency of integrated versus nonintegrated plants and increased technical efficiency for vertically integrated plants transaction specific investments in mines provide monopsony power nonintegrated plants exercise this power while integrated plants do not copyright 1991 by blackwell publishing ltd

virtual prices and a general theory of the owner operated firm theories of entrepreneurial behavior for owner operated firms have a long history in economics these models treat the owner operator as both a producer and consumer of goods production and consumption choices result from utility maximization a preponderance of the work performed in this area has addressed two theoretical issues the consistency of utility and profit maximization and comparative static behavior of the entrepreneur scitovszky s seminal paper 29 demonstrates that under certain circumstances the entrepreneur may trade off income for leisure giving rise to the possibility of income effects on production and inconsistency of utility and profit maximization building on scitovszky s work graaff 14 clower 6 auster and silver 3 and lapan and brown 18 analyze the comparative static behavior of the utility maximizing owner operator and how this differs from the traditional neoclassical profit maximizing firm emphasis is on the possibility of income effects on production and how they may result in seemingly uneconomic behavior a shortcoming of this literature is the focus on special cases based on strong restrictions on technology constant returns to scale and the market for the entrepreneurial input no such market exists as of yet a general analysis of the comparative static behavior of the entrepreneur has not been undertaken scitovszky s work also initiated a vigorous debate concerning the consistency of utility and profit maximization for owner operated firms this debate centers on two principal questions does utility maximization imply profit maximization if not can a utility maximizing owner operated firm survive through time piron 25 olsen 23 24 and hannon 15 conclude that in competitive long run equilibrium utility maximizing entrepreneurs necessarily maximize profit and must do so to remain viable ladd 17 auster and silver 3 feinberg 8 9 10 and schlesinger 28 conclude that utility and profit maximization may diverge moreover these writers maintain that non profit maximizing owner operated firms can survive through time more re

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

technology development and the environment abstract in an attempt to achieve the positive externalities from a more knowledge intensive economy many developing countries have emphasized improvements in their science and technology st a substitution of energy for other factors of production and greater energy consumption by households our findings underscore the importance of considering the economy wide implications of a technology policy recognizing that better technology does not necessarily imply a cleaner environment

estimating input specific technical inefficiency the case of the tunisian banking industry abstract this paper presents an econometric model to estimate input specific technical efficiency iste in a panel data framework it extends the few existing models to estimate iste it can be applied to any flexible functional form and technical inefficiency is firm specific and time variant this model is applied to obtain estimates of technical inefficiency specific to factors of production in the tunisian banking industry it is shown that technical efficiency of labor and capital inputs are decreasing over time labor input is more inefficiently used than capital input and banks which are relatively more efficient in using capital input are less efficient in using labor input

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

nepotism discrimination and the persistence of utility maximizing owner operated firms reply much debate in the discrimination literature surrounds whether employers with biased preferences can persist in the market 7 10 this issue is a natural extension of the broader literature on owner operated firms which focuses on the consistency of utility and profit maximization 12 13 14 18 26 27 theories of owner operated firms which have a long history in economics model the entrepreneur as both a producer and consumer of goods that determines the level of production and consumption jointly through utility maximization 2 9 16 22 31 this approach is applied in this paper to examine employer discrimination and nepotism our analysis provides necessary conditions for utility maximizing firms to persist in the market and shows how biased preferences can yield seemingly uneconomic input and output choices that are in fact rationally inefficient empirical results using data on family farms support the prediction that utility maximizing entrepreneurs trade profit for nonmarket goods and do not hire inputs to maximize profits competitive neoclassical theories of the labor market do not provide a clear theoretical resolution to the issue of persistence of employer nepotism and discrimination the employer discrimination model proposed by becker 4 5 and extended by arrow 1 postulates that entrepreneurs maximize utility that increases with profit but decreases with a nonmarket attribute of some workers e g race ethnicity or gender these models predict that white male workers may initially have better market opportunities than comparable minority or female workers however entrepreneurs who hire based on nonproductive attributes are also predicted to earn less than a normal rate of return and because they derive disutility from an aspect of owning and operating a firm can improve their welfare by leaving the industry and converting firm assets to those that do not require employment decisions e g stocks and bonds this result has the important policy implication that market intervention may not be necessary to improve the relative pay and employment of disadvantaged groups when employers are the source of the discrimination alternatively goldberg 15 uses the arrow 1 framework but postulates that employers

the effect of sulfur regulations on the u s electric power industry a generalized cost approach abstract this paper estimates the effects of sulfur dioxide emission regulations on the us electric power industry during the 1975 1990 period by utilizing a generalized cost function along with shadow input prices in the presence of various regulations including those intended to control sulfur dioxide emissions firms will likely fail to minimize production costs the null hypothesis of cost minimization is rejected implying that the use of a neoclassical cost function is inappropriate for this study a comparison of the results obtained by estimating a generalized cost function and those obtained with a neoclassical cost function reveals that the use of a neoclassical restriction brings an underestimation of the average percentage increase in cost by 1 1 percentage points

regional differences in nuclear and fossil fuel generation of electricity previous research on electric gen eration costs has mainly relied on economy wide data this study disaggregates a broad sample into regions known to have marked differences in fossil fuel availability climate regulatory ef fects and other variables we find differences exist in generation costs among the studied re gions and nuclear power using estimates of scale economies and other measures we also find smaller minimum efficient size fossil fuel firms than previous studies based on recent cost information this study provides insights into several industry structure issues such as capac ity expansion competition input costs environ mental policy and transmission access jel q42

are bureaucrats efficient an application to the provision of afdc the question on how bureaucrats behave in the provision of a public service has been the subject of a considerable amount of research most of which has been largely theoretical and inconclusive especially on the issue of efficiency this paper builds a bureaucratic theoretical model and provides empirical evidence by examining the workings of a government bureau supplying a public service namely aid to families with dependent children afdc at the state level it builds and estimates a generalized short run cost function that allows for systematic relative price inefficiency and does not require cost minimization subject to market prices as a maintained hypothesis the model tests cost minimization as a testable special case the estimating procedure allows us to test for a number of other features of the technology that are of interest such as productivity growth marginal costs returns to scale technical change and factor demands

the utility maximizing self employed physician we estimate a model of utility maximizing physician behavior our model accounts for the interdependence of physician input output and work leisure choices and includes an endogenous virtual wage for physician own time in the medical practice we find that solo practitioners respond to increases in marginal hourly earnings and nonpractice income by allocating less time to medical practice activities our results also suggest that fee reductions induce the substitution of physician own time for auxiliaries and the net effect of this adjustment is reduced patient loads and a decrease in supply from the existing stock of solo practitioners

the labour supply behaviour of self employed solo practice physicians this paper investigates the empirical labour supply behaviour of self employed solo practice physicians the specification of the empirical labour supply equation is based on a model of constrained utility maximizing behaviour that recognizes the physician makes work leisure choices based on an endogenous shadow wage and faces a nonlinear budget constraint the findings suggest that the typical self employed solo practice male physician operates on the upward sloping portion of the labour supply curve and is relatively unresponsive to changes in marginal hourly medical practice earnings and non practice income

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

hospital efficiency and indigent care 1990 hospital efficiency and indigent care applied economics vol 22 no 11 pp 1597 1610

are combination gas and electric utilities multiproduct natural monopolies gas and electric services are provided in some locations by a single firm in others by two firms the loss of competition inherent in single firm provision can be justified by the presence of both economies of scope and product specific economies of scale for each output in multiproduct production the estimation of a multiproduct hybrid translog cost function shows no evidence of such economies at the mean combination utility output vector copyright 1987 by mit press

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

effects of allocative inefficiency on resource allocation and energy substitution in pakistan s manufacturing empirical economists often ignore that firms may not minimise costs in the presence of allocative inefficiency assuming strict cost minimisation when actually cost is not minimum may produce biased parameter estimates and elasticities we consider a method for estimating effects of allocative inefficiency on resource allocation and factor substitution and apply it to data from pakistan s manufacturing results show strong evidence of allocative inefficiency leading to over utilization of raw material and capital viz a viz energy and labour and increasing cost of production of firms by 1 per annum computed elasticities diverge from their true values in the presence of allocative inefficiency

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

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

the effects of product price uncertainty on the owner managed firm theory and evidence in this paper we extend the theory of the owner managed firm to incorporate product price uncertainty and we present an empirical test of the model s predictions under product price uncertainty the trade off between leisure and profit faced by an owner manager is combined with the trade off between surety and risk bearing faced by an entrepreneur the firm s owner bears the uninsurable and undiversifiable risk about profit caused by product price uncertainty and as manager supplies the firm a unique labor factor the model predicts that the substitution effect of an increase in risk on the quantity supplied by the firm is negative the income effect of risk reinforces the substitution effect if the entrepreneur s labor supply has a positive wage elasticity but runs counter to and could dominate the substitution effect if the wage elasticity of labor supply for the entrepreneur is sufficiently negative unlike previous research on price uncertainty and the firm this paper presents an empirical test of the model s predictions using data on physicians in solo practice our empirical analysis indicates that although wage elasticities of labor supply for the physician entrepreneurs are negative greater risk leads to a reduction in output these results suggest that the substitution effect is dominant in determining the response to product price uncertainty for the owner managed firms in our sample frank knight 12 gave prominence to the risk bearing role of the entrepreneur who as residual claimant bears the risk associated with a firm s revenue tibor scitovsky 21 later emphasized a different aspect of entrepreneurial activity the trade off confronted by an ownermanager between consumption of leisure and pursuit of profit both models of the entrepreneur are relevant to predicting the behavior of an owner managed firm operating in a risky environment the entrepreneur in such a firm must choose between consuming leisure and supplying labor which provides an uncertain return the random residual of revenue net of payments to other factors

costs of nitrogen runoff for rural water utilities a shadow cost approach this paper explores the interactions among scale and density economies productive efficiency water quality and customer characteristics and their impact on the costs of delivering treated drinking water implicit benefits of nitrogen abatement are also derived and hypothesis tests concerning their hypothesized drivers are conducted key findings are that nitrogen removal costs increase with rising raw water nitrogen concentration coming from agricultural activities and that network density and system size matter in determining average total costs of community water systems merging water systems to take advantage of scale economies may be difficult due to the heterogeneity of the sector however

the physician labor market in a managed care dominated environment i introduction health maintenance organizations hmos and other managed care arrangements are rapidly growing alternatives to fee for service ffs insurance in the united states hmo enrollment has grown from under 3 million in 1970 interstudy 1986 to over 46 million by early 1995 interstudy 1995 little is known about how these changes in health care financing will ultimately affect physicians incomes but managed care is undoubtedly altering the economic environment of medical practice the shift from ffs to salaried or capitated payment reduces physicians incentives to overtreat 1 further managed care plans control physicians access to their enrollees by monitoring practice patterns and removing overly aggressive doctors from their panels hmos also employ a different physician mix with fewer specialists than the mix that characterizes the ffs environment thus a hypothesized consequence of rising hmo market share is reduced demand for specialists wennberg et al 1993 estimate potential surpluses ranging from 10 for emergency medicine to 210 in pathology surpluses of these magnitudes would be expected to reduce earnings however until recently physicians have enjoyed stable or rising incomes simon and born 1996 this may be explained by asymmetric information between patients and physicians if patients are poorly informed about the effectiveness of treatment options doctors may be able to protect their incomes from the loss of patients to managed care by prescribing more aggressive treatment to their remaining ffs patients despite mixed evidence on the extent of supplier induced demand sid e g fuchs 1978 newhouse et al 1982 dranove and wehner 1994 rizzo and blumenthal 1996 this hypothesis remains popular among policymakers the proponents of quotas for the size and mix of the health workforce argue that the supply side of the health sector is simply impervious to signals from the demand side i t is widely believed that physicians enjoy almost total discretion in dictating the volume and composition of health care they render allow ing physicians to extract very high target incomes virtually regardless of the local physician to population ratio reinhardt 1994 interest in physician incomes arises in part from the central role that incomes play in sending appropriate signals about changing supply and demand conditions if ffs physicians can maintain their incomes as the ffs patient pool shrinks decisions about specialty location and hmos staffing patterns would have little reason to change alternatively if ffs incomes are sensitive to managed care penetration we would expect doctors to increasingly practice in areas and specialties in which employment opportunities have become relatively favorable pursue nonclinical positions or retire likewise hmos would reduce substitution towards non physician providers and away from specialist physicians the consensus among health workforce experts is that the u s has too many physicians and too many specialists relative to primary care physicians and that market adjustments will be insufficient to restructure the physician supply thus many health workforce experts and medical organizations have called for centralized workforce planning e g mitka 1997 committee on the u s physician supply 1996 pew 1995 cohen and todd 1994 schroeder 1994 wennberg et al 1993 proposals include limits on the number and specialty composition of residency positions restrictions on medical school class sizes and immigration by international medical graduates and incentive payments for early retirement retraining or diversion of physicians into non clinical positions before advocating interventions in the medical labor market it is worth exploring the potential for market forces to generate the desired physician supply changes many supporters of workforce policies presume that the failures of a ffs dominated physician services market would persist even in a radically different context

the elasticity of scale and the shape of average costs different concepts of returns to scale the first which is most widely used for defining returns to scale is the relative increase in output as all input quantities are increased proportionally along a ray through the origin the second which is the more relevant concept for micro economic analysis is the increase in output relative to costs for variations along the expansion path where input prices are constant and costs are minimized at every output 2 as it turns out these two concepts yield equal measures for the elasticity of scale3 e at every minimum cost point in the input space however the change in e with output is generally different for the two concepts 4 since expansion paths do not coincide with rays unless the production function is homothetic 5 but it is the change of e along the expansion path and not along the raywhich determines the shape of the average cost curve ac and which is therefore relevant for the analysis of firms and industry behavior under competition 6 these relations are stated and analyzed below it is shown that assumptions made in the literature7 which are related to the behavior of e along rays or to the slope of the technically optimal surface where returns to scale are locally constant are irrelevantbeing neither necessary nor sufficient for implying classical u shaped average cost curves the following definitions and results are used here

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

scale economies and inefficiency of u s dairy farms this study employs data drawn from the 2000 agricultural resource management survey a u s department of agriculture sponsored farmers survey the article estimates returns to scale relationships across dairy farms of different sizes and across different regions incorporating variables hypothesized to influence farm performance results point to significant scale economies in u s dairy farms and underscore the importance of taking account of inefficiency when estimating scale economies contrary to previous research the preferred cost function specification does not show a region of decreasing returns to scale this finding helps explain why the average size of dairy farms has been increasing

price distortions and resource use efficiency in indian agriculture a restricted profit function approach this paper develops a generalized profit function that incorporates price distortions resulting from imperfect market conditions sociopolitical and institutional constraints as well as technical and allocative inefficiency the model is applied to test 1 the appropriateness of the neoclassical profit function and 2 the effect of education and farm size on allocative performance using farm level data from indian agriculture empirical results reject the neoclassical profit maximization hypothesis based on market prices in favor of the general model with price distortions and therefore help to improve allocation of inputs and output farm size is found to reduce price distortions only for small farmers copyright 1992 by mit press

scale and scope efficiencies through hospital consolidations the hospital sector in the province of ontario has recently completed a large scale restructuring marked by wide ranging hospital closures mergers and program transfers given a generally inconclusive economics literature regulators used an accounting as opposed to an economic approach when predicting gains to consolidations this paper uses an economic cost function to examine economies of scale and scope in the years preceding restructuring where there was little doubt that economies were possible issues relating to output aggregation functional form and scale and scope testing are addressed and an equilibrium cost function is derived from an estimated short run function to measure the cost concepts of interest using index and direct approaches we examine a variety of potential reconfigurations and conclude that there were indeed large scale unexploited gains to strategic consolidation in the hospital sector furthermore these gains may not have been detected using standard approaches in the literature

a model of physician behaviour with demand inducement we present a model of the physician patient relationship extending on the model by farley farley p j 1986 theories of the price and quantity of physician services journal of health economics 5 315 333 of supplier induced demand sid first we make a case for the way this model specifies professional ethics physician competition and sid itself second we derive predictions from this model and confront them with the neoclassical model finally we stress the importance of considering how sid affects patient welfare in providing an example where physicians ability to induce makes patients better off to evaluate patient welfare we derive approximations of the patients welfare loss due to physician market power in both the neoclassical model and the inducement model

measurement of the in situ value of exhaustible resources an input distance function abstract we develop a methodology to derive the shadow in situ price of nickel by utilizing an input distance function which can improve upon previous estimates our estimates hold regardless of market power and actual cost minimization the time path of the shadow in situ price is obtained using annual data for inco a nickel company empirical results suggest a slightly increasing in situ price of nickel over the period 1947 92 but the dynamic optimality condition does not hold comparison with the time path of the in situ price obtained by estimating a cost function indicates a sizable discrepancy between the two time trajectories

measuring and decomposing productivity change measuring productivity change with malmquist indices has become common practice because they are easily computed using nonparametric programming techniques and can be readily decomposed into technical and efficiency change however this approach is nonstochastic and requires a constant returns to scale assumption to construct the reference technology we propose estimating productivity change using a stochastic input distance frontier imposing no restrictions on returns to scale we derive the analogous decomposition of productivity change and develop a generalized method of moments strategy in which outputs or inputs may be endogenous we compare two methods in an application to electric utilities

unionization and cost of production compensation productivity and factor use effects unionization affects cost of production through compensation premia technology shifts and deviations from the least cost combination of inputs the first two are familiar but the last is not this article distinguishes the three effects illustrates the factor use effect and suggests that it may resolve several apparent inconsistencies union induced cost effects appear larger than those implied by union compensation and productivity differentials union compensation and productivity differentials suggest a larger effect on labor intensity of output than is observed and employers complain that union work rules reduce productivity when there is little evidence that this is so

technological externalities and economies of vertical integration in the electric utility industry abstract this paper investigates economies of vertical integration of the electric utility industry focusing on the technological externality between the generation and transmission distribution stages for this purpose a shadow cost function of the symmetric generalized mcfadden form is estimated using panel data on the transmission distribution stage of nine japanese electric utility firms the results show that there exist the technological externality effects of generation facilities on the cost of the transmission distribution stage suggesting economies of vertical integration

allocative distortions technical progress and input demand in u s airlines 1970 1984 this paper generalizes a globally concave and flexible cost function to accommodate allocative distortions these distortions are introduced through shadow prices and are specified as functions of regressors that make distortion factors firm input and time specific the estimated model based on a panel of nineteen u s airlines observed during 1970 84 rejects the hypothesis of no allocative distortions increase in costs due to allocative distortions are calculated for each airline over the entire period the rate of technical progress and economies of scale are also estimated based on models with and without allocative distortions copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

beyond gdp an analysis of the socio economic diversity of european regions abstractthis paper aims to analyze the socioeconomic diversity of the european union eu 28 regions from a dynamic perspective for that purpose we combine a series of exploratory space time anal

employment of inputs by a rent seeking firm comment and extension to non minimum cost functions though not actually demonstrated at least it has hopefully been rendered probable above that by making use of fairly recent developments within applied production economics there is a good possibility of circumventing the problems from rent seeking pointed to by levy although even in this simple model the empirical model may not be a simple one but rather quite messy the model is still subject to the general criticism frequently advanced against the use of dual models though since full adjustment of inputs is assumed see e g johnston 1984 336 337 this assumption is however quite standard in applied work and treatment of the adjustment process is beyond the scope of the present note

returns to scale in electricity generation replicated and revisited abstract we replicate the findings of two influential studies on returns to scale in the united states electricity generation market the main results are contrasted using both local linear nonparametric regression a technique robust to parametric functional form assumptions as well as an updated data set while the quantitative findings across all of the estimators deployed differ somewhat regarding the magnitude of returns to scale we document a decrease in returns to scale within the electricity generation market from 1955 to 1996

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

a general index of technical change this paper outlines a procedure for estimating a general index of technical change within the context of a quite general production technology specifically when panel data are available for firms in an industry time specific dummies can be combined in a nonlinear estimation procedure to yield a general index of technical change that may be both nonneutral and scale augmenting this approach offers numerous advantages over the traditional time trend representation of technical change for example the general index can serve as the basis for analysis of the determinants of technical change results for a sample of 30 electric utilities over the period 1951 78 show that the productivity decline of the 1970s can be attributed primarily to sulphur oxide restrictions and secularly declining capacity utilization due to rapidly increasing peak load demands

the effects of lump sum subsidies on the structure of production and productivity in regulated industries abstract the theoretical model developed in this paper indicates that a lump sum subsidy granted to a monopolist facing a binding rate of return constraint will result in a higher level of capital employed and output produced furthermore production costs at any level of output will be higher compared to the pre subsidy situation the empirical results emanating from the application of the model to the bus transport sector indicate that lump sum subsidies have been factor biased and have led to higher costs as predicted by the model the average rate of productivity growth has been reduced by 0 60 percentage points per year as a direct result of the lump sum subsidy

deregulation ownership and productivity growth in the banking industry evidence from india this paper analyzes the relationship between deregulation and total factor productivity tfp growth in the indian banking industry using a generalized shadow cost function approach tfp growth is decomposed into a technological change a scale and a miscellaneous component a disaggregated panel data analysis using the population of public and private banks over 1985 96 that covers both pre and post deregulation periods indicates that a significant decline in regulatory distortions and the anticipated increase in tfp growth have not yet materialized following deregulation while private sector banks have improved their performance mainly due to the freedom to expand output public sector banks have not responded well to the deregulation measures

physician response to fee changes with multiple payers this paper develops a general model of physician behavior with demand inducement encompassing the two benchmark cases of profit maximization and target income behavior it is shown that when income effects are absent physicians maximize profits and when income effects are very strong physicians seek a target income the model is used to derive own and cross price expressions for the response of physicians to fee changes in the realistic context of more than one payer under the alternative behavior assumptions of profit maximization and target income behavior the implications for public and private fee policy and empirical research on physician response to fees are discussed

shephard s lemma and rate of return regulation abstract by counter example this paper shows that in general shephard s lemma cannot be used for the usual formulation of the rate of return regulated cost function a solution to the problem is supplied

property in a global risk society towards marketing research in the office sector this paper suggests that the current uncertainty hovering over the property industry is not simply the result of an internal economic dynamic dooming the industry to damaging booms and slumps rather the novel sense of risk colouring contemporary development activities is the consequence of wider cultural technical and commercial shifts from which property development is not immune the current supply oriented interests of property research predominantly concerned with the collection and analysis of statistical data are unable to respond to these wider questions simply creating more data banks will not help the paper argues that in order to understand the shifting nature of demand property research needs to complement econometric modelling with a more occupier focused marketing research one that is sensitive to the dynamics of the risk society we now inhabit accordingly the paper provides a detailed account of structured market research which should form part of a broader property research agenda in particular structured demand analysis is shown to provide a framework for understanding the complex dynamics of the demand market so demonstrating how the supply industry can improve its efficiency the paper suggests that the scale of the latest property crash offers an opportunity for the industry to improve the efficiency of supply by blending intimate knowledge of changing market demand with established dynamics of provision such a research strategy may provide the key to a more stable mutually profitable property business appropriate to a rapidly changing world economy of risk

privatisation and the efficiency of decentralised electricity generation some evidence from inter war britain the privatization of the electricity supply industry in england and wales has established a decentralized system of supply this paper considers the efficiency of the decentralized interwar electricity supply industry a generalized stochastic frontier cost function is specificed enabling the estimation of returns to scale and inefficiency at plant level these estimates are used in turn to examine the efficiency of stations selected by the central electricity board to supply the national grid the results imply that a decentralized system was not only feasible but that the selection procedure was sensitive to efficiency differences at plant level copyright 1992 by royal economic society

an examination of the effect of ownership on the relative efficiency of public and private water utilities the behavior of privately and publicly owned water utilities is examined by estimating a generalized variable cost function containing the regular characteristics of the neoclassical cost function without requiring that cost minimization subject to market prices be imposed as a maintained hypothesis assuming that unobserved shadow prices reflect the regulatory environment of the water industry tests for cost minimization are obtained by deriving shadow prices as functions of market prices the empirical results provide evidence that public water utilities are more efficient than private utilities on average but are more widely dispersed between best and worst practice

us regional income convergence a spatial econometric perspective rey s j and montouri b d 1999 us regional income convergence a spatial econometric perspective reg studies 33 143 156 this study reconsiders the question of us regional economic income convergence from a spatial econometric perspective recently developed methods of exploratory spatial data analysis provide new insights on the geographical dynamics of us regional income growth patterns over the 1929 94 period strong patterns of both global and local spatial autocorrelation are found throughout the study period and the magnitude of global spatial autocorrelation is also found to exhibit strong temporal co movement with regional income dispersion a spatial econometric analysis of the familiar baumol specification reveals strong evidence of misspecification due to ignored spatial error dependence because of this dependence shocks originating in one state can spillover into surrounding states potentially complicating the transitional dynamics of the convergence process rey s j et montouri

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

cycles and steps in british commercial property values this paper examines cyclical behaviour in commercial property values over the period 1956 to 1996 using a structural times series unobserved components approach the influence of the transition to short rent reviews during the late 1960s and the short and long term impacts of the 1974 and 1990 property crashes are also incorporated into the analysis via dummy variables it is found that once these variables are taken into account a fairly regular cyclical pattern can be discerned with a period of about 7 8 years furthermore the 1974 and 1990 property crashes are shown to have had a major long term impact on property value growth presumably via their influence on investors expectations

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

the convergence of utility and profit maximization the literature discussing the conditions leading to the convergence of utility and profit maximization for owner controlled firms has a long history scitovsky initiated the discussion and derived the important result that in the short run utility and profit maximization are necessarily equivalent only when the several indifference curves of the owner are vertical displacements of each other 10 59 hereafter we refer to indifference curves that are vertical displacements of each other as the scitovsky condition ladd 6 restates scitovsky s model in mathematical form and reaches the same conclusion piron 8 extends scitovsky s analysis to the long run and concludes that utility maximizers also maximize profit recent contributions to the literature examine the issue of convergence when the entrepreneur receives nonpecuniary benefits from managing the firm olsen 7 concludes that a utility maximizer who derives benefits from being self employed does not necessarily maximize profit in either the short or long run feinberg 2 3 4 and schlesinger 9 conclude that utility and profit maximization necessarily diverge when the nonpecuniary benefits cannot be obtained outside the firm in contrast hannan 5 argues that utility and profit maximization necessarily converge even when nonpecuniary benefits exist a theoretically precise measure of the opportunity cost of entrepreneurial activity is crucial to this discussion profit is total revenue less all the opportunity costs of production including entrepreneurial activity a theoretically precise measure of the opportunity cost of such activity is therefore a prerequisite for a precise measure of profit scitovsky uses the indifference curve passing through the point indicating the choice of total leisure to gauge the opportunity cost ladd and piron follow scitovsky s procedure olsen feinberg and schlesinger hereafter ofs use the wage rate foregone as the indicator of opportunity cost

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