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

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

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

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

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

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 future of capitalism a consideration of alternatives the article reviews three entry points into a discussion of alternatives to today s neoliberal capitalism the first examines the need for a green new deal from mostly uk based think tanks positioning the household as central to the economy posing new core values for the economy that respect the environment the social economy as well as the possibilities offered by web based technologies for new economic and political community relations the second entry point is a review of feminists search for alternatives to mainstream economics and global development processes with calls for a transition to place based socio economic practices built on the ethics of care gender justice the centrality of social reproduction and community livelihoods the last section examines the alternatives to global development and neoliberal capitalism emerging from latin america examining buen vivir intercultural pluriversal political and economic practices and lessons from latin american indigenous women and decolonial feminist movements

the nature of the savings function in developing countries a survey of the theoretical and empirical literature the savings rate marginal or average is regarded as a key performance indicator by development economists and foreign aid practitioners admonish their clients to increase their savings ratio as a primary condition for achieving a satisfactory rate of economic growth however not only have questions been raised regarding the significance of the savings effort as an independent determinant of economic progress but the formulation of policies designed to increase the savings propensity has suffered from a dearth of knowledge regarding the nature of the savings function in developing countries a number of alternative savings hypotheses derived mainly from the literature relating to developed economies have been advanced but the paucity of reliable data has made it difficult to test these hypotheses and obtain results which warrant a reasonable degree of confidence the purpose of this article is a to review the theoretical and empirical literature on the savings function in developing countries b to assess critically the findings with respect to the major hypotheses and c to summarize the state of our knowledge on this important topic we shall begin with a brief review of the nature of the data on savings in developing countries with which economic analysts must work

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

gender and the stability of consumption a feminist contribution to post keynesian economics alan coddington critiques post keynesians for their use of fundamental uncertainty he argues that fundamental uncertainty should also affect the consumption function undermining the case for keynesian macroeconomic policies this paper shows how contemporary feminist theory provides post keynesians with a compelling response to coddington it uses the concept of gender as an effect of heteronormativity to integrate the household the institution that undertakes consumption spending into post keynesian economics this gives us a more robust analysis of the sources of consumption stability in a world marked by the fundamental unknowability of the future

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

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 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

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

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

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

an aggregate private expenditure function for the bangladesh economy abstract this paper specifies and estimates an aggregate private expenditure function for bangladesh for the period 1974 1 1985 4 it is specified on the basis of a monetary approach where the level of private expenditure depends not only on the level of real permanent disposable income but also on a variable which measures the extent of disequilibrium in the real money market the regression results suggest that the long run income elasticity of private expenditure is around 0 765 which is lower than unity a fact which induces a decline in the ratio of private expenditure to income as income increases the adjustment coefficient to monetary disequilibrium indicates that in the long run around 32 of excess money supply is reflected in an increase in private expenditure while the rest is mainly used for accumulation of assets

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

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

deficient foresight a troublesome theme in keynesian economics the fact that john maynard keynes had made a distinguished contribution to the theory of probability 1921 no doubt predisposed many of his readers to imbue with great significance his subsequent remarks on the related topic of uncertainty in economic decision making among those who have provided commentaries on his work there are those who have singled out this uncertainty theme not only for its special importance but also for its potential for analytical subversion the purpose of this paper is to scrutinize the ideas involved in this particular aspect of keynes work together with the lines of argument that have emerged from those commentators who have pursued it the result of this scrutiny will be to call into question the idea that there is anything peculiarly subversive in the analytical consequences of broaching problems of uncertainty in economic decision making i shall argue rather that as an analytical issue it is depending on how it is handled either innocuous or else quite indiscriminately destructive

tax policy regulated interest rates and saving abstract the paper evaluates tax policy options designed to reduce distortions to savings behavior that occur when administered interest rates are set beneath market equilibrium levels while the removal of controls on interest rates might be the best option political legal or institutional circumstances might well preclude this solution it suggests that consumption or sales taxes can be designed so that in the short term the rate of return to saving can be changed to approximate the market determined interest rate the main advantage of the measure is that it can provide a time to develop appropriate legal and institutional structures for financial deregulation and b an additional policy instrument that allows the burden of adjustment in a stabilization policy setting to be distributed over more than one instrument

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

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

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

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

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

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