capital and the theory of productivity measurement the purpose of this paper is twofold to provide a brief survey of recent approaches to the measurement of total factor productivity and to comment on some of the special problems which are associated with capital thus in sections i iv below four approaches to the measurement of total factor productivity are outlined while section v compares and contrasts the approaches in section vi i consider how the various approaches have to be modified when welldefined rental markets for components of the capital stock do not exist the usual case

optimal taxation economic growth and income inequality that there is a trade off between equityand efficiency economic growth is wellknown two models have been developed thatlink government spending and taxation toeconomic growth this paper uses thesemodels to provide estimates of thegrowth maximizing tax rate then a twoequation structural model is developed andestimated that is used to find thetrade off rate between economic growth andincome inequality and the growth maximizinglevel of income inequality for the unitedstates over the period 1960 1990

calculating short run marginal costs of active and reactive power production proper pricing of active and reactive power is an important issue for economic and secure operations of power systems in an open transmission access ota environment this paper presents a flexible formulation for this purpose the proposed formulation identifies an important price component for reactive power which is fundamentally different from those existing in the literature this makes the pricing of reactive power more understandable the proposed approach is efficient for real time application and allows for carrying out active and reactive power pricing simultaneously or independently through the use of the decoupled optimal power flow formulation price signals derived from this approach are quite meaningful from an engineering point of view in addition the proposed approach can be easily extended to evaluate nugs and wheeling transactions the paper includes test results on the 30 and 118 bus ieee standard systems

the size of the state economic growth and the efficient utilization of national resources the motives of the state in projecting a more than minimal presence in the economy may be conceived of as benevolent or malevolent whatever the characterization of the motivation increases in the size of the government share of the economy adversely affect economic growth and the allocation of resources nations with relatively large government shares in 1960 on the whole grew more slowly than nations with relatively small state sectors interperiod increases in the size of government were associated with lower growth rates over the period the size of the government share coefficients in the regressions were of sufficiently large magnitude to conclude that the rise in the size of the government has had a substantial depressing effect on economic growth these results are consistent with those reported by landau 1983 and marlow 1986 landau did not adjust economic growth for the growth in factor endowment consequently his results overstate the adverse effect of government size

rights equity and economic efficiency the adelman morris premise that economic development and equity are incompatible is not supported by the evidence of a strong relationship between equality of rights and the income distribution the premise that equity requires the denial of individual rights and the affirmation of state control is an oxymoron what has been overlooked in the literature on growth and equity is the effect of the rights structure on both economic efficiency and on the income distribution the evidence is that free societies have much larger shares of income going to the middle 60 percent of the distribution than is observed in societies where men are not free to choose in politically open societies compared to politically closed regimes the share of income to the middle three quintiles is q2 10 7 vs 8 0 q3 16 0 vs 11 5 and q4 22 9 vs 17 9 in the aggregate the shares to the middle quintiles are 49 6 vs 37 4 in nations that obey the rule of law compared to regimes in which the rights of the state relative to the individual are paramount the comparisons are q2 11 2 vs 7 4 q3 16 3 vs 10 6 q4 23 0 vs 17 3 summing the three quintiles yields a comparison of 50 5 vs 35 3 in countries that have private property market allocation of resources and minimum intervention by the state compared to command economies the shares of income to the middle quintiles are q2 10 8 vs 8 0 q3 16 0 vs 11 1 and q4 22 8 vs 17 7 aggregated the shares of the middle class in regimes with high levels of economic liberty are 49 6 vs 36 8 for regimes with restricted private economic rights

free trade agreements and governance of the global trading system n 1995 when the wto was established it seemed to be final confirmation of the success of a system that had managed multilateral trade relations since 1947 it provided an institutional framework within which governments were not only able to negotiate reductions in trade barriers but also to bind themselves to rules of conduct that in principle were both universal and nondiscriminatory about the same time however the new wave of regional and bilateral free trade agreements ftas was beginning to gather strength for some this has emerged as a threat to the central role of the wto as manager of the trading system and even to presage the fading of an era of multilateralism in trade relations for others it has been a call to revise long held conceptions about the multilateral system and to embrace a more complex world composed of networks of multilateral plurilateral regional and bilateral arrangements in this article we aim to contribute to this debate by exploring how far ftas have strengthened or weakened global governance of the trading system for the most part the contribution of economists to the debate has centred around the effects of preferential tariff regimes including their rules of origin on merchandise trade and trade relations we think that the almost exclusive focus on tariff regimes is too narrow a prism for one thing we are sceptical of the practical significance of the tariff preferences that have been actually introduced in affecting trade flows more important the focus on tariff barriers leaves aside the other major aspects of trade relations that multilateral plurilateral regional and bilateral arrangements seek to address central to these

the theory and measurement of the net benefits of multinationality the case of the international petroleum industry internalization is one of the most important factors for foreign direct investment and multinationality going multinational brings some gains the empirical evidence presented provides an objective quantitative measure of the gains of being a multinational firm in the petroleum refining industry it is estimated that multination ality increases scale efficiency by approximately 3 and reduces business risk by approximately 43 however the gains of multinationality cannot be attained without incurring some costs the cost of expanding the firs s operation beyond its national boundaries is estimated to be approximately a 10 reduction in the firm s overall economic efficiency

technological change in illinois agriculture 1982 1984 abstract this paper has two main purposes 1 to develop a method for measuring the extent and bias of technical change which involves the use of non parametric production frontiers and does not require information on prices or factor shares 2 to apply this method to individual farm data drawn from a sample of illinois grain farms for the years 1982 and 1984 the results indicate that technical innovation is land using in nature and that the rate of technical change is related to the size of farm

the relative efficiency of slave agriculture a comment in their book time on the cross fogel and engerman fe present evidence that average factor productivity was greater for larger southern slave farms in 1860 than for both free farms and smaller slave farms in a recent article field 1988 lends support to the fe theory by finding that an upward shift in the production function occurs for slave farms at 15 slaves the size at which fe propose that gang labour became feasible in a more recent article grabowski and pasurka gp contradict both fe and field by finding that there was no relationship between the size of slave farms and their efficiency the present paper extends both gp s and field s work and refines a point made by fe we distinguish between a technological advantage due to the gang labour system and revenue inefficiency due both to the incentive structure of slavery and the repugnance of gang labour two factors which foster rational shirking and resistance by slaves that is we propose that relative to small slave farms large slave f

economic freedom government policy and the trade off between equity and economic growth this study investigates the role that economicfreedom plays in economic growth and in the distribution in marketincome the role of government policy in advancingeconomic progress and in promoting income equality and the effectthat the rate of economic progress has on thedistribution of market income structural and reduced formmodels are estimated that reveal that economic freedompromotes both economic growth and equity and that there is apositive but relatively small trade off between growth andincome inequality

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

the paradox of politics and policy in redistributing income with political ideology with respect to the income distribution measured by proxy as the fraction of conservative coalition victories it is found that over the period 1961 1984 the degree of conservative coalition strength is positively associated with changes in inequality holding the effects of unemployment and inflation constant

institutional technology and economic growth an endogenous model of constitutional changes and economic growth links the temporal decline in private market returns when technology is constant with the returns to rule changes realized in a political market there is a steady state constitutional setting in which all rule changes have been incorporated that is analytically equivalent to the neoclassical steady state as in the neoclassical model private sector technological progress postpones the steady state to the extent the original constitutional setting promotes innovation the evolutionary process toward the steady state is delayed the model yields a theory of revolution based on forces leading to the adoption of inefficient changes in the constitutional setting

efficiency differences between private and state owned enterprises in the international petroleum industry technical managerial scale and allocative efficiency differences between private and state owned firms in the international petroleum industry are estimated the estimation of aigner chu deterministic frontiers maximum likelihood stochastic frontiers and maximum likelihood gamma frontiers make this analysis the most complete and sophisticated testing of property rights theory available the empirical findings suggestceteris paribus that state firms could satisfy the demand for their output with something less than half of their current resource inputs simply by being converted to private for profit enterprizes

a reactive power capacity market using annual auctions this paper presents a new approach to design reactive power capacity markets under this approach annual auctions to procure reactive power capacity are conducted by the system operator two products are defined reactive power generation and absorption capacity which can be supplied by different independent var sources such as generators svcs capacitor banks and shunt reactors reactive power capacity is allocated using an optimization algorithm that matches capacity bids and system reactive power needs for peak and low demand hours the reactive power requirements are calculated taking into account system contingencies and the dynamic performance of the var sources under these situations another key proposal of the paper is the distribution of costs of the reactive power capacity market to the agents responsible for contingencies according to the use of the service by each market participant this remuneration approach provides fair and efficient economic signals to all market participants the applicability of the approach is illustrated with two case studies

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

best practices in regional trading agreements an application to asia regionalism in asia particularly in the form of free trade areas ftas is a recent trend that is becoming increasingly important this has been disturbing to many given the significance of trade and investment in asian economic growth and development and the region s key role in global commerce in light of this trend the goal of this paper is to develop a blueprint or a set of 10 best practices that can be used as a guide to ftas in order to ensure that they approximate first best outcomes to the greatest extent possible next the paper applies this framework to the existing ftas between asian countries and their regional and extra regional partners the results suggest that the more advanced regional accords generally receive high grades with the notable exception of rules of origin which tend to be even more problematic in the context of accords in which an oecd country is a party

inversion of real time spot prices in the direction of real power flow in a transmission line an increasing number of electricity markets employing some form of spot pricing however limited experience of the behavior of spot prices exists this paper introduces and investigates one particular aspect of pricing behavior observed in the new zealand spot market known as price inversion spot prices are generally calculated using some form of opf or power flow software the phenomena of price inversion is investigated using the dc power flow implemented in the new zealand spot market and using a full ac power flow price inversion is shown to be dependent on the physical characteristics of the power system the economic implications of price inversion are also discussed

property rights vs redistribution which path to national wealth recent empirical and theoretical research suggests that egalitarian income distribution may spur economic growth another different strand of research suggests that property rights are important these two results are not at odds a model of switching between a career of rent seeking and wealth producing shows that for redistribution to boost national income property rights need to be secure a more equal distribution of earned income can induce rent seekers to switch to wealth making but only if they can be assured that their earned income will be protected from other rent seekers the model suggests new directions for empirical testing

decomposition model and interior point methods for optimal spot pricing of electricity in deregulation environments in this paper an integrated optimal spot pricing model is presented first the proposed model includes the detailed derivation of optimal nodal specific real time prices for active and reactive powers and the method to decompose them into different components corresponding to generation loss and many selected ancillary services such as spinning reserve voltage control and security control the features of the proposed model are discussed in relationship to existing pricing models and classical economic dispatch the model is then implemented by modifying existing newton opf methods through interior point algorithms which can effectively avoid go no go gauge i e highly volatile in the calculation of spot prices case studies on 5 bus and ieee 30 bus systems are reported to illustrate the proposed method

freedom and growth do constitutions matter this paper uses an augmented solow model with cross section data to measure the effect on per capita income of a the entrenchment of various rights in a country s constitution and b the level of economic freedom in a country broadly construed the results suggest that entrenchment per se of any single right seldom has a significant general economic effect while the effect of economic freedom is significant and substantial the paper then considers whether such evidence could support the proposition that constitutions do not matter while it concludes otherwise it does caution against incurring excessive negotiation costs to obtain entrenchment of a comprehensive wish list of rights

a method for simulation and analysis of reactive power market this paper presents a method for the simulation and analysis of alternative reactive power market arrangements based on combined reactive power capacity and energy payments the value of reactive power support in terms of both capability and utilisation of each particular generator is quantified using a developed security constrained reactive optimal power flow the relative competitiveness of participating generators is also assessed for a spectrum of arrangements between a reactive capacity and a reactive utilisation based market also the conflicting objectives of the system operator as a purchaser of reactive power service and generators as suppliers of the services are analysed

is unilateral tariff reduction preferable to a customs union the curious case of the missing foreign tariffs during the past decade and a half an important part of the literature on customs unions has dealt with the question of whether a country might obtain the gains it would achieve from a customs union cu in an alternative way by a unilateral tariff reduction utr utr may involve a partial reduction in tariffs or a reduction all the way to zero a widely accepted conclusion see eitan berglas p 329 c a cooper and b f massell 1965b pp 745 47 roma dauphin ch 2 harry johnson p 280 melvyn krauss pp 417 19 and peter robson is that utr does indeed hold out the prospect for all the gains from a cuwithout the disadvantagesif two important simplifying assumptions are made namely that we ignore economies of scale and the effects of a customs union on the terms of trade 2 in the words of berglas it is important to note that if a preferential trade agreement does not affect the terms of trade then it does not allow for any mutually beneficial policy opportunities which are not open to each of the member countries separately through utr p 329 if this conclusion is correct it is very important in that it undercuts the earlier literature on customs unions the question asked by jacob viner in his pioneering work whether a cu represents a net gain or a net loss in economic efficiencybecomes unimportant except insofar as a customs union is based on terms of trade effects3 or economies of scale 4 since a cu can be summarily rejected in favor of utr the utr case would mean that for economists the puzzle is not to identify the efficiency gains or losses from a cu but rather to explain why countries form customs unions in the first place berglas p 329 cooper and massell 1965b p 247 and johnson p 270 indeed in his survey of cu theory krauss identifies the problem raised by cooper and massellof why countries form customs unionsas the theoretical issue of the past decade the 1960 s just as in the prior one the major issue as explicitly defined by jacob viner 1950 was whether a customs union represented a movement towards freer trade or greater protection p 413 the typical reply to the cooper massell question is countries tend to form a cu for noneconomic reasons berglas pp 329 30 5

a bilevel approach to operational decision making of a distribution company in competitive environments this paper presents a model for operational decision making of a distribution company disco with distributed generation dg and interruptible loads il in a competitive market the disco objective modeled through the upper level problem is to minimize the cost of market purchases and dg unit dispatch while taking into account the responses of the other discos this upper level problem is constrained by a lower level market clearing problem whose objective corresponds to maximization of social welfare such a setting results in a multi disco equilibrium problem formulated as an equilibrium problem with equilibrium constraints epec by combining the optimality conditions of all upper level problems using a nonlinear approach the epec problem is reformulated as a single nonlinear optimization model which is simultaneously solved for all discos the proposed approach is applied to an ac model of a power system to account for voltage and reactive power constraints of the transmission and distribution networks numerical examples based on two test systems are presented to illustrate the application of the proposed method

efficiency estimation in a profit maximising model using flexible production function abstract this paper uses a flexible translog production function to estimate efficiency of 227 farms from west bengal india we consider estimation of technical and allocative inefficiencies using a profit maximising framework which accommodates both endogenous and exogenous inputs the maximum likelihood method of estimation developed in this paper is based on the production function and the first order conditions of profit maximisation farm specific technical and allocative inefficiencies are also estimated empirical results show that the mean level of technical efficiency is 75 46 while the best farm is 85 87 efficient technically so far as allocative efficiency is concerned the majority of the farms are found to be under users of the endogenous inputs viz fertiliser manure human and bullock labour

the economic efficiency of backward vertical integration in the international petroleum refining industry a benefit of backward vertical integration in the petroleum refining industry is reduced uncertainly in the supply of crude oil for refining however there is no a priori reason to believe that refiners are more skilful in managing combined refining and crude oil production operations than are specialists in these functions using the concept of frontier production functions efficiency differences between firms with differing degrees of backward vertical integration are estimated backward vertical integration improves scale efficieny and reduces business risk significantly but it reduces both technical and overall economic efficiency this is the first comprehensive empirical test of the efficiency of vertical integration in the literature

estimation of stochastic frontier production function and technical inefficiency via the em algorithm with the definition that e v u being the composite error various alogrithms such as the davidon fletcher powell method are then used for finding the optimal values of the parameter vector 0 b ao oa once the estimates of 0 are obtained jondrow lovell materov and schmidt jlms 4 recently propose a method of decomposing the estimated error y b x into separate components v and u the proposed decomposition method is based on the derivation of the conditional distribution of ut given the composite

opf for reactive pricing studies on the ngc system retail transmission services like those being provided by the national grid company ngc in england and wales pose new challenges for the pricing of reactive power supply a reactive power market approach has been proposed by ngc and continues to be evaluated such an approach includes a novel requirement for transmission constrained economic dispatch of var a problem in the security constrained optimal power flow opf class the problem formulations handled by the opf package in use could not accommodate ngc s requirements this paper describes the reactive pricing problem being addressed the modeling requirements and the resulting extensions made to the opf formulation and package it discusses the test results obtained to date on the ngc system

government expenditure and economic growth a cross country study this paper examines the relationship between the share of government consumption expenditure in gdp and the rate of growth of real per capita gdp the work of the u n international comparison project has recently made available new estimates for over 100 countries of both per capita gdp and the share of government consumption these new estimates are based on direct price comparisons rather than exchange rate conversions as a result the statistics for different countries are more comparable and cross country studies will be more reliable