cost efficiency and optimal scale of electricity distribution firms in taiwan an application of metafrontier analysis abstract this paper analyzes the cost efficiency and optimal scale of taiwan s electricity distribution industry due to the substantial difference in network density firms may differ widely in production technology we employ the stochastic metafrontier approach to estimate the cost efficiency of 24 distribution units during the period 1997 2002 empirical results find that the average cost efficiency is overestimated using the traditional stochastic frontier model especially for low density regions the average cost efficiency of the high density group is significantly higher than that of the low density group as it benefits from network economies this study also calculates both short term and long term optimal scales of electricity distribution firms lending policy implications for the deregulation of the electricity distribution industry

an alternative approach to estimate the wage returns to private sector training summary this paper follows an alternative approach to identify the wage effects of private sector training the idea is to narrow down the comparison group by only taking into consideration the workers who wanted to participate in training but did not do so because of some random event this makes the comparison group increasingly similar to the group of participants in terms of observed individual characteristics and the characteristics of planned training events at the same time the point estimate of the average return to training consistently drops from a large and significant return to a point estimate close to zero copyright 2008 john wiley sons ltd

cost efficiency and electricity market structure a case study of oecd countries the oecd electricity sector has witnessed significant institutional restructuring over the past three decades as a consequence many power generation utilities now act as unregulated companies that technically compete to sell power on an open market this paper analyses the performance in term of cost efficiency for electricity generation in oecd power sector while accounting for the impact of electricity market structures we employ the short run cost function in which capital stock is treated as a quasi fixed factor input empirical models are developed for the cost function as a translog form and analysed using panel data of 25 countries during the period 1980 to 2009 we show that it is necessary to model latent country specific heterogeneity in addition to time varying inefficiency the estimated economies of scale are adjusted to take account of the importance of the quasi fixed capital input in determining cost behaviour and long run constant returns to scale are verified for the oecd generation sector the research findings suggest there is a significant impact of electricity market regulatory indicators on cost in particular public ownership and vertical integration are found to have significant and sizable increasing impacts on cost thereby indicating policy lessons on the desirable ways to implement structural electricity generation reforms

a model of trade credit in a capital constrained distribution channel abstract in a product market with uncertain demand we examine a distribution channel consisting of one manufacturer and one capital constrained retailer the retailer may fund its business by borrowing credit either from a competitive bank market or from the manufacturer provided it is also to the latter s benefit to extend trade credit under bank credit financing we show that the channel behaves as if the retailer is not constrained by capital in a wholesale price contract we find that trade credit makes both channel members better off and is the unique financing equilibrium trade credit better integrates the channel than bank credit by centralizing the financing of distribution at the manufacturer we further compare bank versus trade credit under a classical channel contract revenue sharing contract in addition we present a set of numerical experiments to show how product cost internal capital and demand variability impact on the market equilibrium under both bank and trade credits

has the large firm training advantage declined during the 2000s the study examines data from the survey of income and program participation sipp and finds a falling incidence of job training in the united states during the period between 2001 and 2009 it als

general training in labor markets common value auctions with unobservable investment abstract this paper studies the puzzle of employer financing for the general training of workers a parsimonious theory is developed based on asymmetric information between employers about the quantity of training the labor market is modeled as a common value auction with an informed and an uninformed bidder the novel feature of the game is that one of the bidders can make an unobservable investment that increases the value of the item before the auction by randomizing the amount of training provided an employer can create an endogenous adverse selection problem enabling it to compress the wage structure and capture some returns from its training investment the model generates continuous equilibrium wage and training distributions and identical employees can receive different wage offers and training levels a parametric example is used to illustrate how the shape of the wage distribution depends on the elasticity of production with respect to human capital

scale economies and over capitalization in japanese electric utilities this paper presents empirical evidence on scale economies and overcapitalization in japanese electric utilities we employ the short run equilibrium model in which the variable cost function treats capital stock as a quasi fixed factor we specify the variable cost function as a translog form and estimate it using panel data of nine japanese electric utility firms during the period 1981 to 1985 our results show that eight of the nine firms experience scale economies in the short run but diseconomies in the long run and that seven firms significantly over capitalize as expected by the averch johnson effect

an examination of firms employment costs the existence of quasi fixed costs of work may affect firms desired employee hours and number of workers which has important implications for the estimation of labour supply parameters firm level data from the 1982 employment opportunity pilot project is used to estimate the importance to firms of employee quasi fixed costs related to searching hiring training and firing specifically this paper examines how these costs affect number of workers and hours per worker turnover and vacancies to the extent that the costs are determined by the firm s presumably exogenous industrial classification an attempt is made to control for biases due to employee heterogeneity as well results show that higher costs are associated with lower turnover fewer vacancies and longer hours as predicted by a model of labour demand

a review of trade credit literature opportunities for research in operations abstract trade credit arises when a buyer delays payment for purchased goods or services its nature has predominantly been an area of inquiry for researchers from the disciplines of finance marketing and economics but it has received relatively little attention in other domains in our article we provide an integrative review of the existing literature and discuss conflicting study outcomes we organize the relevant literature into seven areas of inquiry and analyze four in detail trade credit motives order quantity decisions credit term decisions and settlement period decisions additionally we derive a detailed agenda for future research in these areas

on the estimation of returns to scale using variable cost functions abstract this paper compares two methods of estimating returns to scale based on variable cost functions it shows specifically how the methods differ and indicates why it is important to select an appropriate method when drawing inferences about policy

intra firm wage compression and coverage of training costs evidence from linked employer employee data the author uses german linked employer employee data to estimate the impact of intra firm wage dispersion on the probability that establishments pay for further training about half of all establishments in the estimation sample cover all direct and indirect training costs which contradicts the standard human capital approach with perfect labor markets the main finding of cross section panel and instrumental variable probit estimations is that establishments with larger intra firm wage compression are more likely to cover all direct and indirect training costs which is consistent with theoretical considerations of the new training literature about imperfect labor markets

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

economies of scale and utilization in the swiss electric power distribution industry economies of scale and utilization in the swiss electricity distribution industry are analysed a translog variable cost function was estimated using panel data for a sample of 39 municipal utilities over the period 1988 1991 economies of both scale and utilization appear to exist in the distribution of electricity both for small medium and large sized utilities thus the empirical evidence suggests sub additivity of the cost function over the relevant range of output for the swiss electricity distribution utilities a necessary condition for a natural monopoly to exist

the theory of human capital revisited on the interaction of general and specific investments human capital theory distinguishes between training in general usage and firm specific skills becker 1964 argues that employers will only invest in specific training not general training when labour markets are competitive the article reconsiders becker s theory using essentially his framework we show that there exists an incentive complementarity between employer sponsored general and specific training the possibility to provide specific training leads the employer to invest in general human capital conversely the latter reduces the hold up problem that arises with firm specific training we also consider the desirability of institutionalised training programmes and the virtues of breach penalties and discuss some empirical facts that could be explained by the theory

returns to scale from variable and total cost functions abstract estimates of the returns to scale from a variable cost function evaluated at the actual and optimal capital stocks and a total cost function are presented the estimates generally differ depending in part upon the output at which they are evaluated

exploring hospital production relationships with flexible functional forms this paper estimates a multiproduct variable cost function using data on a sample of california hospitals the results provide useful insights into the advantages and disadvantages of flexible functional forms for cost analysis the translog function appears to provide reasonable estimates of marginal costs when evaluated at or near the approximation point of the function the estimated function performs less satisfactorily however when evaluated outside this range the paper s results do not provide strong evidence of either ray scale economies or of weak cost complementarities there is some evidence however that the degree of scale economies may be underestimated

factor substitution and economies of scale and utilisation in kuwait s crude oil industry abstract the cost structure of the crude oil industry in kuwait has been examined with specific focus on factor substitution and economies of scale and utilisation this has been done by estimating translog cost functions both long run and short run using time series data covering the period from 1976 to 1996 the results indicate that the implied production structure is non homothetic and the pattern of scale effect is labour saving but capital and material using the evidence also supports the presence of an induced exogenous technical change which is non neutral labour and capital using and material saving the elasticity of substitution between capital and labour is positive implying that the two inputs are substitute the results also indicate the existence of diseconomies of scale in the production of crude oil but no economies or diseconomies of utilisation

the wage effects of training in portugal differences across skill groups genders sectors and training types this article investigates the determinants and wage effects of training in portugal in a first stage we show that there are considerable differences in training participation across groups of workers with elder and low educated individuals participating substantially less in a second stage we show that training has a positive and significant impact on wages the estimated wage return is about 30 for men and 38 for women discriminating between levels of education and working experience and the public and private sector reveals important differences across categories of workers we find that women low educated workers and workers with long working experience earn larger returns from training the average effect of training is similar in the private sector and the public sector however differences across experience groups are larger in the private sector while differences across education groups are larger in the public sector we use three alternative classifications of training activities and f

regulation capital vintage and technical change in the electric utility industry this paper presents estimates of the rate of technical change in the electric power industry over the period 1951 78 the estimated model directly incorporates the effects of rate of return regulation and uses both a time trend and a vintage index to represent disembodied and embodied technical change respectively the results indicate that disembodied technical change was the primary source of cost reduction during 1951 70 and that tighter regulation as represented by a one point reduction in the rate of return would have reduced the rate of technical change by an average of 1 2 during 1951 78 34 references 18 footnotes 3 tables

training and worker effort a signalling perspective this paper analyzes the interaction between firms investment in general skills training and workers incentives it shows that when a firm has an informational advantage over its workers its provision of free general skills training can serve as a signal that there will be a long term relationship between the firm and its workers this signal induces the workers to exert more effort in learning firm specific skills which enhances the firm s profits in contrast with most of the existing literature the model implies that firms may provide free general skills training even if there is no labour market friction ce memoire analyse l interaction entre l investissement des entreprises dans l acquisition d habiletes generales de leurs employes et les incitations des travailleurs a fournir un effort on montre que quand une firme a un avantage informationnel sur ses travailleurs le fait de fournir gratuitement de la formation qui permette aux employes d acquerir des habiletes generales peut servir de signal qu il va y avoir une relation a long terme entre la firme et ses travailleurs ce signal incite les travailleurs a investir plus d effort dans l acquisition d habiletes specifiques a la firme ce qui augmente les profits de l entreprise ce modele en porte a faux par rapport au gros de la litterature existante suggere que les entreprises peuvent fournir gratuitement de la formation permettant aux employes d acquerir des habiletes generales meme s il n y a pas de friction dans le marche du travail

the effects of competition on publicly owned firms evidence from the municipal electric industry in the u s abstract previous studies have examined the effects of competition on privately owned firms this study examines the impact of competition on a sample of publicly owned electric utilities operating in the u s during 1961 1980 estimates from a translog variable cost function indicate that competitive firms had higher generating costs than monopolists ceteris paribus in addition it appears that operating costs would fall significantly if a single monopolist were to replace two competitors in a given market

credit markets and the control of capital traditional discussions of the role of capital markets have identified a number of distinct functions which they perforrn they allocate scarce capital among competing users and uses l and they provide signals to guide managers in making their investment decisions 2 in this lecture i wish to focus on a rather different function of the capital market what i shall refer to as the control of capital 3 conventional theory treats the typical firrn in an anthropomorphic manner it acts as a single rational individual doing what it is supposed to be doing maximizing stock market value that may have been well and good in those nostalgic bygone days of small firrns each run tightly by their owners who were single mindedly pursuing their lust for wealth but today a majority of production occurs in large corporations in which no shareholder owns more than a small fraction of the shares in which the separation of ownership and control that frank knight was so concerned with in his writings some sixty five years ago has become a reality those

analysis of hospital production an output index approach in this study a new model of hospital costs is developed and estimated utilizing an output index this theoretically appropriate output index is constructed to accurately reflect the differentiated nature of hospital care by employing both patient and diagnosis characteristics in its construction using this output index we estimate a long run translog cost function with a dataset of 321 california hospitals for the year 2003 we find evidence of economies of scope across specialties within primary care and evidence of scope diseconomies within secondary and tertiary care point estimates of scale economies using the output index indicate that minimum efficient scale is reached at a larger level than when using less refined output measurement techniques that have often been used in similar studies our estimates indicate the importance of accounting for specialty specific scope economies when analyzing the production properties of firms producing differentiated products

supply chain contract design under financial constraints and bankruptcy costs we study contract design and coordination of a supply chain with one supplier and one retailer both of which are capital constrained and in need of short term financing for their operations competitively priced bank loans are available and the failure of loan repayment leads to bankruptcy where default costs may include variable proportional to the firm s sales and fixed costs without default costs it is known that simple contracts e g revenue sharing buyback and quantity discount can coordinate and allocate profits arbitrarily in the chain with only variable default costs buyback contracts remain coordinating and equivalent to revenue sharing contracts but are pareto dominated by revenue sharing contracts when fixed default costs are present thus for general bankruptcy costs contracts without buyback terms are of most interest quantity discount contracts fail to coordinate the supply chain since a necessary condition for coordination is to proportionally reallocate debt obligations w

general and specific training evidence and implications using data from the employer opportunity pilot project eopp survey and the national longitudinal survey of youth nlsy we explicitly document the specificity and generality of employer provided training and we analyze how wage growth and mobility are influenced by our direct measures of specific and general training in spite of the emphasis that labor economists have placed on specific training we find that employers in the eopp and workers in the nlsy indicate that most of the skills learned in training are useful elsewhere our results are consistent with several recent models that predict that employers will often extract some of the returns to the general training they provide

trade credit for supply chain coordination abstract trade credit is a seller s short term loan to the buyer allowing the buyer to delay payment of an invoice it has been the largest source of working capital for a majority of business to business firms in the united states numerous theories have been proposed to explain trade credit mainly from finance perspectives it has also been an important issue in supply chain management surprisingly most literature in supply chain management has examined the retailer s stocking policies given a supplier s trade credit this paper attempts to shed light on trade credit from a supplier s perspective and presents it as a tool for supply chain coordination specifically we explicitly assume firms financial needs for inventory following a newsvendor framework we assume that the supplier grants trade credit and markdown allowance given the supplier s offer the retailer determines order quantity and the financing option for the inventory either trade credit or direct financing from a financial institution our result shows that the supplier s markdown allowance alone cannot fully coordinate the supply chain if the retailer employs direct financing positive financing costs call for trade credit in order to subsidize the retailer s costs of inventory financing using trade credit in addition to markdown allowance the supplier fully coordinates the retailer s decisions for the largest joint profit and extracts a greater portion of the maximized joint profit

optimal financing mode selection for a capital constrained retailer under an implicit bankruptcy cost abstract in the context of the capital constrained newsvendor problem under an implicit bankruptcy cost we explore how such a cost affects a capital constrained retailer s financing mode selection decision between bank credit financing bcf and trade credit financing tcf we first study the problem in a single credit channel where the retailer can choose only one of the two financing modes we find that the retailer prefers tcf to bcf only when the tcf interest rate tcf ir is lower than a threshold and the dominant area of tcf expands with increasing bankruptcy cost we then study the problem in a dual credit channel where the retailer can choose a portfolio comprising bcf and tcf and examine two repayment sequences i e repaying bcf first and vice versa we propose two approaches to solve the problems we find that if bcf is repaid first as the tcf ir increases from zero the retailer first chooses only tcf then a portfolio comprising bcf and tcf and finally only bcf on the other hand if tcf is repaid first the retailer always chooses the single credit channel bcf or tcf if the tcf ir is not greater than a threshold or the bankruptcy cost is higher than a threshold otherwise a portfolio comprising bcf and tcf or only bcf finally we conduct numerical experiments to verify our main theoretical findings and examine the effects of the retailer s internal capital endowment on its financing mode selection decision showing that a wealthier retailer is more likely to prefer bcf to tcf

commodity options purchasing and credit financing under capital constraint abstract this paper investigates a purchasing contract with options under capital constraint and credit support from a financial institution the buyer who has limited capital can buy commodity options and a fixed order and choose to exercise all or part of the options at a later time we characterize the buyer s optimal ordering strategy with limited capital there is one critical value for the capital that is the buyer will only purchase a fixed order when the capital is less than the value with more capital the buyer will reduce the fixed order quantity and increase the option orders until the capital is used up or the global optimization is reached this result implies that the option is a risk hedging tool only for easy finance companies furthermore we find that when the buyer obtains funding from a financial institution such as a bank the buyer s profit will be increased with bank financing and the buyer s optimal purchasing decision will follow the similar policy and order less options and more fixed orders compared with the case when there is sufficient capital numerical examples are provided to demonstrate the theoretical results

technical change and the returns and investments in firm level training evidence from thailand abstract this paper examines determinants of investments in and returns to training with focus on technical changes using employee panel data in thai manufacturing industries empirical findings demonstrate significant returns to both on the job and off the job training in first difference fixed effect estimation of wage equations controlling for technical changes which differentially influence training investments and the returns first returns to informal on the job training are robust contrary to findings from developed countries second technical change induces both on the job and off the job training and controlling for technical change makes returns to on the job training even larger implications for training and education policies are discussed

the sensitivity of productivity growth measures to alternative structural and behavioral assumptions an application to electric utilities 1951 1984 this article examines the sensitivity of three alternative multifactor productivity growth estimates for the electric utility industry during the 1951 1984 period the results indicate that multifactor productivity growth estimates are quite sensitive to the relaxation of various structural and behavioral assumptions first a benchmark measure is constructed along the lines suggested by solow 1957 this residual approach produces estimates that suggest a substantial decline in firm level productivity growth after the mid 1960s prior to obtaining the second and third estimates empirical tests of the structural and behavioral assumptions underlying a firm s operation are conducted first the structural assumption of constant returns to scale is rejected and the resulting long run scale adjusted multifactor productivity growth estimates are found to be consistently less than the residual estimates second the behavioral assumption of long run equilibrium is rejected comparing the long run scale ad

economies of scale and utilization in electricity generation in kuwait cost structure of electricity generation in kuwait has been examined with specific focus on the economies of scale and utilization this has been done by estimating a translog variable cost function using time series data covering the period from 1965 to 1990 the results indicate the existence of diseconomies of scale in the generation of electricity but no economies or diseconomies of utilization

capacity investment timing by start ups and established firms in new markets we analyze the competitive capacity investment timing decisions of both established firms and start ups entering new markets which have a high degree of demand uncertainty firms may invest in capacity early when uncertainty is high or late when uncertainty has been resolved possibly at different costs established firms choose an investment timing and capacity level to maximize expected profits whereas start ups make those choices to maximize the probability of survival when a start up competes against an established firm we find that when demand uncertainty is high and costs do not decline too severely over time the start up takes a leadership role and invests first in capacity whereas the established firm follows by contrast when two established firms compete in an otherwise identical game both firms invest late we conclude that the threat of firm failure significantly impacts the dynamics of competition involving start ups this paper was accepted by yossi aviv operations management

counter cyclical substitution between trade credit and bank credit abstract this paper explores the substitution relationship between trade credit and bank credit and its counter cyclic dynamic pattern through economic cycles we propose a new theoretical model using a mechanism design method which predicts the substitution between the two credits and its counter cyclic behavior subject to the condition of technological efficiency not less than one this model also helps explain the somewhat contradictory evidence in the literature on the relationship between the two credits we present empirical evidence on the substitution effect and its counter cyclic behavior by using a balanced panel data set of 284 listed chinese companies for the period 1998 2006 we further find that the substitution behaves counter cyclically with respect to the coincident macroeconomic indicator namely gdp our empirical analysis also has some new features such as treating endogeneity carefully and incorporating the lag effect of trade credit coherently

the production characteristics of local public education a multiple product and input analysis since the seminal work of baumol panzer and willig 1 economists have become increasingly interested in incorporating the multifaceted nature of real world production functions into their empirical analyses multiproducts multiple inputs and the relaxation of the long run equilibrium condition are some prime examples of major innovations in production modeling an excellent example of this innovative literature is the study by cowing and holtmann 7 that focuses on the short run production characteristics associated with the hospital services industry specifically cowing and holtmann find evidence contrary to long run equilibrium and that economies of scope are at least as important as economies of scale in the production of hospital services moreover several empirical studies relating to the production characteristics of other goods and services such as higher education 6 crime prevention 9 electric utilities 15 and airlines 5 have provided ample evidence that these pertinent factors matter from both an econometric and a policy perspective the literature concerning the production characteristics of primary and secondary education however has lagged behind in terms of incorporating more realism into the analysis typically studies concerned with primary and secondary education production 2 3 13 14 maintain that schools operate at a long run equilibrium position and produce a single output with a single input i e teachers thus assuming away factors which these other industry studies have found to be significant in fact jimenez 12 is the only study to date on local primary and secondary education production that is based on less restrictive assumptions several limitations are associated with his research however each of these limitations reduce the generality of his findings concerning the production characteristics of primary and secondary education first jimenez employs a small sample to obtain estimates of various production characteristics bringing into question the overall

inventory management with asset based financing most of the traditional models in production and inventory control ignore the financial states of an organization and can lead to infeasible practices in real systems this paper is the first attempt to incorporate asset based financing into production decisions instead of setting a known exogenously determined budgetary constraint as most existing models suggest we model the available cash in each period as a function of assets and liabilities that may be updated periodically according to the dynamics of the production activities furthermore our models allow different interest rates on cash balance and outstanding loans which is an enhancement over most traditional models in that inventory financed by a loan may be more expensive than that by out of pocket cash we demonstrate the importance of joint consideration of production and financing decisions in a start up setting in which the ability to grow the firm is mainly constrained by its limited capital and dependence on bank financing we then explain the motivation for asset based financing by examining the decision making at a bank and a set of retailers in a newsvendor setting