inflation and wage rigidity flexibility in the short run a recent literature uses accurate wage data from payroll records and provides compelling evidence against the conventional belief that nominal wages are downward sticky this paper provides a unique contribution to this literature by conducting a formal analysis of the role of inflation in cyclical wage rigidity flexibility analysis of payroll based wage data from the korean labor market for the period 1971 2014 finds that the degree of downward nominal wage flexibility is countercyclical and the countercyclicality becomes stronger during a deflationary relative to inflationary recession this serves as a counter example to the conventional theory of cyclical wage rigidity jel e24 e32 j30 j64

wage changes and intrafirm job mobility over the business cycle two case studies despite the many reasons to expect sluggish wage adjustment recent evidence suggests that real wages are quite procyclical growing more rapidly during economic expansions than during recessions and that this wage procyclicality pertains even to workers who stay with the same employer one possible explanation for these findings is the old hypothesis that a portion of firms cyclical adjustment of labor costs is achieved not by changing the wages paid in particular jobs but by changing the quality of labor assigned to those jobs the authors analysis of interwar personnel data from the ford motor company and the a m byers company supports that hypothesis the authors recognize that case studies of only two firms cannot be definitive but they conclude that cyclicality in workers job assignments deserves further attention

an eoq model with stock dependent demand shortage inflation and time discounting abstract this paper develops a finite time horizon deterministic economic order quantity eoq inventory model with shortages where the demand rate at any instant depends on the on hand inventory stock level at that instant the effects of inflation and the time value of money are taken into account considering two separate inflation rates namely the internal company inflation rate and the external general economy inflation rate the results are discussed with a numerical example and particular case of the model is discussed in brief a sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

robustness of a production schedule to inventory cost calculations abstract minimizing the cost of capital tied up by inventory is frequently an important management objective of production scheduling the paper determines the optimal production schedule of a single machine sequencing problem for two cases first when the cost of capital is calculated by periodic interest calculation and second when the cost of capital is determined by continuously compounded interest calculation the results are derived for common due date and for different due dates situations as well the robustness of the suggested production schedules to the method of interest calculation is proved theoretically and demonstrated with the example of a calendar manufacturer

investment opportunity in china s overseas oil project an empirical analysis based on real option approach abstract china s overseas oil investments uphold national energy security located in the complex international economic and political environment the benefits of overseas oil projects are affected by various uncertainties oil companies call for a set of evaluation method dealing with these uncertainties especially when encountering low oil price conditions it is much more crucial to answer when to optimally invest rather than whether to invest this paper analyzes the investment opportunity of an oil project in the development and production phase considering uncertainty irreversibility and management flexibility the decision making process combines discounted cash flow dcf method and the trinomial tree model of real option approach roa for practical purposes tools of hurdle price cumulative probability and decision tree are adopted in addition results of the case project show the economic feasibility at present and optimal start up timing at the end of 2016 besides the lower cost parameters generally make it easier to meet the opportunity the scenario analysis suggests the higher risk contributes to an earlier start up furthermore the issues of method applicability investment signals and decision lag effects are discussed

ford whitman harris and the economic order quantity model ford whitman harris first presented the familiar economic order quantity eoq model in a paper published in 1913 even though harris s original paper was disseminated widely it apparently was unnoticed for many years before its rediscovery in 1988 during this period much confusion developed over the origin of the eoq model this paper explores the early literature on this model and traces the evolution of the confusion it also sketches the remarkable life of harris who made contributions as an engineer inventor author and patent attorney even though he received no formal education beyond high school harris s original 1913 essay is reprinted following this paper

a comparison of var and cvar constraints on portfolio selection with the mean variance model in this paper we analyze the portfolio selection implications arising from imposing a value at risk var constraint on the mean variance model and compare them with those arising from the imposition of a conditional value at risk cvar constraint we show that for a given confidence level a cvar constraint is tighter than a var constraint if the cvar and var bounds coincide consequently a cvar constraint is more effective than a var constraint as a tool to control slightly risk averse agents but in the absence of a risk free security has a perverse effect in that it is more likely to force highly risk averse agents to select portfolios with larger standard deviations however when the cvar bound is appropriately larger than the var bound or when a risk free security is present a cvar constraint dominates a var constraint as a risk management tool

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

investment financing and the role of roa and wacc in value creation abstract evaluating an industrial opportunity often means to engage in financial modeling which results in estimation of a large amount of economic and accounting data which are then gathered in an economically rational framework the pro forma financial statements while the standard net present value npv condenses all the available pieces of information into a single metric we make full use of the crucial information supplied in the pro forma financial statements and give a more detailed account of how economic value is created in particular we construct a general model allowing for varying interest rates which decomposes the project into investment side and financing side and quantifies the value created by either side an equity debt decomposition is also accomplished which enables to appreciate the role of debt in adding or subtracting value to equityholders further the major role of accounting rates of return as value drivers is highlighted and new relative measures of worth are introduced the project roa and the project wacc which aggregate information deriving from the period rates of return to achieve these results we make use of the average internal rate of return airr approach recently introduced which rests on capital weighted arithmetic means and sets a direct relation between holding period rates and npv

mortality reductions educational attainment and fertility choice this paper develops a model where reductions in mortality are the main force behind economic development the model generates a pattern of changes similar to the demographic transition where gains in life expectancy at birth are followed by reductions in fertility and increases in the rate of human capital accumulation the onset of the transition is characterized by a critical level of life expectancy at birth which marks the movement of the economy from a malthusian equilibrium to an equilibrium with investments in human capital and the possibility of long run growth

covenants in venture capital contracts this paper studies how covenants are included in contracts between venture capitalists vcs and entrepreneurs i show that vcs hold covenanted veto rights even though they are shareholders who have access to other powerful governance solutions unlike bank loans and bonds venture capital vc contracts exhibit considerable variation in their contractual designs i exploit this variation to confirm the argument that covenants are in place to overcome a conflict of interest that arises from debt like contractual features of a venture capitalist s preferred stock in particular i find that contracts with higher fixed payoffs include 1 6 more covenants than do contracts with lower fixed payoffs similarly vc contracts with no vc board majority requirement include 0 6 more covenants than do contracts that require a vc board majority covenants are also more common with older companies and when fewer vcs invest in a round my findings contribute to both the debt covenant literature and the entrepreneurial finance literature this paper was accepted by brad barber finance

newsvendor solutions via conditional value at risk minimization abstract in this paper we consider the minimization of the conditional value at risk cvar a most preferable risk measure in financial risk management in the context of the well known single period newsvendor problem which is originally formulated as the maximization of the expected profit or the minimization of the expected cost we show that downside risk measures including the cvar are tractable in the problem due to their convexity and consequently under mild assumptions on the probability distribution of products demand we provide analytical solutions or linear programming lp formulation of the minimization of the cvar measures defined with two different loss functions numerical examples are also exhibited clarifying the difference among the models analyzed in this paper and demonstrating the efficiency of the lp solutions

uncertainty and global sensitivity analysis in the evaluation of investment projects abstract this paper discusses the use of global sensitivity analysis sa techniques in investment decisions global sa complements and improves uncertainty analysis ua providing the analyst decision maker with information on how uncertainty is apportioned by the uncertain factors in this work we introduce global sa in the investment project evaluation realm we then need to deal with two aspects 1 the identification of the appropriate global sa method to be used and 2 the interpretation of the results from the decision maker point of view for task 1 we compare the performance of two family of techniques non parametric and variance decomposition based for task 2 we explore the determination of the cash flow global importance gi for valuation criteria utilized in investment project evaluation for the net present value npv we show that it is possible to derive an analytical expression of the cash flow gi which is the same for all the techniques this knowledge enables us to 1 offer a direct way to compute cash flow gi 2 illustrate the practical impact of global sa on the information collection process for the internal rate of return irr we show that the same conclusions cannot be driven in particular a one has to utilize a numerical approach for the computation of the cash flow influence since an analytical expression cannot be found and b different techniques can produce different ranking these observations are illustrated by means of the application to a model utilized in the energy sector for the evaluation of projects under survival risk the quantitative comparison of cash flow ranking with respect to the npv and irr concludes the paper illustrating that information obtained from the sa of the npv cannot be transferred to the irr

the long run economic costs of aids a model with an application to south africa primarily a disease of young adults acquired immuno deficiency syndrome aids imposes economic costs that could be devastatingly high in the long run by undermining the transmission of human capital the main driver of long run economic growth across generations aids makes it harder for victims children to obtain an education and deprives them of the love nurturing and life skills that parents provide these children will in turn find it difficult to educate their children and so on an overlapping generations model is used to show that an otherwise growing economy could decline to a low level subsistence equilibrium if hit with an aids type increase in premature adult mortality calibrating the model for south africa where the hiv prevalence rate is over 20 percent simulations reveal that the economy could shrink to half its current size in about four generations in the absence of intervention programs to combat the disease and to support needy families could avert such a collapse but they imply a fiscal burden of about 4 percent of gross domestic product gdp

cyclicality of real wages among young men abstract this paper analyzes the cyclical behavior of real wages received by the young men in the national longitudinal surveys of labor market experience it extends the studies by bils journal of political economy 1985 93 666 689 and tremblay quarterly review of economics and business 1990 30 90 101 by using the full duration of the survey and by examining differences in wage cyclicality across industries and between workers that change employers and those that stay with the same employer

what drives value creation in investment projects an application of sensitivity analysis to project finance transactions abstract evaluating the economic attractiveness of large projects often requires the development of large and complex financial models model complexity can prevent management from obtaining crucial information with the risk of a suboptimal exploitation of the modelling efforts we propose a methodology based on the so called differential importance measure d to enhance the managerial insights obtained from financial models we illustrate our methodology by applying it to a project finance case study we show that the additivity property of d grants analysts and managers full flexibility in combining parameters into any group and at the desired aggregation level we analyze investment criteria related to both the investors s and lenders perspectives results indicate that exogenous factors affect investors sponsors and lenders in different ways whether exogenous variables are considered individually or by groups

nominal wage rigidity and the rate of inflation using the accurate and extensive data available in the uk new earnings survey this paper investigates the extent to which nominal wages are downwardly rigid and whether such rigidity interferes with necessary real wage adjustments when inflation is low despite the substantial numbers of individuals whose nominal wages fall from one year to the next we find that if long run inflation is one percent higher the number of individuals with negative real pay growth increases by around 1 4 percent this is controlling for the median and dispersion of the real wage change distribution

the theory of the firm in long run equilibrium in a recent series of articles economists have investigated the comparative statics of the neoclassical firm in a competitive environment with the specific proviso that output price adjusts in response to changes in factor prices the older theory of the firm such as is found for example in paul samuelson 1947 is deficient in this regard metaphors such as short run have been used to gloss over the inconsistency of holding output price constant in the face of changing costs through changing factor prices in this paper a simple yet thorough analysis of a firm in a competitive industry i e a firm facing zero entry and adjustment cost conditions is given new results pertaining to restrictions on the behavior of such firms are offered also the length and complexity of established results is substantially reduced

a joint economic lot size model with financial collaboration and uncertain investment opportunity establishing long term relationships among the members of a supply chain has become necessary to enhance the supply chain s competitiveness in a globalized environment besides coordinating operational decisions such as how much and when to produce or to order the members of a supply chain may also share financial resources or act jointly on the capital market this is important especially when companies have unequal access to capital for example because they are located in countries with different economic conditions and banking policies and or they have different credit ratings the joint financing of investments across the supply chain may thus ensure the stability of production and of the flow of products to the customers in addition it strengthens the established relationships among the supply chain members the paper at hand takes up these issues and presents a joint economic lot size model that allows investments financed cooperatively by the members of the supply chain in particular it considers a two stage single vendor single buyer supply chain and assumes that the vendor has the option to invest in increasing its production rate the outcome of these attempts to improve production capabilities however is uncertain and subject to an investment success probability due to different access to capital the vendor and the buyer may also share the investment and the outcome uncertainty which can be beneficial to both parties

comparative statics of the firm abstract complementarities arise naturally in diverse models of optimal decision making in a firm theoretical properties of supermodular functions provide a powerful tool for analyzing qualitative properties in such circumstances this paper considers a general model of the firm and gives sufficient conditions for complementarities to hold and for optimal decisions to be monotone with a parameter a variety of specific models of the firm are shown to satisfy these conditions necessary conditions delimit those models of the firm that may exhibit monotone optimal decisions journal of economic literature classification numbers b41 c61 d20 l00

the effect of taxation on human capital this study finds a significant negative effect of proportional income taxation on human capital of the few earlier studies to address this issue most suggested a negligible effect of taxation on investment in human capital this earlier conclusion is shown to be incorrect by using a model that is more general in several respects than the models used previously

covenants and collateral as incentives to monitor although monitoring borrowers is thought to be a major function of financial institutions the presence of other claimants reduces an institutional lender s incentives to do this thus loan contracts must be structured to enhance the lender s incentives to monitor covenants make a loan s effective maturity and the ability to collateralize makes a loan s effective priority contingent on monitoring by the lender thus both covenants and collateral can be motivated as contractual devices that increase a lender s incentive to monitor these results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending modern finance theory suggests that financial intermediaries such as commercial banks insurance companies and finance companies monitor and control their borrowers on behalf of other investors 1 this article investigates how the loans made by these institutions can be structured so as to best enhance the institutions role as delegated monitors covenants and collateral are common features of loans made by financial institutions but these features are somewhat difficult to justify consider loan covenants clauses in a loan contract that require the borrower to take or refrain from various actions berlin and mester 1992 magee and sridhar 1994 and park 1994 show that by giving institutions the right to renegotiate or call loans when covenants are violated covenants serve as tripwires that enhance the flexibility and efficiency of financial contracting also as documented in smith and warner 1979 control rights from covenants reduce borrower adverse selection or moral hazard nevertheless by allowing institutions to demand repayment based on any information contractible or not

the gift of the dying the tragedy of aids and the welfare of future african generations this paper simulates the impact of the aids epidemic on future living standards in south africa i emphasize two competing effects on the one hand the epidemic is likely to have a detrimental impact on the human capital accumulation of orphaned children on the other hand widespread community infection lowers fertility both directly through a reduction in the willingness to engage in unprotected sexual activity and indirectly by increasing the scarcity of labor and the value of a woman s time i find that even with the most pessimistic assumptions concerning reductions in educational attainment the fertility effect dominates the aids epidemic on net enhances the future per capita consumption possibilities of the south african economy

aids crisis and growth abstract we investigate an olg economy where an aids epidemic influences human capital accumulation and growth through the creation of large numbers of orphans we study how intra family allocations regarding school and work time of children are adjusted in the face of aids within a family and how in turn these adjustments influence accumulation of physical and human capital we compute the aggregate effects of an aids epidemic on human and physical capital accumulation and growth we find that growth effects of an aids epidemic are large some policies such as subsidization of aids medication have relatively small effects

stochastic properties of a production inventory process with planned production using transform methodology abstract we consider a stochastic inventory process in which demand is generated by individual events separated by independent stochastic time intervals whereas production takes place in batches of possibly varying sizes at different points in time the resulting processes are analysed using laplace transform methodology expressions for inventory and stockouts are developed applying the theory of residues an example includes poisson distributed demand intervals assuming costs for set ups for carrying inventory and for stockouts conditions are developed for determining the optimal production policy on the one hand when applying the traditional average cost measure on the other when applying the annuity stream principle

keynesian controversies on wages in the general theory keynes advanced two hypotheses about movements in wages and urged their empirical investigation john dunlop lorie tarshis and henry richardson responded to this call with articles published in the economic journal in the late 1930s in turn keynes replied to their findings this exchange is described and the subsequent literature on the cyclical movement of real wages and the rigidity of money wages is outlined

global sensitivity analysis in inventory management abstract this paper deals with the sensitivity analysis sa of inventory management models when uncertainty in the input parameters is given full consideration we make use of sobol function and variance decomposition method for determining the most influential parameters on the model output we first illustrate the method by means of an analytical example we provide the expression of the global importance of demand holding costs order costs of the harris economic order quantity eoq formula we then present the global sa of the inventory management model developed by luciano and peccati 1999 capital structure and inventory management the temporary sale problem international journal of production economics 59 169 178 for the economic order quantity estimation in the context of the temporary sale problem we show that by performing global sa in parallel to the modeling process an analyst derives insights not only on the eoq structure when its expression is not analytically known but also on the relevance of modeling choices as the inclusion of financing policies and special orders

aggregate return on investment for investments under uncertainty abstract this paper deals with capital budgeting decisions under uncertainty we present an aggregate return on investment aroi obtained as the ratio of total undiscounted cash flow to total invested capital and show that it is a genuine rate of return which compared with the risk adjusted cost of capital correctly signals wealth creation for choosing between two mutually exclusive projects we derive an incremental aroi and an incremental risk adjusted cost of capital by means of which two unequal risk projects can be correctly compared iterating the incremental procedure we show that the aroi approach correctly ranks any bundle of different risk competing projects relations with other criteria such as modified internal rate of return average irr cash multiple and profitability index are provided theoretically the aroi approach constitutes a link between arbitrage choice theory and corporate investment theory and shows that explicit discounting is not necessary for measuring economic profitability practically the aroi is a user friendly easy to compute rate of return derived from the same set of data required by the net present value npv also it does not incur the difficulties met by the internal rate of return irr in particular it is unique and it is based on economically significant capital values i e market driven values as such the aroi significantly expresses the efficiency of the project s invested capital

focusing the financial flow of supply chains an empirical investigation of financial supply chain management the objective of this paper is to establish a theoretical foundation for financial supply chain management fscm in order to strengthen managerial decisions concerning financial flows in supply chains although such decisions are made frequently and partial aspects of fscm are already understood in business practice empirical knowledge about fscm is in its early stages the study provides fundamental information derived from eight case studies based on 40 interviews the analysis extends previous studies of the interface between operations management and finance by i contributing to a mid range theory of fscm by exploring two distinct but not exclusive fscm categories their antecedents and performance effects ii empirically deriving a testable framework for fscm iii relating fscm to established theories in the field of scm and iv basing the analysis on transaction cost economics managerial insights reveal that weak working capital causes firms to focus on fscm more specifically the study identifies two fscm categories pre shipment fscm before invoice release and post shipment fscm after invoice release managers can improve upstream supply chain working capital with pre shipment fscm whereas post shipment fscm strengthens the buying firm s working capital position based on transaction cost economics we analyze how these improvements stem from risk reductions which are more effective if firms are integrated internally and externally

debt covenant violations and managers accounting responses abstract this paper examines accounting changes costs of default and accounting based covenants violated by 130 firms reporting violations in annual reports i find that managers of firms approaching default respond with income increasing accounting changes and that the default costs imposed by lenders and the accounting flexibility available to managers are important determinants of managers accounting responses i also document that private lending agreements are the first violated that net worth and working capital restrictions are the most frequently violated restrictions and that in 52 percent of the cases lenders require concessions from borrowers to resolve default

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

the wage curve a review in the wage qurve david g blancflower and andrew j oswald argue that there is a fundamental negative relation between wages and the unemployment rate in a worker s local labor market blancflower and oswald use large scale micro data sets to estimate this relation for the united states britain and 10 other countries i review their empirical methods and findings and provide some further evidence on the nature of the wage curve relationship in the united states i conclude that there is a strong statistical correlation between rates of pay and local unemployment although the interpretation of this correlation remains unresolved this abstract was borrowed from another version of this item

evaluation of capital costs in a multi level inventory system by means of the annuity stream principle abstract in this paper some results obtained from applying the annuity stream principle for evaluating capital tied up in inventory and work in progress and presented this principle departs from the cashflows associated with the production inventory processes considered in contrast to traditional procedures by which the inventory value is determined from physical stock evaluated at costs incurred to date in many situations it appears that the traditional procedure will underestimate the amount of capital tied up in production in this paper the two principles are applied to a multi level inventory system and the capital cost expressions and optimal order quantities are compared

portfolio selection under distributional uncertainty a relative robust cvar approach robust optimization one of the most popular topics in the field of optimization and control since the late 1990s deals with an optimization problem involving uncertain parameters in this paper we consider the relative robust conditional value at risk portfolio selection problem where the underlying probability distribution of portfolio return is only known to belong to a certain set our approach not only takes into account the worst case scenarios of the uncertain distribution but also pays attention to the best possible decision with respect to each realization of the distribution we also illustrate how to construct a robust portfolio with multiple experts priors by solving a sequence of linear programs or a second order cone program

the impact of aids on income and human capital this paper studies the impact of hiv aids on per capita income and education it explores two channels on how hiv aids affects income that have not been sufficiently stressed by previous literature the reduction of the incentives to stay in school due to shorter expected longevity and the reduction in productivity of experienced workers in the model individuals live for three periods may get infected in the second period and with some probability die of aids before reaching the third period of their lives parents care for the welfare of the future generations so that they will maximize lifetime utility of their dynasty the simulations predict that the most affected countries in sub saharan africa in the future will be on average 30 poorer than they would be without aids schooling will decline in some cases by 40 these figures are dramatically reduced with widespread medical treatment as it increases the survival probability and productivity of infected individuals

finite change comparative statics for risk coherent inventories abstract this work introduces a comprehensive approach to the sensitivity analysis sa of risk coherent inventory models we address the issues posed by i the piecewise defined nature of risk coherent objective functions and ii by the need of multiple model evaluations the solutions of these issues are found by introducing the extended finite change sensitivity indices fcsi s we obtain properties and invariance conditions for the sensitivity of risk coherent optimization problems an inventory management case study involving risk neutral and conditional value at risk cvar objective function illustrates our methodology three sa settings are formulated to obtain managerial insights numerical findings show that risk neutral decision makers are more exposed to variations in exogenous variables than cvar decision makers

a note on the sensitivity analysis of the internal rate of return abstract in this note we discuss the sensitivity analysis of the internal rates of return irr we show that the use of partial derivatives can be misleading in the identification of key drivers of an investment project s performance to remedy this shortcoming we propose the use of an alternative sensitivity measure called the differential importance measure the analysis shows that even if the theoretical conditions for using the net present value or the irr as valuation criteria apply the sensitivity analysis results for the two indicators may differ

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

real wage cyclicality of job stayers within company job movers and between company job movers using the british new earnings survey panel data nespd for the period 1975 to 2001 we estimate the wage cyclicality of job stayers those remaining within single jobs in a given company within company job movers and between company job movers we also examine how the proportion of internal and external job moves varies over the business cycle we find that the wages of internal movers are slightly more procyclical and wages of external movers considerably more procyclical than those of stayers notwithstanding a decomposition shows that in britain wage cyclicality arises almost entirely from the procyclicality of wages for job stayers with across and within firm mobility playing a lesser role thus there is little evidence for rigid wage models that imply that employers use changes in job titles as a means of adjusting wages to the business cycle we also show that the distinctions between private and public sectors and between workers covered and uncovered by collective agreements have important impacts on the wage estimates of both stayers and movers

the investment strategies for a dynamic supply chain under stochastic demands abstract a successful supply chain management scm should aim to maximize the net present value of joint profits along the supply chain however the volatile market conditions cause the future cash flows along the supply chain more difficult to anticipate to obtain higher supply chain value the supplier and the retailer should cooperatively determine the optimal entry time this paper proposes a two stage dynamic optimization model by using a real option approach and then performs the sensitivity analyses for the option value and the investment threshold the impacts of some critical factors including the growth rate and the volatility of demand shock sunk cost and relating operational costs cost rates fix costs holding costs of inventory and shipping costs are investigated

valuing risky projects option pricing theory and decision analysis in the academic literature and professional practice there are a number of alternative and apparently competing methods for valuing risky projects in this paper we compare and contrast three different approaches risk adjusted discount rate analysis option pricing analysis and decision analysis focusing on the last two we show that in contrast to some of the claims made in the real options literature when both option pricing and decision analysis methods are correctly applied they must give consistent results we also explore ways in which option pricing and decision analysis methods can be profitably integrated in particular we show how option pricing techniques can be used to simplify decision analysis when some risks can be hedged by trading and conversely how decision analysis techniques can be used to extend option pricing techniques to problems with incomplete securities markets

the cyclicality of real wages within employer employee matches using data from the panel study of income dynamics the author examines the cyclicality of wages within employer employee matches for the years 1970 91 recent research on wage cyclicality has suggested that wages are very procyclical tending to rise and fall with economic upturns and downturns even for workers who remain with the same employer the author finds however that the evidence for wage procyclicality within the matches he examines is rather weak except for the small group of workers who were paid by piece rate or commissions despite having acyclical wage rates men who were paid hourly had earnings movements that were very procyclical salaries exhibited little cyclicality but salaried workers who had income sources from bonuses commissions or overtime had procyclical earnings the results suggest that the increasing prevalence of incentive based pay will increase the procyclicality of wages within matches

average rates of return working capital and npv consistency in project appraisal a sensitivity analysis approach abstract in project appraisal under uncertainty the economic reliability of a measure of financial efficiency such as a rate of return depends on its strong npv consistency meaning that the performance metric i supplies the same recommendation in accept reject decisions as the npv ii ranks competing projects in the same way as the npv iii has the same sensitivity to perturbations in the input data as the npv in real life projects financial efficiency is greatly affected by the management of the working capital using a sensitivity analysis approach and taking into explicit account the role of working capital we show that the average return on investment roi is not strongly npv consistent in accept reject decisions if the working capital is uncertain and changes under changes in revenues and costs also it is not strongly npv consistent in project ranking we also show that the internal rate of return irr is not strongly npv consistent and economic analysis may even turn out to be impossible owing to possible nonexistence and multiplicity caused by perturbations in the input data as well as to possible shifts in the financial meaning of irr under changes in the project s value drivers we introduce the straight line rate of return slrr based on the notion of average rate of change which overcomes all the problems encountered by average roi and irr it always exists is unique strongly npv consistent for both accept reject decisions and project ranking and has an unambiguous financial nature

sensitivity analysis of the newsvendor model abstract quality of decisions in inventory management models depends on the accuracy of parameter estimates used for decision making in many situations error in decision making is unavoidable in such cases sensitivity analysis is necessary for better implementation of the model though the newsvendor model is one of the most researched inventory models little is known about its robustness in this paper we perform sensitivity analysis of the classical newsvendor model conditions for symmetry skewness of cost deviation i e deviation of expected demand supply mismatch cost from its minimum have been identified these conditions are closely linked with symmetry skewness of the demand density function a lower bound of cost deviation is established for symmetric unimodal demand distributions based on demonstrations of the lower bound we found the newsvendor model to be sensitive to sub optimal ordering decisions more sensitive than the economic order quantity model order quantity deviation i e deviation of order quantity from its optimum is explored briefly we found the magnitude of order quantity deviation to be comparable with that of parameter estimation error mean demand is identified as the most influential parameter in deciding order quantity deviation

differential importance and comparative statics an application to inventory management abstract in this work we deal with the problem of establishing which parameters impact an inventory policy the most a new sensitivity measure is introduced by relating the differential importance d and the comparative statics cs techniques we discuss the properties of the new indicator and show that it shares the additivity property we provide the expression of for optimization models numerical results are offered for the sensitivity analysis of a recently introduced inventory management model

valuing exploration and production projects by means of option pricing theory abstract this paper provides a general introduction to the valuation of investment projects with option pricing theory opt furthermore a specific application of opt to value exploration and production projects in the petroleum industry is shown to model the various nested options of such investments the discrete approach of the binomial model is preferred to the continuous model by black and scholes furthermore two kinds of binomial trees are used one tree represents the pre drilling period and the other represents the production phase of the reservoir due to the use of a multiplicative binomial process for the oil price trend unrealistic prices may occur to exclude them from the calculation an oil price band is introduced additionally uncertainty of all input parameters not only of the oil price is considered this is achieved by combining opt with the monte carlo simulation

the importance of assumptions in investment evaluation abstract this work illustrates a new method for estimating the importance of assumptions in investment evaluation the most diffused sensitivity analysis schemes present limitations when used to assess the importance of individual parameters and cannot be employed to estimate the importance of groups of assumptions however such problems can be solved by making use of the differential importance measure dim we set forth the framework for the application of dim at the parameter level of investment valuation models we study the relationship between dim and investment marginal behavior we analyze the link between importance of a parameter and risk associated with it we discuss general results for a sample valuation model the numerical application to the valuation of an energy sector investment project follows we rank the factors based on their importance and determine the project risk profile we discuss the importance of groups of assumptions results will show that assumptions relating to revenues are the most influential ones followed by discounting and operating cost assumptions we discuss numerically the relationship between importance and risk analyzing the effect of variable costs hedging through the comparison of the project risk profile in the presence and in the absence of such a hedging

assessing the impact of aids on the growth path of the malawian economy abstract a modified solow growth model is used to simulate the impact of the aids epidemic on output capacity and other key macroeconomic aggregates in malawi comparing a counterfactual no aids scenario to medium and extreme aids projections suggests that average real gdp growth over the 1985 2010 period will be 0 2 0 3 1 2 1 5 percentage points lower in the medium extreme case relative to the no aids case as a result the size of the economy by the year 2010 will be reduced from a real gdp of 5 03 billion constant 1985 kwacha without aids to 4 81 4 77 3 80 3 46 billion kwacha in the medium extreme scenario

mortality decline human capital investment and economic growth abstract we examine the role of increased life expectancy in raising human capital investment during the process of economic growth we develop a continuous time overlapping generations model in which individuals make optimal schooling investment choices in the face of a constant probability of death we present analytic results followed by results from a calibrated version of the model using realistic estimates of the return to schooling mortality decline produces economically significant increases in schooling and consumption allowing schooling to vary endogenously produces a much larger response of consumption and capital to mortality decline than is observed when schooling is held fixed

an evaluation of the investment environment in international logistics zones a taiwanese manufacturer s perspective abstract with the rapid development of international logistics the role of international logistics zones has become increasingly important this study evaluated the importance of investment environment factors namely political infrastructure cost and market factors for firms intention to invest in international logistics zones a structural equation modeling sem approach was employed to analyze respondents foreign direct investment fdi intention results indicated that market cost and infrastructure factors have a positive effect on firms intention to invest in international logistics zones the influence of political factor on firms investment intention was not supported in this study theoretical and practical implications of the findings for firms foreign direct investment in international logistics zones are discussed

valuing patents on cost reducing technology a case study we present an approach for valuing patents on production process improvements specifically we focus on valuing a patent on cost reducing process improvements from the viewpoint of the patent holding firm we do this by considering the relevant cash flows that result from owning the patent the patent value is determined by 1 licensing fees and royalty income 2 competitive advantage resulting from the patent 3 patent maintenance costs we discuss a case study that presents the difficulties and challenges in finding the relevant information that is needed to estimate the cash flows we show that valuation of patents on production process improvements cannot be done without good knowledge of technology markets and competitors

worker job matches job mobility and real wage cyclicality using the british new earnings survey panel data nespd this paper examines male and female real wage cyclicality over the period 1975 2001 estimation is undertaken separately for job stayers and job movers stayers are defined with respect to single jobs within the company while movers refers to individuals changing jobs both within and between companies core estimates concern real hourly standard wage rates additional features include differentiating between manual and non manual workers and distinguishing between hourly wage rates and hourly wage earnings

the deterministic eoq and epq with partial backordering at a rate that is linearly dependent on the time to delivery abstract our original models for the eoq and epq with partial backordering assumed that the backordering rate is a constant in this paper we extend those models to allow to increase linearly as the time until delivery decreases we show how those previous models can be adapted to find the optimal decision variable values for this new assumption and develop for each model type a condition that the initial value of must meet for partial backordering to be optimal

hiv aids and development a reappraisal of the productivity and factor accumulation effects besides the dreadful direct effects enduring epidemics like hiv aids induce much more subtle effects in the economy principally via labor productivity and factor accumulation concerning the former the impact of morbidity on effective labor has been recognized and accounted for since the early work of over 1992 and cuddington and hancock 1994 the impact of mortality shocks on savings and therefore on factor accumulation has also been documented in this early literature with an emphasis on the detrimental role of the induced health expenditures recently asiedu jin and kanyama 2015 show that hiv aids has a negative but diminishing effect on foreign direct investment fdi and this adverse effect occurs even when the prevalent hiv rate is low in contrast the consequences of hiv aids on human capital accumulation have been more rarely treated in particular its impact on schooling time n generally omitted in the macroeconomic literature ferreira pessoa and dos santos 2011 is an exception the inherent mechanism is known as the ben porath mechanism ben porath 1967 a downward trend in life expectancy following mortality shocks reduces the profitability of schooling leading to a decline of human capital accumulation in the medium and long run boucekkine de la croix and licandro 2002 have proposed a theory of endogenous growth based on the ben porath mechanism notice also that the same essential argument that shorter time horizons discourage investment can be applied to physical capital accumulation the latter may collapse not only because of the massive increase in health expenditures undermining savings as in the early literature but also via this indirect mechanism both channels are taken into account by freire 2004 in her analysis of saving behavior in south africa after the outbreak of the hiv aids crisis

adapting inventory models for handling various payment structures using net present value equivalence analysis beullens patrick univ southampton southampton so17 1bj hants england janssens gerrit k univ southampton southampton sch management southampton so17 1bj hants england janssens gerrit k hasselt univ res grp logist b 3590 diepenbeek belgium

the cost of overtime hours in british production industries both theoretical and empirical labour market papers that incorporate the workers hours dichotomy often contain assumptions about shapes of the overtime premium schedules faced by industry using cross section data for british production industries in three years of sharply contrasting economic climates 1981 1984 and 1988 this paper investigates empirically the appropriate choice of schedule and therefore the industrial cost consequences of changing the average number of overtime hours per period the analysis tackles problems associated with data disaggregation the proportion of workers working overtime omitted variables heteroscedasticity and intertemporal variation

the responsiveness of industry wages to low frequency shocks in canada the first objective of this paper is to examine the empirical relationship between low frequency shocks to labour demand and average wages on an industrial basis using a canadian longitudinal data set we estimate a fixed effects model that controls for workers unobservable attributes the second major objective is to extend the existing industry based literature by estimating a specification allowing for a comparison between the degree of wage responsiveness of within firm stayers and between firm movers the findings indicate that average wages by industry tend to respond positively to low frequency changes in employment and that there is some degree of wage flexibility within firm worker matches jel classification j3 j62 la reponse des salaires industriels a des chocs peu frequents au canada le premier objectif de ce memoire est d examiner la relation empirique entre des chocs peu frequents dans la demande de travail et les salaires moyens au niveau de l industrie a l aide d une base de donnees longitudinales pour le canada on calibre un modele a effets fixes qui tient compte des attributs non observables de travailleurs le second objectif est d enrichir la litterature au niveau de l industrie en calibrant une specification du modele qui permet une comparaison entre le degre de reaction des salaires pour ceux qui restent dans leur entreprise et ceux qui se deplacent entre entreprises les resultats indiquent que les salaires moyens par industrie tendent a repondre positivement a des changements peu frequents dans l emploi et qu il y a un certain degre de flexibilite des salaires pour les travailleurs

the joint economic lot size problem a review abstract this article reviews lot size models which focus on coordinated inventory replenishment decisions between buyer and vendor and their impact on the performance of the supply chain these so called joint economic lot size jels models determine order production and shipment quantities from the perspective of the supply chain with the objective of minimizing total system costs this paper first describes the problem studied introduces the methodology of the review and presents a descriptive analysis of the selected papers subsequently papers are categorized and analyzed with respect to their contribution to the coordination of different echelons in the supply chain finally the review highlights gaps in the existing literature and suggests interesting areas for future research

investing in reduced setups in the eoq model this paper is motivated by the observation that the japanese have devoted much time and energy to decreasing setup costs in their manufacturing processes and that there has been little in the way of a formal framework available to use to think about such efforts the object of this paper is to begin to provide such a framework the framework developed identifies only one aspect of the advantages of reducing setups namely reduced inventory related operating costs the other advantages such as improved quality control flexibility and increased effective capacity are not accounted for in this paper nevertheless substantial reductions in setups may be warranted based solely on the benefits identified in this paper the approach taken here introduces an investment cost associated with changing the current setup level and adds a per unit time amortization of this cost to the other costs identified in the standard eoq model the general problem becomes that of minimizing the sum of a convex and a concave function in two special cases the minimization can be carried out explicitly in one of these cases numerous interpretations of the results are made including comparisons of japanese and american practices for example holding other parameters constant there is a critical sales level such that investment is made in reducing setups if and only if the sales rate is above that level when such investment is made the optimal lot size is independent of the sales rate the paper also addresses the joint selection of the setup cost and the sales rate selection of the sales rate is seen as incorporating explicit production and holding costs into the classical monopolist s pricing problem an explicit solution is obtained for the model postulated

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

effects of discounting and demand rate variability on the eoq the economic order quantity eoq formula is probably the most well known formula in inventory theory it determines the optimal value of the ordering quantity by minimizing the average cost in an ordering cycle it is based on the assumptions that there is a fixed lead time and a constant demand rate these assumptions are usually not fulfilled in practice especially when dealing with slow moving items demand seems to fluctuate furthermore since the time between two successive orderings is often large for slow moving items discounted costs instead of average costs should be minimized in this paper we determine the optimal ordering quantity if demand is modelled by a poisson process and the expected discounted costs are minimized we also analyze the case where demand is uniform and or the average cost criterion is used we give graphical presentations of the optimal ordering quantities besides easily determining the optimal values these allow us to show what the effects of changing the objective function and of changing the demand distribution are we derive a simple discounted cost ordering quantity formula denoted by eoq d for slow moving items we show that for items with a small demand rate and high fixed ordering costs the eoq d is much closer to the optimal discounted cost ordering quantity than the traditional eoq formula c 1998 elsevier science b v all rights reserved

sensitivity analysis in investment project evaluation abstract this paper discusses the sensitivity analysis of valuation equations used in investment decisions since financial decision are commonly supported via a point value of some criterion of economic relevance net present value economic value added internal rate of return etc we focus on local sensitivity analysis in particular we present the differential importance measure dim and discuss its relation to elasticity and other local sensitivity analysis techniques in the context of discounted cash flow valuation models we present general results of the net present value and internal rate of return sensitivity on changes in the cash flows specific results are obtained for a valuation model of projects under severe survival risk used in the industry sector of power generation

interrelating operational and financial performance measurements in inventory control financial supply chain management and working capital management are increasingly receiving attention as important avenues to increase profitability in supply chains by actively managing payment terms and working capital requirements managers can influence financial performance and achieve significant cost savings however measures to improve financial performance implicitly restrict and influence operational performance in our research we elaborate on the benefits of equally considering both operational and financial aspects in decision making for the physical and financial supply chain we develop a mathematical model that determines the optimal purchasing order quantity under working capital restrictions and payment delays we analyze the trade offs between the most commonly used financial and operational measurements such as service level return on investment profit margin and inventory level our results demonstrate the significance of payment delays increases decreases in the upstream downstream payment delays favor the system s operations by decreasing operational costs moreover increases in the working capital employed in the system decrease the total operational cost increase the total financial cost and lower the return on working capital investment c 2009 elsevier b v all rights reserved

supply chain coordination perspectives empirical studies and research directions supply chains sc are generally complex and are characterized by numerous activities spread over multiple functions and organizations which pose interesting challenges for effective sc coordination to meet these challenges sc members must work towards a unified system and coordinate with each other a systematic literature review is presented in this paper to throw light on the importance of sc coordination the objectives of this paper are to report and review various perspectives on sc coordination issues understand and appreciate various mechanisms available for coordination and identify the gaps existing in the literature a framework is suggested indicating scope for further research

modeling the macroeconomic effects of aids with an application to tanzania a solow style model is developed to study the effects of the aids epidemic on the growth path of the economy and gdp per capita the model uses conjectures about the demographic effects of aids in tanzania to estimate the macroeconomic effects on the economy the findings suggest that without decisive policy action aids may reduce tanzanian gdp in the year 2010 by 15 to 25 percent in relation to a counterfactual no aids scenario per capita income levels are expected to fall by 0 to 10 percent by 2010

production and shipment lot sizing in a vendor buyer supply chain with transportation cost abstract previous research on the joint vendor buyer problem focused on the production shipment schedule in terms of the number and size of batches transferred between the two parties it is a fact that transportation cost is a major part of the total operational cost however in most joint vendor buyer models the transportation cost is only considered implicitly as a part of fixed setup or ordering cost and thus is assumed to be independent of the size of the shipment as such the effect of the transportation cost is not adequately reflected in final planning decisions there is a need for models involving transportation cost explicitly for better decision making in this study we analyze the vendor buyer lot sizing problem under equal size shipment policy we introduce the complete solution of the problem in an explicit and extended manner that has not existed in the literature we incorporate transportation cost explicitly into the model and develop optimal solution procedures for solving the integrated models all unit discount transportation cost structures with and without over declaration have been considered numerical examples are presented for illustrative purpose

vintage human capital demographic trends and endogenous growth we study how economic growth is affected by demographics in an overlapping generations model with a realistic survival law individuals optimally chose the dates at which they leave school to enter the labor market and at which they retire endogenous growth arises thanks to the accumulation of generation specific human capital favorable shifts in the survival probabilities always induce longer schooling and later retirement but have an ambiguous effect on growth the relationship between the growth of population and per capita growth is hump shaped increases in longevity can be responsible for a switch from a no growth regime to a sustained growth regime and for a positive relationship between fertility and growth to vanish

risk analysis with contractual default does covenant breach matter abstract mergers and acquisitions m a private equity and leveraged buyouts securitization and project finance are characterized by the presence of contractual clauses covenants these covenants trigger the technical default of the borrower even in the absence of insolvency therefore borrowers may default on loans even when they have sufficient available cash to repay outstanding debt this condition is not captured by the net present value npv distribution obtained through a standard monte carlo simulation in this paper we present a methodology for including the consequences of covenant breach in a monte carlo simulation extending traditional risk analysis in investment planning we introduce a conceptual framework for modeling technical and material breaches from the standpoint of both lenders and shareholders we apply this framework to a real case study concerning the project financing of a 64 million euro biomass power plant the simulation is carried out on the actual model developed by the financial advisor of the project and made available to the authors results show that both technical and material breaches have a statistically significant impact on the net present value distribution and this impact is more relevant when leverage and cost of debt increase

production lot sizing with variable production rate and explicit idle capacity cost abstract this paper develops a model for simultaneously determining the optimal run length and the rate of production for a single item as opposed to traditional approaches the item s output rate is treated as a decision variable it is assumed that the production cost per unit is a quadratic function of the production rate in an effort to capture the effect of increased unit cost as a result of deviating from the nominal rate of output for which the system was designed in addition a linear function is incorporated in the proposed model to represent the desirability or undesirability as the case may be of unused capacity the iterative solution procedure developed is illustrated through a numerical example and extensive sensitivity analysis is performed for examining the major tradeoffs involved

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

capital structure and inventory management the temporary sale price problem the paper discusses the use of adjusted present value techniques in a problem of inventory management the temporary sale price problem in the presence of equity or debt financing while traditional net present value approaches produce results very similar to those of the average cost approach our consideration of the capital structure of the firm opens the way to theoretically and numerically different inventory policies