an analysis of interfirm cooperation theory and evidence from electric power pools this paper develops and tests a model for analyzing the extent to which an individual utility participates in a power pool it incorporates the benefits and costs of pool membership in a profit maximization model of an individual utility the study finds that coordination reflects the benefits and costs the degree to which other utilities are committed to the pool and the utility s behavior toward other utilities the results show that large firms are reluctant to pool with small firms and the us pools tend to be loosely coordinated policy implications are that regulatory commissions can be instrumental in coordination efforts and that interstate cooperation among regulatory authorities is needed to encourage pooling and obtain regional solutions to regional problems it is also important to reduce the transactional costs of pooling wherever possible 37 references 3 figures 1 table

modeling skewness with the linear stochastic plateau model to determine optimal nitrogen rates accurate modeling of skewness is needed to increase the actuarial fairness of crop insurance we test day s conjecture that crop yield skewness becomes negative as nitrogen rates increase and determine how well a linear response stochastic plateau lrsp production function matches the pattern of observed skewness using four long term nitrogen experiments stillwater wheat is consistent with day s conjecture but the skewness for lahoma and altus wheat yields as well as altus cotton yields are not the lrsp assumes normal random effects and can explain only a small part of observed skewness so a new lrsp with skew normal random effects is introduced which comes closer to explaining the observed skewness and should increase the accuracy of nitrogen rate recommendations negative skewness reduced optimal nitrogen rates and positive skewness increased optimal nitrogen rates

measuring returns to scale in dea models when the firm is regulated in the standard framework of data envelopment analysis dea models the returns to scale are fully characterized using the multiplier on the convexity constraint of inefficient decision making units dmu using the projection of the input output vector on the frontier in this note we investigate how the returns to scale measurements in dea models are affected by the presence of regulatory constraints these additional constraints change the role played by the convexity constraint in order to avoid biased estimation of the returns to scale we show that the interaction between the regulatory and the convexity constraints has to be taken into account

the impact of regulation on technical change input based regulation restricts a firm s input choices to a subset of those that characterize the production technology the averch johnson hereafter a j 1962 hypothesis states that rate of return regulation affects a firm s input demands for producing its selected output level given that firms can select the level of innovations in inputs through research and development rate regulation can also impact a firm s selection of innovations among inputs regulation s influence on the choice of innovations also impacts the rate at which technical change occurs in an industry the a j hypothesis has been examined extensively in the literature the impact of regulation on technical change has received less attention in the literature and is the focus of this paper the subject matter is of some importance in that regulation via the a j hypothesis leads to higher production costs regulation s impact on a firm s selection of innovations can magnify or dampen the rate at which technical change occurs a magnification dampening of the rate of technical change leads to lower higher production costs in addition to regulation s impact on input demands regulation s impact on the rate of technical change can lead to small or large changes in prices for consumers regulators can use the information on regulation and technical change to evaluate the effectiveness of policies aimed at enhancing technical change by how much do the policies affect production costs and how much would consumer prices change due to the policies regulators can also use the information to predict the impact deregulation would have on consumer prices both regulators and consumers can attempt to determine the amount by which consumer prices would change under deregulation smith 1974 and okuguchi 1975 examined the impact of regulation on a firm s choice of innovations they showed theoretically that regulation can alter a firm s choice of innovations

shared inputs over capitalization and regulation abstract when inputs are joint in production a partially regulated firm has the incentive to allocate all joint inputs to the regulated jurisdiction the regulated firm if required to allocate costs will have less of an incentive to over capitalize

effects of regulation and capital market imperfections on the dynamic behavior of a firm the well known result in the theory of a regulated firm known as the averch johnson effect is that a profit maximizing firm subject to rate of return regulation uses an inefficiently high capital labor ratio to produce its chosen level of output numerous contributions in the literature have been instrumental in clarifying the implications and generalizing the model 1 these contributions however have been mostly couched within a static framework few attempts have been made to investigate the effect of rate of return regulation on the dynamic behavior of the firm in particular its investment plans 2 neoclassical models of investment often assume that the rate of investment under

indicators of technological activities comparing educational patent and r d statistics in the case of sweden abstract this paper explores the use of r d patent and educational data as technology indicators based on swedish data we compare what these indicators tell us about a the distribution of innovative activity between large and small firms and b the technological competence of a set of firms we conclude that r d data probably not only overstate the concentration of technological activities to larger firms but also understate the total technological activities by underplaying the role of small manufacturing firms and service sector firms moreover we find that in some instances educational data may capture the character and the diversity of firms technological competence better than patents do the combined use of educational and patent data should allow us to capture both the fullness of the breadth of the technology base and the precise orientation of the technological efforts of firms

alternative regulatory methods and firm efficiency stochastic frontier evidence from the u s electricity industry the use of incentive regulation and other alternative regulatory programs in u s electricity markets has grown during the past two decades within a stochastic frontier framework i investigate the effect of individual programs on the technical efficiency of a large set of coal and natural gas generation units i find that those programs tied directly to generator performance and those that modify traditional fuel cost pass through programs to provide a greater incentive to reduce fuel costs are associated with greater efficiency levels other programs have no statistical association with efficiency levels

an empirical study of scientific production a cross country analysis 1981 2002 abstract this paper presents the results of an econometric approach to examine the determinants of scientific production at cross country level the paper aims not to provide accurate and robust estimates of investment elasticities a doubtful task given the poor quality of the data sources and the modelling problems but to develop and critically assess the validity of an empirical approach for characterising the production of science and its impact from a comparative perspective we employ and discuss the limitations of a production function approach to relate investment inputs to scientific outputs using a sample of 14 countries for which we have information on higher education research and development herd the outputs are taken from the thomson isi national science indicators 2002 database on published papers and citations the inputs and outputs for this sample of countries have been recorded for a period of 21 years 1981 2002 a thorough discussion of the data shortcomings is provided on the basis of this panel dataset we investigate the profile of the time lag between investment in herd and research output and returns to national investment in science we devote particular attention to analysing the presence of cross country spillovers we show their relevance and underline the international effect of the us system

capacity utilization and new source bias evidence from the us electric power industry abstract while prior research has shown that new source bias has increased construction costs and delayed the building of new electric power plants this research explores the empirical question of whether increased operating costs caused by new source bias are larger than the cost savings of newer technology if new sources do have higher operating costs an incentive exists to utilize order plants more intensively statistical evidence of these differing utilization rates is found

public policies to support basic research what can the rest of the world learn from us theory and practice and what they should not learn the information based theoretical model for public support of basic research developed in the usa at the end of the 1950s has held up well in practice in spite of its neglect of training benefits of necessary investment in research infrastructure and of its consequently limited relevance outside the usa at the same time us practice in basic research has often been misinterpreted as being driven by short term usefulness whereas its key features are massive and pluralistic government funding high academic quality and the ability to invest in the long term development of new often multi disciplinary fields challenges for the future include greater and often ill judged pressures from governments for demonstrable usefulness of the basic research it supports the entirely separate development of direct links to application in bio medical and software fields and more complicated links between basic research and application resulting from the changes in the internationalisation of corporate r d effective policies will depend on better understanding of what makes universities responsive to investments in promising new fields of research and teaching how and why basic fields of great practical usefulness emerge and how basic research requirements are conditioned by a country s level and pattern of economic development bibliometric data could make a considerable contribution if it was more widely recognised that they have informational properties similar to the output of basic research and therefore deserve public support this paper was prepared for the celebration of richard nelson s 70th birthday held in nyc from 13 15 october 2000 comments welcome

what can we learn from the grand policy experiment lessons from so2 allowance trading stable url http links jstor org sici sici 0895 3309 28199822 2912 3a3 3c69 3awcwlft 3e2 0 co 3b2 tthe journal of economic perspectives is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgtue jun 26 16 25 17 2007

the role of copulas in the housing crisis abstract due to its simplicity and familiarity the gaussian copula is popular in calculating risk in collaterized debt obligations but it imposes asymptotic independence such that extreme events appear to be unrelated this restriction might be innocuous in normal times but during extreme events such as the housing crisis the gaussian copula might be inappropriate this paper explores various copula specifications and finds that the degree to which housing prices are related based on the gaussian copula is too small compared with real housing price data

optimizing inventory s contribution to profitability in a regulated utility the averch johnson effect the averch johnson effect is a well known economic phenomenon through which regulated utility companies prefer a capital resource input combination that differs from an efficient level through dynamic network data envelopment analysis ndea this paper first investigates the existence of this effect on a dynamic input that is inventory the analysis was performed for a group of public electric utilities from 2005 to 2014 the result implies that these firms procure a significant extra amount in inventory materials and supplies beyond their efficient levels in order to explore the connection of this effect to profit motives we construct an analytical model of the inventory policy controlling the extra buying of material and supplies that will be inventoried and added to the firm s rate base the model is based on maximizing the net present value of total profits in the deterministic case two results are observed i the firm could achieve a finite optimum by adding a finite amount of inventory above the normal base level which assumes no impact of inventory on the rate hearing and ii the firm could theoretically achieve infinite optimum under the unconstrained model the primary contribution of this paper is the special case of extending typical inventory replenishment models to including the impact on prices and in turn profits in a regulated supply chain

heterogeneity and distributional form of farm level yields representing farm level crop yield heterogeneity and distributional form is critical for risk and crop insuranceresearch moststudieshaveusedcountydata understatingbothsystematicandrandomvariation comparison of systematic versus random intra county variation is lacking few studies compare the various distributional forms that have been proposed this study utilizes the extensive potential of government farm level crop insurance data results show that systematic intra county variation is surprisingly strong a newly applied reverse lognormal distribution is preferred when county wide variation is removed but the normal distribution fits surprisingly well in the crop insurance relevant percentiles when county wide variation is not removed representing and accounting for both spatial and temporal heterogeneity is a major problem in agricultural economics and policy analysis due to the fact that most data are aggregated to at least the county level e g gardner and kramer 1986 just and pope 1999 both systematic and random components of crop yields are major factors in intra county farm level heterogeneity that are critical for modeling risk producer behavior and crop insurance participation most studies have either used aggregate at least county level data or relied on relatively few farm level observations the former makes results primarily illustrative while the latter limits statistical significance this article characterizes intra county crop yield heterogeneity both spatially and temporally with the most extensive dataset utilized to date and evaluates a broader set of parametric distributional possibilities than previously

elasticities of substitution for a regulated cost function abstract this paper proposes a modification to the uzawa 1962 characterization of the allen partial elasticity of substitution under cost minimization to take account of the behavioral properties of the cost function for a firm subject to rate of return regulation

crop yield skewness under law of the minimum technology no satisfactory motivation has been forwarded in favor of any crop yield distribution including the normal this article explores the foundations of yield distributions for the law of the minimum resource constraint technology at the plot level of analysis with independent identical uniform resource availability distributions the yield skew is positive whereas it is negative whenever the distributions are normal simulations show how asymmetries in resource availabilities determine skewness it is suggested that a negative yield skew occurs whenever production is tightly controlled so that the left tails of some resources availabilities distributions are thin irrigation may increase yield skewness copyright 2009 oxford university press

shirking and the choice of technology a theory of production inefficiency with an empirical application abstract we develop a model of shirking and technology choice and show that organizations exercising less effective direct control over shirking adopt technologies that underutilize the workforce to a greater degree relative to neoclassical counterparts in order to control shirking indirectly thus technical inefficiency arises endogenously as a rational response to allocative inefficiency caused by shirking an empirical analysis of data from a sample of collective and private farms operating in jewish palestine reveals the presence of shirking and supports the prediction that farms with less effective direct control over shirking exhibit greater labor hoarding as a manifestation of technical inefficiency

x inefficiency and interfirm rivalry evidence from the electric utility industry competition from the natural gas industry is shown to increase the efficiency of the work force of electric power utilities this conclusion is qualified to the extent that duopoly rivalry does not represent perfect competition in a free market as natural gas reserves decline however the impetus to improve efficiency will diminish but this will be offset by technological advances in both power generation and power transmission if regulators develop policies to encourage competitive interplay utility performance is more likely to improve 38 references 3 tables dck

systematic departures from the frontier a framework for the analysis of firm inefficiency departures from a production or cost frontier may reflect the systematic effect of conditions that contribute to inefficiency to test whether some portion of frontier function departures can be systematically explained the frontier inefficiency error component is modeled as a function of various causal factors and a random component the functional form of the inefficiency error term model is chosen to assure strict one sidedness preliminary empirical results generated from electric utility data suggest the superiority of including both systematic and random components in the inefficiency error term

geography of crop yield skewness analysis of crop yield distributions provides insights into better understanding how natural resources shape agricultural productivity this study seeks to provide a rigorous theoretical and empirical understanding of the effects of exogenous geographic and climatic factors on the first three moments of crop yields with focus on the third moment we hypothesize that exogenous factors having beneficial effects on crop production should make crop yield distributions less positively or more negatively skewed we employ a large crop insurance data set for corn soybean and wheat to find general support for our natural resources determines skewness hypothesis the proposed statistical method optimally uses correlations between the first three moments it significantly improves estimation performance over existing methods including the linear moment model which has been commonly applied in the literature

copula based models of systemic risk in u s agriculture implications for crop insurance and reinsurance contracts the federal crop insurance program has been a major fixture of u s agricultural policy since the 1930s and continues to grow in size and importance indeed it now represents the most prominent farm policy instrument accounting for more government spending than any other farm commodity program the 2014 farm bill further expanded the crop insurance program and introduced a number of new county level revenue insurance plans in 2013 over 123 billion in crop value was insured under the program crop revenue insurance first introduced in the 1990s now accounts for nearly 70 of the total liability in the program the available plans cover losses that result from a revenue shortfall that can be triggered by multiple dependent sources of risk either low prices low yields or a combination of both the actuarial practices currently applied when rating these plans essentially involve the application of a gaussian copula model to the pricing of dependent risks we evaluate the suitability of this assumption by considering a number of alternative copula models in particular we use combinations of pair wise copulas of conditional distributions to model multiple sources of risk we find that this approach is generally preferred by model fitting criteria in the applications considered here we demonstrate that alternative approaches to modeling dependencies in a portfolio of risks may have significant implications for premium rates in crop insurance

testing day s conjecture that more nitrogen decreases crop yield skewness whilecontroversysurroundsskewnessattributesoftypicalyielddistributions abetterunderstandingis importantforagriculturalpolicyassessmentandforcrop insuranceratesetting day 1965 conjectured that crop yield skewness declines with an increase in nitrogen use at low levels but not at higher levels employing four corn yield experimental plot datasets we investigate the conjecture by introducing a a flexible bayesian extension of the just pope technology to incorporate skewness and b a quantilebased measure of skewness shift bayesian estimation provides strong evidence in favor of negative skewnessatcommercialnitrogenratesandforday sconjecture therewasweakerevidenceinfavorof positively skewed cotton yield and little evidence in favor of the conjecture the results are confirmed by the quantile based measure we also find evidence that skewness becomes more negative upon moving from corn after corn to corn after soybean

effects of regulation on utility financing theory and evidence standing of these cross sectional variations might be afforded by the detailed examination of specific industry characteristics and their relationship to firms financing patterns the present study offers a methodology for approaching this issue the first step is to assemble joint theories of industry and financial structure in order to identify the ways in which changing industry conditions might be associated with changes in financing evidence on such simultaneous changes can then be examined in an attempt to identify the most plausible joint theory the methodology is used to investigate the effects of state commission regulation on the financing of electric utilities this is a natural candidate for study since regulation is such a salient feature of the industry in addition the regulatory system imparts some interesting special features to the very nature of utility capital structures inherent in all capital structures for example are opportunities for shifting wealth between bondholders and shareholders but under regulation these wealth shifting opportunities are expanded to encompass consumers as well finally the study of regulation has resulted in several relatively well specified theories of why regulation is imposed and what its observable effects should be in section i the different theories of capital structure and regulation are discussed and their joint implications are derived the capital structure theories include the perfect capital market theory the debt capacity theory and the financing hierarchy theory the regulatory theories include the public interest or market failure theory the political economy theory and the imperfect monitoring theory in section ii financing data from the early days of state commission utility regulation are used to try to distinguish

regulation of administered prices an empirical analysis of the microeconomics of price movement in finland 1972 77 curiously enough the concept of administered prices launched by gardiner means in his 1934 report to the u s secretary of agriculture still shows up in discussions on price policy and control today almost fifty years since it was coined and three decades after the discussion2 in which it should have been buried even more astonishing is the fact that its spin off administered inflation a term introduced by the kefauver committee in 1957 3 is still a part of economic language in some instances in the basic formulation that of means in 1935 administered prices are not assumed to be explicitly linked with market power but simply prices set by administrative action and held constant for a period of time means 12 p 78 although the hypothesis in this form was based on no economic reasoning of acceptable clarity it might still be accepted for the simple truism it is clearly some prices will change more seldom than others since for one thing costs of price changes will vary as is intuitively clear and as shown by sheshinski and weiss 17 pp 294 95 the optimal strategy of a firm in an inflationary environment will consist of longer intervals between successive price changes the higher the cost of such a change is under some very special assumptions risk aversion may also serve as an explanation to a decrease in the number of price changes relative to the number of changes in cost as indicated by the results of schramm and sherman 1 5 4 the administered inflation hypothesis as forwarded by means in his 1957 testimony before the kefauver committee means 12 pp 101 29 and by

how large is the swedish academic sector really a critical analysis of the use of science and technology indicators sweden is perceived to be top ranking and a role model in terms of its volume of academic r d this perception is based on analyses using two standard indicators we assess the validity of these and argue that institutional features skew the result in favour of a high ranking swedish academic r d is more appropriately characterised as average or below average in terms of input and above average in terms of output science policy makers need to acknowledge this and devise policies that strengthen rather than threaten the functioning of an efficient system c 2004 published by elsevier b v

a natural resource theory of u s crop insurance contract choice a large variety of subsidized crop insurance products are available to u s crop growers distinct and perhaps puzzling patterns in the choices of insurance products and coverage levels can be discerned where production conditions are better and yields are less risky then a higher insurance coverage levels are chosen and b revenue insurance is preferred over yield insurance also c the extent of preference for revenue insurance is stronger in more productive areas assuming as many do that growers seek to maximize subsidy transfers point a can be explained by the interaction between yield technology and natural resource endowments points b and c can be explained by location in conjunction with the natural hedge and a contract design bias in how revenue insurance guarantees are computed empirical study of risk management agency data on corn soybean and wheat yields and insurance contract choices lend support to our model inferences

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

extreme dependence in price transmission analysis abstractwe propose a generalized procedure that combines conventional price transmission analysis with copula based dynamic tail dependence to examine price relationships under extreme conditions this approach is used to examine ukrainian wheat markets where export restrictions combined with price surges 2006 2008 and 2010 2012 have contributed to a turbulent market the results indicate that domestic prices were effectively insulated from world price shocks but that a rocket and feathers price relation held between domestic flour and wheat prices these asymmetric price co movements changed with the degree of restrictiveness of the export prohibitions

is the commercialization of european academic r d weak a critical assessment of a dominant belief and associated policy responses there is a widespread belief that eu underperforms in the commercialization of publicly funded research and that the appropriate policy response is to transfer the ownership of intellectual property rights to universities this paper assesses the validity of these twin beliefs in addressing the first we limit ourselves to sweden which still retains its teacher s exemption model in spite of confident statements made in the literature and by government we provide evidence to the contrary i e that swedish academia performs well in terms of commercialization we also have doubts about the usefulness of the medicine prescribed to cure the alleged problem largely drawing on us literature we argue that the medicine risks harming strong university industry networks biasing technical change reducing entrepreneurial activity and generating costs to universities which may be detrimental to technology transfer in conclusion we seriously question the validity of both beliefs

the influence of the economic approaches to regulation on banking regulations a short history of banking regulations this article highlights the theoretical foundations of the regulations at work in the banking sector and examines their responsibility in the onset of the 2007 2008 financial crisis drawing a parallel between the main changes in banking regulations since the 1960s and the evolutions in the economic analyses of regulation over the same period it shows that the shift from the public interest theory of regulation that prevailed until the late 1960s towards the private interest theory of regulation accounts for the substitution of micro prudential regulations for macro prudential ones and explains a paradigmatic change in the conception of the regulatory instruments of the banking authorities it also shows that although the outcome of several factors the 2007 2008 crisis was also a consequence of the fact that the economic analysis of banking regulations supported micro prudential regulations that fail to take the global features and impact of banking activities into account and have proved unable to recommend effective solutions in a context of crisis

economic analysis of the introduction of agricultural revenue insurance contracts in spain using statistical copulas this article aims at determining how the introduction of agricultural revenue insurance contracts in spain will affect the cost of purchasing insurance relative to yield insurance schemes we focus our empirical analysis on the apple and orange sectors in spain statistical copulas are used to jointly model price and yield perils premium rates under revenue and yield insurance are simulated through monte carlo methods results indicate that revenue insurance is likely to reduce the price of agricultural insurance in spain which may result in higher acceptance and demand for agricultural insurance programs

regulation and investment use newly assembled data on regulation in several sectors of many oecd countries to provide evidence that regulatory reform of product markets is associated with an increase in investment a component of reform that plays a very important role is entry liberalization but privatization also has a substantial effect on investment sensitivity analysis suggests that our results are robust jel e22 l5

adverse selection in crop insurance actuarial and asymmetric information incentives adverse selection is often blamed for crop insurance indemnities exceeding premiums plus subsidies however nationwide empirical evidence has been lacking or based on inadequate county level data this article uses nationwide farm level data on corn and soybeans to decompose incentives for participation in u s multiple peril crop insurance into a risk aversion incentive the conventional justification for insurance an actuarial or subsidy incentive reflecting government subsidization and an asymmetric information incentive which reflects farmers information advantage results show that the risk aversion incentive is small farmers participate in crop insurance primarily to receive the subsidy or because of adverse selection possibilities

efficiency based rank assessment for electric power industry a combined use of data envelopment analysis dea and dea discriminant analysis da abstract this study discusses a combined use of dea data environment analysis and dea da discriminant analysis to determine the efficiency based rank of energy firms this type of performance evaluation is important because we often have a difficulty in accessing a large sample on energy firms to derive reliable empirical results the proposed approach is useful in dealing with such a limited number of energy firms often found in previous dea studies on energy industries in the world the proposed approach uses dea to classify energy firms into efficient and inefficient groups based upon their efficiency scores then it utilizes dea da to assess their efficiency scores and ranks in this stage we can find an adjusted efficiency score for each energy firm the proposed approach provides us with the following analytical capabilities all of which cannot be found in a conventional use of dea in assessing energy firms first the proposed dea approach can avoid zero in all multipliers on efficient energy firms by incorporating scsc strong complementary slackness condition so that it can handle an occurrence of multiple reference sets and multiple projections the dea result classifies all energy firms into efficient and inefficient groups second dea da applied to the two groups evaluates all energy firms by an industry wide evaluation not depending upon a limited number of efficient energy firms in a reference set as found in a conventional use of dea the analytical capability can reduce the number of efficient energy firms third the proposed approach can provide their efficiency based ranking scores finally we can conduct a rank sum test based upon their ranking scores to obtain a statistical inference as an application this study uses the proposed approach to examine the performance of japanese electric power industry we find two economic implications one of the two implications is that no major change has occurred in the operational performance of japanese electric power industry because of japanese sluggish economy from 2005 to 2009 the other implication indicates that there are strategic differences in the operation of japanese electric power firms after the liberalization

capital vintage time trends and technical change in the electric power industry beginning with tinbergen in 1942 economists have employed a time trend in cost or production functions to represent the rate at which new technology is introduced into the production unit in sufficiently flexible models of the production process the time trend may be used to obtain estimates of the rate as well as direction of technical change the use of the time trend is generally defended on pragmatic grounds as no theoretical justification exists for assuming that new technology is introduced at a steady rate that is independent of a firm s investment in r d education capital of a more recent vintage etc in recent years alternatives to the traditional time trend have been sought to represent the rate at which new technology is introduced research in this area has been concentrated in the telecommunications industry where the stock of r d or the percentage of calls completed by direct dialing or modern switching facilities have been employed as technological indices by nadiri and schankerman 32 denny et al 14 and christensen et al 7 the latter two studies indicate that explicit technological indices provide a better representation of the pace of innovation than the time trend this conclusion must remain tentative however as it is not possible to determine what is the true direction of technical change in these studies this shortcoming is overcome in a recent study by kopp and smith 24 who compare the performance of time trends and explicit technological indices in a study using pseudo data generated by process analysis models their results unambiguously support the use of technologically explicit indicators of technical change and indicate that the use of a time trend may not provide a consistent estimate of the direction of technical change this study does not however shed any light on the ability of a time trend to accurately reflect the rate of technical change the purpose of this study is to investigate the effects of alternative technological indices on the estimated rate and direction of technical change in the electric power industry the performance of a time trend is compared with that of a vintage index computed as the average age of a firm s steam generating capacity this latter index is consistent with the notion that new technology is embodied in newly constructed capital an assumption sup

cost efficiency of electric grid utilities in china a comparison of estimates from sfa mle sfa bayes and stoned cnls with the purpose of estimating the range of cost efficiency levels of the power grid sector in china we assembled a data set including 23 provincial power grid companies spanning from 2005 to 2009 and conducted an empirical study based on the sfa mle sfa bayes and stoned cnls methodologies empirical results show that the average values of efficiency from different models vary from 0 85 to 0 92 depending especially on the assumptions underlying inefficiency content further results demonstrate that there is exogenous technical progress during the sample period and per capita gdp of the province is negatively related to the costs of the electric grid company located in the corresponding province we hope this empirical study will contribute to the debate on an efficiency based regulation scheme which was introduced to the chinese electric grid sector on a pilot base in 2014

service quality in the electricity industry the role of privatization and managerial behavior abstract this paper analyzes the relationship between privatization and service quality in the electricity industry and tests the hypothesis that managerial behavior is a significant intervening factor the sample includes 31 italian distributors over the period 1998 2004 their quality performance is represented by continuity of supply an aspect of quality that is both contractible and regulated results of the empirical analysis suggest that the transfer of shareholdings to private investors does not lead to quality degradation the results also suggest that managerial dominance translates into a reduction in supply quality this effect is likely to be particularly strong for public sector utilities

behavior of the firm under regulatory constraint a recent article in this review by averch and johnson 3 on the fair rate of return regulation in public utilities industries or more generally regulated industries attracted the attention of many economists in essence averch johnson argues that the introduction of an active constraint of a fair rate of return type would induce the firm to invest more than the original profit maximizing value of capital and this would create an inefficient allocation of inputs in addition to frequent citations in verbal arguments it has invited some thieoretical extensions by economists such as wvestfield 8 and klevorick 5 all of the writers seem to accept the basic theoretical foundations set by averch and johnson for example klevorick 5 recently proposed that the fair rate of return should be inversely related to the size of the capital of a firm the intuitive basis for this is apparent for it in effect creates a penalty as the amount of capital used by the firm increases however it seems to me that averchjohnson s original arguments are sketchy and contain somewhat ambiguous logic at several important points although their conclusion for which they tried to find empirical support that a firm will tend to increase its investment with the introduction of an active constraint seems to be correct it does not follow from their arguments in particular there seems to be a serious error which arises from confusing movements along a curve and shifts of a curve in section ii we clarify those ambiguities and if necessary correct the mistakes in the third section of this paper we shall provide a new formulation of the problem we shall find that the new formulation will give the same answer as averchjohnson namely that a firm will tend to invest more with the iiltroductioin of an active constraint it should be noted however that while the conclusion happens to be the same this was not the necessity for we needed a completely new formulation to obtain the old conclusion

factor price changes technical efficiency and revenue requirements regulation a regulatory framework is considered in which output price adjustments can be initiated only by a change in the price of a non capital input e g fuel at some time in the future which is uncertain at that time there is a processing period and then an adjustment of the output price so that the revenues of the firm meet an allowed rate of return s the regulated firm choosing a putty clay technology is shown to overcapitalize for large values of s and to undercapitalize for sufficiently small values of s a decrease in the length of the processing period is found to accentuate the extent of either the undercapitalization or overcapitalization resulting from the specified rate of return

time of use pricing for load management programs in taiwan power company load management programs have been actively performed by the utilities to reduce peak demand and improve system load factor in recent years the time of use tou tariff based on the peak load pricing theory has been one of the most effective load management strategies proper tou rate structure can actually reflect the generation cost of electricity supplying and give a guideline for customers to modify the power consumption pattern so that the system load factor can be improved the inverse electricity pricing rule can be applied as the basis of tou pricing in this paper the price elasticities of industrial customers of taipower system are solved by the statistical regression model with 2620 data samples

regulator heterogeneity and endogenous efforts to close the information asymmetry gap abstract the now standard principal agent model of regulator firm interactions typically assumes the presence of a single regulator and an exogenously determined information asymmetry between the principal and the agent in this paper we draw upon a unique data set of regulatory inspections conducted by the u s food and drug administration fda to explore the consistency of these assumptions with the actual practice of regulators we find that the canonical assumptions of the agency paradigm are strained by if not altogether inconsistent with the key practical realities of regulation by the fda our analysis uncovers several dimensions along which regulators actively and endogenously seek to close the information asymmetry gap we also find considerable regulator heterogeneity which in turn depends in part upon the specific training and experience of individual regulators

efficient regulation with little information reality in the limit we present a regulatory scheme that converges to ramsey pricing and productive efficiency even if regulators have little information about technology or demand the model has firms selecting prices subject to the regulator s requirement that the firm earn a fair return on capital at today s capital stock and output levels regulators then review later performance and are more likely to request new rate hearings as the firm s return deviates more from the fair return as long as regulators do not review negative returns too fast relative to positive returns these conditions are sufficient for convergence to ramsey prices and productive efficiency public utility regulators generally set prices not rates of return per se these prices however often are meant to achieve approximately some target rate of return but when projecting how prices will affect rates of return regulators are often at the mercy of the firms for economic projections about the effects of various price vectors e g across customer classes upon profits so if realized rates of return deviate from targets regulators may call new rate hearings and they may expedite these hearings if the deviations are large 2 by formalizing these real world observations some rather surprising efficiency results appear suppose that regulators have no knowledge of demands and technologies but can observe past realizations of prices and quantities if the review probabilities are as noted above and satisfy an asymmetry condition then this regulatory process may converge not only to productive efficiency overcoming averch johnson over capitalization effects but to ramsey prices these conclusions are derived from unifying and extending work by bawa and sibley 1980 and vogelsang and finsinger 1979

regulated equity returns a puzzle abstract based on a database of u s electric utility rate cases spanning nearly four decades the returns on equity authorized by regulators have exhibited a large and growing premium over the riskless rate of return this growing premium does not appear to be explained by traditional asset pricing models often in direct contrast to regulators stated intent we suggest possible alternative explanations drawn from finance public policy public choice and the behavioral economics literature however absent some normative justification for this premium it would appear that regulators are authorizing excessive returns on equity to utility investors and that these excess returns translate into tangible profits for utility firms

the multiproduct firm quality choice and regulation a monopolist facing a market of heterogeneous consumers will distort the quality a rray this paper explores three regulatory remedies minimum quality s tandards mqs maximum price regulation mpr and rate of return re gulation rorr that can counteract this distortion mqs and mpr rais e the quality offered to consumers with a low willingness to pay for quality while mqs have no effect on the quality offered to consumers with a high willingness to pay mpr decreases the quality offered to this group if production of high low quality goods is capital i ntensive rorr increases decreases the quality offered to both grou ps copyright 1988 by blackwell publishing ltd

dynamics of rate of return regulation under rate of return regulation a firm s product prices are constrained by the requirement that investors not earn more than an allowable return on the firm s assets this paper examines the dynamic properties of the rate of return regulation process when the regulated firm periodically undertakes new capacity investments our analysis identifies prices that correspond to stationary values of the regulation process it is shown that the underlying depreciation rules for property plant and equipment determine whether these stationary prices will be above equal to or below the long run marginal cost of providing the regulated service we provide conditions under which the rate of return regulation process is dynamically stable so that prices indeed converge to their stationary values the overall efficiency of this regulation method is shown to depend on how well the applicable depreciation schedule matches the productivity pattern of the assets in use this paper was accepted by gerard p cachon accounting

the social shaping of the national science base abstract innovation studies confirm de tocqueville s prediction that continuous technical change in business firms in modern society would require the development in close proximity of publicly funded basic research and associated training the rate and direction of the development of a country s science base is strongly influenced by its level of economic development and the composition of its economic and social activities in other words it is socially shaped

pricing efficiency under rate of return regulation some empirical evidence for the electric utility industry the authors test quasi optimal pricing rules for rate of return regulation for a sample of electric utilities they estimate the regulated cost function and demand equations by class of customer for the sample to yield the cost and demand parameters required to assess the utility rate structures the results indicate that the price structure of electricity by class of customer is not quasi optimal and that welfare improvement might be possible under alternative prices searching for the price structure which satisfies the criteria they find that commercial users rates have been too high relative to residential and to a lesser extent industrial rates they note that commercial uses tend to be less organized and more poorly represented in the rate making process 16 references 8 tables

regulatory and life cycle influences on managerial incentives an important controversy persists in economics concerning the appropriateness of profit maximization as opposed to various competing nontraditional theories of the firm 13 of particular interest has been the comparative relevance of the sales maximization hypothesis suggested by baumol 4 and others a typical methodology employed to empirically analyze the profit versus sales maximization issue has been to question whether the financial rewards of top executives are more strongly influenced by corporate profit or sales performance it is implicitly assumed that the firm has a well defined set of organizational goals and that the structure of executive compensation is designed to provide executives with a consistent set of incentives therefore should profit performance constitute a significant determinant of executive compensation support for the profit maximization hypothesis would be gained on the other hand if executive compensation is closely related to firm sales then the nontraditional sales maximization hypothesis would be supported in an early empirical analysis of the issue mcguire chiu and elbing 14 found that sales and compensation were more highly correlated than were profits and compensation and therefore that the baumol hypothesis seemed most relevant lewellen and huntsman 12 pointed out however that mcguire et al had neglected to consider the deferred and contingent stock options etc elements of executive compensation and in so doing had perhaps biased their analysis against the profit maximization hypothesis by correctly considering the impact of corporate performance on the total compensation of top corporate executives lewellen and huntsman found strong support for the profit maximization hypothesis and no support for sales maximization in fact so convincing were the lewellen and huntsman results that they seemed to resolve the managerial motivation issue in favor of the traditional profit maximization model more recent empirical analyses however have tended to suggest that the issue is far from resolved baker 3 boyes and schlagenhauf 5 and ciscel and carroll 6 have all

quality matters more than quantity asymmetric temperature effects on crop yield and quality grade climate change affects agriculture by altering not only output quantity but also crop quality we quantify the economic impacts of climate change on agriculture through changes in both quantity and quality where quality is measured by crop grades our model controls for methodological issues regarding sample selection aggregation phenology and nonlinearity the empirical application to japanese rice production indicates that temperature effects are asymmetric quantity is especially vulnerable to cold whereas quality is vulnerable to extremely high temperature using these results we simulate the effect of global warming and we find that warming a 3 c increase increases farm revenues by improving yield but decreases revenues as a result of deteriorating quality the net effect is negative suggesting that quality matters more than quantity the negative effect however can be mitigated by shifting cultivation periods and or regions overall our results suggest that the estimated impacts of climate change and adaptation strategies could be severely misleading unless quality is considered

regulatory restructuring and incumbent price dynamics the case of u s local telephone markets prior to the telecommunications act of 1996 many u s states restructured their regulatory framework by replacing rate of return regulation with competition in both the local exchange service and local long distance markets and adopting price regulation price caps and price freezes using a panel data set of incumbent firm prices for three services i investigate whether price regulation and differences in entry conditions affect incumbent operators rate structures i find that competition has prompted a significant amount of rate rebalancing by reducing the amount of cross subsidization present in local telephone markets in addition the added flexibility of price cap regulation speeds the rate rebalance effects of competition

product complementarities capabilities and governance a dynamic transaction cost perspective the organization and governance of the transactions that comprise a bundling arrangement depend on the distribution of capabilities among firms and the amount of time during which the window of opportunity for earning rents is expected to remain open firms engaged in inter firm collaboration must undertake support transactions related to billing marketing customer support and product repair these support transactions differ from the core transactions that have traditionally been perceived as sufficient to provide a product bundle since support transactions create costs of their own the market may turn out to be an expensive means of governing collaborative arrangements undertaken for bundling purposes the telecommunications service sector provides an illustration copyright 1997 by oxford university press

technology transfer and public policy a review of research and theory abstract my purpose is to review synthesize and criticize the voluminous multidisciplinary literature on technology transfer to reduce the literature to manageable proportions i focus chiefly not exclusively on recent literature on domestic technology transfer from universities and government laboratories i begin by examining a set of fundamental conceptual issues especially the ways in which the analytical ambiguities surrounding technology transfer concepts affect research and theory my literature review follows and i emphasize technology transfer s impact and effectiveness i employ a contingent effectiveness model of technology transfer to organize the literature as the model s name implies it assumes that technology effectiveness can take a variety of forms in addition to examining the more traditional effectiveness criteria those rooted in market impacts the model considers a number of alternative effectiveness criteria including political effectiveness capacity building

land resilience and tail dependence among crop yield distributions we propose and empirically test a simple model to shed light on the nature of interactions between weather land quality and yield the conceptual model posits substitution relations between water stress metrics and soil quality as well as a soil conditioned threshold water stress level beyond which soil cannot buffer crop yields the model implies that yield yield dependence should vary as growing conditions vary in comparison with intermediate growing conditions yield yield dependence should strengthen when growing conditions are either very good or very poor county yield data strongly support substitution between soil and benign water availability levels but complementarity between soil and beneficial heat variables our estimated model provides qualified support for the hypothesis that better land is more resilient to water stress we estimate a pseudo copula that nests the gaussian copula finding strong evidence of left tail dependence among yields our formal model and empirical findings corroborate others concerns about the appropriateness of current usda rate setting methodologies which posit constant state conditional rank correlations implicitly assumed by use of the gaussian copula an application to aggregate crop yield rate setting suggests that current methods underprice area yield and whole farm premiums applying our empirical model to medium range weather projections under a climate change scenario for the northern great plains we infer that systemic yield correlations will increase in future years

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

a note on allowed and realized rates of return of the us electric utility industry most empirical investigations of electric utility behavior use the realized rate of return as a proxy for the allowed rate of return we examine the validity of this assumption and investigate the relationship of the allowed and realized rates to the cost of capital between 1973 and 1982 we use two measures of the cost of capital one based on returns to book equity the other derived from a market price of equity while realized and allowed rates were generally higher than the book measure throughout the period both of the rates of return were less than the market price of capital after 1979 we also find firms did not earn their allowed rate of return after 1974 therefore the use of the realized rate as a proxy for the allowed rate in empirical models will lead to biased parameter estimates to help correct this bias we give data for allowed rates

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