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

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

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

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

ownership and environmental regulation evidence from the european electricity industry abstract the paper investigates how ownership affects the environmental performance in developed countries where environmental regulation is introduced in the form of market based instrument by looking at a cross country panel dataset of 29 power markets around europe over the period 1990 2012 we find empirical evidence that an increase of public ownership as measured by the oecd etcr index is associated with a reduction of both greenhouse gas emissions and carbon intensity we also find that the implementation of the european emissions trading scheme ets had a limited impact on emissions reduction due to lax allocation of allowances the positive effect of public ownership on environmental performance has been significant even after the introduction of the ets giving additional incentives to mitigate emissions when the ets cap was not stringent enough this evidence suggests that government control over power companies in europe can has created idiosyncratic incentives to improve environmental quality complementing environmental regulation in the achievement of environmental goals when the latter was absent or sub optimal

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

the capital structure and investment decisions of the small owner managed firm some exploratory issues in the burgeoning literature on small firm financing the problem of underidentification in respect to the supply of and demand for capital has not been fully resolved in an attempt to progress this issue the current paper looks at some of the issues influencing the demand for finance in small firms which are owner managed the paper is primarily exploratory in nature and argues that a greater emphasis might usefully be placed on the cost of capital dimension in future research into small business financing in particular it is suggested that where the objective of an owner manager is to maintain control of the firm interdependent investment and financing strategies may be chosen to control the small firms cost of capital this in turn indicates that the tendency for some small firms to invest sub optimally and exhibit slower than average growth may not be primarily determined by limitations on their supplies of finance on the demand side it may well be that in addition to equity aversion a suboptimal capital structure decision is made in the form of a reduced demand for debt in other words given the level of equity that an owner manager chooses debt may not be fully expanded to the capacity limit consistent with value maximisation

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

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

impact of ownership on the international involvement of smes this paper analyses the relationship between the internationalisation strategies of smes and types of ownership different types of ownership affect firms and this in turn will influence the internationalisation strategy adopted using a sample of spanish smes our results show that internationalisation is negatively related to family ownership and positively related to corporate ownership we have also observed that the presence of a corporate blockholder in family firms encourages internationalisation these results support the idea that ownership type influences the decision to internationalise

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

access price regulation investment and entry in telecommunications abstract we consider a model with a vertically integrated monopolist network provider who faces rival operators in the retail market we examine the network operator s incentives for infrastructure investment we find that investments are below the social optimum even when there is no regulation and access price regulation further reduces investment incentives we show that the underinvestment problem may have negative effects on the viability of competition access price regulation does not necessarily reduce the likelihood of foreclosure and in the presence of regulation rivals are most likely to be foreclosed when they would bring highest benefits to consumers

openness and wage inequality in developing countries the latin american challenge to east asian conventional wisdom the experience of east asia in the 1960s and 1970s supports the theory that greater openness to trade tends to narrow the wage gap between skilled and unskilled workers in developing countries in latin america since the mid 1980s however increased openness has widened wage differentials this conflict of evidence is probably not the result of differences between east asia and latin america instead the conflict is probably the result of differences between the 1960s and the 1980s specifically the entry of china into the world market and perhaps the advent of new technology biased against unskilled workers

intergenerational succession in small family businesses borrowing constraints and optimal timing of succession small family businesses differ from non family businesses in that their functioning is not independent of the life cycle of the owner operator and in that other family considerations sometimes lead to sub optimal managerial decisions from the point of view of the business this is why a smooth intergenerational succession is essential to the profitability of the business and to the welfare of the family as a whole succession within the family involves first of all the choice of a successor the choice is affected by birth order age differentials and qualifications of potential successors choosing a successor means reaching an agreement about the timing of succession and income distribution before and after succession this paper focuses on the decision of the business operating family when to bring in the designated successor a utility maximizing time is shown to differ from the income maximizing time only in the presence of binding borrowing constraints such constraints are likely to enhance an earlier succession in order to use the successor s accumulated off business assets to ease the constraints and to increase future business income due to earlier accumulation of business specific human capital by the successor an additional model shows that the successor will not be willing to wait indefinitely for the formal ownership transfer of the business because of the risk of being disinherited in some future period the consequences of possible strategic behaviors of both the owner and potential successors on the results of these models is discussed informally

legal unbundling can be a golden mean between vertical integration and ownership separation abstract we study an industry in which an upstream monopolist supplies an essential input at a regulated price to several downstream firms legal unbundling means in our model that a downstream firm owns the upstream firm but this upstream firm is legally independent and maximizes its own upstream profits we allow for non tariff discrimination by the upstream firm and show that under quite general conditions legal unbundling never yields lower quantities in the downstream market than ownership separation and integration therefore typically consumer surplus will be largest under legal unbundling outcomes under legal unbundling are still advantageous when we allow for discriminatory capacity investments investments into marginal cost reduction and investments into network reliability if access prices are unregulated however legal unbundling may be quite undesirable

vertical economies in electric power evidence on integration and its alternatives abstract the restructuring of the electric power industry raises questions about the possible sacrifice of economies previously secured by integrating generation with downstream transmission and distribution this study utilizes a data set of u s electric utilities that differ widely in their degree of vertical integration in order to model estimate and measure such economies cost savings from vertical integration are found to be quite substantial for all but the smallest utilities and are largest for those that are nearly fully integrated the study goes on to investigate alternatives to sources of and determinants of vertical integration among other findings it appears that some holding companies achieve economies comparable to those from vertical integration

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

changes in the world distribution of income between 1950 and 1977 trends in the world distribution of income are much discussed and philosophised about the issue of increasing economic inequality among nonsocialist countries in the post war period is central to the debate about the international economic order in i969 the pearson commission report was already pointing to the widening gap between the developed and developing countries as a central issue of our time and was proposing the reduction of that gap as the main objective of international co operation according to that report gnp per capita had increased between i960 and i967 at annual rates of 2 5 and 3 6 in developing and developed countries respectively morawetz i978 found that the gap between the two sets of countries rose from i 2 6 fold in i950 to i3 2 fold in i975 other authors see a more complicated picture atkinson i975 for instance has argued that although the share of poor countries in world income probably declined between i950 and i970 that of the countries at the middle of the world distribution probably increased 2 what may be a mere assessment of relative growth performances among nonsocialist countries becomes a basic theoretical element in the radical stream of economic literature for authors like amin i974 emmanuel i972 and frank i978 the capitalist mode of development necessarily leads to the rich countries of the centre becoming richer and poor countries of the periphery becoming poorer in a degree depending on their involvement in international trade for them a widening gap between developed and developing countries is simply the statistical confirmation of an unavoidable consequence of the national and international capitalist system in the latter perspective the issue at stake is of such importance that the contrast between the abundance of theoretical literature and the lack of empirical work is striking the few existing studies of changes in world distribution provide an inadequate picture intra country income distributions are not taken into account observation periods do not exceed i5 years 8 for andic and peacock i96i and for beckerman and bacon i970 i5 for kirman and tomasini i969 socialist as well as some non socialist countries are excluded and national incomes are converted to u s dollars at official exchange rates 3 finally none of these studies covers the i970s although several shocks which might have affected world distribution occurred during that decade for the non socialist countries to which they refer the andic peacock and beckerman bacon studies found the gini coefficient almost constant over

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

a unified systems perspective of family firm performance abstract theory and practice indicate that in family influenced firms the interaction of the family unit the business entity and individual family members create unique systemic conditions and constituencies that impact the performance outcomes of the family business social system habbershon and williams fam bus rev 12 1999 1 have suggested that these unique systemic family influences can be captured through an analysis of the resources and capabilities of the organization in this paper we pursue their line of thinking and more specifically examine the systemic relationship of resources and capabilities as a source of advantage or constraint to the performance outcomes for family influenced firms the idiosyncratic firm level bundle of resources and capabilities resulting from the systems interactions are referred to as the familiness of the firm wealth creating performance for family influenced firms is a function of the distinctive familiness generated by the family business system the performance model focuses on a particular subset of family influenced firms whose performance goal is transgenerational wealth and wealth creation potential we refer to those families that meet this premise as enterprising families we develop a unified systems model of performance that links the resources and capabilities generated in the enterprising families system with their potential for transgenerational wealth creation

global inequality and international trade the paper analyses the effect of widespread trade liberalisation on global income inequality the analysis of the trend in global inequality during 1981 97 presented in the first part of the paper shows that the apparent growth of income inequality among countries conceals a process of convergence some developing countries achieved significantly faster economic growth than the advanced industrialised countries and though small in number they actually account for a majority of the population of the developing world thus international inequality i e the inequality of distribution of per capita incomes among the world s population in fact declined even though the inter country income inequality increased the analysis in the second part of the paper shows i that while improved trade performance did have a stimulating effect on growth performance of countries trade liberalisation had extremely varied effects on trade performance across countries and ii that the distribution of benefits and costs of trade liberalisation across countries has been such as to reduce international inequality without affecting inter country inequality copyright 2004 oxford university press

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

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

small firm growth access to capital markets and financial structure review of issues and an empirical investigation this article investigates the financial structure of small firms with an emphasis on growth and access to capital markets neo classical economic life cycle pecking order and agency theory perspectives are reviewed in order to formulate testable propositions concerning levels of long term short term and total debt and liquidity up to date financial data were collected from the u k private database for a large sample comprising of both listed and unlisted small firms regression results indicate significant relationships between financial structure and profitability asset structure size age and stock market flotation but not growth except when rapid and combined with lack of stock market flotation analysis of stock market flotation as an interactive dummy reveals major differences between listed and unlisted small firms the results indicate that the variety of financial structures observed in practice may reflect rational trade offs of various costs on the part of small firm owner managers but that the over reliance on internally available funds and the importance of collateral in the case of unlisted small firms are likely to be major constraints on economic growth

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

capital structure and investment in regulated network utilities evidence from eu telecoms this article analyzes the relationship between firm financial and investment decisions and regulatory outcomes in network industries where regulatory opportunism is often viewed to lead to underinvestment we develop a model to describe the effect of an increase in leverage on regulated rates retail as well as wholesale and company investment we then test the model s predictions using a panel of 15 eu public telecommunication operators ptos over the period 1994 2005 our results show that the data cannot reject the model s predictions that leverage positively affects regulated wholesale and retail rates as well as the ptos investment rate moreover since leverage does affect wholesale charges that alternative operators pay to access to the incumbent s network infrastructure we also find that an increase in leverage is followed by a decrease in the number of competitors and by an increase of the incumbent s market share this suggests that the use of debt to discipline the regulator s lack of commitment within a vertically integrated network industry may somewhat impair or delay retail market competition but has a favorable counterpart in mitigating the underinvestment problem

economic openness and green gdp since the early 1990s there have been several attempts to develop national income accounting systems which recognize the negative impacts of environmental degradation and income inequalities on economic welfare collectively these bgreenq gross domestic product gdp studies have generated a wealth of new time series data sets which can be used to reexamine the links between gdp and a host of factors commonly included in traditional economic growth models in this paper we develop models of green gdp growth and the gap between traditional and green gdp by using a panel data set from eight countries spanning 30 50 years in both the growth and gap models the effects of economic openness are tested we find strong and robust results suggesting a negative nonlinear correlation between openness and green gdp growth and a positive nonlinear correlation between openness and growth of the gap between traditional and green gdp while green gdp accounting systems are still in their infancy our paper nonetheless implies that once these more comprehensive measures are fully developed empirical models which explore factors contributing to the growth of economic welfare over time should be reexamined d 2005 elsevier b v all rights reserved

ownership unbundling and investment in electricity markets a cross country study abstract this paper is the first to explicitly test for the presence of a trade off between static and dynamic efficiency and a trade off between vertical economies and competition in a regulated industry the electricity industry we show for 16 european countries over the period 1998 2008 that higher electricity end user prices in a country subsequently lead to larger aggregate investments in the capital stock i e in generation distribution and transmission assets moreover there is a trade off between vertical economies and competition ownership unbundling and forced access to the incumbent transmission grid increases competition but come at the cost of lost vertical economies generally we find that regulation that affects only the market directly like the establishment of a wholesale market or free choice of suppliers increases aggregate investment regulation however that adversely affects the incumbent directly like ownership unbundling decreases aggregate investment spending

variants of agency contracts in family financed ventures as a continuum of familial altruistic and market rationalities abstract funding is a critical dimension of new creation although instances of family involvement in new venture financing are common ironically their role has been largely ignored in much of the mainstream business and economics literature when family members invest in the ventures of other family members they must make many choices either explicitly or implicitly about organizational form and governance consequently the governance of these exchange relationships tends to be highly variable this paper explores the primary rationalities governing the exchange relationships in family investment decisions during the early stages of new venture creation it presents activities as variants of agency contracts occurring within a continuum of familial altruistic and business market rationalities existing venture capital theory is extended through the introduction of rationalities and more comprehensive models of decision making

the measurement of vertical economies and the efficient structure of the electric utility industry in this article the concept of multiproduct cost economies is modified to the case of production at vertically related stages to derive an explicit and general measure of economies of vertical integration the utility of this measure is then demonstrated by estimating the vertical cost structure of the electric utility industry and by carrying out the calculations necessary to determine the magnitude of vertical economies in this industry the results provide empirical evidence of the existence of significant economies of vertical integration between the generation and transmission distribution stages of electricity supply copyright 1991 by blackwell publishing ltd

capital structure and small public firms abstract most analyses of capital structure from both a theoretical and an empirical viewpoint focus on large corporations as a result of data availability problems empirical studies deal with large corporations theoretical frameworks typically use illustrations and casual empirical evidence involving large firms only limited amounts of research focus on small growing entrepreneurial corporations and the factors affecting the capital structures of these firms much of current theory in capital structure deals with factors that are not easily and objectively quantified by outside researchers these factors include items such as expected bankruptcy costs information asymmetries between management and the financial marketplace agency costs of monitoring management and managerial risk preferences this paper reports on a survey sent to over 400 small high growth corporations questions on the survey were derived from various strands of the theoretical financial literature on capital structure over 27 of the surveys were completed and returned and give insight into the motivations and preferences of chief financial officers from over 100 small high growth corporations examination of the responses shows that contrary to financial theory factors dealing with bankruptcy costs agency costs and information asymmetries play little if any major role in affecting capital structure policy rather the responding financial officers seem to follow a pecking order in financing their firm s needs use internal cash as much as possible issue debt if necessary issue equity only as a last resort while being concerned with market conditions and their own preferences the following are implications of these findings first financial theory which is more and more focusing on micro factors while still theorizing efficient macro markets may be incorrectly ignoring the effect that management risk perceptions and preferences play in making capital structure decisions thus additional work is necessary to include the management in theories of capital structure second this survey allows outsiders to peer inside the managerial black box and gain insight into the factors that motivate and impact capital structure decisions it provides an empirical basis to help determine which influences are important third managers of entrepreneurial firms and investors in venture capital can compare their own beliefs perceptions and motivations against the mean results obtained from our sample of high growth firms

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

determinants of investment under incentive regulation the case of the norwegian electricity distribution networks investment in electricity networks as regulated natural monopolies is among the highest regulatory and energy policy priorities the electricity sector regulators adopt different incentive mechanisms to ensure that the firms undertake sufficient investment to maintain and modernise the grid thus an effective regulatory treatment of investment requires understanding the response of companies to the regulatory incentives this study analyses the determinants of investment in electricity distribution networks using a panel dataset of 129 norwegian companies observed from 2004 to 2010 a bayesian model averaging approach is used to provide a robust statistical inference by taking into account the uncertainties around model selection and estimation the results show that three factors drive nearly all network investments investment rate in previous period socio economic costs of energy not supplied and finally useful life of assets the results indicate that norwegian companies have to some degree responded to the investment incentives provided by the regulatory framework however some of the incentives do not appear to be effective in driving the investments

the influence of family ownership dispersion on debt level in privately held firms the aim of this article is to investigate the financing behavior of privately held firms along the dispersion of family ownership drawing on the socio emotional wealth perspective we argue that debt levels are contingent on the degree of ownership dispersion among family members based on a sample of 2451 observations in a 10 year time frame our results reveal the existence of an inverted u shaped relationship between debt level and intra family ownership dispersion we demonstrate that this relationship is moderated by the generational involvement that inverts it in later generations

financing new venture exporters this paper investigates the demand for and access to financing for young small and medium sized enterprises smes the work compares theoretically and empirically two sets of new firms those that export and those that do not export as to the frequency with which they seek and obtain external financing the work hypothesizes that new growth firms and new exporter firms are especially likely to seek external financing yet less likely to obtain financing empirical findings confirm these expectations demonstrating that young growth firms were more likely than non growth firms to seek all forms of capital and exporters were particularly likely to apply for equity and trade credit commercial lenders were less likely to approve loan applications from early stage growth firms and especially so for applications from young growth oriented sme exporters the implications of these results for research and public policy are discussed

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

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

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

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

the 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

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

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

succession financing in family firms business succession is one of the primary management challenges for family firms however many family firms fail at this task because of financial issues although a vast number of studies have investigated the succession process research thus far has failed to determine how and why family firms select particular forms of financing for succession related expenditures accordingly this study conceptually and empirically investigates succession financing we introduce a conceptual framework that investigates the reasons behind an owner manager s intent to use debt for succession financing specifically our model accounts for general and succession related personal factors however we also include a set of firm specific financing behavioral controls in our research the empirical results are derived from a sample of 187 german family firms and the results highlight financial knowledge attitudes succession experience and succession planning as significant determinants of the owner managers debt usage intentions the implications and avenues for future research are discussed

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

bootstrapping in small firms an empirical analysis of change over time abstract while bootstrapping is widely utilized as a strategic practice of small firms and has been regarded in the entrepreneurship literature as an important topic of study little has been done to link bootstrapping to organizational theory this paper presents hypotheses and an empirical study regarding bootstrapping and organizational development for small firms the results of the study indicate that different types of bootstrapping are utilized at different periods in the life of a small firm and that the methods utilized coincide to some extent with organizational theory predictions

capital structure decision making a model for family business abstract most theoretical and empirical studies of capital structure focus on public corporations only a limited number of studies on capital structure have been conducted on small to medium size enterprises smes and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners theory indicates that there is a complex array of factors that influence sme owner managers financing decisions recent family business literature suggests that these processes are influenced by firm owners attitudes toward the utility of debt as a form of funding as moderated by external environmental conditions e g financial and market considerations a number of other factors have been shown to influence financing decisions including culture entrepreneurial characteristics entrepreneurs prior experiences in capital structure business goals business life cycle issues preferred ownership structures views regarding control debt equity ratios and short vs long term debt age and size of the firm sources of funding for growth attitudes toward debt financing issues relating to independence and control and perceived risk and attitudes toward personal risk although these factors have been identified until now there does not appear to have been any attempts to develop empirically based models that show relationships between these factors and family business owners financing decisions utilizing theories derived from divergent disciplines this study develops an empirically tested structural equation model of financing antecedents of family businesses participants of our study involved a random sample of 5000 business owners who were mailed a 250 item australian family and private business questionnaire developed specifically for this investigation notably our findings reveal that firm size family control business planning and business objectives are significantly associated with debt small family businesses and owners who do not have formal planning processes in place tend to rely on family loans as a source of finance however family businesses in the service industry e g retailers and wholesalers are less likely to use family loans as are those owners who are planning to achieve growth through new products or process development use of capital and retained profits is likely for family businesses planning to achieve growth through an increase in sales but less is likely for family businesses in the manufacturing sector and lifestyle firms in addition debt and family loans are negatively related to capital and retained profits equity is a consideration for owners of large businesses young firms and owners who plan to achieve growth through increasing profit margins however equity is less likely to be a consideration for older family business owners and owners who have a preference for retaining family control our findings suggest that the interplay between multiple social family and financial factors is complex in addition our findings indicate the importance of utilizing theories that also help to explain behavioral factors e g owners needs to be in control that affect financial structure decision making processes practitioners and researchers should consider the dynamic interplay among business characteristics e g size or industry behavioral aspects of business financing e g business objectives and financial factors e g gearing levels when working with and researching family enterprises

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

capital structure decisions during a firm s life cycle the study reported here examines the financing choices of small and medium sized firms i e those most vulnerable to information and incentive problems through the lens of the business life cycle we argue that the controversy in the empirical literature regarding the determinants of capital structure decisions is based on a failure to take into account the different degrees of information opacity and consequently firms characteristics and needs at specific stages of their life cycles the results show that in a bank oriented country firms tend to adopt specific financing strategies and a different hierarchy of financial decision making as they progress through the phases of their business life cycle contrary to conventional wisdom debt is shown to be fundamental to business activities in the early stages representing the first choice by contrast in the maturity stage firms re balance their capital structure gradually substituting debt for internal capital and for firms that have consolidated their business the pecking order theory shows a high degree of application this financial life cycle pattern seems to be homogeneous for different industries and consistent over time

deregulation market competition and innovation of utilities evidence from japanese electric sector this paper explores the determinants of electric utility innovation and examines the impact of electric sector deregulation and market competition on it using a balanced panel database of nine japanese utilities from 1978 to 2014 both input r d expenditure and output patent application number and patent quality aspects of innovations are examined the empirical results indicate that deregulation and market competition decrease the former but increase the latter these results are followed by a discussion on why this scenario occurs the results also suggest that after deregulation utilities focus more on short term business oriented r d projects hence we call for governments to support long term public oriented and environmental research in the electric sector

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

family ownership altruism and agency costs in australian small and medium sized enterprises given the continuing uncertainty about whether family firms enjoy lower agency costs this article hypothesizes that a combination of the effects of family ownership altruism and self control is instead at play to begin with family ownership can indeed reduce agency costs through better aligning the interests of owners and managers this is a determining effect in that it independently mitigates one source of agency problems however altruism combined with self control problems arising from the highly concentrated ownership often found in family firms can also increase agency costs this is an embedding effect as it is rooted in the personal relationships within the family firm using the business longitudinal database compiled by the australian bureau of statistics on small and medium sized enterprises smes we find that for larger smes those with 20 200 employees the gains in lower agency costs arising from family ownership are almost completely offset by the losses from altruism and the l

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

the latent demand for bank debt characterizing discouraged borrowers concerns that small firms encounter credit constraints are well entrenched in the literature despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected however many firms may be discouraged from applying for fear of rejection these businesses are the focus of this paper based on responses to a large scale postal survey of uk small and medium sized enterprises smes we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied more particularly we observe a number of distinguishing characteristics of discouraged borrowers relative to applicants these include strategy sector prior entrepreneurial experience and banking relationships the implications of our findings for policy and future research are briefly discussed

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

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

the arguments for and against ownership unbundling of energy transmission networks abstract the question this paper addresses is what is the evidence for the superiority of the ownership unbundled transmission models i e uk or nord pool hybrid over other models we assess the theoretical costs and benefits of ownership unbundling and judge these to be generally positive though these may be potentially offset by the actual reorganisation costs of the ownership unbundling process next we assess the empirical evidence this is in two forms econometric evidence from samples of countries and case studies of reforms in particular jurisdictions the econometric evidence is weak due to problems with simultaneity of reform steps and a lack of studies but the case study evidence is compelling we conclude with a discussion of the issues faced by countries considering implementing ownership unbundling we conclude that evidence seems to be that ownership unbundling of transmission is a key part of energy market reform in the most successful reform jurisdictions

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

strategic investments with spillovers vertical integration and foreclosure in the broadband access market abstract we analyse competition between two retailers of broadband access when they differ in their ability to offer value added services one retailer is vertically integrated and controls the input market for local access this firm invests to increase the input quality upgrading to broadband before an access price regulation is set we first show that access price regulation may lower consumer surplus and welfare if retailers do not differ too much second if the integrated firm s ability to offer value added services is much higher than that of the rival the integrated firm uses overinvestment as an alternative foreclosure tool

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

explaining international and intertemporal variations in income inequality this paper explores the propositions that income inequality is relatively stable within countries and that it varies significantly among countries a new and expanded data set provides broad support for both propositions drawing on a political economy and capital market imperfection arguments to explain the intertemporal and international variation in inequality the empirical analysis shows that the predicted variables associated with the first argument a measure of civil liberties and the initial level of secondary schooling and the second argument a measure of financial depth and the initial distribution of land are indeed important determinants of inequality this paper explores two propositions regarding income inequality they are first income inequality is relatively stable within countries and second it varies significantly across countries to illustrate note that the gini coefficient in india remained almost constant for forty years 1951 92 with mean 32 6 and standard deviation 2 0 2 in contrast the variation in gini coefficients across countries is large 61 9 in honduras in 1968 compared with 17 8 in bulgaria in 1976 if substantiated these propositions have potentially significant implications for poverty the significance of the first is obvious barring any fundamental socio political change poverty reduction will depend crucially on the rate of economic growth given this the significance of the second is that in inegalitarian economies the poor will enjoy a smaller share of any national increment in income than in more egalitarian ones drawing on a new and expanded data set on inequality deininger and squire 1996a the first of the paper s three sections conducts standard statistical tests of the two propositions the sample comprises 573 observations on the most common measure of inequality the gini coefficient for 49 developed and developing countries covering the period 1947 94 the results broadly confirm our two propositions specifically analysis of variance anova shows that about 90 of the total variance in the gini coefficients

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