multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

costs and factor substitution in the provision of local fire services evidence on costs and factor substitution is presented for a sample of local fire departments in new york state the results suggest that fire service production does not fit either leontief cobb douglas or ces technology in addition exogenous socioeconomic variables are found to significantly affect public sector costs and the estimates of factor price elasticities the findings of relatively low factor demand and substitution elasticities suggest that local governments may have limited flexibility in adjusting their production of fire services to minimize the impact of rising factor prices copyright 1992 by mit press

race and human capital while human capital has been used with some success to analyze recent changes in racial income differences scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill based theories as applied to racial questions the challenge they raise is legitimate put simply if measured skill disparities between the races narrowed throughout the twentieth century why did income ratios first begin to converge in the 1960 s in this paper i address this question relying on some unexploited census data by race on education literacy occupations and income using these data that begin with the 1890 census i present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts in addition to reconciling the apparently inconsistent skill and income series these income ratios offer a very different historical record than many economists believe to have been the case to cite a prominent example gunnar myrdal s classic work 1944 saw the economic position of his contemporary black america not only as dismal but made even more so by its sense of hopelessness given the absence of any hint of progress or change while myrdal s pessimism is understandable it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men

scientific basis for the greenhouse effect the international community may reach agreement to limit carbon emissions as early as i 992 when brazil will host a negotiating convention on climate change europe and japan have already made commitments to place ceilings on future emissions at or below present rates because the cost of switching to alternative fuels could be high with profound implications for long term economic growth especially in developing countries policy action must be based on the view that the science of the greenhouse effect is compelling this essay considers the scientific logic and evidence for the effect from the viewpoint of an economist it draws heavily on the findings of the intergovernmental panel on climate change ipcc i will stress that both the science and the policy discussion so far including by ipcc have focused insufficiently on effects in the very long term on the order of 250 to 300 years

the efficiency of the spanish police service an application of the multiactivity dea model in this paper the efficiency of the spanish police service is analysed using data envelopment analysis dea the analysis concentrates on the police activities related to the solving of crimes the theoretical and empirical study of the police production function under this dimension leads to a consideration of the units analysed as centres which carry out their activities with nonidentical technologies and using common inputs accordingly the multiactivity dea model developed by mar molinero journal of the operational research society 47 1996 1273 9 is applied one that is designed to estimate the efficiency of institutions which face several production functions using shared inputs the results demonstrate the important differences that exist between the centres with respect to the distinct activities analysed both as regards the efficiency rates and the factors which determine them

overlapping free trade agreements and international trade a network approach in our work we have analysed the effect of the hub and spoke nature of free trade agreements ftas on trade contrary to previous analyses we have considered the effects of the country s position in the fta network on the bilateral trade of the hub country we have conducted an in depth analysis of the global network of ftas focusing particularly on its evolution in the last 15 years we have utilised a panel data set covering the period 1960 2010 to investigate the effects of the hub and spoke on trade our results show that the countries that are more connected to ftas export more than those that are less involved although not all the partner countries you can connect with are the same an increase in the number of spokes that have no link between them has on average a negative effect on the trade of the hub which indicates that signing ftas with every country is not the optimal strategy for increasing trade however if we consider the way new ftas change the relative position of a country we can see that if new ftas make the country more central or less constrained in the network these new agreements have a strongly positive and significant pro trade effect

economies of scale and economies of scope in multiproduct financial institutions a study of british columbia credit unions this paper investigates the production technology facing computerized credit unions in canada a full system of translog cost equations is estimated in order to test for economies of scale economies of scope and other production characteristics in a multiproduct context the regression results indicate that most of the credit unions in our sample experience significant increasing returns to scale as they expand their level of output there is also evidence of cost complementarity or economies of scope in their mortgage and other lending activities as a result legislation which limits the ability of credit unions to grow and diversify will likely raise the operating costs of this important group of financial institutions additional structural tests of the most general translog specification suggest that none of the restrictive production conditions commonly imposed by other researchers using cobb douglas and ces specifications provide a valid representation of credit union technology the results of many earlier studies are therefore open to question this paper presents a number of structural tests of the production technology facing large computerized credit unions in canada a full system of translog cost equations is estimated using detailed cross sectional data on british columbia credit unions the parameter estimates obtained from our multiproduct specification allow us to test for economies of scale economies of scope and factor substitution unlike many earlier studies the present paper introduces the various outputs as separate variables instead of crudely proxying them with a single output measure such as total assets the total number of loans or the number of depositors by explicitly recognizing the multiproduct nature of the intermediation process we are able to address more interesting production questions and remove some of the bias caused by misspecification and measurement error in simpler approaches the flexible translog specification allows us to estimate the sensitivity of costs to proportionate increases in all outputs economies of scale as well as the cost savings firms realize by producing several outputs jointly rather than specializing in the production of one economies of scope the test results reported in the latter part of the paper suggest that increasing returns to scale exist in almost all of the credit unions in our sample though

production cost structure of us hospital pharmacies time series cross sectional bed size evidence there are current concerns about potential factor substitutions and their implications for factor employments and cost containment in us hospital pharmacies a translog production cost model is estimated for these pharmacies using 1981 9 times series data consisting of seven cross sectional bed size classes per year zellner s joint gls estimation of three factor cost share equations and the parent translog cost function reveals that pairwise factor substitutions are severely limited production is non homothetic occurring in the range of scale diseconomies biased and pure technical change effects dominate the scale augmenting component implications of findings are rationalized in the context of the emerging biopharmaceutical technologies

cost function estimation and quality bias the regulated automobile insurance industry this article explores the implications of endogenous product quality and therefore endogenous output in the empirical estimation of cost functions for regulated automobile collision insurance firms it contains a structural model of such a firm and provides an illustration of the types of biases that can result if data on quality of service are unavailable or otherwise omitted the analysis shows how the directions of biases depend on the nature of the variations in the observed nonquality data a new test suggests that such bias is present in insurance cost functions

fiscal stress and the production of public safety a distance function approach abstract faced with increasing crime rates but nonincreasing budgets local governments are seeking cost saving means of providing public safety this paper investigates a bureaucracy s response to fiscal stress as well as its ability to efficiently substitute civilian for uniformed personnel exploiting duality theory a distance function is used to model technology retrieve information concerning substitutability and shadow prices of personnel and test for cost minimization morishima elasticities are adopted to allow for asymmetry in substitution between types of personnel it is found that the more adverse the public safety environment and budgetary condition the more efficiently resources are allocated

an analysis of returns to scale in public production with an application to fire protection abstract this paper analyzes returns to scale in public production existing studies fail to differentiate among three dimensions of scale service quality the level of governmental activity and the number of people served a fourth dimension economies of scope is need for agencies that provide multiple services this paper provides a formal definition of returns to scale for each dimension this framework is applied to fire protection using a translog cost function with two services fire prevention and fire suppression the results indicate economies of scope increasing returns to quality scale and constant returns to population scale

consumption pollution tradeoffs in an environment vulnerable to pollution related catastrophic collapse abstract this paper considers the consequences of an avoidable risk of irreversible environmental catastrophe for society s optimal long run consumption pollution tradeoffs the risk is assumed to be a nondecreasing function of pollution concentration which evolves as a dynamic environmental renewal process the main objective of the paper is to derive qualitative insights regarding the effects of such risk on optimal management

a model of industrial pollution in a stochastic environment abstract standard models of pollution abatement assume that pollution accumulation occurs in a deterministic pattern as a by product of the production process governmental intervention often occurs in the form of taxation or mandatory abatement controls to reduce inefficiency caused by incomplete markets in this paper we assume that the accumulation effect of pollution may be stochastic due for instance to the random absorption capacity of the ecosystem furthermore we assume that the level of pollution may vary with input use as well as output level we proceed to analyze properties of a policy for efficient social management of competitive firms which generate pollution

the determinants of efficiency in municipal governments this article investigates efficiency in the municipal sector of the region of murcia spain with that aim data of 31 municipalities 69 of the response rate have been collected services analysed are police culture sports green areas refuse collection and water supply ratios of efficiency have been related to other control variables such as economic level size of the municipality decentralization political sign and financial situation a weak positive relation between economic level and efficiency arises some weak evidence also exists that public management of refuse collection is more efficient than private in water supply public management by means of a company controlled by the local government is clearly more efficient than private it also seems that the higher the tax burden the greater the efficiency in providing services

accounting for global warming risks resource management under event uncertainty abstract optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect the uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved taking atmospheric pollution level as the state variable it is found that uncertainty implies the existence of an equilibrium interval within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint the determination of the interval requires no knowledge of the optimal policy in contrast ignoring event occurrence risk implies a single equilibrium level attracting the optimal process from any initial level

uncertainty and irreversibility in groundwater resource management abstract optimal exploitation of renewable groundwater resources when extraction affects the probability of occurrence of an irreversible event is studied the term irreversible signifies that the event occurrence renders the resource obsolete it is found that uncertainty concerning the event occurrence has a profound effect under certainty when the stock level below which the event occurrence has a profound effect the optimal state process converges to a unique equilibrium state under uncertainty when the event occurrence level is unknown we identify equilibrium intervals and show that optimal processes initiated elsewhere converge to a boundary of one of these intervals inside an equilibrium interval the expected loss due to the event occurrence is so high that it does not pay to extract in excess of recharge even though under certainty doing so would be beneficial

the flypaper effect and other anomalies abstract i develop a model in which income both in its own right and as a proxy for other socioeconomic characteristics is an input in the production function for local public services the most obvious example is education though there are other applications as well the comparative statics results from this model yield the following results 1 the observed flypaper effect the tendency for local government to spend a higher fraction of unrestricted grants than income of residents may be due at least in part to the fact that own income but not grants is a substitute for purchased inputs in the technology hence the propensity to spend on purchased inputs out of own income is lower than out of grants 2 the income elasticity of demand for public sector output may be higher than the observed income elasticity of demand for purchased inputs 3 equalization of educational opportunity via wealth neutrality as suggested by feldstein requires major changes in education finance once we recognice the distinction between purchased inputs and output

production of public safety are socioeconomic characteristics of local communities important factors this paper uses the translog cost function and cross section data from florida to investigate the importance of socioeconomic characteristics sec of local communities in the production of public safety the approach used is noteworthy in four respects 1 the underlying production function is specified as an agem production function 2 sec are treated as non purchased fixed inputs 3 two variables are used to proxy sec in estimation and 4 the paper test for the existence of endogenous quality differences in safety it is shown that exclusion of sec from the production cost function of safety leads to misspecification and hence they provide a misleading guide to policy

education achievement in segregated school systems the effects of separate but equal educational achievement in segregated school systems was considerably lower in the black schools than in the white schools economic historians have argued that the racial achievement gap reflected the discriminatory funding of the black schools this paper assesses counterfactually the historical effects of a separate but equal policy of educational finance using cross sectional data from 1930 and 1940 i estimate race specific educational production functions eliminating race differences in inputs supplied by school boards explains 40 50 percent of the racial achievement gap depending on how achievement is measured the remainder appears to reflect the impact of family background on achievement of which the most important effect was adult black illiteracy a legacy of slavery and educational backwardness in the late 19th century the paper also shows how school boards marginal valuation of black achievement can be recovered from the production function estimates compared to preferences that would have led them to voluntarily practice equality southern school boards judged black achievement to be worth roughly half the value they placed on white achievement this abstract was borrowed from another version of this item

elasticity of factor substitution in police agencies evidence from florida a multiproduct translog cost function is estimated and used to calculate elasticities of factor substitution in the production of police services the data come from florida s municipal police departments and are for 1982 1983 it is found that substitution elasticities between any pair of inputs in police production are significantly different from unity this result is inconsistent with the cobb douglas production function a functional form that has been extensively employed in empirical studies of police production

additive general error models for production cost and derived demand or share systems many empirical studies of production specify a deterministic model of the firm derive the implied behavioral equations input demand or share system and then embed this system in a stochastic framework by tacking on linear error terms in contrast this paper proposes general error models gems in which the error specification is an integral part of the optimization model these models are the statistical embodiment of stigler s view that apparent observed inefficiencies reflect the investigator s ignorance of the true optimization problem additive gems are proposed and interpreted specification tests indicate that a translog additive gem is superior to the standard translog specification

costs of reducing global carbon emissions po rojecting the costs of reducing carbon emissions is extremely important and exceedingly difficult such projections are an integral component of cost benefit analyses of alternative policies for example for the global climate policy analysis described by william nordhaus in this symposium moreover the nature of the climate change problem dictates that costs be incurred long before benefits can be realized or accurately measured consequently the political spotlight predictably focuses on the cost estimates whenever specific policy options are contemplated projecting the costs of reducing carbon emissions is difficult because many assumptions must be made about how the world will evolve over a very long period of time with and without a control program typically some of these assumptions like population growth are taken from outside sources other factors like the response of energy demand to changes in economic output or energy prices are the result of modeling the behavior of economic actors in response to exogenous stimuli considerable uncertainty exists about both the exogenous factors and the best way to model the behavioral responses the global nature of the climate change problem adds yet another complication to the cost analysis scientists have concluded that it is the global concentration of carbon in the atmosphere that influences climate moreover since carbon in the atmosphere gets mixed more or less uniformly emissions anywhere change concentrations everywhere but with a long lead time current global carbon emissions are estimated to be only about 4 percent of the stock of co2 in the atmosphere attributable to human activity and about