two dimensional efficiency decomposition to measure the demand effect in productivity analysis this paper proposes a two dimensional efficiency decomposition 2ded of profitability for a production system to account for the demand effect observed in productivity analysis the first dimension identifies four components of efficiency capacity design demand generation operations and demand consumption using network data envelopment analysis network dea the second dimension decomposes the efficiency measures and integrates them into a profitability efficiency framework thus each component s profitability change can be analyzed based on technical efficiency change scale efficiency change and allocative efficiency change an empirical study based on data from 2006 to 2008 for the us airline industry finds that the regress of productivity is mainly caused by a demand fluctuation in 2007 2008 rather than technical regression in production capabilities

a fresh look at the productivity and efficiency changes of uk airlines this article uses the bootstrapped malmquist index methodology to measure and test the extent of efficiency and productivity changes in the uk airline sector the aim of the bootstrap method is to overcome the statistical limitations of the data envelopment analysis dea method generally used to measure the distance functions of the malmquist index in applying the method we use input output data on a sample of major uk airlines for the period 2004 2007 results showed that most airlines have witnessed significant decrease in their productivity efficiency scale and technology measures using a second stage tobit regression this article attributed the sources of productivity and efficiency changes to factors such as stage length load factor and airline size this article also discussed the negative impacts of oil price using illustrations from the uk and other international airlines

reward structures in a planned economy some difficulties there is an extensive literature on the socially optimal pricing policy for public firms but much less attention has been paid to the vital question of how managers of public firms can be induced to follow such policies the politicians or planners who seek to control a public enterprise will be less well informed about cost and demand functions than the manager and there is no reason to suppose that managers are altruists thus with asymmetrical information and selfish managers there is a significant control problem recently tam 1981 has suggested an ingenious iterative incentive mechanism designed to surmount this problem this note a argues that her negative price incentive scheme npis will not achieve its objective of guiding managers to price at marginal cost2 and b compares npis with variants of the performance index pi proposed by scott 1952 1978 and finsinger and vogelsang 1980a 1981 tam s proposal is that the manager of a public firm be paid a bonus b each period

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

a caveat on the measurement of productive efficiency abstract the correspondence between used performance measures and enterprise objectives such as profit maximization and cost minimization is fundamental for manufacturing companies this paper identifies and critically examines a minimal set of relevant properties that a productivity index needs to satisfy to rightly assess performance development of a decision making unit commonly applied and suggested productivity measurement techniques such as partial efficiencies total factor productivity tfp index number approaches integrated partial efficiencies and operational competitiveness ratings are analyzed in order to assess the alignment with superior objectives there is a considerable spread in the results of this class of models and the interpretation may prove difficult or misleading as these apparently less complicated productivity measures increasingly are employed as a component in evaluation of manufacturing efficiency the question is of high managerial relevance in particular the paper points out inconsistencies with properties related to commensurability monotonicity and implications of maximizing behavior based on this viewpoint issues such as the consistency with profit maximization will be shown extra interest the paper also provides a critique of previous work in non parametric efficiency analysis where properties have been postulated or based on other arguments the findings suggest that there is no globally superior measurement technique to be found in this class and that care should be taken when evaluating managerial performance not to penalize rational behavior

scale economies x efficiency and convergence of productivity among bank holding companies abstract are the less productive banks catching up to the more productive ones and if so how quickly and by what means the objective of this study is to answer these questions by looking for convergence in productivity among bank holding companies bhcs in the us past research has identified two major factors governing productivity in the banking sector scale economies and x efficiency if the gains from scale economies decline with firm size and if the only difference between bhcs lies in their initial size then the initially smaller bhcs should eventually catch up to the initially larger ones because the former tend to grow more quickly however the findings from this study do not support this hypothesis of absolute convergence indeed the findings show strong evidence for conditional convergence which means that the steady state productivity to which a bhc is converging is conditional on the bhcs own level of x efficiency conditional convergence implies that initial differences in x efficiency among bhcs can between them create permanent differences in steady state productivity

nonparametric analysis of technical pure technical and scale efficiencies for food crop production in east java indonesia abstract nonparametric analysis of technical efficiency for irrigated farms in the madiun regency in the west central part of east java indonesia is conducted using linear programming techniques this procedure allows the relative technical efficiency for each farm to be determined and for inefficiencies to be decomposed into pure technical inefficiency and scale inefficiency and does not require restrictions or assumptions regarding functional form to be placed on the data farmers in madiun generally are efficient relative to each other farmers operating inefficiently do so more often because of scale inefficiencies rather than pure technical inefficiencies a majority of the farms operate in the region of decreasing returns to scale rather than increasing returns to scale farmer age the level of diversification of cropping activities and high school education were found to be related to technical efficiency in the rainy season under irrigated conditions other socioeconomic factors were not statistically significant the results imply that inefficient farms use excessive levels of inputs particularly nitrogen fertilizer this is perhaps due to the lingering effects of past input subsidization policies particularly of fertilizers in indonesia or to risk reducing behavior the results also imply that current government policies to encourage diversification of cropping practices in java may lead to greater technical inefficiencies in production in addition extension education targeted to younger farmers with low levels of formal education would improve efficiency

time varying discrete monetary policy reaction functions a novel dynamic ordered probit model with time varying parameters is proposed to estimate a monetary policy reaction function with narrative based monetary indicators the estimation and inference are carried out using the bayesian simulation based approach empirically these are the following findings first there is strong evidence in support that the central bank in taiwan responds counter cyclically to inflation but weaker if any evidence to economic growth secondly the persistence and consistence in policy making of the monetary authority is confirmed by the significance of the positive autoregressive coefficient although not all the estimates of the tvp dop model provide at least partial support of time varying parameters finally the results indicate that studies of the discrete monetary policy reaction functions without explicitly considering the possible dynamics inherent in the time series data and time variations in model parameters may be inappropriate if not incorrect

measurement of total factor productivity growth and biases in technological change in western australian agriculture this study investigates productivity growth in broad acre agriculture in western australia tornqvist indices of three output groups crops sheep products and other and five input groups livestock materials and services labour capital and land are constructed and discussed indices of total output and total inputs are also derived and used to form an index of total factor productivity that is observed to grow at an average annual rage of 2 7 the input and output indices are also used in the estimation of output supply and input demand equations derived from a flexible profit function the generalized mcfadden functional form is used because it is possible to impose global curvature upon it without loss of flexibility asymptotic chi square tests reject the hypotheses of hicks neutral technical change in inputs and in outputs technical change is observed to be materials and services saving relative to the other input groups and also appears to favour wool and sheepmeat production relative to the other output groups

a nonparametric method to estimate a technical change effect on marginal abatement costs of u s coal power plants the literature usually assumes that technical change reduces marginal abatement cost however recent results suggest that precisely the opposite occurs this paper proposes a nonparametric method to determine the effect of technical change on marginal abatement cost the method decomposes nox marginal abatement cost changes in 2000 2004 and in 2004 2008 for 325 boilers operating in 134 u s bituminous coal power plant into technical and non technical change effects we find that technical change reduces the nox marginal cost about 28 3 in 2000 2004 and 26 5 in 2004 2008 however more stringent regulations enacted the nox budget program results in lower nox emission levels as plant operators install more advanced nox abatement equipment which in turn causes an overall increase in marginal abatement cost

ldc agriculture nonparametric malmquist productivity indexes abstract this paper examines changes in agricultural productivity in 18 developing countries over the period 1961 1985 we use the nonparametric output based malmquist index to examine whether the results from such an approach confirm results from other methods that have indicated declining agricultural productivity in less developed countries ldcs the results confirm previous findings indicating that at least half of these countries have experienced productivity declines in agriculture we also found that those countries that tax agriculture most heavily had the most negative rates of productivity change

regulation by price adjustment the regulatory price adjustment process originally proposed by vogelsang and finsinger has been shown to be vulnerable to strategic manipulation by the regulated firm this article proposes several modifications to that scheme which improve its performance and broaden its applicability inclusion of a monopoly franchise market and the firm s past prices and earnings in the price adjustment constraints are shown to ensure efficient production by the firm and convergence to ramsey prices regardless of the firm s cost structure

productivity growth in large us commercial banks the initial post deregulation experience abstract we explore productivity growth for a group of 201 large us commercial banks over the initial post deregulation period from 1984 to 1990 using data envelopment analysis dea we measure productivity growth using malmquist productivity indexes and isolate the contributions of technical change technical efficiency change and scale change to productivity growth we find overall productivity growth at the rate of about 4 5 per year on average but productivity declined by 7 61 between 1984 and 1985 and by 0 33 between 1988 and 1989 our second stage panel regressions reveal that larger asset size and specialization of product mix associate with higher productivity growth while higher equity to assets associates with lower productivity growth

the regulation of multiproduct firms part i theory abstract this paper develops a normative model of the regulation of a multiproduct firm with private information about its technology and cost reducing activity it first characterizes the optimal regulatory scheme and illustrates it through examples it then derives necessary and sufficient conditions for the pricing incentive dichotomy to hold i e conditions under which the cost reimbursement rule but not pricing is used to provide incentives last the paper studies the regulation of the multiproduct firm in a general equilibrium framework both to assess the validity of the partial equilibrium approach and to formalize the notion of taxation by regulation

nonparametric measurement of productive efficiency in the presence of regulation abstract during the late 1970s and 1980s volatility in the demand for natural gas in the united states created havoc in the industry s transmission sector managers of firms were presented with the task of improving productive efficiency in an uncertain and regulated industry we measure the relative performance of 20 pipelines using data envelopment analysis dea to produce a regulation constrained minimum cost frontier with the results we construct a fisher productivity index fpi results show that despite productive efficiency decline for most years most firms experienced improvement in technical efficiency and technical progress in most years most of the productive efficiency decline was due to scale diseconomies

verifiable and non verifiable anonymous mechanisms for regulating a polluting monopolist abstract optimal regulation of a polluting natural monopolist must correct for both external damages and market power to achieve a social optimum existing non bayesian regulatory methods require knowledge of the demand function while bayesian schemes require knowledge of the underlying cost distribution we introduce mechanisms adapted to use less information our p rice based s ubsidy ps mechanisms give the firm a transfer that matches or approximates the incremental surplus generated each period the regulator need not observe the abatement activity or know the demand cost or damage functions of the firm all of the mechanisms induce the firm to price at marginal social cost either immediately or asymptotically

airline dynamic efficiency measures with a dynamic ram with unified natural managerial disposability abstract in this paper we propose a dynamic range adjusted measure with unified natural managerial disposability to evaluate the dynamic efficiency of 29 airlines during 2009 2015 in a dynamic period the new model can judge automatically whether the airline should be under natural disposability or managerial disposability in the premise of optimizing the overall efficiency we get some findings 1 scandinavian has the highest overall efficiency among these 29 airlines while norwegian s overall efficiency is the least 2 improving undesirable outputs is not the most urgent work of these airlines 3 in order to optimize the overall efficiency most airlines should be under managerial disposability 4 most airlines efficiencies have no obvious fluctuation in this period

decomposition of the fisher ideal index of productivity a non parametric dual analysis of us airlines data in this paper we offer a non parametric method of decomposing the fisher ideal index of productivity into individual factors measuring i technical efficiency change ii allocative efficiency change iii shift in the cost function iv scale economies due to output change and v an adjustment factor reflecting change in the output attributes cross section data from the us airline industry for the years i 983 and i 984 are utilised in an empirical application illustrating this method the rate of multifactor productivity growth mfpg over time in the single output multiple input case can be measured by the difference in the rates of growth in the quantity of output and the divisia index of input quantity when no technical inefficiency exists this rate of mfpg can be decomposed into two additive components i the rate of technical change measuring the rate of change in the volume of output holding the input bundle unchanged and ii a returns to scale effect showing change in productivity with changes in the input quantities without technical change when technical efficiency varies over time a part of the measured rate of mfpg would be due to efficiency

discrete response state space models with conditional heteroscedasticity an application to forecasting the federal funds rate target we propose a state space mixed model with stochastic volatility for ordinal response time series data for parameter estimation we design an efficient markov chain monte carlo algorithm we illustrate our method with an empirical study on the federal funds rate target the proposed model provides better forecasts than alternative specifications

on categorical variables and non parametric statistical inference in the pursuit of causal explanations this paper proposes a pragmatic alliance between critical realism and non parametric statistical techniques in pursuit of causal explanations of economic phenomena by retroductive means the alliance depends on clarifying the interpretive requirements for forming categories within nominal or classificatory scales or as ordinal or ranking scales it also depends on establishing the scope of demiregularities as something to be explained and as something that allows a rough and ready extension of experimental conditions the roughness and readiness of demiregularities is matched by the assumptions and conditions of non parametric analysis

reward structures in a planned economy the problem of incentives and efficient allocation of resources this paper considers a reward mechanism for inducing the choice of a socially optimal level of output by a socialist price setting manager under this mechanism the planner is assumed to have no information other than the observed output and price level it thus has informational advantages over other schemes thus far discussed in the literature the other schemes require the additional knowledge of demand elasticities of all the products produced in the economy besides this informational advantage the reward structure suggested here also eliminates other basic weaknesses of those schemes suggested previously

retrospectives lange and von mises large scale enterprises and the economic case for socialism in the debates over economic calculation launched by ludwig von mises in 1920 and extending well into the 1940s the central issue concerned the ability of a socialist economy to achieve allocative efficiency von mises emphasized that a collectivist state would have great difficulty in gathering and acting on relevant information therefore under socialism even well intentioned bureaucrats would lack a meaningful system of values on which to calculate defenders of socialism such as oskar lange countered that a market socialism could match demand to supply just as well as capitalism and meet the range of static conditions required for pareto optimality that debate is a rich and interesting story that has been told many times before but in all that has been written an important aspect of the original debate has been lost somewhat oddly both the socialists like oskar lange and the advocates of private ownership like von mises and friedrich hayek maintained that they were defending the progressive tendencies of competitive capitalism against the deadening hand of monopoly power this historic paradox deserves consideration if only because it serves to focus attention on our still incomplete theories of large scale enterprises under socialism and capitalism

the regulation of multiproduct firms part ii applications to competitive environments and policy analysis abstract this paper extends our companion paper part i laffont and tirole 1990 on the regulation of the rate of return and prices of a multiproduct firm in two directions first it studies optimal pricing by a regulated firm competing with regulated or unregulated rivals with or without market power or other distorted pricing it then focuses on the access pricing problem and its potential foreclosure effects second it shows how optimal pricing can be decentralized to the regulated firm in the absence of cost and demand information

a dynamic model for firm response to non credible incentive regulation regimes economic network regulation increasingly use quantitative performance models from econometrics and engineering to set revenues in theory high powered incentive regulation such as revenue caps induces firms to cost efficient behavior independent of underlying model however anecdotal evidence shows regulated firms occasionally maintaining cost inefficiency under incentive regulation even under slumping profitability we present a model for firm level efficiency under a regime with a probability of failure explaining this phenomenon the model is based on the hypothesis that the regulatory choice of method can be associated with intrinsic flaws leading to judicial repeal and replacement of it by a low powered regime the results show that the cost efficiency policy is proportional to the type of firm cost of effort value of time discount factor and the credibility of the method risk of failure a panel data set for 2000 2006 for 128 electricity distributors in sweden is used to validate the model predictions radical productivity slowdown failing profitability and efficiency at the launch and demise of a non credible regulation method the work highlights the fallacy of viewing incentive regulation as a method independent instrument a result applicable in any infrastructure regulation

a cost malmquist productivity index this paper develops a productivity index applicable when producers are cost minimisers and input prices are known the index is inspired by the malmquist index as extended to productivity measurement the index developed here is defined in terms of input cost rather than input quantity distance functions hence productivity change is decomposed into overall efficiency and cost technical change furthermore overall efficiency change is decomposed into technical and allocative efficiency change and cost technical change into a part capturing shifts of input quantities and shifts of relative input prices these decompositions provide a clearer picture of the root sources of productivity change they are illustrated here in a sample of hospitals results are computed using non parametric mathematical programming 2003 elsevier b v all rights reserved

a model for the federal funds rate target this paper is a statistical analysis of the manner in which the federal reserve determines the level of the federal funds rate target one of the most publicized and anticipated economic indicators in the financial world the paper introduces new statistical tools for forecasting a discrete valued time series such as the target and suggests that these methods in conjunction with a focus on the institutional details of how the target is determined can significantly improve on standard vector autoregression forecasts of the effective federal funds rate we further show that the news that the fed has changed the target has statistical content substantially different from the news that the fed failed to make an anticipated target change causing us to challenge some of the conclusions drawn from standard linear var impulse response functions

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

regulating without cost information the incremental surplus subsidy scheme the authors propose a regulatory mechanism called the incremental surplus subsidy iss scheme that can be implemented even when the regulato r has no knowledge of the monopolist s cost structure the regulator need only share the firm s knowledge of demand which may be imperfec t and be able to observe with a lag the firm s expenditures the i ss scheme induces the firm to set marginal cost prices to minimize p roduction costs and to undertake efficient investment levels it als o severely limits the firm s rents and eliminates them altogether if the firm s discount rate is known copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a reexamination of returns to scale density and technical progress in u s airlines the logic of protecting u s airlines from competition was initially founded on the belief that substantial economies of scale existed in the industry and that consumers would benefit through among other things regulation of fares regulation of service network and restrictions on entry and exit from the industry however studies 1 7 8 12 have undermined the faith in economic regulation by showing that economies of scale were minimal and competition would promote efficiency in a recent study caves christensen and tretheway 5 estimated returns to scale rts and returns to density rtd for u s airlines based on a panel dataset for 1970 1981 containing trunk and local service airlines they estimated rtd and rts from a translog cost function for airline services like many other applied economists working with translog cost functions they found that the neoclassical curvature or regularity conditions on the cost function are not satisified in almost half of the observations 105 out of 208 in general concavity property is satisfied in the neighborhood of the sample mean if it is chosen as the point of approximation for the cost function but not at points further from the mean recently diewert and wales 6 suggested alternative flexible functional forms which are globally concave in input prices if the concavity property is satisfied at only one point thus if the concavity property is violated imposition of it at a single point will make the function globally concave without destroying flexibility use of such functional forms can avoid violation of regularity conditions of the cost function at extreme points the objective of this paper is to estimate a model of airline costs along the lines of caves christensen and tretheway 5 however we extend their results in several ways first we consider a modest generalization of the symmetric generalized mcfadden sgm cost function developed by diewert and wales by including network and control variables in the airline cost function the sgm cost function is flexible and globally concave in input prices thus our estimates of parameters and measures of rts rtd and technical progress are based on a cost function which is globally concave second we estimate the system of input demand functions instead of the cost function and while estimating these input demand functions derived from the cost minimizing behavior of the airlines we incorporate firm and input specific effects these effects capture possible differences in production technologies among airlines third we intro

effort rewarding incentive mechanisms for public enterprise managers abstract management incentive schemes leading to welfare optimal pricing and efficient production of public enterprises have so far been mainly concerned with the information advantages that public enterprise managers hold over their supervising government or central planning agency managers under these schemes are induced to improve their firm s performance in adjustment processes which in the limit lead to optimal firm decisions such managers are supposed to be income maximizers disregarding any personal effort which could influence their performance and utility in this paper i show that two incentive schemes recently proposed by tam 1981 and finsinger and vogelsang 1982 can also help to induce managers to provide an optimal level of effort here effort is assumed to reduce managers utility and the firm s costs the result depends crucially on myopic managerial utility maximization once managers maximize the discounted value of future utility levels they will deviate from the optimal behavior under tam s scheme this can hold independent of the optimal effort level under the finsinger vogelsang performance index managers will always show suboptimal effort levels in a steady state equilibrium because the index only rewards welfare improvements effort however has to be rewarded even with no improvement in behavior an improved performance index which provides cumulative rewards is shown to be strategy proof and lead to a welfare optimum this reward structure basically treats managers as if they were private entrepreneurs it looks extremely generous in that it gives managers the fruits of all costs reductions due to increases in effort suggestions are made to mitigate this income distributional impact

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

a mechanism to induce ramsey pricing for natural monopoly firms this paper considers a model with m independent natural monopoly firms it then proposes a taxation subsidy scheme that the regulator can implement to induce the m price setting firms acting independently to jointly adopt ramsey pricing the scheme has the following desirable features 1 the regulator needs only book keeping data on quantities prices and profits 2 the scheme induces cost minimization behaviour 3 the firms will not behave strategically 4 at each step of the convergence process to optimum each firm earns a non negative return and welfare is improved

is there a slowdown in agricultural productivity growth in south america this article estimates agricultural productivity growth in 10 south american countries in 1969 2009 with the objective of investigating if the slowdown being measured in other countries is present in the region results show that productivity growth accounts for half of the three fold increase in agricultural output during this period and that performance is sensitive to r d investments in the sector the slowdown found for the 1990s to 2000s in the u s and some european economies does not seem to be present yet in south america the region s total factor productivity tfp growth rate increased steadily from 1 07 during the 1970s to 2 29 during the 2000s given lags in adoption and the adaptive nature of innovations in these economies we have yet to see the potential effects in south american agriculture of decreases in r d in advanced economies

asymmetric information incentives and price cap regulation a regulatory incentive mechanism is presented in which the regulated firm has superior information about both cost and demand compared to the regulator the mechanism leads to truthful revelation of the demand function and extracts all rents due to private demand information in a nondistorting way the scheme assumes that the regulator can observe lagged expenditures by the firm this mechanism leads to efficient pricing operating and investment behavior by the firm finally it is shown that the mechanism is closely related to recent proposals for price cap regulation and that under certain assumptions simple modifications of these proposals will lead to the mechanisms discussed herein

biased technical change and the malmquist productivity index the malmquist productivity index has many attractive features one is that it can be epxressed as the product of a technical efficiency change index and a technical change index in this paper we express the technical change index as the product of a magnitude index and a bias index we then express the bias index as the product of an output bias index and an input bias index and we state conditions under which each bias index makes no contribution to productivity change

the effect of incentive reforms upon productivity evidence from the vietnamese rice industry in this study we use region level panel data on rice production in vietnam to investigate total factor productivity tfp growth in the period since reunification in 1975 two significant reforms were introduced during this period one in 1981 allowing farmers to keep part of their produce and another in 1987 providing improved land tenure we measure tfp growth using two modified forms of the standard malmquist data envelopment analysis dea method which we have named the three year window tyw and the full cumulative fc methods we have developed these methods to deal with degrees of freedom limitations our empirical results indicate strong average tfp growth of between 3 3 and 3 5 per cent per annum with the fastest growth observed in the period following the first reform our results support the assertion that incentive related issues have played a large role in the decline and subsequent resurgence of vietnamese agriculture

the soviet economic decline soviet growth from 1960 to 1989 was the worst in the world after we control for investment and human capital the relative performance worsens over time there is some evidence that the burden of defense spending modestly contributed to the soviet debacle the declining soviet growth rate from 1950 to 1987 can be accounted for by a declining marginal product of capital with a constant rate of growth of total factor productivity the soviet reliance on extensive growth rising capital to output ratios was no greater than that of market economies such as japan and the republic of korea but a low elasticity of substitution between capital and labor implied especially acute diminishing returns to capital compared with the case in market economies copyright 1995 by oxford university press

malmquist productivity indexes and fisher ideal indexes comment fare and grosskopf i992 henceforth abbreviated as fg showed that under some conditions the productivity index defined as the geometric mean of two input based malmquist productivity indexes is equal to the quotient of the fisher input quantity index and the fisher output quantity index both fisher indices can be computed from observed prices and quantities these conditions appear to be so strong that they will almost certainly never be fulfilled in practice this is shown by a careful inspection of fg s proof however under slightly milder but more plausible conditions it can be shown that the quotient of the fisher input index and the fisher output index is a reasonable approximation of the productivity index consider a firm at two time periods t o i with different technologies which are modelled by the input correspondences lt y x x can produce y x c rn yce rm it is assumed that the sets lt y are closed and convex and that inputs are strongly disposable the vectors x yt wt pt t o i denote observed inputs observed outputs observed input prices and observed output prices respectively the productivity index is defined as

agricultural productivity in developing countries abstract this paper examines changes in agricultural productivity in 18 developing countries over the period 1961 1985 we use a nonparametric output based malmquist index and a parametric variable coefficients cobb douglas production function to examine whether our estimates confirm results from other studies that have indicated declining agricultural productivity in ldcs the results confirm previous findings indicating that at least half of these countries have experienced productivity declines in agriculture

on delegating price authority to a regulated firm this article models a regulatory environment in which the regulated firm possesses better information about demand conditions than does the regulator the regulator would like to tie prices to the firm s private information in a socially optimal way to do so the regulator must induce the firm either truthfully to reveal private information or equivalently unilaterally to set socially optimal prices this is accomplished by assessing lump sum subsidies or taxes that depend in an appropriate way on the prices announced by the firm this mechanism can be reinterpreted as a two part tariff scheme whereby both the service fee and price per unit respond to shifting demand conditions

optimal departures from marginal cost pricing the case of a rate of return constraint models of the regulated monopoly can be categorized under two general types depending on the process by which commodity prices are determined through regulation the first type assumes that the regulator exogenously specifies the regulatory constraint and that the firm chooses its price structure so as to maximize profit subject to this imposed side condition baumol and klevoric review much of this literature in 2 the second class of models assumes that the regulator or the firm chooses a price structure which maximizes a welfare function serving consumer desires subject to a regulatory constraint at the resultant second best output combination the firm is assumed to minimize cost the studies by baumol and bradford 1 boiteux 3 manne 7 and rees 11 are representative of this approach the present paper is concerned with the characterization of a solution to the second type of problem for a case which is not clearly dealt with in the literature in particular we discuss quasi optimal pricing in the presence of a rate of return constraint on capital to our knowledge the only other study which directly addresses this problem is the classic article of baumol and bradford 1 in their initial presentation of the quasi optimal pricing rules they consider a partial equilibrium situation in which a monopoly firm s n commodity prices are being chosen so as to maximize an objective function subject to a regulatory constraint which places a fixed upper bound on profit they point out that a rate of return constraint on capital is equivalent to a fixed profit constraint with maximal profit equal to zero if the regulator s imposed or fair rate of return is equal to the opportunity cost of capital on the other hand if as is typically assumed the fair rate is greater than the cost of capital then maximal profit m in their notation varies with the firm s output levels for this case baumol and bradford note that the regulatory constraint h r c m where r is total revenue and c is total cost can be modified by defining c c m and writing the basic profit constraint as r c 0 their quasi optimality rules can then be reinterpreted in terms of c they then candidly note 1 269 that economic interpretations are however clouded by this modification no further discussion of this case is presented

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

the stochastic volatility in mean model with time varying parameters an application to inflation modeling this article generalizes the popular stochastic volatility in mean model to allow for time varying parameters in the conditional mean the estimation of this extension is nontrival since the volatility appears in both the conditional mean and the conditional variance and its coefficient in the former is time varying we develop an efficient markov chain monte carlo algorithm based on band and sparse matrix algorithms instead of the kalman filter to estimate this more general variant the methodology is illustrated with an application that involves u s u k and germany inflation the estimation results show substantial time variation in the coefficient associated with the volatility highlighting the empirical relevance of the proposed extension moreover in a pseudo out of sample forecasting exercise the proposed variant also forecasts better than various standard benchmarks

a little paradox in the design of regulatory mechanisms several incentive mechanisms have been suggested in the literature to induce regulated monopolists to choose welfare maximiz ing prices and cost levels for their services among the desirable pr operties of such mechanisms is that their application should be contr ollable by third parties verifiability a mechanism recently de signed by sappington and sibley 1988 incremental surplus subsidy which is otherwise ideal in its properties fails to be verifiable a verifiable crude first order approximation to this mechanism retains some but lacks other of the nice properties possessed by increment al surplus subsidy this paper therefore analyzes closer second orde r approximations to incremental surplus subsidy paradoxically thes e approximations in a crucial sense are shown to perform worse than t he cruder approximation copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association