Increasing returns and market efficiency in agricultural trade

Using detailed trader surveys in Benin, Madagascar, and Malawi, this paper investigates the presence of increasing returns in agricultural trade. After analyzing margins, costs, and value added, we find little evidence of returns to scale. Motorized transport is found more cost effective for large loads on longer distances. But transporters appear to pool quantities from multiple traders. Margin rates show little relationship with transaction size. Personal travel costs are a source of increasing returns, but the effect is small. Consequently, total marketing costs are nearly proportional to transaction size. Working and network capital are key determinants of value added. Constant returns to scale in all accumulable factors–working capital, labor, and network capital–cannot be rejected. This implies that policies to restrict entry into agricultural trade are neither necessary nor useful. Governments should focus instead on technological and institutional innovations to upgrade agricultural markets.     

Increasing returns and aggregate production efficiency by a monopoly

This paper considers an economy where there are many firms with increasing-returns-to-scale technologies and attempts to derive sufficient conditions ensuring that monopoly achieves aggregate production efficiency. In a setting of one output and many inputs, we obtain such sufficient conditions which can be interpreted as a nondecreasing generalized average productivity of inputs for each firm. We also show that a special class of generalized Cobb-Douglas production functions has such a property that monopoly always achieves aggregate production efficiency.     

Increasing returns and cycles in fishing

We consider optimal fishery management under the assumption of increasing returns that is supported by previous empirical evidence. We improve the tractability and realism of the previous approaches by introducing flow adjustment costs on changes in harvest rate. Our framework is the first to provide a link between stable limit cycle policies and increasing returns in harvesting. The type of the harvest policy depends on flow adjustment costs: for relatively costly adjustments the usual steady state harvest policy is conceivable, whereas for relatively cheap adjustments the harvest policy is cyclical. We also show a connection between chattering control policies and limit cycles, which helps us to develop a clear economic meaning for cyclical harvesting.     

Increasing returns and the share economy

Under imperfect competition, profit maximization by firms results in the market price exceeding the marginal cost of production; Weitzman terms this “excess supply” Weitzman wishes to replicate in the cost function (in terms of labor) the properties of the revenue function (in terms of output), thus generating “excess demand” for labor. A revenue-sharing scheme will achieve this if and only if there are decreasing returns to scale. Hence increasing returns apparently play no role in Weitzman's analysis.     

Collective efficiency and increasing returns

Recent research on industrial clusters in developing countrieshas unearthed some notable success stories of small local enterprisesgrowing fast and competing in export markets. This paper focuseson some conceptual and theoretical points which help to explainthem. The discussion is conducted with a view to building abridge to current mainstream economics.     

Increasing returns to scale and productive systems

We consider an economy in which some producers may have nonconvex technologies, in particular they may operate under increasing returns to scale. These producers constitute the I-part of the economy. The prices of all goods and the target supply of the I-part are supposed to be given. Each producer in the I-part produces a certain output in a cost-minimizing way. There is a planning board which has to find decentralizing (gross) output levels for the producers in the I-part such that the net output equals target supply. The existence of such output levels is proven under a productivity assumption which includes the case of strongly increasing returns to scale as well as productive Leontief systems.     

Increasing returns to savings and wealth inequality

In this paper I present an explanation to the fact that in the data wealth is substantially more concentrated than income. Starting from the observation that the composition of households' portfolios changes towards a larger share of high-yield assets as the level of net worth increases, I first use data on historical asset returns and portfolio composition by wealth level to construct an empirical return function. I then augment an Overlapping Generation version of the standard neoclassical growth model with idiosyncratic labor income risk and missing insurance markets to allow for returns on savings to be increasing in the level of accumulated assets. The quantitative properties of the model are examined and show that an empirically plausible difference between the return faced by poor and wealthy agents is able to generate a substantial increase in wealth inequality compared to the basic model, enough to match the Gini index and all but the top 1 percentile of the US distribution of wealth.     

Increasing returns,entrepreneurship and imperfect competition

We study a simple bilateral oligopoly model in which individual agents, who are initially endowed with capital, decide sequentially (1) whether they want to act as producers (entrepreneurs) or as capital lenders (rentiers) and, then (2) which quantity of capital they would like to borrow or lend, though exchange of capital units against units of the produced good. Production takes place under increasing returns to scale. We show the existence of “natural equilibria”, at which wealthier capital owners become entrepreneurs while the remaining ones decide to be rentiers. We also study the efficiency of equilibria which is shown to increase by replication of the economy, but sometimes to decrease as a consequence of wealth redistribution.We thank an anonymous referee for his insightful comments     

Daily variation,capital market efficiency and predicting stock returns for the Hong Kong and Tokyo exchanges

Studying capital market efficiency is important because result may infer that there are predictable properties of the time series of prices of traded securities on organized markets. We examine the weak form of the efficient markets hypothesis to indicate its usefulness in terms of the results of this study. Furthermore, this study of individual securities prices of traded securities on the organized markets of Hong Kong and Japan corroborate previous findings of studies of individual stocks and market indexes both in Asian nations, the United States and other stock exchanges in the United Kingdom and Europe. Daily patterns are present in the times series of securities prices. You will note also, that the models identified reflect the returns on individual firms listed on the two of the three largest Asian Stock Exchanges.     

Increasing returns: historiographic issues and path dependence

Writing a history of the analysis of increasing returns in economics is qualitatively different from the usual cumulative history of knowledge, as exemplified by the history of perfectly competitive analysis. The history of increasing returns is much less continuous. The reason for this irregular history lies, in my view, in the analytic nature of the subject. I concentrate on the recent history of the implications of increasing returns for path dependence in economic development. Foreshadowed by Veblen (1915) the topic was made explicit by Paul David in some theoretical analyses of topics in economic history (1971, 1975) and then by subsequent papers by David and by Brian Arthur in the 1980s. Contemporaneously, Farrell, Katz, Saloner, and Shapiro came to parallel conclusions in a very specific industrial organization context marked by network externalities.     

Prequential analysis of stock market returns

The Brier score and a covariance partition due to Yates are considered to study the probabilistic forecasts of a vector autoregression on stock market returns. Probabilistic forecasts from a model and data developed by Campbell (1991 Campbell, JY. 1991. A variance decomposition for stock returns. Economic Journal, 101: 157–79.  ) are studied with ordinary least squares. Calibration measures and the Brier score and its partition are used for model assessment. The partitions indicate that the ordinary least squares version of Campbell's model does not forecast stock market returns particularly well. While the model offers honest probabilistic forecasts (they are well-calibrated), the model shows little ability to sort events that occur into different groups from events that do not occur. The Yates-partition demonstrates this shortcoming. Calibration metrics do not.     

Free trade, factor returns, and factor accumulation

A model of development is studied in which physical capital and unskilled labor are good substitutes, and skilled labor is complementary to the resulting aggregate. Growth in a closed economy is compared with two open regimes. Inflows of physical capital only reduce the interest rate and raise both wage rates. The skilled wage rises more sharply, however, increasing the skill premium and accelerating human capital accumulation. Full integration with a larger and more developed neighbor also reduces the interest rate and raises both wage rates, but in this case the skill premium falls and human capital accumulation changes very little.     

The impact of trade openness on technical efficiency in the agricultural sector of the European Union

The aim of this study is to analyse the impact of trade openness on technical efficiency of the European Union’s (EU) agricultural sector. There are no systematic theories linking trade policy to technical efficiency; hence, the relation between trade liberalization and technical efficiency is fundamentally ambiguous. Stochastic frontier analysis is used to model the relationship between EU’s production resources and agricultural output, as well as the importance of trade openness on technical efficiency of a country. The data for 16 of the 28 EU members were available for the period 1980–2007 including land, capital, fertilizer, labour, agricultural GDP, foreign direct investments (FDI), exports and import data. Results indicate that trade openness has an immediate, negative impact on efficiency in the EU agricultural sector. Over time, however, trade openness does increase efficiency. The FDI outflows increase efficiency. This suggests that an initial reduction in capital supply forces EU nations to utilize other factor inputs more efficiently. However, there is the unexamined potential that over time the depletion of capital results in a decrease in efficiency. Finally, formerly communist member-countries of the EU are found to have the lowest technical efficiency scores whereas Southern European nations have the highest efficiency.     

Increasing returns to scale and the reverse flexible accelerator

We show that the flexible accelerator principle characterizes optimal investment behavior only when the firm's technology exhibits decreasing returns to scale throughout. When there are increasing returns we show that there is a range in which investment increases as the capital stock increases towards its long-run equilibrium level.     

Increasing returns,exhaustible resources,and optimal growth

It is shown that in an optimal growth model having inputs of flows from an exhaustible resource and services of reproducible capital, constant returns to scale is boundary separating paths of non-steady state development from those of steady development including asymptotic steady state growth. The absence of growth in output was observed by Dagsupta and Heal, and Solow for the case of non-increasing returns to scale.     

Stock market returns in an emerging financial market: Turkish case study

We design a conceptual framework for linking two approaches: absorptive capacity and spatial Knowledge Spillovers (KSs). Regions produce new knowledge, but only part of it is efficiently adopted in the economy; the share of efficiently adopted technology depends on cognitive capital. Our dataset is based on a panel of European regions over the period 1999 to 2006, combining data from EUROSTAT and the European Values Study (EVS). We test the hypothesis that insufficient levels of cognitive capital hamper the capability of regions to fully exploit new knowledge. Results show that a lower regional absorptive capacity increases KS towards surrounding areas, hampering the regions’ capability to decode and efficiently exploit new knowledge, both locally produced and originating from outside.     

Goods market responses to trade shocks and trade and wages decompositions

Abstract.  Trade and wages literature asks whether trade or technology has been the major factor behind increases in wage inequality in OECD countries since the 1980s. In this literature, little attention has been paid to how goods market responses to trade shocks affect conclusions. Using an Armington heterogeneous goods trade model we capture demand side effects, and show how trade shocks affecting the price of unskilled‐intensive importable goods can be absorbed on the demand side of goods markets, with little or no impact on relative wage rates. No wage impact occurs if the elasticity of substitution in preferences between imports and import substitutes is one. As this elasticity increases, trade plays an ever larger role in explaining wage inequality changes, and as the elasticity goes below one the sign of the effect changes. We present some results of general equilibrium decompositions of total wage change into trade and technology components using UK data. We suggest that since many import demand elasticity estimates are in the neighbourhood of one, there is a prima facie case that goods market considerations further lower the significance of trade as an explanation of recent trends in OECD wage inequality beyond that claimed in the literature.     

Increasing returns,land use controls and housing prices in China

The Chinese government has been active in trying to cool the alleged bubbles in its housing markets, especially in urban areas. This paper argues that the high housing prices are partly caused by some real factors, including the policy of restricting land uses, in particular the maintenance of a minimum overall agricultural acreage. A simple model of three sectors (housing, agriculture, and others) is constructed to examine the effects of the artificial constraint. The role of increasing returns in the non-agricultural sectors in exacerbating the policy biases is also examined. The model is then calibrated to estimate the effects of land use control policy on housing prices in China.     

Central bank independence and stock market returns in emerging economies

We investigate the effect of central bank independence on stock market returns in emerging economies. We find evidence for a positive overall effect, but economic independence of the central bank appears to be more relevant than political independence.