Stochastic Estimation of Firm Inefficiency Using Distance Functions

Econometric estimation of allocative and technical efficiency has frequently been carried out using a shadow cost function and its associated share or demand equations. Since the problem is formulated in terms of shadow prices, the effect of allocative inefficiency on input usage must be computed indirectly from input share or demand equations. As an alternative approach, we derive and estimate an input shadow distance system comprising the dual shadow input distance function and the price equations derived from the shadow cost minimization problem. Estimated shadow quantities provide direct estimates of the effect of allocative inefficiency on input usage. One can also easily calculate firm- and time-varying technical inefficiency by decomposing the residuals. We also compute returns to scale and the cost savings obtained by eliminating both types of inefficiency, Our approach is illustrated using a panel of U.S. railroads.     

Gatekeeper incentives and demand inducement: An empirical analysis of care managers in the Japanese long-term care insurance program

This study analyzes the incentives and supplier-induced demand of care managers, who are intermediaries between consumers and service providers in the Japanese social insurance program for long-term care. Care managers can be considered as pure gatekeepers, in that their function is limited to referral people to specialists and they themselves do not provide care. Care managers are rewarded by capitation, which is considered as a cost-effective payment mechanism for insurers. However, many care managers actually work for firms that also operate as service providers. Service providers are rewarded by a fee-for-service payment and can have a motivation to induce excess consumer demand. The violation of the neutrality of care managers might result in a financial burden on social insurance. In this study, we empirically test whether there is a positive correlation between care manager density and care costs, which might imply the existence of supplier-induced demand. Our results show a positive correlation, particularly in the case of care managers who work for firms that jointly operate in service provision sectors. Based on these results, we conduct a quantitative analysis, and show that the demand induced by care managers might produce a considerable financial burden on social insurance.     

Some aspects of employment in Indian agriculture

The purpose of this study is to examine the effects of structural differences (due to size of holding) on employment in Indian agriculture. Translog cost function is applied, and restrictions are tested using a likelihood ratio test. For small- and medium-size farms, joint estimation of a non-homothetic cost function with cost share equations is conducted, and Allen elasticities of substitution and price elasticities of demand for eight different inputs are derived. Inputs are classified as substitutes and complements using Slutsky-Hicks-Allen-Schultz definition. Each source of labor against hired labor is a substitute for small farms (0–5 hectares). Some policy analysis of rural employment and a fertilizer subsidy scheme is presented using price elasticities of demand for small and medium farms.     

基于结合分析法的大学生休闲活动选择研究——以北京市高校为例

研究发现,结合分析法与主观评价法在测量大学生主观感知的分析结果上存在明显差异。基于结合分析法的休闲活动选择分析表明,大学生对休闲活动的费用、活动类型和距离最为敏感,而在时间因素上表现出较大弹性。花费越少、耗时越短、距离宿舍越近的休闲活动越受欢迎,教育发展类活动最受大学生青睐,注重场所氛围的营造能够产生较强的吸引力。大学生休闲活动的研究具有重要的社会价值,了解其休闲活动的需求与偏好对于休闲教育的开展,休闲生活的改善,综合素质的提升具有积极的现实意义。     

EBITDA and Managers' Investment and Leverage Choices

EBITDA is a commonly used performance measure for (i) valuation, (ii) debt contracting, and (iii) executive compensation. The widespread use of EBITDA by stakeholders may induce managers to focus their attention on EBITDA. Since EBITDA excludes various expenses, managers who fixate on EBITDA may underweight the excluded expenses when determining their firms' investments in capital and leverage levels. I find that managers who fixate on EBITDA overinvest in capital and overlever their firm relative to their industry peers. These results are robust to alternative proxies for managers' focus on EBITDA and alternative specifications. I also find that firms whose managers focus on EBITDA have weaker operating performance, which is attributed to higher depreciation expense. My primary proxy for managers' focus on EBITDA is whether they choose to disclose EBITDA in annual earnings announcements. I find that the use of EBITDA in setting executive compensation, the prevalence of EBITDA estimates by analysts, and the use of EBITDA‐based covenants in firms' debt contracts are all positively associated with the propensity to disclose EBITDA in earnings announcements. I find weaker evidence of opportunistic motives explaining EBITDA disclosure. These results are consistent with managers disclosing EBITDA to portray to investors that it is a metric they seek to maximize. Overall, this study suggests that while EBITDA is a widely used metric, there is a systematic cost to using this measure—it provides managers with incentives to overinvest in capital and to acquire excessive debt.     

Real money balances as factor saving media: A note

Conclusion A variety of specifications and arguments have been presented in the past in dealing with money in the production system. The most plausible role of money in production seems that it saves production factors as an indirect servicing medium facilitating exchanges and other transaction activities. Based on this hypothesis, real money balances were introduced into the input demand equations in a simultaneous production-equation system. It has been found thatm ₁ plays a more significant factor-saving role thanm ₂ and it saves capital more than labor. Considering the theoretical merits and the statistical consistency of our model, it is suggested that in macro model building real money balances should be treated as input-saving media appearing in the input demand equations rather than direct production factors to be included in the production function.     

Elasticities of derived demand under different objectives of the firm

Conclusions We have reconciled and generalized earlier comparisons of input demand elasticities under different objective functions of the firm. In general little can be said of the relative magnitudes of the elasticities under different objectives, since different goals usually imply different levels of production and input demand. With some simplifying assumptions about the technology we can conclude that a profit-constrained, utility-maximizing firm tends to have higher input demand elasticities than a profit-maximizing firm facing the same cost and demand functions. This tendency is reinforced by a high profit requirement, decreasing returns to scale and slowly falling demand elasticity for the output. The results may help to explain differences in the stability of employment between industries,. Scherer [1980, pp. 365–67] reports that some studies have found an inverse relation between market concentration and stability of employment, which is contrary to the expected result. One may argue that in concentrated industries the firms are likely to have organizational slack or to face an inelastic product demand curve. Hence demand for factors of production should be less elastic than in more competitive industries. We have shown, however, that deviations from profit maximization may lead to higher input demand elasticities. Since non-profit-maximizing goals are likely to be more common in concentrated industries, the observed instability of employment may be partly due to the high elasticity of derived demand. Although the type of alternative goals studied in this paper may not be realistic in practice, the analysis shows nevertheless that goals of the firm may be one factor in explaining differences in the stability of employment.     

A New Cost Efficiency Measure for Not-for-Profit Firms: Evidence of a Link Between Inefficiency and Large Endowments

Cost functions and cost efficiency are commonly estimated for industries with detailed data on production and cost, both for firms that are for profit as well as not for profit. The data on not-for-profits obtained from the IRS Form 990 lack these details and, consequently, encourage substitution of the ratio of program expenses to total expenses to gauge performance. While a larger program expense ratio captures better administrative cost efficiency, it does not gauge best-practice cost and the extent to which an organization’s administrative costs exceed best practice. Using the Form 990 data, this study constructs an administrative cost function for not-for-profits and uses the distribution-free technique of estimating a best-practice cost frontier to gauge the relative efficiency of not-for-profit organizations. Focusing on not-for-profit hospitals and their holdings of liquid assets, the empirical evidence is consistent with Jensen’s free cash flow hypothesis: hospitals holding liquid assets in excess of a benchmark have lower program expense ratios and lower cost efficiency. In addition, the CEOs of more cost efficient hospitals earn higher compensation. The agreement of the evidence on agency problems related to excess holdings of liquid assets from the program expense ratio and administrative cost efficiency reinforce the credibility of the latter as a measure of the performance of not-for-profit organizations.     

The Focus Efficiency of U.S. Hospitals

Hospital productivity has been a research topic for over two decades. Whereas much has been learned regarding cost, technical, scale, and allocative efficiency as well as the impact that weakly disposable inputs/outputs have on hospital behavior, we expand on this research by examining size and service offering, or focus, efficiency at the metropolitan area level for US hospitals. By using an extension of the Free Coordination Hull (FCH), we are able to determine whether hospitals in our sample could become more efficient if they provided more services (reduce inefficiency due to too narrow a focus) or fewer services (reduce inefficiency due to too broad a focus). Our results suggest that findings vary among the hospital markets. This approach could be used by policy makers and managers in order to reduce costs by sharing services, reducing services in hospitals, or expanding services in hospitals. Findings from a study such as this should aid reform programs by providing more information on the sources of hospital inefficiency.     

Misclassifying Core Expenses as Special Items: Cost of Goods Sold or Selling,General, and Administrative Expenses?

Prior studies of classification shifting in the income statement conclude that managers misclassify core expenses as special items to inflate reported core earnings (McVay 2006; Fan, Barua, Cready, and Thomas 2010). These studies do not distinguish between the core expense components—cost of goods sold (COGS) and selling, general, and administrative expenses (SGA). This study models COGS and SGA separately, and investigates managers’ misclassification of COGS versus SGA to meet different profitability benchmarks. We find that COGS (but not SGA) misclassification is associated with just beating the benchmark of gross margin four quarters earlier. In comparison, both COGS and SGA misclassification are associated with just beating the benchmarks of zero core earnings, prior‐year core earnings, and analyst earnings forecasts in the fourth fiscal quarter. We also investigate real activities management (RAM) of COGS and SGA to meet benchmarks, and find that managers engage in RAM of COGS to achieve the gross margin benchmark, but not core earnings benchmarks. We demonstrate that unexpected SGA contains a significant misclassification effect distinct from RAM, suggesting that future RAM research should consider controlling for expense misclassification. Overall, our study extends prior literature on both classification shifting and RAM.     

Enterprise responses to price and output shocks in transitioning economies: The case of the Czechoslovak machine-building sector

The behavior of a sample of 161 state-owned, Czechoslovak machine-building enterprises for the period 1985–89 is examined by means of simulation techniques based on the estimated dynamic factor demand equations. The simulations of input utilization for 1990–92 indicate that the state-owned firms have been less responsive to market signals and to output changes during the transition period of 1990–92 than they were in 1985–89. This may reflect either a change in decision-making regime at the firm level or the magnitude of changes in prices and output levels that occurred in 1990–92. We also find that the output shocks were much more important for the changes in input utilization during the transition than were input price shocks. The research results reported here are part of a World Bank project on enterprise behavior in transition. The results and conclusions are solely the responsibility of the authors and in no way represent the views of the World Bank or of their respective employers.     

农户的种粮行为与政策需求--对粮食主产区6县市300多个农户的调查分析

基于粮食主产区农户个案调查资料,分析农户种粮行为与政策需求之间的关系,可以发现农民在进行粮食生产决策时,劳动投入、资金投入、利润回报一般是最先考虑的因素。不过,传统观念、耕作习惯、处理信息的成本等因素导致的近似理性行为也对农户生产决策产生不可忽视的影响。农户对支农政策是欢迎的,但不应过高估计政策在激励农民种粮积极性方面的作用。加强主产区粮食生产能力建设需要稳定政策和搞好服务。     

客户集中度、CEO背景特征与企业费用粘性

公司费用支出的粘性特征是管理会计研究的核心问题之一,文章以2001-2015年的A股上市公司作为研究对象,实证研究了公司的客户集中度对企业费用粘性的影响,研究发现公司向第1大客户的销售额比例、向前5大客户的销售额比例以及前5大客户销售额的集中度越高,公司的费用粘性越强。在此基础上,文章进一步考察了CEO的背景特征对于上述关系的影响,发现CEO的年龄较大、任期较长以及学历较低时,客户集中度对于企业费用粘性的影响更为显著。文章的研究发现揭示了客户关系对于企业费用粘性的重要影响,同时也丰富了管理者背景特征对于企业费用粘性影响的文献,支持了管理者过度自信和代理问题的有关研究发现。     

Incentives for cost misrepresentation in supply chains

This paper investigates sequential manufacturer–retailer price determination and channel performance under possible misrepresentation by one member of its privately known cost. To the standard double marginalization game, we add a preliminary stage where the manufacturer (alternately the retailer) announces its privately known constant marginal cost. We prove that the manufacturer has no incentive to misrepresent its cost, and we give respective sufficient conditions on the demand function for the retailer to overreport and to underreport costs. Depending on the shape of the demand function, opportunistic behavior by the retailer may lower or raise the manufacturer’s profit and channel performance.     

Monetary policy transmission through the bank lending channel in Thailand

This paper investigates the strength of the bank lending channel in the transmission of monetary policy in Thailand. Bank behavior is captured by quarterly balance sheet data for ten commercial banks of diverse size for the period 2007-2016. Based on a flexible form profit function, bank supply and demand equations are estimated that capture lending and funding choices. The estimation results are used to derive time-dependent supply and demand elasticities which are then combined with estimates of pass-through from the policy rate to retail rates to simulate the dynamic impact of a monetary tightening on bank portfolio allocations. Due to pass-through differentials among retail interest rates, an increase in the policy rate is shown to raise the cost of loan-production relative to the return on loans, thereby motivating banks to contract their lending. Small banks show a greater degree of loan contraction than large banks because large banks are better able to fund continued lending through debt issuance. Because the Thai economy relies heavily on bank loans, these findings suggest that the bank lending channel is an important conduit for the transmission of monetary policy in Thailand.     

A simultaneous estimation of Environmental Kuznets Curve: Evidence from China

This paper uses Chinese provincial data from 1993 to 2002 to examine the existence of an Environmental Kuznets Curve (EKC) relationship between per capita income and per capita pollutant emission. Acknowledging the theoretical framework that economic growth and pollution are jointly determined, this paper starts from formulating a simultaneous equations model (SEM) to investigate the relationship between income and pollutant emission. A Hausman test is applied for income exogeneity and a two-stage least squares (2SLS) method is used to estimate the SEM. There are three main differences found between single polynomial equation estimators commonly used in EKC literatures and simultaneous equationa estimators. Since these differences tend to cause different policy implications, therefore, this paper suggests that the simultaneity between income and pollution should be considered before regressing the model in future EKC studies. In addition, this paper also investigates the determinants of income and government pollution abatement expense. Negative impact of pollution on income, and positive effects of physical and labor on income are found in income equation. Whilst positive effects of pollutant emissions, physical capital and the secondary industry share on pollution abatement expenses are also found in abatement equation.     

基于百度指数的公路运价指数RO-ELM预测

公路运价指数是公路运输市场波动的衡量指标,对中国的公路运输业有重要的预示功能.利用极限学习机(ELM)的神经网络模型快速、低成本预测公路运价指数.以各百度指数与公路运价指数的相关性确定各分量对公路运价指数的影响,进而利用ADF平稳性检验与Johansen协整检验构建输入序列,最后运用时域优化思想优化输入变量,在ELM神经网络模型内输出预测值.结果表明:基于滚动窗口的ELM模型的MAPE与RMSE分别为1.85％ 与25.17,比单一ELM模型在平均绝对百分比误差和均方根误差上都有提升,预测结果与指数波动相符,可以为公路运价指数的走向提供决策参考.     

Speculative Bubbles in U.K. House Prices: Some New Evidence

In this article, we test the view, widely held among both academics and practitioners, that speculative bubbles have characterized the time series behavior of U.K. house prices in recent times. We motivate our empirical analysis using a stylized overlapping-generations model which generates a housing demand function of the form assumed by a large literature, illustrating how rational bubbles may arise as a solution to the house price determination equation. Employing two recently developed econometric techniques specifically designed to test for rational bubbles, we then provide empirical evidence for the existence of bubbles in U.K. house prices over the sample period 1983-2002.     

The dynamics of outsourcing: From labor cost‐saving to preference‐based outsourcing

Jones's (2000) celebrated book has inspired a generation of work devoted to understanding the causes and consequences of outsourcing. While much of this work has focused on the outsourcing versus domestic production decision of the firm, with labor cost‐saving as the key driver for outsourcing, we further explore how preference‐based outsourcing may arise in a dynamic world equilibrium. We address this problem in a North–South model in which the outsourcing decision depends not only on labor costs but also on information about local preferences that arise with outsourcing. As the South develops, demand for manufactured goods becomes more important, so identifying specific tastes of Southern consumers matters more. As a result, preference‐based outsourcing displaces cost‐saving outsourcing. Our quantitative analysis indicates that, as both agricultural and manufacturing technologies grow over time, the dynamic world equilibrium switches from the export regime to the cost‐saving outsourcing regime, and eventually to the preference‐based outsourcing regime.     

Income distribution as an objective in development planning

Summary In an input-output framework, income distribution among classes depends on final demand. Traditionally, it has been assumed that the policy-maker selects a distribution vector maximizing his preference function, and it has been attempted to determine this function by an interview. Here, we assume that the policy-maker does not know his preference function but constructs its relevant parts in a communication process with his adviser. This process converges to a (classwise) Pareto-optimal distribution vector and under some further assumptions, any such vector may be attained in principle. Colombian data are used for illustration.I am indebted to Dr. Jacques Melitz for improving my English and to Mr. Roland Fahrion for computational assistance. Nevertheless, I assume sole responsibility for any remaining deficiencies of this paper.