On the dimensionality of bounds generated by the Shapley–Folkman theorem

The Shapley–Folkman theorem places a scalar upper bound on the distance between a sum of non-convex sets and its convex hull. We observe that some information is lost when a vector is converted to a scalar to generate this bound and propose a simple normalization of the underlying space which mitigates this loss of information. As an example, we apply this result to the Anderson (1978) core convergence theorem, and demonstrate how our normalization leads to an intuitive, unitless upper bound on the discrepancy between an arbitrary core allocation and the corresponding competitive equilibrium allocation.     

The evolving theory of quality management: The role of Six Sigma

While Six Sigma is increasingly implemented in industry, little academic research has been done on Six Sigma and its influence on quality management theory and application. There is a criticism that Six Sigma simply puts traditional quality management practices in a new package. To investigate this issue and the role of Six Sigma in quality management, this study reviewed both the traditional quality management and Six Sigma literatures and identified three new practices that are critical for implementing Six Sigma's concept and method in an organization. These practices are referred to as: Six Sigma role structure, Six Sigma structured improvement procedure, and Six Sigma focus on metrics. A research model and survey instrument were developed to investigate how these Six Sigma practices integrate with seven traditional quality management practices to affect quality performance and business performance. Test results based on a sample of 226 US manufacturing plants revealed that the three Six Sigma practices are distinct practices from traditional quality management practices, and that they complement the traditional quality management practices in improving performance. The implications of the findings for researchers and practitioners are discussed and further research directions are offered.     

Regression models of decision rules in unstable environments

Bowman and others have shown that a decision-maker's performance in a stable environment can be improved by using a regression model to make decisions. However, when the environment changes, a regression model based on past behavior may no longer be appropriate for future decisions. Whether or not regression models are appropriate for unstable environments is examined in this article.The research used an aggregate production and work-force scheduling problem. After 12 periods the cost function was changed; the subjects rapidly adapted to this change. Even during the adaption, the regression rules performed better than the subject's actual decisions. Thus, this study supports the use of regression models in unstable environments.     

Trade and the structure of South African production, 1984-97

With the onset of trade liberalisation, fears have been raised concerning the impact of trade on manufacturing output, employment and growth. Using an input–output methodology, this article decomposes South African output growth between 1984 and 1997 into final demand expansion, trade flows and technology. There are two main findings. First, trade liberalisation has not deindustrialised the manufacturing sector. Although import penetration has risen, export growth has matched and exceeded the potential import-induced losses in domestic production. South Africa's response thus conforms closely to international evidence. Secondly, a combination of strong growth in capital-intensive exports and import penetration in ultra-labour-intensive sectors has aided the structural shift in production towards capital-intensive sectors. However, capital-biased supply-side policies, as well as endemic problems within ultra-labour-intensive sectors, suggest that domestic factors and not trade liberalisation lie behind this shift.     

Sensitivity and Stability of the Classifications of Returns to Scale in Data Envelopment Analysis

Sensitivity of the returns to scale (RTS) classifications in data envelopment analysis is studied by means of linear programming problems. The stability region for an observation preserving its current RTS classification (constant, increasing or decreasing returns to scale) can be easily investigated by the optimal values to a set of particular DEA-type formulations. Necessary and sufficient conditions are determined for preserving the RTS classifications when input or output data perturbations are non-proportional. It is shown that the sensitivity analysis method under proportional data perturbations can also be used to estimate the RTS classifications and discover the identical RTS regions yielded by the input-based and the output-based DEA methods. Thus, our approach provides information on both the RTS classifications and the stability of the classifications. This sensitivity analysis method can easily be applied via existing DEA codes.     

Changes in the risk structure of stock returns: Consumer Confidence and the dotcom bubble

Changes in the risk structure of stock returns may sometimes be very revealing. We examine economic variables that help explain principal components in UK stock returns, 01/1985 to 12/2001. The loading pattern on explanatory variables for the first component in a ‘bubble’ period is distinctive and consistent with a bubble/crash market. The second component shows a loading pattern on a Consumer Confidence variable in a pre-bubble period only. We observe apparently systematic changes in the structure of risk, and conjecture that Consumer Confidence captures a change in market sentiment that could be a signal for the evolution of stock prices.     

Degrees-of-freedom problem and implied cost of equity capital

Bias in implied cost of equity estimates arises from analyst optimism and a degrees-of-freedom problem. The common practice in empirical studies of using a proxy for the earnings forecast horizon beyond two years in the Ohlson and Juettner-Nauroth (OJ) model is potentially biased. We derive a generalized OJ model over a T period forecast horizon and indicate the extent of this bias. The implied cost of equity capital is obtained from a quadratic equation, where our constant term comprises T short-term annual earnings per share growth rates, rather than just the next-period counterpart in the OJ model.     

Contracting in the U.S. Pork and Beef Industries: Extent, Motives, and Issues

Contracting has increased significantly in the US livestock-meat sector. Over half of finished hogs and about a third of fed cattle are marketed under some form of contract. Contracting motives vary by type of contract, whether buyer or seller, and by commodity. Several motives for buyers and sellers of finished hogs and fed cattle are identified and discussed. Issues related to contracting per se and the trend toward increased contracting have been raised by contracting opponents, politicians, and economists. Several of these issues are discussed under six headings. Lastly, agricultural economists are encouraged to become actively involved in addressing these issues, especially providing pragmatic education and assistance to those involved in contracting.     

Economic Growth And Productivity Gains From Capital Inflow: Another Rejoinder

Journal of Quantitative Economics -