Transportation Costs and US Manufacturing FDI

In empirical models of foreign direct investment (FDI), distance is most often used to proxy for transportation costs and other pure‐trade costs. Given that distance is time invariant but transportation costs are not, this approach is less than satisfactory when actual transportation costs rise and fall over time.The contribution of this work is to explicitly control for transportation costs and thereby better understand their impact on FDI. We explore the impact of shipping costs on total US FDI stocks abroad, manufacturing stocks and service stocks using measures of sea‐shipping and air‐shipping costs in a Hausman–Taylor model that controls for endogeneity and allows for time‐invariant variables such as distance. We find that transportation costs have a positive and statistically significant relationship with US total and manufacturing FDI, suggesting a substitute relationship between FDI and trade flows consistent with horizontal MNE activity. As one would expect, these costs are insignificant for service stocks.     

Fixed and Sunk Costs Revisited

The authors attempt to clarify the concepts of, and the link between, fixed costs and sunk costs. They argue that the root for possible confusion between fixed costs and sunk costs is the inconsistency in defining the term fixed costs. They define fixed costs uniformly as the costs that are independent of the level of output and suggest that instructors refer to the part of fixed costs that are irrevocably committed as sunk costs. Under these definitions, the statement “there are no long-run fixed costs” is incorrect. Instructors should teach students that in the long run there are no sunk costs, although there may easily be fixed costs.     

国际制度的形式选择——一个基于国家间交易成本的模型

根据制度化水平的三个维度,国际制度安排的基本形式可分为非正式协议、自我实施的正式协议、一般的正式国际组织和超国家组织。那么,缔约国如何在上述国际制度安排形式之间进行选择?本文尝试从国家间交易成本的角度为这一问题提供一个解释模型。国家间交易成本包括国家间治理成本与国家间缔约成本两个部分。国家间治理成本随着制度化水平的提高而递减,国家间缔约成本随着制度化水平的提高而递增。缔约国在选择国际制度安排形式时,将在国家间治理成本与国家间缔约成本之间进行权衡。作为理性的国际行为主体,缔约国在交易收益给定的情况下,将选择使国家间交易成本最小化的国际制度安排形式。根据这一制度选择模型,本文进一步提出了分别涉及问题领域敏感性、国家同质性、透明度、资产专用性、不确定性和交易频率的六个假说。     

The core periphery model with asymmetric inter-regional and intra-regional trade costs

We generalize the model of Krugman (J Polit Econ 99(3):483–499, 1991) to allow for asymmetric trade costs between regions and for (asymmetric) trade costs that are internal to the regions. We find that industrial activity, in a region, is enhanced by higher costs of importing and lower costs of exporting (more precisely, by a higher ratio between the two trade costs). This suggests that countries may impose tariffs on imported goods and seek to remove the import tariffs in other countries (unilateral protectionism) in order to foster industrial activity. Industrial activity is also promoted by lower domestic internal trade costs and higher foreign internal trade costs (more precisely, by a lower ratio between the two trade costs).     

Optimal Growth Strategy under Dynamic Threshold

We consider an economy in which the technology exhibits nonconvexities due to fixed costs associated with production. Taking into account the incentives for investment to decrease fixed costs, we characterize the circumstances under which an underdeveloped economy can catch up with the developing ones. We show that it is optimal to get rid of the fixed costs inherent in production in finite time provided that the initial level of fixed costs are not too high and the technology for reducing fixed costs is sufficiently efficient. Indeed, we obtain that even though the income disparities may be very persistent and can be perceived as poverty traps, economies with not very high initial fixed costs and sufficiently efficient technology for reducing fixed costs would ultimately converge to the same steady state level of per capita income.     

Estimating the weight of opportunity costs in housing consumption

Behavioural economics suggests that people tend to neglect or underweight opportunity costs. However, strong empirical evidence for the size of the underweighting appears to be largely absent from the literature. What are the weights people attach to opportunity costs relative to out-of-pocket costs? In this article, I estimate the weight of opportunity costs in probably the largest economic decision that households make: buying a house. I show that homeowners attach approximately twice as much weight to out-of-pocket costs of their housing consumption than to the opportunity costs associated with this.     

The role of mental health and addiction among high-cost patients: a population-based study

Aims: Previous work found that, among high-cost patients, those with a majority of mental health and addiction (MHA)-related costs (>50%) incur over 30% more costs than other high-cost patients. However, this work did not examine other high-cost patients in depth or whether they had any MHA-related costs. The objective of this analysis was to examine the role of MHA-related care among other high-cost patients.

Methods: Using administrative healthcare data from Ontario, Canada, this study selected all patients in the 90th percentile of the cost distribution in 2012. It focused primarily on two groups based on the percentage of MHA-related costs relative to total costs: (1) high-cost patients with some MHA-related costs (0%?>?and <50%) and (2) high-cost patients with no MHA-related costs (0%). We examined socio-demographic and clinical characteristics, utilization and costs for both groups, and modeled patient-level costs using appropriate regression techniques. We also compared these groups with high-cost patients with a majority of MHA-related costs (>50%).

Results: High-cost patients with some MHA-related costs incurred over 40% more costs than those without ($27,883 vs $19,702). Patients with some MHA-related costs were older, lived in poorer neighborhoods, and had higher levels of comorbidity compared to those without. After controlling for relevant variables, having any type of MHA-related utilization increased costs by $2,698. Having a diagnosis of psychosis had a large impact on costs.

Limitations: This study did not examine children and adolescents. We were only able to account for 91% of all costs incurred by the public third-party payer; addiction-related costs from community-based agencies were not available.

Conclusions: High-cost patients with MHA incur higher costs compared to those without. When considering interventions aimed at high-cost patients, policy-makers should consider their complex nature, specifically both their physical and MHA-related comorbidities.     

The law of one price revisited: How do goods market frictions generate large and volatile price deviations?

This paper analyzes the role of goods market frictions in accounting for the large and volatile deviations from the Law of One Price (LOP) in a framework of flexible prices. We draw a distinction between the goods market frictions that are required to consume tradable goods (e.g., distribution costs) and those that are necessary for international transactions (e.g., trade costs). We find that trade costs generate LOP deviations by introducing a no-arbitrage band, while distribution costs cause the price to deviate from the LOP by affecting the probability that trade will occur, given the band. We then conduct a Monte Carlo simulation to show that real exchange rate volatility is positively associated with trade costs, but negatively related to distribution costs. This effect depends on the interplay of trade costs and distribution costs, as they work in opposite directions when creating arbitrage opportunities.     

NON-WAGE LABOUR COSTS, POLICY UNCERTAINTY AND LABOUR DEMAND – A THEORETICAL ASSESSMENT

Labour costs in various European countries have reached a record high in recent years. The topic of non‐wage labour costs is therefore increasingly being discussed among and between the political parties because non‐wage labour costs are likely to have major negative effects on employment. We follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm's wage and non‐wage costs are stochastic and adjustment costs are sunk. Simulation exercises show that the interaction between hiring and firing costs, non‐wage labour costs and uncertainty can have important ramifications for employment dynamics.     

The costs of hiring skilled workers

This paper analyzes the structure of hiring costs for skilled workers. We use novel Swiss administrative firm-level survey data that provide direct and detailed measures of hiring costs, including recruitment and adaptation. Results show that average hiring costs range, depending on firm size, from 10 to 17 weeks of wage payments. The structure of hiring costs is convex. Marginal hiring costs increase with the number of hires and reach up to 24 weeks of wage payments. We find no evidence for a fixed cost component. Hiring costs also increase with the hiring rate (the ratio of hires and skilled workers), confirming convexity. Hiring costs generally increase with skill requirements for job applicants, and depend on macroeconomic conditions: a 1% point increase in the unemployment rate reduces average hiring costs by more than 5%.     

Constitutional design for a rent-seeking society: Voting rule choice

If rent-seeking costs are considered in addition to, and separate from, external costs and decision costs in Buchanan and Tullock's economic theory of constitutions, total interdependence costs may have multiple local minima close to the decision-making extremes. As a result, the global minimum, which gives the optimal decision rule, may be much closer to “unanimity rule” or “individual rule” than to “simple majority rule”. Further, the comparison of the minimum total interdependence costs for the public sector with those for the private sector would only justify a smaller scope and size for the public sector than would be the case if rent-seeking costs were ignored. Finally, systematic variation in rent-seeking cost could account for dramatic regime shifts between dictatorship and democracy.     

On Setting Prices and Testing Cross-Subsidy with Accounting Data

Regulators are often faced with the challenge of both setting efficient prices and avoiding cross subsidy. Successful implementation of these goals requires estimates of both marginal costs and incremental costs. We present a methodology for estimating both marginal and incremental costs for postal products. The proposed algorithms combine micro-unit accounting data and econometric estimation of the cost structure. We apply the methodology to the U.S. Postal Service and produce estimates of marginal and incremental costs for eighteen postal products and incremental costs for another four groups of products.     

The determinants and profitability of switching costs in Chinese banking

This article models the determinants of bank switching costs in China in terms of bank characteristics and non-bank variables. It also determines the contribution of switching costs to banks’ profits. Using a sample of 151 banks over the period 2003–2013 it reports a positive relationship between bank profitability and switching costs. The main result is that bank size measured by total assets has a complex relationship with switching costs. Competition between small banks creates the incentive for lock-in and increased switching costs whereas very large banks are less exercised by lock-in and switching costs.     

The Costs of Power Interruptions in Germany: A Regional and Sectoral Analysis

A high standard of security of electricity supply comes at serious electricity system costs. However, these system costs have to be balanced with the economic costs induced by an insecure supply of electricity. Following a macroeconomic approach, we analyze the economic costs imposed by potential power interruptions in Germany. Using an extensive dataset on industries and households, we estimate both Values of Lost Load and the associated hourly costs of power interruptions for different German regions and sectors. We find that interruption costs vary significantly over time, between sectors and regions. Peaking at midday on a Monday in December at 750 Mio € per hour, the average total national outage costs amount to approximately 430 Mio € per hour. A missing gigawatt hour creates average outage costs of about 7.6 Mio €.     

The cost of warfarin treatment for stroke prevention in patients with non-valvular atrial fibrillation in Russia from a collective perspective

Aims: Vitamin K antagonists (VKAs) are used for stroke prevention in patients with non-valvular atrial fibrillation (NVAF), but necessitate regular monitoring of prothrombin time via international normalized ratio (INR) testing. This study explores the economic burden of VKA therapy for Russian patients with NVAF.

Method: Cardiologists provided clinical characteristics and healthcare resource use data relating to the patient’s first year of treatment. Data were used to quantify direct medical costs (INR testing, consultations, drug costs). The same patients completed a questionnaire providing data on direct non-medical costs (travel/expenses for attendance at VKA appointments) and indirect costs (opportunity cost and reduced work productivity). Mean costs per patient per year are described (US dollars).

Results: Cardiologists (n?=?50) provided data on 400 patients (mean age?=?63, 47% female), and 351 patients (88%) completed the patient questionnaire. Patients had a mean of nine INR tests. Estimated direct medical costs totaled $151.06, and 18.5% of direct medical costs were attributable to drug costs. Estimated annual direct non-medical costs were $22.89 per patient, and indirect costs were $275.59 per patient.

Limitations: Included patients had been treated for 12–24 months, so are not fully representative of the broader treatment population.

Conclusion: Although VKA drugs costs are relatively low, regular INR testing and consultations drive the economic burden for Russian NVAF patients treated with VKA.     

Association between provider specialty and healthcare costs and glycemic control for patients with diabetes

Aims: To analyze the association between provider, healthcare costs, and glycemic control for patients with diabetes mellitus (DM).

Materials and methods: This cross-sectional study identified adults with type 1 or 2?DM (T1D, T2D) in the Optum database. The main independent variable was provider (endocrinologist or primary care). Regression analysis compared total medical and pharmacy costs, adjusting for health status and other patient differences, by provider.

Results: For all patients, HbA1C improvement was greater, and medical costs significantly lower with an endocrinologist rather than a primary care provider. The largest HbA1C improvement (4%) occurred for insulin-dependent patients seen by endocrinologists. Significant medical savings with endocrinologist management occurred within the Medicare Advantage population in every sub-group of patients, with 14% lower costs ($4,767) for patients with T1D, 11% lower costs ($3,160) for patients with macro- and microvascular complications, and 10% lower costs ($2,237) for insulin-dependent patients. Within the commercial insurance population, medical costs were reduced by ≥9% in every sub-group of patients, with a 20% reduction ($8,450) for patients with micro- and macrovascular complications. Overall total costs (medical and pharmacy) were 8% ($1,541) higher for patients receiving endocrinologist rather than primary care, although endocrinologist care resulted in a 9% reduction (–$3,710) in costs for Medicare Advantage patients with T1D. Total medical costs (excluding pharmacy costs) may be a more accurate indicator of costs associated with patients in various stages of DM.

Limitations: There was insufficient data to develop risk-adjustment payments for pharmacy costs based on disease severity. The cross-sectional design identifies associations and not cause–effect relationships.

Conclusion: DM management by an endocrinologist was associated with greater HbA1C improvement and significantly lower medical costs. Total costs were higher with an endocrinologist, but for patients with T1D lower costs were seen, ranging from 2–9% regardless of insurance type.     

The transaction costs perspective on international supply chain management; evidence from case studies in the manufacturing industry in the Netherlands

Transaction costs are barriers for internationalisation processes. This paper investigates the practical relevance of transaction costs economics (TCE) for international supply chain management (SCM) in this era of globalisation, which is characterised by splitting up the supply chain in more and more parts. The analysis is based on data from in-depth interviews with seven manufacturing companies in the Netherlands which are actually engaged in this modern way of organising production. It is shown that the balance between transaction costs and sheer production costs (transformation costs) plays a prominent role in the strategic decisions on how and where to organise production. Especially intangible (or ‘soft’) transaction costs are important in this respect. The analysis provides insight in practical experience in the manufacturing industry in the Netherlands with transaction costs and shows how transaction costs affect decisions on transaction management, personnel policy and internationalisation of R&D. This study is to our knowledge the first to confront the theory of TCE with practice of manufacturing firms in their internationalisation decisions using in-depth interviews instead of survey data.     

论公民社会保障权的实施成本及其控制

社会保障权是现代社会公民的一项基本权利,为公民提供社会保障是现代政府的当然职责,但公民社会保障权的实现,需要消耗巨额公共资源。广义上讲,公民社会保障权的实施成本,主要包括直接支付成本、管理成本与转制成本。其中,社会保障权实施的管理成本应属于社会保障制度建设的基础问题,本文在对社会保障权实施的管理成本影响因素进行实证分析的基础上,提出了降低公民社会保障权实施成本的基本思路与政策建议。     

Improving environmental decisions: A transaction-costs story

A multidisciplinary team of researchers made efforts to influence the design and implementation of environmental policy in Australia. A focus of these efforts was the development of the Investment Framework for Environmental Resources (INFFER). In addition, the team undertook a range of communication activities, training, user support, and participation in committees and enquiries. Transaction costs were relevant to these efforts in a variety of ways. Environmental managers perceived INFFER to involve relatively high transaction costs. A balance was struck between the system having simplicity (and low transaction costs) and delivering environmental benefits. Transaction costs were factored into the planning and prioritisation processes developed. For example, public and private transaction costs are accounted for in the calculation of benefit:cost ratios and in the choice of policy mechanisms. There are diverse roles that transaction costs play in the processes of developing, implementing and influencing environmental policy programmes. A key observation is that appropriate strategic investment in transaction costs can improve decisions and increase net benefits from an environmental programme. A well-designed decision process can involve incurring transaction costs at one stage in order to save transaction costs at a later stage.     

Retroactive Liability or the Public Purse?

The article addresses the question of whether responsibility for pollution created in the past should be retroactively applied to firms, or if the costs of cleaning up existing pollution should be financed by the public. We show that making firms liable for retrospective environmental costs can weaken the incentive to take precautions against future environmental costs. This follows since public financing of these costs can lead to greater prospective risk deterrence by allowing firms to more fully internalize the costs of future environmental risks. However, an analysis of existing public financing approaches highlights a set of dangers associated with their practical use.