Are Charters the Best Alternative? A Cost Frontier Analysis of Alternative Education Campuses in Texas

Previous research on the relative efficiency of charter schools focused on schools that serve a general student population. In Texas, as in many other states, some charter schools have been designed specifically to serve students who are at risk of dropping out of school. Such “alternative education campuses” may have very different cost and efficiency profiles than schools designed to serve students in regular education programs. In this article, we estimate a translog stochastic cost frontier model using panel data for alternative public high school campuses in Texas over the five‐year period 2007–2011, and find that alternative education high school campuses operated by charter schools are systematically more efficient than alternative education high school campuses operated by traditional public school districts. Policies that encourage the formation of alternative education charter campuses may thus be a sensible component of strategies to combat the pervasive and pernicious problem of high school dropouts.     

Do Households Prefer Small School Districts? A Natural Experiment

Some education reformers have proposed breaking up large urban school districts, thereby moving to a more efficient scale, increasing school choices, and promoting school competition. This article tests whether households expect these effects and whether they value them. It considers the effect on real estate prices of the surprise breakup of the Los Angeles Unified School District (LAUSD) into 11 minidistricts in April 2000. We estimate households' reaction to this reform in a difference‐in‐differences setting that controls for any unobserved spatial effects unaffected by the announcement. We find that households valued this decentralization, with a 2–3 percentage point increase in housing values in the LAUSD area over pre‐existing trends, compared with control districts. The effect is highest in wealthier neighborhoods but otherwise homogenous within the LAUSD area. The results suggest that households believe that decentralization would make schools more effective and that they respond to signals about schools' future.     

Cost Economies: A Driving Force for Consolidation and Concentration?

Expanding concentration in many industries has generated concern about the determinants of these market structure patterns. Understanding such trends requires information on technological characteristics underlying cost efficiency. However, market structure and power analyses are typically based on restrictive models that limit the representation of cost drivers. In this paper, I model and estimate a comprehensive cost specification allowing for utilization, scale, scope, and multiplant economies using U.S. beef packing plant data. My evidence of substantive cost economies implies economic motivations for observed concentration, consolidation, and diversification and facilitates the interpretation and use of market structure measures for policy guidance.     

COMPETITIVE ISSUES IN THE TAIWANESE BANKING INDUSTRY: MERGERS AND UNIVERSAL BANKS

This paper investigates scale economies and scope economies in the Taiwanese banking system, looking beyond the market‐power (MP) and efficient‐structure (ES) hypotheses. Given the existence of overall economies of scale and the positive value of expansion path sub‐additivity, we conclude that there might be large increases in profits following mergers. Moreover, since the profit‐structure relationship after financial reform is determined by the relative‐market‐power hypothesis, this consolidation trend will not necessarily decrease the social benefit for Taiwanese consumers. With regard to scope economies and product‐specific economies of scale, we are unable to recommend whether Taiwanese banks should develop as specialized banks or diversified banks in the future. Finally, we find that risk indicators play an important role in explaining the observed variation in bank profitability, and present evidence that default risk and leverage risk have negative effects on the profits of banking, although the effect of portfolio risk is uncertain.     

Estimating Cost Functions of Malaysian Commercial Banks: The Differential Effects of Size,Location, and Ownership*

Bank integration and competition policies are a core part of current financial reforms intended to strengthen the financial sector in Malaysia. This paper intends to clarify the production technology employed in Malaysian banks and indicate important policy implications for current bank consolidation policy. While it is essential to conduct a microeconomic analysis of the banking sector to appraise financial reform policy, Katib and Mathews (2000) is the only formal study in this area that uses micro level data on Malaysian banks. Our analysis expands on Katib and Mathews’ study in three aspects. Firstly, while Katib and Mathews employed Data Envelopment Analysis, we use estimation analysis based on a parametric approach. Secondly, we examine technological differences among Malaysian banks according to the size of operations, location of branches and ownership structure. Thirdly, we also explicitly incorporate the existence of hidden bad loans in estimating cost functions. According to our estimation analysis, there is a difference in production technology between large‐sized banks and small or medium‐sized banks. While economies of scale are observed for large‐sized banks, no economies of scope and technological progress are observed for any banks. The results of our analysis suggest that, while the current reform policy is basically appropriate, serious problems remain regarding bank consolidation and the lack of market competition.     

Yardstick Cost Comparison and Economies of Scale and Scope in Japan's Electric Power Industry

This paper utilizes a fixed-effects model of panel data analysis and estimates the translog cost function of the Japanese electric power industry from 1978 to 1998. First, we investigate whether the Japanese electric power industry is naturally monopolistic. We find that all electric power companies still benefit from both scale and scope economies and therefore, this industry remains a naturally mono-polistic industry. Second, in order to apply the idea of yardstick-type competition to a naturally monopolistic industry where costs are quite different between companies, we introduce two kinds of cost-comparison coefficients, one for the individually specific effects and the other for scale and scope economies.     

Market-power versus cost-efficiency in Thailand's banking sector in the post-crisis period (1998–2011)

The degree of competition and effect of market concentration on interest rate margins in the banking sector of Thailand are estimated using the new empirical industrial organization model. We find that the collusive behavior and the market power of banks intensified during 2005–2011, after the East Asian financial crisis. Although the estimated benefit of scale economies resulting from increased concentration is statistically insignificant, its estimated impact would offset the unfavorable effect of higher market-power associated with higher concentration.     

The minimum wage and the financialization of firms: Evidence from China

This paper utilizes China's A-listed firm data to investigate whether increasing the minimum wage promotes the financialization of firms. We apply instrumental variable estimation and various robustness tests to address measurement errors and potential endogeneity. We find robust and consistent evidence that exposure to higher minimum wages increases a firm's investment in financial assets. Furthermore, we explore the effects of moderators, such as increased employment stickiness, intensification of financial constraints, and reduced innovation activities as potential explanations for the positive effect of increasing minimum wages. Moreover, firms located in non-coastal cities with relatively higher equity concentration and lower market competition are substantially more incentivized to increase investment in financial assets. Overall, this paper provides new insights into understanding the effects of increasing labor costs on firms' asset allocation in emerging market economies.     

The Contribution of the School Environment to the Overall Food Environment Experienced by Children

Despite the important role of schools in the food environment faced by children, most research examining access to healthy food has focused on the retail sector. We create a database of school menus and the nutritional information about each item on the menu from nearly all school districts in the United States to examine the influence of the school‐based food environment on the nutritional choices of children. Using the National Household Food Acquisition and Purchase Survey (FoodAPS), we find that, holding constant the neighborhood retail food environment, exposure to healthier meals at school increases the healthfulness of foods acquired by children throughout the day.     

Production Costs,Scale Economies,and Technical Change in U.S. Textile and Apparel Industries

The elimination of quotas in textiles and apparel poses new threats from import competition. To survive, the sectors need to find least-cost methods of production. The production–cost structure of the U.S. textile and apparel industries is examined using a dual cost framework. A translog cost function is used to measure substitution elasticities between inputs, scale economies, and the nature of technical change. The scope for factor substitution in textiles remains limited with all substitution elasticities being less than unity. Labor and materials are complements in apparel production, but there is evidence of substitution between capital and labor. The rate of technical change is higher in textiles than in apparel. Given the intense import competition from low wage countries, in both industries, technical progress is labor saving. Overall, economies of scale are larger in apparel; however, scale economies have continued to increase in textiles.This research was supported by a grant from the National Textile Center.     

What Blows in with the Wind?

The shift toward renewable forms of energy for electricity generation in the electricity generation industry has clear implications for the spatial distribution of generating plant. Traditional forms of generation are typically located close to the load or population centers, while wind‐ and solar‐powered generation must be located where the energy source is found. In the case of wind, this has meant significant new investment in wind plant in primarily rural areas that have been in secular economic decline. This article investigates the localized economic impacts of the rapid increase in wind power capacity at the county level in Texas. Unlike input‐output impact analysis that relies primarily on levels of inputs to estimate gross impacts, we use traditional econometric methods to estimate net localized impacts in terms of employment, personal income, property tax base, and key public school expenditure levels. While we find evidence that both direct and indirect employment impacts are modest, significant increases in per capita income accompany wind power development. County and school property tax rolls also realize important benefits from the local siting of utility scale wind power, although peculiarities in Texas school funding shift localized property tax benefits to the state.     

Capital market distortion,firm entry and wage inequality

Distortions in the capital market are notable in developing economies like China. By building up a dual production structure with oligopolistic competition in urban manufacturing, this paper investigates the distributional and welfare effects of capital market distortions. We find that in the short run, an increase in the capital market distortion in favor of urban firms can lower both the skilled and unskilled wages. However, in the long run, the preferential policy on reducing capital cost to the urban sector attracts new entry of firms, which can worsen the skilled-unskilled wage inequality in the economy. This firm-entry effect of the capital market distortion on wage inequality is empirically confirmed for China.     

Market integration and imperfect competition in labor and product markets

We analyze the consequences of product market integration in a simple two-country, two-sector, general-equilibrium model with imperfect competition due to economies of scale. In contrast to the existing literature we take explicit account of the labor-market structures in the integrating economies. It turns out that the specific labor-market structures are very important for how integration affects total production and product market structure in a particular economy. However, integration always gives rise to a welfare gain in both economies.I have benefitted from comments by an anonymous referee, a coeditor of this journal, and by participants in a workshop arranged by CIE in April 1992, at the University of Aarhus, and by participants at the EEA conference in Dublin 1992.     

What Factors Determine Student Performance in East Asia? New Evidence from the 2007 Trends in International Mathematics and Science Study

This study investigates what factors determine students’ academic performance in 5 major Eastern Asian economies. It does so using data gathered through the 2007 Trends in International Mathematics and Science Study. In a regression analysis, we explicitly consider initial maturity differences, endogeneity of class size and peer effects. We find that a student's individual and family backgrounds are key determinants of educational performance, while institutional and resource variables have a more limited effect. Peer effects are significant in general, but ability‐sorting at the school and/or class levels makes it difficult to interpret these effects in Hong Kong and Singapore.     

Economic Systems and Economic Growth

In a planned economy, state monopoly ensures that economies of scale are exploited. However, state monopoly could not commit to reward its workers. Anticipating this, individuals will exert less effort. In a market economy, competition among firms ensures that higher effort from workers will be rewarded. However, competition means that economies of scale are not fully exploited. Per capita output growth is generated by continuous adoption of new technologies substituting labor for capital. Growth rate in a market economy is higher than that in a planned economy when the incentive to exert effort is relatively more important.     

The impact of financial development on the effectiveness of inflation targeting in developing economies

An ever-increasing number of developing economies with varied levels of financial development have adopted Inflation Targeting (IT) frameworks to guide monetary policy. Using a panel dataset of 54 developing economies over the period 1980 to 2015 (30 of which have IT frameworks), we re-visit the rather controversial issue of whether adoption of an IT framework leads to superior outcomes in terms of reducing inflation and its variability. After controlling for potential endogeneity and self-selection concerns of policy adoption, our main empirical finding is that IT frameworks appear to reduce inflation rates in developing economies regardless of the level of financial development, while it reduces variability of inflation rates only when we control for levels of financial market development. We further find that the effectiveness of IT framework on inflation is highly dependent on financial inclusion and bank characteristics, while the effect on inflation variability is more associated with components of capital market development.     

The Differential Impact of Accurate Product Cost Information in Imperfectly Competitive Markets: A Theoretical and Empirical Investigation*

Many researchers claim that costing systems that provide materially more accurate or precise cost reports have a strict value-enhancing effect on decisions (i.e., Cooper 1988, 1995; Cooper and Kaplan 1991; Christensen and Sharp 1994; Rogers. Comstock. and Pritz 1994; Swenson 1995; Gupta and King 1997). However, this study provides theoretical and empirical evidence that the value of more accurate cost information may be dependent upon the firm's competitive market structure, as well as the firm's product market strategy. We extend the theoretical work of Gal-Or 1986 to incorporate an endogenous imprecise cost signal in two imperfect market structures: Cournot competition and Bertrand competition with imperfectly substitutable products. In addition, we theoretically link market structure to product market strategy. To examine product market strategy, we employ a laboratory markets design that allows for strategic reaction by a rival firm in each of these markets, because the competitive position of a firm is determined by its capacity to produce at low cost, or to differentiate its product from other products (Porter 1985). Consistent with our theoretical work, we argue that firms that compete on the basis of cost leadership (which we demonstrate may be characterized as Cournot competition), benefit through increased profits from increased product cost accuracy, whereas firms that compete on the basis of product differentiation (which we demonstrate may be characterized as Benrand competition) do not benefit from such increased product cost accuracy. Our results are consistent with this contention. That is, profit is higher in the experimental cost leadership markets (operationalized as Cournot markets) when subjects know their true cost, while profit is higher in the experimental product differentiation markets (operationalized as Bertrand markets) when subjects receive uninformative cost reports and make their decisions based on expected costs. These results suggest that the value of more accurate cost reports may be dependent upon the firm's competitive market structure strategy and product market strategy.     

Mandatory Disclosure,Generation of Decision‐Relevant Information,and Market Entry

We investigate the interaction of mandatory disclosure and the gathering of decision‐relevant information in a setting in which a competitor may enter the market. Gathering detailed information allows for an efficient allocation of resources, but eventually attracts competition by revealing beneficial information to competitors. In contrast, refraining from generating detailed information implies inefficient decisions, but eventually prevents competitors from entering the market. Our results show that an incentive not to generate internal information arises for two reasons: If the incumbent's cost advantage is sufficiently large, disclosing aggregated information can be an instrument to avoid competition by reducing the likelihood of market entry. If the incumbent's cost advantage is small, disclosing aggregated information attracts competition by increasing the likelihood of market entry. In this case, imprecise cost information serves as a commitment device to reduce the intensity of competition by forcing the competitor to take into account his efficiency disadvantage in making his production decision.     

Unintended Consequence of Centralized Public School Funding in Michigan Education

As part of the movement to create greater spending equity among school districts, states have centralized funding for public education and instituted funding formulas where high-spending districts are often constrained in their operational expenditures. However, these school districts often maintain local discretion over capital expenditures financed by the sale of bonds. In this study, we find that Michigan's high-spending school districts have a greater probability of issuing bonds after centralizing public school funding, indicating that debt financing of capital expenditures may have become a mechanism to allow these school districts to circumvent the policy's intent for greater spending equity.     

Life-insurance Efficiency in China： A Comparison of Foreign and Domestic Firms

The Chinese life-insurance industry has experienced major structural changes in recent years, primarily because of increasing demand and the entry of foreign insurers. Although the market is clearly booming, the efficiency of its growth and development is unclear. In this paper, we evaluate the efficiency of life insurers operating in China and compare foreign firms with domestic firms. We find that foreign insurers have not brought efficiency into the Chinese market, and that the market is still dominated by domestic giants. However, the gap between foreign insurers and domestic insurers is narrowing. After testing hypotheses regarding scale economy, technical progress andpotential improvements, we discuss several issues＇ of importance to life insurers, market investors and government regulators.