The ministry as the maximizing unit in Soviet industry

Microanalysis of Soviet industry has customarily chosen the enterprise as unit of analysis. This paper recommends that choice of the unit be made according to the criterion of the lowest hierarchical unit customarily receiving plans that hold unchanged for the entire planning period. It experiments with use of the ministry as unit of analysis. Conclusions from statistical data are (1) absence of “taut” planning during normal years of the 1969–1977 period, of with the situation during 1949–1956; (2) absence of any ratchet effect in planning during either period, with greater statistical confidence in this result for the 1969–1977 period.     

The role of unit labor costs in African manufacturing investment and export performance

Several studies have pointed out that manufacturing wages are relatively higher in African countries than in other countries at similar levels of development, and that this contributes to the continent's lower levels of manufacturing competitiveness. This paper derives unit labor costs (ULCs)—average wages relative to productivity—for two-digit manufacturing sectors across a sample of 79 developed and developing countries, including 13 African countries, over the 1990–2015 period. We benchmark the ULCs to China and estimate the relationship between relative ULCs and manufacturing sector investment rates and export performance. We find that relative ULCs have a smaller association with exports in Africa relative to other developing regions. There is some evidence that investment responds to changes in relative ULCs in Africa; however, the estimated effects are smaller than in the full sample. Further, we find that for Africa, the level of labor productivity has a quantitatively stronger and more robust association with manufacturing performance than the level of real wages. The results have important implications for industrial policy in African countries.     

Towards equilibrium offers in unit commitment auctions with nonconvex costs

We compare two types of uniform-price auction formats commonly used in wholesale electricity markets—centrally committed and self-committed markets. Auctions in both markets are conducted by an independent system operator that collects generator bids and determines which generators will operate and how much electricity each will produce. In centrally committed markets, generators submit two-part bids consisting of a startup cost and a variable energy cost. Self-committed markets force generators to incorporate their startup costs into a one-part energy bid. The system operator in a centrally committed system ensures that each generator recovers the startup and energy costs stated in its two-part bid, while no such guarantees are made in self-committed markets. The energy cost ranking and incentive properties of these market designs remains an open question. While the system operator can determine the most efficient dispatch with a centralized market, the auction mechanism used to solicit generator data compels generators to overstate costs. Self commitment might involve less efficient dispatch but have better incentive properties. We derive Nash equilibria for both market designs in a symmetric duopoly setting. We also derive simple conditions under which the two market designs will be expected cost-equivalent.     

Production and costs in the South African motor vehicle industry

This study investigates the existence of economies of scale in the South African motor vehicle industry as well as the substitution possibilities between input pairs and the direct and cross-price elasticities of demand for the various inputs. Because of data limitations, a translog cost function was estimated for only a three input model corresponding to a homogeneous production function involving capital, labour and intermediate goods. The issue of the existence of economies of scale in the South African motor vehicle industry is a particularly important one because South Africa once again is a member of GATT and a full participant in the international trade arena. The null hypothesis of constant returns to scale was rejected at the 0.5% level of significance. Thus, the results of this model are certainly consistent with economies of scale in the South African motor vehicle industry. The estimated direct price elasticities were consistent with the hypothesis that, during the past two decades, capital was the productive factor with the most elastic demand, and the estimated cross-elasticities between input pairs generally supported the hypothesis that all inputs are substitutes.     

Families and firms: Agency costs and labor market imperfections in Sialkot's surgical industry

The family firm is generally viewed as an organizational solution to agency costs in the labor market for managers and institutional underdevelopment. Consistent with this view, this paper links the preponderance of family firms in the surgical instrument industry of Sialkot to the prevailing agency and institutional problems. However, strong dependence on family management coupled with restrictions on family size constrains the firms from optimally choosing management size. The resulting labor market distortion is manifested by a significant positive correlation between the founder's family size and the firm size such that the founders who have more brothers (a larger pool of potential managers) end up with bigger firms.     

Consumption Externalities in a Commercial Fishery: the Queensland Beam Trawl Fishery

Demand and contingent valuation models are used to analyze survey data obtained from a sample of recreational boat and shore fishers in southern Queensland. The value of the recreational fishery to the average fisher in the sample and the value of marginal increases in catches of target species are estimated. These estimates are used to calculate the value of Pigovian taxes representing the marginal cost of catch and congestion externalities imposed by the beam trawl fishery on the recreational fishery. The results suggest that the cost of these externalities does not justify the closure of the beam trawl fishery.     

Optimal Harvesting of an Age-Structured Schooling Fishery

Biologists have criticized traditional biomass models in fishery economics for being oversimplified. Biological stock assessment models are more sophisticated with regard to biological content, but rarely account for economic objectives. This study includes a full age-structured population model for studying schooling fisheries and extends the delayed difference approach used in earlier studies. We take the total harvest as the choice variable, resulting in a simple analytical structure. The model produces optimal steady states that may be higher or lower compared to the delayed-difference formulation. The model is applied to the Baltic sprat fishery. Both ecological and harvesting cost data support specifying Baltic sprat as a schooling fishery. Given nonlinear harvesting costs, the optimal solution is a path toward a steady state with smooth annual harvest and population age structure. Sensitivity analysis shows that the optimal solution is highly dependent on the population level of the sprat’s main predator Baltic cod. A linear cost function and an interest rate below 9 % imply pulse fishing instead of smooth continuous harvesting. Given nonlinear harvesting cost, the optimal steady state yield is rather insensitive to changes in the interest rate. However, under a high cod scenario, interest rates of 10 % or higher implies that no optimal steady state exists.     

Raising rivals' costs: The entry of an upstream monopolist into downstream markets

A regulated upstream monopolist provides an input to firms in a downstream market. If the monopolist enters the downstream market, a natural concern is that it will act so as to raise its downstream rivals' costs. An offsetting incentive is that a higher downstream price will reduce demand for the input, which reduces the monopolist's profit. Conditions under which one incentive dominates the other are derived. The monopolist may desire to lower its downstream rivals' costs rather than raise them. These findings suggest that regulatory policy towards such downstream entry should not focus exclusively on the ability to discriminate.     

The motor vehicle industry in an emerging nation: the case of Brazil

As in other emerging nations, in Brazil, the motor vehicle industry is considered to be strategically important for economic development because of its backward and forward linkages and possibilities for export-led growth. This study analyses prospects for the industry by estimating an industry-level cost function that includes output of both vehicles and component parts with capital, labour and intermediate goods as inputs. The cost elasticity of output (an indicator of scale properties) and the elasticity relationships among inputs are explored. One unexpected outcome of the work that appears to be robust is that during early years of the study period, the industry had constant returns or even diseconomies of scale. However, during later years, when output was greater, there were economies of scale. This finding is likely the result of some combination of the entry of new firms, the development of new models or technological change. The study concludes that if firm output can be increased, economies of scale can be expected to strengthen the position of the Brazilian industry in the international marketplace.     

Determinants of R&D in an LDC: The Indian engineering industry

R&D behaviour of LDC industrial firms is an unexplored subject. Data on the largest engineering firms in India are analysed to test the hypothesis that technological effort in LDCs is primarily directed at assimilating and adapting foreign technologies.     

Variable selection for dynamic measures of efficiency in the computer industry

Data Envelopment Analysis (DEA) measures of efficiency are very sensitive to the choice of variables for two reasons: the number of efficient firms is directly related to the number (n) of variables and the selection of the n variables greatly affects the measure of efficiency. A methodology is proposed which identifies the optimal number of variables, and which identifies the contribution of each variable to the measure of efficiency. The computer industry is used as an example to illustrate the method.     

Measuring the costs of children: an alternative approach

Problems related to the concept of the "cost of a child", more commonly known as the general equivalence scale, are reviewed. The importance of this concept is noted with regard to both theoretical and empirical studies relating to taxation, poverty, income distribution, dietary needs, income maintenance programs, supplementary and child benefits, and other social security payments. "This paper proposes a new methodology for calculating the scale using a framework which is consistent with utility theory and which overcomes the identification problem without having to enforce the arbitrary prior assumptions of recent studies. The proposed method allows easy calculation of not only the basic 'scale' parameter but also how it varies with price and reference utility. [The author illustrates] the usefulness of the procedure by estimating on U.K. budget data at two different levels of aggregation and employing two sets of quite different functional forms. The results are plausible, compare favourably with one another and, hence, confirm the robustness and usefulness of the proposed procedure."     

Trade and productivity: an industry perspective

We use a sample of 14 OECD countries and 15 manufacturing industries to test for the effect of trade on productivity. Endogeneity concerns are accounted for using the geographical component of trade as instrument as suggested by Frankel and Romer (Am Econ Rev 89(3):279–399, 1999). We find that trade, measured in terms of the export ratio, increases productivity, even if country-fixed effects such as the quality of institutions are controlled for, though results are less robust for imports. Estimates at the aggregate manufacturing level turn out much larger, emphasizing the role of inter-industry spillovers.

The effects of rising labour costs on global supply chains: the case of China’s cotton yarn industry

Rapid economic growth in China and India has resulted in rapidly rising labour costs in those countries. In this study a Muth-type model is used to assess the potential effects of this development on global supply chains using China’s cotton yarn industry as a case study. The model considers i) product differentiation at the yarn level; ii) imperfect competition in the markets for cotton yarn and raw cotton fibre, iii) input substitution between raw cotton fibre, labour, and capital; and iv) offsetting increases in the demand for cotton yarn caused by rising consumer income. Results suggest the effects of rising labour costs on the supply chain are modest, and easily swamped or obscured by the effects of rising income. Increases in industry market power (both oligopoly and oligopsony) have the same effect on the supply chain as increases in labour costs, raising prices to consumers of cotton yarn, and lowering prices to input suppliers, including foreign suppliers of raw cotton fibre. The combined effects of increases in labour costs and income have increased the factor shares for labour and to a lesser extent capital at the expense of raw cotton fibre.     

The costs of treating acute heart failure: an economic analysis of the SURVIVE trial

Abstract

Objective: To estimate the incremental cost per life year gained with levosimendan relative to dobutamine in treatment of acute heart failure based on the Survival of Patients with Acute Heart Failure in Need of Intravenous Inotropic Support (SURVIVE) trial.

Methods: SURVIVE enrolled 1,327 patients (levosimendan 664, dobutamine 663) from nine nations with 180-day survival from date of randomisation as the primary endpoint. Hospital resource utilisation was determined via clinical case reports. Unit costs were derived from hospital payment schedules for France, Germany and the UK, and represent a third-party payer perspective. Cost-effectiveness analysis was performed for a subset of the SURVIVE patient population selected in accordance with current levosimendan labeling.

Results: Mortality in the levosimendan group was 26 versus 28% for dobutamine (hazard ratio 0.91, 95% confidence interval 0.74–1.13, p=0.40). Initial hospitalisation length of stay was identical (levosimendan 14.4, dobutamine 14.5, p=0.98). Slightly lower rates of readmission were observed for levosimendan relative to dobutamine at 31 (p=0.13) and 180 days (p=0.23). Mean costs excluding study drug were equivalent for the index admission (levosimendan €5,060, dobutamine €4,952; p=0.91) and complete episode (levosimendan €5,396, dobutamine €5,275; p=0.93).

Conclusion: At an acquisition cost of €600 per vial, there is at least 50% likelihood that levosimendan is cost effective relative to dobutamine if willingness to pay is equal to or greater than €15,000 per life year gained.     

The benefits and costs of ethanol: an evaluation of the government’s analysis

Ethanol production in the United States has been steadily growing and is expected to continue growing. Many politicians see increased ethanol use as a way to promote environmental goals, such as reducing greenhouse gas emissions, and energy security goals. This paper provides a benefit-cost analysis of increasing ethanol use based on an analysis by the Environmental Protection Agency. We find that the cost of increasing ethanol production to almost ten billion gallons a year is likely to exceed the benefits by about three billion dollars annually. We also suggest that earlier attempts aimed at promoting ethanol would have likely failed a benefit-cost test, and that Congress should consider repealing ethanol incentive programs, such as the ethanol tariff and tax credit.      

Hidden costs of control: four repetitions and an extension

We report four repetitions of Falk and Kosfeld’s (Am. Econ. Rev. 96(5):1611–1630, 2006) low and medium control treatments with 476 subjects. Each repetition employs a sample drawn from a standard subject pool of students and demographics vary across samples. We largely confirm the existence of hidden costs of control but, contrary to the original study, hidden costs of control are usually not substantial enough to significantly undermine the effectiveness of economic incentives. Our subjects were asked, at the end of the experimental session, to complete a questionnaire in which they had to state their work motivation in hypothetical scenarios. Our questionnaires are identical to the ones administered in Falk and Kosfeld’s (Am. Econ. Rev. 96(5):1611–1630, 2006) questionnaire study. In contrast to the game play data, our questionnaire data are similar to those of the original questionnaire study. In an attempt to solve this puzzle, we report an extension with 228 subjects where performance-contingent earnings are absent i.e. both principals and agents are paid according to a flat participation fee. We observe that hidden costs significantly outweigh benefits of control under hypothetical incentives.     

The Maximum Sustainable Yield of Artisanal Fishery in Zanzibar: A Cointegration Approach

The objective of this study is to analyze the scope for expanding theartisanal fishery in Zanzibar and to present cointegration as an econometricmethod to estimate the maximum sustainable yield (MSY) in fishery. For thatpurpose the Schaefer and Fox surplus production models are considered.Application of cointegration is discussed to test whether there is atendency to long run equilibrium between catch and effort as assumed bythe surplus production models and implied by the MSY concept. Moreover,estimation of the parameters is dealth with. Application to data relating toartisanal fishery in Zanzibar shows that there is support for a Fox model.Moreover, we find that the current catch is only about 40 percent of theestimated MSY, but the prevalent effort is about two times bigger than theestimated optimum effort. It appears therefore that the fishery in Zanzibaris biologically overfished.