NUCLEAR POWER, SYSTEMATIC RISK, AND THE COST OF CAPITAL

Previous studies of the effects of adoption of nuclear technologies by electric utilities have concentrated on the period following the catastrophe at Three Mile Island (TMI) in 1979. The purpose of this study is to test whether increased risk effects on equity costs of nuclear-adopting utilities existed prior to that event. This study, using panel data and beta measures of systematic risk, concludes that a positive, significant, and persistent nuclear adoption effect existed even prior to TMI. Nuclear adoption increased equity costs, on average, 0.8 percent for periods following the adoption event. This is of the same order of magnitude as adoption effects estimated in other studies for the post-TMI period.     

THE ROLE OF THE STATE AS GUARANTOR OF PUBLIC SERVICES: TRANSACTION COST ISSUES AND EMPIRICAL EVIDENCE

ABSTRACT ** :  The aim of the paper is to take a closer look from a transaction cost perspective at empirical findings on the changing role of the State as a guarantor of public services. In recent years, a number of economic and legal research efforts have been devoted to analyse under which conditions and for which public services specific organizational forms and institutional arrangements would be adequate. The empirical evidence referred to for the public services supports in principle central statements and hypotheses of transaction cost theory and leads to some important conclusions for empirical research and for policy recommendations.     

THE MEASUREMENT OF REAL OUTPUT OF PUBLIC SECTOR SERVICES

Recently there has been discussion concerning the renewal of the volume measurements of public sector services. This renewal has been proposed e.g. in the recent United Nations Draft Manual on Public Sector Statistics. In the present paper we discuss some theoretical and practical problems connected with this renewal. According to some preliminary calculations concerning the Finnish educational sector, the new methodology might lead to a considerable revision of figures of output and labour productivity in the public sector. The revisions are of such a quantity that they might cause significant changes in the measurement of the volume of the total gross domestic product. This is a fact which may still require reflection before the new methodology is generally introduced, even though the revisions as such may be highly desirable from several aspects.     

MEASUREMENT OF CAPITAL IN DENMARK

In December 1973, the so-called 2nd Perspective Plan was published by the Danish Ministry of Finance. It included some 5 and 15 year forecasts of investments in the private sector, based on the projected development of production and labour. The forecasts were made by use of a simple Cobb-Douglas production function, taking as capital-input the stock of buildings and machinery, using the perpetual inventory method (assuming sudden death).
Since the publication of these forecasts, an attempt has been made to refine the capital concept, measuring its services as factor input. Thus, it has been necessary to introduce an exogenous rate of interest. Inspired by Danish findings for private cars, depreciation functions for stocks and utility of machinery are developed. These functions may not seem very realistic for the heterogenous class of durables called machinery, but other possibilities appear even less convincing.
Together with an assumption of exponential decay for buildings, it is possible to produce alternative time-series for changes in input of capital in the production process. Some of the resulting estimates of parameters in the Cobb-Douglas function give a better fit than the original version. But no value of the elasticity of production of capital is firmly established, e.g. it is obviously dependant upon the period of estimation, and therefore of no great value in forecasting. No firm connection between labour productivity and capital input (in short as well as the long run) has so far been revealed in Denmark, so no measure of capital is yet of great use in forecasting, except when future growth in production resembles that of the past fairly closely.     

IS THE COST OF DEBT CAPITAL HIGHER FOR YOUNGER FIRMS?

Not much is known about the returns to aging (maturing) in the market for small business finance. Using a large panel of closely held micro firms, we document that the cost of debt capital is higher for young firms. The main finding of this paper is that this negative qualitative relation is also obtained when cross‐sectional variation in unobservable creditworthiness of small businesses and within‐firm (i.e., inter‐temporal) variation in their observable creditworthiness are held constant. We control for the former by firm‐specific fixed effects and for the latter by a commercial credit score. We also provide an estimate of the quantitative magnitude of the aging effect, on which both economic theory and earlier empirical research are silent. We find that when a small business ages one year, its cost of debt capital decreases by 1–2 basis points. The effect is neither negligible nor alarmingly large.     

中国主要省区物质资本与人力资本利用效率及投资取向

要实现区域的可持续发展,提高资源利用效率是一个根本性的问题。而作为主要生产资源的物质资本与人力资本的利用效率就具有更重要的意义。文章以经济增长理论为依据,利用生产函数分析了中国主要省区物质资本与人力资本对经济增长的贡献率,发现1990年代之后大多数省区的人力资本贡献率已超过了物质资本的贡献率,说明经济增长方式已发生了由外延式向内涵式的很好转变。进一步根据生产者均衡理论,计算了主要省区物质资本与人力资本的利用效率,发现大部分省区的利用效率没有达到最优状态,但1990年代以来利用效率在不断提高。在此基础上,计算了通过提高两项资本利用效率可带来的GDP增长潜力,发现当利用效率达到最高时GDP可增长近24%。由此给出了各省区物质资本与人力资本投资比例的调整方向。     

ENVIRONMENTAL ECONOMICS AND THE SOCIAL COST OF SMOKING

A widely prevailing assumption is that taxing and regulating smoking are justified on efficiency grounds since smokers impose a significant cost on others. Supposedly, the same economic analysis that has been used to justify taxing and regulating environmental pollution also applies to smoking. But two serious problems undermine the efficiency argument for taxation and regulation to internalize the cost of smoking. First, the largest external cost that smoking supposedly generates does not exist. Second, even if smoking does generate an external cost in the form of environmental tobacco smoke, one cannot justify either taxing or regulating smoking when one properly applies the principles of environmental economics.     

REPLY: THE CONCEPT OF CAPITAL

Edward Denison and I agree that the correct theoretical concept of capital is to consider two capital goods equivalent if they generate the same real net revenue, defined as gross revenue minus variable operating costs measured at a fixed set of output and input prices. Although I showed in my book that the correct concept could be fully implemented for commercial aircraft and electric generating equipment, for other products I was able only partially to take operating costs into account. As a result, both Denison and I agree that my radical revision to the official capital goods deflators does not go far enough and is biased toward understating improvements in quality. Our disagreement comes down to research strategy: I believe that I have progressed partway toward the ultimate goal of implementing the correct concept, while he views such a full implementation as infeasible. As a result, he advocates a return to the traditional criterion of base-period production cost, even though this yields price deflators that ignore improvements in performance (as for computers) and improvements in operating efficiency (as for successive generations of jet aircraft) made possible by technological advances that reduct the cost of production.     

COHABITATION AND THE MEASUREMENT OF CHILD POVERTY

We use 1990 U.S. Census of Population data to calculate what poverty rates would have been if cohabitors were treated in the same manner as married couples. We find that the official treatment of cohabiting partners as separate family units overstated the extent of poverty in 1989 among all children by about three percent. Only about 11 percent of the observed rise in child poverty between 1969 and 1989 would be eliminated if the Census Bureau made this change in its definition of the family. We estimate a logistic regression model of the likelihood that poor, cohabiting families with children would be reclassified as non-poor if the cohabitor's income were included in family income.     

RENT DISSIPATION AND THE SOCIAL COST OF PRICE POLICY

This paper uses a general equilibrium-based exchange economy model to examine rent seeking for a price policy. Opposing interests spend resources to influence the government's choice of a price vector. Rents, the willingness to pay for the policy, are determined endogenously from the Nash equilibirum of a non-cooperative game. Numerical simulations explore the degree to which rents are dissipated by wasteful rent seeking. It is found that dissipation, measured as the ratio of rent-seeking costs to rents garnered, can grow without limit, and is greatest when opponents are evenly matched. Dissipation is smallest with widely disparate groups, a result that might help explain the underdissipation that seems to occur in many industries.     

HOME COMPUTER USE AND THE DEVELOPMENT OF HUMAN CAPITAL

This paper uses a regression discontinuity design to estimate the effect of home computers on child and adolescent outcomes by exploiting a voucher program in Romania. Our main results indicate that home computers have both positive and negative effects on the development of human capital. Children who won a voucher to purchase a computer had significantly lower school grades but show improved computer skills. There is also some evidence that winning a voucher increased cognitive skills, as measured by Raven's Progressive Matrices. We do not find much evidence for an effect on non-cognitive outcomes. Parental rules regarding homework and computer use attenuate the effects of computer ownership, suggesting that parental monitoring and supervision may be important mediating factors.     

THE MEASUREMENT OF CAPITAL THROUGH A FIXED ASSET ACCOUNTING SIMULATION MODEL (FAASM)

In this article the author describes a method of estimating the capital stock of the corporate sector which is being developed at Statistics Canada. The method uses a "Fixed Asset Accounting Simulation Model" or FAASM. FAASM provides estimates of the capital stock by inferring the actual service lives of fixed assets, and using these with price indexes to revalue assets on a constant price basis. FAASM is thus an alternative to the widely used Perpetual Inventory Method. By also inferring accounting lives using the depreciation accounts, it has other important outputs. These latter get only passing mention here. Since FAASM exploits the available data in a comprehensive, systematic way, its service life and capital stock estimates may eventually, after system development and improvement in operation, approach the limits of attainable accuracy.     

INDUSTRY COST CURVES AND THE SPATIAL ORGANISATION OF PRODUCTION

The nature of production is examined for a particular class of economic activeiy at the scale of the region. Average cost conditions at the plant level are specified, from which the long-run average cost curve of the regional industry is derived. Attention is then drawn to certain features of this curve, including the upward-sloping form over part of its length. Consideration is also given to different types of adjustment over various time horizons. Finally, for a regional industry under unified control, long-run equilbrium is specified for alternative forms of competition in the extraregional product market.     

GROSS AND NET CAPITAL, AND THE FORM OF THE SURVIVAL FUNCTION: THEORY AND SOME NORWEGIAN EVIDENCE

In this paper we discuss the empirical measurement of capital stocks derived from data on gross investment. Two capital concepts are involved: gross capital-representing the capital's capacity dimension-and net capital–representing its wealth dimension. A brief summary of their components is presented.
The data base consists of long series of Norwegian national accounts data for gross investment at a disaggregated level of sector classification and for 1–3 capital categories within each sector. Survival functions, representing the process of retirement and decline in efficiency of capital units over time, with different curvature (concave, convex) and non-zero interest rates for the discounting of future capital service flows are considered. The effects of these parameters on the calculated gross and net capital stocks in the years 1956–82 as well as on the implied replacement and depreciation rates and rates of return are discussed.