COMMENT: TESTING FOR INVERSEHOMOTHETICITY: A NONPARAMETRIC APPROACH*

This paper starts from Fukuyama and Weber's (2004 ) work on testing for inverse homotheticity to show that the equality of the output gain function and the Zieschang output gain function is not equivalent to inverse homotheticity. Hence, testing for the equality of these gain functions cannot prove that a technology is inverse homothetic. Moreover, it is established that the gain functions are equal if and only if the direct and indirect isoquant and the corresponding efficient set are equal, which does not depend on inverse homotheticity.     

Constrained output maximization and US agriculture

This paper presents a framework for estimating an indirect production function and then applies it to aggregate US agriculture. Issues addressed include tests of standard hypotheses about the underlying technology (homotheticity, neutral technical change, etc.) as well as examination of consistency in aggregation and the effects of changes in the level of aggregate expenditure on farm output. Since there already exist several studies empirically describing agricultural production technologies with indirect objective functions, one might fairly ask whether this paper really breaks any new ground? We feel that it does. One reason is that existing studies (e.g. Binswanger, 1974; Lopez, 1980; Ball and Chambers, 1982; Ray, 1982; and Weaver, 1983) all rely on either profit or cost functions. To date there appears to be only one study using an indirect production (Appelbaum, 1979), and it is not in agriculture. This seems unfortunate because there are many instances in agriculture for which an indirect production function (or revenue function approach) seems more appropriate. The reason why relates directly to one's belief about the objective function and constraints farmers face. Ultimately, it seems plausible in a certainty framework that producers maximize profits. And since cost minimization and output maximization are just constrained versions of profit maximization, both cost and indirect production functions are more appropriately viewed as restricted profit functions. What differs is the constraint. Assuming cost minimization implies that farmers are constrained by a fixed output which they must produce; in most instances, this is implausible. More likely, the level of output is itself a choice variable. Output maximization, on the other hand, suggests that the main constraint is the amount of money that producers can muster to hire resources. In other words, farmers may face binding constraints in obtaining the profit maximizing level on expenditure on input utilization. One might think that expenditure may not be a binding constraint because there exists a relatively active US credit market. However, the US credit market is far from being perfectly competitive in a stylized sense, and thus, the possibility of a farmer being able to finance a given level of expenditure may be limited.

Readers familiar with the dual approach to production problems may already be asking why these ideas rule out cost functions since it is well known that the cost function is the distance function of the indirect production function (Blackorby et al., 1978)? In principle, therefore, one could always estimate a cost function and then invert it to obtain the indirect production function. There are two problems with this approach: the first is that if output maximization is truly the objective, output is not predetermined and cannot be treated as exogenous in cost function estimation. Second, estimation of direct and indirect functions using the same data set does not always yield comparable results. Estimation of a transcendental logarithmic (translog) indirect production function and a translog cost function, separately, does not generally yield identical estimates of the Allen elasticities of substitutions. Solving the first problem in simple, but the second suggests that estimation should proceed on the basis of the objective function the researcher deems most appropriate. Therefore, if output maximization is more plausible than cost minimization an indirect production function should be used.

The plan of the paper is as follows. We first outline the theoretical developments necessary to our approach (included are conditions necessary for consistent aggregation over firms). We then present estimates of an indirect production function and use these estimates to investigate the plausibility of various restrictions on the technology, consistency in aggregation, substitution possibilities in agricultural production, and the effect of expenditure on agricultural input utilization. The paper closes with a discussion of the results and suggestions for future research.     

An input–output model of water consumption: Analysing intersectoral water relationships in Andalusia

This paper presents an input–output model of sectoral water consumption, created by combining the extended Leontief input–output model with the model of energy use developed by Proops. The analysis is applied to Andalusia, a region situated in the South of Spain which is characterized by water shortage. We determine which economic sectors consume the greatest quantities of water, both directly and indirectly, and to what extent this natural resource may become a limiting factor in the growth of certain production sectors. The model allows us to distinguish between direct and indirect consumption, thus offering the possibility of designing an economic and environmental policy oriented towards water saving. Additionally, the model allows simulation of possible changes in water consumption caused by certain environmental measures, as well as their consequences on the regional economy.     

Possible Policies for Expansion

The Australian economy appears certain to be operating at well below full employment into 1992, or even longer. Further reductions in interest rates would operate on output only with long lags, and would be the most inflationary form of stimulus. But cuts in a wide range of indirect taxes, and tax incentives for new investment - especially if announced as temporary - would reduce the length and depth of the recession.
Results of simulations with macro-economic models for a number of countries imply that cuts in indirect taxes or in taxes on employment (either alone or in combination with other fiscal measures) reduce prices as well as stimulating employment and real output. Similar fiscal measures are likely also to improve the current account at any given level of employment or real output, and even more likely to increase the country's net wealth (private investment less the current account deficit).
Failure to adopt appropriate types of fiscal stimulus would reduce the benefits of microeconomic reform and make such reforms harder to achieve. Even if it were true that these forms of fiscal stimulus would not raise real output, the tax cuts in question would at least reduce inflation and could not then increase the current account deficit.     

Graph efficiency and productivity measures: an application to US agriculture

Hyperbolic measures of efficiency and productivity change with respect to a graph representation of production technology allow researchers to consider output and input dimensions simultaneously in measuring producer performance. Hyperbolic efficiency measures have been proposed, but empirical implementation has not followed, either in efficiency analysis or in productivity analysis. The objectives of this paper are to define hyperbolic performance measures on a graph representation of production technology, to motivate their use by stating some of their advantages over their radial counterparts, and to introduce a direct formulation to calculate them making use of Data Envelopment Analysis techniques. The ideas are illustrated by calculating hyperbolic efficiency and Malmquist productivity indexes for a US agricultural panel data set.     

Does human capital or physical capital constrain output in Japanese prefectures?

This paper develops a dynamic–network DEA (data envelopment analysis) model where total output is jointly produced from two sectors: a human capital sector and a physical capital sector. Each prefecture produces a final output and an intermediate product which is used to augment future physical capital. The optimization method allows future production possibilities to be enhanced if some final output in the current period is foregone so that larger amounts of the intermediate product can be produced. The goal is to choose the amounts of final output and intermediate product so as to maximize the size of the production possibility set. The method also allows identification of whether output is constrained by a lack of physical capital, a lack of human capital or a lack of both types of capital. We apply our method to 47 Japanese prefectures during the period 2007–2009. A key finding is that a lack of human capital is constraining potential output.     

Production Efficiency and the Direct-Indirect Tax Mix

In the design of the optimal direct/indirect tax mix, the canonical view was laid by Atkinson and Stiglitz (1976) who showed that commodity taxes are unnecessary in an economy in which there is an optimal nonlinear income tax provided that commodities are separable from labor in the utility functions of all taxpayers, that the aggregators over these commodities are ordinally equivalent and that wages are fixed. When wages are endogenous, Naito (1999) showed that this result may not hold and in addition that production efficiency may not be Pareto optimal. Given an optimal nonlinear income tax, we show that production inefficiency is Pareto optimal if the aggregate technology set is strictly concave. The Atkinson–Stiglitz condition is neither necessary nor sufficient for zero commodity taxation and commodity taxes are part of almost all Pareto optima.     

Estimating direct and indirect rebound effects for U.S. households with input–output analysis. Part 2: Simulation

This is the second part of a two-part paper that integrates economic and industrial ecology methods to estimate the indirect rebound effect from residential energy efficiency investments. We apply the model developed in part one to simulate the indirect rebound, given an estimate of the direct rebound, using a 2002 environmentally-extended input–output model and the 2004 Consumer Expenditure Survey (in 2002$) for the U.S. We find an indirect rebound of 5–15% in primary energy and CO₂e emissions, assuming a 10% direct rebound, depending on the fuel saved with efficiency and household income. The indirect rebound can be as high as 30–40% in NO_x or SO₂ emissions for efficiency in natural gas services. The substitution effect modeled in part one is small in most cases, and we discuss appropriate applications for proportional or income elasticity spending assumptions. Large indirect rebound effects occur as the U.S. electric grid becomes less-carbon intensive, in households with large transportation demands, or as energy prices increase. Even in extreme cases, there is limited evidence for backfire, or a rebound effect greater than 100%. Enacting pollution taxes or auctioned permits that internalize the externalities of energy use would ensure that rebound effects unambiguously increase consumers' welfare.     

税制改革、经济效率和社会福利——基于A-KOLG框架下的动态CGE模拟分析

在经典的世代交叠动态一般均衡(A-K OLG)模型的基础上,建立了一个由一系列不等式方程组所构成的"跨期动态"模型,反现实地模拟了提高间接税同时降低直接税对我国社会福利、经济效率的影响。与基期相比,减少对资本征税会带来福利增长0.34%(纯经济效率提高0.25%),减少对劳动征税会带来福利增长0.1%(纯经济效率提高0.02%)。该实证结果证明了间接税比直接税更有利于实现经济效率的理论观点。因此,提高直接税的比重是需要以一定的经济效率损失为代价的,实行该项举措应该权衡好各方面利弊、把握好改革时机。     

THE MACROECONOMIC EFFECTS OF A SWITCH FROM DIRECT TO INDIRECT TAXES: AN EMPIRICAL ASSESSMENT

This paper investigates the macroeconomic effects of switching the tax burden from direct to indirect taxes in an empirical model based on 22 OECD countries. The Engle-Yoo three step procdure is employed to estimate both the short and long run effects of such a tax switch. The results reveal that a switich from direct to indirect taxes is likely to generate efficiency gans in the short run which lead to higher levels of aggragate output. However, for the majority of countries in the sample the tax changes have no impact on the level of economic activity in the long run.     

A pair-wise approach to output convergence between European regions

We apply the Pesaran (2007) pair-wise approach of convergence to the per capita outputs of 195 European regions for the period 1980-2006. Pesaran's approach is based on the computation of the percentage ratio of output gaps which fulfil a given convergence criterion. A high ratio will be interpreted in favour of convergence. In a first step, we define stochastic convergence between two regions as level stationarity of their output gap. Deviations from its equilibrium value will only have a temporary effect. Results from several usual unit root or stationarity tests show us that the percentage ratio of level stationary output gaps is low, which stands against this definition of convergence. However, this convergence criterion excludes the possibility of changes in output gap equilibrium value or catching up between regions. To fit these cases, we combine the pair-wise approach with unit root or stationarity tests with structural breaks. Structural breaks are modelled by dummies (Zivot and Andrews, 1992; Kurozumi,2002) or as smooth structural breaks (Christopoulos and León-Ledesma, 2009). Overall results are not changed as convergence is not accepted more often. Finally, we consider the autocorrelation function approach of Caggiano and Leonida (2009). Autocorrelations and their confidence intervals are estimated for each output gap. Convergence between two regions is accepted if their per capita output gap autocorrelations become nonsignificantly different from zero after some lag. Results show that a high percentage of regions satisfy this convergence criterion. Contrary to the conclusions which could be made from previous results, shocks to output gaps seem to disappear as time passes.     

Does R&D spur productivity growth in Australia’s broadacre agriculture? A semi-parametric smooth coefficient approach

This article analyses the role of research and development (R&D) in Australia’s broadacre farming by using the semi-parametric smooth coefficient model. While the conventional production function approach only captures the direct effects of R&D, this methodology captures both the direct impact of a change in R&D on output and the indirect impact through changes in efficiency of use of factor inputs in the production process. Moreover, technical inefficiency is introduced in the model allowing it as a function of R&D. Using a unique state-level dataset covering the period 1995–2007, this empirical study finds that once both the direct and indirect effects are taken into consideration, R&D investments significantly increase outputs. The results also show that there are substantial variations in the effects of R&D on output across the state-level average farm through technology parameters as well as through technical inefficiency. Such variations need to be taken into account when designing policies for investing public R&D in agriculture.     

Measuring China's innovative capacity: a stochastic frontier exercise

We adopt a stochastic frontier analysis of innovative activity to disentangle countries’ patenting capacity from patenting efficiency. We analyse the determinants of innovative capacity of a set of 26 OECD countries plus China, over the period 1992–2007, to show if and how China's technological activity is growing faster than commonly held as compared to the most innovative countries of the world. Our results highlight that both internal and external elements jointly contribute to enhance countries’ innovative capacity and efficiency. In particular, while government-funded R&D is more important for innovative capacity, privately funded R&D as well as foreign direct investments (FDIs) affects technical efficiency (TE). Moreover, as for the whole set of countries, FDIs seem to exert a resource-seeking role (as they negatively affect TE), this does not happen for China, where FDIs exert a positive effect. Results are robust to the use of alternative measures of innovative inputs (such as higher education expenditure in R&D and R&D personnel, but also FDI flows rather than stocks). Finally, human capital measures are generally not very effective in enhancing patenting efficiency, apart from tertiary education.     

我国直接融资功效的实证分析--以间接融资为视角的研究

探索转型时期我国直接融资的功效具有非常重要的意义。虽然直接融资市场还很不完善,但直接融资效率还是高于间接融资,直接融资与固定资产投资比率的提高对经济有着积极的作用,且其积极作用越来越明显。     

Endogenous induced technical change and the costs of Kyoto

We present a model for climate change policy analysis which accounts for the possibility that technology evolves endogenously and that technical change can be induced by environmental policy measures. Both the output production technology and the emission–output ratio depend upon a stock of knowledge, which accumulates through R&D activities. Two versions of this model are studied, one with endogenous technical change but exogenous environmental technical change and the other with both endogenous and induced technical change. A third version also captures technological spillover effects. As an application, the model is simulated allowing for trade of pollution permits as specified in the Kyoto Protocol and assessing the implications in terms of cost efficiency, economic growth and R&D efforts of the three different specifications of technical change.     

Privatization and efficiency: a mixed oligopoly approach

While models of mixed oligopoly have been analyzed within a rapidly growing literature, little is known about the mechanism of efficiency improvement relating to partial privatization. In this paper, we endogenize efficiency improvement in relation to the level of privatization. We show that in the short run, an improvement in efficiency associated with a state-owned firm reduces the output substitution among firms, and that the reduction in output substitution effect is proportional to the strength of the improvement in efficiency. Specifically, if the effect of efficiency improvement is sufficiently small, the magnitude of the improvement of social welfare is reduced. In the literature, the optimal policy in the long run is full nationalization. However, we argue that the optimal policy for a state-owned firm is partial privatization. Moreover, efficiency improvement provides the impetus for indirect entry regulation of private entrants.     

Foreign direct investment in a world of multiple taxes

Governments impose multiple taxes on foreign investors, though studies of the effect of tax policy on the location of foreign direct investment (FDI) focus almost exclusively on corporate income taxes. This paper examines the impact of indirect (non-income) taxes on FDI by American multinational firms, using affiliate-level data that permit the introduction of controls for parent companies and affiliate industries. Indirect tax burdens significantly exceed the foreign income tax obligations of foreign affiliates of American companies. Estimates imply that 10% higher local indirect tax rates are associated with 7.1% lower affiliate assets, which is similar to the effect of 10% higher income tax rates. Affiliate output falls by 2.9% as indirect taxes rise by 10%, while higher income taxes have more modest output effects. High corporate income tax rates depress capital/labor ratios and profit rates of foreign affiliates, whereas high indirect tax rates do not. These patterns reveal the impact of indirect taxes and suggest the mechanisms by which direct and indirect taxes affect FDI.     

基础设施领域竞争机制引入方式研究

在政府进行较强程度规制甚至直接进行垄断经营的体制下,基础设施领域的低效运营状况几乎不可避免。基础设施领域各产业独特的技术经济特性决定了竞争机制引入方式的多样性;应针对不同类型的基础设施,采取增加生产者数量、利用潜在进入者和替代产品的威胁、增强买方和供方的侃价能力等多种方式引入竞争机制。政府应采取打破政府在基础设施领域的垄断、以合同约束取代行政管理、建立统一高效的监管体系、完善公共收费和支出体系、重新界定现有行业主管部门的职能等措施,为各种竞争机制的顺利引入创造条件。     

我国货币政策传导机制的体制约束及其重构

本文通过对我国货币政策传导机制的全面分析,认为在实体经济发生根本性的结构变化之后,与原有计划经济相适应的金融体制是造成货币政策低效的主要原因。     

Re-evaluation of global innovation index based on a structural equation model

The Global Innovation Index (GII) was proposed to observe the innovation capability and efficiency levels of individual countries using input and output factors. However, it does not consider potential structural relationships among factors affecting the innovation performance of a country. In this study, we proposed a structural equation model (SEM) based on the hypothesised national innovation structure among seven factors representing inputs (institution, human capital and research, infrastructure, market sophistication, and business sophistication) and outputs (knowledge and technology outputs, and creative outputs). Using GII data from 2013, we discovered that business sophistication and infrastructure have the strongest direct and indirect effects on creative output, respectively. In addition, a new ranking is obtained based on the fitted SEM. We provide feedback information to improve innovation capabilities.