STRATEGIC OUTSOURCING UNDER ECONOMIES OF SCALE

We show that economies of scale in upstream production can lead both the disintegrated downstream firm as well as its vertically integrated rival to outsource offshore for intermediate goods, even if offshore production has a moderate cost disadvantage compared to in‐house production of the vertically integrated firm.     

SCALE ECONOMIES AND HETEROGENEITY IN BUSINESS MONEY DEMAND: THE ITALIAN EXPERIENCE

This paper investigates the demand for money by firms and the existence of economies of scale in the Italian manufacturing industry. We estimate a model for cash elaborated by Fujiki and Mulligan using a different estimation procedure from the previous literature. We then introduce an iterative procedure based on backward exclusion of firms from model estimation which points out the high heterogeneity of Italian companies in money demand. Our estimates show that the Italian manufacturing industry, considered as a whole, does not enjoy scale economies in money demand. However, our iterative procedure points out that the cause of this result has to be ascribed to small firms which are characterized by thin cash money holdings and a consequent very modest opportunity cost.     

A CLASS OF PERFORMANCE‐BASED SUBSIDY RULES*

We consider a benchmark static incentive scheme, i.e. a per unit subsidy, that induces a monopoly to produce a target output level. We show that the same output level can be achieved by a continuum of dynamic subsidy rules based on a performance indicator. The rules require only local information. The present value of the subsidies paid is smaller than the amount paid under the static subsidy. Each of the dynamic subsidy rules results at each moment in a lower per unit subsidy than the static subsidy. The subsidy rate depends on a state variable that reflects the monopolist's performance history.     

ANALYSIS OF THE POSSIBILITIES FOR EXPANSION OF SERVICES IN TANZANIAN SAVINGS AND CREDITS CO‐OPERATIVE SOCIETIES: LEARNING FROM ECONOMIES OF SCALE

Savings and Credit Co‐operative Societies (SACCOS) increasingly recognized as the valuable tool for economic development in low‐income countries. However, recently researchers reported that one of their primary challenges to their expansion is the high level of inefficient. In this study, we analyzed the relationship between growth and efficiency of SACCOS using economies of scale concept. Then we address the role of management of the capital structure and allocation of resources in the expansion of SACCOS. The study used financial statement data from 60 SACCOS in Tanzania for the period of 2004–2011. The findings supports that most of SACCOS are small and cost inefficient because the industry is young, but, the efficiency increases as SACCOS expand. Second the allocation of resources in liquid, financial and non‐financial investment leads to no expansion in SACCOS. Thus, the growth of SACCOS via increasing loan to members, members’ savings, shares, and institutional capital should be encouraged as it increases the efficiency of SACCOS. Also, SACCOS should minimize the allocation of assets in other investments which are different from credit to members.