MODELING INTERNAL DECISION MAKING PROCESS: AN EXPLANATION OF CONFLICTING EMPIRICAL RESULTS ON BEHAVIOR OF NON‐PROFIT AND FOR‐PROFIT HOSPITALS

This article develops multiobjective models of hospital decision making that incorporate the internal decision process in both a for‐profit and a non‐profit hospital (NPH). Predicted output and quality for an NPH differ from those for a for‐profit hospital under some conditions but converge under others. Convergence may be the result of a complex internal decision structure with decision control primarily by physicians, similar objectives across different organizational forms, or differing constraints. The mechanisms underlying these outcomes provide explanations for conflicting results in empirical studies of non‐profit and for‐profit hospitals and provide a different rationale for convergence than non‐profit response to competition from for‐profit hospitals. Understanding the source of convergence is important for policies directed toward the tax treatment of NPHs.(JEL D21, D23, I11, L3, L21)     

Understanding nonprofit social enterprises: Lessons from Austrian economics

There is a large literature on the role of nonprofit enterprises within society. This literature typically views nonprofits as either substitutes for government enterprises or complements to, and even necessary extensions of, these government efforts. While this literature has improved our understanding of the role and importance of nonprofit social enterprises, how social entrepreneurs identify opportunities, allocate resources, and adapt to changing circumstances has been relatively underexplored. Efforts to fill this gap within Austrian economics have categorized nonprofits and identified the limitations of calculation and coordination in the nonprofit sector and the characteristics of successful and unsuccessful nonprofit enterprises. This strand of literature focuses on the differences between economic calculation in for-profit enterprises and decision making in nonprofit enterprises. We argue that another meaningful aspect to determining the ability of nonprofit enterprises to coordinate plans is whether they are structured more like private enterprises and public enterprises. These insights from Austrian economics shed light on why some nonprofits are more effective than others at achieving social goals.

     

An Empirical Analysis of Cost Efficiency in Non‐profit and Public Nursing Homes

Abstract *** :  This paper examines the issue of cost‐efficiency in Switzerland's nursing homes, an issue of concern to policy makers because of the rapid growth of elderly care expenditure and the aging of the population. The fact that nursing homes in Switzerland exist in different institutional forms, private for‐profit, government and non‐profit status, raises the issue of their relative cost efficiency. A panel data of 17 public and 19 nonprofit nursing homes operating over the 9‐year period from 1993 to 2001, in one of the 26 Swiss cantons, Ticino, is studied. Ticino's nursing homes are heavily regulated and monitored by the canton's authorities. However, given that in public firms there are more bureaucratic constraints and agency problems, one can expect a relatively low level of cost‐efficiency. In this paper the effect of institutional form on efficiency is studied using a translog stochastic cost‐frontier model. Several specifications are used to study the robustness of the results. The results suggest that the institutional form influences the efficiency of the studied nursing homes in that non‐profit foundations are likely to be more cost‐efficient than the nursing homes operated by government administration. The results also suggest that a great majority of the nursing homes in the sample do not fully benefit from scale economies. This implies that efficiency gains can be obtained with larger capacities or joint operations .     

AN INTEGRATED SYSTEM OF SOCIAL ACCOUNTS FOR AN ECONOMY OF THE YUGOSLAV TYPE

The system of social accounts described in this article is based on the following five principles: (1) Producers of goods and services are working organizations which represent groups of people or individuals organized for the purpose of earning a living by producing goods and services that satisfy individual or collective needs. Business, government, profit and nonprofit, corporate and unincorporated working organizations are treated in a uniform way. (2) Since the behaviors of the market and non-market sectors differ considerably, these two sectors are consistently separated throughout the accounting system. (3) There are four basic activities: (a) production, (b) consumption, (c) investment, and (d) income redistribution. These call for four separate accounts: (a) Working Organizations, (b) Households, (c) Community, including government and certain non-government institutions, and (d) Accumulation. The fifth account, Rest of the World, serves for balancing purposes. (4) The same classifications of transactions are used for activities and institutions, making possible complete matching of social product and financial flows accounts. (5) The system strives to achieve the maximum analytical flexibility. Some of its possibilities are visible from the classification of industries: A. Market (Material) Sector: 1. Agriculture, II. Forestry, III. Mining and Manufacturing, IV. Construction, V. Transportation, VI. Trade and Catering, VII. Handicrafts; B. Non-Market (Non-Material) Sector: VIII. Housing and Communal Economy, IX. Education, Culture, and Social Welfare, X. Public Services Social Organizations (Political, Religious, etc.), Finance and Insurance, Public Administration and Judiciary, National Defence. Sector A corresponds to the material definition of social product. Sectors A + B correspond to the SNA definition. Sectors A + B minus Industry × reflects the welfare definition. Further, Industries I-IV produce goods, V-VII market services, VIII and IX non-market services with welfare content, X intermediate nonmarket services, V-X all services.     

GENERAL EQUILIBRIUM ANALYSIS OF OVERLAPPING GENERATIONS WITH HETEROGENEOUS TIME PREFERENCES

The overlapping generations model presented herein requires incorporation of exactly three periods in which one lives, but makes intertemporal decision‐making twice, neither once nor three times. Single decision‐making at the outset, none thereafter, ignores the fact that one makes decisions every day anew as long as tomorrow exists. Incorporating such observations most simply requires decisions to be made at the first period and the second, but not at the third or last period. Our model reveals how the Mabiki (infanticides) and the Narayama (elderlycides) can occur simultaneously. We also find conditions under which child‐indulgence and parental overprotection called sunekajiri might be reckoned a virtue.     

Efficiency of Junior High Schools and the Role of Proprietary Structure

Abstract: In this paper we deal with the role of proprietary structure in explaining efficiency within the Italian school industry. We analyze a sample of 497 schools located in Piemonte, a region in the North‐Western part of the country, distinguishing between public, private for‐profit and private nonprofit schools. In stage one of the analysis, we provide robust estimates of efficiency scores, using the two most widely known techniques in applied works, namely Data Envelopment Analysis (DEA) and Stochastic Frontiers (SF). In stage two, we suggests that proprietary structure matters in explaining efficiency. Nonprofit schools are more efficient than public ones, whereas for‐profit counterparts are outperformed by public producers. Moreover, we find that foreign and disabled students affects negatively efficiency, raising concerns for cream‐skimming practices among private producers. Finally, school size is another important determinant of efficiency.     

IMPROVING THE ANALYTICAL AND DATA FRAMEWORK OF THE GOVERNMENT SECTOR FOR NATIONAL GOALS ACCOUNTING*

Provision of “market goods” follows the decision rules of traditional microeconomics; pricing and resource allocation for such goods tend towards Pareto optimality. The provision of “collective goods,” by contrast, depends on political (or quasi-political) collective decision processes; beneficiaries often receive a share of collective goods free of charge or well below average or marginal (private or social) costs. No inherent tendency towards optimality may be presumed and separate analysis of collective goods becomes an essential part of national goals accounting. The national-income-accounts (NIA) distinction between personal consumption expenditures (PCE) and government purchases of goods and services corresponds roughly to a division between market goods bought by the consumer and a major category of “collective goods” (i.e. “public goods” provided by government). However, a significant proportion of PCE represents “collective goods” paid for by government, business, or nonprofit organizations and provided on behalf of the consumer, whereas a part of NIA government purchases represents services paid for by the consumer (i.e. “market goods”). This article develops operationally meaningful distinctions among “market goods,”“collective goods,” and “tied aid” (a mixed category with market-good and collective-good characteristics). These distinctions are determined by the nature of the decision processes–rather than by the characteristics of the beneficiary or the supplier. This classification is related to the national income accounts and major discrepancies are pinpointed. The blurring of the distinction among market goods, collective goods and tied aid is found to be most consequential in the NIA treatment of “education” and “medical care” services. NIA data for these two services are restructured for national goals accounting purposes in order to illustrate both the quantitative importance and the empirical feasibility of classifying benefits by their respective decision processes.     

ARE DISAGREEMENTS AMONG MALE AND FEMALE ECONOMISTS MARGINAL AT BEST?: A SURVEY OF AEA MEMBERS AND THEIR VIEWS ON ECONOMICS AND ECONOMIC POLICY

The authors survey economists in the United States holding membership in the American Economic Association (AEA) to determine if there are significant differences in views between male and female economists on important policy issues. Controlling for place of current employment (academic institution with graduate program, academic institution—undergraduate only, government, for‐profit institution) and decade of PhD, the authors find many areas in which economists agree. However, important differences exist in the views of male and female economists on issues including the minimum wage, views on labor standards, health insurance, and especially on explanations for the gender wage gap and issues of equal opportunity in the labor market and the economics profession itself. These results lend support to the notion that gender diversity in policy‐making circles may be an important aspect in broadening the menu of public policy choices. (JEL A11, J78, A14)     

ON THE EMERGENCE OF NON‐PROFIT FIRMS AS ALTERNATIVES TO THE GOVERNMENT*

It is well known that many non‐profit firms coexist with government firms in industries that provide collectively consumed goods and services, such as education, healthcare, social services, and art and culture. This paper explores the specific circumstances under which non‐profit firms can emerge as alternatives to the government. We show that a non‐profit firm emerges only when the residents’ median preference for a collective good is significantly low. This finding implies that, somewhat paradoxically, a non‐profit firm emerges to replace the government and provide a collective good only when the majority of residents consider the good non‐essential.     

Social Conflict and Gradual Political Succession: An Illustrative Model*

This paper studies the evolution of political institutions in the face of conflict. We examine institutional reform in a class of pivotal mechanisms—institutions that behave as if the resulting policy were determined by a “pivotal” decision maker drawn from the potential population of citizens and who holds full policy‐making authority at the time. A rule‐of‐succession describes the process by which pivotal decision makers in period t + 1 are, themselves, chosen by pivotal decision makers in period t. Two sources of conflict—class conflict, arising from differences in wealth, and ideological conflict, arising from differences in preferences—are examined. In each case, we characterize the unique Markov‐perfect equilibrium of the associated dynamic political game, and show that public decision‐making authority evolves monotonically downward in wealth and upward in ideological predisposition toward the public good. We then examine rules‐of‐succession when ideology and wealth exhibit correlation.     

RACIAL DISPARITIES IN FEDERAL DISABILITY BENEFITS

We estimate racial differences in the Social Security Administration’s (SSA) decision to award federal disability benefits using newly available data, multivariate econometric models, and Oaxaca decomposition methods. We focus on the appellate level of SSA’s disability decision‐making process. We find that for claimants represented by attorneys there is no statistically significant difference in benefit award rates between whites and African‐Americans. However, for claimants without attorney representation, we find sizable and significant differences between whites and African‐Americans. (JEL J15, H53)     

THE ECONOMICS OF THE NON-DISTRIBUTION CONSTRAINT: A CRITICAL REAPPRAISAL

ABSTRACT ** ** Résumé en fin d'article; Zusammenfassung am Ende des Artikels; resumen al fin del artículo.
: This paper re‐examines the non‐distribution constraint as a key structural feature of non‐profit organization. It argues that its traditional understanding as a trustworthiness‐enhancing device is incomplete. This paper shows that the non‐distribution constraint is also a reflection of the directly utility‐enhancing character of involvement in non‐profit firms for their key stakeholders. This alternative explanation allows one to solve the central puzzle of trustworthiness theory: why doesn't the non‐distribution constraint destroy entrepreneurial motivation? Additionally, it helps one to understand the role of the non‐distribution constraint in economic theories of non‐profit organization that do not rely on trustworthiness theory. Finally, it enables one to logically integrate the different economic theories of non‐profit organization.     

Does organizational ownership matter? Objectives of employees in public,nonprofit and for-profit nursing homes

Does organizational ownership matter for employees? We conducted a discrete choice experiment to reveal employees’ objectives in for-profit, nonprofit and governmental nursing homes. The results indicate that differences in objectives among nursing home staff are at least partially related to differences in ownership type. More specifically, we find that employees of public nursing homes are less extrinsically motivated than their for-profit and nonprofit counterparts. However, the results also show that employees of for-profit, nonprofit and governmental nursing homes are trading off output quality and output quantity differently, in line with the view that public providers of elderly care are pursuing a supplier-of-last-resort objective function.     

DOES THE MISSION OF PROVIDERS MATTER ON A QUASI‐MARKET? THE CASE OF THE BELGIAN ‘SERVICE VOUCHER’ SCHEME

ABSTRACT 1 : In 2001, the Belgian government introduced a ‘service voucher’ scheme in the field of domestic (housework) services, following a quasi‐market mechanism which fosters competition between providers of different types as regards sector (for‐profit, public, third sector) and mission (seeking profits, home care provision to vulnerable groups and work integration of the unemployed). Empirical evidence suggests that third sector organizations focusing on a social mission recognized by a tutelary regulation are the best performing with regards to the quality of jobs and service organization, leading to a better ‘triangulation’ of the service relationship. On the other hand, for‐profit providers, especially temporary work agencies, seem to favour their capacity of adaptation to the desiderata of their clients and costs’ minimization to the detriment of the quality of jobs which are made as flexible as possible.     

Unit Versus Ad Valorem Taxes: The Private Ownership of Monopoly in General Equilibrium

Employing a general equilibrium framework, Blackorby and Murty prove that, with a monopoly and under 100% profit taxation and uniform lump‐sum transfers, the utility possibility sets of economies with unit and ad valorem taxes are identical. This welfare equivalence is in contrast to most previous studies, which demonstrate the superiority of the ad valorem tax in a partial equilibrium framework. In this paper, we relax the assumption of 100% profit taxation and allow the consumers to receive profit incomes from ownership of shares in the monopoly firm. We find that, under certain regularity conditions, for any fixed vector of profit shares, the utility possibility sets of economies with unit and ad valorem taxes are not generally identical. But it does not imply that one completely dominates the other. Rather, the two utility possibility frontiers cross each other. Additionally, employing a standard partial equilibrium welfare analysis, we show that the Marshallian social surpluses resulting from the two tax structures are identical when the government can implement unrestricted transfers.     

MIXED OWNERSHIP,MANAGERIAL INCENTIVES AND BANK COMPETITION

We consider deposit competition between two banks, where prior to competition one bank is subjected to a nationalization decision and the other bank chooses managerial incentives. The government who maximizes a modified form of social welfare (with greater weight on profit than depositor surplus) chooses only partial nationalization, which still hurts the rival private bank. But by offering deposit‐linked managerial incentives the private bank recovers its lost profit and induces even less nationalization, leaving social welfare unchanged. However, under interest rate competition for differentiated deposits the private bank offers profit‐linked managerial incentives while the other bank may be completely nationalized.     

Lobbying Bureaucrats*

We study how interest group lobbying of the bureaucracy affects policy outcomes and how it changes the legislature's willingness to delegate decision‐making authority to the bureaucracy. We extend the standard model of delegation to account for interest group influence during the implementation stage of policy. We analyze how the decision to delegate changes when the bureaucratic agent is subject to external influence. The optimal degree of delegation as well as the extent to which interest groups influence policy outcomes differ depending on whether the system of government is characterized by unified or divided control. The result is a comparative theory of bureaucratic lobbying.     

MANAGERIAL AUTONOMY, CONTRACTUAL INCENTIVES AND PRODUCTIVITY IN A TRANSITION ECONOMY: SOME EVIDENCE FROM CHINA'S TOWN AND VILLAGE ENTERPRISES

Abstract. In advanced industrial economies it is accepted that efficiency requires aligning managerial autonomy in decision‐making with managerial incentives. Should this hold for economies like that of rural China where (at least until very recently) managers might abuse autonomy and government owners may have objectives other than profit maximization? This paper tests for the effects of managerial autonomy on efficiency with and without alignment with incentives in a panel of Chinese town and village enterprises (TVEs). The results show that managerial autonomy has had a positive and significant effect on productivity only when aligned with incentives.     

THE PUZZLING DIVERGENCE OF RENTS AND USER COSTS, 1980–2004

This paper demonstrates that, in the context of U.S. housing data, rents and ex ante user costs diverge markedly—in both growth rates and levels—for extended periods of time, a seeming failure of arbitrage and a puzzle from the perspective of standard capital theory. The tremendous volatility of even appropriately‐smoothed ex ante annual user cost measures implies that such measures are unsuitable for inclusion in official price statistics. The divergence holds not only at the aggregate level, but at the metropolitan‐market level as well, and is robust across different house price and rent measures. But transactions costs matter: the large persistent divergences did not imply the presence of unexploited profit opportunities. In particular, even though detached housing is readily moved between owner and renter markets, and the detached‐unit rental market is surprisingly thick, transactions costs would have prevented risk‐neutral investors from earning expected profits by buying a property to rent out for a year, and would have prevented risk‐neutral homeowners from earning expected profits by selling their homes and becoming renters for a year. Finally, computing implied appreciation as a residual yields a house price forecast with huge errors; but either longer‐horizon or no‐real‐capital‐gains forecasts—which turn out to have similar forecast errors—imply a far less divergent user cost measure which might ultimately be useful for official price statistics. Some conjectures are offered.     

A Theoretical Model of the Effects of Public Funding on Saving Decisions by Charitable Nonprofit Service Providers

Why do charitable nonprofit, service‐providing organizations save? What are the tradeoffs between using income to build up cash reserves and serving more clients? Saving may generate income, protect the organization against a drop in donations, and increase the organization's chances of survival. Saving, though, may affect the likelihood that nonprofits receive private and public funding. We model the relationship among private and public income, economic conditions, and nonprofit savings. We find that anticipation of government help during difficult times tends to reduce the amount of saving done by the nonprofit. This effect is strengthened if government officials view unspent donations as indicative of a lack of need. Both these effects provide a strong incentive for nonprofits to spend on current consumption rather than to save for the future, and thus to increase the burden on the public purse.