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."     

Issue costs and regulated returns: A general approach

This paper sets forth a general, unified procedure for the treatment of flotation costs for the regulated utility, a method which reduces to standard treatments as special cases. In this approach, the regulated return becomes a weighted average of the required rates on different portions of equity capital, portions that are distinguished by whether or not issue costs are incurred in their acquisition. In addition, the method provides solutions for a host of financial environments, including solutions where past flotation costs are to be recognized, and where merged utilities with different flotation-cost recovery patterns must be combined.     

Switching costs and screening efficiency of incomplete contracts

We study the role of switching costs in a dynamic buyer-seller relationship where quality is not contractible and the sellers retain private information about their quality-relevant abilities. In this environment buyer switching costs increase the seller's bargaining power in negotiations for the second contract, but they also induce the seller to improve quality during the first ontract, in signalling his type. The overall effect is to enhance efficiency and ncrease the buyer's welfare. This beneficial effect stems from the link between quality, the buyer's posterior beliefs, and ex post distribution of bargaining power as a function of the switching cost. JEL Classification: L14
L'auteur étudie le rôle des coûts de commutation dans une relation dynamique acheteur-vendeur où la qualité de la prestation ne peut être partie du contrat, et où les vendeurs peuvent rationner l'information quant à leurs compétences à livrer un produit de qualité. Dans ce contexte, les coûts de commutation de l'acheteur accroissent le pouvoir de marchandage du vendeur dans la négociation du second contrat, mais ils peuvent aussi inciter le vendeur à améliorer la qualité au cours du premier contrat pour signaler ses compétences à l'acheteur. L'effet global est d'améliorer l'efficacité et d'accroître le bien-être de l'acheteur. Cet effet bénéfique émerge du lien entre la qualité, les croyances de l'acheteur a posteriori, et la répartition du pouvoir de négociation ex post en tant que fonction des coûts de commutation.     

Gender and the social costs of claiming value: An experimental approach

This paper employs economic experiments to explore the social costs of claiming value in distributive negotiations. I use a reverse dictator game, a “Taking” game, to measure value claiming behavior and an Investment game to measure the social costs of claiming value in terms of trust offered by third parties to Takers. I observe social costs to claiming value and find that male Trustors impose higher social costs than female Trustors. Women reduce how much value they claim in the presence of social costs, but men do not. Takers anticipate this response and claim less when observed by a man.     

Expanded newborn screening for genetic and metabolic disorders: modeling costs and outcomes

Newborn screening for genetic and metabolic disorders is a state-based public health program in the United States, for the elimination and/or reduction of associated mortality, morbidity, and disabilities. As new technologies for newborn screening and new interventions for treatment are realized, it will be increasingly important for health leaders and policymakers to have data to inform their decisions regarding expanding newborn testing. The entire costs of a screening program, including not only instrumentation but also labor and time costs; initial, repeat, and confirmatory testing; screening sensitivity and specificity; and short and long-term followup, should be considered in decisions regarding expansion of screening programs. The decision model cited in this study can serve as a tool in exploring alternatives for critical decisions regarding the addition of new disorders to existing newborn screening panels. The evaluation of genetic disorders in this study can be used as a prototype of an approach to evaluating screening for any newborn genetic/metabolic disorder.     

The overlooked costs of the permanent war economy: A market process approach

How does the permanent war economy interact, and subsume, the private, non-military economy? Can the two remain at a distance while sharing resource pools? This paper argues that they cannot. Once the U.S. embarked upon the path of permanent war, starting with World War II, the result was a permanent war economy. The permanent war economy continuously draws resources into the military sector at the expense of the private economy, even in times of peace. We explore the overlooked costs of this process. The permanent war economy does not just transfer resources from the private economy, but also distorts and undermines the market process which is ultimately responsible for improvements in standards of living.     

Regulating an externality-generating public utility: A multi-dimensional screening approach

In this paper, I present a monopoly screening model in which a firm holds private information on fixed abatement costs. Because of the nature of the optimal contracts, bunching is never optimal even with ‘n’ distinct types. A characterization of full and limited information solutions is offered and it is shown that the design standards alone determine the value of an information rent. The variable charge is completely free of any marginal information costs. This allows the variable charge to track marginal damages and thereby ensures that marginal social costs are covered. A fixed charge implements the optimal solution.     

The effects of inflation uncertainty on interest rates: a nonlinear approach

In this article, we investigate the effects of inflation variability on short-term interest rates within a nonlinear smooth transition regression framework. The test results suggest that only the conditional mean of the inflation is a nonlinear process whereas the conditional variance is time variant but linear. Using the square root of conditional variance as a proxy for inflation risk, we estimate Fisher equation augmented with inflation risk. Although the estimated Fisher equations suggest that inflation risk reduces short-term interest rates, we find that the effects of inflation risk on interest rates are regime-dependent. Particularly, we find that the negative effects of inflation variability on nominal rates are greater in low-inflationary regimes when compared to high-inflationary regimes. On the other hand, it is found that both inflation and inflation uncertainty raise the expected inflation effect.     

Exploring the variability of patient costs in disease management programs: a hierarchical modelling approach

Disease management programs include a wide variation of patients with different chronic diseases and different health care utilization. The aim of this article was to identify factors on patient-level and organizational-level that explain the variability in costs of patients with different chronic diseases enrolled in a DMP by employing a rigorous analytical model. A generalized linear mixed model (GLMM) was specified to perform a multi-level analysis of cross-sectional hierarchical data from 16 DMPs in the Netherlands. Multiple imputation, sub-group analysis per disease and analysis from both the health care and the societal perspectives were also performed. Our model showed that age, the presence of cardiovascular disease, multi-morbidity and payments on top of the payment for the usual care had positive relation with costs, while better quality of life was associated with lower health care costs. In the COPD sample, physical activity and employment were associated with health care costs. Our study showed that there is great variability in health care costs among patients included in DMPs and identified patient and organizational explanatory factors. The findings are relevant to the design of future DMPs and their payment schemes.     

The determinants of international reserves in the emerging countries: a nonlinear approach

In this article, we adopt a nonlinear approach to examine the dynamics of the international reserves holdings by the emerging economies. To do so, we estimate the demand for international reserves with a Panel Smooth Transition Regression (PSTR) model that loosens two restricting hypotheses, homogeneity and time-stability. We find evidence for the presence of a nonlinear behaviour in the demand for international reserves, a result that is new to the literature. The coefficients are found to change smoothly, as a function of two threshold variables – out of five candidates tested in total. Our specification accounts for the acceleration of foreign exchange reserves accumulation that the linear specifications fail to explain.     

The J-Curve phenomenon in European transition economies: A nonlinear ARDL approach

This article examines the J-curve phenomenon for 16 European transition economies. While previous studies assume a linear relationship between the exchange rate and the trade balance, this paper allows for nonlinearity. Following Bahmani-Oskooee and Fariditavana (2015 Bahmani-Oskooee, M., and H. Fariditavana. 2015. “Nonlinear ARDL Approach, Asymmetric Effects and the J-curve.” Journal of Economic Studies 42 (3): 519–530. doi:10.1108/JES-03-2015-0042.[Crossref], [Web of Science ®] , [Google Scholar], 2016 Bahmani-Oskooee, M., and H. Fariditavana. 2016. “Nonlinear ARDL Approach and the J-curve Phenomenon.” Open Economies Review 27 (1): 51–70. doi:10.1007/s11079-015-9369-5.[Crossref], [Web of Science ®] , [Google Scholar]), the empirical method used is the nonlinear cointegrating autoregressive distributed lag (NARDL) model of Shin et al. (2013 Shin, Y., B. Yu, and M. J. Greenwood-Nimmo. 2013. “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework.” In Festschrift in Honor of Peter Schmidt, edited by William C. Horrace and Robin C. Sickles. New York, NY: Springer Science and Business Media. [Google Scholar]) in which short-run and long-run nonlinearities are introduced via positive (appreciation) and negative (depreciation) partial sum decompositions of the real exchange rate. We argue that the lack of support for the J-curve phenomenon could be due to the linearity assumption. This issue is examined by utilizing the linear and the NARDL models. Using the linear autoregressive distributed lag (ARDL) model, we are unable to find support for the J-curve phenomenon in any case. However, when the NARDL model is used, we are able to find evidence for the J-curve in 12 out of the 16 countries. This suggests that allowing for nonlinearity in the adjustment process is important when studying the J-curve phenomenon.     

Measuring fixed costs for firms’ use of a free trade agreement: Threshold regression approach

By employing the threshold regression method, we estimate the average tariff equivalent of fixed costs for the use of a free trade agreement (FTA) among all existing FTAs in the world. It is estimated to be around 3%.     

Revisiting the oil price and stock market nexus: A nonlinear Panel ARDL approach

In this paper, we re-examine the relationship between oil price and stock prices in oil exporting and oil importing countries in the following distinct ways. First, we account for possible nonlinearities in the relationship in order to quantify the asymmetric response of stock prices of these two categories to positive and negative oil price changes. Secondly, in order to capture within group differences, we allow for heterogeneity effect in the cross-sections by formulating a nonlinear Panel ARDL model which is the panel data representation of the Shin et al. (2014) model and also analogous to the non-stationary heterogenous panel data model. Thirdly, we evaluate the relative predictability of the linear (symmetric) and nonlinear (asymmetric) Panel ARDL models using the Campbell and Thompson (2008) test. Our results depict that stock prices of both oil exporting and oil importing groups respond asymmetrically to changes in oil price although the response is stronger in the latter than the former. This finding is further corroborated by the out-of-sample forecast results suggesting that the inclusion of positive and negative oil price changes in the predictive model for stock prices will produce better forecast results only for the oil importing countries. Our results are robust to different oil price proxies, lag structure and in-sample periods. Overall, the dichotomy between oil exporting and oil importing countries has implications on oil price-stock nexus.     

Incorporating distributional considerations in the safe minimum standard approach: endangered species and local impacts

Explicitly incorporating current distributional concerns into the safe minimum standard (SMS) approach is the objective of this study. The SMS approach is a collective choice process that prescribes protecting a minimum level of a renewable natural resource unless the social costs of doing so are somehow excessive or intolerably high. More complete implementation of an SMS approach, if it is to be a pragmatic policy tool, requires that distributional considerations be included in determining whether the economic consequences of preservation actions are intolerable. Two case studies involving the US Endangered Species Act are used to illustrate how distributional concerns might be incorporated into the SMS approach.     

Transaction costs and the property rights approach to the theory of the firm

The standard property rights approach is focused on ex ante investment incentives, while there are no transaction costs that might restrain ex post negotiations. We explore the implications of such transaction costs. Prominent conclusions of the property rights theory may be overturned: A party may have stronger investment incentives when a non-investing party is the owner, and joint ownership can be the uniquely optimal ownership structure. Intuitively, an ownership structure that is unattractive in the standard model may now be desirable, because it implies large gains from trade, such that the parties are more inclined to incur the transaction costs.     

Market frictions: A unified model of search costs and switching costs

It is well known that search costs and switching costs can create market power by constraining the ability of consumers to change suppliers. While previous research has examined each cost in isolation, this paper demonstrates the benefits of examining the two types of friction in unison. The paper shows how subtle distinctions between the two costs can provide important differences in their effects upon consumer behaviour, competition and welfare. In addition, the paper also illustrates a simple empirical methodology for estimating separate measures of both costs, while demonstrating a potential bias that can arise if only one cost is considered.