Measuring environmental efficiency of industry: a case study of thermal power generation in India

Technical and environmental efficiency of some coal-fired thermal power plants in India is estimated using a methodology that accounts for firm’s efforts to increase the production of good output and reduce pollution with the given resources and technology. The methodology used is directional output distance function. Estimates of firm-specific shadow prices of pollutants (bad outputs), and elasticity of substitution between good and bad outputs are also obtained. The technical and environmental inefficiency of a representative firm is estimated as 0.06 implying that the thermal power generating industry in Andhra Pradesh state of India could increase production of electricity by 6/ while decreasing generation of pollution by 6%. This result shows that there are incentives or win–win opportunities for the firms to voluntarily comply with the environmental regulation. It is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms. This result calls for the use of economic instruments like pollution taxes instead of command and control regulation used currently in India to reduce air pollution.

Small firms in Portugal: a selective survey of stylized facts,economic analysis,and policy implications

I survey a number of stylized facts pertaining to the dynamics of firm entry, growth, and exit in competitive industries. I focus particularly on data for Portugal, although I also consider, for comparison purposes, data from other countries. I then present a series of theoretical models that attempt to explain the stylized facts and evaluate the welfare impact of market distortions. Finally, I derive a number of policy implications, all centered around the notion of economic mobility.

Sovereign-Wealth Funds: the institutional dimension

In the recent past, the operations of the capital-rich Sovereign-Wealth Funds (SWFs) went on increasing in the global capital markets. As the global economic crisis that started in 2007 deepened, SWF operations dramatically spurted, leading to further progressive increase in their significance for the global capital markets. For all appearances they are going to be important financial players in the foreseeable future. This article focuses on the basic concept of SWFs, their structure and operations. It attempts to analyze and elucidate on them. Notwithstanding the fact that SWFs are an instrument of enhancing liquidity and financial resource allocation in the international capital market, they managed to become a source of controversies. Consequently they became a source of escalation in financial protectionism in several advanced industrial economies, in particular the USA. The article concludes that this was unwarranted. Recently SWFs have attempted to device an array of best practices to improve the transparency of their global financial operations. These measures are expected to enhance the acceptance of SWFs as well as global recognition of their operations. They would also help in dispelling the negative image that SWFs have held in several advanced industrial economies.

A system approach for measuring the euro area NAIRU

This paper addresses the issue of measuring the NAIRU for the euro area and assessing the robustness and precision of the obtained estimates. The empirical framework adopted is based on systems combining an Okun-type relationship between cyclical unemployment and the output gap with a Phillips curve and stochastic laws of motion for the NAIRU and potential output. Such systems have been estimated using Kalman-filter techniques. The results obtained point to an estimate of the area-wide NAIRU that is robust to changes in the underlying models. This robustness is shown to hold both in terms of the mean – i.e., the shape of the resulting NAIRU – and the variance of the process. The latter is derived through bootstrap exercises using the models alone or pooled together. The evidence found suggests that the increase in the aggregate NAIRU that took place in the early part of the sample period has come to a halt and may be about to be reversed.Jel classification: C11, C15, E31, E32The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the Institutions they belong to. The authors are grateful to Per Jansson for providing parts of the econometric RATS code and to Gonzalo Camba-Mendez and Frank Smets of the ECB for useful comments. Comments and recommendations by two anonimous referees are also gratefully acnowledged. All the remaining errors are the authors responsibility. All correspondence to Ricardo Mestre.First version received: January 2002/Final version received December 2002     

Fractional integration and business cycle features

We show in this article that fractionally integrated univariate models for GDP lead to a better replication of the main business cycle characteristics. We firstly show that the business cycle features are clearly affected by the degree of integration as well as by the other short run (AR, MA, etc.) components of the series. Then, we model the real GDP in the UK and the US by means of fractionally ARIMA (ARFIMA) model, and show that the time series can be specified in terms of this type of model with orders of integration higher than one but smaller than two. Comparing the ARFIMA specifications with those based on ARIMA models, we show via simulations that the former better describe the business cycles features of the data.Jel classification: C12, C15, C22The authors want to thank two anonymous referees for wise remarks. We have also benefited from questions and comments of the attendances at the econometric seminar of the Humboldt Universität zu Berlin and the ESEM2001 congress in Lausanne. Remaining errors and omissions are ours. All correspondence to: Luis A. Gil-Alana.First version received: February 2002/Final version received: December 2002     

Quantile estimation of frontier production function

The purpose of the paper is to provide new information on the performance of frontier estimation methods, using data from Italian hotel industry. Quantile regression is also suggested as solution to frontier production function estimation. It is shown that, while the choice of estimation methods among conventional techniques significantly affects the economic analysis, quantile regression provides valuable new information by estimating the whole spectrum of production functions corresponding to different efficiency levels. In addition, the method makes available a coherent framework to analyze the performance of the conventional techiniques. Jel classification: C14, C16, D24We would like to thank the Co-Editor, the Associate Editor and an anonymous referee for comments and suggestions. The research was supported by the University Research Council and the National Research Council. The usual disclaimer applies.The estimates were computed using the Roger Koenker and StatLibS-Plus routine of quantile regression and the Tim Coelli and CEPA Web site FRONTIER 4.1 Program. The data set is provided by the Ho.Re.Ca. survey conducted by ISTAT in 1992.First version received: June 2001/Final version received: December 2002     

Policy matters. The long run effects of aggregate demand and mark-up shocks on the Italian unemployment rate

This paper estimates a VAR including labor productivity, real wage and unemployment rate, to identify the dynamic effects of technology, demand, and mark-up shocks, respectively, on the Italian labor market. Identification is achieved by imposing recursive restrictions on the matrix of long run multipliers. Our results show that both mark up and aggregate demand shocks permanently reduce the unemployment rate. Finally, technology shocks do not significantly affect the unemployment rate in the long run. These findings convey important policy implications: expansionary aggregate demand and deregulation policies reducing the mark up permanently decrease the Italian unemployment rate.Jel classification: C32, E32, J29This paper has been produced as part of a CEPR Research Network on New Approaches to the Study of Economic Fluctuations. We would like to thank Marcello DAmato, Mario Forni, Marco Lippi and Antonio Ribba for useful comments. We are also grateful to Bernd Sussmuth for pointing out to us several significant improvements to the paper.First version received: November 2001/Final version received: October 2002     

Financial development and economic growth in Australia: An empirical analysis

The paper empirically examines the dynamic relationship between financial development and economic growth in Australia in terms of bank-based and market-based financial structure. A time-series approach using the VAR Model is used to provide evidence for the dynamic relationship. The paper provides empirical evidence on the causal impact of the financial market on the economic growth of the Australian economy. The results suggest that financial intermediaries and financial markets have different impacts on economic growth given their diverse roles in the domestic economy. In particular there is evidence of causality from economic growth to the development of the financial intermediaries. On the other hand, development in the financial markets causes economic growth but there is no evidence of any causality from economic growth to financial markets. The sensitivity test using different interest rates does not change the results.I Jel classification: O16, G18, G28I We would like to thank Tilak Abeysinghe and Rajagurn Gunasekaran for their helpful comments on the first draft. Also, we would like to thank the Editor, Prof. Baldev Raj, and two anonymous referees for their helpful comments.First version received: October 2001/Final version received: October 2002     

Retesting symmetry and homogeneity in a cointegrated demand system with bootstrapping: The case of meat demand in Greece

A small Almost Ideal Demand System is estimated for Greek meat consumption using the Johansen procedure in conjunction with parametric bootstrapping and Bartlett corrections. Asymptotic Wald and likelihood ratio tests broadly support the predicted number of cointegrating relationships but reject symmetry and homogeneity. Bootstrapping and Bartlett corrections give support to symmetry and homogeneity but give less support for the predicted number of cointegrating relationships.Jel classification: C32 D12First version received: September 2001/Final version received: March 2003     

Price determination and dynamic adjustments: An inverse demand system approach to meat products in the United States

In this study the process of retail meat price determination is depicted in the form of an inverse demand system taking into consideration the dynamic adjustments present in monthly consumption data. The general dynamic framework identifies both long run and short run effects in a systematic manner and allows direct estimation of the long run price and scale flexibilities that are consistent with theory. The empirical application based on monthly U.S. meat products data provides reasonable and promising results.The authors are senior econometrician, Department of Risk Management, TRS, American Express Co., Phoenix, and assistant professor, Department of Applied Economics, University of Minnesota, St. Paul, respectively. The work was performed when the first author was an assistant research scientist at the Center for Agricultural and Rural Development, Department of Economics, Iowa State University, Ames. Journal Paper No. J-15784 of the Iowa Agriculture and Home Economics Experiment Station, Ames, Iowa. Project No. 3109.     

On latitude and affluence: The equatorial grand canyon

Our objective is to explain per capita GDPs by the countries' latitude, using PPP-based data for 138 countries in 1985 (PPP = purchasing power parity). A simple approach is formulated which nevertheless accounts for as much as two-thirds of the variance of the per capita GDPs.Theil is the McKethan-Matherly Eminent Scholar Emeritus and Courtesy Professor of Food and Resource Economics, while Galvez is an Associate in Research of the Bureau of Economic and Business Research, both at the University of Florida (UF). We thank Sri Devi Deepak, Charles B. Moss and James L. Seale of the UF Food and Resource Economics Department for helpful discussions and Robert Summers of the University of Pennsylvania for making the data available to us.     

Alcohol content and demand for alcoholic beverages: A system approach

This paper examines how alcohol content affects the consumption of alcoholic beverages in Finland. Three different quality hypotheses are studied and compared: Fisher and Shell, Theil, and an additive one. The comparison of the hypotheses is based on quality elasticities implied by the hypotheses. The results show that, under all hypotheses, alcohol content positively affects the demand for alcoholic beverages, and this effect depends negatively on income. The results of the comparison of the hypotheses show that the additive fits the data best. However, the other hypotheses are almost as good: Fisher and Shell's hypothesis better than Theil's.I would like to thank K. Koskela, A. Nyberg, M. Salo, M. Stenius, and I. Suoniemi for their useful comments and suggestions. The author bears sole responsibility for any remaining errors.     

An overlooked explanation of the declining saving rate

With a socioeconomic model of the determinants of savings that takes into account variables reflecting the abrupt changes in the divorce rate that occurred during the 1970s and the 1980s in the U.S., the increase in women's participation in the labour force, and their greater investrnent in education, we explain part of the measured decline in the saving rate. The uncertainty generated by the increased likelihood of divorces encourages households and women, in particular, to substitute human capital to financial or physical capital for precautionary savings.The authors thank Anna J. Schwartz and Pierre Perron for helpful suggestions and Anne-Marie El Hakim for her dedicated assistance on this project. The comments of the editor and of an anonymous referee contributed to improve the final version of the paper. The project was financed, in part, by a grant of the Quebec FCAR Fund.     

The combined estimator approach to model transferability and updating

The idea of transferability is to employ in model estimation, fitted model parameters computed from a different data set. Thecombined estimator approach to the transferability problem is expressed as a linear combination of the unbiased direct estimators on the two data sets. The major gain is in variance reduction. The combined estimator is shown to have superior accuracy, in a Mean Square Error sense, to a unbiased direct estimator whenever the transfer bias is relatively small. A test that indicates if the combined estimator is superior to the direct estimator is provided. Variances of the direct estimators are assumed to be known. Monte Carlo experiments are performed to assess the quality of the approximations. The results show that the approximations used are highly conservative. An empirical example of the combined estimator applied to a discrete choice problem is presented.     

The formation of production expectations in manufacturing industry for nine industrialized countries

Using tendency surveys in the manufacturing industry for nine countries, different production expectations formation mechanisms are tested. Simple expectations hypotheses are compared by conducting nested and non-nested tests, and whether other information than that based solely on past production and expectations, is taken into consideration. It is found that expectations in most cases are formed regressively and/or follow a combined regressive and adaptive process and that information other than past production and expectations, only influence the formation of current expectations weakly. Finally, the rational expectations hypothesis is weakly rejected.I am grateful to Trevor Breusch, Robert Gregory, Paul Grimes, Raja Junankar, Wolfgang Schneider, two anonymous refereces and participants at the Advanced Studies Program in Economic Policy Research Conference at Kiel Institute of World Economics, May 1989, for helpful comments and suggestions.