Re-estimating gender differences in income in South Africa: The implications of equivalence scales

Most studies of poverty and inequality in South Africa measure individual welfare by deflating total household resources, such as income, by household size. This per-capita method makes no adjustments for the different consumption needs of children or for household economies of scale. However, in addition to being more likely to live in households where average per-capita household income is lower compared with men, we show that women in South Africa also live in significantly larger households which include more children. These gendered differences in household composition are driven to a large degree by low rates of co-residency between men and women. We therefore investigate how adjusting household resources for the presence of children and economies of scale affects measures of the gender gap in income.     

Economies of scale and optimal capital in nuclear and fossil fuel electricity production

This paper tests for economies of scale in the electric utility industry using a five-year panel data set that includes both fossil fuel and nuclear fuel electricity generation. In addition, a variable cost function is used as opposed to a total cost function because the assumption of cost-minimizing production inputs is not met. That is, electric utilities are overcapitalized. Therefore, the optimal capital stock is estimated, which is significantly less than the actual capital stock, and an estimate of economies of scale is generated. Evidence suggests that firms are operating on the negatively sloped portion of the long-run average cost curve near the trough. This indicates either slight economies of scale or no economies of scale.     

Third-Degree Price Discrimination: Apology Not Necessary

Applied work in price discrimination often treats demand curves among multiple market segments as algebraically additive. Yet the welfare effects of multi-market (third degree) price discrimination depend on how the demand segments are added. Treating demands as geometrically additive yields the well known result that discrimination absent an increase in production diminishes Marshallian surplus. But if demands are treated as algebraically additive then discrimination increases welfare over uniform pricing. Quantity is identical in the three cases, so the effect is not due to market opening. Nor is the effect due to scale economies since marginal cost is assumed constant. Profit is always greater under discrimination, so the effect is due to distributional changes in consumer surplus. The model is restricted to linear demands and constant marginal cost but can be generalized for future work and policy analysis.     

China's Trade Liberalization and Structural Adjustments for the World Economy

While China's open-door policy has benefited the world economy, there are anxieties, both in China and abroad, about increased competition and the cost of dramatic adjustments. This paper attempts to analyse the implications of China's trade reform for structural change and welfare in China and the rest of the world. Three sets of experiments are implemented with the GATP model. The study finds that China is the biggest gainer from its own liberalization, its labour-intensive sector will expand but other sectors, including agriculture will contract. The structural adjustment for other countries is likely to be concentrated on the clothing sector. But the economies which experience the biggest adjustments are also the biggest gainers. Multilateral trade liberalization, such as the APEC free trade process, increases the gain both for the rest of the world and for China.     

Market integration and imperfect competition in labor and product markets

We analyze the consequences of product market integration in a simple two-country, two-sector, general-equilibrium model with imperfect competition due to economies of scale. In contrast to the existing literature we take explicit account of the labor-market structures in the integrating economies. It turns out that the specific labor-market structures are very important for how integration affects total production and product market structure in a particular economy. However, integration always gives rise to a welfare gain in both economies.I have benefitted from comments by an anonymous referee, a coeditor of this journal, and by participants in a workshop arranged by CIE in April 1992, at the University of Aarhus, and by participants at the EEA conference in Dublin 1992.     

Cost Economies: A Driving Force for Consolidation and Concentration?

Expanding concentration in many industries has generated concern about the determinants of these market structure patterns. Understanding such trends requires information on technological characteristics underlying cost efficiency. However, market structure and power analyses are typically based on restrictive models that limit the representation of cost drivers. In this paper, I model and estimate a comprehensive cost specification allowing for utilization, scale, scope, and multiplant economies using U.S. beef packing plant data. My evidence of substantive cost economies implies economic motivations for observed concentration, consolidation, and diversification and facilitates the interpretation and use of market structure measures for policy guidance.     

The impact of e-commerce: It always benefits consumers, but may reduce social welfare

This paper investigates the impact of e-commerce on social welfare using a linear city model. Our model incorporates the diversity of consumers such that some can purchase the good via the Internet while others cannot. Our main result is as follows. The appearance of e-commerce enhances retail competition and always increases consumer surplus. However, total surplus does not necessarily improve. This is because the equilibrium market division between conventional stores and e-commerce is not socially optimal and efficiency loss of distribution accrues if the population of Internet shoppers is small and/or the cost of e-commerce is high. Our theoretical results indicate that the small e-commerce market share in the Japanese and US economies may result in welfare loss.     

比较优势、规模经济和贸易成本:国际生产分割下垂直关联产业的空间分布

在国际生产分工背景下,比较优势和规模经济成为影响企业生产区位的重要因素。本文在新经济地理框架下构建开放条件下理论模型,探讨不同贸易成本下比较优势和规模经济对垂直关联产业空间分布的影响。结果刻画出在比较优势和规模经济共同作用下,伴随贸易成本变化出现的4种垂直关联产业空间分布模式。表明我国目前所处的国际分工地位是在现有贸易成本条件下比较优势和规模经济相互作用的均衡结果,而吸引上游产业在中国聚集是实现我国产业结构升级的合理路径。     

Inflation and Welfare in Latin America

This paper follows Bailey (J Polit Econ 64:93–110, 1956) and Lucas (Econometrica 68:247–274, 2000) and estimates the welfare cost of inflation for 17 Latin American economies. We use annual data, from 1955 to 2000, and recent advances in the field of applied econometrics to estimate the inflation rate elasticity of money demand and report significantly high and differential welfare cost estimates for these economies.     

Should East Asia’s currencies be pegged to the yen? The role of invoice currency

Growing concern that a dollar peg exposes East Asian economies to fluctuations in the dollar–yen exchange rate has stimulated research on currency basket regimes as alternatives for these economies. However, existing studies have mostly ignored an important characteristic of East Asia, i.e., most of its international trade is invoiced in the U.S. dollars. This paper investigates how the preponderance of dollar invoicing affects optimal currency basket regimes for East Asian economies. I develop a three-country center-periphery sticky-price dynamic stochastic general equilibrium model for the analysis. The model is solved numerically by taking second-order approximations to the policy functions with the expected lifetime utility of households chosen as the welfare criterion. Contrary to the conjecture of existing literature, I show that predominance of dollar invoicing implies that the dollar should receive a smaller weight than suggested by bilateral trade shares between emerging markets in East Asia and the United States. The results hinge on the interaction of different degrees of pass-through implied by the choice of invoice currency and endogenous responses of monetary policies in the center countries.     

Impact of nontraditional activities on scale and scope economies: A case study of Japanese regional banks

The recent financial deregulation in Japanese banking has enabled regional banks to engage in trust businesses. This paper examines the impact of such nontraditional banking activities on cost structure by measuring economies of scale and scope. A generalized translog cost function, which can take zero outputs into consideration, is employed to simultaneously investigate entrants and non-entrants. While ray scale economies are observed for trust businesses, product-specific scale economies are not. Further, cost complementarities are not observed in almost all the pairwise combinations of the products. Thus, entering into the trust business yields no cost reduction for Japanese regional banks.     

The social value of income information in a model with market power and endogenous variety

The present paper analyzes the value of public information in a general equilibrium economy with imperfect competition. The welfare effects of an improved information system for perfectly competitive economies have been extensively investigated in the published literature. Schlee (2001) shows that the value of information is always negative in exchange economies if an efficient risk sharing mechanism exists. In contrast, in economies with production, better information reduces welfare provided consumers are sufficiently risk-averse ( Eckwert and Zilcha 2000, 2003 ). In the present paper it will be shown that this result is robust if the production sector exhibits monopolistic competition in the Chamberlinian sense. Even so, the inefficiency of equilibria adds further potential for positive welfare effects of improved information. A model is presented where the degree of market imperfection is positively linked to the value of information. If the markup on competitive prices is sufficiently high, the value of information is positive; that is, better information increases economic welfare.     

The Influence of Demographics and Household-Specific Price Indices on Consumption-Based Inequality and Welfare: A Comparison of Spain and the United States

Previous research has suggested that inequality is lower in Spain than in the United States when it is based on income. For the present article, both inequality and social welfare are examined, with household consumption expenditures used as a proxy for household welfare. For tractability, equivalence scales depended only on the number of people in the household. Household-specific price indices were used to express the 1990-1991 expenditure distributions in 1981 and 1991 winter prices. Our results reveal that inequality and welfare comparisons are drastically different for smaller and larger households. When all households are considered, the two-country comparison suggests that the income inequality ranking can only be maintained for expenditure distributions when economies of scale are small or nonexistent. However, welfare is always higher in the United States than in Spain. Because inflation during the 1980s in both countries was essentially distributionally neutral, all results appear to be robust to the choice of time period.     

Welfare Implications of Currency Integration: Labor Mobility and Pricing-to-Market

In this paper, we examine the welfare cost of renouncing monetary policy autonomy in a model that includes labor mobility and pricing-to-market (PTM) behavior in firms. We find that renouncing monetary policy autonomy becomes a cost of currency integration when the consumption basket weights differ between candidate countries and when country-specific total factor productivity (TFP) shocks hit economies, even when the union fulfills the classic optimum currency area theory of labor mobility. We also found that a firm's PTM behavior has a significant effect on the welfare implications of currency integration combined with labor mobility. For instance, currency integration does not produce greater welfare losses in the PTM case (where the labor input weights differ across member countries and asymmetric labor disutility shocks occur), although greater welfare losses arise in the case of producer currency pricing.     

Corruption,market quality,and entry deterrence in emerging economies

In many emerging economies incumbent firms often use dubious means to deter entry of other firms. We analyze this scenario in a three‐stage game of entry deterrence. The incumbent has incomplete information about the entrant's costs but can increase this cost by resorting to unfair means (e.g. bribing a politician who harms the entrant). We completely characterize the optimal bribe and show that this depends on the “fairness index” and the “differentiation” parameter. We also show that zero bribes need not maximize welfare and market quality. Our results seem to be compatible with anecdotal evidence from emerging economies such as India.     

School district consolidation: Market concentration and the scale‐efficiency tradeoff

Consolidation is often proposed as a strategy for increasing school district quality without increasing educational funding. However, if consolidation reduces competition in the local school market and reduces efficiency, any savings from exploiting economies of scale may be lost to increased inefficiency. We use a stochastic cost function to investigate these effects for districts in Texas. We find important economies of scale, but we also find that increased market concentration leads to increased cost inefficiency. Finally, we illustrate the practical importance of these two potentially offsetting factors in a simulation that considers consolidating Texas school districts to county‐level districts. We find that failure to consider the effect on competition can lead to large overestimates of the benefits of consolidation.     

Increasing Returns,the Choice of Technology,and the Gains from Trade

This paper studies the implications of international trade in a general equilibrium model in which the returns to scale are internal and firms choose their production technologies. The production function generated from internal increasing returns and the choice of technology leads to returns to scale similar to those based on external increasing returns. Trade always increases a country's welfare in a two-sector model in which the agricultural sector has constant returns to scale and average cost in the manufacturing sector may decrease without being bounded asymptotically by a given level of marginal cost. Why a small country may lose from trade under external increasing returns is also illustrated.     

Cost efficiency,economies of scale,technological progress and productivity in Indonesian banks

This study estimates cost efficiency, economies of scale, technological progress, and productivity growth among Indonesian banks from 1993 to 2000. Average cost efficiency for the banking sector over this period was 70%. However, there is a marked difference in cost efficiency before and after the Asian economic crisis. The banking sector cost efficiency was 80% prior to the crisis and 53% after the crisis. Moreover, results indicate that private-owned banks and joint venture/foreign banks were more efficient than public-owned banks. Furthermore, the relationship between cost efficiency and total assets suggests an optimum bank asset size. Cost reductions attributed to technological progress and economies of scale were greater prior to the Asian economic crisis. Larger decreases in total factor productivity are evident in the post-crisis period.     

Production Costs,Scale Economies,and Technical Change in U.S. Textile and Apparel Industries

The elimination of quotas in textiles and apparel poses new threats from import competition. To survive, the sectors need to find least-cost methods of production. The production–cost structure of the U.S. textile and apparel industries is examined using a dual cost framework. A translog cost function is used to measure substitution elasticities between inputs, scale economies, and the nature of technical change. The scope for factor substitution in textiles remains limited with all substitution elasticities being less than unity. Labor and materials are complements in apparel production, but there is evidence of substitution between capital and labor. The rate of technical change is higher in textiles than in apparel. Given the intense import competition from low wage countries, in both industries, technical progress is labor saving. Overall, economies of scale are larger in apparel; however, scale economies have continued to increase in textiles.This research was supported by a grant from the National Textile Center.     

Welfare State, Market Imperfections, and International Trade

Within a two-sector-two-country model of trade with aggregate scale economies and unionisation, a more generous welfare state in one country increases welfare in that country and can have positive spillover effects on the other. Furthermore, synchronised expansions of social security are more welfare enhancing than unilateral ones. Our results counter the fears that a race to the bottom in social standards may result from the ‘shrinking-tax-base’ entailed by international capital mobility. While affecting trade patterns and income distribution, capital mobility interacts with welfare state policies in increasing welfare, even when capital flows out of the country that initiates the shock.