Assessing the impact of economic liberalization across countries: a comparison of dairy industry efficiency in Canada and the USA

This paper examines and compares the technical efficiency measures of Ontario and New York dairy producers for the period 1992 to 1998. A nonparametric stochastic frontier model is introduced to estimate technical efficiency. The backfitting algorithm of Breiman and Friedman is used to estimate the frontier. Empirical results indicate that during the period of study, New York dairy farmers produced milk more efficiently than Ontario dairy producers, but the magnitude of the difference was small. The estimated mean technical efficiency for the former group is 0.602 as compared to 0.532 for the latter. The results also indicated that over time, dairy farms in both regions improved their level of technical efficiency. Furthermore, no correlation was found between farm size and estimated technical efficiency.     

Pricing fx forwards in OTC markets – new evidence for the pricing mechanism when faced with counterparty risk

By using daily foreign exchange (fx) market data for five major currency pairs, this article shows that, especially since the beginning of the financial crisis, pricing of fx forwards has not matched the pricing formula derived from the covered interest rate parity (CIP). This corresponds to previous empirical results. Therefore, the CIP leads to systematic over- or underpricing. Overall, four statistically significant explanatory factors for this systematic over- or underpricing have been identified – the volatility in the difference between the interest rate levels, the spot price, the fx forward spread and the counterparty risk. In particular, the high significance of the counterparty risk demonstrates that pricing models for fx forwards should be reviewed.     

Die Bedeutung der Produktionsperiode für die Krisentheorie

Ohne ZusammenfassungVortrag, gehalten in der nationalökonomischen Gesellschaft in Wien am 1. Februar 1935.Aus dem Englischen übersetzt von Gertrud Lovasy     

Environmental Policies, Comparative Advantage and the Gains/Losses from International Trade

A multihousehold economy with multilateral nondepletable externalities, environmental (output) taxation and governmental production of pure, nonexclusive and nonrivalrous public goods is assumed. Modelling many different households the "almost perfect" isomorphism between the normative analysis of public goods and environmental policies is highlighted. Globally valid necessary and sufficient conditions for gains from international trade are derived and interpreted. A simple yet general environmental policy rule ensuring trade gains is put forward. The law of comparative advantage is generalized to economies with multilateral nondepletable externalities and over or underproduced pure public goods.     

An analysis of asymmetric demand response to price changes: The case of local telephone calls

Asymmetric demand responses to price changes are not an observable implication of classical demand theory, which predicts that consumers will react to a small price increase in much the same way as they do to a small price decrease. Yet applied researchers have long speculated that consumers are more sensitive to price increases than they are to price decreases. In addition, recent empirical studies generally support the theory of asymmetric demand responses. We construct a dynamic model based on data gathered from monthly telephone bills for 128 New York Telephone customers over a five-year period. Our results support the conclusion that customers react more quickly and strongly when prices go up than they do when prices go down.We would like to thank Manny Haas and Bernie Reddy for their comments and suggestions.     

Some reflections on technical progress in financing small firms ∗

Starting from a comparison of Josef Steindl's observations on the problems of the financing of small firms, with the implications of the Modigiani – Miller approach to financial structure, this paper investigates relationships between financial leverage and operating leverage by the application of option pricing theory to the value of a firm's debt. Drawing on possible differences between the second-hand break-up value and the present value of the flow of earnings from a firm's assets, it suggests linkages between production structure and firm financial structure. It then extends these results to resolving the problems of providing market financing for the creation and evolution of small firms in industrialized and transforming economies.