FINANCING SATELLITE OUTPATIENT CARE IN RURAL HOSPITALS

Providing health care to low income or elderly residents of rural areas remains a serious national health care problem in the United States. This case study evaluates an intervention for primary outpatient care to a particular class of patients – veterans – and shows how it can benefit them. Locating the outpatient clinic in a struggling rural hospital makes an outreach by the urban veterans hospital financially feasible and is profitable for the rural hospital.     

The value of a flow-through entity in an integrated corporate tax system

In an integrated corporate tax system, resident shareholders receive a tax credit for corporate tax paid that can be used to offset personal tax on dividend income. Nonresident and tax-exempt (pension plan) investors cannot use the tax credit on corporate dividends and thus prefer to invest in flow-through entities. We estimate the value of the flow-through entity to nonresident and pension plan investors by examining the price change around the date of an unexpected announcement of a change in tax law related to Canadian publicly traded income trusts units creating an entity-level tax that makes them no longer tax-favored to these investors.     

Measuring the unmeasurable: an application of uncertainty quantification to Treasury bond portfolios

We extract from the yield curve a new measure of fundamental economic uncertainty, based on McDiarmid’s diameter and related methods for optimal uncertainty quantification (OUQ). OUQ seeks analytical bounds on a system’s behaviour, even where aspects of the underlying data-generating process and system response function are not completely known. We use OUQ to stress test a simple fixed-income portfolio, certifying its safety—i.e. that potential losses will be ‘small’ in an appropriate sense. The results give explicit tradeoffs between: scenario count, maximum loss, test horizon, and confidence level. Unfortunately, uncertainty peaks in late 2008, weakening certification assurances just when they are needed most.     

Segregación por género en el sector manufacturero formal de la India

Mediante el cálculo de un índice de disimilitud con datos de la Encuesta Anual de Industrias, los autores constatan que la segregación por género en las manufacturas indias entre 1989–1990 y 2000–2001 disminuyó, aunque debido sobre todo a cambios en la estructura sectorial del empleo, y no tanto a la integración de género. El índice resultó sensible al número de grupos de industrias establecido en la clasificación utilizada para el cálculo. Tanto a escala nacional como estatal, las mujeres tienen muy pocas oportunidades de empleo formal, concentradas en ciertos sectores manufactureros tradicionalmente femeninos, como los de alimentos, tabaco, confección, hilado y textil.     

The damage costs of climate change toward more comprehensive calculations

It is argued that estimating the damage costs of a certain benchmark climate change is not sufficient. What is needed are cost functions and confidence intervals. Although these are contained in the integrated models and their technical manuals, this paper brings them into the open in order to stimulate discussion. After briefly reviewing the benchmark climate change damage costs, region-specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate. Furthermore, cost functions are assumed to be quadratic, as an approximation of the unknown but presumably convex functions. Results from the damage module of the integrated climate economy modelFUND are presented. Next, uncertainties are incorporated and expected damages are calculated. It is shown that because of convex loss functions and right-skewed uncertainties, the risk premium is substantial, calling for more action than analysis based on best-guess estimates. The final section explores some needs for further scientific research.     

The weighted average cost of capital is not quite right: Reply to M. Pierru

In this journal [Miller, R. A. (2009). The weighted average cost of capital is not quite right. The Quarterly Review of Economics and Finance, 49, 128–138], I argued that the standard WACC formula is inadequate in most circumstances to reward stockholders and bondholders where the necessary cash flows are calculated separately to exactly cover the respective costs of capital. Axel Pierru [2009. ‘The weighted average cost of capital is not quite right’: A comment. The Quarterly Review of Economics and Finance, 49, 1219–1223] observes correctly that my assumed repayment schedules (equal periodic payments to bondholders; similarly for stockholders) imply a temporal drift in the debt (or leverage) ratio; he would recalculate the WACC annually. He proposes an alternative calculation of the repayment schedules under the constraint of a constant debt ratio. Here I suggest three additional possible repayment schedules; in general repayment schedules determine the drift in the debt ratio. However, the expected repayment schedules are established at the time the project is accepted and financed, hence the relevant debt ratio is that which exists at that time. The WACC for a specific project need not (and should not) be recalculated for that project throughout its financial life when that project has already been accepted and financed.     

Computing optimal tax equilibria

This paper proposes a technique for computing optimal taxes in a full general equilibrium model. It is based upon a fixed point algorithm of the type that is widely used to solve Walrasian general equilibrium models. Computing an optimal tax equilibrium is more difficult than solving a general equilibrium model only to the extent that the derivatives of the social welfare function and of the consumer demand functions must be calculated in the former case. Solutions to several sample problems are provided to demonstrate the technique. They suggest that optimal tax rates are exceedingly sensitive to the specification of the model used to derive them.     

A SURVEY ON THE OUTPUT EFFECTS OF TAX REFORMS FROM A POLICY PERSPECTIVE

This study reviews the existing evidence on the effects of tax reforms on output levels and growth over the short and long run from different strands of the literature. It develops and applies criteria to evaluate the usefulness of ex‐post estimates to predict the effects of tax reforms ex ante. Based on these criteria, we present detailed tables summarizing and comparing ex‐post estimates of the effects of tax reforms. Overall, our review suggests that at least the direction of the short‐run and long‐run growth effects can be predicted with a reasonable degree of certainty, but there is disagreement with respect to the magnitude. Our review also suggests that depending on the tax change, trade‐offs between short‐run stabilization and long‐run growth may arise and that more research on this question is needed. (JEL E62, H20, O20)