Profit inefficiency of Indian farms: A system approach

This article attempts to measure the level of profit inefficiency of Indian farms using a stochastic profit function. In the process, the degree of misallocation of inputs and nonoptimal supply of output is also estimated. Likelihood ratio tests allow division of total observations into two groups-large and small farms. Results indicate that both groups are profit-inefficient due to misallocation of inputs and undersupply of output. However, small farms are less profit inefficient than their larger counterparts. Within each group relatively larger farms are less inefficient.The editor for this paper was Lennart Hjalmarsson.     

Slack-adjusted efficiency measures and ranking of efficient units

In non-parametric methods many units are calculated as efficient. The article suggests a method for ranking efficient units, not by their efficiency, but by importance as benchmarks for the inefficient units, in contrast to earlier suggestions in the literature which rank units high if they are specialized. However, the total potentials for improvement frequently remain unrevealed by calculating radial efficiency measures of the Farrell type only. The article therefore first develops efficiency measures that explicitly extend the radial measures to include slacks. The new measures are applied to a typical multidimensional small-sample data set for Norwegian employment offices.     

Delaying integration of immigrant labor for the purpose of taxation

Delayed integration (DI) is a rule for taxing migrants. It requires that immigrants be taxed in the host country only after some period of transition. Conversely, emigrants are released from the obligation to pay taxes only after a certain period. DI is an alternative to the Employment Principle and the Home-Country Principle. The former governs the international taxation of labor. The latter is a close substitute for the Nationality Principle, on which US tax law is based. The paper studies DI in a setting which allows one to trade off the efficiency costs of distortionary taxation and of wasteful government.     

Nonlinear incentive provision in Walrasian markets: a Cournot convergence approach

The paper studies insurance with moral hazard in a system of contingent-claims markets. Insurance buyers are modelled as Cournot monopolists or oligopolists. The other agents condition their expectations on market prices, as in models of rational-expectations equilibrium with asymmetric information. Thereby they correctly anticipate accident probabilities corresponding to effort incentives induced by insurance buyers’ net trades. When there are many agents to share the insurance buyers’ risks, Cournot equilibrium outcomes are close to being second-best. In contrast, if insurance buyers are price takers, equilibria fail to exist or are bounded away from being second-best.     

Parallel Neutrality

This paper develops the notion of parallel-neutral technical change for inputs and outputs. It is shown that parallel-neutral technical change generalizes existing radial notions of neutral technical change. A taxonomy of the structural consequences of parallel-neutral technical change is developed.     

Experiencing change and the evolution of adaptive skills: Implications for economic growth

We distinguish learning in a static environment from that in a dynamic environment to show the existence of an important interaction between the development of new technologies and human capital accumulation. Because technological progress creates a more dynamic environment, it complements education in the production of human capital by enhancing adaptive skills. Higher levels of adaptability and human capital in turn determine the profitability of new inventions and the incentive to invest in new R&D. Differences in the history of technological progress produce different levels of adaptability and our results suggest why countries that have comparable levels of education and per capita incomes may differ significantly in their growth performance.     

DEALING WITH UNCERTAINTY: ROBUST RULES IN MONETARY POLICY

We argue that in seeking to insure against model uncertainty, monetary policy makers are often ready to trade ex post performance for greater certainty in the outcome. They thus look for rules that although not optimal ex post, have certain properties that qualify them as robust. We apply first, Gul's approach of ‘disappointment’ aversion to describe policy makers' aversion to uncertainty and then define the properties the notion of ‘robustness’ entails. With these two tools we then link the desirability of such robust rules to the degree of policy makers' aversion to uncertainty. We thus show that provided such robust rules exist, a larger degree of disappointment aversion leads to a greater emphasis on robustness in policy implementation.