The relative contributions of location and preferential policies in China's regional development: being in the right place and having the right incentives

A large part of the literature on provincial inequality in China has found it necessary to include regional dummies in the provincial growth regressions. A smaller but vocal part of the literature has emphasised the granting of preferential policies to explain the faster growth of the coastal provinces. We replace the regional dummies with a measure of the ability to participate in international trade (Geography), and a preferential policy index (Policy). We find that geography and policy had about equal influence on coastal growth (3 percentage points each). Geography affected growth with a much longer lag than policy, however. The policy index was highest for the metropolises (Beijing, Shanghai, and Tianjin) and lowest for the central and northwestern provinces. The preferential policies are to a large extent “deregulation policies” that enabled marketization and internationalization of the coastal economies and allowed them to become more like their East Asian neighbours (and competitors). The weak (statistically insignificant) support for conditional convergence is in line with the existence of institutions that retard the income convergence process generated by the movement of labor and capital and by the Stolper–Samuelson mechanism. The household registration system ties the peasants to the land, the monopoly state bank system favors borrowing by state enterprises, and local protectionism reduces inter-provincial trade. Clearly, these institutions need to be deregulated. An effective strategy to develop the western provinces must therefore encompass physical capital formation, human capital formation, and institutional capital formation.     

Cost Efficiency for Alberta and Ontario Dairy Farms: An Interregional Comparison

In this study, two non-homothetic translog stochastic meta-frontier cost functions—with and without local concavity imposed—are estimated using a nonlinear maximum likelihood estimation procedure to compare the cost efficiency of Alberta and Ontario dairy farms for the period 1984–96. The resulting cost efficiency estimates are not very sensitive to whether or not curvature is imposed. In contrast, the properties of the cost and input demand functions (e.g., elasticities) are sensitive to imposition of local concavity during estimation. The implication is that if an inappropriate model that does not satisfy the properties required by the economic theory is used, the estimated input demand functions may not be reliable. Average cost efficiency for the pooled sample, with local concavity imposed, is approximately 89%. This suggests some potential for improved performance in the sector. The results also suggest that Ontario dairy farms may be more cost efficient than Alberta dairy farms, but the statistical evidence is inconclusive.     

The structure of US food demand

An exactly aggregable system of Gorman Engel curves for US food consumption is developed and implemented. Box-Cox transformations on prices and income nest functional form. The model nests rank up to rank three. The model is estimated by nonlinear three-stage least squares with annual time series data on 21 foods, 17 nutrients, age and race demographics, and the distribution of income for 1919–1941 and 1947–2000. Results are consistent with full rank three. Point estimates for the Box-Cox parameters on income and prices are 0.86 and 1.09, respectively, strongly rejecting zero and one in both cases. No statistical evidence of serial correlation, specification errors, or parameter instability is found.     

Establishing Indices of Genetic Merit Using Hedonic Pricing: An Application to Dairy Bulls in Alberta

This study investigates the use of hedonic pricing to identify the value of relevant production and type traits for dairy bulls in Alberta. A hedonic pricing model is estimated that considers semen price as a function of individual production and longevily characteristics for a sample of Holstein bulls. The results suggest that the most important characteristics used by Alberta daity producers in valuing dairy bulls are milk volume, protein and fat content, general conformation, body capacity and the popularity of the bull. For a given set of such characteristics, the probability that the bull's semen may be in short supply does not significantly affect the value. This methodology may be used to establish a method of forecasting semen prices for newly proven bulls. The valuation procedure may be easily updated and adjusted as producers'breeding objectives change over time because of the changing economic environment. The results of this analysis suggest that hedonic pricing may be a better method of placing a value on production and type characteristics for dairy bulls than the Lifetime Profit Index currently being used by the Canadian dairy industry.     

Country fund discounts and the mexican crisis of December 1994: Did local residents turn pessimistic before international investors?

It has been suggested that Mexican investors were the “front-runners” in the peso crisis of December 1994, turning pessimistic before international investors. Different expectations about their own economy, perhaps due to asymmetric information, prompted Mexican investors to be the first ones to leave the country. This paper investigates whether data from three Mexican country funds provide evidence that supports the “divergent expectations” hypothesis. We find that, right before the devaluation, Mexican fund Net Asset Values (mainly driven by Mexican investors) dropped first and/or faster than Mexican country fund prices (mainly driven by foreign investors). Moreover, we find that Mexican NAVs tend to Granger-cause the country fund prices. This suggests that causality, in some sense, flows from the Mexico City investor community to the Wall Street investor community.     

An experimental analysis of the bandit problem

Summary.  We investigate, in an experimental setting, the behavior of single decision makers who at discrete time intervals over an “infinite” horizon may choose one action from a set of possible actions where this set is constant over time, i.e. a bandit problem. Two bandit environments are examined, one in which the predicted behavior should always be myopic (the two-armed bandit) and the other in which the predicted behavior should never be myopic (the one-armed bandit). We also investigate the comparative static predictions as the underlying parameters of the bandit environments are changed. The aggregate results show that the behavior in the two bandit environments are quantitatively different and in the direction of the theoretical predictions. Received: October, 27, 1994; revised version February 27, 1996     

A MULTIFACTOR ANALYSIS OF COUNTRY FUND RETURNS

Previous closed‐end country fund research concludes that returns behave more like the U.S. market than like their target markets. We argue this finding may be biased by model misspecification and inappropriate estimation techniques. We propose a single‐equation model containing five hypothesized factors of fund returns. We estimate this model for nineteen pooled seasoned funds using a time‐series cross‐section regression that corrects for two types of autocorrelation. We show that returns are strongly related to target markets. Returns are also related to changes in discounts, exchange rates, and other countries' markets, but are only weakly related to the U.S. market. JEL classification: G10, G12     

Short-Term Persistence in Mutual Fund Performance

We estimate parameters of standard stock selection and markettiming models using daily mutual fund returns and quarterlymeasurement periods. We then rank funds quarterly by abnormalreturn and measure the performance of each decile the followingquarter. The average abnormal return of the top decile in thepost-ranking quarter is 39 basis points. The post-ranking abnormalreturn disappears when funds are evaluated over longer periods.These results suggest that superior performance is a short-livedphenomenon that is observable only when funds are evaluatedseveral times a year.     

Uncertainty and Information Search Activities: A Study of Owner–Managers of Small High-Technology Manufacturing Firms

This study examines the relationship among perceived strategic uncertainty (PSU), environmental scanning, and the information sources used by owner–managers of a sample of 153 small high-technology manufacturing firms. The results suggest that increased scanning activities are associated with high levels of PSU. Perhaps most importantly, the results also suggest that owner–managers of younger firms respond to uncertainty differently than their counterparts in more mature firms. Specifically, owner–managers of younger firms appear to respond to higher PSU by relying more heavily on personal and external information sources. Owner–managers of older firms, on the other hand, rely more heavily on internal and impersonal information sources to address environmental uncertainty.     

ECONOMIC ANALYSIS FOR HEALTH PROJECTS

This paper applies to the health sector a method of projectanalysis advocated recently by Devarajan, Squire, and Suthiwart-Narueput.A health project evaluation should establish a firm justificationfor public involvement; establish the counterfactual—whatwould happen with and without the project; and determine thefiscal effect of the project and the appropriate levels of feesin conjunction with project evaluation. The evaluation shouldalso acknowledge the fungibility of project resources and examinethe incentives both for high-level public servants to shiftgovernment resources away from project-funded activities tothose that have not been evaluated and for lower-level contractorsand civil servants to provide good or bad service. Market failuresin health services and insurance markets should serve as a startingpoint for economic analysis, not as a reason to ignore economicsin health projects. Project outputs should be predicted aftertaking into account the reaction of consumers and providersin the private sector as well as market structures of supply,demand, and equilibrium for health services.