Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects

This article analyzes the World Bank's experience with projectevaluation for a sample of 1,015 projects by comparing estimatedrates of return at appraisal with reestimated rates of returnwhen construction works are completed, usually 5 to 10 yearsafter appraisal. The analysis highlights the high degree ofuncertainty in project analysis. A wide range of variables hasbeen introduced to explain the observed divergence in appraisaland reestimated rates of return, but only a relatively smallpart of the divergence can be explained, even with the benefitof hindsight. Project analysis thus has to cope with a largedegree of uncertainty, which the traditional methods of projectevaluation and selection have not been able to reduce.     

The Russian Tax System and Its International Competitiveness

The last several years were very favourable to the development of the Russian economy. While this has partly been the consequence of favourable conditions on the international markets for raw materials, the economic policy of President Vladimir Putin, including the tax reforms initiated at the end of the 1990s, also played a major role. Our authors examine in detail the effects of the tax reforms to date and point out the room for further improvements under Putin’s successor, Medvedev.     

Consumer dissatisfaction — Search for causes and alleviation outside the marketplace

This paper is an attempt to provide a theoretical basis for the design of new, more effective, directions for institutions and consumer leaders whose goal is the alleviation of today's widespread dissatisfaction among consumers. In contrast to the common assumption that consumer dissatisfaction is caused by inequalities and imperfections in the marketplace, the author introduces, and defends by use of the framework of E. R. G. theory, the concept that a large portion of the dissatisfaction experienced and expressed by an individual in the area of material consumption reflects his dissatisfaction with need fulfillment at the higher level of interpersonal relationships. The new concept suggests that the most effective route to greater satisfaction among consumers is not likely to be found in increased consumption opportunities through higher incomes and/or better deals in a more perfect marketplace, but in improved satisfaction of relatedness needs.

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Zusammenfassung Der Beitrag versucht, einen neuen Ansatz zur Verringerung der Unzufriedenheit von Verbrauchern theoretisch zu begründen. Im Gegensatz zu der sonst üblichen Annahme, daß Verbraucherunzufriedenheit auf Unzulänglichkeiten von Produkten und Märkten zurückgeht, wird hier die Auffassung vertreten, daß sie weitgehend auf unzureichender Befriedigung von Bedürfnissen nach zwischenmenschlichen Beziehungen beruht. Diese Auffassung wird bedürfnistheoretisch (mit der E. R. G.-Theorie) abgeleitet. Sie legt nahe, daß höhere Zufriedenheit von Verbrauchern nicht so sehr durch bessere Marktbedingungen, bessere Produkte oder höhere Einkommen erreicht werden kann, als vielmehr durch verbesserte Möglichkeiten zur Befriedigung von zwischenmenschlichen Beziehungen.

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Gerhard W. H. Scherf is an Associate Professor at University of Guelph, Department of Consumer Studies, Guelph, Ontario, Canada N1G 2 W1.     

Is the European Community facing a fresh financial crisis?

The further development of the European Community that has been decided at the Maastricht summit will be impossible to realize without a significant increase in the EC budget and an adjustment to the financing system. What will be the additional financing requirement? How could the Community's financing system be reformed?     

Restructuring Ukrainian enterprises after privatization: Does ownership matter?

This paper presents data from a survey of large and medium-sized industrial enterprises in Ukraine after privatization. To analyze this data, regression equations are estimated and explain the response of restructuring and performance indicators to ownership structures, competitive pressures, and hardening budget constraints. While ownership matters less for restructuring activity than competition and budget constraints, concentrated outside ownership does have a significant positive impact on the firm's performance. This research was financially supported by a grant from the International Association for Promotion of Cooperation with Scientists in the New Independent States of the Former Soviet Union (952-0280) and by a Research Fellowship provided by Konferenz der Deutschen Akademien der Wissenschaften, sponsored by Volkswagen Stiftung.     

Diffusion and scale dynamics: A case study

This paper examines the relationship between the diffusion of a major process innovation, oxygen steel-making, and the growth of plant sizes. As in some previous studies, a step-wise pattern of scale increases is observed; however, there is no stable correlation of these increases to cumulative capacity expansion, maximum plant sizes appear to have stabilized, and plants of widely dispersed capacities continued to be built as oxygen steel-making became the dominant technique, world-wide. Factors responsible for scale increase are analyzed; steadily growing equipment size, the addition of equipment to existing plants, and a wide range of minor innovations and adaptations have contributed to growth in plant capacities; in most instances, scale-up continued after the beginning of operations. It is concluded that the frequently-used concept of an optimal, or maximum feasible, plant scale remains ambiguous without reference to the specific technical and economic conditions of production systems, and that plant-size increases are fully dependent on continuing technological effort.     

Recursive Nash bargaining over a productive asset

We propose an equilibrium concept (the recursive Nash bargaining solution) that describes the outcome of repeated negotiations between two rational agents under the assumptions that the state of the economic system under consideration changes according to the actions of the players and that neither party can make binding commitments to future behavior. This equilibrium is dynamically consistent but typically not Pareto-efficient. As an application, we compute the recursive Nash bargaining solution in a model of two heterogeneous agents bargaining over the use of a productive asset with constant gross rate of return and study how the time-preference rates and the elasticities of substitution affect the solution.     

Ein empirischer Test der Annahme der permanenten Einkommenshypothese von Milton Friedman

Summary We apply the Variate-Difference-Method to yearly Austrian data from 1956 to 1975 to test the permanent-income-hypothesis byM. Fiedman.First we determe the degree of the polynomial, which is sufficient to eliminate the trend (i.e. the permanent part) from time series of disposable income. Then the permanent income variable is constructed in two alternative ways: first, as a polynomial in time and second bySheppard's smoothing formulae. Transitory consumption is identified with the residuals of the consumption function. A correlation analysis shows that, transitory income and consumption are correlated, if permanent income is determined by a trend polynomial, while this is not the case ifSheppard's smoothing formulae is used to estimate permanent income.Consumption functions are specified for total consumption, durables and non-durables and eleven sub-groups of total private consumption. The results indicate that autocorrelation can considerably be reduced by usingSheppard's smoothing formulae.     

Seasonal adjustment of Austrian labour force series

Zusammenfassung Seit mehr als fünfzig Jahren haben Statistiker ihre Anstrengungen darauf gerichtet, optimale Methoden der Saisonbereinigung zu entwickeln. Einige dieser Methoden verwenden wir in der vorliegenden Arbeit, um saisonale Schwankungen aus österreichischen Arbeitsmarktreihen auszuschalten. Saisonbereinigte Reihen spielen für die laufende Konjunkturbeobachtung eine große Rolle. Aber um Enttäuschungen vorzubeugen, möchten wir gleich zu Beginn eine Warnung anbringen. Viele Praktiker scheinen zu glauben, daß bei Verwendung von saisonbereinigten Reihen Veränderungen gegen den Vormonat ein eindeutiges Bild der augenblicklichen Konjunkturlage vermitteln. Dabei wird leider häufig übersehen, daß saisonbereinigte Reihen eine irreguläre Komponente enthalten. In vielen Fällen ist diese Komponente so groß, daß sie die Schwankungen der Reihe von Monat zu Monat dominiert. Es ist daher oft von Vorteil, die jüngsten Daten mit solchen zu vergleichen, die schon zwei oder drei Monate früher anfielen, anstatt sich auf einen Vergleich mit dem Vormonat zu konzentrieren. Der dabei in Kauf genommene Informationsverlust wird durch die größere Verläßlichkeit der Ergebnisse mehr als wettgemacht, und die Information ist noch immer viel früher verfügbar, als wenn man mit Vorjahresvergleichen unbereinigter Daten operiert.

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Financial support by the Jubiläumsfonds der Oesterreichischen Nationalbank under grant no. 2203 is gratefully acknowledged. We wish to thank Manfred Deistler and Wolfgang Polasak for their helpful comments and suggestions.