Labour productivity measurement with variable returns to scale in Australia's construction industry

As an important productivity indicator, the change of labour productivity is one indispensable marker in determining the rise or fall of overall industrial performance. This study aims to address whether the labour productivity level of the Australian construction industry has, in fact, shown a huge improvement during the last few decades. This article constructs a measuring method estimating labour productivity changes based on the data envelopment analysis technique with variable returns to scale. By adopting a production frontier approach, the labour productivity index can be broken down into components attributable to efficiency change, technological progress and capital accumulation. The numerical results exemplified by a single-input and single-output system indicate that the average annual labour productivity levels of the construction industry are slowly growing in all the Australian states and territories. However, the year-on-year change in the overall labour productivity performance does not maintain a long-term increase over the period 1990–2008. The study forms the basis for further industrial productivity research. Proposals and recommendations are expected to be beneficial for making policy and strategic decisions to improve the performance of the construction industry.

Impact of policy changes on the efficiency and returns-to-scale of Japanese financial institutions: an evaluation

This paper examines the impact of FSA's (Financial Services Agency) recent policy changes on the efficiency and returns-to-scale (RTS) of Japanese financial institutions including banks, securities companies and bank holding companies. Three kinds of efficiency are investigated namely, technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) using the non-parametric methodology named data envelopment analysis (DEA). The DEA analysis shows a substantial improvement in the overall efficiency of Japanese banks, albeit a significant difference of efficiency scores between the major/city banks and the regional banks. Results are robust to alternative specifications of efficiency and scale changes.

Returns to scale, market power, and the nature of price rigidity in new keynesian models with self-fulfilling expectations

Increasing returns to scale and firms' market power are two potential sources of sunspot expectations in neoclassical models. We show that in New Keynesian models, returns to scale and market power can have fundamentally different implications for broad macroeconomic issues, including self-fulfilling expectations, depending on the nature of price rigidity. Our findings suggest that the design of stabilization monetary policy can depend on precise knowledge about the economy's real and nominal features. Therefore, a clear understanding of the specific economic environment and its relevance to monetary policymaking for ensuring macroeconomic stability can be an integrated part of monetary policy practice.

An agent-based approach to value theory and wealth distribution in economics

Any attempt to model an economy requires foundational assumptions about the relations between prices, values and the distribution of wealth. These assumptions exert a profound influence over the results of any model. Unfortunately, there are few areas in economics as vexed as the theory of value. I argue in this paper that the fundamental problem with past theories of value is that it is simply not possible to model the determination of value, the formation of prices and the distribution of income in a real economy with analytic mathematical models. All such attempts leave out crucial processes or make unrealistic assumptions which significantly affect the results. There have been two primary approaches to the theory of value. The first, associated with classical economists such as Ricardo and Marx were substance theories of value, which view value as a substance inherent in an object and which is conserved in exchange. For Marxists, the value of a commodity derives solely from the value of the labour power used to produce it - and therefore any profit is due to the exploitation of the workers. The labour theory of value has been discredited because of its assumption that labour was the only ‘factor’ that contributed to the creation of value, and because of its fundamentally circular argument. Neoclassical theorists argued that price was identical with value and was determined purely by the interaction of supply and demand. Value then, was completely subjective. Returns to labour (wages) and capital (profits) were determined solely by their marginal contribution to production, so that each factor received its just reward by definition. Problems with the neoclassical approach include assumptions concerning representative agents, perfect competition, perfect and costless information and contract enforcement, complete markets for credit and risk, aggregate production functions and infinite, smooth substitution between factors, distribution according to marginal products, firms always on the production possibility frontier and firms’ pricing decisions, ignoring money and credit, and perfectly rational agents with infinite computational capacity. Two critical areas include firstly, the underappreciated Sonnenschein-Mantel- Debreu results which showed that the foundational assumptions of the Walrasian general-equilibrium model imply arbitrary excess demand functions and therefore arbitrary equilibrium price sets. Secondly, in real economies, there is no equilibrium, only continuous change. Equilibrium is never reached because of constant changes in preferences and tastes; technological and organisational innovations; discoveries of new resources and new markets; inaccurate and evolving expectations of businesses, consumers, governments and speculators; changing demand for credit; the entry and exit of firms; the birth, learning, and death of citizens; changes in laws and government policies; imperfect information; generalized increasing returns to scale; random acts of impulse; weather and climate events; changes in disease patterns, and so on. The problem is not the use of mathematical modelling, but the kind of mathematical modelling used. Agent-based models (ABMs), objectoriented programming and greatly increased computer power however, are opening up a new frontier. Here a dynamic bargaining ABM is outlined as a basis for an alternative theory of value. A large but finite number of heterogeneous commodities and agents with differing degrees of market power are set in a spatial network. Returns to buyers and sellers are decided at each step in the value chain, and in each factor market, through the process of bargaining. Market power and its potential abuse against the poor and vulnerable are fundamental to how the bargaining dynamics play out. Ethics therefore lie at the very heart of economic analysis, the determination of prices and the distribution of wealth. The neoclassicals are right then that price is the enumeration of value at a particular time and place, but wrong to downplay the critical roles of bargaining, power and ethics in determining those same prices.

Leviathan resists : the endogenous relationship between privatization and firm performance

Using a panel dataset of privatized cement firms in Turkey, this paper models and finds support for the simultaneous relationship between privatization and firm performance. It is found that favorable short-run performance, weak market potential, higher employment, lower socio-economic development, concentrated voter preferences, and weaker representation of right-wing parties in the firms’ locality delay the timing of privatization. The paper also finds that privatization increases output in the medium-term by reducing the labor stock and promoting the adoption of more advanced technology, such that production shifts from constant to decreasing returns to scale.

The suboptimality of optimal punishments in Counot supergames

We investigate, within a Cournot supergame, whether previous termoptimalnext term punishments may become suboptimal when economies of scale are not negligible. We show that, for sufficiently strong increasing returns to scale, the critical discount factor associated to grim trigger strategies is lower than the one associated to previous termoptimalnext term penal codes.

ACE-Obesity : priority setting for obesity prevention

The ACE-Obesity study uses an evidence-based approach to evaluate interventions aimed at reducing the prevalence of obesity in Australian youth. It informs decision-makers about the benefits of individual interventions and the packaging of a coherent strategy for obesity prevention and management. To avoid methodological confounding, the approach employs standardised methods including a two stage concept of benefit; a common comparator, setting and decision context; Australian data; and extensive probabilistic uncertainty testing. The technical cost-effectiveness results (cost per DALY) for each of the selected interventions will be reported. Modelling is undertaken to convert changes in behaviour to BMI outcomes and then to DALYs, and issues of the attribution of costs across multiple objectives arise. Due process is achieved by involving stakeholders on a Working Group, and by consideration of second stage filters (such as equity, acceptability and feasibility). The results are brought together in a 'league table' in which all the interventions are ranked in order of economic merit without the usual methodological concerns about results drawn from studies lacking in comparability. In packaging interventions to meet particular budget allocations, the divisibility, mutual exclusivity and returns to scale of individual interventions are considered, as well as issues of program logic, target group coverage and a range of settings.

Research of the construction industry efficiency in China-based on DEA panel data approach

The efficiency of the construction industry is analyzed based on provinces panel data in China in this paper. The Mean Number of Employee and the Mean Completed Investment are used as inputs. The Mean Actual Sales of Commercial Houses and the Mean Net Profit are used as outputs. Data Envelopment Analysis (DEA) model is used to measure the efficiency of the construction industry. Shanghai and Zhejiang are found technically efficient. Shandong is scale efficient but technology efficiency is lower. There are two provinces are decreasing returns to scale and other provinces are increasing returns to scale. On the whole, the technology efficiency of the construction industry of China is lower. Based on the conclusions, the paper proposes some suggestions to improve the efficiency of the construction industry in China.

Managing undesirable outputs in the Australian construction industry using Data Envelopment Analysis models

Carbon reduction has become one of the most significant challenges for economic growth. This paper presents the preliminary analysis of undesirable output reduction targets and emission schedules in temporal-spatial comparisons based on Data Envelopment Analysis. The reduction targets of undesirable outputs are investigated, including the maximum, input, technical and ideal reduction targets. Four Data Envelopment Analysis models that are based on a sequential benchmark technology and variable returns to scale are introduced to measure these reduction percentages. In order to formulate the optimal emission schedule of undesirable outputs, an optimal model is provided without inflation. Data from the Australian construction industry from 2000 to 2010 are employed to develop the models. The results of the analysis indicate that the Australian Government could achieve its promised carbon reduction targets in the construction industry. Most Australian regions' construction industries possess carbon mitigation potential and some of them could increase their desirable outputs if carbon were decreased. This paper suggests that policymakers can benefit from formulating various suitable undesirable output reduction objectives and schedules through the models developed. The research method can be replicated for other sectors and regions focussing on undesirable output reduction.

The responsiveness of LPT returns and their attributes

The Australian listed property sector has experienced substantial growth over the past decade. Relative to international property markets, Australia has the highest percentage of listed real estate and the highest proportion that makes up the total equity market in the world, hence, making it an important component of domestic financial markets. This study employs the Stone (1974) two factor asset pricing model to investigate the sensitivity of Listed Property Trust (LPT) returns to market and interest rate returns from 2000 to 2005, and the characteristics (namely, management structure, specialisation and the degree of financial leverage) that may be driving these sensitivities. Our results indicate an increase in the market risk profile of LPTs, suggesting an erosion of the defensive benefits of LPTs against stockmarket volatilities.

Technical and scale efficiency of Islamic banking operations in Malaysia: an empirical investigation with a longitudinal perspective

Against the background of increasing competition from globalization and the trend towards consolidation, diversification and rationalization, the study of efficiency is most relevant in the Malaysian Islamic banking context, where all domestic commercial banks operate Islamic banking schemes. Using the non-parametric method of Data Envelopment Analysis (DEA), this study investigates the recent efficiency of the Malaysian Islamic Banking system. The attributions of technical efficiency (utilization of capacity) and scale efficiency (optimality of scale achieved) are identified. Further, Islamic Banking Schemes operating under the dual banking system of foreign and domestic commercial banks were benchmarked to the country's two full-fledged Islamic banks to provide insight of the relative efficiencies. Amidst an overall improvement in TE and SE, it was noted that foreign banks (FB) increased efficiency levels to achieve full efficiency over the six-year period, and domestic banks (DB) followed by smaller improvement while the fully-fledged Islamic banks (FFIE) experienced a general decline in efficiency which was solely attributed to scale inefficiency. The findings provide useful guidelines for policy implications and may also assist banks concerned with their strategic planning with regard to the future of Islamic banking.