Transaction costs: an empirical analysis of their relationship with investment and foreign direct investment

As stated by the New Institutional Economics theory, transaction costs play a relevant role in economics and, according to the extent of such costs, agents make investment decisions. Actually, transaction costs may represent a disincentive to entrepreneurship. This work aims to verify whether transaction costs are related to investment rate and foreign direct investment rate (FDI) in different business environments. The results suggest that foreign investors do not have precise information about other countries as domestic investors do; as it is observed, only the relation between transaction costs and investment rate is significant. Furthermore, there is evidence that the business environments of BRIC countries are less developed when compared to business environments of other countries in the study

Understanding the hierarchy governance choice of some wineries in Brazil - case study of 3 Brazilian wineries

ABSTRACT This study aims to contribute towards understanding the multiple factors, which influence firm's governance decisions. To identify some of these factors, three cases in the Brazilian wine industry were analyzed: Miolo located in Vale dos Vinhedos (South of Brazil) and in Vale do Rio São Francisco (Northeast of Brazil); Don Laurindo located in Vale dos Vinhedos; and ViniBrasil located in Vale do Rio São Francisco. For the most part, all three firms procure the grapes they use for their wine production in-house. Only Miolo purchases an insignificant amount of grapes outside of its production. By Brazilian standards, these regions have a long tradition of grape production and it is not difficult to purchase sufficient quantity of grapes to produce wine. However, the wineries are concerned also about the quality of the grapes they use and purchasing high-quality grapes might be critical issue. On the other hand, the quality of grapes is easily measured and the cost to buy in the market is cheaper than producing in-house. Furthermore, also the level of asset specificity present in the grape-grower-wine-producer transaction seems, by itself, insufficient to justify the use of hierarchical governance forms. Then, the aim of the article is to analyze the reasons why these wineries largely rely on hierarchy governance forms to procure their grape-inputs. What explains their use of hierarchy governance, given that both asset specificity and measurement problems appear to be relatively low?

Fuzzy rule-based system for evaluation of uncertainty transaction in cassava chain

A fuzzy ruled-based system was developed in this study and resulted in an index indicating the level of uncertainty related to commercial transactions between cassava growers and their dealers. The fuzzy system was developed based on Transaction Cost Economics approach. The fuzzy system was developed from input variables regarding information sharing between grower and dealer on “Demand/purchase Forecasting”, “Production Forecasting” and “Production Innovation”. The output variable is the level of uncertainty regarding the transaction between seller and buyer agent, which may serve as a system for detecting inefficiencies. Evidences from 27 cassava growers registered in the Regional Development Offices of Tupa and Assis, São Paulo, Brazil, and 48 of their dealers supported the development of the system. The mathematical model indicated that 55% of the growers present a Very High level of uncertainty, 33% present Medium or High. The others present Low or Very Low level of uncertainty. From the model, simulations of external interferences can be implemented in order to improve the degree of uncertainty and, thus, lower transaction costs.

Direct treatment costs of HIV/AIDS in Portugal

OBJECTIVE To analyze the direct medical costs of HIV/AIDS in Portugal from the perspective of the National Health Service. METHODS A retrospective analysis of medical records was conducted for 150 patients from five specialized centers in Portugal in 2008. Data on utilization of medical resources during 12 months and patients’ characteristics were collected. A unit cost was applied to each care component using official sources and accounting data from National Health Service hospitals. RESULTS The average cost of treatment was 14,277 €/patient/year. The main cost-driver was antiretroviral treatment (€ 9,598), followed by hospitalization costs (€ 1,323). Treatment costs increased with the severity of disease from € 11,901 (> 500 CD4 cells/µl) to € 23,351 (CD4 count ≤ 50 cells/ µl). Cost progression was mainly due to the increase in hospitalization costs, while antiretroviral treatment costs remained stable over disease stages. CONCLUSIONS The high burden related to antiretroviral treatment is counterbalanced by relatively low hospitalization costs, which, however, increase with severity of disease. The relatively modest progression of total costs highlights that alternative public health strategies that do not affect transmission of disease may only have a limited impact on expenditure, since treatment costs are largely dominated by constant antiretroviral treatment costs.

Sharing competences in strategic alliances: a case study of the Cosan and Shell biofuel venture

In a competitive world, the way a firm establishes its organizational arrangements may determine the enhancement of its core competences and the possibility of reaching new markets. Firms that find their skills to be applicable in just one type of market encounter constraints in expanding their markets, and through alliances may find a competitive form of value capture. Hybrid forms of organization appear primarily as an alternative to capturing value and managing joint assets when the market and hierarchy modes do not present any yields for the firm's competitiveness. As a result, this form may present other challenging issues, such as the allocation of rights and principal-agent problems. The biofuel market has presented a strong pattern of changes over the last 10 years. New intra-firm arrangements have appeared as a path to participate or survive among global competition. Given the need for capital to achieve better results, there has been a consistent movement of mergers and acquisitions in the Biofuel sector, especially since the 2008 financial crisis. In 2011 there were five major groups in Brazil with a grinding capacity of more than 15 million tons per year: Raízen (joint venture formed by Cosan and Shell), Louis Dreyfus, Tereos Petrobras, ETH, and Bunge. Major oil companies have implemented the strategy of diversification as a hedge against the rising cost of oil. Using the alliance of Cosan and Shell in the Brazilian biofuel market as a case study, this paper analyses the governance mode and challenging issues raised by strategic alliances when firms aim to reach new markets through the sharing of core competences with local firms. The article is based on documentary research and interviews with Cosan's Investor Relations staff, and examines the main questions involving hybrid forms through the lens of the Transaction Cost Economics (TCE), Agency Theory, Resource Based View (RBV), and dynamic capabilities theoretical approaches. One focal point is knowledge "appropriability" and the specific assets originated by the joint venture. Once the alliance is formed, it is expected that competences will be shared and new capabilities will expand the limits of the firm. In the case studied, Cosan and Shell shared a number of strategic assets related to their competences. Raízen was formed with economizing incentives, as well to continue marshalling internal resources to enhance the company's presence in the world energy sector. Therefore, some challenges might be related to the control and monitoring agents' behavior, considering the two-part organism formed by distinctive organizational culture, tacit knowledge, and long-term incentives. The case study analyzed illustrates the hybrid arrangement as a middle form for organizing the transaction: neither in the market nor in the hierarchy mode, but rather a more flexible commitment agreement with a strategic central authority. The corporate governance devices are also a challenge, since the alignment between the parent companies in the joint ventures is far more complex. These characteristics have led to an organism with bilateral dependence, offering favorable conditions for developing dynamic capabilities. However, these conditions might rely on the partners' long-term interest in the joint venture.

The cost of excessive postoperative use of antimicrobials: the context of a public hospital

OBJECTIVE: To evaluate the improper use of antimicrobials during the postoperative period and its economic impact.METHODS: We conducted a prospective cohort study by collecting data from medical records of 237 patients operated on between 01/11/08 and 31/12/08.RESULTS: from the 237 patients with the information collected, 217 (91.56%) received antimicrobials. During the postoperative period, 125 (57.7%) patients received more than two antimicrobials. On average, 1.7 ± 0.6 antimicrobials were prescribed to patients, the most commonly prescribed antibiotic being cephalothin, in 41.5% (154) of cases. The direct cost of antimicrobial therapy accounted for 63.78% of all drug therapy, this large percentage being attributed in part to the extended antimicrobial prophylaxis. In the case of clean operations, where there was a mean duration of 5.2 days of antibiotics, antimicrobials represented 44.3% of the total therapy cost.CONCLUSION: The data illustrate the impact of overuse of antimicrobials, with questionable indications, creating situations that compromise patient safety and increasing costs in the assessed hospital.

Relação entre mercado de terras, crescimento econômico e insegurança fundiária explicada por um modelo a "geração imbricada"

In this paper, we analyze the relationship between the land market failures and the economic growth in Brazil, starting from an overlapping model including two sectors: agricultural and industrial. The land is both a specific factor for agriculture and an asset that can be substituted to the capital used in industry. The trade-off between land and capital holding depends, among other factors, on the transaction costs on the land market. These costs result from land insecurity and generate a decrease in the land price that favors capital accumulation. Two assumptions follow from our model: one the one hand, land insecurity has a negative effect on the land price; one the other hand it has a positive effect on economic growth. These two hypotheses are tested on panel data for Brazilian Federation. The econometric results do not reject our hypothesis.

Fiscal reform and federal relations: Brazilian deadlocks

Brazilian fiscal reform got to deadlocks because proposals tried to avoid considering federal relations. There are two main types of federal relations: the competitive and the cooperative. In both types is possible to observe coordination mechanisms. Brazilian federalism is a mixture of both types what leads to difficulties finding solutions. We argue that is more important to find mechanisms to facilitate cooperation than to discuss the qualities of any alternative fiscal structure. Fiscal reforms brings along a great deal of uncertainty. So it is important to discuss the reform timing and the compensation mechanisms before hand.

Judiciário e política regulatória: instituições e preferências sob a ótica dos custos de transação

Judiciary and regulatory policy. Increasingly, judges and the courts appear as actors capable of affecting the trajectory of the government decisions, as strategic agents in the policy process. This paper presents an analytical model able to clearly and objectively measure the impact of judicial review in the design of policies in the sphere of economic regulation. Underlying the model is the concept of transaction costs, through which one can raise the levels of intervention of the judiciary in regulatory policy. In addition to the analytical model, the article demonstrates that the interaction between the heterogeneity of preferences in the courts and institutional mechanisms of the justice system is capable of generating greater coordination and cooperation than expected.

Global coordination: weighted voting

In order to halt the depletion of global ecological capital, a number of different kinds of meetings between Governments of countries in the world has been scheduled. The need for global coordination of environmental policies has become ever more obvious, supported by more and more evidence of the running down of ecological capital. But there are no formal or binding arrangements in sight, as global environmental coordination suffers from high transaction costs (qualitative voting). The CO2 equivalent emissions, resulting in global warming, are driven by the unstoppable economic expansion in the global market economy, employing mainly fossil fuel generated energy, although at the same time lifting sharply the GDP per capita of several emerging countries. Only global environmental coordination on the successful model of the World Band and the IMF (quantitative voting) can stem the rising emissions numbers and stop further environmental degradation. However, the system of weighted voting in the WB and the IMF must be reformed by reducing the excessive voting power disparities, for instance by reducing all member country votes by the cube root expression.

Direct medical costs associated with schizophrenia relapses in health care services in the city of São Paulo

OBJECTIVE: To assess direct medical costs associated with schizophrenia relapses in mental health services. METHODS: The study was conducted in three health facilities in the city of São Paulo: a public state hospital; a Brazilian National Health System (SUS)-contracted hospital; and a community mental health center. Medical records of 90 patients with schizophrenia who received care in 2006 were reviewed. Information on inpatient expenditures was collected and used for cost estimates. RESULTS: Mean direct medical cost of schizophrenia relapses per patient was US$ 4,083.50 (R$ 8,167.58) in the public state hospital; US$ 2,302.76 (R$ 4,605.46) in the community mental health center; and US$ 1,198.50 (R$ 2,397.74) in the SUS-affiliated hospital. The main component was daily inpatient room rates (87% - 98%). Medication costs varied depending on the use of typical or atypical antipsychotic drugs. Atypical antipsychotic drugs were more often used in the community mental health center. CONCLUSIONS: Costs associated with schizophrenia relapses support investments in antipsychotic drugs and strategies to reduce disease relapse and the need for mental health inpatient services. Treating patients in a community mental health center was associated with medium costs and added the benefit of not depriving these patients from family life.

Burden of physical inactivity and hospitalization costs due to chronic diseases

OBJECTIVE To evaluate the physical inactivity-related inpatient costs of chronic non-communicable diseases. METHODS This study used data from 2013, from Brazilian Unified Health System, regarding inpatient numbers and costs due to malignant colon and breast neoplasms, cerebrovascular diseases, ischemic heart diseases, hypertension, diabetes, and osteoporosis. In order to calculate the share physical inactivity represents in that, the physical inactivity-related risks, which apply to each disease, were considered, and physical inactivity prevalence during leisure activities was obtained from Pesquisa Nacional por Amostra de Domicílio (Brazil's National Household Sample Survey). The analysis was stratified by genders and residing country regions of subjects who were 40 years or older. The physical inactivity-related hospitalization cost regarding each cause was multiplied by the respective share it regarded to. RESULTS In 2013, 974,641 patients were admitted due to seven different causes in Brazil, which represented a high cost. South region was found to have the highest patient admission rate in most studied causes. The highest prevalences for physical inactivity were observed in North and Northeast regions. The highest inactivity-related share in men was found for osteoporosis in all regions (≈ 35.0%), whereas diabetes was found to have a higher share regarding inactivity in women (33.0% to 37.0% variation in the regions). Ischemic heart diseases accounted for the highest total costs that could be linked to physical inactivity in all regions and for both genders, being followed by cerebrovascular diseases. Approximately 15.0% of inpatient costs from Brazilian Unified Health System were connected to physical inactivity. CONCLUSIONS Physical inactivity significantly impacts the number of patient admissions due to the evaluated causes and through their resulting costs, with different genders and country regions representing different shares.

Cardiac Surgery Costs According to the Preoperative Risk in the Brazilian Public Health System

AbstractBackground:Heart surgery has developed with increasing patient complexity.Objective:To assess the use of resources and real costs stratified by risk factors of patients submitted to surgical cardiac procedures and to compare them with the values reimbursed by the Brazilian Unified Health System (SUS).Method:All cardiac surgery procedures performed between January and July 2013 in a tertiary referral center were analyzed. Demographic and clinical data allowed the calculation of the value reimbursed by the Brazilian SUS. Patients were stratified as low, intermediate and high-risk categories according to the EuroSCORE. Clinical outcomes, use of resources and costs (real costs versus SUS) were compared between established risk groups.Results:Postoperative mortality rates of low, intermediate and high-risk EuroSCORE risk strata showed a significant linear positive correlation (EuroSCORE: 3.8%, 10%, and 25%; p < 0.0001), as well as occurrence of any postoperative complication EuroSCORE: 13.7%, 20.7%, and 30.8%, respectively; p = 0.006). Accordingly, length-of-stay increased from 20.9 days to 24.8 and 29.2 days (p < 0.001). The real cost was parallel to increased resource use according to EuroSCORE risk strata (R$ 27.116,00 ± R$ 13.928,00 versus R$ 34.854,00 ± R$ 27.814,00 versus R$ 43.234,00 ± R$ 26.009,00, respectively; p < 0.001). SUS reimbursement also increased (R$ 14.306,00 ± R$ 4.571,00 versus R$ 16.217,00 ± R$ 7.298,00 versus R$ 19.548,00 ± R$935,00; p < 0.001). However, as the EuroSCORE increased, there was significant difference (p < 0.0001) between the real cost increasing slope and the SUS reimbursement elevation per EuroSCORE risk strata.Conclusion:Higher EuroSCORE was related to higher postoperative mortality, complications, length of stay, and costs. Although SUS reimbursement increased according to risk, it was not proportional to real costs.

Performance, carcass traits and costs of Suffolk lambs finishing systems with early weaning and controlled suckling

The performance, carcass traits and finishing costs of Suffolk lambs were evaluated in three systems: (1) lambs weaned with 22 kg of body weight (BW) and supplemented with concentrate on pasture until slaughter; (2) lambs weaned with 22 kg BW and fed in feedlot until slaughter; (3) lambs maintained in controlled nursing after 22 kg BW and creep fed in feedlot until slaughter. Average daily gain (ADG) was 224 g/d for lambs weaned and supplemented with concentrate on pasture, 386 g/d for lambs weaned in feedlot and 481 g/d for lambs under controlled nursing. Empty body weight and visceral fat deposition were highest in lambs from feedlot systems. Carcass weights and carcass yields were highest for lambs in controlled nursing. Finishing total costs were highest in controlled nursing and lowest in the system with weaning in feedlot. High concentrate diet associated with controlled nursing in feedlot allowed lambs to reach the growth potential and carcasses with higher weights, higher yields and higher fat content. After weaning, lambs in feedlot fed with high concentrate diet had higher weight gain than lambs supplemented with concentrate on pasture. Carcasses produced under these two systems presented the same characteristics. The system with weaning in feedlot showed the lowest cost per kg carcass.