Direct and indirect subsidies in markets with system goods in the presence of externalities. Preliminary version

This paper derives a model of markets with system goods and two technological standards. An established standard incurs lower unit production costs but causes a negative externality. The paper derives the conditions for policy intervention and compares the effect of direct and indirect cost-reducing subsidies in two markets with system goods in the presence of externalities. If consumers are committed to the technology by purchasing one of the components, direct subsidies are preferable. For a medium-low cost difference between technological standards and a low externality cost it is optimal to provide a direct subsidy only to the first technology adopter. As the higher the externality cost raises, the more technology adopters should be provided with direct subsidies. This effect is robust in all extensions. In the absence of consumers commitment to a technological standard indirect and direct subsidies are both desirable. In this case, the subsidy to the first adopter is lower then the subsidy to the second adopter. Moreover, for the low cost difference between technological standards and low externality cost the fi rst fi rm chooses a superior standard without policy intervention. Finally, a perfect compatibility between components based on different technological standards enhances an advantage of indirect subsidies for medium-high externality cost and cost difference between technological standards. Journal of Economic Literature Classi fication Numbers: C72, D21, D40, H23, L13, L22, L51, O25, O33, O38. Keywords: Technological standards; complementary products; externalities; cost-reducing subsidies; compatibility.

Cost effectiveness of a new combined immunosuppressive and antiviral regimen on the one-year follow-up of kidney transplant patients.

Background: Medical prescription after organ transplant must prevent both rejection and infectious complications. We assessed the 1-year effectiveness and cost of introducing a new combined regimen in kidney transplantation. Methods: Patients transplanted from January 2000 to March 2003 (Period 1) were compared to patients transplanted from April 2003 to July 2005 (Period 2). In period 1, patients were treated with Basiliximab, Cyclosporin, steroids and Mycophenolate (MMF) or Azathioprine. Prophylaxis with Valacyclovir was prescribed only in CMV D+/R- patients. In period 2, immunosuppressive drugs were Basiliximab, Tacrolimus, steroids and MMF. A 3-month universal CMV prophylaxis with Valganciclovir was used. Medical charts of outpatient visits allowed identifying drug, laboratory and radiological tests use, and hospital information system causes of hospitalisation and length of stay (LOS) over the first year after transplant. Patients with incomplete costs data were excluded. Results: 53 patients were analysed in period 1, and 60 in period 2. CMV serostatus patterns were not significantly different between the 2 periods. Over 12 months, acute rejection decreased from 22 patients (42%) in period 1 to 4 patients (7%) in period 2 (p<0.001), and CMV infection from 25 patients (47%) to 9 patients (15%, p<0.001). Average total rehospitalisation LOS decreased from 28±19 to 20±11 days (p<0.007). Average outpatient visits decreased from 49±10 to 39±8 (p<0.001). Average immunosuppression and CMV prophylaxis costs increased from US$ 18,362±6,546 to 24,637±5,457 (p<0.001), while average graft rejection costs decreased form US$ 4,135±9,164 to 585±2,850 (p=0.005), and average CMV treatment costs from US$ 2,043±5,545 to 91±293 (p=0.008). Average outpatient visits costs decreased from US$ 7,619±1,549 to 6,074±1,043 (p<0.001), and other hospital costs from US$ 3,801±6,519 to 1,196±3,146 (p=0.007). Altogether, average 1-year treatment costs decreased from US$ 35,961±14,916 to 32,584±6,211 (p=0.115). Cost-effectiveness ratios to avoid graft rejection and CMV infection decreased from US$ 61,482±9,292 to 34,911± 1,639 (p=0.006) and US$ 68,070±11,122 to 39,899±2,650 (p=0.015), respectively. Conclusion: The new combined regimen administered in period 2 was significantly more effective. Its additional cost was more than offset by savings linked with complications avoidance.

Book vs. Fair Value Accounting in Banking, and Intertemporal Smoothing

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. We consider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale(1997), in an overlapping generation model, banks have a role as intergenerational connectors as they allow for intertemporal smoothing. Our main result is that when dividends depend on profits, book value ex ante dominates fair value, as it provides better intertemporal smoothing. This is in contrast with the standard view that states that, fair value yields a better allocation as it reflects the real opportunity cost of assets. Banking regulation play an important role by providing the right incentives for banks to smooth intertemporal consumption whereas market discipline improves intratemporal efficiency.

Direct cost of connecting, maintaining and disconnecting patient-controlled analgesia pump

Quantitative research that aimed to identify the mean total cost (MTC) of connecting, maintaining and disconnecting patient-controlled analgesia pump (PCA) in the management of pain. The non-probabilistic sample corresponded to the observation of 81 procedures in 17 units of the Central Institute of the Clinics Hospital, Faculty of Medicine, University of Sao Paulo. We calculated the MTC multiplying by the time spent by nurses at a unit cost of direct labor, adding the cost of materials and medications/solutions. The MTC of connecting was R$ 107.91; maintenance R$ 110.55 and disconnecting R$ 4.94. The results found will subsidize discussions about the need to transfer money from the Unified Health System to hospitals units that perform this technique of analgesic therapy and it will contribute to the cost management aimed at making efficient and effective decision-making in the allocation of available resources.

O impacto das energias renováveis na economia dos países emergentes: o caso de Cabo Verde

A elevada dependência dos combustíveis fósseis é uma das principais dificuldades sentidas no actual sistema energético de Cabo Verde. O preço dos combustíveis constitui um peso significativo, representando cerca de 70%, da estrutura de custos do preço de energia eléctrica. Com este trabalho, pretende-se analisar o impacto das energias renováveis no sistema energético e na economia de Cabo Verde, destacando a sua contribuição para a formação do PIB, no Preço, na Balança de Pagamentos, no Emprego, e no Serviço da Dívida, e estabelecer uma comparação com as ilhas da Macaronésia, em particular a Região Autónoma dos Açores. Contribuindo assim, para a discussão que poderá demonstrar que o potencial de renováveis por explorar, trará benefícios económicos para o país, pois a expectativa é superar os 50% de taxa de penetração de Energias Renováveis na produção de electricidade em Cabo Verde até 2020. Prevê-se que o consumo de electricidade que em 2010 era de 335 MWh, duplique até o ano de 2020, atingindo os 670 GWh. Segundo estudos efectuados, o país possui um potencial estimado de 2.600 MW de Energias Renováveis, tendo sido analisados mais de 650 MW em projectos concretos com custos de produção possivelmente inferiores aos dos combustíveis fósseis. Cabo Verde goza de boas condições para o aproveitamento de Energias Renováveis, mas a contribuição desse potencial, sobretudo eólica e solar, continuam muito limitado, pelo que o país deverá apostar no incremento da utilização dessas formas de energia para reduzir a dependência externa em matéria de energia. The high dependence on fossil fuels is one of the main difficulties in the current energy system in Cape Verde. The price of fuel is a significant, accounting for about 70%, and the cost structure of the price of electricity. With this work, seeks to analyze the impact of renewable energy in the energy system and the economy of Cape Verde, highlighting their contribution to the formation of BIP, in the Balance of Payments, in Employment, and the Service of Debt, and to draw a comparison with the islands of Macaronésia, in particular the Autonomous Region of Azores. Thus contributing to the discussion that may show that the potential of renewable energy by exploring will bring economic benefits to the country, because the expectation is to exceed the 50% penetration rate of Renewable Energy in the production of electricity in Cape Verde until 2020. It is estimated that the consumption of electricity in 2010 was 335 MWh, will double by the year 2020, reaching the 670 GWh. According to studies carried out, the country has an estimated potential of 2,600 MW of Renewable Energy, having been analyzed more than 650 MW in concrete projects with production costs possibly less than the fossil fuels. Cape Verde enjoys good conditions for the use of renewable energy, but the contribution of this potential, especially wind and solar, are still very limited, so that the country should invest in increasing the use of these forms of energy to reduce the dependence on foreign sources of energy.

Book vs. fair value accounting in banking and intertemporal smoothing

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. We consider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale(1997), in an overlapping generation model, banks have a role as intergenerational connectors as they allow for intertemporal smoothing. Our main result is that when dividends depend on profits, book value ex ante dominates fair value, as it provides better intertemporal smoothing. This is in contrast with the standard view that states that, fair value yields a better allocation as it reflects the real opportunity cost of assets. Banking regulation play an important role by providing the right incentives for banks to smooth intertemporal consumption whereas market discipline improves intratemporal efficiency.

Introducing systematic dispatcher-assisted cardiopulmonary resuscitation (telephone-CPR) in a non-Advanced Medical Priority Dispatch System (AMPDS): implementation process and costs.

OBJECTIVE: In order to improve the quality of our Emergency Medical Services (EMS), to raise bystander cardiopulmonary resuscitation rates and thereby meet what is becoming a universal standard in terms of quality of emergency services, we decided to implement systematic dispatcher-assisted or telephone-CPR (T-CPR) in our medical dispatch center, a non-Advanced Medical Priority Dispatch System. The aim of this article is to describe the implementation process, costs and results following the introduction of this new "quality" procedure. METHODS: This was a prospective study. Over an 8-week period, our EMS dispatchers were given new procedures to provide T-CPR. We then collected data on all non-traumatic cardiac arrests within our state (Vaud, Switzerland) for the following 12months. For each event, the dispatchers had to record in writing the reason they either ruled out cardiac arrest (CA) or did not propose T-CPR in the event they did suspect CA. All emergency call recordings were reviewed by the medical director of the EMS. The analysis of the recordings and the dispatchers' written explanations were then compared. RESULTS: During the 12-month study period, a total of 497 patients (both adults and children) were identified as having a non-traumatic cardiac arrest. Out of this total, 203 cases were excluded and 294 cases were eligible for T-CPR. Out of these eligible cases, dispatchers proposed T-CPR on 202 occasions (or 69% of eligible cases). They also erroneously proposed T-CPR on 17 occasions when a CA was wrongly identified (false positive). This represents 7.8% of all T-CPR. No costs were incurred to implement our study protocol and procedures. CONCLUSIONS: This study demonstrates it is possible, using a brief campaign of sensitization but without any specific training, to implement systematic dispatcher-assisted cardiopulmonary resuscitation in a non-Advanced Medical Priority Dispatch System such as our EMS that had no prior experience with systematic T-CPR. The results in terms of T-CPR delivery rate and false positive are similar to those found in previous studies. We found our results satisfying the given short time frame of this study. Our results demonstrate that it is possible to improve the quality of emergency services at moderate or even no additional costs and this should be of interest to all EMS that do not presently benefit from using T-CPR procedures. EMS that currently do not offer T-CPR should consider implementing this technique as soon as possible, and we expect our experience may provide answers to those planning to incorporate T-CPR in their daily practice.

A dilution cost approach to financial intermediation and securities markets

This paper proposes a model of financial markets and corporate finance,with asymmetric information and no taxes, where equity issues, Bankdebt and Bond financing may all co-exist in equilibrium. The paperemphasizes the relationship Banking aspect of financial intermediation:firms turn to banks as a source of investment mainly because banks aregood at helping them through times of financial distress. The debtrestructuring service that banks may offer, however, is costly. Therefore,the firms which do not expect to be financially distressed prefer toobtain a cheaper market source of funding through bond or equity issues.This explains why bank lending and bond financing may co-exist inequilibrium. The reason why firms or banks also issue equity in our modelis simply to avoid bankruptcy. Banks have the additional motive that theyneed to satisfy minimum capital adequacy requeriments. Several types ofequilibria are possible, one of which has all the main characteristics ofa "credit crunch". This multiplicity implies that the channels of monetarypolicy may depend on the type of equilibrium that prevails, leadingsometimes to support a "credit view" and other times the classical "moneyview".

Convertibility, currency controls and the cost of capital in Western Europe, 1950-1999

For most of the post-war period, Europe s capital markets remained largely closed to international capital flows. Thispaper explores the costs of this policy. Using an event-study methodology, I examine the extent to which restrictions ofcurrent and capital account convertibility affected stock returns. The delayed introduction of full currency convertibilityincreased the cost of capital. Also, a string of measures designed to reduce capital mobility before the ultimate collapseof the Bretton Woods System had considerable negative effects. These findings offer an explanation for the mountingevidence suggesting that capital account liberalization facilitates growth.

Análisis del comportamiento de los resultados en 'full' y 'direct costing'

In this paper we perform a mathematical analyse of profits and losses indirect and full costing. They are compared in different situations, mainlythe utilisation of productive capacity and the existence of beginninginventories. Direct costing was conceived as a system of cost accountingwhich would show profits as a function of sales. In full costing profitsdepend on available combinations of sales, production, costs of beginninginventories, etc., and information displayed in financial statements displayappears incongruent. Differences in profits with full and direct costingincrease when full costing allocates fixed costs according to normalproduction, in some cases differences, and financial statements would showmore incongruent performance. It is concluded about the importance thatprofit and loss statement expresses profits in both costing systems.

Monetary unions and the transaction cost savings of a single currency

This paper studies the transaction cost savings of moving froma multi-currency exchange system to a single currency one. Theanalysis concentrates exclusively on the transaction andprecautionary demand for money and abstracts from any othermotives to hold currency. A continuous-time, stochastic Baumol-like model similar to that in Frenkel and Jovanovic (1980) isgeneralized to include several currencies and calibrated to fitEuropean data. The analysis implies an upper bound for thesavings associated with reductions of transaction costs derivedfrom the European Monetary Union of approximately 0.6\% of theCommunity GDP. Additionally, the magnitudes of the brokeragefee and the volatility of transactions, whose estimation hastraditionally been difficult to address empirically, areapproximated for Europe.

Systemic risk, interbank relations and liquidity provision by the Central Bank

We model systemic risk in an interbank market. Banks face liquidityneeds as consumers are uncertain about where they need to consume. Interbank credit lines allow to cope with these liquidity shocks while reducing the cost of maintaining reserves. However, the interbank market exposes the system to a coordination failure(gridlock equilibrium) even if all banks are solvent. When one bankis insolvent, the stability of the banking system is affected in various ways depending on the patterns of payments across locations. We investigate the ability of the banking industry to withstand the insolvency of one bank and whether the closure ofone bank generates a chain reaction on the rest of the system. Weanalyze the coordinating role of the Central Bank in preventing payments systemic repercussions and we examine the justification ofthe Too-big-to-fail-policy.

Cost-containment in health care: The case of Spain from the eighties up to 1997

The purpose of this paper is to provide an overview of the evolutionof health care expenditure in Spain during the period 1980-1997, andhenceforth to comment on the cost containment measures put forwardto control its growth. The paper is divided into three separatesections. The first offers a brief description of the Spanish HealthCare System, with emphasis placed on the issue of expenditure controland health planning targets. The second part outlines a set of costcontainment measures that has accompanied the process of extendinguniversal health care coverage which occurred during the mentionedperiod and which has helped keep public expenditure under control.Finally, the third part describes some of the more recent proposalsfor reform of the Spanish Health Care Sector.

Cost efficiency in primary care contracting: A stochastic frontier cost function approach

The principal aim of this paper is to estimate a stochastic frontier costfunction and an inefficiency effects model in the analysis of the primaryhealth care services purchased by the public authority and supplied by 180providers in 1996 in Catalonia. The evidence from our sample does not supportthe premise that contracting out has helped improve purchasing costefficiency in primary care. Inefficient purchasing cost was observed in thecomponent of this purchasing cost explicitly included in the contract betweenpurchaser and provider. There are no observable incentives for thecontracted-out primary health care teams to minimise prescription costs, whichare not explicitly included in the present contracting system.

Does it cost to be virtuous? The macroeconomic effects of fiscal constraints

We study whether and how fiscal restrictions alter the business cycle features of macrovariables for a sample of 48 US states. We also examine the typical transmission properties of fiscal disturbances and the implied fiscal rules of states with different fiscal restrictions. Fiscal constraints are characterized with a number of indicators. There are similarities in second moments of macrovariables and in the transmission properties of fiscal shocks across states with different fiscal constraints. The cyclical response of expenditure differs in size and sometimes in sign, but heterogeneity within groups makes point estimates statistically insignificant. Creative budget accounting is responsible for the pattern. Implications for the design of fiscal rules and the reform of the Stability and Growth Pact are discussed.