Increasing quasiconcave production and utility functions with diminishing returns to scale

In microeconomic analysis functions with diminishing returns to scale (DRS) have frequently been employed. Various properties of increasing quasiconcave aggregator functions with DRS are derived. Furthermore duality in the classical sense as well as of a new type is studied for such aggregator functions in production and consumer theory. In particular representation theorems for direct and indirect aggregator functions are obtained. These involve only small sets of generator functions. The study is carried out in the contemporary framework of abstract convexity and abstract concavity.

Comparing Input- and Output-Oriented Measures of Technical Efficiency to Determine Local Returns to Scale in DEA Models

This paper shows how one can infer the nature of local returns to scale at the input- or output-oriented efficient projection of a technically inefficient input-output bundle, when the input- and output-oriented measures of efficiency differ.

Cost Improvements, Returns to Scale, and Cost Inefficiencies for Real Estate Investment Trusts

This paper extends the existing research on real estate investment trust (REIT) operating efficiencies. We estimate stochastic-frontier, panel-data models specifying a translog cost function. The specified model updates the cost frontier with new information as it becomes available over time. The model can identify frontier cost improvements, returns to scale, and cost inefficiencies over time. The results disagree with most previous research in that we find no evidence of scale economies and some evidence of scale diseconomies. Moreover, we also generally find smaller inefficiencies than those shown by other REIT studies. Contrary to previous research, higher leverage associates with more efficiency.

Procyclical Productivity and Returns-to-Scale in Philippine Manufacturing

The Philippines is regarded as a highly oligopolistic economy, and it is argued that this is a cause of the relative stagnation of the economy to neighbouring East Asian economies. This presumption might be associated with increasing returns to scale and market power, which are consistent with the procyclical total factor productivity that is observed in the Philippines and the United States. However, this study found no strong evidence supporting increasing returns for aggregate manufacturing and three-digit manufacturing industries during 1956-1980 in the Philippines, based on data constructed by Hooley (1985). Further, this study does not support external effect discussed in Caballero and Lyons (1992).

Estimating variable returns to scale production frontiers with alternative stochastic assumptions

Two stochastic production frontier models are formulated within the generalized production function framework popularized by Zellner and Revankar (Rev. Econ. Stud. 36 (1969) 241) and Zellner and Ryu (J. Appl. Econometrics 13 (1998) 101). This framework is convenient for parsimonious modeling of a production function with returns to scale specified as a function of output. Two alternatives for introducing the stochastic inefficiency term and the stochastic error are considered. In the first the errors are added to an equation of the form h(log y, theta) = log f (x, beta) where y denotes output, x is a vector of inputs and (theta, beta) are parameters. In the second the equation h(log y,theta) = log f(x, beta) is solved for log y to yield a solution of the form log y = g[theta, log f(x, beta)] and the errors are added to this equation. The latter alternative is novel, but it is needed to preserve the usual definition of firm efficiency. The two alternative stochastic assumptions are considered in conjunction with two returns to scale functions, making a total of four models that are considered. A Bayesian framework for estimating all four models is described. The techniques are applied to USDA state-level data on agricultural output and four inputs. Posterior distributions for all parameters, for firm efficiencies and for the efficiency rankings of firms are obtained. The sensitivity of the results to the returns to scale specification and to the stochastic specification is examined. (c) 2004 Elsevier B.V. All rights reserved.

Improving envelopment in Data Envelopment Analysis under variable returns to scale

In a Data Envelopment Analysis model, some of the weights used to compute the efficiency of a unit can have zero or negligible value despite of the importance of the corresponding input or output. This paper offers an approach to preventing inputs and outputs from being ignored in the DEA assessment under the multiple input and output VRS environment, building on an approach introduced in Allen and Thanassoulis (2004) for single input multiple output CRS cases. The proposed method is based on the idea of introducing unobserved DMUs created by adjusting input and output levels of certain observed relatively efficient DMUs, in a manner which reflects a combination of technical information and the decision maker's value judgements. In contrast to many alternative techniques used to constrain weights and/or improve envelopment in DEA, this approach allows one to impose local information on production trade-offs, which are in line with the general VRS technology. The suggested procedure is illustrated using real data. © 2011 Elsevier B.V. All rights reserved.

Essays on international lending and increasing returns to scale

Standard economic theory suggests that capital should flow from rich countries to poor countries. However, capital has predominantly flowed to rich countries. The three essays in this dissertation attempt to explain this phenomenon. The first two essays suggest theoretical explanations for why capital has not flowed to the poor countries. The third essay empirically tests the theoretical explanations.^ The first essay examines the effects of increasing returns to scale on international lending and borrowing with moral hazard. Introducing increasing returns in a two-country general equilibrium model yields possible multiple equilibria and helps explain the possibility of capital flows from a poor to a rich country. I find that a borrowing country may need to borrow sufficient amounts internationally to reach a minimum investment threshold in order to invest domestically.^ The second essay examines how a poor country may invest in sectors with low productivity because of sovereign risk, and how collateral differences across sectors may exacerbate the problem. I model sovereign borrowing with a two-sector economy: one sector with increasing returns to scale (IRS) and one sector with diminishing returns to scale (DRS). Countries with incomes below a threshold will only invest in the DRS sector, and countries with incomes above a threshold will invest mostly in the IRS sector. The results help explain the existence of a bimodal world income distribution.^ The third essay empirically tests the explanations for why capital has not flowed from the rich to the poor countries, with a focus on institutions and initial capital. I find that institutional variables are a very important factor, but in contrast to other studies, I show that institutions do not account for the Lucas Paradox. Evidence of increasing returns still exists, even when controlling for institutions and other variables. In addition, I find that the determinants of capital flows may depend on whether a country is rich or poor.^

Ecosystem dynamics at disturbed and undisturbed sites in North Queensland wet tropical rain forest. III. Nutrient returns to the forest floor through litterfall

The nutrient contents and accessions in litterfall over a period of 3 y are reported for undisturbed areas and at two sites disturbed by selective harvesting in tropical rain forest in North Queensland, Australia. Mean concentrations (mg g(-1) dry weight) of nutrients in litterfall ranged from 10 to 12 for nitrogen; 0.33 to 0.43 for phosphorus; 3.6 to 4.3 for potassium; 6.0 to 10.5 for calcium and 1.7 to 2.6 for magnesium. These concentrations are in the middle to lower part of the spectrum of values recorded for tropical forest. Accessions of nutrients in litterfall (kg ha(-1) y(-1)) ranged from 59 to 64 N; 1.9 to 2.4 P; 20 to 24K; 34 to 63 Ca; and 9 to 16 Mg. These rates, particularly for IN and P, are among the lowest recorded for tropical forests. There were no consistent between-site differences in total nutrient accessions in small litterfall. In terms of the contribution of litterfall to the accessions of nutrients to the forest floor, this suggests that the logged sites have recovered from the effects of selective harvesting within 25 y. Nutrient accessions at each site were distinctly seasonal, with maximum accessions occurring in the late dry season to late in the wet season. Leaf-fall accounted for the largest proportion of nutrient accessions over the study period, although at certain times accessions in both reproductive material and wood were significant. A cyclone which crossed the coast near the study sites resulted in large nutrient accessions over a short period but had little effect on the total annual accession. A comparison with previous studies of litterfall in Australian tropical rainforests indicates that nutrient return in litterfall is directly related to soil fertility.

Returns to farm-level soil conservation on tropical steep slopes: The case of the Eritrean highlands

This study conducts an economic analysis of investment in simple soil conservation technologies in the highlands of Eritrea. The data used in the analysis were obtained from a farm survey and supplemented with data from secondary sources. Risk analysis techniques are used to take account of the uncertainties regarding the relationship between soil erosion and crop yield. The financial analysis reveals negative net present values (NPVs) and internal rates of return (IRRs) below 12 per cent for various slope categories. On the other hand, the economic analysis returns positive NPVs and IRRs of over 20 per cent. The results clearly indicate that in-vestment in soil conservation technology may not be a viable short-term proposition from the farmer's point of view and yet the net social benefits are positive. There is a strong case for government to provide incentives for soil conservation in view of the economic benefits.

Investigating technical and scale efficiencies of Australian universities through data envelopment analysis

Performance indicators in the public sector have often been criticised for being inadequate and not conducive to analysing efficiency. The main objective of this study is to use data envelopment analysis (DEA) to examine the relative efficiency of Australian universities. Three performance models are developed, namely, overall performance, performance on delivery of educational services, and performance on fee-paying enrolments. The findings based on 1995 data show that the university sector was performing well on technical and scale efficiency but there was room for improving performance on fee-paying enrolments. There were also small slacks in input utilisation. More universities were operating at decreasing returns to scale, indicating a potential to downsize. DEA helps in identifying the reference sets for inefficient institutions and objectively determines productivity improvements. As such, it can be a valuable benchmarking tool for educational administrators and assist in more efficient allocation of scarce resources. In the absence of market mechanisms to price educational outputs, which renders traditional production or cost functions inappropriate, universities are particularly obliged to seek alternative efficiency analysis methods such as DEA.

Returns to vocational education in Portugal

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics

Bias in returns to tenure when firm wages and employment comove: A quantitative assessment and solution

It is well known that, unless worker-firm match quality is controlled for, returns to firm tenure (RTT) estimated directly via reduced form wage (Mincer) equations will be biased. In this paper we show that even if match quality is properly controlled for there is a further pervasive source of bias, namely the co-movement of firm employment and firm wages. In a simple mechanical model where human capital is absent and separation is exogenous we show that positively covarying shocks (either aggregate or firm level) to firms employment and wages cause downward bias in OLS regression estimates of RTT. We show that the long established procedures for dealing with "traditional" RTT bias do not circumvent the additional problem we have identified. We argue that if a reduced form estimation of RTT is undertaken, firm-year fixed effects must be added in order to eliminate this bias. Estimates from two large panel datasets from Portugal and Germany show that the bias is empirically important. Adding firm-year fixed effects to the regression increases estimates of RTT in the two respective countries by between 3.5% and 4.5% of wages at 20 years of tenure over 80% (50%) of the estimated RTT level itself. The results extend to tenure correlates used in macroeconomics such as the minimum unemployment rate since joining the firm. Adding firm-year fixed effects changes estimates of these effects also.

The private and fiscal returns to schooling and the effect of public policies on private incentives to invest in education: a general framework and some results for the EU

This paper develops a comprehensive framework for the quantitative analysis of the private and fiscal returns to schooling and of the effect of public policies on private incentives to invest in education. This framework is applied to 14 member states of the European Union. For each of these countries, we construct estimates of the private return to an additional year of schooling for an individual of average attainment, taking into account the effects of education on wages and employment probabilities after allowing for academic failure rates, the direct and opportunity costs of schooling, and the impact of personal taxes, social security contributions and unemployment and pension benefits on net incomes. We also construct a set of effective tax and subsidy rates that measure the effects of different public policies on the private returns to education, and measures of the fiscal returns to schooling that capture the long-term effects of a marginal increase in attainment on public finances under c