Showing papers on "Inefficiency published in 2001"

The provision of public goods under alternative electoral incentives

Abstract: Politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork-barrel spending. We compare a winner-take-all system--where all the spoils go to the winner--to a proportional system--where the spoils of office are split among candidates proportionally to their share of the vote. In a winner-take-all system the public good is provided less often than in a proportional system when the public good is particularly desirable. We then consider the electoral college system and show that it is particularly subject to this inefficiency.

Bank ownership and efficiency.

Abstract: Agency issues associated with different types of firm ownership are an area of concern in many banking systems where state-owned banks operate alongside mutual and private-sector institutions. This paper uses a variety of approaches to model cost and profit inefficiencies as well as technical change for different ownership types in the German banking market. We find little evidence to suggest that privately owned banks are more efficient than their mutual and public-sector counterparts. While all three bank ownership types benefit from widespread economies of scale, inefficiency measures indicate that public and mutual banks have slight cost and profit advantages over their private sector competitors.

An Empirical Survey of Frontier Efficiency Measurement Techniques in Education

Abstract: Educational institutions worldwide are increasingly the subject of analyses aimed at defining, measuring and improving efficiency. However, despite the importance of efficiency measurement in education, it is only relatively recently that the more advanced econometric and mathematical programming frontier techniques have been applied to primary and secondary schools, university departments and degree programmes, and universities as a whole. This paper attempts to provide a synoptic survey of the comparatively few empirical analyses in education using frontier efficiency measurement techniques. Both the measurement of inefficiency in education and the determinants of educational efficiency are examined.

Alternative methods to examine hospital efficiency: data envelopment analysis and stochastic frontier analysis.

Abstract: There has been increasing interest in the ability of different methods to rank efficient hospitals over their inefficient counterparts. The UK Department of Health has used three cost indices to benchmark NHS hospitals (Trusts). This study uses the same dataset and compares the efficiency rankings from the cost indices with those obtained using Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA). The paper concludes that the methods each have particular strengths and weaknesses and potentially measure different aspects of efficiency. Several specifications should be used to develop ranges of inefficiency to act as signalling devices rather than point estimates. It is argued that differences in efficiency scores across different methods may be due to random "noise" and reflect data deficiencies. The conclusions concur with previous findings that there are not truly large efficiency differences between Trusts and savings from bringing up poorer performers would in fact be quite modest.

Measuring Integration and Efficiency in International Agricultural Markets

Abstract: This paper critiques the methods used to investigate integration and efficiency in international markets. Integration is best reflected by flow-based indicators of tradability, while efficiency is related to price-based notions of market equilibrium. Data insufficiency poses a serious constraint because empirical tests that rely on just prices cannot separate tests of the market efficiency hypothesis from tests of the strong assumptions underpinning model specification. Finally, even if market efficiency holds, there may nonetheless be considerable social inefficiency remaining due to trade barriers and excessive costs of commerce.

Why Do New Issues and High-Accrual Firms Underperform: The Role of Analysts' Credulity

Abstract: We find that analysts' forecast errors are predicted by past accounting accruals (adjustments to cash flows to obtain reported earnings) among both equity issuers and non-issuers Analysts are more optimistic for the subsequent four years for issuers reporting higher issue-year accruals The predictive power is greater for discretionary accruals than non-discretionary accruals, and is independent of the presence of an underwriting affiliation Predicted forecast errors from accruals partially explain the long-term underperformance of new issuers The predictability of forecast errors also for non-issuers with high accruals suggests that analysts' credulity about accruals management more generally contributes to market inefficiency

House Price Dynamics: A Survey of Theoretical and Empirical Issues

Abstract: During the past decade, the number of studies on intertemporal changes in house prices has increased rapidly because of wider availability of extensive micro-level data sets, improvements in modeling techniques, and expanded business applications. This article reviews the main theoretical, empirical, and methodological issues related to analyzing house price dynamics. The theoretical issue that has received the most attention is informational efficiency. The literature in this regard generally supports our intuition that real estate markets are not efficient—that is, short-run intertemporal changes in house prices and excess returns are found to be positively serially correlated. No trading rule has emerged that consistently yields abovenormal returns, however, because of the substantial transaction costs. The second part of the article surveys various methodological issues in estimating house price indices and excess returns. Given severe measurement problems and biases in models, the literature increasingly indicates that any result might be an artifact of the price index used rather than a real feature of the market. More research is needed before firm conclusions can be reached about inefficiency in the residential real estate market.

Timeless Perspective Vs Discretionary Monetary Policy in Forward-Looking Models

Abstract: This Paper reviews the distinction between the timeless perspective and discretionary modes of monetary policymaking, the former representing rule-based policy as recently formalized by Woodford (1999b). In models with forward-looking expectations there is typically a second inefficiency from discretionary policymaking, besides the inflationary bias. The Paper presents calculations of the quantitative magnitude of this second inefficiency, using calibrated models of two prominent types; it examines the distinction between instrument rules and targeting rules; and briefly investigates operationality issues involving the unobservability of current output and the possibility that an incorrect concept of the natural-rate level of output is used by the policymaker.

Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra

Abstract: This paper presents a theory of rent seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members. The two key assumptions are constraints on lump‐sum transfers from poorer members and disproportionate control rights wielded by wealthier members. Transfers of rents to the latter are achieved by depressing prices paid for inputs supplied by members and diverting resulting retained earnings. The theory predicts that increased heterogeneity of landholdings in the local area causes increased inefficiency by inducing a lower input price and a lower level of installed crushing capacity. Predictions concerning the effect of the distribution of local landownership on sugarcane price, capacity levels, and participation rates of different classes of farmers are confirmed by data from nearly 100 sugar cooperatives in the Indian state of Maharashtra over the period 1971–93.

Cost efficiency of US hospitals: a stochastic frontier approach

Abstract: This study examined the impact of managed care and other environmental factors on hospital inefficiency in 1631 US hospitals during the period 1990-1996. A panel, stochastic frontier regression model was used to estimate inefficiency parameters and inefficiency scores. The results suggest that mean estimated inefficiency decreased by about 28% during the study period. Inefficiency was negatively associated with health maintenance organization (HMO) penetration and industry concentration. It was positively related with Medicare share and for-profit ownership status.

Coalitional Power and Public Goods

Abstract: We study the provision of public goods when all agents have complete information and can write binding agreements. This framework is in deliberate contrast to a traditional view of the free‐rider problem based on hidden information or voluntary provision. We focus on coalition formation as a potential source of inefficiency. To this end, we develop a notion of an equilibrium coalition structure, based on the assumption that each coalition that forms does so under a rational prediction of the society‐wide coalition structure. In a simple model, we characterize the (unique) equilibrium coalition structure. Only in some cases does the equilibrium involve full cooperation, resulting in efficient provision of the public good. In other cases, the equilibrium consists of several coalitions and inefficient provision. However, the degree of inefficiency and the number of possible coalitions are bounded.

Estimating confidence intervals for technical efficiency: the case of private farms in slovenia

Abstract: This paper analyses the technical efficiency of private farms in Slovenia. Both parametric and non-parametric frontier techniques are employed. The results of the competing methods are compared, and variables that might determine the differences in efficiency are identified. Special attention is directed to the construction of confidence intervals for the individual efficiency estimates. For this purpose, distributional assumptions as well as bootstrapping methods are employed. The analysis reveals a significant degree of inefficiency. However, the confidence intervals suggest a more cautious interpretation of the efficiency scores. Copyright 2001, Oxford University Press.

The operating efficiency of international tourist hotels in Taiwan

Abstract: This study evaluates the operating efficiency of international tourist hotels in Taiwan The actual operating data of 53 international tourist hotels in Taiwan are collected from 1996 to 1998 There are 6 output variables and 7 input variables in this study By using the DEA technique, the efficiency of international tourist hotels is analyzed, and we can distinguish between efficient hotels and inefficient hotels Moreover, the magnitude of inefficiency for input factors and output combinations could be clearly identified

Does the energy-efficiency paradox exist? Technological progress and uncertainty

Abstract: We explain why firms may choose not to undertake investments inenergy-saving technologies that appear profitable from a net presentvalue perspective. As future technological advances are inherentlyuncertain and investments in new technology are, at least partly,irreversible, it may ``pay'' to postpone investments in energy savingand wait for the arrival of improved varieties. This insight casts doubton the existence of so-called ``low hanging fruits in energy saving''(although we do not wish to deny that organisational failures may alsobe important). Failure to appreciate the underlying stochasticity oftechnological progress may obscure the insight that there is value inwaiting, and costs involved in terminating the option to invest. Theappetite for low-hanging fruits will be less when these costs areincorporated in the analysis. We demonstrate that the effect of thearrival rate of new technologies on the adoption lag for a rational firmis ambiguous. The same holds for the effect of the expected ``jump'' inefficiency of new technologies. Government policies aimed at enhancingthe adoption of new technologies through stimulation of R&D maytherefore be counterproductive.

Living with uncertainty : gender, livelihoods and pro-poor growth in rural sub-Saharan Africa

Abstract: This paper provides a gender perspective on recent arguments about the link between economic growth and poverty reduction in rural sub-Saharan Africa. Recent research from the African context, which adopts a 'bargaining' approach in place of the earlier 'unified' approach to the study of household economics, has suggested that gender relations within the household are a major factor constraining women's productivity in African agriculture and leading to various types of allocational inefficiency. The paper suggests that many of these studies overlook the fact that households are arenas of joint, as well as competing, interests, and may overstate the extent to which gender conflict underlies observed low productivity. A livelihoods approach, which takes account of the key objectives which characterise households in poor, agrarian environments, and the multiplicity of ways in which they seek to attain these objectives, provides a richer and more nuanced account of nature of poverty in the region. Using such an approach, the paper discusses the role of households and families in an environment characterised by pervasive uncertainty and notes the various ways in which women are disadvantaged, relative to men, in the pursuit of security of livelihoods. These include both intra-household inequalities, but also inequalities generated by biases in the wider institutional arena. The paper concludes by noting some of the ways in which addressing these gendered constraints might contribute to the long-term effectiveness of pro-poor growth strategies as well as to the goal of greater gender equity.

Measurement of Technical Efficiency in Public Education: A Stochastic and Nonstochastic Production Function Approach

Abstract: 1. Introduction Efficiency in the public education system is a significant issue in the United States. Nationwide, real expenditure per student in public education increased more than 3% per year between 1960 and 1998, but output as generally measured by standardized test scores has not increased and in some cases (e.g., the verbal SAT score) has declined.' One explanation is that resources are not being utilized efficiently. There may be productive or technical inefficiency and/or allocative or price inefficiency (i.e., given the relative prices of inputs, the cost minimizing input combination is not used). This paper focuses on the former by evaluating technical inefficiency in public education using data from Utah school districts. The pioneering work by Farrell in 1957 provided the definition and conceptual framework for both technical and allocative efficiency. Although technical efficiency refers to failure to operate on the production frontier, allocative efficiency generally refers to the failure to meet the marginal conditions for profit maximization. Considerable effort has been made in refining the measurement of technical efficiency. The literature is broadly divided into deterministic and stochastic frontier methodologies.2 The deterministic nonparametric approach that developed out of mathematical programming is commonly known as data envelopment analysis (DEA), and the parametric approach that estimates technical efficiency within a stochastic production, cost, or profit function model is called the stochastic frontier method. Both approaches have advantages and disadvantages, as discussed in Forsund, Lovell, and Schmidt (1980). DEA has been used extensively in measuring efficiency in the public sector, including education, where market prices for output generally are not available. For example, Levin (1974), Bessent and Bessent (1980), Bessent et al. (1982), and Fare, Grosskopf, and Weber (1989) used this method to estimate efficiency in public education. The stochastic frontier methodology was used by Barrow (1991) to estimate a stochastic cost frontier using data from schools in England. Wyckoff and Lavinge (1991) and Cooper and Cohn (1997) estimated technical efficiency using school district data from New York and South Carolina, respectively. Grosskopf et al. (1991) used the parametric approach to estimate allocative and technical efficiency in Texas school districts. The recent literature has seen a convergence of the two approaches and their complementarity is being recognized.3 However, there is a lack of empirical evidence in the literature about the proximity of these two approaches in measuring technical efficiency. Policy formulations based on only one of these efficiency estimates may not be accurate because of the inherent limitations of each. Before any correctional measures are taken, the stability of the technical efficiency estimates obtained from a parametric method should be evaluated by comparing them against those found when using the nonparametric method. In this study, the technical efficiency estimates for each school district using the stochastic frontier method and Tobit residuals from the two-stage DEA model are compared. In the twostage DEA model, technical efficiency scores obtained from DEA using controllable inputs are regressed on student socioeconomic status and other environmental factors. The residuals of this regression measure pure technical efficiency after accounting for fixed socioeconomic and environmental factors. The empirical analysis uses data from the 40 school districts in Utah for the academic year 1992-1993. The standardized test score for 11 th-grade students is used as a measure of school output, and two classes of inputs are included. The first class is considered to be subject to control by school administrators and includes the student-teacher ratio, the percentage of teachers having an advanced degree, and the percentage of teachers with more than 15 years of experience. …

Measuring Efficiency in Local Government: An Analysis of New South Wales Municipalities' Domestic Waste Management Function

Abstract: Data envelopment analysis (DEA) is used to measure the technical and scale efficiency of the domestic waste management function in 103 New South Wales’ local governments. After allowance is made for nondiscretionary environmental factors which may affect the provision of these local public services, such as congestion and the inability to operate machinery in densely-populated urban areas, comparison of efficiency across geographic/demographic criteria is made. The results suggests that, on average, waste management inputs could be reduced to just over 65 percent of the current level based upon observable best-practice whilst productivity losses due to scale effects account for slightly over 15 percent of total inputs. The results also indicate that inefficiency in urban developed councils is largely the result of congestion and other collection difficulties encountered in densely-populated areas, whilst inefficiency in regional and rural councils stems from an inability to attain an optimal scale of operations.

Estimation of Profit Functions When Profit Is Not Maximum

Abstract: This paper deals with derivation and implications of profit functions when profit is not maximum due to the presence of either technical inefficiency or allocative inefficiency, or both. We show that input demand and output supply, elasticities, and returns to scale are, in general, affected by these inefficiencies. We also show that the overall profit efficiency is not necessarily the product of technical and allocative efficiencies, meaning that technical and allocative inefficiencies are not necessarily independent. Estimation techniques are developed for both cross-sectional and panel data models. Working of the model is illustrated using a panel of 60 salmon farms. Copyright 2001, Oxford University Press.

Savings behaviour in low-income countries

Abstract: The empirical literature on savings in low-income countries has exploited some remarkable data sets to shed new light on savings behaviour in the poor agricultural households that make up the majority of the population in such countries. A number of conclusions have emerged: (i) the degree of consumption smoothing over seasons within the year and across years, in response to very large income fluctuations, is higher than was supposed; (ii) the lack of complete insurance and credit markets, however, is manifested in asset stocks and asset compositions among farmers, especially small farmers, that are inefficient; (iii) the combination of low and volatile incomes is an important cause of inefficiency and income inequality; (iv) the proximity of formal financial institutions increases financial savings and crowds out informal insurance arrangements, thus, in principle, better facilitating financial intermediation; and (iv) simple life-cycle models of savings do not appear to explain long-term savings in low-income settings. Copyright 2001, Oxford University Press.

Cost inefficiency in Washington hospitals: a stochastic frontier approach using panel data.

Abstract: We analyze a sample of Washington State hospitals with a stochastic frontier panel data model, specifying the cost function as a generalized Leontief function which, according to a Hausman test, performs better in this case than the translog form. A one-stage FGLS estimation procedure which directly models the inefficiency effects improves the efficiency of our estimates. We find that hospitals with higher casemix indices or more beds are less efficient while for-profit hospitals and those with higher proportion of Medicare patient days are more efficient. Relative to the most efficient hospital, the average hospital is only about 67% efficient.

On the Efficiency of Monetary Exchange: How Divisibility of Money Matters

Abstract: We use alternative assumptions about the divisibility of goods and money and the ability of agents to use lotteries on money to investigate to what extent the indivisibility of money is the cause for the typically inefficient production and consumption decisions in search-theoretic models of money. Our framework potentially generates three types of inefficiencies: the no-trade inefficiency, where no trade takes place even though it would be socially efficient to trade; and the too-much-trade and too-little-trade inefficiencies, where the quantities produced and exchanged are either larger or smaller than what the solution to a social planner's problem would mandate. It is shown that while the no-trade and the too-much-trade inefficiencies are caused by the indivisibility of money, the too-little-trade inefficiency remains even when money is divisible unless it is sufficiently valued.

A DEA Study to Evaluate the Relative Efficiency and Investigate the District Reorganization of the Taiwan Power Company

Abstract: In this study, data envelopment analysis (DEA) models were applied to evaluate the relative efficiencies of twenty-two electricity distribution districts of the Taiwan Power Company (TPC) in Taiwan, ROC. The empirical study showed that the TPC districts have good overall efficiency. We found that eleven districts were inefficient. Most of the inefficient districts suffer from scale inefficiency to a greater degree than technical inefficiency. We suggested the specific improvement directions for the corresponding inefficient districts. This study also investigated district reorganization to increase the efficiency. The proposed district reorganization alternatives have higher efficiency scores than the current one.