Production Function (production + function)

Distribution by Scientific Domains
Distribution within Business, Economics, Finance and Accounting

Kinds of Production Function

  • aggregate production function
  • health production function

  • Terms modified by Production Function

  • production function approach

  • Selected Abstracts


    IQ IN THE PRODUCTION FUNCTION: EVIDENCE FROM IMMIGRANT EARNINGS

    ECONOMIC INQUIRY, Issue 3 2010
    GARETT JONES
    We show that a country's average IQ score is a useful predictor of the wages that immigrants from that country earn in the United States, whether or not one adjusts for immigrant education. Just as in numerous microeconomic studies, 1 IQ point predicts 1% higher wages, suggesting that IQ tests capture an important difference in cross-country worker productivity. In a cross-country development accounting exercise, about one-sixth of the global inequality in log income can be explained by the effect of large, persistent differences in national average IQ on the private marginal product of labor. This suggests that cognitive skills matter more for groups than for individuals. (JEL J24, J61, O47) [source]


    On the Specification and Estimation of the Production Function for Cognitive Achievement*

    THE ECONOMIC JOURNAL, Issue 485 2003
    Petra E. Todd
    This paper considers methods for modelling the production function for cognitive achievement in a way that captures theoretical notions that child development is a cumulative process depending on the history of family and school inputs and on innate ability. It develops a general modelling framework that accommodates many of the estimating equations used in the literatures. It considers different ways of addressing data limitations, and it makes precise the identifying assumptions needed to justify alternative approaches. Commonly used specifications are shown to place restrictive assumptions on the production technology. Ways of testing modelling assumptions and of relaxing them are discussed. [source]


    A Production Function with an Inferior Input: Comment

    THE MANCHESTER SCHOOL, Issue 6 2001
    Christian E. Weber
    Epstein and Spiegel (The Manchester School, Vol. 68 (2000), No. 5, pp. 503,515) have discussed a production function in which one input is inferior: an increase in the target level of output reduces the quantity of the input demanded. This paper provides a more straightforward proof that the input in question is inferior. This proof has the added advantage that, unlike the proof of Epstein and Spiegel, it is based on the firm's cost minimization problem. It thus emphasizes the connection between the firm's cost minimization problem and the issue of input inferiority. It is also shown that, if we treat the Epstein,Spiegel functional form as a utility function rather than a production function, then the inferior good can exhibit Giffen behavior. [source]


    A Production Function with an Inferior Input

    THE MANCHESTER SCHOOL, Issue 5 2000
    Gil S. Epstein
    The expanding car industry has revealed an increase in the use of robots and machines together with a decrease in labor. This phenomenon refocuses attention on the possible existence of labor as an inferior input with robots as rival technical alternatives. In our paper we suggest a specific production function that allows for inferior inputs. We verify the general conditions that have been developed in past research. [source]


    The CES--Translog Production Function, Returns to Scale and AES

    BULLETIN OF ECONOMIC RESEARCH, Issue 3 2001
    Kern O. Kymn
    The translog functional form imposes no a priori restrictions on the substitution possibilities between the factor inputs, by relaxing the assumption of strong separability, and the CES,translog cost function specification allows for testing homothetic technology with Hicks-neutral technical change. In this paper an n -factor CES,translog production function is presented which develops the parameters to directly assess scale effects from those due to technology in the production structure. In addition, by applying Shephard's lemma it was possible to derive the input demand functions, as well as the partial elasticities of substitution and the cross-partial price elasticities of demand for a generalized CES,translog production structure. [source]


    Educational production in Europe

    ECONOMIC POLICY, Issue 43 2005
    Ludger Wößmann
    SUMMARY Europe's schools Available data and recently developed estimation methods make it possible to assess school performance in terms of a production process, where ,inputs' of students, teachers, and resources are combined to create a very important ,output': the cognitive skills of students. This paper estimates the education production function using representative samples of middle-school students in 15 West European countries. The size of teaching classes is a particularly important feature of the educational production process because it can be relatively easily manipulated by policy makers. However, no statistically and economically significant class-size effect is detected by any of the evidence considered in this paper. The results suggest that, at least in the context of the resources and organizational structure of West European lower secondary education systems, expensive across-the-board reduction of class sizes is extremely unlikely to foster student learning. , Ludger Wößmann [source]


    Do Peer Groups Matter?

    ECONOMICA, Issue 277 2003
    Peer Group versus Schooling Effects on Academic Attainment
    This paper estimates an educational production function. Educational attainment is a function of peer group, parental input and schooling. Conventional measures of school quality are not good predictors for academic attainment, once we control for peer group effects; parental qualities also have strong effects on academic attainment. This academic attainment is a then a key determinant of subsequent labour market success, as measured by earnings. The main methodological innovation in this paper is the nomination of a set of instruments, very broad regions of birth, which, as a whole, pass close scrutiny for validity and permit unbiased estimation of the production function. [source]


    Connecting Optimal Capital Investment and Equity Returns

    FINANCIAL MANAGEMENT, Issue 2 2005
    R. Burt Porter
    Economic theory predicts a contemporaneous correlation between equity returns and investment growth that is only weakly present in the data. By modifying the firm's production function to include a lag between investment decisions and expenditures, and after correcting for the temporal aggregation of investment, I find the predicted correlation to be present in the data. I estimate the model for 31 industries and find that investment returns are highly correlated with the industry portfolio equity returns. Further, the portion of investment returns orthogonal to equity returns is associated positively with changes in profitability and negatively with lagged differences between equity and investment returns. [source]


    A New Technical Progress Function (1962)

    GERMAN ECONOMIC REVIEW, Issue 3 2010
    Carl Christian Von Weizsäcker
    Induced technical progress; factor income distribution; quasi-Cobb,Douglas production function Abstract. In this paper, I show that labour-saving or capital-saving technical progress is induced by the distribution of income between capital and labour. In the long run, technical progress is Harrod neutral. The long-run equilibrium factor income distribution is determined by a parameter of the technical progress function. [source]


    Assessment of the nitrogen status of grassland

    GRASS & FORAGE SCIENCE, Issue 2 2004
    A. Farruggia
    Abstract Two types of diagnostics are used for N management in grasslands: diagnostics based on N concentration of shoots and diagnostics based on soil mineral N. The Nitrogen Nutrition Index (NNI) is an example of the first type. However, its evaluation requires the determination of shoot dry weight per unit area and, thus, constitutes a practical limit to its utilization in the context of farm studies. In order to simplify its evaluation, a method based on the N concentration of the upper sward layer (Nup) has been proposed. The objectives of this study were to test the relationship between NNI and Nup in the context of permanent grassland and to examine the relationship between Nup and soil mineral status. The study was conducted as two experiments, one on small cut-plots receiving contrasting rates of mineral N fertilization, and a second on plots of an existing field-scale lysimeter experiment. In each plot and at several dates, shoot biomass within quadrats was measured, N concentration was determined on the upper leaves and on the entire shoots, and mineral nitrogen of the soil below the vegetation sampled was determined. N concentration of the upper lamina layer of the canopy was linearly related to the NNI determined on the entire shoots. Therefore, determining N concentration in leaves at the top of canopy appears to be an alternative means to evaluate NNI without having to measure shoot biomass. The absence of an overall significant correlation between soil mineral N content and sward N index, observed over the two studies, indicates that each of these two indicators has to be considered specifically in relation to the objective of the diagnostic procedure. As sward N index may vary independently of soil mineral N content, the sward N indicator does not appear to be a suitable indicator for diagnosis of environmental risks related to nitrate leaching. However, soil mineral N content does not allow the prediction of sward N status and thus is not a suitable indicator of sward growth rate. Although soil mineral N content is an important environmental indicator for nitrate-leaching risks during potential drainage periods, it has a limited diagnosis value with respect to the herbage production function of grasslands. [source]


    Spatial Agglomeration, Technological Innovations, and Firm Productivity: Evidence from Italian Industrial Districts

    GROWTH AND CHANGE, Issue 3 2008
    GIULIO CAINELLI
    ABSTRACT The aim of this paper is to analyse the impact on firms' productivity of innovative activities and agglomeration effects among firms belonging to Marshallian industrial districts and the possible joint effect of these two forces. We study a sample of 2,821 firms active in the Italian manufacturing industry in the period 1992,1995. Our analysis uses an original data set based on three different Istituto Nazionale di Statistica statistical sources,Community Innovation Survey, Archivio Statistico delle Imprese Attive (Italian Business Register), and Sistema dei Conti delle Imprese (Italian Structural Business Statistics),to estimate an "augmented" Cobb-Douglas production function to account for the impact of technological innovations and district-specific agglomeration effects on a firm's productivity growth. Our data set allows us to distinguish between product and process innovations, thus, through econometric analysis, we hope to achieve a better understanding of which of these two types of innovative activities benefits most from participation in an industrial district. Our empirical results show that belonging to an industrial district and making product innovations are key factors in the productivity growth of firms and that product innovations appear to have a greater effect on the economic performance of district rather than non-district firms. [source]


    Measuring the productive efficiency and clinical quality of institutional long-term care for the elderly

    HEALTH ECONOMICS, Issue 3 2005
    Juha Laine
    Abstract The authors consider the association between productive efficiency and clinical quality in institutional long-term care for the elderly. Cross-sectional data were collected from 122 wards in health-centre hospitals and residential homes in Finland in 2001. Productive efficiency was measured in terms of technical efficiency, which was defined as the unit's distance from the (best practice) production frontier. The analysis employed stochastic production frontier estimation, where technical inefficiency in the production function was specified to be a function of ward characteristics and clinical quality of care. Several quality indicators based on the Resident Assessment Instrument, such as prevalence of pressure ulcers and depression with no treatment, were used in the analysis. The results did not reveal systematic association between technical efficiency and clinical quality of care. However, the prevalence of pressure ulcers, indicating poor quality of care was associated with technical efficiency, a fact which highlights the importance of including quality measures in the assessment of efficiency in long-term care. Copyright © 2004 John Wiley & Sons, Ltd. [source]


    A new class of production functions and an argument against purely labor-augmenting technical change

    INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 4 2008
    Jakub Growiec
    E23; O30; O40 This paper derives the macro-level production function from idea-based microfoundations. Labor-augmenting and capital-augmenting developments are assumed to be Pareto-distributed and mutually dependent. Using the Clayton copula family to capture this dependence, a new "Clayton,Pareto" class of production functions is derived that nests both the Cobb,Douglas and the constant elasticity of substitution. In the most general case, technical change is not purely labor-augmenting over the long run, but it augments both capital and labor. Under certain parametrizations, the derived elasticity of substitution between capital and labor exceeds unity and, therefore, gives rise to long-run endogenous growth. [source]


    Assessment of the water,salinity crop production function of wheat using experimental data of the Golestan province, Iran,

    IRRIGATION AND DRAINAGE, Issue 4 2009
    A. R. Kiani
    stress hydrique; stress de salinité; fonctions de production; blé Abstract Optimisation of agricultural water management in arid and semi-arid regions requires the availability of water,salinity crop production functions. A two-year experiment was conducted in the northern Golestan province of Iran to assess the water,salinity production function of wheat. The treatments in the experiment consisted of four levels of irrigation water, i.e. 50 (W1), 75 (W2), 100 (W3) and 125 (W4) % of crop water requirement, and four levels of water salinity, respectively 1.5 (S1), 8.5 (S2), 11.5 (S3) and 14.2 (S4) dS,m,1. The plots were arranged in a randomised complete block design with three replications and water quantity as main plot treatment and water quality as subplot treatment. The data were analysed using linear, quadratic, Cobb,Douglas and transcendental functions, complemented with an economic analysis. The results indicate that for the given climate,soil conditions, transcendental functions best predict wheat yield under both water and salinity stress conditions. Yield reduction caused by a unit increase of matric potential is found to be larger than that caused by a unit increase of osmotic potential. The marginal rate of technical substitution indicates that each one of the two factors studied, namely soil salinity and water supply, can be substituted with the other in a wide range in order to achieve equal amount of yield. Copyright © 2008 John Wiley & Sons, Ltd. L'optimisation de la gestion de l'eau agricole dans les zones arides et semi-arides nécessite de savoir la relation entre l'apport d'eau selon sa salinité et la production végétale. Une expérience de deux ans a été menée dans le nord de la province du Golestan en Iran pour évaluer la fonction de production de l'eau saline sur le blé. Les traitements expérimentaux consistaient en quatre niveaux d'apports d'eau soit 50% (W1), 75% (W2), 100% (W3) et 125% (W4) des besoins en eau des cultures, et quatre niveaux de salinité de l'eau, respectivement 1.5 (S1), 8.5 (S2), 11.5 (S3) et 14.2 (S4) dS,m,1. Les parcelles ont été disposées dans un bloc de Fisher randomisé avec trois répétitions avec la quantité de l'eau comme variable principale et la qualité de l'eau comme variable secondaire. Les données ont été analysées en utilisant les fonctions linéaires, quadratiques, Cobb,Douglas et transcendantes, complétées par une analyse économique. Les résultats indiquent que, pour un climat et un état du sol donnés, les fonctions transcendantes donnent les meilleures prédictions du rendement de blé en condition de salinité et de stress hydrique. La baisse de rendement causée par une augmentation d'une unité de potentiel hydrique est plus importante que celle causée par l'augmentation d'une unité de potentiel osmotique. Le taux marginal de substitution technique indique que chacun des deux facteurs étudiés, à savoir la salinité des sols et l'apport d'eau, peuvent être largement substitués l'un à l'autre pour viser rendement identique. Copyright © 2008 John Wiley & Sons, Ltd. [source]


    Bias from Farmer Self-Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data

    JOURNAL OF AGRICULTURAL ECONOMICS, Issue 1 2007
    Benjamin Crost
    Q12; D81 Abstract In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm-level yield gains from GM crop adoption. Yet most farm-level studies in the literature do not control for farmer self-selection, a potentially important source of bias in such estimates. We use farm-level panel data from Indian cotton farmers to investigate the yield effect of GM insect-resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self-selection. A production function is estimated using a fixed-effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross-sectional estimates of the yield effect of Bt cotton, which do not control for self-selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed. [source]


    Damage Control Productivity: An Input Damage Abatement Approach

    JOURNAL OF AGRICULTURAL ECONOMICS, Issue 3 2001
    Alfons Oude Lansink
    This paper compares the value of the marginal product of three different pesticides from different specifications of the production function. The specifications are the output damage abatement specification proposed by Lichtenberg and Zilberman, a general input damage abatement specification and a traditional production function. These specifications are estimated on panel data of specialised Dutch arable farms over the period 1989,1992, using Generalised Maximum Entropy estimation. Results of the input damage abatement specification show that pesticides have different impacts on individual productive inputs, although statistical evidence is weak. The output damage abatement specification produces statistically more significant relations, but imposes restrictions that are only partly supported by the data. It is also found that estimation of a quadratic traditional production function, that treats damage abatement inputs in the same way as productive inputs, does not lead to over estimation of the value of the marginal product as previous authors have hypothesised. [source]


    The Solow model with CES technology: nonlinearities and parameter heterogeneity

    JOURNAL OF APPLIED ECONOMETRICS, Issue 2 2004
    Winford H. Masanjala
    This paper examines whether nonlinearities in the aggregate production function can explain parameter heterogeneity in the Solow growth regressions. Nonlinearities in the production technology are introduced by replacing the commonly used Cobb,Douglas (CD) aggregated production specification with the more general Constant-Elasticity-of-Substitution (CES) specification. We first justify our choice of production function by showing that cross-country regressions favour the CES over the CD technology. Then, by using an endogenous threshold methodology we show that the Solow model with CES technology is consistent with the existence of multiple regimes. Copyright © 2004 John Wiley & Sons, Ltd. [source]


    The Role of Risk Management and Governance in Determining Audit Demand

    JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2006
    W. Robert Knechel
    Abstract:, Most prior research into audit fees has been based on a theoretical model which treats audit fees as the by-product of a production function ignoring potential demand forces that may drive the level of the audit fee. Inspired by prior ,anomalous' results, we take a different perspective by focusing on demand factors that may affect the level of the audit fee. Using data collected from a sample of listed companies in Belgium, we consider both disclosures about risk and risk management and actual decisions about corporate governance to examine whether audit fees are higher when these demand forces exist. In general, we expect that external auditing will increase in situations where there are multiple stakeholders with individual risk profiles who can shift some of the cost of monitoring to other stakeholders. Consistent with our theory and expectations, our results indicate that audit fees are higher when a company has an audit committee, discloses a relatively high level of financial risk management, and has a larger proportion of independent Board Members. Audit fees are lower when a company discloses a relatively high level of compliance risk management. The latter result indicates that controls are only complementary as long as they are voluntary, as mandated controls act as substitutes for non-mandated controls. [source]


    Research And Development Productivity And Spillovers: Empirical Evidence At The Firm Level

    JOURNAL OF ECONOMIC SURVEYS, Issue 4 2005
    Robert Wieser
    Abstract., A variety of methods have been used to investigate the empirical relationship between research and development (R&D) spending and the productivity of firms. The most widely employed frameworks are the production function and the associated productivity framework. In these settings, productivity growth is related to expenditures on R&D, and an attempt is made to estimate statistically the part of productivity growth that can be attributed to R&D activities. This article surveys the expansive body of empirical literature on this subject and finds a large and significant impact of R&D on firm performance on average. However, the estimated returns vary considerably between the different studies due to differences across data samples and econometric models, as well as methodological and conceptual issues. A meta-analysis on the studies surveyed reveals that the estimated rates of return do not significantly differ between countries, whereas the estimated elasticities do. Furthermore, the estimated elasticities are significantly higher in the 1980s and consistently higher in the 1990s compared with the 1970s. Hence, contrary to a widely held belief, we find no convincing evidence of an exhaustion of R&D opportunities in the last two decades. [source]


    A new production function estimate of the euro area output gap,

    JOURNAL OF FORECASTING, Issue 1-2 2010
    Matthieu Lemoine
    Abstract We develop a new version of the production function (PF) approach for estimating the output gap of the euro area. Assuming a CES (constant elasticity of substitution) technology, our model does not call for any (often imprecise) measure of the capital stock and improves the estimation of the trend total factor productivity using a multivariate unobserved components model. With real-time data, we assess this approach by comparing it with the Hodrick,Prescott (HP) filter and with a Cobb,Douglas PF approach with common cycle and implemented with a multivariate unobserved components model. Our new PF estimate appears highly concordant with the reference chronology of turning points and has better real-time properties than the univariate HP filter for sufficiently long time horizons. Its inflation forecasting power appears, like the other multivariate approach, less favourable than the statistical univariate method. Copyright © 2009 John Wiley & Sons, Ltd. [source]


    Evaluating the impact of agricultural extension on farms' performance in Crete: a nonneutral stochastic frontier approach

    AGRICULTURAL ECONOMICS, Issue 2 2007
    Ariel Dinar
    Farm performance; Extension; Stochastic frontier Abstract This article attempts to integrate the production- and the efficiency-based approaches for evaluating the impact of extension on farms' performance. For this purpose the nonneutral production frontier model is used, and the empirical analysis refers to a sample of farms from Crete, Greece. The empirical results support the proposed formulation instead of either the production- or the efficiency-based formulations as extension was found to have a statistically significant effect on closing both the technology and management gaps. Public and private extension services were found to be competitive in the production function and complementary in the technical inefficiency effect function. In addition, farms using both public and private extension services achieved a higher degree of technical efficiency than those using either public or private extension services, and farms with no extension services were found to be the least efficient. [source]


    More on the effectiveness of public spending on health care and education: a covariance structure model

    JOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 6 2003
    Emanuele Baldacci
    Using data for a sample of developing countries and transition economies, this paper estimates the relationship between government spending on health care and education and selected social indicators. Unlike previous studies, where social indicators are used as proxies for the unobservable health and education status of the population, this paper estimates a latent variable model. The findings suggest that public spending is an important determinant of social outcomes, particularly in the education sector. Overall, the latent variable approach yields better estimates of a social production function than the traditional approach, with higher elasticities of social indicators with respect to income and spending, therefore providing stronger evidence that increases in public spending do have a positive impact on social outcomes. Copyright © 2003 John Wiley & Sons, Ltd. [source]


    Endogenous innovation growth theory and regional income convergence in China

    JOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 2 2001
    Yingqi Wei
    Endogenous innovation growth theory is tested by using panel data for 27 provinces across China. R&D expenditure and openness are added to the standard convergence regressions to control for different structural characteristics in each province. A standardized ,t -bar' test for unit roots is applied to examine the properties of the data and identify a long-run relationship among the variables. By allowing for differences in the aggregate production function across regions, we find evidence of convergence. The empirical results support the endogenous innovation growth model in which regional per capita income can converge given technological diffusion, transfer and imitation. Copyright © 2001 John Wiley & Sons, Ltd. [source]


    Half a Century of Public Software Institutions: Open Source as a Solution to Hold-Up Problem

    JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 4 2010
    MICHAEL SCHWARZ
    We argue that the intrinsic inefficiency of proprietary software has historically created a space for alternative institutions that provide software as a public good. We discuss several sources of such inefficiency, focusing on one that has not been described in the literature: the underinvestment due to fear of hold-up. An inefficient hold-up occurs when a user of software must make complementary investments, when the return on such investments depends on future cooperation of the software vendor, and when contracting about a future relationship with the software vendor is not feasible. We also consider how the nature of the production function of software makes software cheaper to develop when the code is open to the end users. Our framework explains why open source dominates certain sectors of the software industry (e.g., programming languages), while being almost non existent in some other sectors (e.g., computer games). We then use our discussion of efficiency to examine the history of institutions for provision of public software from the early collaborative projects of the 1950s to the modern "open source" software institutions. We look at how such institutions have created a sustainable coalition for provision of software as a public good by organizing diverse individual incentives, both altruistic and profit-seeking, providing open source products of tremendous commercial importance, which have come to dominate certain segments of the software industry. [source]


    Dynamic Voluntary Provision of Public Goods: A Generalization

    JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 1 2009
    KENJI FUJIWARA
    In this note we examine if the proposition offered by Fershtman and Nitzan (1991) and Wirl (1996) in the context of a dynamic voluntary provision model with a linear production function can be generalized to a more general CES formulation. By comparing the steady-state stocks of a public good in open-loop and feedback Nash equilibria with that under the cooperative solution, we demonstrate that their ranking among the steady-state stocks is indeed preserved under the CES framework. [source]


    Bayesian Estimation of Regional Production for CGE Modeling

    JOURNAL OF REGIONAL SCIENCE, Issue 4 2003
    Lee C. Adkins
    CGE modelers argue that in many instances reliable econometric estimates of important model parameters are unavailable because they must be estimated using small numbers of time-series observations. To address these criticisms, this paper uses a Bayesian approach to estimate the parameters of a translog production function in a regional computable general equilibrium model. Using priors from more reliable national estimates, and parameter restrictions required by neoclassical production theory, estimation is done by Markov chain Monte Carlo simulation. A stylized regional CGE model is then used to contrast policy responses of a Cobb-Douglas specification with those from the estimated translog equation. [source]


    The Regional Allocation of Public Investment: Efficiency or Equity?

    JOURNAL OF REGIONAL SCIENCE, Issue 2 2000
    Norihiko Yamano
    In this paper we examine the effect of public investment on the regional economies of Japan. The efficient policy for regional allocation of public capital is to invest in highly productive regions, whereas the actual policy pursues equity goals by allocating more public investment to depressed regions. We determine the effects of this equity- oriented allocation by estimating the aggregate regional production function and calculating the productivity of public capital stock for each region, using a cross-sectional time-series data set. Our results show that the marginal productivity of public capital has recently declined in most depressed regions, whereas the productivity in developed regions (e.g., Tokyo, Osaka) has increased slightly. We compare alternative policies of allocating public investment and their effects on the regional and national economies using numerical simulations. We then quantitatively describe the trade-off between the efficient and the equitable allocation of public investment. [source]


    The Effects of Uncertainty on the Demand for Health Insurance

    JOURNAL OF RISK AND INSURANCE, Issue 1 2004
    atay Koç
    This article analyzes the effects of uncertainty and increases in risk aversion on the demand for health insurance using a theoretical model that highlights the interdependence between insurance and health care demand decisions. Two types of uncertainty faced by the individuals are examined. The first one is the uncertainty in the consumer's pretreatment health and the second is the uncertainty surrounding the productivity of health care. Comparative statics results are reported indicating the impact on the demand for insurance of shifts in the distributions of pretreatment health and productivity of health care in the form of first-order stochastic dominance, Rothschild,Stiglitz mean-preserving spreads, and second-order stochastic dominance. The demand for insurance increases in response to a Rothschild,Stiglitz increase in risk in the distribution of the pretreatment health provided that the health production function is in a special class and the price elasticity of health care is nondecreasing in the pretreatment health. Provided also that the demand for health care is own-price inelastic, the same conclusion is obtained when the uncertainty is about the productivity of health care. [source]


    WELL-BEHAVED PRODUCTION ECONOMIES

    METROECONOMICA, Issue 4 2005
    Michael Mandler
    ABSTRACT We show that production economies are tâtonnement stable if consumers satisfy the weak axiom of revealed preference. To ensure that producer supply decisions are well defined, we restrict prices in the tâtonnement so that positive profits cannot occur but do allow supply decisions to be multi-valued. The model therefore permits linear activities and hence the technologies that admit capital theory paradoxes. The result thus shows that if the consumer side of the economy is well behaved then capital theory paradoxes are irrelevant for stability. Other features of the Walrasian general-equilibrium model that have aroused suspicion (e.g. that a price below its equilibrium value may have negative excess demand and thus temporarily move even lower in a tâtonnement) may be a sign of trouble but also have nothing to do with capital theory paradoxes. We show that these phenomena arise even when there is no choice of technique and there is an aggregate production function. [source]


    Endogenous Growth, Increasing Returns and Externalities: An Alternative Interpretation of the Evidence

    METROECONOMICA, Issue 4 2001
    Jesus Felipe
    A number of recent papers have used aggregate production functions in an attempt to measure the degree of returns to scale and possible external effects in US manufacturing industries. In this paper I argue that the methods used and the results obtained are deceptive. The reason is that underlying every aggregate production function is the income accounting identity that relates output in value terms to the sum of wages and profits. This identity can be transformed, depending on the empirical paths of the wage and profit rates and of the factor shares, into different mathematical forms which resemble neoclassical production functions. Estimation of these forms, as is done in the literature discussed in the paper, poses serious problems for the interpretation of the results. [source]