EXPECTATIONS-DRIVEN FLUCTUATIONS WHEN FACTOR UTILIZATION IS VARIABLE

2004 ◽  
Vol 8 (1) ◽  
pp. 3-26 ◽  
Author(s):  
PATRICK A. PINTUS
Keyword(s):  
Empirical Studies ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Constant Input ◽  
Input Substitution ◽  
Factor Substitution ◽  
Local Determinacy ◽  
Local Indeterminacy ◽  
Labor Utilization ◽  
Constant Returns To Scale

The present paper studies the influence of variable labor utilization on local indeterminacy and expectations-driven fluctuations, in one-sector models with (nearly) constant returns to scale. It is shown that, in comparison to the configuration of constant input utilization, considering variable utilization reduces the actual possibilities of factor substitution and, consequently, the range of input substitution elasticities that are compatible with endogenous fluctuations. In particular, local indeterminacy and expectations-driven fluctuations occur only if utilization rates are sufficiently inelastic, whereas local determinacy prevails when utilization is highly elastic. However, accounting for the fact that variable utilization reduces theeffectiveelasticity of capital/labor substitution leads us to argue that expectations-driven fluctuations are more plausible because they require larger elasticities ofapparentinput substitution. In contrast with the recent literature, the analysis does not rely on significantly increasing returns to scale in production. Accordingly, the results are not at variance with recent empirical studies emphasizing the importance of variable utilization and denying the evidence of large increasing returns.

ASSET PRICING IN DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODELS WITH INDETERMINACY

2007 ◽  
Vol 12 (1) ◽  
pp. 50-71 ◽  
Author(s):  
NATALIA GERSHUN ◽  
SHARON G. HARRISON
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Returns To Scale ◽  
Dynamic Stochastic General Equilibrium ◽  
Increasing Returns ◽  
Dsge Model ◽  
Increasing Returns To Scale ◽  
Local Indeterminacy ◽  
Dynamic Stochastic ◽  
The One

We explore asset pricing in the context of the one-sector Benhabib-Farmer-Guo (BFG) model with increasing returns to scale in production and compare our results with financial implications of the standard dynamic stochastic general equilibrium (DSGE) model. Our main goal is to determine the effects of local indeterminacy and the presence of sunspot shocks on asset pricing. We find that the BFG model does not adequately represent key stylized facts of U.S. capital markets and does not improve on the asset-pricing results obtained in the standard DSGE model.

A Smithean Perspective on Increasing Returns

2000 ◽  
Vol 22 (1) ◽  
pp. 43-48 ◽  
Author(s):  
James M. Buchanan ◽  
Yong J. Yoon
Keyword(s):  
Comparative Advantage ◽  
Adam Smith ◽  
Economic Value ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Natural Feature ◽  
History Of ◽  
Exchange Network ◽  
David Ricardo ◽  
Constant Returns To Scale

Despite its recent re-emergence to analytical importance, the phenomenon of increasing returns remains outside the central core of neoclassical economics. The history of this idea (or set of ideas) might have been quite different if Adam Smith's explanation of the origins of trade had not been replaced by that of David Ricardo. To Adam Smith, mutually beneficial exchange emerges because of specialization, which, in its turn, implies the presence of increasing returns to the size of the exchange nexus. Even in a world of equals, trade offers mutuality of gain. There is no need for participants in the economic nexus to differ one from another. In the Ricardian logic, by contrast, trade presumably emerges because productive resources differ in their capacities to create economic value, at least among separate “goods.” Specialization is a “natural” feature of resource endowments—a feature that is exploited by trade. Comparative advantage ensures the mutuality of gain. But, in this explanation, there is no direct linkage between the size of the exchange network and the degree of specialization that is viable. There is no need to introduce increasing returns. Comparative advantage may be present even if there are constant returns to scale, both for the economy and for its separate productive sectors.

On the Effects of Wage Pressure on the Unemployment Rate and Capital Share

2006 ◽  
Vol 7 (4) ◽  
pp. 389-401 ◽  
Author(s):  
Takashi Ohno
Keyword(s):  
Labour Market ◽  
Unemployment Rate ◽  
Monopolistic Competition ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Stylized Facts ◽  
Important Conclusion ◽  
The Past ◽  
Capital Share ◽  
Constant Returns To Scale

Abstract The purpose of this paper is to understand the behaviour of the capital share and the unemployment rate in Europe over the past quarter of a century. We consider a model with monopolistic competition, increasing returns and an imperfect labour market, assuming that the elasticity between capital and labour is less than unity. Previous works have generally assumed constant returns to scale. Our results offer an important conclusion, namely that increased wage pressure will increase the unemployment rate and the capital share even though the latter initially decreases, which fits the stylized facts about the studied economies.

scholarly journals Breaking Say’s law in a simple market economy model

2020 ◽  
Vol 39 (81) ◽  
pp. 897-918
Author(s):  
Carlos Humberto Ortiz Quevedo ◽  
Rodrigo Castillo Rentería
Keyword(s):  
Market Economy ◽  
Economic Activity ◽  
Capital Accumulation ◽  
Aggregate Demand ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Market Size ◽  
Increasing Returns To Scale ◽  
Production Factors ◽  
Constant Returns To Scale

This paper analyses a multi-sector market economy where preferences are non-homothetic and satiable. Capital and labour are the production factors. Food and manufactured goods are produced with a constant-returns-to-scale technology and an increasing-returns-to-scale technology, respectively. Results include: an original capital accumulation process is required for manufacturing industrialization to take place, a minimum market size is needed for the economy to operate, and capital property concentration diminishes aggregate demand. Full general equilibrium is possible for intermediate degrees of capital concentration, but the price system collapses under high degrees as an economy regulator, labour unemployment is unavoidable, and a minimum wage is justified to enhance economic activity.

scholarly journals ARE VACCINATION SITES IN BANGLADESH SCALE EFFICIENT?

2003 ◽  
Vol 19 (4) ◽  
pp. 692-697 ◽  
Author(s):  
Vivian Valdmanis ◽  
Damian Walker ◽  
Julia Fox-Rushby
Keyword(s):  
Data Envelopment Analysis ◽  
Cost Effectiveness ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Data Envelopment ◽  
Dhaka City ◽  
Increasing Returns To Scale ◽  
Multiple Outputs ◽  
Expanded Program On Immunization ◽  
Constant Returns To Scale

Objectives: The overall aim of this study is to discern whether and to what degree vaccination sites exhibit constant returns to scale.Methods: Data Envelopment Analysis is used to compare all the facilities in the sample in terms of input costs used to produce multiple outputs. The application considers the Expanded Program on Immunization (EPI), which operated in Dhaka City, Bangladesh, during 1999.Results: A preponderance of EPI sites were determined to be operating at increasing returns to scale.Conclusions: Our findings question the applicability of cost-effectiveness analyses that assume constant returns to scale.

Factor substitution, technical change, and returns to scale in Canadian forest industries

1985 ◽  
Vol 15 (6) ◽  
pp. 1116-1124 ◽  
Author(s):  
Felice Martinello
Keyword(s):  
Technical Change ◽  
Returns To Scale ◽  
Cost Savings ◽  
Pulp And Paper ◽  
Increasing Returns ◽  
Annual Data ◽  
Increasing Returns To Scale ◽  
Input Demand ◽  
Forest Industries ◽  
Factor Substitution

This paper reports estimates of factor substitution, technical change, and returns to scale for three Canadian industries, pulp and paper, sawmills and shingle mills, and logging, using annual data from 1963 to 1982. Each industry's input-demand functions slope down and are inelastic. Factor substitution is not rejected in any of the industries but it is not large. Sawmills and shingle mills show moderate increasing returns to scale, while logging and pulp and paper show very large increasing returns to scale. The technology of the industries is nonhomothetic and cost savings as a result of changes in scale are made mostly on the capital and labour inputs. Technical change is nonneutral, capital using, and labour saving in all industries. Negative technical change is estimated for sawmills and shingle mills and pulp and paper so that all of the productivity gains made over the period of the sample are associated with changes in scale rather than the passage of time. The technical change in all industries is labour saving enough that labour becomes more productive over time, holding everything else constant.

scholarly journals LOCAL INDETERMINACY IN CONTINUOUS-TIME MODELS: THE ROLE OF RETURNS TO SCALE

2012 ◽  
Vol 17 (2) ◽  
pp. 326-355 ◽  
Author(s):  
Jean-Philippe Garnier ◽  
Kazuo Nishimura ◽  
Alain Venditti
Keyword(s):  
Continuous Time ◽  
Returns To Scale ◽  
Capital Intensity ◽  
Investment Good ◽  
Intertemporal Substitution ◽  
Elasticity Of Intertemporal Substitution ◽  
Good Sector ◽  
Social Returns ◽  
Local Determinacy ◽  
Local Indeterminacy

The aim of this paper is to discuss the effect on returns to scale on the local determinacy properties of the steady state in a continuous-time two-sector economy with endogenous labor supply and sector-specific externalities. First we show that when labor is inelastic and the elasticity of intertemporal substitution in consumption is large enough, for any configuration of the returns to scale, local indeterminacy is obtained if there is a capital intensity reversal between the private and the social levels. Second, we prove that when labor is infinitely elastic, saddlepoint stability is obtained if the investment good sector has constant social returns, whereas local indeterminacy arises if the investment good sector has increasing social returns and the elasticity of intertemporal substitution in consumption admits intermediate values. Finally, our main conclusion shows that local indeterminacy requires a low elasticity of labor when the investment good has constant social returns, but requires either a low enough or a large enough elasticity of labor when the investment good has increasing social returns.

scholarly journals Efficiency in Utilization of the Resources Allocated to Lower Level Health Facilities in Uganda: a Case Study of Health Centre IVs

2021 ◽  
Author(s):  
Expeditus Ahimbisibwe ◽  
Ezrah Trevor Rwakinanga ◽  
Christine Tashobya Kirunga
Keyword(s):  
Average Length ◽  
Health Centre ◽  
Returns To Scale ◽  
Health Sector ◽  
Increasing Returns ◽  
Scale Efficiency ◽  
Increasing Returns To Scale ◽  
Catchment Population ◽  
Quality Life ◽  
Constant Returns To Scale

Abstract Background: Everyone has a right to quality life with good health of the household and, thus, health sector financing should be a top priority because when the population is healthy, it is very productive and wealthy. In Uganda, Health Centre IVs (HCIVs) created under Uganda National Minimum Health Care Package provide curative, prevention and promotion services. The efficiency of these HCIVs is as critical as people’s health and this paper measures efficiency in utilization of resources allocated to them.Methods: The study used Hospital and HCIV Census data for 2014 and health sector data for FY2015/16 reported by MOH in the Annual Health Sector Performance Report. STATA software was used to perform Data Envelopment Analysis for a preferred model was out-put oriented that optimizes variable returns to scale. In this way, efficiency scores for every HCIV were calculated. Also, a Tobit regression model was run to estimate the factors contributing to the adjusted inefficiency scores for HCIVs.Results: Overall, 7 HCIVs (23.3%) were operating under constant returns to scale, implying that they were efficient (both pure technical and scale efficiency) while the 19 (63.3%) were operating under increasing returns to scale, implying that their health service outputs would increase by a greater proportion compared to any proportionate increase in health services if more inputs were added in the facility. Four HCIVs (13.3%) were operating at decreasing returns to scale meaning an additional input to the HCIVs would produce a less proportional change of outputs. The study identified catchment population, average length of stay, bed occupancy rate, and outpatient department visits as a proportion of inpatient days as the main factors of efficiency among HCIVs.Conclusions: This study has shown how Data Envelope Analysis methods can be applied at the HCIV level of the health system to gain an insight into variation in efficiency across health centers using routinely available data. And, with the majority of HCIVs operating at increasing returns to scale, it showed that there is a need to increase inputs like staff, medicines and beds to achieve the desired optimal scale in case of constant returns to scale.

scholarly journals Do traders learn to select efficient market institutions?

2021 ◽  
Author(s):  
Carlos Alós-Ferrer ◽  
Johannes Buckenmaier ◽  
Georg Kirchsteiger
Keyword(s):  
Returns To Scale ◽  
Production Costs ◽  
Switching Behavior ◽  
Double Auction ◽  
Trading Behavior ◽  
Market Institutions ◽  
Market Institution ◽  
Simple Rules ◽  
Rules Of Thumb ◽  
Constant Returns To Scale

AbstractWhen alternative market institutions are available, traders have to decide both where and how much to trade. We conducted an experiment where traders decided first whether to trade in an (efficient) double-auction institution or in a posted-offers one (favoring sellers), and second how much to trade. When sellers face decreasing returns to scale (increasing production costs), fast coordination on the double-auction occurs, with the posted-offers institution becoming inactive. In contrast, under constant returns to scale, both institutions remain active and coordination is slower. The reason is that sellers trade off higher efficiency in a market with dwindling profits for biased-up profits in a market with vanishing customers. Hence, efficiency alone might not be sufficient to guarantee coordination on a single market institution if the surplus distribution is asymmetric. Trading behavior approaches equilibrium predictions (market clearing) within each institution, but switching behavior across institutions is explained by simple rules of thumb, with buyers chasing low prices and sellers considering both prices and trader ratios.

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