Demand Uncertainty and Cost Behavior

2013 ◽  
Vol 89 (3) ◽  
pp. 839-865 ◽  
Author(s):  
Rajiv D. Banker ◽  
Dmitri Byzalov ◽  
Jose M. Plehn-Dujowich
Keyword(s):  
Demand Uncertainty ◽  
Manufacturing Sector ◽  
Cost Structure ◽  
Data Availability ◽  
Congestion Costs ◽  
Capacity Choice ◽  
Cost Behavior ◽  
Short Run ◽  
Using Data ◽  
The Relationship

ABSTRACT We investigate analytically and empirically the relationship between demand uncertainty and cost behavior. We argue that with more uncertain demand, unusually high realizations of demand become more likely. Accordingly, firms will choose a higher capacity of fixed inputs when uncertainty increases in order to reduce congestion costs. Higher capacity levels imply a more rigid short-run cost structure with higher fixed and lower variable costs. We formalize this “counterintuitive” argument in a simple analytical model of capacity choice. Following this logic, we hypothesize that firms facing higher demand uncertainty have a more rigid short-run cost structure with higher fixed and lower variable costs. We test this hypothesis for the manufacturing sector using data from Compustat and the NBER-CES Industry Database. Evidence strongly supports our hypothesis for multiple cost categories in both datasets. The results are robust to alternative specifications. Data Availability: All data used in this study are available from public sources.

scholarly journals Demand Uncertainty, Cost Behavior, and the Asian Financial Crisis: Evidence from Korea

2019 ◽  
Vol 11 (8) ◽  
pp. 2238
Author(s):  
Dae-Hyun Kwon
Keyword(s):  
Financial Crisis ◽  
Loss Aversion ◽  
Demand Uncertainty ◽  
Structural Changes ◽  
Environmental Changes ◽  
Asian Financial Crisis ◽  
Cost Structure ◽  
Congestion Costs ◽  
Cost Behavior ◽  
Using Data

The mix of fixed and variable costs in response to environmental changes is important for the sustainability of a firm. This study examines how demand uncertainty affects managers’ cost structure decisions. Using data on Korean firms from 1982 to 2015, my study provides evidence that cost rigidity increases in demand uncertainty. This finding implies that managers under higher uncertainty will increase the committed capacity to reduce congestion costs, resulting in a more rigid (less elastic) cost structure with higher fixed and lower variable costs in the short term. I also investigate the effect of the 1997 Asian financial crisis on cost rigidity. I predict that the massive structural changes entailed by the crisis, such as the deteriorated access to external funds, increase in the tendency of loss aversion, and expansion of outsourcing and temporary job positions, will reduce the magnitude of cost rigidity following greater demand uncertainty. Consistent with the prediction, the positive relation between demand uncertainty and cost rigidity becomes weaker in the period following the crisis, compared to the pre-crisis period.

Electricity consumption and economic growth in ASEAN

2017 ◽  
Vol 5 (2) ◽  
pp. 16
Author(s):  
Ahmad Ghazali Ismail ◽  
Arlinah Abd Rashid ◽  
Azlina Hanif
Keyword(s):  
Economic Growth ◽  
Energy Use ◽  
Electricity Consumption ◽  
Panel Estimation ◽  
Real Gdp ◽  
Long Run ◽  
Bidirectional Relationship ◽  
Short Run ◽  
Using Data ◽  
The Relationship

The relationship and causality direction between electricity consumption and economic growth is an important issue in the fields of energy economics and policies towards energy use. Extensive literatures has discussed the issue, but the array of findings provides anything but consensus on either the existence of relations or direction of causality between the variables. This study extends research in this area by studying the long-run and causal relations between economic growth, electricity consumption, labour and capital based on the neo-classical one sector aggregate production technology mode using data of electricity consumption and real GDP for ASEAN from the year 1983 to 2012. The analysis is conducted using advanced panel estimation approaches and found no causality in the short run while in the long-run, the results indicate that there are bidirectional relationship among variables. This study provides supplementary evidences of relationship between electricity consumption and economic growth in ASEAN.

Unraveling the Black Box of Cost Behavior: An Empirical Investigation of Risk Drivers, Managerial Resource Procurement, and Cost Elasticity

2015 ◽  
Vol 90 (6) ◽  
pp. 2305-2335 ◽  
Author(s):  
Martin Holzhacker ◽  
Ranjani Krishnan ◽  
Matthias D. Mahlendorf
Keyword(s):  
Financial Risk ◽  
Demand Uncertainty ◽  
Empirical Investigation ◽  
Health Planning ◽  
Data Availability ◽  
Cost Elasticity ◽  
Cost Structures ◽  
Cost Behavior ◽  
Prior Literature ◽  
Contract Labor

ABSTRACT This paper extends prior literature on cost behavior by providing insights into how firms achieve changes to cost structure in response to two important risk drivers, i.e., demand uncertainty and financial risk. Using theory from labor economics, supply-chain management, and finance, we posit that demand uncertainty and financial risk influence cost management activities. Specifically, we argue that firms are likely to alter resource procurement choices to increase cost elasticity in response to these two risk drivers. We use data from California hospitals that allow for the calibration of three distinct resource procurement choices that increase cost elasticity: outsourcing, leasing of equipment, and hiring contract labor. Mediation analysis using 2,202 hospital year observations indicates that both demand uncertainty and financial risk influence cost elasticity. Importantly, these effects are mediated by the three aforementioned resource procurement choices. Overall, our findings support the view that firms make procurement choices to manage the risk associated with cost structures. Data Availability: Data used in this study are publicly available from the Office of Statewide Health Planning and Development (see: http://www.oshpd.ca.gov/). JEL Classifications: I18; M41.

scholarly journals Investigating in the J-curve phenomenon in Tunisia- ARDL bound test approach

2020 ◽  
Vol 12 (5(J)) ◽  
pp. 23-32
Author(s):  
Elham Shubaita ◽  
Muhammad Mar’i ◽  
Mehdi Seraj
Keyword(s):  
Trade Balance ◽  
Real Exchange Rates ◽  
Distributed Model ◽  
Long Run ◽  
J Curve ◽  
Short Run ◽  
Using Data ◽  
Bound Test ◽  
The Relationship ◽  
Ardl Bound Test

This paper investigates the relationship between trade balance, real exchange rates, and incomes in Tunisia by adopting the autoregressive distributed model (ARDL) by using data over the period of 1980 to 2018. We also used the bound test cointegration between variables at a 10% significant level. Our findings show that the Tunisia economy does not match the Marshall-Lerner condition in the long run, that provides an accurate description of the particular situation for which a country currency devaluation or depreciation its currency under both fixed or floating regime is predicted to enhance the trade balance of a country, which means there is no j-curve phenomenon in the long run, which tries to differentiate between the change of short-run and long-run effects in the change of exchange rate on the trade balance. Our findings match the Marshall-Lerner condition in the short run and can confirm the existing j-curve in the case of Tunisia.

Energy Intensity, Productivity and Pollution Loads: Empirical Evidence from Manufacturing Sector of India

2020 ◽  
Vol 8 (2) ◽  
pp. 194-211
Author(s):  
Prantik Bagchi ◽  
Santosh Kumar Sahu
Keyword(s):  
Energy Intensity ◽  
Manufacturing Sector ◽  
Vital Role ◽  
Sustainable Growth ◽  
Indian States ◽  
Secondary Sources ◽  
Using Data ◽  
The Relationship ◽  
Efficiency And Productivity ◽  
Pollution Loads

We explain the relationship between energy intensity and productivity for the organized manufacturing sector of India. Using data from the secondary sources, we explain the relationships at aggregate, state and industry levels. The novelty of this paper lies in bringing in pollution loads in explaining inter-industry variations in energy intensity. Results of this study indicate that the organized manufacturing sector of India has gained energy efficiency and productivity. We found heterogeneity among Indian states in productivity growth and energy intensity. The results indicate that small states performed well whereas large states fall in the productivity paradox. The productivity dilemma hypothesis is validated at industry level analysis however, results are inconsistent to validate the decoupling growth hypothesis. Pollution loads as classified by Government of India, plays a vital role in explaining energy intensity variations across industries, which calls for better policies aiming at pollutive industries specifically to achieve sustainable growth for the manufacturing sector of the Indian economy.

Sustainability Efficiency Assessment in the Turkish Manufacturing Sector

2022 ◽  
pp. 261-285
Author(s):  
Isil Erem Ceylan
Keyword(s):  
Manufacturing Sector ◽  
Corporate Sustainability ◽  
Data Envelopment ◽  
Manufacturing Companies ◽  
Social Dimensions ◽  
Sustainability Index ◽  
Efficiency Assessment ◽  
Potential Improvement ◽  
Using Data ◽  
The Relationship

This chapter intends to measure environmental, social, and economic sustainability efficiency levels of the manufacturing companies listed in Borsa Istanbul Sustainability Index by using data envelopment analysis (DEA) based on the target year of 2019. In this context, considering the relationship between inputs and outputs determined as a result of the comprehensive review of the related literature, efficiency assessment is made by considering environmental, social, and economic indicators, which are the main dimensions of corporate sustainability. The input-oriented Charnes, Cooper, and Rhodes (CCR) and Banker, Charnes, and Cooper (BCC) models have been used in the efficiency measurement. According to the obtained efficiency scores for the relatively inefficient companies in terms of environmental, economic, and social dimensions, several suggestions are offered depending on the potential improvement rates for them.

scholarly journals Will an increase in landholding size reduce child labour in the presence of unemployment? A theoretical analysis

2019 ◽  
Vol 64 (221) ◽  
pp. 85-106
Author(s):  
Kamalika Chakraborty ◽  
Bidisha Chakraborty
Keyword(s):  
Human Capital ◽  
Overlapping Generations ◽  
Manufacturing Sector ◽  
Child Labour ◽  
Household Economy ◽  
Long Run ◽  
Short Run ◽  
Set Up ◽  
The Relationship ◽  
Agricultural Labourers

This paper builds an overlapping generations household economy model in a rural set up and examines the relationship between landholding and child labour in the presence of unemployment in the manufacturing sector. We find that irrespective of whether the parents work as agricultural labourers or work on their own land, an increase in landholding size leads to a decline in the child worker?s schooling in the short run and a decline in the growth rate of human capital formation in the long run, but may lead to an increase in steady state human capital in the long run.

HOW BARRIERS INFLUENCE FIRMS’ SEARCH STRATEGIES AND INNOVATIVE PERFORMANCE

2018 ◽  
Vol 22 (02) ◽  
pp. 1850011 ◽  
Author(s):  
DAVID ADEYEYE ◽  
ABIODUN EGBETOKUN ◽  
JACOB OPELE ◽  
OMOLAYO OLUWATOPE ◽  
MARUF SANNI
Keyword(s):  
Developing Country ◽  
Manufacturing Sector ◽  
Search Strategies ◽  
Firm Level ◽  
Innovative Performance ◽  
Regulatory Constraints ◽  
The Face ◽  
Using Data ◽  
The Impact ◽  
The Relationship

This paper contributes to intellectual discourse on the impact of barriers to firms’ innovative performance and external search strategies in the context of a developing country. Using data from the 2011 Nigeria’s innovation survey in the manufacturing sector, we tested three hypotheses: the relationship between barriers and firms’ innovativeness, breadth and depth of external knowledge sources. We found that firms’ innovativeness can decrease when they encounter a broad range of organisational rigidities. On the contrary, firms’ innovativeness increase in the face of regulatory constraints as firms may evolve ways to circumvent problematic bureaucracies while expectedly, as knowledge and infrastructure barriers become more intense, firms find it difficult to implement innovations. Similarly, we found that higher intensity of barriers, particularly knowledge and infrastructure barriers is associated with lower breadth of search. Hence, our results underscore the importance of regulation and infrastructure as key requirements for enhancing not only firm-level innovation but also knowledge search activities of firms.

Accent Policy and Accent Modification Enterprises as Potential Indicators of Intercultural Power Relations: A Call for an Updated Research Agenda

2013 ◽  
Vol 3 (1) ◽  
pp. 22-33 ◽  
Author(s):  
Brynne D. Ovalle ◽  
Rahul Chakraborty
Keyword(s):  
International Relations ◽  
Identity Construction ◽  
Social Theory ◽  
Power Relations ◽  
Linguistic Diversity ◽  
Cultural Organization ◽  
Using Data ◽  
The Individual ◽  
The Impact ◽  
The Relationship

This article has two purposes: (a) to examine the relationship between intercultural power relations and the widespread practice of accent discrimination and (b) to underscore the ramifications of accent discrimination both for the individual and for global society as a whole. First, authors review social theory regarding language and group identity construction, and then go on to integrate more current studies linking accent bias to sociocultural variables. Authors discuss three examples of intercultural accent discrimination in order to illustrate how this link manifests itself in the broader context of international relations (i.e., how accent discrimination is generated in situations of unequal power) and, using a review of current research, assess the consequences of accent discrimination for the individual. Finally, the article highlights the impact that linguistic discrimination is having on linguistic diversity globally, partially using data from the United Nations Educational, Scientific and Cultural Organization (UNESCO) and partially by offering a potential context for interpreting the emergence of practices that seek to reduce or modify speaker accents.

Workplace Ostracism and Its Negative Outcomes

2016 ◽  
Vol 15 (4) ◽  
pp. 143-151 ◽  
Author(s):  
Xiaoming Zheng ◽  
Jun Yang ◽  
Hang-Yue Ngo ◽  
Xiao-Yu Liu ◽  
Wengjuan Jiao
Keyword(s):  
Affective Commitment ◽  
Psychological Capital ◽  
Intention To Leave ◽  
Future Research ◽  
Conservation Of Resources ◽  
Negative Consequences ◽  
Negative Outcomes ◽  
Workplace Ostracism ◽  
Using Data ◽  
The Relationship

Abstract. Workplace ostracism, conceived as to being ignored or excluded by others, has attracted the attention of researchers in recent years. One essential topic in this area is how to reduce or even eliminate the negative consequences of workplace ostracism. Based on conservation of resources (COR) theory, the current study assesses the relationship between workplace ostracism and its negative outcomes, as well as the moderating role played by psychological capital, using data collected from 256 employees in three companies in the northern part of China. The study yields two important findings: (1) workplace ostracism is positively related to intention to leave and (2) psychological capital moderates the effect of workplace ostracism on affective commitment and intention to leave. This paper concludes by discussing the implications of these findings for organizations and employees, along with recommendations for future research.

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