Cost Elasticity Research Articles

Exploring the determinants of periodontal treatment costs: A special focus on cigarette smoking

Determinants of periodontal treatment costs are explored by constructing and estimating a recursive multi-equation model. The costs are based on treatment needs defined by the conventional concept of periodontal disease. Special attention is paid to the effect of cigarette smoking on the costs. The model is based on the health production theory and the findings of earlier studies of factors affecting periodontal disease. The model was estimated by Lisrel by using the ML method. The data were based on a clinical examination and interview of a representative sample ( n = 4771) of the dentulous Finnish population aged 30 years and over (The Mini-Finland Oral Health Survey). Most of the predictions of the model were confirmed by the empirical testing. In terms of direct effects, there seems to be four significant explanatory factors to the total costs: the number of remaining natural teeth, age, caries status and smoking in that order. The elasticity of costs with respect to the number of cigarettes per day was 0.072 for men and 0.021 for women. Moreover, the model revealed other interesting connections between oral health variables, oral hygiene and health care habits and the exogenous variables of age, education and income. Implications of new concepts of periodontal disease on results are also discussed.

MEASURING THE EFFECT OF COST VARIATION ON INDUSTRIAL OUTPUTS*

ABSTRACT. This paper introduces the household interactive variable input‐output (HIVIO) model to measure the effect of cost variation on industrial outputs. The model produces a variety of cost elasticities that separate out impacts on industrial prices, imports, and outputs, with “own” and “cross” elasticity components. Like the conventional input‐output multipliers, these cost elasticities can be useful parameters to evaluate the substituting behavior of firms and consumers. By using the 1980 Korean input‐output transactions table, we find the wage and import price effects on industrial prices, outputs, and import demands.

Infrastructure-production system dynamics in national and regional systems: An econometric study of the Indian economy

Treating infrastructure inputs as quasi-fixed in the short run, a multi-equation econometric model of production-infrastructure (social overhead capital) interlinkages and adjustments is developed based on a flexible functional form. Adjustment dynamics are endogenized and costs of adjustments are explicitly incorporated. The model is estimated with regional and national data from India; results include optimal paths and speeds of adjustments for infrastructure inputs market inputs' own and cross-price elasticities and demand elasticities with respect to the level of output, infrastructure stocks and associated user costs; and production cost elasticities with respect to output and infrastructure stocks.

Estimating short-run costs of a barge company

By extending a methodology developed by the US Army Corps of Engineers, firm-specific short-run costs of a barge company are estimated in this paper. The estimated costs include average costs, marginal costs, and cost elasticities. These estimates led to a breakeven analysis and an analysis of financial conditions of the barge industry in general. Findings include that the breakeven ton-mile rates range from 0. 52 to 0.72 cents for a full-capacity operation and that the costs of barge services are highly inelastic. A questionnaire survey of 256 barge and towing companies has also been shown to corroborate the findings of this paper.

Pricing of related products by a multiproduct monopolist

This paper examines the pricing behavior of a multiproduct monopolist (MPM). For a firm selling two products, the profit maximizing price of a particular item is found to depend upon its marginal cost, the own and cross-price elasticities and the budget shares of both products. Conditions are identified under which the price charged by a MPM will be greater than, less than, and equal to the price charged by an otherwise identical single product monopolist as well as the circumstances under which it is profitable for a MPM to utilize one product as a loss leader.

Tobin’s Q, non-constant returns to scale, and imperfectly competitive product markets

SummaryThis study explores the impact of non-constant returns to scale and imperfectly competitive product markets on the empirical performance of the q-model of investment. We present an econometric specification linking the unobserved shadow price of capital to financial market data when returns-to-scale are not necessarily constant and product markets are not necessarily competitive. Furthermore, unlike most Q-studies, we work within a discrete-time framework, and give explicit attention to the relations between inventories, sales, and production. Our new specification allows us to recover parameters characterizing returns-to-scale, product market, and adjustment cost elasticities. Estimates are reported for 12 mature industries in the United States drawn from VALUELINE.

On the estimation of hospital cost functions

Data from 166 general hospitals in New York State (1981) is used to estimate a quadratic and logarithmic long-run cost function. Both equations fit the data very well but give very different results. The quadratic appears to confirm the commonly-held view of a shallow U-shaped average cost curve, whereas the log function indicates significant economies of scale: a total and average cost elasticity of 0.9 and −0.10, respectively (using beds or patient days to measure output). Ramsey's RESET test is used to discriminate between the two models and the quadratic is clearly rejected as a misspecification. Scale economies thus exist even where the usual quadratic suggests otherwise.

Cost structure and production technology in transit: An application to the Israeli bus transit sector

The objective of this study is to empirically analyze the cost structure and production technology, including the demand for input factors and cost elasticities of transit. To that end a four-input, two-output translogarithmic cost model is estimated. The estimated parameters are then used to explore various aspects of the production function as well as to measure scale economies with respect to each output. Following the description of the methodology, the cost model is applied to the Israeli bus transport sector which, in most relevant aspects, is very similar to these of other countries. Major conclusions from the empirical analysis are also presented.

Scale economies in the savings and loan industry before diversification

This study investigates scale economies in the savings and loan (S&L) industry prior to deregulation. Use of the translog cost function permits the estimation of U-shaped cost curves and of separate scale and branch size eonomies. The model also allows the cost elasticities to vary by size of financial institution. The model is estimated on a large nationwide sample of savings and loan associations. The results indicate significant economies of scale over a wide range of output for institutions that engage in traditional specialized activities.

A multiproduct cost elasticity

Abstract A cost elasticity with useful properties is proven to be inverse to multiproduct scale elasticity. The condition for the theorem is that the output combination as well as the input combination be cost minimizing. Ray output expansion is not needed.

A cost analysis of the lumber and plywood industries in two Pacific Northwest sub-regions

Translog cost models are used to represent production technologies for the Pacific Northwest lumber and plywood industries. Expressions for cost elasticities are obtained along with measures for derived demand, factor substitution, and biased technological change. Emphasis is placed on the behavior of costs over output, the derived demand and substitutability of inputs due to changes in factor prices and technology, and the resulting effects on product prices. Estimation results over the 1950–79 sample period suggest the presence of output economies in specific industries, a potential impact of reduced factor prices, and the lack of a consistent trend in technological change across products and regional industries.

Pricing behaviour and market power in North American non-ferrous metal industries

The paper considers the degree to which declining market power explains modifications in pricing behaviour observed since the late 1970s in the North American aluminium, copper, lead and zinc industries. More precisely, it relates those changes in pricing policies to the price elasticity of demand facing the dominant strategic group in each industry, the cost elasticity of supply and to the management's ability to coordinate or internalize conduct decisions. The results suggest that the firms in the copper and lead industries do not hold as a group any form of market power. In the case of the aluminum industry, a notable increase in the price elasticity of demand since the end of the 1970s, a sustained decrease in the concentration ratio and a rigid production process are weakening the presence of market power in that industry. The results are inconclusive in the case of the zinc industry since the determinants of market power move in opposite directions.

The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and West Germany. Mervyn A. King , Don Fullerton

Previous articleNext article No AccessBook ReviewsThe Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and West Germany. Mervyn A. King , Don Fullerton Ingemar Hansson and Charles StuartIngemar Hansson Search for more articles by this author and Charles Stuart Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 93, Number 4Aug., 1985 Article DOIhttps://doi.org/10.1086/261336 Views: 2Total views on this site Citations: 2Citations are reported from Crossref Copyright 1985 The University of ChicagoPDF download Crossref reports the following articles citing this article:Nadja Dwenger User Cost Elasticity of Capital Revisited, Economica 81, no.321321 (Oct 2013): 161–186.https://doi.org/10.1111/ecca.12054Nadja Dwenger Corporate Taxation and Investment: Explaining Investment Dynamics with Firm-Level Panel Data, SSRN Electronic Journal (Jan 2009).https://doi.org/10.2139/ssrn.1496335

Firm and industry cost functions for the control of emissions

The relation between firm (micro) and industry (macro) cost functions for the control of emissions are analyzed in this paper. Using aggregation methods found in modern production theory, it is demonstrated how industry cost functions can be constructed from firm functions. The model is illustrated with an empirical study of the Swedish Iron and Steel and Pulp and Paper industries where empirical micro functions are estimated and aggregated into macro relations. The main empirical result is that the cost of reduction at the micro level reveal strong economics of scale while the opposite is true at the macro level. The elasticity of cost with respect to reduced emissions varies (at the macro level) is around 1.5, indicating that a 1% increase in emission reduction increases cost with about 1.5%.

Qualitative Choice and the Blending of Discrete Alternatives

This paper takes a fresh look at discrete choice theory by observing that decision makers can deliberately blend discrete alternatives within an extended planning honrzon. Multinomial logit and generalized probit models are developed and their properties examined. These are then estimated and compared to the traditional myopic model using the travel diaries of a sample of commuters from Seoul, Korea. The new models yield travel cost elasticities which are substantially lower than those of the traditional approach.

Estimation of Economies of Scale in Banking Using a Generalized Functional Form

THIS PAPER ADDRESSES four issues that arise in the estimation of economies of scale in the commercial banking industry. First, a common assumption underlying many of the studies of economies of scale in banking is the assumption of a Cobb-Douglas production function with exogenous input prices. The use of a Cobb-Douglas production function facilitates the estimation of the output elasticity of cost. However, there does not appear to be any other reason, a priori, for such an assumption. This paper utilizes a Box-Cox (hereafter B-C) generalized functional form methodology to directly test the assumption of an underlying Cobb-Douglas production function. Second, if the assumption of a Cobb-Douglas production function is inappropriate as a description of the production process of the financial firm, estimates of the output elasticity may be biased. The sensitivity of the estimates of this elasticity to the choice of functional form can also be examined through the use of a generalized functional form methodology. Third, no general consensus has been reached regarding the appropriate definition of bank output. Thus, a diversity of measures of bank output have been employed in previous estimates of economies of scale in banking. The sensitivity of the estimated output elasticity of cost to the selection of several alternative measures of output is examined through the use of the generalized functional form methodology. Finally, the B-C estimates of the cost function for commercial banks can be used

Forecasting the cost of energy conservation in the residential sector: 1980–2000

This paper attempts to analyse and forecast the cost of energy conservation in the residential sector to the year 2000. It postulates that costs of conservation will increase as investors in conservation progress from the least cost conservation technologies, such as attic insulation and storm doors and windows, to heat pumps and solar water heaters. The methodology is that of regression equations and the data are costs of twenty types of capital stocks and the associated quantities of energy conserved. The regression equations of annualised cost on annualised quantities of conservation had a good fit and statistically significant coefficients so that the costs were increasing with increased conservation. The elasticity of cost with respect to conservation was 2·13 so that an increase in conservation by 1 per cent will increase its cost by more than 2 per cent. The cost-effectiveness of conservation was determined by comparing the cost of conservation per million Btu with the cost of purchasing an equivalent quantity of energy. It was concluded that energy conservation was cost-effective because the cost was only $0·84 per million Btu compared with the cost of purchasing energy, which was from two to eight times for natural gas to electricity.

Forecasting the cost of energy conser vation in the transportation sector

This paper attempts to estimate and forecast the cost of energy conservation in the transportation sector to the year 2000. It stipulates conservation as a depleting resource industry so that the costs tend to increase as additional quantities of energy are conserved. The methodology is that of regression equations and the data are from the US Department of Transportation and the Department of Energy. The regressions of annual costs on corresponding annual quantities of conservation have a good fit and positive and statistically significant coefficients. Hence the theory of energy conservation as a depleting resource industry or that of increasing cost is vindicated. The elasticity of cost with respect to conservation is 1·12 so that an increase in conservation by 1 per cent tends to increase cost by 1·12 per cent.

Scale and cost elasticity in the multiproduct case

Scale and cost elasticity in the multiproduct case

Equilibrium of a Residential City, Attributes of Housing, and Land-Use Zoning

This paper investigates the impact of land-use zoning such as building-height and building-density restrictions on housing rent, land rent, the design parameters of a building, and population density in a residential city. A theoretical land-use model with several new features is used. Building capital, the demand for, and the supply of housing are explicitly defined. Housing is treated as a multi-dimensional good, the elements of which are floor area, finishing cost of a dwelling unit, garden space, and building height. Building costs are the sum of structural frame costs, which are a function of building height and building area, and finishing costs, which are independent of design parameters. Zoning restrictions are explicitly considered. The utility and profit maximisations are simultaneous through the housing attributes, which are implicitly priced. There are six major conclusions: First, the relative gradients of the endogeneous variables, all with regard to distance, depend not only on demand specifications but also on structural frame cost elasticities, i.e. supply specifications. Secondly, in empirical tests the free market and zoning restrictions can be discriminated with regard to housing rent if, and only if, housing attributes are taken into account. Thirdly, both the relative housing-rent gradient and land-rent gradient are the same with zoning restrictions. Fourthly, the finishing cost of a dwelling unit depends on the household's taste and income and is the same in all cases. Fifthly, while in the case of the free market a residential city with one income class could consist of single-family homes only, this is impossible in the case of binding zoning restrictions. Sixthly, the cost of zoning restrictions to tenants, or the loss of utility in terms of money, can be obtained from the indirect utility function evaluated at the equilibrium.