General Inflation Rate Research Articles

Developments in digital journals

This article explores recent developments in the production and delivery of scholarly journal articles in digital form. It identifies the key stakeholders as authors, publishers, librarians and end users. It explores their concerns with regard to the digital journal production and delivery chain. It also explores the interrelationships of different stakeholder groups and considers how their concerns accord or conflict. The paper goes on to review cost and pricing developments. There appears to be no relationship between production costs and subscription prices of scholarly journals. Journals are priced according to what the market will bear, but, at the same time, the market is inelastic. As a result, prices have consistently increased annually at a rate well above the general inflation rate for the last two decades. Digital publishing by publishers has done nothing to relieve this problem. The ‘serials crisis’ has been the impetus for a number of developments that aim to use digital technology to reduce costs for the HE sector. These include alternative models of journal production such as that proposed by Harnad, and initiatives that aim to influence the structure of the market for scholarly journals with a view to driving prices down such as SPARC and HighWire Press. These developments are reviewed.

Trends in Medicaid physician fees, 1993-1998.

This study uses data on Medicaid physician fees in 1993 and 1998 to document variation in fees across the country, describe changes in these fees, and contrast how they changed relative to those in Medicare. The results show that 1998 Medicaid fees varied widely. Medicaid fees grew 4.6 percent between 1993 and 1998, lagging behind the general rate of inflation. This growth was greater for primary care services than for other services studied. Relative to Medicare physician fees, Medicaid fees fell by 14.3 percent between 1993 and 1998. Medicaid's low fees and slow growth rates suggest that potential access problems among Medicaid enrollees remain a policy issue that should be monitored.

The University in Ruins?

Just before his untimely death, Bill Readings finished writing a book that will be a center of discussion and an object of critical dialogic exchange for some time to come. The University in Ruins contains an argument that should be considered carefully by academics, administrators, and the general public.' This argument demonstrates that, while the culture wars may not be as heated as they were only a short time ago, the issues they raised are in no sense a thing of the past. Indeed the consequences of polarization and rhetorical overkill are still with us, as is the tendency of extreme ideological positions to meet in curious and unsettling ways. I would begin by noting that, in my own judgment, the contemporary academy is based on a systemic, schizoid division between a market model and a model of corporate solidarity and collegial responsibility. (Often one or the other model is invoked in ways that best serve the selfinterest of the commentator.) The market model is employed in the prevalent idea that undergraduates subsidize research and graduate education and that they are not getting their money's worth, notably at a time when tuition is very high and has been outpacing the general rate of inflation. The market model has also played a significant role in the establishment of criteria for teaching and reward in departments and in the setting of salaries and perquisites for individuals. The idea here is that a department, to be competitive nationally, must conform to national criteria, for example, with respect to faculty that it is trying to recruit. And

Index Number Issues in the Consumer Price Index

This paper addresses the following issues: what is an appropriate theoretical consumer price index that statistical agencies should attempt to measure; what are some of the possible sources of biases between the fixed base Laspeyres price index that statistical agencies produce and the theoretical cost-of-living index; and what factors will make the biases larger or smaller and how will the biases change as the general inflation rate changes? This paper addresses all of the issues mentioned above and discusses what statistical agencies can do to reduce the biases.

Forecasting Retail Food Prices Under Current Conditions

Many consumers remember the wild food price fluctuations in 1973 and 1974, when prices climbed almost 15% each year. Several factors led to the sharp increases: high energy prices, a high general inflation rate, and reduced supplies of domestically produced corn and wheat. When tight grain supplies and record-high wheat prices occurred in 1996, some analysts automatically forecasted significantly larger increases in overall food prices. But today's food price situation is very different from the 197374 period, so a spike in food prices due to tight supplies did not occur in 1996 and is not expected in the following years. Overall food prices rose a modest 3.3% in 1996, continuing the fairly stable trend of 3% annual increases since 1992.

Inflation, Taxation and the Valuation of Shares

Abstract A share valuation model is developed that takes account of the possibility of shareholding periods extending beyond one year, income taxes, capital gains taxes paid on realised gains and indexation for inflation. For an infinite dividend series, an optimal shareholding period is derived, which is shown to be related to the level of the after-tax risky rate, discounted at the growth rate, vis-a-vis the after-tax riskless rate, deflated for the general rate of inflation. In turn, this determines whether or not the value of the share is indifferent to the capital gains tax rate and the rate of inflation.

Effects of Warranty Execution on Warranty Reserve Costs

Previous research has usually assumed full execution of warranty if a product fails within the warranty time. This paper investigates the effect of warranty execution on the expected warranty reserves of a linear pro rata rebate plan. The failure distribution investigated includes the Weibull distribution with different parameter values. A weight function is used that depicts the effect of warranty execution. Several forms of this warranty execution modeling consumer behavior, which is influenced by factors such as the rebate plan, warranty time, product class, and warranty attrition, are studied. Expected present value of warranty reserves, by using a factor that includes the firm’s discount rate and the general inflation rate, are found for the different warranty execution functions. The impact of the warranty execution function on the warranty reserves per unit is explored. The paper also investigates the effects of the model parameters, such as the failure distribution parameters and differences in consumer behavior in claiming warranties on warranty costs per unit.

Rationing Resources While Improving Quality

MY LAST article concluded with a very unpleasant idea— that rationing services, refusing to cover a service from shared resources, is inevitable.¹Although no one knows the correct proportion of the gross domestic product (GDP) that health care should consume, it is clear that one way or another, sooner or later, the growth must be stabilized. Ideally, we would like to find all the required savings in administrative and operational inefficiencies, without having to touch the content of care. Unfortunately, an analysis of the increases in health care costs over the last 30 years indicates that about two thirds of the excess increase—the portion of the increase that exceeds the general inflation rate and population growth— is caused by increases in the "volume and intensity of services." The other third is caused by medical price inflation that exceeds general price inflation. These two forces exist in large part because

Four proposals for market-based health care system reform

A perfectly free, competitive medical market would not meet many social goals, such as universal access to health care. Micromanagement of interactions between patients and providers does not guarantee quality care and frequently undermines that relationship, to the frustration of all involved. Furthermore, while some North American health care plans are less expensive than others, none have reduced the medical inflation rate to equal the general inflation rate. Markets have always fixed uneven inflation rates in other domains. The suggested reforms could make elective interactions between patients and providers work more like a free market than did any preceding system. The health and life insurance plan creates cost-sensitive consumers, informed by a corporation with significant research incentives and abilities. The FFEB proposal encourages context-sensitive pricing, established by negotiation processes that weigh labor and benefit. Publication of providers' expected outcomes further enriches the information available to consumers and may reduce defensive medicine incentives. A medical career ladder would ease entry and exit from medical professions. These and complementary reforms do not specifically cap spending yet could have a deflationary impact on elective health care prices, while providing incentives to maintain quality. They accomplish these ends by giving more responsibility, information, incentives, and choice to citizens. We could provide most health care in a marketlike environment. We can incorporate these reforms in any convenient order and allow them to compete with alternative schemes. Our next challenge is to design, implement, and evaluate marketlike health care systems.

The National Health Service pharmaceuticals market. Recent and prospective reforms.

The way that medicines are supplied and paid for in the UK has altered dramatically since the National Health Service (NHS) was designed in 1948. As the government now faces acute pressure to reduce public sector borrowing requirements, careful control of public expenditure is necessary if sharp rises in taxes are to be avoided. Furthermore, advances in medical technology have dramatically increased the cost of healthcare since the NHS began. The doctor-patient relationship has also changed in that it is no longer based on authority but is evolving into a partnership based on informed consent. Consequently, there is a need for a radical review of the system. 1. The Current System and its Defects When the NHS was first established, all medicines were supplied free if prescribed by a doctor; however, this was unsustainable in the long term. The prescription charge has risen much faster than the rate of inflation since 1968, and since 1979 the charge has risen at more than 3 times the rate of general inflation.[l] The current charge of £4.25 is high compared with the cost of many medicines, and it exceeds the cost of about 50% of items. In 1990, the total revenue raised by the prescription charge was £250 million, or 8% of the total cost of drugs. 82% of UK prescription items were exempt 1 Full details of this study have been previously published. Green D, Lucas D. Medicard: a better way to pay for medicines? London: Institute of Economic Affairs, 1993. This article is published with permission. from the charge. The exemptions to the prescription charge are generous compared with those in other European countries (table I) and many are difficult to justify (table II). 48% of the population is exempt from prescription charges and only 18% of prescription items are subject to the charge, primarily because of heavy usage by the elderly, who are not expected to pay. Furthermore, exempt patients are not required to pay for any medicines at all, whereas in most other countries patients are only exempt from co-payment for treatments related to the specified disease. Moreover, chronic conditions requiring continuous drug therapy are not exempt in the UK. Conditions with a strong case for exemption include mental illness, Parkinson's disease, rheumatoid arthritis, cystic fibrosis, pernicious anaemia, asthma and Wilson's disease. Measures intended to influence doctors' prescribing include the imposition of the selected list in 1985; the general practitioner (GP) fundholding scheme, which gives fundholding practices a fixed budget; the indicative prescribing scheme, which applies to nonfundholding GPs; the encouragement of generic prescribing; supplying information to GPs about the cost of their prescribing decisions; and providing advice about therapeutic alternatives. Measures intended to influence doctors' prescribing and to control spending, such as the indicative prescribing scheme,[3] may adversely affect decisions made by doctors, with damaging results for patients. There is already evidence that therapeutic advances are being with

DRUG PRICE CONTROLS

The Manufacturers Association (PMA) has called for strong medicine to ease prescription drug prices in an effort to avoid the bitterest pill of all: mandatory government price controls. Under pressure from Congress and President Bill Clinton, PMA has proposed price-control mechanism that would voluntarily limit average annual drug price increases to the general rate of inflation. The industry initiative comes within weeks of Congressional Office of Technology Assessment report, Pharmaceutical R&D: Costs, Risks, and Rewards which suggests firms have priced their drugs 4.3% higher than necessary to recover R&D costs. Capitol Hill critics were generally unimpressed with the PMA proposal. A spokesman for Rep. Pete Stark (D.Calif.), who as chairman of the Ways & Means Committee's Subcommittee on Health advocates the establishment of drug price review board, says the PMA proposal does not change the Representative's opinion that drug prices are too high. PMA's proposal is a way for them ...

Reserpine and the Medical Marketplace

THE COST of treating hypertension in the United States exceeds $10 billion per year, 1 most of which is spent on medications. Prescription drug costs are rising at three times the general inflation rate and are the largest out-of-pocket medical expense for three fourths of all elderly patients. 2 An important cause of rising drug costs is a shift in physician prescribing from inexpensive old drugs to expensive new drugs, 3 which is driven to a considerable extent by new drug marketing. This sometimes includes active discouragement of the use of older drugs, as with diuretics, 4 but often lack of promotion alone is sufficient to cause an older drug to fall into disuse. 5 Inexpensive generic drugs are not advertised and are less likely to be discussed in symposia or by visiting lecturers or studied and reported on in industry-funded trials. Negative reports about these drugs go unchallenged, positive

Comment on Donald L. Redfoot's “Long‐term care reform and the role of housing finance”

At this writing, the Clinton administration’s proposal for reforming the nation’s health care system has just been released. The proposal includes an optional state-federal program that provides some coverage for long-term care, including home and community-based care for disabled persons. But there is no mention of housing. This iteration in the development of longterm care policy is only the latest in a long history of academic studies of the long-term care system and congressional proposals to reform it. Housing has essentially always been excluded. One must recognize this history of neglect to fully appreciate the significance of Don Redfoot’s article, “Long-Term Care Reform and the Role of Housing Finance.” The article joins what is unfortunately only a handful of writings that have addressed the link between housing and broader social welfare issues—in this case, long-term care (e.g., Cohen 1969; Newman 1990; Newman and Schnare 1992; Noelker 1982; Sussman 1979). Redfoot’s effort and publication of his article in Housing Policy Debate certainly increase the odds that at least the housing sector may begin to pay serious attention to the need to conceptualize the role of housing in long-term care. For this alone, Don Redfoot and Fannie Mae deserve much credit. Redfoot reviews a litany of ills associated with the current system of long-term care and, particularly, nursing homes: high costs that have grown faster than the general inflation rate; inappropriate placement in nursing homes of many elderly who do not require the level or intensity of services provided; the requirement that elderly persons pauperize themselves to qualify for Medicaid coverage of nursing home costs; and discrimination against nursing home applicants whose disability levels generate unacceptable cost-reimbursement ratios. His preferred solution to these problems is universal coverage for long-term care services—a much more extensive program than the optional capped block grant for home and community-based

SOME EVIDENCE ON LUMP SUM VERSUS CONVEX COSTS OF CHANGING PRICES

2 Two models in which results from adjustment are tested. One, an (s,S) pricing model, assumes lump-sum adjustment and predicts firms will make relatively large, infrequent changes. The other assumes convex adjustment and predicts frequent, partial adjustments. Survey data of firms'price behavior reveal patterns consistent with the (s,S) model. However, many of the patterns are also consistent with partial-adjustment rules, although the high percentage of firms which fix prices for a quarter or more casts doubt on the plausibility of the partialadjustment hypothesis. I. INTRODUCTION In new Keynesian economics price stickiness arises not because of wage rigidity so much as because either the gains to individual firms from changing prices are negligible or the of doing so deter full and immediate changes. As a result, nominal shocks which affect demand for the firm's product, as well as real shocks, give rise to changes in output. The nature and the timing of the effects of demand changes, such as those initiated by monetary policy, thus depend on how individual firms respond to the signals they receive. Sticky-price models based on of adjustment take at least two different forms. One assumes a lump-sum to changing prices, which leads to predictions firms generally keep prices fixed and make infrequent, relatively large changes. The other assumes convex adjustment and leads to the prediction firms make relatively small and frequent partial adjustments toward a target level. Evidence drawn from a series of surveys conducted by the National Federation of Independent Business will be used to test the predictions from these two types of models. While the data do not allow a definitive test between the two models, the available evidence supports the model with lump-sum of changing prices with the important proviso there be substantial heterogeneity in the relative to firms of making changes so the frequency and size of changes vary considerably across firms. II. (s,S) RULES WITH LUMP-SUM COSTS OF PRICE CHANGES How frequently should a firm change its price? When a change takes place, how large should it be? Sheshinski and Weiss [1977] and Barro [1972] provided the first answers to these questions. In their models an individual firm incurs a lump-sum when changing its nominal price, and the firm's profits depend on its real price, where real is defined as the firm's nominal divided by an index of the prices of all other firms in the economy. Sheshinski and Weiss assume the firm tries to maximize the present value of its real profits. Their solution amounts to what is known in the optimal inventory literature as an (s,S) rule, in which S-s units are ordered when stocks run down to s. As applied to a pricing rule, when prices rise elsewhere in the economy, the firm's real falls to a lower bound s, at which point the firm raises its nominal so its real jumps to S. They prove a more rapid general inflation rate calls for a lower s and higher S. Furthermore, subject to a monotonicity condition, a higher general inflation rate calls for a shorter time between changes. After showing a number of numerical examples, Sheshinski and Weiss report that numerical experiments with a quadratic profit function ... give high intervals between changes (1-2 years) even with very low adjustment costs [1977, 300]. When the profit function is flat in the neighborhood of the profit-maximizing real price, there is little benefit from changing price. A similar argument appears in the menu cost explanation for real effects of nominal disturbances. In the absence of private incentives for individual changes, there may be real aggregate effects of nominal disturbances. For example, see Mankiw [1985], Akerlof and Yellen [1985], Kuran [1986], Blanchard and Kiyotaki [1987]. …

The Effects of Cost Containment on the Care of Elderly Diabetics

The study in this issue of theARCHIVES, entitled "The Effects of Cost Containment on the Care of Elderly Diabetics,"¹poses a number of important questions and offers an opportunity for consideration of many issues plaguing health care strategists today, including the interactions of cost containment and quality, medical care processes and outcomes, and health services planning vs rationing. The study on the management of diabetics by Retchin and Preston¹contributes useful information to the debate about the impact of cost containment on the quality of the process of health care in a sector of the health care system that finds itself under increased scrutiny as public and corporate belts are tightened and concern is generated about the adverse effects of cost-containment strategies. Health care costs are continuing to grow far above the general rate of inflation, and physicians and managers alike need to examine practice patterns carefully.

CEFIC Expects Moderate Growth in Chemicals in West Europe This Year

Growth in production in the chemical industry in Western Europe will likely be about 2.5% this year over 1989, predicted the European Chemical Industry Federation (CEFIC) at its annual meeting two weeks ago in Paris. That is only slightly lower than the expected increase of 3% in both gross domestic product and all manufacturing production. Production slowed considerably in the second half of 1989 because of destocking, as companies ran down inventories. CEFIC analysts assume that further destocking will continue during the first half of 1990, as a result of low prices. Producer price increases will probably be below the rate of general inflation, reflecting the strong competition in the European chemical industry and the fact that prices for oil and other raw materials are expected to rise only marginally. For the fourth consecutive year, according to CEFIC, West European domestic chemical demand in 1989 was the main driving force for the industry's sales. Exports ...

Evaluating STAT Testing Alternatives by Calculating Annual Laboratory Costs

Until 1984, when the Deficit Reduction Act (DRA) was passed, hospitals and their clinical laboratories were fully reimbursed for nearly all test analyses that were performed. The DRA established a Medicare system that indirectly pays for laboratory tests as part of a total-care reimbursement fee based on the diagnosis-related group (DRG) that classifies the patient’s clinical condition. Under this system, a hospital makes money if its actual patient care costs are less than the DRG reimbursement, or it loses money if its costs exceed the predefined DRG level. Two-thirds of health care reimbursements are now paid by Medicare or similar prospective payment programs. In addition to the prospective payment environment, several emerging trends impact the financial management of a hospital laboratory service: (1) Competition for Resources-Laboratories now must compete with other hospital departments for available resources. More than 70 percent of operating laboratories have experienced budget reductions.’ (2) Increased Costs-The cost of operating laboratories has increased faster than the general inflation rate, primarily due to an increased volume of testing caused by advances in technology, worry over malpractice liability risk, easier access to testing, and an increase in the acuity of illness in our aging population.23 (3) Higher Standard of Care Demands-Clinicians expect laboratories to quickly deliver reliable results to help them make immediate patient management decisions. The American Heart Association and the Emergency Care Research Institute recommend, for example, that blood gas and electrolyte results in open heart surgery be available within five minutes.4’5 The expected required turnaround time for these same tests in other critical care settings varies, but it is generally in the range of five to 15 minutes. These standards are

Alternative Liability Regimes for Medical Injuries

In the U.S. physicians and other medical providers are subject to a negligence rule of liability. Under a negligence rule a patient who is injured as a result of medical care is entitled to compensation only if he or she can show that the injury was caused by the physician's failure to take due care. Given a finding of liability, compensation is determined by a civil jury. In recent years the frequency of malpractice claims has been increasing at 10 percent a year and claim severity (average amount per paid claim) has increased at twice the rate of general inflation. Malpractice insurance rates increased at 25 to 40 percent a year between 1985 and 1987 (Danzon, 1988). Coverage for high risk specialities and excess limits of coverage have reportedly been unavailable. Concern over this crisis has generated serious consideration of radical alternatives to the present negligence system, including nofault compensation schemes along the lines of those adopted in Sweden and New Zealand.

Commodity Prices and Inflation: Evidence from Seven Large Industrial Countries

This paper examines the relationships between movements in primary commodity prices and changes in inflation in the large industrial countries. It begins by developing a two-country model in order to examine the theoretical effects of monetary, fiscal, and supply-side disturbances on commodity and manufactures prices and on exchange rates. It is shown that if monetary shocks dominate, then commodity prices should lead general price movements, and the level of commodity prices should be correlated with the general inflation rate. Non-monetary shocks generally weaken these relationships, but such disturbances may cancel out for broad indexes covering a wide range of commodities. Country-specific commodity price indexes are developed for the major industrial countries. The weights assigned to different commodities vary substantially across countries. Nonetheless, when the indexes are expressed in a common currency, they tend to be highly correlated over time, except when sharp movements occur in certain commodity prices. The major source of contrast across countries in the behavior of the indexes derives from exchange rate movements. Several empirical tests broadly support the conclusions of the theoretical model, with relatively few differences across countries. Three main tendencies may be cited. First, low inflation in industrial countries has tended to be associated with low levels of commodity prices, and conversely; commodity-price levels are cointegrated with consumer-price inflation rates. Second, there has been some tendency for movements in commodity prices to precede changes in general inflation rates by a few months, although it is not clear whether this tendency is strong enough to be a reliable aid in forecasting the rate of inflation. Third, there s a strong and fairly reliable tendency for turning points in general inflation rates. Commodity prices thus appear to contribute to predictions of turning points in inflation, predictions of inflation rates but more strongly to predictions of turning points in inflation.

Optimal Price Dynamics and Speculation with a Storable Good

This paper analyzes as a dynamic game the optimal price and storage strategies of, respectively: (a) the seller of a storable good, who must keep pace with inflation but incurs a cost to changing his price; (b) his customers, who speculate on the timing of price adjustments to buy and store just before. A unique (Markov) perfect equilibrium is shown to exist, and is fully characterized. rt generally involves a phase of mixed strategies, during which the seller tries to deter speculation by injecting uncertainty into its price dynamics, while speculators store in increasing numbers, with possibly a final run on the good. The stochastic price policies of a large number of such firms are shown to aggregate back to a price index growing at the rate of general inflation in response to which they arose. The model thus establishes that: (a) a constant rate of aggregate inflation can at the same time generate and cover up significant uncertainty and social costs at the microeconomic level; (b) speculation can be destabilizing and socially wasteful, even in the absence of shocks and imperfect information. Most importantly, they provide a theoretical foundation for the frequently encountered claim that inflation causes price uncertainty.