Low Opportunity Cost Research Articles

Does Heterogeneity Help in Overcoming the Public Goods Dilemma in a Sequential Contribution Environment?

This paper compares behavior of heterogeneous groups with homogeneous groups in public goods production. In heterogeneous groups members differ in their opportunity costs of contribution, while in homogeneous groups, members have the same opportunity costs. Members of three-player groups sequentially make all-or-nothing contributions towards the production of a public good where contribution decisions, payoffs, and opportunity costs of preceding players in the group are known to each group member. We find that heterogeneous groups perform better than homogeneous groups controlling for average opportunity costs at the group level. Our results also indicate that subjects develop an endogenous contribution norm to sustain public goods production where subjects in the first positions, and subjects with relatively low opportunity costs contribute most often.

Potential of cultivation of Gliricidia (Gliricidia sepium) in coconut triangle for bioenergy generation

Evaluation ofleast cost and environmentally friendly energy alternatives is essential to overcome theprevailing energy crisis. Dendro thermal energy generation has been identified as one of the bestoptions due to its potential as a low cost and locally available environmentally sound energy source.However. this potential has not been exploited by the people in most of the potential areas whichhinder the further expansion of establishing bio-energy plants. With this background, a study wasundertaken to evaluate the present status and the potential of gl iricidia (Gliricidia sepium) cultivationin coconut triangle for bio-energy generation. Gliricidia sepium is a multipurpose crop used forwood, fuel wood, fodder and nitrogenous organic fertilizer. The wood is presently used for thermalenergy i.e., electricity generation for the national grid (Walapane); electricity generation for off-gridrural electrification (Kakkapalliya, Thanamalwi la);industrial heat application (Madarnpe, Kottawa etc.)and household cooking. The study further attempted to determine the factors associated with thesupply of gliricidia for bio-energy generation and attitudes of the coconut growers towards the gliricidiaintercropping. Finally, it examined the strengths and weaknesses of the supply as well as demand inorder to make sound recommendations to promote gliricidia cultivation in coconut lands for bio-energygeneration.Two field surveys were simultaneously conducted to gather the necessary data. The first survey dealtwith the existing suppliers in Anarnaduwa area, while the second survey was carried out in Kuliyapitiyaarea with the potential growers. In addition, a case study was conducted with successful growers.Logit modeling was used to analyze the data.The study found that the opportunity costs ofland and labour of the both sites of study were fairly low.Moreover, the investment on agriculture related activities in marginal coconut lands were extremelylow. Further the study revealed that even though there was a positive attitude and high demand forgl iricid ia cultivation, there is an inadequate supply to the thermal plants for bio-energy generation. Thetechnical information on growing gliricidia for bioenergy generation had not disseminated into thepeople of the area mainly due to lack of awareness programmes. The results of the logit analysisrevealed that income from coconut, total highland availability and willingness to become a contractfanner are significant variables that influence the willingness to cultivate gliricidia. The case studyrevealed that the cultivation of gliricidia appear to be economically profitable and technically feasibleoption given that its low input nature, availability of marginal coconut lands, low opportunity cost oflabour and less income opportunities avai lable in these areas, Government involvement and having areasonable price with stable market for gliricidia will encourage the public to enter into this businesswhereas effective extension service is a must for making people aware.

What factors influence participation in payment for ecosystem services programs? An evaluation of Ecuador's SocioPáramo program

PES programs have been touted as a means to achieve conservation goals while also alleviating poverty and promoting rural development. However, the degree to which these goals are met depends, in part, on accessibility and desirability of programs targeting rural communities and smallholders. Empirical research on factors motivating or dissuading PES landowner participation remains limited and a more complete understanding of these factors is critical to improving PES social equity outcomes. In this paper, we evaluate factors facilitating and constraining participation in Ecuador's SocioPáramo program, a recently launched PES initiative targeting highland Andean grasslands (páramos). We conducted semi-structured interviews with all community landowner participants who had enrolled by May 2011, the majority of individual landowner participants who had enrolled by October 2010, and several non-participant communities and individuals. We found that, while SocioPáramo is attracting substantial participation among rural farmers and communities, a number of factors, including land tenure requirements, legal or biophysical land-use restrictions, and a need for pre-existing social, human, and financial capital, make SocioPáramo more accessible and desirable to larger, and often wealthier, landowners. While motivations for enrolling in the program varied, a key similarity among participants was access to alternative livelihood sources, a low opportunity cost associated with program land-use regulations, and a high value placed on the water provisioning services of the páramo. The majority of participants described incentives as a “reward” for conserving, as a means to strengthen existing conservation efforts or land security, or as a means to compensate for legal or biophysical land use restrictions. Our results suggest that the broader context of land tenure security, access to social capital, environmental attitudes, and alternative livelihood strategy development may require more attention in order to achieve greater participation among rural smallholders and communities. These results provide useful lessons for developing and adapting this and other PES programs so that they can better meet social goals.

Voting as a signaling device

In this paper, citizens vote in order to influence the election outcome and in order to signal their unobserved characteristics to others. The model is one of rational voting and generates the following predictions: (i) The paradox of not voting does not arise, because the benefit of voting does not vanish with population size. (ii) Turnout in elections is positively related to the size of the local community and the importance of social interactions. (iii) Voting may exhibit bandwagon effects and small changes in the electoral incentives may generate large changes in turnout due to signaling effects. (iv) Signaling incentives increase the sensitivity of turnout to voting incentives in communities with low opportunity cost of social interaction, while the opposite is true for communities with high cost of social interaction. Therefore, the model predicts that smaller communities have more volatile turnout than larger communities. JEL-Code: C700, D720, D800.

Trade-off analysis of ecosystem services in Eastern Europe

In this paper we assess trade-offs between ecosystem services in a spatially explicit manner. From a supply side perspective, we estimate opportunity costs, which reflect in monetary terms the trade-offs between ecosystem services due to a marginal land use change. These are based on estimation of the frontier function, which gives the feasible bundles of ecosystem services that can be generated. For this, a two-stage semi-parametric method is applied and spatial data are used on agricultural revenues, cultural services, carbon sequestration and biodiversity for 18 Central and Eastern European countries. Based on the estimates, we assess which regions are most suitable for expanding any of the ecosystem services. Where opportunity costs are low, a further expansion of any of the ecosystem services is cost-effective. If areas are targeted carefully, joint improvement of several ecosystem services can be reached. If carbon sequestration levels are to be increased, it is best to focus on areas already having high sequestration levels because opportunity costs of carbon sequestration decrease with increasing sequestration levels. For biodiversity and cultural services the pattern is less clear as low opportunity cost were found both in areas rich and poor with these services.

Incorporating opportunity costs in strategic management research: The value of diversification and payout as opportunities forgone when reinvesting in the firm

This article explores the theoretical and empirical implications of incorporating forgone opportunities in strategic management research. Drawing on the well-studied literature examining whether firms should reinvest in focused businesses or pursue alternatives of diversifying and/or paying out excess cash to shareholders, hypotheses are developed for when diversification and payout policy, as the opportunity costs of reinvesting in the firm’s original businesses, will present firms with higher and lower opportunity costs. Empirical results suggest that the value of reinvestment in existing businesses is higher for firms facing lower opportunity costs of forgoing other alternatives (e.g. diversification and paying out) than for firms that have much higher opportunity costs of forgoing these same alternatives. Implications for incorporating opportunity costs into the diversification literature and the broader strategic management literature are also explored.

Resource constraints and partial adoption of conservation agriculture by hand-hoe farmers in Mozambique

Conservation agriculture is a set of practices widely promoted to increase agricultural productivity while conserving soil through reduced tillage, mulching and crop rotation. Adoption levels are low across southern Africa and farmers often use only some components on small portions of their land. This study uses in-depth interviews and partial budget analysis to explore adoption of conservation agriculture in Mozambique's Angonia highlands. Farmers described many benefits but there was little sign of adoption beyond plots where non-governmental organizations promoting conservation agriculture had provided inputs. Most farmers were adamant that conservation agriculture could perform better than conventional agriculture only if they applied fertilizer or compost. With current costs and prices, conservation agriculture is unprofitable except on small plots for farmers with low opportunity cost of household labour. These findings suggest that conservation agriculture can improve maize yields but capital and labour constraints limit adoption to small plots in the absence of free or subsidized inputs. Given the current ranges of prices for grain and inputs these manual forms of conservation agriculture will not be adopted on a large scale in Angonia. Nevertheless, small conservation agriculture plots can provide farmers with high yields where constraints are lowest.

Fishing Farmers: Fishing, Livelihood Diversification and Poverty in Rural Laos

The relationship between fishing, livelihood diversification and poverty was investigated in the lower Mekong basin, in Laos, where fishing forms an important, but usually secondary part of rural livelihoods. Results from a household survey show that participation in fishing is common and positively associated with higher occupational diversity and more agricultural activities. This is likely due to the low opportunity costs associated with many forms of fishing and factors such as tradition, enjoyment of fishing, underutilised labour and low capital requirements. Alternative livelihoods within the rural setting are therefore unlikely to cause fishers to leave the fishery, but instead strengthen the livelihood portfolio as a supplementary activity. Fishing is not an activity only for the very poorest households, but is undertaken by all wealth groups. However, fishing forms a greater proportion of income, employment and food security for the poor and is important in households with poor quality farm land.

Children, Kitchen, Church: does ethnicity matter?

Abstract Ethnic differences in the allocation of non-market time are important, as they may shed more light on the integration level of ethnic minorities and on the factors that affect both household productivity and ethnic identity. In this paper we examine the role of ethnicity and gender by analyzing differences in the time spent on a range of activities employing the 2000 UK Time Use Survey. Based on the economics of religion and identity economic models, we hypothesize that if ethnic minority women have lower opportunity costs of time and a strong ‘ethnic’ or ‘traditionally female’ identity, they will engage more in ‘traditional’ home activities. Double-hurdle regression results indicate that while the effect for childcare is not significant when estimated for parents only, non-white women spend significantly more time on food management and particularly religious activities than white women, with the greatest effect of the latter being for Pakistani and Bangladeshi women.

After the Farm Crisis: Religiosity in the Rural United States

The farm crisis in the United States in the 1980s had profound effects on rural, agricultural regions of the country, but almost no impact on urban and suburban areas. I use a difference-in-difference methodology and find that religiosity as measured by religious attendance increased significantly in areas impacted by the crisis for those who worked in agriculture. Chen (2010) describes increased religiosity in Indonesia following the 1998 financial crisis, and this paper demonstrates a similar response to severe financial distress in the United States. I also find evidence that this increase is not due to a lower opportunity cost of time, as those who are currently employed have higher levels of attendance than those who are not. I hypothesize that the increased religiosity results from religious institutions' ability to provide public goods, both financial and emotional, in the form of community support.

Improving the efficiency of conservation policies with the use of surrogates derived from remotely sensed and ancillary data

Conservation policies are emerging in many places around the world, many of which involve payment for ecosystem services (PES) schemes. PES schemes provide economic incentives for forgoing land uses that reduce the provision of ecosystem services. The efficiency of such schemes depends not only on the ecosystem services provided by an area but also on the willingness of local people to forgo their land use activities. Targeting land for enrollment in PES schemes on the basis of the potential provision of ecosystem services and on the willingness to forgo certain economic activities, may therefore improve the efficiency of these schemes. The objective of this study was to develop a targeting approach, based on three surrogates derived from remotely sensed and ancillary data, for identifying land to be enrolled in one of the largest PES schemes in the world: China's Grain-to-Green Program (GTGP). The GTGP encourages farmers to return steep hillside cropland to forest by providing cash, grain and tree seedlings. The three surrogates used in the targeting approach were slope index, cropland probability, and GTGP enrollment probability. Combining these surrogates through Bernoulli trials allows targeting areas under cropland, with low opportunity costs for farmers and with potentially high soil erosion and landslide susceptibility. Results of applying the targeting approach in a case study area (Baoxing County, Sichuan Province, China) show that around half of the land currently enrolled is placed in areas with gentle slopes and tend to be located distant from forest areas. This reduces the potential benefits obtained from the GTGP. Targeting land using the proposed approach may double the benefits obtained from the program under the same budget, thus improving its efficiency. The approach may be applied to the entire GTGP implementation area in China and with proper modifications it may also be applicable to similar PES programs around the world.

Is Inheritance Morally Distinctive?

This paper examines a rarely-discussed argument for the right to bequeath wealth. This argument, popular among libertarians, asserts that opposition to the practice of inheritance is prone to over-generalize, such that opponents of inheritance cannot avoid condemning other uses of private property, like gift-giving. The argument is motivated by an interesting methodological claim, namely, that the morality of bequest ought to be evaluated from the perspective of the donor, and not evaluated in ways that invoke the effects of bequest on the distribution of wealth. This paper argues that this donor-centric approach ultimately favors restricting the right of bequest. Specifically, I maintain that bequest generally carries a lower opportunity cost than other uses of property. Accordingly, inheritance tax is less coercive than other taxes, and bequest is less obviously as generous an act as gift giving. While the arguments made here will encourage traditional opponents of inheritance (such as egalitarians), I also suggest why they might be welcomed by at least some types of libertarian.

Cost Analysis of Community-Based Daily and Weekly Programs for Treatment of Moderate and Mild Wasting among Children on Nias Island, Indonesia

Ready-to-use food in the form of biscuits (RUF-Nias biscuit) was locally produced for rehabilitation of moderately and mildly wasted (weight-for-height z-score > or = -3 to < -1.5 SD) children on Nias Island, Indonesia. Daily programs were performed in semiurban settings, and weekly programs took place in rural areas. To analyze the cost of daily and weekly distribution and supervision of RUF-Nias biscuit programs. The costs of the daily and weekly programs were derived from the financial report and interviews with program implementers and participating households. Costs were calculated on the basis of total rehabilitation costs per child per day required to achieve a target weight-for-height z-score > or = -1.5 SD in daily and weekly programs. Institutional costs to the implementing organization were similar for both programs (approximately US $4 per child per day). The daily programs resulted in a significantly higher proportion of recovered children (78.6% vs. 65.4%) and higher weight gain (3.7 vs. 2.2 g/kg/day) than the weekly programs. About 6% to 7% of the total cost of the programs was accounted for by locally produced RUF-Nias biscuits. The social cost borne by the community for the weekly programs was about half that for the daily programs. The daily programs achieved better results for the implementing organization than the weekly programs; however, the weekly programs were preferred by the community because of the lower time constraints and the lower opportunity cost of time. The willingness of community and household members to invest their time in more intensive activities in the daily programs led to better program outcomes.

Cash Holdings, Market Frictions and Monetary Policy: An Investigation of Increase in Cash Holdings

We investigate the secular increase in the corporate cash holding over the period 1980-2006. We show that along with firm characteristic–related variables, monetary policy and banking structure have a significant bearing on corporate cash holdings, as they determine the opportunity cost of holding cash as well as access to cash. Specifically, we establish that the need to hold cash was complemented by the ability to hold cash during the given period due to low opportunity cost. We also investigate the role of cash as collateral for financially constrained firms. Our findings allow us to provide insight into the cross-sectional variation.

The economic performance of jatropha, cassava and Eucalyptus production systems for energy in an East African smallholder setting

AbstractThis study evaluates the potential economic feasibility of three smallholder energy crop production systems (jatropha, cassava and eucalyptus) under typical semi‐arid conditions in Eastern Africa. This feasibility is determined by assessing net present values (NPV), internal rates of return (IRR), benefit‐cost ratios (BCR) and payback periods (PBP). In addition, the production costs are compared to the costs of reference energy systems, petrol, diesel and pellets. Low and intermediate input systems are considered and specific attention is paid to the opportunity cost of labour, by considering both family labour (no labour costs) and hired labour. The results show that all family labour settings have positive NPVs and high IRR and BCR values. Moreover, cassava has the highest family labour NPV (2900–5800US$ ha−1) and the shortest PBP, but the required investment costs are high in comparision with the other crops. If hired labour is used, the NPV of eucalyptus is highest (380–1400$/ha−1), and it is also the least sensitive to changes in wages and yields. Jatropha performs best only for the indicator IRR and only with family labour or low labour opportunity costs. The analysis and comparison of bioenergy production costs shows that eucalyptus pellets (2.6–3.1$ GJ−1) are competitive compared with reference pellets at current market prices (5$ GJ−1). Jatropha SVO (19$ GJ−1) and cassava ethanol (19–36$ GJ−1) are only competitive with fossil diesel (21$ GJ−1) and petrol (25$ GJ−1) in a family labour setting. At current values jatropha biodiesel (24–37$ GJ−1) is not competitive. The economic performance is sensitive to variations in crop yields and yield data are highly uncertain. However, this study demonstrates that there is considerable potential for increasing the economic performance by further improvements in yield, harvesting efficiency and conversion efficiency as well as reductions in transport and packaging costs.

The varying relationship between helping and individual quality

Individuals of different quality often differ in their helping behavior, but sometimes it is the high-quality individuals who help most (e.g., human meat sharing, vigilance) and other times it is the low-quality individuals (e.g., reproductive queues, primate grooming). We argue that these differences depend on individual differences in the performance costs of actually helping, the opportunity costs from forsaking alternative activities, and the fitness benefits for engaging the help. If helping is more difficult for some individuals to do (quality-dependent help), it will usually be done by high-quality individuals, whereas help that all individuals could do equally well (quality-independent help) will be done by whoever pays lower opportunity costs. Our model makes novel predictions about many kinds of helping, allows us to categorize different types of helping by their relationship with individual quality, and is general enough to apply to many situations. Furthermore, it can be generalized to any other type of (nonhelping) behavior where there are individual differences in benefits, performance costs, or opportunity costs.

Dilemma of Third World Countries - Problems Facing Pakistan Energy Crisis a Case-in-Point

Developing countries of the world are facing enormous problems and Pakistan is no exception. Pakistan is a developing country in South Asia which is the fourth largest populated country in the region and sixth largest country in the world. This study on Pakistan is a case-in-point for other developing nations of the world. So, it is important to highlight these problems including the energy crisis which has assumed serious dimensions during the last three to four years. Pakistan is facing serious problems in almost all the sectors, but energy problem has impacted the economic development severely. Apart from identification of the problems being faced by Pakistan, the paper focuses on the public perception and suggestions to solve them. Lack of governance, corrupt leaders, inadequate and faulty planning, and non-availability of speedy justice are the most critical of a long list of problems being faced by Pakistan. Pakistan is facing energy crises in the shape of Supply /Demand gap, Interrupted Supply, Energy losses, Energy Conservation, Quality of Energy Resources, Quality of energy services, inefficient appliances, Lack of infrastructure, Deforestation, Environmental issues, Health issues, Low BTU value, opportunity cost, fertilizer issues, Renewable and Nuclear Energy Promotion issues, etc. In the paper, relevant conclusions are drawn to suggest some solutions.

Explaining the Development–Civil War Relationship

The vast majority of civil wars occur in economically less developed countries, as measured by GDP per capita. Two suggested explanations for this are prominent: one emphasizing that poverty facilitates rebel recruitment due to lowered economic opportunity cost of rebelling, and the other highlighting that low state reach and capacity give political and military opportunity for organizing insurgency. I argue that the latter account is more powerful. Low state reach is vital not only to rebel survival; it also enables rebels to obtain control over remote settlements, which facilitates the effective use of persuasion, coercion, organization, and economic rewards for mobilizing recruits and other resources. Although low economic opportunity costs can ease recruitment, it may not be essential if such tools are available. The argument is supported by a quantitative analysis covering 133 countries from 1989 to 2006. Countries experiencing civil war were distinguished more by low state reach (measured by road density, telephone density, and % urban of the population) than by depth of poverty (measured by the mean income of the poorest decile). Moreover, the negative association between GDP per capita and civil war risk disappeared when controlling for state reach, but remained strong controlling for poverty.

How Immigration May Affect U.S. Native Entrepreneurship: Theoretical Building Blocks and Preliminary Results

This paper describes the theoretical underpinnings and provides empirical evidence for a model that predicts a positive impact of immigration on entrepreneurial activity. Immigrants, we hypothesize, facilitate innovation and entrepreneurship by being willing and able to invest in new skills. At the heart of this theoretical prediction is the observation that human capital not immediately valued in the U.S. labor market is useful for learning new skills. Because immigrants face a lower opportunity cost of investing in new skills or methods, this transfer of source-specific skills to the U.S. may lead immigrants to be more flexible in their human capital investments than observationally equivalent natives. Areas with large numbers of immigrants (even if they are not self-employed) may prove to be areas in which entrepreneurship and innovation are easier to accomplish. Our theory offers a unique perspective on the contributions of immigrants to economic development beyond traditional perspectives that focus on low-cost immigrant labor or immigrant entrepreneurship.

The Role of Preferences and Opportunity Costs in Determining the Time Allocated to Housework

The time devoted to housework in couple households is substantial. Research on intrahousehold time allocations has generally assumed that housework is a necessary evil and that the partner with the lower opportunity cost of time in the market will devote more time to home production. In reality, households/individuals are likely motivated to maximize happiness, and preferences regarding even mundane household chores differ considerably. We use information on preferences, opportunity costs, and time use from the 2000-2001 United Kingdom Time Use Survey to examine the time partners spend doing laundry, ironing, cleaning, and food shopping. While compared with other household chores such as gardening and do-it-yourself repairs, the selected activities are generally less enjoyable, preferences do vary across the population and are correlated with reported time use. Joint multivariate analysis of his and her time on weekend and weekday days as well as maid service reveals that her opportunity cost of time matters substantially more than his, but that his preferences play a greater role than hers.