Net Marginal Cost Research Articles

The ownership effect on corporate investment distortion in the transitional economies: Mitigating or exacerbating?

This article analyzes how asymmetric information in corporate management and equity financing distorts corporate investment and how different corporate ownership (government, managerial, and foreign) affects investment distortion in a transitional economy. When managerial entrenchment is sufficiently high, government ownership further distorts investment by biasing downward managers’ net marginal cost of investment; in contrast, managerial and foreign ownership counter the bias and thereby reduce investment distortion. Furthermore, unlike government ownership, managerial and foreign ownership mitigate rather than exacerbate the extent to which high entrenchment distorts investment. An econometric analysis of a large sample of Chinese public firms provides strong evidence in support of these theoretical predictions.

Home Health Care Quality, Its Costs and Implications for Home Health Value-Based Purchasing.

The Home Health Value-based Purchasing (HHVBP) demonstration, incorporating a payment formula designed to incentivize both high-quality care and quality improvement, is expected to become a national program after 2022, when the demonstration ends. This study investigated the relationship between costs and several quality dimensions, to inform HHVBP policy. Using Medicare cost reports, OASIS and Home Health Compare data for 7,673 home health agencies nationally, we estimated cost functions with instrumental variables for quality. The estimated net marginal costs varied by composite quality measure, baseline quality, and agency size. For four of the five composite quality measures, the net marginal cost was negative for low-quality agencies, suggesting that quality improvement was cost saving for this agency type. As the magnitude of the net marginal cost is commensurate with the payment incentive planned for HHVBP, it should be considered when designing the incentives for HHVBP, to maximize their effectiveness.

Inclisiran as Adjunct Lipid-Lowering Therapy for Patients with Cardiovascular Disease: A Cost-Effectiveness Analysis

Inclisiran inhibits hepatic synthesis of proprotein convertase subtilisin-kexin type 9 (PCSK9). The comparison of inclisiran with statin versus statin alone in the ORION-10 trial demonstrated significant reductions in low-density lipoprotein cholesterol (LDL-C). Our study explored whether the use of inclisiran with statin versus statin alone for secondary prevention of cardiovascular events is cost effective from the Australian healthcare perspective, based on the price of currently available PCSK9 inhibitors. A Markov model was developed based on the ORION-10 trial to model outcomes and costs incurred by patients over a lifetime analysis. The three health states were 'alive with cardiovascular disease (CVD)', 'alive with recurrent CVD', and 'dead'. Cost and utilities were estimated from published sources. The cost of inclisiran was estimated from the annual cost of evolocumab, a PCSK9 inhibitor currently available in Australia (AU$6334, based on 2020 data). Outcomes of interest were incremental cost-effectiveness ratios (ICERs) in terms of cost per quality-adjusted life-year (QALY) and cost per year of life saved (YoLS). All costs, QALYs and YoLS were discounted at 5% per annum in line with Australian standards. Among 1000 subjects followed-up over a lifetime analysis, inclisiran with statin compared with statin alone prevented 235 non-fatal myocardial infarctions (NFMIs; 151 NFMI and 84 repeat NFMI cases) and 114 coronary revascularisation cases, and increased years of life by 0.549 (discounted) and QALYs by 0.468 (discounted). At an annual price of AU$6334, the net marginal cost was AU$58,965 per person. The above values equated to ICERs of AU$107,402 per YoLS and AU$125,732 per QALY gained. Assuming a willingness-to-pay threshold of AU$50,000, inclisiran would have to be priced 60% lower than other available PCSK9 inhibitors to be considered cost effective. As an adjunct therapy to statin treatment in those who have persistently elevated LDL-C despite optimal statin therapy, inclisiran is effective in reducing cardiovascular events in patients with atherosclerotic CVD. Inclisiran is not cost effective from the Australian healthcare perspective, assuming acquisition costs of current PCSK9 inhibitors. The cost of inclisiran would have to be 60% lower than that of evolocumab.

Development of a multi-objective optimization model for determining the optimal CO2 emissions reduction strategies for a multi-family housing complex

Measures to improve the building energy efficiency of deteriorated multi-family housing complexes (MFHCs) require trade-offs between economic and environmental feasibility, and therefore these aspects should be considered simultaneously. Towards this end, this study aimed to develop a multi-objective optimization model for determining the optimal CO2 emission reduction (CER) strategies for MFHCs that can be used not only by experts but also by non-experts. This study used integrated multi-objective optimization with a genetic algorithm as an optimization methodology. The developed model, which considers the five optimization objectives (i.e., initial investment cost, net present value, savings-to-investment cost, CER, and marginal abatement cost) at the same time, can review a total of 31,200 scenarios combined with four energy saving measures (i.e., insulation, window, lighting, and shading systems). To verify the feasibility of the developed model, this study conducted a case study targeting ‘D’ MFHC in South Korea. First, the accuracy of the calibration of the energy simulation model for ‘D’ MFHC (coefficient of variation of the root mean square error: 12.84%; mean bias error: 0.39%) satisfied the criteria of ASHRAE Guideline 14; second, I8 (expanded polystyrene board - type 1 (No. 4))-L3 (LED lighting installed in louvered ceiling) and I8 (expanded polystyrene board - type 1 (No. 4)) - L4 (ceiling-mounted light) were determined to be the optimal CER strategy (integrated multi-objective optimization score: 0.2252). The developed model can help building owners make the optimal decision on green modeling by entering simple information (e.g., region, total floor area, etc.).

Qualitative and quantitative efficacy measurement of TERI library and information centre resources

Purpose The purpose of the paper is to evaluate print and electronic resources of TERI’s Library and Information Centre (LIC) with an aim to maximize the net marginal benefits and minimize net marginal costs, without compromising the quality of the library resources. Design/methodology/approach The parameters considered for analyzing the value of the library resources for this exercise were resource access costs, strategic value of the resource based on subject area coverage, frequency of use, citations, direct and indirect benefits to users. The data regarding these parameters were provided from wide range of sources (both tangible and intangible), to come out with the qualitative and quantitative assessment through an optimization and simulation based model. Findings Out of the total holdings in TERI LIC that were analyzed, 85 percent of book collections and 63.5 percent of journals were found to be useful for the researchers. The least-used books and journals were identified for weeding to optimize the value of library for users and make space for new and topical library collections. Research limitations/implications A sample of data sources out of the total library collections was defined for the evaluation. Practical implications The paper demonstrates the value of library resources that is of critical importance to libraries for an effective and efficient delivery of services for generating future knowledge. Evaluating the value of libraries resources has implications both for librarians as well as library users. Originality/value The evaluation exercise established the efficacy of the TERI library holdings for research and academic purposes in the domain of sustainable development. The library collection was found to be cost effective and beneficial to meet the future demand from the user community.

'Leaning Against the Wind', Macroprudential Policy and the Financial Cycle

Should monetary policy against financial stability risks? This has been a subject of fierce debate over the last decades. We contribute to the debate about leaning against the wind (LAW) along three lines. First, we evaluate the cost and benefits of LAW using the Svensson (2017) framework for the euro area and find that the costs outweigh the benefits. Second, we extend the framework to address a critique that Svensson does not consider the lower frequency financial cycle. Third, we use this extended framework to assess the costs and benefits of monetary and macroprudential policy. We find that macroprudential policy has net marginal benefits in addressing risks to financial stability in the euro area, whereas monetary policy has net marginal costs. This would suggest that an active use of macroprudential policies targeting financial stability risks would alleviate the burden on monetary policy to lean against the wind.

A Boundedly Rational Day-to-Day Rerouting Model with Dynamic Indifference Band and Net Marginal Cost Preference

This paper suggests factoring both dynamic indifference band (DIB) and marginal decision rule into boundedly rational day-to-day traffic dynamics modeling. To this purpose, a relative indifference band based DIB is employed to capture the variation of indifference band against dynamical network traffic conditions, and the net marginal cost preference (NetMCP) is newly introduced and quantified to replace the routine marginal cost preference as an amended behavior criterion for rerouting decision. To concentrate on the essence, DIB and NetMCP are mathematically formulated into the traffic evolution equation of the classical proportional-switch adjustment process with a new revision protocol, leading to the present dynamically bounded rational swapping process with NetMCP (DBRSP-NetMCP), of which the stationary state is defined and proved. It is also proved that DBRSP-NetMCP is a bounded rational behavior swapping process; and given separable link travel times, DBRSP-NetMCP is globally stable. It is numerically demonstrated that i) an object-oriented modelling approach may cause obvious deviation in rerouting behavior from the behavior-oriented one, and thus is inadvisable to model the day-to-day traffic dynamics; and ii) both DIB and NetMCP show striking effect on traffic evolution, and NetMCP helps to shorten the evolution path towards the stationary states, which may contribute to better the performance of a swapping algorithm to solve the deterministic traffic equilibrium.

Leaning Against the Wind: Macroprudential Policy and the Financial Cycle

Should monetary policy lean against financial stability risks? This has been a subject of fierce debate over the last decades. We contribute to the debate about “leaning against the wind” (LAW) along three lines. First, we evaluate the cost and benefits of LAW using the Svensson (2017) framework for the euro area and find that the costs outweigh the benefits. Second, we extend the framework to address a critique that Svensson does not consider the lower frequency financial cycle. Third, we use this extended framework to assess the costs and benefits of monetary and macroprudential policy. We find that macroprudential policy has net marginal benefits in addressing risks to financial stability in the euro area, whereas monetary policy has net marginal costs. This would suggest that an active use of macroprudential policies targeting financial stability risks would alleviate the burden on monetary policy to “lean against the wind”. JEL Classification: E58, G01

Weed control by pyrazosulfuron-ethyl and its influence on yield and economics of transplanted rice

A field experiment was conducted on a silty clay loam soil at Palampur, Himachal Pradesh during Kharif 2016 and 2017 to assess pyrazosulfuron-ethyl as an alternative herbicide to manage weeds in transplanted rice. Ten treatments comprised of company released sample of pyrazosulfuron-ethyl at 10, 15, 20 and 30 g/ha was compared to its market sample at 10 and 15 g/ha, bispyribac-sodium at 20 and 40 g/ha, hand weeding twice and weedy check. Pyrazosulfuron-ethyl and bispyribac-sodium effectively reduced the biomass of Echinochloa colona, Echinochloa crusgalli and Cyperus difformis. These herbicides also suppressed the growth of Ammannia baccifera, but not to the extent as hand weeding twice. Pyrazosulfuron-ethyl curtailed Eclipta alba, but lower dose of bispyribac-sodium was not effective against it. In 2016, pyrazsulfuron-ethyl 20 g/ha gave significantly higher yield while in 2017, pyrazsulfuron-ethyl 30 g/ha gave significantly higher yield of rice over other weed control treatments. Every gram weed biomass increase per square metre caused 5.6 kg/ha yield reduction of transplanted rice. Samples of pyrazosulfuron-ethyl obtained directly from the industry had an edge over the market samples. Weed persistence index was found to be decreased and crop resistance index increased corresponding to increase of dose of pyrazosulfuron-ethyl and bispyribac-sodium. The minimum weed index was under company's pyrazosulfuron-ethyl at 20 g/ha followed by 15 g/ha, 30 g/ha and market's sample at 15 g/ha. Cost of weed control was 3.0 to 4.7% of the total cost with pyrazosulfuron-ethyl and 6.1 to 9.8% with bispyribac-sodium. Company procured pyrazosulfuron-ethyl at 15 and 20 g during 2016 and at 20 and 30 g/ha during 2017 had higher net returns and marginal benefit cost ratio (MBCR). Eighty per cent of applied pyrazosulfuron-ethyl got degraded within 5 days of its application. Residues of pyrazosulfuron-ethyl in grain and straw at the time of harvest were below detectable level (BDL) irrespective of treatments.

Cost effectiveness of cascade testing for familial hypercholesterolaemia, based on data from familial hypercholesterolaemia services in the UK.

AimsFamilial hypercholesterolaemia (FH) is a vastly under-diagnosed genetic disorder, associated with early development of coronary heart disease and premature mortality which can be substantially reduced by effective treatment. Patents have recently expired on high-intensity statins, reducing FH treatment costs. We build a model using UK data to estimate the cost effectiveness of DNA testing of relatives of those with monogenic FH.Methods and ResultsA Markov model was used to estimate the cost effectiveness of cascade testing, using data from UK cascade services. The estimated incremental cost effectiveness ratio (ICER) was £5806 and the net marginal lifetime cost per relative tested was £2781. More than 80% of lifetime costs were diagnosis-related and incurred in the 1st year. In UK services, 23% of 6396 index cases were mutation-positive. For each mutation-positive index case, 1.33 relatives were tested, resulting overall in a rate of 0.31 tested relatives per tested index case. If the number of relatives tested per tested index case rose to 3.2 (projected by National Institute for Health and Care Excellence in 2008) the ICER would reduce to £2280 and lifetime costs to £1092.ConclusionCascade testing of relatives of those with suspected FH is highly cost effective. The current Europe-wide high levels of undiagnosed FH, and associated morbidity and mortality, mean adoption of cascade services should yield substantial quality of life and survival gains.

Lifetime direct costs of stroke for indigenous patients adjusted for comorbidities.

To estimate the lifetime health costs of stroke by comorbidity and indigenous status in Australia's Northern Territory (NT), where a large indigenous population resides. Incidence-based cohort study using linked hospital, primary care, and Pharmaceutical Benefits Scheme data to estimate lifetime direct costs for hemorrhagic stroke (HS), ischemic stroke (IS) and undetermined stroke (UND). Inverse probability-weighted survival analysis was adapted to adjust for loss to follow-up. Log-linear modeling was used to analyze the net stroke costs and marginal comorbidity costs by indigenous status. Between 1992 and 2013, there were 3,733 patients admitted with stroke in the NT (74% were incident strokes, 38% indigenous, 56% male, 56% IS). In 2012/2013 Australian dollars, the estimated lifetime cost for an incident stroke in NT was $302,538 AUD ($207,218 USD) per patient. The net lifetime cost per non-indigenous female HS patient aged <45 years without comorbidity (reference category) was $72,773 AUD ($49,844 USD); IS cost 54% and UND 9% more than HS (p < 0.01). Stroke cost was greater for indigenous patients (∆ 44%) and patients with renal disease (∆ 71%), coronary heart disease (∆ 44%), hypertension (∆ 30%), and diabetes (∆ 28%) in comparison with the reference category (all p < 0.01). Chronic obstructive pulmonary disease, atrial fibrillation, depression, and cancer were negatively associated with lifetime stroke costs. The costs of stroke for indigenous people and patients with different comorbidities are substantial and an integrated prevention strategy is needed.

A Note on the Inefficiency of Technology- and Region-Specific Renewable Energy Support: The German Case

Renewable energy (RES-E) support schemes have to meet two requirements in order to lead to a cost-efficient renewable energy mix. First, RES-E support schemes need to expose RES-E producers to the price signal of the wholesale market, which incentivizes investors to account not only for the marginal costs per kWh ( $\overline{MC}$ ) but also for the marginal value per kWh ( $\overline{MV^{el}}$ ) of renewable energy technologies. Second, RES-E support schemes need to be technology- and region-neutral in their design (rather than technology- and region-specific). That is, the financial support may not be bound to a specific technology or a specific region. In Germany, however, wind and solar power generation is currently incentivized via technology- and region-specific feed-in tariffs (FIT), which are coupled with capacity support limits. As such, the current RES-E support scheme in Germany fails to expose wind and solar power producers to the price signal of the wholesale market. Moreover, it is technology- and region-specific in its design, i.e., the support level for each kWh differs between wind and solar power technologies and the location of their deployment (at least for onshore wind power). As a consequence, excess costs occur which are burdened by society. This paper illustrates the economic consequences associated with Germany’s technology- and region-specific renewable energy support by applying a linear electricity system optimization model. Overall, excess costs are found to amount to more than 6.6 Bn Euro $_{2010}$ . These are driven by comparatively high net marginal costs of offshore wind and solar power in comparison to onshore wind power in Germany up to 2020.

Costs and benefits of microfinance institutions offering health protection services to clients

Five microfinance institutions (MFIs) in Bénin, Bolivia, Burkina Faso, India and the Philippines developed and offered health protection services to microfinance clients: health education, health loans, health savings, health micro-insurance, linkages to health providers and distribution of health products. After about two years, the services were collectively reaching over 300,000 clients and are continuing to scale up. The cost to the MFI was generally low for each service (average annual net marginal cost of US$0.29 per client and average total annual cost, including allocated expenses, of $1.59 per client). Some were expected to become profitable in the near term. In addition to the financial cost of offering such services and who bears the cost, we discuss the broader benefits both to clients and to the MFIs themselves and suggest that more MFIs around the world could find similar cost-effective ways to deliver health protection services to their clients.

Interest on Reserves and the Flexibility of Monetary Policy in the Euro Area

AbstractThis paper shows that remunerating required reserves can increase the flexibility of monetary policy. The remuneration at the current policy rate implies constant net marginal interest costs of holding required reserves. This allows the central bank to change the policy rate also within a reserve maintenance period without inducing a problematic reserve shifting on behalf of the banks. In the euro area, required reserves are remunerated at an average rate. Therefore, the way in which reserves are remunerated has to be changed in order to make use of the advantage of a higher flexibility of monetary policy.

Introduction of a waste incineration tax: Effects on the Swedish waste flows

A tax on waste-to-energy incineration of fossil carbon in municipal solid waste from households was introduced in Sweden on July 1, 2006. The tax has led to higher incineration gate fees. One of the main purposes with the tax is to increase the incentive for recycling of materials, including biological treatment. We investigate whether and to what extent this effect can be expected. A spreadsheet model is developed in order to estimate the net marginal cost of alternative waste treatment methods, i.e., the marginal cost of alternative treatment minus avoided cost of incineration. The value of the households’ time needed for source separation is discussed and included. The model includes the nine largest fractions, totalling 85% (weight), of the household waste currently being sent to waste incineration: food waste, newsprint, paper packaging, soft and hard plastic packaging, diapers, yard waste, other paper waste, and non-combustible waste. Our results indicate that the incineration tax will have the largest effect on biological treatment of kitchen and garden waste, which may increase by 9%. The consequences of an incineration tax depend on: (a) the level of the tax, (b) whether the tax is based on an assumed average Swedish fossil carbon content or on the measured carbon content in each incineration plant, (c) institutional factors such as the cooperation between waste incinerators, and (d) technological factors such as the availability of central sorting of waste or techniques for measurement of fossil carbon in exhaust gases, etc. Information turns out to be a key factor in transferring the governing force of the tax to the households as well improving the households’ attitudes towards material recycling.

Is the Uncertainty about Climate Change too Large for Expected Cost-Benefit Analysis?

Cost-benefit analysis is only applicable if the variances of both costs and benefits are finite. In the case of climate change, the variances of the net present marginal costs and benefits of greenhouse gas emission reduction need to be finite. Finiteness is hard, if not impossible to prove. The opposite is easier to establish as one only needs to show that there is one, not impossible representation of the climate change with infinite variance. The paper shows that all relevant current variables of the FUND model have finite variances. However, there is a small chance that climate change reverses economic growth in some regions. In that case, the discount rate becomes negative and the net present marginal benefits of greenhouse gas emission reduction becomes very large. So large, that its variance is unbounded. One could interpret this as an indication that cost-benefit analysis is invalid. Alternatively, one could argue that the infinity is present in both the base case and the policy scenario, and therefore irrelevant; in that interpretation, cost-benefit analysis is a valid tool.

Efficient use of health care resources: the interaction between improved health and reduced health related income loss.

Cost effectiveness is a criterion that is often recommended for prioritizing between different types of health care. A modified use of this criterion can be justified as the outcome of a choice that is made "behind a veil of ignorance." Reduced health will in many cases also gives an income loss that is shared between the patient and society ar large. In the special case where the marginal utilities of health status (measured by QALYs) and income are independent of the health state, an efficient allocation of health resources is characterized by net marginal costs per QALY being equalized across different types of health care. Net marginal costs are equal to gross marginal costs minus the reduction in health related income losses due to treatment. In the general case where marginal utilities depend on the health state this rule must be modified.

Evaluating cost-effective strategies for meeting regional CO 2 targets

Various climate protocol proposals oblige different industrialized countries to reduce CO 2 and other greenhouse gas emissions. In principle, the total costs of these obligations could be substantially reduced if emission reductions are implemented in regions with low marginal costs for CO 2 reduction. This has been difficult to quantify because of lack of models with suitable regional and sectoral detail. In this paper we perform these calculations by taking advantage of the capability of the IMAGE 2 model to compute regional emissions and costs. Two main options are examined for allocating emission reductions required of industrialized regions in a cost effective manner: (1) allocating them among industrialized regions (2) allocating them among all world regions. The cost savings for each of these options are presented. The main conclusions are that (a) it is of great importance for the cost comparisons of protocols to use a well defined baseline scenario and clearly formulated targets, and (b) large economic benefits, in the order of 35–65%, can accrue from joint-implementation agreements which allocate investments on the basis of net marginal costs of CO 2 emission reduction.

The Marginal Cost of Funds With Nonseparable Public Spending

This article provides new calculations of the welfare effects of fiscal changes when the publicly provided good is nonseparable in utility and production so that it affects economic agents' marginal decisions. The authors' results show that these nonseparabilities significantly alter the marginal cost of funds (MCF ) that previous studies have calculated. The authors also report estimates of the nonseparable marginal benefits (NSMB ) associated with aggregate government purchases. The net marginal cost offunds (NMCF ), which is equal to MCF - NSMB, is in general positive over a wide range of parameter values that encompass empirically relevant specifications. Thus the nonseparable benefits by themselves are not sufficient for a marginal increase in aggregate government purchases of goods and services to be worthwhile.

Pigouvian penalty for oil spills

The imposition of ex ante taxes on expected spilled oil, in addition to ex post payments for damages under tort liability, would foster economic efficiency. This paper begins the analysis of the joint approach with the case in which Pigouvian taxes are used exclusively. A model is developed in which the volume of spilled oil causing environmental damage is reduced, first by spill prevention expenditures by shippers and then by clean-up expenditures by the government. The efficient Pigouvian tax on expected spilled oil equals marginal environmental damage which equals the net marginal cost of prevention which equals marginal clean-up cost.