Opportunity Cost Of Investment Research Articles

Using a Formal Strategy of Priority Setting to Mitigate Austerity Effects Through Gains in Value: The Role of Program Budgeting and Marginal Analysis (PBMA) in the Brazilian Public Healthcare System.

The fiscal regime implemented in Brazil with the constitutional amendment 95 (EC-95) of December 2016 froze primary expenditures for 20years, including healthcare spending. Previous studies have estimated strong negative effects of this policy on the health of Brazilians. Although there has been a constant pressure to repeal EC-95, this policy is unlikely to be changed in the near future. Thus, there is also a need to take actions within its own terms in order to mitigate its harmful consequences on population health. Shedding light on the existing evidence about the impact of austerity on health, the present work discusses how decision-makers can use a formal framework of decisionmaking in priority setting and resource allocation to tackle the amplified budgetary strain. Drawing on principles of Program Budgeting and Marginal Analysis (PBMA), efficiency can be improved by shifting spending from low-value to higher-value areas, avoiding the "across-the-board cut" caused by non-differential consideration of expenditures in a context of mismatched growth of demand and supply of healthcare. By evaluating opportunity costs of investment and disinvestment proposals on the basis of multiple criteria and marginal analysis, the Brazilian public healthcare system could obtain gains in value, achieving better performance and attenuating the relative decline in spending on health brought by an austerity scenario.

Next generation mega container ports: implications of traffic composition on sea space demand

ABSTRACT Demand for sea space brought about by increasing container-shipping traffic has important implications on how this space is managed and used. This is particularly important given the long-term nature, high-asset specificity, high- opportunity cost of investment, and significant economic impact of container port activity on a locality. The challenge is especially pressing for ports, which are facing constraints in seaside capacity where container traffic also has to co-exist with the needs of other types of ship traffic. This challenge is likely be multiplied for next generation container ports, which are expected to handle even larger traffic volumes. These ports are also likely to face competing sea space demands from other economic and social activities especially when they are concurrently major confluences of trade, logistics, and urban populations. This is the first research to investigate in detail the impact and importance of investigating sea space requirements from the perspective of cargo traffic composition and ship capacity. Results show that transshipment containers can generate much higher demand for sea space due to the higher volume of shipping capacity that accompanies such traffic. Sustainability issues and managerial and policy implications pertaining to the development of next generation container ports are provided.

THE IMPLEMENTATION OF CHARACTERISTICS OF ORGANIZATIONAL CULTURE “SHARING” BASED ON LOCAL WISDOM IN INCREASING HR COMPETENCE IN INDONESIA (FACING ASIAN FUTURE SHOCK 2020)

Indonesia as the country with the opportunity cost of investment and the highest corruption in ASIA business caused a cultural and population changes which is affect to family structure in the development business and state. Based on those conditions, Indonesia must change fast become count country in ASIA to build character through local knowledge possessed a vast country and large The shift in the pattern of the surviving members of regional communities is an indicator of impending shocks to the mindset, ways of thinking, feeling and reacting based on the environment and the condition of the demands of the behavior of the members together are embraced and accepted by the organization to act and solve problems, adapt and unites members of the organization through a shift in values, norms and cultural rules significantly (mean) the impact of the shock towards the life of the nation both by employers and stakeholders organizations in Indonesia. ASIA development of the business sector in the 21st century emphasizes ethical investment. Ethical investments In the 21st century, supporting ethical organization, including in developed countries the problem of ethics and organizational behavior into consideration when deciding policies and financial. The idea of ethical investment had various depend on each country, and company cultural perception. The application of ethical investment strategies of individual, non-profit organizations, governments and companies to attract potential investors, in the hope that the fund is managed in a way that does not have a negative impact on society, including Indonesian society. The influence of cultural, social and geographical had very strong impact to employers and stakeholders behavior. The diversity behavior is fundamental basic considered in fundamentals treatment will support the success of Indonesia development over this years. It will deal with the honesty, integrity in the right employees, strong leadership and support for ethnic behavior. Those conditions would cause a shock to the human resources therefore need nation quality recovery in national policies circle in order to determine direction of attitudes change and nation view as an interactive consequence in organizational culture characteristic which is owned Indonesian HR should be able to function as a tool to support the implementation of the development progress through employee competence and leadership. The Indonesian efforts to increase capacity and competence of the Human Resources (HR) with respect to resilience in the face of 2020, namely the implementation of a characteristic of organization culture that will affect the way work is done and how employees behave based on the philosophy of Pancasila and the results of research in the form of build character first through local wisdom in the sunda level; like "sareundeuk saigel sabobot sapihanean, penance grindstones penance foster compassion, silih simbeuh mean to share (Sharing). (Mulyaningsih, Japan Meijo 2015) The paradigm of thought in enhancing the competence of behaving for Human Resources in Indonesia by sharing (sharing) the future is not only to be able to survive in the economic crisis but as a cornerstone in carrying out the work or the owner (owner) as well as the investors who use ethical investment as competence businesses, professional stakeholders to support the business sector and the advantages of statehood in Indonesia capable of competitiveness in 2020.

The odd notion of “reversible investment”

Abstract Irreversible investment and the attendant concept of real-option value have been well discussed. Complete reversibility has been frequently invoked but less studied, especially for the case of lumpy investment typically considered in capital budgeting. We examine a simple lumpy investment problem for the full range, from complete irreversibility to completely reversibility, with a focus on the latter. The optimal stopping rules under complete reversibility are to invest when the project generates enough net cash flow to cover Jorgenson’s opportunity cost of investment and to disinvest when it does not. Given the static nature of these rules, net present value as a timing criterion under reversibility is not pertinent. Investments that are partially reversible have much in common with completely irreversible investments but nothing in common with completely reversible investments. The case of reversible investment provides a foil for understanding that the distinguishing feature of investment as treated in corporate finance is that it entails at least some irreversibility.

Management of Energy Technology for Sustainability: How to Fund Energy Technology Research and Development

Operations management methods have been applied profitably to a wide range of technology portfolio management problems, but have been slow to be adopted by governments and policy makers. We develop a framework that allows us to apply such techniques to a large and important public policy problem: energy technology R&D portfolio management under climate change. We apply a multi‐model approach, implementing probabilistic data derived from expert elicitations into a novel stochastic programming version of a dynamic integrated assessment model. We note that while the unifying framework we present can be applied to a range of models and data sets, the specific results depend on the data and assumptions used and therefore may not be generalizable. Nevertheless, the results are suggestive, and we find that the optimal technology portfolio for the set of projects considered is fairly robust to different specifications of climate uncertainty, to different policy environments, and to assumptions about the opportunity cost of investing. We also conclude that policy makers would do better to over‐invest in R&D rather than under‐invest. Finally, we show that R&D can play different roles in different types of policy environments, sometimes leading primarily to cost reduction, other times leading to better environmental outcomes.

인플레이션 불확실성의 기업 설비투자에 대한 비대칭적 효과 분석

Inflation uncertainty is known to have deleterious effects on facilities investment by disturbing the corporate decision on the opportunity cost of investment. In this paper, we test the validity of this hypothesis in Korea by estimating the inflation uncertainty with both a time-varing parameter model with GARCH disturbances and the relative price volatility and then, estimate the facilities investment equation which includes those uncertainty indicators. The uncertainty indexes estimated by the above-mentioned methods continue to fluctuate even after the inflation rate has dropped dramatically reflecting the structural changes of Korea’s economy since the financial crisis in 1997. As a result of estimation of the investment equation by both OLS and GMM, we find the inflation uncertainty has a negative effect on facilities investment with a statistical significance. Moreover, by means of Markov-switching regression model utilized to verify the non-linearity of this relationship, we draw a conclusion that this negative effect of inflation uncertainty heightens asymmetrically during the downturn periods of business cycle.

The antagonism of push and pull strategies, and the current funding campaigns to fight orphan diseases

We argue that an increase in investments in R&D for innovative treatments to eradicate neglected diseases in developing countries leads to a rational decrease in investments in available treatment technologies. In a formal model where the government of a developing country seeks to optimally allocate public resources, we show that the higher the odds of appearance of an innovative treatment, as occurring when investments in R&D increase, the lower the optimal provision of current treatments and other health expenditures. We also show that this phenomenon is aggravated when the opportunity cost of investments in current treatments increases. This implies that welfare in developing countries deteriorates as innovative treatments are more likely to become available. We also describe an insurance scheme that remedies these issues, and that leads to Pareto-optimal allocations regardless of the investment level in R&D for innovative treatments.

Randomized Prospective Trials of Innovative Radiotherapy Technology Are Necessary

The most important clinical problem facing radiation oncology is whether randomized prospective trials are necessary to assess innovative technologies. Some radiation oncologists feel strongly that randomized trials are unnecessary, because highly conformal beams are self-evidently worthy, and the only interesting question is the magnitude of the gain, not whether a gain is achievable. Supporters of randomized trials invoke a long list of historical examples wherein such trials demonstrated the uselessness of technologies that were thought to be "self-evidently" better. Physicians with financial or academic career interest in the promotion of innovative technologies are not objective parties in this debate. There are also considerable opportunity costs of investments in expensive innovative technologies. It is possible to identify innovations that should be required to meet the standard of proof of a benefit in a randomized prospective clinical trial before being introduced into widespread clinical practice.

Excess Capital and Liquidity Management

These notes present a new approach to corporate finance, one in which financing is not determined by prospective income streams but by financing opportunities, liquidity considerations, and prospective capital gains. This approach substantially modifies the traditional view of high interest rates as a discouragement to speculation; the Keynesian and Post-Keynesian theory of liquidity preference as the opportunity cost of investment; and the notion of the liquidity premium as a factor in determining the rate of interest on longer-term maturities.

Optimal Growth and Borrowing with Non-convex Technology

This paper employs a simple intertemporal optimization model to analyze the optimal growth and borrowing for a small open economy with non-­convex technology that imports intermediate inputs for production. Unlike other papers in the literature, this paper concludes that there is only one path for an open economy to achieve optimal growth: namely, the pursuit of the highest possible steady-state capital-labor ratio. Thus, a country in a region of low capital intensity can achieve high long run economic growth by putting itself on a locally unstable path. By setting a high marginal opportunity cost of investment, a country can achieve higher long run output. An economy cannot become a creditor if it starts as a net debtor. Moreover, if an unanticipated permanent deterioration in the terms of trade occurs, the economy should decrease investments in order to improve its current accounts.

Deficits, Interest Rates, and the User Cost of Capital: A Reconsideration of the Effects of Tax Policy on Investment

Under traditional formulations, lower capital income tax rates reduce the user cost of capital and stimulate investment. The traditional approach, however, implictly or explicitly considers a revenue-neutral reduction in capital income taxation. We extend the traditional approach by considering a reduction in taxes that generates an increase in the budget deficit; the expanded budget deficit raises interest rates and the opportunity cost of investment. This provides a mechanism through which tax cuts can raise the cost of capital. Representative calculations show that, even with relatively modest interest rate effects, the net effect of making the Administration's recent tax cuts permanent or a 10-percent reduction in individual income tax rates would be to raise the user cost of capital. Thus, sustained tax cuts can raise the cost of capital and reduce investment.

Deficits, Interest Rates, and the User Cost of Capital: A Reconsideration of the Effects of Tax Policy on Investment

Under traditional formulations, lower capital income tax rates reduce the user cost of capital and stimulate investment. The traditional approach, however, implicitly or explicitly considers a revenue-neutral reduction in capital income taxation. We extend the traditional approach by considering a reduction in taxes that generates an increase in the budget deficit; the expanded budget deficit may raise interest rates and the opportunity cost of investment. This provides a mechanism through which tax cuts can raise the cost of capital. Representative calculations show that making the administration's recent tax cuts permanent would be to raise the user cost of capital.

A fuzzy approach to real option valuation

To have a real option means to have the possibility for a certain period to either choose for or against making an investment decision, without binding oneself up front. The real option rule is that one should invest today only if the net present value is high enough to compensate for giving up the value of the option to wait. Because the option to invest loses its value when the investment is irreversibly made, this loss is an opportunity cost of investing. The main question that a management group must answer for a deferrable investment opportunity is: How long do we postpone the investment, if we can postpone it, up to T time periods? In this paper we shall introduce a (heuristic) real option rule in a fuzzy setting, where the present values of expected cash flows and expected costs are estimated by trapezoidal fuzzy numbers. We shall determine the optimal exercise time by the help of possibilistic mean value and variance of fuzzy numbers.

The Benchmark Issue in the Islamic Financial System

This paper identifies a major lacuna in the conceptual development ofIslamic financial market operations. It argues that in the absence of awell developed benchmark that would facilitate macro- and micro-leveldecision making with regards to cost of capital and opportunity cost ofinvestments in comparative projects of similar risk, Islamic financialinstitutions are relying on interest rate-based indices such as the LondonInter-Bank Offer Rate (LIBOR) to make lending decisions. The authorcontends that this is clearly unacceptable since Islam disallows a predeterminedor fixed rate of capital. The paper then proposes a benchmarkbased on Tobin’s q theory of investment. The author further maintainsthat unlike existing alternatives which are limited to macro-levelapplications only, the q-based benchmark would be useful for firms andbanks (micro-decisions) as well as governments and institutions(macro-planning).

Deutschland im Steuerwettbewerb / Germany in Tax Competition

Zusammenfassung Die für 1997 in Deutschland geplante Steuerreform ist durch eine Verbreiterung der Bemessungsgrundlagen und eine Senkung der Steuersätze gekennzeichnet. Aufgrund theoretischer und empirischer Überlegungen wird gezeigt, daß diese Reform positive Wohlfahrtseffekte für Deutschland hat, die allerdings teilweise auf paradoxe Weise zustande kommen. Das Papier unterscheidet zwischen Investitionen, deren Erträge nach dem Quellenlandprinzip (z. B. Direktinvestitionen), und Investitionen, deren Erträge nach dem Wohnsitzlandprinzip besteuert werden (normale Investitionen, die auf dem Wege über die Finanzmärkte mit dem Ausland verbunden sind). Die Investitionen des ersten Typs werden durch die deutsche Reform trotz der geringfügigen Verschlechterung der Abschreibungsbedingungen, die mit ihr einhergeht, bessergestellt. Die Investitionen des zweiten Typs werden jedoch diskriminiert, weil sowohl die Verbreiterung der Bemessungsgrundlagen als auch die Senkung der Steuersätze zu einer Erhöhung der Kapitalkosten führt. Letzteres ist ein im Aufsatz empirisch ermitteltes Ergebnis, das seine theoretische Erklärung im Phänomen der Abschreibungsbeschleunigung hat (Steuerparadoxon). Die Anreizwirkungen beider Investitionstypen sind wohlfahrtserhöhend, obwohl sie in unterschiedliche Richtungen laufen. Der Grund liegt darin, daß die Reform in beiden Fällen die Lücke zwischen den sozialen Erträgen und den sozialen Kosten der Investition schließt. Sowohl eine anfangs vorliegende Diskriminierung der Investitionen des ersten Typs als auch eine anfangs vorliegende Subventionierung der Investitionen des zweiten Typs wird zurückgenommen.

Endogenous growth cycles—Arrow's learning by doing reconsidered

A two-sector growth model is presented in which human capital is acquired through learning by doing. It is shown that, for both the competitive situation and the social optimum, endogenous growth cycles may be the outcome. Concerning the economic prerequisite for persistent oscillations we detect a bunching of investment at nearby dates leading economic variables to overshoot the long-run steady state values. This clustering of investment, for its part, may be caused by adjacent complementarity with respect to the stocks or by a sufficiently strong external effect of investment on the marginal product of physical capital or on the opportunity costs of investment.

Project Evaluation in International Development

Project evaluation methods used by the World Bank and the United Nations Industrial Development Organization are compared with regard to measures of value, use of shadow prices, discount rates and opportunity costs of investment, and other issues of project evaluation. While there are some similarities, it appears that the choice of method will make a difference in which projects are found acceptable. The UNIDO approach seems to be more flexible but requires considerably more information.