Output Elasticity Research Articles

The Impact of Renewable Energy on GDP

Besides traditional production factors, such as labor and capital, one of the inputs used in the production process is energy. Although the use of fossil fuels is more common in many production processes renewable energy sources are increasingly important in ensuring sustainable development. In many countries in the world, the share of renewable energy is the total energy consumption is very high, including in European Union (EU) countries. The purpose of this study is the investigate the output elasticity coefficients of capital and renewable energy in 12 EU countries by using the Cobb–Douglas production function approach. In this study, the Gross domestic Product these countries from 2000 to 2017, was examined using a generalized method of moments estimation, which used labor, capital, and renewable energy data. As a result of the study, the output elasticity coefficient in the Cobb–Douglas production function was found to be 1.147. This indicates that a 1% increase in labor, capital, and renewable energy increased GDP by 0.598%, 0.446%, and 0.093%, respectively. Among the findings, the relationship between GDP and explanatory variables is statistically significant and economically significant. It is understood that there is a positive relationship between the variables.

Collaborative innovation and policy support: the emergence of trilateral networks

ABSTRACT The present article models the critical factors for a successful and evolutionarily stable National System of Innovation. We simulate a model, against the background of increasingly complex technologies, in a national process of agents’ interactions with social-dilemma characteristics. In particular, the articleinvestigates the emergence of a trilateral collaborative innovation alliance among ‘enterprise’, ‘university’ and ‘government’. We apply a tripartite evolutionary game with a replication process and explore the role and options of the public policy agent to support collaboration on innovation. We find that some policy mix, in particular, a combination of (1) public rewards for cooperation, (2) public punishment for non-cooperation and (3) settings of public cost controls and tax income from innovation, can promote broad and sustainable innovation alliances. For instance, threats of strong punishment, even with low public rewards for cooperation, may promote the formation of a collaborative innovation alliance. We run some sensitivity analyses of the results through parametric variation of two critical factors of the model, knowledge spillover and output elasticity of knowledge input. We find some qualifications for the velocity of the process.

How Farmers Make Investment Decisions: Evidence from a Farmer Survey in China

Based on the grain production data hand collected in Mid-East China, a multinomial Logit model was employed to analyze factors that are critical to farmers’ investment decisions in food production. Reasonable explanations are provided to help understand differences between expected farmers’ investments in grain production and the actual results. It was found that the cost of machinery and the number of farmers is key factors affecting farmers’ willingness to adjust investment. Further research shows that most of the farmers who had the willingness to adjust investment did not implement the adjustments in the short-term. From the micro-adaptability expectation perspective, the time that it takes to adjust the planting area could explain farmers’ investment adjustment intention and the behavior. From the macro-investment perspective, short-term output elasticity of physical capital is less than long-term output elasticity. The differences between farmers’ willingness to invest and the actual results are therefore generated. These findings suggest that it is necessary to strengthen the application of big data technology in agriculture in order to improve the platforms’ efficiency in data releasing and reaching out to farmers to provide more accurate advice regarding investment adjustment.

Alleviating the misallocation of R&D inputs in China's manufacturing sector: From the perspectives of factor-biased technological innovation and substitution elasticity

Although China's technological strength has improved, the country's innovation inefficiency caused by research & development (R&D) resource misallocation should be addressed. Using the heterogeneous stochastic frontier approach and the panel data of China's 28 manufacturing sectors from 2001 to 2015, this paper estimates innovative technical efficiency, the output elasticity of R&D inputs, the factor-biased indicators of technological innovation, and the elasticity of substitution between R&D inputs. Ways to alleviate R&D resource misallocation are discussed based on these indicators. We find that the innovative technical efficiency of China's manufacturing sector is less than 1 and exhibits a markedly fluctuating trend, implying that R&D inputs are severely misallocated. The output elasticity of R&D capital experiences a continuously downward trend, while that of R&D personnel presents a stably upward trend. Overall, the technological innovation of China's manufacturing sector was biased to R&D personnel in the period of 2002–2013, and then presented a fluctuating change in the period of 2014–2015. R&D capital and R&D personnel exhibited a stable substitution relationship from 2008 to 2015. However, during the period of 2001–2007, the relationship between these two R&D inputs changed alternately. Finally, we provide some solutions to alleviate the misallocation of R&D resources for different sub-sectors according to the output elasticities of R&D inputs, the factor-biased level of technological innovation, and the substitution relationship between R&D inputs. Specifically, it is necessary to increase the input of R&D factor with a higher output elasticity by adjusting the factor-biased level of technological innovation.

Energy substitution effect on transport sector of Pakistan: A trans-log production function approach

Abstract Transport sector of Pakistan is one of the highest fossil fuel consumption and carbon dioxide (CO2) emission sector. As a key user of fossil fuel energy, Pakistan’s transport sector has created many problems i.e. noise, air pollution, CO2 emissions and environmental problem. In this study, trans-log production function model for Pakistan’s transport sector is established and input factors of labor, capital, and energy consumption are comprised. The output elasticity of an individual, input elasticity between a pair of factors, and elasticity of substitution between input factors are analyzed. To manage the multicollinearity issue, ridge regression is applied at different values of K. From 1991 to 2018, the outcomes show that output elasticities and a pair of input factor’s elasticities are increasing. The elasticities of substitutions between labor-energy consumption and capital-energy consumption show higher outcomes because of the more elevated amount of substitution elasticities. The substitution elasticity between labor and capital starts from 0.9797 to 0.9326 with slightly decreasing trend. The outcomes suggest that maximum output can be achieved by increasing capital and energy technologies. By allocating the maximum capital in the transport industry, energy-saving technologies, substitution between energy and capital, and substitution among capital-labor can enhance environmental protection. In the above’s view function, the present study estimates the level of energy-saving and CO2 emissions reduction under the different scenarios from 2015 to 2018. The policy suggestions of the results are given below.

Influences of Extreme Precipitation on China’s Mining Industry

Global climate change is increasingly influencing the economic system. With the frequent occurrence of extreme weather events, the influences of climate change on the economic system are no longer limited to the agricultural sector, but extend to the industrial system. However, there is little research on the influences of climate change on industrial economic systems. Among the different sectors of the industrial economic system, the mining industry is more sensitive to the influences of climate change. Here, taking the mining industry as an example, we analyzed the influences of extreme precipitation on the mining industry using the trans-logarithm production function. In addition, the marginal output elasticity analysis method was employed to analyze the main factors influencing the mining industry. It was found that the mining investment in fixed assets, labor input, and technical progress could promote the development of the mining economy, while the extreme precipitation suppressed the growth of the mining industry. The increase in fixed asset investment and the technical progress could enhance the resistance of the mining industry to extreme precipitation, while there was no indication that labor input can reduce the influences of extreme precipitation.

Study on factors affecting corn yield based on the Cobb-Douglas production function

This paper presents an analysis of the quantitative correlations between corn yield and its influencing factors in Daqing City, China by establishing a Cobb–Douglas production function model. The effective precipitation, corn planting area and chemical fertilizer and pesticide application rates were selected as the influencing factors of corn yield. Using the Cobb–Douglas production function model, the output elasticity and degree of influence for each factor on increasing grain yield were calculated. The current fertilizer and pesticide application rates, effective precipitation and planting area had positive effects on increasing corn yield, and the Daqing City area has the potential to produce more corn. Among the four influencing factors, the amounts of pesticide applications had the greatest impact on corn yield, followed by planting area, amounts of chemical fertilizer applications and, finally, effective precipitation. In this study, we used remote-sensing images combined with meteorological station data to calculate the effective precipitation in corn fields in Daqing City. The accuracy of this method was 0.01%–11.0% greater than that of the traditional effective precipitation calculation method. The innovation was the use of Thiessen polygons to calculate regional precipitation by combining satellite images with ground meteorological station data. The insufficient sensitivity of satellite inversion for precipitation (short and heavy rainfalls cannot be detected) and insufficient temporal resolution were avoided by using precipitation data from ground meteorological stations. Using satellite image interpretations, the weight coefficient of precipitation could be confirmed according to the location and size of the study area, improving the accuracy of Thiessen polygons in calculating regional precipitation. However, this method still has limitations. When calculating precipitation over a short time, it can be limited by the cloudiness of satellite images. When calculating the long-term precipitation trend, it can be limited by incomplete precipitation data from surface meteorological stations.

English

The main objective of this study is to examine the level and determinants of technical efficiency of smallholder Teff producers in Ethiopia using Stochastic Frontier Analysis (SFA), with appropriate production function, trans-log by LR test. Secondary data from Ethiopian socio-economic survey were used for the analysis. The result of Maximum likelihood Estimate (MLE) shows that area, fertilizer and fragmentation of land are major factors that influence productivity, and output elasticity has positive response on area, labour and fertilizer inputs. The average estimated technical efficiency of small holder farmers ranges from 0.13 to 0.92%, with mean efficiency of 73%. This implies that Teff productivity can be increased by 27% at existing level of technology. The result also shows there is inefficiency in production of Teff since discrepancy ratio gamma, γ is high and about 0.85. The study also identified that agro-ecology zones, age, extension, seed type, other income are the major socio economic factors influencing efficiency. Finally, the study recommends that policy geared towards the enhancement of productive efficiency of smallholder, through the appropriate consideration of inputs, socio economic factors and other facilities are important to address problem of food insecurity in Ethiopia. Key words: Teff, technical efficiency, stochastic frontier, agro-ecological zone, maximum likelihood estimate, Ethiopia.  

Does risk aversion affect bank output loss? The case of the Eurozone

We propose a new model to infer the evolution of bank-specific output losses due to the uncertainty in bank output prices. Losses are based on bank risk aversion with micro foundations tethered to the uncertainty regarding prices. Our model allows us to measure time-varying bank-specific output losses and risk aversion while taking into account all bank cross-sectional heterogeneity. We employ a panel data set to estimate the input and output elasticities with both parametric and non-parametric techniques. We are the first to document that increasing risk aversion among Eurozone banks during the financial crisis resulted in sizable output losses. Although subdued thereafter, losses have been resurging in recent years. Both conventional and unconventional monetary policy responses by the European Central Bank (ECB) mitigated uncertainty in bank output prices, though unequally so across countries. Certain measures of unconventional monetary policy may have even enhanced bank risk aversion and thereby output losses, but mainly so for large countries.

ANALYSIS OF THE RELATIVE IMPACT OF MONETARY AND FISCAL POLICIES ON ECONOMIC GROWTH IN ETHIOPIA, USING ARDL APPROACH TO CO-INTEGRATION: WHICH POLICY IS MORE POTENT?

Empirical investigation on the comparative potency of monetary and fiscal policies is still dubious among two major schools of thought in economics so called classical and Keynesian. Hence, this paper investigates the relative effectiveness of monetary and fiscal policies in affecting economic growth by employing Auto-Regressive Distributive Lag Model (ARDL) for the time spanning from 1975 to 2017. The proxies used in this study for monetary and fiscal policy were Broad money supply (M2) and government consumption expenditure respectively while real GDP at constant prices in 2010 is used as proxy for economic growth in Ethiopia. Anderson and Jordan (1968) “St. Louis equation’’ has been used to estimate the comparative potency of monetary and fiscal policies. The empirical results indicate that both the monetary and fiscal policies have equal statistically significant and positive impact on economic growth in Ethiopia with different significance level and magnitude. Besides of equal effectiveness, the elasticity of real output with respect to fiscal policy variable is greater than the elasticity with respect to money supply which show fiscal policy is more effective than monetary policy in influencing Real GDP in the long-run. However, in the short run, the fiscal policy is effective while that of the monetary policy proxy by money supply is ineffective in affecting output growth in Ethiopia. Therefore, to have continuous and sustainable economic growth, the coordination of monetary and fiscal policies are vital and the lack of this coordination leads to a sharp downturn of overall economic performance, even can hurt the economy.

The Effect of Climate Change on Agricultural Crop Returns in Uganda

The study examined the effect of climate change on agricultural crop returns in Uganda using the Ricardian Panel Tobit technique and the World Bank Living Standards Measurement Survey (LSMS) data, climate data from Uganda National Meteorological Authority (UNMA) and global weather data. The findings showed that climate related risks account for over 67 percent of agricultural risks and less than 2 percent of the farming households practise irrigation. Farmers that practised irrigation earned higher agricultural returns nationally than their counterparts did. The findings show that the output elasticities with respect to temperature range from -2.02 percent to 0.543 percent. This implies that for the average temperature increase by 1 percent, maize farm returns decreased by 2.02 percent, banana by 1.7 percent, cassava by 1.50 percent and beans by 1.01 percent. While 1 percent increases in rainfall, lowered banana returns by 0.02 percent, beans by 0.08 percent, cassava by 0.035 percent, maize by 0.025 percent except for groundnuts’ returns increased by 0.115 percent. Apart from climate factors, non-climate factors such as capital, labour, farm size, fertilizers and soil quality are equally important inputs and significantly impact on agricultural farm returns. The study proposes that due to unrelenting adverse climate change effects in Uganda, adoption of multi-pronged approaches such as extensive irrigation, agro-insurance, diversification of agricultural activities, use of food cribs during bumper harvests would be the breath of life for Ugandan farmers.

Neoliberal conservation in REDD+: The roles of market power and incentive designs

Market power relations and incentive designs are critical determinants affecting the success or failure of implementing the scheme of Reducing Emissions from Deforestation and Degradation (REDD+). This paper explores how market power differences in REDD + and incentive designs with different motivating objects affect the actors’ own emissions-reducing behavior. Guided by a theoretical framework that considers both market power and incentive designs, this paper examines the impacts of incentive designs and market power on the behavior of actors in REDD + by constructing game models. A numerical simulation is applied to examine the effects of parameter changes on the optimal strategies of each actor under different market-power structures and different incentive solutions. The results demonstrate the following. First, the incentives for landholders in REDD + are more conducive to affect actors’ efforts to reduce emissions than the incentives for the investor. Second, landholders, rather than investors, were found to obtain more market power due to the unequal market-power structure in REDD+, which will ultimately improve the landholders’ efforts to conserve forests and make a profit. At the same time, investors’ efforts and profits were also found not decline, despite the existence of the unequal market power. Third, the effects of market power and incentive designs on actors were found to be related to various REDD + factors, including opportunity costs, payments, the price of carbon credits, and the output elasticities of efforts. This paper further demonstrates that the incentive designs and market power have a more significant impact on landholders than on investors.

Solving the Time-Varying Cobb-Douglas Production Function Using a Varying-Coefficient Quantile Regression Model

The output elasticity estimated by the traditional Cobb-Douglas production function is a fixed constant that describes developed countries with relative stable factor shares well. While the fixed constant fails to describe developing countries with changing factor shares during economic transitional periods, such as China. In this paper, we construct a time-varying elasticity production function model and extend the Cobb-Douglas production function to a time-varying elasticity Cobb-Douglas production function. The semi-parametric varying-coefficient quantile model, together with the local polynomial and the two-phase methods, is used for the estimation of the time-varying elasticity of the capital coefficient and the labor force. Empirical research on Chinese economic growth shows that the time-varying elasticity of capital is declining and the time-varying elasticity of the labor force is increasing gradually.

Calculation of the contribution rate of China's hydraulic science and technology based on a feedforward neural network.

Quantitative analysis of the contribution rate of China’s hydraulic science and technology and analysis of the underlying reasons behind changes provide an important foundation upon which the government can formulate water policies. This paper abandons the assumption of a scale economy and separates the changes of benefits brought about by the scale from scientific and technological progress, thus changing the C-D production function from linear to nonlinear. Based on a feedforward neural network, it calculates the coefficient of the output elasticity, the economic contribution rate of China’s hydraulic science and technology and the scale economies for each year using relevant data from 1981 to 2016. The results show that (1) the average contribution rate of capital investment from 1981 to 2016 was 47.3%, and the average contribution rate of labor from 1981 to 2016 was 9.1%. It is not obvious that the significant increase in the labor force has contributed to the growth of China’s water conservancy industry. (2) The average contribution rate of scale economies in 1981–2016 was 26.7%, and the contribution rate of scale economies is negatively correlated with the capital contribution rate. (3) The average contribution rate of China’s hydraulic science and technology was 43.6% from 1981 to 2016, and the average contribution rate of the total factor productivity after removing scale economies from 1981 to 2016 was 16.9%. During the period of the 6th Five-Year Plan(1981~1985), the contribution rate of water conservancy science and technology was relatively high. Since that time, it has remained at 40%. In recent years, as water conservancy reforms in key areas have made positive progress, scientific and technological progress has increased the growth of water conservancy benefits annually.

The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs

Agents’ decisions to exert effort depend on the incentives and the potential costs involved. So far, most of the attention has been on the incentive side. However, our laboratory experiments underline that both the incentive and the cost side can be used separately to shape work performance. In our experiment, subjects work on a real-effort slider task. Between treatments, we vary the incentive scheme used for compensating workers. Additionally, by varying the available outside options, we explore the role of implicit costs of effort in determining workers’ performance. We observe that incentive contracts and implicit costs interact in a nontrivial manner. In general, performance decreases as implicit costs increase. Yet the magnitude of the reaction differs across incentive schemes and across the offered outside options, which, in turn, alters estimated output elasticities. In addition, comparisons between incentive schemes crucially depend on the implicit costs. This paper was accepted by Yan Chen, decision analysis.

Research on energy directed technical change in China's industry and its optimization of energy consumption pattern

Crucial to the green and sustainable development of China's industry are both choosing an appropriate path of directed technical change and optimizing and improving energy consumption pattern. In this paper we incorporate fossil energy, non-fossil energy and environmental factors into the traditional production function and calculate the factor output elasticity, the growth rate of environmental total factor productivity, the factor-biased degree of directed technical change and factor substitution elasticity in China's industrial sector based on stochastic frontier analysis of the transcendental logarithmic production function. The results show that the high output elasticity of capital leads to the highest factor-biased degree of directed technical change of capital although it is accompanied by an increase in energy consumption and environmental degradation. At present, the factor-biased degrees of directed technical change in China's industry, from high to low, are capital, the environment, fossil energy, labor and non-fossil energy; these can be seen as the root cause of, among other things, overcapacity, energy shortages and environmental pollution. Optimizing the path of directed technical change of labor, capital and non-fossil energy is an advisable way to solve the above problems. The patterns of energy consumption in industrial production in most provinces are unsustainable and each province should optimize its local energy consumption pattern according to those technical changes biased towards non-fossil energy and the positive factor substitution relationship between two kinds of energy.

Maximum likelihood estimation technique of grasscutter (Thryonomys swinderianus) production in Osun State, Nigeria

The study estimated quantitatively the technical efficiency of production and its determinants in grasscutter enterprise in Osun State, Nigeria, using a stochastic production frontier function approach. A total of Seventy-two grasscutter farmers across the three agricultural zones were selected using a simple random sampling technique. Data were collected on the socio-economic characteristics and other variables of interest such as prices of production inputs and output, through a well-structured questionnaire. The Maximum Likelihood Cobb-Douglas estimation procedure was used. Careful analysis revealed that labour, concentrates, capital and farm size were identified as the major determinants of the total output of grasscutter enterprise in the study area. The study also showed that membership of cooperative, access to credit, level of education and extension contact significantly influenced efficiency level in the study area. The maximum technical efficiency attained by the farmers was 93% while the minimum technical efficiency was found to be 45%. The mean technical efficiency (MTE) was 86%. The sum of output elasticities which denotes returns to scale was established at 1.04 signifying increased returns to scale. In essence, the enterprise did not attain maximum production frontier. Based on these findings, it is recommended that efficiency could be increased through better use of available resources, access to credit facilities and assisting and encouraging the farmers in joining cooperative societies so as to have access to loans. Also, educational programmes should be organized to sensitize farmers more on how to improve on their efficiency level.

Carbon Consumption, the Carbon-Based Ecosystem, and Output

This paper studies the effects of the carbon-based ecosystem on a country's output. We propose and estimate a dynamic game production model in which a country's ecosystem, as measured by its reservoir of carbon in land biomass and soils, is a productive input. This reservoir is diminished when higher levels of greenhouse gas concentrations reduce land sink absorption of atmospheric carbon. In equilibrium, a country's land carbon policy accounts for its direct effects on the ecosystem and on diminished land sink as GHG concentrations increase. We first estimate land sink absorption rates and the output elasticities of land use and the land carbon ecosystem for 152 countries. Calibrating the model to these estimates, we simulate the model to 2100 under four standard Representative Concentration Pathway scenarios. In the simulations, all countries experience higher average annual GDP growth under lower GHG concentration scenarios. The growth differentials between high and low scenarios are starkest for more developed countries. When compared to a counterfactual constant sink model, the ``active sink makes little difference in low concentration scenarios, but decreases global GDP growth by around 1.3% per year over the next 80 years in the highest scenario. Again, the differences are most pronounced in developed countries.

How does tax system on energy industries affect energy demand, CO2 emissions, and economy in China?

Energy savings and CO2 emission reduction have become a major issue in recent years. Taxes on energy production sectors may be an effective way to save energy, reduce CO2 emissions, and improve environmental quality. This paper constructs a dynamic recursive Computable General Equilibrium (CGE) model to analyze the impact of the energy tax on energy, economy, and environment from the perspective of tax rates and tax forms (specific tax and ad valorem tax). The results show that adjusting the tax system and the tax rate has important implications for energy conservation while having minor impacts on the output of other industries. The impact of an increasing energy tax on the energy demand is greater than the impact on sectoral output, indicating that energy efficiency will be increased to some extent. The CO2 reduction will increase over time when an ad valorem tax is implemented on enterprises. We found that ad valorem tax has greater elasticity of economic output, energy demand, and CO2 emission reduction. The results support the direction of China's resource tax reform. However, we argue that it is better to increase the tax rate relatively and relax the control on energy prices so that energy efficiency will increase.

Potential Inter-Fuel Substitution between Hydroelectricity and Fossil Fuels in Nepal

In spite of huge hydro-electricity potential, Nepal still relies on fossil fuel to meet its energy demand. However, as the pace of hydroelectricity generation gets momentum in recent years, there are concerns about the excess supply of hydroelectricity in the domestic market in the near future. In this context, this paper examines the potential substitution of conventional fuels by the hydroelectricity in Nepal. Using translog production function, this paper calculates the elasticity of substitution between hydroelectricity, coal, gas, petrol, diesel, and kerosene for the period of 1980 to 2016. Our findings suggest that all the fuels except kerosene are positively associated with economic growth during the study period, and the output elasticity of hydroelectricity is found be largest among these sources of energy. The findings also suggest that hydroelectricity has the potential for substitute other conventional fuels if the share of hydroelectricity is increased in the energy consumption composition. While there is not a huge variation in the elasticity of substitution between hydroelectricity and other fuels, the hydroelectricity has relatively higher potential to substitute coal followed by petrol, diesel, kerosene, and gas. The findings of the paper are supportive of the hypothesis that Nepal could potentially absorb the hydroelectricity generated in near future if incentive mechanisms are initiated that allow substitution of conventional fossil fuels by the hydroelectricity.