Possibility Frontier Research Articles

Равновесие «невидимой руки» в семье: сила притяжения между мужчиной и женщиной на брачных рынках

The proof of the Invisible hand describes the inner market mechanism, which leads the producer to the meeting point with the uninformed consumer, where the price and the meeting time provide the maximization of the output on the consumption-leisure production possibility frontier and unintentionally maximize the buyer’s consumption-leisure utility. This mechanism also works in marriage markets where the Invisible hand corrects the misleading information. The paper confirms G. S. Becker’s assumption that more beautiful, charming, and talented women tend to marry wealthier and more successful men but refutes his conclusion that such marriage maximizes the aggregate output. The high male productivity really attracts women because it produces a strong male gravitation field. But the marriage of a very productive man to a beautiful woman fails because it represents for a beautiful woman a corner solution. The man’s wealth, accumulated before the marriage, as well the bride price reinforces this disequilibrium. A dowry can also result in a disequilibrium because it gives time for a man to look for another partner. The paper argues that the quality of men is determined not by their productivity as such but by the trade-off between the productivity and their ability to provide household services on the family consumption-leisure production possibility frontier. The quality of women is determined by the trade-off between household activity and efforts to support her natural female attractiveness. The invisible hand equilibrium represents something close to the mating of unlikes but with some peculiarities. The woman’s ability to provide household services substitutes the man’s household activity but it complements his gender-related quality of productivity. A housewife raises the productivity of her husband; she increases his attractiveness and reinforces his gravitation field at the expense of her own attractiveness and her gravitation field but only this way she maximizes her consumption-leisure utility. Polygamy also represents the invisible hand equilibrium but in this case the equal distribution of wealth between wives is followed by unequal distribution of household activities when some wives spend less time in the kitchen but more leisure time with the husband because they are more attractive. In monogamy, the woman’s strong gravitation field produces the phenomenon of the ‘tragedy of a femme fatale’. Her alliance with a wealthy man comes to the corner solution; she needs more attention of her husband but with that she decreases his gravitational field, and he becomes less interesting to her. The loss of male attractiveness results in the short time horizon of the equilibrium determined by the invisible hand.

Economic growth under Solow-neutrality

This study is the first attempt to measure growth depending on the equation of the concave production possibility frontier, under Solow-neutrality. Although there is evidence that the nature of technological progress is Solow-neutral, Solow-neutrality is not compatible with the steady-state. This study solves that contradiction. To do this, we make three simple contributions. First, the natural rate of growth has been explained in harmony with the economic concepts such as constant returns to scale, full capacity and steady-state, under Solow-neutrality. Secondly, the equation of the concave production possibility frontier has been obtained when the nature of technological progress is Solow-neutral. Thirdly, economic growth has been explained based on the equation of the concave production possibility frontier, under Solow-neutrality. According to the first result of the study, Solow-neutrality becomes compatible with the long-run equilibrium growth and the steady-state under specific conditions. According to the second result of the study, positive economic growth occurs under specific conditions.

Trust and Governance in Collective Blockchain Treasuries

Blockchain treasuries are pools of collectively owned cryptocurrency earmarked for the purpose of funding ‘local public goods’ (e.g., protocol fixes, research, bridging infrastrastructure). Ecosystem participants face a trust problem in ensuring that the treasury is robust to opportunism (e.g., theft, hacking, misappropriation). Governance mechanisms (e.g., non-profit foundations, expert committees, voting systems) help to mitigate opportunism and bolster trust in the treasury, but they do so in different ways. In this paper we apply a framework from new comparative economics (the Institutional Possibility Frontier) to compare those governance mechanisms in how they minimise the costs of dictatorship and disorder. We provide case studies of innovative treasury governance mechanisms and interpret them within this framework. We find that the social costs of treasury governance shift throughout the lifecycle of a blockchain ecosystem (suggesting that the optimum governance structure also shifts) and that those costs can be revealed through crisis, leading communities to choose different governance mechanisms.

THE POLITICAL ECONOMY THEOREM

Welfare maximization is constrained by the ultimate frontier of efficient allocations, with a unique, interior optimum. By the second welfare theorem, such an optimum depends on a specific wealth distribution out of innumerable ones at given prices, whereby the state cannot refrain from redistributing. Such has long been known by the profession, but it never received a mathematical formalization, which this article takes up. Building on the literature, this research also presents two simplified proofs to the two welfare theorems and a mathematical formalization of the resolution to the compromise between equity and efficiency, for the additional constraint binds the social welfare function in equity and it originates the ultimate possibility frontier in efficiency.

Productivity, profitability, efficiency, and land utilization scenarios of rice cultivation: An assessment of hybrid rice in Bangladesh

The productivity gains attained from high-yielding varieties (HYV) of rice ( Oryzasativa L.) developed during the Green Revolution are no longer sufficient to feed the increasing populace. This has led to a greater focus on hybrid rice (developed by crossing two inbred varieties). However, the adoption of hybrid rice is stagnant in Bangladesh. This study assessed the current status of hybrid vis-à-vis HYV rice, the problems in the adoption of hybrid rice, and the potential of hybrid rice in increasing productivity and farmers’ income. The technical efficiency of rice cultivation and determinants of inefficiency were also investigated in addition to the development of various optimal land utilization scenarios. Primary data from 400 randomly selected farmers were collected in 2016 from four districts, Dinajpur, Sherpur, Gopalganj, and Noakhali, in Bangladesh. The analytical methods included the marginal benefit-cost ratio, stochastic production possibility frontier, and linear programming. The results showed that hybrid rice had higher productivity (20–25%) than HYV rice, while the marginal benefit-cost ratios were higher than one (3.65–5.34) across all the sampled districts. The area under hybrid rice decreased and the growth rate was negative (–2.52%) during the study period due to the rising price of seed and insect infestation. Based on land utilization scenarios, the optimal land utilization would require reallocation of 8–52% rice area in favor of hybrid rice across the sampled districts. The efficiency analysis showed the mean technical efficiency of 76%, which indicated the presence of technical inefficiency in rice production, significantly affecting the outputs. Farmer's education and extension service access were the main avenues for reducing inefficiency. As hybrid rice has higher productivity and profitability, hybrid seeds provide opportunities for enhancing rice production in Bangladesh. Yet, this can only be achieved by developing and disseminating affordable hybrid seeds with insect pest resistance and improved palatability of grain. The concerned government departments should also provide better access to extension services to reduce production inefficiencies.

Input-Output Production Structure and Non-Linear Production Possibility Frontier

Input-output (Leontief) production function is widely used in economic analysis. And diminishing marginal rate of return is a very well accepted economic fact. Leontief production function normally results in a linear production possibility frontier (PPF) due to its linear feature, whereas diminishing marginal rate of return implies a non-linear PPF. In this paper, the authors aim to fix this problem by considering multiple primary inputs in a simplified two-sector economy. The authors find that it is possible to curve a non-linear PPF by using Leontief production function when the authors add heterogeneous primary inputs. The authors also discuss the PPF using non-linear production function. Furthermore, the authors propose that three commonly used economic presumptions cannot hold in the same framework. These presumptions are “single primary input”, “fixed-proportion inputs” and “law of diminishing marginal returns”.

Development of the digital economy and its impact on labour market

The article considers the effects of technology on the level and composition of employment. Technological progress, by increasing the productivity of factors of production, expands an economy’s production possibility frontier but also decreases the number of existing workplaces. So the aim of the paper to consider the opportunities to the positive impact of the ICT on the labour market.

On the insufficiency of some conditions for minimal product differentiation

The basic framework is Hotelling’s model of product choice with quadratic transportation cost. Duopolists choose locations in the initial period and compete in prices in subsequent infinite periods. The firms share profits on the profit possibility frontier. Friedman and Thisse (Rand J Econ 24:631–645, 1993) provides a set of sufficient conditions for a unique equilibrium and minimal product differentiation in this setting. This paper reexamines those conditions. In the presence of some mild continuity requirements, there is exactly one profit sharing rule which satisfies those conditions. Furthermore, given any discount factor(s), the corresponding profits cannot be the outcome of a subgame perfect Nash equilibrium at every pair of locations. This brings out an inconsistency in the conditions. A slight weakening of the conditions, to allow for a wider class of profit sharing rules, can result in multiple equilibria and minimal product differentiation need not obtain. Two examples demonstrate this. Thus, neither those conditions nor their weaker variants can be used to characterize a unique equilibrium.

Co-Production in Local Public Service Delivery: The Case of Waste Management

Abstract In a simple model of waste management, we analyse the basic aspects of co-production in local public service delivery. Our results suggest that citizen involvement may lead to an expansion of the production possibility frontier, if waste sorting is made sufficiently convenient, relative to work, through an appropriate tax policy. However, by diverting time away from work, this policy may trigger a tax base erosion phenomenon. We find that the incentive power of the tax should be high (low) when local preferences for the service are very high (low) relative to local incomes. In the intermediate situation, two cases arise. First, when preferences are (not very) low relative to incomes, taxation should pursue resource collection purposes and be deprived of its incentive effects. Second, when preferences are middle-to-high relative to incomes, the trade-off between incentive provision and tax base erosion causes the optimal tax rate to first increase, then decrease.

Efficiency of Small-scale Irrigation Farmers in Northern Ghana: A Data Envelopment Analysis Approach

This study measures and explains technical efficiency (TE), economic efficiency and allocative efficiency of 110 small-scale vegetable farmers practicing various irrigation technologies for increased productivity. We employed the two-stage approach to estimate efficiency scores under constant returns to scale (CRS) and variable returns to scale (VRS) specifications. First, using a linear programming method, efficiency scores of the irrigated vegetable farmers were measured using the data envelopment analysis approach. The results show that about 27.3 per cent of the farmers currently operate on the production possibility frontier and are technically efficient, while 3.6 per cent were found to be both economically and allocatively efficient. The mean TE score for CRS was 50.6 per cent, compared with 78.1 per cent under the VRS. A Tobit regression at the second-stage analysis revealed that gender, experience, health and credit utilization have significant effects on TE. These results are valuable for stakeholders interested in promoting efficiency in smallholder irrigated production. JEL Classification: C14, C61, D24, D61, Q12

Foreign-Funded Enterprises and Pollution Halo Hypothesis: A Spatial Econometric Analysis of Thirty Chinese Regions

China is one of the world’s major environmental polluters, therefore, Chinese environmental efficiency is an issue of global importance. In this study, we aim to identify economic factors affecting environmental efficiency scores in different regions of China from a spatial econometric perspective. We measure environmental efficiency scores, relative to the theoretically consistent production possibilities frontier estimated, according to a novel iterative methodology. As expected, we find that environmental efficiency scores are negatively affected by the prevalence of heavy industry sector in the economy, with a higher share of coal as a source of energy exacerbating the problem. We also find evidence that strongly support the pollution halo hypothesis, which credits foreign-funded enterprises with producing in a more environmentally-friendly way. Surprisingly, we find a negative association between the share of tertiary sectors in a regional economy and environmental efficiency—emphasizing the need to address the indirect effects produced on the environment by the seemingly innocuous sectors, such as the hotel sector. We encourage the creation of foreign-funded enterprises, and support formulating environmental protection policies that consider the indirect effects various economic sectors have on the environment.

Two Indias: The structure of primary health care markets in rural Indian villages with implications for policy

We visited 1519 villages across 19 Indian states in 2009 to (a) count all health care providers and (b) elicit their quality as measured through tests of medical knowledge. We document three main findings. First, 75% of villages have at least one health care provider and 64% of care is sought in villages with 3 or more providers. Most providers are in the private sector (86%) and, within the private sector, the majority are ‘informal providers' without any formal medical training. Our estimates suggest that such informal providers account for 68% of the total provider population in rural India. Second, there is considerable variation in quality across states and formal qualifications are a poor predictor of quality. For instance, the medical knowledge of informal providers in Tamil Nadu and Karnataka is higher than that of fully trained doctors in Bihar and Uttar Pradesh. Surprisingly, the share of informal providers does not decline with socioeconomic status. Instead, their quality, along with the quality of doctors in the private and public sector, increases sharply. Third, India is divided into two nations not just by quality of health care providers, but also by costs: Better performing states provide higher quality at lower per-visit costs, suggesting that they are on a different production possibility frontier. These patterns are consistent with significant variation across states in the availability and quality of medical education. Our results highlight the complex structure of health care markets, the large share of private informal providers, and the substantial variation in the quality and cost of care across and within markets in rural India. Measuring and accounting for this complexity is essential for health care policy in India.

Production possibilities and trade in a one-primary factor economy with public infrastructure

In this paper, we consider a Ricardian type of economy with public infrastructure, which is of “creation of atmosphere” type or “unpaid factor” type. We show that, although the production possibility frontier is convex in the creation of atmosphere type of infrastructure but is concave in the unpaid factor type, the optimal supply of public infrastructure increases according to an increase in the good that is more heavily dependent on the infrastructure along the production possibility frontier for both types. Subsequently, we showed that a country with larger labor endowment likely exports the good more heavily dependent on public infrastructure in the creation of atmosphere case, while that country likely exports the other good in the unpaid factor case.

The Determinants of Technical Efficiency of Cocoa Production in Ghana: An Analysis of the Role of Rural and Community Banks.

The role of rural and community banks (RCBs) has been laudable in promoting sustainable cocoa farming throughout rural communities in Ghana. Through liquidity mobilization and the ultimate provision of institutional credit to farmers for various agricultural related activities, RCBs could trigger increased revenue and agricultural sustainability. However, pragmatic evidence on this assertion is inadequate and no study has acknowledged the supporting conditions required for RCBs intervention to improve cocoa production in the agricultural sector. In a three-stage sampling procedure, a cross-sectional data from 500 cocoa farmers were used to evaluate the role of RCBs intervention in improving farmers’ sustenance and technical efficiency. In this study, the Heckman's treatment effect model and stochastic frontier analysis (SFA) were applied to study cocoa farmers’ production efficiency. Empirical results from the study indicated that the financial support received from RCBs has a significant and positive effect on farmers’ technical efficiency. Although accessibility to RCBs credit is constrained by a myriad of conditions, the overall technical efficiency of farmers was 0.81 (81%) suggesting that no farmer reached the cocoa production possibility frontier of 1 (100%). However, the mean efficiency gap between credit takers and non-credit takers is 0.09 (9%) confirming the positive impact of credit on farmers' efficiency. Relating the agricultural growth indicators such as cocoa output and income to efficiency, close observation revealed that increasing farmers' accessibility to credit can close the efficiency gap between farmers and its subsequent reduction in the severity of poverty and extreme poverty. Although the sector is bedeviled by pests and diseases, lack of finance, and uncertain weather conditions, the inefficiency model indicated that education, membership of FBO, experience, credit access, and participation in government-sponsored mass spraying program had a significant and positive impact on efficiency scores. Therefore, we recommend policy directed at making institutional credit from rural and community banks easily accessible to all categories of cocoa farmers.

Optimal forest rotation under carbon pricing and forest damage risk

Forests have two notable economic roles in the future: providing renewable raw material and storing carbon to mitigate climate change. The pricing of forest carbon leads to longer rotation times and consequently larger carbon stocks, but also exposes landowners to a greater risk of forest damage. This paper investigates optimal forest rotation under carbon pricing and forest damage risk. I provide the first-order optimality conditions for this problem and illustrate the setting with numerical calculations representing boreal forests. Under the considered range of parametrizations, carbon price has far greater impact on the optimal rotation than the damage probability. Increasing forest carbon stocks through longer rotations is thus economically attractive option for mitigating climate change, despite the forest damage risk. Carbon pricing increases land expectation value and reduces the economic risks posed by disturbances. The production possibility frontier between harvests and carbon storage suggests that significantly larger forests carbon stocks are achievable, but implies lower harvests. However, forests' societally optimal role between these two activities is not yet clear-cut; but rests on the future development of relative prices between timber, carbon and other commodities dependent on land-use.

Untapped regional integration potential: A global frontier analysis

ABSTRACT This paper proposes a novel approach to estimate untapped regional integration potential across geographical subregions of the world. We first construct an empirical production possibility frontier for regional integration outcomes based on two composite indices capturing enabling factors and achieved levels of regional integration outcomes across various domains. We then use non-parametric frontier analysis to rate the performance of subregions in terms of integration relative to their estimated potential. The obtained efficiency scores allow us to quantify and compare the empirical magnitudes of untapped integration potential across individual subregions. Our results suggest that, globally, subregional integration levels are currently at 60 percent of the estimated potential on average. Furthermore, there is large variation in integration outcomes, and subregions with large untapped integration potential are spread across all parts of the world. We also demonstrate how, from a policy perspective, the proposed method can be used for assessing achievements in targeting subregions with certain needs and characteristics, and guiding decisions about types of interventions that future programs aimed at fostering higher integration should prioritize in each subregion.

Ricardian Model of Comparative Cost Advantage in Operating Intercity State Transport Corporation (ISTC) and Opoku-Agyemang (O.A) Travel and Tour

This study employed the Ricardian Model of Comparative Cost Advantage, the study was able to relate to how much productive or cost efficient one transport corporation is than the other. In this case, the research centered on how much one transport provider is efficient in a particular service than the other and therefore can tell which transport corporation should resort to specializing in human transport and leave parcel transport service and vice versa due to high patronage. Stratified sampling was used to divide the population into homogeneous subgroups (Bosco training Collage, UDS Navrongo Campus, OA bus terminal and ISTC bus terminal). Structured questionnaire was design and administered to generate precise and accurate information on the effectiveness of Intercity State Transport Coaches ltd (ISTC) and Opoku Agyeman travel and tour (O.A) in terms of human transport and parceling services. The study revealed that O.A, is a private enterprise that is time conscious in terms of delivery. ISTC on the other hand specializes in safety. From the research, the cost of transporting humans from Bolgatanga to Kumasi and vice versa was lower for O.A than ISTC and this allows most customers to prefer O.A to ISTC. However, the affordability of charges of parcels moving from Kumasi to Bolgatanga and vice versa is better in ISTC than O.A. This gives O.A a comparative cost advantage in terms of human transportation than ISTC. ISTC however has a comparative cot advantage over O.A in parceling service. Keywords: Ricardian Model, Comparative Cost Advantage, Opportunity Cost Theory, Productive Possibility Frontier, Transportation. DOI: 10.7176/JESD/11-4-03 Publication date: February 29 th 2020

The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.

We provide a quantitative analysis of the trade-offs between health outcomes and the distribution of economic outcomes associated with alternative policy responses to the COVID-19 pandemic. We integrate an expanded SIR model of virus spread into a macroeconomic model with realistic income and wealth inequality, as well as occupational and sectoral heterogeneity. In the model, as in the data, economic exposure to the pandemic is strongly correlated with financial vulnerability, leading to very uneven economic losses across the population. We summarize our findings through a distributional pandemic possibility frontier, which shows the distribution of economic welfare costs associated with the different aggregate mortality rates arising under alternative containment and fiscal strategies. For all combinations of health and economic policies we consider, the economic welfare costs of the pandemic are large and heterogeneous. Thus, the choice governments face when designing policy is not just between lives and livelihoods, as is often emphasized, but also over who should bear the burden of the economic costs. We offer a quantitative framework to evaluate both trade-offs.

Testing for the emergence of spontaneous order

We report on an experimental investigation of the emergence of Spontaneous Order, the idea that societies can co-ordinate, without government intervention, on a form of society that is good for its citizens, as described by Adam Smith. Our experimental design is based on a production game with a convex input provision possibility frontier, where subjects have to choose a point on this frontier. We start with a simple society consisting of just two people, two inputs, one final good and in which the production process exhibits returns to specialisation. We then study more complex societies by increasing the size of the society (groups of 6 and 9 subjects) and the number of inputs (6 and 9 inputs respectively), as well as the combinations of inputs that each subject can provide. This form of production can be characterised as a cooperative game, where the Nash equilibrium predicts that the optimal outcome is achieved when each member of this society specialises in the provision of a single input. Based on this framework, we investigate whether Spontaneous Order can emerge, without it being imposed by the government. We find strong evidence in favour of the emergence of Spontaneous Order, with communication being an important factor. Using text classification algorithms (Multinomial Naive Bayes) we quantitatively analyse the available chat data and we provide insight into the kind of communication that fosters specialisation in the absence of external involvement. We note that, while communication has been shown to foster coordination in other contexts (for example, in public goods games, market entry games and competitive coordination games) this contribution is in the context of a production game where specialisation is crucial.

NEW SOURCES OF GROWTH: THE ROLE OF FRUGAL INNOVATION AND TRANSFORMATIONAL LEADERSHIP

This paper’s main thesis is that frugal innovation and transformational leadership offeradditional sources of growth. Our main contribution is the proposal of what we referto as the breakthrough possibility frontier (BPF) model, which integrates two aspectsof leadership: innovation quality (frugal innovation) and leadership competency(transformational leadership). We test the BPF model on two groups of respondents,one group consisting of university students who had never been formal leadersand the other formal leaders who had office experience. The BPF analysis suggeststhat transformational leadership is a game changer, required for breakthroughs.Transformational leadership is key to encouraging innovation quality and leadershipcompetency and, we argue, to facilitating new sources of growth. Our results implythe development of an integrated institutional framework for innovation. We believethat innovative leadership development programs that can be easily implementedand replicated in other regions are needed to develop transformational leadershipcompetencies.