Private Sector Profitability Research Articles

Rethinking developmental state intervention in the housing supply of a transitional economy: Evidence from Hanoi, Vietnam

The Vietnamese government has consistently played the role of policy initiator to achieve mass affordable housing provision through mobilising resources from the private sector since the Doi Moi policy was proclaimed. Consequently, high-rise apartments have gradually changed Hanoi's cityscape, while self-built row-houses still dominate the housing market. This study explores the evolution in housing types from the perspective of policy deviation. It aims to examine Hanoi's housing development using the developmental state model's theoretical framework to verify the impact of government intervention. The research methods involved collecting official statistics and survey data on apartment plans; an in-depth literature review on the local laws and regulations; and focus group interviews with government officials, professors, and construction industry businesspeople. This study shows that crude regulations and mismatches in actual housing demand led to malfunctions in ambitious housing supply plans during policy implementation. It also identifies that public land ownership and centralised planning authority are critical elements of the state's incentive-control scheme for housing provision. The public entities' market independence, ensuring the private sector's profitability, and financial instruments that promote housing affordability are essential for the state-led housing development policy's success.

CARE DEPENDENCY IN OLD AGE IN MEXICO: SITUATIONAL ANALYSIS, IMPLICATIONS, AND RECOMMENDATIONS

The demographic transition, population aging, and the epidemiological transition in Mexico have modified the burden of the disease profile, and impose important economic, social, and health care challenges, particularly old-age and disability-related care dependency. We describe old age health and dependency conditions, and analyze the supply of services to dependent population, including aging and disability norms and policies, the role of the government and the private sector (profit & non-profit) in the provision of related services. Based on the analysis, it is clear that public strategies for care dependency are practically non-existent and that policies aimed at these populations focus on guaranteeing access to basic health services, an economic income, and social integration. Also, there are no support strategies for family caregivers who currently carry most of the care work. Care dependency strategies to support those who need them as well as those who currently provide them are urgently needed.

'The State of Intellectual Freedom in America' (Written Testimony Before the United States House of Representatives Committee on the Judiciary Subcommittee on the Constitution and Civil Justice)

Disagreement between knowledgeable scientific experts and median political views often do not suggest political bias on the part of scientists, but rather an effort by think tanks, media organizations, interest groups and politicians to inappropriately politicize scientific issues. For example, the causes and consequences of Climate Change are scientific issues. The likely economic harm from such changes, and the costs of preventing or mitigating them, are also scientific issues. So are the adverse health consequences from air and water pollution or the health effects of smoking. So is the question of whether tax cuts can generate enough economic growth to reduce the Debt-to-GDP ratio. While scientific questions can have political and policy implications, scientific inquiry should not be politicized. The best evidence should be analyzed with the best methods, and the implications and degree of uncertainty honestly conveyed to policymakers and the public. But according to scientific experts, many scientific issues have been inappropriately politicized when scientific evidence threatened private sector profits or government budgets. These issues include the causes and effects of climate change, the health risks of pollution, and the dangers of tobacco use. According to a Pew survey, nearly 80 percent of scientists believe that previous administrations suppressed government scientists’ findings for political reasons. Many scientists worry that suppression of scientific findings for political reasons is becoming more common. Note that the Pew sample consists overwhelmingly of natural or “hard” scientists in fields such as medical sciences, chemistry, physics and geosciences. Pew’s sample included those who work in private industry as well as those who work in government and universities. Recently, there have been systematic efforts by some members of Congress to weaken the role of science in informing agency rule-making and increase the role of political actors. Some politicians have also sought to prevent government agencies from collecting basic data about demographics, the environment, health and safety, and the economy, even if de-identified to protect individual privacy. Today, threats to academic freedom can come from powerful donors, political leaders, and outside pressure groups who sometimes seek to subtly (or not so subtly) influence ostensibly neutral and unbiased academic research to further their own business interests or other political preferences. The best way to protect universities from undue influence may be to secure and expand revenue sources that are indifferent to or cannot sway the conclusions of academic research. This is analogous to the approach we take to try to protect the independence of members of the federal judiciary or the Federal Reserve.

Right back like we left something: examining the commodification of Blackness in social services to address racial disparities – the case of Hartford

ABSTRACTMarket-based approaches to addressing racial disparities have essentially re-commodified Blackness. Utilizing Hartford, which contains the largest percentage of Blacks per capita in Connecticut, this article examines market-based approaches to address racial disparities while discussing Blackness as an enduring commodity that is tied to private sector profit. The study argues that market based approaches incentivize punitive approaches to social problems associated with Blackness. The study concludes by suggesting that addressing disparities utilizing markets requires reimagining policy incentives to focus on prevention and treatment of social problems associated with Blackness. Failure to reimagine policy incentives serves to commodify Blackness whereby industries benefit from the continuity of disparities rather than the elimination of disparities.

Made in America: Race, Trade, and Prison Labor

Made in America: Race, Trade, and Prison Labor

Public-private partnerships for energy efficiency projects: A win-win model to choose the energy performance contracting structure

To stimulate private sector investments and promote energy efficiency, in recent years through Public Private Partnership arrangements, the public sector uses private companies, the Energy Service Company (ESCO), to perform one or more activities related to the provision of energy services, and the contractual arrangements defining the contracting parties' obligations and rights are traditionally based on Energy Performance Contracting (EPC). Although EPC is a valuable model for delivering public energy efficiency projects, the adoption is still far from its vast potential mainly because of two unresolved issues: the dilemma of equally sharing the benefits between the public and private parties so as assuring a win-win condition, and the lack of adequate public procedures that support the selection of the most appropriate EPC schema given certain circumstances and projects' characteristics. The existing literature have analyzed the advantages of EPC mechanism for delivering energy efficiency projects and explored the critical success factors of EPC. However, it does not provide any solution to address the issues that hamper the adoption of EPCs in public sector. To fill this gap, this paper proposes a model for assessing and benchmarking the net benefits of the different EPC structures, so as choosing the EPC schema that creates a ‘win–win’ solution for both the ESCO and the government, by balancing the private sector's profitability needs and the public sector's economic interests. The assessment of the benefits of the EPC schema for contractual parties and the benchmark among the contracts are based on an economic approach, which expresses the net benefit gained by each party through the three EPC contracts in monetary terms and benchmarks the three EPC schema through the Net Present Value (NPV) method. The win-win condition is ensured by the contract that minimizes the difference between the net profits (NPV) gained by the contractual parties. This will support the public authority in the decision-making process about the EPC structure to be adopted to develop an energy efficiency project as a PPP. To demonstrate the applicability of the proposed model, we apply it to an energy efficiency project launched by the Municipality of Noci (Southern Italy).

“Cutting costs to the bone”: the Portuguese experience in renegotiating public private partnerships highways during the financial crisis

How can governments renegotiate public private partnerships (PPPs) in order to reduce public expenditures? In 2011, in the aftermath of the financial and sovereign debt crisis, Portugal asked for financial assistance from the European Union, the European Central Bank, and the International Monetary Fund (“the Troika”). Annual payments to PPPs in the highway sector represented one of the major burdens of public finances. Over the last two decades, Portugal used PPPs to close the “infrastructure gap” by building 4000 km of highways. The Troika demanded that the Portuguese government renegotiate these PPPs in order to reduce annual payments by 30%, and to develop a more sustainable model. This paper describes these renegotiations. We also discuss the strategy of these renegotiation, in order to reduce costs focus on the main motivations for the public and private sector to conduct this process. A reduction of 18% on future payments was achieved, by using five main strategies: (1) reduce operational service levels; (2) transfer operational service to the public sector, at a lower marginal cost; (3) increase the period between “major repairs”; (4) reduce private sector profitability; and (5) change the risk allocation. We detail each strategy and analyse their respective impact on total cost reductions. This paper should be useful to both academics and practitioners, as it describes a complex renegotiation process that led to gains for both sides and reduced public payments in one of countries that used PPPs most aggressively worldwide.

The impact of quantitative easing (QE) on the cost of debt in project finance investments

Recession-driven low inflation and high spreads have increased the cost of debt in public sector project finance investments, therefore reducing private sector profits and bankability. This paper investigates the impact of quantitative easing by central banks, showing that it can stimulate economic growth producing shared public and private benefits.

Iconic eyesores: exploring do-it-yourself preservation and civic improvement at abandoned train stations in Buffalo and Detroit

This inquiry documents two citizen-driven campaigns to reclaim iconic train stations and their adjacent landscapes, assessing their effectiveness as agents of preservation and civic improvement, and potential as catalysts for local development. Examining grassroots efforts to conserve and reuse Buffalo’s Central Terminal and Detroit’s Michigan Central Station and the adjacent Roosevelt Park, it considers a unique form of preservation practice – one devoid of significant public sector funding and the conventional market-based adaptive reuse strategies that are ineffective in declining settings. Driven by idiosyncratic collectives of residents, business owners, cultural entrepreneurs, artists, designers, and planners, these groups coalesce around a shared desire to conserve local landmarks and play an active role in the physical rebuilding of their cities. Their incremental and incomplete transformations are driven by an ethic that transcends both typical market-oriented targets (private sector profits or “pays-for-itself”) and the “fully restored” end states that are the goals of conventional projects. While these acts of reclamation are far from complete, they have the potential to inform similar locally driven efforts in settings of decline.

Private Sector Profitability and Depreciation Pressure within Managed Floating Exchange Rate Regimes: Evidence from Nigeria

I find evidence for persistence in depreciation related currency pressure in the Naira to US$ exchange rate with persistence exacerbated by private sector profitability. The empirical evidence shows the Central Bank of Nigeria (CBN) reins in depreciation pressure induced within the private sector using buyback yields on Treasury Bills. Given the resultant appreciation of the Naira limits profitability within the private sector, this somewhat reactionary policy to exchange rate management simultaneously enables the CBN to manage investment risk within Nigeria's banking sector. My findings indicate managed floating or alternative hybrid exchange rate regimes can be especially appropriate in countries within which currency values erode with private sector profitability. In such countries, my findings indicate it is advantageous for Central Banks to be responsible for both bank regulation and monetary policy.

Private Sector Profitability of Maize Production in the Bajío Region of Guanajuato, Mexico

Agriculture, generally speaking, is the basis of the food system of any country. Mexico's maize crop is particularly important, not only in terms of food security but also as in terms of culture and identity. The fact that, in recent decades, Mexico has positioned itself as the second largest importer of maize is worrying. For the purpose of measuring the private sector profitability of maize production in the Bajío region of Guanajuato, this study analyzed data from 2,996 producers who participate in the "High Yield Maize Assessment Program (PROEMAR)", of the Instituto Nacional de Investigaciones Forestales, Agrícolas y Pecuarias- Bajío Experiment Camp (INIFAP-CEBAJ). We used the Policy Analysis Matrix (PAM) developed in 1989 by Monke and Pearson. The results indicate that the benefit-cost ratios of the three technological systems analyzed (considering in their total income, the sale of grain and sub products), were 2.20 for rainfall (T); 1.50 for irrigation with livestock (RCA) and 1.01 for irrigation without livestock (RSA), excluding land costs; including land costs decreased the ratios to 2.13, 1.35 and 0.91. The private cost ratio (RCP), excluding the land, by production system was: T = 0.04, RCA = 0.13 and RSA = 0.85, which implies that the maize producers in the Bajío region of Guanajuato are competitive. When including land rent in the production costs, the rainfall and irrigation with livestock systems remained competitive with a RCP of 0.07 and 0.32, respectively; not so for the production unit with the irrigation system without livestock (2.04). The most significant input was fertilizer costs, which represented 50% of the costs.

Balance sheet recession as the ‘other half’ of macroeconomics

Once every several decades, the private sector loses its mind in a bubble, leverages itself up to the hilt, and is forced into debt minimization in order to remove its debt overhang following the crash. When the private sector as a whole is deleveraging, even at record low interest rates, monetary policy is largely ineffective while fiscal policy becomes absolutely essential in keeping both the economy and money supply from shrinking. The superior effectiveness of monetary policy during private sector profit maximization and of fiscal policy during private sector debt minimization indicates that the latter was the long-overlooked ‘other half’ of macroeconomics.

Commercial Opportunities and Ethical Pitfalls in Personalized Medicine: A Myriad of Reasons to Revisit the Myriad Genetics Saga

In 1996, the US-based biotechnology company Myriad Genetics began offering genetic diagnostic tests for mutations in the genes BRCA1 and BRCA2, which are linked to hereditary breast and ovarian cancer. Since that time, Myriad has been a forerunner in the field of personalized medicine through the use of effective commercialization strategies which have been emulated by other commercial biotechnology companies. Myriad’s strategies include patent acquisition and active enforcement, direct-to-consumer advertising, diversification, and trade secrets. These business models have raised substantial ethical controversy and criticism, often related to the company’s focus on market dominance and the potential conflict between private sector profitability and the promotion of public health. However, these strategies have enabled Myriad to survive the economic challenges that have affected the biotechnology sector and to become financially successful in the field of personalized medicine. Our critical assessment of the legal, economic and ethical aspects of Myriad’s practices over this period allows the identification of the company’s more effective business models. It also discusses of the consequences of implementing economically viable models without first carrying out broader reflection on the socio-cultural, ethical and political contexts in which they would apply.

Why IRR is an inadequate indicator of costs and returns in relation to PFI schemes

Abstract The Internal Rate of Return (IRR) is a commonly used indicator of the performance of Private Finance Initiative (PFI), schemes in the UK. Treasury guidance recognises, however, that IRR is potentially misleading, unless the relevant payment streams are of a flat, annuity, type. This paper uses data on a number of actual PFI schemes to examine whether the payment streams involved are sufficiently flat for IRR to be a reliable indicator. There is clear evidence that the assumption of flat payment profiles in PFI schemes is violated. As a result, quoting IRR alone in the PFI context is liable to understate both the true opportunity cost of PFI finance to the public sector, and the potential scale of private sector profit. Our analysis also indicates that a statistic based on average outstanding debt is a reliable indicator of the extent of departures of the relevant payment profiles from annuity type.

Accounting, regulation and profitability: The case of PFI hospital refinancing

Abstract The refinancing of PFI (Private Finance Initiative) projects represents one of the most contentious aspects of Public Private Partnerships (PPPs) in the UK. The negative publicity associated with UK PFI refinancing deals is associated with several factors, including, evidence of massive private sector profit making, the failure of private sector financiers to share refinancing profits and, lastly, private sector frustration of adequate regulatory intervention in this area. Utilising a dynamic model of capital market and state interaction, this paper explains these outcomes as a function of effective private sector lobbying of bureaucratic state agencies to alter the structure of accounting, accountability and regulation with the goal of securing favourable profit and risk outcomes. These dynamics are illustrated with reference to the history of UK PFI refinancing and a case study of one of the projects where these gains reached extreme levels.

Public versus private health care in a national health service

This paper studies the interaction between public and private health care provision in a National Health Service (NHS), with free public care and costly private care. The health authority decides whether or not to allow private provision and sets the public sector remuneration. The physicians allocate their time (effort) in the public and (if allowed) in the private sector based on the public wage income and the private sector profits. We show that allowing physician dual practice 'crowds out' public provision, and results in lower overall health care provision. While the health authority can mitigate this effect by offering a higher wage, we find that a ban on dual practice is more efficient if private sector competition is weak and public and private care are sufficiently close substitutes. On the other hand, if private sector competition is sufficiently tough, a mixed system, with physician dual practice, is always preferable to a pure NHS system.

Public Versus Private Health Care in a National Health Service

This paper studies the interaction between public and private health care provision in a National Health Service (NHS), with free public care and costly private care. The health authority decides whether or not to allow private provision and sets the public sector remuneration. The physicians allocate their time (effort) in the public and (if allowed) in the private sector based on the public wage income and the private sector profits. We show that allowing physician dual practice crowds out public provision, and results in lower overall health care provision. While the health authority can mitigate this effect by offering a higher wage, we find that a ban on dual practice is more efficient if private sector competition is weak and public and private care are sufficiently close substitutes. On the other hand, if private sector competition is sufficiently hard, a mixed system, with physician dual practice, is always preferable to a pure NHS system.

Russia's Post-Stabilisation Economic Decline, its Crash and finally its Revival. Don't Just Blame the Corruption. It's the Exchange Rate, Stupid.

Coverage of Russia in western newspapers leaves an overriding impression that the place is corrupt and doomed. Economists and pundits have focused on corruption, and the lack of the rule of law as the main causes of last year's crash. These structural problems definitely exist and they are indeed serious. But they also existed and were serious when the stock market was booming in 1996-1997 on the perceived success of Russian reforms. In fact, focus on these two problems neither explains the crash nor the real news of recent months - that production in Russia is steadily growing for the first time in a decade. The reason for this turnaround is the collapse of the rouble, which freed industry from the uncompetitiveness of the former exchange rate. The August 17 debacle is turning out to be salvation of Russian industry. The depression of Russia's heartland in 1995-1998 was largely caused by the very success of stabilisation. To bring down rampant inflation the exchange rate was pegged. As a result inflation was swiftly reduced in 1996 and consumption and financial booms in 1997 triggered a small growth blip, but industry sank further into its depressive mire. While stock markets went from high to high the real economy was suffering from Russia's version of the Dutch Disease. The commodity-based export sector prospered, largely freed from the subsidisation role of Soviet times, but Russian manufacturing went from bad to worse. Companies made more losses and in order to survive they failed to pay tax, wage and supplier bills, and turned to barter. While corruption, tax avoidance and plain stealing by management were - and are - pervasive, they alone do not suffice to explain the growth of these virtual phenomena during the stabilisation period. Post-crash, things are different. Federal tax revenues are up which has allowed the government to start paying off some of its outstanding arrears. In the private sector profits, cash-flow, and order book levels are up, while barter and wage arrears are down. With a competitive exchange rate the Russian economy is reviving for the first time in decades. Russia's transformation into a market economy, however flawed, is bearing some fruit. Provided there is no fast real appreciation and no major political upheaval, there is nothing to suggest that the Russian economy will not keep on growing. But although denouncing corruption might help to foster positive change, blaming it for the crash (and for the West's loss of Russia) provides precious little insight. Straight exchange rate economics goes much further in explaining why Russia continued to decline after stabilising in 1995, and why it is growing now.

Public pricing of final and intermediate goods in the presence of externalities

The purpose of this paper is to investigate the impact of externalities on pricing decisions by a public or a private regulated firm selling both final and intermediate goods. The externalities generate feedbacks in demand that affect both consumers and producers. The model is very general in that it does not impose constant returns to scale on private production, allows for distributional effects of both the publicly determined prices and private sector profits, and captures the general equilibrium effects of public pricing. Socially optimal pricing rules are derived, and the relation of the results with previous models of pricing in the presence of externalities is investigated.

Market Valuation with No Market – Valuing Properties with Little Evidence

Discusses the valuation “public sector assets” comprising public parks, infrastructural assets (roads, drains, water supply, etc.), hospitals, schools, universities and the like; and takes a passing look at the modern public sector accounting practices which appear to create a need for such valuations. The question about Cwhether or not accounting and valuation technicians and definitions which are applied to private sector profit making commercial organizations can be applied to public sector non‐profit making entities is also examined. Since, in most cases, there is no market for such assets does a valuation serve any useful purpose in any accounting, accountability or management framework? Indeed, are the utilities used by public sector organizations strictly “assets” as that term is normally understood? What “bundle of rights” attaches to such public facilities as parks and roads? To the entity responsible for the provision and maintenance of such “assets” are they not more in the nature of liabilities?