Social Rate Of Return Research Articles

Solow's attempt to revive the concept of ‘social rate of return’ and Pasinetti's critique

AbstractThe paper deals with Robert Solow's attempt to revive the concept of the ‘social rate of return’ and Luigi Pasinetti's critique of it. By means of this concept Solow thought to be able to circumnavigate the capital theoretical attack on the marginalist theory by claiming that the rate of interest is an accurate measure of, and can be seen as being determined by, the ‘social rate of return’. His analysis focused on a switch‐point between two techniques, in which, alas, the rate of interest is already fixed. Pasinetti objected that, by construction, Solow established the opposite of what he thought he had done. Since in a switch‐point also the prices of capital goods are known, the ‘quantity of capital’ employed is fixed: it depends on the rate of interest and therefore cannot be taken as given independently of it and the corresponding system of prices.

The Global Infrastructure Gap: Potential, Perils, and a Framework for Distinction

In 2015, the World Bank claimed that rich-country private capital could: (i) close the infrastructure services gap in poor countries, (ii) achieve the sustainable development goals, and (iii) make money by moving from “billions to trillions” of investment in poor-country infrastructure. Our framework distinguishes those poor countries in which the Bank’s claim is tenable from those where it is not. For a given poor country, the framework reveals that investing a dollar in infrastructure is efficient if the social rate of return on infrastructure clears two hurdles: (a) the social rate of return on private capital in the poor country, and (b) the social rate of return on private capital in rich countries. Applying the framework to the only comprehensive, cross-country dataset of social rates of return on infrastructure indicates that in 1985 just 7 of 53 poor countries cleared the dual hurdles in both paved roads and electricity. (JEL H43, H54, L94, O13, O18, Q01)

Optimal global spending for group A Streptococcus vaccine research and development

Group A Streptococcus (Strep A) leads to 600,000 deaths and 600 million cases of pharyngitis annually. Although long a promising target for vaccine development, how much funding should be allocated to develop a Strep A vaccine is unclear. We aim to calculate the optimal amount of global spending for Strep A vaccine development, the resulting benefits, and the social rate of return on this spending. We develop a model of optimal spending, from a global societal perspective, on research and development (R&D) for vaccines and treatments. The model takes as inputs total harm from the disease, the probability an R&D project succeeds, the cost of a project, and the fraction of total harm a success alleviates. Based on these inputs the model outputs an optimal amount of spending and a rate of return. We calibrate the model for Strep A. Optimal spending is estimated to be 2020 USD33 billion. This spending leads to 2020 USD1.63 trillion in benefits and a real return of 22.3% per year for thirty years. Sensitivity shows an optimal spending range of 15.9 billion to 58.5 billion, a benefits range of 1.6 trillion to 37.9 trillion, and a return range of 18.0–48.2%. Investment in a Strep A vaccine could create enormous benefits for comparatively little cost. It represents one of the highest return uses of public spending. Policy can promote Strep A vaccine development through direct funding of projects and by promoting financial mechanisms that allow the private sector to diversify its R&D investment.

The Economic Benefits of Supporting Private Social Enterprise at the Nexus of Water and Agriculture: A Social Rate of Return Analysis of the Securing Water for Food Grand Challenge for Development

This article attempts to evaluate the comparative socioeconomic benefits of funding performance-based private sector social enterprises and posits that the social rate of return of such investments is significant and exceeds expectations for similar investment portfolios. Using the case study of the Securing Water for Food Grand Challenge for Development, we perform a social rate of return analysis on 16 water conservation technologies (WCTs) in 10 nations. Through using an extensive benefit cost ratio, we obtain the Marginal Internal Rate of Return whereby the discounted value of future benefits is equal to the reinvestment cost of capital for the SWFF portfolio. This allows the impact of SWFF to be comparable to other investments and serve as a benchmark. The resulting social rate of return metrics exceed the conservative expectations of impact investment funds as well as comparable foreign aid investments. The reasons behind this high rate of social impact are further explored and recommendations are provided accordingly for an alternative performance-based investment model of foreign aid disbursement that prioritizes scalable small and medium-sized social agribusiness enterprises in developing nations.

ECONOMIC EVALUATION OF SOME AGRICULTURAL INITIATIVE PROJECTS IN IRAQ

This research aims to identify the economic and national feasibility of some agricultural activities benefiting from the agricultural initiative's lending funds, as well as to show the impact of the agricultural initiative on these projects in terms of raising social profitability, in the light of the results of the national evaluation criteria addressed in the research. All the studied projects have achieved a net added value at the level of the national economy. The dairy cattle breeding project recorded the lowest net added value of about 914 million dinars (about 745 thousand dollars), and poultry projects achieved the highest added value of about 5 billion ID for the projects of table eggs production 4.9 billion ID for broiler projects, while the relative change in the standard showed that and the broiler production project is one of the most benefited from loan subsidies as the rate of change reached about 25%, while the project of broiler production and poultry hatchery and the project of raising milk cow have negative social return .The initiative's subsidies have increased the social rate of return for these projects to around 24%, 20.5%, and 20%. Agricultural loans from the agricultural initiative raise the national profitability of agricultural projects, which would contribute to the process of agricultural development in Iraq.

Combined ecological and economic benefits of the solar photovoltaic industry in arid sandy ecosystems

Solar photovoltaic (PV) panels and the vegetation under them consist of a combined system that could provide not only clean electrical power but also an effective preventive measure against wind erosion in sandy ecosystems. Here, by evaluating the effectiveness of the two-tier model, this study focused on the socioeconomic and environmental co-benefits of the solar PV industry in sandy ecosystems. The results showed that the ecosystem services provided by the combined system land were 24 times higher than those provide by natural recovering land. The combined system could achieve $5258.86 × 104 in benefits per year, including $3897.48 × 104 from electricity and $1361.38 × 104 from ecosystem services value. The ecosystem services value could reach 34.93% of the electricity benefits value and become a vital part of the total valuation. The results indicated that electricity benefits and considerable ecosystem value could be generated from the combined systems. These combined systems have great potential for combating desertification and should be considered appropriate public investment projects with high economic and social rates of return in arid areas.

Allocating Subsidies for Private Investments to Maximize Jobs Impacts

Governments often aim to influence the amount and sectoral allocation of private investments through explicit or implicit subsidies. The rules used to select projects to benefit from subsidies may vary, depending on the policy objective. This paper develops a general framework to allocate subsidies to private investments in the presence of jobs-linked externalities (JLEs). JLEs emerge when wages exceed the opportunity cost of labor (labor externalities), or when there are social gains from creating better jobs for some classes of worker, such as women or youth (social externalities). Like all externalities, JLEs create a gap between private and social rates of return. Investments can be socially profitable (once the corresponding JLEs are internalized) but the private returns may be too low for the firm to go ahead. JLEs help to explain why many developing countries see insufficient investment in projects that would reallocate labor towards better jobs. The concept of JLEs is well established in economic literature, but there is a need for better operational approaches to address them. Like other externalities, JLEs can be corrected using a variety of possible subsidies (such as: grants, subsidized infrastructure, credit, training, technical assistance and tax exemptions). But doing this efficiently and at scale this requires mechanisms to (a) estimate the value of the externality and (b) discover the amount of subsidy needed to trigger the private investment. This paper shows that the optimal way to allocate subsidies to offset JLEs is through a competitive bidding process which selects projects based on the estimated amount of JLEs per dollar of subsidy. The bidding process provides an incentive to investors to reveal the subsidy needed for a project to become privately viable. We show that the proposed approach maximizes the jobs impacts of a given amount of fiscal resources that has been allotted to support better jobs outcomes

Economic Impact Studies of Pressure and Vacuum Metrology at CSIR-NPL, India

Measurement standards and metrological activities provide scientific and metrological infrastructure in the country. The Pressure and Vacuum Metrology (PVM) activity has a major role in national and international metrological research and development. The PVM group is successfully providing national calibration and measurement services and fulfilling its national duty as per the mandate of CSIR-National Physical Laboratory (CSIR-NPL). Since last 35 years, no significant efforts were made to assess socio-economic impact of the services provided. Such impact studies are carried out by several National Metrology Institutes, but in India it is still an unexplored area so far. This motivated us to carry out the impact assessment, and present paper is an attempt made in this direction. Systematic studies of the contribution of PVM, established at CSIR-NPL, on national industrial growth and economy, are carried out by assessment of impact. The aim of the present paper is to present the summary of the results thus obtained which is based on the investment made over the years and the estimated benefits to the users. The studies are based on some industrial survey, personal interviews and interactions with stakeholders and sampling of services provided over the years. An overall social rate of return, an indicator of system efficiency, is found to be 180% which is quite high as compared to the present rate of return (8%). This indicates that the PVM activity is quite efficient, and future investment in the activity is safe and would provide excellent returns. The studies are very useful for broader understanding of the economic benefits of PVM and to improve understanding of the decision and policy makers about the relevance, continuation and further investment in PVM activity. This present case study may be explored and applied for other metrological fields also.

Global Infrastructure: Potential, Perils, and a Framework for Distinction

This paper evaluates the literature that claims poor countries have an infrastructure investment gap of roughly 1 trillion dollars per year and therefore possess widespread opportunities for productive spending on infrastructure. The evaluation introduces and employs a simple framework that concludes this claim is invalid. The framework compares a poor country’s social rate of return on infrastructure investment with: (a) the poor country’s return on private capital, and (b) the average rich country’s return on private capital. The dual comparison reveals that additional investment in a poor country’s infrastructure is: (1) efficient only if the return on poor-country infrastructure exceeds the return on poor-country private capital; and (2) financeable through private rich-country savings only if the return on poor-country infrastructure exceeds the return on rich-country private capital. This dual-hurdle rate framework suggests a two-by-two classification that sorts countries into quadrants according to their potential for efficient investment in infrastructure. The paper then applies the classification to the only existing, comprehensive cross-country estimates of the social rate of return on infrastructure (electricity and paved roads). The conventional wisdom is that there are ubiquitous opportunities for infrastructure investment that meet the two criteria. In fact, only 7 of 53 developing countries clear the dual-hurdle rate in both electricity and paved roads. Where it is efficient to invest, however, the potential for excess returns on infrastructure is quite large—five times larger, in fact, than the excess returns that existed, but have long since been arbitraged away, in emerging-market stocks when foreigners were first permitted to own shares. The framework thus implies a new definition of the infrastructure gap as the amount of investment required to close the difference between the return on infrastructure in poor countries and the return on private capital elsewhere. More importantly, the framework moves the discussion away from alarmism and exaggeration toward the clarity that economics can and should bring to any policy discussion.

How Innovations affect Firm's Productivity? A literature reviews

Improving productivity is one of the vital tasks of an enterprise in the era of globalization. In which, innovation is widely considered as an essential solution to enhance the firm's productivity. However, there is still much controversy between concept as well as the measurement of innovation. Besides, the impact of innovation on firm's productivity is questionable, and most studies have focused on the direct effect. This paper has comprehensively analyzed the impact of innovations on productivity, including both direct and indirect impacts. Accordingly, direct effects through private rate of return reflect the investment efficiency of firms, the indirect impact through social rate of return reflects the overall impact of innovations on society and is interested in the governments. The study also reviewed three direct impact measures, the link between them and the important role of R&D consortium in improving regional and global productivity.

Returns to Education in Azerbaijan: Some New Estimates

ABSTRACT This article estimates private and social returns to investment in education in Azerbaijan, using the 2015 Azerbaijan Monitoring Survey for Social Welfare. The private rate of return to education is 6 percent; this is the first estimate of returns to schooling in Azerbaijan since 1995. The returns to schooling are 6 percent for men and 8 percent for women, even controlling for selection. In addition, the article estimates the returns for higher education; for this level, the rate of return is 9 percent. Finally, using the full discount method, the private rate of return for tertiary education is 9 percent, and the social rate of return is 8 percent. One policy implication is to reexamine the funding of higher education and its expansion.

Will land development time restriction reduce land price? The perspective of American call options

Land speculation can increase idle or inefficient land use, thus causing a number of problems, which many countries around the world address with reasonable administrative intervention. According to China’s “Disposal Measures for Idle Land”, the land development time is limited to two years. If this time is exceeded, the government will restore the land use rights to the state without compensation for the developer.11China's “Disposal Measures for Idle Land” was adopted in 1999 and was revised and implemented on July 1, 2012. The second clause defines “vacant land” and stipulates the disposal method for vacant land in Article 14: Land idleness fees shall be paid at 20% of the land transfer or allocation price if the project has not been started for one year. The idle land fee shall not be included in the production cost. If the project has not been started in two years, the municipal and county land and resources authorities shall recover the right to use the state-owned construction land without compensation. Source: Ministry of Land and Resources of the People's Republic of China www.mlr.gov.cn/zwgk/zytz/201206/t20120607_1107632.htm. Using the perspective of American call options, this study combines the Optimal Stopping Time and the Martingale Theory in Real Option Pricing Theory. Both land and house price data from 2010 to 2016 have been integrated for Beijing, Wuhan, and Nanning in China. Furthermore, an empirical analysis of the optimal stopping time for land development has been conducted in these three cities to study whether the imposed limit on land development time reduces land prices. The results show that the optimal stop-time fluctuation of land development is large due to factors such as house price and land price volatility as well as social rates of return. In addition, the optimal stopping time for land development differs in specific regions and periods of different levels of economic development. Limiting the land development time will sometimes lower the land price and exert a stronger impact on low-price areas. Although limiting the land development time can help certain areas to reduce idle land, the suppression of land speculation and the stabilization of land prices are not obvious. This strategy will, however, obstruct the development of real estate economy. The conclusions of this study will help the government to formulate a sound policy, control land speculation, improve land use efficiency, and reduce the occurrence of land waste.

New Immigrant Health Professional’s Individual, Societal and Economic Impact of Ryerson University’s Internationally Trained Medical Doctors (ITMDs) Bridging Program: Results from a Pilot Bridge Training Program at the Chang School of Continuing Education

Although Canada is home to a large number of internationally educated health professionals, their skills and experiences are grossly underutilized in the Canadian healthcare landscape. Barriers to medical practice are pervasive, and as a result the majority of internationally trained medical doctors (ITMDs) work in “survival” jobs significantly below their skill level. The pilot ITMD Bridging Program was developed to provide an alternative path for ITMDs by providing the skills and competencies required for non-licensed health sector employment, ultimately aiming to improve integration of ITMDs into the Canadian workforce. This secondary research evaluates the ITMD Bridging Program by assessing the impact of the program at both individual and societal levels.Qualitative and quantitative data were used to evaluate the individual and societal impact of the program. Secondary data from participants’ entry and exit surveys, as well as key informant interviews conducted with ITMDs upon program completion were used for the analysis. The economic impact of the program and its overall utility to the economy of Ontario were assessed through literature review and social rate of return analysis.ITMDs program participants reported substantial improvements in skills related each of the core courses including health research methods, health informatics and data management, fundamentals of project management, as well as healthcare professionals communication and leadership skills. ITMDs also perceived the program to be a viable option to address human potential waste, enhance the economy, develop individual capacity building, and alleviate frustrations associated with labour market exclusion. The program is also economically viable at the societal level, and represents a rate of return of 6.52%.The ITMD Bridging Program has demonstrated that providing non-licensed health sector employment is a viable option for policymakers to consider in their efforts to address the current brain waste in the Ontario healthcare sector. Bridging programs similar to the ITMD Bridging Program have the capacity to impact individual outcomes of ITMDs, the economic landscape in Ontario, and Canada at large.

Benefits of Public R & D in US Agriculture: Spill-Ins, Extension, and Roads

This paper uses panel data for the 1980-2004 period to estimate the contributions of public research to US agricultural productivity growth. Local and social internal rates of return are estimated accounting for the effects of R & D spill-in, extension activities and road density. R & D spill-in proxies were constructed based on both geographic proximity and production profile to examine the sensitivity of the rates of return to these alternatives. We find that extension activities, road density, and R & D spill-ins, play an important role in enhancing the benefit of public R & D investments. We also find that the local internal rates of return, although high, have declined through time along with investments in extension, while the social rates have not. Yet, the social rates of return are not robust to the choice of spill-in proxy.

The Social Cost of Capital: Recent Estimates for the EU Countries

Discounting enables to express future monetary or socio-economic effects in terms of present values when inter-temporal decisions are to be taken. In the context of the cost-benefit analysis, this allows for directly comparing net benefits expressed in terms of their net present values, and, subsequently, for aggregating them to obtain a single measure of the project value (the net present value). This paper deals with the social discount rate used to discount economic flows and estimate the investment’s economic profitability indicators. It discusses the two most popular approaches for estimating the social discount rate, namely the social rate of return on private investment and the social rate of time preference, as well as the important implications on present and future generations deriving from using one discount rate instead of another. An overview of the social discount rates applied in several countries worldwide is provided and country-specific social discount rates for some EU Member States are empirically estimated using the social rate of time preference approach.

Commentary: Could Academic Research Be More Policy Influential?

Commentary: Could Academic Research Be More Policy Influential?

Exhaustibility and Risk as Asset Class Dimensions: A Social Investor Approach to Capital-Resource Economies

This paper develops a framework in which asset class dimensions are extended to include both risk and exhaustibility for explaining the evolution of shadow prices of marginal units of exhaustible natural resources in capital-resource economies. It is shown that the pricing kernel function required for socially valuing marginal units of exhaustible resource, hereafter called the Exhaustion-Stochastic Discount Factor, combines a factor that discounts for risk and another factor that discounts for resource exhaustion over time. The social rate of return on the marginal unit of resource stock adds to the risk-premium an exhaustion premium that accounts for the resource depletion over time. In this setting, the principle of no-arbitrage holds by extending asset-class dimensions to include not only a risk dimension but also an exhaustibility dimension.

Science for food, climate protection and welfare: An economic analysis of plant breeding research in Germany

We analyze the economic effects of plant breeding research in Germany. In addition to market effects, for the first time also effects of reduced CO2 emissions due to productivity increases are being quantified. The analysis shows that investments in German plant breeding research in the period 1991–2010 have reduced the global expansion of agricultural area by 1–1.5 million hectares. This has led to reduced CO2 emissions of 160–235 million tons. The economic value generated by plant breeding research, through increased production and reduced greenhouse gas emissions, is estimated at 10.8–15.6 billion EUR in the same period. This can be translated into a social rate of return on research investment in the range of 40–80% per year. Projections for the period 2011–2030 generate a return rate in the range of 65–140% per year. Investments into plant breeding research in Germany are highly profitable from a societal point of view. At the same time, our results show significant under-investments in agricultural research in Germany. These results provide a good justification for policy-makers to reverse funding cuts for public agricultural research over the last decades and to improve institutional conditions for private research, e.g. through better protection of intellectual property rights.

The Social Rate of Return to Investing in Character: An Economic Evaluation of Alberta’s Immigrant Access Fund Microloan Program

Skilled immigrants have been identified as a key source of labour supply to address the expected labour market shortages in Canada arising from an aging population and strong economic growth. The integration of immigrants into the workforce often requires that they have the necessary accreditation to work at their chosen occupation. However, credential recognition has proven to be a significant labour market barrier for skilled immigrants in part due to a lack of access to credit. We estimate the social rate of return of investing in immigrant credentials by analyzing the results of the Immigrant Access Fund (IAF), an institution providing small loans on a not-for-profit basis to assist Alberta immigrants in acquiring the Canadian accreditation and training they need to work their field of expertise. Under very conservative assumptions, our assessment of the average return to the public funds put towards the IAF loan program—and not recouped through loan repayment—is on average 33 %, which makes immigrant accreditation a step to be considered in immigration policy.

ESTIMATION OF PRIVATE AND SOCIAL RATES OF RETURN TO INVESTMENTS IN EDUCATION IN LATVIA

The main aim of the paper is to evaluate the rates of return to investments in education at individual and society level as well. The task of the paper is to provide detailed analysis and estimation of the variables which impact the private and social rates of return. It is based on Professor Angel de la Fuente methodology complemented by Mincer earnings function and non-parametric DEA (Data Envelopment Analysis) method to estimate world technological frontier and the technological gap. For this purpose the authors build the matrix with respective years of schooling depending from level of schooling and birth of year taking into account the differences in schooling system since 1940ties. The authors have used the data of Labour Force Survey of Central Statistical Bureau of Latvia data 2010 for Mincer rate of return selecting the figures corresponding to the criteria of 6148 records, to estimate other variables the authors used mainly Eurostat data base and AMECO data base to obtain net capital stock to GDP at constant market prices. The methodology involves the estimation of several variables – net replacement ratio of unemployment benefits, employment levels of employees with secondary and tertiary education and increase of employment level from one additional year of schooling, average years of schooling based on R. Barro and J.W. Lee’s methodology, average retirement age based on D.Latulippe’s methodology, productivity growth from one additional year of schooling, taxes and unemployment level of youth. The private rate of return in 2006 was equal to 16.76%, in 2008 it was 12.82% and in 2010 it was 13.91% which shows the benefits of tertiary education as higher income and employment probability after financial investments in education. The results show that private rate of return to tertiary education has decreased before crisis. It can be explained by inadequate high wage levels of the individuals with lower education. The rate of return is twice higher as rate of return from investments in education in secondary education. The results of the survey confirm the positive impact of education at individual and societal level even during the crisis and that approves thesis that education has important role in achieving better and faster European integration. DOI: http://dx.doi.org/10.5755/j01.eis.0.7.5088