Kambiz Raffiee

Specification and estimation of the effect of ownership on the economic efficiency of the water utilities

Abstract A stochastic frontier cost function is used to specify the cost of inefficiency of publicly and privately owned urban water utilities in terms of their different ownership structures and firm-specific characteristics. A translog cost function is used to approximate the production technology. Both mean and variance of inefficiency are specified in the model as functions of firm-specific factors. Estimation is done in two steps, which does not require a set of stringent distributional assumptions as needed for the estimation of a standard frontier model. Results show that when the operation is small, privately owned water utilities are comparatively more efficient. Public water utilities are comparatively more efficient when the scale of operation is large. A generalized likelihood ratio test of the null hypothesis that the inefficiency effects are not firm-specific is rejected in favor of a firm-specific specification.

Chaos in oil prices? Evidence from futures markets

Abstract We test for the presence of low-dimensional chaotic structure in crude oil, heating oil, and unleaded gasoline futures prices from the early 1980s. Evidence on chaos will have important implications for regulators and short-term trading strategies. While we find strong evidence of non-linear dependencies, the evidence is not consistent with chaos. Our test results indicate that ARCH-type processes, with controls for seasonal variation in prices, generally explain the non-linearities in the data. We also demonstrate that employing seasonally adjusted price series contributes to obtaining robust results via the existing tests for chaotic structure. Maximum likelihood methodologies, that are robust to the non-linear dynamics, lend support for Samuelsons hypothesis on contract-maturity effects in futures price-changes. However, the tests for chaos are not found to be sensitive to the maturity effects in the futures contracts. The results are robust to controls for the oil shocks of 1986 and 1991.

Ownership and sources of inefficiency in the provision of water services

The relative efficiency of service provision by publicly versus privately owned enterprises has been the subject of considerable theoretical debate and empirical investigation for at least the last hundred years. This research investigates the relative efficiencies of publicly versus privately owned water utilities. The publicly owned enterprises are found to be more efficient overall, as well as in the technical efficiency associated with the employment of labor, capital, energy, and material inputs. No significant differences are found in scale efficiencies between the two classes of enterprise. The greatest level of inefficiency results from the overuse of capital relative to the most efficient firms in the sample, while discrepancies in labor use was the least among the four inputs considered.

Cost analysis of water utilities: A goodness-of-fit approach

The behavior of privately owned and publicly owned water utilities is examined by calculating the percentage difference between the observed cost and the optimum cost consistent with the Weak Axiom of Cost Minimization for each individual water utility. It allows for a comprehensive analysis of nearly optimizing behavior of economic units as opposed to the conventional analysis of exact optimizing behavior. The empirical results provide evidence that private water utilities are more efficient than public water utilities.

Alaska North Slope crude oil price and the behavior of diesel prices in California

Abstract In this paper we analyze the price dynamics of Alaska North Slope crude oil and L.A. diesel fuel prices. We employ VAR methodology and bivariate GARCH model to show that there is a strong evidence of a uni-directional causal relationship between the two prices. The L.A. diesel market is found to bear the majority of the burden of convergence when there is a price spread. This finding may be seen as being consistent with the general consensus that price discovery emanates from the larger, more liquid market where trading volume is concentrated. The contestability of the West Coast crude oil market tends to cause it to react relatively competitively, while the lack of contestability for the West Coast diesel market tends to limit its competitiveness, causing price adjustment to be slow but to follow the price signals of crude oil. Our findings also suggest that the derived demand theory of input pricing may not hold in this case. The Alaska North Slope crude oil price is the driving force in changes of L.A. diesel price.

Inflation, output, and stock prices: Evidence from two major emerging markets

Research in economics and finance documents a puzzling negative relationship between stock returns and inflation rates in markets of industrialized economies. The present study investigates this relationship for Korea and Mexico. We show that the negative relationship between the real stock returns and unexpected inflation persists after purging inflation of the effects of the real economic activity. Johansen and Juselius cointegration tests verify that the long-run equilibrium between stock prices and general price levels is weak. However, in both economies, stock prices and general price levels seem to show a strong long-run equilibrium with the real economic activity.

Interactions between hospital admissions, cost per day and average length of stay

Hospital cost per day (COST), annual admissions per capita (ADMIT), and average length of stay (ALOS) are important health policy variables because each variable provides important information about hospital industry performance. This study uses country-level data to explore the empirical relationships between COST, ADMIT, and ALOSin three steps: OLS estimation, application of the Wu-Hausman endogeneity test, and re-estimation with two-stage least squares. The major results are (i) ADMITand ALOSexert exogenous influences on COSTand (ii) ADMITand ALOSare endogenously related with possible one-way casuality from ADMITto ALOS.

On Total Price Uncertainty and the Behavior of a Competitive Firm

In this paper, a general model of the competitive firms behavior under output and factor (total) price uncertainty is developed to evaluate the role of market interdependencies in analyzing long-run equilibrium conditions and comparative statics analysis of increased uncertainty in output and input prices. It is demonstrated that the results shown in the literature are a special case of the findings reported here and market interdependencies play a central role in determining the firms long-run equilibrium under uncertainty.

Regional Financial Crises and Equity Market Reactions: The Case of East Asia

In this paper we investigate the relationship between regional financial turmoil and equity markets of three emerging Asian economies: Indonesia, Malaysia, and Thailand. The study focuses on the contagion of the regional banking and financial difficulties to security markets in these three countries. The VAR and bivariate GARCH model results show that, once the regional financial crisis spreads, equity markets decline and exacerbate the crisis. The speed with which equity markets respond to the regional liquidity and financial turmoil is quite similar despite disparate market capitalization and GDP of the regional economies. The volatility becomes persistent and the equity market and financial sector volatility appear to fuel further volatility in one another. However, we show that Malaysia, the most developed of the sample markets, weathered the crisis quicker and more successfully than the other two. These results have important ramifications for financial market participants, local regulators, and international governing bodies such as the IMF.

Optimization Analysis of the U.S. Aggregate Consumption: A Goodness-of-Fit Approach

This paper examines the hypothesis of optimizing behavior of the U.S. consumers using quarterly and seasonally adjusted series on real consumer expenditures on eight commodity groups: clothing, durable goods, energy, food, housing, medical care, transportation, and others for the period of 1947:I through 1993:I. Following the Weak Axiom of Revealed Preference (WARP), a money-metric utility function is derived to calculate an efficiency index to determine the percentage difference between the observed cost of consumption and the optimum cost of consumption in each period of the sample. The empirical results provide evidence that the allocative efficiency in the U.S. has improved only slightly due to the wave of deregulations in the early 1980s. Our results are consistent with the predictions of the general theory of second best in showing that gains in the allocative efficiency may be minimal as long as many sectors of the economy remain partially or totally regulated.