Moheb A. Ghali

Inventories, Production Smoothing, and the Accelerator: Some Empirical Evidence

Introduction, 149. — A simple production-smoothing model, 150. — Empirical findings, 152. — Conclusions, 157.

The demand for higher education facing an individual institution

The purpose of this paper is to provide an estimate of the elasticity and cros-selasticities of demand for higher education facing an individual institution. The utility which a high school graduate derives from each educational option open to him is assumed to be a stochastic function of the attributes of that option. For certain types of utility functions the maximization of utility results in the logit probability model. This model is used to analyze the choices made by a sample of high school graduates in Hawaii. Estimates of the price elasticity and the cross-price elasticities of demand for enrollment at the University of Hawaii are obtained. It is found that the demand is quite inelastic with respect to both tuition and total cost of education. These estimates imply that changes in tuition will not affect enrollment appreciably.

Models of regional growth: An empirical evaluation☆

Abstract Cross section data are used to test two types of regional growth models: the demand and the supply based models. While the demand based model explained twice as much of the interregional variations in growth rates as did the supply model, we found that the basic element of the supply model, factor mobility, contributes significantly to the determination of regional growth. A model combining both demand and supply is developed and fitted tothe data. The performance of this model as judged by goodness of fit and dynamic simulations is remarkable. Long-run implications are derived from dynamic simulations.

Inventories and Short-run Output Stabilization*

Empirical studies of the role played by production-smoothing in determining inventory behavior have accounted for the production-smoothing effect by the introduction of seasonal dummy variables, and/or the change in output as additional variables in the inventory equation. Lovell [7, 192-93] has reviewed the empirical results of the studies by Johnston, Modigliani and Sauerlender, and Mills, and also reported the results of his own investigation of the production-smoothing effect. The results of these studies lend very weak support to the empirical usefulness of the hypothesis. On the other hand, Ghali [4, 149-57] has produced some evidence strongly supporting the role of production smoothing. In this paper a simple model of inventory behavior is developed under the assumption that the cost functions facing the firm are quadratic. The model includes both the production-smoothing and the buffer-stock motives for holding stocks of finished goods. The model is applied to monthly data for six industries and to ten pooled time seriescross section samples on one of the industries. The results lend strong support to the effect of production-smoothing on inventory behavior. In the concluding section it is shown that the flexible accelerator model of inventory behavior is a special case of the production-smoothing model developed. Modigliani [10] * A summary of the results reported in this paper was presented at the First International Symposium on Inventories, Hungarian Academy of Science, Budapest, August, 1980. I am indebted to a referee of this Journal, and to my colleagues Edwin Fujii and Burnham Campbell for valuable comments and suggestions.

The choice of crime: An empirical analysis of juveniles' criminal choice

Abstract This article applies the theory of individual rational choice to micro data on the criminal activity of juveniles. The individual choice model is developed and applied to data on 1,171 files on property offenses adjudicated by the Family Court between 1972 and 1976. It is found that the type of crime chosen, as indicated by the charge at the time of arrest and the final charge, is influenced by sex, age, number of prior referrals to the court, ethnic extraction, and place of residence of the juvenile. As the effect of each of these individual characteristics on the probability of selecting the various crimes differs, the choice of crime exhibits dynamic features; as the individual age increases, and as the number of prior referrals to court increases, the probabilities of selecting particular crimes change. These features are examined by generating the probabilities and examining the patterns which emerge.

Models of production and inventory behaviour

Abstract To carry out empirical research on the behaviour of firms it is necessary to specify the cost functions explicitly. The behaviour of production and inventories are then derived by maximizing profits or minimizing costs over a planning horizon consisting of a number of production periods. Thus, it is inevitable that the implications of the model with respect to the behaviour of production and inventories will depend on the form of the cost functions posited, on the relative magnitudes of the parameters of these functions, as well as on the time path of demand. Different authors specify different forms of cost functions and obtain different models such as the production smoothing or the buffer stock models. The models are then applied to data on a number of industries and their success, or comparative performance, is judged by the frequency of a models ability to explain the data. In this paper we consider three models of the firms decisions regarding production and inventories when faced with changing and uncertain demand conditions. Each of the models is developed using certain assumptions regarding the cost functions for production and for holding inventories. Each of the models is fitted to seasonally unadjusted monthly data for six industries. The results of the estimation are presented and discussed. The conclusion is that no single model can be considered best in describing the behaviour of production and inventories in all of the industries. The obvious expectation that each model will succeed in explaining behaviour in industries where cost conditions are closely approximated by the cost functions underlying the model is supported.

The Interaction of Supply and Demand

We found in the two previous chapters that both demand- and supply-based models are supported by the empirical evidence. Each of the two types of models is capable of explaining a significant portion of the observed interregional variations in the growth rates of output. Furthermore, each of the two types of models is capable of generating regional growth patterns closely resembling those observed.

A GENERALIZED TEST FOR FOUR TYPES OF REGRESSION SPECIFICATION ERROR

Abstract Savin and White (1978) suggested a simultaneous test for two types of specification error. This paper generalizes their test to cover all four common sources of specification errors: functional form, autocorrelated disturbances, heteroskedasticity, and missing variables. The Savin-White test, as well as standard tests for one specific error, are special cases of the test developed. The generalized test is applied to data in an example.

Regional Economic Policy

The model of regional growth developed in the previous chapter can be used to investigate the long-run implications of various regional growth policies. A policy’s objectives and immediate impact might differ significantly from its long-term effects. It is not possible to evaluate an economic policy without fully understanding its long-term effects. This problem does not arise in models that are static or that lack interactions between demand and supply within a region and interregional interactions through input flows and trade flows. Once these elements are included, the long-run effects of a policy cannot be inferred from its short-run impact, for the magnitude and even the direction of the effect of the policy will be determined by complex inter-temporal and interregional as well as intraregional feedbacks.

Demand and Regional Growth

One of the main characteristics of regional (subnational) economies is their degree of openness (Richardson, 1973, pp. 9-10). They rely more heavily on external trade than do national economies. In a sense this openness and dependence on trade is the result of less diversity in natural resource endowments at the regional level; thus interregional differentials in relative resource endowments make the potential gains from interregional trade large. Regional specialization in production and dependence on trade to achieve a consumption pattern different from the pattern of production is thus a result of the relative homogeneity of endowments within a region, the relative homogeneity of the consumption patterns between regions, and the variability in relative factor endowments between regions.