The Reality of Cost-Shifting

1984 ◽  
Vol 3 (1) ◽  
pp. 129-130
Author(s):  
Allan N. Johnson
Keyword(s):  
Cost Shifting

The Relation between Cost Shifting and Segment Profitability in the Defense-Contracting Industry

2002 ◽  
Vol 77 (4) ◽  
pp. 949-969 ◽  
Author(s):  
Annie S. McGowan ◽  
Valaria P. Vendrzyk
Keyword(s):  
Market Power ◽  
Government Contracts ◽  
Cost Shifting ◽  
Defense Contractors ◽  
Defense Contracting ◽  
Government Work ◽  
Defense Contracts

We test the conjecture from prior research that defense contractors' excess profitability in the 1980s stemmed from their ability to shift common overhead costs to government contracts that typically allow cost reimbursement or price renegotiation (Rogerson 1992; Thomas and Tung 1992; Lichtenberg 1992). Although we confirm prior evidence that defense contractors enjoyed abnormally high profitability on their government work in the 1984–1989 period (a period of relatively low competition for defense contracts), we find no evidence that this excess profitability is attributable to cost shifting. In addition, we find no evidence that the Top 100 defense contractors (firms that likely wield above-average market power) are able to use cost shifting to exploit a lack of competition in the industry. Our results suggest that, contrary to the conjectures in prior research, the unusually high profitability reported on government contracts in 1984–1989 is more likely attributable to nonaccounting explanations than to cost shifting.

Rights, Redistribution, and the Rise of the “Litigation State”: The Case of Disability Discrimination Laws

2021 ◽  
pp. 1-38
Author(s):  
David Freeman Engstrom ◽  
David K. Hausman
Keyword(s):  
Empirical Test ◽  
State Level ◽  
Welfare Programs ◽  
Cost Shifting ◽  
Disability Discrimination ◽  
Social Welfare Programs ◽  
Disability Law ◽  
Fresh Perspective ◽  
Legislative Choice ◽  
Cost Shift

Critics have long maintained that the rights revolution and, by extension, the postwar turn to litigation as a regulatory tool, are the product of a cynical legislative choice. On this view, legislators choose rights and litigation over alternative regulatory approaches to shift costs from on-budget forms (for example, publicly funded social provisions, public enforcement actions by prosecutors or agencies) to off-budget forms (for example, rights-based statutory duties, enforced via private lawsuits). This “cost-shift” theory has never been subjected to sustained theoretical scrutiny or comprehensive empirical test. This article offers the first such analysis, examining a context where the cost-shift hypothesis is at its most plausible: disability discrimination laws, which shift costs away from social welfare programs by requiring that employers hire and “accommodate” workers with disabilities. Using a novel dataset of state-level disability discrimination laws enacted prior to the federal-level Americans with Disabilities Act (ADA) and a range of archival and other materials drawn from state-level legislative campaigns, we find only limited support for the view that cost shifting offered at least part of the motivation for these laws. Our findings offer a fresh perspective on long-standing debates about American disability law and politics, including judicial interpretation of the ADA and its state-level analogues and the relationship of disability rights activism to other rights-based political movements.

State Spending On Dual Eligibles Under Age 65 Shows Variations, Evidence Of Cost Shifting From Medicaid To Medicare

2012 ◽  
Vol 31 (5) ◽  
pp. 939-947 ◽  
Author(s):  
Thomas Bubolz ◽  
Constance Emerson ◽  
Jonathan Skinner
Keyword(s):  
State Spending ◽  
Cost Shifting ◽  
Dual Eligibles

Investment Strategies for Sourcing a New Technology in the Presence of a Mature Technology

2021 ◽  
Author(s):  
Wei Zhang ◽  
Hsiao-Hui Lee
Keyword(s):  
Operations Management ◽  
New Technologies ◽  
New Technology ◽  
Investment Strategy ◽  
Profit Sharing ◽  
Development Effort ◽  
Investment Strategies ◽  
Cost Shifting ◽  
The One ◽  
The Cost

To stay competitive, high-technology manufacturers not only frequently source new technologies from their suppliers, but also financially support the development of these new technologies into component products or production tools. We consider a manufacturer that can either source a new but immature technology from a financially constrained supplier, or source a mature technology from an existing supplier if and only if the development of the new technology fails. To support the new technology, the manufacturer can choose to inject capital in the form of an equity or loan. The investment strategy not only affects the new supplier’s development effort and the probability of technical success (PTS), but also affects the existing supplier’s effort to improve the mature technology, which presents the manufacturer with a trade-off. Following the debt financing literature, we find that a loan contract is associated with a cost-shifting effect and often leads to a higher PTS. However, because the manufacturer not only maintains an investment but also a procurement relationship with the new supplier, we find a profit-sharing effect associated with an equity investment, which does not exist in the traditional equity issuance literature. In particular, we show that the profit-sharing effect can dominate the cost-shifting effect and lead to a higher PTS when the new supplier’s technological capability is sufficiently high. Nonetheless, we also show that the strategy that derives a higher PTS does not necessarily generate a higher payoff for the manufacturer. On the one hand, a loan can be preferred even when it leads to a lower PTS because the cost-shifting effect allows the manufacturer to offer a sufficiently low procurement payment while maintaining a sufficiently high PTS. On the other hand, when the existing supplier is very capable of reducing its costs, a loan can over-incentivize the new supplier to exert excessive effort and backfire. This paper was accepted by Charles Corbett, operations management.

Cost Shifting

2014 ◽  
pp. 126-129
Author(s):  
M.A. Morrisey
Keyword(s):  
Cost Shifting
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