environmental factors affecting european and central asian health systems bias corrected efficiency health expenditures comprise a large part of national incomes which explains the growing interest of government agencies in establishing efficient control and management policies in the current co

the effects of devaluation on the trade balance a critical view and re examination of mile s new results abstract in a often cited article miles 1979 claims to have shown empirically the validity of the global monetarist proposition that devaluations do not affect the balance of trade this paper first uses mile s own framework of analysis to reveal serious deficiencies in his methodology and tests that cast doubt on the validity of his results in a respecified trade balance equation we show that devaluations do affect the trade balance in the traditionally predicted direction the pivotal difference between the two specifications arises from our inclusion of relative price effects and longer lag structure for the exchange rate variable

efficiency and productivity of world health systems where does your country stand this article deals with estimating efficiency of world health systems using panel data on world health organization who member countries the stochastic frontier sf approach is used for this purpose we evaluate absolute efficiency as well as rankings and their sensitivity across alternative model specifications using both output maximizing and cost minimizing frameworks we also compare productivity of health service among countries derived from the output maximizing and cost minimizing models results show that efficiency rankings of countries vary substantially depending on whether the goal of healthcare provision is output maximization or health cost minimization the same applies to different sf model specifications

employment policies wage formation and trade union behavior in a small open economy a model of trade union determined wages is developed which provides an explanation of underemployment based on optimizing behavior it is shown that fiscal policy will in general affect employment under perfect foresight and immediate wage flexibility future consequences of short run stabilization policies are discussed ratchet effects with respect to government expenditure and game theoretic interdependence between government and trade union behavior are emphasized if the trade union takes short run policy measures in order to increase employment as an indication of an employment stabilization rule the future behavior of the trade union changes and the result may be a decrease in long run employment

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

comment on e j driffill macroeconomic stabilization policy and trade union behavior as a repeated game driffill s paper is motivated by the notion that government concern over the level of unemployment enables unions to obtain higher real wages than they otherwise would with the paradoxical result that stabilization policy raises the average unemployment rate a closely related problem has been studied by barro gordon 1983 in the context of the inflation unemployment tradeoff in that case government attempts to reduce the unemployment rate end up creating higher inflation the process reaching equilibrium when the marginal cost of inflation to the government is equal to the putative gain that would be obtained from lower though unattainable unemployment

the choice of exchange rate regimes in developing countries a multinomial panel analysis abstract this paper analyses the choices of exchange rate regimes in developing countries since 1980 static and dynamic random effects multinomial panel models are estimated using simulation based techniques explanatory variables include oca fundamentals stabilization considerations currency crises factors and political and institutional features the results reveal strong state dependence in regime choices we also find evidence for non monotonic relationship between regime determinants and the degree of regime flexibility

wages and employment under trade unionism microeconomic models and macroeconomic applications the first part of this paper is a critical survey of microeconomic research into behavioural models of trade unionism although certain formulations of union objectives and models of wage and employment determination in unionized markets have found favor with economists unfortunately only a little is known about their empirical relevance the second part of this paper deals with the daunting problems of applying these models at the macroeconomic level one such model is estimated with data from sweden s mining and manufacturing sector from 1968 to 1982

is incomes policy the answer to unemployment in western europe unemployment has remained obstinately high ever since 1975 what has prevented governments from reducing it the answer is simple if unemployment were reduced by normal methods inflation would rise it follows that the only way to cut the long run level of unemployment is to find some other way of controlling inflation no such device will be costless but if we could find any method that was less costly than unemployment we ought to adopt it maurice chevalier was asked in later life what he thought of old age it s not so bad he replied when you consider the alternative that was a true economist talking and it is also the spirit in which i shall approach the unhappy choices open to us my argument will proceed roughly as follows first imagine that a costless incomes policy is available then most people would probably agree that if inflation was too high a temporary incomes policy would be a good idea in order to get inflation down but what then when it was down we would still be left with far too high an unemployment rate only a permanent incomes policy can substantially reduce the non inflationary level of unemployment however against these benefits have to be set the costs of an incomes policy a conventional incomes policy which permanently suspended collective bargaining would be out of the question in a free society so we have to have an incomes policy that works by incentive rather than by regulation the best thing would be a tax on wage increases levied on employers and proportional to wage increases above a prescribed norm i shall spend some time discussing this tax using various different models of wage setting to explain how it would have its effect and finally i shall try producing a first draft of the operator s manual

exchange rate policy wage formation and credibility abstract since the collapse of the bretton woods system some european countries have pursued discretionary exchange rate policies in order to maintain or enhance the international competitiveness of the traded goods sector these countries which typically feature centralized wage setting have also tended to experience high nominal wage increases the overall outcome may be described as a devaluation wage spiral this paper applies two models of repeated games to analyze the strategic interaction between an exchange rate setting policy maker and a wage setting trade union it is shown how a devaluation wage spiral may result from a conflict of interest over the real wage it is also shown how reputational forces may provide a way out of the devaluation wage spiral

labour use efficiency in swedish social insurance offices this paper considers the estimation of frontier production functions in panel data models it proposes a multi stage method to obtain estimates of 1 the parameters of a flexible input requirement function and 2 technical inefficiency decomposed into time invariant firm specific time varying and the residual components the proposed method is used to analyse labour use efficiency of swedish local social insurance offices on the basis of a large panel of observations during the time period 1974 84 empirical results show 1 substantial variations in labour use efficiency among these offices with the mean efficiencies declining over time 2 presence of economies of scale thereby meaning that most of the offices were of suboptimal size

the efficiency of the health system in south africa evidence from stochastic frontier analysis the availability of increased resources and the lack of parallel improvement in health status have renewed interest on health system performance particularly where progress towards the millennium development goals has been slow since the political transition in 1994 south africa has consistently invested over eight of its gross domestic product gdp on health but so far returns remain uneven with some localities delivering lower outcomes than others even when they have comparable input levels this study measures the performance of the country s health system following a stochastic production frontier approach results have revealed that eight of the 52 districts in the country had an efficiency score of below 60 and in four of these the score was below 50 technical inefficiency was positively and significantly associated with hiv prevalence and illiteracy rates reported for districts overall mean technical efficiency te in the country was around 80 given this further improvements in he

classical unemployment accommodation policies and the adjustment of real wages a model of wage formation and stabilization policy in economies with strong trade unions is developed the analysis provides a theoretical underpinning for the assertion that accommodation policies may cause wage inflation and ultimately reduce employment various methods of accomplishing a real wage adjustment are discussed i a policy of complete nonaccommodation 2 continued accommodation policies but with lower employment targets 3 social contracts and 4 tax based incomes policies tip

the recent slowdown of productivity growth the slowdown of productivity growth in the developed countries during the seventies will in this paper be viewed as a combined effect of three closely interacting forces i a long term deterioration in the efficiency and flexibility of some basic mechanisms of the economic and political systems of these countries ii the fading away of a number of uniquely favourable circumstances for productivity growth during the fifties and sixties and iii the exposure of these economies to unusually severe macroeconomic disturbances in the seventies careful inspection of time series with attempted modifications for cyclical factors suggests that there was hardly any general slowdown of productivity growth among developed countries before approximately i972 4 1 as we know the situation is radically different since then labour productivity growth per year for the entire national economy gdp per man hour seems to have fallen between the periods i960 73 and i973 9 by about i 2 percentage points in the united states 45 by about 24 percentage points in western europe2 45 and by about 5 9 percentage points in japan 6o table i see also fig i the slowdown was of about the same size in the business and manufacturing sectors see table i to calculate the extent of the slowdown of total factor productivity growth is of course a much more hazardous matter to which i will return later if just the various system changes and the fading away of the uniquely favourable factors had been the dominating forces behind the productivity growth slowdown we would expect the slowdown to have been gradual rather than abrupt as it turned out to be this abruptness as well as its timing makes the dramatic macroeconomic disturbances around i972 4 a prime suspect when looking for the villain behind the productivity growth slowdown indeed it is a basic hypothesis of the paper that these macroeconomic disturbances were not only by themselves strongly unfavourable for productivity growth but that they also revealed and accentuated the gradual deterioration of the

union militancy external shocks and the accommodation dilemma stabilization policy under centralized wage setting is represented as a noncooperative game between an encompassing union and the government the dilemma of the government is whether or not to accommodate supply disturbances when it cannot tell if they are due to an intentionally militant wage policy or unforeseen external price shocks in a single round of wage setting there is no government strategy which can both guarantee full employment and prevent union militancy in a repeated game however there exists a conditional accommodation policy which permits accommodation of supply shocks while inducing the union to refrain entirely from a militant wage policy

impact of macroeconomic policies upon agricultural trade and international agricultural development international commodity markets in the early 1980s have experienced a severe cyclical downturn high real rates of interest have discouraged stock holding and disinflation has caused asset market participants to shift out of commodities into financial assets this is only the most recent bout of turbulence since we passed from the stable bliss of the 1950s and 1960s the basic question is whether this instability results from a seemingly unending series of shocks or is there a more general basic explanation which transcends individual events

do devaluations improve the trade balance the evidence revisited do devaluations improve the trade balance the evidence revisited this paper reexamines the effectiveness of devaluation in trade balance adjustment the question is addressed in a framework which improves the previous empirical literature in several respects the evidence indicates that devaluations have been a successful tool in inducing trade balance adjustment in particular nominal devaluations are found to result in significant real devaluations that last for at least three years and the real devaluation induces significant trade flows that are distributed over a two to three year period the evidence comes from two different samples 1953 73 and 1975 84 involving twenty seven countries and sixty devaluation episodes 1 introduction do devaluations affect real magnitudes in particular the trade balance a devaluation may effect the trade balance through two channels devaluation of the real exchange rate and a direct effect on domestic absorption the traditional approach stresses the first channel a nominal devaluation is assumed to change the real exchange rate a relative price and thus improve competitiveness in turn if relative prices the terms of trade in a two country two good model affect the trade balance devaluation will be successful in the sense of improving the trade balance ceteris paribus the absorption effect becomes the sole or most important channel in the monetary approach in a world in which all goods and assets are perfect substitutes prices are exogenously given for the small country and wages and prices are flexible in both nominal and real terms a devaluation increases the price level by the same percentage the increase in the price level reduces real balances and thus domestic absorption dornbusch 1973 883 has argued that if such a real balance effect is not present then it might stand to reason that the effects of devaluation are negligible not that there must be other powerful avenues through which it exerts its effects emphasis added the controversy over the effects of devaluation on the trade balance arises because according to frenkel and johnson 1976 42 the monetary approach rejects the emphasis given to the role of relative prices in the analysis of devaluation global monetarists argue that neither of the links in the chain postulated by the traditional approach is likely to hold in practice see laffer 1977 the major disagreement centers on the question of the effectiveness of nominal devaluation to affect the real exchange rate and the importance of the latter in influencing trade flows theoretical arguments have not settled the issue the question is as strongly debated today as it was forty years ago see for example branson 1983 katseli 1983 kaldor 1983 nashashibi 1983 and mckinnon 1981 nor does it seem that the available empirical evidence leads to a consistent answer the best known studies cooper 1971 laffer 1977 salant 1977 miles 1979 gylfason and risager 1984 reach contradictory conclusions 1 cooper and gylfason and risager find that devaluations improve the trade balance or current account while laffer and miles conclude exactly the opposite salant finds that devaluations improve the trade balance but not as often as the overall balance of payments in the face of such diverse findings frenkel 1984 suggests that a reexamination of the issue would be useful indeed himarios 1985 shows that a close examination of miles s widely quoted study reveals serious deficiencies that once addressed lead to opposite results this paper provides new evidence concerning the effectiveness of devaluation in trade balance adjustment the approach differs from past studies in several respects it differs from cooper s laffer s and salant s studies in that it accounts for the effects of other variables that affect the trade balance

monetary and exchange rate policies for international financial stability a proposal w v ithout a common monetary standard the remarkable integration of western european north american and the industrialized asian economies in both commodity trade and financial flows is less efficient and becoming untenable dissatisfaction with wildly fluctuating relative currency values euphemistically called floating or flexible exchange rates is a prime cause of the resurgence in protectionism in 1986 87 the overvalued yen forced japanese industrialists to close factories retire workers and write off once valuable investments in plant and equipment this parallels what their american counterparts were forced to do between 1981 and 1985 when the dollar suddenly became overvalued similarly the paring down of the british manufacturing base was precipitated when the pound unexpectedly became a strong petrocurrency in 1979 81 in agriculture japan and european countries are determined to insulate their domestic prices of farm products from unsettling international influences including volatile fluctuations in the yen dollar or mark dollar exchange rates thus unless exchange stability is first achieved the american government s attempt to broaden the general agreement on tariffs and trade to encompass agriculture and services is likely to fail but what keeps the three major industrial blocs from developing a common monetary standard to prevent exchange rate fluctuations although many people

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

the international convergence of inflation rates during fixed and floating exchange rate regimes abstract according to the assets approach to the balance of payments exchange rate under a fixed exchange rate regime inflation must grow at the same rate in each of the participating countries at least in the long run the model implies that reserve currency inflation causes world inflation the mechanism by which inflation is transmitted when currencies are allowed to float is more complex the long run international convergence of inflation is studied using modern time series techniques on post war data from the g 7 countries the evidence on the convergence of inflation during the fixed regime portion of the sample is strong and consistent with the notion of reserve currency causality i e from the us to the rest of the world the evidence of convergence over the floating portion of the sample is also quite strong but no single currency can be characterized as the common underlying source of world inflation implying the inflation rates are endogenous

protecting capital from itself u s attempts to regulate the eurocurrency system in 1979 and 1980 the u s government attempted to regulate the eurocurrency system in order to stabilize the international monetary and financial systems and for u s domestic monetary purposes the conflict between the u s government especially the treasury department and the federal reserve board and u s based transnational banks tnbs illustrates tnbs contradictory interests which are neither self evident nor easily discernible even to tnbs themselves the state comes to play a mediating role vis a vis tnbs in an only partially successful attempt to transform contradictory interests into coherent policy resulting in conflict between the state and tnbs the origins of u s regulatory initiatives are rooted in multilateral attempts to supervise banks between 1974 and 1978 and the failure of such coordination during the 1978 dollar crisis from the conflict between u s officials and u s tnbs emerge varying concepts of tnbs interests after examining the reasons for the failure of the u s proposals i conclude by suggesting some implications of tnbs contradictory interests for statist and social conflict theories of the advanced capitalist state few theories of the state have adequately taken into account the complexity and contradictory interests of transnational capital

the domestic demand compensated effects of changes in the exchange rate foreign prices tariffs and foreign demand macroeconomic models for open economies are often quite similar in terms of the supply side of the economy but specification of the demand side varies substantially in this paper aggregate domestic demand is assumed to be exogenous the choice of how to specify what determines aggregate domestic demand is thus avoided the simple treatment of the demand side of the economy makes it possible to render other parts of the model more general than usual in particular our model has several goods which may be divided into tradeables with exogenous prices tradeables with endogenous prices and nontradeables with endogenous prices intermediate inputs of imported and domestically produced goods are allowed for changes in exogenous variables such as the exchange rate tariff rates foreign prices government consumption and foreign demand are analyzed

measuring performance in primary care econometric analysis and dea we use data from the health service indicators database to compare different methods of measuring the performance of english family health services authorities fhsas in providing primary care a variety of regression and data envelopment analysis methods are compared as summary efficiency measures of individual fhsa performance the correlation of the rankings of fhsas across dea and regression methods across two years of data and across three different specifications of the technology of primary care are examined efficiency scores are highly correlated within variants of the two methods and across years for a given method inter method correlations are smaller and correlations across different specifications of the primary care production process are negligible and sometime negative

real exchange rate dynamics the role of elastic labor supply abstract empirical evidence suggests that the flexibility of labor supply is closely related to the dynamic adjustment of the real exchange rate this paper investigates this relationship in a two sector dependent economy model while the long run equilibrium real exchange rate is independent of the elasticity of labor supply our analysis confirms that the nature of the labor supply can be a crucially important determinant of its short run dynamics the extent to which this is so depends to some degree on the source of the underlying structural change that is driving the dynamics of the real exchange rate numerical simulations confirm that this mechanism may help explain the larger short run volatility and more rapid convergence typically associated with developing countries having less flexible labor markets

labor union objectives and collective bargaining we consider a model oflabor union behavior in which workers make decisions about wages and employment by simple majority rule we show that under general conditions such a union has a well behaved objective function different from those previously postulated in the literature we then show that the union s majority preferences generally lack a von neumann morgenstern utility representation and thus cannot be inserted into traditional bargaining models we then develop and characterize the solutions to a new bargaining model that is consistent with the structure of union preferences several comparative statics results are presented

the insulation capacity of a flexible exchange rate system in the context of external inflation recent experience with more flexible exchange rate regimes has led to scepticism about their capacity to insulate an economy from foreign inflation the paper is concerned with the consequences of flexible rates when insulation is incomplete the first model examined involves static expectations which produces zero short run but complete long run insulation the second model shows that even with perfect foresight insulation will be incomplete in the short run and foreign inflation may even lead to a short run depreciation of the exchange rate without short run insulation an attempt to achieve long run insulation requires domestic deflation and excess supply

currency substitution and instability in the world dollar standard comment myron ross correctly points out in his comment that u s price inflation is better predicted by the american money supply mlus than by the broader ten country world money supply mlw over the whole statistical time series from 1960 to 1980 provided in mckinnon s 1982 article specifically he showed that american price inflation is more highly correlated with mlus lagged one or two years than with mlw similarly lagged however mckinnon s present tense assertion that in general growth in the world money supply is a better predictor of american price inflation than is american money growth applies only to the weak dollar standard of the 1970 s and early 1980 s as his preceding discussion intended but failed to indicate clearly only in this later period of volatile exchange rates and price level instability in the united states do alternative hard currencies such as the yen and deutsche mark become competitive as international stores of value and units of account hence international currency substitution associated with the ebb and flow of speculation against or for the dollar significantly destabilized the demand for mlus in the 1970 s and 1980 s and only in this later period might one expect the sum of these internationally substitutable monies ml to predict world and perhaps even american price inflation better than does mlus in contrast during the strong dollar standard of the 1950 s and 1960 s the dollar was unchallenged as international money exchange rates were by and large convincingly fixed speculation for or against the dollar was incapable of substantially altering u s interest rates or of directly affecting the demand for mlus because cyclical international influences did not then destabilize the demand for dollars mlus was by itself a fairly efficient predictor of american prices thus ross s statistical results for the period 1960 to 1980 show somewhat greater predictive strength in mlus compared to ml because the 1960 s data outweigh the dissimilar data of the 1970 s let us instead partition the sample of imf data around the year 1970 whence began the transition from fixed to fluctuating exchange rates and the maturation of alternative monetary systems in europe and japan after applying similar statistical correlation procedures to those used by ross we show a striking structural shift in the world s monetary system the explanatory power of mlw increases sharply as that of mlus declines moderately tan 1982 for the early period of 1960 to 1970 table 1 shows simple correlation coefficients between annual percentage changes in money supplies and changes in american and world wholesale price indices the mlus provides a good explanation of u s prices and of world prices one to two years hence whereas the broader definition of mlw in which mlus enters with a 50 percent weight does surprisingly poorly being insignificantly correlated with american or world prices apparently money growth in industrial countries other than the united states was not then an independent source of worldwide inflationary pressure during the strong dollar standard table 2 shows the same simple correlations between percentage changes in prices and money for the weak dollar standard of stanford university please note that a typographical error giving the last word in the original title as market appeared on the cover of the june 1982 issue of this review the title was correct in the table of contents and on the article

specification and estimation of stochastic multiple output production and technical inefficiency this paper presents a primal based approach for specification and estimation of multiple output production frontiers that allows simultaneous identification and estimation of determinants of technical inefficiency the proposed model extends the technical efficiency effects model by battese and coelli 1995 to general multiple output technologies an empirical application using swedish health care panel data from the years 1989 1994 is included the key issue is to test for the effects on technical efficiency of an organizational reform implemented with the primary purpose to increase efficiency the results reveal no significant effect on technical efficiency of the reform but evidence of overall decreased technical efficiency and technical progress in the provision of health care over the studied time period are found

evaluating the role of subsidy reform in addressing poverty levels in malaysia a cge poverty framework abstractmalaysia as one of the top subsidised countries around the world has launched to reduce subsidies to capture its development goals this study therefore analyses the effects of the subsidy reform on the macroeconomic welfare and poverty levels of malaysia by applying a cge model the findings suggest that subsidy removal leads to significant falls in both income and consumption of rural urban and non citizen households and consequently decreases their welfare however poverty levels among rural households will most likely increase significantly when compared to urban households due to their relatively low level of income compared to other groups

impacts of energy subsidy reform on the malaysian economy and transportation sector malaysia is paying a high level of subsidies on the consumption of energy about 5 of its gdp therefore reforming the energy subsidies as planned by the government will have a significant impact on household welfare and energy intensive sectors such as the transport sector this study employs a computable general equilibrium cge model to highlight the transmission channels through which the removal of energy subsidies affects the domestic economy the findings show that the shock increases real gdp and real investment while decreasing malaysian total exports and imports the removal of energy subsidies also decreases the aggregate energy demand and consequently decreases the level of carbon emissions in the malaysian economy in addition households experience significant falls in their consumption and welfare the transport sector is significantly influenced through an increase in production costs due to an increase in the prices of intermediate inputs the total output and total exports of the whole transport sector decrease while its imports increase in addition the use of all kinds of transport by households decreases significantly the malaysian energy subsidy reform leads to an initial decrease in co2 emissions and demand for electricity gas and petroleum products in the entire transport sector

evaluation of external market effects and government intervention in malaysia s agricultural sector a computable general equilibrium framework the purpose of this study is to evaluate the effects of changes in the external trade environment and domestic economic policies on the agricultural development of malaysia the scope of this research also includes providing further insights into the strengths and weaknesses of the computable general equilibrium cge methodology for agricultural policy analysis the first analysis focuses on the export agriculture sector which encompasses malaysia s two primary agricultural commodities rubber and palm oil heavily dependent on exports of rubber in the 1950s and 1960s malaysia has since built a more diversified economy with strong emphasis on manufacturing export agriculture however is still an important component of the national economy the second objective examines the influence of domestic policy on agricultural development the simulation results demonstrate the growing resiliency of the malaysian economy to external shocks also they point to the domestic economy s ability to buffer internal policy induced distortions

new estimates of the demand for non gold reserves under floating exchange rates abstract the demand for non gold reserves in per cent of imports is found to depend on fundamental factors such as real imports and on disturbance factors including changes in exchange rates and in the terms of trade in a way that differs between groups of countries these reserve percentages and not just import prices are raised through faster m2 growth in the united states than in other industrial countries conversely a higher us unemployment rate associated with global slack generally depresses reserve percentages giving us policy significant influence over the evolution of international reserves

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

rules discretion and reality both with respect to inflation and productivity macroeconomic performance in the last decade or so has been disappointing promises of policymakers to improve things have been frequently thwarted not only in terms of inflation and growth but also in terms of achieving targets for such summary measures of policy as the budget deficit or the money supply moreover critics have charged that policy failures are to blame for many of our economic difficulties the net effect has been to raise the practical question of whether the political process as now constituted can produce good economic policies the last decade or so has also been marked more than coincidentally by substantial professional criticism of conventional neokeynesian macro models and the theory of policy associated with them one of the major punch lines of this research is that activist macroeconomic policy is misguided indeed at best it is seen as ineffective and at worst highly counterproductive as a consequence the so called new classical economists argue that policymakers should avoid activism or discretion and instead be guided by simple rules the issue of rules vs discretion has of course been a source of long standing professional debate and while the new classical economists have provided some additional intellectual ammunition for rules this hardly serves to explain the apparent popular resurgence in advocacy of rules recent interest in rules is reflected in the emphasis on monetary targeting in proposed legislation even constitutional amendments for controlling the federal budget and in attempts to untarnish the gold standard this paper reviews the current state of the rules vs discretion debate i the nature of policy some preliminaries

corporatism run amok job stability and industrial policy in belgium and the united states corporatism jonathan s leonard and marc van audenrode in explaining high and persistent unemployment in western europe as compared to the united states this article shifts the emphasis away from the now familiar institutions and policies directly related to the labour market instead it focuses on the active and pervasive industrial policies which distinguish many european countries from the united states during the seventies and eighties a large share of european countries industrial policy has been directed towards schemes to help declining firms and industries using the example of belgium we show that this policy of supporting declining industries has actually contributed to higher unemployment through two channels first the subsidization of failing firms has imposed a tax on growing firms which has contributed to the freezing of the labour market and to low levels of job creation second by partially insuring against the threat of business failure the policy has contributed to the rapid growth of real wages

determinants of exchange rate practices some empirical evidence from thailand although thailand has achieved a spectacular average annual growth rate of 8 in the past two decades due largely to the opening of the economy to international trade there is not yet a consensus on the exchange rate regime that is most suited to the restoration of sustained growth in thailand this study empirically investigates the predictors of exchange rate regimes in thailand using quarterly data spanning the period 1990 1 and 2002 3 results indicate that the government is likely to choose a pegged exchange rate regime in periods of monetary shocks and unsustainable public finance whereas an open economy with a degree of economic development and foreign reserves will encourage the government to opt for a flexible exchange regime in thailand

union wages temporary lay offs and seniority it is widely believed that the seniority system in conjunction with the collective bargaining process contributes significantly to the determination of the unemployment level in unionized sectors causa i empiricism suggests that real wage demands often remain buoyant in these sectors in the face of seemingly high rates of unemployment among union members james medoff 1979 p 380 convincingly documents the evidence that adjustment through lay offs is substantially greater in unionized firms than in comparable non unionized firms the usual but somewhat informal explanation is that the outcome of union voting is greatly influenced by senior workers who are fairly certain that they will not be laid off when normal shifts in the industry s demand for labour occur 2 these inframarginal workers are believed to vote for higher wage settlements than they would if their own jobs were not so secure

service sector protection considerations for developing countries the inclusion of services in the uruguay round of multilateral trade negotiations has focused attention on the protection of domestic service suppliers against competition from foreign suppliers issues arising from these negotiations however may obscure another and more important issue the case for unilateral liberalization this article first surveys methods of protection in the service sector and then examines the likely cost of protection particular attention is given to developing countries what evidence there is suggests that the costs of protection may be high the article also discusses economic principles that could guide a review of policy toward international transactions in the service sector quantitative restrictions or bans on foreign service suppliers whether they wish to supply through trade or establishment cannot easily be defended in economic terms and provide an obvious first target

comment on t hersoug workers vs government who adjusts to whom ever since the days of keynes economists have been puzzled by the behavior of wages in the classical macroeconomic system real wages were supposed to clear the labor market yet real wage rates were only slightly reduced by the massive and persistent unemployment during the depression it is true that nominal wage rates fell but prices fell in roughly the same proportion