bluuebunny/crossref_metadata_2025 huggingface dataset:
Household Equivalence Scales: New Australian Estimates from the 1984 Household Expenditure Survey*
Authors: BINH TRAN NAM , WHITEFORD PETER
Published: October 2007

Equivalence scales are measures of the relative incomes required by households of different size and composition to attain a similar standard of living, and are used in analysis of consumer expenditure patterns as well as in judging the appropriateness of the structure of income maintenance payments. The paper reviews equivalence scales previously derived for Australia and presents a range of new estimates based on the 1984 Household Expenditure Survey.
World Agricultural Trade Reform: Implications for Australia
Authors: HORRIDGE MARK , PEARCE DAVID , WALKER AGNES
Published: October 2007

In this paper we assess the implications of agricultural trade reform by GATT member countries. To do this, we link two general equilibrium models, a world food trade model and the ORANI model of the Australian economy. By treating the ORANI model as an integral part of the world model, we are able to focus on the implications for Australia of world agricultural trade reform.

The findings suggest that, if price distorting agricultural policies were removed by GATT member countries, world food commodity prices would rise, some by up to 30 per cent, and world food trade expand by about a third. Australia would be a major beneficiary of these international developments, the value of its agricultural exports rising by close to 15 per cent. In 1986, this would have meant for Australia additional export earnings of around SUS750 million, as well as more rapid economic growth.
Applications of Optimal Stopping in Resource Economics*
Authors: CLARKE HARRY R. , REED WILLIAM J.
Published: October 2007

Some applications of optimal stopping rules in the analysis of resource economic problems are surveyed. The conceptual foundation for the approach stems from the dual roles of uncertainty and irreversibility in these problems. A stochastic adaptation of Wicksell's ‘tree‐cutting’ paradigm is exposited and shown to provide a rigorous methodology that is as intuitive as more familiar contingent‐asset approaches. Four resource economic applications are considered: environmental problems, urban development, bioeconomic harvesting and resource project timing and valuation.
Challenging the Human Capital Orthodoxy: The Education‐Productivity Link Re‐examined*
Authors: MAGLEN L.R.
Published: October 2007

The human capital orthodoxy has it that education is an investment, not only for the individual undertaking it but also for society when it devotes scarce resources to it The return to society on that investment is seen mainly in terms of the enhanced productive contribution made by more‐educated workers. The measure of that greater contribution most often used by economists is the extra earnings the more‐educated on average receive This paper re‐examines the available evidence of links between education and productivity (and between earnings and productivity) and finds it to be inconclusive.
Investment Spending in Australia: Further Study and Interpretation*
Authors: HEUDRA BEN J. , SCARTH WILLIAM M.
Published: October 2007

Recent work in macro theory suggests that aggregate ‘demand’ policies have direct supply‐side effects in the short run, if Lucas's standard specification of the nonlinear adjustment costs for capital is generalized In this paper, we estimate an investment equation (involving Tobin's valuation ratio and Australian data) which nests three hypotheses: Lucas's standard specification of adjustment costs, a simple generalization which permits labour to be involved in the installation of capital and a model which allows for liquidity constraints. The results support the suggested alternative formulation of the q‐theory
The Setting of Retail Prices in a Customer Market*
Authors: McDONALD IAN M.
Published: October 2007

This paper extends the theory of the determination of retail prices in a customer market to a shop selling many types of goods. For a multi‐good shop, a discontinuous marginal revenue function for each good sold is derived. Under reasonable assumptions the size of this discontinuity depends only on the customer dynamics and is independent of own‐price elasticities and cross‐price elasticities. A discussion of the determination of producer prices shows how the theory can explain the relative stability of retail prices.
Invention in the Face of Necessity: Marshallian Rhetoric and the Giffen Good(s)
Authors: WHITE MICHAEL V.
Published: October 2007

Alfred Marshall's introduction of the ‘Giffen Good’ case appears puzzling, if only because it was not discussed by Robert Giffen. This article suggests that the analytical framework which Marshall used to discuss the case owed a good deal to the work of W.S. Jevons. The precise argument, however, was introduced as a rhetorical device to defend the notion of consumer surplus (against J.S. Nicholson) and to criticize the advocacy of tariff reform (by W.A.S. Hewins).
The Impact of Productivity Growth on the Costs of Production in Australian Manufacturing Industries*
Authors: WHTTEMAN JOHN L.
Published: October 2007

The primary objective of this study is to examine the impact of technological progress on costs of production in 34 Australian manufacturing industries. An analytical model incorporating the notion of factor‐augmenting technological change was developed and applied to each industry. The results indicated that in most of the industries technological progress during the period 1954–55 to 1981–82 had been biased towards augmenting labour and thereby reducing the cost of labour per unit of production. The implication of the analysis is that there is a nexus between incomes policy and the rate and bias of factor‐augmenting technological change.
A Test of Long‐run Purchasing Power Parity Allowing for Structural Breaks*
Authors: CORBAE DEAN , OULIARIS SAM
Published: October 2007

If exchange rates and prices are integrated processes, standard econometric tests of the purchasing power parity (PPP) hypothesis may be biased towards rejection. This paper avoids this problem by using the Engle and Granger (1987) theory of cointegrated processes. If the absolute version of purchasing power parity is true, and nominal exchange rates and prices are integrated processes, inter‐commodity arbitrage should ensure that the real exchange rate is stationary. The stationarity hypothesis is tested using Australian real exchange rate data for the 1890–1984 period We find that the effective real exchange rate cannot be modelled as a stationary process and therefore reject the absolute version of PPP. We also employ a test for structural breaks due to, for instance, the oil price shock and find mixed results. Another interpretation of our results is that the real exchange rate was affected by a series of permanent, real shocks during the sample period
Lifetime Earnings and Inequality*
Authors: CREEDY JOHN
Published: October 2007

It is argued that for many purposes the measurement of inequality should be based on income measured over a longer period than a single year. However, samples of individual earnings over a long period are extremely rare, and there are no data on complete lifetime earnings. This survey examines the wide variety of attempts that have been made to estimate inequality using a longer accounting period Emphasis is placed on the problems of extending the accounting period, rather than the properties of particular statistical measures of inequality.
Modelling the Allocation of Australian Bilaterial Aid: A Two‐Part Sample Selection Approach*
Authors: McGILLIVRAY MARK , OCZKOWSKI EDWARD
Published: October 2007

This paper focuses on the allocation of Australian bilateral aid to developing countries. It simultaneously models the determination of potential recipients' eligibility for Australian aid and the amounts of aid that eligible countries receive. A variant of the econometric technique developed by Lee and Maddala (1985) is utilized. The results obtained indicate that the decisions underlying the allocation of Australian bilateral aid generally seem consistent with the humanitarian, commercial, political and strategic motives underlying the aid program as a whole.
A Model of Technology Gap, Product Cycle, and the Process of Catching up Between the North and the South*
Authors: CHOU CHIEN‐FU , SHY OZ
Published: October 2007

The paper presents a multi‐product two‐country overlapping generations model of trade and innovation. We show that for a low level of innovation (unitation) in the South, firms in the North innovate at a level which guarantees a long‐term technological gap between the North and the South. However, a high innovation level in the South leads to a situation where the South can catch up the North in a finite time. This model differs from the existing literature in two major aspects. a) Except for the head start of the North we assume that the North and the South are identical with respect to factor endowment and their ability to develop new goods. b) It is general enough to explain both the product cycle phenomena and the catching‐up process.
The Quantity Theory is Always and Everywhere Controversial—Why?*
Authors: LAIDLER DAVID
Published: October 2007

Controversy about the Quantity Theory has been marked by common themes since the 18th century. These include the definition of money, the relationship between correlation and causation, and the transmission mechanism. Controversy has continued because of the technical difficulty of sorting out the direction of causation running between money and prices, and, on a deeper level, because ideological concerns about the viability of market mechanisms are at stake in the controversy.
Explaining Australia's Imports: 1974–1989*
Authors: WILKINSON JENNY
Published: October 2007

A model is estimated to explain Australia's demand for imports over the period from September 1974 to September 1989. Using cointegration techniques, it is found that growth in imports is well explained by movements in domestic activity, relative prices of imports and exports, and overtime. The models explain almost all of the rapid growth in imports over the period from September 1986 to September 1989. Over this period, the relative price of domestic goods to imports grew more strongly than domestic activity, and the contribution of relative prices to growth in imports is found to outweigh that of activity.
A Characterization of Australian Unemployment Compensation: An Analysis of Labour Market Adjustment*
Authors: GASTON NOEL
Published: October 2007

This paper uses a labour contracting framework to analyze the microeconomics of the Australian unemployment compensation system. We find that employers adjust labour inputs by using layoffs rather than shortened workweeks or work‐sharing during economic recessions. Increases in government benefits tend to reinforce this result Countervailing influences are shown to be the severity of the income test applying to benefits eligibility and the Family Allowance Supplement in its role as supplementing the income of low‐income families.
Taxation and Wage Bargaining*
Authors: PEMBERTON JAMES
Published: October 2007

The paper analyzes the effects of personal taxes on wage bargaining It concludes that an increase in tax progressivity will normally increase union wage‐bargaining pressure and so raise the equilibrium wage This is the opposite result to that recently derived by Creedy and McDonald (1990).
Unemployment, Participation and Family Incomes in the 1980s*
Authors: BRADBURY BRUCE
Published: October 2007

Microsimulation methods are used to estimate the impact of changing Australian participation and unemployment rates on the level and distribution of family disposable incomes between 1981‐82 and 1988‐89. Between 1983‐84 and 1988‐89 a fall in unemployment and an increase in the labour force participation of married women both led to significant increases in family disposable incomes Whilst the inequality increasing effect of the recession in the early 1980s was thus partly reversed, intra‐family employment patterns suggest that the increased incomes due to participation increases largely bypassed those married couples at the bottom end of the income distribution.
Deliveries on Commodity Futures Contracts
Authors: PECK ANNE E. , WILLIAMS JEFFREY C.
Published: October 2007

Deliveries on futures contracts are widely thought to be relatively insignificant in amount; indeed sizeable deliveries are taken to indicate problems in a futures market. In fact, deliveries on five of the largest, physical delivery, futures markets in the US average approximately 10 per cent of the maximum open interest in each delivery month. Analysis also demonstrated the value of the timing and location options often provided by contract specifications. One implication is that measures of market performance like hedging effectiveness are sensitive to the imbedded options' effects on prices
Rewards Available to Currency Futures Speculators: Compensation for Risk or Evidence of Inefficient Pricing?
Authors: TAYLOR STEPHEN J.
Published: October 2007

Filter, channel and moving‐average trading rules are compared with rules which use ARIMA price forecasts, by evaluating their ex ante performance for currency futures transactions from December 1981 to November 1987. All of the trading rules are profitable. Market efficiency is discussed Monte Carlo results strongly suggest that the trading profits are too large to be explained by the elusive, time‐varying risk premium sought in forward market literature
Financing Higher Education: A General Equilibrium Public Choice Approach*
Authors: CREEDY JOHN , FRANCOIS PATRICK
Published: October 2007

A public choice approach is used to examine the level of a tax‐financed grant chosen by a cohort, allowing for a wide range of interdependencies, including the goverment's budget constraint The existence of an externality is necessary, but not sufficient, for support of a grant It is shown that a majority voting equilibrium exists. Comparative static analyses are carried out using a minimum of assumptions about the structure of the model An increase in government expenditure for non‐higher education purposes is associated with an increase in the preferred grant while an increase in private returns to education reduces the grant
Youth Wages, Risk, and Tertiary Finance Arrangements*
Authors: MILLER PAUL , VOLKER PAUL
Published: October 2007

Human capital earnings functions typically explain a small fraction of the total variation in earnings. The considerable uncertainty associated with expected future earnings streams enhances the desirability of a loans scheme for higher education possessing income contingent characteristics on the repayment side. The Higher Education Contribution Scheme (HECS) possesses this feature The profitability of higher education even after taking account of the HECS suggests there is scope for higher student contributions. Other possible modifications to the HECS include higher repayment rates, a change to the tax base, and a minimum repayment amount
Shock Persistence and Stochastic Trends in Australian Aggregate Output and Consumption*
Authors: ERMINI LUIGI
Published: October 2007

The distinction between transitory and permanent shocks is at the centre of the debate on which class of models is best suited to represent economic variables: stationary models around a deterministic trend, or stationary models around a stochastic trend The debate u here focused on the Australian case. It is found that both aggregate output and consumption are characterized by stochastic trends, but without a transitory component This corresponds to a measure of shock persistence equal to one for both variables. For the specific case of aggregate output, this result may be interpreted as indicating the absence of business cycles
On Macroeconomic Policy and Macroeconometric Models*
Authors: WALLIS KENNETH F.
Published: October 2007

Macroeconometric models provide a formal and quantified framework that is an irreplaceable adjunct to the processes of policy thought. This article analyzes some recent developments in model structure and model use, and the interactions between them. Two major areas in which recent research has contributed to the ongoing process of model development are considered, namely the ‘supply‐side’ approach to wages and unemployment, and the modelling of the exchange rate. An improved vehicle for macroeconomic policy analysis is an objective of such developments, and some issues surrounding the use of macroeconometric models in policy analysis are discussed
A Probit Analysis of Aboriginal Employment Prospects in New South Wales*
Authors: ROSS RUSSELL
Published: October 2007

Using data from the 1986–87Survey of Working Age Aborigines in New South Wales, this paper presents the results of a probit analysis to determine the characteristics which differentiate employed Aborigines from Aborigines not in employment The results of the probit analysis show the importance of the acquisition of human capital to the employment success of Aborigines, at least in New South Wales. Increments in level of education, previous participation in formal labour market programs, and previous employment experience all have significant, positive impacts on the likelihood of individual Aborigines being in employment
Taxes, Retirement Transfers, and Annuities*
Authors: BATEMAN HAZEL , KINGSTON GEOFFREY , PIGGOTT JOHN
Published: October 2007

In most countries, retirement benefits from pension saving must be taken as an annuity. By contrast, Australia allows benefits to be taken as a lump sum, and instead has recently introduced various tax incentives to encourage annuity purchase. This paper investigates the effectiveness of these tax concessions, and concludes that they do little to achieve this objective This is because they are nullified by the provisions of the broader tax and social security framework within which Australian private pension policy is set
Testing for Equilibrium in the Australian Wage Equation*
Authors: LEWIS PHILIP E.T. , MacDONALD GARRY A.
Published: October 2007

In this paper a range of unit root and cointegration tests are applied to the time‐series variables most commonly found in the various specifications of the Australian wage equation. We find a contradiction between the standard Dickey‐Fuller (DF) tests and the results from Johansen estimation regarding the order of integration. The conclusion we reach using tests developed by Perron (1989,1990) is that all the variables are trend stationary processes and that the cointegration framework is inappropriate in this case.
International Reserves under Floating Exchange Rates: Two Paradoxes Explained*
Authors: GRIMES ARTHUR
Published: October 2007

The paper provides expressions for optimal international reserve holdings under floating exchange rates These expressions indicate why reserves are held under a floating regime and why the level of reserve holdings under floating rates may be similar to holdings under fixed rates.
The Transmission of Monetary Policy: The Relationship Between Overnight Cash Rates*
Authors: ELLIOTT GRAHAM , BEWLEY RONALD
Published: October 2007

This paper utilizes daily data from the period of the ‘clean’ float of the Australian dollar to consider the relationship between two key Australian short‐term interest rates: the official and the unofficial overnight cash rates. There is a stable long‐run differential of I per cent between the two rates and a short‐run dynamic policy reaction function is found which indicates that the official rate reacted to the size of the past interest rate differential.
Incidence Theory, Specific Factors and the Augmented Heckscher‐Ohlin Model*
Authors: CLAGUE CHRISTOPHER , GREENAWAY DAVID
Published: October 2007

The concepts of ‘true protection’ and the ‘incidence of protection’ are potentially very useful for the evaluation of commercial policy. These concepts have been developed in the context of a model in which the production functions are implicit. The present paper develops the analysis of true protection in models in which the factors of production are explicitly identified. The paper finds that the Heckscher‐Ohlin model may not be an appropriate vehicle for the analysis of the effects of tariffs, while the specific‐factors model facilitates a fuller evaluation of, and permits additional insights into, the incidence of protection.
Macroeconomic Fluctuations in the Australian Economy*
Authors: SMITH JEREMY , MURPHY CHRIS
Published: October 2007

This paper uses an Error Correction Model (ECM) of the Australian economy in an attempt to capture the major causes of fluctuations in the Australian economy over the past 15 years. The model is shocked by each variable in turn and the responses to the shocks are traced out. The model concludes that real wage and domestic demand shocks account for most of the instability seen in Australia in the recent past with little of the variation due to world variable shocks. For comparative purposes these responses are then compared with similar responses applied to a macroeconomic model of the Australian economy.
An Empirical Analysis of Australian Strike Activity: Further Evidence on the Role of the Prices and Incomes Accord*
Authors: MORRIS ALAN , WILSON KENNETH
Published: October 2007

This paper builds on Beggs and Chapman (1987a) to investigate whether the continuous operation of a corporatism consensual incomes policy over the past decade, in the form of the Prices and Incomes Accord, contributed significantly to the observed reduction in Australian strike activity. Models of strike incidence and strike duration are tested for the period 1959 (3) to 1991 (4). The evidence presented here indicates that the Accord has had a significant negative impact on the incidence of strikes. The Accord also appears to have reduced strike duration, although, somewhat surprisingly, this negative impact is stronger after the ‘second‐tier’ decision.
Expenditure Patterns and Aggregate Consumer Behaviour: Some Experiments with Australian and New Zealand Data*
Authors: CHATTERJEE SRIKANTA , MICHELINI CLAUDIO , RAY RANJAN
Published: October 2007

This paper analyzes expenditure patterns in Australia and New Zealand by estimating ‘complete’ demand systems on budget data. Tests of linear Engel curves and separable preferences are carried out on both data sets. The study also exploits the information on household composition to test for demographic effects. Several new demographic ally extended demand functional forms are proposed and estimated, and their behavioural and welfare implications in terms of equivalence scales compared. The study yields plausible estimates of price and expenditure elasticities, and shows that relevant price information can be used successfully to estimate the ‘cost’ of a child.
On Optimal Enclosure and Optimal Timing of Enclosure*
Authors: LONG NGO VAN
Published: October 2007

This paper demonstrates that the enforcement of property rights by enclosing properties under common access is, in general, socially suboptimal: the timing of enclosure may be inappropriate, causing inefficiency. It is argued that the first fundamental theorem of welfare economics applies for a given collection of production sets, while enclosure implies a choice over collections of production sets
Saving, Investment and Current Account Dynamics*
Authors: BURBDDGE JOHN B. , SCARTH WILLIAM M. , STEMP PETER J.
Published: October 2007

A standard model of a small open economy involving optimizing households and firms is used to derive the dynamics of private saving and investment. The paper is critical of a common test of perfect capital mobility, since domestic saving and investment can easily correlate positively despite the assumption of perfect capital mobility. The time path for the current account deficit is studied both analytically and through simulations. Adjustment is very slow, and overshooting in the current account is possible. Even though the government budget is balanced the current account deficit can remain large for many years before being eliminated.
Inventories and the Business Cycle*
Authors: FLOOD DARREN , LOWE PHILIP
Published: October 2007

This paper examines the relationship between the inventory cy and the business cycle using both macroeconomic and survey da It is argued that over the past decade and a half, the changes inventory management have reduced the amplitude of the inventc cycle. The paper also argues that the behaviour of inventories consistent with demand shocks being an important source of business cycle fluctuations.
Indirect Tax Exemptions and the Distribution ot Lifetime Income: A Simulation Analysis*
Authors: CAMERON LISA , CREEDY JOHN
Published: October 2007

This paper uses a simulation model to compare the lifetime consequences of a revenue neutral partial shift towards a consumption tax, involving exemptions, with its cross‐sectional effects. Exemptions of goods consumed proportionately more by lower income groups reduce the inequality of the distribution of net lifetime consumption by more than in the cross‐sectional case. However, the tax shift increases lifetime inequality by more than it increases cross‐sectional inequality, and the net effect is that exemptions cannot compensate for the income tax change. Concern with inequality is most appropriately handled by raising transfer payments rather than introducing exemptions.
Reconsidering the Marginal Welfare Cost of Taxation*
Authors: FREEBAIRN JOHN
Published: October 2007

A model with sticky wage rates and involuntary unemployment is used to compute the marginal cost of taxation, and these estimates are compared with those obtained from the conventional price‐clearing equilibrium model. Important determinants of the marginal cost estimates are the response of sticky wages to a tax increase, the elasticity of demand for labour, and the unemployment gap. By contrast, the conventional model focuses on the elasticity of labour supply. The different models have different implications for efficient tax design. However, the new model generally agrees with the conventional model regarding significant efficiency costs of higher taxation.
Price Dynamics in Repeat‐Purchase Markets*
Authors: SIBLY HUGH
Published: October 2007

A retail market in which customers repeat purchase is modelled. When customer movement between firms is sluggish, price overshooting characterizes firms' optimal response to demand or cost shocks. Thus retail prices would be predicted to be more variable than wholesale prices, a prediction at variance with empirical evidence. Uncertainty in demand and customer imperfect information are introduced into the model to attempt to reconcile this inconsistency between theory and evidence. The introduction of demand uncertainty actually increases the magnitude of price overshooting. By contrast, the introduction of imperfect customer information reduces the variability in retail prices.
Social Discount Rates from Stratospheric Ozone Control*
Authors: AGEE MARK D. , FAH KENNETH C.
Published: October 2007

We develop a model of optimal project timing to infer the discount rate US residents attach to investments in stratospheric ozone preservation. In this model, the calendar date at which preservation‐related benefits offset costs is shown to be an increasing function of the real social rate of time preference. Estimates of US costs and benefits associated with the original (1987) Montreal Protocol are used to determine a range of discount rates from the US control of stratospheric ozone depletion. From this example the range is about 3.0 to 8.77 per cent.
A Time‐Series Perspective on Convergence: Australia, UK and USA since 1870*
Authors: OXLEY LES , GREASLEY DAVID
Published: October 2007

Tests of the Convergence Hypothesis or the tendency for per capita income levels to narrow over time, have generally utilized cross‐sectional data and have usually found conflicting evidence. In this study we utilize time‐series data on Australia, UK and USA for the period 1870–1992, and time‐series tests, to consider both ‘catching‐up2 and ‘long‐run convergence’. The paper finds evidence in favour of long‐run convergence in per capita income levels for the UK and Australia for the period 1892–1992 and catching‐up in the case of UK and USA, and Australia and USA, giving some support for the exogenous approaches to economic growth.
Resource Rents, Cost Differences and Fiscal Equalization*
Authors: PETCHEY JEFFREY
Published: October 2007

It has been argued that the fiscal equalization process in Australia, which transfers wealth between States, has efficiency costs. Here, I show that equalization transfers can be efficiency enhancing. Further, it is shown that under certain assumptions about inter‐state differences in costs of production and resource endowments, such transfers may need to favour relatively high cost and resource rich States, such as Western Australia and Queensland, while under other assumptions about diversity, they should favour relatively resource poor and low cost States, such as Victoria and New South Wales.
Fiscal Settings and the Steady State Growth Path*
Authors: HAWTREY K. M.
Published: October 2007

This paper outlines how deficit‐neutral fiscal settings, via their impact on the growth/distribution equation, can play a positive role in minimizing deviant macroeconomic performance. The conventional Solow‐Swan model of economic growth assigns no role to the standard instruments of fiscal policy in influencing the equilibrium growth path. In the model presented here, government fiscal policy–in the form of tax and transfer rates–is shown to have real effects on the long‐term growth path of the unionized macroeconomy, even when the budget is permanently balanced and policy is fully announced.
The Economics of Transition and the Transition of Economics*
Authors: HORNE JOCELYN
Published: October 2007

The economics of transition is the study of the economic transformation from one economic system–central planning–to another, a market system. This paper discusses a number of issues in reform strategy and experiences with reform of Eastern Europe. It is argued that the economics of transition has a wider significance that transcends specific issues of reform strategy and individual country experience. That significance lies in two areas; as a ‘living test’ of the neoclassical model which underpins the reform strategy and as an ultimate challenge to the economics discipline.
Occupational Crowding*
Authors: LEWIS DONALD E.
Published: October 2007

In comparison to occupational segregation, occupational crowding has been neglected by labour economists during the past 50 years. We redress this by proposing several indices of occupational crowding and estimating the value of these indices for Australian women and men from 1891 to 1991. The empirical results indicate that women have been consistently crowded into a narrow range of occupations. Although women are becoming less crowded, the decline is less than that for men. Consequently, the overcrowding of women relative to men is increasing.
The Wool Debt, the Wool Stockpile and the National Interest: Did the Garnaut Committee Get it Right?*
Authors: HASZLER HENRY , EDWARDS GEOFF , CHISHOLM ANTHONY , HONE PHILLIP
Published: October 2007

In July 1993 the Wool Industry Review (Garnaut) Committee presented its recommendations on disposal of the wool stockpile, on wool marketing, and on organizational arrangements in the wool industry. This paper focuses on the Report's treatment of two issues central to the future economic benefits to Australia from wool: the approach to the industry's stockpile‐related debt, and disposal of the stockpile. There are strong grounds for thinking that the Garnaut Committee's recommendations on these issues– accepted by the government–are contrary to the best interests of the wool industry and Australia.
Disappearing Middle or Vanishing Bottom? A Comment on Gregory*
Authors: BELCHAMBER GRANT
Published: October 2007

The ‘disappearing middle’ hypothesis suggests a relative growth of both low paid and high paid jobs, with a relative decline in the number of jobs in the middle of the distribution. The methodology underpinning Gregory's 1993 results (which supported the hypothesis for the Australian case) is challenged and an alternative approach outlined. The results show no ‘disappearing middle’ between 1985 and 1991 in Australia, when recorded job growth was substantial. This is pertinent to discussion of the effect of institutions and minimum wage laws on labour market outcomes.
Regional End‐Use Gas Demand in Australia*
Authors: BARTELS ROBERT , FIEBIG DENZIL G. , NAHM DAEHOON
Published: October 2007

End‐use energy models explain the demand for energy by households at the level of specific end uses, such as space heating, cooking and water heating. An important advantage of end‐use energy models is their usefulness in analyzing complex policy questions relevant to understanding and managing the demand for energy. With data available on total household gas demand and appliance ownership, the statistical method of conditional demand analysis (CDA) is utilized to estimate the end‐use consumptions of reticulated gas in Australia. We extend the existing literature by expanding the scope of the analysis to different regions of Australia thus providing a comprehensive national picture of end‐use gas consumption and facilitating interregional comparisons. Our results show that there are significant interregional differences in the gas consumption for different end uses. Energy policies which ignore these interregional differences, for example, national policies aimed at persuading households to switch from electricity to gas in order to reduce CO2 emissions, are likely to lead to inefficient or ineffective outcomes.
Sources of Exchange Rate and Price Level Fluctuations in Two Commodity Exporting Countries: Australia and New Zealand*
Authors: FISHER LANCE A.
Published: October 2007

Dynamic interactions between the exchange rate, domestic price level and terms of trade of Australia and New Zealand, relative to the United States, are evaluated. Under the restriction that a nominal shock has no long‐run effect on the relative terms of trade, real shocks dominate nominal shocks in accounting for fluctuations in real and nominal exchange rates. For Australia, real shocks that improve the relative terms of trade have a negligible effect on the domestic price level relative to that of the United States but, for New Zealand, there is a significant permanent increase in the relative domestic price level.
Trade Discrimination–Yesterday's Problem?*
Authors: SNAPE RICHARD H.
Published: October 2007

Existing tariff levels of many countries, and particularly of developing countries and on agriculture for most countries, still give plenty of scope for trade discrimination. For non‐tariff barriers there is substantial scope for discrimination within and beyond the transitional arrangements of the Uruguay Round Agreements, as well as under free trade agreements, customs unions and developing country preferences. Criteria are suggested which could ensure that preferential trading arrangements would promote rather than undermine the development of a liberal, multilateral trading system: actual preferential arrangements generally fall well short of satisfying these criteria. The proliferation of preferential (that is discriminatory) arrangements suggests there is a real possibility that the negative aspects of discrimination could be a problem of tomorrow, and not just of yesterday.
Earnings Inequality in Australia*
Authors: BORLAND JEFF , WILKINS ROGER
Published: October 2007

This study examines the nature and sources of changes in the distributions of earnings for full‐time male and female employees in Australia between 1975 and 1994. Measures of change in real earnings and in earnings inequality are constructed using grouped earnings data for 1975 to 1994, and individual‐level earnings data for 1982, 1986 and 1990. The effects on earnings inequality of changes in the skill composition of the workforce and in returns to skills are assessed through a variety of tests, and changes in earnings inequality in Australia are compared with recent trends in other countries.
The Cost of Public Funds in Australia*
Authors: CAMPBELL H.F. , BOND K.A.
Published: October 2007

A model of labour supply is used to calculate Australia's marginal cost of public funds, which is the appropriate cut‐off benefit/ cost ratio for an additional public project. The labour supply model incorporates effective average and marginal tax rates faced by the representative household in each gross income decile. These rates are estimated from the ABS 1988–89 Household Expenditure Survey. A simulation analysis is performed to calculate the effect on labour supply of a 1 per cent increase in marginal tax rates. The estimated changes in tax revenues and deadweight loss in each decile are used to estimate the marginal cost of public funds.
Ignorance and Ricardian Equivalence*
Authors: GRUEN DAVID
Published: October 2007

An immortal, intertemporally‐optimizing consumer who is ignorant of the link between bonds and future taxes, is exposed to the changing level of US Federal government debt over the 30 years, 1961–90. Estimates of the cost of ignorance are about $1 to $10 per annum. Provided governments do not use bond‐financing too aggressively, it may therefore be privately optimal for consumers to ignore the link between bonds and future taxes. Then bond‐financed fiscal policy has significant systematic effects on aggregate demand and national savings.
Where Are We Now With Human Capital Theory in Australia?*
Authors: PRESTON ALISON
Published: October 2007

The dominant economic paradigm for the study of wage determination is the human capital model. Increasingly, however, there is growing discontent with this model. The catalyst is the empirical literature on important earnings relationships which cannot be explained by competitive wage theory. Is human capital theory redundant? How useful is the model in the 1990s? This paper provides an assessment of the current status of human capital theory in Australia. The analysis demonstrates that even in a non‐competitive environment such as Australia the human capital framework is extremely useful for the study of wage determination. Its weakness is its inability to explain significant and persistent interindustry, inter‐occupational and gender wage differences.
Welfare and Economic Progress of Indigenous Men of Australia and the US 1980–1990*
Authors: GREGORY R.G. , DALY A.E.
Published: October 2007

At the beginning of the 1980s the average income of an Australian Indigenous male was 50.5 per cent of his white counterpart. In the US the Indigenous income ratio was 58.3 per cent. By the end of the decade the relative income position of the two Indigenous groups had reversed. The Aboriginal income ratio increased 10 per cent and that of our sample of Native American men decreased 17 per cent. The paper documents the reasons for this change.
Labour Supply and Social Welfare when Utility Depends on a Threshold Consumption Level*
Authors: CREEDY JOHN
Published: October 2007

This paper examines labour supply and social welfare, following Lewis and Ulph (1988>), in a model in which individuals gain a utility premium if they raise their net income up to or above a threshold level. It may thus be worthwhile for some individuals to avoid poverty by supplying a higher amount of labour than in the standard model. Over a range of wage rates, labour supply falls as the wage increases. In this framework, poverty is integral to a social welfare function because it matters to individuals. A special case leads to the use of the headcount poverty measure in an abbreviated social welfare function.
A Survey of Manufacturing Industry Policy: From the Tariff Board to the Productivity Commission
Authors: FREEDMAN CRAIG , STONECASH ROBIN
Published: October 2007

Since World War II Australian industry policy has shifted from providing extensive assistance such as tariff protection to the manufacturing sector to creating an environment for the efficient operation of markets. This paper surveys the evolution of the goals and instruments of industry policy in Australia and elsewhere.
Measures of Intra‐Industry Trade as Indicators of Factor Market Disruption*
Authors: DIXON PETER B. , MENON JAYANT
Published: October 2007

Concepts of intra‐industry trade (IIT) are often used to indicate the extent to which trade growth is accommodated without factor market disruption. The most common indicators are movements in Grubel‐Lloyd indexes. However, these are sometimes misleading. We develop two other indicators. The first involves changes in IIT. While this provides a measure of the contribution of ITT growth to trade growth, it can over‐estimate the contribution of non‐disruptive trade growth. This problem is overcome by our second indicator, the contribution of dynamic intra‐industry trade or matched changes in trade. All three indicators are illustrated with Australian manufacturing data.
Education and Health in an Effective‐Labour Empirical Growth Model*
Authors: KNOWLES STEPHEN , OWEN P. DORIAN
Published: October 2007

A structural growth equation is formulated incorporating education and health as labour‐augmenting variables in an aggregate production function. Although the model is an extension of the neoclassical framework, with diminishing returns to physical capital, growth rates in output per worker need not be identical across countries, even in their steady states. Cross‐country empirical estimates suggest a strong positive relationship exists between growth and health (as proxied by life expectancy), even after allowing for possible simultaneity, consistent with other evidence on the productivity‐enhancing effects of improved health status. By contrast, the relationship between output per worker and education is not significant.
Shock Persistence and Structural Change*
Authors: GREASLEY DAVID , OXLEY LES
Published: October 2007

Testing for unit roots, and the related issue of measuring shock persistence, has attracted considerable econometric interest. The issue of the size of the random walk component raised by Cochrane (1988) has been extended by Coglcy (1990). Jaeger (1990), Leung (1992), and latterly Mayadunne, Evans and Inder (1995).
Trade and Endogenous Growth with Ricardo‐Viner Production Technology*
Authors: CHAND SATISH
Published: October 2007

This paper derives three main results. First, learning by doing is sufficient to generate endogenous growth under Ricardo‐ Viner production technology. One implication of this result is that policy has a role when agents do not intermalize the dynamic gains from learning. Second, trade is advantageous for a small country and in the case of domestic goods having low elasticity of substitution in final consumption, high human capital content and/or a high learning rate. Third, border distortions in the form of import tariffs can affect pattern of specialization and long‐run growth but only for large economies and under very special circumstances.
The Changing Face of Australian Industrial Relations: A Survey*
Authors: HAWKE ANNE , WOODEN MARK
Published: October 2007

In 1994 David Metcalf, writing about Britain, reached the following conclusion: ‘There can be no doubt that the institutions and processes of British industrial relations has [sic] changed fundamentally in the last decade or so’ (Metcalf 1994, p. 152).

This description seems perfectly apt in describing recent change in Australia. The spread of enterprise agreements, the increased scope for individual agreements, the marked fall in trade union membership, the restructuring and rationalization of trade union structures, and the dramatic fall in levels of industrial action and persistence of relative industrial peace have all been relatively recent phenomena and mark the last 10 to 15 years as a period of significant change, certainly as compared with the relative stability of the industrial relations institutions throughout most of this century.

Despite this, whether the volume and nature of change experienced to date can be judged as transformational is still questionable. The Commission, for example, despite legislative change designed to limit its influence, continues to act as an arbiter of national and award‐based minima in pay and conditions and as a means of conciliation and arbitration. Furthermore, while the introduction of enterprise and individual agreements within the awards system is a significant change, it does not yet constitute a break with past centralized practices since agreements remain subject to approval by either the Commission or the newly formed Office of the Employment Advocate. Moreover, it is not clear that enterprise agreements are necessarily delivering outcomes that are greatly different from that which would have been delivered in their absence, either through awards or through over‐award bargaining. Only the changed role of the trade union movement can clearly be judged as transformational. Even the most die‐hard unionists have long since given up hoping that the downward trend in union membership might be reversed. The best they can hope for is that the haemorrhage is staunched.
Intergenerational Risk Sharing and Health Insurance Financing
Authors: JACK WILLIAM
Published: October 2007

When medical care prices and individual health needs follow stochastic processes with non‐zero trends. community rating facilitates lifetime insurance and intergenerational risk sharing. While such a policy is unsustainable in competitive private insurance markets. it provides the basis for the financing of public health systems designed to spread risks efficiently.
Should We Wait to ‘Grow Out of’ Unemployment? The Implications of a Neoclassical Calibration Analysis
Authors: COLEMAN WILLIAM
Published: October 2007

The paper uses a Solow‐Ramsey growth model to evaluate the effectiveness of growth as a remedy for unemployment in the face of a wage minimum. Plausible calibration of the model suggests that the elimination of 5 per cent unemployment by the process of capital accumulation may take about 20 years.
F. H. G. Gruen: 1921‐97
Authors: CHAPMAN BRUCE
Published: October 2007

Economics Society of Australia Distinguished Fellow 1997 Fred Gruen was awarded the 1997 Economics Society of Australia Distiguished Fellow for his contribution to the Australian economics profession. Throughout his life Professor Gruen's writtings on economic policy were distinguished by their breadth, relevance and insight. His advice had direct influence on government policy, such as the 25 per cent tariff cut in 1973, and the reintroduction of the assets test on pensions in 1985. His contribution to the development of the economics profession included his role as President both of the Australian Agrucutural Economics Society and the Australian Academy of Social Sciences.

This citation has been shortened to accompany the following obituary.
Is There a Bank‐Lending Channel of Monetary Policy in New Zealand?
Authors: GUENDER ALFRED V.
Published: October 2007

The results reported in the paper cast serious doubt on the existence of a potent bank‐lending channel of monetary policy in New Zealand either before or after the reforms of the mid‐1980s. We find no sound evidence of a link between a number of different finance mix variables and economic activity in New Zealand. Similar, unfavourable results are reported by the investigation of the connection between movements in an interest rate spread and real economic performance. Moreover, neither the finance mix variables nor the spread respond consistently to changes in various indicators of monetary policy.