bluuebunny/crossref_metadata_2025 huggingface dataset:
Country Default Risk: An Empirical Assessment
Authors: Stein Jerome L. , Paladino Giovanna
Published: March 2003

We provide benchmarks to evaluate what is an optimal foreign debt and a maximal foreign debt (debt‐max), when risk is explicitly considered. When the actual debt exceeds debt‐max, then the economy will default when a ‘bad shock’ occurs. This paper is an application of the stochastic optimal controls models of Fleming and Stein (2001), which gives empirical content to the question of how one should measure ‘vulnerability’ to shocks, when there is uncertainty concerning the productivity of capital. We consider two sets of high‐risk countries during the period 1978–99: a subset of 21 countries that defaulted on the debt, and another set of 13 countries that did not default. Default is a situation where the firms or government of a country reschedule the interest/principal payments on the external debt. We thereby explain how our analysis can anticipate default risk, and add another dimension to the literature of early warning signals of default/credit risk.
A Behavioural Approach Towards Futures Contract Usage
Authors: Pennings Joost M.E. , Leuthold Raymond M.
Published: March 2003

We propose a behavioural decision‐making model to investigate what factors, observable as well as unobservable, owner‐managers consider regarding futures contract usage. The conceptual model consists of two phases, reflecting the two‐stage decision structure of manager's use of futures. In the first phase owner‐managers consider whether futures are within the market choice set for the enterprise. In the second phase the owner‐manager decides whether or not to initiate a futures position when confronted with a concrete choice situation. In both phases owner‐manager’s beliefs and perceptions play an important role. The proposed model is tested on a data set of Dutch farmers, based on computer‐assisted personal interviews. Because we incorporate latent variables (e.g., perceptions and beliefs) in both phases, we propose an estimation procedure that takes the measurement error of these latent variables explicitly into account. The implications of the behavioural decision‐making model for futures contract design are derived.
Simultaneity, Rationality and Price Determination in US Live Cattle
Authors: Goss Barry A. , Avsar S. Gulay , Inder Brett A.
Published: March 2003

The results of recent research on the informational efficiency of the US live cattle futures market are ambiguous. Moreover, simultaneous, rational expectations models of spot and futures markets for non‐storables are lacking in the literature. This paper addresses both issues: by developing a simultaneous rational expectations model of the US live cattle market, with functional relationships for short hedgers, long hedgers, net short speculators and consumers, the paper employs a wider information set than in previous research and it thus provides a more powerful test of the efficient market hypothesis (EMH). Tests indicate the possible presence of non‐linearities in the long hedging and net short speculation equations.

The results suggest first, that there is support for Working’s hypotheses of selective and operational hedging, for short and long hedgers respectively, second that speculators may be noise traders or risk‐loving (although the non‐linear version of the speculation function partially corrects this anomaly), and third that beef is a normal good while corn is a complementary input. Time‐varying volatility is represented as an EGARCH (p, q) process. Post‐sample, this model does not significantly outperform the futures price in spot price forecasting, implying non‐rejection of the EMH.
Regulatory Tools and Price Changes in Futures Markets
Authors: Hall Anthony D. , Kofman Paul
Published: March 2003

There is an extant literature investigating the relation between futures price limits and the volatility of futures price changes. An equally impressive number of papers investigates margin levels and their relation with price volatility. Very few papers explicitly model the indirect relation, through volatility, between margins and limits. Brennan’s (1986) model is an exception. In his model, price limits help control contract default risk, thereby reducing required margins and ultimately lead to lower transaction costs. The crucial assumption in Brennan’s model is the absence of accurate price signals when prices are locked at the limit. The paper extends Brennan’s model with more realistic price change distributions that capture the typical characteristics of futures prices such as fat tails and time‐varying volatility. It also discusses how learning can occur and how this may affect cost minimising optimality of regulation.
Market Architecture and Nonlinear Dynamics of Australian Stock and Futures Indices
Authors: Anderson Heather M. , Vahid Farshid
Published: March 2003

This paper studies the All Ordinaries Index in Australia, and its futures contract known as the Share Price Index. We use a new form of smooth transition model to account for a variety of nonlinearities caused by transaction costs and other market/data imperfections, and given the recent interest in the effects of market automation on price discovery, we focus on how the nonlinear properties of the basis and returns have changed, now that floor trading in the futures contract has been replaced by electronic trading.
Purchasing Power Parity and Interest Parity in the Laboratory
Authors: Fisher Eric O’N.
Published: March 2003

This paper analyses purchasing power parity and uncovered interest parity in the laboratory. It finds strong evidence that purchasing power parity, covered interest parity, and uncovered interest parity hold. Subjects are endowed with an intrinsically useless (green) currency that can be used to purchase another useless (red) currency. Green goods can be bought only with green currency, and red goods can be bought only with red currency. The foreign exchange markets are organised as call markets. In the treatment analysing purchasing power parity, the price of the red good varies. In a second treatment, the interest rate on red currency varies. In a third treatment, the interest rate on red currency varies, and the price of the red good is random.
Impact of the GST and Wine Tax Reform on Australia’s Wine Industry: A CGE Analysis
Authors: Wittwer Glyn , Anderson Kym
Published: March 2003

This study analyses the impacts of the Goods and Services Tax (GST) introduced on 1 July 2000, and the associated wine tax reform, on both the premium and non‐premium segments of the grape and wine industry using a computable general equilibrium (CGE) model of the Australian economy. Through input cost reductions, the grape and wine industry is projected to gain from the GST tax package. Thus the industry can still gain even though wine consumption is taxed a little more heavily after than before the introduction of the GST. This is particularly so for the export‐oriented premium wine segment. A switch from the current ad valorem to a revenue‐neutral volumetric tax on wine under the GST is shown also to favour the premium segment of the industry, but at the expense of the non‐premium segment.
Intertemporal Consumption Smoothing and Capital Mobility: Evidence from Australia
Authors: Cashin Paul , McDermott C. John
Published: March 2003

This paper examines the optimality of international capital flows to Australia, a persistent net importer of capital, during its post‐capital controls period 1984–99. The evolution of Australia’s current account balance is compared against a benchmark derived from an optimising model of intertemporal consumption smoothing. The consumption‐smoothing approach to the determination of the current account implies that international capital flows act as a buffer to smooth aggregate consumption in the face of temporary shocks to the economic fundamentals: changes in national cash flow (that is, changes in the level of output, investment or government spending). It is found that in the early 1990s a structural break occurred in the relationship between consumption and national cash flow, which coincides with a switch from debt‐financing to equity‐financing of the current account deficit. In the decade of the 1990s following this structural break (and unlike the decade of the 1980s which preceded this break), international capital flows to Australia implied a path for consumption which was broadly consistent with expected‐utility maximisation under the consumption‐smoothing model of the current account.
Tests of Income Pooling on Household Budget Data: The Australian Evidence
Authors: Lancaster Geoffrey , Ray Ranjan
Published: March 2003

The unitary household model implies pooling of all individual incomes. This study distinguishes between various types of income pooling and tests them on Australian household income/expenditure data. The tests recognise the endogeneity of both earned and unearned income and are performed using a 3 SLS estimation procedure that allows feedback between the various equations. The results support income pooling for some items, though not for others. Moreover, income pooling across gender seems much less likely for old people than for the younger individuals. The study, also, provides evidence on the interaction between the various types of income.
Valuing Credit Spreads on Quality Australian Dollar Eurobonds in a Multivariate EGARCH Framework
Authors: Batten Jonathan , Hogan Warren , In Francis
Published: March 2003

We apply a multivariate EGARCH model implied from the closed‐form valuation model of Longstaff and Schwartz (1995), to explain the time‐varying volatility of credit spreads on high‐quality Australian dollar Eurobonds with different maturities. The results support the proposition that relative credit spreads returns are negatively related to both changes in Australian Government bond yields and changes in the All Ordinaries Index. There is also evidence of a high level of volatility interaction and persistence between Australian dollar Eurobonds, though the volatility transmission mechanism is asymmetric in that negative innovations tend to increase the volatility in other bonds more than positive innovations.
Agglomeration Economies, Division of Labour and the Urban Land‐rent Escalation: A General Equilibrium Analysis of Urbanisation
Authors: Sun Guang‐Zhen , Yang Xiaokai
Published: March 2003

A general equilibrium model with increasing return to labour specialisation and economies of transaction agglomeration is developed to address the residential land‐rent escalation associated with the urbanisation process, which is in turn endogenised as a result of the evolution of the division of labour. The interplay among the geographical pattern of transactions, trading efficiency and the network size of the division of labour plays a crucial role in our story of urbanisation. We show that: as transaction conditions are improved, the equilibrium level of division of labour and individuals specialisation levels increase; the urban land‐rent increases absolutely as well as relative to that in the rural area, the relative per capita lot size of residence in the urban and rural areas decreases; the diversity of occupations in the urban area and the population share of urban residents increase; and the productivity of all goods and per capital real income increase.
Public Monopoly, Mixed Oligopoly and Productive Efficiency
Authors: Nishimori Akira , Ogawa Hikaru
Published: March 2003

In general, the introduction of competition into the public sector seems to lead to higher cost‐efficiency in service production. However, there are examples of substantial cost increases in some areas. In this paper, using a mixed oligopoly model, we investigate the effects of deregulation on the cost‐reducing incentives of a public firm. Our results show that a firm that is a public monopoly has greater incentive to conduct cost‐reducing investment than a public firm within mixed oligopoly market.
Determinants of the Effective Real Exchange Rate of the Synthetic Euro: Alternative Methodological Approaches
Authors: Detken Carsten , Dieppe Alistair , Henry Jérôme , Smets Frank , Marin Carmen
Published: March 2003

On the basis of historical data aggregated over the period 1973 to 2000, we have experimented with four different approaches to estimate the synthetic euro's equilibrium exchange rate. Using a number of competing models with the same data set, variable definitions and sample period offers the possibility to assess the uncertainty surrounding such equilibrium levels, both from an empirical (different estimates) and a theoretical viewpoint (different specifications). In this exercise, the ‘Rest of the World’ is proxied by the US, the UK, Japan and Switzerland, aggregated on the basis of trade weights.

We employed reduced form co–integration models, a structural VAR, a NATREX model (estimated in structural form) and the ECB's small–sized euro area wide macro–econometric model. In this order the approaches feature an increasing degree of ‘structure’, in the sense of the constraints based on economic theory embedded in the econometric models that were estimated. The results confirm the high likelihood for the euro having been undervalued in Q4 2000, while stressing the significant empirical and theoretical uncertainty with respect to the equilibrium exchange rate level.
Determinants of the Euro Real Effective Exchange Rate: A BEER/PEER Approach
Authors: Maeso–Fernandez Francisco , Osbat Chiara , Schnatz Bernd
Published: March 2003

This paper presents an empirical analysis of the medium–term determinants of the euro effective exchange rate. The empirical analysis builds on synthetic quarterly data from 1975 to 1998, and derives a Behavioural Equilibrium Exchange Rate (BEER) and a Permanent Equilibrium Exchange Rate (PEER). Four different specifications are retained, due to the difficulties encountered in specifying an encompassing model. The results indicate that differentials in real interest rates and productivity, and (in some specifications) the relative fiscal stance and the real price of oil, have a significant influence on the euro effective exchange rate. Assessing the existence and the extent of the over– or undervaluation of the exchange rate is not straightforward, since these different specifications often lead to contrasting findings. However, all four specifications point unambiguously to the undervaluation of the euro in 2000, although the extent of this undervaluation largely depends on the specification chosen.
Endogenous Growth in an Open Economy and the Real Exchange Rate
Authors: Federici Daniela , Gandolfo Giancarlo
Published: March 2003

This paper is a step in the direction of a larger research project aimed at determining the long run equilibrium value of the euro/dollar real exchange rate. Given this value, one could then give a precise meaning to the notion of undervaluation or overvaluation of the euro, and calculate its misalignment. The problem however arises of how to assess the reliability of such misalignment calculations. In our opinion, we must have a benchmark (namely a period in which we exactly know from outside sources the misalignment itself), against which we can test the validity of the model underlying our calculations. This of course is not (yet) possible for the euro, so that all the calculations of the misalignment of the euro that have been made can only be compared with one another, without knowing which is the good one. Hence, before building a model to be applied to the euro/dollar, we tested our ideas incorporating them in a basic model to be applied to the lira/dollar in a period in which we do know the actual misalignment of the lira from outside sources.
Concentration and Liquidity in Mature Markets: Evidence from the US Dollar/Yen Futures Market
Authors: Goss Barry A. , Avsar S. Gulay
Published: March 2003

The cost of liquidity is the major cost of transacting on organised futures exchanges. Liquidity has value both to traders and to exchanges. This paper argues that liquidity varies directly with market development, and that this relationship provides a major incentive for mergers among exchanges. While previous research on liquidity has focused on spot markets for a range of securities, this paper employs data from the US dollar/Yen futures contract to investigate the relationship between liquidity and volume, between liquidity, volume and volatility, and between liquidity and the speculation ratio. The paper tests for non–linearity in these relationships, and explores the presence of Granger causality between pairs of key variables.

The results include inter alia the presence of a significant negative relationship between the cost of liquidity and volume, and evidence of a significant non–linear relationship in which the cost of liquidity varies directly with volatility and negatively with the conditional fourth moment about the mean of daily prices (a measure of kurtosis). Moreover, there is evidence that liquidity Granger causes volume, that volatility Granger causes volume, and that liquidity Granger causes the speculation ratio.
Mixed Duopoly with Product Differentiation: Sequential Choice of Location
Authors: Matsumura Toshihiro , Matsushima Noriaki
Published: March 2003

We investigate the sequential choice of location in a mixed duopoly, where a welfare–maximising public firm competes against a profit–maximising private firm. We examine the desirable role of the public firm in a mixed market. We also consider the effect of price regulation. We find that the public firm should become the follower (leader) if a price regulation is (is not) imposed. We also find that neither price regulation nor privatisation of the public firm improves welfare.
A Note on Technology Transfer by a Monopoly
Authors: Wang X. Henry , Yang Bill Z.
Published: March 2003

This paper studies the incentive for a monopoly to license its technology. It shows that a patent–holding monopoly may be willing to license its proprietary technology to a potential competitor when such a technology transfer has a market–expanding effect.
A Perspective on Modelling the Australian Real Trade Weighted Index since the Float
Authors: Aruman Shakila , Dungey Mardi
Published: March 2003

Since the deregulation of the Australian dollar market in December 1983, considerable effort has been devoted by the central bank to understanding movements in the value of the currency. As the Reserve Bank of Australia (RBA) has a pivotal role to play in currency markets, attention has been focussed on the modelling techniques used by the Bank's researchers in this process. This paper examines the ancestral development of the current model of the Australian Trade Weighted Index (rtwi) used at the RBA, as specified in Beechey et al. (2000). Estimates and forecasting evaluations of the various models imply that only the relationships between the rtwi, the terms of trade and interest differentials hold consistently, providing the empirical foundation for the current RBA model.
Analysing Comparative Advantage and Competitiveness: An Application to Australia's Textile and Clothing Industries
Authors: Havrila Inka , Gunawardana Pemasiri
Published: March 2003

Australia's comparative advantage and competitiveness in textile and clothing (TAC) industries are analysed, using Balassa's revealed comparative advantage index and Vollrath's measures of competitiveness. The analysis based on Balassa's indices shows that Australia has a strong comparative disadvantage in textiles and clothing as aggregate commodity groups, but there is comparative advantage in sub–categories of ‘special textile products’, ‘floor coverage, tapestry etc’, and ‘fur clothing’. The analysis based on Vollrath's indices shows that Australia is not competitive in the world market with respect to aggregate commodity groups of textiles and clothing. Grubel–Loyd index of intra–industry trade was calculated for seven categories of textiles and two categories of clothing. The results show a rising trend in intra–industry trade in some of these categories of TAC products, implying that Australia increasingly exports and imports differentiated TAC products. Australian TAC industries may look to further promote exports of their products in the global market through increased product differentiation and improved quality and design.
A Two‐stage Price‐setting Duopoly: Bertrand or Stackelberg
Authors: Matsumura Toshihiro
Published: March 2003

This paper investigates a two‐stage price‐setting duopoly with differentiated goods. First, each firm announces its price; second, it chooses its actual price; and finally the market opens. Once a firm announces a price, it is able to discount it but not raise it. The model includes Stackelberg‐type and Bertrand‐type equilibria as possible outcomes. Whether Bertrand or Stackelberg appears in equilibrium depends on the properties of demand functions crucially. We find three patterns of equilibrium outcomes; one case has Bertrand equilibrium only, another has Stackelberg only, and the other has both equilibria
Trends in the Australian Gender Wage Differential over the 1980s: Some Evidence on the Effectiveness of Legislative Reform
Authors: Kidd Michael P. , Meng Xin
Published: March 2003

The article examines the legislative reforms incorporating the Sex Discrimination Act and the Affirmative Action Act introduced during the 1980s. We utilise the Australian Bureau of Statistics Income Distribution Surveys 1981–82 and 1989–90 to reflect pre‐ and post‐legislative reform.

The article adopts the Brown, Moon and Zoloth (1980) methodology which treats both the wage and occupational status of the individual as endogenously determined. In the current context this is a particularly flexible framework allowing one to capture both the direct and indirect effects of the legislative reforms. The indirect effect refers to the narrowing of the gender wage gap associated with legislative manipulation of the male‐female occupational distributions.

The results contrast the slow convergence in the gender wage gap during the 1980s with the much faster pace of the 1970s. The article concludes that despite the focus of the 1980s legislation on employment equity, changes in the male‐female occupational distribution over the period are small and the associated impact on gender wage convergence is also small.
Evaluating Airline Deregulation in Australia
Authors: Quiggin John
Published: March 2003

It has frequently been claimed that the cost of air travel in Australia has fallen by around 20 per cent in real terms since the end of the Two Airline agreement. However, this claim rests on a misinterpretation of price data. In this article, an analysis based on the theory of price indexes is presented. It is concluded that the representative passenger has probably experienced a small reduction in the cost of air travel since deregulation. Some additional benefits have flowed from the expansion of frequent flyer schemes, and from increased frequency of service. The distributional effects of deregulation are unclear, but are probably favourable on balance. The Australian airline industry is a natural duopoly and the market is not contestable. Therre is no evidence of dynamic efficiency gains arising from deregulation. The observed effects of deregulation are consistent with the predictions of neoclassical microeconomic theory.
Has Financial Deregulation Revived the Permanent Income/Life Cycle Hypothesis?
Authors: Olekalns Nilss
Published: March 2003

The permanent income/life cycle hypothesis is tested using Australian data for periods covering the regulated and deregulated financial systems. The hypothesis is rejected for the entire sample period. Further investigation reveals that the rejection is confined to the period in which the financial system was regulated. The evidence points to liquidity constraints as being the cause of this rejection although the existence of myopic consumers may also be a possibility.
Ethnicity and Job Tenure in a Segmented Labour Market: The Case for New Zealand
Authors: Herzog, Jr Henry W.
Published: March 2003

The labour market experience of 1984–1992 turned on end the prevailing notion of ‘personal security’ within New Zealand, founded as it was upon guaranteed employment (and full‐employment in the aggregate). This study examines, in a systematic fashion and within a dynamic setting, why job tenure varied consistently over this period between two ethnic groups, the first comprised of European/Pakeha workers, and the second New Zealand Maori and Pacific Islanders.

Econometric analyses of total, voluntary and involuntary separations indicate that the low relative job security of Maori/Pacific Islanders cannot be attributed solely to differential attributes that, on the one hand represent such individuals’ gender/age distribution, qualifications, and conditions of employment, and on the other provide controls for the relative competitive positions of their employers. Rather, other factors, such as worker segmentation, are likely operative within the New Zealand labour market, conditions that, on net, work to the disadvantage of non‐Europeans.
The Efficiency of State Taxes
Authors: Albon Robert
Published: March 2003

The states have increased their share of national revenue from about 16 per cent in the late 1980s to over 20 per cent. This shift may not have improved the efficiency of raising national taxation revenue. Eight taxes with total revenue in 1995–96 of $26.5 billion are considered. In order of revenue these are payroll tax, business franchise taxes, stamp duties, gambling taxes, government business enterprise taxes, financial institutions taxes, land tax and mineral taxes. Business franchise taxes fall on a few items of consumption that are already taxed heavily by the Commonwealth. Financial taxes and stamp duties are suspect because they are transactions taxes, not taxing economic activity directly. Two important state taxes—on payrolls and on land—have badly fractured bases. The pressure on the states to raise more revenue is continuing. In meeting their revenue requirements efficiently the short‐term solution lies in substantial reforms of existing taxes, including repairing the bases of the payroll and land taxes, and removal or reduction of the least efficient ones. The longer term solution lies in the states having access to broader based taxes, particularly consumption.
Fiscal Policy in Australia and Southeast Asia: An Overview
Authors: McDonald Ian M.
Published: March 2003

Ian M. McDonald introduces a Policy Forum on Fiscal Policy in Australia and Southeast Asia. In this Policy Forum two papers focus on the fiscal policy of the Howard Government. A third paper considers the role of fiscal policy in the currency crisis in Southeast Asia.
Inflation, Unemployment and the NAIRU in Australia
Authors: Crosby Mark , Olekalns Nilss
Published: March 2003

In this paper we investigate the relationship between inflation and unemployment in Australia, post 1959. Our approach is based on identification of the time series components of the data. Evidence is found of significant correlations between the non‐trend frequencies of inflation and unemployment and these correlations are exploited to estimate a simple forecasting model that does not suffer from the instability normally associated with the Phillips Curve. Estimates of the NAIRU are also provided and these range from as low as 2.3 per cent to as high as 9.2 per cent over this period, but these estimates are quite imprecise. Reasons for this imprecision are discussed.
Testing the Olson Hypothesis within the Australian Context
Authors: Marks Andrew , Sadeghi Mehdi
Published: March 2003

This article seeks to empirically test whether the Olson hypothesis is applicable in the Australian context. Both cointegration and regression analyses which are utilised for this purpose provide strong support for this hypothesis; that is, the existence of a statistically significant negative relationship between import protection and the proportion of manufactured goods exported. More specifically, it is revealed that falling levels of import protection have underpinned an increase in the proportion of manufacturing goods exported and hence assisted in improving the manufacturing sector’s export orientation in the period 1980:1–1996:2. A particularly important dimension of the empirical results is the strengthening of this relationship in the more recent years to 1996:2. This phenomenon probably indicates the favourable impact of the accumulated reduction in the protection levels since the early 1970s.
Funding Australian Universities
Authors: Williams Ross
Published: March 2003

This article sets out the principles that should govern university funding, outlines the extent to which current funding arrangements meet these principles, and examines alternative funding models that would encourage flexibility and diversity in universities.
Higher Education in Australia and Britain: What Lessons?
Authors: Barr Nicholas
Published: March 2003

The theoretical principles which should shape policy towards the funding of higher education are discussed and recommendations of the UK Dearing Report and the UK Government’s response are assessed. Lessons for Australia conclude.
The Demand for Water by Single‐Metered and Group‐Metered Households
Authors: Creedy John , Van De Ven Justin , McKenzie Kirsty E.
Published: March 2003

This paper examines water consumption in group‐metered households. A utility‐maximising model is developed in which the marginal price schedule is approximated by a polynomial function of water consumption. The model is modified to allow for an incentive for group‐metered households to consume more water than if they were separately metered. This occurs if households do not expect their own increase in water consumption to be matched by other households sharing the meter, so that part of the marginal cost of water is shifted to other households. Estimates using Western Australian data are, however, unable to detect any significant effect of this kind, perhaps because the price response itself is small.
Why Has the Workplace Become Safer?
Authors: Borooah Vani K. , Mangan John
Published: March 2003

This paper asks whether the fall over 1983–1993 in the aggregate injury‐to‐workforce ratio (the injury rate) that occurred in Queensland was due to improvements in industrial safety or due to shifts in employment away from ‘unsafe’ industries. The conclusion, based on data from the Queensland Employee Injury Data Base, is that improvements in industrial safety were the main reason for the State’s workplace becoming safer. The paper then conducts an econometric investigation in to why industrial injury rates in Queensland fell over 1983–1993. The evidence is that in Mining, Manufacturing and Construction, there was a significant autonomous decrease in the injury rate. The problem is that since the data available were only for those injuries against which compensation was claimed, it is difficult to say—except as a matter of judgement—whether improvements in injury rates in these sectors were due to genuine improvements in safety or caused by a fall in the propensity to claim compensation. Changes in general economic conditions—particularly, rising unemployment—have also contributed to falling injury rates.
Towards a Negative Income Tax System for Australia
Authors: Dawkins Peter , Johnson David , Scutella Rosanna , Beer Gillian , Harding Ann
Published: March 2003

The undue complexity of the Australian tax‐transfer system is outlined as are the associated high effective marginal tax rates for many individuals and families. A negative income tax system is a possible solution to these problems.

The most radical version of negative income tax is a ‘basic income/flat tax’ system which combines universal tax credits (that vary according to presence of children, disability etc.) and a flat tax rate on private income. Using NATSEM’s microsimulation model STINMOD it is found that to ensure that no current social security beneficiaries become worse off under such a system would either be very expensive to introduce or require a tax rate that is likely to be unacceptably high. Less radical versions of negative income tax are also costed, incorporating the possibility of varying tax rates, the tapering out of tax credits, and placing some restrictions on the granting of tax credits. This makes negative income tax look more feasible.

The analysis does not incorporate behavioural responses. Since the motivation for a negative income tax system is largely to achieve such responses (for example, labour supply responses), this feasibility analysis might have been unduly harsh. Research is required to incorporate behavioural responses into the analysis.
The State of Play of Effective Marginal Tax Rates in Australia in 1997
Authors: Beer Gillian
Published: March 2003

This paper looks at the impact of the means tests in the current income tax and social security systems on the incentives for Australians to work or work more and examines the number of Australians facing poor workforce incentives.
Improving Incentives: Changing the Interface of Tax and Social Security
Authors: Keating Michael , Lambert Simon
Published: March 2003

This paper proposes a scheme to improve incentives by consolidating all means tests, and discusses how this could enhance proposals for tax reform.
An Economic and Policy Analysis of Australian Export Concession Schemes
Authors: Feaver Donald , Morris Alan , Cole William
Published: March 2003

This paper examines the relationship between the implementation of industry policy instruments known as export concession schemes and the growth in Australian value‐added exports.
In Search of the Fourth Way: A Commentary on the Books by Fred Argy and Mark Latham
Authors: Hamilton Clive
Published: March 2003

This paper is a critique of the new books by Mark Latham and Fred Argy, the first of which in particular is said to herald the ‘Third Way’ in Australian politics. It considers the implications for new policies of economic power and the redefinition of economic welfare, and concludes that if this is the Third Way then we are in need of a Fourth Way.
Web‐Based Resources for the Macroeconomist
Authors: Henry Ólan T.
Published: March 2003

Information is provided about sources of macroeconomic and financial time series, archives of working papers and econometric software. Other resources, such as sites dedicated to fields of the discipline, and on‐line journals are also highlighted.
Immigration and the Australian Macroeconomy: Perspective and Prospective
Authors: Junankar P.N.(Raja) , Pope David , Withers Glenn
Published: March 2003

Australia has long been a nation of immigrants. The economic purposes of migration and its economic consequences are major public policy issues. This selective review of research looks at the macroeconomic dimensions of this issue for Australia.
Managing Global Capitalism
Authors: Sachs Jeffrey
Published: March 2003

Over the last year and a half there has been a growing concern about the ability of the world’s international financial system and its associated institutions, such as the International Monetary Fund and the World Bank, to provide the appropriate framework for the management of global capitalism.

This paper is a transcript of the first David Finch Lecture at the University Melbourne, presented by the well‐known Harvard economist, Jeffrey Sachs. The lecture was delivered on 24 October 1997, at an early stage of what was first called the Asian financial crisis, and what is now being described by some as a world financial crisis.

In this lecture, Sachs outlines how the world became a world of global capitalism and some of the challenges that poses, especially for institutions such as the international Monetary Fund and the World Bank. Given the nature and extent of the international financial developments that have occurred since the lecture was delivered, it is remarkable how apposite the contents remain over a year later.
Budget Standards and the Poverty Line
Authors: Saunders Peter
Published: March 2003

This article reports some of the results from a recent study which, among other things, developed and costed low cost budgets for a range of Australian households. A budget standard represents what is needed, in terms of goods, services and activities, to achieve a particular standard of living and what that costs in a particular place and time. A low cost budget standard is one designed to meet basic needs at a frugal level while still allowing social and economic participation consistent with community expectations. The low cost budget standard estimates for households living in Sydney in February 1997 are somewhat higher than the Henderson poverty line, partly a reflection of the high cost of housing in Sydney, but also a consequence of the low cost standard itself being above a poverty standard. In spite of this, the budget standard relativities for different households provide an estimate of the relative needs of Australian households in the 1990s which could replace the current much‐criticised equivalence scale.
An Environmental Cooperation Agreement for the Asia‐Pacific Region?
Authors: Li Eric A. L.
Published: March 2003

We discuss the significance of environmental cooperation in the Asia‐Pacific region through addressing the growing concern on pollutionhaven formation; standards harmonisation as a trade prerequisite; and the undue reliance on the environmental Kuznets curve. Such an agreement must be supported by the sustainability principle and should capitalise on the favourable empirical response time to international treaties. With these we then examine the negotiation of an Asia‐Pacific Agreement on Environmental Cooperation separate from the Asia‐Pacific Economic Cooperation. Such separation desirability is explained with the help of the Bhagwati principle of harmonisation and free trade, a real options analysis, and the accountability principle.
Taxing Super
Authors: Doyle Suzanne , Kingston Geoffrey , Piggott John
Published: March 2003

Australia’s taxation arrangements for retirement saving are among the most complicated in the world. It is almost unique in applying taxat all three possible points in the retirement saving cycle: contributions, earnings and benefits. Starting from the proposition that the ‘best’ pension tax is to tax benefits under the personal income tax, this paper proposes a ‘withholding tax’ arrangement which would have impacts on individual contributors equivalent to a benefit tax, while altering the time profile of tax collections to address cash‐flow concerns on the part of the revenue authorities. Simulations are presented to show that individual contributors benefit from the proposed reform, and that equity across contributors in different wage bands is broadly maintained.
An Evaluation of Alternative Methods of Forecasting Australian Inflation
Authors: Alles Lakshman , Horton Dean
Published: March 2003

The purpose of this paper is to evaluate the forecast of Australian inflation based on four alternative procedures: a univariate time series model, an interest rate model, an error correction model and a public survey of inflation forecasts. We derive estimates of expected and unexpected inflation from each of the methods and compare the out‐of‐sample forecasting results. Based on a range of evaluation criteria, the time series model dominates the other models, with the interest rate model, the error correction model and the survey forecasts following in that order.
Changing the Tax Mix
Authors: Freebairn John
Published: March 2003

A tax mix change, including a component of the Australian tax reforms, involves a net increase in taxation of consumption and a net decrease in income taxation. If the tax mix change is approximately aggregate revenue neutral and retains current vertical equity, the new income tax rate schedule must be more progressive than the current schedule. The Australian proposal involves a revenue shortfall and some erosion of vertical progressivity. For the large proportion of households who save very little, the tax mix change has negligible effects on incentives and efficiency, and on total tax paid.
The Final Incidence of Australian Indirect Taxes
Authors: Scutella Rosanna
Published: March 2003

The Australian Bureau of Statistics provides a breakdown by industry of the revenue collected from each of the major indirect taxes in Australia. This information does not show who bears the ultimate burden of indirect tax as each industry may pass on its initial burden to others. Thus, the burden of the tax may be passed on round by round to indirect business purchases and final demand until the total burden of the tax is passed onto the final consumer. Using a method to derive final indirect tax incidence developed from earlier studies, the final incidence of a selection of indirect taxes in Australia is presented. The major innovation is to include the use of margin industries in the initial flows of the input‐output matrix ensuring that taxes on inputs to margin services are fully passed forward onto the good or service that the consumer purchases. It is found that many goods and services that are initially exempt from the main indirect taxes, such as the wholesale sales tax, have significant effective tax rates once taxes on inputs to industry are taken into account.
Carbon Taxation, Fuel Substitution and Welfare in Australia
Authors: Creedy John , Martin Cameron
Published: March 2003

This paper examines the potential role for fuel substitution in electricity production in reducing carbon dioxide emissions over a ten‐year time horizon. This is achieved by adding fuel substitution to output changes resulting from demand responses arising from a tax on carbon dioxide emissions. A time profile of adjustments is developed. The tax required for Australia to meet a 20 per cent reduction in emissions from 1993 levels is calculated and effects on inequality and social welfare are examined. The paper also examines the potential effect of a subsidy towards the use of low‐emission fuels, financed from the carbon tax. A subsidy produces an improvement in emissions abatement and a lower tax required to reach the emissions target.
An Evaluation of Inertia Models of Unemployment
Authors: Le Anh T. , Miller Paul W.
Published: March 2003

Two approaches have been used to model unemployment. The first, conventional, approach involves linking the unemployment outcome to observed indices of productivity, structural factors and discrimination such as educational attainment, location and birthplace. The second approach, the inertia model, involves using a person's labour market history as a way of including in unemployment models information on the ‘unobservables’ that influence employability. This paper evaluates the performance of both models of unemployment. The results provide unambiguous support for the inertia model when modelling unemployment. The inertia model has higher explanatory power, higher within‐sample prediction rate success and fewer out‐of‐sample forecasting errors than the conventional model. The estimates from the inertia model can be used to provide quite accurate predictions of the risk of becoming unemployed. This is important if individuals at high risk of becoming unemployed are to be targeted for labour market assistance.
Poverty Intensity in Australia
Authors: Rodgers J. R. , Rodgers J. L.
Published: March 2003

Even though poverty indices with axiomatically sound properties have been advocated for several decades, most empirical studies of poverty in Australia and elsewhere continue to use the crude, but easily understood, head‐count ratio. The difficulty of interpreting the axiomatically more desirable indices is a major reason why their use has been resisted in applied poverty measurement. This paper demonstrates how the more sophisticated poverty indices can be converted into a form that is readily interpreted as a measure of poverty intensity of a group, relative to the population to which the group belongs. The resulting poverty‐intensity index is easy to understand and it retains the axiomatic properties of the poverty index on which it is based. We apply the method to Australian data. Poverty measures reported previously in the literature are converted into measures of poverty intensity and interpreted accordingly. We also calculate and interpret some new measures of poverty and poverty intensity using the 1996–97 Income and Housing Costs Survey, Australia (Australian Bureau of Statistics 1997). It is hoped our procedure will lead to wider use of poverty indices that are theoretically superior to the head‐count ratio.
A Comparison of Income and Expenditure Inequality Estimates: The Australian Evidence, 1975–76 to 1993–94
Authors: Blacklow Paul , Ray Ranjan
Published: March 2003

Using Australian unit record data this paper compares income and expenditure inequalities over the period 1975–76 to 1993–94. The study finds inconsistencies between the two inequality movements over much of this period. We also observe differences in the nature of income and consumption disparities. Both approaches show that the ‘within group’ inequality dominates the ‘between group’ component when the population is divided into household types. The inequality estimates are sensitive to the equivalence scale used as the household size deflator but not to the cost of living index used as the price deflator.
Analysing Recent Changes in Indigenous and Non‐Indigenous Australians' Income: A Synthetic Panel Approach
Authors: Hunter B. H. , Gray M. C.
Published: March 2003

Data from the 1986, 1991 and 1996 censuses are used to conduct a synthetic cohort analysis of the income distributions for Indigenous and non‐Indigenous males and females. The advantage of this approach is that statistical techniques can be used to control for unobservable differences between the Indigenous and non‐Indigenous populations, such as ability and schooling quality, as well as assimilation, discrimination and other attitudes. The results demonstrate that the failure to control for unobserved differences in existing studies of Indigenous income will induce a significant bias in both empirical and policy analysis. Trends in relative income are also identified and are related to broad changes in labour force status. The deliberate policy shift in the early 1990s to paying welfare to individuals (‘individualisation’) has resulted in an increase in financial independence among many females. The other insight from the analysis is that the generosity of welfare payments or improved targeting of benefits has materially advantaged extremely poor Indigenous people. While this is a positive outcome in its own right, policy also needs to take into account the interaction between tax, welfare, productivity and incentives to work.
Perspectives on Australian Retirement Incomes
Authors: King Anthony , Walker Agnes , Harding Ann
Published: March 2003

With important developments over the past two decades in Australian retirement income policy, projected future outcomes—for the public purse, for the national economy and for the future retired—have received considerable attention. This focus on the future should not, however, cause us to lose sight of the present. While the major changes in retirement income policy outcomes will not occur for some decades, the picture for current and recent cohorts of retired people is not static. This article begins with an account of the important policy developments since the 1980s in the Australian retirement income arena—the Australian retirement income system still differs radically from that in most other countries, in relying heavily on a means‐tested income maintenance system, rather than on social insurance. The outcomes for current and recent cohorts of retired people are then examined from two perspectives. The first perspective is an examination of the incomes of the aged in the mid 1990s and of trends over the 1980s and 1990s—including consideration of changes in the level, composition and distribution of aged incomes. The second perspective is an international comparison of the incomes of the aged.