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The Determinants of Relative Wage Change in Australia
by
Elizabeth Webster and Yi-Ping Tseng
December 2000
This paper uses micro data from over 4000 Australian individuals to investigate which factors have had a significant influence on microeconomic wage growth over the past 3 years. The relative importance of four type of factors: outside incomes, demand for labour, workers' relative bargaining strength and category of wage contract are compared. Basic individual demographic characteristics (partial substitute variables for outside incomes), and some indicators of workers' bargaining power provided most of the explanation for wage changes. Proxy variables for labour demand, while significant and correctly signed, were small in magnitude. Information on workplace characteristics and the individual's work history were not available.
This paper investigates the determinants of profitability of Australian tax entities over the period 1993/94 to 1996/97 for each of 91 three-digit ANZSIC industries. The theoretical model is based on that of Cowling and Waterson (1976). However, it is augmented by the inclusion of lagged profitability to allow for habit persistence in entity profitability. The so-called operational Wansbeek-Bekker estimator is used to control for endogeneity of this lagged dependent variable, whilst simultaneously controlling for observed and unobserved entity heterogeneity. Aggregate results suggest that profitability in the previous year, entity capital intensity, and barriers to entry have the expected positive association with current profitability measured by the price-cost margin. Entity market share-and to a lesser extent concentration-are found to have a U shaped relationship with profitability.
There is a growing literature that seeks to analyse the relationship between consumer sentiment and economic variables, primarily because of the pervasive belief that consumers' opinions and expectations can influence the direction of-or signal changes in the direction of-the economy. There has been little previous empirical work on Australian consumer sentiment, either in determining its explanatory power, or examining the factors that influence consumer sentiment. This research aims to fill part of this gap by providing a clearer understanding of the relationship between consumer attitudes and 'real' economic variables. Specifically, the predictive power of the consumer sentiment index for consumption will be examined using the methods proposed in Carroll, Fuhrer and Wilcox (1994). Private consumption expenditure accounts for a large proportion of GDP; hence, early detection of possible shifts in consumer spending could assist policy makers in smoothing out the business cycle. Our results suggest that the causal relationship between consumption and sentiment in Australia is more complicated than what Carroll et al suggest, and that the behaviour of consumption in Australia looks more like the permanent income hypothesis than it does in the US.
This paper empirically investigates the relationship between innovative effort, measured by R&D intensity, and foreign shareholding and competition. The data set used is a sample of large Australian firms between 1994 and 1997. Previous studies have used aggregate variables to account for these international factors. The theory and analysis are extended to account for the differing attributes of separate geographic regions. The results show foreign shareholding and competition to be important influences in determining the level of innovative activity in Australia. In particular, strong evidence is found of a positive association of revenue earned in Europe and a negative association of Asian shareholdings with domestic innovation levels.
This paper provides an overview of how labour market analysis can be conducted in the context of VAR-based models. The examples presented here show that these methods are quite flexible, and capable of addressing a wide variety of theoretical and policy-related issues. Specifically, the various techniques are illustrated in models which: examine the dynamics of gross job flows; assess the relationship between real wages and unemployment; quantify the contribution of sectoral shocks to the number of people unemployed by duration of unemployment; examine the relative contributions of discouraged worker effects, insider effects, etc. on the persistence of unemployment; and analyse the effects of labour market shocks in the OECD countries.
This paper examines the treatment of the labour market in three macroeconometric models of the Australian economy: the Australian Treasury Macroeconomic (TRYM) model, the Access Economics Macro (AEM) model, and the Murphy model. In each of these models, employment and unemployment are basically determined at the aggregate level (though in the Murphy model, labour demand is determined at the industry level). The unemployment rate converges in the long run to an equilibrium level at which the average rate of real-wage inflation across the economy is equal to the rate of productivity growth in the economy. This rate, the non-accelerating inflation rate of unemployment or NAIRU, is given by an expectations-augmented Phillips curve. In each of the models, the NAIRU is treated as exogenous and its value is estimated as a parameter of the model. In the short run, expected wage inflation depends on deviations of the unemployment rate from the NAIRU and on a number of other variables including, in all the models, the change in the unemployment rate (a "speed-limit" effect). This makes it possible to define a "short-run" or "flexible" NAIRU as the unemployment at which expected real-wage inflation equals the rate of productivity growth, and this short-run NAIRU depends on lagged unemployment.
This paper reviews evidence on causes of unemployment in Australia from cross-country studies of the relation between the rate of unemployment and a range of macroeconomic and institutional factors. An overview of the evolution of this literature and of the possible institutional factors that might affect labour market outcomes is presented. The main findings from the different types of studies are summarised, and results from some studies are applied to show the particular set of factors that account for increases in the rate of unemployment in Australia between the 1960s and 1990s. Finally, an evaluation of some problems with cross-country studies is presented.
This paper reviews evidence on causes of unemployment in Australia from disaggregated modelling of the labour market. Three main types of modelling are considered. First, information on unemployment rates of labour force participants with different skills is presented, and analyses that seek to explain why unemployment varies between skill groups are described. Second, descriptive evidence on unemployment rates by state and neighbourhood is presented, and possible causes of regional differences in unemployment rates are assessed. Third, descriptive information on the distribution of unemployed persons by duration of unemployment spell is presented, and studies of the determinants of the duration of unemployment spells are summarised.
This paper reviews evidence on the equilibrium rate of unemployment and on causes of unemployment in Australia from empirical modelling of labour market outcomes. Three main types of models are reviewed - Phillips curve models; Multi-equation models; and Beveridge curve models. The paper begins with a simple review of labour market theory in order to provide some motivation for the empirical approaches that are examined. In the main part of the paper the three modelling approaches are reviewed. For each model the estimation methodology is described, main results on causes of unemployment from that approach are summarised, and an evaluation of the model is made.
This paper provides non-technical summaries of theories which posit a relationship between aggregate employment and real wages and presents results from Australian and selected overseas empirical studies. Neoclasssical supply side theories assume that real wages, for given endowments of physical capital, primarily influence the cost of employing labour, and have an inverse relationship to aggregate employment. Keynesian demand side theories maintain that real wages affect both demand for labour as well as the relative costs of employing different techniques of production. Most estimations of the wage elasticity of demand for labour assume that real output is fixed and are thus not proper elasticities of demand. Recent Australian estimates range from -0.15 to -1.0 but the equations are not long run estimates as they include either output or the capital stock as an explanatory variable.
This paper uses administrative data from the Australian Tax Office, to model the effective tax rates (ETRs) of large Australian corporates. The extent to which there is any habit persistence in ETRs is also examined. The results suggest that unobserved entity heterogeneity is important in explaining ETRs. In terms of observed heterogeneity, entity size, level of leverage, capital intensity, foreign income and R&D, are all important explanators of ETRs. There is also evidence of a significant amount of habit persistence, implying that ETRs converge monotonically towards the statutory rate of corporation tax.
Poor industrial relations performance can be costly for firms. In particular, employee quits, employee absence, industrial action and substandard relations between management and employees can all be detrimental to the firm. Using the 1995 Australian Workplace and Industrial Relations Survey (AWIRS) this paper examines how particular human resource management techniques and industrial relations settings can influence the industrial relations outcomes of Australian workplaces. The results indicate that unions have played an important role in affecting performance outcomes. They also suggest that although particular human resource management techniques can have an influence on performance, there is not a single bundle of human resource management policies that will apply across workplaces to affect all measures of performance in the same way.
Since the early seventies an increasing attention has been paid to the impact environmental policy has on foreign trade. One of the most important issues is whether countries with relatively strict environmental regulat ions tend to experience a deterioration of international competitiveness and thus a fall in the exports, and a rise in the imports, of t he pollution-intensive commodities or, on the other hand, benefit from the improvement in environmental quality and are likely to develop new comparative advantages in the environmentally more sensitive industries. So far, most empirical studies have concluded that the proportion of environmental costs to the total production costs is still so marginal that environmental policies have hardly any effect on comparative advantage patterns and thus on foreign trade. One of the few exceptions is Van Beers and Van den Bergh (1997), who found that stricter regulat ions have some negative impact on bilateral trade flows between OECD countries. The aim of this paper is to show that t his outcome is part ly due to model mis-specification. The analysis is based on a triple indexed fixed-effects model and on its variant's. It is found that, as so on as both t he importing and exporting country specific effects are taken into consideration, the relationship between stricter regulations and foreign trade becomes statist ically insignificant. This suggests that environmental costs do not have a real impact, neither negative nor positive, on foreign trade.
This paper investigates the determinants of firm-level labour productivity in the manufacturing sector using GAPS data. These data are from a stratified survey, where the strata are based on industry and firm size. The paper focuses on whether weights should be applied in the regression analysis. Augmented Cobb-Douglas production functions are estimated, where a set of dummies are used as proxies for firm-level knowledge stocks. The regression results show that there are significant differences between the parameters estimated by weighted least squares (WLS) and OLS, particularly for the variables union density and training expenditure. These differences can be caused by parameter heterogeneity (across strata); in theoretical terms this means that applying the same production function across all firms is not appropriate. Given this parameter heterogeneity, both the OLS and WLS methods do not estimate parameters of interest. Instead, there is a requirement to estimate sub-sample regressions. These are presented in the second part of the empirical results.
The impact of import competition on labour productivity is examined using panel data for a sample of Australian manufacturing firms over the period 1984 to 1993. Import competition is found to interact with domestic competition; such the positive impact of import competition on the level and rate of growth of labour productivity rises with the degree of concentration among domestic producers. The results suggest that the movement towards lowering border protection on manufactured imports into Australia has led to enhanced productivity by domestic producers, especially those in highly concentrated industries.
This paper uses data from the Growth and Performance Survey of Australian firms to investigate the determinants of innovation. The measure of innovation is based on whether the firm introduced a new product or process in 1997. Various determinants are investigated including market structure, export status, the use of networks, and training. Regression analysis is conducted separately for manufacturing and non- manufacturing firms, and within each sector by firm size groups. Overall, the results show there is persistence in innovative activities (i.e. firms that innovated in 1995 are more likely to innovation in 1997); small manufacturing firms which use networks tend to be more innovative; and medium sized manufacturing firms that export are also more innovative. However, the main conclusion of the analysis is that many of the explanatory variables are not significant. Moreover, the results vary dramatically across firm size and sector, suggesting that the process of innovation is complex.
Previous research on union wage effects has underestimated the potential for unions to raise member wages since the data used do not enable differences across bargaining units to be properly accounted for. This study addresses this deficiency by utilising matched employer-employee data which permit workplace-specific union wage effects to be identified. Results from the estimation of wage equations indicate that while there is only a very small intra-workplace union wage effect, differences across workplaces are considerable. This differential, however, only exists at workplaces where there is substantial coverage by collective agreements.
In this study, individual labour market dynamics are analysed using the Australian Longitudinal Survey. A random utility framework for analysing discrete choices is adopted. In this context, a model incorporating a state dependent relationship between employment outcomes is estimated. The influence on individual employment outcomes of additional variables including education, gender and unemployment benefits is also investigated. It is found that, even after controlling for observable and unobservable differences between individuals, there is strong evidence of state dependence. In certain key respects, the findings of this study differ markedly from those of other Australian labour market studies. It is expected that these findings will provide further insight into the causes of contemporary unemployment, and may constitute further evidence of a 'scarring' effect of unemployment.
The gravity model has long been used for modelling and predicting trade flows. This paper generalises the gravity model allowing for proper representation of local and target country effects and also the business cycle. The new approach is based on a panel data framework (instead of a simple cross sectional or time series approach) where the additional information available from using both types of dat a (i. e. cross sectional and time series) is utilised to properly model all the specific effects. The model is applied to a panel of APEC countries.
While privatising or tendering out government infrastructure and public works services has become commonplace in Australia, its incursion into human services is comparatively new. Some outsourcing issues and problems are common to both types of service but the welfare or human dimension also brings forth different complexities. This paper discusses the theoretical rationale for outsourcing existing government services in the context of empirical studies. It also provides a short history of outsourcing in Australian job placement and labour market programs. Although large scale outsourcing placement services occurred two years ago (May 1998) with the introduction of the Job Network, there has been no published formal evaluations undertaken due to the lack of publication of administrative data.
Recent advances in computing power have brought the use of computer intensive estimation methods of binary panel data models within the reach of the applied researcher. The aim of this paper is to apply some of these techniques to a marketing data set and compare the results. In addition, their small sample performance is examined via Monte Carlo simulation experiments. The first estimation technique used was maximum likelihood estimation of the cross section probit (ignoring heterogeneity). The remaining techniques estimated the binary panel probit model using: standard maximum likelihood; the Solomon-Cox approximation to this likelihood; and finally, the Gibbs sampler to obtain Bayesian estimates. The results suggested that, in most cases, standard maximum likelihood estimation of the binary panel probit model was the preferred technique primarily because it is readily available to applied practitioners. Although when the variance of the heterogeneity term is small, the computational simplicity of the Solomon-Cox approximation may prove attractive. When the sample size was increased, the Gibbs sampler was also found to perform well.
There is no qualitative dependent model that can simultaneously account for data sets in which the variable of interest has both a multi-modal distribution and is potentially ordered. Such a multimodal distribution may be the result of individuals being captive to particular choices. Such a case arises when there is digit preferencing (particular numbers, such as 0, 5 and 101 are often favored in many survey-based data sets). This paper introduces a new discrete choice model, the Dogit Ordered Extreme Value (DOGEV), that does account for both ordering and digit preferencing in the data, and applies it to an Australian Inflationary Expectations data set
This paper uses a sample of 180,738 tax entities from the full Australian Tax Office (ATO) tax return data to investigate the determinants of profitability. The sample of Australian tax entities are averaged over the period 1994/95 to 1996/97. Analysis is carried out at a 3 digit ANZSIC level of classification. Using simple regression techniques the analysis suggests that size of entity is positively related to profitability but industry characteristics have limited importance in explaining entity profitability. Concentration, defined at a 4 digit level, is positively and significantly related to entity profitability in 27% of Australian 3 digit industries, while a significant negative association is found in 8% of the industries. There is some evidence that barriers to entry have the positive relationship with entity profitability as dictated by theory when proxied by the industry capital intensity but not when proxied by the minimum efficient scale or industry trademark intensity. There is strong evidence that the market share of an entity has a U-shaped relationship with profitability.
This paper discusses alternative approaches to tax modelling, placing emphasis on the strengths and limitations of different types of model, rather than their detailed structure. Tax models come in all shapes and sizes, depending on the nature of the policy issues examined. The policy questions may concern specific problems, concerning perhaps the revenue implications of a particular tax, or they may involve an extensive analysis of the redistributive effects of a large number of taxes and transfer payments. Tax changes inevitably involve gainers and losers, so value judgements cannot be avoided. Policy advice based on tax modelling can take the form of presenting the detailed implications of tax changes so that policy-makers can make their own judgements. Alternatively, models can be used to examine the nature of policies that are suggested by the adoption of clearly specified value judgements.
This analysis uses a sample selection model to estimate the hours of work decision for married women in Australia using unit record data for 1995 and 1996. Hours of work are found to be positively related to the after tax wage rate and negatively related to unearned income (which includes benefits). Other characteristics of married women are also found to have an effect on the labour supply decision. Wage elasticities are calculated from the results of the labour supply estimation. These show considerable heterogeneity in married women's responsiveness to the wage rate between different demographic types.
The failure of the 'one size fits all' policy response to the Asian economic crisis initially favored by the IMF provides timely evidence of the institutional and country specific nature of macroeconomic policy. Thus, each economy needs to choose the broad macroeconomic policy regime that is best suited to its particular circumstances. There are significant constraints on the broad macroeconomic policy regimes that are feasible. Most notably a country cannot simultaneously achieve an independent monetary policy, exchange rate stability and complete financial market integration. It can partly achieve a convex combination of these objectives or fully achieve two of the objectives. A well-developed capacity for quantitative macroeconomic analysis is required if countries are to make a well-informed choice of regime while meeting the constraints just cited. Such a capacity is also required to determine the appropriate policy settings one a regime is chosen. In this paper I present a non-technical discussion of these issues, present some tentative policy conclusions and canvas the macroeconomic issues that might occupy research agendas of Asia Pacific regional research institutes seeking to build a capacity for macroeconomic analysis.
The discordance between the rising demand for skilled workers and the high numbers of men with limited schooling raises concern that sections of the male labour market will become increasingly at risk economic marginalisation over coming decades. This paper is an attempt to provide more information on the male labour market by documenting the occupational career paths of several cohorts of men since the Second World War. Occupations have been divided into 10 major groupings and an attempt has been made as far as possible to keep major occupational definitions consistent over time. The dominant trend is that more recent cohorts of men are more likely to leave the labour market as they age and be unemployed or be employed in a higher skilled job rather than be employed in a middle skilled job. Relative employment in low skilled labouring jobs was relatively stable. These patterns are found among all major educational attainment groups.
This paper uses a unique survey of consumers (incorporating the Melbourne Institute Household Savings Survey and the Westpac-Melbourne Institute Survey of Consumer Sentiment) to examine the determinants of Australian household saving. Unit records from 17,700 Australian households are available, which enables the incorporation of a range of household characteristics that may be important factors for saving behaviour, but which are not typically available to researchers undertaking macroeconomic analyses. An ordered probit estimation method is used, and the results support the view that current incomes are perhaps the most important determinant of saving. However, it can also be seen that demographics and householders level of economic optimism play a key role.
The Effective Tax Rate (ETR) paid by firms can differ from the statutory rate due to the usage of tax shields and applicable credits and rebates. This paper attempts to investigate the characteristics of large Australian firms which drive ETR's away from the standard rate of corporation tax. There is evedence to suggest that interest payments, R&D expenditure, foreign ownership, stock-market listing, and the number of subsidiaries, all have a significant effect on ETR's. The result also suggest that unobserved firm heterogeneity plays a significant role.
This paper provides a review of the role of market share, concentration and diversification in firm performance. An empirical analysis of the profitability of 722 large Australian firms for the period 1993 to 1996 is also undertaken. Using simple regression techniques the analysis suggests that industry concentration (as proxied by the 4-firm concentration ratio) has a positive influence on profitability. The market share of a firm does not appear to have any significant linear association with profitability, however, a non-monotonic relationship is found to be significant. This suggests that as market share increases to around 30% (of a 3-digit ANZSIC industry) profitability declines. When market share increases above 30% profitability rises, although only 9 firms in our sample have market shares above 30%. The extent of diversification appears to have little influence on profitability although, when loss making firms are excluded from the analysis, more focused firms do appear to have higher profitability.
This paper provides some empirical evidence on the determinants of labour productivity in the workplace using data from the Australian Workplace Industrial Relations Survey (AWIRS). The results presented in this paper support the general conclusions reached by other authors investigating productivity, that is, workplace practices-particularly the organisation of work-matter for labour productivity. This suggests that there are a number of issues at the workplace that management can directly address in order to improve labour productivity and workplace efficiency.
This paper provides a survey of the development and role of economic indicator analysis in measuring and analysing business cycles. Our major objective is to highlight the usefulness of leading and coincident indexes of economic activity, both for forecasting purposes and as an aid to macroeconomic policy. We show that the analysis of business cycles can be facilitated by distinguishing between classical cycles (which involve fluctuations in the level of aggregate economic activity) and growth cycles (recurring fluctuations in the rate of growth of economic activity around its trend). Many recent theoretical and empirical studies have concentrated on deviations from trend (that is, growth cycles) to the exclusion of classical cycles. We also argue for the use of a range of indicators, combined in a composite index, rather than using a single series such as gross domestic product as a proxy for the business cycle. We illustrate our survey with empirical evidence on the business cycles of the United States and Australia.
A paucity of reliable Australian household data means that very little is known about household saving behaviour in Australia, despite the importance of understanding saving behaviour from a policy perspective. This paper aims to contribute to our understanding of Australian household saving-and saving intentions-by using the Melbourne Institute Household Saving Survey and the Westpac-Melbourne Institute Survey of Consumer Sentiment to consider the motives for Australian household saving and the form in which household savings are held. The information presented here, while relatively simple in nature, can go some way to improving our knowledge of motivations for household saving patterns. It can therefore assist in assessing the likely impact on savings of transitory (such as the economic downturn in Asia) and permanent (such as the introduction of a GST) changes in the economic circumstances facing Australian households. The evidence suggests that there are a range of motivations for saving that are in effect at any one time, ranging from a life-cycle style hypothesis, to precautionary motives and leisure.
One explanation for concurrent levels of high unemployment and inflation during the 1980s and early 1990s has been the high incidence of long term unemployment. It has been argued that employers cease to regard the long-term unemployed as viable alternatives for more experienced workers and are thus more likely to grant the latter pay increases rather than hire more workers when under pressure from demand or supply. Labour market programs are recommended as policies to reverse this de-skilling effect. If employers come to consider the unemployed as substitutes for their incumbent workforce they will be less inclined voluntarily to grant wage increases. This paper aims to test whether Australian labour market programs have affected wage inflation since 1989, by applying pooled cross-sectional time series data to a general bargaining model. We find that a doubling of labour market program participants per employee leads, at most, to a 1 per cent reduction in nominal wages.
Among OECD countries, there has been a growing advocacy of health system reforms involving a greater use of market and quasi-market relationships and incentives, in order to introduce a degree of self-regulating capacity within health care systems. This advocacy (and the corresponding reforms) are framed in the context of universal national programs offering a guaranteed package of care, in general financed publicly through taxation or earmarked social security contributions. The central question considered in this paper is whether, and to what extent, a model of this kind would have advantages in the Australian context. The managed competition model offers a framework within which the objective of increased efficiency could be pursued without sacrificing the goal of universal access and without the impairment of health outcomes and social cohesion which the abandonment of this access would involve. It would do this by removing the present multitude of structural impediments to rational decision making and allocating to governments and markets the functions which they perform best.
This paper examines take-up rates in a simple model in which there is a single means-tested benefit involving a 'taper rate' at which benefits are withdrawn as earnings increase. There is a fixed cost of applving for benefits. The model involves a joint decision regarding both laboilr supply and the take-up of the benefit. It is found that take-up increases as the level of the taper rate increases, and the value of benefits increases. The achievement of 100 per cent take-up is associated with labour supply responses whereby there are few, if any, individuals who are both working and eligible for benefits. The results have implications for the effects of lowering the taper rate on the costs and effective targeting of benefits.
Macroeconomics has a long tradition of inspecting and interpreting patterns in graphs of aggregate data. However, the move towards more precise quantification of macroeconomic phenomena has seen academics shift away from a study of turning points, which are a natural and obvious way of summarizing business cycles, towards measures of co-movement in detrended series. This shift arise from several developments, but an important one was the belief among academics that Burns and Mitchell's methods lacked the statistical basis and, hence, the precision required in modern macroeconomics.
We adopt the older perspective that business cycles are to be defined in terms of the turning points in the level of economic activity. We show that such turning points can be associated with a well defined sequence of outcomes and can therefore be precisely analyzed. In turn this enables us to explore how various parametric models of aggregate output generate a cycle through the interaction of trend movements in activity with the volatility and serial correlation in growth rates.
One of the strongest points in the rhetoric of modern business cycle theory is that trend and cycles should not be divorced. Consequently, any definition of the business cycle in terms of the co-movement of detrended data has to find the task of integration a difficult one. In contrast, we show that a return to the older tradition of studying the classical cycle in the level of economic activity produces a natural interpretation of the origin of the cycle in terms of the interaction of trend and the second moments of growth rates. This seems a critical advantage for the approach taken in this paper.
An important issue that has also been debated in the literature is whether non-linear models are required to make a business cycle. Using the techniques developed in this paper we dissect the cycle of a number of countries and find little evidence that non-linearities, of the type investigated in the literature, are important in accounting for the broad features of the average cycle.
Policy makers are primarily interested in fluctuations in the level of
activity - the classical cycle. Academics have in recent times focused their efforts on studying fluctuations and co-movement in aggregate variables that have been rendered stationary after some appropriate transformation. That is academics focus on the growth cycle. One reason for this shift in focus was the impression among academics that Burns and Mitchell's work lacked the precision required in modern macroeconomics. In this paper we show that pattern recognition algorithms which emulate Burns and Mitchell's approach to the cycle can be constructed and used to collect precise information on the classical cycle. The information so marshaled comprises the duration, amplitude, and cumulative movements of output within business cycle phases. We show that this information can be used to assess a range of business cycle models that have been proposed in the literature.
This paper re-examines the Gini-based method proposed by Lambert and Aronson (1994) to decompose the redistributive effect of taxation into vertical, horizontal, and re-ranking components. A problem is shown to arise because of the practical need to band proximate pre-tax income units into groups of 'close equals'. When applied to banded data, the horizontal component does not measure the desired effect. However, the situation can be retrieved by a simple change involving decomposing the welfare premium from progression rather than its redistribution. The consequences of different bandwidth choices for the estimation are discussed, and two opposing forces are identified which militate against choosing a very small or large bandwidth. These effects are illustrated using simulation, and it is concluded that the best procedure is to use the bandwidth which maximises the estimated vertical component, compute the reranking component exactly as a sample statistic and obtain the horizontal effect by subtraction.
This paper provides a technical survey of recent developments in behavioural microsimulation. We discuss the criteria by which models of labour supply may be chosen for application to behavioural microsimulation, and consider how such models may be augmented to control for fixed costs, child-related work costs, preference heterogeneity and endogeneity in wages. We describe methods by which nonlinear budget constraints may be accommodated in estimation, in policy simulations and in welfare analysis, and discuss how stochastic terms may be factored into the simulation of behavioural responses to some policy shock.
Firms can invest in two types of capital good: tangible commodities such as plant and equipment and intangible commodities such as training and staff development, innovation, marketing, management expertise and workplace relations. Compared with the former, the analysis and measurement of the latter has been relatively neglected. This paper is an attempt to measure the relative growth in aggregate intangible capital and investment since the 1950s. One of the measures calculated suggests that intangible enterprise capital as a ratio of all enterprise capital has grown at an average annual rate of 1.3 per cent over the 50 years to 1998.
Measuring the costs of children is of immense practical importance in a whole range of economic and social policy areas. In this paper, a new econometric procedure that improves on existing methods for obtaining estimates of such costs using the demand system approach is introduced. The study is based on the use of an extended linear expenditure system and develops an iterative maximum likelihood estimator that overcomes possible estimation problems that arise from the 2-step estimation procedures employed by the earlier authors. We also allow for a more general assumption about the equation "errors", that of non-zero correlation between the errors for different commodities in the same household. Another important contribution is the development of an estimation procedure for sets of seemingly unrelated regressions where the different sets of equations are linked by some common parameters. The proposed procedure is applied to the 1984, 1988-89 and 1993-94 Australian Household Expenditure Survey and results obtained update estimates of both the commodity-specific and general scales previously obtained for Australia
This paper considers the possible implications of population ageing for social expenditure. The paper begins by briefly examining the role of demographic transitions in generating a shift from family (inter-generational) support systems towards the use of social insurance. Factors affecting the substantial growth in social expenditure during the 20th century are discussed in order to place the role of ageing in perspective. Projections of the ratio of social expenditure to gross domestic product in Australia are then presented for alternative assumptions about migration. The limitations of such projections are stressed, particularly regarding their sensitivity to changes in crucial variables and the likely interdependencies among the many elements.
This paper examines the question of whether indirect tax rates should be uniform, using four different modelling strategies. First, marginal tax reform is examined. This is concerned with the optimal direction of small changes in effective indirect tax rates, and requires considerably less information than the calculation of optimal rates. Second, the welfare effects of a partial shift from the current indirect tax system in Australia towards a goods and services tax (GST) are considered, with particular emphasis on differences between household types and the role of exemptions. The third approach examines the extent of horizontal inequity and reranking that can arise when there are non-uniform tax rates. These inequities arise essentially because of preference heterogeneity. Fourth, in view of the stress on a distributional role for exemptions of certain goods from a GST, the potential limits to such redistribution are considered.
This paper involves an examination of the labour supply effects of a stylised version of a Basic Income Flat Tax system (BI/FT) compared with a Means Tested Graduated Tax system (MT/GT). A highly simplified simulation model is developed in which individuals are homogeneous except for the wage they face, and there is a single means-tested benefit. It is concluded that there are reasons to believe that moving towards universality could increase labour force participation and that such effects could outweigh the labour supply reductions of taxpayers already in work. The number of losers is found to be quite small relative to the number of winners. Even if a fully universal system is not adopted, a move towards it by reducing the taper on means tested benefits at the expense of a higher tax rate, can lead to significant winners without losers. These findings do not appear to be very sensitive to assumptions about the individuals utility function defined over income and leisure. This confirms that there are good reasons to be interested in reforms to the tax-transfer system that aims to reduce effective marginal tax rates.
In the majority of applied work on the determinants of individual wages, the existence of significant industry wage differentials is typically used as evidence against competitive wage theories. The contention of this paper is that such inter-industry wage premiums are generally a manifestation of unobserved individual heterogeneity. We control for individual heterogeneity by utilising a sample selection panel model, that is, a model that allows for endogenous employment outcomes whilst controlling for unobserved heterogeneity. Estimation of such a selectivity-corrected wage equation using panel data is more computationally demanding than the standard Heckman (1979) cross-section case. As a consequence, there are few empirical examples in the literature.
This paper investigates the determinants of innovation in a panel of 698 Australian workplaces. Innovation activity is proxied by four types of workplace change. Data on these workplace changes comes from the 1990 and 1995 AWIRS. Workplaces are allocated into one of three innovation groups - dynamic, periodic or infrequent - depending on whether they (a) reported the change in both the 1990 and 1995 surveys, (b) reported the change in only one year, or (c) never reported the change. Various workplace characteristics and environmental factors are investigated using both cross tabulations and an ordered probit model. The results suggest that better employee-management communications are associated with more change, and that workplaces with higher levels of training undergo more change.
This paper provides an overview of the performance of large Australian-based private companies using a data set of 653 companies for the period 1993 to 1996. Four aspects of performance are considered: profitability, growth of revenue, export intensity and innovation. In addition, two important company characteristics - the debt to equity ratio and Tobin's Q - are considered.
This paper provides an overview of the performance of small and medium private enterprises (SMEs) using the growth and Performance Survey. Three aspects of performance are considered: profitability, productivity and innovation. SMEs are defined as enterprises with less than 100 employees and their performance is contrasted with the performance of firms with more than 100 employees. Comparisons are made at the 2 digit ANZSIC level. SMEs as a group tend to have higher median profitability (than large firms) in manufacturing. SMEs tend have lower median labour productivity and higher median capital productivity than large firms. This reflects the fact that SMEs have lower capital to labour ratios. In addition, SMEs seem to rely more on leased capital.
With the success of neoclassical economic policy applications among governments in OECD (and other) nations, ordinary citizens find themselves increasingly living in societies with new 'ground rules'. Privatisation, competition policies, efficiency and 'user pays' principles, together with labour market reform, imply that individuals and families and other groups may find that a lack of economic 'nouse' may well be welfare reducing. This paper utilises the results of a survey of 236 Australian respondents (drawn from electoral rolls) which probed the extent to which the economic ideas of 'ordinary' Australians were consistent with neoclassical economics (loosely defined). The paper uses principal component analysis to determine the arrangement of lay economic 'knowledge' across three broad areas: trade and tariffs, market clearing, and efficiency. The results have implications for both the teaching of economics in schools, and the communication of economics through economic journalism.
Assessing the performance of Government Trading Enterprises (GTEs) has become increasingly important in the context of the push towards privatisation. This paper provides an overview of GTE performance over the 5 years to 1996 using the IBIS Enterprise Database, following the method of analysing firm performance as outlined by the Steering Committee (1998). The bulk of the results are made up of a balanced panel of firms who were able to provide EBDIT figures over the five years to 1996. The results indicate that there are large differences in performance across firms, and more particularly, across industries.
This paper analyses profitability in a sample of large Australian companies over the period 1985 to 1996. Various measures of profitability are used and the paper provides a discussion of the theoretical basis for these measures. The key issues investigated are a comparison of the profitability measures, the distribution of profitability between firms, and the persistence of firm profitability. The results are compared to previous studies on firm profitability.
This paper constructs a measure of labour productivity from the ABS Growth and Performance Survey. An overview of labour productivity is provided by considering differences between industry, firm size and firm age categorisations. In addition, the distribution within these categories are analysed. Labour productivity if found to vary substantially across industries and firm size. Since labour productivity does not control for the level of capital used in production this is to be expected. Less expected is the fact that levels of firm productivity within industries (and firm size categories) also vary substantially. This suggests that the factors determining firm productivity must be investigated at the firm level and cannot be assumed to be similar within an industry.
This paper investigates the data relating to innovation in three databases: the Growth and Performance Survey (GAPS), the IBIS-Innovation Scoreboard and the Australian Workplace Industrial Relations Survey. The two databases we focus upon are the GAPS and IBIS. Data in GAPS includes questions on whether an innovation had occurred and on expenditures relating to innovation. The IBIS database contains R&D expenditures and the number of applications for patents, trade marks and designs for large Australian firms. Various summary statistics are presented and the data are analysed with reference to industry, firm size, firm age and foreign ownership categorisations. A number of broad results emerge. The extent of innovations (an output) and innovative activities (inputs) varies substantially across industries. For manufacturing firms the following points emerge. R&D and 'tooling-up' expenditures are the largest types of innovation expenditures. Small firms are much less likely to undertake R&D, although, those that do, tend to have high R&D intensities. The distribution of innovation intensities (e.g. R&D/sales) is skewed to the right (i.e. there are a small number of high intensity firms that can dominate). R&D intensity for individual firms appears to be volatile over time, with firms with the highest levels of R&D intensity tending to have the highest volatility.
Simple models are used to assess changes in effective average and marginal tax rates on income from work and capital and on income consumed and spent caused by a shift from taxation of income to taxation of consumption. The new income tax rate schedule becomes more progressive than currently. For low income earners with negligible savings, the same aggregate tax burden is paid, but with less lost in income tax and more in consumption tax. For middle and high income earners, on average the aggregate tax burden changes little, but those with larger savings win and those with low savings lose. Also, the lower tax burden on saving and capital income is matched by a higher tax burden on labour income.
This paper describes a role for qualitative research in examining the behavioural responses of low-income households to changes in personal income taxes, indirect taxes and transfers. A series of Focus Groups were conducted to flesh out decision-making processes with respect to labour supply and consumption. Discussions with sole parents and couples with dependent children are reported in this paper.
Focus Group sessions explored the nature and strength of spending adjustments to past variations in prices, and the management of situations in which expenditure exceeded the participant's current income. A second strand of questions focused on the interface between the labour market and the tax and transfer systems. By identifying factors that had influenced their participation or non-participation in the paid labour force, Focus Group members shed light on possible labour supply responses to a change in effective marginal tax rates.
This paper uses data from the first wave of the Survey of Employment and Unemployment Patterns to estimate the effect of labour market programs on markets outcomes. Several indicators of outcomes are used, viz. labour force participation, employment and earnings. The findings are compared with the information from DEETYA post program monitoring system. A fair degree of correspondence is found but out results suggest that employment training programs have a large effect on outcomes than indicated by the post program monitoring data.
Australians are again looking at the possibility of major tax reform, including a reexamination of options once taboo, such as the GST. But there is, in fact, a wider range of possible tax systems available to us. One major option not so far considered is the 'direct expenditure tax'. As a concept it is not new, although it is not familiar in the Australian debate. This is surprising, as it has strong potential benefits to offer.
A progressive direct expenditure tax would replace the so-called 'income' tax currently levied on individuals and business enterprises. The sum to be taxed would be a measure of expenditure on final consumption. In effect, then, savings would be exempt from taxation. But when the savings, and the returns earned on them, were ultimately spent, they would be taxed. A progressive tax rate schedule, which reflected both capacity to pay and family circumstances, would be applied to individuals and perhaps also to business enterprises, to calculate tax
payable.
This expenditure tax offers two alternative options under its direct taxation scheme: the 'cash-flow' and the 'yield-exempt' options. Illustrative simplified tax forms for individuals and for business enterprises using both options are presented, discussed. and compared with the present 'income' tax forms. In order to collect the same revenue as the current 'income' tax system it would replace, a direct expenditure tax would require higher tax rates. This is because the tax base would not include savings which are now subject to income tax. A slight increase in the degree of progressiveness of the current tax rate schedule would also be required, to maintain current notions of equity between richer and poorer t
axpayers.
The welfare effects of several indirect tax reforms in Australia are examined for a number of types of household in a range of income groups. The welfare chances, measured using equivalent variations, are based on the use of the linear expenditure system, where parameters are different in each of the income groups. The effects of the current system and of several reforms are found to differ significantly among, the household types. However, the results suggest that the extent of vertical redistribution involved in the current indirect tax structure, and possible reforms to it, are small. The role of exemptions are examined in the case of food, for which the budget shares are systematically higher in lower income households., and health services. In view of the strong assumptions used at each stage, the results must be regarded as tentative.a
This paper discusses the definition and measurement of innovation at the firm-level. Innovation is the process of introducing new ideas to the firm which result in increased firm performance. Various measures of innovative activity are discussed and evaluated. All the individual measures discussed can only act as partial indicators of the extent of innovation. This is because innovation covers an extremely broad range of activities which varies between firms. To create better measures of innovation it is necessary to aggregate the various individual measures. Methods to achieve this are discussed. The paper also provides a short review of previous Australia firm-level studies on innovation.
This paper introduces the various methods that have been used to analyse
productivity. Productivity is defined as the ratio of output to input for a specific production situation. Productivity changes can be caused by either movements in the 'best practice' prdcuction technology, or a changes in the level of efficiency. The paper discusses the various problems encountered in measuring productivity when there are multiple outputs and inputs. Also, the problems concerning the measurement of inputs and outputs are discussed. Methods that analyse the level of inefficiency within a sample of firms are reviewed. These include data envelopment analysis, stochastic production functions and panel data methods. Lastly, a few Australian productivity studies are reviewed to illustrate the empirical use of the various definitions and techniques.
Wansbeek and Bekker (1996) considered a new estimator for simple dynamic panel data models (where there are no exogenous variables) which involved a complex weighting matrix. In this paper we propose an operational variant of this estimator which is applicable to the more realistic case where there are exogenous variables. We also propose an easy-to-compute approximation to the weighting matrix. The performance of this (these) new estimator(s) is examined, revealing very desirable small sample properties in a wide range of situations that the applied researcher is likely to encounter, especially in moderate time series length panels.
Gravity type models have often been used to analyse trade flows between countries and trading blocs. Previously however, these models were only applied to either cross-section data, or to single country time-series data, which imposed severe explicit (or implicit) restrictions on the specification of the model. Recently Gravity models have been generalised and adapted to a panel data setting, where several time-series of cross-section data sets were pooled. This approach not only increases the degrees of freedom, it also enables the proper specification of source and target country effects and time (or business cycle) effects. In this paper, we review in a unified framework, the recent developments in the econometric methodology of Gravity models, and refine the estimation techniques to account for any possible simultaneity bias. Although a fully specified fixed effects Gravity model has been estimated previously, this paper contains the first ever results of its random effects counterpart. We also suggest an extension to the basic model, which accounts for the fact that contemporaneous trade flows are likely to be strongly related to previous ones. Once more, this appears to be the first application of such a model in the literature.
Finally, all of these various models and methods are illustrated with an application to export flows in the APEC region. The results clearly suggest that it is important to properly specify the model, in terms of source, target and business cycle effects. If this is not the case, policies could be instigated that do not take into account, for example, that some countries have 'naturally'
higher propensities to import than others. Moreover, if these effects are not properly specified the affect of other important driving factors, e.g. population will be wrongly estimated. In both cases, policy will be misguided. Important explanatory variables are found to be domestic and target country GDP, and dependent upon specification, local and domestic population, the exchange rate and foreign currency reserves. Also, there is strong evidence that current export flows are highly correlated with those of the previous year.
Labour is becoming an important asset
vis-a-vis physical capital as the asset structures of firms change over time. The peculiarities of labour assets are that they appreciate with usage rather than depreciate. By contrast to physical capital, over-use leads to an increase in their value and under-use leads to an erosion. The more able or those considered to have the most potential are generally recruited to this asset sector of the labour market where positive work experiences are reinforcing while the less able or those considered to have less potential are excluded. Accordingly, the work experiences and skills of the labour force becomes more polarised. Regarding the aggregate labour market in this light may account for some of the observed changes in the labour market over the last few decades.
This paper is concerned with the measurement of company performance in the context of the IBIS panel data set of large Australian firms. The analysis provides a framework which distinguishes between: 'static', 'comparative static' and 'dynamic' measures; and 'partial', 'multiple' and 'total' measures. The chapter demonstrates that all of these measures are related to economic measures of firm profitability. Thus, some time is spent in defining profits and, in doing so, developing the linkages between economic and accounting concepts of performance. Finally, it relates the discussion of the conceptual issues of measuring performance to the information available in the IBIS database.
This paper analyses two basic questions concerning R&D and the performance of large Australian firms using data from the IBIS data base. First, what factors determine the extent of investment in R&D. Second, what impact does R&D have on the dynamic performance of Australian firms. A review of previous work on these questions is included. In analysing the first question, using a sample of up to 85 firms, we find that technological opportunity is a major determinant of R&D. In addition, it appears that firms which are less "focused" (in terms of diversification of activities) have lower R&D intensities. Firm size appears to have no relationship to R&D intensity. To investigate dynamic performance we use a Tobin q approach which seeks to explain the market value of firms. We find that intangible assets are an important determinant of market value. In particular, we find that contemporaneous R&D expenditure is positively linked to market value. The strength of this relationship depends on the exact sample used. Lastly, firms which have experienced relatively high levels volatility in R&D expenditure appear to have lower market values.
This paper investigates factors associated with changes to people's labour market status over the 12 month period September 1994 to September 1995. Overall, 28 per cent of people looking for work at the beginning of the period were working by September 1995 and 21 per cent of working people became 'lookers'. Regression analysis found that the transition from looking to working was associated with age - prime age people were more likely to become workers; disability - the disabled were less likely to be working; labour market history - year of previous work experience was positively associated with one's chance of working, trade union membership - members were more likely to be working and household - people with a spouse working full-time were more likely to have gained a job. There is some evidence that the transition out of looking and into working was affected more by individual heterogeneity than state dependence.
The aim of this paper is to examine empirically the relationship between diversification and firm performance. The paper uses a sample panel of large Australian firms covering the period 1989 to 1994. Following a discussion of some arguments for and against diversification, bivariate and multivariate analyses are performed to test whether diversification ceteris paribus improves or impedes performance. The results indicate that diversification has a negative impact on firm performance, controlling for firm size, gearing, and whether or not firms are listed and foreign owned.
While it is generally accepted that industrial action can have a negative impact on a firm's performance, the direct effects of a strike on the affected firm may be only one component of the total impact resulting from the action. The existence of indirect or 'spillover' effects can also have important implications for the economic performance of competing firms. This paper uses a panel dataset of firm-level financial and industrial disputes data on a large sample of firms in Australian manufacturing to determine the extent of direct and spillover effects of industrial action.
This paper describes the IBIS database. The database contains detailed longitudinal information on an annual basis for medium to large firms in Australia over the period 1979 through to the present. The strengths and weaknesses of the data are discussed. The paper introduces two panels extracted from the database. The first ("long and shallow") panel contains 333 firms and extends from 1983 to 1994. The second ("short and deep") panel follows 939 firms over the period 1989 to 1994.
Labour market programs are often advocated on the basis that by re-introducing unemployed people to the culture of the workplace, they will re-skill and motivate them enough to make them suitable employees to prospective employers. Accordingly total employment will rise and vacancy rates will fall. If successful, we should be able to detect a systematic relationship between labour market
program expenditure and the distance of the Beveridge curve from the
origin ceteris paribus. There are few studies in the world which have directly tired to assess the impact of labour market program expenditure on the Beveridge curve. Our estimates for Australia over the last 18 years do not support the view that labour market programs have moved the Beveridge curve inwards, that is there is no evidence that they lead to an expansion of aggregate employment.
Unemployment is arguably one of the most important policy issues this
country is presently facing, with the unemployment rate not having fallen below 8 per cent at any stage of the most recent expansion phase. This paper presents a brief history of unemployment in Australia, examining various characteristics in detail. Specifically, it covers the issues of hidden unemployment, the underemployed and the long-term unemployed. The Australian experience is also put into an international context, comparing our recent unemployment performance with that of the OECD countries, and making a more detailed comparison with the United States and France.
Commonwealth labour market programs currently consume $1.5 billion dollars per annum. Most of this expenditure is aimed at the long term unemployed. Since 1973-74, expenditure on these programs has risen and fallen in line with the unemployment rate. This government behaviour parallels the overseas experiences. Most empirical evidence from Australia and elsewhere indicate that programs improve
participants' employment experiences for at least a year or two after leaving the program. However, most of this improvement could well be at the expense of other jobseekers. There is a lack of convincing evidence that the programs reduce wage pressures enough to permit an increase in total employment. Nevertheless, labour market programs appear to have intrinsic worth as an equity instrument, for they provide hope and opportunity to the most disadvantaged of all jobseekers.
The focus of this paper is the relationship between executive remuneration, board structure, institutional shareholders and the performance of Australian companies. The paper presents a preliminary survey of the economic literature related to these areas, and then outlines a plan for a research project. The project will investigate the effect on the performance of Australian firms of the nature and generosity of firms' executive remuneration schemes, the structure of
firms' board of directors and the influence of substantial institutional shareholders. The project is part of a broader research agenda at the Melbourne Institute that concerns the factors that determine Australia's economic performance. As a stimulus to research into corporate strategy and firm performance, the paper includes an extended research bibliography.
It is often argued that a general consumption tax is necessarily regressive, particularly because households with high incomes typically save relatively more than those with low incomes. This paper uses very simple tax models to examine the combination of income and consumption taxes. It suggests that it is preferable to consider the overall impact of all taxes and transfers rather than relating payments of a single tax to gross income, instead of the relevant tax base. Insofar as savings might be relevant, attention should be given to the income tax treatment of investment income.
Indirect taxes are taxes assessed on producers in respect of the production, sale, purchase or use of goods and services which are charged to the expense of production. There are currently many indirect taxes operating in Australia, each with its own legislation and administering department which may be at the Federal, State or Local level. In this paper, a description of the existing indirect tax structure in Australia is provided. Part of this involves placing each tax in the context of its importance to government revenue raising. The other and more substantial part of the task involves describing the base and rate structures of each tax. Emphasis is placed on Wholesale Sales Tax, Stamp Duties, Financial Institutions Duties, Bank Accounts Debits Tax, Payroll Tax, Excise Duties and Franchise Fees.
The Australian Bureau of Statistics provide a breakdown by industry of the statutory incidence of the major indirect taxes in Australia. This statutory incidence is the amount of revenue collected from each industry for each indirect tax. In other words it shows who actually writes the cheques to the government. This information does not show who bears the ultimate burden of the tax as each industry may pass on its initial burden to purchasing industries and/or final consumers through higher prices. Thus, the burden of the tax is passed on round by round to indirect business purchases and final demand until the total burden of the tax is passed on to final demand. This paper explains the process involved in evaluating the final incidence of indirect taxes in Australia. The method used to derive final indirect tax incidence is developed from earlier studies. 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. The methodology is differentiated by type of tax so it is possible to investigate the impact of any plausible change in indirect tax on household consumption and hence on household welfare.
This study provides new evidence on the determinants of the profitability of Australian manufacturing firms by analyzing a unique firm level data set of firm performance over the period 1983 -1993. This data set allows a significant advance over previous Australian studies that have relied on one or more cross sections of aggregate industry level data. In particular, the panel nature of the data permits the estimation of dynamic profitability models over the business cycle, to test both the persistence and cyclicality of firm profitability. From estimations based on an adaptation of a standard oligopoly model, econometric results suggest that lagged profitability is a significant determinant of current profit margins, and that industry concentration is positively related to firm profit margin. As well, both union density and real wage inflation are found to be negatively associated with firm profits. Finally, the cyclicality of profit margins depends on industry concentration - firm margins are procyclical in concentrated industries and are counter-cyclical in less concentrated industries. The main results are also shown to be robust to a number of alternative specifications.
In May 1997 the Melbourne Institute conducted a telephone survey of 1200 households across Australia in order to assess community attitudes towards government retirement income plans and superannuation. Our survey found considerable support for some form of contributory superannuation scheme and also a high degree of awareness that people, especially the young, will have to support themselves by superannuation or private assets in their retirement. This implies that people are likely to a sanguine view of governments which take positive policy steps to further these intentions. However, if left in its current form, superannuation programs appear unlikely to deliver higher saving rates. Very few people indicated that they would voluntarily put more of their discretionary incomes into superannuation.
The assumption of innovation spillovers is a major aspect of many endogenous
growth models. These models assume that a firm can learn from the total stock
of innovations, or more generally 'knowledge', in the entire economy
('global spillovers'). In contrast, the extensive empirical work on
spillovers has endeavoured to incorporate the intuitively plausible fact that
spillovers are likely to be stronger between certain firms. In empirical work, researchers have weighted the spillover effect by measures of technological, geographical or trade-related closeness.
Thus, the empirical work assumes that spillovers
are 'local' not 'global' in extent. This paper provides a new theoretical method of analysing local innovation spillovers by using a cellular automata framework. This framework, in contrast to the endogenous growth models, allows us to explicitly model localised spillovers. Within this framework we compare localised spillovers with global spillovers. The results show that the localised spillover case is not merely a proportional reduction of the global spillovers case.
This paper presents estimates of income and price elasticities of Australian
Households using data from the Household Expenditure Survey for 1993. Strong
assumptions are required in order to obtain the price responses from budget
data. The elasticities are based on estimates of the LES for each of a
number of income (total expenditure) groups. An assumption regarding the
variation in the Frisch parameter with total expenditure is needed.
The results can be used to examine the distribution of the welfare
effects of price changes, including those arising from indirect tax changes.
This paper analyses the historical relationship between exports, imports,
and national income growth in Australia and Canada, using over 100 years of
data for each country. I test for the presence of "export-led growth" and
"import-led growth" in both countries over several
time intervals, interpreting these concepts to mean a unidirectional causal ordering. I find no evidence to support the export-led growth
hypothesis for Australia, but strong evidence for this hypothesis in
Canadian data in the period 1915-38. The results here suggest a much
stronger role for imports than has been found in previous analysis of
Canadian data: imports as well as exports appear to lead growth over the
1915-38 period. In addition, import growth tends to be causally prior to
export growth in both countries, but at different times. The strength
of the relationship between trade and growth is generally comparable across
countries. Finally, although there is little evidence of unidirectional
causality in either country, there is substantial evidence of
bi-directional causality.
This paper illustrates the use of different criteria used to evaluate
alternative tax and transfer systems. Means-tested and universal transfer
systems are compared, using numerical examples involving a small number
of individuals, in order to highlight the precise effects on incomes. The
implications of fixed incomes and of endogenous incomes, using CES utility
functions, are examined. Comparisons between tax systems involve fundamental
value judgements concerning inequality and poverty, and no tax structure
can be regarded as unambiguously superior to another. Judgements depend
on the degree of inequality aversion and attitudes to poverty. However, in
cases where means-testing is preferred, the desired tax or taper rate
applying to benefits is substantially less than 100%.
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