|
This paper examines the response of consumption to income, credit and interest rate changes in Australia. In contrast to previous studies on consumption in Australian, this paper adopts an Euler equation approach. The Euler equation derives from the consumers' utility maximising problem under the assumption that rule of thumb consumers have borrowing restrictions. To assess the role of credit explicitly, credit variables are also included in the Euler equation. The paper further assumes that coe±cients are time-varying. The results con¯rm the signi¯cant e®ects of income and credit on consumption and also reveal that while consumption growth is not responsive to interest rate changes, the coe±cient on the real interest rate was time varying and the coe±cient becomes smaller in absolute terms since the mid 1990s. This implies that consumption may have been less responsive to interest rate changes since then.
Physicians are one, albeit key, input into the production of better health and well being. There are two parts to the measurement of doctor productivity: activities performed and the value of those activities to society, via their impact on health and welfare. The former is easiest to measure, whilst the latter is more difficult since prices are unlikely to reflect patients valuations of services provided. In Australia, the quantity of services per doctor has been falling whilst the revenue from fees charged per FTE doctor has been increasing. This suggests that the increase in revenue per doctor is due entirely to increases in real prices. This is against a context of a reduction in the supply of hours by GPs and specialists balanced against weak evidence of an increase in the quality of GP services. Fewer services are being provided and costs are rising with unknown changes in quality. The net effect on population health depends on whether the forgone health gains of patients deterred from using health care due to price rises are lower than the potential increase in health from an increase in quality of care for those who do visit their GP. Further research should focus on the routine measurement and valuation of quality in clinical practice, with a focus on those aspects of doctor activity that patients’ value. As with many countries, there is little empirical evidence to determine the most cost-effective policies to improve doctor productivity.
Developing the institutional details for markets which will improve the allocation of scarce water as proposed in recent government initiatives is still a work in progress, and the designers face many challenges. Differences in the relevant market time interval, the important effects of geography on costs, and differences in the forms and extent of market failures suggests a system of three property rights rather than a single property right system. Specifically, it is proposed that there be a market for water at source, for water delivery, and a water use licence to capture differences in external costs. For water at source, a dual system of water entitlements with different levels of supply security is proposed. The public good nature of most benefits provided by environmental flows requires direct government intervention informed by ecological assessments and nonmarket valuation of these services. Water treatment and delivery infrastructure costs should reflect at least operating costs and scarcity rents when capacity constraints are reached. The importance of natural monopoly calls for regulatory oversight over infrastructure fees. A system of water use licences based on one of regulations, taxes or tradeable permits is proposed to internalize the different regional and water use external costs of water use.
This paper aims to study the effects on poverty and income inequality of trade liberalisation in South Africa. This is achieved by using a micro-macro model. The main issue of interest is the effect of international trade on households (especially their income); some changes may contribute to reduce poverty while other changes could work against the poor. The approach presented in this paper relies on combining a macro-oriented computable general equilibrium (CGE) model and a microsimulation (MS) model. Combining these two models the microeconomic effects (on poverty and inequality) of a macroeconomic policy (trade liberalisation) can be analysed. The paper gives details about the MS model, the CGE model and the "top-down" approach used to link the two models. The main concern regarding poor households is whether the decrease in real (or nominal) earnings for formal low-skilled and skilled workers is offset by the upward trend in formal employment levels. This appears to be the case implying a decrease in poverty due to trade liberalisation. Although whites emerge as the main winners, the increase in inter-group inequality is more than compensated by the decrease in intra-group inequality.
This paper describes a newly-built micro-macro model for South Africa. A computable general equilibrium (CGE) model and a microsimulation (MS) model are combined in a sequential approach in order to build an effective tool to assess the effects of various macroeconomic policies and shocks on South African households. The CGE model is used to simulate the macro-changes in the structure of the economy after the policy change or the macro-shock. In a second step, these changes are passed on to the MS model. Micro-macro consistency equations, along with the direct transmission of prices, ensure that macro-changes are fully transmitted from the CGE to the MS model. Given any change in the macroeconomic structure of the economy predicted by the CGE model, the MS model predicts how individual agents modify their behaviours and how their incomes are affected, while accounting for individual heterogeneity.
Recent years have seen a growth in the literature on a variety of aspects of intangible investment, the complement of the more familiar investment in tangible assets such as buildings, plant, and equipment. For economic and business analysts this change in emphasis necessitates the selection of a meaningful metric for intangible investment and the firm’s total capital stock of tangible and intangible assets, which is not provided by conventional accounting systems. This gives rise to a deficiency of information for two principal audiences: shareholders and external stakeholders in the firm and the internal management of the firm. Information to know and understand the level of returns to past investments; and to form expectations about future investments, their returns, and risk profiles is accordingly missing. This paper builds on recent studies focusing on this problem to (1) characterize the nature and implications of the information deficiency; and (2) develop an intangible metric that illustrates what can be achieved with suitable accounting data.
This paper tests for the presence of nonlinear dynamics in selected Asian short rates and employs a regime varying unit root test to detect non-stationarity for distinct regimes. Nonlinearities in the form of Markov-switching dynamics are found in all short rates sample. The mean-reverting behaviour of interest rates is dependent on both the level and volatility of interest rates. The occasional random walk and mean-reverting dynamics of short rates are attributed to the macroeconomic fundamentals, exchange rate regimes and monetary policy objectives in these economies.
This paper describes the dynamics of smoking behaviour in Australia and investigates what impact smoking ban regulations have, if any, on individual smoking patterns. Such legislation receives a lot of press attention when announced and introduced, but its effect on individuals’ smoking behaviour has received little research attention. The main argument used to motivate the introduction of tougher smoking bans is reducing exposure of non-smokers to second hand smoke. From a public policy perspective it is important to know if these policies also affect whether people smoke, or if they only influence when and where people smoke. The Household, Income and Labour Dynamics in Australia (HILDA) survey data allow us to track individuals’ smoking behaviour over the period 2001 to 2003, during which time smoking ban initiatives in Queensland, Victoria and the Northern Territory came into effect. We exploit this variation over time and across states to assess the impact of tougher smoking regulations. Our findings indicate that smoking is strongly correlated with education, gender, early life experiences, alcohol consumption, income, and other characteristics. Conditional on being a smoker in the previous period, we find that the single biggest predictor of quitting is pregnancy. Few other characteristics are able to explain who quits. Conditional on not smoking in the previous period, people who drink daily or weekly and couples who separated or divorced between the previous and current periods are most likely to take up smoking. The effect of the introduction of smoking ban regulations on individuals’ smoking behaviour is generally in the expected direction, albeit not statistically significant for most types of individual. However, we find a significant ‘rebellion’ effect among 18 to 24 year old smokers, with the introduction of smoking bans found to increase the likelihood that they continue to smoke.
Previous research hypothesizes that long working hours are related to consumerism, the ideal worker norm, high levels of human capital, and a high cost-of-job-loss. The authors test these hypotheses using panel data on working hours for an Australian sample of full-time employed workers. Analyses include a static cross-sectional model and a persistence model for long hours over time. The results suggest that long hours (50 or more hours in a usual week) are often persistent, and provide strongest support for the consumerism hypothesis, with some support for the ideal worker norm and human capital hypotheses, and no support for the cost-of-job-loss hypothesis. Other results are consistent with a backward-bending supply of long hours, and with multiple job holders and the self-employed working long hours.
The revenue, efficiency, equity and operating costs properties of alternative tax bases or taxable sums are compared and contrasted. Initially the assessment is made for generic, comprehensive tax bases on income and consumption flows, wealth stocks, and on transactions. On the criteria of efficiency and equity, there are unresolved conceptual and empirical arguments in choosing between income, consumption and wealth tax bases, but general revenue raising transaction taxes are inferior. In practice, including in current Australia, the different tax bases are far from comprehensive because of the many exemptions and deductions. On all good tax design criteria, the case is made to broaden the tax bases for income, the GST, payroll and land taxes; special purpose transaction taxes to counter market failures should be redesigned; and conveyance duties and other stamp duties should be removed.
Melbourne Institute Working Paper No. 10/2005
The Effect of Financial Incentives on Labour Supply: Evidence for Sole Parents from Microsimulation and Quasi-Experimental Evaluation
by
Lixin Cai, Guyonne Kalb, Yi-Ping Tseng and Hong Ha Vu
July 2005
The aim of this paper is to analyse work incentive effects from a recent change in the Australian tax and transfer system on sole parents. Two approaches are used in the analysis: microsimulation and quasi-experimental evaluation. Both approaches examine the effects on the probability of employment and average working hours. The results from both approaches show that the combined changes introduced in July 2000 involving reduced withdrawal rates, changed family payments and lower income tax rates¯have increased labour supply for sole parents to a small extent. The results from microsimulation are slightly smaller than those estimated from a quasi-experimental approach using matching techniques to control for alternative influences. In addition, using microsimulation, the separate effects of the components can be estimated. It was found that reduced benefit withdrawal rates, a reduction in the withdrawal rates and abolition of the sudden death for family payments, and lower income tax rates all increased labour supply. However, the replacement of tax rebates with additional non-income-tested family payments is estimated to have a negative effect on labour supply.
The trend of declining labour force participation by older working-age men, combined with an ageing population, has led many industrialised nations to develop policies encouraging older male workers to remain in the labour force. A better understanding of how an individual’s health influences the labour force participation decision among this group of workers would facilitate the development of effective policies. The current research uses the Household, Income and Labour Dynamics in Australia (HILDA) survey to investigate the issue. The longitudinal nature of the three-wave HILDA data, which are currently available, allows for a better control for unobserved heterogeneity than was possible with earlier data. Therefore, more efficient estimates of the direct health effects on labour force participation can be obtained than in a cross-sectional analysis. Unobserved factors are likely to affect both health and labour force status, therefore we estimate a model that takes the correlation between the two error terms in the health and labour force status equations into account. The results show that controlling for unobserved heterogeneity and the correlation between the two equations is important. That is, the estimated variances of the unobserved heterogeneity terms are significantly different from zero in both equations and the two error terms are correlated. Any restriction on the correlation between the two equations appears to lead to underestimation of the direct health effects.
In this paper we review new empirical methods for evaluating microeconomic policies. Experimental and quasi-experimental evaluation measure the causal impact of a policy by comparing outcomes in the presence of the policy 'treatment' with outcomes in the absence of this treatment. For example, evaluation of a government program involves comparing outcomes associated with participation and non-participation in the program. We describe the motivation for the use of experimental and quasi-experimental methods, the types of policy effects that they can identify, and how they are implemented. Application of experimental and quasi-experimental methods is illustrated through a brief review of a variety of recent Australian studies that have evaluated microeconomic policies such as labour market programs, welfare payments policies, education policies, health policies and minimum wage laws.
Working hours in Australia are quite widely distributed around the population mean. That is, there are relatively many people working both relatively short hours and relatively long hours each week. From a welfare perspective, however, it is not the actual number of hours worked that is of importance, but whether the hours being worked are consistent with individual preferences. In this paper the question of how closely hours preferences are being met is examined using data collected in the first wave of the HILDA Survey. The study focuses specifically on workers in couple households. The analysis involved two main stages. In the first stage, evidence of a significant time divide - the co-existence of many people working part-time hours who would prefer to work longer and many people working very long hours who ould prefer to work fewer hours - is found. The extent of this time divide, however, should not be overstated - the hours of the majority of workers are still reasonably close to their stated preference. The second stage of the analysis focused on identifying the factors associated with mismatch in working hours preferences. The extent of overemployment, for example, is found to rise with age, and is more pronounced among the self-employed and less pronounced among those with a recent history of unemployment. Underemployment, on the other hand, is also associated positively with self-employment, as well as with casual employment. Perhaps of most interest, we find that in couples preferred hours are influenced by whether or not, and the extent to which, partners achieve their working time preferences. That is, if one member of the couple is unable to work as many hours as desired, this leads their partner to prefer more hours.
This paper examines the factors that cause differences in patent examination outcomes at the trilateral patent offices using a dataset of more than 70,000 non-PCT patent applications filed at the European and Japanese Patent Offices conditional upon them being granted by the United States Patent and Trademark Office. The paper finds that the quality of the invention, the applicant and whether the inventor was a local resident were the major determinants of patent grants. There is some, albeit inconsistent, evidence that examination decisions are made in the interests of the region's national trade.
While most developed countries apply the same criteria to determine whether an invention is eligible to be protected by a patent, there are substantial procedural differences in the way in which different patent offices examine a patent application. This means that a patent application may be granted in one jurisdiction but rejected in others, which raises welfare concerns about the ability of patents to provide an ex ante incentive for investment. In this article, we analyze whether there are systematic differences in patent application outcomes across the trilateral patent offices. In order to determine how much “disharmony” exists, we examine whether the patent offices make consistent decisions for a given invention using a dataset of 70,000 patent applications that have been granted in the US and submitted in Japan and Europe and have a single, common priority application. Specifically, we model the patent application outcomes using a multinomial logit to see how the decisions made by the patent offices vary across different patent characteristics such as technology area, non-obviousness of the invention and priority country.
The effects of innovation on firm performance is conventionally analysed using R&D or patent applications as measures for innovation capital and market value as the measure of firm performance. We argue that such studies fall short in three important respects. First, the proxies used for innovation capital are flows not stocks as the theory suggests. Secondly, while they are derived from the theory of intangible capital, their estimations ignore other important intangible capital such as organisational and marketing capital; and thirdly, by using market value, the studies heroically assume that stock markets work efficiently. In this paper, we develop a model of the effects of intangible capital, including, but not limiting to, innovation capital, on firm profits, using new measures for the former. Our results indicate that profits vary, ceteris paribus, according to the type of IP rights held by the firm, the age of the firm, the size of the firm, and the lifespan of the IP right.
This paper presents a conceptual framework for thinking about issues associated with the transition to retirement by older workers, and then reviews available Australian and international empirical evidence and literature on this topic.
This paper describes microsimulation modelling in non-technical terms and explains what can be achieved with microsimulation modelling in general, and the Melbourne Institute Tax and Transfer Simulator (MITTS) in particular. The focus is on behavioural microsimulation modelling, which takes individuals’ labour supply responses into account when analysing tax and transfer reforms. Microsimulation models are built to replicate closely the considerable degree of heterogeneity observed in the population. Several examples of recent uses of MITTS are given and briefly described. Given the relatively recent development of behavioural microsimulation models, there are several opportunities for further extensions. For example, it would be valuable to allow for the demand side of labour, indicating whether new labour force participants are likely to find work or to allow for life-cycle dynamics, which are important to deal with population-ageing issues and female labour force participation.
In this article, we examine contract efficiency in a complex contractual environment for services characterized by cost uncertainty and an unknown level of service provision. Using data on water and sewerage network maintenance services contracts from two Melbourne water retailers, we compare the expenditure across fixed-price and cost-plus service contracts. The results suggest that the fixed-price contracts outperform the cost-plus contracts, thereby confirming the standard result that efficient contracts trade-off risk for incentives.
Error processing SSI file
Error processing SSI file
|
