Showing papers in "Applied Economics in 1996"

The impact of BSE on the demand for beef and other meats in Great Britain

Abstract: Indices of media coverage of BSE are incorporated in a dynamic AIDS model of meat demand. The publicity which BSE has received is found to have had significant effects on the allocation of consumer expenditure among the meats. A short-run impact has been identified which accounts in large part for the discernible drop in the market share of beef in the early 1990s. And more important, there also appears to be a significant long-run impact of BSE, which by the end of 1993 has reduced the beef market share by 4.5%.

The incidence of, and returns to overeducation in the UK

Abstract: The 1991 wave of the British Household Panel Survey is used to examine the extent of, and the returns to overeducation in the UK. About 11% of the workers are overeducated, while another 9% are undereducated for their job. The results show that the allocation of female workers is more efficient than the allocation of males. The probability of being overeducated decreases with work experience, but increases with tenure. Overeducated workers earn less, while undereducated workers earn more than correctly allocated workers. Both the hypothesis that productivity is fully embodied and the hypothesis that productivity is completely job determined are rejected by the data. It is found that there are substantial wage gains obtainable from a more efficient allocation of skills over jobs.

Host country characteristics and agglomeration in foreign direct investment

Abstract: By combining unique data on Swedish multinationals with industry data for 18 countries, the influence of host country characteristics on the location of foreign production is analysed. Particular attention is directed towards agglomeration tendencies in firms' location. The sample selection incorporates countries where firms have no affiliate production, which is an extension of previous research in this area. The results suggest that agglomeration effects are present, predominantly in technologically advanced industries. It is also shown that market size, the supply of skilled labour and earlier exports pattern, affect the location of overseas production.

An implicitly additive demand system

Abstract: The problem of endowing large applied general equilibrium models with numerical values for parameters is formidable. For example, a complete set of own- and cross-price elasticities of demands for the MONASH model of the Australianeconomy involves in excess of 50000 items. Invoking the minimal assumptions that demand is generated by utility maximization reduces the load to about 26000 - obviously still a number much too large for unrestrained econometric estimation. To obtain demand systems estimates for a dozen or so generic commodities at a top level of aggregation (categories like ‘food’, ‘clothing and footwear’, etc.), typically Johansen's lead has been followed, and directly additive preferences imposed upon the underlying utility function. With the move beyond one-step linearized solutions of applied general equilibrium models, the functional form of the demand system adopted becomes an issue. The most celebrated of the additive-preference demand systems, the linear expenditure system (LES), has one...

Malmquist indices of productivity change in the UK gas industry before and after privatization

Abstract: The UK Government's privatization programme was justified in terms of potential efficiency gains. This paper concentrates on measures of technical efficiency in the regions of the UK natural gas industry before and after privatization and the associated regulatory changes. It uses non-parametric frontier analysis and Malmquist indices to show that the rate of productivity growth increased significantly after privatization. However the differences in technical efficiency amongst regions remain, suggesting that failure to break up the industry has sacrificed potential gains from direct competition or indirect competition through yardstick regulation.

The demand for English league football: a club-level analysis.

Abstract: A demand equation is estimated for 19 large urban-based English Football League clubs over the period 1962/3 to 1991/2, in order to analyse the economic determinants of club attendances while controlling for football-specific factors. Attendances are measured with and without correction for admission of season-ticket holders. Using an error-correction specification to model attendances, it is shown that both adjusted and unadjusted attendances respond to real ticket prices in the long-run, in 17 and 18 clubs, respectively. The price-elasticity is typically larger for adjusted attendances, suggesting that ‘casual’ spectators are more price-sensitive than season-ticket holders. Among football-specific factors, league position, goals scored and promotion and relegation between the divisions are all important determinants of attendance patterns.

Corporate structure, ownership and the likelihood of innovation

Abstract: An examination is conducted into the effect which external ownership and other aspects of corporate ownership structure have on the likelihood of innovation for a sample of manufacturing plants located in Scotland. Econometric estimation indicates that plant size, the presence of in-plant R&D, and non-UK ownership have a positive effect on the likelihood of innovation. Multiplant operation, market power and variations in industrial structure have no discernible effect on innovation. The finding that foreign ownership is positively associated with innovation contrasts with previous research conducted on manufacturing plants in Northern Ireland.

The relationship between job satisfaction and managerial remuneration in small and medium-sized enterprises: an empirical test of ‘comparison income’ and ‘equity theory’ hypotheses

Abstract: The relationship between job satisfaction levels and the remuneration of non-owner managers employed by a sample of 97 UK small and medium sized enterprises (SMEs) is investigated. The main empiric...

The determinants of the demand for private health insurance under Medicare

Abstract: Since the introduction of Medicare in 1984, the proportion of the Australian population with private health insurance has declined considerably. Insurance for health care consumption is compulsory for the public health sector but optional for the private health sector. In this paper, we explore a number of important issues in the demand for private health insurance in Australia. The socio-economic variables which influence demand are examined using a binary logit model. A number of simulations are performed to highlight the influence and relative importance of various characteristics such as age, income, health status and geographical location on demand. A number of important policy issues in the private health insurance market are highlighted. First, evidence is provided of adverse selection in the private health insurance pool, second, the notion of the wealthy uninsured is refuted, and finally it is confirmed that there are significant interstate differences in the demand for private health insurance.

An assessment of the efficiency of Spanish Courts using DEA

Abstract: The objective is to provide a measure of technical efficiency of the Administrative Litigation Division of the Spanish High Courts. The concept of efficiency to be measured and the most adequate technique for carrying out the efficiency analysis are selected by considering the specific characteristics of public production. The analysis is undertaken by using data envelopment analysis (DEA) and various homogeneity tests (returns to scale and restrictions on weights) are applied in order to ensure a correct comparison between Courts. Some additional extensions to the analysis (such as the calculus of efficient delays and an approximation to the calculus of global efficiency) are carried out.

Economies of scale and utilization in the Swiss electric power distribution industry

Abstract: Economies of scale and utilization in the Swiss electricity distribution industry are analysed. A translog variable-cost function was estimated using panel data for a sample of 39 municipal utilities over the period 1988–1991. Economies of both scale and utilization appear to exist in the distribution of electricity, both for small-medium- and large-sized utilities. Thus, the empirical evidence suggests sub-additivity of the cost function over the relevant range of output for the Swiss electricity distribution utilities, a necessary condition for a natural monopoly to exist.

Economic and other determinants of infant and child mortality in small developing countries: the case of Central America and the Caribbean.

Abstract: Inter-country differences in infant and child mortality are explained by looking at demographic, economic, health and educational factors. A model is presented in which the infant mortality rate, the child mortality rate, and the birth rate are endogenous. The model is tested using cross-national multiple regression analysis and simulations. The presence of simultaneity is confirmed. Introducing non-economic factors transforms the character of the relationship between exogenous and endogenous variables, from a 'diminishing returns' to an 'increasing returns' one. The role played by public expenditure in education, vaccination coverage, low birth weight, female schooling, number of nurses, access to safe water, or malnutrition can be assessed, as well as that played by 'structural adjustment' variables such as the inflation rate or the external debt to GNP ratio. Infant and child mortality can be diminished everywhere in the region with relatively small amounts of expenditure. Disappointing outcomes in som...

Economic growth, export and external debt causality: the case of African countries

Abstract: Empirical investigation of the export-driven economic growth hypothesis has provided mixed results in a bivariate causality framework. The problem with such bivariate causality analysis is that there can be an omitted variable which could adversely affect the results. This paper looks at the trivariate causality analysis of African countries by introducing external deby servicing as a third variable in the export-economic growth analysis. The results indicate that there is a feedback or bidirectional causality between external debt servicing, economic growth and exports. Evidence of the 1983–90 subperiod is consistent with the argument that the structural adjustment programmes which were designed to remove economic distortions, promote exports and encourage external debt management, increased growth in the countries involved.

Cointegration and Wagner's hypothesis: time series evidence for Canada

Abstract: It is argued that Wagner's hypothesis is essentially a proposition about the secular comovement of income growth and public spending. Using the Engle and Granger cointegration tests and time series data from Canada, the long-run validity of Wagner's hypothesis is maintained.

Franchising, agency problems, and the cost of capital

Abstract: Explanations for franchising are examined in the context of the US hotel industry. The study is distinct from previous research on franchising because it explicitly recognizes the existence of three organizational forms, whereas previous research has focused exclusively on two of these three forms. The two organizational forms examined in previous work are franchising and company ownership. The additional organizational form is company-management/investor-ownership, which involves management by the franchisor and ownership by outside investor groups. A plausible explanation for the existence of the last organizational form is based on the availability of low cost capital from non-chain sources.

Aggregate uncertainty, investment and asymmetric adjustment in the UK manufacturing sector

Abstract: Theory suggests that the level of uncertainty facing firms should affect both the rate of adjustment to, and the steady state level of, investment, although there is ambiguity about the sign of the effect. A non-linear model of investment behaviour incorporating time varying adjustment speeds with threshold effects is estimated for the UK manufacturing sector. The most general non-linear specification is found to be most congruent with the data. Uncertainty has a large and significant effect on both levels and rates of adjustment.

How large is the extent of the market for public goods: evidence from a nationwide contingent valuation survey

Abstract: To assess the extent of the geographic area over which to sum vertically the public-good benefits of removing two dams and restoring salmon populations, households were surveyed throughout the US. Households were asked a dichotomouschoice contingent-valuation question regarding their willingness to pay higher federal taxes for ten years to remove the dams and restore salmon populations. While the distance from the site of the dam removal is statistically significant and negative in the logit willingness-to-pay equation, benefits per household fall off slowly and the extent of the market is nationwide. With a majority of households living outside the immediate area of the dam, the rest of the US households reflect 97% of the national benefits for dam removal and salmon restoration. This example suggests that failure to account for the national public-good market can result in a serious underestimate of the value of public goods.

Aggregate imports and expenditure components in the UK:an empirical analysis

Abstract: This paper examines the long-run relationship between UK aggregate imports and the macroeconomic components of final expenditure, using the Johansen multivariate cointegration analysis. It is found that there are significant differences between the long-run elasticities of import demand with respect to the different components of final expenditure, over the period 1972 to 1990. An error correction model is proposed for short-run forecasting of UK aggregate imports. The short-run model appears to track the data well.

Measuring the efficiency of european railways.

Abstract: This paper is concerned with the definition and measurement of efficiency in a public body, specifically railways. The authors argue against commonly used measures such as profit and labour productivity in favour of a production possibility frontier approach. Physical measures of input and output are derived and applied using a variety of methodologies. Results from some of the most popular, such as Data Envelopment Analysis and Corrected Ordinary Least Squares using the Translog function, are shown to be potentially misleading. Two original approaches, one using Uniform efficiency distributions and the other applying Bayesian State Space techniques, are developed and applied but these too are found to be potentially unreliable. Comparison with results from other authors finally lead to the conclusion that accurate measurement of efficiency is not possible, although the research is able to indicate good and bad performers. The final conclusion is that efficiency on the railway is a product primarily of go...

Temporal causality and the dynamics of different categories of crime and their socioeconomic determinants: evidence from Australia

Abstract: Hale and Sabbagh (1991) failed to find cointegration (i.e. a long-term equilibrium relationship) between crime and unemployment in the case of England and Wales. The present study (basedon multiple cointegrationtests preceded by various unit root or non-stationarity tests) is the first attempt at putting the analysis of crime in a temporal Granger-causal framework in the Australian case (1963 - 90) by binding the relationship between different categories of crime and their socioeconomic determinants within a multivariate cointegrated system. The results, based on the most recent methodology, broadly indicate that, although the relative importance of the determinants of crime varied by type of crime, of all the determinants it is 'dwelling commencements' (a proxy for 'wealth') that appears to impact more or less on all the categories of crime significantly, followed by 'urbanization'.

Intervention analysis with cointegrated time series: the case of the Hawaii hotel room tax.

Abstract: Tourism taxes have become an important source of revenue for many tourist destinations in the USA. Among the most widely used is the hotel room tax, levied by 47 states and many localities. Room taxes are touted by proponents as a way to shift the local tax burden to non-residents, while the travel industry claims the levies signi® cantly harm their competitiveness. Previous studies of room tax impacts have relied on ex ante estimates of demand and supply elasticities. In this study, we analyse the eA ect onhotel revenuesof the Hawaiiroom tax using timeseries interventionanalysis. We specify a time series model of revenue behaviour that captures the long-run cointegrating relationships among revenues and important income and relative price

Testing the null of stationarity against the alternative of a unit root: an application to the Italian post-war economy

Abstract: Testing stationarity of economic time series has become a central issue in empirical economics. However, the testing procedure commonly employed, i.e. the augmented Dickey - Fuller test for a unit root (ADF test), has become the subject of rising criticism. Recently, some authors have proposed to 'revert the burden proof' by testing the null hypothesis of stationarity. Following this new line of research, this paper compares, using a set of annual time series of the post-war Italian economy, the results of the ADF test and the test recently proposed by Kwiatkowski et al. (KPSS test), where the null hypothesis is one of stationarity. A procedure which consists of combining the answers of the two tests is also considered. The evidence shows that while the ADF test strongly supports the unit root hypothesis, either the KPSS or the combined procedure provide a much less definite conclusion.

Determinants of the performance of Japanese financial institutions in Australia 1987-1992

Abstract: This paper constructs a model that attempts to explain the performance of Japanese financial institutions in Australia. In general the model proposed performs well for size measures, but comparatively poorly for measures of profitability. Size, as measured by home country equity, was found to increase both Australian assets and Australian profitability. Institutional features in both Australia and Japan were found to have their greatest impact upon size measures. Net interest margin differences were found to have no significant relationship with any performance measure used. However, the results are not sufficiently conclusive to produce a definitive model to explain the performance of foreign-owned banks in Australia.

A Kaldorian approach to regional economic growth in China

Abstract: Kaldor's engine of growth hypothesis is examined in the case of the Chinese economy. China has in the last decade experienced a rapid industrialization and very strong economic growth. Using regional data of this growth process, the three Kaldorian laws of economic growth are tested. The empirical results support the hypothesis. There seems to be an especially strong relation between productivity and industrial growth.

A system approach to the demand for salmon in the European Union

Abstract: This study addresses the demand for salmon in the European Union. A system of demand equations are specified with an almost ideal demand system (AIDS)to analyse the demand structure for fresh, frozen and smoked salmon, using quarterly data for the period 1984–92. The time series porperties of the data series are explored, and the data series are found to be non-stationary, but cointegrated. To avoid the invalild inference and spurious regression problems that may be created by non-stationary data series,the fully modified least squares (FMLS) estimatior is utilized.

Foreign aid and government fiscal behaviour in low-income South Asian countries

Abstract: The major purpose of this study was to analyse the relationship between foreign aid and government fiscal behaviour using a pooled sample of three low-income South Asian countries: Pakistan, India and Sri Lanka. A simultaneous equation system was developed and estimated using nonlinear three-stage least squares procedure. The results confirm the hypothesis that foreign aid affects both the expenditure and the revenue side of the recipient government budgets. Both grants and loans are used for consumption as well as for investment purposes. However, grants leak into consumption more than loans. Thus, if the purpose of aid is to generate investment, it is more helpful if donors extend loans to the developing countries than by giving grants. The results also indicate that both grants and loans increase the taxation effort. Multilateral aid actually pulls resources out of consumption and places them into investment projects. Thus the results confirm the assertion that a shift from bilateral to multilateral ai...

The impact of human capital on labour productivity in manufacturing sectors of the European Union

Abstract: The effects of human capital on both the level and growth of labour productivity in manufacturing sectors in seven member states of the European Union are analysed, distinguishing between four effects of human capital: worker, allocative, diffusion and research. Human capital is represented by the shares of intermediate and highly-skilled workers in the workforce of a sector. It is shown that the manufacturing sectors can be divided into three classes of sectors with different intensities of highly-skilled workers: low-, medium- and high-skill sectors. The estimation results show that both intermediate and highly-skilled labour have a positive effect on the labour productivity of a sector, although the effect is only significant for highly-skilled labour. Moreover, there are indications of underinvestment of human capital in some manufacturing sectors. These sectors could improve their competitive position by raising the employment shares of intermediate and highly-skilled labour. Finally, intermediate-sk...

Devaluation and the trade balance in India: stationarity and cointegration

Abstract: A study of devaluation and the trade balance in India corrects the data for nonstationarity. Previous empirical tests have used non-stationary data. The trade balance in India is not cointegrated with a number of variables, including the exchange rate. Absorption, elasticity, and monetary models are compared, and the monetary model performs better. There has been no J-curve in India, and devaluations have had no significant long-run effect on the trade balance.

A pooled dynamic analysis of interfuel substitution in industrial energy demand by the G-7 countries

Abstract: A dynamic version of Considine's (1990) linear logit model is used to obtain theoretically consistent estimates of long-run price elasticities from pooled intercountry data on industrial energy consumption. This model also provides a rare direct estimate of the important rate of dynamic adjustment, revealing a median lag of ten years. The long-run demands for oil and coal are the most elastic, and the strongest channels for interfuel substitution are between oil and natural gas, with no significant evidence of complementarity between fuels.

Locational advantage and US foreign direct investment in UK manufacturing

Abstract: The relationship between foreign direct investment (FDI) and international trade is examined with specific reference to US FDI in the UK. Four complementary hypotheses are tested on a cross-section of UK industries. There is evidence of US FDI being located in UK industries which have a revealed comparative advantage and that large market size effects are important. On the other hand, little evidence was found for the protection jumping and industrial concentration hypotheses.