Showing papers in "Canadian Journal of Economics in 1994"
TL;DR: In this article, the authors define and discuss formalism and anti-formalism, individualism and holism, rationality and rule following, efficiency and reform, and complementarity.
Abstract: 1. Definitions and issues 2. Formalism and anti-formalism 3. Individualism and holism 4. Rationality and rule following 5. Evolution and design 6. Efficiency and reform 7. Conflicts and complementarities.
602 citations
TL;DR: The authors compared the economic performance of foreign-owned and Canadian-owned establishments and found that foreign affiliates have significantly higher value-added per worker and pay higher wages than do Canadian establishments, but these differences vanish once they control for factors such as size and capital intensity.
Abstract: This study compares the economic performance of foreign-owned and Canadian-owned establishments. The authors' results show that foreign affiliates have significantly higher value-added per worker and pay higher wages than do Canadian establishments but these differences vanish once they control for factors such as size and capital intensity. The authors find no significant differences in the performance of Canadian establishments owned by U.S., European, and Japanese firms. Their findings suggest that foreign investment may benefit Canada but do not provide support for country-specific investment promotion policies.
288 citations
TL;DR: Simple general equilibrium analysis shows that migration can lead to Pareto-inferior outcomes in the destination region if immigrants are the beneficiaries of redistributive transfers.
Abstract: This paper analyses redistribution policies that transfer income between owners of immobile factors of production and workers in a given region. The menu of income distribution possibilities attainable through tax/transfer policy in the presence of labour mobility is characterized. Simple general equilibrium analysis shows that migration can lead to Pareto-inferior outcomes in the destination region if immigrants are the beneficiaries of redistributive transfers. All residents of the destination region may gain however if transfer payments are also paid to workers in the source region so as to reduce the level of immigration. (SUMMARY IN FRE) (EXCERPT)
194 citations
TL;DR: In this article, a study of self-employment/paid-work choice, based on a representative sample of white Canadian men, was conducted and the main findings were as follows: relative potential earnings is the main choice determinant; potential earnings differences between groups is primarily due to unobserved factors: market values of observed characteristics are similar between groups and relative potential earning, based only on observed characteristics, are not an explainer of choice; and paid workers have higher potential earnings in both sectors, with a greater advantage in paid work.
Abstract: The author reports a study of self-employment/paid-work choice, based on a representative sample of white Canadian men. The main findings are as follows: relative potential earnings is the main choice determinant; potential earnings differences between groups is primarily due to unobserved factors: market values of observed characteristics are similar between groups and relative potential earnings, based only on observed characteristics, are not an explainer of choice; and paid workers have higher potential earnings in both sectors, with a greater advantage in paid work. But the apparent comparative advantage is not significant.
141 citations
TL;DR: In this article, the authors address the question of how the tax burden in a federated area should be distributed across the different jurisdictions so that the social cost of providing government services is minimized.
Abstract: In this paper, we address the question: How should the tax burden in a feder- ation be distributed across the different jurisdictions so that the social cost of providing government services is minimized? Using optimal tax theory, we derive formulas for the optimal equalization grants that equalize the social marginal cost of raising revenue across all provinces. We show how the optimal equalization grants are related to a measure of tax effort based on the marginal cost of public funds and a measure of fiscal capacity that takes into account the elasticity of the tax base and its substitutability with other tax bases.
123 citations
TL;DR: In this article, the effects of taxation in a two-sector model of endogenous growth, based on the joint accumulation of physical and human capital, are examined, and the response to wage taxes, capital taxes, and consumption taxes is explored.
Abstract: This paper examines the effects of taxation in a two-sector model of endogenous growth, based on the joint accumulation of physical and human capital. Both transitional dynamics and balanced growth paths are computed, and the response to wage taxes, capital taxes, and consumption taxes is explored. Welfare costs of alternative tax regimes are computed. The capital tax is by far the least efficient method of generating revenue. The differences between taxes with respect to their effects on long-run growth rates are relatively unimportant. The key difference between the capital tax and wage or consumption taxes lies in their different level effects on the permanent paths of output, consumption, and labour supply.
117 citations
TL;DR: In this article, the authors examine international trade in a commodity whose production creates a negative externality for the importing country and consider the nations' strategic policy choices when they can restrict trade and when they are bound by a free-trade agreement.
Abstract: The authors examine international trade in a commodity whose production creates a negative externality for the importing country and they consider the nations' strategic policy choices when they can restrict trade and when they are bound by a free-trade agreement. When pollution-abatement technology is available, the exporting country induces its adoption, despite national indifference to the externality, in order to reduce the tariff. In a free-trade agreement, environmental policy is used to exploit monopoly power in trade. An alternative policy instrument, a process standard, is introduced. National competition in controlling emissions leads to very restrictive antipollution measures. We examine international trade in a commodity whose production creates a negative externality for the importing country; and we consider the nations' strategic policy choices, when they can restrict trade, and when they are bound by a free-trade agreement. When pollution-abatement technology is available, the exporting country induces its adoption, despite national indifference to the externality, in order to reduce the tariff. In a free-trade agreement, environmental policy is used to exploit monopoly power in trade. An alternative policy instrument, a process standard is introduced. National competition in controlling emissions leads to very restrictive anti-pollution measures.
112 citations
TL;DR: In this paper, the authors developed a numerical general equilibrium model of the world economy with local and global environmental externalities, which was then used to investigate the relationship between trade and the environment.
Abstract: This paper develops a numerical general equilibrium model of the world economy with local and global environmental externalities. The model is then used to investigate the relationship between trade and the environment. The authors' results suggest that international trade has little impact on environmental quality. Furthermore, the magnitude of the welfare effects of environmental policies is not significantly affected by changes in trade policies. At the same time, the size and distribution of the gains from trade liberalization appear to be little affected by changes in environmental policies.
101 citations
TL;DR: This article established some basic empirical regularities concerning the wages of aboriginal Canadians in Canada, applying techniques drawn from the earnings function literature to the Statistics Canada 1986 Census Public Use Sample Tape and found that the raw wage gap between aboriginal and white Canadians is relatively small compared with that of other disadvantaged groups in North America, and it is smaller for women than for males.
Abstract: The labor market behavior of aboriginal Canadians has been little studied by economists. This paper establishes some basic empirical regularities concerning the wages of natives in Canada, applying techniques drawn from the earnings function literature to the Statistics Canada 1986 Census Public Use Sample Tape. The raw wage gap between aboriginal and white Canadians is relatively small compared with that of other disadvantaged groups in North America, and it is smaller for women than for males. Differences in observable characteristics such as education, language, and region account for as much as 50 percent of the overall white-native wage gap.
87 citations
TL;DR: In this article, the authors examined how the benefits and costs of doing volunteer work, as they are represented by individual characteristics such as age, education, or occupation, explain the choice to carry out or not carry out volunteer work and found that individuals whose family or career is likely to benefit are more likely to do volunteer work.
Abstract: This paper examines how the benefits and costs of doing volunteer work, as they are represented by individual characteristics such as age, education, or occupation, explain the choice to carry out or not to carry out volunteer work. The predictions of the analytical framework are supported by empirical results obtained by using data from a 1987 national survey of volunteer work. The results indicate that individuals whose family or career is likely to benefit are more likely to do volunteer work. This paper examines how the benefits and costs of doing volunteer work, as they are represented by individual characteristics such as age, education, or occupation, explain the choice to carry out or not to carry out volunteer work. The predictions of the analytical framework are supported by empirical results obtained by using data from a 1987 national survey of volunteer work. The results indicate that individuals whose family or career is likely to benefit are more likely to do volunteer work.
79 citations
TL;DR: In this paper, the authors hypothesize that, when their products are imperfect substitutes, firms can promote collusion by cross-licensing their competing patents by credibly introducing the threat of increased rivalry in the market for each firm's product.
Abstract: This paper hypothesizes that, when their products are imperfect substitutes, firms can promote collusion by cross-licensing their competing patents. Cross-licensing is shown to enhance the degree of collusion achieved in a repeated game by credibly introducing the threat of increased rivalry in the market for each firm's product. The paper then examines the consistency of the theory developed with the available evidence. Antitrust implications of the practice of cross-licensing of competing patents are discussed.
TL;DR: In this paper, the authors estimate inter-industry wage differentials in Canada at the one-and two-digit levels of industry aggregation for various types of workers, and find that substantial inter-Industry wage differences exist and are relatively stable over time.
Abstract: Using the 1986 Labour Market Activity Survey as their major source of data, the authors estimate interindustry wage differentials in Canada at the one- and two-digit levels of industry aggregation for various types of workers. The major findings are that substantial interindustry wage differentials exist and are relatively stable over time; that the pattern of interindustry wage differentials is very similar for different kinds of workers; and that these differentials cannot be explained easily by compensating factors. The differentials seem to be consistent with the rent-sharing explanations of the labor market, such as those based on the notion of efficiency wages.
TL;DR: The derivation of the Gross National Product, Canada, 1870-1926: The Derivation of the Estimates as mentioned in this paper is an essential reference tool for further investigation into the new basic estimates, qualitative economic history, and Canadian Econometrics.
Abstract: This book, prepared by M.C. Urquhart, includes shapters on specific sectors of the economy by Alan G. Green, Thomas K. Rymes, Alastair Sinclair, and Marion Steele, and contributions by D.M. McDougall and R.M. McInnis. Gross National Product, Canada, 1870-1926: The Derivation of the Estimates will be an essential reference tool for further investigation into the new basic estimates, qualitative economic history, and Canadian Econometrics.
TL;DR: The authors assesses the impact on the probability of welfare participation of budget constraint variables such as the expected wage, welfare benefit level, and implicit welfare tax rate on the expected welfare participation.
Abstract: This paper assesses the impact on the probability of welfare participation of budget constraint variables such as the expected wage, welfare benefit level, and implicit welfare tax rate. The empirical results are based on a model of welfare participation that is estimated using a sample of female heads of household in Canada. The coefficients on the budget constraint variables are significant and carry signs that are generally consistent with the predictions of the model and the results of related studies based on data from the United States. In addition to the budget constraint variables, which include important policy tools, a wide range of sociodemographic variables are included in the specification.
TL;DR: It is concluded that the interindustry mobility of labour is dominated by the availability of employment hours, and that wage differentials are a statistically significant, but small, determinant of interregional migration.
Abstract: This paper argues that interindustry labour mobility and interregional migration are simultaneously determined processes. It estimates a bivariate probit model of migration and mobility [using data for Canada] and concludes that the interindustry mobility of labour is dominated by the availability of employment hours and that wage differentials are a statistically significant but small determinant of interregional migration....Since interindustry mobility is much larger in magnitude than interregional migration quantity constraints in labour markets are of central importance to the adaptive capacity of the economy. (SUMMARY IN FRE) (EXCERPT)
TL;DR: In this paper, the authors examine the literature on redistribution within a federation with mobile agents and conclude that redistribution is a function best assigned to the national government; local governments with diverse preferences for redistribution distort individual migration decisions.
Abstract: The authors reconsider the literature on redistribution within a federation with mobile agents. They conclude that redistribution is a function best assigned to the national government; local governments with diverse preferences for redistribution distort individual migration decisions. The authors also examine the fiscal externality literature, which has made an efficiency argument for interregional transfers. They show that, if local governments have the same preferences for redistribution, the Nash equilibrium is efficient. If preferences are diverse, the authors show that nationally imposed interregional transfers do not address the source of the inefficiency. Nevertheless, interregional transfers are shown to be a part of decentralized behavior.
TL;DR: In this paper, the authors present an infinite-horizon economy where the stock of technological knowledge enhances the productivity of all households, and they endogenize the public-sector investments in R&D through majority voting.
Abstract: In this paper, the authors present an infinite-horizon economy where the stock of technological knowledge enhances the productivity of all households. Technological knowledge depends upon public sector investments in R&D. These investments are financed by income taxes. Households in the authors' economy are differentiated by their initial capital endowments. The authors find that public policy affects the growth rate of per capita income but has no impact on income inequality. They endogenize the public-sector investments in R&D through majority voting. Under the endogenous policy, there is no trade-off between long-run growth and income inequality.
TL;DR: In this paper, the authors examine the effects of import tariffs and export subsidies in a two-sector model with sector-specific wage differentials and an equilibrium level of unemployment, and show that policies designed to attract workers to the high-wage sector could also result in reduced employment and lower social welfare.
Abstract: The author examines the effects of import tariffs and export subsidies in a two-sector model with sector-specific wage differentials and an equilibrium level of unemployment. In general, such policies change both the composition and level of employment. Policies designed to attract workers to the high-wage sector could also result in reduced employment and lower social welfare. This could happen if the low-wage sector is also the relatively labor-intensive sector. In such situations, the optimal policy might entail protecting the low-wage, labor-intensive sector. I examine the effects of import tariffs and export subsidies in a two-sector model with sector-specific wage differentials and an equilibrium level of unemployment. In general, such policies change both the composition and level of employment. Policies designed to attract workers to the high-wage sector could also result in reduced employment and lower social welfare. This could happen if the low-wage sector is also the relatively labour-intensive sector. In such situations the optimal policy might entail protecting the low-wage labour-intensive sector.
TL;DR: In this paper, the authors used cost elasticity weights to estimate the rate of TFP growth of Canadian telecommunications firms during the 1980s and 1990s, and showed that the conventional Tornqvist index yields a very distorted picture of efficiency gains in the two largest Canadian telephone companies.
Abstract: Canadian telecommunications firms do not price proportionately to marginal cost. The prices of toll services tend to be above marginal costs, whereas the prices of basic local services are typically set below marginal costs by regulators. In such circumstances, estimates of TFP growth using the conventional Tornqvist (Divisia) formula which weights outputs by revenue shares in determining the rate of growth of aggregate output is theoretically incorrect and needs to be replaced by a formula which uses cost elasticity weights. Empirically, the conventional Tornqvist index yields a very distorted picture of efficiency gains in the two largest Canadian telephone companies during the 1980s. For Bell Canada, I calculate the upward bias to be approximately 75 percent over the period 1980-89 and 80 percent over the period 1985-89. For B.C. Tel a similar calculation yields an upward bias of 37 percent over the period 1980-89 and 48 percent over the period 1985-89.
TL;DR: The authors analyzes various equilibria associated with intervention in trade in the context of non-cooperative policy games with endogenous timing and concludes that trade is not eliminated in quota games.
Abstract: This paper analyzes various equilibria associated with intervention in trade in the context of noncooperative policy games with endogenous timing. It is shown that, while the subgame perfect equilibria in quota games always involve sequential play, that is not necessarily the case in tariff games. One implication of the analysis is that, in contrast to existing theory, trade is not eliminated in quota games. Another implication is that quotas are not necessarily inferior to tariffs. The paper also examines the ways policy leaders and followers differ in their preferences over instruments and allows the choice over instruments to be determined endogenously. This paper analyses various equilibria associated with intervention in trade in the context on non-cooperative policy games with endogenous timing. It is shown that, while the subgame perfect equilibria in quota games always involve sequential play, that is not necessarily the case in tariff games. One implication of the analysis is that, in contrast to existing theory, trade is not eliminated in quota games. Another implication is that quotas are not necessarily inferior to tariffs. The paper also examines the ways policy leaders and followers differ in their preferences over instruments and allows the choice over instruments to be determined endogenously.
TL;DR: In this article, the authors examine how the incumbent in a market threatened by entry can exploit its first-mover advantage by licensing its technology not to a potential entrant but to firms that would have remained outside the industry.
Abstract: In a more general setting than has been considered hitherto, this paper examines how the incumbent in a market threatened by entry can exploit its first-mover advantage by licensing its technology not to a potential entrant but to firms that would have remained outside the industry. It is shown, among other things, that the incumbent may subsidize the variable costs of its licensees in order to deter entry. Even when entry is not deterred, it is demonstrated that the incumbent might opt to invite outsiders as licensees.
TL;DR: This paper used the 1989 labour market activity survey to examine the gender wage differential in Canada and concluded that intra-occupation wage effects explain most of gender wage gap in Canada, and used the Zabalza and Arrufat imputation method to estimate the level of female labour market experience.
Abstract: The paper utilizes the 1989 Labour Market Activity Survey to examine the gender wage differential in Canada. The aim is to update previous studies and extend earlier analysis in two significant ways. First, occupation is treated as endogenously determined. Secondly,the Zabalza and Arrufat(1985) imputation method is utilized to estimate the level of female labour market experience. The results suggest that the level of estimated gender discrimination is sensitive to the measure of labour market experience. The paper also concludes that intra-occupation wage effects explain most of gender wage gap.
TL;DR: In this paper, the domestic and international arbitrage pricing theories are modified to encom- pass the hypotheses that the Canadian and global North American equity markets are com- pletely or partly integrated (segmented).
Abstract: The domestic and international arbitrage pricing theories are modified to encom- pass the hypotheses that the Canadian and global North American equity markets are com- pletely or partly integrated (segmented). The exchange rate determination literature is used to identify potentially priced binational factors, and the sensitivities and factor prices are es- timated using non-linear SUR. The two equity markets are only partly integrated (segmented). Canadian stock returns are influenced by the pure domestic components of the term structure and lagged industrial production and by the pure international components of the differential
TL;DR: Klein et al. as discussed by the authors analyzed a duopoly model where firms first choose locations on a line segment and then choose quantities in the second stage, and found that pure strategy quantity equilibria fail to exist for locations close together.
Abstract: The authors analyze a duopoly model where firms first choose locations on a line segment and then choose quantities in the second stage. Pure strategy quantity equilibria fail to exist for locations close together. For low transport costs, near agglomeration occurs and the firms choose locations where pure strategy quantity equilibria exist. As transport costs rise, firms become less direct competitors as they move away from the center of the market. Coauthors are James F. Klein, Eytan Sheshinski, and Steven M. Slutsky. We analyse a duopoly model where firms first choose locations on a line segment and then choose quantities in the second stage. Pure strategy quantity equilibria fail to exist for locations close together. For low transport costs, near agglomeration occurs and the firms choose locations where pure strategy quantity equilibria exist. As transport costs rise, firms become less direct competitors as they move away from the centre of the market. Coauthors are James F. Klein, Eytan Sheshinski, and Stephen M. Slutsky.
TL;DR: In this paper, the authors model the geographical composition of Canadian foreign trade and show that trade diversion towards the United States and EFTA is likely to be important in the event of increased E.C. protectionism.
Abstract: This paper models the geographical composition of Canadian foreign trade. Imports and exports are disaggregated into nine regions that together cover most of the OECD area. The author uses both the flexible and the semiflexible versions of the symmetric normalized quadratic functional form. The reduction in flexibility allows for large savings in the number of parameters and yet it is not incompatible with the data. The author's results suggest that there are significant substitution possibilities in Canadian foreign trade and that trade diversion towards the United States and EFTA is likely to be important in the event of increased E.C. protectionism.
TL;DR: It is found that migrants with high school education have the highest propensity to outmigrate, while those with less than high schoolEducation have the lowest.
Abstract: This paper studies the partial effect of various socio-economic characteristics on the rate of outmigration of the foreign-born from the Canadian population. The data sets used are based on the microdata of the 1971 and 1981 censuses of population. It is found that migrants with high school education have the highest propensity to outmigrate while those with less than high school education have the lowest. The propensity to outmigrate is positively related to the age of the migrant. Males tend to have a higher propensity to outmigrate while having a command of official languages reduces the propensity to outmigrate. (SUMMARY IN FRE) (EXCERPT)
TL;DR: In this article, the authors argue that errors in variables can seriously distort inference when they are not taken into account explicitly, and that whether some explanatory variables should instead be used as instruments is largely a matter of interpretation unless further information is available.
Abstract: Errors in variables can seriously distort inference when they are not taken into account explicitly. Coefficient values, their significance, and whether some explanatory variables should instead be used as instruments are largely a matter of interpretation unless further information is available. Higher moments of the observable variables impose restrictions that allow testing for identification and specification and estimating the parameters of the standard errors-in-variables model. The argument is developed partly through examples illustrating the points. Errors in variables can seriously distort inference when they are not taken into account explicitly. Coefficient values, their significance, and whether some explanatory variables should instead be used as instruments are largely a matter of interpretation unless further information is available. Higher moments of the observable variables impose restrictions that allow testing for identification and specification and estimating the parameters of the standard errors-in-variables model. The argument is developed partly through examples illustrating the points.
TL;DR: In this article, the implications of risk and irreversibility for the measurement of marginal effective tax rates (METR) on capital are examined. And when capital is irreversible, the METR is an increasing function of systematic and unsystematic, capital and income risk.
Abstract: The implications of risk and irreversibility for the measurement of marginal ef- fective tax rates (METR) on capital are examined. It is shown that when capital is irreversible, the METR is an increasing function of systematic and unsystematic, capital and income risk. The tax system may thus distort investments in risky capital to a much greater extent than is implied by previous research that ignored irreversibilities. METR calculations based upon the Canadian corporate tax system are provided.
TL;DR: In this paper, the authors focus on adjusting to technological change, something that a lot of people are doing nowadays and emphasize that these changes constitute a social process that involves more than the sum of our individual struggles with inanimate nature.
Abstract: The subject of my address is adjusting to technological change, something that a lot of people are doing nowadays. The revolution in information and communication technologies and the transition to a knowledge-based economy are inducing people in every sector to change how they work and do business. What I want to emphasize is that these changes constitute a social process that involves more than the sum of our individual struggles with inanimate nature. People are adjusting not only to changes in technology but to changes that others are making to technology. Adjustments in one sector induce unexpected adjustments and innovations in other sectors in a complex process that none of the participants can possibly comprehend. The process is governed by social institutions, particularly by the business enterprises that organize almost all economic transactions in a modem economy, and at the same time it is transforming those institutions. A graphic account of how peoples' lives are being tossed about by the winds of change might be too depressing for this occasion. So to keep it light I am simply going to talk about macroeconomic theory. If there is one profession that has not yet seen much of the darker side of technological change, it is macroeconomic theory. In fact, the recent resurgence of interest in growth and technological change seems to have had a calming effect on the profession by diverting attention from the issues of unemployment, inflation, and aggregate-demand management that have been the subjects of the furious controversies since the Keynesian revolution. Peaceful coexistence has emerged between previously opposing schools, now united by the
TL;DR: This article showed that when an RRSP is introduced to a system that taxes capital income, the rate of return on marginal saving within the RRSP was driven to equality with the rate on non-RRSP saving, which stands in contrast to the conventional view from the public finance literature.
Abstract: Within a progressive income-tax system, Registered Retirement Saving Plans (RRSPs) generate a substitution effect that decreases saving. The key point made here is that when an RRSP is introduced to a system that taxes capital income, the rate of return on marginal saving within the RRSP is driven to equality with the rate of return on non-RRSP saving. Since RRSP contributions redistribute taxable income across periods, they also have the effect of increasing future marginal income-tax rates, which lowers the after-tax return to saving. This result stands in contrast to the conventional view from the public finance literature.