Economic Issues Volume 1

ECONOMIC ISSUES

Volume 1 (1996)

Part 1, March

Please select from the titles below:

Part 2, September

Please select from the titles below:

Part 1, March

Wage Subsidies and European Unemployment: Theories and Evidence (p.1)

by N Adnett and A Dawson

Abstract: Wage subsidies are an increasingly popular policy instrument. This survey provides a critical assessment of wage subsidies in the context of contemporary labour market problems in the EU. A selective review of the experience of wage subsidies in the OECD is provided and the development of theory since Kaldor is critically assessed. The paper expounds the merits of Snower's Benefit Transfer Programme, a marginal job-creating subsidy targeted on the long-term unemployed. It suggests modifications to his proposal to distinguish between the tradable and non-tradable sectors and to respond to the growth of part-time employment and to the threat of increasing wage inequality.

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The Economics of Advertising: A Reappraisal (p.23)

by A Bearne

Abstract: The traditional view of advertising is that it is economically wasteful and damaging to welfare as it distorts consumers' preferences, thus creating monopoly power for firms that produce heavily advertised brands. The alternative school of thought takes a broader view of competition and stresses the informative role of advertising. In a world characterised by uncertainty and ignorance, it is argued that advertising has a key role to play in providing consumers with information, reducing search costs and enabling them to make better informed choices. Further theoretical developments have stressed the importance of market structure, strategic interaction between firms and the role that advertising plays in this.

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Structural Change and Economic Behaviour: The Case of UK Exports (p.39)

by S G Hall, G Urga and J Whitley

Abstract: In this paper, we make use of the sequential testing procedure which dates unknown break points proposed in Banerjee and Urga (1995,a,b) to analyze UK export behaviour. We show that the evidence points to a structural shift in 1979. Although there is some support for a supply-side interpretation in that there have been changes in the behaviour of prices, this does not appear to be closely associated with the changes in export behaviour and there appears to have also been a shift in the underlying demand for UK exports. We also find that variables that proxy changes in the quality of UK exports, or other supply-side influences, do not properly account for the observed structural break in UK export performance.

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Economic Growth and Sustainability: A Simple Framework (p.51)

by I Hodge

Abstract: The debate about the relationship between economic growth and the environment embraces many different strands, some emphasise the limits to the capacity of the earth to sustain economic activity, some focus on options at the local level, some suggest that growth and environment are complementary. This paper suggests a framework based on elementary concepts from economics that illustrates the essential characteristics of these diverse elements and the relationships between them. The framework identifies limits to technological options which may press against a sustainability constraint.

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The Simple Economics of Profit Sharing Scheme (p.65)

by D Leslie

Abstract: This paper proposes a very simple structure to reach the heart of the issues concerning profit-sharing schemes. It shows that a framework which assumes that there is no uncertainty is hardly appropriate and that when uncertainty is introduced the claim that profit-sharing can create jobs becomes an ambiguous one. An appealing and intuitive rationale for this ambiguity is given. This represents a middle ground between Weitzmann who claims profit-sharing is employment-creating and his critics who argue that there are no positive effects. The paper argues that the only hard core justification for profit-sharing is to enable mutually profitable trades in risk to occur. Any employment consequence should be seen as incidental and if there is `equilibrium' unemployment then there are alternative and more robust ways of generating more employment.

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Public Utility Regulation in Britain: Some Lessons from the pre-1945 Experience (p. 73)

by P Lowe

Abstract: The system of public utility regulation untoduced following privatisation has been the object of much criticism but, subject to reform, is likely to survive any change of government. Much discussion of the present regulatory regime, if it takes a historical perspective, does so primarily with the nationalisation experience after 1945 in mind. This paper takes a longer term view by suggesting that the pre-war mixed system of regulation is worthy of investigation as indeed is US regulation in that period. The paper focuses towards the end on some important criticisms of the present regulatory regime and compares these with concerns in that earlier experience.

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Part 2, September

Financial Fluctuations and Fragility (p.1)

by D Green

Abstract: Recent years have witnessed rapid financial sector liberalization, pronounced asset price fluctuations and costly episodes of financial fragility. Neoclassical economic analysis stresses the beneficial effects of financial market de-regulation and laissez-faire whilst post-Keynesian analysis highlights the inherent tendency of de-regulated financial markets to lead to financial instability. This paper reviews the contribution which these perspectives make to understanding the substantial asset price fluctuations of recent years and the specific development of the banking industries of the United States, Japan and three Nordic countries. The paper demonstrates that the post-Keynesian financial instability hypothesis contributes much to understanding these episodes of financial fragility whilst inappropriate regulation has also been a cause. Future policy should give a higher weighting to the pursuit of financial stability.

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The Demand for Money in the European Union: Further Empirical Results (p.15)

by Y Pu and G Zis

Abstract: This study estimates a European Union wide demand for money function, for both narrow and broad definitions of money, which differs from others in terms of the specification of the long-run function, the definition of the explanatory variables, the sample period, the coverage of the aggregated data and the estimation methodology. The empirical findings presented suggest the existence of EU demand for money functions for both M1 and M2. This implies that increasing coordination of national monetary policies through the European Monetary Institute is likely to yield benefits for member countries.

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Foreign Direct Investment in Poland: Is Low Cost Labour Really the Sole Determinant? (p.29)

by D Floyd

Abstract: Of late, much interest has been shown in the effects of Eastern European economic transition and its possible impact on international business. It has often been suggested that Eastern European economies such as Poland will have a major role to play in terms of low cost labour production for multinational firms. However, this is still far from being realised and equally important too, it is not clear that this would be the sole motivating factor for multinationals wishing to invest in Eastern Europe. This article attempts to establish the key determinants of foreign direct investment (FDI) activity in Poland by application of Dunning's theory of international production. This should help establish whether the common view of low cost labout being the sole determinant is justified.

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Monotonic Movement of Price Vectors (p.41)

by Ch Bidiard and I Steedman

Abstract: It is well-known that long-period relative prices in a Sraffa-like analysis can change in an apparently complicated way as the uniform rate of profit (interest) changes. It is shown here how a certain simplicity of movement (monotonicity) can be detected.

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Educational Entrepreneurship within UK Schools (p.45)

by D Finlay

Abstract: The aim of this paper is to explain the nature of educational entrepreneurship by synthesising the literature on individual and organisational entrepreneurial behaviour with educational research evidence. This paper, based on survey and case study material in the East Midlands region of the UK tests two main hypotheses. Firstly, that educational entrepreneurship exists and is a necessary, if not sufficient conditions for successful education quasi-market activity and secondly, that educational innovation is dependent upon educational entrepreneurs initiating and creating the conditions for entrepreneurial activity within their own organisation. This paper notes that entrepreneurial school Principals have a general understanding of mnarket orientation and that they are in a slrategic position to effect entrepreneurial activity in their schools and in the broader social and economic community. apparently complicated way as the uniform rate of profit (interest) changes. It is shown here how a certain simplicity of movement (monotonicity) can be detected.

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