Economic Papers A journal of applied economics and policy

Published by Wiley

Online ISSN: 1759-3441

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Print ISSN: 0812-0439

Articles


The Global Financial Crisis of 2007-2009 - An Australian Perspective*
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September 2009

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305 Reads

The global financial crisis was not wholly caused by 'greed' or 'market fundamentalism' but had many causes. Fortunately, governments and central banks have absorbed the lessons of mistakes made in the 1930s. Australian policy responses to the crisis have been particularly effective, although we cannot afford to be complacent. Copyright (c) 2009 The Economic Society of Australia.
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The Post-2007 Financial Crisis and Policy Challenges Facing Australia

September 2009

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32 Reads

The post-2007 financial crisis had similar roots to many previous crises since the 1970s: moral hazard and easy credit. It had a global impact because it was centred in the USA and UK, and hence triggered a fall in global demand and international trade. The paper argues that financial deregulation and innovation contributed to economic growth in the 1990s and 2000s in the USA and UK, as well as Australia and elsewhere, and with a dynamic risk-taking financial sector crises are the flip side of high growth as some risk-taking institutions end up making bad loans. The policy challenge is to reap the advantages of a dynamic financial sector while ensuring sufficient prudence to offset the inherent moral hazard when depositors are insured by the state. Australia did not experience a serious financial crisis in 2007-9, but active macropolicy was necessary to address the economic crisis. Nevertheless, future bank failures are to be expected and policy-makers need to design appropriate financial sector regulations in preparation. Copyright (c) 2009 The Economic Society of Australia.


The Economics of Carbon Abatement: An Integrated Diagrammatic Framework

June 2009

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17 Reads

The aim of this article is to present the economics of carbon abatement in an integrated framework with application to key policy questions. While the core ideas are well known, the innovation here is to integrate the marginal costs and benefits of carbon abatement with the market for carbon permits in a diagrammatic framework. This framework is then used to analyse a range of issues in the public debate about carbon abatement and carbon trading schemes, such as special assistance for certain industries, tax concessions on particular carbon-intensive goods such as petrol, government subsidies for renewable energy, and the effects of uncertainty and technological change. Copyright (c) 2009 The Economic Society of Australia.

Macroeconomic Policy and Abba Lerner’s System of Functional Finance

June 2011

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88 Reads

Lerner’s system of functional finance, said to have provided the logical framework for Keynes’s policy, has largely been neglected in the recent literature and policy deliberation. This paper considers the relevance of Lerner’s system and at the same time provides a critique of the opposing “sound finance” doctrine that governs much of the current thinking on macroeconomic policy making in the shadows of the Global Financial Crisis (GFC).

Industry Structure Issues in the Water and Wastewater Sectors in Australia: A Comment on Abbott and Cohen

September 2010

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12 Reads

In this brief comment on Abbott and Cohen (2010), we identify two shortcomings in their paper on the Australian water and wastewater sectors. First, the empirical literature survey in the paper is deficient because it does not adequately cover the Australian scholarly work in the area. This neglect inter alia negates some of the recommendations for further research offered by Abbott and Cohen (2010). Second, the paper has overlooked important work on urban water markets in Australia undertaken by the Productivity Commission. This has also served to undermine some of the conclusions drawn in the paper.


The Changing Sociology of the Australian Academic Economic Profession

March 2010

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8 Reads

This article undertakes a census of how the Australian economics profession changed over the span of eleven years. It shows that the academic economics community has become more professionalised. It also explores which departments are expanding or contracting and whether there is any truth in the claim that the profession is becoming more Americanised. Copyright (c) 2010 The Economic Society of Australia.


A Look at the Long‐term Accumulation of Human Capital and Knowledge Intensity of Work in Australia

September 2011

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24 Reads

The history of Australia since the 1960s has been one of substantial economic change. One of the key drivers of this has been the growth in the importance of human capital formation and the knowledge intensification of occupations. This paper analyses the intensification of knowledge in different types of employment, over the longer term and the corresponding increase in human capital formation. In order to undertake this analysis, the O*NET measures of knowledge and Australian employment data are used to determine the degree to which human capital in Australia has changed. The paper concludes that there has been a slow but steady rise in the knowledge intensity of Australian occupations over the past thirty-five years, although not uniformly across different groups and consequent level of human capital.

Blended Learning in Finance: Comparing Student Perceptions of Lectures, Tutorials and Online Learning Environments Across Different Year Levels

March 2011

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553 Reads

In modern pedagogy, a blended approach is used comprising both face-to-face and online learning. This study investigates how undergraduate students majoring in finance view the different learning environments, and evaluates the changes in perception over the three years of the degree after controlling for gender, age, international ⁄ domestic student and English as a first language. Using a purpose designed survey instrument, students across the three years of undergraduate study rated the importance of lectures, tutorials and web-based learning environments in a blended learning model. The results indicate that there is still a strong preference for face-to-face learning. Additionally, there were significant differences in attitudes and perception by year level.

The Value of Don Bradman: Additional Revenue in Australian Ashes Tests

December 2004

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48 Reads

This study examines the impact of the Indian cricket team's performance in one day international cricket matches on returns on the Indian stock market. The main conclusion of the study is that there exists an asymmetric relationship between the performance of the Indian cricket team and stock returns on the Indian stock market. While a win by the Indian cricket team has no statistically significant upward impact on stock market returns, a loss generates a significant downward movement in the stock market. When Sachin Tendulker, India's most popular cricketer, plays the size of the downward movement in returns is larger.

Figure 1. Simplicity versus flexibility 
Table 2 . Specification of fiscal rules Specification Weak fiscal rules Strong fiscal rules EU rules 
Table 3 . Reforming the SGP: main proposals 
Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?

February 2003

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278 Reads

The Stability and Growth Pact is under fire. Problems have appeared in sticking to the rules. Proposals to reform the Pact or ditch it altogether abound. But is the Pact a flawed fiscal rule? Against established criteria for an ideal fiscal rule, its design and compliance mechanisms fare reasonably well. Where weaknesses are found, they tend to reflect trade-offs typical of supra-national arrangements. In the end, only a higher degree of fiscal integration would remove the inflexibility inherent in the recourse to predefined budgetary rules. This does not mean that the EU fiscal rules cannot be improved. Given the existing degree of political integration in EMU, however, internal adjustment rather than attempting to redesign the rules from scratch appears a more suitable way to bring about progress. Redefining the medium term budgetary target, improving transparency, tackling the pro-cyclical fiscal bias in good times, moving towards non-partisan application of the rules and improving transparency in the data can achieve both stronger discipline and higher flexibility.

Intra-Industry Trade and Adjustment Costs in the Australian Textile, Clothing and Footwear and Motor Vehicle Industries: A Comparative Case Study Approach*

December 2009

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35 Reads

Australian studies have focused on different dimensions of intra industry trade (IIT) between the manufacturing sector and the rest of the world at the disaggregated level, i.e. 1, 2, 3, 4 or 5 digit levels. The current study seeks to complement the existing literature by examining the IIT and hence output and employment performance of two different digit industries in the form of the textile, clothing and footwear (TCF) (2 digit) and motor vehicle (4 digit) industries because they are characterized by different factor intensity in production. Specifically, the former is fundamentally labour intensive whilst the latter is capital intensive in production. The central results reveal that the motor vehicle industry has exhibited a superior IIT and hence output and employment performance as compared to the TCF industry, as well as the manufacturing sector. The sophisticated capital goods produced and the capital intensive nature of motor vehicle production have made it possible to derive the cost benefits of large scale production which in turn has led to stronger export penetration. Moreover, the industry specific assistance measures which have been biased towards tax incentives for investment and R&D expenditure have favoured the motor vehicle industry's production and exports at the expense of the TCF industry, thereby reinforcing the former industry's stronger IIT and hence output and employment performance. Copyright (c) 2010 The Economic Society of Australia.

Advancing Water Trade: A Preliminary Investigation of Urban‐Irrigation Options Contracts in the Ovens Basin, Victoria, Australia

September 2010

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15 Reads

Climate change predictions include forecasts of higher variability in rainfall and river flows leading to greater uncertainty about future availability of water across urban and agricultural sectors. Under conditions of water scarcity, it makes economic sense to facilitate the transfer of water from low- to high-value users. This paper provides insights into the merits of water options contracts as a vehicle for facilitating trade and represents an alternative to the politically contentious permanent sale of water by agriculturalists. In addition, we provide some indicative results from an analysis of the feasibility of options contracts in an inter-sectoral setting by considering their deployment to remove urban/industrial water restrictions. A case study of the urban community of Wangaratta and upstream agricultural interests has been selected. The objective is to identify the conditions under which option contracts might work and to highlight the important contract design features that need to be considered.

Testing Comparative Advantage in Australian Broadacre Agriculture Under Climate Change: Theoretical and Empirical Models*

December 2009

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16 Reads

According to the conventional wisdom, Australia enjoys a comparative advantage in broadacre agriculture, despite the fact that little empirical research supporting this proposition has been reported in the literature. This paper seeks to survey the theoretical and empirical models that may potentially be used to test the theory of comparative advantage as it relates to broadacre agriculture under climate change. The implications of the analysis are explored. Copyright (c) 2010 The Economic Society of Australia.


Monetary and Fiscal Policy: How an Agreed Inflation Target Affects Fiscal Policy

March 2011

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20 Reads

When the 1989 legislation was passed giving the Reserve Bank of New Zealand a high degree of operational independence, with an overriding responsibility for achieving and maintaining stability in the general level of prices, the extent to which this would inevitably drive change in fiscal policy was not widely understood. It wasn’t long before the Government realised the inevitable inter-relationship.

Affordable Housing: Concepts and Policies

March 2009

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2,294 Reads

This article discusses the concepts of housing affordability and policies for increasing housing affordability. Most current measures of housing affordability used in Australia are based on the acquisition costs of housing. They define housing costs in nominal rather than in real terms and include mortgage repayments that are properly regarded as savings. Moreover, they do not account for household choice over type of house or household composition. The first part of this article proposes that measures of housing affordability should be based on real housing user costs or rents. Turning to policy issues, this article argues that housing affordability is essentially a household income problem made worse by government restrictions on housing supply. High housing costs do not reflect housing market failures. To reduce housing costs, the government should allow more housing in established and Greenfield areas. The government may also improve housing affordability by subsidising housing for low-income households. However, subsidies to urban infrastructure nearly always raise the price of land rather than reduce the price of housing. Also, the Australian government's proposed national housing and rental affordability funds are poorly defined and likely to be ineffective. Copyright (c) 2009 The Economic Society of Australia.

Causes and Consequences of Fragility in Africa: The Experience of the Greater Lakes Region

December 2010

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56 Reads

This article identifies the consequences of fragility in African states but with more focus on countries in the Greater Lakes region. Such countries constitute a development challenge given their enormous needs and difficulties associated with implementation of recovery and development programmes. Although there is no universally agreed definition of fragility, this study pays much attention to both national conflicts and those with a regional bearing. Given the scale and frequency of these conflicts, Africa has witnessed the destruction of institutions, infrastructures and systems which have impacted negatively on the growth of economies. The article reviews the causes and analyses the consequences of fragility and the conclusions are that the causes range from historical perspectives, social to economic. Similarly, the consequences not only include the destruction of human capital, institutions and infrastructures, but also the erosion of good governance and accountability. This article also emphasises the principles for engagement in the stabilisation, recovery and development programmes, but most important is the reorganisation of capacity constraints and political will as well as aligning interventions with local priorities and systems. The article concludes that provision of recovery and development programmes should be integrated within the local programmes for ownership and sustainability in such engagements and financing mechanisms should be aligned within the existing framework for efficiency and effectiveness.

Embedded Incentives in the Funding Arrangements for Residential Aged Care in Australia

September 2011

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35 Reads

We examine interventions by the Australian Government in the market for residential aged care and consider the impacts on the incentives of market participants. We find that providers are likely to have an incentive to discriminate against high-care residents, in favour of low-care residents. As a result, since high-care residents, unlike low-care residents, face few viable alternatives, many are forced into public hospital beds, which has placed pressure on the broader health system. Providers are “squeezed” between an inability to charge high-care residents a bond of any value and an inability to derive bonds of sufficient value from low-care residents, given the availability of substitutes. We stress the importance in policy design of fostering proper incentives and suggest a path for a program of microeconomic reform in health care.

Sharing the Burden: Understanding the Roles of Public and Private Insurance in Financing Aged Care

September 2011

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12 Reads

Reform of the aged-care financing system should be informed by objective, quantifiable evidence about how various strategies perform in achieving public policy goals such as target efficiency, prevention of catastrophic out-of-pocket expenditures, and system balance. In this context, I will discuss the relative merits of public and private insurance and what is needed to move the discussion of financing reform ahead in an objective quantifiable way.

Ageing, Labour Force Participation and Education: Comparing the Implications for Economic Growth in China and India

September 2010

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49 Reads

An ageing population will result, over the next forty years, in a fall in China’s labour force as the more youthful Indian labour force continues to grow. However, we find that growth in output per capita has been dominated, in both countries, by growth in labour productivity. China’s stronger labour productivity performance has resulted, until recently, from a stronger growth in their capital/labour ratio. Now, however, it is the growth of China’s total factor productivity, driven by a much stronger public investment in education, that keeps them ahead. To match China, India must increase participation in education and in the workforce, especially amongst women.

Two Taxation Agendas: The Gallop Government's First Term

January 2004

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14 Reads

This essay reviews the Gallop Government’s revenue raising and tax reform agendas, and considers why these two agendas were not integrated in a united policy framework to improve the long term structure of the state taxation regime in the State. In particular, consideration is given to why, over the first three years of the term, large annual increases in the more inefficient and distorting state taxes, especially stamp duty, were being introduced when a separate tax reform package was being developed and enacted.

Rediscovering the Condorcet Approach as an Aggregation Technique for Progress Measures

September 2011

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24 Reads

There are three main aggregation techniques designed for progress measurements to help facilitate the benchmarking and ranking of countries according to aggregated dimensions. They are: (i) additive methods; (ii) geometric aggregations; and (iii) non-compensatory multi-criteria analysis. Virtually, all measures utilise one of the first two techniques. This article will critically review these aggregation approaches. In doing so, this article will assert that the Condorcet approach, despite being overlooked by many major institutions, demands strong consideration for aggregating progress measures. The theoretical implications of using the Condorcet method will be explored. An empirical application of the Condorcet model is undertaken on the Resource–Infrastructure–Environment Index to test the validity of this approach as an aggregation technique for progress measures.

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