Volume 38, Issue 2, 2008

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Articles:

  • A Message from the Editors (Uwe Dulleck, Benno Torgler and Clevo Wilson)
  • Knock, Knock: Where is the Evidence for Dangerous Human-Caused Global Warming? (Robert M. Carter)
  • Uncertainty and Climate Change Policy (John Quiggin)
  • Industry Policy for a Productive Australia (Gary Banks)
  • Imported Equipment, Human Capital and Economic Growth in Developing Countries (Uwe Dulleck, Neil Foster)
  • Foreign Aid and Economic Growth: A Cointegration Analysis of the Six Poorest African Countries (Girijasankar Mallik)
  • Excess Demand, Market Power and Price Adjustment in Clearinghouse Auction Markets for Water (Edward Oczkowski)
  • National and Regional Impacts of Increasing Non-Agricultural Market Access by Developing Countries – the Case of Pakistan (Muhammad Shoaib Butt, Jayatilleke S Bandara)
  • Causes and Consequences of Tax Morale: An Empirical Investigation (Benno Torgler, Ihsan C. Demir, Alison Macintyre, Markus Schaffner)
  • Practitioner's Corner: Introduction (Stan Hurn, Kenneth Lindsay)
  • The Devil is in the Detail: Hints for Practical Optimisation (T. M. Christensen, A. S. Hurn, Kenneth Lindsay)
  • Book Reviews
  • Special Issue 2009: A Call for Papers, The Economics of Limited and Open Access Publishing

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A Message from the Editors

Uwe Dulleck, Benno Torgler and Clevo Wilson

Pages: 173-174

Introduction:
We are proud to publish the second issue of Economic Analysis and Policy (EAP) in 2008 as the new editors. While editorial messages are usually rare events, EAP is currently undergoing several changes and hopefully we hope that these changes will improve the quality of the journal.
One of the changes we are introducing in this issue is a new section called the practitioners forum, edited by Prof. Stan Hurn of the Queensland University of Technology (QUT) and Prof. Kenneth Lindsay of the University of Glasgow in the UK. The practitioners corner addresses issues in applying current econometric ideas to current topics of economic and social science research. The focus is on addressing difficulties in the use and implementation of new techniques. Furthermore, this section deals with certain paradoxes, which remain poorly explained or lack evidence in the real world. While this idea of introducing a practitioners corner is by no means new (cf. the Oxford Bulletin of Economics and Statistics) EAP hopes to contribute further to this tradition. We would very much like to encourage applied economists to share their expertise on problems and dilemmas of implementing current econometric methods with the readership of EAP. The first contribution is by Christensen, Hurn and Lindsay on ‘Practical Optimisation’.

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Knock, Knock: Where is the Evidence for Dangerous
Human-Caused Global Warming?

Carter, Robert M.

Pages: 177-202

Abstract: -

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Uncertainty and Climate Change Policy

Quiggin, John

Pages: 203-210

Abstract:
The paper consists of a summary of the main sources of uncertainty about climate change, and a discussion of the major implications for economic analysis and the formulation of climate policy. Uncertainty typically implies that the optimal policy is more risk-averse than otherwise, and therefore enhances the case for action to mitigate climate change.

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Industry Policy for a Productive Australia

Banks, Gary

Pages: 213-229

Abstract: -

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Imported Equipment, Human Capital and Economic Growth in Developing Countries

Dulleck, Uwe and Foster, Neil

Pages: 233-250

Abstract:
That both equipment investment and human capital affect growth in developing countries is a well established fact in the empirical growth literature. Few studies have asked to what extent human capital and equipment investment are complements, with human capital affecting the ability of developing economies to make use of investment in capital goods. We study the effect of equipment investment on the growth of developing countries and the interrelationship between such investment and human capital. We find a complex interrelationship between equipment investment and human capital. Generally, the relationship between equipment investment and growth is lowest, and often negative, for countries with low levels of human capital, highest for countries within an intermediate range and somewhat in between for countries with the highest level of human capital.

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Foreign Aid and Economic Growth: A Cointegration Analysis of the Six Poorest African Countries

Malik, Girijasankar

Pages: 251-260

Abstract:
After more than thirty five years of development assistance, the people in the poorest African countries are still living in poverty. Their real per capita income since 1965 has either declined or remained stagnant. The obvious question is: why could these countries not break the poverty trap despite receiving large inflows of foreign aid? This paper examines the effectiveness of foreign aid for economic growth in the six poorest and highly aid dependent African countries, namely the Central African Republic, Malawi, Mali, Niger, Sierra Leone and Togo. Using cointegration analysis, we have found that a long run relationship exists between per-capita real GDP, aid as a percentage of GDP, investment as a percentage of GDP and openness. However, the long run effect of aid on growth was found to be negative for most of these countries.

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Excess Demand, Market Power and Price Adjustment in Clearinghouse Auction Markets for Water

Oczkowski, Edward

Pages: 261-276

Abstract:
This paper examines price variations in Northern Victorian (Australia) ‘clearinghouse’ auction markets for temporary water entitlements. The analysis assesses the role that the excess demand of unsatisfied bids and the market power of large volume bids, have on price variations. For four seasons (2002/3 to 05/6) and trading in the Greater Goulburn zone, results indicate that the excess demand of unsatisfied bids does significantly explain price variations, with elasticities ranging from 0.12 to 0.19. This relationship appears to be a result of the natural equilibrating nature of clearinghouse markets, rather than prices adjusting to previous levels of excess demand. Strategically, this implies that it is the accurate anticipation of demand and supply changes which is likely to be of most benefit to market traders. Market power is also illustrated to potentially impact on price variations, however, its impact appears to have been diminished in more recent seasons. Results suggest that large average demand bids (compared to average supply bids) negatively impact on prices with elasticities from -0.04 to -0.12. These results suggest that large demanders have demonstrated their ability to time their market bids to reap the rewards of lower market prices.

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National and Regional Impacts of Increasing Non-Agricultural Market Access by Developing Countries – the Case of Pakistan

Butt, Muhammad Shoaib and Bandara, Jayatilleke S.

Pages: 277-311

Abstract:
The US, the EU, Brazil and India met in Germany in June 2007 with a view to bridging differences between developed and developing countries on the Doha Round of trade negotiations. However, the talks broke down because of disagreement on the intertwined issues of agricultural protection and Non-Agricultural Market Access (NAMA). This study uses the first regional computable general equilibrium (CGE) model of Pakistan to evaluate the national and regional impacts of increasing NAMA as per two actual proposals of the US and the EU and Brazil and India at the 2007 meeting. The results suggests that overall benefits to Pakistan’s economy—in terms of increased exports and real GDP—will plausibly be higher under the NAMA proposal advocated by the US and the EU than that advanced by Brazil and India. However, inter-industry inequalities in Pakistan and the existing regional disparities between the largest region and the three smaller regions of the country are projected to be higher under the proposal of the US and EU. Drawing on the results of the CGE simulations, the study puts forward a NAMA proposal which can be beneficial and acceptable to both developed and developing countries. A breakthrough in NAMA may also break the impasse over the agricultural issues because of the interdependence of the two issues.

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Causes and Consequences of Tax Morale: An Empirical Investigation

Torgler, Benno, Demir, Ihsan C., Macintyre, Alison and Schaffner, Markus

Pages: 313-339

Abstract:
Many taxpayers truthfully declare their income to the tax administration. Why is this the case given that there is a relatively low likelihood of being audited? One answer could be found in tax morale of the citizens. Using micro data sets from the USA and Turkey, we find a significant correlation between tax morale and tax evasion after controlling for a variety of factors. Furthermore, we analyse tax morale as a dependent variable and study the determinants that shape it. The results indicate that factors such as the tax administration, tax system and the perceived tax burden, tax awareness, compliance perceptions, trust in officials, the state and others, institutional quality such as corruption, the willingness to obey and religiosity have a relatively strong impact on tax morale.

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Practitioner's Corner: Introduction

Stan Hurn and Kenneth Lindsay

Pages: 343-343

Abstract:
The Practitioners’ Forum is a new initiative by Economic Analysis and Policy and will be a regular feature of the journal. The role of the Forum will be to publish papers whose main concern is the practice of applied econometrics. Indicative areas of interest include, but are not limited to, the following.

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The Devil is in the Detail: Hints for Practical Optimisation

Christensen, T.M., Hurn, A.S. and Lindsay, K.A.

Pages: 345-368

Abstract:
Finding the minimum of an objective function, such as a least squares or negative log-likelihood function, with respect to the unknown model parameters is a problem often encountered in econometrics. Consequently, students of econometrics and applied econometricians are usually well-grounded in the broad differences between the numerical procedures employed to solve these problems. Often, however, relatively little time is given to understanding the practical subtleties of implementing these schemes when faced with illbehaved problems. This paper addresses some of the details involved in practical optimisation, such as dealing with constraints on the parameters, specifying starting values, termination criteria and analytical gradients, and illustrates some of the general ideas with several instructive examples.

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Book Reviews:

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Special Issue 2009 - A Call for Papers (THE ECONOMICS OF LIMITED AND OPEN ACCESS PUBLISHING)

Zimmermann, Christian

Pages: 374-374

Abstract:
Economic Analysis and Policy (EAP) is a 38 year old journal published by the Economic Society of Australia (Queensland branch) that has just adopted an open access policy. To celebrate this important step, EAP intends to publish in 2009 a special issue on the Economics of publishing, with special reference to different business models, like the commercial, university press, open access and pre-print models. Academic publishing is undergoing a profound transformation that we wish to better understand. EAP particularly seeks to publish passionate, critical, and controversial articles. It is open for orthodox but also unorthodox approaches. We expect to publish 5 to 8 articles. They will be peer-reviewed under the guest editorship of Christian Zimmermann (University of Connecticut). Please submit your manuscript in PDF format through the online submission. Submission deadline: 1 November 2008

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