This paper examines the welfare loss caused by import restrictions on bananas in Australia, which we argue to be a classic rent‐seeking policy. We propose a new micro‐model of agricultural production under uncertainty and production delays and ask whether, due to cyclones and the timing of planting decisions, Australian banana import restrictions have turned into a form of export promotion. We exploit two cyclones as exogenous supply shocks, and use new data to estimate the price elasticity of demand for bananas in Australia to be around −0.5. We estimate the total welfare loss of Australia's banana import restrictions to be over A$150 million per year, implying a yearly subsidy of more than a quarter of a million dollars per banana grower.
{"title":"A Tale of Cyclones, Exports and Surplus Forgone in Australia's Protected Banana Industry","authors":"Chia Chiun Ko, P. Frijters, Gigi Foster","doi":"10.1111/1475-4932.12414","DOIUrl":"https://doi.org/10.1111/1475-4932.12414","url":null,"abstract":"This paper examines the welfare loss caused by import restrictions on bananas in Australia, which we argue to be a classic rent‐seeking policy. We propose a new micro‐model of agricultural production under uncertainty and production delays and ask whether, due to cyclones and the timing of planting decisions, Australian banana import restrictions have turned into a form of export promotion. We exploit two cyclones as exogenous supply shocks, and use new data to estimate the price elasticity of demand for bananas in Australia to be around −0.5. We estimate the total welfare loss of Australia's banana import restrictions to be over A$150 million per year, implying a yearly subsidy of more than a quarter of a million dollars per banana grower.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"507 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134623941","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper uses detailed information about household supermarket purchases from the Australian Nielsen Homescan Survey to estimate price elasticities of demand for a range of food categories. An instrumental variable strategy is employed to address endogeneity issues. The estimates obtained from our analysis are used to study five scenarios in which the rate of the GST on food categories is increased or in which the tax base is broadened to include currently GST-free categories. Our findings reveal that there is considerable scope for raising revenue by increasing the rate and broadening the tax base. Low-income households (the bottom 40% of the income distribution) can be compensated for the loss in consumption induced by a tax increase. We demonstrate that increasing the rate of the GST from 10% to 15% and broadening the tax base would increase tax revenues by up to $8.6 billion, whereas compensating lowincome households would require up to $2.2 billion. We also provide a detailed list of tax revenues and compensation payments associated with each food category to allow readers to “build their own tax reform” by choosing the categories that should be taxed.
{"title":"GST Reform in Australia: Implications of Estimating Price Elasticities of Demand for Food","authors":"S. Hasan, Mathias Sinning","doi":"10.1111/1475-4932.12412","DOIUrl":"https://doi.org/10.1111/1475-4932.12412","url":null,"abstract":"This paper uses detailed information about household supermarket purchases from the Australian Nielsen Homescan Survey to estimate price elasticities of demand for a range of food categories. An instrumental variable strategy is employed to address endogeneity issues. The estimates obtained from our analysis are used to study five scenarios in which the rate of the GST on food categories is increased or in which the tax base is broadened to include currently GST-free categories. Our findings reveal that there is considerable scope for raising revenue by increasing the rate and broadening the tax base. Low-income households (the bottom 40% of the income distribution) can be compensated for the loss in consumption induced by a tax increase. We demonstrate that increasing the rate of the GST from 10% to 15% and broadening the tax base would increase tax revenues by up to $8.6 billion, whereas compensating lowincome households would require up to $2.2 billion. We also provide a detailed list of tax revenues and compensation payments associated with each food category to allow readers to “build their own tax reform” by choosing the categories that should be taxed.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114543607","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Despite the emergence of intractable economic stagnation in most developed countries, spectacular failures in financial markets and the empirical refutation of hypotheses central to economic policy for the last three decades, the economics profession remains largely complacent. Some reasons for this complacency are discussed, along with some suggestions for future directions.
{"title":"The State of Economics in 2012: Complacency Amid Crisis","authors":"J. Quiggin","doi":"10.1111/1475-4932.12037","DOIUrl":"https://doi.org/10.1111/1475-4932.12037","url":null,"abstract":"Despite the emergence of intractable economic stagnation in most developed countries, spectacular failures in financial markets and the empirical refutation of hypotheses central to economic policy for the last three decades, the economics profession remains largely complacent. Some reasons for this complacency are discussed, along with some suggestions for future directions.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123670780","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A buyer group is a subset of downstream firms that pool their demand for an upstream input to negotiate a better deal with suppliers. This study develops a simple model that shows how a buyer group changes market behaviour, focusing on the impact on downstream firms outside the buyer group. This impact critically depends on whether or not the buyer group and the supplier can write a contract contingent on the market price paid by outsiders. With contingent contracts, the price paid by firms outside the buyer group rises and their profits fall. If such contracts are infeasible, possibly due to legal concerns, the market price is lower after the buyer group forms. These results raise issues for antitrust authorities in Australia, Europe, the USA and elsewhere who evaluate buyer-group agreements. We extend the model to consider the situation where a supplier can commit in advance to the market price. In this situation, the bargaining power of the buyer group becomes relevant with the market price inversely related to this bargaining power. We illustrate our results with a simple example.
{"title":"Buyer Groups, Antitrust and Outsiders","authors":"Stephen P. King","doi":"10.1111/1475-4932.12015","DOIUrl":"https://doi.org/10.1111/1475-4932.12015","url":null,"abstract":"A buyer group is a subset of downstream firms that pool their demand for an upstream input to negotiate a better deal with suppliers. This study develops a simple model that shows how a buyer group changes market behaviour, focusing on the impact on downstream firms outside the buyer group. This impact critically depends on whether or not the buyer group and the supplier can write a contract contingent on the market price paid by outsiders. With contingent contracts, the price paid by firms outside the buyer group rises and their profits fall. If such contracts are infeasible, possibly due to legal concerns, the market price is lower after the buyer group forms. These results raise issues for antitrust authorities in Australia, Europe, the USA and elsewhere who evaluate buyer-group agreements. We extend the model to consider the situation where a supplier can commit in advance to the market price. In this situation, the bargaining power of the buyer group becomes relevant with the market price inversely related to this bargaining power. We illustrate our results with a simple example.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131713576","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-03-01DOI: 10.1111/j.1475-4932.2011.00765.x
D. Léonard, Ngo van Long
The purpose of this article is to present a model of the endogenous evolution of a society's property rights regime. We use an overlapping-generations framework in which capital accumulation takes place. Property rights enforcement is costly. Individuals decide collectively in each period the appropriate level of enforcement and pay taxes to finance it. Poor households have less interest in the enforcement of property rights than rich households. We also consider heterogenous households with different tastes. They differ on their choice of law enforcement. As their wealth and numbers evolve, political power may change sides, hence the property rights regime also evolves.
{"title":"Endogenous Changes in Property Rights Regime","authors":"D. Léonard, Ngo van Long","doi":"10.1111/j.1475-4932.2011.00765.x","DOIUrl":"https://doi.org/10.1111/j.1475-4932.2011.00765.x","url":null,"abstract":"The purpose of this article is to present a model of the endogenous evolution of a society's property rights regime. We use an overlapping-generations framework in which capital accumulation takes place. Property rights enforcement is costly. Individuals decide collectively in each period the appropriate level of enforcement and pay taxes to finance it. Poor households have less interest in the enforcement of property rights than rich households. We also consider heterogenous households with different tastes. They differ on their choice of law enforcement. As their wealth and numbers evolve, political power may change sides, hence the property rights regime also evolves.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"154 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"118281887","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2009-03-01DOI: 10.1111/j.1475-4932.2008.00525.x
Mardi Dungey, A. Pagan
Dungey and Pagan (2000) present a SVAR model of the Australian economy which models macroeconomic outcomes as transitory deviations from a deterministic trend. In this paper we extend that model in two directions. First, we relate it to an emerging literature on Dynamic Stochastic General Equilibrium modelling of small open economies. Second, we allow for both transitory and permanent components in the series and show how this modification has an impact on the design of macroeconomic models.
{"title":"Extending a SVAR Model of the Australian Economy","authors":"Mardi Dungey, A. Pagan","doi":"10.1111/j.1475-4932.2008.00525.x","DOIUrl":"https://doi.org/10.1111/j.1475-4932.2008.00525.x","url":null,"abstract":"Dungey and Pagan (2000) present a SVAR model of the Australian economy which models macroeconomic outcomes as transitory deviations from a deterministic trend. In this paper we extend that model in two directions. First, we relate it to an emerging literature on Dynamic Stochastic General Equilibrium modelling of small open economies. Second, we allow for both transitory and permanent components in the series and show how this modification has an impact on the design of macroeconomic models.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"58 23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"118707794","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2007-12-01DOI: 10.1111/j.1475-4932.2007.00429.x
Chongwoo Choe, C. Hyde
This paper studies the multinational firm's choice of transfer prices when the firm uses separate transfer prices for tax and managerial incentive purposes, and when there is penalty for non-compliance with the arm's length principle. The optimal incentive transfer price is shown to be a weighted average of marginal cost and the optimal tax transfer price plus an adjustment by a fraction of the marginal penalty for non-arm's length pricing. Insofar as the tax rates are different in different jurisdictions, the firm optimally trades off the benefits of tax arbitrage against the penalty for non-arm's length pricing.
{"title":"Multinational Transfer Pricing, Tax Arbitrage and the Arm's Length Principle","authors":"Chongwoo Choe, C. Hyde","doi":"10.1111/j.1475-4932.2007.00429.x","DOIUrl":"https://doi.org/10.1111/j.1475-4932.2007.00429.x","url":null,"abstract":"This paper studies the multinational firm's choice of transfer prices when the firm uses separate transfer prices for tax and managerial incentive purposes, and when there is penalty for non-compliance with the arm's length principle. The optimal incentive transfer price is shown to be a weighted average of marginal cost and the optimal tax transfer price plus an adjustment by a fraction of the marginal penalty for non-arm's length pricing. Insofar as the tax rates are different in different jurisdictions, the firm optimally trades off the benefits of tax arbitrage against the penalty for non-arm's length pricing.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"87 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120214133","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-09-01DOI: 10.1111/j.1475-4932.2006.00328.x
J. MacKinnon
There are many bootstrap methods that can be used for econometric analysis. In certain circumstances, such as regression models with independent and identically distributed error terms, appropriately chosen bootstrap methods generally work very well. However, there are many other cases, such as regression models with dependent errors, in which bootstrap methods do not always work well. This paper discusses a large number of bootstrap methods that can be useful in econometrics. Applications to hypothesis testing are emphasized, and simulation results are presented for a few illustrative cases.
{"title":"Bootstrap Methods in Econometrics","authors":"J. MacKinnon","doi":"10.1111/j.1475-4932.2006.00328.x","DOIUrl":"https://doi.org/10.1111/j.1475-4932.2006.00328.x","url":null,"abstract":"There are many bootstrap methods that can be used for econometric analysis. In certain circumstances, such as regression models with independent and identically distributed error terms, appropriately chosen bootstrap methods generally work very well. However, there are many other cases, such as regression models with dependent errors, in which bootstrap methods do not always work well. This paper discusses a large number of bootstrap methods that can be useful in econometrics. Applications to hypothesis testing are emphasized, and simulation results are presented for a few illustrative cases.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127874413","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-09-01DOI: 10.1111/j.1475-4932.2006.00331.x
Wai-mun Chia, J. Alba
We examine the impact of terms-of-trade shocks on key macroeconomic variables by numerically solving a dynamic stochastic general equilibrium model of a small open economy. The model considers nominal price rigidity under different exchange rate regimes. The numerical solutions obtained are consistent with the empirical regularities documented by Broda (2004), in which output responses to shocks are smoother in floats than in pegs; in moving from pegs to floats, the rise in nominal exchange rate volatility is coupled by the rise in real exchange rate volatility; and in both exchange rate regimes, net foreign assets is the most volatile variable.
{"title":"Terms-of-Trade Shocks and Exchange Rate Regimes in a Small Open Economy","authors":"Wai-mun Chia, J. Alba","doi":"10.1111/j.1475-4932.2006.00331.x","DOIUrl":"https://doi.org/10.1111/j.1475-4932.2006.00331.x","url":null,"abstract":"We examine the impact of terms-of-trade shocks on key macroeconomic variables by numerically solving a dynamic stochastic general equilibrium model of a small open economy. The model considers nominal price rigidity under different exchange rate regimes. The numerical solutions obtained are consistent with the empirical regularities documented by Broda (2004), in which output responses to shocks are smoother in floats than in pegs; in moving from pegs to floats, the rise in nominal exchange rate volatility is coupled by the rise in real exchange rate volatility; and in both exchange rate regimes, net foreign assets is the most volatile variable.","PeriodicalId":346063,"journal":{"name":"Wiley-Blackwell: Economic Record","volume":"2017 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128028035","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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