nep-pbe New Economics Papers
on Public Economics
Issue of 2006‒03‒25
27 papers chosen by
Peren Arin
Massey University

  1. Fiscal Shocks, the Current Account, and the Exchange Rate By Faik Koray; W. Douglas McMillin
  2. Fiscal competition, revenue sharing, and policy-induced agglomeration By Jean, HINDRIKS; Susana , PERALTA; Sholmo , WEBER
  3. Why Are Capital Income Taxes So High? By Floden, Martin
  4. Ageing and the sustainability of Dutch public finances. By Casper van Ewijk; Nick Draper; Harry ter Rele; Ed Westerhout
  5. The Welfare State -- Background, Achievements, Problems By Lindbeck, Assar
  6. One Sector Models, Indeterminacy, and Productive Public Spending By Sergey Slobodyan
  7. Carbon Taxation, Prices and Welfare in New Zealand By John Creedy; Catherine Sleeman
  8. Macroeconomic impacts of the reform of public services in Uruguay - A CGE analysis By María Inés Terra; Alvaro Forteza; Gabriel Katz; Andrés Pereyra
  9. Team incentives in public organisations; an experimental study. By Jana Vyrastekova; Sander Onderstal; Pierre Koning
  10. When the Quality of a Nation triggers Emigration By Hendrik P. van Dalen; Kène Henkens
  11. Beans for Breakfast? How Exportable Is the British Workfare Model? By Olivier Bargain; Kristian Orsini
  12. Border Wars: Tax Revenues, Annexation, and Urban Growth in Phoenix By Carol E. Heim
  13. Does Contributing Sequentially Increase the Level of Cooperation in Public Goods Games ? An Experimental Investigation By David Masclet; Marc Willinger
  14. Is VAT the Best Way to Impose a General Consumption Tax in Developing Countries? By Richard M. Bird
  15. Public Investment in Infrastructure and Productivity Growth: Evidence from the Venezuelan Manufacturing Sector By José Pineda; Francisco Rodríguez
  16. Accounting for Population Ageing in Tax Microsimulation Modelling by Survey Reweighting By Lixin Cai; John Creedy; Guyonne Kalb
  17. 'Making Work Pay' in a Rationed Labour Market By Olivier Bargain; Marco Caliendo; Peter Haan; Kristian Orsini
  18. Competition and Public School Efficiency in Sweden By Waldo, Staffan
  19. School Vouchers and Public School Productivity - The Case of the Swedish Large Scale Voucher Program By Waldo, Staffan
  20. Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy By Pelikan, Pavel
  21. Making Philippine Cities Child Friendly: Voices of Children in Poor Communities By Mary Racelis; Angela Desiree M. Aguirre; Liane Pena-Alampay; Felisa U. Etemadi; Teresa Banaynal Fernandez; Rosemarie Matias Fernandez; Marita Castro Guevara; Jerome A. Serrano; Ching Li Ye; Eunice Anne M. Enriquez; Careza P. Reyes; Institute of Philippine Culture; UNICEF Innocenti Research Centre
  22. Import duty incidence By Paul Veenendaal
  23. Does More Generous Student Aid Increase Enrolment Rates into Higher Education? Evaluating the German Student Aid Reform of 2001 By Hans J. Baumgartner; Viktor Steiner
  24. Risk Sharing through Financial Markets with Endogenous Enforcement of Trades By Thorsten Koeppl
  25. Structure of Public Governance Institutions and Their Impact on Delocalisation of Labour-Intensive Industries By Kaarel Kilvits; Alari Purju
  26. Adult Equivalence Scales, Inequality and Poverty By John Creedy; Catherine Sleeman
  27. Optimal safety standards for dike-ring areas. By Carel Eijgenraam

  1. By: Faik Koray; W. Douglas McMillin
    Abstract: This paper investigates empirically, using a VAR model, the response of the exchange rate and the current account to fiscal policy shocks for the U.S. economy during the period 1981:3-2005:3. The results indicate that positive shocks to real government purchases generate a persistent increase in the budget deficit, a transitory expansionary effect on output, and a long-lived positive effect on the price level, but reduce the real interest rate. Simultaneously, and consistent with interest parity, the real exchange rate depreciates, and the current account improves. Negative shocks to net taxes also generate a persistent increase in the budget deficit, and the effects on the model variables are generally in the same direction, but are almost never significant. Our results indicate it is inappropriate to attribute rising current account deficits to expansionary fiscal policy shocks, even though these shocks generate long-lived increases in the budget deficit.
  2. By: Jean, HINDRIKS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Susana , PERALTA; Sholmo , WEBER
    Abstract: Revenue sharing can be used to discourage low tax regions from competing for capital and firms with high tax regions. However, with heterogeneous regions, revenue sharing involves net transfers across regions and creates a “moral-hazard” problem - that is, regions may want to invest less in market fostering public good when the benefits are shared across nations. This paper analyzes these costs and benefits of revenue sharing. When asymmetric regions compete in capital income taxes only, we show that revenue sharing can be desirable for the high tax region if it is pushed far enough (i.e., J-curve effect), while tax harmonization is always harmful for the low tax region. When regions also compete through public investments, we find that tax competition distorts (downards) public investments. While revenue sharing discourages public investments due to moral-hazard effect, it remains beneficial in most cases. Moreover, there are new agglomeration forces resulting from public investments because the inflow of capital raises the incentive for public investments which in turn attract more capital. This leads to the possibility of policy-induced agglomeration (which is different from the classical agglomeration forces in the New Economic geography).
    Keywords: Heterogeneous Regions; Fiscal Federalism; Revenue Sharing; Moral Hazard; Agglomeration
    JEL: C72 H23 H70
    Date: 2005–12–15
  3. By: Floden, Martin (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: The Ramsey optimal taxation theory implies that the tax rate on capital income should be zero in the long run. This result holds even if the social planner only cares about workers that do not hold assets, or if the planner only cares about any other group in the economy. This paper demonstrates that although all households agree that capital income taxation should be eliminated in the long run, they do not agree on how to eliminate these taxes. Wealthy households would prefer a reform that is funded mostly by higher taxes on labor income while households with little wealth would prefer a reform that is funded mostly by high taxes on initial wealth. Pareto improving reforms typically exist, but the welfare gains of such reforms are modest.
    Keywords: optimal taxation; inequality; redistribution
    JEL: E60 H21
    Date: 2006–03–08
  4. By: Casper van Ewijk; Nick Draper; Harry ter Rele; Ed Westerhout
    Abstract: The ageing of the population jeopardises the sustainability of public finances in the Netherlands. The doubling of the ratio between the number of retirees and the number of workers destroys the balance between future public expenditure and tax revenues. Indeed, the increase in expenditure on public pensions and health and long-term care will outweigh the increase in tax revenues. Budgetary reforms are therefore necessary in order to avoid that future generations will have to raise taxes or economize on public expenditure. <P> Reforms in the field of social security of the last few years are a step in the right direction, but are insufficient. In particular, the decline of interest rates and the reduced wealth of pension funds have worsened the sustainability of public finances. The effects of reforms on the intergenerational balance are important for the question which further reforms are most attractive.
    Keywords: Ageing; public finances; intergenerational balance
    JEL: H62 J11
    Date: 2006–03
  5. By: Lindbeck, Assar (The Research Institute of Industrial Economics)
    Abstract: This paper starts out with a brief discussion of the historical background, the justifications and the political forces behind the built up of the modern welfare state. It also summarizes its major achievements in terms of economic efficiency and redistribution. The paper also tries to identify some major problems of contemporary welfare-state arrangements, differentiating exogenous shocks from endogenous behaviour adjustments by individuals to the welfare state itself. The latter include tax distortions, moral hazard, and endogenous changes in social norms concerning work and benefit dependency.
    Keywords: Justifications for Welfare State; Incentive Problems; Moral Hazard; Social Norms
    JEL: H40 H53 H55 J22
    Date: 2006–02–27
  6. By: Sergey Slobodyan
    Abstract: This paper studies the influence of different modelling assumptions on the determinacy of the steady state in one—sector models of economic growth with externalities in the production function. We show that productive public spending subject to congestion, combined with variable capital utilization, can lead to indeterminacy at very low degrees of social increasing returns to scale. We perform a calibration of the model to the tax regimes observed in the USA. We shed some light on the conflicting effects of progressive taxation on the steady state stability reported in the literature. Finally, we extensively discuss the features of the model that lead to an indeterminate rather than an explosive steady state once the saddle—path stability is broken.
    Keywords: indeterminacy, absolute instability, productive public spending, progressive taxation.
    JEL: E32 E62 H41
    Date: 2006–03
  7. By: John Creedy; Catherine Sleeman
    Abstract: This paper examines the effects on consumer prices arising from imposing a carbon tax in New Zealand, using information about inter-industry transactions and the use of fossil fuels by industries. The welfare effects of the carbon tax are examined for a range of different household types. Finally, overall measures of inequality are reported.
    Keywords: Carbon tax; equivalent variations; excess burdens; inequality
    JEL: H23 H31 Q58 D57
    Date: 2005
  8. By: María Inés Terra (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Alvaro Forteza (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Gabriel Katz (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Andrés Pereyra (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: This paper investigates the macroeconomic impacts of the reform of public services in Uruguay. A computable general equilibrium (CGE) model is used to simulate different policy scenarios, analyzing the reforms of the regulatory framework of public services, changes in their investment policies, modifications in the competitive environment and reforms in their tax structure. The results show that the macroeconomic effects of the proposed reforms are relatively small.
    Keywords: Social Accounting Matrix, Computable General Equilibrium Models, public services, public sector reform.
    JEL: E17 H11 H32 L42
    Date: 2005–12
  9. By: Jana Vyrastekova; Sander Onderstal; Pierre Koning
    Abstract: Using a simple production game, we investigate whether public firms perform better when they increase the power of their workers’ incentive schemes. In a laboratory experiment, subjects choose between a ‘public firm’ and a ‘private firm’ with team and individual incentives, respectively. When exposed to individual incentives, workers in the public firm increase effort in one parametrisation, but show a decrease in another. One reason for the latter observation is that reciprocators self-select in the public firm, rendering cooperation profitable.
    Keywords: Personnel Economics; Game theory; Experiments; Nonprofit organizations and public enterprise
    JEL: M5 C7 C9 L3
    Date: 2006–03
  10. By: Hendrik P. van Dalen (Erasmus Universiteit Rotterdam, and NIDI); Kène Henkens (NIDI)
    Abstract: Why do people leave high-income countries with extensive welfare states? This article will examine what underlies the emigration intentions of native-born inhabitants of one industrialized country in particular: the Netherlands. To understand emigration from high-income countries we focus not only on factors that refer to individual characteristics, but also on the perception of the quality of the public domain, which involves institutions (social security, educational system, law and order) as well as the 'public goods' these institutions produce: social protection, safety, environmental quality, education, etc. Based on data about the emigration intentions of the Dutch population collected during the years 2004-2005 we conclude that besides traditional characteristics of potential emigrants - young, single, male, having a network in the country of destination, higher educated, seeking new sensations - modern-day emigrants are motivated not so much by private circumstances but by a longing for a better public domain. In particular, emigrants are in search of a better quality of life as approximated by the presence of nature, space, silence, and a less populated country. To gauge the effect of the quality of the public domain, a counterfactual scenario is offered, which suggests that a perception of severe neglect of the public domain substantially increases the pressure to emigrate. Under this scenario, approximately 20 percent of the Dutch population would express an intention to emigrate. Compared with the level of emigration intentions measured today, this represents an increase by a factor of 5.
    Keywords: emigration; international migration; population pressure; public goods; externalities; brain drain
    JEL: F22 H4 J24 J61
    Date: 2006–03–15
  11. By: Olivier Bargain (IZA Bonn); Kristian Orsini (K.U. Leuven)
    Abstract: Social assistance and inactivity traps have long been considered amongst the main causes of the poor employment performance of EU countries. The success of New Labour has triggered a growing interest in instruments capable of combining the promotion of responsibility and self-sufficiency with solidarity with less skilled workers. Making-work-pay (MWP) policies, consisting of transfers to households with low earning capacity, have quickly emerged as the most politically acceptable instruments in tax-benefit reforms of many Anglo Saxon countries. This chapter explores the impact of introducing the British Working Families' Tax Credit in three EU countries with rather different labor market and welfare institutions: Finland, France and Germany. Simulating the reform reveals that, while first round effects on income distribution is considerable, the interaction of the new instrument with the structural characteristics of the economy and the population may lead to counterproductive second round effects (i.e. changes in economic behavior). The implementation of the reform, in this case, could only be justified if the social inclusion (i.e. transition into activity) of some specific household types (singles and single mothers) is valued more than a rise in the employment per se.
    Keywords: tax-benefit systems, in-work benefits, microsimulation, household labor supply
    JEL: C25 C52 H31 J22
    Date: 2006–03
  12. By: Carol E. Heim
    Abstract: Phoenix and neighboring municipalities, like many in the South and West, pursued a growth strategy based on annexation in the decades after World War II. This paper explores the link between annexation and competition for tax revenues. After discussing arguments for annexation, it traces the history of annexation in the Phoenix metropolitan area. A long-running series of "border wars" entailed litigation, pre-emptive annexations, and considerable intergovernmental conflict. The paper argues that tax revenues have been a key motivation for annexation, particularly since the 1970s. It then considers several related policy issues and argues that while opportunities for annexation are becoming more limited, competition for tax revenues (particularly sales tax revenues) continues to be fierce and to create dilemmas for municipalities in the region.
    JEL: H71 H77 N92 R51
    Date: 2006
  13. By: David Masclet (CREM - Centre de Recherche en Economie et Management - - [CNRS : UMR6211] - [Université Rennes I][Université de Caen] - []); Marc Willinger (LAMETA - Laboratoire Montpellierain d'économie théorique et appliquée - - [CNRS : UMR5474][INRA] - [Université Montpellier I] - [Ecole Nationale Supérieure Agronomique de Montpellier])
    Abstract: We run a series of experiments in which subjects have to choose their level of contribution to a pure public good. Our design differs from the standard public good game with respect to the decision procedure. Instead of deciding simultaneously in each round, subjects are randomly ordered in a sequence which differs from round to round. We compare sessions in which subjects can observe the exact contributions from earlier decisions ("Sequential treatment with Information") to sessions in which subjects decide sequentially but cannot observe earlier contributions ("Sequential treatment without information"). Furthermore, we investigate the effect of group size on aggregate contributions. Our result indicate that contributing sequentially increases the level of contribution to the public good when subjects are informed about the contribution levels of lower ranked subjects. Moreover, we observe that earlier players in the sequence try to influence positively the contributions of subsequent decision makers in the sequence, by making a large contribution. Such behaviour is motivated by the belief that subsequent players will reciprocate by also making a large contribution.
    Keywords: Public good; sequential Game; contribution
    Date: 2006–03–17
  14. By: Richard M. Bird (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: In this paper we discuss some recent critical literature on VAT in developing countries relating to its revenue productivity, its equity, and its impact on the development of the formal economy. Illustrating our argument with reference to two recent country studies (of Ukraine and Jamaica) we conclude that while there is merit in many of the criticisms that have been made, on the whole if a country needs a general consumption tax, as most developing countries do, then VAT is the one to have in almost all cases – although this conclusion certainly does not imply that the VAT already in force in most such countries is necessarily the ‘best’ VAT for their circumstances.
    Keywords: value-added tax; progressivity; informal economy; Ukraine; Jamaica.
    JEL: H24 H22 O17
    Date: 2006–03
  15. By: José Pineda (Corporación Andina de Fomento); Francisco Rodríguez (Economics and Latin American Studies, Wesleyan University)
    Date: 2006–02
  16. By: Lixin Cai; John Creedy; Guyonne Kalb
    Abstract: This paper investigates the use of sample reweighting in a behavioural tax microsimulation model, to examine the implications for government taxes and expenditure of population ageing in Australia. First, a calibration approach to sample reweighting is described, producing new weights which achieve specified population totals for selected variables, subject to the constraint that there are minimal adjustments to the weights. Second, the performance of the Australian Bureau of Statistics’ (ABS) weights provided with the 2001 Survey of Income and Housing Cost (SIHC) was examined and it was found that reweighting does not improve the simulation outcomes for the 2001 situation, so the original ABS weights were retained for 2001. Third, the implications of changes in the age distribution of the population were examined, based on population projections to 2050. A ‘pure’ change in the age distribution was examined by keeping the aggregate population size fixed and changing only the relative frequencies in different age-gender groups. Finally, the effects of a policy change to benefit taper rates in Australia were compared for 2001 and 2050 population weights. It is suggested that this type of exercise provides an insight into the implications of changes in the population on government income tax revenue and social security expenditure, indicating likely pressures for policy changes.
    Date: 2005
  17. By: Olivier Bargain (IZA Bonn); Marco Caliendo (DIW Berlin and IZA Bonn); Peter Haan (DIW Berlin); Kristian Orsini (K.U. Leuven)
    Abstract: We assess the labour supply effects of two ‘making work pay' reforms in Germany. We provide evidence in favour of policies that distinguish between low effort and low productivity by targeting individuals with low wages rather than individuals with low earnings. In assessing the policies we account for demand-side constraints by using a double-hurdle model. We identify and decompose the potential bias of labour supply elasticities derived in standard unconstrained models. Although this bias is not significant when assessing policies which mainly target voluntarily unemployed workers (typically secondary earners), it is substantial for policies which affect groups with high shares of involuntary unemployment.
    Keywords: tax-benefit systems, microsimulation, household labour supply, multinomial logit, involuntary unemployment, double-hurdle
    JEL: C25 C52 H31 J22
    Date: 2006–03
  18. By: Waldo, Staffan (Swedish Institute for Food and Agricultural Economics)
    Abstract: The focus in this study is on how efficiency in public education is affected by competition from private schools. The Swedish educational system is used, since the Swedish large scale voucher program implies that private and public schools compete on similar terms. In 2002 approximately 5% of the Swedish children attended private schools, and the share is rapidly increasing. Public school efficiency is estimated using Data Envelopment Analysis (DEA). Modelling education is difficult since educational production is not only dependent on factors under control of the school management, but also on the students’ socio-economic backgrounds. A number of approaches have been proposed concerning how to model this in a DEA setting. In this study, four different approaches are used and compared. Special focus is put on a second stage regression, where the efficiency estimates are regressed on competition and other explanatory variables. We can not show that the share of children attending private schools is related to public school performance.
    Keywords: Data Envelopment Analysis; competition; education
    JEL: H73 I21
    Date: 2006–03–23
  19. By: Waldo, Staffan (Swedish Institute for Food and Agricultural Economics)
    Abstract: Since the school voucher reform in 1992/93 Sweden has experienced a rapid increase in private schools. School regulations allow private and public schools to compete for students on very similar terms. This makes the Swedish educational market interesting for studying how competition affects the provision of education. In this study competition and public school productivity are analyzed for 105 urban municipalities during the period 1998/99 to 2001/02. The empirical estimations are performed in two stages. In the first stage, productivity is estimated using Data Envelopment Analysis (DEA) and a Malmquist productivity index. In the second stage, the estimated productivity is regressed on private school competition and a number of control variables. We cannot reject competition to be exogenous in a Hausman test. The coefficient for competition is not significant at the 5 percent level in any of the empirical specifications.
    Keywords: Malmquist index; competition; education
    JEL: H73 I21
    Date: 2006–03–23
  20. By: Pelikan, Pavel (Prague University of Economics and The Ratio Institute)
    Abstract: In addition to recognizing that human rationality has bounds, these are recognized to be unequal across individuals. Unequally bounded rationality is found to be a special scarce resource, tied to individuals and used for deciding on its own uses. In consequence, its allocation to uses in society cannot approach efficiency without a trial-and-error evolution. Important differences are found between the institutions (“the rules of the game”) that can shape this evolution on markets and the ones that can shape it within governments. The policy implications appear ideologically mixed: against all national planning, selective industrial policies, and government ownership of enterprises in production, but for some paternalism and redistribution in final consumption.
    Keywords: Rationality; institutions; organizations; entrepreneurs: owners
    JEL: A10 D61 G10 H10 O16 P51
    Date: 2006–03–21
  21. By: Mary Racelis; Angela Desiree M. Aguirre; Liane Pena-Alampay; Felisa U. Etemadi; Teresa Banaynal Fernandez; Rosemarie Matias Fernandez; Marita Castro Guevara; Jerome A. Serrano; Ching Li Ye; Eunice Anne M. Enriquez; Careza P. Reyes; Institute of Philippine Culture; UNICEF Innocenti Research Centre
    Abstract: The study analyses how the Philippines’ national Child Friendly Movement, which has engaged government, NGOs, civil society, children and UNICEF, has enhanced the capacity of local governments, communities and young people to fulfil the rights of the poorest children. The study uses participatory methodologies and reflects the viewpoint of children and the community. It reveals that in areas where the Child Friendly Cities strategy was adopted, greater attention is paid to the most excluded and vulnerable groups and interventions are developed on a wider spectrum of children’s rights. Beyond providing insights on concrete ways in which child rights are bring promoted at local level, it provides recommendations on how the fulfilment of child rights can be further enhanced by municipal governments.
    Keywords: 'Abandoned Children" 2;"Adjust;; Philippines;
    JEL: H79 I31
    Date: 2006
  22. By: Paul Veenendaal
    Abstract: Using National Accounts data and static input-output analysis we assess the extent of shifting the incidence of Dutch import duties to foreign customers and global tariff incidence on final demands. About 70% of the tariffs collected in the Netherlands are paid by foreign customers, mainly those in other EU-countries. While the Dutch export the incidence of most of the import duties that they collect, they also import duties levied elsewhere in the EU. Assessing tariff incidence globally we conclude that Dutch tariff incidence is in line with the incidence in the other member states of the European Union. We extensively explain the computational procedures followed.
    Keywords: import duties; tax incidence; input-output analysis
    JEL: C67 F1 H22
    Date: 2005–11
  23. By: Hans J. Baumgartner (DIW Berlin); Viktor Steiner (Free University of Berlin, DIW Berlin and IZA Bonn)
    Abstract: Students from low-income families are eligible to student aid under the federal students’ financial assistance scheme (BAfoeG) in Germany. We evaluate the effectiveness of a recent reform of student aid that substantially increased the amount received by eligible students to raise enrolment rates into tertiary education. We view this reform as a ‘natural experiment’ and apply the difference-in-difference methodology using a discrete-time hazard rate model to estimate the causal effect on enrolment rates into higher education. We find that the reform had a small positive but statistically insignificant effect on enrolment rates.
    Keywords: educational transitions, educational finance, natural experiment and difference-indifference estimation
    JEL: H31 I28 I22 J24
    Date: 2006–03
  24. By: Thorsten Koeppl (Department of Economics, Queen's University)
    Abstract: When people share risk in financial markets, intermediaries provide costly enforcement for most trades and, hence, are an integral part of financial markets' organization. We assess the degree of risk sharing that can be achieved through financial markets when enforcement is based on the threat of exclusion from future trading as well as on costly enforcement intermediaries. Starting from constrained efficient allocations and taking into account the public good character of enforcement we study a Lindahl-equilibrium where people invest in asset portfolios and simultaneously choose to relax their borrowing limits by paying fees to an intermediary who finances the costs of enforcement. We show that financial markets always allow for optimal risk sharing as long as markets are complete, default is prevented in equilibrium and intermediaries provide costly enforcement competitively. In equilibrium, costly enforcement translates into both agent-specific borrowing limits and price schedules that include a separate default premium. Enforcement costs - or, equivalently, default premia - increase borrowing costs, while interest rates per se depend on the change in enforcement over time.
    Keywords: Limited Commitment, Enforcement Intermediaries, Lindahl-equilibrium, Endogenous Borrowing Constraints
    JEL: C73 D60 G10 H41 K42
    Date: 2004–12
  25. By: Kaarel Kilvits (School of Economics and Business Administration, Tallinn University of Technology); Alari Purju (Estonian Business School; School of Economics and Business Administration, Tallinn University of Technology)
    Abstract: The public governance issues and their impact on labour intensive industries are the main problems discussed in this paper. The governance possibilities at global, EU, national, local and sector levels are described. Policies have been applied in different fields like industrial policy, innovation policy, foreign trade, foreign direct investments (FDI), labour relations, taxes and subsidies, support to clusters, support to local companies to improve position in the value chain. A matrix that links together levels and fields of policies has been developed for analysis. One important aspect is related to discussion of EU governance models in innovation and labour market policies. The issue is linked closely to the general choice between more market based or more intervention based policies and determines the scale and scope of measures applied at the EU level and their influence through harmonisation efforts on national policies. The role of multinational enterprises (MNE) and their relationships with different level governing institutions is another important factor. The critical areas where economic interests of MNEs and policy goals of governing institutions meet are labour market regulations, FDI related problems, conditions for foreign trade, innovation, taxation and state aid. Subcontracting, outsourcing, off-shoring and offshore outsourcing, value chain and clusters are the specific concepts that describe forms in which organisational and technological capacities have been matched together. One task of the current paper has been to clarify those concepts and to formulate research questions for further empirical study in the field of electronics, software, garment and footwear industries.
    Keywords: industry, delocalisation, deindustrialisation, public governance
    JEL: F15 F42 F42 H70 J40
    Date: 2005
  26. By: John Creedy; Catherine Sleeman
    Abstract: This paper examines the sensitivity of inequality and poverty measures to the adult equivalence scale and the unit of analysis. Comparisons are made using parametric equivalence scales, and income units include individuals, equivalent adults and households. The role of the correlation between equivalent income and household size, and the weight attached to children, is examined analytically. Empirical results are based on New Zealand Household Expenditure Survey (HES) data for total expenditure. Further results using a variety of equivalence scales, for New Zealand,Australia, the UK and the OECD, are examined.
    Keywords: Inequality; poverty; equivalence scales; living standard; income unit
    JEL: D31 D63 H23 I31 I32
    Date: 2005
  27. By: Carel Eijgenraam
    Abstract: After the flood disaster in 1953 in the southwestern part of the Netherlands, Van Dantzig tried to solve the economic-decision problem concerning the optimal height of dikes. His formula with a fixed exceedance probability after each investment (Econometrica, 1956) is still in use today in cost benefit analysis of flood-protection measures. However, his solution is both incomplete and wrong. In the context of economic growth, not the exceedance probability but the expected yearly loss by flooding is the key variable in the real optimal safety strategy. Under some conditions, it is optimal to keep this expected loss within a constant interval. Therefore, when the potential damage increases by economic growth, the flooding probability has to decline in the course of time in order to keep the expected loss between the fixed boundaries. The paper gives the formulas for the optimal boundaries for a more complicated problem which is more in line with engineering experience. One condition is that the rate of return at the moment of investment (FYRR) has to be zero (or positive). Then the net present value (NPV) of a safety investment will be very positive or even infinite. Therefore, in case of economic growth the well known NPV criterion in cost benefit analysis of a single project is not a sufficient criterion for investing. <P> An application of the model with the original figures for the dike ring Central Holland has been added as well as a recent application for dike ring areas along the river Rhine.
    Keywords: Optimal safety norms; cost benefit analysis; optimal height of dikes
    JEL: C61 D92 H43
    Date: 2006–03

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