Faculty of Commerce - Economics Working Papers

A discourse of classification: what type of "thing" is the myers-briggs type indicator and what makes it "work"?

Karin Garrety — Sun, 12 Dec 2010 21:32:20 PST

Theorists who study discourses are interested in the social construction of reality through talk and text. The discursive construction of reality occurs at different (though interconnected) levels - from transient and situated instances and episodes oflanguage use (Potter & Wetherell 1987), through to the circulation of durable sets of interrelated knowledge claims, usually created and maintained by certified experts attached to institutions such as schools, universities, hospitals, prisons and courts (Foucault 1972, 1978). In this paper, we explore some aspects of these different dimensions of discourse, through a consideration of the creation, circulation and use ofthe Myers-Briggs Type Indicator (MBTI), a popular personality typing tool. We argue that closer attention to the characteristics of discourses and the practices that surround them - that is, how they are created, maintained and structured - can help us to understand how they work to construct reality across a variety of contexts.

Banks’ efficiency and productivity analysis using the Hicks-Moorsteen approach: a case study of Iran

Amir Arjomandi — Wed, 06 Oct 2010 15:20:20 PDT

This study is the first to use the Hicks-Moorsteen TFP index developed by O’Donnell (2008, 2009, 2010c) to analyse efficiency and productivity changes in the banking system. The advantage of this approach over the popular Malmquist productivity index is that it is free from any assumptions concerning firm optimising behaviour, the structure of markets, or returns to scale. The effects of Iranian government regulations launched in 2005 on the Iranian banking industry are investigated through an analysis of performance over the period 2003-2008 assuming variable returns to scale. The results obtained show that although the Iranian banking industry has been inefficient over the entire period of the study, the industry’s technical efficiency level - which had improved over the period 2003-2006 - deteriorated considerably after the regulatory changes were introduced. The industry experienced its highest negative efficiency growth in 2006 which was 43% and became more mix inefficient after 2005, with a considerably negative productivity change after 2007. Overall, changes of production possibility set and scale efficiency changes exerted dominant effects on productivity changes.

An analysis of the world’s environment and population dynamics with varying carrying capacity, concerns and skepticism

Peter Berck — Wed, 06 Oct 2010 15:16:44 PDT

Due to the open-access nature of the environment we consider an ad hoc adjustment of people’s footprints to the quality of the environment. The adjustment is due to concerns, but hindered by skepticism about announced changes in the state of the environment. Changes in the quality of the environment affect Earth’s carrying capacity. By expanding the Lotka-Volterra predator-prey model to include these features we show that despite skepticism the environment-population system does not collapse. We also show that in the ideal case of no skepticism, the interplay between the non-optimally changing environmental concerns and carrying capacity sends the world’s environment and human population on an oscillating course that leads to a unique interior steady state. These results require no further technological, social or international progress.

An empirical analysis of international stock market volatility transmission

Indika Karunanayake — Wed, 06 Oct 2010 15:12:56 PDT

This paper examines the interplay between stock market returns and their volatility, focusing on the Asian and global financial crises of 1997-98 and 2008-09 for Australia, Singapore, the UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992-June 2009). Based on the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time-varying co-volatility among these markets indicates that it is riskier for investors to diversify their financial portfolio by acquiring stocks within these four countries only.

Optimal control of broadcasting spectrum

Amnon Levy — Thu, 16 Sep 2010 17:15:21 PDT

A socially desirable number of royalties-paying users of state-owned broadcasting spectrum is derived within an optimal control framework that allows free entry and exit. The analysis takes into account the trade-off between the benefits from higher variety and royalties’ revenues and the costs of the intensified interferences associated with entry. It also considers the opposing effects of broadcasts on aggregate income: information dissemination versus diversion of productive time. The steady-state of the broadcasting industry is derived for the case where these effects offset one another and for the case where the positive information-dissemination effect is dominant.

Long-run mortality effects of Vietnam-era army service: evidence from Australia’s conscription lotteries

Peter Siminski — Thu, 16 Sep 2010 17:12:37 PDT

We estimate the effect of Vietnam era Army service on mortality, exploiting Australia’s conscription lotteries for identification. We utilise population data on deaths during 1994-2007 and military personnel records. The estimates are identified by over 51,000 compliers induced to enlist in the Army, including almost 16,000 who served in Vietnam. The implicit comparison group is the set of men who did not serve in the Army, but who would have served had their date of birth been selected in the ballot. We find no statistically significant effects on mortality overall, nor for any cause of death (by ICD-10 Chapter). Under reasonable assumptions on the death rate of compliers, the results can be expressed as relative risks (RR) of death during 1994-2007. The estimated overall RR associated with Army service is 1.03 (95% CI: 0.92, 1.19). On the assumption that Army service affected mortality only for those who served in Vietnam, the estimated RR for Vietnam Veterans is 1.06 (95% CI: 0.81, 1.51). We also find no evidence to support a hypothesis of offsetting effects due to domestic Army service (beneficial to longevity) and service in Vietnam (detrimental).

Identifying and measuring technical inefficiency factors: evidence from unbalanced panel data for Thai listed manufacturing enterprises

Yot Amornkitvikai — Thu, 16 Sep 2010 16:50:07 PDT

This study employs stochastic frontier analysis (SFA) and two-stage DEA approaches to predict firm technical efficiency and analyse an inefficiency effects model. Aggregate translog stochastic frontier production functions are estimated under the SFA approach using an unbalanced panel data of 178 Thai manufacturing enterprises listed in the Stock Exchange of Thailand (SET), covering the period 2000 to 2008. The maximum-likelihood Tobit model is used to conduct the second-stage of the two-stage DEA model to investigate the relationship between technical inefficiency and environmental variables. Both parametric and nonparametric approaches are found to produce consistent results. The empirical evidence from both approaches highlight that Thai listed manufacturing firms had been operating under decreasing returns to scale over the period 2000 to 2008. The SFA approach reports that technical progress decreased over time, and relied on labour input. Both estimation approaches suggest that leverage (financial constraints), executive remuneration, managerial ownership, exports, some types of listed firms (i.e., family-owned firm and foreign-owned firm), and firm size have a negative (positive) and significant effect on technical inefficiency (technical efficiency). The empirical results obtained from both approaches also suggest that liquidity, external financing, and research & development (R&D) have a significantly positive (negative) effect on technical inefficiency (technical efficiency)

Firm performance in Vietnam: evidence from manufacturing small and medium enterprises

Viet Le — Thu, 16 Sep 2010 16:46:00 PDT

This paper examines the performance of domestic non-state manufacturing small and medium enterprises (SMEs) in Vietnam. Specifically, it evaluates firm level technical efficiency and identifies the determinants of technical efficiency of these SMEs. The paper uses an econometric approach based on a stochastic frontier production function to analyse 5,204 observations of SMEs from three surveys conducted in 2002, 2005 and 2007. The results from the estimations reveal that manufacturing SMEs in Vietnam have relatively high average technical efficiency ranging from 84.2 percent to 92.5 percent. The paper further examines the factors influencing efficiency. It finds that firm age, size, location, ownership, cooperation with a foreign partner, subcontracting, product innovation, competition, and government assistance are significantly related to technical efficiency, albeit with varying degrees and directions. Exporting does not appear to influence technical efficiency. The paper offers some evidence-based policy recommendations to improve the technical efficiency and competitiveness of manufacturing SMEs.

The financial crisis 2007-08 and causality: a hicksian perspective

Eduardo Pol — Thu, 16 Sep 2010 16:41:54 PDT

Almost everyone agrees on two general features displayed by the recent banking crisis, namely: the crisis was stupefyingly complex and the financial system was devoured by its own creations. Beyond these points of agreement, there are many questions that will be debated by academics and policymakers for decades. One of the outstanding questions is what caused the financial crisis 2007-08. To shed light on this question, the paper compiles a list of the tentative causes of the recent financial crisis, discusses their separability and attempts an appraisal of the separable causes using the Hicksian methodology for causality analysis. Specifically, this paper identifies three major separable causes of the recent banking crisis and brings into sharp focus the far-from-trivial requirements that are necessary in order to demonstrate that a particular set of events can indeed be the preponderant causes of the severe banking crisis 2007-08.

Is the age gradient in self-reported material hardship explained by resources, needs, behaviours or reporting bias?

Peter Siminski — Thu, 16 Sep 2010 16:38:02 PDT

Older people report much less hardship than younger people in a range of contexts, despite lower incomes. Hardship indicators are increasingly influential, so the source of the gradient has considerable policy implications. We propose a theoretical and empirical strategy to decompose the sources of this relationship. We exploit a unique feature of the Household, Income & Labour Dynamics Australia (HILDA) survey, which collects reports of hardship from all adult household members, facilitating within-couple estimates. The majority of the relationship is explained by observed resources, particularly wealth and home ownership. One third of the relationship is explained by unobserved differences between households, which we interpret as age-related behavioural choices. Reporting error does not appear to contribute to the age gradient.

Exploring older male worker labour force participation across OECD countries in the context of ageing populations: a reserve army of labour?

Martin O'Brien — Thu, 16 Sep 2010 16:31:58 PDT

The governments of many developed economies are confronting a number of policy issues associated with ageing populations. For example, pension reforms, increasing the labour force participation of older workers and increasing the standard retirement age are various policy reforms suggested by the OECD to cope with the fiscal strain associated with ageing populations. However, many of the same governments now embracing these reforms had until recent times allowed the early exit of older workers from the labour force by various means in periods of excess labour supply, leading to the allegation that these governments had treated older workers as a ‘reserve army of labour’. In this paper panel models for the labour force participation of males aged 55-59 and 60-64 years in 12 OECD countries are estimated as a function of social security and labour market variables covering the time period 1967 to 2007. In contrast to previous OECD modelling, allowances are made for both country specific intercept and slope terms in various specifications, thereby allowing the incorporation of unique aspects of each country’s social security system or labour market. In addition, both long run models and also short run models incorporating error correction terms are estimated. The findings suggest that the ‘one size fits all’ policy advocated by the OECD is inadequate to address country specific factors affecting older worker labour force participation. The recent pension reforms are now out of character with the reserve army of labour explanation and results also imply that governments in many OECD countries will struggle to increase older male labour force participation through pension policy reform alone, without addressing the important role of the aggregate labour market.

An analysis of the world’s environment and population with varying carrying capacity and concerns

Amono Levy — Thu, 16 Sep 2010 16:28:06 PDT

Due to the open-access nature of the environment we consider an ad hoc adjustment of people’s footprints. People’s environmental concerns are intensified (diminished) as the quality of the environment falls below (rises above) a threshold. Changes in the quality of the environment affect Earth’s carrying capacity. We claim that without technological, social and international progress the interplay between the nonoptimally changing environmental concerns and carrying capacity embarks the world’s environment and human population on a clockwise oscillating course that leads to a unique interior steady state with population similar to the current one residing in a slightly more degraded environment. (JEL O13, Q20)

International emission inequality: abatement on a per capita basis with rewards

Amnon Levy — Thu, 16 Sep 2010 16:23:39 PDT

Greenhouse gas emission inequalities between and within five income groups of countries are computed. The revealed dominant emission inequality between the high income groups and the low and middle income groups and its likely intensification by an internationally uniform abatement rate constitute a case for using per capita figures in analyzing countries’ unilateral and internationally cooperative emission abatements. The analysis suggests that the cooperative expected net benefit maximizing emission abatement can be smaller than the unilateral abatement for weak countries and also for lower and upper middle income economies with high ability and inclination to politically and economically reward other countries.

An Analysis of Productivity Changes in the Iranian Banking Industry: a Bootstrapped Malmquist Approach

Amir Arjomandi — Wed, 15 Sep 2010 18:37:22 PDT

This study employs various bootstrapped Malmquist indices and efficiency scores to investigate the effects of government regulation on the performance of the Iranian banking industry over the period 2003-2008. An alternative decomposition of the Malmquist index, introduced by Simar and Wilson (1998a), is also applied to decompose technical changes further into pure technical change and changes in scale efficiency. A combination of these approaches facilitates a robust and comprehensive analysis of Iranian banking industry performance. While this approach is more appropriate than the traditional Malmquist approach, for the case of banking efficiency studies, it has not previously been conducted for any developing country’s banking system. The results obtained show that although, in general, the regulatory changes had different effects on individual banks, the efficiency and productivity of the overall industry declined after regulation. We also find that productivity had positive growth before regulation mainly due to improvements in pure technology, and that government ownership had an adverse impact on the efficiency level of state-owned banks. The bootstrap approach demonstrates that the majority of estimates obtained in this study are statistically significant.

A sensitivity test of the bilateral trade balance to exchange rates: a review of the Australian bilateral trade balance with Japan between 1988 and 2007

Yumiko Meloche — Tue, 14 Sep 2010 23:02:25 PDT

This paper examines the relationship of the bilateral trade balance and exchange rates between Australia and Japan in the period from 1988 to 2007. This study provides the short-run and long-run, relationship of trade balance and real exchange rates, and the potential existence of a “J-curve” using quarterly time series data in that period. The minimum Lagrange Multiplier unit root tests (Lee and Strazicich: 2003, 2004) have been applied to determine endogenously potential structural break(s) for each series of data. Then, using the autoregressive distributed lag (ARDL) model, the cointegration is estimated.

Recently the relationship of Australian bilateral total trade balance and exchange rates with Japan in the same period was investigated (Meloche 2009), and the results showed that there is a stable long run relationship among the trade balance, national income of both countries and real exchange rates. However, the existence of J-curve in that period was not detected. A failure to detect a J-curve could be due to an aggregation bias. This study disaggregated trade balances into 10 trade sections (Standard International Trade Classification 1-digit level) and then analysis was carried out. The empirical results showed that there is a stable long run relationship among trade balance, national incomes and real exchange rates in three trade sections. Those trade sections are beverages and tobacco (TB1), crude materials, inedible, except fuels (TB2) and animal and vegetable oils, fats and waxes (TB4). The results also support that the existence of a J-curve in the above three trade sections.

Trade and investment liberalisation and industrial per capita emissions in China: 1990 to 2007

Kankesu Jayanthakumaran — Tue, 14 Sep 2010 22:58:02 PDT

It was hypothesised that trade and investment liberalisation in China had a short term negative effect on the environment and a long term positive effect based on the assumption that externality can be internalised and that an environmental Kuznets curve (EKC) exists in China. To test this hypothesis, a modified version of Dean’s (2002) simultaneous model using a sample as a whole, and a disaggregated sample based on above and below the turning point income of EKC was adopted. The results from the overall sample showed that for air pollutant (SO2) and water pollutant (COD), the scale effects outweigh the technique effects, which is evidence for the pollution haven hypothesis. The split sample provided limited support for the EKC hypothesis because at the provincial level, a rising income via an increased level of international trade was associated with falling emissions due to the technique effect, so that rising income among the provinces tends to show a superior performance. The policy implication is that stricter environmental regulations are required for growing incomes because they may encourage better production techniques.

Analysing the asymmetric effects of inflation on real investment: the case of Iran

Abbas Valadkhani — Tue, 14 Sep 2010 22:45:16 PDT

Using a threshold regression model and annual data (1960-2008), this paper examines the determinants of investment in Iran. We found that real GDP, the trade openness index and inflation can influence investment. However, the effect of inflation on investment follows an asymmetry adjustment process. The threshold value for the rate of inflation has endogenously been estimated to be at 11.9 per cent. If the annual rate of inflation exceeds this threshold, it will have a negative impact on investment. But, if inflation remains below this rate, not only the negative effect fades away but also rising prices can boost investment.

Modelling Australian stock market volatility: a multivariate GARCH approach

Indika Karunanayake — Tue, 14 Sep 2010 22:39:32 PDT

This paper uses a multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) model to provide an insight into the nature of interaction between stock market returns of four countries, namely, Australia, Singapore, the UK, and the US. Using weekly data spanning from January 1992 to December 2008 the results indicate that all markets (particularly Australia and Singapore) display significant positive mean-spillovers from the US stock market returns but not vice versa. We also found strong evidence for both own and cross ARCH and GARCH effects among all four markets, indicating the existence of significant volatility and cross volatility spillovers across all four markets. Given a high degree of common time-varying co-volatility among these four countries, investors will be highly unlikely to benefit a reduction of risk if they diversify their financial portfolio with stocks from these four countries only (JEL: G15, F36).

Ricardian equivalence and the efficacy of fiscal policy in Australia

Shane Brittle — Tue, 14 Sep 2010 22:32:52 PDT

Events surrounding the global financial and economic crises of 2008 and 2009 have sparked a renewed interest in discretionary fiscal policy. This paper considers whether private saving in Australia behaves in a manner that is consistent with Ricardian equivalence, thus mitigating the effects of fiscal policy, or conversely, if fiscal policy has some ability to influence real economic activity. A model of private and public saving is estimated using the autoregressive distributed lag approach (ARDL) to cointegration. This estimation procedure is advantageous due to its ability to provide both short- and long-run coefficient estimates, and can accommodate coefficients for structural breaks. Given that the Australian economy has been subject to a substantial amount of structural change over the past 50 years, the estimations attempt to account for these structural effects on long-run savings behaviour. Results indicate that while there is not a full Ricardian response to changes in the fiscal stance, evidence suggests some partial offsetting behaviour – implying that fiscal policy does elicit some (limited) impact on economic activity.

How useful is growth literature for policies in the developing countries?

B. Bhaskara Rao — Tue, 14 Sep 2010 22:29:04 PDT

This paper examines the growing gap between the theoretical and empirical growth literature and policy needs of the developing economies. Growth literature has focused mainly on long term growth outcomes, but policy makers of the developing economies need rapid improvements in the short to medium term growth rates; see Pritchett (2006). In this paper we argue that this gap can be reduced by distinguishing between the short to medium term dynamic effects of policies from their long run equilibrium effects. With data from Singapore, Malaysia and Thailand, we show that an extended version of the Solow (1956) model is well suited for this purpose. We find that the short to medium term growth effects of the investment ratio are quite significant and they may persist for up to 10 years.