Internet Economics and Policy: An Australian Perspective

Publicly available information indicates that the demand and supply of Internet and Internet–related services are continuing to expand at a rapid pace. Since 1997 the number of Internet service providers (facilities–based and resellers) has increased by nearly 40 per cent; the number of points–of–presence per Internet service provider has increased by five times; the number of hosts connected to the Internet has more than quadrupled; and Internet traffic has increased from six to 10 times. The emergence of electronic commerce (e–commerce), driven by this rapid adoption of Internet services and continual technological innovation, is likely to have profound economic and social impacts on Australian society. This paper provides a detailed analysis of the impact of the Internet and e–commerce, ranging from the changes in the market structure of the telecommunications industry, its role in changing the organisation of traditional markets, the emergence of new markets, and the structural shifts to employment, productivity and trade. The paper also analyses contemporary Australian regulatory responses.     

A Knowledge–based Algorithm for the Internet Transmission Control Protocol (TCP)

Using a knowledge–based approach, the authors derive a protocol for the sequence transmission problem, which provides a high–level model of the Internet transmission control protocol (TCP). The knowledge–based protocol is correct for communication media where deletion and reordering errors may occur. Furthermore, it is shown that both sender and receiver eventually attain depth– n knowledge about the values of the messages for any n , but that common knowledge about the messages is not attainable.     

LABOUR MOBILITY AND TRANS‐TASMAN CURRENCY UNION*

The prospect of a common currency for Australia and New Zealand has been canvassed by senior poli‐ticians and bureaucrats, and has been the subject of academic debate. According to Mundell (1961 ), a high degree of internal labour mobility is a desirable feature of currency unions. This study looks at the extent to which long‐term migration between Australia and New Zealand responds to output shocks. Estimated VAR models and panel Granger‐causality tests demonstrate that shocks to relative per capita output have a significant and symmetrical impact on migration flows between Australia and New Zealand, and most of the impact is felt after about one year. Separating the shocks to Australia and New Zealand shows that ‘pull’ effects are more important than ‘push’ effects. Additionally, the trajectory of the Australian economy proves particularly influential for the choice of New Zealand emigrants. Although permanent migration responds intuitively to the state of the economy in Australia and New Zealand, the level of these migration flows is low in comparison to Australian inter‐state migration; yet it is high in relation to any third country.     

THE ECONOMIC IMPACT OF TARIFFS IN THE 1930s IN AUSTRALIA: THE BRIGDEN REPORT RE-EXAMINED*

In 1927, the Prime Minister of Australia, Mr S.M. Bruce, appointed a committee of economists to undertake an inquiry into the economic impact of the Australian tariffs. The Report of this committee, known as the Brigden Report, was published in July 1929. In assessing the impact of tariffs on the Australian economy, the committee concluded that the protective tariff has been an effective means of securing a higher standard of living for a larger population. The purpose of this paper is to examine this conclusion quantitatively by simulating a computable general equilibrium (CGE) model of the 1930s in Australia. The results support the above conclusion of the Brigden Committee if the demand for Australian primary exports were price inelastic.     

International Shocks on Australia – The Japanese Effect

Although Australia has an equivalently large trading relationship with Japan and the US, current macro models often incorporate only US variables in the external sector of Australia. This paper explores the consequences of including both US and Japanese effects in the international sector of a SVAR model of Australia. The results indicate the significance of the Japanese effects. Excluding Japan results in an overstatement of the impact of US based shocks on the Australian economy. When Japan is included, US based shocks remain dominant in explaining Australian outcomes, but the responses are moderated compared with a model incorporating only a US based external sector. This has important implications for domestic policy responses to international shocks. Without the influence of Japan, domestic monetary policy will over-react to a US based shock.     

The Effects of Government size on Economic Performance: a Quantitative Assessment of a Budget Reduction

A question featuring prominently in policy debates over the last few years is whether Australia can gain from having smaller government. Proponents have stressed beneficial impacts on the supply side of the economy; opponents have stressed the deflationary impact from possible reductions in demand. This article provides a quantitative assessment of this essentially empirical question, namely, whether supply or demand responses would dominate. It suggests that over the short term, demand contraction may be important. In the longer term, increased incentives can expand Australia's productive capacity, although incentives to work longer appear less important than incentives created for capital accumulation. But the longer term expansion may be crucially dependent on foreign investor acquiescence to increased involvement in the Australian economy.     

The evolution of control in the digital economy

Control over digital transactions has steadily risen in recent years, to an extent that puts into question the Internet’s traditional openness. To investigate the origins and effects of such change, the paper formally models the historical evolution of digital control. In the model, the economy-wide features of the digital space emerge as a result of the endogenous adaptation (co-evolution) of users’ preferences (culture) and platform designs (technology). The model shows that: a) in the digital economy there exist two stable cultural-technological equilibria: one with intrinsically motivated users and low control; and the other with purely extrinsically motivated users and high control; b) before the opening of the Internet to commerce, the emergence of a low-control-intrinsic-motivation equilibrium was favored by the specific set of norms and values that formed the early culture of the networked environment; and c) the opening of the Internet to commerce can indeed cause a transition to a high-control-extrinsic-motivation equilibrium, even if the latter is Pareto inferior. Although it is too early to say whether such a transition is actually taking place, these results call for a great deal of attention in evaluating policy proposals on Internet regulation.     

Learning from Other Economies: The Unique Institutional and Policy Experiments Down Under

This paper argues that detailed studies of particular economies, such as Bob Gregory's work on Australia, are relevant to all of economics. The paper builds on the concept of a model species from biology to develop the notion of a model economy – one whose experiences illuminate fundamental economic issues; examines the criterion for an economy to serve as a model economy; and describes three areas – labour relations and the awards system of wage-setting, marketising public services and growth through immigration and natural resources – where Australian experience provides insights into economic behaviour and the operation of markets broadly.     

Estimates of the Underground Economy in Australia

In an age of tighter government regulation, many individuals and businesses are distorting our notion of the size of the Australian economy by actively participating in the underground economy. The consequences are clear: policy makers have imperfect knowledge on the state of economic affairs. Although there exists considerable international literature on the size of the underground economy, academics and public officials alike appear to have paid little attention to the extent of illicit economic behaviour in Australia. The aim of this paper is to provide the first known time-series estimate of the size of the Australian underground economy and to illustrate that its existence has implications for the nature of the business cycle in Australia.     

LABELLING CHARACTERISTICS AND DEMAND FOR RETAIL GROCERY PRODUCTS IN AUSTRALIA*

This paper examines whether labelling characteristics affect short‐run demand for manufactured foods in Australia. We estimate the effect of common labelling characteristics on demand using data from 92 brands in 12 product categories from major supermarket stores across Australia over the period 2002 to 2005. We find that certain characteristics – such as whether the product is made from recycled materials, certified as being Australian‐made, is a private label product, is health‐conscious or supports a charity – have a positive effect on demand. However, being an environmentally‐friendly good had a negative impact on demand as did products which offer the chance to win a prize and uncertified Australian‐made goods.     

Strengthening Intellectual Property Rights in Asia: Implications for Australia

Asian developing economies are both the greatest target of pressure for stronger intellectual property rights (IPRs) and the region of most significant change. These countries have enacted numerous improvements in their laws. I discuss how higher standards might affect economic activity in East Asia and Australia and the importance of adopting mechanisms for ensuring that they promote effective competition.
Stronger standards in the region could affect the Australian economy in a number of ways. More rapid Asian growth should increase the demand for Australian exports, perhaps by as much as $350 million per year. Further, Australian consumers could gain from imports of higher-quality Asian products. Australian firms also have an emerging comparative advantage in supplying technologies, designs, and services to Asian partners.
However, there may be some costs as well, including higher regional prices of protected products and additional competition for inward foreign direct investment. Thus, Australia would be advised to improve its attractiveness as a location for investors. Australia also has an interest in maintaining effective competition in its own market as IPRs are strengthened regionally. Australia could take a leading role in countering attempts by the United States and Europe to erect excessively protectionist new standards.     

Providing Duty-Free Access to Australian Markets for Least-Developed Countries: A General Equilibrium Analysis

The Doha ministerial declaration commits WTO members to liberalising access to their markets for least‐developed countries (LDCs). Preferential trade policies have diverse impacts on the initiating country and its trading partners. These effects are of concern to scholars and policy makers. We use Australia as a case study to quantify the direct and indirect effects of providing preferential access to LDC imports entering Australian markets, using a general equilibrium model of the world economy. LDCs are projected to benefit and Australia is predicted to lose, reflecting adverse terms of trade effects. However, the magnitude of the adverse effect on Australia is small. If one was to view this initiative as an exercise in foreign aid, it suggests that Australia can provide a significant benefit to the poorest nations with which it trades, at almost no cost to itself.     

Understanding the deviation of Australian policy rate from the Taylor rule

This investigation aims to explain and quantify the deviations of the Australian policy rate (set by Reserve Bank of Australia) from the Taylor Rule. A three-step econometric procedure designed to reflect the data-rich environment in which central banks operate is proposed using information for 229 macroeconomic series. This procedure can be applied to data for any economy with inflation targeting monetary rule. Our application with Australian data shows that approximately 65% of Australia’s policy rate deviation from the Taylor Rule can be explained systematically, with international factors and a domestic factor accounting for 41.9% and 22.5%, respectively, of the total variation in deviation from the rule.     

Employment Effects of Minimum Wages: Evidence from a Quasi-Experiment

To estimate the impact of raising the minimum wage on employment, this article uses a natural experiment, arising from six increases in the Western Australian statutory minimum wage during the period 1994–2001. Relative to the rest of Australia, the employment to population ratio in Western Australia fell following each of the six rises, twice by a statistically significant margin. Aggregating the increases, the elasticity of labour demand with respect to the Western Australian statutory minimum wage is found to be ?0.13.     

Exchange Rate Pass-through: How Much do Exchange Rate Changes Affect the Prices of Australian Exports?

Australia is generally held to be a small open economy with a high proportion of commodity exports. It is therefore regarded as a 'price taker' in international markets, and pass-through on exports is expected to be zero. This paper uses the Johansen Multivariate Cointegration technique to estimate the pass-through of exchange rate changes to the destination-currency prices of aggregate Australian exports. The results demonstrate a stable long-run pass-through level of 60 per cent, which refutes the 'small-country' assumption of Australian exporters as price takers. These findings have important implications for Australia's terms of trade and current account deficit     

电子商务对国际贸易的影响

随着信息化技术和经济全球化的快速发展,电子商务在国际贸易中的广泛应用已成为知识经济时代的必然潮流.本文总结了电子商务的兴起对国际贸易产生的影响,分析了将电子商务应用于国际贸易时所面临的问题,最后从观念的转变、信息基础设施的建设、关键技术的研发以及配套政策的完善等方面提出了我国在国际贸易中应用电子商务时应采取的主要对策.     

中国电商经济发展的消费效应研究*

本文基于中国2002—2013年的省级面板数据建立了动态面板模型,利用系统广义矩估计方法（SYS—GMM）考察了电商经济发展的消费效应。研究发现：我国电商经济发展显著提高了总体消费规模,促进了跨区域的消费集聚,拉大了城乡消费差距,且这种消费差距效应可以通过扩大城乡收入差距这一机制实现。上述三大消费效应均表现出一定的地区异质性,在中西部地区影响更大。本文系统地考察了电商经济发展的消费效应,尤其体现在消费集聚效应和城乡消费差距效应两个方面。本文的研究结论为新常态下促进消费增长识别到另一条路径——发展电商经济释放消费潜力,为打造区域性电商消费集聚中心提供了经验证据,明确了电商经济收益共享的推进方向,以实现城乡居民消费差距收敛。     

Australia’s foreign investment review board and the regulation of Chinese investment

Foreign investment has played an important role in the Australian economy since the country’s foundation. Part of the latest wave of foreign direct investment (FDI) in Australia has been by Chinese firms, and largely by state-owned enterprises with connections to the Chinese state. Despite the value it has generated for the Australian economy, Chinese FDI has been controversial and has exposed some of the shortcomings in Australia’s foreign investment review process. This article evaluates Australia’s foreign investment regime, and pays particular attention to the Foreign Investment Review Board (FIRB). Questions are asked about how closely the FIRB’s role and processes resemble regulatory best practice. The article also considers whether greater fidelity by the FIRB to principles of good governance could better serve Australia’s broad policy interests and reduce Chinese perceptions of an opaque and discriminatory foreign investment regime.     

Labour Mobility With Vocational Skill: Australian Demand and Pacific Supply

Can new channels for mid-skill labour mobility simultaneously enhance the welfare of Australia and the Pacific Region? Answering this question requires forecasting Australian demand for vocationally-skilled migrants over the next generation, and the potential for Pacific supply of those migrants. We project demand for such mid-skill migrants over the next three decades by combining data on trends in the demand for basic tasks with data on trends in native investment in education commensurate with those tasks. We estimate that the Australian economy growing at historical rates through the year 2050 will demand approximately 1.6–2.1 million foreign workers with Technical and Vocational Education and Training. A large share of these could be supplied from the Pacific Islands with sufficient investment in training, with direct cooperation from Australian employers, and targeted access to the Australian labour market.     

“Fair go” for all? Wealth and Risk Aversion of Australian Households*

A mean‐variance framework is applied to Australian household financial portfolios in order to provide estimates of relative risk aversion in the economy. Controlling for various socio‐economic characteristics, we explore whether risk aversion heterogeneity is a function of wealth heterogeneity. In contrast to most studies, we find evidence of very high risk aversion amongst the majority of households of poor households but vastly lower risk aversion amongst the high percentiles in the wealth distribution. Applying a first differences model across three survey waves spanning 2002 to 2010, we find that risk tolerance increases significantly with wealth. Risk tolerance is positively associated with mortgage payments, but rental payments have no relationship. In addition, we found no evidence that holding a university education has any discernible impact on risk aversion. Lastly, we present some preliminary findings as to the impact of financial advice on observed risk aversion. Financial advice is found to accentuating risk aversion, particularly amongst the wealthiest households. The findings have potential implications for the distribution of wealth in Australia that has received renewed interest recently.