Rationing in open economy and dynamic macroeconomics: A survey

Summary A survey of rationing in micro theories of macroeconomics is presented. The survey starts with a closed economy with money and inventories, which consists of a representative household, a firm and government. After a discussion of the notional demands and supplies and the properties of the Walrasian equilibrium, a discussion of the effective demands and supplies leads to an analysis of the four regimes (Keynesian unemployment, classical unemployment, repressed inflation and underconsumption). A fiscal and monetary contraction decreases sales and employment when there is Keynesian unemployment, but is expansionary (neutral) when there is repressed inflation (classical unemployment). The survey continues with an analysis of the effects of rationing in a small open economy. It considers the one-sector model and a model with a traded and a nontraded sector. The latter model is used to discuss the effects of an oil discovery on the Gulf countries and on Latin American countries. The survey ends with a discussion of rationing in dynamic economies, which leads to an analysis of the effects of expectations about future constraints on current regimes and to a discussion of boot-strap equilibria.The author is Director of the Network for Quantitative Economics. This paper is a brief and eclectic survey of rationing models of closed one-period and two-period economies and of small open economies. It contains no significant new material. The author is grateful to Professor Theo van de Klundert for his constructive comments on an earlier version of this survey.     

Income distribution,economic structure and employment in South Africa

This paper discusses the impact of a redistribution of current income from the White to the Black population on the distribution of sectoral output, and total employment by means of a semi‐closed input‐output model.

The results show that a redistribution of current income towards Black households — which no doubt will have positive social and political repercussions — has a non‐negative effect on GDP and a definite positive effect on the performance of sectors with a high private consumption expenditure component, as well as on total employment.     

Debt Relief and Economic Growth in Mexico

Could external restraint and internal balance in Mexico havebeen reconciled at levels of savings and investment that allowedsatisfactory growth in output without the 1989–90 restructuringof debt? What are the likely implications of Mexico's "Bradydeal" on economic growth? What are the macroeconomic effectsof debt-equity swaps? This article develops and estimates amodel to address these issues. The analysis concludes that the1989–90 agreement in Mexico will contribute materiallyto macroeconomic stability and the restoration of economic growth.     

The Ju/'hoan Bushman Development Foundation and basic needs in eastern Bushmanland,Namibia

The Ju/'hoan Bushman Development Foundation (JBDF) is a multi‐dimensional development foundation which has as its main objective the raising of the standard of living of the indigenous Ju/'hoan Bushmen in eastern Bushmanland, Namibia. It has a basic needs approach to development.

The development activities of the Foundation started in 1981. The Nyae Nyae Farmers’ Cooperative, through which the Foundation now directs its development activities, was established in 1986. It is funded by various international development agencies, such as Christian Aid, NORAD, SIDA, Bread for the World, Oxfam Canada, and the EEC.

The basic needs approach of the Foundation addresses the following dimensions: water, food, cash, clothing, health, literacy and education, community esteem, and problems and propositions.     

The role of extension in the development of the farmer as entrepreneur

Different viewpoints were expressed at the 1990 annual national conference of the South African Society for Agricultural Extension regarding the role of extension in the development of the farmer as entrepreneur. It is expected that public funding will increasingly be limited to functions of general public interest. To achieve independence farmers should be willing to expose themselves to entrepreneur development stimuli. it is in the public interest to develop scarce human, economic and natural resources. Research findings indicate distinct behavioral differences between entrepreneurs of differing perceptions. A comprehensive interdisciplinary education is recommended for agriculturalists. Because needs change, education programmes must be re‐evaluated from time to time. It serves little purpose to educate people in extension who do not have a technical message to communicate. The state extension service seeks closer cooperation and liaison with agricultural co‐operative and private sector know‐how. Departmental policy will probably be less rigid in future.

A clear distinction should be made between information and extension services. The adoption of an ethical code for extensionists may be opportune. Relevancy is an important contributing factor to extensionist credibility.     

Inflation, investment and economic performance: The role of internal financing

This paper studies a link between inflation and economic activity that is built on two hypotheses. First, firms mitigate informational frictions in financial markets by accumulating retained earnings over a period of time. Second, firms allocate earnings among three competing uses - dividends, current investment, and the accumulation of internal funds - and inflation directly distorts this allocation decision as well as the real value of accumulated internal funds. The model predicts that the level of inflation - both unanticipated and expected inflation - as well as the variability of inflation distort firms’ internal financing decisions, increases frictions in financial markets, reduces the level and efficiency of investment, and reduces aggregate output. The marginal effects of inflation are increasing in the inflation rate.     

Regulating an Externality-Generating Utility Environmental Taxes Under Limited Information

Global warming is currently an important item on most nationalenvironmental agendas. In many countries, coal-fired electricity generatingstations represent an important source of greenhouse gases. We examinehow regulations to curb emissions affect public utility pricing regulationwhen regulators act non-cooperatively. We show that, when there is limitedinformation on fixed abatement costs, an environmental regulator prefersan emission tax over an output tax or a lump sum environmental tax. Thepublic utility regulator prefers the lump sum tax regime.     

Structural Decomposition Analysis of Physical Flows in the Economy

Many environmental problems can be attributedto the extraction and emissions of physicalsubstances. Increasing our understanding of theeconomic and technological driving forcesbehind these physical flows can contribute tosolving the environmental problems related tothem. The input-output framework is a usefulsetting in which to integrate detailedinformation about economic structure andphysical flows. In this article a specificmethod in input-output analysis is reviewed,namely Structural Decomposition Analysis (SDA).It is based on comparative static analysis,which decomposes historical changes of a policyvariable into determinant effects. SDA has beenapplied, for example, to analyze the demand andtechnological driving forces of energy use,CO₂-emissions and various other pollutantsand resources. This article examines thetheoretical aspects of structuraldecomposition, in particular those concerningphysical flows and environmental issues.Furthermore, the article includes an extensivesurvey of empirical studies.     

Does the dutch model really exist?

The policy that led from the "Dutch disease" (in the 1980s) to the "Dutch miracle" (in the 1990s) consists of three tracks: wage moderation, retrenching public expenditure and reducing the tax burden, and slimming the welfare system. The wage moderation track seems to have been the most important. The term "Dutch model" refers to the socioeconomic system of the Netherlands. Most observers point particularly to the relatively low unemployment rate to indicate the success of this model. However, the economic inactivity rate in the Netherlands is not lower than in neighboring countries. This suggests that open unemployment in the Netherlands has been partly replaced with hidden unemployment. In particular, the disability scheme seems to contain a large component of hidden unemployment. Another feature of the Dutch model is its consensus-seeking nature, which is fostered by its institutional structure.