TEXTILE FLAMMABILITY AND ITS INFLUENCE ON PRODUCT DESIGN

This paper shows how the design of garments and soft furnishing can influence textile flammability, and suggests modifications.     

BANK EFFICIENCY AND THE EFFECTIVENESS OF MONETARY POLICY

Advances in information technology and bank consolidation have altered the way banks operate by necessitating that banks control costs and provide services efficiently to remain competitive. Given the unique role bank operations play in the transmission of monetary policy, a key unresolved question is whether bank efficiency alters monetary policy outcomes. Using a stochastic frontier approach to measure cost‐efficiency and panel data of U.S. bank balance sheets, we show that banks with greater cost‐efficiency are more sensitive to monetary shocks. (JEL E52, E44, E51)     

The Behaviour of Declining Industries

This paper examines how the prospect of imminent exit by a competitor in a declining industry affects the market behaviour of that industry prior to exit. We show that 'survivor' firms have an incentive to increase their holdings of inventories and to hold excess capacity before exit occurs. Preparation for the failure of a rival will also involve increasing output. This will push down the market price and may hasten the rival firm's demise. The welfare consequences of these actions are mixed but can be very different from the same actins in a growing or stable industry. In particular, holding excess capacity or increased inventories may be procompetitive.     

THE FISCAL DIVIDEND MYTH OF AN INCOME/GST TAX SWITCH*

Reaping a windfall fiscal dividend from the taxation of the ‘underground’ economy's expenditures on ‘legitimate’ commodities is often seen as a significant advantage for a goods and services tax (GST) over an income tax. This claim ignores the changes in prices in the underground economy which would arise from the introduction of a GST. Employing a general equilibrium model which allows for tax evasion, we show that any ‘dividend’ arising from a change in the income tax/GST mix is equivalent to a rise in the income tax rate without a GST.     

An Experimental Investigation of the Effect of Cost Information and Feedback on Product Cost Decisions*

Abstract. In this paper we report the results of an experiment designed to investigate the potential benefits of more accurate costing systems. Subjects in our experiment participated in one of four single-person decision making settings, which varied in terms of the accuracy of costing systems (less accurate versus more accurate cost reports) and in the complexity of the economic environment (less heterogeneous versus more heterogeneous products). The costing systems provided imperfect reports that subjects could use to select forecasts of future product costs. Forecast accuracy determined the resulting payoffs for subjects. In addition to having the cost reports when making forecasts, subjects also observed the association between forecasts and actual profits for previous periods and the rank ordering of the products' relative usage of resources at each of the production processes. The results from our experiment indicate that subjects did not select forecasts based only on reported costs. Rather they updated forecasts using profit feedback and the supplemental rank information about the products' relative usage of resources. We found that profits decreased as the complexity of economic environment increased but increased with the accuracy of cost reports. The profits associated with less accurate costing systems, however, were not as low as we would have predicted had the subjects used the cost reports as their forecasts. In fact, using profit feedback, subjects were able to converge toward optimal profits even with imperfect cost information.