A Portion of Profits to Charity: Corporate Social Responsibility and Firm Profitability

I develop a model in which a firm can choose to donate a portion of its profits to the provision of a public good. Consumers value this public good and are willing to pay a price premium to a firm which makes such a donation. When this price premium is sufficiently large, the firm can raise its net profits by pledging a portion of those profits to provision of the public good. This is more likely when the consumer's marginal valuation of contributions to the public good is high and when the firm (in the absence of donations) has a high ratio of fixed costs to operating profits. I also identify circumstances under which corporate social responsibility makes consumers worse off.     

INCOME INEQUALITY, RECIPROCITY AND PUBLIC GOOD PROVISION: AN EXPERIMENTAL ANALYSIS

This paper analyses the impact of income inequality on public good provision in an experimental setting. A sample of secondary school students were recruited to participate in a simple linear public goods game where income heterogeneity was introduced by providing participants with unequal token endowments. The results show that endowment heterogeneity does not have any significant impact on contributions to the public good, and that consistent with models of reciprocity, low and high endowment players contribute the same fraction of their endowment to the public pool. Moreover, individuals appear to adjust their contributions in order to maintain a fair share rule.     

RAISING EDUCATIONAL ATTAINMENT OF THE POOR: POLICIES AND ISSUES

Despite every policymaker's recognition, enrollment rates of the low‐income countries remain low. A simple framework of understanding educational outcomes is presented using a unitary model with an altruistic parent and a child. The traditional interventions, so‐called supply‐side policies, and recent innovation of relaxing constraints faced by households, the conditional transfer programs or so‐called demand‐side policies, are reviewed. In addition, recent trends on estimation technique are discussed. It has been argued that randomization is clearly the best for inference, however, one may still want to choose the optimal combination of randomized experiments and observational data, as the former requires more resources and time. This is particularly true for economics than other hard sciences, partly because of our inability to fine‐tune the control, and partly because of our lack of solid microfoundation than other sciences when an experiment shows unexpected results.     

FIRM RESTRUCTURING AND THE OPTIMAL SPEED OF TRADE REFORM

We study the consequences and optimality of alternative speedsof trade liberalization when investment (restructuring) activitieshelp firms learn their true level of efficiency and determinesurvival prospects In contrast to the existing literature, wefind that a gradual trade reform might be preferred when authoritiesare more preoccupied with the longer term. We also show thatcosts of business closures have an ambiguous impact on the optimalpace of liberalization.     

ON THE CYCLICALITY OF SOUTH AFRICAN FISCAL POLICY

This paper examines the cyclicality of government revenue, spending and the key fiscal balances in South Africa during 1972‐2001. The results suggest that while government revenues were largely acyclical, government spending appears to have been predominantly counter‐cyclical, in line with the recommendations of neoclassical analysis. In addition, countercyclical government spending appears to have translated into a countercyclical policy stance overall. This finding contrasts markedly with the results from other empirical studies of South Africa and other emerging market and developing economies, which typically indicate procyclical fiscal policy.     

TAX REFORM AND THE PROGRESSIVITY OF PERSONAL INCOME TAX IN SOUTH AFRICA

This paper investigates the progressivity of personal income tax in South Africa over the period 1989 to 2003. We use the effective, redistributive and disproportionality measures of progressivity and find that progressivity of the tax system increased over the period 1990 to 1994. However, during the first phase of the reform programmes the results are inconclusive with the Kakwani index (disproportionality measure) showing increased progressivity. The redistributive effect measure, on the other hand, indicates a marginal decline in progressivity. During the second phase of the reform programmes, both techniques suggest a worsening in progressivity. One explanation for the decline in progressivity during the latter period in the analysis is the fact that many more “new” taxpayers entered the tax net (higher income groups in our database) which made the distribution of pre‐tax income more unequal thus impacting on progressivity. On the other hand, the disproportionality measure shows a continuous, albeit volatile increase in progressivity over the latter period under investigation.     

THE EFFECT OF THE SOUTH AFRICAN OLD AGE PENSION ON LABOUR SUPPLY OF THE ELDERLY

In this paper, we estimate the effect of the means tested South African Old Age Pension on labour supply amongst the elderly African subpopulation in South Africa. We find significant decreases in employment rates and labour supply. Those who remain employed beyond the pensionable age are more likely to work in jobs with flexible hours of work, and work even fewer hours than people in similar jobs who are not pension age‐eligible. Our results suggest that governments do need to consider the labour supply related incentives provided via its various welfare programmes.     

ELECTRICITY REFORMS IN MALI: A MACRO–MICRO ANALYSIS OF THE EFFECTS ON POVERTY AND DISTRIBUTION

This paper uses a computable general equilibrium (CGE) micro-simulation model to explore the distributional and poverty-related effects of price reform in the electricity sector of Mali, a poor country in West Africa. In the first part of the paper we analyse the distribution of electricity in Mali by income deciles, showing that few poor households are connected to the electricity grid. We then apply a sequential CGE micro-simulation model to track the transmission mechanisms between increases in electricity prices and changes in poverty and inequality among different household groups. Our results show that direct price increases have a minimal effect on poverty and inequality, whereas the general equilibrium effects of such increases are quite strong and negative. The compensating policies we tested do not help those who lose from the pricing reform. In fact they amplify the negative effects.     

GLOBAL CARBON CYCLE AND THE OPTIMAL TIME PATH OF A CARBON TAX

The existing models of fossil fuel consumption with carbon accumulationimply that the optimal time path of carbon tax is either hump-shapedor monotonically decreasing. These models specify the decayof atmospheric carbon as a constant rate of total concentration.We extend this specification to more accurately reflect theglobal carbon cycle models of climatologists and show that thisextension changes the basic economic properties of the optimalcarbon tax. Our analysis reveals that the optimal carbon taxmay as well be constant through time, increase monotonically,or have a U-shape. In addition, optimal resource extractionmay have an open-close- open cycle.     

CIGARETTE DEMAND IN SOUTH AFRICA OVER 1996-2006: THE ROLE OF PRICE, INCOME AND HEALTH AWARENESS

The study seeks to re‐investigate the role of price, income and health awareness in the evolution of South African cigarette demand over the period 1996 to 2006. At first glance, rising cigarette prices appear to have played an important role in reducing cigarette consumption over the sample period, especially during the late 90s. But how dependent is the impact of price increases on general economic conditions and overall health awareness among smokers? Health awareness, in particular, has not received sufficient attention in the South African context, due to a lack of data. Previous estimates of price and income elasticities of cigarette demand are based on long annual time series data, which do not allow for changes in underlying tastes and preferences. The paper attempts to disentangle the forces of price, income, health awareness and policy intervention using a quarterly data set. In addition, the study also cautions against the upward bias in estimates derived from formal cigarette sales data – in the light of increasing illicit cigarette volumes in South Africa.     

FORMATION AND DEVELOPMENT OF THE WELFARE STATE IN THE REPUBLIC OF KOREA: PROCESS OF REFORM OF THE PUBLIC ASSISTANCE SYSTEM

The legal framework for social security in the Republic of Korea began to be formed in the early 1960s (the first period) and further progress was made during the process of democratization in the 1980s (the second period). However, it remained a “top‐down” residual system, preserving conservative elements. With the constitutional lawsuit over the right to life in 1994 as a turning point, however, there was a major shift to a universal system, supported by “bottom‐up” efforts through petitions to the National Assembly and legislation by Assembly members. This led to the enactment of the Framework Act on Social Security (1995), the National Basic Livelihood Security Act (1999) and other measures (the third period). This paper attempts to analyze the Korean‐style welfare state by tracking these institutional changes as well as the main actors.     

THE CHANGING FACE OF PUBLIC FINANCING OF HIGHER EDUCATION,WITH SPECIAL REFERENCE TO SOUTH AFRICA1

Higher education displays characteristics of both private and public goods and there is a trend worldwide to expect individuals to pay more of the costs of their higher education. In South Africa public funding of higher education decreased from 0.86% of GDP in 1986 to only 0.66% in 2006; so that student tuition fees had to be increased to compensate for this loss of income. In the process staff numbers were kept relatively constant while student numbers increased appreciably. Two future scenarios, based on public higher education expenditure as a percentage of GDP and on real state allocation per WFTES, are spelt out. Although the qualifications awarded per FTE academic staff member increased over time, the graduation rates of the higher education institutions in South Africa are worsening. High‐level research, measured in publication units per FTE academic staff member, shows a disturbing decreasing trend since 1997.     

ECONOMIC IMPACT ANALYSIS OF PORT DEVELOPMENT ON THE SOUTH AFRICAN ECONOMY

Ports have been regarded as economic infrastructure and catalysts for the economies they serve, and it is evident that the associated development would generate economic benefits. In this paper, the economy‐wide impacts of port development in South Africa are examined via a computable general equilibrium analysis. Central to the analysis is to make quantitative contributions to the understanding of the impacts of port investment and changes in freight costs on the national economy. The results support the economic significance of port development, as a means of promoting growth, trade and employment, in South Africa.     

FISCAL SUSTAINABILITY AND THE FISCAL REACTION FUNCTION FOR SOUTH AFRICA: ASSESSMENT OF THE PAST AND FUTURE POLICY APPLICATIONS

How does the South African government react to changes in its debt position? In investigating this question, this paper estimates fiscal reaction functions using various methods (ordinary least squares, threshold autoregressive, state‐space modelling and vector error‐correction model). This paper finds that since 1946, the South African government has run sustainable fiscal policy by reducing the primary deficit or increasing the surplus in response to rising debt. Looking ahead, this paper considers the use of fiscal reaction functions to forecast the debt/gross domestic product (GDP) ratio and gauging the likelihood of achieving policy goals with the aid of probabilistic simulations and fan charts.     

THE ECONOMIC IMPACT OF HIV/AIDS ON SMALL,MEDIUM AND LARGE ENTERPRISES1

Based on the Bureau of Economic Research (BER's) 2005 HIV/AIDS survey, this paper provides a snapshot view of the nature and the extent of the impact of HIV/AIDS on companies of different sizes in South Africa, as well as their response to the epidemic. Whereas the focus of most of the previous workplace surveys has been on “evaluating workplace responses”, the present study also considers the economic impact of HIV/AIDS. This study provides evidence of the impact of HIV/AIDS on the largest sample of small, medium and large companies in South Africa to date. The survey results suggest that employer responses are strongly linked to company size, with the majority of medium and large companies indicating that they have an HIV/AIDS policy in place and small companies having done little in the way of action against the epidemic.     

Experimenting with Contests for Experimentation

We report an experimental test of alternative rules in innovation contests when success may not be feasible and contestants may learn from each other. Following Halac, Kartik, and Liu (in press), the contest designer can vary the prize allocation rule from Winner‐Take‐All (WTA) in which the first successful innovator receives the entire prize to Shared in which all successful innovators during the contest duration share in the prize. The designer can also vary the information disclosure policy from Public in which at each period, all information about contestants' past successes and failures is publicly available, to Private, in which contestants only know their own histories. In our setting, the optimal contest design in terms of maximizing the probability that at least one innovator is successful depends on the probability of successful innovation, given that innovation is feasible. Under some parameters the designer will prefer a WTA‐Public contest; while, under others he will prefer Shared‐Private. Our experiments provide evidence that Private disclosure contests behaviorally dominate Public disclosure, regardless of the prize allocation rule, and moreover that Shared‐Private contests dominate WTA‐Private contests.     

HIGH AND VOLATILE TREASURY YIELDS IN TANZANIA: THE ROLE OF STRATEGIC BIDDING AND AUCTION MICROSTRUCTURE

The observed increase in the level and volatility of Tanzania's Treasury yields in recent years against an otherwise benign macroeconomic backdrop presented a puzzle for policymakers, while raising concerns about the fiscal burden of rising debt interest payments and diversion of bank credit away from the private sector. Using evidence from bid-level data, and supported by a simple theorising of bidder incentives under unorthodox issuance practices, this paper traces the recent volatility in yields to the emergence of a sharp segmentation of the T-bill market between sophisticated financial market players (foreign-controlled banks) and a less-experienced group of investors (domestic pension funds and small banks). An important policy recommendation that emerges is that public debt managers should avoid micro-managing Treasury bill auctions by issuing amounts in excess of those offered or by dipping into oversubscribed segments of the yield curve, as such practices seriously disadvantage the less-sophisticated (but more competitive) investors vis-à-vis the more sophisticated players.