MARKET POWER AND THE PHARMACEUTICAL INDUSTRY IN SOUTH AFRICA

This paper examines the social cost of the pharmaceutical industry in South Africa. From a regulatory perspective the industry is seen to exhibit monopolylike behaviour resulting in monopoly prices on the supply (manufacturing) side and diminished consumption on the demand (consumer) side. The evidence presented here, which is complementary to that of previous studies, does not support that view. The findings contained here are relevant to the highly contentious subject of access to drugs.     

STATE TECHNOLOGY PROGRAMS AND INDUSTRY EXPERIENCE IN THE UNITED STATES*

Because of the growth of new technology based economic development policies at the state level in recent years, this research project provides an assessment of the experiences of users of one such program: the technology research center in microelectronics. A survey of a large number of companies gave us results that should be of interest to decision makers in universities, private industry as well as the public sector. Access to students as future employees was seen as a major reason why companies get involved with universities, more so than research enhancement per se. A univerisity's inability to protect what companies see as confidential research is seen as a major disincentive to further university-industry relationships, while most companies did not see federal or state tax incentives as encouraging collaboration. Among companies who had direct experience with state-funded technology center programs, most reacted positively to their experiences. Such collaboration was seen to stimulate related research within many participating companies, while also leading to improvements in the quality of products and production methods. While the majority of companies thought that states should continue to fund technology development programs, particularly at universities, neither universities nor government were seen as important sources of technical knowledge by many companies. A lack of information about state programs was seen among many companies that responded to the survey.     

PRIVATISATION AND EFFICIENCY IN THE UK WATER INDUSTRY: AN EMPIRICAL ANALYSIS*

ABSTRACTS The post-privatisation structure of the UK water industry involves the separation of environmental services from other outputs previously produced under an integrated system by the publicly-owned water authorities. This paper examines the extent to which the integrated authorities benefitted from joint production. Estimating a dynamic multi-product cost function from pooled cross-section, time-series quality adjusted data drawn from the accounts of the water authorities for the period 1979/80–1987/88, prior to privatisation, significant elements of joint production are found. Divestiture of the industry, arguably justified on other criteria, implies the loss of substantial areas of cost complimentary.     

THE LOW-TRUST ROUTE TO ECONOMIC DEVELOPMENT: INTER-FIRM RELATIONS IN THE UK ENGINEERING CONSTRUCTION INDUSTRY IN THE 1980S AND 1990S*

There is a growing body of literature that suggests that advanced economies are experiencing an economic restructuring such that the engines of economic development are smaller, more independent, firms acting in an increasingly cooperative manner. In assessing whether the UK economy is actually experiencing such a shift in inter-firm relations, the paper firstly assesses the existing evidence. This evidence suggests the continued dominance of large firms and only limited and uneven movements away from a low-trust system. Secondly, the paper presents evidence on the nature of inter-firm relations in the UK engineering construction industry in the 1980s and 1990s. the research shows considerable improvement in performance against schedule associated with the emergence of management contractors. Management contractors can improve performance either by adopting a high-trust route in which they seek to make overall efficiency gains by integrating design and construction, or by adopting a low-trust route in which they seek to reduce scope for opportunism by rigidifying design, and by passing on risk. Evidence is presented which shows that management contractors in the UK have so far predominantly adopted the low-trust route to improved performance. Cumulatively, the evidence suggests the dominance of the ‘top down’ control of inter-firm relations in the UK.     

MONETARY TRANSMISSION MECHANISM IN CENTRAL AND EASTERN EUROPE: SURVEYING THE SURVEYABLE

Abstract.  This paper surveys recent advances in empirical studies of the monetary transmission mechanism, with special attention to Central and Eastern Europe (CEE). Our results indicate that the strength of the exchange rate pass-through substantially declined over time mainly due to a fall in inflation rates and to some extent due to the so-called composition effect. The asset price channel is weak and is likely to remain weak because of shallow stock and private bond markets and because of low stock and bond holdings of domestic households. House prices may become an exception with booming mortgage lending and with high owner occupancy ratios. While the credit channel could be a powerful channel of monetary transmission – as new funds raised on capital markets are close to zero in CEE – it is actually not, as both commercial banks and non-financial corporations can escape domestic monetary conditions by borrowing from their foreign mother companies. The moderately good news, however, is that those banks and firms are influenced by monetary policy in the euro area because their parent institutions are themselves subjected to the credit channel in the euro area.     

EUROPE AND CHINA: THE FATAL CONCEIT1

China's recent economic growth has been driven by an apparent acceptance by the Chinese government of many of the key insights of Hayek's economic and social thought. Current Chinese economic policies stand in stark contrast to those being pursued by the EU and many European countries, where interventionist policies of the kind Hayek predicted would lead to relative impoverishment and declining freedom are being pursued. The long‐term consequence of these two trends is likely to be the economic dominance of China over Europe in the present century.     

COMPETITION AND SOCIAL HOUSING IN EUROPE

This article discusses the application of the concept of competition to social housing in Europe. A distinction is made between competition amongst social housing suppliers and between social housing organisations and commercial suppliers of housing. The competitiveness of social housing is examined using evidence mainly from England and the Netherlands.     

POLICING IN THE UK AND USA: A BRIEF COMPARISON

The relative advantages and disadvantages of approaches to policing in the UK and USA can be traced back to their different methods of funding and organisation. However, in both cases, the community role is essential for the future of successful policing.     

The London Business School with Gower Publishing: Forecast Release: EARNINGS AND UNEMPLOYMENT IN THE CAR INDUSTRY: THE BEST AND WORST OF BRITISH INDUSTRY

The Chancellor has described the cost in terms of lost output and higher unemployment of getting inflation down as ‘well worth paying’. Yet the trade-off so far is a miserable 1.25 per cent off the underlying rate of growth of earnings for an unemployment increase approaching 600,000, some 2–3 per cent off the underlying rate of inflation for a 3 per cent drop in GDP and a 7 per cent fall in manufacturing output. The question is clear: why is it that in the UK we seem to have to pay such a high price in terms of lost output and higher unemployment to make only modest progress on reducing wage and price inflation? One possible answer is in terms of the NAIRU; another stems from the way in which we measure retail price inflation. Using the example of the car industry as a backdrop, we examine the relationship between unemployment and inflation and ask whether there is a role for government to play in improving the trade-off. Our conclusion is that the present non-interventionist stance is probably appropriate but that the government should be doing more to educate both sides of the wage bargain - a challenge picked up by the Prime Minister in his recent speech to the CBI. This is especially appropriate at the present time, because price inflation is falling but wage inflation is lagging behind. It is not a cut in real wages that is required but an equi-proportionate deceleration in both wages and prices. By joining the ERM, we will ultimately obtain German rates of inflation; low wage settlements would both shorten the time-scale and reduce the unemployment cost of convergence.