The Effectiveness of the U.K. Travel Allowance

This paper discusses a method for analyzing the pricing and production behaviour of a mature oligopoly, characterized by stable market shares and well established patterns of price leadership. The oligopoly utilized as an example is the US primary producers of copper. The paper develops three pricing/production strategies which are felt to be most relevant to the US primary producers. While one of these strategies (collusive monopolistic pricing) is more desirable to the oligopoly, the ability of the oligopoly to impose any of the strategies depends upon market conditions and government stockpile intervention. A generalized logit probability model is developed and estimated to indicate the effects of market conditions and government action upon the ability of the oligopoly to impose its desired pricing/production strategies.     

Sources of Inequality Between Male and Female Wages in Australia

This article examines the influence of labour force status, full-time/part-time employment status, educational qualifications, work experience, and occupation as sources of inequality between male and female wages in Australia. A decomposition method is used to identify the effect of these factors on male/ female inequality. This strategy involves successively removing persons who differ with respect to each of these factors from the population under study and then decomposing the inequality in the remaining sub-population into inequality within each sex and inequality between the sexes. This decomposition is done using the I₀ inequality index proposed by Theil (1967). The study is based on unit record data from the 1981–82 Income and Housing Survey conducted by the Australian Bureau of Statistics. It finds that a significant proportion of the inequality between the wages of the sexes can be explained by their differences with respect to the factors listed above.     

Political and Regulatory Risk: Beta Sensitivity in U.K. Electricity Distribution*

To establish price caps, regulators must determine appropriate returns for utilities capital employed. This paper uses the techniques of the Kalman Filter to estimate daily betas for the U.K.s regional electricity companies in the period from privatization to end-1998. The paper demonstrates that utilities risk is time-variant, and establishes significant political and regulatory influences in the systematic risk faced by shareholders. It finds beta to be mean reverting, with little evidence of cyclical variation across the regulatory review cycle. The paper confirms the prevalence of significant excess returns in U.K. privatized electricity distribution and suggests that over-estimation of the systematic risk faced by investors may imply further excess returns in the next regulatory review period.     

The profitability of U.K. foreign direct investment under colonialism

The effects of discrimination in favor of metropolitan direct investment in colonies on the size and composition of foreign investment there and the profits accruing therefrom have been derived with the help of a simple model. Empirical studies show that the rate of return to U.K. investment in her colonies was significantly higher than in non-British LDCs, although some doubt remains as to the extent to which this result is explained by data imperfections.     

The cyclical behaviour of prices in the U.K.: Some structural time series evidence

The cyclical behaviour of prices in the U.K. is investigated using a sample of annual observations covering the period 1886–1993. A structural time series model relating consumer prices to output is estimated over four sub-periods. The results indicate that prices were procyclical in the inter-war period, countercyclical in the post-1973 period and acyclical otherwise. The proposition that the cyclical behaviour of prices is determined by the dominance of supply or demand shocks alone is disputed on the basis of empirical evidence and theoretical reasoning. It is concluded that the cyclical behaviour of prices cannot be explained just by analysing time series on output and prices and that due attention should be paid to the institutional and policy changes occurring during the period under study. It is demonstrated that the empirical results are consistent with the events experienced by the U.K. economy in the most recent period. First version received: November 1998/final version accepted: October 1999     

A cross section analysis of intra-industry trade in the U.K.

In this paper the inter-industry patterns of intra-industry trade in the United Kingdom are explored. A cross-section econometric model is explained and estimated for the year 1977. Two samples of 37 and 68 observations are tested using a variety of proxies for features of market structure including market concentration, product differentiation and cost conditions. The results suggest that a significant proportion of the inter-industry variation in intra-industry trade can be explained by the model.     

Filter Tests of U.K. Share Prices

The purpose of this paper is to develop and test a model of the promotional expenditure decision for a firm operating under conditions of combined uncertainty and oligopoly. The uncertainty is assumed to exist in respect of the impact of any particular level of promotional expenditure upon the demand conditions facing the firm.

The analysis forms part of a wider study of advertising by confectionery manufacturers and arose largely as a result of conversations with advertising executives in the confectionery market. In the course of these discussions it became clear that the existing body of theory concerning the promotional expenditure decision is almost completely incapable of accommodating the extensive uncertainty which is an integral part of the promotional decision in a market such as that under consideration. It also became clear (at least in the case of the confectionery market) (a) that decision makers regard the pricing and promotional expenditure decisions as being largely independent and (b) that in a large number of cases decision makers think in terms of a minimum or ‘threshold’ level of promotional expenditure. While these factors are predominantly in the nature of impressionistic informal observations and therefore of doubtful validity as bases for a scientific enquiry, it was nonetheless felt worthwhile to attempt to develop a theoretical framework capable of accommodating them.

While exhibiting considerable indeterminacy, the model developed below at least takes explicit cognisance of risk and uncertainty. It is also formulated in such a way that the promotional and pricing decisions are independent. It is rather remarkable and most encouraging that the analysis appears to predict something closely akin to minimum ‘threshold’ levels of advertising expenditure. Our theoretical exercise might therefore be afforded the minimal justification of providing a framework capable of accommodating the various results of introspection and conversational empiricism.     

The Changing Distribution of Income: Evidence and Explanations

This article is concerned with the economics of the distribution of income, emphasizing aspects which have been missing from the recent literature. It begins with factor shares and the rise in real interest rates. These are important in their own right and in relation to the determination of wage differentials. The paper questions the conventional wisdom which locates rising inequality and unemployment solely in a shift in demand away from unskilled workers. This explanation is too partial in its approach, is hard to reconcile with the empirical evidence, and ignores labour market institutions and the role of social norms. In seeking to explain the experience of different countries, we need to look not just at wages but also at the capital market, and should not be limited to a simple competitive supply-and-demand story.