THE IMPACT OF ANTI‐TERRORISM EXPENDITURE ON ECONOMIC GROWTH AND WELFARE

This paper examines the effects of increasing anti‐terrorism expenditure on economic growth rate and social welfare. It is shown that: (i) spending the least amount possible on anti‐terrorism expenditure will lead to a maximum economic growth rate; and (ii) to achieve maximum social welfare, the government should allocate its budget to anti‐terrorism expenditure. The results shed light on why the US government has chosen to uphold and pursue its anti‐terrorism policies in recent years to present day.     

TARIFF POLICY AND WELFARE IN AN INTERNATIONAL DUOPOLY WITH CONSUMER‐FRIENDLY INITIATIVE

The purpose of this paper is to explore how strategic tariff policy and welfare are affected by the consumer‐friendly initiative of foreign exporting firms. We define a firm that is consumer‐friendly or non‐profit‐based if it considers both its own profit and consumer surplus. This paper extends Brander and Spencer by taking the consideration of consumer‐friendly firms into an international duopoly, and within such context examining the tariff policy and welfare. The consumer‐friendly initiative that leads to trade liberalization is a ‘Win‐Win‐Win’ solution in the sense that it is not only beneficial for foreign exporting firms, but also for the government and consumers of the importing country.     

COURNOT AND BERTRAND EQUILIBRIA COMPARED: A CRITICAL REVIEW AND AN EXTENSION FROM THE OUTPUT‐STRUCTURE VIEWPOINT*

This paper compares Bertrand competition with Cournot competition. In previous studies, the welfare ranking has not been examined in any general setting. One purpose of this work is to fill this gap. In the Zanchettin model, the ranking regarding the less efficient firm's output is sensitive to the degree of asymmetry between firms, whereas the welfare ranking is not. Another goal of this study aims at dealing with this paradox. We demonstrate that the rankings regarding average price, average output and the Herfindahl index are not sensitive to the degree of asymmetry, and hence can explain the welfare ranking.     

MARKET‐DEMAND BOOSTING AND PRIVATIZATION IN A MIXED DUOPOLY

This study incorporates demand‐boosting strategies into a mixed duopoly model in order to consider the endogenous determination of market demand. The results indicate equilibrium characteristics that differ from those found under an exogenous demand setting. As consumers become more sensitive to the demand‐boosting strategies of firms, the government must choose a lower level of privatization. This suggests that the responsiveness of consumer demand to the demand‐boosting strategies of firms constitutes a limiting factor for privatization.     

TECHNICAL EFFICIENCY IN THE INDIAN TEXTILES INDUSTRY: A NON‐PARAMETRIC ANALYSIS OF FIRM‐LEVEL DATA

The Indian textiles industry is now at the crossroads with the phasing out of the quota regime that prevailed under the Multi‐Fiber Agreement until the end of 2004. In the face of a full integration of the textiles sector in the WTO, maintaining and enhancing productive efficiency is a precondition for competitiveness of the Indian firms in the new liberalized world market. In this paper, we use data obtained from the Annual Survey of Industries for a number of years to measure the levels of technical efficiency in the Indian textiles industry at the firm level. We use both a grand frontier applicable to all firms and a group frontier specific to firms from any individual state, ownership or organization type in order to evaluate their efficiencies. This permits us to separately identify how locational, proprietary and organizational characteristics of a firm affect its performance.     

A CLASS OF PERFORMANCE‐BASED SUBSIDY RULES*

We consider a benchmark static incentive scheme, i.e. a per unit subsidy, that induces a monopoly to produce a target output level. We show that the same output level can be achieved by a continuum of dynamic subsidy rules based on a performance indicator. The rules require only local information. The present value of the subsidies paid is smaller than the amount paid under the static subsidy. Each of the dynamic subsidy rules results at each moment in a lower per unit subsidy than the static subsidy. The subsidy rate depends on a state variable that reflects the monopolist's performance history.     

GROWTH, R&D AND WELFARE: THE ROLE OF PUBLIC POLICY

This paper analyzes the normative side of an R&D growth model in which market structure and growth are jointly determined in the equilibrium of a one‐sector economy under monopolistic competition. We find that a distortion in the allocation of R&D, namely the presence of technological spillovers between firms, generates two market failures: insufficient growth and excessive entry of firms. We show that this result is driven by the interplay between market structure and growth. A simple tax/subsidy scheme to support the efficient solution is proposed.     

EFFICIENCY AND PRICES OF REGULATION‐EXEMPT CONSUMER‐OWNED NATURAL MONOPOLIES: A FIRST LOOK AT ELECTRICITY DISTRIBUTORS IN NEW ZEALAND

Following the New Zealand Electricity Industry Reform Act in 1998 integrated electricity distribution and retail companies were forced to unbundle at ownership level, creating line companies and retailers. Electricity line companies that meet the ‘consumer‐owned’ criteria as set out in the Commerce Act are exempt from price‐quality regulation as of 2009. In this study, we examine the effects on variable costs and unit prices of the exemption by comparing exempt line companies and line companies that fall under the price‐quality regulation. The findings suggest that exempt line companies did not charge higher prices than non‐exempt line companies, and that they experienced a larger decline in their variable costs compared to non‐exempt line companies, following the exemption.     

A REVISIT TO THE STATIONARITY OF OECD INFLATION: EVIDENCE FROM PANEL UNIT‐ROOT TESTS AND THE COVARIATE POINT OPTIMAL TEST*

This paper re‐examines the stationarity of inflation rates in 19 Organisation for Economic Cooperation and Development countries with the use of cross‐sectional information. We employ the panel unit‐root tests that allow for cross‐sectional dependency and the covariate point optimal test. These tests have high power in common due to the exploitation of cross‐sectional information, and they can assist mutually to draw a concrete conclusion on inflation dynamics for all series in the panel. Our empirical results show that allowing for cross‐sectional dependency rejects the null hypothesis that all series in the panel have a unit root, implying that there is at least one stationary series in the panel. With the help of the results of the covariate test, we can distinguish the panel into a group of stationary and a group of non‐stationary series. For robustness, the two groups of series are re‐confirmed by the panel tests. Our results reveal evidence of mean reversion in inflation for 15 of 19 countries, which is significantly stronger as compared to that obtained by the state‐of‐the‐art univariate unit‐root tests.     

A NOTE ON “A ONE‐SECTOR NEOCLASSICAL GROWTH MODEL WITH ENDOGENOUS RETIREMENT”: EXISTENCE OF MULTIPLE STEADY STATES*

This note extends Matsuyama's 0–1 endogenous retirement choice model to the framework with continuous endogenous retirement choice to study the consumption‐saving decision and capital accumulation in an overlapping generation model. The conditions for the existence of multiple steady states have been derived. In contrast to the 0 or 1 labour choice, the partial retirement may be a stable steady state under the continuous endogenous retirement choice in the second period. And this implies that partial retirement may be a stable optimal choice. Also, we find that the retirement choice depends on the initial capital stock when there are multiple steady states.