Estimating the Costs of Protecting Native Species from Invasive Animal Pests in New South Wales,Australia

Invasive animal pests reduce crop and livestock output, require management and control measures, and threaten native plants, animals and their habitat. The agricultural and management costs are often directly measurable. But the costs to protect threatened native plants and animals are harder to assess. The Rural Lands Protection Boards were the government agency in New South Wales that managed invasive animals. An analysis of their decisions provided the opportunity to estimate the costs of protecting native species. The number of native plants and animals threatened by invasive pests was modelled against the expenditure, area, pest abundance, climate and location of 38 Board districts. There was a strong negative relationship between the number of threatened native species and Board expenditure. This relationship was interpreted to estimate the marginal cost of protecting a threatened native species, the downward shift in the supply curve necessary to protect all threatened native species, and the gains from the shift in the form of cost savings in the continued protection of non-threatened native species. These results value some of the costs that invasive animal pests impose on the environment.     

Entry, Prices, and Investment in Regulated Industries

The paper studies how the optimal regulatory policy is affected by the possibility of unregulated firms entering the market. In such cases, the regulator may prefer to limit price and cost reductions in the regulated incumbent. The extent to which this happens is shown to depend on the extent of the regulator's commitment: if it commits to a chosen policy, then the market outcome following entry is less competitive than it would be without commitment: price and production costs are both higher. We also show that, unlike the natural monopoly case, incentives for cost reducing investment are stronger when the regulatory policy has a short regulatory interval.     

Airline Schedule Competition and the Entry Route Choices of Low‐Cost Carriers

This study investigates the entry route choices of low‐cost carriers (LCCs). A LCC considers whether to enter a spoke route or a rim route of a major carrier's hub‐spoke network. Under a Cournot schedule competition model, we demonstrate that rim entry is more profitable for LCCs if connecting passengers' hub‐through additional travel time cost is large, and spoke entry is more profitable if this time cost is small. Welfare analysis shows that rim entry is socially preferable when the time cost is large and that spoke entry is socially preferable when the time cost is small. In a certain range of time costs, however, LCCs choose spoke entry even though it is not socially preferable.     

House Prices,Wealth and Consumption: New Evidence from Australia and Canada

Over the past two decades, a number of countries have experienced appreciation in house prices at the same time that aggregate consumption has increased. This paper tests alternative hypotheses for this phenomenon by using repeated household surveys from Australia and Canada to identify the transmission mechanism that links consumption and household wealth. The empirical analysis suggests that neither a direct wealth effect nor a common causal factor likely accounts for the observed correlation between wealth and consumption in these two countries. Rather, indirect factors such as collateral effects arising from relaxation of credit constraints are a more likely explanation.     

Changes in Hospitalisation Rates and Costs in New South Wales, 1996–97 and 2000–01

Changes in hospital admission rates and costs in New South Wales (NSW) between 1996‐97 and 2000–01 were examined by age, hospital type and socioeconomic status. A novel method led to a more accurate assessment of hospital patients' socio‐economic status than was previously possible. Use of unit record hospitals data and full population Census data allowed very high levels of disaggregation. Considerable increases in the baby boomer and frail aged populations led to higher hospital admission rates over the period. This was driven by the private sector, which saw its admission rates increase by 20 per cent (with the public sector rate declining by 6per cent). Public hospital admission rates by age were found to be up to 40 per cent greater for the poorest 20 per cent of the population than for the richest 20 per cent‐with a reversal of the pattern for private hospitals (up to 45 per cent greater for the richest 20 per cent than for the poorest 20 per cent). In a period when total NSW hospital expenditures increased by 21 per cent, we found that ‘per admission costs’ in the inpatient non‐psychiatric sub‐sector changed little.     

Unobserved Heterogeneity,Exit Rates,and Re‐Employment Wages

Exit rates from unemployment and re‐employment wages decline over a period of unemployment, after controlling for worker observable characteristics. We study the role of unobserved heterogeneity in an economy with asymmetric information and directed search. We show that the unique equilibrium is separating and that skilled workers have more job opportunities and higher wages. The composition of the unemployed varies with the duration of unemployment, so average exit rates and wages fall with time. The separating equilibrium relies on performance‐related pay schemes and the ability of firms to commit to renting an input that is complementary to worker skills.     

Money Wages, Consumer Prices, and Causality in Australia*

This paper exploits recently developed statistical techniques to examine the causal patterns in lag relationships between changes in wages and consumer prices. The analysis uses quarterly data for selected periods and a total historical sample period 1954-82. Causation has generally been unidirectional from wages to prices. However, for the first half of the 1970s bidirectional causation was detected, though the causation from wages to prices was statistically more significant. Brief consideration is given to some policy implications of the results.     

Commodity Prices and the Dynamics of Inflation in Commodity‐Exporting Nations: Evidence from Australia and Canada*

A commodity‐price boom is under way. What does this boom mean for inflation in countries with substantial net commodity exports? The answer depends on movements in commodity prices, changes in foreign exchange rates and the determinants of domestic price inflation. We estimate equations to provide indications of the strength of each of these forces for both Australia and Canada. The results show that world commodity prices move pro‐cyclically with world industrial production and that rates of change in commodity prices are directly related to domestic inflation in both countries. However, there is an offsetting impact of exchange‐rate changes, which is strong enough in the case of Australia, but not Canada, to substantially eliminate the inflationary impact of a commodity‐price boom.     

The relative economic efficiency of urban water utilities in regional New South Wales and Victoria

In recent times the relative economic efficiency of urban water utilities has been neglected as policymakers sought to secure urban water supplies. This paper is an effort to measure the efficiency consequences of a number of recent urban water policy initiatives. Data Envelopment Analysis (DEA) is employed in order to measure the relative technical efficiency of urban water utilities in regional New South Wales (NSW) and Victoria. We show that the almost universal policy of water restrictions is likely to reduce relative efficiency and the typically larger utilities located in Victoria are characterised by a higher degree of managerial efficiency. A number of implications for urban water policy are advanced.     

An Analysis of Income Distribution between the North and the South: the Grossman–Helpman and Lai Results Re‐examined*

This paper studies the effects of labor supply on relative wages in a dynamic North–South model of trade. Lai (1995 )—a generalization of the Grossman and Helpman (1991a,b , ch. 11) models—showed that the relative wage of skilled (unskilled) labor in a region is positively (negatively) related to the supply of skilled (unskilled) labor in that region. These surprising results depend crucially on the specification of the functional form of the Southern imitation activity. We will show that these results (except for the relative wage of unskilled labor in Lai) are reversed in the case where the productivity of imitation depends only on the number of products the North manufactures.     

Wine Quality and Varietal, Regional and Winery Reputations: Hedonic Prices for Australia and New Zealand

We estimate hedonic price functions for premium wine from Australia and New Zealand, differentiating implicit prices for sensory quality ratings, wine varieties and regional as well as winery brand reputations over the vintages 1992–2000. The results show regional reputations have become increasingly differentiated through time (although less so for New Zealand). In particular, cool-climate regions are becoming increasingly preferred over other regions in Australia. In each country, price premia associated with both James Halliday's and Winestate magazine's sensory quality ratings, and with Halliday's winery ratings and classic wine designations, are highly significant.     

The Use and Cost of Child Care in Australia

The use and cost of child care have become important policy issues with rising labour force participation for women responsible for young children. In this article it is shown that for children aged less than 2 informal care is much more important than formal care. For children aged 3 to 5 by far the most important, and cheapest, form of formal care is preschool. The category of formal care which has expanded most rapidly is child care centre places. However the recent expansion of female employment has been effected with no rise in the share of formal care in the total. Publicly supplied child care centre places are over 40 per cent more expensive to produce than private ones. It is argued that for those who do not receive a fee relief subsidy public care is more expensive than private care. The inference is drawn that people are willing to pay more for public than private care because public care is of higher quality. However those buying this higher quality care pay (at most) only 80 per cent of the cost of producing the care. The shortage of care in the public sector is not solved by private sector expansion because users of care are not willing to pay the price of producing high quality care.     

Real Rates of Return in Electricity Supply: New South Wales,Tasmania and Victoria*

This paper uses a newly developed economic return model to estimate the real (inflation adjusted) costs of supply, and rates of return, for the electricity systems in three States over very long time periods. It is shown that because of a combination of public ownership and the use of historical cost accounts, the real return on capital tends to fall with the onset of rapid inflation such as occurred in the mid 1970s In NSW in particular the rapid growth in demand for electricity in the 1970s due to falling real electricity prices and considerable increases in other energy prices has given rise to a major investment program and rapidly developing excess capacity. Higher real electricity prices in the 1980s, combined with the economic slump of 1982, resulted in low or negative growth rates in demand Much of the boom I bust mentality evident in all three States may have been avoided or ameliorated had the electrical supply authorities been required to earn even a very modest real rate of return of (say) 4 or more per cent p.a. which is considerably below the (pre-tax) return earned in the corporate sector.     

The Cost of Public Funds in Australia*

A model of labour supply is used to calculate Australia's marginal cost of public funds, which is the appropriate cut-off benefit/ cost ratio for an additional public project. The labour supply model incorporates effective average and marginal tax rates faced by the representative household in each gross income decile. These rates are estimated from the ABS 1988–89 Household Expenditure Survey. A simulation analysis is performed to calculate the effect on labour supply of a 1 per cent increase in marginal tax rates. The estimated changes in tax revenues and deadweight loss in each decile are used to estimate the marginal cost of public funds.     

The Impact of Cost Changes on Industry Entry and Exit

Increases in costs may have interesting, non-obvious effects on industry entry and exit. Three cases are possible when costs rise: the competitor neutral case, in which entry decreases and exit increases, entrant favoring, in which entry and exit both increase, and incumbent favoring, in which entry and exit both decrease. The model places restrictions on which outcomes are possible given which costs rise (marginal or fixed). The model can be used to examine the impacts of cost-increasing regulation or exogenous process innovation on industry entry and exit.