Transport Cost and Tariff Protection of Australian Manufacturing*

This paper provides estimates of transport cost and tariff protection available to import-competing Australian manufacturing industries. It finds that transport costs provide an important component of total protection available to such industries; one which, for many, is more important than the Australian tariff. In view of the effects of protection on industrial structure and performance, it should be explicitly recognized that transport costs are an unavoidable element of the protective structure and are deserving of study in their own right.     

The Impact of International Trade and Protection on Australian Manufacturing Employment

The labour market consequences of trade and protection have only recently come under the scrutiny of labour economists. This paper seeks to accomplish two things - to survey the recent research and to provide estimates of the effect that reductions in effective rates of assistance afforded to Australia's manufacturing industries have had on employment. Recent labour market developments reveal a downward trend in manufacturing employment levels. The declines appear to have been associated with lower levels of assistance. However, the estimates of the effect of lower levels of protection are generally small - about a one per cent reduction in employment for each ten per cent reduction in the effective rate of industry assistance. In addition, the manufacturing employment developments appear to be only weakly linked to real wage resistance. Overall, an overriding impression from the find ings presented in this paper is the strength of the structural adjustments ongoing in Australia     

An Estimated Trade Restrictiveness Index of the Level of Protection in Australian Manufacturing

In this paper we provide a new 31‐year time series of the level of protection in the Australian manufacturing sector. The index used is an estimate of the partial equilibrium form of the Trade Restrictiveness Index recently developed by the World Bank. This is the theoretically correct welfare based average of levels of nominal protection. The paper outlines the index and its properties. Some comments are made on the insights gained from the new series and on the record of the Labor and coalition governments in making reforms to industry assistance.     

Technological Change in Australian Manufacturing

In the modern era, the extent and character of technical change features prominently in discussions of productivity growth and movements in the competitiveness of manufacturing. While technical change is pervasive in modern manufacturing, it occurs unevenly. In this study, technical change is estimated by fitting dual cost functions for each of 38 sectors of Australian manufacturing over the 32 year period, 1968–69 to 1999–2000. The estimates show that technical change is heavily labour-saving in all industries, but that the overall rate of change, as measured by a rate of cost diminution, and the degree of bias towards saving labour, rather than capital or material, varies substantially across industries.     

Globalization and the Future of Social Protection

Social protection in industrial countries has been provided through regulations, tax expenditures, and public spending. This paper argues that globalization will affect the governments' ability to continue providing social protection at the level of recent decades. Specifically, tax competition among jurisdictions, ballooning electronic commerce, and increased mobility of the factors of production will likely cause significant falls in tax revenue in future years while increasing competition will reduce the scope for some forms of regulations. The paper concludes that countries need to look for new ways to provide social protection.     

Pricing in Australian Manufacturing*

The rate of change of prices of competing foreign products and the rate of change of costs of domestic production are both found to have positive impact on the rate of domestic price inflation in a cross section of Australian manufacturing industries over the period from 1968-69 to 1986-87. Prices of competing foreign products are found to have more impact, while production costs are found to have less impact, the higher is the level of domestic concentration, supporting the hypothesis that foreign and domestic competition have interactive effects on domestic prices.     

International Competition and the Degree of Monopoly in Australian Manufacturing

Pricing behaviour in open economies is examined by adapting Kalecki's analysis of pricing in closed economies. The parameters of the resulting pricing equation are estimated using data for a sample of Australian manufacturing industries. These estimates are then used to calculate measures reflecting the degree of monopoly for an open economy, which are compared with the ratio of aggregate proceeds to aggregate direct costs as a measure reflecting the degree of monopoly for a closed economy.     

The Cost of Monopoly in Australian Manufacturing

This article looks at the deadweight loss arising from monopoly elements in Australian manufacturing under various assumptions and its relationship with the level of concentration.     

Inflation and Capacity Constraints in Australian Manufacturing Industry

In the present paper we estimate a model of price-cost inflation for Australia using business survey responses of firms in the manufacturing sector. The data allow us to circumvent a number of key statistical problems, related in particular to the measurement of costs and structural changes in the model. Equally important, the data allow a new and more detailed perspective on the nature of supply constraints affecting inflation in the manufacturing sector. A new finding is that capital constraints have been more important in generating inflationary pressure than labour constraints or general indicators of capacity utilisation.     

Productivity Trends in Australian and New Zealand Manufacturing

The purpose of this article is to study relative trends in total factor productivity (TFP) between the Australian and New Zealand manufacturing sectors from 1986 to 1996. Since 1984 both economies have undergone major structural changes with varying degrees of speed and intensity. We use the Malmquist index to measure TFP growth and decompose it into an efficiency change and a technical change component. This decomposition provides extra insight on assessing relative productivity trends during a period of economic reform. The results indicate the Australian manufacturing sector exhibits better rates of individual factor productivity performance while multifactor productivity is estimated to be higher in New Zealand manufacturing. TFP growth in New Zealand is driven by technical rather than efficiency change. In fact, the New Zealand manufacturing average rate of efficiency change is estimated to be negative over the sample period.     

Structural Changes in Australian Manufacturing Industry*

The paper uses a neoclassical production function and historical data to test for structural stability in Australian manufacturing industry. The production function is an extended constant elasticity of substitution form in which factor substitution elasticity, returns to scale and market structure in output, capital and labour are testable hypotheses. Tests for structural changes in homogeneity and factor substitution elasticity relations are based on overall and individual tests of covariance analysis and also on a special version of the Swerling-Kalman filtering systems as proposed by Cooley and Prescott. The empirical findings possess desirable statistical properties and indicate the existence of structural instability in the industry. The evidence also repudiates the assumptions of unitary factor substitution elasticity, constant returns to scale and market competitiveness in output and factors of production.     

Cyclical and Competitive Influences on Pricing in Australian Manufacturing

Dynamic pricing equations are estimated using an error correction model, with data on a panel of 89 Australian manufacturing industries for the 14 years, 1971172 through 1984/85. The overall pattern is consistent with prices approximately following a fixed mark-up rule in low concentration industries, while the mark-up factor in high concentration industries is strongly pro-cyclical. Also, in high concentration industries that are heavily exposed to import competition, the mark-up factor increases with prices of foreign competing products and with the general price level for domestic manufactures.     

Adjustment of Profits: Evidence from Australian Manufacturing

Studies of industry profitability generally deal with long-run equilibrium models, making no allowance for slow adjustment to equilibrium. In this study, a cross-sectional analysis is carried out against a sample of Australian manufacturing industries at the Australian Standard Industrial Classification (ASIC) four-digit level between 1977–78 and 1984–85. Firstly, a profit model is estimated in equilibrium form as well as allowing for both uniform and variable adjustment rates across industries. The variable adjustment model is superior, with either model implying at least half adjustment to equilibrium within the seven-year sample period. Secondly, results are examined for the impact of firm homogeneity of firms within industries. Homogeneity of firms is found to have substantial impact,increasing both the estimated profits-concentration relationship and the estimated speed of adjustment.     

The Determinants of Firm Profitability in Australian Manufacturing

This study provides new evidence on the determinants of the profitability of Australian manufacturing firms by analyzing a unique firm-level data set of firm performance over the period 1984-93. The panel nature of the data permits the estimation of dynamic profitability models over the business cycle, to test both the persistence and cyclicality of firm profitability. Econometric results suggest that lagged profitability is a significant determinant of current profit margins, and that industry concentration is positively related to firm profit margins. Also, profit margins are found to be procyciical in concentrated industries but counter-cyclical in less concentrated industries.     

The Duration of Industrial Disputes in Australian Mining and Manufacturing

Using a unique dispute-level database of industrial action in Australian mining and manufacturing industries, this paper investigates the determinants of the duration of industrial action. For the first time in the Australian literature, the duration of individual disputes is analysed within a hazard function framework that estimates conditional settlement probabilities over the duration of the dispute. Further, the analysis is conducted for both strikes and non-strike forms of industrial action such as bans on working overtime. A range of parametric and semi-parametric specifications are estimated in order to determine the sensitivity of the results to alternative econometric techniques. The duration of both strikes and work bans are found to be affected by a range of factors, including the state of the labour market, industry characteristics, past union experiences and the cause of the dispute. The conditional settlement rate of both strikes and bans are found to be upward sloping, implying that the longer that a dispute has already lasted, the more likely that it is to end. However, failing to control for unobserved heterogeneity results in bias toward declining conditional settlement rates.