The Performance of Service Industries in Canada: A Real Value Analysis

The performance of service industries in Canada has been lower than that of good industries over the last four decades, with noticeable exceptions such as for railways and telecommunication carriers. Service industries were less economically (and technically) efficient in that they generated less output value (quantity) per hour worked (level and growth) or per combined unit of labour and capital (multifactor productivity growth) than good industries. The relative output price of services declined slightly over time compared with goods. At the disaggregated level, changing relative output prices were substantial and proved to be an important factor explaining the relative satisfactory economic performance of many service industries despite their low technical performance. Nevertheless, the output share of service industries increased over that period, sustained, mainly, by the growing recourse of all firms to outsourcing of services.     

Accounting for Option–based Compensation: The Economic Cost Approach

The intrinsic value approach amortizes over the life of the option, the difference between the stock price on the date of the grant and the exercise price of the option. The fair market value approach amortizes over the life of the option, the market value of stock options on the date of the grant. These approaches do not reflect the changes in the option–based compensation cost after the grant date. This paper proposes an economic cost approach that not only adjusts for the changes in the value of the options during its life but also records the issuance of the stock at fair market value on the exercise date.     

Corporate self-greenewal: Strategic responses to environmentalism

The rise of environmentalism in the past decade has become a major transforming force in pollutive and hazard prone industries. Corporate environmental responsiveness is not simply a peripheral and one of the many ‘social’ or ‘ethical’ issues facing business. It is becoming a central concern for competitiveness, productivity, and profitability. It is creating strategic transformation of companies in a diverse range of industries such as, Autos, Chemicals, Oil, Fast Foods, Power Generation, Pharmaceuticals, etc. The process of environmentally directed self-renewal, called ‘greenewal’ here, affects all aspects of companies. It implies changes in products, production systems, waste management practices and internal systems. It seeks to make companies simultaneously more competitive and environmentally responsible. This paper describes the pressures of and responses to environmentalism in a selected set of industries. It examines the processes of greenewal that companies are undergoing. It identifies implications for strategic greening of firms.     

Budget deficits and real interest rates: Updated empirical evidence on causality

Using error-correction model (ECM) estimation, the paper empirically examines the causality relationship between the federal government budget deficit and the ex ante real interest rate yield on high grade long term tax free municipal bonds in the U.S. To clarify this deficit or interest rate relationship, the budget deficit is measured by the primary budget deficit, which excludes net interest payments by the Treasury. In a model that includes federal personal income tax rates and net international capital flows, as well as money supply growth, the ECM estimates strongly suggest a bi-directional relationship between the primary budget deficit and the ex ante real interest rate yield. Budget deficits apparently do matter! William Simon's concerns were justified.The author is indebted to P. A. V. B. Swamy for ideas and helpful suggestions and Will Perry for data assembly and processing.     

Service Competitiveness – An Anglo-US Study

This article reports on the latest in a series of international comparisons of management practices and performance outcomes of industries in various countries. Here, it is the service industries in the UK and the US which come under the microscope. Among the companies surveyed, there were more world-class performers in the US than the UK, but also more low performers. The concluding part of the article is diagnostic – the authors also suggest measures which could improve performance.     

Fiscal sustainability and solvency: theory and recent experience in Indonesia

A major challenge for Indonesian economic policy makers is to avoid the recurrence of conditions that could trigger a new economic crisis. One of the important dimensions of this challenge will be to conduct fiscal policy in a way that is sustainable, given the level of interest rates and the rate of growth of the economy. This paper synthesises various approaches to the measurement of fiscal sustainability that have appeared in the economic literature, relates these measures to the fundamental concept of fiscal solvency, and applies the framework to Indonesia over the period 1991–2003. The domestic and foreign debt positions of the central government are treated separately, to capture the influence of exchange rate changes on the relative costs of domestic and foreign borrowing. The empirical analysis indicates that Indonesia has met the fiscal sustainability criterion in recent years, except when the rupiah has depreciated heavily.