Product choice for a firm selling related products: A parimutuel application

This paper provides a framework for analysis of product choice by a multiproduct firm selling several products whose demands are interrelated. The decision making process of a racetrack-racebook regarding the parimutuel wagering products (both number and which ones) it should supply is illustrated. A racetrack-racebook is a business entity, which offers its patrons the opportunity to wager, not only on live horse racing conducted at the racetrack but also on races simulcast to that racetrack from a variety of racetracks, from both in-state and out-of-state locations. The demands for these wagering products are interrelated and these interrelationships play a key role in determining the number (and which ones) of these wagering opportunities that will be supplied. Based on the experience of a specific racetrack-racebook, these demand functions are estimated econometrically and the role of these interrelated demands in the supply decision is explored. An algorithm is developed to search over all possible product portfolios to determine that combination of products yielding the highest sales, revenue, or profit.     

New panel results on cointegration of international health expenditure and GDP

This article tests for existence of cointegration between health expenditure and GDP using data from 25 OECD countries for the period 19607ndash;1997. The empirical modelling is based on a heterogeneous bivariate vector error correction panel model that allows for trending data as well as intercepts and trends in the cointegrating relations. Univariate country-by-country and panel unit root tests generally fail to reject the null of a unit root in the health expenditure and GDP variables. Country-by-country results based on the Johansen multivariate likelihood-based inference indicate somewhat mixed results on country-specific cointegration with a rank of one found for 12 countries and a rank of zero for the remaining 13 countries. Application of a new panel test for cointegration rank with higher power than the individual tests indicates that health expenditure and GDP are cointegrated around linear trends.     

Exchange rate pass-through: The case of China

This paper studies the degree of the exchange rate pass-through (ERPT) to import and consumer prices in China with both the ratio of China’s imports to GDP and domestic prices of China’s main trade partners going up. Statistic results show that the degree of ERPT is somehow less than the degree of marginal cost plus mark-up pass-through of exporters, and econometric analyses reach the same conclusion. Besides, the ERPT to import prices is found to be high while the ERPT to CPI is low owing to some factors that obstruct the import prices pass-through channel to domestic CPI. But this situation has been changing significantly since August 2005. Thus, a more flexible exchange rate system is needed for China to absorb the price shock from aboard efficiently.     

China’s value-added tax reform,firm behavior and performance

China reformed value-added tax (VAT) by removing investment from the tax base in northeastern provinces in 2004, which is a “natural experiment” of its tax system. Using difference-in-differences method, this paper for the first time investigates the impact of VAT reform on China firms’ fixed asset investment, employment behavior, innovative activities, and productivity, and furthermore discusses the impact of firm behavior on industrial structural upgrade and employment with a firm-level panel data of large and medium-sized manufacturing enterprises in China. We find that VAT reform significantly promotes firms’ fixed asset investment, and increases firms’ capital-labor ratio and productivity; while enhancement of firms’ productivity is mainly achieved by means of substituting labor with capital, rather than independent technology innovation; meanwhile, VAT reform distinctly decreases employment. Our findings have essential policy implications on the extension of VAT reform in the entire China.     

The non-productive entrepreneurial process

A large literature explores the importance of entrepreneurship as the catalyst of economic progress. In contrast, this paper argues that entrepreneurs are the driver of economic stagnation. We analyze the non-productive entrepreneurial process and discuss three channels through which non-productive activities have a multiplier effect culminating in economic decline and stagnation. Drawing on examples of non-productive entrepreneurship from both underdeveloped and developed countries, we provide insight into why economic stagnation persists in the former and why economic decline can occur in the latter.     

Sustainable Development and a Dwindling Carbon Space

Curbing global warming by setting long term maxima for temperature rise or concentrations of greenhouse gases defines spaces within which further emissions of these gases are to remain (referred to here as ‘carbon spaces’). This paper addresses questions related to how to share between countries the carbon space and/or efforts to stay within it, in the perspective of sustainable development; different allocation mechanisms are reviewed, responding to criteria such as ‘responsibility’ for climate change, ‘capability’ to engage in abating it, and ‘potential’ or future contribution. The carbon space remaining at any time will depend on effective mitigation up till that time, and will condense if more stringent maxima are to be set; per capita this space becomes smaller with rising population. Sharing the carbon space in a fair way requires “convergence” of currently widely unequal per capita emissions. If the world is to stay within the carbon space consistent with <2° warming, then developed economies—the wealthiest sources of greenhouse gases should quickly and deeply engage in mitigation. Also, substantial mitigation is to take place in developing countries and that this will require substantial support to developing countries (financially, technologically). Changing development paths can make a major contribution to climate change mitigation; this requires changes in investment, production and consumption patterns. Green New Deals as proposed in the context of a widened response to the current economic crisis could become a first phase of a fundamental transition towards a decarbonised global economy worldwide. Concerns to do with equity as well as sustainability must be incorporated and integrated into coherent transitory strategies.     

Competition and innovation: an experimental investigation

The paper analyzes the effects of more intense competition on firms’ investments in process innovations. More intense competition corresponds to an increase in the number of firms or a switch from Cournot to Bertrand competition. We carry out experiments for two-stage games, where R&D investment choices are followed by product market competition. An increase in the number of firms from two to four reduces investments, whereas a switch from Cournot to Bertrand increases investments, even though theory predicts a negative effect in the four-player case. The results arise both in treatments in which both stages are implemented and in treatments in which only one stage is implemented. However, the positive effect of moving from Cournot to Bertrand competition is more pronounced in the former case.     

Toward a Horizonal Theory of Justice: Efficiency,Equity, Rights and Capabilities in a Free Market Economy

The theory of planning horizons and their relation to pricing, conscience and learning has been explored in some detail in terms of efficiency attributes and ecological health (Jennings 2003, Journal of Economic Issues 39:365-373, 2005, 2007a, b, 2008a). This paper addresses the equity implications of planning horizons in terms of the social role and importance of justice, rights and capabilities in a free market economy. From my earlier work, cooperation—not competition—is seen as the means to longer and broader horizons in an efficiency frame, mitigating any alleged tradeoff against equity issues. The impact of longer horizons on fairness and justice in terms of intentions and outcomes along with rights and capabilities still remains unexplored. This paper reviews the normative aspects of planning horizons, showing how ethical and ecological conscience spreads with horizon effects, strengthening goals of fairness and the internalization of social effects. In this setting, capabilities and empowerment are enhanced by respect for human rights, as social conscience spreads through interhorizonal complementarities. The features of a long-horizon world differ from myopic contexts, specifically in the relation of efficiency to other goals. This paper examines that difference in terms of its equity aspects, with regard to social justice and the role of rights and capabilities in economic cultures.     

Information and Communication Technology (ICT) and Singapore’s economic growth

Singapore’s remarkable success in economic development has been strongly associated with the country’s vigorous efforts to embrace the Information and Communication Technology (ICT) revolution to promote economic growth. This study provides a comprehensive investigation of the contributions of ICT to Singapore’s economic growth during the 1990–2008 period. It documents three key findings. First, there is a strong positive association between the intensity of ICT use and value-added and labor productivity growth at the sector level. Second, ICT investment contributed approximately 1 percentage point to Singapore’s GDP during 1990–2008, and its role in driving economic growth has become increasingly important over time. Third, the contribution of the ICT manufacturing sector to Singapore’s growth was notable, but it was on the decline and faced difficult restructuring challenges. This paper also provides valuable policy lessons and strategic insights for governments in both developed and developing countries that aspire to embrace ICT to promote economic growth.     

Explorations - Introduction: Towards Lesbian,Gay, and Bisexual Perspectives in Economics: Why and How They May Make a Difference

The economics profession has only recently begun to include research on lesbians and gay men, but we argue that a lesbian economics has long existed, with documentation of anti-lesbian discrimination, discussion of its private and social costs, and practical work for change. This tradition, along with the newer traditions built upon work with gay men and bisexual people, provides a basis for feminists to expand work in economics on lesbian and gay issues. The articles in the symposium propose ideas for future research, for learning from other disciplines, and for creating a more welcoming academic climate.