Back to basics: Theory for the rhetoric in the North-South round

The theoretical failings of the Southern position in the New International Economic Order debates of the 1970s are reviewed. Suggestions are made regarding future issues and strategy, following the precepts of Prebisch, Nurkse and Lewis.     

Determinants of financial covenants and pricing of debt in private debt contracts: the UK evidence

This paper presents details of financial covenants given by a sample drawn from the largest 200 non-financial quoted firms in the UK in private debt contracts and analyses these data to see whether there are relationships between the nature of the covenants given and firm characteristics. Data were obtained from 72 firms, of which 17 gave no financial covenants. Firm size was found to be the only significant factor influencing whether firms did or did not give covenants as well as the only factor which influenced the margin given on debt. Some types of covenants given were found to be different from those found in previous research. In particular, there is greater use of EBITDA as a base for both interest cover and gearing covenants. This shows the importance of cash flow based lending as opposed to asset based lending for general financing for large firms.     

South-north trade and southern growth: Bleak prospects from the structuralist point of view

A three-country, three-commodity model is developed to illustrate the dynamics of growth among the ‘North’, the ‘South’ and ‘OPEC’. One conclusion is that the Southern growth rate will be increased by faster growth of Northern capital, with a steady state response coefficient of unity. However, if the steady state is perturbed by increases in Northern productivity or the oil price, then the coefficient becomes less than one. In the short run, higher capital flows from North to South increase the former's growth rate but may have only marginal impact on growth in the South. Higher productivity in the South will slow its growth rate and reduce its terms of trade when the Engel elasticity of Northern demand for its exports is less than one. These and other results follow from surplus labor in the South and its dependent position in international trade, from which it will be difficult to escape.     

Cereal stocks,food aid and food security for the poor

This paper reviews recent events in world cereals markets, and argues that a significant proportion of the 1972–74 price increases resulted essentially from panic buying by a number of governments which controlled their countries' grain trade. Under these circumstances, a price stabilizing buffer stock would be beneficial, especially for poor countries in conjunction with food aid and emergency relief provisions. However, major producer countries might well lose from price stabilization, and may stand in the way of international agreement on buffer stocks.     

Human Capital Formation and General Equilibrium Treatment Effects: A Study of Tax and Tuition Policy

Policies to promote human capital formation have been advocated as a remedy for reducing the economy-wide problem of rising wage inequality. These policies are national in character and are designed to substantially alter the proportion of the work-force that is skilled. Yet the methods used to evaluate these policies are partial equilibrium in nature and do not take account of the consequences of the changes in skill prices that are produced by the policies. This paper summarises our research on general equilibrium evaluation of tuition and tax policies. We compare estimates of policy impact from our approach with those obtained from conventional partial equilibrium ‘treatment effect’ approaches to policy evaluation, and find substantial differences. Conventional partial equilibrium approaches present an overly optimistic view of what tax and tuition policy can achieve because they ignore the change in human capital investment levels induced by the change in prices due to the policy. In addition, conventional partial equilibrium approaches fail to provide an accurate assessment of the welfare consequences of these policies.     

Competitive Irrationality in Transitional Economies: Are Communist Managers Less Irrational?

Why do marketing managers in the transitional economies of Eastern Europe and China often engage in competitively irrational behavior, choosing pricing strategies that damage competitors’ profits, rather than choosing pricing strategies that improve their firm’s profits? We propose one possible reason, the moral vacuum created by the collapse of communist ideology. We hypothesize and find that managers who experienced formal communist moral ideological indoctrination are less likely to be competitively irrational than the post-communist managers who did not. Implications are discussed.