THE CHANGING FACE OF PUBLIC FINANCING OF HIGHER EDUCATION,WITH SPECIAL REFERENCE TO SOUTH AFRICA1

Higher education displays characteristics of both private and public goods and there is a trend worldwide to expect individuals to pay more of the costs of their higher education. In South Africa public funding of higher education decreased from 0.86% of GDP in 1986 to only 0.66% in 2006; so that student tuition fees had to be increased to compensate for this loss of income. In the process staff numbers were kept relatively constant while student numbers increased appreciably. Two future scenarios, based on public higher education expenditure as a percentage of GDP and on real state allocation per WFTES, are spelt out. Although the qualifications awarded per FTE academic staff member increased over time, the graduation rates of the higher education institutions in South Africa are worsening. High‐level research, measured in publication units per FTE academic staff member, shows a disturbing decreasing trend since 1997.     

Should merchant transmission investment be subject to a must-offer provision?

Merchant electricity transmission investment is a practically relevant example of an unregulated investment with monopoly properties. However, while leaving the investment decision to the market, the regulator may decide to prohibit capacity withholding with a must-offer provision. This paper examines the welfare effects of a must-offer provision prior to the capacity choice, given three reasons for capacity withholding: uncertainty, demand growth and pre-emptive investment. A must-offer provision will decrease welfare in the first two cases, and can enhance welfare only in the last case. In the presence of importer market power, a regulatory test might be needed.      

No significant service gap between west Germany and the USA

Conclusions The analyses show that a significant “services gap” does not exist between west Germany and the USA. Such a gap is not even evident in the area of low-skill service activities, such as in catering, once the marginal employment relations — the importance of which is understated by the official statistics — are included. This finding invalidates the empirical basis for economic policy proposals for an expansion of employment in service branches as a way out of the employment crisis. It is evident that a solution to Germany's current employment problems can only be found in a strategy that increases the scope for employment at the macro-economic level, i.e. irrespective of sectoral developments and whatever the implications of this for the distribution of the various types of activity. Having said this, the heavy bias in the output structure of the German economy in favour of industrial output suggests that an additional employment potential does exist in services, especially personal services.     

THE DUTCH ECONOMY 1921–39: REVISED MACROECONOMIC DATA FOR THE INTERWAR PERIOD

A set of revised macroeconomic time series for the Netherlands 1921–39 is presented. The series cover the "Consolidated Accounts for the Nation" of the SNA in current prices as well as the national product account and some additional series in prices for the previous year. The new interwar series differ considerably from the data that has been published before. They are also more comprehensive, more detailed, and conceptually consistent with the modern national accounts.     

Oil and the Euro area economy

We examine the macroeconomic effects of different types of oil shocks and the oil transmission mechanism in the Euro area. A comparison is made with the US and across individual member countries. First, we find that the underlying source of the oil price shift is crucial to determine the repercussions on the economy and the appropriate monetary policy reaction. Second, the transmission mechanism is considerably different compared to the US. In particular, inflationary effects in the US are mainly driven by a strong direct pass-through of rising energy prices and indirect effects of higher production costs. In contrast, Euro area inflation reacts sluggishly and is much more driven by second-round effects of increasing wages. The monetary policy reaction of the ECB to oil shocks is also strikingly different compared to the FED. The inflation objective, relative to the output stabilization objective, appears more important for Euro area monetary authorities than for the FED. Third, there are substantial asymmetries across member countries. These differences are due to different labour market dynamics which are further aggravated by a common monetary policy stance which does not fit all.
--- Gert Peersman and Ine Van Robays     

Eigentumsentflechtung,deep-ISO,der dritte Weg — wohin führt die Reise der Europäischen Energiemärkte?

This paper discusses vertical unbundling of networks from the commercial businesses in the European energy markets. The current status quo in the political field in Brussels is to implement a choice between three options: ownership unbundling, the “deep-ISO”, the “third way”. The “third way” is the strengthening of the current unbundling regulations, but will change hardly anything in the industry structure. The “deep-ISO” requires the separation of system operations into an independent entity, whereas transmission ownership does not change hands and thus possibly remains in one hand with the power plants. If the ISO decides and orders network investment, we speak of a “deep-ISO”. The more controversial proposal is ownership unbundling. A social-cost-benefit-analysis of the German transmission system operators (Brunekreeft, 2008) suggests that the likely overall effect for social welfare is slightly positive, but effects are small.     

Benchmarking regression algorithms for loss given default modeling

The introduction of the Basel II Accord has had a huge impact on financial institutions, allowing them to build credit risk models for three key risk parameters: PD (probability of default), LGD (loss given default) and EAD (exposure at default). Until recently, credit risk research has focused largely on the estimation and validation of the PD parameter, and much less on LGD modeling. In this first large-scale LGD benchmarking study, various regression techniques for modeling and predicting LGD are investigated. These include one-stage models, such as those built by ordinary least squares regression, beta regression, robust regression, ridge regression, regression splines, neural networks, support vector machines and regression trees, as well as two-stage models which combine multiple techniques. A total of 24 techniques are compared using six real-life loss datasets from major international banks. It is found that much of the variance in LGD remains unexplained, as the average prediction performance of the models in terms of R² ranges from 4% to 43%. Nonetheless, there is a clear trend that non-linear techniques, and in particular support vector machines and neural networks, perform significantly better than more traditional linear techniques. Also, two-stage models built by a combination of linear and non-linear techniques are shown to have a similarly good predictive power, with the added advantage of having a comprehensible linear model component.     

Cultural Differentiation of Negotiating Agents

Negotiations proceed differently across cultures. For realistic modeling of agents in multicultural negotiations, the agents must display culturally differentiated behavior. This paper presents an agent-based simulation model that tackles these challenges, based on Hofstede’s model of national cultures. The context is a trade network for goods with a hidden quality attribute. The negotiation model is based on the ABMP negotiation architecture and applies a utility function that includes market value, quality preference and risk attitude. The five dimensions of Hofstede’s model are the basis for the modification of ABMP parameters and weight factors in the utility function. The agents can observe each other’s group membership and status. This information is used, along with the indices of Hofstede’s dimensions, to differentiate behavior in different cultural settings. The paper presents results of test runs that verify the implementation of the model. The model helps to explain behaviors of actors in international trade networks. It proves that Hofstede’s dimensions can be used to generate culturally differentiated agents. Further validations of the model with case studies from literature and experiments have yet to be conducted. Extensions can make this model a useful tool for training traders who engage in cross-cultural negotiation and for implementation in negotiation support systems.     

Macro‐integration with inequality constraints: an application to the integration of transport and trade statistics

Macro‐integration is the process of combining data from several sources at an aggregate level. We review a Bayesian approach to macro‐integration with special emphasis on the inclusion of inequality constraints. In particular, an approximate method of dealing with inequality constraints within the linear macro‐integration framework is proposed. This method is based on a normal approximation to the truncated multivariate normal distribution. The framework is then applied to the integration of international trade statistics and transport statistics. By combining these data sources, transit flows can be derived as differences between specific transport and trade flows. Two methods of imposing the inequality restrictions that transit flows must be non‐negative are compared. Moreover, the figures are improved by imposing the equality constraints that aggregates of incoming and outgoing transit flows must be equal.