Business Sector Production in the Short and Long Run in Israel

Engle-Granger representation theory is used to estimate the secular and cyclical determinants of business output in Israel during 1960–1988. The specification of the secular production function is based on the technique of cointegration, while the cyclical, or short-term, production function is specified in terms of an error correction model. In the preferred model of the secular production function returns to scale are slightly increasing and the productivity of Palestinian workers is approximately 40 percent of Israeli workers. In the short-term production function total factor productivity is pro-cyclical.     

Defining indicators to assess socially responsible enterprises

Concern for the social responsibility of business by both the public and enterprises themselves has been growing since the fall of the Berlin Wall. The private sector's relative unconcern with Apartheid in South Africa, poor and dangerous products, and environmental disasters have all led concerned people to question the relative social autonomy of business. As Government's tire of social expenditures and the public become weary of paying taxes, the future corporation will have to take its share of responsibility for social concerns more than ever before. Globally, the worlds' production cannot eventually end up going to the lowest common denominator, ie the country with the lowest social costs, the most paltry wages, poorest working conditions, and those with meager pensions for the old. In practice this means that beggar-thy-neighbor rent-seeking by enterprises whereby production is allocated to the poorest but cheapest working conditions must come to an end. Consumers, too, will insist that the enterprises of the future must be more socially responsible both within and outside their workplaces. What sorts of indicators to measure what will be a ‘socially responsible enterprise’ of the future is the subject of this paper.     

Reviews

POLICIES FOR TRAINING AND THE LONG-TERM UNEMPLOYED.

Corney, M. 1990: The Black Hole in Britain's Training System; Training for People in Employment: Robinson, P. 1989: Stagflation; Lessons from Other Places; and Meacher, M. 1990: Adopting the Employment Principle: A Green Paper. All published by the Campaign for Work. The price of the first is £4.00, the second £5.00 and the third £3.50.

US LESSONS IN EVALUATION.

Bingham, R. D., Hill, E. W. and White, S. B. (eds) 1990: Financing Economic Development: An Institutional Response. Newbury Park, California and London: Sage Publications, £33.25 cloth, £16.75 paper.

LESSONS FROM THE USA.

Hambleton, R. 1990: Urban Government in the 1990s: Lessons from the USA,

Occasional Paper No. 35, Bristol: School for Advanced Urban Studies. No price stated.

SKILLS TRAINING.

CBI, 1989: Managing the Skills Gap. London: CBI, £10.00 paper; Report of the Vocational Education and Training Task Force, 1989: Towards a Skills Revolution. London: CBI, £20.00 paper; Association of London Authorities, 1990: Training for London. London: ALA.     

Explaining Growth: A Contest Between Models

Recent contributions to the empirical growth literature show no tendency to convergence in specification, as researchers seek to identify new variables that can account for significant regional effects in earlier work. We conduct non-nested tests between the models of Barro (1997), Easterly and Levine (1997) and Sachs and Warner (1997). The data strongly prefer an encompassing model, but fail to reject any of the candidate models, implying that each model represents a partial truth. We identify a model that includes most (but not all) of the regressors in the candidate models and is robust to the inclusion of regional dummies.     

How Should An Accumulative Toxic Substance be Banned?

The harmful effects on human health or ecosystems of many toxic substances depend on their cumulative concentration in the carrying medium (water, soil, or air), not just on the annual deposition rates of the substances. Accumulative toxic substances pose challenges to regulatory policy that are not faced when controlling pollutants whose damaging effects are though to depend primarily on annual emission flows. An increasingly common response is to phase out offending uses or production of the substance. In this paper we take as given the goal of phasing out an accumulative pollutant and examine different ways this could be done using a simple, partial-equilibrium dynamic model. We focus on phaseout measures in which the cumulative production and release of the offending substance over the transition period is fixed. Once this cumulative volume is reached, users must convert to a known but higher-cost substitute that is assumed to be benign. The key to the analysis is the observation that the quota on cumulative production makes production of the toxic substance during the transition analogous to extraction of an exhaustible resource with a higher-cost, nonexhaustible ‘backstop’ technology. Using this framework, we first describe the cost-effective outcome when the ‘sunset’ date is chosen to maximize product market surplus subject to the cumulative production constraint. This outcome is compared to one in which the regulator fixes the sunset date, and one in which the regulator limits annual production as well as cumulative production out of concern for acute exposure effects. Finally, we discuss the kinds of market-based policy instruments that would be appropriate for supporting a cost-effective outcome.     

Internationale Wettbewerbsfähigkeit forschungs- und wissensintensiver Unternehmen

Einige wichtige Indikatoren deuten darauf hin, dass der Innovationsstandort Deutschland im Bereich der forschungs- und wissensintensiven Branchen seine derzeitige technologische Wettbewerbsposition im Vergleich zu wichtigen Konkurrenzl?ndern nicht dauerhaft halten kann. Welche Schw?chen sind entlang der gesamten Wertsch?pfungskette erkennbar? Welche Ma?nahmen zum Gegensteuern sollten ergriffen werden? Dr. Michael Nusser, 38, ist Leiter des Gesch?ftsfeldes „?konomische Effekte neuer Technologien“ am Fraunhofer-Institut für System- und Innovationsforschung (ISI) in Karlsruhe.     

ECONOMIC EFFECTS OF SMOKING BANS ON RESTAURANTS AND PUBS

The United Kingdom has recently enacted smoking bans in public places such as restaurants and pubs. Public health advocates argue that bans are necessary because non‐smokers need protection from second‐hand smoke. Advocates also claim that bans do not exert harm on owners because of a vast empirical literature showing that restaurants and bars in the United States never suffer harm following bans. This paper examines whether these claims are true by developing a model within the Coasian framework whereby owners of businesses have incentives to deal with smoking disputes between smokers and non‐smokers. Our model demonstrates that it is incorrect to argue that smoking bans are necessary because the private market has no method of attempting to solve smoking problems. It also predicts that bans exert different effects on different businesses: some will be unaffected while others will experience losses or gains. Our literature review reveals that predictions of differential effects are consistent with the empirical evidence.     

Measuring Investment Distortions when Risk-Averse Managers Decide Whether to Undertake Risky Projects

We create a dynamic model in which a self-interested, risk-averse manager makes corporate investment decisions at a levered firm with characteristics typical of public US firms. We examine the magnitude of distortions in those decisions when a new project changes firm risk and find expected changes in the values of future tax shields and bankruptcy costs to be important factors. We evaluate the extent to which these distortions vary with firm leverage, debt duration, project size, managerial risk aversion, managerial non-firm wealth, and the structure of management compensation packages     

Sectoral Selection and Informality: a Nicaraguan Case Study

Using microdata from the 1998 and 1993 Nicaraguan Living Standards Measurement Survey, this paper analyzes the relative size and attractiveness of formal and informal sector employment. Switching regression models of the formal/informal sector employment choice indicate that education across years and gender are the primary determinants of formal sector participation. Furthermore, the formal sector is characterized by positive selection. The results for the informal sector are less definitive, but are also suggestive of positive selection. These findings imply that the informal and formal sectors in Nicaragua contribute positively to the overall economy by attracting those individuals best suited for (in)formal sector employment.