Exchange rates, tax-subsidy schemes, and the revenue from foreign trade in a centrally planned economy

Conclusions It has been argued that while in the traditional analysis of the classic CPE the exchange rate has only an accounting function, inappropriate methods of national income accounting can lead to changes in the exchange rate generating changes in the real economy, provided that trade in unbalanced in foreign currency prices. This thesis was explored by examining the way the profits from foreign trade were calculated by the Ministry of Foreign Trade, and then transferred to the state budget. It was shown that the correct measure of the state's increased command over domestic resources from engaging in foreign trade, derived from the implicit taxes on that sector, was the ministry's profits on its domestic operations, the first term in (2). However, evidence was presented which suggested that its profits on foreign currency account measured in domestic currency, the second term in (2), were also passed over to the state budget. This implies that transferred profits from foreign trade will overstate the underlying command over resources when there is a balance of payments surplus, and understate them when there is a deficit. The consequence of this is that the domestic economy faces a series of erratic, though small, inflationary and deflationary impulses, regardless of changes in the exchange rate.The theoretical role of the preisausleich system was explored in some detail and it was argued that, although the system has been designed to insulate the domestic economy from external disturbances, there were clear reasons why it had come to play a major part in revenue raising. Specifically, it is administratively convenient to tax resources at their point of entry into or exit from the economy; the taxation of foreign trade widens the tax base and reduces the visibility of the tax system. But, of course, this grafting onto the preisausgleich of a second major function of revenue raising does lead to the development of a further channel through which external disturbances can pass into the domestic economy. That is external disturbances impact on the domestic economy not only through the production and welfare effects of changing exports and imports, and through whatever tenuous links are allowed between foreign and domestic prices, but also insofar as those disturbances affect the ministry's profits from foreign trade. In short, foreign economic disturbances show up in variations in the position of the non-inflationary government budget constraint. To that extent the second function of the preisausgleich impairs its ability to perform its original insulation function. In a minor way, the successful non-inflationary performance of the insulation function has always required adjustments in the government budget constraint. But the growth in the importance of foreign trade taxation has magnified the importance of this phenomenon, and led to a trade-off between the two functions.University of Bath. Initial research for this paper was carried out under ESRC grant HRP 7417/1.     

The productivity of private and social farms: Multilateral Malmquist indices for Slovene dairying enterprises

Applying programming techniques to farm-level panel data for four cooperative and 12 private dairy farms in the Yugoslav Republic of Slovenia gives estimates of technical efficiency, scale efficiency, and technical progress. These are used to construct multilateral Malmquist indices of total factor productivity (TFP). For the cooperatives, TFP growth has been slow and is attributable to technical progress. For the private farms, technical progress was also slow, but TFP growth was faster due to improved efficiency. Scale inefficiency explains the poorer absolute performance of the private farms, indicating the need for land reform as well as technological change.     

Implications of variant efficiency measures for policy evaluations in UK higher education

Policy goals in UK higher education encourage the publicly funded universities to become more-specialised and larger in size without compromising output quality. Efficiency gains are expected to flow from this increased specialisation in accordance with universities’ comparative research and teaching strengths. Mergers to reap further gains from economies of scale are also being actively encouraged. Given this scenario, the paper investigates whether best-practice efficiency measurement based on data envelopment analysis (DEA) provides empirical support for the current policy goals. It also assesses whether such support is dependent on the specific type of efficiency measure used in the DEA modelling. This assessment finds that a selection of (nine) commonly used, variant efficiency measures generally support the current policy goals. The paper also uses the principal-agent framework to explore the issues involved in using computed DEA-based efficiency scores for policy evaluations and possible funding guidance in UK higher education. This highlights empirically how policy-makers and universities can have very different preferences about which efficiency measure is to be used for policy evaluations and possible funding guidance.     

The brain drain and education opportunity in less developed countries

The impact of the brain drain on the educational systems of the countries of origin is examined, with particular reference to governmental decisions concerning education subsidies and the market for educational services. Two hypothetical cases are considered, one in which governments increase expenditures for education in the presence of a widespread brain drain, the other in which they decrease such expenditures.     

CEO compensation and the seasoned equity offering decision

Empirical research on seasoned equity offerings indicates that the decision to make an SEO typically engenders a decline in firm value, as investors interpret this decision as a signal of poor financial health or that the stock is overpriced. Here, we add to the literature by analyzing the short‐term market reaction to SEO announcements and the chief executive officer's link to firm performance (i.e. the proportion of CEO equity‐based compensation). Results support the hypothesis that investors are more likely to view the announcement of an SEO as a last resort source of capital when the proportion of CEO equity‐based compensation is high. In such cases of high equity‐based compensation, our findings indicate that the SEO announcement provides an incremental signal of financial distress above that provided by financial statements. We also find this relationship (last resort signal) to be stronger when large information asymmetries exist between management and investors. Thus, managers should consider the ramifications of executive compensation structure when considering whether to make an SEO. Copyright © 2006 John Wiley & Sons, Ltd.     

Industrial relations in Denmark: problems and perspectives*

Most studies on Scandinavian industrial relations have inevitably focused on Sweden, and little has so far been written on Danish industrial relations[1]. This article highlights the similarities and differences between the Danish system and the ‘Swedish model’, and examines some of the current issues in Danish industrial relations.     

Book Reviews

Yujiro Hayami and Toshihiko Kawagoe, The Agrarian Origins of Commerce and Industry: A Study of Peasant Marketing in Indonesia (with a foreword by Peter Timmer), St Martins Press, New York, 1993, pp. 208.

J. Thomas Lindblad, Between Dayak and Dutch: The Economic History of Southeast Kalimantan 1880–1942, Verhandelingen van het Koninklijk Instituut voor Taal-, Land- en Volkenkunde No. 134, Foris Publications, Dordrecht, 1988, pp. x + 282. Dfl. 30.-.

Mark Cleary and Peter Eaton, Borneo: Change and Development, Oxford University Press, Singapore, 1992, pp. ix + 271. A$44.95

James Spillane, Komoditi Kopi: Peranannya dalam Perekonomian Indonesia [Coffee: Its Role in the Indonesian Economy], Kanisius, Jakarta, 1990, pp. 259.

United Nations Industrial Development Organization, Indonesia: Growth and Diversification, Industrial Development Review Series, Economist Intelligence Unit (EIU), London, 1993, pp. xxiii + 255. £95.     

Regulatory Impact Assessment in Developing and Transition Economies: A Survey of Current Practice

Regulatory impact assessment (RIA) involves a systematic appraisal of the costs and benefits associated with a proposed new regulation and evaluation of the performance of existing regulations. So far, most academic research has been concerned with the adoption of RIA in OECD countries. This article assesses the contribution that RIA can make to 'better regulation' in developing and transition economies. The results reported in this article suggest that a growing number of low and middle-income countries are beginning to apply some form of regulatory assessment, but that the methods adopted are partial in their application and are not systematically applied across government. The authors discuss the implications of their findings for capacity building and future research.