On recalls, layoffs, variable hours, and labor adjustment costs

The paper analyzes the employment policy of a firm that can vary both hours and the level of employment. The analysis differs from previous work in the adjustment cost literature in that the firm is able to change its employment not only through hires, layoffs, and quits, but also by recalls of employees who were previously laid off. Thus, we introduce the possibility of the firm inventorying the labor input. It is shown that this labor inventory potential is necessary if the firm is to ever lay off workers. Further, it is demonstrated that linear rather than strictly convex adjustment costs are then required if the firm is to always recall employees who were previously laid off prior to hiring new workers.     

Tax competition,uniform assessment,and the benefit principle

In previous discussions it has been argued that tax competition between local governments results in a tax burden on business that is less than the cost of public services for business and in suboptimal levels of public expenditures for residents. However, this conclusion has never been substantiated by a full theoretical treatment. Here a theoretical model of tax competition is developed between metropolitan areas, with labor perfectly immobile and two local public goods, one for residents and one for business. For “plausible” parameter values, numerical solutions of the optimality conditions are computed by means of a nonlinear programming algorithm.     

Localized externalities,contagious processes and the deterioration of urban housing: An empirical analysis

Housing deterioration can develop in spatial-temporal patterns which are compatible with the operation of localized externalities if deteriorated structures exert negative effects on the condition of nearby structures or if structures are affected by unfavorable conditions which are endemic to entire neighborhoods. The pattern of housing deterioration in space and time is examined, using a time series of housing condemnations for Indianapolis. A non-linear logit model with a spatial-temporal lag structure is used to analyze the association between the occurence of new condemnations and the location of existing condemned structures. The model predicts the probability that a housing condemnation occurs within a given time period as a function of the numbers of condemned structures in the same area and adjoining areas at the beginning of the time period. The size of the areas is flexible and an appropriate scale for the process is identified by varying the size of the areas.     

The economics of decision making in the new manufacturing firm

Decision making in a modern manufacturing firm producing a variety of products while meeting order deadlines appears at first to have little basis in the economic Theory of the Firm. It is shown that optimal budget allocations, the fractions of revenue expended on inputs, are likely to remain constant for a succession of orders for each of a family of products, thus simplifying the decision process. Well-known heuristic decision rules may not only have a sound basis in economic theory but are evidently the best way to incorporate economic logic into a stream of fast-moving decisions. The discussion is extended to an explanation of the economic value of decision making to the firm, and why this value is usually assumed to be zero in theory.     

A reconciliation of recent results in optimal taxation theory

The recent papers by Guesnerie and Diewert on tax reforms are interpreted as contributions to the characterization of second-best optima. This paper demonstrates that when it is possible to achieve any feasible direction of change in supplies by a differential change in producer prices, there are unique producer support prices. Under these circumstances, the apparent differences between Guesnerie and Diewert are reconciled. Optimality conditions with nonunique support prices are also considered.     

Business Ethics in Australia and New Zealand

The scandals of the 1980s, extending into the 1990s, came as a profound shock to Australians and New Zealanders. Both countries have prided themselves – somewhat smugly and naively – on being open, fair and honest societies. So it was very disillusioning to see both corruption and gross dereliction of duty exposed in virtually every sphere of public life. Perhaps the most positive outcome, however, amidst an almost daily diet of amazing revelations, has been the ability of the system – and especially the judiciary and the media – to expose and deal with corruption even at the highest level.Following an extensive survey and literature review, it is clear that there is now widespread awareness of the need for reform in many areas of public administration, corporate governance and professional behaviour. However, a continuing cause for concern is the lack of leadership in identifying and addressing complex ethical dilemmas, particularly in the areas of conflict of interest and disclosure.Feedback from professional bodies, industry associations and university business schools indicates slow but uneven progress in ethics education. While several ethic centres and prominent individual ethicists have introduced innovative programs and given ethical issues greater prominence in the media, narrow vocationalism still takes precedence over personal values in the business and management curriculum.     

Book Reviews

Ruth McVey (ed.), Southeast Asian Capitalists, Ithaca: Southeast Asia Program, Cornell University, 1992, pp. 218.

Joan Hardjono (ed.), Indonesia: Resources, Ecology and Environment, Singapore: Oxford University Press, 1991, pp. xvi + 262. Cloth: A$50; £25.

Chris Dixon, South East Asia in the World-Economy: A Regional Geography, Cambridge: Cambridge University Press, 1991, pp. xv + 281. Paper: A$29.95; Cloth: npg.

Kym Anderson (ed.), New Silk Roads: East Asia and World Textile Markets, Cambridge: Cambridge University Press, for the Trade and Development Series, National Centre for Development Studies, Australian National University, 1992, pp. xxvi + 24. A559.50.

K. S. Sandhu et al. (comps), The ASEAN Reader, Singapore: Institute of Southeast Asian Studies, 1992, pp. xxvi + 582.

Kim Seung Jin and Suh Jang-Won (eds), Cooperation in Small and Medium-Scale Industries in ASEAN, Kuala Lumpur: Asian and Pacific Development Centre, 1992, pp. xiv + 389.