Fiscal Policy in Europe: How Effective Are Automatic Stabilisers?

It is largely recognised that fiscal policy will have largerresponsibilities for cyclicalstabilisation in EMU given the loss of the monetary instrument.At the same time, theEMU's budgetary framework emphasises the need to rely onautomatic fiscal stabilisers,rather than active policies in cushioning the business cycle.We show that automaticstabilisers are relatively powerful in the event of shocksto private consumption, but lessso in the case of shocks to private investment and exports.In the case of supply sideshocks, the automatic stabilisers are largely ineffective,but this may actually be a goodthing to the extent that supply-side disturbances call forstructural adjustment rather thancyclical stabilisation.     

The measurement and decomposition of nonuse values: A critical review

We critically review the literature that claims that existence values, or nonuse values in general, are a large and measurable component of total value for certain environmental resources. Our concern is not with the question “do nonuse values exist?” For some individuals they surely do. Rather, our concern is with two interrelated questions: are there operationally meaningful theorems which might lead to the specific measurement of nonuse values, and do we in fact have a body of credible evidence which shows that nonuse values, particularly components of any nonuse value, are “large”? We find nothing in the way of operationally meaningful hypotheses which would permit the estimation of values attributable to specific motives of individuals. We find no credible basis for claims related to either the measurement of existence and other motive-related values or claims for the “large” relative size of such values. In short, we question the conventional wisdom that such values are measurable and that they are significant as a component of total value.     

A multilevel, identity-based approach to leadership development

A frontier of leadership development is examined involving the respective roles of levels-of-analysis and identity in constructing an integrated development system. An approach is described in which individual and relational leadership identities are the focus of developmental efforts at lower organizational levels (e.g., individual contributor and first-level supervisor) but collective identities become the focus at higher levels (e.g., general manager and above). The separate areas of levels-of-analysis and leader identities are first discussed in terms of their respective relevance to leadership development. These are then discussed jointly in elaborating on a proposed development approach that integrates across organizational levels as well as levels of development (i.e., leader development and leadership development). In developing collective leadership identities, processes that involve participants in engaging across boundaries (functional, hierarchical, geographical) are recommended.     

The political economy of industrialisation

This paper analyses how incentives under different sets of political institutions map into policies that promote industrialisation. I set out an endogenous growth model with non-overlapping generations, where agents are heterogeneous with respect to wealth, skills and political power. The skills of the political elite play a crucial role for industrialisation to occur. It is shown that a flat wealth distribution and a skilled political elite enhance development the most in elitist regimes, while democracies perform as well as elitist regimes in terms of industrialisation. The theoretical results regarding elitist regimes are in line with evidence on the Industrial Revolution.     

Expected utility theory and the experiments

The experimental evidence against expected utility theo or unconvincing. When one modifies the experiments to mi tends to support traditional theory.Dewey H. Johnson Professor of Economics, Department of Economics, College of Business Administration, University of South Carolina. I am grateful for comments from seminar participants at the University of Melbourne, University of South Carolina, University of Stockholm, and the University of Western Ontario. John Hey provided a firm, but sympathetic, editorial hand.     

Book Reviews

Leon A. Mears, The New Rice Economy of Indonesia, Yogyakarta: Gadjah Mada University Press, 1981, pp. xxiii + 605. Price US$15.

Alfian, Mely G. Tan, Selo Soemardjan (eds). Kemirkinan Struktural: Suatu Bunga Rampai (Structural Poverty: A Collection). Jakarta: Yayasan Ilmu-Ilmu Sosial (YIIS), 1980. pp. 189. Rp 2000.

Thee Kian Wie, Pemerataan- Kemiskinan- Ketimpangan (Equalization-Poverty-Uneven Distribution), Jakarta: Sinar Harapan. 1981, pp. 152. Rp 1750.

Bulletin Leknns, Year 1 No. 2, Feb. 1982, Special Edition on Employment Opportunity, Poverty and Population Mobility in Rural Areas, pp. 146.

Mubyarto (ed.), Growth and Equity in Indonesian Agricultural Development, Jakarta: Yayasan Agro Ekonomika, 1982. pp. xv + 258.

Muriel Charras, De la forêt malefique à I'herbe divine [From Malign Jungle to Divine Grain]: La transmigration en Indonesie: Les Balinais a Sulawesi, Paris: Editions de la Maison des sciences de I'homme 1982, pp, viii + 341. Price Fr. 90.00.

Yujiro Hayami and Masao Kikuchi. Asian Village Economy at the Crossroads: An Economic Approach to Institutional Change, Tokyo: University of Tokyo Press, 1981, pp. xvi + 275. Yen 4000. Geoffrey B. Hainsworth (ed.), Village-level Modernization in Southeast Asia: The Political Economy of Rice and Water. Vancouver: University of British Columbia Press. 1982. pp. ix + 411. Can$34.00.

Colin MacAndrews and Chia Lin-Sien (eds.). Too Rapid Rural Development: Perceptions and Perspectives from Southeast Asia, Athens: University of Ohio Press, pp. xiv + 369. Cloth $19.95, paper $10.95.

Gary E. Hansen (ed.), Agricultural and Rural Development in Indonesia, Boulder, Colorado: Westview Press, 1981, pp. xiv + 312.

William L. Collier, Declining Labour Absorption (1878 to 1980) in Javanese Rice Production, Bogor: Agro-economic Survey, Rural Dynamics Study, Publication No. 2, 1980, pp. 120.     

Strategic trading and learning about liquidity

Many practitioners point out that the speculative profits of institutional traders are eroded by the difficulty in gauging the price impact of their trades. In this paper, we develop a model of strategic trading where speculators face such a dilemma because of incomplete information about time-varying market liquidity. Unlike the competitive market makers that they trade against, informed traders do not know the distribution of liquidity (“noise”) trades. Instead, they have to learn about liquidity from past prices and trading volume. This learning implies that strategic trades and market statistics such as informational efficiency are path-dependent on past market outcomes. Our paper also has normative implications for practitioners.