Neoclassical growth model with two fixed delays

“Delay” has been considered as one of destabilizing factors in economic dynamics for a long time. Dynamic macroeconomics is concerned with explaining growth and fluctuations. This paper shows how various dynamics involving cyclic fluctuations can emerge in the standard neoclassical growth model when two distinct delays, a delay in production and a delay in depreciation, are explicitly taken into account. We first confirm that the production delay has a stabilizing effect and the depreciation delay has a destabilizing effect in a one‐delay model. We then determine the stability switching curve analytically in the two delay model. It is shown that cyclic fluctuations emerge via Hopf bifurcation when stability is lost. It is also found that stability loss and gain repeatedly occur. Numerical examples verify the theoretical results when the Cobb‐Douglas production function is adopted.     

A Note on the Composition of Public Expenditure under Capital Tax Competition

Keen and Marchand ( Journalof Public Economics, 1997, 66, 33–53) argue that undercapital tax competition, the composition of public expenditureis inefficient in that too much is spent on public inputs benefitinglocal business and too little on public goods benefiting residents.Their result depends on labor immobility. This note shows thatthe Keen-Marchand argument may not hold if both labor and capitalare mobile. An interesting case is identified where capital taxationdoes not distort the mix of public goods and public inputs, eventhough the overall level of public expenditure is inefficientlylow.     

Redistribution and regional development under tax competition

This paper considers how capital tax competition affects transfer and development policies in the presence of regional income disparity. In each country, development policies determine the number of rich (poor) regions that (do not) engage in production activities, while transfer policies redistribute income between rich and poor regions. The mix of transfer and development policies is inefficient under tax competition: conditional on the equilibrium tax rate, too much revenue is spent on development policies and too little on transfer policies. This analysis of the expenditure mix implies that development policies are used as a means of regional redistribution even if transfer policies are efficient instruments for this purpose. Moreover, it is shown that the overall level of public expenditure may be too high because of the possibility of over-development.     

Deindustrialization in the UK: a comparison analysis with Japan

As a mature economy, the UK has experienced continuous decline in manufacturing competitiveness under the process of deindustrialization. On the other hand, the service sector has been developing a comparative advantage and creating new jobs. This article attempts to recognize the change in inter-dependence between industries, particularly the manufacturing and service sectors, in the process of deindustrialization. Using partitioned multiplier effects, I analyse the extent to which deindustrialization, particularly expansion in the service sector, has benefited the UK economy. I show that the contribution of the service sector to the UK economy has not been significant.     

COMPETITIVE POSITION OF PRIMARY AIRPORTS IN THE ASIA‐PACIFIC RIM

This paper measures and compares the network performance and hub competitive position of primary airports in the Asia‐Pacific rim, taking into account the quantity and quality of both direct and indirect connections. The results reveal that Tokyo has the best network performance and hub competitive position. The most striking growth of network development is found at Chinese airports, while network performance deteriorates at Oceanian airports. Finally, the results show that the position of Oneworld and Star Alliance is stronger in this region, whereas SkyTeam has an innegligible position especially at Japanese airports, owing to the fifth and sixth freedom rights.     

Portfolio Insurance with Liquidity Risk

This paper studies a portfolio insurance problem with liquidity risk. We consider an investor who wants to maximize the expected growth rate of wealth in a low liquid market. The investor can trade assets only at random times and his wealth must not fall below a predetermined floor. We find the optimal expected growth rate and an optimal strategy. The optimal strategy is closely related with a traditional constant proportion portfolio insurance strategy. Also we show that the same strategy maximizes the growth rate almost surely. Further we study the floor effect on the growth rate.     

Estimating Cost Functions of Malaysian Commercial Banks: The Differential Effects of Size,Location, and Ownership*

Bank integration and competition policies are a core part of current financial reforms intended to strengthen the financial sector in Malaysia. This paper intends to clarify the production technology employed in Malaysian banks and indicate important policy implications for current bank consolidation policy. While it is essential to conduct a microeconomic analysis of the banking sector to appraise financial reform policy, Katib and Mathews (2000) is the only formal study in this area that uses micro level data on Malaysian banks. Our analysis expands on Katib and Mathews’ study in three aspects. Firstly, while Katib and Mathews employed Data Envelopment Analysis, we use estimation analysis based on a parametric approach. Secondly, we examine technological differences among Malaysian banks according to the size of operations, location of branches and ownership structure. Thirdly, we also explicitly incorporate the existence of hidden bad loans in estimating cost functions. According to our estimation analysis, there is a difference in production technology between large‐sized banks and small or medium‐sized banks. While economies of scale are observed for large‐sized banks, no economies of scope and technological progress are observed for any banks. The results of our analysis suggest that, while the current reform policy is basically appropriate, serious problems remain regarding bank consolidation and the lack of market competition.