The Political Economy of Higher Education: An 'Austrian' Aalysis

One of the most wasteful inefficiencies of the nationalised industries is that, isolated from price signals in the market, they make mistaken investment decisions. State-run higher education is no different. Excessive investment, following the Robbins Report of 1963, has resulted in over-staffing, but university 'managers'– vice-chancellors, heads of department, etc. – have no incentive to maximise efficiency by firing less desirable members of staff. It is the better qualified lecturers who are leaving, bribed with severance payments, to take up jobs in the private sector.     

Paper and Hill: An In‐Class Corporate Governance Case

Corporate governance is a set of rules and processes that help ensure that firms are effectively run for the benefit of their stakeholders. Good corporate governance is predicated on having directors fulfill their fiduciary duties while acting as stewards of the corporation. The fact that good corporate governance is essential to a well‐functioning and prosperous society is reflected in CPA Canada's Strategy and Governance competency. Unfortunately, there are few in‐class Canadian corporate governance cases that instructors can use to help accounting students improve their understanding of these three fundamental governance concepts: director duty of care, director duty of loyalty, and the business judgment rule. This Canadian corporate governance case is based on the actual events regarding the approval of Steven Hill's employment contract as the Chair of Paper Enterprises Inc. The case is presented using PowerPoint slides, rather than in a traditional narrative format, as it intended to be used as an in‐class case that does not require advance student preparation.     

Relationship Trading in Over-the-Counter Markets

We examine the network of trading relationships between insurers and dealers in the over-the-counter (OTC) corporate bond market. Regulatory data show that one-third of insurers use a single dealer, whereas other insurers have large dealer networks. Execution prices are nonmonotone in network size, initially declining with more dealers but increasing once networks exceed 20 dealers. A model of decentralized trade in which insurers trade off the benefits of repeat business and faster execution quantitatively fits the distribution of insurers' network size and explains the price–network size relationship. Counterfactual analysis shows that regulations to unbundle trade and nontrade services can decrease welfare.     

Factor Endowments,Democracy, and Trade Policy Divergence

We develop a stochastic model of electoral competition in order to study the economic and political determinants of trade policy. We model a small open economy with two tradable goods, each of which is produced using a sector‐specific factor (e.g., land and capital) and another factor that is mobile between these tradable sectors (labor); one nontradable good, which is also produced using a specific factor (skilled labor), and an elected government with the mandate to tax trade flows. The tax revenue is used to provide local public goods that increase the economic agents’ utility. We use this general equilibrium model to explicitly derive the ideal policies of the different socioeconomic groups in society (landlords, industrialists, labor, and skilled workers). We then use those ideal policies to model the individual probabilistic voting behavior of the members of each of these socioeconomic groups. We use this model to shed light on how differences in the comparative advantages of countries explain trade policy divergence between countries as well as trade policy instability within countries. We regard trade policy instability to mean that, in equilibrium, political parties diverge in terms of the political platforms they adopt. We show that in natural resource (land)–abundant economies with very little capital, or in economies that specializes in the production of manufactures, parties tend to converge to the same policy platform, and trade policy is likely to be stable and relatively close to free trade. In contrast, in a natural resource–abundant economy with an important domestic industry that competes with the imports, parties tend to diverge, and trade policy is likely to be more protectionist and unstable.     

RECENT TRENDS IN JOB TRAINING

This paper analyzes new data on job qualifications and training. Between 1983 and 1991, the share of workers reporting skill-improvement training on their jobs increased as did the wage premium for this training. Even in 1991, however, 58 percent of all workers reported no training on their jobs, and 44 percent reported needing no special qualifications to obtain their jobs. Training rates are especially low for young and less-educated workers. Skill demands appear to have shifted toward general and cognitive skills—best taught in formal training programs and schools—and away from specific and manual skills acquired through informal on-the-job training .     

ECONOMIC ADJUSTMENT IN HEAVILY INDEBTED DEVELOPING COUNTRIES

The threat to the international financial system resulting from the developing-country debt problem has diminished since the initial 1982 crisis, despite halting adjustment and impaired creditworthiness in heavily indebted developing countries. The threat to the financial system has eased as commercial banks have reduced sharply the share of their assets and capital exposed to the troubled debtor countries. The countries themselves, however, are no better off. A sizable balance-of-payments adjustment has occurred in the heavily indebted developing countries, but that adjustment was concentrated–at least in quantitative terms–during the years immediately following the onset of the crisis and might have been more efficient had it been executed more gradually. Despite the adjustment that has occurred, the creditworthiness of the heavily indebted countries–as evaluated by conventional indices–has not improved. And, for reasons that this article explores, economic growth per capita has not resumed either.     

Farmer Initiatives and Livelihood Diversification: From the Collective to a Market Economy in Rural China

This paper explores how, despite relatively undifferentiated economic, cultural and land tenure conditions, some farmers in a rural area of Hebei Province, north-east China, have managed to devise innovative livelihood activities that provide them with better living standards than the majority of villagers. The research concludes that the dynamics of farmer innovations emerge from a variety of factors: the building of effective social networks and sources of information, 'enlightenment' deriving from small-group interactions, and the construction of trust relations, self-help and cooperation. These factors belong to the sphere of social resources rather than to those of natural, physical, human or financial assets. Hence it is social components that constitute the mobilizers of change in regard to farmers' livelihood development.