On the Validity of the Random Lottery Incentive System

The random lottery incentive system is widely used in experimental economics to motivate subjects. This paper investigates its validity. It reports three experiments which compare responses given to decision tasks which are embedded in random lottery designs with responses in single choice designs in which each subject faces just one task for real. The experiments were designed to detect cross-task contamination effects in the random lottery treatment. No significant differences between treatments, and no significant contamination effects, were found. Over the three experiments, observed differences between the treatments are adequately explained as sampling variation.     

Strategic planning and strategic management in Australian organisations

Many planning and organisational aspects of 48 Australian organisations were examined. The empirical information tends to suggest that the process of adopting the strategic management concept is well advanced in some Australian organisations. Irrespective of size and ownership status, some organisations have already adopted strategic planning, and the process of evolution is continuing towards the final stage of strategic management. The increasing environmental volatility and growing international exposure of organisations in Australia and elsewhere in the Asia Pacific region will increase the pressure to implement international management systems, including strategic management.     

Nonparametric event study tests

This paper provides the first documentation of the power and specification of the generalized sign test, which is based on the percentage of positive abnormal returns in an estimation period. In simulations using daily stock return data, the generalized sign test is well specified with both exchange listed and NASDAQ stocks. A rank test is more powerful under ideal conditions. However, the rank test is more sensitive to increases in the length of the event window, to increases in return variance, and to thin trading. The generalized sign test is a viable alternative to the rank test under these conditions.     

Value-added tax options for India

The pressures of aggregate revenue, the requirement of a reduced role for customs duties for the liberalization of the economy, and the complexity and strains of the current system together point clearly toward the desirability of tax reform in India. Since domestic indirect taxes provide the major source of revenue, they deserve special attention. This paper argues that India would benefit from moving toward a system of value-added taxation (VAT) and focuses on the way in which a VAT (or VATs) can be best introduced into India given the country's federal structure. Three different options are distinguished: a central VAT, dual VAT, and states' VAT. We argue that the first is politically infeasible, that the second represents the best way forward in the short term, and that the third deserves consideration as a long-run option. Special attention is paid to the problems that would arise under either a states' or a dual VAT with regard to taxing interstate trade.     

Time Series Analysis of Deregulatory Dynamics and Technical Efficiency: The Case of the U.S. Airline Industry

As markets worldwide become less regulated, it becomes increasingly possible and timely to establish the presence of an empirical relationship between technical efficiency and market forces compelling agents to economize. This article, taking an innovative approach to test the hypothesis that competitive pressure enhances efficiency, constructs a methodology to examine time series of technical efficiency indices for cointegration and convergence. A panel of U.S. airlines, observed quarterly between 1970 and 1990, is used as a case study. Cointegration results are suggestive of long-run relationships between carriers; furthermore, convergence tests document less dispersion in firm performance over time.     

Keynesian economics in the twenty-first century1

The Keynesian theory as set out by Keynes embodied an Achilles heel which he himself half understood but chose to ignore. It is also ignored by “post-Keynesians” and “New Keynesians”. The trouble is not in the labour market but in the goods market, where The General Theory, at least up to Chapter 19, definitely assumes perfect competition. But on that assumption the possibility of a Keynesian recession requires that employers behave with highly inconsistent expectations. Once, however, the assumption of perfect competition in the goods market is replaced by imperfect competition or oligopoly, the Keynesian theory re-emerges not only as robust, but also totally relevant to the 21st century.     

Redistribution with Unobservable Bequests: A Case for Taxing Capital Income

This paper addresses the question of the optimal taxation of labour and interest income in an overlapping generations model with two unobservable characteristics, ability and inheritance. We assume realistically that saving can only be taxed anonymously, whereas the tax on labour earnings can be individualized and made non-linear. In such a setting, we show that a withholding tax on interest income along with a non-linear tax on labour income is desirable. The role of interest income taxation is to indirectly tax inherited wealth.
JEL Classification D 63, H 2