Currency competition: A partial vindication of Hayek

This paper establishes the existence of equilibria for environments in which outside money is issued competitively. Such equilibria are typically believed not to exist because of a classic overissue problem: if money is valued in equilibrium, an issuer produces money until its value is driven to zero. By backward induction, money cannot have value in the first place. This paper shows that overissuance is not a problem if agents believe that if an issuer produces more than some threshold number of notes, then only those notes issued up to the threshold will be valued; additional notes will be worthless. This result is very general, applying to any monetary economy in which equilibria with and without valued money exist if the money supply is finite. The paper also compares the allocation achieved by a monopolist to that achieved with competitive issuance in both a search and an overlapping-generations environment. The results depend on the environment considered, but two general conclusions arise. First, it is ambiguous whether competitive issuers can achieve a more desirable allocation than a monopolist. Second, with competitive issuance, a licensing agency can always improve on pure laissez-faire and achieve the efficient allocation in the long run.     

Price elasticity of water allocations demand in the Goulburn–Murray Irrigation District*

Bid prices for the demand and supply of water allocations between 2001 and 2007, and average monthly prices paid for water allocations from 1997 to 2007 in the Goulburn–Murray Irrigation District are analysed to estimate price elasticities. Based on bid prices, the price elasticity of demand for water allocations appears highly elastic, with elasticities strongly influenced by the season and drought. The price elasticity of supply for water allocations is also elastic, albeit less elastic than demand. Using actual prices paid, water demand is negatively related to price and is inelastic, and appears to be most influenced by demand the previous month, drought and seasonality factors.     

International competitiveness, technical change and the state: The machine tool industry in Taiwan and Japan

It is widely accepted that the growth performance of Japan and the Asian newly industrialized countries (Hong Kong, Singapore, South Korea and Taiwan) is partly the result of the international competitiveness they have achieved in a number of export industries. It remains, however, to explain how this competitiveness was achieved. In the first part of the paper an attempt at such an explanation, based on the theory of comparative advantage, is critically examined. It is argued that while this explanation does have some explanatory power, it does not deal adequately with (a) the role of technical and productivity change; (b) the causal mechanisms underlying economic growth; and (c) the role of the state. The rest of the paper examines the case of machine tools in Taiwan and Japan showing the importance of these three factors as well as a number of others as determinants of international competitiveness. The paper ends with a discussion of policy dilemmas relating to international competitiveness in the Taiwanese machine toot industry.     

The future of work and work-life balance 2025

This paper explores the concept of the future of work and identifies some of the challenges that Europe will increasingly face in regards to economic, social and demographic changes. We argue that workers will find themselves in an age of transition driven by new technological opportunities and the feminization of the labor force. The consequences of these changes will affect the organization of future work and the concept of the work-life balance. Special attention is given to the Scandinavian models and cases, as the welfare states of the north are often regarded as being on the forefront concerning the work-life balance. We will demonstrate how aging is affecting Denmark and purport that the Scandinavian model will face significant challenges. We describe the components of work-life balance and present alternative fictionalized scenarios for future work that highlight the interplay between macroeconomics and the work-life balance.     

Property–Liability Insurer Reserve Error: Motive,Manipulation, or Mistake

We use two reserve error definitions found in the literature to investigate the joint impact of previously studied incentives on the magnitude of reserve error. We find many prior conclusions are dependent upon the restricted setting in which the hypotheses are tested and on the definition of the reserve error. We find strong evidence that financially weak insurers underreserve to a greater extent than other insurers. However, our evidence casts doubt on the conclusion that insurers manipulate reserves to avoid solvency monitoring. We also find insurers increase reserves for tax purposes and to reduce the impact of regulatory rate suppression.     

Is there a gender gap in CEO compensation?

The gender pay gap generates significant political and social debate. This study contributes to this discussion by examining if a gender pay gap exists at the highest level of corporate management, the CEOs. While previous studies have documented a gender pay gap for most levels of executives the findings with respect to CEOs are conflicting. In this paper we focus only on CEO's as it is the most homogenous of executive roles and does not require us to assume that executives with similar titles undertake identical roles. Our evidence is based on 291 US firm-years for the period of 1998–2010. We do not find any association between CEO pay and gender using both the total sample and a sample matched using propensity scores to control for firm characteristics. These insignificant results hold for total pay, salary and bonuses, and for different matching procedures and econometric specifications. Our results therefore indicate that women who rise through the “glass ceiling” to the level of CEO are remunerated at similar levels to their male counterparts.     

The Helios strategy: An heretical view of the potential role of solar energy in the future of a small planet

Over the next hundred years there must be a worldwide transition from reliance on fossil fuels to the use of some combination of long-term and abundant primary sources for the production of heat, electricity, and synthetic fuels. The rate at which such options can be developed and employed, as well as the maximum rate at which they can provide energy at a sustained rate, will place important constraints on the rate and limits to growth of other human activities. It is generally argued that only the fission option, in the form of the fast-breeder and high-temperature reactors, can provide the energy required for a livable world, particularly if this means a world of 10 billion people living at the present energy level of Western Europe. However, a careful examination indicates that the use of solar energy, through a menu of technological options, can provide the needs of a world at this scale of energy use, and that this can be accomplished within the constraints of land availability and requirements for energy, materials, and labor. No scientific breakthroughs are required, although a number of these would be helpful, but very substantial engineering advances are required, and the transition of such a world-wide system would take no less than a century. However, the feasibility of such large-scale use of solar energy will substantially alter those aspects of the “limits to growth” discussions in which future growth strategies are constrained by available and acceptable energy alternatives. This paper outlines a global solar-energy system considered feasible for more than 10 billion people living at 5 kW per capita.     

German managers'' attitudes towards Anglo-American accounting: Results from an empirical study on global accounting harmonization

The starting-point of the present paper are systematic differences between the answers of German corporate managers and professors in an empirical study by C&L Deutsche Revision AG (1995) on accounting harmonization. In this study, managers expressed themselves in all questions more positively towards current German accounting and more negatively towards US accounting than professors. The fundamental assumption put forward in this paper is that these differences are due to differences in the economic interests of the two groups. To test this empirically, hypotheses are deduced with regard to the accounting-related interests of the executive managers. The idea behind the hypotheses is that managers' answers to questions in the C&L Industry Study can be explained by structural features of their respective companies. The hypotheses are tested using multiple regression analysis. The results of the tests show that managers' answers can, to some extent, be explained by the suggested multiple regression approach. However, the answers to the rather general and abstract question (the preferred balance between the true-and-fair-view and prudence accounting principles) are much better explained than the answers with regard to detailed US-GAAP regulations. We must assume that the managers' attitudes towards concrete US-GAAP, which are directly related to corporate accounting practice, are influenced by a multitude of firm-specific and personal factors.     

The telecoms boom and bust 1996-2003 and the role of financial markets

Financial crises are still as much a part of the modern, information-and-communication-technology-based (ICT) economy as they were of previous economies. Why are we apparently unable to learn lessons from the past and avoid what Charles Kindleberger (2000) has called manias, panics and crashes? Why is it that our sophisticated stock of information, made readily and relatively cheaply available to us by our investment in ICTs, and our abundant theories and models, have not allowed us to steer clear of these financial excesses? The aim of this paper is to highlight some of the processes and mechanisms that have played a significant role in causing the Telecoms Boom and Bust, 1996-2003. The question of whether anything can be done about these processes and mechanisms in order to try and modify such financial excesses in the future is taken up in the conclusion.JEL Classification: A12, D8, E3, G1, L63, L96, N2, O30The author would like to acknowledge, without implicating, the helpful discussion with Richard Burns, Fred Bleakley and others who commented on an earlier version of this paper at Institutional Investors European Institute meeting in Berlin in March 2003, and with Stan Metcalfe on other occasions. In addition, thanks are due to many friends in NTT and InfoCom who assisted my learning about the Telecoms Industry and its dynamics.     

Optimal Harvesting of an Age-Structured Schooling Fishery

Biologists have criticized traditional biomass models in fishery economics for being oversimplified. Biological stock assessment models are more sophisticated with regard to biological content, but rarely account for economic objectives. This study includes a full age-structured population model for studying schooling fisheries and extends the delayed difference approach used in earlier studies. We take the total harvest as the choice variable, resulting in a simple analytical structure. The model produces optimal steady states that may be higher or lower compared to the delayed-difference formulation. The model is applied to the Baltic sprat fishery. Both ecological and harvesting cost data support specifying Baltic sprat as a schooling fishery. Given nonlinear harvesting costs, the optimal solution is a path toward a steady state with smooth annual harvest and population age structure. Sensitivity analysis shows that the optimal solution is highly dependent on the population level of the sprat’s main predator Baltic cod. A linear cost function and an interest rate below 9 % imply pulse fishing instead of smooth continuous harvesting. Given nonlinear harvesting cost, the optimal steady state yield is rather insensitive to changes in the interest rate. However, under a high cod scenario, interest rates of 10 % or higher implies that no optimal steady state exists.