Financial Pressure and Balance Sheet Adjustment by Firms*

This paper examines the financial policies and balance sheet adjustment of companies. Using a large panel of UK‐listed firms we consider how companies resolve pressures on their balance sheet, estimating models for dividends, new equity issuance and investment. The results indicate that companies resolve balance sheet pressures by each of these means. Financial policies, through dividends and new equity issuance, and real investment decisions, respond to the underlying level of debt and the borrowing cost of servicing that debt. Dividends are estimated to be slow to adjust in the short run.     

One little Lebanese cucumber is not going to break the bank: Price in the choice of fresh fruits and vegetables

This paper reports on empirical research into individual consumer behaviour in the context of fresh fruit and vegetable purchases. The discussion draws on research results from two studies conducted around the actual shopping process. The findings suggest that consumers' price response behaviour may not be consistent with that predicted by economic theory and that this could be significant at the aggregate level. The existence of 'acceptable price ranges' points to the presence of price thresholds within which consumers are relatively insensitive to price movements. Also of relevance is that the primary influence of the budget constraint may be at a broader level rather than at the level of choosing particular products.     

Formalism, logic and reality: a Keynesian analysis

It is the purpose of this paper to elaborate on the argumentthat formalism is non-neutral; analyses which today would bedescribed as informal turn into something quite different whenformalised. The reasons for non-neutrality refer to the choiceof assumptions or axioms, the choice of method, the type oflogic employed and closure. Focusing on the last three of these,the paper addresses the question of how to move from resultsobtained with formal methods under conditions of closure tothe reality one is attempting to model. We explore the needfor provisional closure to analyse open systems and for a rangeof methods to complement formal modelling in the attempt tounderstand the complex reality of an economic system.     

A cross-country comparison of the demand for labour in Europe

A Cross-Country Comparison of the Demand for Labour in Europe.-This paper investigates structural differences in the demand for labour in France, Germany, and the UK. It finds substantial differences in the sensitivity of the demand for labour to international product demand and factor prices in all three countries. In particular, it reacts to domestic factor prices in Germany but international cost competitiveness in France and the UK; it depends upon European-wide product demand in France and Germany and a wider measure of product demand in the UK. The authors attribute these differences to product market conditions and institutional factors rather than to differences in the production technology.     

Industrial Sickness, Primary and Secondary: The Effects of Exit Constraints on Industrial Performance

In an attempt to protect workers from unemployment, governmentsin some countries subsidize firms which would otherwise fail.This article examines the effects of such subsidies on output,prices, and welfare. It also briefly reviews the effects forvarying price elasticities of supply and demand, for nontradedand fully traded goods, and for firms in which wages exceedtheir free market level. If the firm produces a nontraded good,the "sickness" of one firm that is subsidized to maintain productioncan spread to other firms that would be viable in the absenceof the subsidies. The analysis shows that the exit constraintshave the most detrimental effect when the elasticity of demandis low and supply elasticity is high, and when the governmentweighs the welfare of the firm's workers and consumers lessthan that of the general taxpayers and the firm owners. Whenlabor costs are higher than their free market levels and outputis thus less than the optimal levels, the subsidies could havean effect similar to that of an optimal production subsidy.In practice, however, this possibility is likely to be outweighedby associated rent-seeking costs and other distortions.     

LIVESTOCK PRODUCTION POLICIES AND MEAT PROCESSING MARGINS: THE CASE OF NEW ZEALAND, 1967-1988*

The New Zealand export meat industry has been through a considerable number of changes in the 1980s. The deregulation of export slaughter facilities, Supplementary Minimum Prices, Producer Board intervention, declining livestock numbers and domestic cost pressures have all affected the performance of the domestically based processing sector. Major changes in market access and demand have influenced off-shore marketing operations, particularly for sheepmeats. Additionally, there has been a change in the type of meat exported with a greater proportion of further processed product shipped in recent years. As an example of the impact of these developments on livestock producers, the producer share of the United Kingdom wholesale market return for a representative prime lamb carcase has fallen from 40 per cent in 1978 to 25 per cent in 1988. In this article the pattern of intervention in the New Zealand pastoral meat industries from the mid-1960s is detailed, emphasising the different environments of the beef and sheepmeat enterprises. Then the principal factors influencing domestic processing margins for these products are empirically examined. Alternative model specifications and alternative estimation techniques are compared and contrasted. The results of these analyses are discussed in terms of the historical patterns of assistance and structural change, and in terms of current rationalisation pressures on the meat processing sector.     

A Conceptual Analysis of Price Setting in Australian Local Government

A complex set of issues underlies the pricing of the diverse range of goods and services from which Australian local governments derive a significant portion of their revenues. Although local governments have a not‐for‐profit orientation, they are expected to be financially viable and embrace a broad notion of accountability. They are also expected to influence the behaviour of constituents in accordance with policy decisions, but be equitable in doing so. These and related parameters are discussed and illustrated in order to reveal and elucidate the nature of pricing decisions in local government, and to differentiate the local government context from other price‐setting environments.