Trade and Industry Policy

This article consists of a review of changes in trade and industry policy, along with discussions of the determinants of change and the major problem areas. Policy between 1965 and 1985 is summarised, and the growth of unemployment in the 1970s is suggested as a key determinant of change. Higher protection in certain industries, and moves to more quantitative methods ot protection can be related to unemployment, in Australia as in other countries. Theory and empirical evidence suggest that protection is likely to prove ineffective in reducing unemployment. The reliance on protection in particular cases is ascribed to a wish by governments to preserve specific jobs, not to increase overall employment. Policy can have a role in facilitating or restricting structural change which can arise from several sources, such as changing trade patterns and preferences. The devices of policy are considered briefly to determine whether they are likely to facilitate change or not. It is concluded that they often provide incentives to avoid change. The scale problem is considered, and it is suggested that the cost of protection could be high in industries subject to significant scale economies. Scale and adjustments are considered in the light of two industries, motor vehicles and whitegoods, and the role of industry plans is examined. The actuality of trade and industry policy often differs from announced intentions, and this ambiguity can give rise to uncertainty which itself has a cost.     

Flunking economics?

Economists are in revolt over President Clinton's health care reform proposal. Many contend that the Administration is abandoning free-market principles and embracing price controls that could have disastrous consequences. But others argue that traditional rules of supply and demand don't apply to the health care sector.     

Portfolio Capital Flows: Hot or Cold?

A distinction is often made between short-term and long-termcapital flows: the former are deemed unstable hot money andthe latter are deemed stable cold money. Using time-series analysisof balance of payments data for five industrial and five developingcountries, we find that in most cases the labels "short-term"and "long-term" do not provide any information about the time-seriesproperties of the flow. In particular, long-term flows are oftenas volatile as short-term flows, and the time it takes for anunexpected shock to a flow to die out is similar across flows.long-term flows are also at least as unpredictable as short-termflows, and knowledge of the type of flow does not improve theability to forecast the aggregate capital account.     

The impact of tax on foreign direct investment: Empirical evidence and the implications for tax integration schemes

We estimate the impact of taxation on foreign direct investment (FDI) flows, using data on flows between seven countries for 1984 through 1989, and a sophisticated measure of the cost of capital. We find that the choice between domestic investment and total outward FDI is not significantly affected by taxation but that taxation does affect the location of outward FDI. These results are used to examine the impact of tax integration systems. Giving a tax credit to foreign shareholders may induce a large increase in inward FDI from exemption countries but not from partial-credit countries. For the United States, the total effect would be small.     

Methods for estimating the population contribution to environmental change.

"This paper introduces general methods for quantitative analysis of the role of population in environmental change. The approach is applicable over a wide range of environmental issues, and arbitrary regions and time periods. First, a single region is considered, appropriate formulae derived, and the limitations to quantitative approaches discussed. The approach is contrasted to earlier formulations, and shown to avoid weaknesses in a common approximation. Next, the analysis is extended to the multiple region problem. An apparent paradox in aggregating regional estimates is illuminated, and the risk of misleading results is underscored. The methods are applied to the problem of climate change with two case studies, an historical period and a future scenario, used to illustrate the results. The contribution of change in population to change in green house gas emissions is shown to be significant, but not dominant in both industrialized and developing regions."