Tax Interaction Effects,Environmental Regulation,and “Rule of Thumb” Adjustments to Social Cost

Preexisting distortions in factor markets complicate the estimation of the social welfare effects of regulatory interventions. The existence of these tax interaction effects (TIEs) suggests that general equilibrium (GE) approaches should be used to evaluate regulatory policies. However, formal GE analysis is not always feasible for the numerous environmental regulations proposed by federal, state, and local agencies. The question addressed in this paper is whether an empirically based rule of thumb upward adjustment factor is appropriate to properly scale social cost estimates in environmental policy. We argue that such rule of thumb adjustments are significantly less reliable than estimates based on a detailed general equilibrium analysis because of the uncertainty about both the magnitude and sign of the social cost distortion. In addition to addressing this question, the paper gives an overview of TIEs and their relevance to environmental policy.     

Imposing Capital Controls on Credit Unions: An Analysis of Regulatory Intervention in Australia

Abstract ** ** Résumé en fin d’article; Zusammenfassung am Ende des Artikels; resumen al fin del artículo.
: What impacts would minimum capital requirements have on mutual institutions lacking the ability to raise equity capital? Can the response of credit unions to capital controls be explained by internal member bonding? The imposition of capital controls on credit unions by the Australian Financial Institutions Commission is studied as a Box‐Tiao time series quasi‐experiment. Time series intervention and trend analyses are performed on a sample of 150 credit unions over the period 1987 to 1997, together with cross‐sectional regressions of the estimated responses. The results demonstrate that the capital controls had a significant impact on credit union behavior. Consistent with theoretical expectations, the response of individual credit unions is found to be a function of initial capital levels and internal member bonding.     

HOW SHOULD WE MEASURE THE “ECONOMIC” ASPECTS OF WELL‐BEING?

The Human Development Index (HDI) uses GDP per capita to measure “command over resources,” which implicitly makes the strong value judgment that inequality and insecurity do not matter. This paper presents revised estimates of the Index of Economic Well‐Being (IEWB) for the United States, the U.K., Canada, Australia, Germany, Norway and Sweden for the period 1980 to 2001 and demonstrates that replacing an index of the log per capita incomes with our IEWB as the “command over resources” component in the Human Development Index (HDI) affects the level and trend of the HDI, even among affluent nations. Because the IEWB recognizes four dimensions of command over resources (Current effective per capita Consumption flows, Net societal Accumulation of stocks of productive resources, Income Distribution and Economic Security), its use has a particularly large impact where underlying trends in these components diverge (e.g. the U.K. or the United States).     

Using Micro Data to Test the Divergence between Prices and Labour Values

An extremely robust finding in Marxian empirical economics is the 'Shaikh result' that estimates of labour values are closely correlated with prices. This result is established using input-output data together with a standard procedure in which variations in money wages are assumed to reflect labour quality. Two problems with this standard procedure can be identified. First, there is no translation between money units of wages and labour value units of output produced by different types of heterogeneous labour. Second, the standard procedure assumes perfectly competitive labour markets. In this paper, a new micro procedure for estimating labour values is developed in which both of these problems are addressed. To translate between money wage rates and the labour value of outputs a practical starting point for empirical analysis is suggested using some of the readily available tools of neoclassical economics. The assumption of perfect competition is accordingly relaxed by estimating a microeconometric wage equation using data from the UK Family Expenditure Survey. Conjoining this micro data with input-output data, estimates of labour values are used to test the Shaikh result, which is found not to hold in this particular exercise; with labour values diverging substantially from money prices.     

The effects of mid-career military enlistment on civilian career prospects: evidence from the Australian banking industry during World War II

This paper uses personnel records of employees from an Australian bank to analyse the labour market consequences of career interruptions due to voluntary military service during the Second World War. The records contain the employees’ career position and pay histories, and pre-war outcomes are used to control for selection bias caused by non-random enlistment. It is shown that, despite losing human capital during the War, upon their return veterans did not face a wage penalty relative to non-volunteers. Finally, evidence from non-wage outcomes suggests that the absence of a wage penalty was a form of positive discrimination by the Bank.

Where’s the Money? An Investigation into the Whereabouts and Uses of Australian Banknotes

The Reserve Bank of Australia is the sole issuer and redeemer of Australian banknotes, but between issuance and destruction there is little information about where banknotes go or what they are used for. We estimate the whereabouts and uses of Australian banknotes, and find that 15–35 per cent are used to facilitate legitimate transactions, 4–7 per cent are used for transactions in the shadow economy, while the remainder are non-transactional. The vast majority of non-transactional banknotes are likely to be hoarded, and we estimate that 5–10 per cent of outstanding banknotes are lost or collected.     

Optimal regulation under imperfect enforcement: Permits,tickets, or both?

Economic activity is often regulated through both permits and tickets (subsequent inspections). We study the effectiveness of such policies where corruption and an underground economy make enforcement imperfect. In the theoretical model, asymmetric information justifies regulatory action which is enforced by corruptible bureaucrats. We find that regulation through permits alone is useless when corruption exists, while tickets still offer some benefit. Surprisingly, we also find that a system with both permits and tickets achieves welfare that is higher than that which can be achieved with only tickets—that combining the two mechanisms has an effect that is greater than the “sum of the parts.”     

Do household definitions matter in survey design? Results from a randomized survey experiment in Mali

Household definitions used in multi-topic household surveys vary between surveys but have potentially significant implications for household composition, production, and poverty statistics. Standard definitions of the household usually include some intersection of keywords relating to residency requirements, common food consumption, and intermingling of income or production decisions. Despite best practices intending to standardize the definition of the household, it is unclear which types of definitions or which intersections of keywords in a definition result in different household compositions. This paper conducts a randomized survey experiment of four different household definitions in Mali to examine the implications for household-level statistics. This approach permits analysis of the trade-offs between alternative definition types. We find that additional keywords in definitions increase rather than decrease household size and significantly alters household composition. Definitions emphasizing common consumption or joint production increase estimates of the levels of household assets and consumption statistics, but not on per adult equivalency asset and consumption statistics, relative to open-ended definitions of the household. In contrast, definition type did not affect production statistics in levels, though we observe significant differences in per adult equivalency terms. Our findings suggest that variations in household definition have implications for measuring household welfare and production.     

Introducing ‘Journeys Home’

Homelessness, despite being a major social policy issue in Australia, is an area that is not well served by data. Most sorely lacking is any large‐scale panel study that follows a broad sample of persons with recent experience of homelessness and unstable housing histories. In 2010, the Australian Government set about rectifying this deficiency when it commissioned the Melbourne Institute to undertake a new panel study, now known as ‘Journeys Home’. This study draws its sample from the population of Centrelink income‐support recipients, targeting persons identified in the administrative data as having recent experience of homelessness, as well as others with similar characteristics who may be vulnerable to housing difficulties in the future. This article summarises the design of this new study and reports on fieldwork outcomes from the first two waves of data collection.