Reviews

'LONDON INDUSTRIAL STRATEGY'

Greater London Council, London Industrial Strategy. London: GLC, 1985. £5.00 paper. (Now available from Economic Policy Group, Middlesex House, 20 Vauxhall Bridge Road, London, SW1.)

'FUTURE WORK'

James Robertson: Future Work Aldershot, Hants; Gower Publishing Co Ltd, 1985. £15.00 hardback, £6.95 paperback.

'SMALL FIRMS IN REGIONAL ECONOMIC DEVELOPMENT'

STOREY, D. J. (ed): Small Firms in Regional Economic Development-Britain, Ireland and the United States. Cambridge University Press, 1985. Cloth, £22.50.

'POLITICS AND METHOD'

Massey, D. and Meegan, R. (eds): Politics and Method: Contrasting Studies in Industrial Geography. London. Methuen, 1985. £6.95 paperback.     

How Chinese Agricultural Immigrants Affect Farmers in the Russian Far East

China’s international position as a net creditor nation provides it with foreign exchange that it has invested in Asian and African countries. One example is China's investment in the Russian Far East (RFE). Thousands of Chinese agricultural workers have migrated to the RFE in recent decades. They are often welcomed by Russian farmers who face a labor shortage and by local residents who can buy cheap vegetables from them, but there are others who resent their presence in the region as competitors. Our study is the first empirical study of this relationship. Our results demonstrate economic benefits to the Russian households. There are, however, some negative repercussions of Chinese farmers in the RFE, and the governments of both China and Russia need to manage the situation wisely.     

The impact of regulatory change on EU energy utility returns: the three liberalization packages

The European Union’s (EU) energy sector is changing due to major policy reforms. In this article, we examine the impact of major legislative changes which were designed to induce competition in the energy sector: the three liberalization packages. Competition was expected to benefit the industry by phasing out inefficient firms. EU citizens were also expected to benefit as competition was likely to promote a more efficient energy sector and more consumer choice of energy products and services. However, this legislative change occurred during a period of extreme market turmoil. We examine the impact of all these changes on the risk profile of the sector. Our results show that the liberalization legislation significantly increased systematic risk exposure of the sector, reducing its role as a defensive investment asset. We also show that commodities had relatively little impact on sector returns, but this was expected as utilities can offset commodity risk in hedging markets. We compare our results to those obtained in neighbouring EU sectors and find the impacts are isolated to the energy sector. This article makes a major contribution to energy policy by empirically showing the change in risk as a result of sector liberalization.     

Risk premia and seasonality in commodity futures

We develop and estimate a multifactor affine model of commodity futures that allows for stochastic seasonality. We document the existence of stochastic seasonal fluctuations in commodity futures and that properly accounting for the cost‐of‐carry curve requires at least three factors. We estimate the model using data on heating oil futures and analyze the contribution of the factors to risk premia. Correctly specifying seasonality as stochastic is important to avoid erroneously assigning those fluctuations to other risk factors. We also estimate a nonlinear version of the model that imposes the zero lower bound on interest rates and find similar results.     

Consumption Externalities,Coordination, and Advertising*

The aim of this article is to demonstrate that advertising can have an important function in markets with consumption externalities apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. Although, at times, the one‐period advertising expense can exceed the one‐period monopoly profit, in equilibrium, consumers will pay a premium for the more heavily advertised brand.     

Monetary Policy with Sectoral Trade‐Offs

We formulate a two‐sector New Keynesian economy featuring sectoral heterogeneity along three dimensions: price stickiness, consumption goods durability, and the usage of input materials in production. These factors affect both inter‐sectoral and intra‐sectoral stabilization. We examine the welfare properties of simple rules that react to alternative measures of final goods price inflation. Due to factor demand linkages, the cost of production in one sector is influenced by price‐setting in the other sector. Therefore, measures of aggregate inflation weighting sectoral prices based on their relative stickiness do not allow one to keep track of the effective speeds of sectoral price adjustment.     

Design beyond complexity: Possible futures—Prediction or design? (and techniques and tools to make it possible)

This paper is an attempt to discuss the concepts of complexity and complex social system and their relation with the concepts of design and design activity. It is argued that a design cannot appear as an emergent property out of such systems, since it presupposes intentionality. However, to a certain extent, complex (social) systems need to be governed by means of design. Even if design requires prediction, which in our opinion is impossible in strict sense in case of social systems, there are two important conditions for a “good design”, namely, to look at the past, and to look at the future. After this general discussion, the paper provides a few suggestions on how to do the former without prejudices, and presents an effective technique for doing the latter without illusions.