Evaluating the economic significance of downward nominal wage rigidity

The existence of downward nominal wage rigidity has been abundantly documented, but what are its economic implications? This paper demonstrates that, even when wages are allocative, downward wage rigidity can be consistent with weak macroeconomic effects. Firms have an incentive to compress wage increases as well as wage cuts when downward wage rigidity binds. By neglecting compression of wage increases, previous literature may have overstated the costs of downward wage rigidity to firms. Using micro-data from the US and Great Britain, I find that the evidence for the compression of wage increases when downward wage rigidity binds. Accounting for this reduces the estimated increase in aggregate wage growth due to wage rigidity to be much closer to zero. These results suggest that downward wage rigidity may not provide a strong argument against the targeting of low inflation rates.     

Abnormal Returns in the Acquisition Market: The Case of Bank Holding Companies, 1990–1993

Recent evidence suggests that announcements of bank holding company acquisitions result in wealth transfers from the bidding to target shareholders. Empirically, this is demonstrated through findings of negative average abnormal returns to bank holding company acquirers and positive average abnormal returns to targets on announcement. Using a sample of acquisitions from the early 1990s—a period marked by the removal of significant geographic entry barriers—this paper reexamines the issue by applying a general statistical model to the event study framework to more precisely measure abnormal returns. In particular, we model returns according to the GARCH process to control for time-varying volatility. With respect to the unconditional distributions of acquirer and target abnormal returns, our findings are consistent with prior research. Further investigation into the conditional distribution of acquirer returns finds that, on announcement, interstate acquisitions using the purchase method of accounting actually increased shareholder wealth for acquirers (on average) by 1.44%. However, over a longer event horizon, the most important determinants of acquirer abnormal returns appear to be the relative size of the transaction and the method of accounting.     

Tenure security and productivity in small‐scale agriculture in Zimbabwe: Implications for South Africa

This article tests empirically the interaction between land tenure security and agricultural productivity in small‐scale agriculture in Zimbabwe. Data for the analysis were gathered during April and August of 1995 by means of an interview survey of farmers in the small‐scale commercial sector, communal area and Model A resettlement area of Zimbabwe. Two‐stage least squares regression estimates reveal that land tenure security has a positive and significant influence on investment incentives and agricultural productivity in the sample. This result has two important implications for proposed land reforms in South .. Africa. Firstly, the result lends support to the notion that indigenous tenure institutions in communal areas of South Africa are a constraint on agricultural development. Secondly, it is clear that a national land redistribution policy must be accompanied by innovative tenure institutions which facilitate economic interaction and internalise externalities on land resettled by individuals and groups. This is particularly important in South Africa where groups of up to 300 families are being settled on commercial farms under a group ownership model.     

Generalizing the OLS and Grid Estimators

The vast majority of market valuations employ either some formal estimator such as ordinary least squares (OLS) or rely upon an informal set of rules defining the grid adjustment estimator. The success of the grid adjustment estimator suggests the data do not obey the ideal assumptions underlying OLS. However, the grid adjustment estimator's lack of a formal statistical foundation makes it difficult to use for inference and other purposes. This article demonstrates how to generalize the grid estimator and OLS to potentially obtain the best features of both. Interestingly, the generalization defines a spatial autoregression. On an empirical example the spatial autoregression outperforms the grid estimator which in turn outperforms OLS.     

Logistical Strategies and Risks in Canadian Grain Marketing

Logistics management in grain marketing has become very important with the maturity of the industry. This is particularly critical in the Canadian grain marketing system, which has experienced disruptions for various reasons over many years. These problems have been the topic of numerous industry evaluations, have resulted in a complaint about service obligations during the 1996–97 crop year, and were addressed by the Estey Commission. A detailed model of the Canadian grain logistics system is developed in this paper to evaluate factors that cause disruptions, as well as the effect of several important logistics and marketing strategies on system performance. The results illustrate that there is sufficient randomness throughout the various functions of the system that it is expected that demurrage at the west coast would periodically be an important cost. The frequency of service disruptions and demurrage are affected by several factors, including the distribution of tough and damp grains, mis‐graded grain and the level of exportable supplies. Several strategic variables affect system performance. These include the aggressiveness in selling relative to capacity and the level of beginning port stocks. La gestion de la logistique dans le commerce des céréales a acquis une grande importance maintenant que ce secteur a atteint la maturité. C'est particulièrement important dans le système canadien de mise en marché des céréales lequel, pour diverses raisons, a essuyé bien des perturbations ces dernières années. Les problèmes en cause ont fait l'objet de nombreuses évaluations du secteur. Ils ont même abouti au dépôt d'une plainte sur les obligations de service dans la campagne agricole 1996–1997 et ont étéétudiés par la Commission Estey. Dans la présente communication nous avons construit un modèle détaillé du système canadien de logistique du marché des céréales ainsi que de l'effet de plusieurs stratégies importantes de logistique et de commercialisation sur la performance du systeme. Les résultats obtenus montrent qu'il y a suffisamment d'aléatoire dans les diverses fonctions du systeme pour conclure que les frais de séjour à quai sur la côte ouest seraient périodiquement un important poste de dépense. La fréquence des perturbations des services et les coûts a quai sont associés à plusieurs facteurs dont la livraison de grain gourd et humide, de grain mal classé et le niveau des disponibilités exportables. Plusieurs variables stratégiques influent sur le fonctionnement du système, notamment l'agressivité manifestée dans la vente par rapport aux stocks disponibles et le niveau des stocks disponibles dans les ports au début de la campagne d'exportation.     

Enigmatic exchange mechanisms in modern societies: Community and business barter and international countertrade

Modem domestic barter systems are operating in Australia and other high-income countries at the local community level, and at the national level for business exchanges. Both governments and firms practise countertrade at the international level. These exchange regimes appear to have become institutionalised in a macromarketing system which is organised on the primacy of market exchange based on price as the coordinating device. In this paper, explanations for this enigma are presented with a particular emphasis on the Australian context.