A General Equilibrium Analysis of VAT in India

Indian industry is under pricing pressure after the government cut tariffs in a phased manner as per the WTO agreements. In order to be competitive, the consensus opinion in government, academics and industry is the implementation of a VAT in India. The paper evaluates the welfare implications of a VAT in the static and a sequentially dynamic context after accounting for the political and administrative constraints facing the Indian government in implementing a VAT. Replacing the old indirect tax structure with a VAT is welfare worsening. The increase in final consumer prices on account of reduced tax base leads to higher price of essentials, causing welfare loss. Zero rating v/s exemption plays an important role on welfare, with lower welfare loss if essential commodities are exempt from VAT. Agriculture sector unambiguously plays a crucial role in welfare.     

Sources of Bank Interest Rate Risk

We investigate bank stocks'sensitivity to changes in interest rates and the factors affecting this sensitivity. We focus on whether the exposure of commercial banks to interest rate risk is conditioned on certain balance sheet and income statement ratios. We find a significantly negative relation between bank stock returns and changes in interest rates over the period 1991–1996. We also find that bank characteristics measured from basic financial statement information explain bank stocks'sensitivity to interest rate changes. These results suggest that bank managers, analysts, and regulators can use this information to assess the relative risk exposure of banks.     

Initial Margin Requirements, Volatility, and the Individual Investor: Insights from Japan

Initial margin requirements represent: (1) a cost impediment to the wealth constrained investor and (2) a potential way of mitigating excessive volatility. However, prior empirical research finds that margins are not an effective tool in reducing volatility. We consider the possibility that margins primarily affect certain stocks and investors. Specifically, we test whether margins affect individuals who, as a group, we believe to be the investors most affected when margin requirements change. Our initial empirical tests, however, do not support this contention.     

From T-Bills to Stocks: Seasonal Anomalies Revisited

This paper employed eleven data series which consist of stocks, bonds, bills, equity premiums, term premiums, and various default premiums to investigate whether January seasonality reported in existing literature is robust across different states of the economy as this has important trading implications. For the periods 1926–1990, small stocks, small stock premiums, low grade bonds, and default premiums (spread between high grade, low grade and government bonds) reveal January seasonality and that the seasonality is robust across different states of the economy except for low grade bond returns and default premiums. January seasonality for low grade bond returns and low grade bond default premiums are primarily driven by results found during periods of economic expansion. Overall, January seasonality is more evident during the economic expansion periods although the magnitude of default premiums is larger during periods of economic contraction. Furthermore, prior findings of strong summer equity returns are primarily driven by the results found during the periods of economic contraction. It is also found that equity returns are generally higher during periods of economic expansion.     

THE RETURNS TO ENDOGENOUS HUMAN CAPITAL IN PAKISTAN'S RURAL WAGE LABOUR MARKET

This paper estimates the private returns to human capital in Pakistani rural labour markets. The rich data used permit inclusion of several dimensions of human capital and control for endogeneity resulting from investment in human capital. The results suggest that, without data on determinants of human capital, it would not be possible to disentangle the separate effect of each dimension of human capital on wage differentials nor to distinguish human capital explanations for wage differentials from signalling and credentialist models. With control for endogeneity of human capital and selectivity into wage employment, cognitive achievement, but not schooling attainment separate from cognitive achievement nor long-run health status, affects wage differentials.     

Futures and forward price differential and the effect of marking‐to‐market: Australian evidence

The objective of this paper is to examine the effects of marking‐to‐market of futures contracts on the price differential between futures and forward contracts based on the predictions of the Cox, Ingersoll and Ross (1981) (CIR) model. Cox et al ., (1981) derive a series of propositions with respect to the relationship between futures and forward prices and a set of testable implications. These are tested empirically in this paper using Australian data from November 1991 to June 1997. The results provide evidence of the presence of significant futures and forward price differences, where the futures price is consistently below the forward price. Only partial support is found for the Cox et al ., (1981) propositions, implying that the effect of marking‐to‐market is not able to fully account for the price differential. Therefore, it is not possible to rule out the influence of other institutional factors on the futures‐forward price difference.     

The political economy of direct legislation: direct democracy and local decision–making

Local and regional governments account for an important share of total government spending and, given the decentralization trend in OECD nations, this is likely to increase. How should this spending be governed? This article argues that direct democracy is best suited to organize decision–making at the state and local level. To support this, we present the main theoretical arguments on why and how referenda and initiatives affect fiscal policy outcomes. The basic argument concerns voter control. Under representative democracy, citizens only have direct control at election time. With referenda and initiatives, citizens can selectively control their representatives on specific policies whenever they deviate sufficiently from citizens' preferences. As a result, fiscal policy outcomes are likely to more closely reflect voter preferences. We empirically test this on Swiss data since Switzerland provides a 'natural laboratory' for local governance. The governance structures of Swiss cantons and localities with respect to fiscal issues range from classic parliamentary democracy to pure direct democracy, and an important part of spending and taxation is controlled at these levels. Specifically, we estimate an econometric model of fiscal behaviour using data from 1986 to 1997 for the 26 Swiss cantons, and 1990 data on 134 local communities. It is shown that mandatory referenda on fiscal issues at both levels have a dampening effect on expenditure and revenue, and at the local level also on public debt. Combining this with existing empirical evidence leads to a relatively uncontested result, namely that elements of direct democracy are associated with sounder public finances, better economic performance and higher satisfaction of citizens.     

A manufacturing excellence team-based learning process for our foundation workers

Foundation workers, people who do the daily tasks to serve customers, have long been ignored and misused in the productivity equation. Every person in a company can and must contribute to improved performance. Equipping out foundation workforce with knowledge and skills via a team-based education and training process is prerequisite to their effective engagement in the business management process.