Demographic Change and Policy Responses: Implications for the Global Economy

The fertility declines associated with the final phase of the global demographic transition have led to slower population growth and accelerated ageing in developed countries and in several advanced developing countries. A global demographic and economic model is used to assess the implications of these changes for population sizes, age‐gender distributions, labour force growth and their implications for economic performance. A baseline projection that incorporates declining fertility is compared with a hypothetical constant population growth scenario. The results show that slower population growth and ageing reduces average saving rates in industrial regions, yet global investment demand is also slowed and saving rates rise in developing regions, so there is no net tightening of financial markets. Increased aged labour force participation, considered one solution to the resulting rise in aged dependency in advanced regions, is found to redistribute investment in favour of the industrialised regions and hence to accelerate their per capita income growth, while conferring on the other regions compensatory terms of trade improvements. The alternative of replacement migration is found to require inconceivably large population movements. It also impairs real per capita growth in destination regions but by least in Western Europe, where the terms of trade are improved by the immigration.     

Tax evasion and heuristics: A research note

The paper examines the heuristics which taxpayers use in making tax evasion decisions. The following propositions are tested in an experiment using students. First, the taxpaper's own level of evasion will be positively related to what he perceives as the levels of evasion by others. Second, taxpayers who have been audited are more likely to assess the probability of audit as higher and therefore decrease their levels of evasion. The experimental results fail to support the first proposition but do support the second suggesting the presence of an ‘availability’ effect.     

MORE ON WELFARE GAINS TO DEVELOPING COUNTRIES FROM LIBERALIZING WORLD FOOD TRADE

The common presumption that food-importing developing countries would be harmed by a liberalization of world food trade is questioned in this paper. Both theory and new empirical modelling evidence suggest the possibility of the opposite conclusion. Even if just advanced industrial countries were to liberalize their food trade, the present empirical analysis (using a model of world food markets) suggests that economic welfare and net foreign exchange earnings from food trade could improve for the vast majority of developing countries. The extent to which that gain would be greater if developing countries also were to liberalize their policies affecting food markets is shown as well. The analysis helps to reconcile differences between previous results using partial-equilibrium models and those derived from computable general equilibrium models.     

Sharon Ghamari-Tabrizi. The Worlds of Herman Kahn: The Intuitive Science of Thermonuclear War. Cambridge, Mass.: Harvard University Press, 2005. 387 pp. ISBN 0-674-01714-5, $26.95.

When Herman Kahn published On Thermonuclear War in 1960, heshocked readers by thinking the unthinkable, that is, by visualizingthe effects of various levels of preparedness and civil defenseon the rates of survival in the event of a devastating thermonuclearattack on the United States. As he did so, however, Kahn cloakedhis futurological scenarios in a strange mix of mathematicalcalculation, gallows humor, and a tendency to ignore some ofthe hideous consequences of thermonuclear     

Agricultural trade in North America: Trade creation, regionalism and regionalisation

Trade creation in agricultural products is defined as a statistically significant positive break in the trend function of the growth in exports and imports between member countries. The present study attempts to determine the time of any break in the trend of real exports and imports between the Canada–USA Free Trade Agreement (CUSTA) and the North American Free Trade Agreement (NAFTA) member countries for the years 1980:I through 1999:II, and document the scale of the phenomenon. The present study finds trade creation only occurs in USA agricultural exports to Canada because of CUSTA. The results confirm the theory that the regionalism of NAFTA did not lead to regionalisation or an increasing share of intraregional international trade.     

Organizational management in New Zealand’s public service

This paper explores the extent to which New Zealand’s central government organizations are effectively reporting on, and arguably therefore focusing on, the management of their organizations, as well as their operations. There is widespread concern that new public management reforms have resulted in an over-emphasis on the former at the expense of the latter. A solution to this problem requires a clear and consistent framework for how organizational management should be reported.     

SEASONED EQUITY OFFERINGS FOR NEW INVESTMENT AND THE INFORMATION CONTENT OF INSIDER TRADES

Significant negative valuation effects are widely acknowledged for firms announcing seasoned equity offerings. This result is consistent with theoretical models linking new equity issues to increased adverse-selection costs, lower management ownership in the firm, misuse of free cash flow, or expectations for earnings declines. Also increasingly evident, insiders trade around corporate announcements. We test the hypothesis that insider trading and announcements of new equity issues serve as joint signals in the market's evaluation of prospective capital investment projects. Our findings are consistent with the hypothesis that insider trading is related to market reaction to announcements of new equity issues.     

LIBERALISING OECD AGRICULTURAL POLICIES IN THE URUGUAY ROUND: EFFECTS ON TRADE AND WELFARE

A dynamic, stochastic, multi-commodity model of world food markets is used to estimate the effects of liberalising agricultural policies in industrial countries. The effects on international and domestic prices, on trade volumes and on economic welfare of a phased liberalisation of industrial-country policies between 1988 and 1992 are compared with the effects of a similar hypothetical liberalisation in the early 1980s. The results suggest that, because of the dramatic increase in agricultural protection during the 1980s, the effects of a liberalisation under the Uruguay Round would be, in real terms, more than double those that would have resulted from a similar liberalisation a decade earlier. Major gainers are consumers in Western Europe and Japan and farmers in developing countries. But the cost to tax-payers in Western Europe is also escalating, not to mention the burden on non-agricultural producers in those countries whose competitiveness is reduced by farm policies. These domestic pressures from treasuries and from producers of non-farm products, together with greater international pressure for reform from agricultural-exporting countries, have raised the probability of at least some liberalisation during the Uruguay Round of multilateral trade negotiations.