Using Principal‐Agent Theory to Deal with Output Slippage in the European Union Set‐Aside Policy

This paper proposes modifications to the existing EU set‐aside policy which are designed to alleviate the problem of output slippage associated with heterogeneous land quality by using “incentive‐compatible” mechanisms drawn from principal‐agent theory. Specifically, it is suggested that there should be differential reference yields based on land quality to discourage the “adverse selection” of lower quality land for set‐aside, and that the scope of set‐aside monitoring should be expanded to include both the quantity and the quality of land set‐aside so as to discourage “moral hazard” problems. The potential of these modifications is illustrated using a numerical analysis, which is also used to evaluate the role of a range of factors which determine the set‐aside decision. Finally, an estimate of the “benefits” from reducing slippage required to justify the costs of including these modifications is provided.     

Provision of accessible marketing and extension services in less‐developed agriculture

An agricultural marketing system is important in assisting farmers to make the transition from subsistence to semi‐commercial and commercial agriculture, but requires a communication system to provide farmers with information on marketing channels and procedures. A study of the marketing system in Ciskei showed that it had not resulted in an increase in marketable surplus among small‐scale subsistence farmers and that the provision of marketing information was inadequate. Recommendations are proposed/or making marketing and extension services more accessible to subsistence farmers.     

The Sensitivity of Tests of Asset Pricing Models to the IID-Normal Assumption: Contemporaneous Evidence from the US and UK Stock Markets

Standard tests of asset pricing models are based on the iid -normal assumption. We compare standard test results with those obtained from procedures that do not require iid -normality. Analysing unconditional and conditional asset pricing models, we find that the use of tests that consider departures from the iid -normal assumption affect probability values, sometimes by a considerable amount but that test outcomes are not affected. The results also suggest that issues surrounding the testing of joint hypothesis influence probability values and that the use of appropriate tests may be more important when analysing US data than when analysing UK data.     

Policy making in London's transport planning

This article discusses several new traffic/environmental schemes proposed for London, and moves by feminist, consumer/worker and community groups to challenge conventional planning procedures. Continuous bus lanes, free or low public transport fares and pedestrianized areas are emphasized over private motoring, to result in lower traffic noise, congestion and accidents. The power of the UK's road lobby, the limitations of traditional professional planners and a lack of open debate are offered as explanations for the resistance of London's planners to enacting such schemes. The author concludes that central government policy of minimizing public transport subsidy and providing roads instead for private transport has led to hostility to more popular plans.     

Book Reviews

Miyohei Shinohara and Fu-Chen Lo (eds), Global Adjustment and the Future of Asian-Pacific Economy, Kuala Lumpur and Tokyo: Asian and Pacific Development Centre and Institute of Developing Economies, 1989, pp. 585 + xxi, npg.

Frank J. Costa, Ashok K. Dutt, Laurence J.C. Ma and Allen G. Noble, Urbanization in Asia: Spatial Dimensions and Policy Issues, Honolulu: University of Hawaii Press, 1989. US$44.

W. de Jong and F. van Steenbergen, Town and Hinterland in Central Java, Jogyakarta: Gadjah Mada University Press, 1987, pp. 250 + iv. Paper: Rp 7,000.

Bruce Mckern and Praipol Koomsup (eds), The Minerals Industries of Asean and Australia: Problems and Prospects, Sydney: Allen and Unwin, 1987, pp. 378 + xviii. Paper: $29.95.

Bruce Mckern and Praipol Koomsup (eds), Minerals Processing in the Industrialisation of Asean and Australia, Sydney: Allen and Unwin, 1988, pp. 388 + xvii. Paper: $29.95.

Mohamed Ariff and Tan Loong-Hoe (eds), The Uruguay Round: Asean Trade Policy Options, Singapore: Institute of Southeast Asian Studies, 1988, pp. 211 + xvi.

William R. Cline, The Future of World Trade in Textiles and Apparel, Institute for International Economics, Washington, 1987, pp. 325 + xiv. US$20.

Peter Drysdale, International Economic Pluralism: Economic Policy in East Asia and the Pacific, Sydney: Allen and Unwin, 1988, pp. 294. Paper $20; Cloth: $30.

Helen Hughes (ed.), Achieving Industrialization in East Asia, Cambridge: Cambridge University Press, 1988, pp. 377 + xviii. $59.50.

BRIEFLY NOTED: J. C. Conroy, Shelter for the Homeless: Asian-Pacific Needs and Australian Responses, Canberra: Australian Council for Overseas Aid Development Dossier No 22,1987, pp. 141 + vi.     

Education and human capital development in the giants of Asia

Educational development has proceeded at a different pace and under different planning regimes in India, China, and Indonesia. This paper provides an overview of the role of education in their recent development—in particular their ability to capitalise on favourable trends in dependency ratios—and presents some key issues facing education planners and policy hurdles to overcome in further improving their level and quality of human capital. Common findings and useful strategies are highlighted in the conclusion, as well as the importance of seizing the opportunity of low dependency ratios to effect policies that will help develop human capital.     

An application of maximum entropy estimation: the demand for meat in the United Kingdom

In many econometric studies of demand relationships the design matrix is frequently subject to severe collinearity. In this paper the Generalized Maximum Entropy methodology is introduced and used to estimate a set of demand relationships. The ability of Generalized Maximum Entropy to estimate economic relationships that are typically subject to a high degree of collinearity among the explanatory variables, thus potentially causing traditional methods of estimation to be unreliable, is explained. The results derived by this alternative method of estimation, for a UK meat demand data set, are analysed and examined. The potential for this emerging estimation methodology is discussed.     

‘Fourth World’ Cities in the Global Economy: The Case of Phnom Penh,Cambodia

While globalization is often perceived to present opportunities for developing countries as a result of the relocation of industry and the development of a new international division of labor, the least developed countries (LDCs) have for the most part experienced declining shares of global trade and investment. This has led some to characterize such ‘fourth world’ countries as ‘structurally irrelevant’ to global capital accumulation, and to infer that patterns of urbanization in LDCs are largely unaffected by globalization. Yet a number of aspects of the global economy have important implications for cities in LDCs, including increased international economic interaction, rapid technological change, changes in regional economies, and the increased influence of transnational organizations. This paper explores the impact of these phenomena in the context of Phnom Penh, Cambodia, a city in an LDC that has experienced major socio-economic and spatial change as a result of increased interaction with the global economy. Bien qu’il soit souvent présumé que la globalisation offre aux pays en voie de développement des opportunités provenant d’un transfer de l’industrie et du développement d’une nouvelle division internationale du travail, le commerce et l’investissement globaux sont en déclin dans la plupart des pays les moins développés. Certains analystes en ont déduit que de tels pays du ‘Quatrième Monde’ n’ont ‘structurellement aucun rapport’ avec l’accumulation globale du capital, et que les modèles d’urbanisation de ces pays sont peu touchés par la globalisation. Néanmoins certains aspects de cette globalisation ont des implications importantes pour les villes dans les pays les moins développés, y compris une interaction économique internationale accrue, des changements technologiques rapides, des changements dans les économies régionales, et l’influence grandissante des organisations transnationales. Cet article discute l’effet de ces phénomènes dans le contexte de Pnom Penh au Cambodge, une ville d’un pays les moins développés qui a éprouvé des changements sociaux et économiques majeurs produits par une interaction croissante avec l’économie globale.     

An Experimental Study of Auditor Analytical Review Judgements

This paper provides evidence as to how five factors highlighted in the current UK auditing standard are taken into account by auditors in analytical review (AR) judgements. While the relative importance of particular cues was generally found to be consistent with the standard, certain factors were taken into account only to a marginal extent. Little evidence of configural cue usage was identified. The study also provides evidence of a tendency towards conservatism in the way auditors approach AR. The results suggest both that the potential to substitute AR for other substantive procedures may be realised only imperfectly and that the issue of configural reasoning should be addressed in the auditing standard.     

Livelihoods and farm efficiency in rural Georgia

This study contributes to the literature on the role of livelihood strategies in rural growth and poverty reduction. It distinguishes between livelihood diversity strategies that contribute to sustainable growth in household incomes, and those that mainly have a ‘coping’ function. It suggests that typically, the contribution of livelihood diversity to growing household income is through relaxing dependence on credit for access to capital. In this scenario, livelihood diversity would lead to higher technical efficiency in agriculture via investment and thereby to higher household incomes. Survey data from Georgia are introduced and used to test these hypotheses using a Bayesian stochastic frontier approach. The findings are relevant to defining more clearly the scope and aims of policies to stimulate the rural non-farm economy in developing and transition countries.