Domestic and trade impacts of foot‐and‐mouth disease on the Australian beef industry

Australia is the sixth largest producer of beef and the second largest exporter of beef. Average beef exports from Australia are approximately 65 per cent of the total amount of beef produced, about 1.3 million tonnes. Australia is particularly vulnerable to diseases that are not endemic to the country and could close or disrupt its export markets for beef. In this study, we construct a bioeconomic optimisation model of the Australian beef industry that captures production and consumption decisions, domestically and internationally, and the impacts on the beef industry of a potentially catastrophic disease, foot‐and‐mouth disease (FMD). This study analyses localised to large‐scale outbreaks and suggests that changes in economic surplus because of FMD range from a positive net gain of $57 million to a net loss of $1.7 billion, with impacts on producers and consumers varying depending on the location of the outbreak, control levels and the nature of any trade ban.     

Economic Perspectives on Nutrition Policy Evaluation

Too much food energy intake (relative to expenditure) and unbalanced diets are implicated in a range of diseases that impose major burdens on healthcare systems and cause pain and suffering. Governments have responded by introducing a range of measures, mainly targeting information and education, largely to children. However, more interventionist measures have been advocated and, in the past year, various food taxes have been introduced in Denmark, Hungary and France. The Address discusses evaluation of policies, particularly in the light of alternative theories of diet choice (rational choice, systematically irrational, automatic). The public health approach uses quality adjusted life years but fails to distinguish between private and social benefits and takes no account of the drivers of food choice behaviour. The economic approach, based on informed choice, makes the distinction between private and social benefits (if not always explicitly) but struggles to evaluate policies that change utility functions and with behavioural assumptions other than traditional rationality. Alternative assumptions and approaches could put the cost of unhealthy eating anywhere between £10 billion and £100 billion per annum in the UK. Evidence suggests that information measures (to perform or persuade) do not much change diets, nor do they tackle the externality element of unhealthy eating. They may, however, help change long‐term social norms. More interventionist measures like taxes improve social welfare (according to the compensation principle) and reduce health inequalities but are regressive, like all sin taxes. Almost all interventions pass cost‐effectiveness tests.     

Trading away what kind of jobs? Globalization,trade and tasks in the US economy

Economists and other social scientists are calling for a reassessment of the impact of international trade on labor markets in developed and developing countries. Classical models of globalization and trade, based upon the international exchange of finished goods, fail to capture the fragmentation of much commodity production and the geographical separation of individual production tasks. This fragmentation, captured in the growing volume of intra-industry trade, prompts investigation of the effects of trade within, rather than between, sectors of the economy. In this paper we examine the relationship between international trade and the task structure of US employment. We link disaggregate US trade data from 1972 to 2006, the NBER manufacturing database, the Decennial Census, and occupational and task data from the Dictionary of Occupational Titles. Within-industry shifts in task characteristics are linked to import competition and technological change. Our results suggest that trade has played a major role in the growth in relative demand for nonroutine tasks, particularly those requiring high levels of interpersonal interaction.     

A Note on Allen’s Arc Elasticity with Arithmetic, Geometric and Harmonic Means

Discussion and debate on the application of Allen??s arc elasticity has continued into the 21st century. This note demonstrates three points. First, perceived differences between Allen??s geometric mean elasticity and a constant demand elasticity based on an assumed isoelastic demand curve are negligible for small changes in price and quantity, which comprise the vast majority of such changes. Second, in some cases of rapid security or commodity price movements, the harmonic mean may provide the most accurate elasticity estimates across measures of central tendency. Third, because the arithmetic and harmonic means serve as bounds for the geometric mean, an elasticity based on the geometric mean may be considered a prudent choice among these three on this basis alone.     

An Analytical Model for External Auditor Evaluation of the Internal Audit Function Using Belief Functions

The purpose of this paper is to advance research in internal audit (IA) evaluation by developing an IA assessment model that considers interrelationships among specific factors used by external auditors to evaluate the strength of the IA function. The model is based on three factors identified by auditing standards and by prior academic research: Competence, Work Performance, and Objectivity. We develop an analytical expression of the model using the belief function framework in order to overcome limitations of prior research. Our results reveal that modeling the “And” relationship is essential for assessing the strength of the IA function. As far as interrelationships are concerned, the analysis shows that, when the three factors have a strong or a perfect relationship, the strength of the IA function remains high even if there is positive or negative evidence about one of the factors. This result holds as long as there are high levels of belief about the other two factors. Further, we demonstrate how the quality of corporate governance affects the evaluation of the IA function and how a cost–benefit analysis can be applied to this framework to help determine the amount of external audit work needed to comply with standards. Our analysis reveals that the extent of external audit work to be carried out by the external auditor depends on the strength of the IA function and the amount of litigation and regulatory costs likely to be faced by the external auditor.     

An examination of minimum tick sizes on the Tokyo Stock Exchange

In setting a minimum tick size, exchanges balance the competing objectives of lowering transaction costs and encouraging liquidity provision by minimizing stepping-ahead risk. We examine the trade-off between these two types of costs by examining the proportion of time that the quoted spread equals the minimum tick size (PTIMEMIN). We undertake this analysis on the Tokyo Stock Exchange, a market that sets nine different tick sizes based on stock price. PTIMEMIN varies markedly across stocks, ranging from almost 0 to almost 100 percent. We find that trade size, the number of trades, and price are the most important determinants of whether the minimum tick size is a binding constraint. In fact, trade size and number of trades are more significant determinants of tick size constraint than price. Consequently, we argue that tick size should be set based on trading activity and price, rather than price alone.     

Forecasting the Yen/U.S. Dollar exchange rate: Empirical evidence from a capital enhanced relative PPP-based model

This study uses a relative purchasing power parity (PPP) model based on price indexes (consumer, CPI or traded-goods price indexes, TPI), interest rate differentials, and a linear forecasting technique to determine the horizon over which such a model outperforms a random walk in forecasting the Yen/U.S. Dollar exchange rates out-of-sample. The results improve if one adjusts a simple CPI-based PPP-model by interest rate differentials, while the best results are obtained using a TPI-based PPP-model. For example, the TPI-based model, adjusted by interest rate differentials, is able to statistically significantly outperform the pure random walk starting at forecast horizons of 1 month.