Trade and Industry Policy

This article consists of a review of changes in trade and industry policy, along with discussions of the determinants of change and the major problem areas. Policy between 1965 and 1985 is summarised, and the growth of unemployment in the 1970s is suggested as a key determinant of change. Higher protection in certain industries, and moves to more quantitative methods ot protection can be related to unemployment, in Australia as in other countries. Theory and empirical evidence suggest that protection is likely to prove ineffective in reducing unemployment. The reliance on protection in particular cases is ascribed to a wish by governments to preserve specific jobs, not to increase overall employment. Policy can have a role in facilitating or restricting structural change which can arise from several sources, such as changing trade patterns and preferences. The devices of policy are considered briefly to determine whether they are likely to facilitate change or not. It is concluded that they often provide incentives to avoid change. The scale problem is considered, and it is suggested that the cost of protection could be high in industries subject to significant scale economies. Scale and adjustments are considered in the light of two industries, motor vehicles and whitegoods, and the role of industry plans is examined. The actuality of trade and industry policy often differs from announced intentions, and this ambiguity can give rise to uncertainty which itself has a cost.     

Convergence of numerical methods for valuing path-dependent options using interpolation

One method for valuing path-dependent options is the augmented state space approach described in Hull and White (1993) and Barraquand and Pudet (1996), among others. In certain cases, interpolation is required because the number of possible values of the additional state variable grows exponentially. We provide a detailed analysis of the convergence of these algorithms. We show that it is possible for the algorithm to be non-convergent, or to converge to an incorrect answer, if the interpolation scheme is selected in appropriately. We concentrate on Asian options, due to their popularity and because of some errors in the previous literature. This revised version was published online in June 2006 with corrections to the Cover Date.     

Rules,standards, and ethics: Relativism predicts cross-national differences in the codification of moral standards

This research examines the relationship between the code of ethics adopted by businesses in a country and the ethics positions of the inhabitants of that country. Ethics Position Theory (EPT) maintains that individuals’ personal moral philosophies influence their ethical judgments, actions, and emotions. The theory, when describing individual differences in moral philosophies, stresses two dimensions: relativism (skepticism with regards to inviolate moral principles) and idealism (concern for positive outcomes). Extending previous research that identified differences in relativism and idealism between residents of different countries and world regions, we examined the relationship between relativism, idealism, and the regulatory standards governing commercial activities of firms headquartered in Australia, Austria, Belgium, Canada, Hong Kong, Ireland, Japan, New Zealand, Spain, the UK, and the US. The results indicated that the level of relativism of a nation's populace predicted degree of ethical codification of commerce in that nation. These findings suggest that the ethical conduct of business will be more closely regulated in countries where relativism is low (e.g., Australia, Canada) but less closely regulated in countries where the residents are more ethically relativistic (e.g., Hong Kong, Spain).     

A method for reducing information asymmetry in destination–airline relationships

We propose a measure of business risk in air travel demand at the route level that can reduce information asymmetry during route development negotiations between tourism destinations and airlines. Aviation-exposed risk (AER) conveys information about the level of uncertainty with regard to air travel demand from an airline’s perspective. Using AER, tourism destinations and air service development teams can evaluate their risks from the perspective of the airline and its network. From there, an assessment can be made as to the value of air services in certain circumstances, including whether a direct underwrite or risk share between airlines and destinations is viable and necessary. By applying a portfolio analysis to an airline’s network, we find evidence that AER does indeed mimic the actual capacity distribution of the network. This provides support for AER as a useful risk measure to be used in practice.     

Price competitiveness of tourism packages to Australia: Beyond the “Big Mac” index

One issue facing any country or region concerns its price competitiveness as a package tour destination. One method of measuring this is to use what in other contexts has been referred to as the Big Mac approach. The “Big Mac” is a simple product with ingredients in fixed proportions, whereas the tourism product is a very complex one comprising different components depending on tourist expenditure patterns. There is no equivalent tourism product offered across countries, as the nature of the product is tailored to the origin market, expenditure levels and the length of the trip involved. The key issue is that of how to standardize the products being compared, so as to determine their relative price competitiveness. A method of constructing price competitiveness indexes, developed by the authors, can be applied to develop measures of the price competitiveness of different tour packages. This paper has three aims: To set down the essence of the preferred approach to measuring price competitiveness, noting its advantages and limitations; to employ this approach to construct price competitiveness indexes for package tours to Australia from Japan and the USA; and to indicate areas for farther research into the price competitiveness of package tourism worldwide.     

Airport alliances and mergers – Structural change in the airport industry?

Recent years have seen a global trend towards the emergence of multi-airport companies operating at a global scale. This paper employs industrial and transaction costs economics to identify the main drivers that shape the patterns of international cross-ownership structures that have emerged in the airport industry. In addition, implications for competition and competition policy are drawn.     

Are Environmental Social Movements Socially Exclusive? An Historical Study from Thailand

Environmental social movements in developing countries are often portrayed as democratizing but may contain important social divisions. This paper presents a new methodology to analyze the social composition and underlying political messages of movements. Nearly 5 000 newspaper reports during 1968–2000 in Thailand are analyzed to indicate the participation of middle and lower classes, and their association with “green” (conservationist) and “red-green” (livelihoods-oriented) environmental values. Results show middle-class “green” activism has dominated forests activism, but lower-class “red-green” activism has grown for forests and pollution. Newspapers, however, portray all environmentalism as “democratization,” suggesting that the possible exclusiveness of some environmental norms is unacknowledged.     

Economic Impacts of Inbound Tourism under Different Assumptions Regarding the Macroeconomy

On what is taken to be the 'Standard View', increased tourism expenditure from inbound markets has direct, indirect and induced effects on a host destination, leading to increased production, income and employment. Strong links between tourism and other sectors of business reduce import leakages from tourism expenditure thereby enhancing the multiplier effects of the injected expenditure on domestic output, value added and employment. The usual technique for analysing these effects is input-output analysis. This paper argues that economy-wide effects must be taken into account in determining the impacts of increased tourism expenditure on a destination, and that the 'Standard View' is superficial and very often misleading. An expanding tourism industry tends to 'crowd out' other sectors of economic activity, reducing the demand for traditional exports and import competing industries. The extent of these 'crowding out' effects depends, in turn, on the workings of labour markets, changes in prices and the real exchange rate, and the macroeconomic policy context. It is argued that these mechanisms can only properly be taken into account using Computable General Equilibrium (CGE) models rather than input-output modelling. The paper then looks at applications of CGE modelling to tourism growth in both nations and regions, classifying the various studies according to assumptions made about labour markets and government policies. The discussion has relevance for estimating the economic contribution of tourism in all destinations. The paper concludes with some observations regarding the use of CGE modelling in tourism contexts internationally and issues for further research.     

The Constitution and liberty1

The present drive for piecemeal constitutional change in Britain is ‘unprecedented in a thousand years of history’. Many of the proposed changes are ‘superfluous and irresponsible’. The one change which could be justified - removing the anti-Catholic provisions of the Act of Settlement - is not on the agenda. We should try to retain the foundations of the Constitution on which liberties rest.