EDITORIAL: TAX REFORM AND SIMPLIFICATION

Major tax reform to simplify the UK tax system is possible. Merging income taxes, social security taxes and corporation tax into only a single flat-rate of tax on all incomes would be a radical start. Avoiding taxes on income and expenditure which are 'too high' requires major reductions in government spending, mainly on the welfare state. Given the political will, over a period of years we really can hugely improve the UK tax system.     

Negotiation support using the Graph Model for Conflict Resolution

The Graph Model for Conflict Resolution is a flexible methodology for systematically studying strategic conflicts in the real world, and is therefore a natural tool for negotiation support. The basic definitions underlying the graph model are reviewed, and the techniques for analysis and interpretation are discussed. The modeling and analysis of a case study, an international trade negotiation concerning the export of Canadian softwood lumber to the United States, are used to demonstrate the practical application of the Graph Model for Conflict Resolution as a negotiation support tool. The modeling and analysis is carried out using the GMCR software system. The ability of the Graph Model for Conflict Resolution to provide insights and advice to negotiators is emphasized.     

Role transitions in older adults: A marketing opportunity

Consumers act out roles throughout their lives. Marketers assist in this role playing by providing the wardrobes, props, and sets in the form of products and services. They also help people understand acceptable role behavior by portraying roles in their communication programs. Consumers assume new roles as they age. This article is designed to enhance understanding of the often-ignored roles that accompany aging and provides examples of and suggestions for effective marketing for these role transitions.     

Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation

Linear and nonlinear Granger causality tests are used to examine the dynamic relation between daily Dow Jones stock returns and percentage changes in New York Stock Exchange trading volume. We find evidence of significant bidirectional nonlinear causality between returns and volume. We also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by Clark's (1973) latent common-factor model. After controlling for volatility persistence in returns, we continue to find evidence of nonlinear causality from volume to returns.     

The approximation capabilities of the minflex-Laurents,translog, and generalized Leontief forms

This paper compares the approximation capabilities of the minflex-Laurents translog and minflex generalized Leontief cost functions with their translog and generalized Leontief counterparts in Monte Carlo experiments. The minflex Laurent specifications generally provided closer approximations to underlying technical and economic parameters. Imposition of nonlinear restrictions on some of the parameters of the minflex Laurent models yielded measurable improvement in estimated elasticities of substitutions, returns to scale, and rates of technical change.The refereeing process of this paper was handled through E. Appelbaum.     

Lobbying, multisector trade, and sustainability of free‐trade agreements

Abstract.  This paper is concerned with the sustainability of free‐trade agreements (FTA). FTA sustainability is influenced by governments' valuations of political contributions, discount factors, the lobbying position of the specific‐interest groups in the intra‐industry trade sectors, and the sectoral coverage of the FTA. I find that (i) under certain conditions, the FTA under protectionist lobbying could be more sustainable than the FTA under no political pressure; (ii) the lobby‐supported FTA is more sustainable than the lobby‐opposed FTA and the FTA under no political pressure; and (iii) multisector trade enhances FTA sustainability. JEL Classification: F12, F13, F15.     

Trade, foreign firms and economic policy in Indonesian and Thai manufacturing

This paper first examines the rapid growth and changing composition of manufactured exports in Indonesia and Thailand, highlighting the rapid growth of office and computer machinery and electric machinery, somewhat slower growth of non-electric and transportation machinery, as well as the low growth of previously large exports of textiles apparel. Second, the important contributions of foreign multinational enterprises (MNEs) to export growth in the machinery industries, particularly in electric, office, and computing machinery, are documented. Third, the paper describes trade policies in all these industries in some detail, emphasizing how low protection was a key facilitator of rapid export growth in the MNEs that dominated the electric, office, and computing machinery industry, while high protection reduced incentives to export among MNEs in the transportation machinery industry.     

The fleeting nature of permanent reinvestment: Accounting for the undistributed earnings of foreign subsidiaries

Over the last decade, an increasing percentage of the profits reported by U.S. corporations were earned by their foreign subsidiaries and retained outside the United States resulting in the deferral of income taxes. The American Jobs Creation Act of 2004 provided a temporary federal tax incentive to remit such earnings, which resulted in the repatriation of $140 billion by the 30 firms comprising the Dow Jones Industrial Average. An analysis of the financial reporting disclosures made by these firms reveals that a tax expense was not fully recognized on a substantial portion of the earnings until repatriation because of an exception for foreign reinvestments deemed to be essentially permanent in duration. The implications of the currently acceptable accounting for undistributed foreign earnings are discussed as well as recommendations to improve the relevancy and reliability of the disclosures required for this exception to comprehensive recognition of deferred taxes.