METROPOLITAN HOUSE PRICES IN SOUTH AFRICA: DO THEY CONVERGE?

The question this paper investigates is whether or not different metropolitan areas each constitute a separate housing market or whether or not there is a single South African housing market. Theory on the Law of One Price suggests that if products or geographic areas belong in the same market, their absolute prices must converge, so that their relative prices are stationary. By using cross-sectional time series data of five metropolitan areas, the paper tests for the Law of One Price by applying the Im, Pesaran and Shin panel unit root test. The paper finds strong evidence of convergence in large middle-segment house prices and weaker support for convergence in medium middle-segment house prices. In addition, the paper finds no evidence for convergence in small middle-segment house prices. This suggests the existence of a national market for large and possibly middle-segment houses in metropolitan areas, but separate metropolitan markets for small middle-segment houses. In addition, the paper estimates the speed of convergence and finds that large middle-segment house prices converge within two to seven quarters, while the speed of convergence for medium middle-segment house prices in three of the five areas is five to eight quarters.     

Equity‐Based Compensation for Employees: Firm Performance and Determinants

I examine the effect of employee equity‐based compensation (EBC) on firm performance and the determinants of EBC. Using two samples, I find that firms have come to rely more heavily on EBC than in the past. For both samples, I document a significant, positive relation between Tobin's q and the percentage of employee compensation that is equity based. For accounting returns, I find a positive relation with the earlier sample. However, for the later sample I find that greater use of EBC leads to lower levels of future accounting returns. I also find that the determinants of the proportion of EBC are different between the two samples.     

Advertising,Price and Quality in Self–regulating Professions: A Survey

This paper surveys the theoretical and empirical literature on the relationship between advertising, fees and quality in the self–regulating professions. Much of the literature is derived from the perspective of advertising as an information–enhancing device, helping to reduce the information asymmetry between professional and client. This is consistent with the majority of the empirical studies which suggest that advertising tends to have a downward effect on professional fees, with little if any adverse effect on quality. There are, however, important issues of method and measurement which may lessen the force of this conclusion     

Fiscal Decentralisation and Economic Growth in High‐Income OECD Countries

Among the majority of high–income OECD countries, the degree of fiscal decentralisation has converged over the last 30 years towards an intermediate level. The theoretical arguments for and against fiscal decentralisation point to explanations for this tendency, because both extreme decentralisation and extreme centralisation are associated with disadvantages for economic growth. Hence, the observed trend of convergence would be growth–promoting. The paper analyses the long–run empirical relationship between per capita economic growth, capital formation and total factor productivity growth, and fiscal decentralisation for the high–income OECD countries. The evidence supports the view that the relationship is positive when fiscal decentralisation is increasing from low levels, but then reaches a peak and turns negative. A policy implication is that policy–makers in several countries with relatively low degrees of fiscal decentralisation could possibly mobilise growth reserves by increasing it.     

Moore's Law and the Semiconductor Industry: A Vintage Model*

In this paper we develop a vintage model to gain a better understanding of the semiconductor industry and its role in recent U.S. productivity gains. Unlike previous work, in our model the observed price declines of individual chips are driven by the introduction of better vintages rather than by learning economies. Dominated chips, nonetheless, continue to be produced, for a time, due to sunk investments in chip‐specific production equipment. The model lends partial support to Jorgenson's hypothesis that an exogenous increase in Moore's Law could have generated the more rapid price declines, and faster productivity growth, seen after 1995.     

Regulatory reform of the UK gas market: The sase of the storage auction

The UK gas industry has undergone major changes since it was privatised in 1986 as a fully integrated monopoly. The most significant of these has occurred not as a result of the privatisation legislation but by the intervention of the ordinary competition authorities in support of an active industry regulator. While price capping continues to be used as the primary instrument for welfare protection against the still substantial monopolistic powers of the incumbent, new competition (which has been positively encouraged) has had the greater impact on prices and choice. Recently, however, the regulator has encouraged the use of auctions for the sale of storage capacity. This paper considers the merits of auctions and makes a tentative evaluation of their effectiveness. Further use of auctions is recommended but reserve prices are considered inappropriate where monopoly power still remains.     

Multinational Companies,Technology Spillovers and Plant Survival*

How does the presence of multinational companies affect plant survival in the host country? We postulate that multinational companies can impact positively on plant survival through technology spillovers. We examine the nature of the effect of multinationals using a Cox proportional hazard model, which we estimate using plant‐level data for Irish manufacturing industries. Our results show that the presence of multinationals has a life‐enhancing effect only on indigenous plants in high‐tech industries, suggesting the presence of technology spillovers. In contrast, multinationals compete with each other in low‐tech sectors in the host country.     

FACTORS THAT AFFECT THE LONG‐TERM SURVIVAL OF MICRO,SMALL AND MEDIUM ENTERPRISES IN ETHIOPIA

There is an increasing recognition of the potential importance of micro, small and medium enterprises (MSMEs) for employment, income and poverty reduction in Ethiopia. Although the MSME sector contributes significantly to the national economy, the high failure rate among well established small businesses and enterprises is a matter of major concern. A random sample of 500 small businesses and enterprises selected from five major cities in Ethiopia were followed up for 6 years in order to assess the impact of influential factors that affect the long‐term survival and viability of small enterprises. Hazard ratios estimated from the Cox Proportional Hazards Model were used to quantify the impact of key predictors of survival. Businesses that ceased operation were characterised by inadequate finance (61%), low level of education (55%), poor managerial skills (54%), shortage of technical skills (49%), and inability to convert part of their profit to investment (46%). The study shows that participation in social capital and networking (iqqub schemes) was critically helpful for long‐term survival. Businesses that did not participate in iqqub schemes regularly were found to be 3.25 times more likely to fail in comparison with businesses that did. Results of the study have implications that could be used for developing policy initiatives that are aimed at fostering long‐term growth in small businesses and enterprises.     

Adjustment Costs,Inventories and Output

This paper analyzes the optimal adjustment strategy of an inventory‐holding firm facing price‐ and quantity‐adjustment costs in an inflationary environment. The model nests both the original menu‐cost model that allows production to be costlessly adjusted, and the later model that includes price‐ and quantity‐adjustment costs, but rules out inventory holdings. It is shown that the firm's optimal adjustment strategy may involve stockouts. At low inflation rates, output is inversely related to the inflation rate, and the length of time demand is satisfied increases with the demand elasticity but decreases with the storage cost and the real interest rate.     

Are Venture Capitalists a Catalyst for Innovation?

In this paper we test two hypotheses concerning the presence of innovation in venture capital investments and the growth of innovative venture backed firms. To examine these hypotheses we considered sample of 37 Italian venture backed firms that went public on the Italian Stock Exchange between 1995 and 2004 and by a statistical matching procedure we picked 37 twin firms among the non‐venture backed IPOs for the same period. Our evidence shows that innovation is an important factor during the selection phase but once the investment is made, the company does not promote continued innovation and concentrates all efforts to improve other economic and managerial aspects.