Outsourcing and benchmarking in a rural public hospital : does economic theory provide the complete answer?

INTRODUCTION: The ideology and pronouncements of the Australian Government in introducing 'competitive neutrality' to the public sector has improved efficiency and resource usage. In the health sector, the Human Services Department directed that non-clinical and clinical areas be market tested through benchmarking services against the private sector, with the possibility of outsourcing. These services included car parking, computing, laundry, engineering, cleaning, catering, medical imaging (radiology), pathology, pharmacy, allied health and general practice. Managers, when they choose between outsourcing, and internal servicing and production, would thus ideally base their decision on economic principles. Williamson's transaction cost theory studies the governance mechanisms that can be used to achieve economic efficiency and proposes that the optimal organisation structure is that which minimises transaction costs or the costs of exchange. Williamson proposes that four variables will affect such costs, namely: (i) frequency of exchange; (ii) asset specificity; (iii) environmental uncertainty; and (iv) threat of opportunism. This paper provides evidence from a rural public hospital and examines whether Williamson's transaction cost theory is applicable. d into an analysis that relies solely on transaction

The impact of court delays on the prosecutor and the defendant: an economic analysis

One important aspect of the economic theory of criminal court delay is to understand how the prosecutor and the defendant make their decisions, and how these respond to changes in trial delay. If both parties jointly maximise expected utility, trial delay may increase or decrease the number of trials, depending upon the decision makers' attitudes towards risk. The main policy implication is that providing the criminal courts with more resources in the form of additional judges and court capacity may lengthen the trial queue rather than shorten it. This is a counterintuitive result contrary to popular belief.

Is the treatment of economic loss by the Australian courts in torts cases anomalous?

The well developed economic theory of tort liability has never been able to comfortably accommodate negligence cases causing pure economic loss as opposed to physical damage or injury. In fact, contrary to received opinion, Australian Courts at least, are increasingly allocating pure economic losses to achieve predominantly an efficiency objective, with corrective justice notions relegated into the background. Consequently, it is difficult to classify these cases as anomalous in the sense of falling outside the efficiency paradigm.

An industrial organisation economic supply chain approach for the construction industry : a review

Understanding industries in terms of the concepts of chains, clusters and networks is becoming increasingly important in economies around the world. Supply chain management for an individual organization is an
emerging field of research in the construction management discipline, but less attention has been devoted to investigating the nature of the construction supply chains and their industrial organizational economic environment. This selected review of construction and mainstream management supply chain literature is organized around four themes; distribution, production, strategic procurement management and industrial
organization economics, and highlights the need to develop an industrial organization economic supply chain framework for construction. The merging of the supply chain concept with the industrial organization model
as a methodology for understanding firm conduct and industry structure and performance is an important contribution to both construction supply chain and construction economic theory. Much of the industrial organization supply chain literature has tended to focus upon manufacturing industries, where typically firms are permanent organizations. This raises issues as to the differences between industries founded upon temporary compared with permanent organizations. There is potential for the development of an industrial organization methodology applicable to the project based industry. Ultimately industrial organization research seeks to have direct implications for industry performance and government policies.

Applying the theory of resource curse to disadvantaged migrant communities and criminal offending: Vietnamese Australians and the heroin trade as a case study

Australia has a substantial Vietnamese community, a consequence of the refugee exodus from Southeast Asia which followed the Communist victory in Vietnam in 1975. While Vietnamese Australians have contributed greatly to their host society, they are also stigmatised because of an association with the trade in illicit drugs, particularly heroin. Drug-related offending remains very high in Vietnamese Australian communities, with resultant high rates of incarceration and social exclusion. In its formative years the Vietnamese Australian community was faced with exclusion from economic and social opportunity, but was uniquely well-positioned as an ethnic enclave economy to take advantage of the growing demand for illicit drugs, especially heroin. I argue that the heroin trade had an effect analogous to ‘resource curse’, and has been a major source of continuing disadvantage and social harm to the Vietnamese Australian community.

The tax treatment of employee stock options : generous to a fault

In the 2000 budgets, both the federal and Ontario governments introduced changes to the tax treatment of employee stock options for the explicit purpose of making their tax treatment in Canada similar to or more favourable than that in the United States. The federal budget added a deferral, similar to that currently applicable to options granted by Canadian-controlled private corporations, for up to $100,000 per year of public company stock options. The Ontario budget introduced an exemption from tax for employees involved in research and development on the first $100,000 per year of employee benefits arising on the exercise of qualified stock options or on eligible capital gains arising from the sale of shares acquired by the exercise of eligible stock options. These proposals reflect the apparent acceptance by the two governments that there is a “brain drain” from Canada to the United States of knowledge workers in the “new” economy and that reductions in Canadian taxes should stem this drain. In the author’s view, the tax treatment of employee stock options, even without these changes, is overly generous. Both the federal and provincial proposals ignore the fact that most employee stock options are taxed more favourably in Canada than in the United States in any event. In particular, most employee stock option benefits in Canada are taxed at capital gains tax rates, whereas in the United States most are taxed at full rates. While the US Internal Revenue Code does provide capital gains tax treatment for certain employee stock option benefits, a number of preconditions must be met. Most important, the shares acquired pursuant to the options must be held for a minimum of one year after the option is exercised. In addition, there are monetary limits on the amount of options that qualify for capital gains treatment. In Canada, there are generally no holding period requirements or monetary limits that apply in order for the option holder to benefit from capital gains tax rates. Empirical evidence indicates that the vast majority of employees in the United States exercise their options and immediately sell the shares acquired. These “cashless exercises” do not benefit from capital gains treatment in the United States, whereas similar cashless exercises in Canada generally do. This empirical evidence suggests not only that the 2000 budget proposals are unwarranted, but also that the existing treatment of employee stock options in Canada is already more generous than that in the United States. This article begins with a theoretical “benchmark” for the taxation of employee stock options. The author suggests that employee stock options should be treated in the same manner as other income from employment. In theory, the value of the benefit should be included in income when the option is granted or vests. However, owing to the practical difficulty of valuing employee stock options, the theoretical benchmark proposed is that the value of the benefit (the difference between the fair market value of the shares acquired and the strike price under the option) be taxed when the shares are acquired, and the employer be entitled to a corresponding deduction. The employee stock option rules in Canada and the United States are then compared and contrasted with each other and the benchmark treatment. The article then examines the arguments that have been made for favourable treatment of employee stock options. Included in this critique is a review of the recent empirical work on the Canadian brain drain. Empirical studies suggest that the brain drain—if it exists at all—is small and that, despite what many newspapers and right-wing think-tanks would have us believe, lower taxes in the United States are not the cause. One study, concluding that taxes do have an effect on migration, suggests that even if Canada adopted a tax system identical to that in the United States, the brain drain would be reduced by a mere 10 percent. Indeed, even if Canada eliminated income tax altogether, it would not stop the brain drain. If governments here want to spend money in order to stem the brain drain, they should focus on other areas. For example, Canada produces fewer university graduates in the fields of mathematics, sciences, and engineering than any other G7 country except Italy. The short supply of university graduates in these fields, the apparent loss of top-calibre academics to US
universities, and the consequent lower levels of university research in these areas (an important spawning ground for new ideas in the “new” knowledge-based economy) suggest that Canada may be better served by devoting more resources to its university institutions, particularly in post-graduate programs, rather than continuing the current trend of budget cuts that universities have endured and may further endure if taxes are reduced.
As far as employee stock options are concerned, if Canada does want to look to the United States for guidance on tax reform (which it seems to do with increasing frequency of late), it should adopt the US rules applicable to nonstatutory options, which are close to the proposed benchmark treatment. In the absence of preferential tax treatment, employee stock options would still be included in compensation packages provided that there were sound business reasons for their use. No persuasive evidence has been put forward that the use of stock options, in the absence of tax incentives, is suboptimal. Indeed, the US experience suggests quite the opposite.

A dynamic ratio-based model for signalling corporate collapse

The recognition of behavioural elements in finance has caused major shifts in the analytic framework pertaining to ratio-based modeling of corporate collapse. The modeling approach so far has been based on the classical rational theory in behavioural economics, which assumes that the financial ratios (i.e., the predictors of collapse) are static over time. The paper argues that, in the absence of rational economic theory, a static model is flawed, and that a suitable model instead is one that reflects the heuristic behavioural framework, which is what characterises behavioural attributes of company directors and in turn influences the accounting numbers used in calculating the financial ratios. This calls for a dynamic model: dynamic in the sense that it does not rely on a coherent assortment of financial ratios for signaling corporate collapse over multiple time periods. This paper provides empirical evidence, using a data set of Australian publicly listed companies, to demonstrate that a dynamic model consistently outperforms its static counterpart in signaling the event of collapse. On average, the overall predictive power of the dynamic model is 86.83% compared to an average overall predictive power of 69.35% for the static model.

Egovernance : a growing paradigm in Germany and India

EGovernance is fast becoming a focal issue with governments worldwide, enabled by the ICT revolution. Many economies are adopting eGovernance as a medium of reaching out and empowering the average citizen, stretching tax revenues and cutting down transaction costs. In this paper, we have examined Germany and India, two disparate economies in terms of development yet similar in administrative structures against a backdrop of insightful socio-economic fabric. We have taken a positivist approach and used the exploratory research method, supported by the transaction cost economic theory to draw broad conclusions on similarities and differences in eGovernance adoption, within these economies.

Sustainability: meaning and measurement with application to agriculture

Sustainability refers to having the ability to meet present needs without impacting on future generations to meet their needs. It incorporates social, economic and environmental aspects, and as a measure of sustainability, a range of sustainability indicators at the economy, regional, and individual level, have been suggested. However, given the complex and multidisciplinary nature of the concept, an interdisciplinary approach is necessary. Sustainability is not something that is easily measurable, and the aim of this paper is to present a conceptual framework for quantifying sustainability on the basis of social economic efficiency. According to neoclassical economic theory, economic activity will only be sustained by the private sector as long as it is profitable. However, private economic decisions do not always ensure long-term sustainability of environmental resources or production. The approach suggested here is to derive a measure of social economic efficiency as a measure of sustainability. For dairy farmers, increased productivity has been emphasized, while recognizing the need to reduce greenhouse emissions, pests and disease, nutrient run-off into the environment and degradation of the soil structure. By incorporating environmental and economic impacts, a fuller measure of efficiency, social economic efficiency, and sustainability of the farming practice can be developed.

Stop taxing happiness : a new perspective on progressive taxation

The development of taxation law and policy has been driven largely by economic considerations and economic theory. Underlying this is the assumption that money is important to human well-being and is in fact the most important thing in this regard. Recent empirical studies of human well-being disprove this assumption. Money has only a limited bearing on happiness. It follows that economic arguments that have long shaped taxation law and policy should be discarded in preference for recent learning concerning what really matters to people. The results of the recent studies have significant implications for the manner in which we should raise tax. We argue that for income under approximately $20,000 the rate should be 0 to 5 per cent. For income between $20,000 to $50,000 the rate should be about 15 per cent. Incomes beyond this level should taxed at approximately 75 per cent. There is no reason to have further rate differentials.

Forecasting industry-level CPI and PPI inflation : does exchange rate pass-through matter?

We show that incorporating the effects of exchange rate pass-through into a model can help in obtaining superior forecasts of domestic, industry-level inflation. Our analysis is based on a multivariate system of domestic inflation, import prices and exchange rates that incorporates restrictions from economic theory. These are restrictions on the transmission channels of the exchange rate pass-through to domestic prices, and are presented as testable hypotheses that lead to model reduction. We provide the results of various tests, including causality and prior restrictions, which support the underlying economic arguments and the model we use. The forecasting results for our model suggest that it has a superior performance overall, jointly producing more accurate forecasts of domestic inflation.

Priority setting in health: origins, description and application of the Australian Assessing Cost-Effectiveness initiative

This article reports on the ‘Assessing Cost–Effectiveness’ (ACE) initiative in priority setting from Australia. It commences with why priority setting is topical and notes that a wide variety of approaches are available. In assessing these various approaches, it is argued that a useful first step is to consider what constitutes an ‘ideal’ approach to priority setting. A checklist to guide priority setting is presented based on guidance from economic theory, ethics and social justice, lessons from empirical experience and the needs of decision-makers. The checklist is seen as an important contribution because it is the first time that criteria from such a broad range of considerations have been brought together to develop a framework for priority setting that endeavors to be both realistic and theoretically sound. The checklist will then be applied to a selection of existing approaches in order to illustrate their deficiencies and to provide the platform for explaining the unique features of the ACE approach. A case study (ACE-Cancer) will then be presented and assessed against the checklist, including reaction from stakeholders in the cancer field. The article concludes with an overview of the full body of ACE research completed to date, together with some reflections on the ACE experience.