Modelling Wages and Prices in Australia

This paper estimates a simultaneous-equation model of wages and prices for Australia, underpinned by a competing claims framework of imperfect competition. Two separate co-integrating relationships for wages and prices are identified by imposing the economic hypotheses implied by the theory. The steady-state relationships for wages and prices are then embedded in a parsimonious, dynamic wage-price model. The final model is both simple and parsimonious and able to describe the process of wage and price inflation in Australia

Modelling Spikes in Electricity Prices

uring periods of market stress, electricity prices can rise dramatically. Electricity retailers cannot pass these extreme prices on to customers because of retail price regulation. Improved prediction of these price spikes therefore is important for risk management. This paper builds a time-varying-probability Markov-switching model of Queensland electricity prices, aimed particularly at forecasting price spikes. Variables capturing demand and weather patterns are used to drive the transition probabilities. Unlike traditional Markov-switching models that assume normality of the prices in each state, the model presented here uses a generalised beta distribution to allow for the skewness in the distribution of electricity prices during high-price episodes.

Energy polarization and popular representation: Evidence from the Russian Duma

In this article we introduce the term “energy polarization” to explain the politics of energy market reform in the Russian Duma. Our model tests the impact of regional energy production, party cohesion and ideology, and electoral mandate on the energy policy decisions of the Duma deputies (oil, gas, and electricity bills and resolution proposals) between 1994 and 2003. We find a strong divide between Single-Member District (SMD) and Proportional Representation (PR) deputies High statistical significance of gas production is demonstrated throughout the three Duma terms and shows Gazprom's key position in the post-Soviet Russian economy. Oil production is variably significant in the two first Dumas, when the main legislative debates on oil privatization occur. There is no constant left–right continuum, which is consistent with the deputies' proclaimed party ideology. The pro- and anti-reform poles observed in our Poole-based single dimensional scale are not necessarily connected with liberal and state-oriented regulatory policies, respectively. Party switching is a solid indicator of Russia's polarized legislative dynamics when it comes to energy sector reform.

Distribution of benefits of irrigation induced technological changes and commodity markets : new evidence

A plethora of literature exists on irrigation development. However, only a few studies analyse the distributional issues associated with irrigation induced technological changes (IITC) in the context of commodity markets. Furthermore, these studies deal with only the theoretical arguments and to date no proper investigation has been conducted to examine the long-term benefits of adopting modern irrigation technology. This study investigates the long-term benefit changes of irrigation induced technological changes using data from Sri Lanka with reference to rice farming. The results show that (1) adopting modern technology on irrigation increases the overall social welfare through consumption of a larger quantity at a lower cost (2) the magnitude, sensitivity and distributional gains depend on the price elasticity of demand and supply as well as the size of the marketable surplus (3) non-farm sector gains are larger than farm sector gains (4) the distribution of the benefits among different types of producers depend on the magnitude of the expansion of the irrigated areas as well as the competition faced by traditional farmers (5) selective technological adoption and subsidies have a detrimental effect on the welfare of other producers who do not enjoy the same benefits (6) the short-term distributional effects are more severe than the long-term effects among different groups of farmers.

Determinants of health costs due to farmers’ exposure to pesticides : an empirical analysis

It is now well known that pesticide spraying by farmers has an adverse impact on their health. This is especially so in developing countries where pesticide spraying is undertaken manually. The estimated health costs are large. Studies to date have examined farmers’ exposure to pesticides, the costs of ill-health and their determinants based on information provided by farmers. Hence, some doubt has been cast on the reliability of such studies. In this study, we rectify this situation by conducting surveys among two groups of farmers. Farmers who perceive that their ill-health is due to exposure to pesticides and obtained treatment and farmers whose ill-health have been diagnosed by doctors and who have been treated in hospital for exposure to pesticides. In the paper, cost comparisons between the two groups of farmers are made. Furthermore, regression analysis of the determinants of health costs show that the quantity of pesticides used per acre per month, frequency of pesticide use and number of pesticides used per hour per day are the most important determinants of medical costs for both samples. The results have important policy implications.

Noblesse oblige? Determinants of survival in a life and death situation

This paper explores what determines the survival of people in a life–and-death situation. The sinking of the Titanic allows us to inquire whether pro-social behavior matters in such extreme situations. This event can be considered a quasi-natural experiment. The empirical results suggest that social norms such as ‘women and children first’ are persevered during such an event. Women of reproductive age and crew members had a higher probability of survival. Passenger class, fitness, group size, and cultural background also mattered.

Gender and public attitude toward corruption and tax evasion

The topics of corruption and tax evasion have attracted significant attention in the literature in recent years. We build on that literature by investigating empirically: (1) whether attitudes toward corruption and tax evasion vary systematically with gender and (2) whether gender differences decline as men and women face similar opportunities for illicit behavior. We use data on eight Western European countries from the World Values Survey and the European Values Survey. The results reveal significantly greater aversion to corruption and tax evasion among women. This holds across countries and time, and across numerous empirical specifications. (JEL H260, D730, J160, Z130)

Interaction of natural survival instincts and internalized social norms exploring the Titanic and Lusitania disasters

To understand human behavior, it is important to know under what conditions people deviate from selfish rationality. This study explores the interaction of natural survival instincts and internalized social norms using data on the sinking of the Titanic and the Lusitania. We show that time pressure appears to be crucial when explaining behavior under extreme conditions of life and death. Even though the two vessels and the composition of their passengers were quite similar, the behavior of the individuals on board was dramatically different. On the Lusitania, selfish behavior dominated (which corresponds to the classical homo oeconomicus); on the Titanic, social norms and social status (class) dominated, which contradicts standard economics. This difference could be attributed to the fact that the Lusitania sank in 18 minutes, creating a situation in which the short-run flight impulse dominates behavior. On the slowly sinking Titanic (2 hours, 40 minutes), there was time for socially determined behavioral patterns to re-emerge. To our knowledge, this is the first time that these shipping disasters have been analyzed in a comparative manner with advanced statistical (econometric) techniques using individual data of the passengers and crew. Knowing human behavior under extreme conditions allows us to gain insights about how varied human behavior can be depending on differing external conditions.

The impact of tax morale and institutional quality on the shadow economy

This paper uses a multivariate analysis to examine how countries‘ tax morale and institutional quality affect the shadow economy. The literature strongly emphasizes the quantitative importance of these factors in understanding the level of and changes in the shadow economy. Newly available data sources offer the unique opportunity to further illuminate a topic that has received increased attention. After controlling for a variety of potential factors, we find strong support that a higher tax morale and a higher institutional quality lead to a smaller shadow economy.

Local autonomy, tax morale, and the shadow economy

Policymakers often propose strict enforcement strategies to fight the shadow economy and to increase tax morale. However, there is an alternative bottom-up approach that decentralises political power to those who are close to the problems. This paper analyses the relationship with local autonomy. We use data on tax morale at the individual level and macro data on the size of the shadow economy to analyse the relevance of local autonomy and compliance in Switzerland. The findings suggest that there is a positive (negative) relationship between local autonomy and tax morale (size of the shadow economy).

Serious tax non compliance : motivation and guardianship

This article reviews what international evidence exists on the impact of civil and criminal sanctions upon serious tax noncompliance by individuals. This construct lacks sharp definitional boundaries but includes large tax fraud and large-scale evasion that are not dealt with as fraud. Although substantial research and theory have been developed on general tax evasion and compliance, their conclusions might not apply to large-scale intentional fraudsters. No scientifically defensible studies directly compared civil and criminal sanctions for tax fraud, although one U.S. study reported that significantly enhanced criminal sanctions have more effects than enhanced audit levels. Prosecution is public, whereas administrative penalties are confidential, and this fact encourages those caught to pay heavy penalties to avoid publicity, a criminal record, and imprisonment.

On the endogeneity of the pay-performance relationship in professional soccer

In this reply we show that the Nüesch (2009) comment paper to our initial contribution (Torgler and Schmidt 2007) has several shortcomings. He suggests that professional soccer wages seem to buy talent rather than motivation. We therefore provide a larger set of talent proxies and estimations to check whether this assertion is correct. Our results indicate that his conclusion is problematic. We still observe a strong motivational effect, and in some cases the effect is even larger than the talent effect. A further key problem in Nüesch’s contribution is the fact that he neglects to consider the relevance of the relative salary situation.

Comment on “The spreading of disorder”

Keizer, Lindenberg and Steg (2008) conduct six interesting field experiments and report that their results provide evidence of the broken windows theory. Such an analysis is highly relevant as the (broken windows) theory is both controversial and lacking empirical support. Keizer et al.’s key aim was to conceptualize a disorderly setting in such a way that it is linked to a process of spreading norm violation. The strength of the study is the exploration of cross-norm inhibition effects in a controlled field experimental environment. Their results show that if norm violating behavior becomes more common, it negatively affects compliance in other areas. Nevertheless, this comment paper discusses several shortcomings or limitations and provides new empirical evidence that deals with these problems.

Limited information estimation and evaluation of DSGE models

We advance the proposition that dynamic stochastic general equilibrium (DSGE) models should not only be estimated and evaluated with full information methods. These require that the complete system of equations be specified properly. Some limited information analysis, which focuses upon specific equations, is therefore likely to be a useful complement to full system analysis. Two major problems occur when implementing limited information methods. These are the presence of forward-looking expectations in the system as well as unobservable non-stationary variables. We present methods for dealing with both of these difficulties, and illustrate the interaction between full and limited information methods using a well-known model.

A review of rationale for allocating costs and payments in producing and supplying public sector information PART A of 2 Parts – Chapters 1, 2 and 3) 13 March 2011 version

This work reviews the rationale and processes for raising revenue and allocating funds to perform information intensive activities that are pertinent to the work of democratic government. ‘Government of the people, by the people, for the people’ expresses an idea that democratic government has no higher authority than the people who agree to be bound by its rules. Democracy depends on continually learning how to develop understandings and agreements that can sustain voting majorities on which democratic law making and collective action depends. The objective expressed in constitutional terms is to deliver ‘peace, order and good government’. Meeting this objective requires a collective intellectual authority that can understand what is possible; and a collective moral authority to understand what ought to happen in practice. Facts of life determine that a society needs to retain its collective competence despite a continual turnover of its membership as people die but life goes on. Retaining this ‘collective competence’ in matters of self-government depends on each new generation: • acquiring a collective knowledge of how to produce goods and services needed to sustain a society and its capacity for self-government; • Learning how to defend society diplomatically and militarily in relation to external forces to prevent overthrow of its self-governing capacity; and • Learning how to defend society against divisive internal forces to preserve the authority of representative legislatures, allow peaceful dispute resolution and maintain social cohesion.