Melbourne Institute Working Paper Series Abstracts (1997)
Melbourne Institute Working Paper No. 28/97
Diversification and the Performance of Australian Enterprises
by
Derek Bosworth, Peter Dawkins, Mark Harris and Stuart Kells
November 1997
ABSTRACT
The aim of this paper is to examine empirically the relationship between diversification and firm performance. The paper uses a sample panel of large Australian firms covering the period 1989 to 1994. Following a discussion of some arguments for and against diversification, bivariate and multivariate analyses are performed to test whether diversification ceteris paribus improves or impedes performance. The results indicate that diversification has a negative impact on firm performance, controlling for firm size, gearing, and whether or not firms are listed and foreign owned.
Melbourne Institute Working Paper No. 27/97
The Spillover Effects of Industrial Action on Firm Profitability
by
James Ted McDonald and Harry Bloch
October 1997
ABSTRACT
While it is generally accepted that industrial action can have a negative impact on a firm's performance, the direct effects of a strike on the affected firm may be only one component of the total impact resulting from the action. The existence of indirect or 'spillover' effects can also have important implications for the economic performance of competing firms. This paper uses a panel dataset of firm-level financial and industrial disputes data on a large sample of firms in Australian manufacturing to determine the extent of direct and spillover effects of industrial action.
Melbourne Institute Working Paper No. 26/97
An Introduction to the IBIS Database
by
Stuart Kells and Christopher Worswick
October 1997
ABSTRACT
This paper describes the IBIS database. The database contains detailed longitudinal information on an annual basis for medium to large firms in Australia over the period 1979 through to the present. The strengths and weaknesses of the data are discussed. The paper introduces two panels extracted from the database. The first ("long and shallow") panel contains 333 firms and extends from 1983 to 1994. The second ("short and deep") panel follows 939 firms over the period 1989 to 1994.
Melbourne Institute Working Paper No. 25/97
Labour market programs and the Australian Beveridge Curve: 1978 to 1996
by
Elizabeth Webster
October 1997
ABSTRACT
Labour market programs are often advocated on the basis that by re-introducing unemployed people to the culture of the workplace, they will re-skill and motivate them enough to make them suitable employees to prospective employers. Accordingly total employment will rise and vacancy rates will fall. If successful, we should be able to detect a systematic relationship between labour market program expenditure and the distance of the Beveridge curve from the origin ceteris paribus. There are few studies in the world which have directly tired to assess the impact of labour market program expenditure on the Beveridge curve. Our estimates for Australia over the last 18 years do not support the view that labour market programs have moved the Beveridge curve inwards, that is there is no evidence that they lead to an expansion of aggregate employment.
Melbourne Institute Working Paper No. 24/97
A Brief Overview of Unemployment in Australia
by
Joanne Loundes
October 1997
ABSTRACT
Unemployment is arguably one of the most important policy issues this country is presently facing, with the unemployment rate not having fallen below 8 per cent at any stage of the most recent expansion phase. This paper presents a brief history of unemployment in Australia, examining various characteristics in detail. Specifically, it covers the issues of hidden unemployment, the underemployed and the long-term unemployed. The Australian experience is also put into an international context, comparing our recent unemployment performance with that of the OECD countries, and making a more detailed comparison with the United States and France.
Melbourne Institute Working Paper No. 23/97
Labour Market Programs: A Review of the Literature
by
Elizabeth Webster
October 1997
ABSTRACT
Commonwealth labour market programs currently consume $1.5 billion dollars per annum. Most of this expenditure is aimed at the long term unemployed. Since 1973-74, expenditure on these programs has risen and fallen in line with the unemployment rate. This government behaviour parallels the overseas experiences. Most empirical evidence from Australia and elsewhere indicate that programs improve participants' employment experiences for at least a year or two after leaving the program. However, most of this improvement could well be at the expense of other jobseekers. There is a lack of convincing evidence that the programs reduce wage pressures enough to permit an increase in total employment. Nevertheless, labour market programs appear to have intrinsic worth as an equity instrument, for they provide hope and opportunity to the most disadvantaged of all jobseekers.
Melbourne Institute Working Paper No. 22/97
Executive Remuneration, Board Structure, Corporate Strategy and Firm Performance: A Taste of the Literature
by
Stuart Kells and Mark Rogers
September 1997
ABSTRACT
The focus of this paper is the relationship between executive remuneration, board structure, institutional shareholders and the performance of Australian companies. The paper presents a preliminary survey of the economic literature related to these areas, and then outlines a plan for a research project. The project will investigate the effect on the performance of Australian firms of the nature and generosity of firms' executive remuneration schemes, the structure of firms' board of directors and the influence of substantial institutional shareholders. The project is part of a broader research agenda at the Melbourne Institute that concerns the factors that determine Australia's economic performance. As a stimulus to research into corporate strategy and firm performance, the paper includes an extended research bibliography.
Melbourne Institute Working Paper No. 20/97
Are Consumption Taxes Regressive?
by
John Creedy
September 1997
ABSTRACT
It is often argued that a general consumption tax is necessarily regressive, particularly because households with high incomes typically save relatively more than those with low incomes. This paper uses very simple tax models to examine the combination of income and consumption taxes. It suggests that it is preferable to consider the overall impact of all taxes and transfers rather than relating payments of a single tax to gross income, instead of the relevant tax base. Insofar as savings might be relevant, attention should be given to the income tax treatment of investment income.
Melbourne Institute Working Paper No. 19/97
Description of the Current Indirect Tax System
by
Rajat Sood and Rosanna Scutella
August 1997
ABSTRACT
Indirect taxes are taxes assessed on producers in respect of the production, sale, purchase or use of goods and services which are charged to the expense of production. There are currently many indirect taxes operating in Australia, each with its own legislation and administering department which may be at the Federal, State or Local level. In this paper, a description of the existing indirect tax structure in Australia is provided. Part of this involves placing each tax in the context of its importance to government revenue raising. The other and more substantial part of the task involves describing the base and rate structures of each tax. Emphasis is placed on Wholesale Sales Tax, Stamp Duties, Financial Institutions Duties, Bank Accounts Debits Tax, Payroll Tax, Excise Duties and Franchise Fees.
Melbourne Institute Working Paper No. 18/97
Calculating the final incidence of Australian indirect taxes
by
Rosanna Scutella
August 1997
ABSTRACT
The Australian Bureau of Statistics provide a breakdown by industry of the statutory incidence of the major indirect taxes in Australia. This statutory incidence is the amount of revenue collected from each industry for each indirect tax. In other words it shows who actually writes the cheques to the government. This information does not show who bears the ultimate burden of the tax as each industry may pass on its initial burden to purchasing industries and/or final consumers through higher prices. Thus, the burden of the tax is passed on round by round to indirect business purchases and final demand until the total burden of the tax is passed on to final demand. This paper explains the process involved in evaluating the final incidence of indirect taxes in Australia. The method used to derive final indirect tax incidence is developed from earlier studies. The major innovation is to include the use of margin industries in the initial flows of the input output matrix ensuring that taxes on inputs to margin services are fully passed forward onto the good or service that the consumer purchases. The methodology is differentiated by type of tax so it is possible to investigate the impact of any plausible change in indirect tax on household consumption and hence on household welfare.
Melbourne Institute Working Paper No. 17/97
The Determinants of Firm Profitability in Australian Manufacturing
by
James Ted McDonald
July 1997
ABSTRACT
This study provides new evidence on the determinants of the profitability of Australian manufacturing firms by analyzing a unique firm level data set of firm performance over the period 1983 -1993. This data set allows a significant advance over previous Australian studies that have relied on one or more cross sections of aggregate industry level data. In particular, the panel nature of the data permits the estimation of dynamic profitability models over the business cycle, to test both the persistence and cyclicality of firm profitability. From estimations based on an adaptation of a standard oligopoly model, econometric results suggest that lagged profitability is a significant determinant of current profit margins, and that industry concentration is positively related to firm profit margin. As well, both union density and real wage inflation are found to be negatively associated with firm profits. Finally, the cyclicality of profit margins depends on industry concentration - firm margins are procyclical in concentrated industries and are counter-cyclical in less concentrated industries. The main results are also shown to be robust to a number of alternative specifications.
Melbourne Institute Working Paper No. 16/97
Estimates of the Cost of Monopoly Using the IBIS Database
by
Robert Dixon
July 1997Melbourne Institute Working Paper No. 15/97
Householder attitudes towards retirement incomes, Australia, 1997
by
Elizabeth Webster
July 1997-
ABSTRACT
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In May 1997 the Melbourne Institute conducted a telephone survey of 1200 households across Australia in order to assess community attitudes towards government retirement income plans and superannuation. Our survey found considerable support for some form of contributory superannuation scheme and also a high degree of awareness that people, especially the young, will have to support themselves by superannuation or private assets in their retirement. This implies that people are likely to a sanguine view of governments which take positive policy steps to further these intentions. However, if left in its current form, superannuation programs appear unlikely to deliver higher saving rates. Very few people indicated that they would voluntarily put more of their discretionary incomes into superannuation.
Melbourne Institute Working Paper No. 14/97
Employment Dynamics in Australia: Validation of the IBIS Database against Alternative Data Sources
by
Jeff Borrland
July 1997Melbourne Institute Working Paper No. 13/97
Innovation Spillovers: A Cellular Automata Model
by
Kieron Meagher and Mark Rogers
July 1997
ABSTRACT
The assumption of innovation spillovers is a major aspect of many endogenous growth models. These models assume that a firm can learn from the total stock of innovations, or more generally 'knowledge', in the entire economy ('global spillovers'). In contrast, the extensive empirical work on spillovers has endeavoured to incorporate the intuitively plausible fact that spillovers are likely to be stronger between certain firms. In empirical work, researchers have weighted the spillover effect by measures of technological, geographical or trade-related closeness. Thus, the empirical work assumes that spillovers are 'local' not 'global' in extent. This paper provides a new theoretical method of analysing local innovation spillovers by using a cellular automata framework. This framework, in contrast to the endogenous growth models, allows us to explicitly model localised spillovers. Within this framework we compare localised spillovers with global spillovers. The results show that the localised spillover case is not merely a proportional reduction of the global spillovers case.
Melbourne Institute Working Paper No. 12/97
Estimates of the Linear Expenditure System Using the 1993 Household Expenditure Survey
by
John Creedy and Cameron Martin
July 1997ABSTRACT
This paper presents estimates of income and price elasticities of Australian Households using data from the Household Expenditure Survey for 1993. Strong assumptions are required in order to obtain the price responses from budget data. The elasticities are based on estimates of the LES for each of a number of income (total expenditure) groups. An assumption regarding the variation in the Frisch parameter with total expenditure is needed. The results can be used to examine the distribution of the welfare effects of price changes, including those arising from indirect tax changes.
Melbourne Institute Working Paper No. 11/97
Marginal Indirect Tax Reform in Australia
by
John Creedy
June 1997Melbourne Institute Working Paper No. 10/97
Analysis of Structural Change Using the Gibbs Sampler: The Case of the Mexican Debt Crisis
by
Peter M. Summers
June 1997Melbourne Institute Working Paper No. 9/97
Trade and Growth in Settler Economies: Australian and Canadian Comparisons
by
Peter M. Summers
June 1997-
ABSTRACT
This paper analyses the historical relationship between exports, imports, and national income growth in Australia and Canada, using over 100 years of data for each country. I test for the presence of "export-led growth" and "import-led growth" in both countries over several time intervals, interpreting these concepts to mean a unidirectional causal ordering. I find no evidence to support the export-led growth hypothesis for Australia, but strong evidence for this hypothesis in Canadian data in the period 1915-38. The results here suggest a much stronger role for imports than has been found in previous analysis of Canadian data: imports as well as exports appear to lead growth over the 1915-38 period. In addition, import growth tends to be causally prior to export growth in both countries, but at different times. The strength of the relationship between trade and growth is generally comparable across countries. Finally, although there is little evidence of unidirectional causality in either country, there is substantial evidence of bi-directional causality.
Melbourne Institute Working Paper No. 4/97
Means-Tested Versus Universal Transfers: Alternative Models and Value Judgements
by
John Creedy
January 1997
ABSTRACT
This paper illustrates the use of different criteria used to evaluate alternative tax and transfer systems. Means-tested and universal transfer systems are compared, using numerical examples involving a small number of individuals, in order to highlight the precise effects on incomes. The implications of fixed incomes and of endogenous incomes, using CES utility functions, are examined. Comparisons between tax systems involve fundamental value judgements concerning inequality and poverty, and no tax structure can be regarded as unambiguously superior to another. Judgements depend on the degree of inequality aversion and attitudes to poverty. However, in cases where means-testing is preferred, the desired tax or taper rate applying to benefits is substantially less than 100%.