In 2011, Swaziland&#x2019;s fiscal policy was extensively scrutinized following its worst fiscal crisis in decades. The impacts of fiscal adjustment on Swaziland&#x2019;s growth, inflation, and sectoral allocations of resources were some of the issues analyzed. The fall in the Southern African Customs Union revenue receipts to levels below the trend line, for two consecutive years, and the fiscal challenges that followed were the main motivation behind this interest. This paper attempts to establish whether fiscal sustainability was threatened, and if so what were the policy options? Based on the results from econometric estimations, using a sample for the 1986 to 2012 period, I show that the country&#x2019;s fiscal sustainability was not threatened. However, calculations of the tax gap and the primary gap covering the period 2000 to 2016 reveal that fiscal sustainability was threatened. Subject to the major drivers of government expenditure and revenue handles, it is concluded that, in the short run, the two needed to be realigned while also allocating more resources to support growth.

Albert Mafusire

Assessing Swaziland&#x2019;s Fiscal Sustainability and Policy Options

The present study analyses the effects on social welfare of the existence of cross-participation at ownership level in a Cournot duopoly. We show that cross-participation, although it lowers the degree of competition by reducing total output and consumer surplus, may increase social welfare, provided that (i) the firm owned by a single shareholder is less efficient than the other (cross-participated) firm and (ii) the size of the market is not too large. Therefore, the policy implication is that larger cross-participations at ownership level should be favoured, despite their anticompetitive nature, when the cross-participated firm is relatively more efficient and the extent of the market is not too large.

Luciano Fanti

Partial Cross-Ownership, Cost Asymmetries, and Welfare

This paper revisits the strategic selection of the bargaining agenda in a unionized industry with potential entry and decentralized negotiations for different competition modes. The incumbent chooses Right-to-Manage (RTM) or Efficient Bargaining (EB) considering two scenarios: (1) the agenda is imposed to the (potential) entrant (committed bargaining) and (2) the entrant can flexibly choose the agenda (flexible bargaining). In the mixed duopoly, the timing of the game is as follows: at stage 1, the EB firm bargains over wage and employment with its union, while the RTM firm bargains over the wage; at stage 2, the RTM firm chooses employment. This paper shows that the strategic selection of the agenda strongly depends on the interaction between the degree of market competition, the union&#x2019;s power, and the convergence or divergence between parties on the agenda&#x2019;s choice. This complex interaction leads to a very rich set of equilibrium outcomes, including multiple and even (as regards the union&#x2019;s preferences on the agenda) asymmetric equilibria. Compared with alternative timings in the literature, this specification leads to substantial differences with flexible bargaining: EB emerges as equilibrium in Nash strategies for a noticeably increased set of cases.

Domenico Buccella

On the Strategic Choice of Union-Oligopoly Bargaining Agenda: Further Results

This paper applies the two-stage hierarchical non-full rank linear econometric model to make a deep analysis based on revenue generated from key Norwegian export items over the world&#x2019;s continents. The model&#x2019;s ability to analyse the variation of Norway&#x2019;s export trade gives us the following interesting details: (1) for each continent intra- and intervariation of export items, (2) access to deep knowledge about the characteristics of the Norway&#x2019;s export items revenue, (3) quantifying the economic importance and sustainability of export items within continents; and finally (4) comparing a given export item economic importance across continents. The results suggest the following important policy implications for Norway. First, Europe is the most important trade partner for Norway. In fact, 81.5&#x25; of Norwegian export items are transported to Europe. Second, there is a structural shift in Norwegian exports from North and Central America to Asia and Oceania. Third, the new importance of Asia and Oceania is also emphasized by the 85&#x25; increase in export revenues over the period 1988&#x2013;2012. The trade pattern has changed and trade policy must change accordingly. The analysis has shown that in 2012 there are two important export continents for Norway: Europe and Asia and Oceania.

Yohannes Yebabe Tesfay

Per Bjarte Solibakke

Econometric Modelling of the Variations of Norway&#x2019;s Export Trade across Continents and over Time: The Two-Stage Non-Full Rank Hierarchical Linear Econometric Model Approach

This paper discusses an extended version of the Hawkins and Simon condition which constitutes a synthetic formulation of the mathematical properties that viable economies must satisfy in single production models. The new version is implicit in the economic interpretations offered by them of the Hawkins and Simon condition, once a correction is introduced in one of those interpretations. Moreover, the paper details the meaning of the extended version following the interpretation of the original version proposed by Dorfman, Samuelson, and Solow. It also introduces a characteristic property of indecomposable matrices that has not previously been published.

Alberto Ben&#xed;tez S&#xe1;nchez

An Extension of the Hawkins and Simon Condition Characterizing Viable Techniques

This paper investigates the spending and current-account effects of a permanent terms-of-trade change in a dynamic small open economy facing an imperfect world capital market, where the households&#x2019; subjective discount rate is a function of savings. Under the assumption that the bond holdings are measured in terms of home goods, it is shown that when the discount rate is a decreasing function of savings, there does not necessarily exist a stable state; however, when the discount rate is an increasing function of savings, a saddle-path stable steady state comes into existence and the Harberger-Laursen-Metzler effect does not exist unambiguously; that is, an unanticipated permanent terms-of-trade deterioration leads to a cut in aggregate expenditure and a current-account surplus. The short-run effects obtained by the technique by Judd (1985, 1987) and Zou (1997) are consistent with the results from the long-run analysis and diagrammatic analysis.

Deng-Shan Wang

Miao Jin

Nonexistence of Harberger-Laursen-Metzler Effect with Endogenous Time Preference in an Imperfect Capital Market

This paper presents a classroom experiment on pricing strategies available to monopolists. Each student makes production decisions as a monopolist during the experiment, learning from his/her own experiences what it means to be a price searcher. Full information is provided on cost conditions, while the demand function remains unknown to the participants. Given a sufficient number of periods, students will in principle be able to maximise their profits by applying a simple trial and error strategy. However, one of the objectives of the experiment is to demonstrate to students that search strategies based on economic principles are more efficient.

Korbinian von Blanckenburg

Milena Neubert

Monopoly Profit Maximization: Success and Economic Principles

Frequent occurrence of food safety incidents in recent years has made analyzing safety of agricultural product in view of contract theory become academic research focus. Based on incentive theory, in this paper we establish a static game under the condition of asymmetric information and analyze how the &#x201C;company + farmer&#x201D; contract is influenced by a complete quality tracing system composed of ex-ante inspection and ex-post traceability. Meanwhile, we find out that a complete quality tracing system can increase the safety level of agricultural product and that ex-ante inspection and ex-post traceability can replace each other in the process. Finally, we put forward policy suggestion for the policy-maker to solve the problem of food safety.

Jun Zhao

Bin Zhou

The Effect of Quality Tracing System on Safety of Agricultural Product

The leading indicator ability of yield spread for future output growth and inflation is tested for India. Using the yields on securities with maturities ten years and three months to construct yield spread, we study the predictive power of yield spread for output growth and inflation. Our results based on regression of future inflation and output on yield spreads indicate that there is no information in the yield spread about future economic activity and inflation in India. Further, the predictive power of yield spread is analyzed over different quantiles of inflation and output growth using quantile regression; we find that there is again no evidence of predictive information in the yield spreads. Using multiscale wavelet based regression, predictive power is however unveiled at higher time scales for output growth only.

Arif Billah Dar

Firdous Ahmad Shah

In Search of Leading Indicator Property of Yield Spread for India: An Approach Based on Quantile and Wavelet Regression

The purpose of this study is to propose a new economic index, namely, real national income average growth rate (RNIAGR), which measures the performance of economic growth with consideration for income distribution. This study also develops another new economic index, called five-scale real national income average growth rate (FSRNIAGR), which simplifies the calculation of RNIAGR. The merits of these new indexes are discussed to justify their efficacy. This paper also justifies the use of proposed index by showing that this index can actually measure the ordering of social welfare. To highlight the difference between this new index and the traditional ones, this paper compares the index with real economic growth rate using the data of Taiwan. In addition, this paper shows that when the real growth stagnates or even declines, this new index indicates that income distribution deteriorates.

Chien Wei Wu

Wei Zhan Hung

Real National Income Average Growth Rate: A Novel Economic Growth and Social Fair Evaluation Index

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