David K. Round

A Comparison of Diversifying and Nondiversifying Australian Industrial Firms

This paper examines corporate motives for diversification and compares the performance of diversifying and nondiversifying Australian industrial firms. No significant difference appears to exist in...

International Trends in Economics Degrees During the 1990s

Abstract Australia, Canada, Germany, and the United States experienced a substantial decline in undergraduate degrees in economics from 1992 through 1996, followed immediately by a modest recovery. This cycle does not conform to overall degree trends, shifts in the gender composition of undergraduate populations, or changing interests of female students in any of the four countries. There is no evidence that changes in the “price” of a degree to students, tightened marking standards or degree requirements, or changes in pedagogical methods caused the cycle. Jobs for economics graduates declined in the United States between 1988 and 1990 and thereafter recovered. With a two-year recognition lag, the pattern of employment prospects fits the U.S. slump in economics degrees perfectly. Unfortunately, employment patterns in the other three countries are inconsistent with the degree cycle. The explanation that fits the economic degree pattern best is interest in business education.

Business cycle transmission and interdependence between Japan and Australia

Abstract This paper investigates business cycle transmission and interdependence between Australia and Japan over the period 1961.1–1994.4. Vector autoregression (VAR) and vector error correction (VEC) models were constructed utilizing GDP/GNPs, producer prices, interest rates and money supplies. The model is tested for cointegration. Two cointegrating vectors are found, and a vector error correction (VEC) model is estimated. The coefficients and the F-tests of the VEC are used to measure the effect of one economy upon the other. Impulse responses from a VAR are examined for evidence of business cycle transmission, and recursive least squares estimates are used to check for structural change in the relationship. Figures are used to graphically demonstrate these relationships and have been collected in an appendix, which can be found at the end of the text. While the two countries engage in a close trading relationship, the two economies are found to be only somewhat interdependent in macroeconometric terms. Japan is found to transmit some of its business cycle fluctuations to Australia, but there is little reverse transmission.

Merger Impacts on Investor Expectations: An Event Study for Australia

Abstract In previous work, little evidence of share‐price response to Australian price‐fixing investigations was found. However, these investigations often involve a small part of a company’s operations and antitrust penalties have tended to be relatively small; in fact, some weak support was found for a greater response by investors when penalties were expected to be more significant. Mergers, on the other hand, clearly represent a much more significant event, and we would anticipate a clearer share‐price response both to announced mergers and to associated antitrust challenges. While such studies have been done in other countries (primarily for the US), we know of no prior research of this sort for Australia. In this paper we focus on a sample of about 50 mergers and acquisitions involving Australian companies from 1996 to 2003, examining the impact on share prices of the announcement of these mergers both on the firms involved and on rival firms. For those which were challenged by the Australian antitrust enforcers, we also consider the impact of the announcement of such a challenge.

The effect of domestic and foreign competition on performance in Australian manufacturing industries

Summary and ConclusionsThis study investigated the role of both domestic structural factors and tariff protection in explaining inter-industry differences in profitability in Australian manufacturing industries. At no stage did concentration have a significant effect on profitability at the four-digit level of analysis, in comparison to its observed significant positive effect at the three-digit level. Other structural factors appear to be more important in explaining inter-industry variations in profitability in Australia. The effective tariff rate was negatively associated with profitability, the relationship notably being more highly significant in those industries enjoying higher than average tariff protection. It is suggested that this negative relationship for Australia may be due to a similar phenomenon noted in relation to Canadian manufacturing, namely that tariff protection has led to the permanent creation of too many sub-optimal production units, resulting in lower efficiency and decreased profits. A reduction in the effective rate of tariff protection given to high cost Australian manufacturing industries may therefore yield greater efficiency, as well as at the same time permitting the possibility of increased potential and actual foreign competition.

The Economics Degree in Australia: Down but Not Out?

Before 1980, strong demand existed in Australia for the economics degree. Since then, competition from programs in business and management has increased. Student preferences have shifted from university and secondary economics. Economics enrollments have declined in both sectors. The authors analyze these trends and assess economic education publications by Australian economists.

The Influence of Gaming Expenditure on Crime Rates in South Australia: A Local Area Empirical Investigation

Although there has been much speculation about the possible links between gambling and crime rates, relevant quantitative evidence has been practically non-existent in Australia to date. This paper reports the results of research that utilised a model designed to investigate the potential relationship between electronic gaming machine expenditures and property (income-generating) crime rates reported to police in local areas in South Australia in 2002–2003. The research found that the higher the expenditures on gaming machines in a particular local area per adult, the higher the income-generating crime rate in that area. No such relationship was found between gaming machine expenditure and non-income-generating crime rates. However, further research is required before any policy-relevant conclusions can be drawn.

The 'three pillars of stagnation': challenges for air transport reform.

Various aspects of trade and investment in air transport services are regulated by a series of bilateral agreements in which rights of market access are exchanged. Industry commentators have identified this system and the associated national ownership rules as well as the prevailing attitude of competition authorities (on merger policy and on airport pricing) as the most important factors limiting adjustment in the international air transport industry. These ‘pillars of stagnation’ are examined here. Features of the bilateral agreements in aviation that are similar to those of other preferential trading agreements are noted and linked to the slow pace of policy reform in this industry. The three ‘pillars’ are not independent, and effective liberalization of trade and investment in air transport services depends on complementary regulatory reform. Options are presented on ways in which these changes might be designed and introduced, and in what sequence that might be done. Air transport services are currently excluded from the WTOs General Agreement on Trade in Services (GATS), and an important enquiry is how multilateral commitments recorded in the GATS might support reform.

Magazine Subscription Discounts in Australia

The Australian magazine publishing industry is an extremely rivalrous oligopoly, with publishers competing through the constant introduction of new titles, give-aways, editorial content, paper quality, and the use of color, although price competition in the form of direct cutting of cover prices is rare. Magazine cover prices are well-known internationally for their “stickiness”, but subscription sales frequently offer readers a substantial saving over the cover price. This paper investigates the influences of several supply and demand factors on subscription rates, and concludes that there appear to be several systematic influences on subscription savings, including issue frequency, cover price, circulation and size of the publisher.

The power of two: squaring off with Australia's large supermarket chains*

The level and nature of competition in supermarket retailing in Australia has been hotly debated as a policy issue in recent times. The creeping acquisitions of smaller groups by Coles and Woolworths have led to several investigations amid claims that consumers will be disadvantaged by the growth of the two big chains. Yet little convincing evidence has been found to support these assertions. Although on occasions the big two may have used their power vertically to squeeze suppliers, consumers have experienced highly competitive retail markets. In this paper, it is argued that it is market conduct, not structure, that should be the prime focus of regulatory and policy interest, and that recent corporate activity may lead to a third force in supermarket retailing in Australia that could not only ensure continued competitiveness in the industry, but could also help to constrain the successful exercise of vertical market power by the two big chains. Accordingly, it is argued that intervention as a general policy in supermarket retailing would not be socially efficient, at least not until a wide range of objective and quantitative assessments have been carried out on the operation of the supermarket sector.