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Volume 14, Issue No. 2, August 2007
- Ulrich Kohli, Terms-of-Trade Changes, Real GDP, and Real Value Added in the Open Economy: Reassessing Hong Kong’s Growth Performance
- Hong Hwang and Chao-cheng Mai, Optimal Technology Subsidies vs Export Subsidies: A Strategic Approach
- Omar Al Farooque, Tony van Zijl, Keitha Dunstan and AKM Waresul Karim, Ownership Structure and Corporate Performance: Evidence from Bangladesh
- Shigemi Yabuuchi, Someday My Prince Will Come: Unemployment, Income Transfer and International Factor Movement
- Paul A. Griffin and David H. Lont, An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley
Terms-of-Trade Changes, Real GDP, and Real Value Added in the Open Economy: Reassessing Hong Kong’s Growth Performance
Ulrich Kohli
Swiss National Bank
Abstract
Real GDP underestimates the increase in real domestic value added when the terms of trade improve. An improvement in the terms of trade is similar to a technological advance, but the national accounts treat these two phenomena very differently. Given its extreme openness and the massive terms-of-trade improvements it has enjoyed over the past forty years Hong Kong makes for an interesting case study. We find that average growth has been underestimated by real GDP by approximately 0.4% per annum between 1961 and 2003. This study also innovates in its measurement of the effect of real-exchange-rate changes on real income.
JEL Classification: O11, O41, C43, F11
Keywords: Terms of trade, real exchange rate, real GDP, real GDI, real value added
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Optimal Technology Subsidies vs Export Subsidies: A Strategic Approach
Hong Hwanga and Chao-cheng Maib*
aNational Taiwan University and Academia Sinica
bTamkang University and Academia Sinica
Abstract
National governments, especially in developing countries, play a key role in certain international industries, particularly those high technology and high investment industries. By endogenizing the firm’s technology choice, this paper has developed a strategic approach to examine the economic effects of technology subsidy and/or export subsidy on the technology and output decisions. The main findings of this paper are as follows: (1) If the domestic government can prescribe only one policy to improve its competitiveness in the international market, then export subsidy is superior to technology subsidy. (2) It does not matter whether the technology and export subsidies are implemented simultaneously or sequentially – both policies can lead to the first-best solution: cost minimization in the technology choice and Stackelberg leader position in the export market. (3) To reach the cost-minimizing technology level, the tax revenue required is higher under sequential than that under simultaneous policy implementation.
JEL Classification: F12, F13
Keywords: Technology subsidy, export subsidy, strategic trade policy
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Ownership Structure and Corporate Performance: Evidence from Bangladeshs
Omar Al Farooquea*, Tony van Zijlb, Keitha Dunstanc and AKM Waresul Karimd
aUniversity of New England
b, c, dVictoria University of Wellingtona
Abstract
This paper models the corporate ownership and performance relationship in Bangladesh listed firms using a simultaneous equations approach. Consistent with contemporary literature a “reverse-way” causality relationship between the two is documented. Using an unbalanced pooled sample of 660 firm-years, our results suggest that ownership does not have a significant impact on performance (Tobin’s Q or ROA). However, performance does appear to have a significant negative impact on ownership. With few exceptions, other governance and control variables appear to have significant effects on both performance and ownership. These results imply that despite significant governance differences between Bangladesh and developed market economies there are strong similarities in “internal governance mechanisms” and the implications of agency theory.
JEL Classification: G32, G34
Keywords: Emerging markets, board ownership, financial performance, endogeneity, reverse-way causality
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Someday My Prince Will Come: Unemployment, Income Transfer and International Factor Movement
Shigemi Yabuuchi
Nagoya City University
Abstract
Unemployment has been observed in developed countries as well as developing countries. The unemployed in the developed countries can be characterized as being dependent because they have excessive expectations of their jobs and rely on others for a living. This type of unemployment has been increasing, particularly among the younger generation in industrialized countries, for example, Japan. On the other hand, there has been an extensive movement of labor among countries. Thus, this paper investigates the effects of international labor (as well as capital) movement on unemployment, particularly when there is income transfer to the unemployed workers.
JEL Classification: F16, J61, R13
Keywords: Unemployment, income transfer, international factor movement
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An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley
Paul A. Griffina and David H. Lontb*aUniversity of California
bUniversity of Otago
Abstract
This study analyzes audit fees following SOX, in particular, the residual increase in audit fees controlling for those factors predicted to change such fees but for the Act. We find significant relations between residual audit fees and incremental audit risk, audit effort, and auditor changes. These factors are noticeably more influential in the period following SOX that includes the implementation of section 404 on internal control. Our results imply that SOX most likely caused an increase in the auditing profession’s share of the risk of defective financial statements and client companies’ resources to audit a costlier accounting system.
JEL Classifications: K22, L80, M41, M42
Keywords: Sarbanes-Oxley, audit fees, SEC certification, section 404, internal control
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