#5 January 2002 - Melbourne Institute News

ISSN 1442-9519

Print Post Approved PP381667/01204

Issue 5 January 2002

Brookings Institution Expert to Return for Opportunity and Prosperity Conference On 4 and 5 April 2002, the Melbourne Institute, in association with The Australian newspaper, will present a major national economic and social outlook conference at the University of Melbourne. As suggested by its title, Towards Opportunity and Prosperity, its focus will be forward looking and will address a broad range of policy issues crucial to Australia’s prosperity in coming years and decades.

Prominent international and Australian experts will join with leaders from politics, government, business, community groups and unions at the conference. One of the international experts will be Dr Gary Burtless of the Brookings Institution. Gary was one of the Melbourne Institute’s prestigious visitors in 2001, when he made a big impression on a range of audiences. First, he was the keynote speaker at our joint conference with the ANU, in Canberra in September, on Creating Jobs: the Role of Government. He followed this with addresses at the Melbourne Institute’s Business Economics Forums in Melbourne and Sydney, where the special topic was the OECD’s Report on the Job Network and related aspects of Australia’s labour market policy (see pages 4 and 5). His conference paper is being published in the March issue of our refereed journal, the Australian Economic Review, and his comments on the OECD report will feature in a policy forum in the same journal.

At the forthcoming Towards Opportunity and Prosperity Conference Gary will be one of our speakers in two sessions. In one he will provide an international perspective on the policy implications of an ageing population. In the other he will speak about the US experience of welfare reform as it has affected lone parents. He is an acknowledged expert on both topics. During his visit to Melbourne he will also be discussing the possibility of collaborative research with the Melbourne Institute.

Dr Gary Burtless of the Brookings Institution and Professor Robert Drago of Pennsylvania State University

Professor Robert Drago, an international expert on work and family issues from Pennsylvania State University and last year’s Downing Fellow at the University of Melbourne, will also be returning for the April conference.

Meanwhile, he has been collaborating with Melbourne Institute researchers, in the consideration of work and family issues in Australia, on a project in the Melbourne Institute’s social policy research agenda funded by the Department of Family and Community Services.

Another highlight of the April conference promises to be a session on globalisation and the Australian economy, in which the Governor of the Reserve Bank and the Secretary of the Treasury will be two of the speakers.

Other topics to be examined at the conference include: Australia’s productivity performance; inequality and joblessness; labour market reform; the role of science, technology and innovation; the environment and the Kyoto Protocol; and work and family issues, to name a few.

Melbourne Institute of Applied Economic and Social Research The University of Melbourne, Victoria 3010 Australia Phone: +61 3 8344 5330 Fax: +61 3 8344 5630 Email: melb.inst@iaesr.unimelb.edu.au WWW: http://www.melbourneinstitute.com  2002 The University of Melbourne, Melbourne Institute of Applied Economic nd Soci l Rese rch

Those wishing to take part in this high level gathering to set the agenda for Australia’s future can either enrol for the April conference now or register a no-obligation expression of interest so as to be kept informed of conference details as they evolve (see www.melbourneinstitute.com).

★★ Inside Stories ★★ •

Melbourne Institute enters 40th year. See page 3

•

Report on 2001 Conferences on Unemployment. See page 4

•

Report on Business Cycles Conference. See page 5

•

Intellectual Property Research Institute Established. See page 6

•

2001 Intellectual Property Scoreboard Released. See page 6

Hard Heads, Soft Hearts: Director’s Letter1 Now to the Policy Agenda In the aftermath of the election, attention is now turning to the policy agenda. It is to be hoped that the new Coalition Government will identify the key issues that need to be addressed for the short- and long-term benefit of Australia. At the same time, Labor under Simon Crean is under pressure to find a new and convincing policy agenda that will make them a credible alternative government.

Towards Opportunity and Prosperity Conference, 4–5 April 2002 It is in this environment that the Melbourne Institute is organising an Economic and Social Outlook Conference, jointly with The Australian newspaper, to be held on 4 and 5 April 2002. It is being titled Towards Opportunity and Prosperity. In this conference we will take stock of the economic and social environment, examining such issues as Australia’s productivity performance, trends and cause of inequality and joblessness, Australia’s demographic outlook and ageing population, and Australia’s performance on environmental issues. We will then go on to confront many of the major policy issues that need to be addressed if government is going to effectively promote both opportunity and prosperity for Australians.

Jobs and Education Some of the important issues were identified in the election campaign. But a compelling policy agenda is still to emerge. Two of the main issues are jobs and education. In a recent article in The Australian newspaper I argued that we need to produce a more efficient and equitable short-, medium- and long-term plan for the employment and development of Australia’s human capital.

On the one hand, we want a strategy that will ‘back Australia’s ability’ and allow our children to realise their potential and for Australia to be a ‘clever country’ or a ‘knowledge nation’. This is a medium-term to long-term policy agenda to help achieve sustained economic growth and afford greater opportunity to a larger number of Australians to develop their skills and be paid higher wages than would otherwise be possible.

To do this will require a combination of more public investment in education, especially (but 1. This letter is an extended version of Peter Dawkins’s opinion page article in The Australian newspaper on 27 November.

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not exclusively) in pre-school and primary school education, and more private investment in human capital, especially at the post-secondary level. It will also require greater diversity in education provision to meet diverse needs and a more highly paid, ambitious, productive and accountable teaching profession. A more deregulated higher education sector appears to be needed. This would involve greater variety of fees payable for a greater variety of courses, alongside a subsidy and loan system (building on the current HECS arrangements) that helps to ensure that a more efficient and dynamic system and the encouragement of excellence can be coupled with more equitable outcomes.

On the other hand, as well as developing aspirational policies aimed at ensuring high and growing wages for our younger generation, we have to recognise that we have a major problem with the high level of joblessness, which is unduly concentrated in jobless households. Research that I have undertaken with Paul Gregg (from the University of Bristol) and one of our research fellows, Rosanna Scutella, has shown that about one in six households with at least one person of ‘working age’ possesses no jobs. Almost one in six children live in jobless households. While the medium- to long-run education agenda outlined above can provide some help to some of these families, for example in enhanced early childhood education in disadvantaged areas, there is an urgent need to get jobless households into jobs.

We have to be realistic that for many of these households we cannot be too ambitious about the skills that will be required in such jobs.

Those in jobless households are generally not in a position to land high skilled jobs or to command high wages. Indeed in getting jobless households into jobs, many of the jobs will have to have low wage costs attached to them for employers to have the incentive to hire the jobless workers.

We will need to provide supplements to low wages through the tax and social security system to make a big dent in the number of jobless households while improving the living standards of these households. A carefully designed mixture of welfare reform and labour market reform is needed to improve the incentive for employers to hire jobless workers and to provide the rewards to jobless workers from obtaining employment, as well as helpful employment services which address the individual’s needs and the associated administrative requirements of those that we seek to help.

Soon after the 1998 election, I was one of the so-called ‘five economists’ who recommended this sort of approach to unemployment and joblessness. We argued that without reform of this kind it would be hard to get unemployment down much below seven per cent on a sustained basis, just via economic growth. With the unemployment rate still around seven per cent, this argument remains quite compelling. While some elements of our plan are showing signs of being adopted in the welfare reform process, a more comprehensive approach is needed. In particular, while the employed are pleased that their real wages have risen significantly, rising real costs of hiring low skilled workers is making it harder for many of the jobless to ‘break in’.

We want full employment and high wages for as many as possible. In the long run our education system will be a major factor in helping to create such conditions. This requires the development of a compelling education policy agenda. At the same time we do not want to leave behind our unemployed workers and jobless families. Not only will the jobless suffer, but so will their children.

Such a hard-headed but soft-hearted approach to employment and education, in my view, is a major part of what is needed to promote prosperity and opportunity in Australia. My view, however, is just one that will receive exposure at this exciting conference which will seek to explore the various ways in which policy development can help promote opportunity and prosperity. Welfare reform, health policy, population policy, work and family, labour market reform, other microeconomic reform issues, and macroeconomic policy are amongst the other areas that will be canvassed.

20 December 2001

Professor Peter Dawkins Ronald Henderson Professor and Director

News on Staff and Other Developments Melbourne Institute Enters 40th Year The 40th anniversary of the establishment of the Melbourne Institute will be celebrated in less than a year’s time. The Melbourne Institute, which was formed in December 1962 under the leadership of Professor Ronald Henderson, was the first economics research institute in an Australian university. Various plans to celebrate this important milestone will be advertised during the first half of 2002.

Melbourne Institute Director Awarded Fellowships The Melbourne Institute Director, Peter Dawkins, was recently elected as a Fellow of the Academy of the Social Sciences of Australia (FASSA). This award was made in recognition of his important contribution to social sciences in Australia and the role of those conferred this title is to help further the goals of the social sciences.

The award was conferred at the annual FASSA conference dinner on 11 November.

Professor Peter Dawkins (centre) receiving his testamur as a Fellow of the Academy of the Social Sciences from Professor Faye Gale (left) and Professor Leon Mann (right), the President of the Academy

Peter Dawkins was also recently nominated and accepted as a Fellow of the Institute of Public Administration in Victoria (FIPA (Vic)). This title is awarded to those regarded as having made an important contribution to public policy in Victoria and this group provides an important network for those involved in public policy.

Mark Wooden Appointed to International Labour Economists Network In October 2001 Mark Wooden was invited to become a Research Fellow of the IZA (the Insti-

tute for the Study of Labour), an international research centre in labour economics based at Bonn University in Germany. He now joins a long list of other luminaries in the field, including Orley Ashenfelter, Olivier Blanchard, Dan Hamermesh, James Heckman, Alan Krueger, Robert LaLonde and Marc Nerlove.

Key Role for Melbourne Institute in New Intellectual Property Research Institute The Federal Minister for Science, Mr Nick Minchin, in October announced that the University of Melbourne was the successful bidder for $4 million of Federal Government funding to establish a national centre for intellectual property research. Melbourne Institute Director Peter Dawkins, representing the Faculty of Economics (which along with the Faculty of Law and the Melbourne Business School is one of the three faculties that will create the new centre), coordinated the University of Melbourne bid.

The Intellectual Property Research Institute of Australia (IPRIA), the first Australian national centre in this field, will undertake a range of research and analysis on intellectual property issues to support high-quality policy development by government. According to Peter Dawkins, modern developments in information technology and biotechnology pose considerable challenges in intellectual property protection, management and exploitation, and have become major policy issues around the world.

The Inaugural Director of the centre, intellectual property law expert Associate Professor Andrew Christie, will be joined by three Assistant Directors, one from each of the three participating faculties. The Melbourne Institute’s Elizabeth Webster has been appointed as one of the Associate Directors and will be employed half time in the new centre.

Elizabeth Webster, Senior Research Fellow, appointed as Associate Director of the Intellectual Property Research Institute of Australia

Tim Fry joins Melbourne Institute Associate Professor Tim Fry will join the Melbourne Institute as a Principal Fellow in January.

Tim has a PhD in econometrics from the University of Manchester and was most recently employed as a Senior Lecturer at Monash University. Tim Fry Tim’s particular area of research interest has been in applying econometric techniques to problems in microeconomics, broadly defined.

MITTS Model Launched In April and again in August Professor Alan Duncan from the University of Nottingham visited the Melbourne Institute for two weeks, working on a range of projects associated with the Melbourne Institute Tax and Transfer Simulator (MITTS) Alan Duncan the building of which he led in association with Professor John Creedy. Professor Duncan is a Professorial Fellow of the Melbourne Institute. His research interests lie in the field of welfare program evaluation; the analysis of work incentives; static and behavioural tax microsimulation; econometric models of labour markets and welfare program participation; modelling childcare use and the impact of childcare policies; and poverty.

During his August visit, the MITTS model was formally launched in Canberra at an event organised by the Department of Family and Community Services. MITTS is designed to analyse the effects of changes in tax or social security arrangements on government budgets and the distribution of income, taking into account the behaviour (labour supply) effects of such (continued on page 7)

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Labour, Social and Fiscal Studies Household, Income and Labour Dynamics in Australia (HILDA)

Unemployment Conference on ARC Linkage Project

On 16–17 August the Melbourne Institute hosted As reported in earlier Newsletters, the Mela conference on unemployment in Melbourne. bourne Institute and our partners in the HouseThe conference considered work in progress on hold Income and Labour Dynamics in Australia an ARC Linkage Project in association with the (HILDA) survey are conducting one of the most comprehensive long-term studies into Australian households ever undertaken in Australia, funded by the Department of Family and Community Services.

Under the leadership of Mark Wooden the project is progressing well. Stage 1, involving development and refinement of the survey content and pilot testing of the draft questionnaire by AC Nielsen Pty Ltd (who won the tender to undertake the survey), has been completed.

Stage 2, which involves three HILDA Core Team: Nicole Watson, Mark Wooden and Simon Freidin waves of data collection, is underDepartment of Family and Community Services, way and all indications are that the HILDA survey DEWRSB and the Productivity Commission. is progressing well. Wave 1 of the data collection Questions addressed included: the determicommenced in September and as of 30 Novemnants of the ‘speed limits’ that constrain ecober there were over 7264 responding housenomic and employment growth; how the level of holds and at this stage we are hopeful of achieving employment and unemployment are affected by a 68 per cent response rate. Early returns also productivity shocks, wages and fiscal and monesuggest response rates for the self-completion tary policy; and the impact of welfare reform on component in excess of 90 per cent. Further, the labour supply, employment and unemployment. high incidence of missing income data observed Guest speakers included Professor Dan in the pilot appears no longer to be a problem.

Hamermesh from the University of Texas; ProWhile the fieldwork for Wave 1 was not comfessor Richard Jackman from the London School pleted until end-December, design for Wave 2 of Economics; and Professor Alan Duncan from has been underway since October. Data collecthe University of Nottingham. Other speakers intion for Wave 2 is expected to commence in Sepcluded Dr Mardi Dungey and Professor Bob Gretember 2002, and for Wave 3 in September gory from the ANU; Professor Peter Dixon from 2003. (For more information see the HILDA Monash; Melbourne Institute Adjunct Professors website at http:melbourneinstitute.com/hilda/.)

Jeff Borland and John Freebairn of the University of Melbourne; and Don Harding and Peter SumFaCS Research Contract mers from the Melbourne Institute.

The project on which this conference was As part of the Melbourne Institute’s Social Policy based is a joint project of the Labour, Social and Research Contract, sponsored by the DepartFiscal Studies Program and the Business Cycles ment of Family and Community Services (FaCS), and Forecasting Program of the Melbourne Inresearch has been undertaken on approximately stitute. In addition, it involves a number of econ20 projects related to the following broad study omists from the Economics Department of the streams: empirical studies of the interaction beUniversity of Melbourne. tween the labour market and the social security system; economic and social analysis of the famJoint Melbourne Institute – ANU ily and communities; and supply of and demand Conference on Creating Jobs for income security: behavioural policy modelling. A number of presentations were made on The Melbourne Institute participated in a consome of the projects at a one-day seminar at ference on Creating Jobs and the Role of GovFaCS in December.

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ernment at the ANU in Canberra in September.

The keynote speaker at this conference was Dr Gary Burtless from the Brookings Institution.

Also contributing was Dr Mardi Dungey from Monash University, the discussant of whose paper was Peter Summers from the Melbourne Institute. Melbourne Institute Director Peter Dawkins also presented a paper at this conference about the so-called ‘Five Economist’s Plan’ of which he was a participant in 1998.

Elizabeth Webster from the Melbourne Institute and Mike Dockery from Curtin University presented a joint paper at the conference that addressed the growing problem of people who have spent a large part of their working lives without a job. According to their findings, the incidence of very long-term unemployment has risen by 1 per cent per annum since the late 1970s. However, Australian labour market programs were not targeted at this group until the introduction of the Job Compact in 1994. Despite concerted active measures taken since then, along with highly favourable growth conditions, there remain nearly 100,000 people in Australia who have been unemployed for over two years. The majority of these people have been without work for a large portion of their working lives.

There is broad consensus among existing empirical studies that the net effects of programs to help the work-deprived are either small or very small. Despite such programs, not a great deal has been learned about what works and why. An initial analysis identifies five different clusters of work-deprived individuals. Policy suggestions include more targeted assistance for these clusters and enduring job creation programs, combined with enhanced evaluation efforts in order to guide future policy.

Forums on the Job Network Dr Gary Burtless also participated in the September Melbourne Institute Business Economics Forums in Melbourne and Sydney. The special subject of discussion at these meetings, as well as at the Public Economics Forum in Canberra, was the OECD’s recently released report entitled Innovations in Labour Market Policies: The Australian Way. Dr Burtless was one of the key discussants of this report, along with Dr Peter Shergold (Department of Employment and Workplace Relations) and Professor Bob Gregory (ANU) and Peter Dawkins. (See page 5.)

Business Cycles and Forecasting Business Cycles Conference The act of economic forecasting, which walks a fine line between art and science at the best of times, has become both more uncertain and more vital since September 11.

The terrorist attacks, coupled with the already-weak economic health of the United States and most industrialised countries, served to underscore the theme of the recent Melbourne Institute conference on International Business Cycles and the Impact on Australia, sponsored by the Macroeconomics and Business Cycles Research Program. The conference was held on 8– 9 November at the Melbourne Business School and featured presentations in four main areas: international transmission of business cycles, measuring and monitoring business cycles, issues related to the practical conduct of monetary policy, and coincident and leading indicators.

The keynote speaker was Dr Barry Hughes of Credit Suisse Asset Management. Drawing on his considerable experience as an academic economist, an advisor in the Keating government, and now a consultant, Dr Hughes warned of the dangers of what he called ‘period-specific policy rules of thumb’. By this he meant the reliance of economic policy upon relationships that appear to hold true over many years, but which do not necessarily represent a fundamental structure.

As examples, Dr Hughes pointed to the almost complete focus on monetary policy as a means of controlling (or causing) business cycles and to the nature of the strong correlation between Australian and US GDP growth rates. Bill Evans, General Manager Economics Westpac, was the discussant of Dr Hughes’s presentation.

Dr Barry Hughes and Mr Bill Evans, speakers at the Business Cycles Conference

The conference also featured a symposium on the economic outlook since September 11. Mr Alan Oster of the National Australia Bank and Peter Summers both gave their assessment of the likely impact of the terrorist attacks, how much they had (or had not) contributed to the down-

turn in the United States, and possible areas of risk to their baseline forecasts. Both forecasters thought the most likely scenario was a fairly rapid recovery in the United States, fuelled in part by stimulatory policy settings.

Business Economics Forums In addition to the launch of the leading indexes of employment and the usual update on the economic outlook, the 10 and 12 September Business Economics Forums in Melbourne and Sydney had as their special focus a discussion of the OECD’s recently released report entitled Innovations in Labour Market Policies: The Australian Way. Key discussants were Dr Peter Shergold (Secretary, Department of Employment, Workplace Relations and Small Business), Dr Gary Burtless (Brookings Institution, USA), and Peter Dawkins.

Mr Alan Oster, Mr Tony Cole and the Melbourne Institute’s Peter Summers at the November Business Economics Forum in Melbourne

The November round of Business Economics Forums were held in Melbourne on 27 November and in Sydney on 29 November. At the Melbourne Forums Peter Summers presented the Melbourne Institute’s latest forecasts and Mr Alan Oster, Chief Economist of the National Australia Bank, commented on these. The special topic addressed by Jonathan Kelley (ANU and Melbourne Institute) was Economic and Social Issues for Business and Government. He presented findings from a number of social surveys on issues such as public versus private schools, privatisation and free trade. In addition to the usual presentation on the economy by Peter Summers, the Sydney Forum had as its special topic Downsizing: Is it Working for Australia?

Key discussants were Mariah Evans and Peter Dawkins from the Melbourne Institute.

tute’s macroeconomic forecasting model of the Australian and US economies and this is being made available to those who wish to purchase this service. The value of this model is that it allows users to analyse various economic scenarios of their own devising (for example, which make different assumptions about interest rates); to vary the contemporary and long-term relationship between variables; and to produce associated macroeconomic economic forecasts.

Annual subscription to the model also includes model updates as they occur as well as assistance and support from Melbourne Institute staff when this is required.

New Leading Indexes of Employment Another recent addition to the stable of products produced by the Business Cycles and Forecasting Program of the Melbourne Institute are the leading indexes of employment, which were launched at the 10 September Business Economics Forum in Melbourne.

The Melbourne Institute Leading Indexes of Employment have been designed to forecast annual average trend employment growth in six months’ time. The forecasts are expressed as a percentile of the historical distribution of employment growth rates, and range from 0 to 100.

A value of 0 (100) means that employment growth six months from now is predicted to be the slowest (fastest) rate observed since the beginning of the available data in February 1980. A value of 50 means that employment growth is forecast to be at its median value (that is, the forecast lies in the middle of the range of observed growth rates).

The major advantage of computing the indexes in this way is that a given employment growth rate, say 3 per cent, could be a relatively positive or negative outcome depending on the category of employment and the State. For example, 3 per cent annual growth is very high by historical standards for male full-time employment in Australia. Between February 1980 and December 1999, this sector of the labour market grew faster than this only 6 per cent of the time (about 14 months out of 240). On the other hand, growth in female part-time employment in Western Australia exceeded 3 per cent in roughly 96 out of the same 240 months, or about 40 per cent of the time. Thus, the indexes are

Forecasting Model for ‘Sale’ Peter Summers and Michael Chua have created a demonstration version of the Melbourne Insti-

(continued on page 7)

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Enterprise Performance R&D and Intellectual Property Scoreboard 2001 The 2001 edition of the R&D and Intellectual Property Scoreboard was released in early November. For the second year in a row ResMed is at the top of the ‘Innovation Index’, which incorporates a company’s R&D, patent, trademark and design applications into a single figure. A list of the top ten Australian businesses is shown in the table below.

advertising), innovation, productivity and profitability in Australian firms using a four-year balanced panel from the Australian Bureau of Statistics Business Longitudinal Survey. Their results (yet to be published) indicate that R&D, intangible assets and advertising are complementary discretionary investments, and expenditure on tangible assets is heavily reliant on the profitability of the firm. The likelihood of a firm innovating depends on investment in intangible assets in the previous year and whether it is uti-

Innovation Index—Top 10 Australian Businesses R&D 1999/00 ($’000s)

Patents 1998

Designs 1998

Trademarks 1998

Company name

Index

1.

ResMed Holdings Limited

100

10,702

26

3

8

2.

Cochlear Limited

63

20,207

7

0

0

3.

Keycorp Limited

48

20,616

2

0

5

4.

Ericsson Australia Pty Ltd

35

81,379

11

0

0

5.

Varian Holdings (Australia) Pty Limited

30

8,281

2

0

0

6.

Blackmores Limited

30

259

1

0

11

7.

AMRAD Corporation Limited

28

22,323

0

0

0

8.

Orbital Engine Corporation Limited

25

13,630

7

0

0

9.

Ci Technologies Group Limited

10. Solution 6 Holdings Limited

24

4,255

0

0

0

20

46,454

0

0

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The Financial Performance of Government Trading Enterprises During the 1990s several measures were introduced which aimed to improve the efficiency and financial performance of government trading enterprises in Australia. Joanne Loundes has undertaken a study to discover whether there has been any change in the financial performance of government trading enterprises operating in electricity, gas, water, railways and ports industries as a result of the introduction of these measures. Data were obtained from the Productivity Commission and IBISWorld. It was found that there was no noticeable enhancement in the financial performance of most of these businesses as a result of these measures, although railways showed a slight improvement from a low base (see Working Paper 5/01 entitled The Financial Performance of Australian Government Trading Enterprises Pre- and PostReform).

lising a business strategy which incorporates a business plan and comparison with other firms.

Productivity changes predominantly with past values of itself and factor inputs (including R&D). Profitability is shown to be influenced by past profitability as well as productivity changes.

Management and Industrial Relations in the 21st Century The first wave of our enterprise survey, which is being conducted as part of the project on Effects of Workplace Reform on Enterprise Performance, has begun and so far the response has been positive. Anne-Marie Skegg and Anita O’Hearn were exceedingly busy calling senior managers to ascertain who would be willing to fill out the survey and, of 1000 businesses called, around 800 have agreed to have a survey posted to them. This survey is part of an ongoing ARC SPIRT-funded project in association with the BCA, CEDA and IBIS, which is headed by Mark Wooden.

The Dynamic Performance of Australian Enterprises

Benchmarking Profitability

Joanne Loundes and Professor Derek Bosworth (Manchester School of Management) have recently investigated the interaction of discretionary investments (R&D, capital investment and

An important issue for shareholders and company managers is how well a firm is performing relative to its competitors. There are several measures of such firm performance and one of

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the most favoured is profitability. In their paper entitled Benchmarking Profitability (yet to be published), Peter Dawkins, Simon Feeny and Mark Harris provide a framework for benchmarking firms’ performance with regard to their profitability, and apply the technique to a sample of large Australian firms.

Segmented Skilled and Unskilled Labour Markets Lei Lei Song and Elizabeth Webster have tested whether there is any evidence of two distinct Beveridge curves for the skilled and unskilled aggregate labour markets. Their results (see Working Paper 14/01) support the dualism hypothesis and specifically find that the skilled labour segment is more efficient at matching workers with jobs and/or has lower turnover rates than the unskilled segment. Lower turnover rates may also be indicative of a better prior match. They also found that other shift variables, such as the replacement rate, the incidence of long-term unemployment, the immigration rate and the market circumstances in the other segment, had differential effects on each curve.

The Working Holiday Maker Scheme and the Australian Labour Market Glenys Harding and Elizabeth Webster have recently completed a two-year study on the labour market effects of working holiday makers. Their findings are that each working holiday maker currently undertakes an average of 2.87 jobs per stay at an average of 1.96 months per job, which implies 0.511 full-year jobs per person. However, Harding and Webster estimated that if the scheme did not exist, only a fraction of these (continued on page 7)

Elizabeth Webster and Glenys Harding

Melbourne Institute Visitors (continued) (continued from page 3) changes. Alan Duncan will be returning in 2002, first as a speaker at the April Towards Opportunity and Prosperity Conference and again in between August and October when he will be the 2002 Downing Fellow.

Other Visitors to the Melbourne Institute The Melbourne Institute has been fortunate to receive a number of eminent visitors who have made important contributions to a range of ongoing research projects in recent months.

In June last year, Professor Derek Bosworth from the Manchester School of Management spent a week at the Institute collaborating with researchers in the Enterprise Performance Re-

Laurie Hunter

search Program, particularly in the field of the economics of innovation.

In June and July the Melbourne Institute welcomed Professor Robert Drago from Pennsylvania State University. Professor Drago was the 15th Downing Fellow of the Faculty of Economics and Commerce and gave the annual Downing address on 19 June on the subject of Economics, Feminism, and Conflicts between Work and Family.

Also visiting the Melbourne Institute in August were Professor Richard Jackman of the London School of Economics and Professor Dan Hamermesh from the University of Texas. Both visitors provided research advice to the Melbourne Institute as associate investigators in an Australian Research Council project on unemployment. Both participated in the Melbourne Institute conference on unemployment held in mid August (see page 4).

In September Dr Gary Burtless from the Brookings Institution visited the Melbourne Institute and was the keynote speaker at a joint Melbourne Institute – ANU conference on the jobs network, as well as participating in the Business Economics Forums in Melbourne and Sydney (see page 4). Dr Burtless is a Senior Fellow in the Economic Studies Program of the Brookings Institution and his areas of expertise include income distribution, labour markets, social security, poverty, demographics and education and training.

A recent visitor to the Melbourne Institute was Professor Laurie Hunter from the University of Glasgow. Professor Hunter worked collaboratively with members of the Enterprise Performance team on the relationship between knowledge-intensive workers and the organisation and productivity of the workplace. During his visit he also worked with staff from the Department of Management and Deakin University on related projects.

Also recently at the Melbourne Institute (until the end of December) was Mr Paul Gregg from the University of Bristol, where he is a Reader in the Economics Department. Paul is visiting as part of his collaboration with Peter Dawkins and Rosanna Scutella in some projects for the Department of Family and Community Services social policy contract on jobless families.

Paul Gregg

Stories Continued from Pages 5 and 6 (continued from page 5)

(continued from page 6)

computed in such a way as to reflect the fact that labour market conditions vary over time, across States, by employment status (full- or part-time) and by gender.

Separate indexes are computed for each of four employment categories: male full-time employment, female full-time employment, male part-time employment, and female part-time employment. These indexes are provided for Australia and for each of the six States.

At the present time the Melbourne Institute is seeking a sponsor to facilitate the regular publication and sale of these indexes. For more information about these new indexes, see the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends 3.01.

jobs would have been taken by long-term unemployed Australian youth. About three-quarters of low skill casual jobs are taken by full-time students and mature age women. Only one-quarter of low skill casual jobs are taken by people who are similar in age group to unemployed youth and are not students.

However, working holiday makers were also found to contribute towards demand and thus local employment. On average, working holiday makers spent $16,314 on the local economy.

Harding and Webster estimated that the total employment generated per working holiday maker was 0.613 full year jobs.

In sum, while 0.511 Australians are displaced in employment by each working holiday maker

on average, 0.613 Australians gain a job through their total spending. Accordingly, the net impact of each working holiday maker on average is an additional 0.102 full year jobs. Most jobs were created in the same tourism and hospitality industries where working holiday makers work.

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Melbourne Institute Publications Journals The Australian Economic Review (Australia’s leading economic policy journal; quarterly) Australian Social Monitor (4 issues per year) Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends Macroeconomic and Social Indicators Westpac – Melbourne Institute Indexes of Economic Activity (monthly) Westpac – Melbourne Institute Survey of Consumer Sentiment (monthly) Melbourne Institute Survey of Consumer Inflationary Expectations (Sponsored by the Reserve Bank; monthly) Westpac – Melbourne Institute Survey of Consumer Sentiment: NSW, Vic., Qld, WA (quarterly) ING – Melbourne Institute Household Saving Report (quarterly) Melbourne Institute Wages Report (quarterly) Poverty Lines: Australia (quarterly) Recent Working Papers Most of our working papers can be downloaded from the Melbourne Institute website. A list of the most recent working papers follows: 5/01 The Financial Performance of Australian Government Trading Enterprises Pre- and Post-Reform by Joanne Loundes 6/01 Simulating the Behavioural Effects of Welfare Reforms among Sole Parents in Australia

by Alan Duncan and Mark N. Harris

7/01 Innovation and Performance: Benchmarking Australian Firms

by Simon Feeny and Mark Rogers 8/01 Enterprise Bargaining and Productivity: Evidence from the Business Longitudinal Survey by Yi-Ping Tseng and Mark Wooden 9/01 Measuring Welfare Changes with Nonlinear Budget Constraints in Continuous and Discrete Hours Labour Supply Models

by John Creedy and Guyonne Kalb 10/01 The Effects of Flattening the Effective Marginal Rate Structure in Australia: Policy Simulations Using the Melbourne Institute Tax and Transfer Simulator by John Creedy, Guyonne Kalb and Hsein Kew 11/01 The Revenue Elasticity of Taxes in the UK by John Creedy and Norman Gemmell 12/01 The Negative Inflation-Growth Effect: Theory and Evidence by Mark N. Harris, Max Gillman and László Mátyás 13/01 Delinquency and Gender

by Guyonne Kalb and Jenny Williams 14/01 How Segmented Are Skilled and Unskilled Labour Markets: The Case of Beveridge Curves by Lei Lei Song and Elizabeth Webster 15/01 Aggregating Labour Supply and Feedback Effects in Microsimulation

by John Creedy and Alan Duncan 16/01 The Melbourne Institute Tax and Transfer Simulator (MITTS)

by John Creedy, Alan Duncan, Guyonne Kalb and Hsein Kew 17/01 The Contribution of Economic

Indicator Analysis to Understanding and Forecasting Business Cycles

by Ernst A. Boehm 18/01 The Importance of Pecuniary and Non-Pecuniary Rewards in Job Choice

by Elizabeth Webster and Thea Bainger 19/01 Policy Options to Reduce Unemployment: TRYM Simulations

by Lei Lei Song, John Freebairn and Don Harding 20/01 Modelling Firm Innovation using Panel Probit Estimators by Mark N. Harris, Mark Rogers and Anthony Siouclis Books, Monographs, Reports Melbourne Institute Annual Report and Outlook How Big Business Performs: Private Performance and Public Policy (contact Allen & Unwin) R&D and Intellectual Property Scoreboard 2001: Benchmarking Innovation in Australian Enterprises The Contours of Restructuring and Downsizing in Australia Downsizing: Is it Working for Australia?

Policy Implications of the Ageing of Australia’s Population (contact the Productivity Commission) The Economics of Intangible Investment (contact Edward Elgar) For further information or a copy of the publications brochure please contact Lara Hammond on (03) 8344 3701.

Melbourne Institute Business and Public Economics Forums The Melbourne Institute operates three Forums. The Business Economics Forum (Melbourne) and the Business Economics Forum (Sydney) focus on the economic outlook and a range of special economic topics. The Public Economics Forum (Canberra) is oriented towards public policy.

Three levels of membership are available: Gold, Associate and Individual. All memberships include attendance at the quarterly breakfast/luncheon Forums and a year’s sub-

scription to the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends. Additional benefits that can be added to the basic package include: • publications from the extensive catalogue produced by the Melbourne Institute • discount registration at Melbourne Institute public conferences • access to consultancy by researchers of the Melbourne Institute • other benefits negotiable.

Attendance at the quarterly Forums is possible for non-members also. Those wishing to attend on a casual basis can enter their details on a mailing list via our website to receive invitations.

For further information on either the Melbourne Institute Business Economics Forums or the Melbourne Institute Public Economics Forum, please contact Karen Roe on (03) 8344 7885.

Enquiries relating to the Melbourne Institute may be directed to Melbourne Institute of Applied Economic and Social Research The University of Melbourne, Victoria 3010 Australia Phone: +61 3 8344 5330 Fax: +61 3 8344 5630 Email: melb.inst@iaesr.unimelb.edu.au For further information on the Melbourne Institute and its products and services, log on to http://www.melbourneinstitute.com

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