The existence and magnitude of scale economies for firms has long been an important issue. Identifying and measuring the factors affecting scale relationships is, however, difficult since they encompass a wide range of interactions related to a broadly defined notion of Short run scale effects are due to substitution constrained by fixity of private capital; long run (internal) scale economies result from utilizing the technology embodied in existing capital more efficiently as production expands; and external scale effects arise from technological factors associated with industryor economy-wide capital accumulation, which increases input-effectiveness. A number of such external or shift factors have been identified in traditional productivity or endogenous growth models, most of which can be expressed in terms of an increase in the availability or effectiveness of either physical or human capital. These include regulations, public infrastructure, R&D, and changes in the composition and quality of the labour force and capital stock, in addition to the more generic notion of disembodied or exogenous technical change. A combination of these scale effects and internal scale economies drives observed fluctuations and growth of firms and industries. Untangling the complex interactions involved requires a model that explicitly incorporates the various scale factors. In this paper we begin to shed some light on these interactions and the resulting pattern of internal and external scale effects in U.S. manufacturing. First, we provide a theoretical structure that can be used to identify the external and internal effects embodied in observed cost-output relationships. We then apply this framework to data at different levels of aggregation -aggregating from the 4-digit manufacturing level to 2-digit and then to total manufacturing -to assess whether identifiable patterns or biases emerge in

This paper examines the interactions between the market place and the political arena from the perspective of improving our understanding of whether the market is a force for peace or a cause of war. Economists generally presume that, since the market is based on voluntary transactions, it stands as an alternative to war as a resource allocation mechanism. War is usually assumed to be exogenous to the system. This paper questions this assumption by suggesting that war may also be endogenous to the system. It examines how conflict mray arise from changes in the distribution of income, technological changes and rent-seeking activity. Trade in a perfectly competitive market is probably the best example of the market as a force for peace. Since no one will voluntarily engage in a transaction that will make him or her worse off, the market allocation mechanism must be a positive sum game, which increases social welfare. The military allocation mechanism, on the other hand, is either a zero sum game in which the victors gain at the expense of the vanquished or one in which the net change in social welfare is negative, with the total losses exceeding the gains of the victors. From this perspective, the mutual benefit of market transactions can be viewed as a force for peace. A perfectly functioning market economy would reach a Pareto optimum over time. At this point, welfare is maximized and no one can become better off without making someone else worse off. The positive sum game of the sub-optimal state is thus transformed into the zero sum game of the optimal one. We then can expect that the players, motivated by self-interest, will resort to extra-market activities, including force, to enhance their incomes. Ironically, the very success of the voluntary market allocation mechanism in maximizing welfare may spell its doom. In actuality, the above example is an unrealistic one, based on the assumptions of perfect competition and a static economy. In today's world of imperfect competition there is no certainty that trade is mutually

Recently, DuWors and Haines (1990) developed a new measure of brand loyalty based on event history analysis. They measure brand loyalty as the time until a consumer switches to another brand for the first time. This measure is an improvement since it can be applied for either static or timedependent loyalty. However, there are also problems. The measure does not consider competing-risks although their data contain multiple brands. More importantly, heterogeneity is not allowed for, which may lead to biased results and spurious state dependence (Heckman and Singer 1984). What appears as time-dependent loyalty may be an artifact due to aggregating consumers with heterogeneous purchase probabilities. In addition, they only consider the time until the first switch. This may provide a deceptive picture of loyalty if brand switching is frequent in a product category.

There is an extensive literature about the effect of an effective minimum wage on employment, and some literature on its effect on labour force participation. The contribution of this paper to the literature is three fold. First, while previous research estimated these effects separately, this paper estimates them within a simultaneous equations model. Demand and supply equations are formulated for competitive labour markets, and these structural equations are estimated simultaneously. Second, the probability of getting a job is introduced into the labour supply equation, and its effect on labour force participation is estimated. This follows Mincer (1976), who suggests that by ignoring it, the traditional analysis of minimum wage effects is deficient; the variable may be an important determinant of labour supply whenever there is excess supply in labour markets, and this is the case when the minimum wage is effective. This probability is likely to change as a result of a change in the effective minimum wage, affecting, in turn, labour force participation (at a given minimum wage). Third, most of the literature studies minimum wage effects on low wage groups, e.g. youth. However, economic theory suggests that labour substitutions (and spill-over effects) may affect the wages and labour demands and supplies of other groups. The paper follows studies like Schaafsma and Walsh (1983), and estimates the minimum-wage effect on several sex-age groups. The theoretical model is summarized in the next section. The third section discusses the statistical model and the variables. The fourth section deals with the data and the estimation procedures. The empirical results are summarized and discussed in the last section.

Issues relating to training have recently received considerable attention in Canada. In part this increased interest reflects the belief that the skills and knowledge of the labour force are more important today than they have been in the past. In addition, high levels of dislocation and adjustment have led to greater emphasis on 'active' labour market policies such as training and re-employment assistance and less emphasis on 'passive' income maintenance programs. This paper summarizes some key findings of an evaluation (Park et al., 1993) of several government-sponsored training programs carried out in Canada between 1988 and 1991. The study is unique in carrying out a comparative analysis of the training options available to UI claimants. Training for UI claimants can be provided under several labour market programs, and this study examines labour market outcomes for participants in five such programs: (1) The Feepayer option, under which claimants may receive UI benefits and are exempted from having to search for a job while taking training, although they or a third party must pay the cost of the training; (2) DIR clients, who are UI claimants who take part-time training without the formal sanction of the UI authorities and who may be permitted to remain eligible for Ul if the training does not interfere with job search; (3) Job Development, a program for the long term unemployed, defined as those who have been unenmployed for at least 24 weeks in the previous 30; (4) Job Entry, a program for women re-entering the labour force after an absence of at least three years, or for youths no longer required to attend school and with little labour market experience; and (5) Skill Shortages, a program which provides training in designated areas of current or anticipated occupational skill shortages.

Recent estimates of the size of the underground economy in Canada run from roughly 3 to 22 percent of GDP. This study finds that a more critical scrutiny of the monetary techniques used can narrow the range of uncertainty. Various monetary methodologies have been applied to Canada, most recently by Mirus, Smith and Karoleff (1994). The most plausible one from the viewpoint of economic theory is Tanzi's (1983) variant of the currency-ratio approach, which predicts currency demand based on tax rates. It is used in the present study. Granger causality testing for the one-year lagged effect of the change in tax rates on growth in currency implies that the probability of the tax rate being non-causal is 0.0000. Tanzi's methodology, which has been followed by other Canadian researchers, expresses currency as a fraction of some other monetary variable. In fact, M2 is an inappropriate scale variable, as currency is used for transactions purposes, whereas M2 contains substantial amounts that represent long-term wealth accumulation. A better alternative, first used for Canada by Spiro (1993), is consumer expenditure. Advances in financial technology are unlikely to be correlated with changes in consumer expenditure, implying that the estimated coefficient on consumer expenditure would be more likely to be unbiased. U.S. studies, such as Dotsey (1988), have also found that consumer expenditure or retail sales work better as the scale variable than personal income or total GDP.

Empirical studies of the influence of UJ generosity on unemployment rates face an ongoing problem with endogeneity of the UJ generosity variable. This occurs for two reasons. First, the replacement ratio will likely increase in a recession as the more remunerative but exposed jobs are laid off. Second, the ratio of the maximum duration of benefits to the minimum work requirement (a component of UJ generosity) will both increase in a recession and be higher in the high unemployment regions (see Osberg 1995). This issue can be nominally addressed by using lagged values of Ul generosity as instruments. However, with so much serial correlation in the time series data, this may not solve the problem. The purpose of this note is to estimate the impact of Ul generosity on provincial unemployment rate disparities while miminizing this problem. The crux of the issue is that the weighted standard deviation of unemployment rate disparities moves pro-cyclically, whereas Ul generosity moves counter-cyclically. When the standard deviation of unemployment rate disparities is the dependent variable and Ul generosity is an explanatory variable, any residual endogeneity of UJ generosity would tend to bias its coefficient in the negative direction. Thus, it should be harder to show a positive relation between Ul and unemployment rate disparities; but if we can show one, we should have more confidence in it.

The objective of this study is to analyze the sources of economic growth of ten Asian Pacific countries (APCs)--China, Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand--in conjunction with four industrialized Western countries (IWCs)--France, West Germany, United Kingdom and the United States--in the postwar period. In previous studies, Boskin and Lau (1990) and Kim and Lau (1994c) find, for the Group-of-Five (G-5) and the East Asian newly industrialized countries (NICs) respectively, that (1) all countries share the same aggregate metaproduction function in terms of efficiency-equivalent units and (2) technical progress can be represented in all countries as purely capitalaugmenting. However, Kim and Lau (1994c) also find that there has been no measured technical progress in the East Asian NICs, despite their much higher rates of economic growth. The questions of interest in this study are: (1) Does the same aggregate meta-production function that applies to the G5 countries and the East Asian NICs also apply to other APCs? (2) Does the finding of absence of technical progress hold for all the other APCs except Japan? and (3) What is the relative importance of the different sources of economic growth for the APCs?

Grain, especially wheat and barley, make up more than half of Canadian export sales to China, and that country is the largest single off-shore market (outside North America) for Canadian potash (potassium chloride, an essential ingredient for crop production in several countries). Grain and potash together have accounted for virtually all of Canadian-Chinese trade, while almost all of the grain and all of the potash is produced in the Western Canadian province of Saskatchewan where the foreign merchandise trade surplus has been equivalent to over 20 per cent of Canada's merchandise trade surplus every year except one since 1988 and more than 17 per cent every year since 1965. Little is known about the adjustments that can be expected in Canada with economic reform in China. Clearly they come by way not just of CanadianChinese bilateral trade, but also the trade of Canada and of China with third countries. China is but one of several markets in the world for Canadian grain and potash, and Canada is but one of several suppliers of these products to world markets. This paper develops a measure of the changing structure of a country's export earnings and of the effects of economic reform in a trading partner. The effect on changes in total export earnings of changes in the magnitude of individual commodity and country export earnings is separated from the effect of changes in the commodity and country mixes of the earnings. Assuming for simplicity that the adjustment to a new equilibrium is a continuous process, the relation describing the multi-commodity, multicountry equilibrium flow of export earnings can be transformed into a logarithmic relation, and, thus, into a relation expressed in terms of the natural rates of growth of export earnings. These reflect the magnitudes of the earnings. A displacement from equilibrium is the time derivative of the equilibrium relation and is expressed in terms of the natural rates of growth of individual commodity and individual country export earnings and the proportion of individual commodity and country export earnings in the total.