The Singapore Economic Review

In this paper, we use data from a survey of taxi drivers in Singapore to test two competing labour supply hypotheses: the standard intertemporal model and the income targeting model, where workers set an earnings target over some short time horizon. The former predicts positive wage elasticities of labour supply, while an extreme form of the latter implies an elasticity of -1. The estimated wage elasticities are persistently negative, even after correcting for measurement error using instrumental variables. However, these findings are consistent with those in Camerer et al. (1997)'s study of New York City's cab drivers.

This paper analyses the effect of the Australian goods and services tax. First, we compute the social marginal cost per dollar revenue raised for nine broad commodity groups to determine whether a uniform flat rate is efficient. Second, we evaluate the welfare effects of the tax on the consumption of different income groups. The results indicate that a uniform tax may not be efficient and that the goods and services tax has adversely affected the distribution of purchasing power and thus, there is little scope for using the indirect tax system as a means to redistribute consumption towards the poor.

We analysed the factors influencing the level of cross-border tourism from Brunei Darussalam to Eastern Malaysia based on a random survey of 675 Bruneian residents returning from land and sea trips to Eastern Malaysia and using simple statistical and multiple regression analysis. The results revealed that the age of the respondents, personal income, perceived quality of Eastern Malaysia as a better place to rest and relax, perceived quality of goods and services in Eastern Malaysia, use of alcohol by respondents and having family members and friends living in Eastern Malaysia were significant factors affecting the number of visits to Eastern Malaysia. This analysis was based on visits over the 12-month period prior to the survey, a period of relative price stability. Regression analysis of personal expenditures on goods and services of respondents during their most recently completed trip indicated that personal income, travelling with friends, number of days spent on the trip, perception of Eastern Malaysia as a better place to rest and relax and use of public transport were the significant factors affecting expenditures. We estimated that Bruneian residents spent about B$426 million a year on goods and services while visiting Eastern Malaysia, and this amount accounted for roughly 5.7% of Brunei's gross domestic product (GDP) in the year 2000.

The endogenous growth literature can be broadly separated into two classes of growth models: Rival human capital models and non-rival "idea" models. Both classes differ in their positive and normative implications for growth. Following Klenow's (1998) approach, this paper uses industry panel data to investigate which class of growth models might be the most appropriate for the New Zealand economy: Exogenous growth, or one of the two classes of endogenous growth models. In contrast to Klenow's findings for the United States, in the New Zealand case rival human capital models seem more applicable, though none of the models correctly predicts all of the empirical relationships.

A slew of empirical evidence on horse racetrack betting markets points to betting biases and market inefficiency. More recent empirical work has documented the absence of betting biases in racetrack betting markets characterized by a high volume of betting. This paper offers a competition-based model of betting behavior that is consistent with the pattern of betting biases reported in the literature. We postulate the existence of professional bettors who, being better informed and/or having different objectives than the general betting population, engage in odds arbitrage when doing so is profitable. We evaluate the case of a single odds-arbitraging bettor first in order to establish the fundamental properties of odds arbitrage. We then examine the effects of entry of professional bettors who play a Nash game in odds arbitrage; the results show that professionals' participation causes the final track odds to converge to the level implied by the horses' true win probabilities when there is a high volume of betting.

The neutrality result that total private savings (voluntary and compulsory) are invariant to a change in the employee's CPF contribution rate has been derived by Hoon (1991) and Liew (2000), both of whom assumed perfect capital markets. It was shown by Lim (1994) to hold in a model with borrowing constraints as long as the latter are nonbinding. In this article, we integrate the phenomena of income uncertainty (from Liew) and borrowing constraints (from Lim) in a stochastic, intertemporal optimisation model. We demonstrate the existence of precautionary savings and, contrary to received thinking, the nonneutrality result of total savings to the employee's CPF contribution rate even for workers with positive voluntary savings. The broader implications of this result are also discussed.

Hedge funds are collective investment vehicles fast becoming popular with high net worth individuals as well as institutional investors. These are funds that are often established with a special legal status that allows their investment managers a free hand to use derivatives, short sell and exploit leverage to raise returns and cushion risk. Given that they have substantial latitude to invest, it is instructive to examine the performance of hedge funds as compared to other forms of managed funds. This paper provides an overview of hedge funds and discusses their empirical risk and return profiles. It also poses some concerns regarding the empirical measurements. Given the complexity of hedge fund investments, meaningful analytical methods are required to provide greater risk transparency and performance reporting. Hedge fund performance is also beset by a number of practical issues generating "practical risks". These risks are not fully addressed by the usual risk-adjusted performance measures in the literature. A penalty function to discount these extraneous risk dimensions is proposed. The paper concludes that further empirical work is required to provide informative statistics about the risk and return of hedge funds.

Singapore's exchange rate policy in practice is a policy mix somewhat more complicated than the simple "strong Singapore dollar policy". This paper discusses the theoretical and empirical foundations of this policy mix. It then proceeds to evaluate the past performance of Singapore's exchange rate policy. By highlighting a drastic decline in foreign inflation towards a negligible level nowadays, the paper recommends a far more moderate appreciation of Singapore dollar than those in the past.