Vol.
24 No. 4 December 1998
Articles:
The Canadian Experience with Targets for Inflation Control
Gordon G. Thiessen
This article reflects on Canada's experience with inflation targeting
in the 1990s. The discussion opens with a synopsis of the evolution
of inflation targets against a backdrop of other monetary policy approaches.
The
author then proceeds to outline the main advantages of explicit inflation
targets - advantages that go beyond the well-known benefits of low
inflation. Increased transparency and accountability, and an improvement
in the Bank's internal decision making, are highlighted in particular.
It is also argued that inflation targets provide a useful mechanism
for dealing with demand and supply shocks in a way that reduces disruptive
fluctuations. The major criticisms of targeting low rates of inflation
(related to wage rigidity, a zero floor on nominal interest rates,
and concerns about deflation) are also examined. Although it is too
early for definitive conclusions, the author's view is that inflation
targets lead to better policy decisions, better economic performance
over time, and greater accountability for autonomous central banks.
Reforming Employment Insurance: Transcending the Politics of the
Status Quo
Geoffrey E. Hale
Incremental changes to the Unemployment Insurance program during the
1990s have resulted in a substantial retrenchment of the program,
along with significant changes in the balancing of its objectives.
The EI reforms of 1994-96 in introducing structural change through
a strategy of purposeful incrementalism illustrate both the relative
autonomy of the federal government and Human Resources Development
Canada from major societal interests and the limits on that autonomy
imposed by regional interests and the dynamics of federal-provincial
relations. Internal competition within the federal bureaucracy, Cabinet,
and caucus played a more significant role in sharing the EI reform
agenda than external interests.
Economic Analysis of Packaging Waste Reduction
Donald N. Dewees and Michael J. Hare
This paper examines the rationale for regulating packaging waste and
finds two goals that survive careful analysis: saving the social costs
of waste disposal and reducing pollution from the manufacture of the
packaging materials. We find that source reduction has reduced the
disposal of soft drink packaging waste more than either mandatory
deposit-refund programs or household recycling. The benefits of packaging
reduction justify some well-run recycling programs but they do not
justify mandatory deposit-refund programs. We suggest two policies
that will promote efficient packaging waste reduction.
Medical Service Provision and Costs: Do Walk-In Clinics Differ
from Other Primary Care Delivery Settings?
Darrel J. Weinkauf and Boris Kralj
Reductions in health care funding by both the federal and provincial
governments in recent years have focused attention on the cost-effectiveness
of health care delivery, particularly on the delivery of primary care
services. We use data extracted from the Ontario Health Insurance
Plan (OHIP) claims database to assess differences between walk-in
clinics and other primary care delivery settings in initial visit
costs, follow-up visit costs, service duplication, and diagnoses treated.
Our analysis indicates that the generally negative reputation of walk-in
clinics is largely underserved. Walk-in clinics differ very little
from office-based practices in terms of overall costs, the percentage
of patients seen again, and follow-up costs. The relatively high costs
of primary care provided in emergency departments combined with the
fact that a fairly large share of visits to emergency departments
are for self-limiting conditions suggest that patient education on
the proper use of emergency departments or providing alternatives,
such as telephone triage services, should result in health care cost
savings.
The Relative Efficiencies of Canadian Universities: A DEA Perspective
Melville L. McMillan and Debasish Datta
The results of using data envelopment analysis (DEA) to assess the
relative efficiency of 45 Canadian universities are reported. Outcomes
are obtained from nine different specifications of inputs and outputs.
The relative efficiencies are quite consistent across the alternative
specifications. A subset of universities - including universities
from each of three categories (comprehensive with medical school,
comprehensive without medical school, and primarily undergraduate)
- are regularly found efficient and a subset quite inefficient but,
overall and for most universities, the efficiency scores are relatively
high. Simulation of the recent 20-percent cut in provincial grants
to the Alberta universities illustrates how potential efficiency improvements
(as implied and measured by this methodology) might be realized but
it also illustrates certain limitations. Regression analysis is used
in an effort to identify further determinants of efficiency. While
there are limitations to the methodology and the available (especially
output) measures which makes the specific efficiency outcomes tentative,
this analysis provides insight to university productivity in Canada
and its analysis.
What Does Downward Nominal-Wage Rigidity Imply for Monetary Policy?
Seamus Hogan
A recent paper has suggested a reason why there might be a lasting
trade-off between inflation and unemployment at low inflation rates.
This has led some economists to recommend that Canada increase its
inflation rate. The idea underlying this view is that, because firms
are reluctant to cut workers' nominal wages, a moderate amount of
inflation can be used to facilitate needed reductions in real wages.
This paper discusses the link from downward nominal-wage rigidity
to unemployment, and considers some of the issues that need to be
addressed in order to determine whether a change in Canada's monetary
policy is warranted.
