Answering questions and doing research Assignment

Answering questions and doing research - Assignment Example They do not indicate any doubt on the Adidas products or material durability. The only challenge that came out, however, was the issue of design and price. There is a need for Adidas to input more efforts and try to design new products that are attractive to the customers. Several people have heard about â€Å"Adidas† as a brand and have bought Adidas products before. However, the populations had varying attitudes and perception towards Adidas. Some thought that Adidas was a product of some famous football (Regine Business Research, 2013). Research also reveals that other people initially thought that Adidas was a brand meant for people who were of very high class. Most of the people, however, indicated that they buy Adidas products and prefer the Adidas products over the products of other brands such as Nike and Puma. Several respondents feel satisfied with the material and quality used in the products of Adidas. The respondents however had issues with the design of the products of Adidas. They feel that Adidas design is sub-standard with no attractive, stylish design. Several people preferred the Nike designs. Some people compare it to Nike and come out with some differences. Some people feel that Adidas has a problem with its branding as compared to Nike. People get positive and immediate impressions when thinking about the Nike brand and to the contrary, not when the same people think about the brand of Adidas. Adidas has got no stellar branding work like Nike making the market share of Nike relative. As a result, the worldwide market share of Adidas is almost half that of Nike (Regine Business Research, 2013). It is very important for Adidas to consider the influences from the groups because the groups and the company mutually depend on each other. According to Beard (2014), the groups consume the products of Adidas and, therefore, influence the success of the company

Critique of the Literature Review Assignment Example | Topics and Well Written Essays - 1250 words

Critique of the Literature Review - Assignment Example The study sought to investigate the relationship among leadership styles, demographic factors, and confidence in the delegation of duty by registered nurses in a nursing facility. Results identified lack of a relationship between confidence in delegating duties to â€Å"unregistered assistive personnel† and applied leadership style by registered nurses (Saccomano and Pinto-Zipp, 2011, p. 522). The results also noted that fresh nurses with lower academic qualifications reported lower confidence in delegating duties to the unlicensed personnel than registered nurses. This however changed and after years of experience, the nurses with lower qualifications reported higher confidence than registered nurses did (Saccomano and Pinto-Zipp, 2011). The article identified the study’s problem with clarity. Based on its literature review, registered nurses focus on clinical practice but disregard managerial and leadership roles. Previous studies had also not explored the relationship between leadership among registered nurses and their confidence in delegation despite a belief that leadership is significant to the nurses’ ability to manage unlicensed personnel and this knowledge gap informs the study’s problem. The researchers also identified frameworks for their study through the concept of transformational leadership and through the path-goal theory. They defined a relationship between transformational leadership concept and problem, delegation among nursing leaders, and the relationship between the Path-Goal theory and the delegation problem. The theory, the concept, and their proposed effect on an individual’s ability to empower followers and delegate duties to them make the theory and concept appro priate for the study’s problem (Saccomano and Pinto-Zipp, 2011). Reviewed literature was appropriate for the topic and contributed to knowledge development on the topic’s variables. Selected information from the reviewed literature was relevant to the topic and the scope of the  literature’s contents was consistent with the scope of the article’s aim.  

A Sense of Truth Essay Example | Topics and Well Written Essays - 1250 words

A Sense of Truth - Essay Example A thorough analysis and better understanding not only clarifies but illuminates the distinction between deception and truth, trust and mistrust. Plato in his work, "Allegory of the Cave" published in his book The Polity presented the false reality that chained the people inside the cave. They had been blinded by ignorance and overshadowed by darkness. They believed that the shadows on the walls of the cave were true as opposed to the reality that these were just puppets and illusions. One of the prisoners had eventually escaped and seen the light. The sunlight represents the absolute Truth, which is what actually is, and is not relative to what any person might think to be truth (Christian Dunn, 2006). The point of Plato was to find the truth as the ultimate goal; relying on the senses to interpret reality would not give the truth. This perception of the truth will also be different from person to person. Furthermore, Plato suggested that our senses can be a distraction from the truth and should not be trusted because they are untrusting and false guides to realities. Siddhartha Gautama, the Buddha argued otherwise. ... With the background and foundation laid, I am now ready to answer the question "Should we trust our senses to give us truth" Trusting our senses achieves the purpose of knowing what the truth is. It simply means allowing the mind to digest the information perceived through the senses and making judgment based on these perceptions. Every person's reactions although varied will detect that the stimuli have been responded to depending on the conditions and courses of an event. While an observation is a prelude to a deduction of what really happens, it is still with empirical knowledge that the truth is tested and settled. After all, a claim remains a claim if not backed up with facts. Nevertheless, trusting the senses still remains the ultimate paradigm that ushers the knowledge of the truth. In an unchartered territory, the most a person can do is to act according to his instincts and survive depending on a perception of this environment. Needless to say, it is the right time for his senses to be utilized and maximized. Imagine being stuck in the Arabian Desert. What penetrate your eyes are visions of sand, sky, date palms, and occasional arachnids like scorpions, ticks and spiders. The dust swaying in the air provides an unbearable smell. The resolute stillness and serenity generate a deafening sound as well as the booming of the wind. The taste of water and soda creeps into your nerves and makes you thirst. Worse of all, the scorching heat reaches up to 54C. All these in consideration will determine the ability of a person to forge his reactions based on stimuli. Let's say there is a snake in the middle of the Desert. Trapped in this situation, the individual must find ways to get rid of the snake. How When the

Hair-hashish thesis and analysis Assignment Example | Topics and Well Written Essays - 250 words

Hair-hashish thesis and analysis - Assignment Example The lyrics demonstrate the perception held by people on drug use and scene as well as the counter dissociative culture in the sixties. In the song, Hair Cast talks about drug use among the generation and addresses the revolution. The drug problem has been intensively addressed as a proliferation in the community of all mood altering, illicit and physically dangerous drugs. The drugs also lead to problems such as crime, threat of crime, disease, violence, loss of productivity, growing number of users in welfare of the public, over-crowding of the penal institutions, congestion of court system, diversion of tax from productive areas, erosion of our civil rights, and corruption of law enforcement agencies. Hair Cast in â€Å"Hashish† song, addresses the theme of drug scene through the aspects involved such as remorseful mood and depressed tone featured in the lyrics. In summary, this research paper will be carried out through listening to the song and researching two other sources which will be cited properly in the paper. The paper will consider addressing the themes of the song in detail and illustrate how the aspects of the song such as tone and lyrics represent the mentioned

Essay Essay Example for Free

Essay Essay THE MOST MEMORIABLE VACATION My most memorable vacation was when I went to NHA TRANG with my family last summer. When my father told me I was excited because NHA TRANG famous for beautiful beaches and delicious foods. After four hours on the train, finally we arrived. Although I felt tired after long hours, I am happy when I was standing in front of a beautiful beach. Firstly, we arranged our bags and after that, we quickly swim in the blue sea. Next, my younger brother and I were building sandcastles while my parents were sunbathing on the sand. For a few hours, we felt hungry so we went to a nearby restaurant to enjoy tasty foods. In the afternoon, we visited some beautiful and famous places such as THAP BA PONAGAR; HON CHONG then went to NHA TRANG center to buy some souvenirs. The day went by so fast. The trip was short but it had a strong impression on me and my family and I have many memories of that day. QUALITY OF A GOOD TEACHER The good teacher has three important qualities. The first quality of a good teacher is that having strong knowledge of his or her subject matter. For instance, teachers have to provide students with specific content knowledge. A good teacher will know how to explain the content that he or she is teaching in a way easy to the most understand for students. Another quality of a good teacher is enthusiastic and caring. For example, he or she always cares academic status of the students and help them more advance in learning. Moreover, they also learn about the family circumstances of the individual students and find ways to help the poor students. The last quality is that confidence. Standing in front of a class, he or she has to the voice clear and full of confidence to their student pay attention to his or her lectures. To sum up, a good teacher need to have three qualities above and ethic good quality. DISADVANTAGES OF LIVING IN THE DOMITORY Living in a college dormitory has several disadvantages. The first disadvantage is narrow space. For example, dormitory in PHU YEN University, there are eight students sharing the room, it becomes crowded and narrow. You do not have much space to learn within a dorm. In addition, your  roommates can be messy, upset, or talkative so you will feel uncomfortable when living together with them. Another disadvantage is food. You are not allowed to cook in the dormitory so you have to eat rice at the canteen or at the restaurant. The amount you have to pay for meals in the dorm expensive than in the motel. In addition, you will feel tired of when you have to eat the same foods every day. Finally, living in a dormitory is noisy. Sometime you cannot concentrate for learn if your roommate opens music loudly. To sum up, you must find the best accommodation for you to convenient for your learning but you should think before deciding to live in the dormitory. A BEAUTIFUL BEACH AT DAWN Beyond a shadow of doubt, NHA TRANG beach is one of the most beautiful beaches in Vietnam, particularly at dawn. Every day, at 5.30pm, the sunrise slowly, it is like yolk rise from the bottom of the sea. At that time, the beach always crowded. Many people get together here very early to do the exercise and bathe in the sea. The beach scenery at dawn is fantastic, with a neglected beauty. The silence covers the whole beach; there is no sound but the sound of breaking waves. If you stand on the sandbank and stare into the distance, in the sun direction, you will have a strange feeling; have something peaceful in the deep of your soul. The atmosphere is so great by the winds, which come from. When the sun has risen completely, you can see some light rays of sunlight; they signal to you that the dawn-time nearly ended. I think words cannot describe how nice this beach is at dawn. If you have a chance to visit somewhere, why do not you try visiting NHA TRANG to enjoy the beach landscape at dawn in the true sense of the word? A BEAUTIFUL BEACH AT DUSK Sitting on the fine sand, I can see the amazing beauty of the beach at dusk. The sun like a fiery orb looks like it is gradually receding into the waters below. The setting sun’s red rays lit up the sky above the western horizon. At the time, the sky consisted of an assortment of shades, a blend of reds, oranges, and yellows. The waters below mirror this effect. The waves are tinted vermilion; the sand under my feet is the same color, the vivid color mix highlights the beauty of the beach at dusk like a perfect picture. I can  hear is the sound of the waves as they crash against the shore, and seagulls, which I cannot see, squawking in the distance. Sometime I can smell the fishy smell of fish. It smells warm and salty, as I breathe in the cold, salty. I just stand there, eyes closed, and feel the moment until the dusk and the warm feeling fades. I wish time could stop to enjoy this wonderful moment longer. HOW TO MAKE CHICKEN RICE You can make a tasty chicken rice dish if you follow these easy steps. The first step is to prepare the necessary ingredient such as haft chicken, rice, three slices ginger, salt, coriander onions, cucumbers, tomatoes, and chilly sauce. Next, cook the rice in the rice cooker. The third step is to cut the chicken into bite-sized pieces, and then combine all the other ingredients and mix well in a bowl. After that, pour the mixture over the chicken, cover with foil and bake until the rice is cooked. When the rice is cooked, season to taste with salt, if needed. Finally, scoop a bowl of chicken rice on plate. Place cooked chicken over the rice. Garnish with sliced cucumbers, tomatoes, coriander, and spring onions. Now sit down and enjoy your delicious chicken rice plate with ginger sauce and chilly sauce on the side. HOW TO PREPARE FOR A JOB INTERVIEW Before a job interview, you can be stressful, but you can reduce your stress by following these skills. The first skill is picking out what you are going to wear to your job interview. The first choice an interviewer makes is going to base on how you look and what you are wearing. That is why it is always important to dress appropriately for a job interview. The second skill is that practiced greeting before your interviewer. You should always greet your interviewer with a friendly smile and a firm handshake. It will create a good impression about you to the interviewer. Next, you should prepare some typical interview questions you will probably be asked during a job interview. If you prepare well the answers of the interviewers can ask, you will not be surprised with questions about them. Practice interviewing  with a friend or family member ahead of time and it will be much easier when you are actually in a job interview. To sum up, the interviewers will appreciate what you did and can choice if you have a good preparation. AUSTRALIAN AND VIETNAMESE EDUCATION SYSTEM Australian and Vietnamese have similarities and differences in the education system. We can see that both education systems of Australian and Vietnam are quite similar that they have twelve grades, from one to twelve. In addition, schooling is compulsory for students until the age of fifteen. Despite the similarities, the two educations have some very important differences in system division, school-time. The first major difference between Vietnamese and Australian education is the system division. In Australia, primary school goes from grade one to six and secondary school from grade seven to twelve. In Vietnam, we have primary school (from grade one to five), middle school (from grade six to nine), and high school (from grade ten to twelve). Another obvious difference that we can see from these two educations is school-time. In Australian, the academic year begins in early February for school students and late February/early March for vocational and university students. However, in Vietnamese, the academic year begins in middle August for students and late August/ early September for university students. Although both education systems of Australian and Vietnamese have a lot of differences and similarities, they are good education systems for students. AMERICAN AND VIETNAMESE MEALS American and Vietnamese meals are quite different. One difference is Americans have one big dinner per day but Vietnamese have three meals a day with some snacking on fruits and cakes. Americans always think to take advantage of that time to be effective, breakfast and lunch only eating briefly, in the evening with more spare time, so comfortable chatting happily, and eating dinner together. Another difference is that the Vietnamese have breakfast with soup â€Å"pho,† rice or rice noodles; bean sprouts; greens; boiled eggs; and crusty bread and drink green tea or coffee. The Vietnamese have lunch and dinner with rice, fish, or meat;  vegetable dish with fish sauce then snacks with fruits or cakes. In contrast, Americans eat many foods that are high in calories and fat, such as hamburger, fried chicken, sandwiches. They do not spend much time in preparing food so they choose fast foods or going to the restaurant to eat. All in all, though there are differences between American meal and Vietnamese meal, they are typical culturally in the world.

Competition Between The Three Major Supermarkets Economics Essay

Competition Between The Three Major Supermarkets Economics Essay For my Extended Essay, I decided to investigate the competition between the three major supermarkets in my local area, and whether they collude or not, prompting my research question: To what extent do the larger supermarkets in my local area collude with each other? By analysing data collected on pricing from the three supermarkets, it was found that two of the three supermarkets at hand colluded tacitly with each other, under and oligopoly market structure. The prices of fifteen identical prices were recorded across a time span of three weeks. The analyses of these prices lead to two conclusions. Firstly, it was found that two supermarkets colluded with each other, but still had non-price competition between them. This was mainly due to the advantage of the two stores acting as a monopoly by charging the same price. This allowed the two supermarkets to make abnormal profit, which in turn they used to create a stronger brand loyalty, and thus, a more inelastic demand curve. Secondly , it was found one of the supermarkets was undercutting the other two supermarkets prices. The main reason for this was that the supermarket could gain greater revenue at the time by undercutting rivals, due to having more customers. These findings show that there was collusion between larger supermarkets in my area, but not between all supermarkets. Finally, the essay could be improved if I included more products in my data collection, as well as collecting the data over a longer time period. 1. INTRODUCTION Tesco, Asda and Sainsburys are the three main supermarkets that constitute weekly shopping for the public in my local area, west Charlton. These three supermarkets are recognised for their vast range in goods and at affordable prices. It is no surprise then that in terms of market share, they each comprise the top three places for having the most market share in the U.K.1 During the last couple of years, though, I have noticed that many of the smaller supermarkets in the same area have begun to close down. Since enrolling in the IB Higher Economics course and studying market structures in particular, Ive developed an interest into how supermarkets compete with each other, or even, how they collude together. Maybe, given their large hold of the market share, the benefits from collusion would be unmatchable compared to other smaller supermarkets, in terms of increased sales revenue. Also, formal collusion, one of two forms of collusion, is illegal as it goes against the Competition Act 1998 (the Act) Chapter 12. Therefore, the research question I have formulated is To what extent do the larger supermarkets in my local area collude with each other? To be able to explore this research question, I will first present a summary of the supermarkets, where the characteristics of them will be described. This will lead on to my next section where I will discuss relevant theoretical market structures and relate economic theories to them. After I have presented these theories, I will hypothesise which market structure is adequate for the supermarkets present, thus creating a sufficient research design where the prices of similar products will be compared. Finally, I will analyse the collected data and prove or disprove my research question, leading to a conclusion of my essay and exploring possible limitations. 2. MARKET SUMMARY In the area I am studying there are three main supermarkets; Asda, Tesco and Sainsburys, situated in West Charlton (appendix 1.1). Each supermarket is similar in size, satisfying the vast needs of the inhabitants in the area. It is worth mentioning that due to the supermarkets being of a substantial size structurally, there must have been large start up costs. Each of the three engages in non-price competition. This includes things such as advertising on T.V, having parking areas and the use of brand names. The offerings of these services are in the attempt to attract more customers. Take for example, Asda, which has parking as well as various sectors to its stores such as electrical and clothing sections as well as groceries. The aim of this is that customers can visit only this store by satisfying all their needs from the vast offers of goods. Furthermore, each supermarket advertises their brand names to gain more customers due to the brand loyalty it has established. This could ma ke their demand curve more inelastic, meaning that an increase in the price of a good would result in the increased revenue exceeding the reduction of quantity sold (appendix 1.2). These three supermarkets also dictate the majority of market share, as I have mentioned. Lastly, it is worth mentioning that Sainsbury ¿Ã‚ ½s and Asda are open for 24 hours from Tuesday to Friday, otherwise it is from 7 in the morning to 11 in the evening. Tesco are open from 7 to 11 everyday, apart from Sunday when they open an hour later and close an hour earlier. I don ¿Ã‚ ½t think that the slightly lesser hours that Tesco is opened during the week will affect my research much, or at all. This is due to the fact that I don ¿Ã‚ ½t believe Tesco make much of their sales between midnight and 7 in the morning. 3. MARKET STRUCTURE THEORIES I will now present the four types of market structure theories and their assumptions. I will not going into great detail on the structure of a monopoly as this is not a possible market structure for the supermarkets, given the fact that there is evidently more than one firm in the area. This is the same for perfect competition, as the goods produced by supermarkets are not identical. Firstly, I will present the market structure of a monopolistic competition. The assumptions of this market structure are3: * The industry is made up by a large number of firms * The firms each act independently of each other, due to each firm being small, relative to the size of the industry * The firms produce differentiated products; consumers can tell one product from another * Firms are free to enter and exit the industry, due to lack of barriers to entry and exit * Firms are able to make abnormal profits in the short run, however due to lack of barriers to entry; this attracts other firms into the industry. This means that in the long run, only normal profits are able to be made Due to the fact that the supermarkets in question are of a substantial size, I believe that the start up cost in itself will be of a great barrier to entry. Also, I don ¿Ã‚ ½t believe the industry I am examining is made up of a large number of firms, as there are only three supermarkets of their type in the local area. Another market structure that the supermarkets could come under is an oligopoly. These are the basic assumption of an Oligopoly:4 * A few firms dominate the industry * There are barriers to entry and/or exit for the industry * The firms are price makers as they have a downward sloping demand curve * The firms are interdependent; the action of one firm can have an effect on another * Abnormal profits can be made both in the short run and long run In addition to these assumptions, firms in an Oligopoly can be either collusive or non-collusive. Non collusive oligopolies face price stability due to the kinked demand curve. This is shown in figure 1. Figure 15 Due to the kinked demand curve, price will be stabilized at price  ¿Ã‚ ½P ¿Ã‚ ½. This happens as the Price elasticity of Demand (PED: The responsiveness of the quantity demanded of a good or service to a change in its price)6 above price  ¿Ã‚ ½P ¿Ã‚ ½ is greater than 1. This means that an increase in price above point  ¿Ã‚ ½P ¿Ã‚ ½ will result in a loss of revenue. Likewise, the PED below price  ¿Ã‚ ½P ¿Ã‚ ½ is less than one, meaning a reduction in price to this level will result in a loss of revenue again. Due to these factors, it is logical that firms do not favour either move, so they are said to be stable at point P. This also results in the output being stable at point  ¿Ã‚ ½Q ¿Ã‚ ½ as a change in marginal cost from MC1 to MC2 would still mean output would stay at  ¿Ã‚ ½Q ¿Ã‚ ½. This is due to firms in this market structure producing at the profit maximising point, where MC=MR.7 Firms in this market structure may also be collusive. This exists when the firms collude to charge the same prices for their products, in effect acting as a monopoly. There are two types of collusion, formal and tacit. Formal collusion exits when firms openly agree on the prices they will charge. In the case of supermarkets in the U.K, it is illegal for this to occur as it is deemed to be going against the interest of the consumer due to it resulting in less output and higher prices. Tacit collusion, however, exists when firms charge the same prices without any formal collusion. The three supermarkets in question may have decided to charge the same prices and not compete with each other, in order to increase revenue. This is represented in figure 2. Figure 28 As shown in figure 2, firms can make abnormal profits between their price and cost, due to the price exceeding the cost to the firm. This form of collusion is very possible as each supermarket is very similar to each other and all produce similar type goods. Firms in an Oligopoly can experience economies of scale. Economies of scale are any decreases in the long-run average costs that occur when a firm changes all of its factors of production, in order to increase its scale of output. There are a number of different economies of scale that can benefit a firm as it increases its scale of output. These can be: 9 * Specialisation- Firms can be more efficient when they specialize in different areas of expertise * Division of labour- This is the breaking down of a longer production process into many smaller activities, making production more efficient by reducing unit costs * Bulk buying- As firms increase in scale they are often able to negotiate discounts with their suppliers, as they are buying more altogether. This reduces the firm ¿Ã‚ ½s cost of input, and thus their unit costs of production * Financial economies- Larger firms are able to get loans at lower interest rates, as they are seen as a lesser risk to lend money to than smaller firms, by the bank The assumptions of a monopoly are as followed:10 * Only one firm producing the product at hand, so the firm is the industry * High barriers to entry and/or exit * Abnormal profits can be made in the long run, due to barriers to entry This market structure is unlikely to be present in my research area as there are clearly more than firm in the same industry. Finally, the basic assumptions of perfect competition are: * The industry is made up by many firms, so total output cannot be affected by one firm * The firms all produce homogeneous (exactly identical) products * No barriers to entry and/or exit * Producers and consumers all have perfect knowledge of the market Again, this market structure is unlikely to feature in my study, mainly due to the fact that there is product differentiation, as well as evident start up costs. 4. HYPOTHESIS After reviewing and comparing the discussed market summary and theories, I have hypothesised that the market structure the supermarkets are in are oligopoly. I have reached this hypothesis for the main reasons that: * There are evident barriers to entry such as strong branding of products and start up costs * There are only three supermarkets in the local area, between them sharing almost 64% of the market share.11 In addition to these points, I believe tacit collusion between the three supermarkets would greatly benefit their competition with other smaller supermarkets in the area. It would also avoid unnecessary competition between each other, and perhaps result in gaining more customers. After hypothesising that the three supermarkets are in an oligopoly, and thus capable of collusion, I will now be able to test my research question  ¿Ã‚ ½To what extent do the larger supermarkets in my local area collude with each other? ¿Ã‚ ½ 5. RESEARCH DESIGN For me to test my formulated research question, I will create a methodology. I will compare the prices of 15 different products across the three supermarkets. I will check the prices once every week for three weeks, so I can get a mean price at the end, making the result more reliable. I will make sure the prices of the same products are taken in the same time period, and where possible, use products produced in the U.K. This would avoid export costs affected and invalidating results. If not enough U.K based products can be found, I will make sure that any exported product used will have been exported from all supermarkets. This will maintain a degree of validity in the research. I will also avoid products produced by the supermarkets themselves. This would be because the cost of production may be very different from one supermarket compared to another, thus having a large impact on the final pricing. I will compare independent brands that feature across all three stores. Each superm arket in the area of West Charlton is located within one mile of each other.12 In terms of the data collection, I will go to each supermarket and compare similar, or when possible, identical products and their prices. I will note down their current price at which they sell at. Also, I will go to each supermarket close to their opening times on Saturday, as on this day the stores all open at the same time. The reason for not going later on in the day is because of price reduction on non-durable goods that are set to expire. If I include goods which prices have just been reduced temporarily to get rid of lasting stock, it would not represent the overall pricing of the good in regular situations. Lastly, I will compare the prices using adequate means of analysis; thus deducing whether or not there is enough similar pricing evident to suggest collusion of some sort. 6. DATA COLLECTION ANALYSIS Firstly, I will present my data collected for the prices of 15 products from all three supermarkets, across a span of three weeks, once a week. Table 1 shows my findings of the prices. Table 1 Source: Prices collected by me for all supermarkets To analyse the spread of the data, I will work out the standard deviation for each product, which will indicate the spread of the data. A lower standard deviation would indicate a set of closer, similar prices, likewise a higher standard deviation would imply less chance of collusion evident.13 The standard deviation for each product is represented in Table 2, along with the mean prices for each product over the three weeks. From the standard deviation, we can see they are all overall quite small, indicating the prices are all close to the mean price. This seems to indicate some form of collusion occurring between the supermarkets. However, there are some exceptions. For some goods the standard deviation is relatively high to the other products. Also, in most of these goods, such as soft drinks, crisp packs, pizza, ice cream and cooked chicken, it is Asda who feature the lowest price out of the three, while Tesco and Sainsbury ¿Ã‚ ½s have similar prices to each other. This seems to show that there is possible collusion between Tesco and Sainsbury ¿Ã‚ ½s, while Asda undercuts their prices. The similar pricing between Sainsbury ¿Ã‚ ½s and Tesco suggests a form of collusion, tacit or formal. I inquired to the Office of Fair Trading (OFT) about my findings. The OFT are a government based organisation that ensure businesses are  ¿Ã‚ ½fair and competitive. ¿Ã‚ ½14 In a reply they stated:  ¿Ã‚ ½Although similar prices might seem to suggest that companies are getting together to agree them, this is not necessarily the case. For example, one company might have independently decided to price at a level similar to another or both may have independently decided to behave in the same way ¿Ã‚ ½.15 As similar pricing does not necessarily mean formal collusion is taking place, I will assume that the two supermarkets are tacitly colluding, although this area may be needed to be researched into further for a definite result. As well as colluding, I have also noticed that there is evidence of non-price competition between Tesco and Sainsbury ¿Ã‚ ½s. This included things such as the use of advertising, free delivery and other services situated in the store themselves. This has lead to each supermarket gaining brand loyalty, and as a result, creating a more inelastic demand curve for their products. This is possibly another explanation of why these two supermarkets in particular where of a higher price overall, compared to the other supermarket, Asda. For the case of Asda, they have engaged in price war tactics, rather than forming a collusion. In this case, undercutting rivals may be beneficial to them by increasing their sales revenue. This can be represented by  ¿Ã‚ ½game theory ¿Ã‚ ½. Supermarket The table shows that if both supermarkets lower price, they will make less revenue than if they had colluded. However, it is still tempting to undercut the other store as then that would lead to greater revenue. The highlighted box shows the possible situation at the moment, with Asda undercutting the other supermarkets thus increasing revenue. This choice making situation is known as  ¿Ã‚ ½the prisoner ¿Ã‚ ½s dilemma ¿Ã‚ ½. 16 Another explanation for the lower price offered by Asda for goods could be down to lower unit costs caused by a greater storage capacity. The supermarket ¿Ã‚ ½s cost of storage mainly depends on the material used to build them, which is the surface area of the building. The level of output for the supermarket will depend on its storage capacity, so its volume area. As the size of a supermarket increases, the volume to surface area ratio increases. Therefore, the cost per unit overall will be much less than a smaller supermarket, such as Sainsbury ¿Ã‚ ½s and Tesco. Lastly, from analysing my collected data, I have reached the conclusions: * Tesco and Sainsbury ¿Ã‚ ½s collude by charging very similar prices, but still have non-price competition between them. * Asda competes with a price-war tactic, by undercutting the other two supermarkets. 7. CONCLUSION The aim of my research was to investigate the type of competition, if any, between the three major supermarkets in my area, West Charlton. The question  ¿Ã‚ ½To what extent do the larger supermarkets in my local area collude with each other? ¿Ã‚ ½ prompted me to gather the pricing of 15 identical products across the three stores. The prices were taken every Saturday morning one a week for three weeks. I found that two of the three supermarkets had signs of collusion, while the third supermarket engaged in a price-war by undercutting the other two supermarkets. Firstly, Tesco and Sainsbury ¿Ã‚ ½s have similar prices to each other, while having higher prices than Asda. This was mainly due to the two stores acting as a monopoly by colluding and charging similar prices. This meant that each firm could make abnormal profit, which they used to create greater brand loyalty, thus making the demand for their products more inelastic. Lastly, the final supermarket, Asda, engaged in price-war tactics. The main reason for this was due to the idea of gaining more revenue as indicated by  ¿Ã‚ ½the prisoner ¿Ã‚ ½s dilemma ¿Ã‚ ½. In addition to this, Asda had a greater storage capacity, meaning an overall lower cost per unit. Therefore, after collecting data and analysing them, it is found that there was evidence of collusion, but only between two of the supermarkets, not all three studied. There are, though, apparent limitations in my study. Firstly, my area of research was only in one town. If there is found to be some form of collusion between supermarkets here, it doesn ¿Ã‚ ½t necessarily mean it is occurring all over the country with those same supermarkets. Also, the time span of my investigation was three weeks. This may not have been enough time to gather an appropriate amount of results to come to a reliable decision. This could be said the same for the amount of products used in my investigation; 15 products may not have been enough to come to an appropriate result. As well as this, I could not make a judgment whether the collusion between Tesco and Sainsbury ¿Ã‚ ½s was either tacit or collusion. This would have to be investigated further. All of these limitations overlook the aim of my study and thus should be inspected further. 8. BIBLIOGRAPHY/ACKNOWLEDGMENT Anderton, A. (2006). Economics: Fourth Edition. In A. Anderton, Economics: Fourth Edition (pp. 63-64). Causeway Press. Dorton, I. (2007). Economics. In I. Dorton, Economics (pp. 119-123). Oxford University Press. Dorton, I. (2007). Economics. In I. Dorton, Economics (pp. 114-118). Oxford University Press. Dorton, I. (2007). Economics. In I. Dorton, Economics (p. 115). Oxford University Press. Dorton, I. (2007). Economics. In I. Dorton, Economics (pp. 81-82). Oxford University Press. Dorton, I. (2007). Economics. In I. Dorton, Economics (pp. 105-111). Oxford University Press. Garner, E. (2010, June 1). TNS Global. Retrieved June 1, 2010, from TNS Global Website: http://www.tnsglobal.com/news/news-56F59E8A99C8428989E9BE66187D5792.aspx Measure of Spreads. (2007). Retrieved June 3, 2010, from Stats4students: http://www.stats4students.com/Essentials/Measures-Of-Spread/Overview_3.php Office of Fair Trading. (n.d.). Office of Fair Trading. Retrieved June 3, 2010, from http://www.oft.gov.uk/: http://www.oft.gov.uk/ Office of Fair Trading. (2010, May 25). Office of Fair Trading Reply Letter. London, U.K. Prisoners Dilemma. (1997, September 4). Retrieved June 3, 2010, from Stanford Encyclopedia of Philosophy: http://plato.stanford.edu/entries/prisoner-dilemma/

The Monetary And Fiscal Policies Of Portugal Economics Essay

The Monetary And Fiscal Policies Of Portugal Economics Essay I. Introduction: Portugal macroeconomic situation before the crisis. Despite economic and financial crises seem to be regarded as unusual and rare, in reality they are common events. Particularly, Portugal has already seen its worst financial crisis in 1891. This crisis led Portugal to abandon the gold standard and the country was banned from borrowing in international financial markets during 20 years (Lains, 2007, p. 485). Since then, Portugal has radically changed, however, its weakness in facing the crises has remained. During the last economic and financial crisis that started in August 2008, the Portuguese economy was caught in the middle of a period of adjustment during which was already facing up to the need to correct its fiscal and external imbalances within a phase of low growth with pro-cyclical policies (Torres, 2009, p.55). This period started in the second half of 1990s with the accession to the Economic and Monetary Union (EMU) and was characterized by an economic boom which was followed by a slump. As a matter of fact, Blanchard (2007, p.1), two years before the crisis, stated that the Portuguese economy is in serious trouble: Productivity growth is anemic. Growth is very low. The budget deficit is large. The current account deficit is very large. Although, from 1995 to 2001, Portugal was in a catching-up phase benefiting from positive wealth effects of EMU (lower interest rates which supported the increase of the domestic demand), the current account deficit rose drastically and the unemployment rate fell to about 4% (figure 1). The reason behind the increase in the current account deficit was, indeed, the low level of unemployment which boosted the nominal wages to increase more than the labour productivity provoking a huge raise in unit labour cost and a decline in competitiveness. Moreover, the indebtedness of households and non-financial enterprises was increasing because of the elimination of the exchange rate risk, the access to the euro bond market, and the lower interest rates, both nominal and real, set by the European Central Bank (Blanchard, 2007). As result, from 2000 to 2003, savings dropped and investments increased, therefore the current account deficit slightly decreased. The Portuguese economy slowed down and then contracted in 2003. The subsequent slump was the result of the large imbalances built up during the phase of boom. For instance, the high levels of consumption were not counterbalanced by the supply which had to deal with low productivity growth and increasing unit labour costs. As a matter of fact, figure 1 shows a combined upward trend of unemployment and current account deficit between 2003 and 2005, and the attempt to reverse it through the budgetary consolidation process re-assumed by the socialist majority government elected in 2005 (Blanchard, 2007) (Torres, 2009). To sum up, table 1 and table 2 offer an overview of the macroeconomic imbalances during the phase of the boom 1995-2000 and the one of the slump 2001-2007. Table 1. Macroeconomic evolutions, 1995-2001. Source: Blanchard (2007) Table 2. Actual and projected Macroeconomic evolutions, 2001-2007. Source: Blanchard (2007) The growth rate was rather high in the timeframe 1995-2000, then, since 2001 it started falling in the subsequent years. The current account and the budget surplus were in deficit over the whole observed period and the productivity growth started to be very low since the year 2000 causing the raise of the unit labour cost. It was important to describe the macroeconomic situation of Portugal prior to the crisis in order to explain, in the next sections, how those problems have been aggravated since 2008. In fact, the phase of slump was prolonged by the financial crisis occurred in 2008. II. Policy Responses Prior to analyze the European and Portuguese policy responses to the major financial crisis that the whole world is facing since 1929, it is essential to point out what kind of crisis our society is dealing with. The main cause of the crisis may be ascribed to the crisis of derivative market in the United States. In particularly, it started from the so-called subprime mortgage crisis which was the result of a speculative bubble in the housing market in the United States. Starting from the United Stated, it has spread by causing ruptures across many other countries in the form of financial failures and a global credit crunch. The main (systemic) Portuguese banks seem not to be particularly exposed to the so-called financial toxic assets and, unlike in Ireland or Spain, there was no speculative bubble in the housing market in Portugal nor is there a subprime segment in the credit to the housing sector. (Banco do Portugal, 2008 as cited in Torres 2009) However, according to Torres (2009, p.56): Portugal, a small economy fully integrated in economic and financial terms, is particularly affected by the global financial crisis and economic recession. This is not so much due to the international exposure of the Portuguese banking sector (the Iceland syndrome) but primarily to the countrys long protracted correction of its fiscal and external imbalances, which worsen its creditworthiness and aggravate the costs of servicing the debt and the countrys perceived risk of insolvency (an Argentinean type of problem, without the risk of a currency crisis as long as the eurozone remains in place). One of the main consequences of the financial crisis was, indeed, the credit crunch. During the last decades, the European banking system has changed from a system where the bank was the intermediary for investments between families and factories, into a new system where there are large money-centre banks which play the role of the intermediary amongst regional banks, in other words, they distribute funds among regional banks. The banking crisis has occurred in Europe because of two related reasons. The large money-centre banks that provide the backbone of the inter-bank lending market are undercapitalised. With their low capitalisation, they are vulnerable to even small swings in market conditions. Any liquidity problem, thus, turns almost immediately into a solvency problem. Because of this vulnerability they did not trust each other, thus paralysing the inter-bank market. 2.1 European Policy Responses For the Euro-area countries, the monetary policy is unique and conducted by the European Central bank (ECB). Since the atmosphere of mistrust, caused by the crisis, was no longer confined to the interbank market, but it was also spreading among ordinary citizens and consumers, the European policy-makers figured out that one possible solution was to put into effect measures which contain two elements in order to restart the interbank lending: support for the liquidity management of banks and bank re-capitalisation. The first element concerns the extraordinary measures taken at European level and the second one the bank rescue measures adopted at national level. As a matter of fact, firstly, the ECB has been reducing the rate for its main refinancing operations from 4,25% to 1,5%, in the timeframe October 2008 March 2009, in order to prevent contagion by providing short-term liquidity support on the interbank markets. Such interest rate cuts have provided significant relief to the highly indebted Portuguese economy (Torres, 2009). However, if Portugal could have managed the monetary policy on its own, probably it would have set a lower interest rate which combined with the initiative for strengthening financial stability (discussed in detail in the next section) could have led to the reestablishment of bank lending standards at pre-crisis level. In other words, the upward trend of the credit diffusion index, starting in the last quarter of 2008, could have continued to increase instead of contracting in 2009 (figure 3). Moreover, a dramatic reduction in real interest rates is the main channel through which fiscal consolidation can increase demand in the short run. Since this is not the case for Portugal, as the nominal interest rate is determined for the eurozone as a whole, while a deficit reduction is needed, it would be unwise to expect it to lead, by itself, to higher demand and lower unemployment à ¢Ã¢â€š ¬Ã‚ ¦ or à ¢Ã¢â€š ¬Ã‚ ¦ to a boom in investment, and through capital accumulation, to a substantial improvement in competitiveness (Blanchard, 2007, p.8-9). Secondly, the ECB has promoted coordination and cooperation between national supervisors through the European System of Central Banks Banking Supervision Committee. As result, the promoted cooperation engaged both the Euro-area and the European Union (EU) in an expansionary coordinated anti-cyclical fiscal stance (Torres, 2009, pp. 56-59). To further improve the EU coordinated approach, the European Commissions response was to launch the European Economic Recovery Plan (EERP) whose strategic aims is to avoid a deep recession by promoting a counter-cyclical macro-economic response to the crisis in the form of an ambitious set of actions to support the real economy. The plan consisted of an immediate budgetary stimulus amounting to 1.5% of EU GDP, a number of priority actions, grounded in the Lisbon Strategy, and designed at the same time to adapt our economies to long-term challenges, continuing to implement structural reforms aimed at raising potential growth and a set of EU guidelines to be followed by the member States (European Commission, 2008). According to Bà ©nassy-Quà ©rà © et al. (2009, p.39), out-of-ordinary methods are used in a financial crisis because: the traditional transmission of policy rates to lending rates is hampered by the dysfunctional state of money markets. This happens at two levels: first, the interbank rate (the rate at which banks lend liquidity to each other) diverges from the central banks policy rate because banks fearing counterparty default price risk accordingly; second, the spread between the commercial banks lending rate and the interbank rate increases both because of higher risk premiums and because banks seek to increase their profits. According to Meier (2009, p. 6), a switch to unconventional policy may be motivated by the severe turmoil in credit markets. With the financial sector in crisis, policy rate cuts are not only constrained by the zero bound, but may also be less effective than during normal times. The reason is the sharp tightening of credit conditions, as lenders have curtailed loan supply and certain sources of capital market funding have all but disappeared. Indeed, such dislocations can provide a rationale for launching unconventional policies even before interest rates hit the lower bound. In sum, unconventional monetary policies serve both as a complement and as an extension of standard operations centered around the setting of short-term interest rates. One of the unconventional actions is the so-called outright asset purchase, a technique to decrease the discrepancy between interbank and lending rates. Furthermore, Meier (2009) provides a categorization of such operations, distinguishing between qualitative easing, as sterilized interventions that do not involve an increase in the central banks balance sheet, and quantitative easing, as unsterilized interventions implying an increase in base money. Unlike the US and the UK, in the Eurozone the direct purchase of government debt instruments is forbidden by art. 101 of the EC Treaty, therefore quantitative easing is not contemplated. Figure 2 shows how liquidity provisions and out-of-the-ordinary policies, adopted by ECB, Federal Reserve (FED) and Bank of England (BOE), increased the size of the central banks balance sheets. Assets hold by the ECB are about 50% lower than FED and BOE because they executes quantitative ease operations (Bà ©nassy-Quà ©rà © et al. 2009, pp. 42-44). 2.2 Portuguese Policy Responses With the financial crisis Portugal has re-focused its economic policy from budgetary consolidation to an anti-cyclical budgetary policy effort to support households, investment, employment and, last but not least, to strengthen financial stability (MFAP 2009 as cited in Torres 2009). At the end of 2008, to guarantee stability of the financial system and to safeguard the households deposits held by credit institutions, the Portuguese government, following the trend of the other member states, decided to save two banks: the Banco Portuguà ªs de Negà ²cios (BPN) and the Banco Privado Portuguà ªs (BPP). In particular, BPN was nationalized and BPP was granted a guarantee for a bank loan provided by a group of banks. Although the dimension of those banks was small, the government feared that the potential loss incurred by many small depositors could generate a run of bank depositors in general, putting at risk the stability of the financial system (Torres, 2009, p.61). The second measure to strengthen financial stability was taken in October 2008 when the Portuguese Ministry of finance and public administration announced the endorsement of the Initiative for strengthening financial stability (ISFS) in order to respond to the substantial external shock, to which it was being subject, due to severe liquidity restrictions in international financial and money markets. The ISFS was aim to enhance conditions for credit institutions access to liquidity in financial markets and was based on granting State guarantees for the financing of credit institutions. According to MFAP(2008), this Initiative: (i) Enhances the confidence in the domestic financial system; (ii) Permits timely intervention adapted to market conditions; (iii) Is temporary, remaining effective only while market conditions have not returned to normal; (iv) Safeguards the interest of depositors and taxpayers; (v) Allows the shareholders and managers of banks to be held accountable whenever necessary and fosters the adoption of good corporate governance principles, in accordance with best international practices; (vi) Safeguards the interests of the market in general and a level playing field among competitors, in particular. According to Torres (2009, p. 60), the aim of the coordinated guarantees on new issuance of bank debt was to address funding problems of liquidity-constrained but solvent banks. Thus, this initiative was a viable and less costly source of funding to allow banks to issue new debts. A third measure was to take advantage of the increased flexibility of the Stability and Growth Pact (SGP) to pay outstanding state debts under the form of a program for the extraordinary settlement of the states debts to suppliers (Council of Ministers Resolution no. 191-A/2008 of 27 November as cited in Torres 2009). However, in my opinion the results of those initiatives were rather limited. I can, indeed, argue that, in Portugal, bank lending standards are tightening. In support to my opinion, figure 3 provides an evidence: the largest observed swing occurred from the last quarter of 2007 to the last one of 2008 when the diffusion index dropped sharply to the minimum observed value, representing the credit crunch. To evaluate the effects of the ISFS it is sufficient to look at the trend starting from the last quarter of 2008, the upswing lasts for only a quarter to stabilize at the level of about minus 45% compared to the pre-crisis conditions. The 19th of January 2009, the Portuguese government updated the Stability and growth Program for 2008-11. Following the EU guidelines concerning EERP, the government incorporated in the SGP program the Investment and Employment Initiative Program (IEIP), as fully consistent with the National Reform Plan for 2008-2010 (within the framework of the Lisbon Strategy), as it also aimed at contributing to addressing the countrys structural weaknesses. The draft law creating the IEIP was composed of five structural measures including several projects or actions to support households and businesses next to those aimed at combating the rise in interest rates and in the price of raw materials and food products and credit restrictions, which had already been envisaged in the state budget for 2009.. The IEIP was expected to have a budgetary impact of about 0.8 per cent of GDP in 2009 (about 0.5 increase in expenditure and 0.3 reduction in revenue in percentage of GDP). The five measures were: modernization of schools; fostering renewable energies, energy efficiency and energy transmission infrastructure; modernization of technological infrastructure and new generation broadband networks; special support to economic activity, exports and SME; protecting employment and strengthening social protection (Torres, 2009). 1). Higher investment in human capital help to avoid the risk of depression of productivity performance. In Portugal the educational attainment of the working-age population is low and the intergenerational educational mobility has been sluggish. Furthermore, the international student performance survey (PISA) shows that Portuguese students are below the OECD average (figure 4). To increase efficiency, the smallest schools have been closed and changes to the teachers timetable are allowing a more efficient allocation of human resources. Moreover, upper-secondary education has been diversified to incorporate technical and vocational courses (OECD 2009). and 3). Portugal might take advantage of the temporary increase in spending under the recovery plan to promote a leap forward to new competitive green goods and technologies. There is a clear case for the world, and for the EU to maintain its leadership in the process, and even more so for a small country like Portugal, to address climate change and the financial crisis at the same time by building up a competitive basis for sustainable development (Torres, 2009, p.66). Activity collapsed at the end of 2008 under the weight of the global economic crisis. The huge decline in external demand was caused by the falling activity in a number of Portugals major export markets, particularly Spain which accounts for about 25% of portuguese total exports. Moreover, insufficient harmonization of regulations with major trading partners seem to have impeded trade, particularly in services. Despite the governments announcement of additional revenue measures the deterioration in economic activity without further reductions in government outlays, or a more rapid economic upturn, means that the budget deficit could rise above 4.5% in 2010 and to increase further in 2011. The deterioration in economic activity was partly caused by the administrative burdens on business. Starting, running, and closing a business have been hampered by onerous regulation, including a cumbersome licensing regime that has weakened competition and, thus, productivity growth throughout the economy (OECD, 2008, 2009a, 2009c; European Commission 2009). Figure 5 provides evidence that Portuguese burden on business in the form of regulation are higher than EU average. Productivity growth has been sluggish during the last decade, lagging behind the OECD average with a decreasing trend since 1990 (figure 6), partly on account of labour market rigidities such as high employment protection and insufficient human capital accumulation. Those weaknesses have led to a further widening of the large productivity gap with respect to the Eurozone. The protection of workers against individual dismissal has been the most restrictive in the OECD, with very cumbersome procedures, as clearly highlighted in figure 7. The new legislation put forward by the Portuguese government is aimed to significantly simplify dismissal procedures. However, protection of regular workers against dismissals will remain more restrictive than in the average OECD country. Therefore, it is essential to enforce the reform measures because tighter credit conditions, weak exports, and subdued internal demand depressed business investment in 2009 and led to a labour shedding and an increase in the unemployment rate which is projected to reach a double-digit rate in 2010 (OECD , 2008, 2009c; European Commission 2009). According to Blanchard (2007), Portugal is today in a scenario of Competitive disinflation, defined as a period of sustained high unemployment, leading to lower nominal wage growth until relative unit labor cost have decreased, competitiveness has improved, the current account deficit has decreased, and demand and output have recovered. If we look at the Real Effective Exchange Rate (REER) of a country, an instrument which can be used to assess price or cost competitiveness relative to the position of the countrys principal competitors, it is easy to notice that Portugal has substantially lost competitiveness against Germany since 1995 (figure 8). A rise in the index means a loss of competitiveness taking into account productivity changes via the movement in comparative unit costs (Hugh, 2009). Therefore, as this trend is going on since 15 years it is hard to invert it without huge efforts and structural reforms. In the context of the budgetary policy, in 2008, Portugal has also taken action to reduce taxes through the cut of one percentage point of the VAT rate, the creation of a general corporate income tax rate of 12,5% and the reduction of advance income tax payments for SME (State Budget, 2009). Nevertheless, the fiscal position has deteriorated significantly in 2009 reflecting weaker economic conditions, lower revenues and spending rises to support the economy. Fiscal stimulus measures focusing on public investment, support to companies and exports and social assistance will directly increase the budget deficit (OECD, 2009a, 2009b). Torres (2009, p. 65) argued that: In a small open economy like Portugal, fiscal policy has limited effectiveness with regard to influencing aggregate demand. This applies even more to the current environment of financial distress and uncertainty, where banks will try to de-leverage and households to save. Moreover, the Portuguese economy is already particularly exposed due to its fragile financial position, as reflected in its accumulated external imbalances, which puts at stake the markets confidence in the sustainability of public finances. Given the risks involved for the costs of servicing the debt and ultimately for its solvency and permanence in EMU, it seems essential for the government to credibly pre-commit to medium-term budgetary objectives. It thereby signals its determination to pursue fiscal consolidation in spite of the temporary stimulating measures adopted within the EERP and to ensure that those exceptional measures do not mark a departure from budgetary sustainability. Moreover, external debt has been high and rising (figure 9) and, thus, leading Portugal to become the third eurozone economy to undergo a long-term credit rating reduction, to AA minus, by Standard Poors because of its failure to tackle deteriorating public finances (Torres, 2009, p.64). Finally, last but not least, Portugal is undergoing a strong disinflation process which is highlighted by the fall of the Consumer Price Index to its minimum levels (figure 10). European Central Bank council member and Bank of Portugal Governor Vitor Constancio is aware of the danger and has indicated that the ECB is prepared to reduce borrowing costs further to prevent inflation slowing significantly below its 2 percent ceiling, even going so far, if necessary, as to introduce some variant of quantitative easing. He still thinks it wont happen, but he is well aware of the possibility, as indeed we all should be (Hugh, 2009, p. 21). To conclude, it is important to point out that the inflation is expected to be under the OECD average during the whole 2010 to catch-up with the OECD countries after 2011 (figure 11). Furthermore, the danger of the risk of disinflation is real as shown in figure 12, where the harmonized index of consumer prices is expected to remain below the ceiling of 2% during the whole projected period. Conclusions: What should be done? The policy responses analysis has highlighted serious structural problems for Portugal and, as a matter of fact, Portuguese growth is expected to lag behind the OECD average during the whole 2010 and 2011 (figure 13). SUM UP PROBLEMS In fact, despite Portugal has made significant progress in fiscal consolidation and has launched important structural reforms to modernize the economy and enhance growth, in my opinion, additional structural reforms, in order to find a way out from the crisis, are still necessary, notably, in the following areas: Education The secondary education attainment should be improved since human capital represents one of the main durable determinants of growth in the long run. Moreover, reforming the educational system might enhance productivity performance. According to OECD (2009c), the reform should increase the proportion of education spending on non-wage items, continue to strengthen teachers on the job-training and to develop vocational and technical education and, finally, Portugal should fully implement a performance-based evaluation and career-progression system for teachers. Employment One of the clearest examples of the problems highlighted by the crisis is to be found in the stagnation of the labour market. It is essential to reform employment protection legislation with proposals aimed at enhancing the adaptability of the labour force, to address rigidities in labour market regulations and improve the efficiency of active labour market programs; otherwise the strictness of the Portuguese employment protection will continue to have negative effects on growth and productivity (OECD 2009c). Moreover, the unemployment rate is expected to be higher than the OECD average during the next two years (figure 14). Concerning the slow productivity growth problem, Blanchard (2007, p.8-20) suggests a decrease in nominal wages. Even if it sounds exotic, it can substantially reduce the employment cost of the adjustment. However, in Portugal today, the labor law forbids unjustified wage decreases and in practice rules out decreases in nominal wages for economic reasons. Business A deepening of the reform process is required to create a dynamic business environment by reducing the administrative burdens on business. Despite the importance of the recent reforms, a full implementation of them is essential. Competition in the whole economy should also be strengthened through investment in key infrastructure sectors, such as telecommunications, electricity and transportation, to enhance the quality, efficiency and quantity of the services they provide. This would have a direct effect on the cost-competitiveness of firms in Portugal, facilitate trade flows, domestically and internationally and make Portugal a more attractive destination for FDI, which has the potential to boost productivity (). Finally, OECD (2009c) recommends to harmonize regulations with major trading partners, including service sector standards and qualification requirements. Tax system A reform is necessary to simplify the tax system, broaden the corporate tax base and decrease tax expenditures in order to reduce fiscal imbalances. Designing and implementing fiscal consolidation remains a priority for Portugal because the deficit needs to be reduced. Silva (2008) provides empirical evidence that, in Portugal, taxes negatively affect productivity because an increase in the taxes decreases consumption, capital, output and welfare. Moreover, he states that for Portugal taxes are able to predict the pattern of the labour supply over the years. Therefore, the government should take into consideration how a tax system reform might serve a double objective: raise the productivity and reduce fiscal imbalances. Nevertheless, à ¢Ã¢â€š ¬Ã‚ ¦ Table 3. Actual and projected Macroeconomic evolutions, 2001-2007. Source: OECD