Managing Global Transitions International Research Journal editor Anita Trnavčevič, National Leadership School, Slovenia co-editor Dušan Lesjak, University of Primorska, Slovenia associate editors Roberto Biloslavo, University of Primorska, Slovenia Andrej Koren, National Leadership School, Slovenia Egon Žižmond, University of Primorska, Slovenia editorial board Boštjan Antončič, University of Ljubljana, Slovenia Zoran Avramovič, University of Novi Sad, Federal Republic ofYugoslavia Terriče Bassler, Open Society Institute, Slovenia Cene Baveč, University of Primorska, Slovenia Jani Beko, University of Maribor, Slovenia Vito Bobek, University of Maribor, Slovenia Fedor Cerne, Government Office for European Affairs, Slovenia KariDehli, University of Toronto, Canada Enes Duvnjakovič, Ministry of Education, Science, Culture and Sport, Tuzla Canton, Federation of Bosnia and Herzegovina Jeffrey Ford, The Ohio State University, usa Tim Goddard, University of Calgary, Canada George Hičkman, Memorial University of Newfoundland, Canada Andras Inotai, Institute for World Economics of the Hungarian Academy of Sciences, Hungary Hun Joon Park, Yonsei University, South Korea Štefan Kajzer, University of Maribor, Slovenia Jaroslav Kalous, Charles University, Czech Republic Neva Maher, Ministry of Labour, Family and Social Affairs, Slovenia Massimiliano Marzo, University of Bologna, Italy Luigi Menghini, University of Trieste, Italy Marjana Merkač, College of Entrepreneurship, Slovenia Kevin O'Neill, State University of New York, Plattsburgh, usa Susan Printy, Michigan State University, usa Jim Ryan, University of Toronto, Canada Boris Snoj, University of Maribor, Slovenia Ian Stronačh, Manchester Metropolitan University, uk Ciaran Sugrue, Dublin City University, Ireland Zlatko Šabič, University of Ljubljana, Slovenia Mitja I. Tavčar, University of Primorska, Slovenia Nada Trunk Širča, University of Primorska, Slovenia Ivan Turk, University of Ljubljana, Slovenia Zvone Vodovnik, University of Ljubljana, Slovenia Min-BongYoo, Sungkyunkwan University, South Korea Pavel Zgaga, University of Ljubljana, Slovenia v A FAKULTETA ZA | FACOLTÄ DI | FACULTY OF ^fl MANAGEMENT Managing Editor: Alen Ježovnik Editorial Assistant: Staša Ferjančič Editorial Office University of Primorska Koper Fačulty of Management Cankarjeva 5, si-6000 Koper, Slovenia Phone: ++386 (0) 5 610 2021 Fax: ++386 (0) 5 610 2015 E-mail: mgt@fm-kp.si www.fm-kp.si Copy Editor: Alan MčConnell-Duff Cover Design: Studio Marketing iwt Text Design and Typesetting: Alen Ježovnik Printed in Slovenia Managing Global Transitions International Research Journal volume 1 • number 2 • fall 2003 • issn i58i-63ii Table of Contents 115 The Editor's Corner 117 Competition and Oligopoly: A Case of uk Grocery Retailing Kevin A. Lawler Chih-Cheng Yang 135 Demand Functions for Services of Public Railway Passenger Transportation: An Empirical Analysis for Slovenia Jani Beko 153 Analysis of the Nature of Economic Growth of Slovenian Economy Matjaž Novak 169 The Yokes of Gender and Class: The Policy Reforms and Implications for Equitable Access to Education in Kenya Njoki Nathani Wane Wambui T. Gathenya 195 Unexpected Learning by Neophyte Principals: Factors Related to Success of First Year Principals in Schools Keith Walker Kirk Anderson Larry Sackney Jeff Woolf 215 Reflections, Comments, Discussions The Editor's Corner In our first number of the first volume the editorial board dedicatedly promised to keep moving toward our aim: to have a journal that would provide readers with findings and research in a variety of areas. We keep the promise - the second number is published. However, it was not only our promise that kept us moving and working on the second number. We were also encouraged by your responses to the first number. We have received positive and supportive letters and e-mails from readers in Europe and North America, which increased the enthusiasm to continue with our work. The letter by Alan Anov is published in this number in the new section called Reflections, Comments, Discussions. We kindly invite you to open discussions on the articles, send your comments and engage the audience in critical dialogues. The second number of the Journal embraces two research areas, eco- nomics and education. Kevin Lawler and Chih-Cheng Yang discuss the competition and oligopoly of uk grocery retailing. Their article might raise some interesting issues also for a reader who is not 'an economist'. Jani Beko discusses demand functions for services of public railway pas- senger transportation and Matjaž Novak provides an analysis of the nature of economic growth of the Slovenian economy. Slovenia has undergone major economic changes and restructuring in the recent, post-independence era, therefore both articles contribute to better un- derstanding and knowledge about current movements in the Slovenian economy. Njoki Wane and Wambui Gathenya analyse policy reforms in Kenya and their implications for equitable access to education. They dis- cuss 'gender' and 'class' barriers that might affect education for women in Kenya. With their article, the authors have 'opened a page' in our Journal that might be of an interest for other scholars and researchers - the ques- tion of equity which is still under-discussed in the current 'competition and survival' global village. Keith Walker, Kirk Anderson, Larry Sackney and Jeff Woolf discuss the first year school principals and factors that af- fect their success. Their article, if seen in the context of decentralization and devolution of power to schools, offers an insight into the first year principals who are confronted with challenges but also with tasks and duties that might threaten their success. The article might specifically be found interesting for those readers who work with principals. In November 2003, Faculty of Management Koper also hosts an in- ternational conference Knowledge Society: Challenges to Management. We hope to have the opportunity to publish some articles on this topic in the Volume 2 Number 1. We kindly invite you, the reader, to consider the topic and contribute your work to the Journal. Also other topics are welcome. Dear reader, author, Editorial Board member! At the end of 2003, let me use this opportunity to express my gratefulness and appreciation for your contribution to the Journal. Your work, either by contributing articles, reviewing them or working as a Board member, has shaped and framed the Journal. As the editor of the Journal I am pleased to have you 'on board' and wish you all the best in forthcoming 2004. Anita Trnavcevic Editor Competition and Oligopoly: A Case of uk Grocery Retailing Kevin A. Lawler Chih-Cheng Yang In this paper we develop a model of Bertrand price competition with uncertainty as to the number of bidders. The auction models predict retail price dispersion as an observable feature of price discrimination. The implications of the auction models are tested using a logit model on primary data. Some simulations of the logit model further enrich and capture critical states of chain-store rivalry. The findings show that consumer characteristics define type of store choice and that an auction model of price competition with uncertainty is an appropriate way to model retail grocery competition. Introduction In this paper, we use the term 'discount stores' to apply to those which offer a wide selection of primary shopping venues and which are char- acterised by low prices and low service attributes. With particular refer- ence to the North East, the dominant discount formats are represented by Aldi, Lidl, Netto, Kwik Save and Somerfield. The quality supermarket retailers that feature higher quality service levels and higher prices are Asda, Morrisons, Sainsbury's Safeway and Tesco. Competition between these two strategic groups creates price dispersion in urban grocery mar- kets. The aim of the paper is to explain this phenomenon in terms of market segmentation and auction theory. Hypotheses concerning price dispersion derived from the auction model are tested using logit analysis. In theory, discount stores may enhance price competition in grocery sub-markets because: 1. they represent a significant innovation appealing to price sensitive buyers, 2. they are a means of low cost entry in supermarket sub-markets in metropolitan areas, Dr Kevin A. Lawler is Head of the Higher Education, European School of Management, uk. Chih-Cheng Yang is a PhD candidate in Applied Econometrics at the University of Sunderland, uk. 3. discount stores constitute new strategic groups in Porter's (1976) sense, potentially reducing the ability of incumbents to coordinate competition, 4. they stress low prices so their entry is likely to stimulate price rivalry with at least some incumbents. Apart from the perception of relatively low price levels, there are no universal features that can be applied to describe all discounters, how- ever within the discounter category there are further sub-divisions which are - limited line discounters, discount supermarkets, hypermarket dis- counters (Kaas 1994). To date, uk supermarket sub-markets have been dominated by the multiples, Sainsbury's, Tesco, Safeway, Asda and Gateway (Davies 1992). The competition between the dominant players in these markets in the uk has instigated iterative changes in the strategic characteristics of the major supermarket chains. As a consequence, the uk multiples have con- verged towards adopting a homogeneous format, where all have simi- lar attributes in, for example: national coverage, quality product ranges, quality images, high service levels and superstore/hypermarket locations. Marion (1998) suggested that each of the food store formats illus- trated in Figure 1 constitute new strategic groups. Different formats offer a unique mix of price, non-price and service characteristics. Formats on or above the horizontal axis compete with each other for major shopping trips of consumers: the remaining groups largely compete for secondary shopping activity. Roberts et al. (1996) argued that price dispersion may result from such factors as costs or other unobserved brand heterogeneity. In this study, we seek to contribute to an understanding of strategic market segmenta- tion between discounters and quality chain-store food retailers. A feature of many studies of supermarket grocery retailing is that the focus of the econometric work is at an aggregative level where time series data exist. The focus of this study is, by contrast, on the demand and supply sides of grocery sub-markets. The contribution of the paper is to estimate the conditional probability that buyers with certain characteristics make re- peated trips to similar classes of store. Throughout the rest of the paper the generic discounter groups are referred to as type d store, whereas the quality multiples are dubbed type p stores. The paper seeks to make a specific contribution in two areas: first de- veloping a Bertrand model with uncertainty as to the number of direct Competition and Oligopoly: A Case of uk Grocery Retailing 119 Primary Shopping Hypermarket Discounters e. g. Aldi, Kwik Save, Lidl, Netto, Lo-Cost, Food Giant, Co-op's Pioneer Low Price, Low Save n' Spend, Netto, Aldi, Dales, Kwiksave, Lidl o Departmental store, House of s- v Fraser, John Lewis Partnership Group Hypermarket stores, e. g. Tesco, Safeway, Sainsbury's, Asda - High Price, High cz^ Convenience Stores: Safeway, Tesco, Spar Secondary Shopping Figure 1: Strategic Groups in Grocery Supermarket Sub-markets in the North East rivals using an auction format. Second, the paper tests implications of this model regarding consumer choice using logit analysis. Applying Auction Theory to Retail Grocery Price Competition The similarities between Bertrand price competition and first price sealed bid auctions is well known (Baye 1997). The model developed here can be viewed as tackling the question as to what is the optimal bid if the number players in a sealed bid auction is not known. How- ever, uncertainties can arise on the demand side too, when consumers know some retail prices today but they do not know all prices today or tomorrow. Moreover, time constrained buyers may regard rival goods as new perfect substitutes, or search costs may be unclear from the grocer's viewpoint or, consumers may simply vary in sophistication regarding search behaviour. A Simultaneous Symmetric Bertrand Model Let the variable x represent the probability that a given grocer does not continually compete, so periodically does not bid for particular classes or brands of groceries. This could be because the current supply chain has reached capacity, priced grossly in excess of reservation prices by mistake or, because some consumers have not realised that a particular seller may bid or is bidding. Accordingly we model a first price sealed bid auction for grocery retailing. This captures the essence of Bertrand price compe- tition in grocery sub-markets, where a number of grocers offer repeated bids to consumers without knowing how many rival bidders are actively competing in specific or general branded grocery products. a price discrimination model Let there be a grocery sub-market: of N + 1 risk neutral grocers which submit and announce bids pi to supply consumers. Each grocer has a marginal cost of c, or, with a probability independent for each grocer, infinity, which is increased only if the grocers capture consumers. Gro- cers with high marginal costs do not compete or exit general or specific product classes. The consumer buys grocery bundles at the best known prices and pays up to a reservation maximum of Pmax. If grocer i uses a mixed strategy we depict the distribution of prices as pi; x represents the probability that a grocer exists but does not compete. The grocers an- nounce bids simultaneously via advertising messages to supply branded products. It is now well known that there are no pure strategy Nash equi- libria, unless x is 0 or 1. If x is zero, firms charge c; if x= 1, there are no rivals and all grocers exit specific product classes. This could be caused by disruptions to the supply chain. If x E (0,1) no viable unique price equilibrium is possible for P > c. If the two lowest prices that exist are not equal or, where all firms have minimum prices, a firm gains by increasing prices (the Edgeworth case). If the two lowest prices were equal, one grocer could cut price and gain market share. However, there is no equilibrium where pi = c; this is the zero profits textbook Bertrand point, because firm raising price could get a surplus of Pmax c with probability of xN. The equilibrium is now therefore in mixed strategies. Thus, the standard textbook version of the Bertrand Paradox is a false theorem (Klemperer 2000). Each firm picks price > c, but less than Pmax. Since any firm gains positive profits at Pmax and wins with a probability of xN, the range of strategies must be bounded by (P, Pmax), where P > c. A symmetric equilibrium for N + 1 1 exists where: (1) for the price range [xNPmax + (1 - xN) cPmax] (see p. 130). max In this case profits are positive, but expected price and profits fall smoothly as the number of firms increases, as in Cournot. In this model the lowest bid wins consumers with certainty and still earns a profit. Risk averse sellers gain in this model by continually pushing prices down. High prices are a gamble in the hope that rivals are temporarily inactive. an asymmetric bertrand model with two sellers: type d and type p grocers Proposition 1: Two sellers: type d stores are always competing, the type p grocers enter and exit product classes repeatedly. P(c) = (1 — x) where x is the probability of exit. (3) Let both types of seller have different mixing distributions over [Q, Pmax]. The equilibrium is: 0 for p< (1- x)c+xPmax, Ji (p) = 1 - X(Pma^ ~ c) for pe[(l-x)c + xPmax,Pmax], p c 1 for p > Pmax, 0 for p < (1 - x)c+ xPmax, F2(p) = 1- x P"i;ix ~p for pe[(l-x)c + xPmax,Pmax], 1 — x p — c 1 for p > Pmax. Continuous price dispersion is the clear outcome for the asymmetric case when p c. Implications of this auction model for sub-market grocer price strategies are as follows: 1. A continuous pure strategy for discounter is not sustainable in re- peated plays if consumers search costs change due to, say, increased on-line shopping. Moreover, if due to demographic changes, new consumers enter the sub-market then the equilibrium strategies for both types of supermarket groups need to be mixed. 2. In particular, the discounters will need to use mixed strategies. In such situations, let the probability of not competing for previously segmented bundles of goods be - and indeed is - the probability of competing. The auction model identifies precise boundary condi- tions for this outcome. Hence repeated plays will induce greater sub-market price dispersion for the two groups as both utilise mixed strategies. The auction model clarifies this important point as the two groups, being competitive bidders, perceive the game as an ascending and/or descending price auction in branded goods. Price dispersion will not necessarily narrow even with new entry, as prices vary between Pj > c but less than Pmax for both types of store format. Hence third degree price discrimination is a probable strategy for both formats. This could be proved using the revenue equivalence theorem (Klemperer 2000). Testable Hypotheses Derivable from the Models The auction model permits the formulation of the testable hypothesis that demand and supply side uncertainties are a primary cause of price dispersion in grocery sub-markets. However, in this model, search costs faced by consumers create the opportunity for sellers to practise price discrimination. The possibility for price discrimination is caused by un- certainty in the market. All sellers adopt mixed strategies targeted at different consumer demand characteristics. Search constraints faced by consumers allow both types of seller to use mixed price strategies to in- duce periodic price oscillations, thus generating different degrees of price dispersion. An interesting research question implicit in the models con- cerns the degree to which consumer characteristics of search behaviour may determine store choice in the context of price discrimination. We approach this issue using logit analysis on primary data collected in the uk. Testing Implications of the Models - Using Logit Analysis the data The data were collected between 10 am to 7 pm in Newcastle upon Tyne, Sunderland and Middlesborough central business districts through di- rect interview by researchers who approached consumers randomly. Buyers were asked a set of straight-forward questions regarding total weekly grocery expenditure, income, distances travelled for primary shopping, value for money perceptions, type of store preferred, and the most significant reason for choice of store format. Approximately 2000 people were approached, and a total 497 completed questionnaires were obtained. Of the incomplete questionnaires, approximately 603 people refused to give income details and the remainder would not divulge weekly expenditure levels. Nonetheless, the data obtained are rich, ge- ographically diverse and comprehensive. The regressors to be used in the logit analysis were tested for independence. The null hypothesis that there was no association between regressors X1 to X7 was rejected in all cases. This is consistent with theoretical propositions relating to differen- tiation, and in particular the predictions of Hotelling's (1929) oligopoly model. We now turn to consider the econometric model. From a con- sumer perspective, choice of a store depends upon whether the store is price-orientated or not, as this leads to expectations about relative price levels offered by different stores, as evident in the auction models. How- ever, service levels and other aspects of the store environment are an issue creating product differentiation in consumer services and service quality levels. the model and results To analyse the impact of different consumer characteristics in determin- ing store choice, we conducted a logit analysis of the sample data. The objective was to predict the conditional probability of a consumer patro- nising either type of store given seven characteristics which are illustrated in Table 1. The following equation was estimated: 1 P(Y= 1| Xu ....X 1 + exp[-{ß0 + ßi Xu + - • • + ß7Xli}\' The above series of classifications identifies 256 (i. e. 28) different types of consumer in the north-east of England. The objective here is to calcu- late the conditional probability that any one set of consumers choose ei- ther a type p or d store. It is important to note that each set of consumers is identified by seven characteristics. All characteristics must therefore be present for different consumer sets to be captured. Hence, the combina- tion of all seven characteristics generates a unique class of consumers. We used the logit model to estimate these conditional probabilities. The model descriptors are given in Table 1. The estimation was carried out using Microfit 4, which has a well established routine for this purpose. The computer output consists of a table containing the estimated coeffi- cients, t-ratios and 'goodness of fit' measures. These values are presented in Table 2. Following these points, it should be pointed out that an in- significant t value reported for a given regressor is not of any particular consequence, since we are not interested in any significant combination of these regressors. We are only interested in the combined influence of all regressors that jointly identify different sets of buyers. Our base run findings are given in Tables 3 and 4. However, by setting the regressors Table 1: Consumer profiles in the uk north-east: Model Descriptors Consumer Status Descriptions Input = 1 Input = 0 characteristics of variables Y Dependent Choice of store Discounter Quality multiple Xi Independent Distance to store Equal to or less than 3 miles Over 3 miles X2 Independent Value for money Both price and Either price or by consumers non-price expectations are met non-price expectations are met X3 Independent Firms are acti- vely competing in identifiable classes of bran- ded groceries Price Non-price factors; e. g. convenience, stock range, service, quality of products X4 Independent Consumer type Strategic buyers Time-constrained X5 Independent Level of income Less than or equal to £16,000 per year Over £16,000 per year Xa Independent Means of transportation On foot Public or private transport X7 Independent Store loyalty Yes No X1 -X7 at different levels permits an interesting set of simulations which can be compared with the base run. With respect to the base-run the 'goodness of fit' statistic and other diagnostics are sound (Table 2). Summary of Simulations Table 5 provides the statistic results from the simulations and the findings are summarised as the following: 1. When all are given equal locational distances, a positive change in signs X5 (income) and a negative change in X7 (loyalty) are ob- served, but both are insignificant. 2. Compared with the base case, when value criteria are all met, the only noticeable but insignificant changes are positive on income (X5) and negative on store loyalty (X7). 3. When all grocers compete on price factor, compared to the base run, it changes signs for distance (Xi), value (X2), and means of trans- Table 2: Logit Maximum Likelihood Estimation for Discount Stores: Base-Run Case Dependent variable is Store Choice - 497 observations used Regressor Coefficient Standard Error T-Ratio [Prob] Xi -.70603 .21851 -2.5888[.ooo] X2 -.76905 .19374 -3.9695[.ooo] X3 .58802 .22454 2.6388[.oo4] X4 .54369 .22468 2.4645 [.004] X5 -.50669 .23297 -1.92967[.005] X6 -1.4100 .21249 -6.6357[.ooo] x7 .52646 .25663 2.139o[.oo5] Marginal effects = .16112 Goodness of fit = .79678 Pseudo-r2 = .30589 The estimation method converged after 6 iterations portation (X6). This is a significant impact on the sign for consumer types (X4). 4. When all consumers are strategic buyers, positive changes to in- comes coefficient (X5) are noticed and store loyalty dramatically falls. 5. When all consumers are on low incomes, all coefficients stay very similar but again store loyalty drops significantly compared to base case. 6. When consumers all have zero travelling costs, again income (X5) and store loyalty (X7) observably change the signs. 7. When there is repeated store switching, compared to base run, this changes the sign of the income coefficient. The findings of base-run compared with simulations are summarised in Table 6 for comparative purposes. The consistency of the base findings with the simulated results for high probability cases is extraordinary. The base case characteristics of consumers who patronise discount stores are seen to be those who travel less than 3 miles, search for good value, per- ceive the store as competing in price, have low incomes and travel on foot to the store. They also exhibit high store loyalty. For the high proba- bility cases there is a good degree of harmony between the base-run and the simulations. Thus, in these simulations, consumers who use discount Table 3: Base-run of consumers profiles and probabilities of choosing discount stores Consumers' profiles i 3 <3 0 o* o-* a 1 3 Probabi- Distance 3 miles Value for money Firms are actively Consumer Income level at Means of lities residual competing in behavioural type £16,000 p.a. transportation identifiable classes (costs incurred) of branded goods Store loyalty > <= Yes No Non- price Price T.c.i S.b.2 >= < Cars, etc On foot Yes No 0.77871 * * * * * * * 0.68676 * * * * * * * 0.60858 * * * * * * * 0.58478 * * * * * * * 0.52049 * * * * * * * 0.5 * * * * * * * 0.45487 * * * * * * * 0.38265 * * * * * * * 0.25586 * * * * * * * 0.21889 * * * * * * * 0.1811 * * * * * * * 0.16035 * * * * * * * 0.1376 * * * * * * * 0.11928 * * * * * * * 0.10165 * * * * * * * 0.095889 * * * * * * * 0.076697 * * * * * * * 0.05563 * * * * * * * £ 3' t-i a a 3 Kl, O 3- O 3- <3 £ <3 1. Time constrained consumer 2. Strategic buyers Consumers' profiles £ ? 3 o1 to lo £ O S Probabi- Distance 3 miles Value for money Firms are actively Consumer Income level at Means of lities residual competing in behavioural type £16,000 p.a. transportation identifiable classes (costs incurred) of branded goods Store loyalty > <= Yes No Non- price Price T.c.i S.b.2 >= < Cars, etc On foot Yes No 0.97297 * * * * * * * 0.96827 * * * * * * * 0.94928 * * * * * * * 0.932 * * * * * * * 0.9215 * * * * * * * 0.9029 * * * * * * * 0.88968 * * * * * * * 0.85239 * * * * * * * 0.8318 * * * * * * * 0.8068 * * * * * * * 0.77978 * * * * * * * 0.7624 * * * * * * * 0.70358 * * * * * * * 0.65636 * * * * * * * 0.58032 * * * * * * * 0.5 * * * * * * * 0.45886 * * * * * * * O o >1 a 3 Kl, O t o O a C * O o n TO >3 1. Time constrained consumer 2. Strategic buyers Table 5: Results of Simulations on Each Variable; Coefficients and t-ratios Coefficient Xi* XA* x7* Xi -2.4211 -.25682 .065416 -.37271 -.26749 -.20416 -.31525 X2 -.56811 -2.2108 19094 -.51745 -.51901 -.60455 -.58748 X3 1.4726 1.3588 1.7518 1.6312 1.4943 1.5010 1.5048 X4 .94262 .89269 -1.1405 -1.7298 .99876 .93296 .92905 X5 .50905 .45390 -.50610 .64867 -1.8872 .61875 .51952 X6 -.46711 -.54512 .53017 -.52046 -.64258 .61875 -.51575 x7 -.10519 •11539 •23538 -.058869 -.032405 -.079572 -2.2172 t-Ratio [Prob.] Xi -5.3720 [.000] -.76773 [.443] .20150 [.840] -1.1144 [.266] -.79297 [.428] -.61555 [.538] -.94004 [.348] X2 -2.0181 [.044] -4.2221 [.000] .72642 [.468] -1.8713 [.062] -1.8616 [.063] -2.1572 [.031] -2.0896 [.037] X3 5.5405 [.000] 5.2908 [.000] 3.4654 [.001] 6.2179 [.000] .6090 [.000] 5.6422 [.000] 5.6501 [.000] X4 3.4752 [.001] 3.3075 [.001] -4.3561 [.000] -3.4309 [.001] 3.7153 [.000] 3.4434 [.001] 3.4195 [.001] X5 1.8780 [.061] 1.6912 [.091] -1.9314 [.054] 2.4367 [.015] -3.7357 [.000] 2.3327 [.020] 1.9138 [.056] X6 -1.5885 [.113] -1.8361 [.067] 1.8551 [.064] -1.7702 [.077] -2.2072 [.028] -6.1829 [.000] -1.7245 [.085] X7 -.33819 [-735] -.37383 [•709] .79065 [•430] -.19160 [.848] -.10420 [.917] -.25521 [•799] -4.5640 [.000] Marginal effects .12210 .12310 .134719 .12726 .12337 .12256 .12144 Goodness of fit .82093 .81690 .81690 .81891 .82294 •83099 •82495 * Targeted variables; changing in sign indicated in bold case. stores, are consistently revealed to be strategic buyers who perceive price competition as a key factor. This is true in all the simulations (Table 6). However, for the lowest probabilities cases, there is no consistency with the base run. For example, although store loyalty is high in the base run, it is not observed in the low probability cases. Thus, for example, store loyalty is low and most buyers are time-constrained. The use of the logit model for simulations is a powerful way of restating some results from the base run. Moreover, the simulations are a legitimate way to configure consumer characteristics when all the regressors are 'environmental' or not directly under the control of the firm. Use of logit analysis for sim- ulation on variables under the firms' control would be inappropriate. The simulations create different computer generated sub-data sets of the base case. In a sense they are clones of the base run when one regressor is altered each time. In this way, consumer profiles are enriched. Implications of the Findings The findings of the logit model and simulations indicate significant fea- tures relating to consumers who patronise discount and quality gro- cers. Quality stores clearly have an advertising communications strat- egy which links directly to service levels and non-price factors which time-constrained buyers need. Consumers who regularly conduct pri- mary shopping at discount stores are typically strategic buyers. The auc- tion models predict that both stores are strategically positioned for price discrimination targeted on grocery sub-markets. Time-constrained buy- ers will on the basis of the logit model regard prices at quality stores as representing poor value for money compared to discount stores. A typical consumer profile for a discounter's consumer would be a strate- gic buyer who was price sensitive with an income level higher or lower than £16,000 p. a. A fundamental feature depicted in Tables 3 and 4 is that there is clear linkage between value for money, price as the most important reason for store choice and strategic buying clearly locating the grocery discounters sub-market base. This is clear from the simu- lations, too. By contrast, a quality store's customer base is defined by time-constraints rather than 'value-for-money' or price considerations. That said, there is high probability that a consumer using a quality store will perceive prices as being too high and 'value-for-money' low com- pared with a discounter. Hence the time-constrained consumers using quality stores trade off value for money and relatively high prices against high service levels and other aspects of vertical product differentiation. The findings in Tables 3 and 4 produce clear possibilities for third de- gree price discrimination in grocery sub-markets and provide an ex- planation of enduring price dispersion (Walsh and Whellan 1999). In- deed, the grocery sub-market price dispersions are endogenous to the auction model. Moreover, consumers who choose discount stores gen- erally believe that these stores offer better 'value-for-money' than those consumers who normally use quality stores. This is true in the base run and the simulations. Paradoxically, enhanced price dispersion may be an outcome of increased new entry in grocery retailing. Inspection of Tables 3, 4 and 6 shows clear market segmentation built on the char- acteristics of consumers and the potential for price discrimination. The simulations underline this, too. Critically, if search behaviour changes or time-constraints rise or fall then both types of format need to use mixed strategies or exit product lines periodically. This is clear from the auction model and is supported in the literature (Cotterill 1983,1986,1992). The simulations using the logit model are a powerful tool for estimat- ing differences in characteristics. Thus when all stores are given the same location details, the other coefficients are much of the same in terms of directional changes. When all stores in the sample are given value for money equivalence - when all compete in price - the change in the coef- ficients is marginal. Again when all consumers are strategic buyers with no time constraints, the main change is that store loyalty goes down. Conclusions Most spatial models have a single-dimensional feature on which sell- ers are placed (straight lines or cycles) about which consumers are dis- tributed uniformly. The assumption in such models is that consumers differ in preferences with respect to a single good characteristic. In re- ality, grocery consumers may have different tastes and preferences over many sellers and goods characteristics. An exception to this is Palma et al. (1994) and others who have treated two or more characteristics of spatial price dispersion of market space and search costs within it using nested logit specifications. Our focus is on the effects of vertical and horizon- tal product differentiation on price equilibria and dispersion, in grocery sub-markets. One of our findings is that large sellers emphasising service quality and wide choice charge higher prices for wide ranges of branded groceries. This is at odds with the Palma et al. result (ibid). However, the findings of the logit are robust and point to consistency in findings be- tween the base-run and the simulations (Table 6). The simulations con- sistently changed store loyalty, means of transportation, perceptions of value for money. The other coefficients are, in many cases, very similar. This is further evidence of the robustness of the logit model/developed. Proof For the price range [xNPmax + (1 - xN)cPmax]. Table 6: A Comparison of Consistencies of the Base Run with the Simulations Characteristics X\ < 3 miles X2 - value X3 - firm X4 - strategic X5 - income Xg - means Xj - store competing buyers < 16,000 of travel loyalty on price Highest probabilities Base-run 0.77871 / / / / k / / Simulation i 0.62318 / k / / / k / Simulation 2 0.55917 / / / / / k / Simulation 3 0.72673 / k / / / k / Simulation 4 0.54422 / k / / / k / Simulation 5 0.5838 / k / / / k / Simulation 6 0.58883 k k / / / / / Simulation 7 0.60371 / / / / / k k Lowest probabilities Original 0.05563 k k k k / k k Simulation 1 0.027611 / / k k k / k Simulation 2 0.041964 / / k k k / k Simulation 3 0.051048 / / / k k / k Simulation 4 0.039191 / / k / k / k Simulation 5 0.03394 / / k k / / k Simulation 6 0.027069 / / k k k / k Simulation 7 0.02569 / / k k k / k O o >1 a 3 Kl, O t o O a C « O o n to >3 A Proof of the Simultaneous Symmetric Bertrand case We hypothese that, with equilibrium existing in the range (P, Pmax), the expected payoff to firm i, is from a pure strategy, Pi = p is then: m(p) = \J (xN + (1 — rN)(l — f(p))N[p — c]. Over this range *is equal for any price. When P = Pm ni(Pmax) = x (Pmax _ c)• (2) (3) Since i, wins if and only if (iff) no other firm bids (except when other prices are Pmax which has zero probability). Equating (2) to (3): ^XN + (1_ 1- f(p))N[p-c]= XN (Pmax c), which solved yields: m= N1 by definition P from (5). 0 = 1 r xN 1 PP -'max r [l-xN\ P-c r xN 1 PP -'max r [l-xN\ P-C which yields: P=XNPmax + (1~ XN)c. The expected price that a firm charges is P such that: 0.5 = f(P) = which yields: c Pm 1 r xN 1 PP -'max r l-xN F -c P c)x N [1 - 0.5^(1 +xN)Y The expected n for ith firm is: ni = {1- XxN( Pmax c) • Profit decline as N increases for individual firms. Expected industry profit is therefore: N+1 2 = (N + 1)(1- x)xN(Pm i=1 (4) (5) (6) (7) (8) (9) (10) References Baye, M., and J. Morgan. 1997. Information transmission, information ac- quisition and price dispersion in 'thin' markets. Working paper, Indi- ana University, Kelly School, Department of Business Economics and Public Policy. Cotterill, R. W. 1983. The food retailing industry in Arkansas: A study of price and service levels. Unpublished report submitted to the Honor- able Steve Clark, Attorney General, State of Arkansas. Cotterill, R. W. 1986. Market power in the retailing food industry: Evi- dence from Vermont. Review of Economics and Statistics 68:379-86. Cotterill, R., and L. Haller. 1992. Barrier and queue effects: A study of leading us supermarket chain entry patterns. Journal of Industrial Eco- nomics 40:427-40. Davies, G. 1992. Positioning, image and the marketing of multiple retail- ers. International Review of Retail, Distribution and Consumer Research 2:13-35. Kaas, P. 1994. The rise of discount: How to survive the profit squeeze? British Food Journal 92 (2): 18-22. Klemperer, P. D. 2000. Why every economist should learn some auction theory. An invited paper for the World Congress of the Econometric Society, Seattle, 11-16 August 2000. Marion, B. W. 1998. Competition in grocery retailing: The impact of a new strategic group on bls. Review of Industrial Organisation 13:351-99. De Palma, A., R. Lindsey, B. von Hohenbalken, and D. S. West. 1994. Spa- tial price and variety competition in an urban retail market: A nested logit analysis. International Journal of Industrial Organisation 12:331-57. Porter, M. E. 1976. Interbrand choice, strategy, and bilateral market power. Cambridge, ma: Harvard University Press. Roberts, J., and W. Supina. 1996. Output price, mark-ups and producer size. European Economic Review 40:909-21. Walsh, P. P., and C. Whellan. 1999. Modelling price dispersion as an out- come of competition in the Irish grocery market. The Journal of Indus- trial Economics 47 (3): 325-43. Demand Functions for Services of Public Railway Passenger Transportation: An Empirical Analysis for Slovenia Jani Beko The paper deals with the estimation of demand functions for services of public railway passenger transportation in the case of Slovenia. Six demand functions were selected and separately interpreted. The aggre- gate values ofdemand elasticities reported in this paper suggest that the railway passenger demand is price and income inelastic. Coefficients of income elasticity below unity show that the services of railway passen- ger transportation in Slovenia can be classified among normal goods. A hypothetical increase in average real fares leads to a percentage de- crease in the number of passengers travelling by rail that is smaller than the percentage increase in fares. The estimated price elasticities imply that, in the short run, there is potential for improving revenues of the railway operator by increasing average real fares. Introduction In the literature we can find detailed descriptions of a range of factors and their specific characteristics (a variety of products offered by rail- way companies, complexity of the production process in railway trans- portation, and a business environment of the railway companies that is strongly affected by state regulations), which explain the dominant struc- tural changes in railway transportation in either a comprehensive or a specific manner. However, there are fewer empirical estimates of the de- mand functions for services of railway passenger transportation that are directly based on chosen parameters of consumer behavior. The result of these analyses is the identification of the degree to which these services are attractive for average consumers with respect to prices and their in- come. The opinion is that the demand for services of different modes of transportation is typically inelastic, since transportation costs are rela- tively small in comparison with the value or utility of these services. But the estimates for the coefficient of income and price elasticity of demand for railway passenger services can also be heterogeneous. The outcomes Dr Jani Beko is Assistant Professor at the Faculty of Economics and Business, University of Maribor, Slovenia. of the studies depend on the specification of functions, the level of ag- gregation, and how stiff the competition is on the railway market and transportation market in general. Despite the fact that several empirical studies have confirmed relatively inelastic price and income demand for services of railway passenger transportation (Owen and Phillips 1987; de Rus 1990, Goodwin 1992, Oum et al. 1992, Luk and Hepburn 1993), one should not ignore the tendency toward the gradually increasing magni- tude of coefficients of elasticity of demand that can be observed within a longer time horizon. The article presents the estimates of responsiveness of demand for ser- vices of railway passenger transportation for chosen price and income el- ements in Slovenia. The theoretical concepts of price elasticity of demand are described in the second section of the paper. In the third section, we first classify the groups of variables that are used in the empirically ori- ented literature abroad. We then compare them with the characteristics of the currently available data base in Slovenia and, using methodologi- cal and content criteria, choose the set of data series to be used for esti- mation. Different specifications for the demand function for services of railway passenger transportation are delineated in the fourth section. In the fifth section we show the estimates, and we conclude with a summary of the key findings. Concepts of Demand Elasticity Economic theory distinguishes between two concepts of demand func- tions: ordinary demand function and compensated demand function (Nicholson 1995). From this division are usually derived two types of price elasticity of demand: ordinary and compensated elasticity of de- mand (Oum and Watters 2000). The ordinary demand function (Mar- shallian demand) is based on maximizing the consumer utility function, which is subject to the budget constraint. The Marshallian demand is formally set as follows: X=dx(Px, Py, I, s, e), max U = u(X, s, e), where X represents the quantity demanded, Px the price of good X, PY is the vector of prices for other goods, I is available income, s is a vector of socio-economic factors (economic activity in home economy, inter- national economic environment, type of market structure, etc.), e is a vector of stochastic disturbances, and U utility of a consumer. In the de- mand function set up in this way, the change of PX causes two effects: the substitution and income effect. The substitution effect shows changes in the demand of individuals due to changes in the reference price, given the unchanged level of utility. The income effect comes about because the changes in the reference price change the real purchasing power of income, which affects the changes in the quantity consumed. The dy- namics of this depend on the ratio of consumption to income. Compensated demand (Hicksian demand) is based upon minimizing consumer expenditures (E) at a chosen level of utility. It can be formal- ized as follows: X=hx(Px, Py, U, s, e), min E= e(I), Px-X+Py-Y= I. Since the curve of compensated demand represents the relationship between the changing reference price and the quantity demanded with unchanged other prices and utility, the compensated elasticity of de- mand, unlike the ordinary elasticity of demand, shows only the substitu- tion effect for chosen changes of prices along a given indifference curve. Choosing between both concepts of elasticity for empirical analysis, and before that between the concepts of demand functions, is a ques- tion of their methodological suitability. The concept of the compensated demand function is appropriate to estimate, for example, consumer sur- plus. However, the availability of data on the dynamics of income and price variables allows for easier estimation of the ordinary demand func- tion. The problem concerning compensated demand is also the utility function, which cannot be measured directly. Demand functions for services of passenger transportation are usu- ally formed under the assumption of a utility maximizing representative consumer, subject to his/her own budget constraint. Therefore almost all studies of the estimates for price elasticity of the demand for services of passenger transportation cite elasticity that simultaneously includes income and substitution effects, although the authors do not empha- size this and only rarely discuss the differences between the two concepts of elasticity (Oum et al. 1992; Oum and Watters 2000). This study es- timating the demand functions for services of public railway passenger transportation for Slovenia is also along these lines. Presentation of Data Base In estimating the demand functions for services of public railway passen- ger transportation within the country, the authors usually include five groups of explanatory variables, which can be divided into two classes.1 The first class comprises the variables with which we are trying to capture socio-economic factors. It is possible to distinguish among four groups of variables: • price variables; • income variables; • seasonal factors; • other socio-economic factors. In the second class we place the group of variables that express quali- tative components of the demand factors: • frequency of arrivals and departures; • saved travelling time in comparison with alternative modes of travel; • quality of services that supplement the basic service (transporta- tion). The choice of the variables to be used from among a range of those theoretically recommended depends on the chosen methodological pro- cedures of the estimation of demand function parameters, the level or aggregation in demand functions, and on available statistical data. In the present paper we employed the widely used econometric me- thod of ordinary least squares (ols). This requires, among others, suffi- cient length of time series. available time series The demand functions estimated in this study reach the highest level of aggregation since the dependent variable represents the total number of passengers transported by railway traffic in Slovenia.2 The dependent variable is thus not disaggregated into different routes, groups of pas- sengers and fare classes.3 Because of the aggregate approach, we have to eliminate all the theoretically suggested variables from the second class. Introduction of the qualitative components requires the disaggregation of passengers according to different routes, which can be alternatively supplemented with disaggregation of the number of passengers into dif- ferent groups (transportation to school, commuting to job, etc.). Thus we can use only socio-economic variables for the estimation of the equa- tions, however we can choose among different time series (Table 1). Table 1: List of available time series for different groups of independent variables Price variables Deflators Income Variables Variables of variables of seasonal other socio- factors economic factors Average fare Railway passenger Real gross Dummy Number of transportation domestic variables first-time price index product registered (rptpi) personal cars Average fare per Services price Registered Prices of passenger kilometre index (spi) real petrol household income Railway passenger Transportation Prices of rep- transportation price price index (tpi) resentative index (rptpi) personal cars Price of tickets without Transportation and discount for second communications class journeys (21-25 price index (tcpi) kilometres) Price of tickets without Consumer price discount for second index (cpi) class journeys (36-40 kilometres) Note: The list of available data series was compiled using data of the Slovenian Railway Company, Statistical Office of the Republic of Slovenia and Bank of Slovenia. The income series were deflated by cpi. There are two candidates for the dependent variables: the number of passengers transported and the number of passenger kilometres. From Table 1 it can be seen that within the available series none of the income and socio-economic variables is expressed in terms of passenger kilome- tres. Because of the chosen methodology of elasticity estimation (ols), we cannot use the series 'number of passenger kilometres'. Among the price variables we had to exclude the following variables: average fare per passenger kilometre, price of tickets without discount for second class journeys (average transport route 21-25 kilometres) and price of tickets without discount for second class journeys (average trans- port route 36-40 kilometres), since a comparable dependent variable is not available. Among available series for the price variable, the only suit- able nominal category is the series railway passenger transportation price index (rptpi). The series average fare represents the non-weighted tolar revenue per transported passenger. Since this series is also in nominal terms, it is appropriate to calculate the real variable. When doing this we can choose among five deflators. Based on the nature of the problem, the most suitable are the consumer price index (cpi) and railway pas- senger transportation price index (rptpi). We also introduce the trans- portation and communications price index (tcpi), transportation price index (tpi), and services price index (spi). Based on the content, all ad- ditional deflators are placed within cpi, which is the most broadly based category, and rptpi, which is the narrowest price category and is spe- cially used also as a direct nominal price variable. Concerning income variables, we can choose between real gross do- mestic product and registered real household income. The latter series comprises real net wages, other real receipts from employment and real transfer receipts. A priori we cannot decide between the two. However, taking into consideration the nature of the problem, the series of reg- istered real household income is more appropriate. The final choice of income variables will be carried out on the basis of objective criteria of econometric analysis. When analyzing passenger railway transportation, it is reasonable to expect seasonal influences. Simple graphical analysis of the time dynam- ics of the number of transported passengers shows that the number sub- stantially declines in the summer (June, July and August) or in the second and third quarters. Estimating the elasticities we can address the seasonal influences in two ways: • using dummy variables or • seasonally adjusting the time series (multiplicative method x-11). Based on a priori analysis of the content, we cannot exclude from anal- ysis any of the socio-economic time series (number of first-time regis- tered personal cars, prices of gasoline, prices of representative personal cars). The choice will therefore be based on the results of the economet- ric analysis. usable time series We exclude several of the available time series based upon the limita- tions arising from the chosen method of estimation and content suit- ability. The set of available series can therefore be narrowed down to a set of usable series (Table 2). The series of this set satisfy content and methodological criteria. Additionally we require that the following tech- nical characteristics of the usable series be fulfilled: • number of observations; • frequency of the time series (monthly, quarterly); • possible structural breaks recording data for certain series. series actually used in estimation of demand functions Since we have three groups of explanatory variables - income, price and variables for other socio-economic factors - we require at least 90 ob- servations at a monthly level, which corresponds to 30 observations at a quarterly level. The time series also should not contain structural breaks. Additionally we require stationarity of time series in order to prevent possible spurious regressions when estimating the equations. Based on these criteria, we can choose the set of time series from Table 2 that satisfies methodological and content criteria and technical characteristics, and is therefore suitable for estimating the demand func- tions for services of railway passenger transportation. The set of the time series suitable for econometric estimation is given in Table 3. The dependent variable (Q) covers the period 1993m1-2002m7. The same is true for both income variables (Ii and I2), series P7 for price vari- able and series O2 for the variable of other socio-economic factors. The other price variable P1, P2, P3, P4, P5 and P6 covers the period 1994m1- 2002m7. Two groups of series can be derived from the available time se- ries. In the first group we place the monthly series for the period 1994m1- 2002m7. In the second group are quarterly series that cover 1994q1- 2002q2. Specification of Demand Functions for Services of Public Railway Passenger Transportation Following empirical analyses (Owen and Phillips 1987; Oum 1989; de Rus 1990; Oum et al. 1992), we chose the following specification of the de- mand function for services of public railway passenger transportation: The specification was used on monthly time series and tackles seasonal influences through the use of dummy variables. The mathematical speci- fication of this kind is not directly applicable for econometric estimation Table 2: List of usable time series Symbol Series name Number of observations Frequency Break Time period Q Number of passengers transported 115 Monthly 1993m1-2002m7 h Real gross domestic product 115 Monthly 1993m1-2002m7 k Registered real household income 115 Monthly 1993m1-2002m7 Pi Average nominal fare 103 Monthly 1994m1-2002m7 Pz Average real fare (deflator spi) 103 Monthly 1994m1-2002m7 P3 Average real fare (deflator tpi) 103 Monthly 1994m1-2002m7 Pi Average real fare (deflator tcpi) 103 Monthly 1994m1-2002m7 P5 Average real fare (deflator rptpi) 103 Monthly 1994m1-2002m7 P6 Average real fare (deflator cpi) 103 Monthly 1994m1-2002m7 Pj Railway passenger transportation price index (rptpi) 115 Monthly 1993m1-2002m7 Oi Number of first-time registered personal cars 67 Monthly 1997m1-2002m7 Oz Average retail price of lead-free 95-octane petrol 115 Monthly 1993m1-2002m7 O3 Average retail price of lead-free 98-octane petrol 115 Monthly 1993m1-2002m7 O4 Average retail price of leaded 98-octane petrol 114 Monthly 1993m1-2002m6 O5 Average retail price of lead-free 91-octane petrol 48 Monthly 1993m1-1996m12 o6 Average retail price of representative car Renault 5 48 Monthly 1993m1-1996m12 o7 Average retail price of representative car Renault Clio 67 Monthly 1999 Ml 1997m1-2002M7 Og Average retail price of representative car vw Polo 67 Monthly 1999 Ml 1997m1-2002m7 Note: For easier understanding of the specification of regression equations of demand for railway passenger transportation we added symbols to the listed variables. We used the following symbols: Q - quantity of demand, I - income, P - price, and O - other socio-economic variables. Since for some variables several series are available, we also added numbered subscripts to the letters. Table 3: List of actually used time series Symbol Series name Number of observations at monthly level Number of observations at quarterly level Time period Q Number ofpassengers transported 115 38 1993m1- 2002m7 Ii Real gross domestic product 115 38 1993m1- 2002m7 I2 Registered real household income 115 38 1993m1- 2002m7 Pi Average nominal fare 103 34 1994m1- 2002m7 P2 Average real fare (deflator spi) 103 34 1994m1- 2002m7 P3 Average real fare (deflator tpi) 103 34 1994m1- 2002m7 P4 Average real fare (deflator tcpi) 103 34 1994m1- 2002m7 P5 Average real fare (deflator rptpi) 103 34 1994m1- 2002m7 Pe Average real fare (deflator cpi) 103 34 1994m1- 2002m7 P7 Railway passenger transportation price index (rptpi) 115 38 1993m1- 2002m7 O2 Average retail price of lead-free 95-octane petrol 115 38 1993m1- 2002m7 Note: The stationarity of all selected variables was checked by df test. of individual coefficients, since the function is not linear in parameters. However, this condition can be satisfied by taking logs of the above equa- tion. In what follows we present four different variants of theoretical speci- fications of the regression equations. Equation 1: Regression equation - monthly data and using dummy variables ln( Qm) = ln( + ß2ln( If) + Pf) + Of) + ßs De + ße D7 + ß7 Ds + u Symbol: Qm - number of passengers transported per month im - rth income variable, monthly Pm - rth price variable, monthly Om - rth variable for other socio-economic factors, monthly De - dummy variable for seasonal component in June D7 - dummy variable for seasonal component in July D8 - dummy variable for seasonal component in August ln(ß1) - regression constant ß2, ß3, ß4, ß5, ß6, ß7 - partial regression coefficients u - random variable. Equation 2: Regression equation - monthly seasonally adjusted series ln( QSAm) = ln( ß1) + ßzln( ISA^ + ß3ln( PSAm) + ß4ln( OSA^ + u Symbol: QSAm - number of passengers transported per month (seasonally adjusted) ISAm - rth income variable, monthly (seasonally adjusted) PSAm - rth price variable, monthly (seasonally adjusted) OSAm - rth variable for other socio-economic factors, monthly (seasonally adjusted) ln(ß1) - regression constant ß2, ß3, ß4 - partial regression coefficients u - random variable. Equation 3: Regression equation - quarterly data and using dummy variables ln( Qq) = ln ß1) + ß2ln( I?) + ß3ln( P?) + ß41^ O) + ß5 D2 + ße D3 + u Symbol: Q? - number of passengers transported per quarter Ir - rth income variable, quarterly P? - rth price variable, quarterly O? - rth variable for other socio-economic factors, quarterly D2 - dummy variable for seasonal component in second quarter D3 - dummy variable for seasonal component in third quarter ln( ß1) - regression constant ß2, ß3, ß4, ßs, ß6 - partial regression coefficients u - random variable. Equation 4: Regression equation - quarterly seasonally adjusted series ln( QSAq) = ln( ßi) + ß2 ln( ISAj) + ßaln( PSAj) + ß4ln( OSAj) + u Symbol: QSAq - number of passengers transported per quarter (seasonally adjusted) ISAq - rth income variable, quarterly (seasonally adjusted) PSAq - rth price variable, quarterly (seasonally adjusted) OSAq - rth variable for other socio-economic factors, quarterly (seasonally adjusted) ln( ß^ regression constant ß2, ß3, ß4 - partial regression coefficients u - random variable. Estimation of the Demand Functions for Services of Public Railway Passenger Transportation For estimation of parameters for the functions specified in previous sec- tion, we used the method of ordinary least squares. The choice of the method is appropriate because all the specified equations are linear in parameters, the chosen method is relatively simple to use and assures (given that certain conditions are satisfied) ideal statistical properties. Using the time series, the method produces unbiased and best esti- mates if the estimated regression equation does not show autocorrela- tion (this means that there is no systematic component in the variable that measures the random deviations) and if the explanatory variables are not linearly related. The latter is related to the level of precision of the estimates, which is an important criterion when estimating elasticity. In order to be able to use classical approaches of statistical testing when checking for the mentioned requirements, it is necessary that the resid- uals of the regression model be distributed normally. To this we add a condition that the estimated regression coefficients be statistically signif- icantly different from zero, which is checked with exact levels of signifi- Table 4: List of econometric tests used Requirement Test Stationarity of time series df test with constant, and with constant and trend jb test of normality lm test for first-, second-, fourth-, sixth and twelfth-order autocorrelation p values, t statistic, confidence intervals Inclusion of different deflators, Cusum and Cusum q test reset test Adj. r2 and f test Distribution of residuals Autocorrelation Significance of coefficients Stability of estimates Specification of regression equations Explanatory power of equations cance (p values). Besides this the explanatory power of individual regres- sion equations was also considered. For the estimated regression equations that satisfied the mentioned criteria we investigated the suitability of the specification (reset test), the confidence intervals for regression coefficients and their stability (Cusum and Cusum q test). Most of the estimated variants of regression equations are related to the use of different price variables, which are the result of deflating with different price indicators. Therefore, among those with similar results, we considered the ones where the chosen deflator best matched the con- tent criteria. estimates Taking into account a number of different time series for measuring in- dividual variables, two modes of including the seasonal components and two types of time frequencies (monthly and quarterly), the total num- ber of regression equations that can be estimated is equal to 112. It turns out that estimated regression equations for monthly data do not fulfill the condition of normal distribution of residuals (56 equations). For 28 of the equations that are based on quarterly series, the inclusion of the variable for other socio-economic factors worsens the precision of the estimates (it increases the degree of linear relationship among explana- tory variables). Seven regression equations, which are based on season- ally adjusted quarterly data and include real gross domestic product as the income variable, have too weak explanatory power. Thus there are e1 e2 21 specifications, based on quarterly data, which are suitable for analysis. Of these, fourteen include dummy variables to capture seasonal compo- nents, and seven of them are estimated using seasonally adjusted data. Most of these 21 variants of regression equations are linked to the use of five deflators when calculating the price category of average real fares. We found that the use of different deflators does not cause important dif- ferences in estimates of point elasticity. Therefore, based on the content criterion, we decided to use both marginal deflationary indices and to include the following six estimated specifications in the final analysis:4 5 ln( Qq) = ln( ß0 + ß2ln( + ß3ln( P§) + ß4 D2 + ßs D3 + u ln( Qq) = ln( ßi) + ßiH ID + ß3ln( pqt) + ß4 D2 + ßs D3 + u e3 lnQq) = lnßi)+ß2ln(iq2)+ß3lnpq5) + ß4 D2 + ßs D3 + u e4 lnq) = lnßi) + ß2ln(iD + ß3ln(pq) + ß4 D2 + ßs D3 + u e5 ln( QSAq) = ln( ßi) + ßtM ISAq) + ß3ln( PSAq) + u e6 ln( QSAq) = ln( ß0 + ß2ln(ISAq) + ß3ln( PSAqe) + u A summary of estimates of all six functions is presented in Table 5.® discussion of results The results of point and interval estimates of price and income elastic- ities, based on models e1-e6, are presented in part a of Table 5. The outcomes of the analysis can be summarized with the following conclu- sions: • Point estimates of price elasticity of equations e1 and e2 are -0.2045 and -0.2032. Based on the calculations we infer that an increase in the average real fare by 1% will be followed by on average an ap- proximately 0.20% decrease in the quantity of demand for services of railway passenger transportation. The low values of standard er- rors of the regression coefficient estimates for average real fares con- tribute to a satisfactory width of confidence intervals for the refer- ence price elasticities. 148 Jani Beko Table 5: Empirical results a Point Point Confidence intervals Confidence Confidence n oi estimates estimates for price elasticity intervals for intervals for ta u of price ofincome income elasticity price elasticity, E elasticity elasticity differences e1 -0.2045 0.9286 [-0.3781, -0.0309] [0.5211,1.3360] 0.3472 (-2.9015)* (5.6104)* (0.0070)** (0.0000)** e2 -0.2032 0.9273 [-0.3870, -0.0193] [0.4957,1.3589] 0.3677 (-2.7208)* (5.2894)* (0.0109)** (0.0000)** e3 -0.3586 0.4319 [-0.6274, -0.0897] [0.2181, 0.6457] 0.5377 (-3.2837)* (4.9737)* (0.0027)** (0.0000)** e4 -0.3966 0.4628 [-0.6969, -0.0964] [0.2240, 0.7016] 0.6005 (-3.2520)* (4.7719)* (0.0029)** (0.0000)** e5 -0.3681 0.4375 [-0.6259, -0.1104] [0.2325, 0.6425] 0.5155 (-3.5021)* (5.2334)* (0.0014)** (0.0000)** e6 -0.4061 0.4684 [-0.6951, -0.1171] [0.2385, 0.6982] 0.5780 (-3.4451)* (4.9969)* (0.0017)** (0.0000)** Note: for explanation see note 6 on page 152. • For equations e1 and e2 the calculated point estimates of income elasticities are 0.9286 and 0.9273. An increase in real gross domestic product by 1% thus causes an increase in the quantity of demand for services of railway passenger transportation of about 0.93%. Both coefficients of partial elasticities are statistically significant. How- ever, they have relatively wide confidence intervals, which shows bad precision of the point estimates. • Estimates of price elasticities in equations e3 and e4 increase in comparison with point estimates from equations e1 and e2. Also the interval estimate of price elasticity parameters increases, which suggests a relative worsening of the precision of point estimates. b c d e f Confidence lm(i) lm(2) lm(4) Adj. R2 reset Cusum jb test intervals for test and income elasticity, Cusum q differences test 0.8149 0.0012 0.1566 1.6729 0.9686 0.0015 + 0.5548 (0.9721) (0.9247) (0.7956) (0.0000) (0.9698) (0.7577) 0.8632 0.0000 0.1676 1.3513 0.9677 0.0130 + 0.7463 (0.9945) (0.9196) (0.8526) (0.0000) (0.9099) (0.6886) 0.4276 0.6334 0.6405 1.7858 0.9647 0.0875 + 1.5761 (0.4261) (0.7260) (0.7751) (0.0000) (0.7695) (0.4547) 0.4776 1.0390 1.1259 2.1352 0.9645 0.2484 + 1.0838 (0.3081) (0.5695) (0.7109) (0.0000) (0.6221) (0.5816) 0.4100 0.8198 0.8510 2.2102 0.7281 5.4809 + 0.8419 (0.3652) (0.6534) (0.6972) (0.0000) (0.0261) (0.6564) 0.4597 1.2137 1.2151 2.4055 0.7256 5.9878 + 0.3354 (0.2706) (0.5447) (0.6616) (0.0000) (0.0205) (0.8456) From the results it follows that increasing average real fares by 1% will on average be followed by a 0.36% or 0.40% lowering of the quantity of demand for services of railway passenger transporta- tion. • In equations e3 and e4 the series registered real household income replaced the real gross domestic product. The point estimates of in- come elasticity are lower and more precise compared to the ones in equations ei and e2, since the confidence intervals are now approx- imately half the previous ones. Based on the income elasticity esti- mates from equations e3 and e4, we can conclude that the number of passengers transported on average increases by 0.43% or 0.46% if the registered real household income increases by 1%, all other elements being unchanged. • In equations e3 and e4 considering the confidence intervals, the precision of the income elasticity estimates improved, but the pre- cision of the price elasticities worsened in comparison with those from equations e1 and e2. For an additional check of the magnitude of income and price elasticities we seasonally adjust the time series that are used for estimating equations e3 and e4, and use them for estimating e5 and e6. • Point and interval estimates of price and income elasticities in equa- tions e5 and e6 are very similar to those from equations e3 and e4. If the registered real household income increases by 10%, the de- mand for services of railway passenger transportation on average increases by 4.4% (equation e5) or 4.7% (equation e6). The pa- rameters for variable real fares suggest that a 10% increase in aver- age real fares would cause a contraction of demand for services of railway passenger transportation on average by 3.7% (equation e5) or 4.1% (equation e6). We can base our judgment of the explanatory power of estimated re- gression equations on the value of adjusted coefficients of determination. It turns out that all equations show satisfactory explanatory power: 73% or 97% of variance in the number of railway transport passengers can be explained by the combination of variables that are included in the six model specifications. The results of the Breusch-Godfrey test of autocor- relation testify that none of the estimated models displays autocorrela- tion in the residuals of the regression equations. The results of the reset test (part d of Table 5) warn us about the possibility of omitting an important explanatory variable from equations e5 and e6 (despite their satisfactory explanatory power, which is seen in part c of Table 5). Taking into account the results of testing for the presence of autocorrelation and the outcomes of specification tests of equations e3 and e4, we think that the outcome of the reset test for equations e5 and e6 is mostly due to seasonally adjusted series and not directly to the incorrect specification of the regression equations. All the estimated coefficients of elasticity from equations e1, e2, e3, e4, e5 and e6 are structurally stable at an acceptable level of significance (a = 0.05). We close the presentation of the content of econometric tests in Table 5 by checking the distribution of residuals for the chosen equations. The results derived from the Jarque-Bera test conclusively confirm that the residuals are normally distributed from all regression equations. Conclusion Taking into account the estimates of demand functions for services of railway passenger transportation in Slovenia, we can conclude that it is price and income inelastic. Coefficients of income elasticity of demand below unity show that for the average consumer, the services of rail- way passenger transportation can be classified among normal goods, i. e. among essential consumer expenditures. For the case of increased average real fares, the number of transported passengers by rail decreases in percentage terms by less than the fare ac- tually increases (in percentage terms). The recorded price inelasticity of demand leads us to conclude that revenues of the railway operator in- crease when the average real fare increases. We consider that the presented estimates of elasticity, and the conclu- sions derived from them, offer useful suggestions for setting the compre- hensive price policy for public railway passenger transportation in Slove- nia. The presented coefficients of elasticity are a result of the estimation of the aggregate demand functions. Therefore it would be sensible to ex- pand the current analysis in the future by comparable testing of demand functions for services of railway passenger transportation according to individual fare classes or according to different categories of tickets sold. Notes 1. The list of theoretically justified variables when specifying the equa- tion of demand for services for railway passenger transportation was compiled on the basis of the following studies: Owen and Phillips (1987), Oum (1989), de Rus (1990), Goodwin (1992), Oum et al. (1992) and Wardman et al. (1997). 2. The choice of the dependent variable (the total number of transported passengers) is discussed below. 3. At the moment the computer processing of passengers in all fare classes in Slovenia amounts to between 67% and 74% of all passen- gers transported by railway. This incomplete treatment allows only for estimation of aggregate functions. 4. For the definition of variables see Table 3, and for the meaning of ele- ments in specification see pp. 143-145. 5. Results of the estimation of price elasticities, derived from the other three deflators, are available upon request from the author. 6. In part a are the point and interval estimates of price and income elasticities. Below point elasticities in parentheses, marked by *, are t statistics, below t statistics in parentheses, marked by **, are p values. Interval estimates are calculated at the significance level 0.01. In part b are values for the Breusch-Godfrey lm tests, values in parentheses are p values. Adj. r2 are in part c with p values in parentheses. Results of reset tests are given in part d (f statistics and p values in paren- theses). In part e are the results of Cusum and Cusum q tests with the level of significance 0.05. a+ indicates structural stability of esti- mated parameters. jb tests of normality with p values in parentheses are listed in part f. References de Rus, Gines. 1990. Public transport demand elasticities in Spain. Journal of Transport Economics and Policy 24:189-201. Goodwin, P. B. 1992. A review of new demand elasticities with special ref- erence to short and long run effects of price changes. International Journal of Transport Economics 26:155-69. Luk, J., and S. Hepburn. 1993. New review of Australian travel demand elasticities. Research report arr 249. Melbourne: Australian Road Re- search Board. Nicholson, W. 1995. Microeconomic theory: Basic principles and extensions. Philadelphia: The Dryden Press. Oum, T. H. 1989. Alternative demand models and their elasticity estimates. Journal of Transport Economics and Policy 23:163-87. Oum, T. H., and W. G. Watters ii. 2000. Transport demand elasticities. In Handbook of transport modelling, ed. D. A. Hensher and K. J. Button. Amsterdam: Pergamon. Oum, T. H., W. G. Watters ii, and J.-S. Yong. 1992. Concepts of price elas- ticities of transport demand and recent empirical estimates: An inter- pretative survey. Journal of Transport Economics and Policy 26:139-54. Owen, A. D., and G. D. A. Phillips. 1987. The characteristics of railway passenger demand: An econometric investigation. Journal of Transport Economics and Policy 21:231-53. Wardman, M., J. P. Toner, and G. A. Whelan. 1997. Interactions between rail and car in the inter-urban leisure travel market in Great Britain. Journal of Transport Economics and Policy 31:163-81. Analysis of the Nature of Economic Growth of Slovenian Economy Matjaž Novak The aim of this article is to outline the economic growth for the Slove- nian economy between 1992-2001. Our major interest is the nature of the past growth. Was it intensive or extensive? On the basis of four groups of different arguments we were expecting that there would be a predominantly extensive economic growth. In order to answer this question we developed an empirical study, which follows the conven- tional neo-classical growth accounting framework. First we estimated three mathematical specifications of aggregate pro- duction functions. The analysis was than conducted through an econo- metric analysis of these estimates. Using these results we developed the growth accounting equation, which allowed us to compute the contri- butions of each particular input (physical capital, human capital and technical progress) to output growth. On base of our received empirical results we are able to state, that the past economic growth of the Slovenian economy was significantly ex- tensive. Introduction In the Slovenian economy from 1990 on there was an intensive process of accepting new concepts of economic actions in the direction from a semi command toward a market economy. This fact raises questions about the nature of economic proceses: production, distribution, export intensity and structural adjustment. The basic process from which all other forms come is production, whose characteristics are described by the aggregate production function. The comparative empirical analyses of aggregate production func- tions between developed industrial economies and developing countries, which were made from 1950 till 1990, called attention to the fact that there exist completely different characteristics of the basic production pro- cesses on aggregate level between the compared groups of countries. The first group of countries feature an intensive economic growth, while the economic growth in developing countries (second group of economies) is rather extensive. Matjaž Novak is an Assistant at the Faculty of Management Koper, University of Primorska, Slovenia. After a period of fully ten years, since the transition process in the for- mer centrally planned economies started, the question about the charac- teristics of the economic growth is also interesting for transition coun- tries. We are especially interested in finding out how successful1 were the transition economies in using available resources. How did they solve the basic economic problems of scarce resources? Is economic growth in these countries mainly extensive or intensive? Which production factor in this process was more important: physical capital, human capital or the sources of technical progress (Total Factor Productivity - tfp)? We will find the answers to these questions trough an ex post analysis of the aggregate production function of the Slovenian economy. Hypothesis No common answer could be found to the nature of economic growth for transition economies. Therefore, we do not have any common pat- tern whose validity we could use for testing purposes for the selected economy (Slovenia). But in spite of all that, we can expect a predomi- nantly extensive economic growth. There are four groups of reasons, which justify our hypothesis: • The growth rate of gross domestic product in transition economies was on the average higher than in the developed economies (Cam- pos in Corricelli 2002). • In the transition period this growth was mainly financed through foreign direct investments (Kudina 1999). • Different national governments tried to reduce the pressure of un- employment and so made greater efforts to increase the use oflabor (Blanchard et al. 1992). • Typical for all economies in transition is the improved educational structure of the population. This has a large influence on the in- crease of human capital, which is also an important production fac- tor (Jeffries 1993; Ayers et al. 1996; Sjögren 1998; Friere-Seren 2001). The high economic growth is therefore connected with an intensive use of production factors. But was the use of these resources the main source of growth as we suppose? An empirical analysis will prove the facts. Methodology We will examine the characteristics of basic economic processes2 at the aggregate level with the help of two analytical instruments, which means realizing our empirical research in two steps. First we examined the char- acteristics of the production process in the Slovenian economy, which can be deduced from econometric estimations of aggregate production functions. In the second step we evaluated the growth accounting equa- tion, which presents how much of the output growth can be attributed to each particular production factor. If we want to construct the growth accounting equation on the basis of the estimated parameters of aggregate production functions, we have to consider the restriction that the estimated parameters satisfy the con- ditions of efficiency and structural stability. When analysing these condi- tions we will use the procedure of statistical inferences. Following these results we can choose the most suitable mathematical specification of ag- gregate production function for developing the growth accounting equa- tion. Theoretical Background aggregate production function The production function defines the technical connection between used inputs (capital, labour) and output. The researcher has to be aware of the fact that using the production function as an analytical instrument bears a decisive influence upon the specification of the variables, from criteria, which have to be fulfilled by the valuation, and from the choice of an adequate mathematical specification. In our case we shall use the aggregate production function as an in- strument of an ex post analysis of the basic economic process at the ag- gregate level. The definition of variables and mathematical specification of equations must be subordinated to this aim. Definition of Variables A theoretical (non-deterministic) specification of the aggregate produc- tion function is based on two production factors and the efficiency pa- rameter: Q= f(K, L, A) Symbols: Q - output, K - capital, L - labour, A - efficiency parameter. In an ex post analysis we are interested in finding out how many dis- posable production factors the economy used in the past in order to pro- duce a calculated quantity of gross domestic product. We are therefore calculating the use of production factors and not the disposable capac- ities. Along with these criteria we also have to consider the restrictions, which are related to disposable empirical data from the national statistics bureau. Considering these restrictions the discussion in Novak (2003) shows that the series of labour may express the use of human capital, the series of capital payments for investments, and that the efficiency parameter should present Hick's definition of the neutral technical progress. The non-deterministic (common) formulation of the aggregate production function used in our analysis is defined as follows: Q= A- f(INV, HL) Symbols: Q - gross domestic product, A - efficiency parameter, INV - physical capital, HL - human capital. Source: own specification. Mathematical Specification of Aggregate Production Function Next we have to construct a mathematical (deterministic) specification of the aggregate production function. In economic analysis the Cobb- Douglas production function is often used. This function exhibits con- stant returns to scale. The partial coefficients of this function are at the same time the elasticity coefficients. The Cobb-Douglas function: Q = A- KaL(-a Symbols: Q - product, A - efficiency parameter, K - capital, L - labour, a - elasticity of product with respect to capital, (1 — a) - elasticity of product with respect to labour. Source: Humphrey (1997, 52). Beside the Cobb-Douglas specification, the universal form of power function is also used in economic analysis. This form does not exhibit linear homogeneity apriori. Universal specification of power function: Q= A ■ KaLß Symbols: Q - product, A - efficiency parameter, K - capital, L - labour, a - partial elasticity of product with respect to capital, ß - partial elasticity of product with respect to labour. Source: own specification. The dilemma occurred with the question about the unitary elastic- ity of substitution, which is inherent to both the Cobb-Douglas func- tion and universal specification of power function. The group of au- thors mentioned in the literature as acms (Arrow, Chenery, Minhas, and Solow 1961,225-250) designed the new form of the neo-classical produc- tion function - the ces3 production function.4 češ function: Q = A \SK~$ + (1 - S) V Symbols: Q - product, A - efficiency parameter, K - capital, L - labour, S - distributon parameter (0 < S < 1), $ - parameter of substitution (^ > 1), p - parameter of homogeneity. Source: Guarda (2000,52-53). The three mathematical specifications described are often subjects of theoretical and empirical analyses and will be therefore used in our em- pirical research. Empirical Claims of Estimated Parameters Consider the fact that the estimation of the aggregate production func- tion is only the starting-point of developing the given study of our em- pirical work and that our final goal is to construct the growth accounting equation. But which of the presented mathematical specifications can be used further on in the empirical work? This depends on the selected cri- teria. Antras (2000,10-15) mentions three conditions to be fulfilled by the estimated production function when using it in the growth accounting framework. • The first criterion is connected with the goodness of fit of the esti- mated regression line. • The second condition refers to the statistical significance of the par- tial regression coefficients. As they are the constitutional part of the growth accounting equation, it is recommended that they be statis- tically significant. • The third criterion requires that the estimated production func- tion does not contain a statistically significant structural break. The structural stability of the estimated parameters would signify that the role of individual production factors is not different in various periods. Therefore it is acceptable to establish a growth account- ing equation for the whole period, because the characteristics of the productions are unique for the whole pattern of observation. According to the content it would be correct to make conclusions about extensive or intensive growth on the basis of results received in this way. growth accounting equation Having estimated the parameters of selected aggregate production func- tions we can set up the growth accounting equation. By calculating the parameters of this equation we can analyse the contribution of individ- ual factors to the economic growth as we determine what part of the pro- duction growth can be explained by the growth of used human capital, physical capital and what part is attributed to the growth of total factor productivity (tfp). When analysing the contribution of production fac- tors to the economic growth our attention is directed to the changes of the dependent variable in connection with the changes depending on the marginal changes of all explanatory variables. The conventional instru- ment for this analysis is the mathematical tool of a total differential. From the specification of the production function Q A f K, L we can (by mathematical manipulation) set up the growth accounting equation: q = £q,a -a + £q,k-k+ £q,l -l Symbols: q - growth rate of aggregate product, £q,a , £q,k, £q,l - partial elasticity coefficients, a - growth rate of total factor productivity, k - growth rate of capital, l -growth rate of human capital. Source: Valdes (1999, 88-90). Following the neo-classical theory we assume, that the production fac- tors are paid marginal products. Thus we can set up from the growth accounted equation the quantification of the contributions of the indi- vidual factor to output growth: q £Q,A ■ a £Q,K ■ k eQti ■ 1 ^ <7 <7 <7 <7 1 _ £q,a • a £q,k • k eQ>L ■ 1 <7 <7 <7 Symbols: £q,a ■ a/ q - contribution of technical progress to output growth, £q,k • k j q - contribution of capital input to output growth, £ql-l/q - contribution of human capital input to output growth, Source: Valdes (1999, 88-90). Results from Econometric Estimation and Analysis Econometric estimation was made with the help of the Eviews software. With the ordinary least squares estimator we estimated the parameters of Power, Cobb-Douglas and ces specification of the aggregate production functions. data used To measure the dependent variable (output) we have chosen the gross domestic product (1995 tolars). Capital is measured by payments for in- vestments (1995 tolars). We have received all data from Statisticni urad Republike Slovenije (surs) and from Agencija Republike Slovenije za placilni promet (arspp). Variable labour was measured in units of effec- tive labour - we calculated the series.5 The database included 37 observa- tions for the period 1992q1-2001q1. regression equations The linearized regression equations of the chosen production functions were defined as: • Power function: ln(BDPt)= ln(b^ + b2 ■ ln(INVt) + b3 ■ ln(EFDt) + et • Cobb-Douglas specification: ln(BDPefdt) = ln(bi) + b2 • ln(INVefdt) + et • ces function: ln(BDPt)= ln( bO + b2 ■ ln(INVt) + b3 ■ ln( EFDt) +b4 • ln(INVefd2t) + et Note: The INVefd variable is expressed as a quotient between the vari- ables INV and EFD, the INVefd2 variable is expressed as the square of the quotient between the variables INV and EFD. econometric analysis On the basis of results, which are derived from econometric analysis, we can choose the best specification of aggregate production function. We started this analysis with a test of normality assumption. The purpose of the test was to find out if we could continue using the classical statis- tics (t, F, x2) in our econometric analyses. In order to test the hypothesis about distribution of residuals the Jarque-Bera test was used. Next we checked three assumptions of the classical linear regression model: the lack of autocorrelation, homoscedasticity and the lack of multicollinearity between the explanatory variables included in the re- gression equation. The test of the autocorrelation was made with the Breusch-Godfrey test. The required homoscedasticity of variance was re- searched with the White-test and the multicollinearity was analysed by the calculated value of the variance-inflation factor (vif). The econo- metric analysis was concluded by testing the fulfilment of two empiri- cal criteria: goodness of fit of the estimated functions (f-test) and test of structural stability of the estimated functions. For analysing structural stability we used the Chow breakpoint test. We focused on the analysis of the p-value. The high p-value in individual types of the test suggests that we cannot reject zero hypotheses at an acceptable level of significance. Table 1: Results of econometric estimations and tests Power Function Cobb-Douglas ces Function Function Parameter estimates ln( bi) 2.661 0.047 4.146 (1.999) (2.244) (1.734) [0.054] [ 0.031] [0.092] b2 0.149 0.134 0.345 (13.677) (17.181) (1.622) [0.000] [0.000] [ 0.114] b3 0.662 0.448 (6.325) (1.387) [0.000] [0.175] bi 0.011 (0.750) [0.459] Jarque-Bera test lb 1.469 0.616 1.254 _[0450]_[p-735]_[0-534] Breusch-Godfrey test lm(1) 0.447 0.939 0.114 (3.841)* (3.841)* (3.841)* lm(2) 0.804 1.150 0.514 (5.997)* (5.997)* (5.997)* lm(4) 1.199 1.585 1.212 (9.488)* (9.488)* (9.448)* Lm(6) 1.867 2.516 2.098 (12.592)* (12.592)* (12.592)* results On the basis of the results represented in table 1 we can make the follow- ing conclusions: 1. For the universal specification of power function and the Cobb- Douglas aggregate production function the estimated parameters are statistically significant. In the case of the ces function the fourth parameter is not statistically significant. 2. On the basis of the Jarque-Bera test statistics we can conclude that the residuals of the estimated equations are normally distributed. 3. In the regression equation the serial correlation is not present. Table 1 (continued): Results of econometric estimations and tests Power Function Cobb-Douglas Function ces Function White test ofhomoscedasticity n - R2 5.545 (11.071)* 3.417 (5.991)* 7,148 (15.507)* Multicollinearity VIFln( EFD) :ln( EFD) VIFln( EFD) :ln( INVefdZ) EFDln(EFD):ln(JNVefd2) 2.512 2.512 50.253 1.881 f-test of adjusted r2 Rldj 0.962 [0.000] 0.879 [0.000] 0.964 [0.000] Chow test of structural stability p < 0.01 0 0 0 0.01 < p < 0.05 0 0 0 0.05 < p < 0.10 0 0 1 0.10 p 29 29 28 Note: the calculated test statistics are mentioned in round brackets. In squared brackets the exact level of significance (p value) is mentioned. Symbol * denotes the critical value of test statistic at the 0.05 level of significance. Source: own calculations. Therefore, the error term of the regression models does not con- tain any systematic component. We may expect that the established definitions of the explanatory variables and the choice of statistical data for their measurements are correct. 4. On the basis of the White test we can conclude that there is no het- eroscedasticity. 5. Between the variables INV and INVefd2 included in the ces speci- fication of production function there exists a high rate of multicol- inearity. Therefore we can explain why the fourth regression coeffi- cient in this function is not statistically significant at an acceptable level of significance. The statement suggests that the ces function does not differ from the Cobb-Douglas function. 6. The values of the determination coefficients show the good analyt- ical power of the specified functions. 7. On the basis of the results obtained from the structural stability test Table 2: Results of econometric analysis Power Function Cobb- Douglas Function ces Function Overall significance of estimated equations + + + Significance of partial regression coefficients + + - Structural stability + + + Linear homogenity restrictions - Note: the symbol + signifies, that the restrictions are fulfilled, and the symbol - that they are not. Source: own calculations. we may conclude that all estimated aggregate productions functions are structurally stable. The behaviour pattern of the economic sub- jects did not change. Irrespective of whatever period we might have chosen in our empirical test we would have found that differences might not be statistically significant. With regard to these criteria we could not carry out a grounded selec- tion between the potentional and Cobb-Douglas specification (for this reason the elimination of the ces function is justified), therefore, we de- cided to make another test on the characteristics of returns to scale.6 The results show that inclusions of a priori expectations of constant returns scale, which are inherent to the Cobb-Douglas specification, are not jus- tifiable. Inferences About the Nature of Economic Growth The described parameters represent objective criteria for the choice of the most suitable production function, from which we can derive the explanation and the characteristics of the production process in the ob- served period. The statistically insignificant parameters in the ces func- tion and also the insignificant constant returns to scale in the Cobb- Douglas specification suggest the power function as a suitable produc- tion function. If we were doing further research, on the ground of the hypothesis that we may describe the characteristics of production process with the selected production function, we would have to quantify the growth rates of individual series, which were included in the production function. Here we use the trend growth rates received as a result of econometric estimation of the exponent trend. The selected results are mentioned in table 3. Table 3: Data used for developing the growth accounting equation Trend Growth Rate rbdp = 0.010486 riNV = 0.039399 rEFD = 0.004576 Partial Elasticity £BDP,INV = 0.149133 £BDP,EFD = 0.661527 Note: rBDP - trend growth rate of quarterly real gross domestic product (constant prices 1995), rjNV - trend growth rate payments for investments (constant prices 1995), rEFD - trend growth rate of effective labour, eBDP.INV and eBDP,EFD - coefficient of partial elasticity. Source: own calculations. Table 4: Contributions of production factors to economic growth Contribution of physical capital Contribution of human capital Contribution of total factor productivity Source: own calculations. From the data in the table we can estimate the growth rate of total factor productivity: rBDP = rA + eBDP,INV ■ rINV+ eBDP,EFD ' rEFD rA = rBDP — eBDP,INV ■ rINV ~ eBDP,EFD ' rEFD rA = 0.010486 - 0.005876 - 0.003027 rA = 0.001583 From this we receive all known parameters for writing down the final growth accounting equation: rBDP = rA + eBDP,INV ■ rINV+ eBDP,EFD ' rEFD 0.010486 = 0.001583 + 0.005876 + 0.003027 If we want to find out the share part of growth of individual produc- tion factors in the explanation of 1,048 percentage of the trend growth rate of gross domestic product, we have to divide the last equation with this growth rate: 0.010486 0.001583 0.005876 0.003027 o.oio486 o.oio486 o.oio486 o.oio486 1 = 0.150963 + 0.560366 + 0.288671 Conclusion In this article we presented the results abote empirical analysis of the nature of economic growth of Slovenian economy during the transition period 1992-2001. We were especially interested in finding out how suc- cesful was this economy in using available resources. On the basis of four 56.04% 28.87% 15.09% groups of different arguments we were expecting that there would be a predominantly extensive economic growth. We tested this hypothesis us- ing empirical analysis. In the first step we estimated three mathematical specifications of aggregate production functions. In the second step we made an econometric analysis of these estimates. Using these results we selected the power function and developed the growth accounting equa- tion, which allowed us to compute the contributions of each particular input (physical capital, human capital and technical progress) to output growth. From the received results it follows that the sixty-five percent of trend growth rate of the real gross domestic product can be explained by the growth of physical capital, by the growth of human capital twenty-nine percent and by the growth of total factor productivity of fifteen percent of growth of the Slovenian gross domestic product. We can conclude that the past economic growth of the Slovenian econ- omy during the period 1992-2001 was predominantly extensive. Notes 1. Some aspects of transition in Slovenia are well documented in Beko (2002) andŽižmond (1994,1996). 2. We developed our analytical framework on the basis of the following references: Brown 1957, Uzawa 1962, Fisher 1971, Senjur 1993, Thomas 1993, Humphrey 1997, Stiroh 1998, Valdes 1999, Guarda 2000, and Mrkaic 2001. 3. ces = Constant Elasticity of Substitution. 4. ces production function means according to the preliminary one of Cobb-Douglas, which is actually her generalization (Thomas 1993, 304). 5. Analytically the calculation of series effective labour is shown in Novak 2003. 6. This test is not separately mentioned in this paper. The testing proce- dure and received results are presented in Novak 2003. References Antras, P. 2000. Is the us aggregate production function Cobb-Douglas? New estimates of the elasticy of substitution. http://econ-www.mit .edu. Arrow, K. J., B. Chenery, B. S. Minhas, and R. M. Solow. 1961. Capital- labor substitution and economic efficiency. The Review of Economic and Statistics 3:225-50. Ayers, R., B. Castaneda, C. J. Cleveland, R. Costanza, H. Daly, C. Folke, B. Hannon, J. Harris, R. Kaufmann, X. Lin, R. Norgaard, M. Ruth, D. Spreng, D. I. Stern, and J. C. J. M. Bergh. 1996. Natural capital, human capital and sustainable economic growth. Boston: Boston University. Beko, J. 2002. Foreign trade flows and economic activity in Slovenia: Causality patterns from a transition episode. Working Papers, no. 132:1- 23. Budapest: Hungarian Academy of Sciences and Institute for World Economics. Blanchard, O., R. Dornbusch, P. Krugman, R. Layard, and L. Summers. 1992. Reform Eastern Europe. Massachusets: mit Press. Brown, E. 1957. The meaning of the fitted Cobb-Douglas function. Quar- terly Journal of Economics 7:546-60. Campos, F. N., and F. Coricelli. 2002. Growth in transition: What we know, what we don't and what we shuld. cepr Discussion Paper, no. 324:1-3. Fisher, F. M. 1971. Aggregate production functions and the explanation of wages: A simulation experiment. Review of Economics and Statistics 53:305-26. Friere-Seren, M. J. 2001. Human capital accomulation and economic growth. Investigaciones Economicas 3:585-602. Guarda, P. 2000. A production function for Luxemburg: Estimating ces function. Luxemburg: Centre de Recherche Publique. Humphrey, T. M. 1997. Algebraic production functions and their uses be- fore Cobb-Douglas. Economic Quarterly 83:51-82. Jeffries, I. 1993. Socialist economies and the transition to the market. New York: Routledge. Kudina, A. 1999. An approach to forcaste Ukrainian gdp from the supply side. case Working Paper, no. 11:1-50. Mrkaic, M. 2001. Skupna faktorska produktivnost slovenskega gospo- darstva. Organizacija 9:596-601. Novak, M. 2003. Analiza narave rasti slovenskega gospodarstva. Koper: Fakulteta za management. Senjur, M. 1993. Gospodarska rast in razvojna ekonomika. Ljubljana: Eko- nomska fakulteta. Sjögren, A. 1998. Human capital, r&d and economic growth. Working Pa- per Series in Economics and Finance, no. 238:5-20. Stiroh, K. J. 1998. Long-run growth projections and the aggregate pro- duction functions: A survey of models used by the us government. Contemporary Economic Policy 14:467-79. Thomas, R. L. 1993. Introductory econometrics. London: Longman. Uzawa, H. 1962. Production functions with constant elasticies of substitu- tion. Review of Economic Studies 29:291-99. Valdes, B. D. 1999. Economic growth: Theory, empirics and policy. Chel- tenham: Edward Elgar. Žižmond, E. 1994. Economic developments in Slovenia. Eastern European Economics 6:75-99. Žižmond, E. 1996. Slovenia: The case of a successful transition. Rivista In- ternazionale di Scienze Economiche e Commerciali 2:453-73. The Yokes of Gender and Class: The Policy Reforms and Implications for Equitable Access to Education in Kenya Njoki Nathani Wane Wambui T. Gathenya Kenya, a former British colony, attained its political independence in 1963. Despite its political independence, Kenya inherited a colonial ed- ucation system that was based on segregation and exclusion because of race, culture, class, and gender. This is a qualitative analysis exam- ining the education system in Kenya. In the analysis, we explore gen- der and class barriers that may inhibit education for women in Kenya. We review existing secondary literature on policy documents; reflect on our experiences and observations; and also reflect on interviews with Njeri and Nyokavi, who live in the 21st century 'post-colonial' Kenya. As Kenyan women from subsistence-farming backgrounds, we, the au- thors, seemed destined to remain at the very bottom of the hierarchi- cal education structure established during the colonial period. We ex- plore the impact of contemporary, globally and locally mandated ed- ucation policy reforms and emerging social service provision partner- ships. These are often packaged as policy reforms and viable strategies of a just, equitable, and fair distribution of opportunities for all, meant to correct the colonial disparities. Our arguments are informed by the system's discursive framework (Wane 2000b) and the anti-colonial dis- cursive framework (Amadiume 1989, 1997; Dei 1999, 2000; Oyewumi 1997; Wane 2002). The analysis authenticates that, since independence, Kenya has realized tremendous educational growth at all levels. How- ever, such educational reforms have resulted in the exclusion of many children who are from low socio-economic groups, in essence replac- ing the racial segregation of the colonial system with cultural and class- based inequities of the post-colonial society. Dr Njoki Nathani Wane is Assistant Professor at the Ontario Institute for Studies in Education, University of Toronto, Canada. Dr Wambui T. Gathenya is Assistant Director at the Ministry of Education, Kenya. Introduction The colonial legacy of segregation and inequitable distribution of re- sources and the unprecedented pace of global change, characterized by, among other things, the continual relocation and displacement of pop- ulations, have created significant socio-economic inequities in Kenyan society. The rapid population and political transformation has, in turn, resulted in the pressing need for related structures, including educational systems and organizations, to reflect and respond to the growing diver- sity and inequity (Iseke-Barnes and Wane 2000). Drawing from the shifting socio-economic and political scenario, this paper examines some of the policy reforms, through both documentary sources and our experiences. We discuss how such reforms, on the one hand, have influenced educational growth but have also contributed to the marginalization of children from low-income groups, the girls in par- ticular. Using systems and anti-colonial discursive frameworks, we ana- lyze multiple equity issues arising from various cultural and class dynam- ics and their implications for access to education. Further, systems dis- course enables us to explore interconnections between schools, students, and society (Wane 2000b). In addition, we are able to examine the rela- tionships between class, gender, and culture. An anti-colonial discursive approach, on the other hand, affirms the pedagogic need to confront the challenge of social diversity and the urgency of creating an educational system that is both more inclusive and better able to respond to the var- ied local concerns about formal schooling (Dei 2000). This is a qualita- tive analysis examining the education system in Kenya. In the analysis, we explore gender and class barriers that may inhibit education for women in Kenya. We review existing secondary literature on policy documents, and, using vignettes, we reflect on our experiences and observations and also reflect on interviews with Njeri and Nyokavi, who live in the 21st century 'post-colonial' Kenya. The paper is based on work in progress on comparative policy analyses of Kenya, India, and Canada, which at- tempts to interrogate how equity could be created through schooling (Reva, Wane, and Gathenya, Creating equity through schooling: A cross- national study of Kenya, India and Canada). Our discussion is grounded in the global educational goal of Education for All (efa) (unesco 2000), in the context of the current figures for children who have not attained formal schooling. This analysis builds on the work of scholars such as George Dei (1999; 2000), Annette Henry (1998), Linda Smith, Gloria Ladson-Billings (1994), Vivian Gunn Morris and Curtis L. Morris and Angela Valenzuela (2000), to name just a few, who are questioning the inadequacy of social, educational, and political practices that do not speak to the variety of human experiences or to the diverse history of events and ideas that have shaped human growth and development. Examining educators', admin- istrators', and learners' locations, the politics of meaning in education, and issues of bias in education can highlight the problems associated with institutions of learning as sites for the reproduction of social in- equalities (Wane 2000b). The theoretical and practical underpinnings of cultural studies, critical pedagogy, feminist studies, anti-racism educa- tion, and Aboriginal education are important avenues that assist in the interrogation of power inequalities and bias in educational settings and society (Wane 2000b). Employing critical educational pedagogies and social theories makes it possible to articulate a pedagogic discourse to understand the political organization and relationship of school and so- ciety. Assumptions of what constitutes the norm, what qualifies as valid knowledge, and what alternatives to the dominant discourses exist are some of the pedagogical challenges to be confronted (Wane 2000a). As educators, we must counter the negative effects of oppression and address areas where critical work is needed. We acknowledge that this is not an easy task but rather one that will require a great deal of sensi- tivity and knowledge to address the intersecting issues of equity in our classrooms. As Waterfall (2000) eloquently puts it, 'To do so effectively requires that our praxis be informed by a solid framework. Without such a framework our good intentions can end up reinforcing and exacerbat- ing the reality of inequity in [education]' (Waterfall 2000, xviii). In order to illustrate the issue more clearly, we will employ vignettes to reflect on the complexity of the educational experiences of girls in Kenya. Njeri, an Eight-Year-Old Kenya Girl, Beats the Odds It is six o'clock in the morning. Njeri is walking briskly to school. She has two miles to get to her destination. This morning she cannot sing her recently learned hymn, nor can she chase the butterflies or pick some flowers. She is saying her times tables: 12 x 1 = 12,12 x 2 = 24,12 x 3 = 36,12 x 4 = 48,12 x 5 =____Oh! She cannot remember. She examines her arms and legs where she had written her times tables, to see whether the numbers are still visible. But, alas, she forgot to preserve those spots when washing her arms and legs this morning. The alternative is to re- cite them before the teacher, so she tries again, starting from the very beginning: 12 x 1 = 12____This time, she remembers up to 12 x 8, but she cannot remember 12 x 9. She tries once again, and, this time, she is determined to get it right. She does not want to go to school on Saturday as a punishment. What upsets her is knowing that the teacher will force her, and those of her classmates who cannot recite their 'homework', to bring firewood and water from home. That is a long distance to carry firewood or water. She feels that this is not a fair punishment and on a Saturday____That is the only full day to play with her friends or to help her mother. Sunday is too short because she has to attend Sunday school and learn all the Bible verses. She wonders how much adults have in their brains if they have to memorize everything. However, she pauses to en- joy the rays of the sun and the silver beads formed by the morning dew. She wishes these beads were real, because she would have loved to make a necklace for her teacher. Well, maybe one day she will make a coloured beaded necklace for her. She has been observing her grandmother make necklaces and following her instructions on how to thread together these tiny beads. She goes back to her times tables, but her thoughts run away again. She is thinking of her sister Nyokavi, who has been out of school for the last two years. Her parents wanted her to go on, but something happened, she is not sure what, something to do with not passing her exams and being sent to a secondary school that requires a lot of money; her father referred to it as an Harambee (let us pull together) school. But she needs to get this times table: 12 x 10 = 120____Once again, she is distracted. She enjoys school but sometimes her teacher does not ask her to answer questions even if she raises her hand. She hears the sound of the bell and starts to run as she completes her times table: 12 x 1 =____ Drawing from this vignette of Njeri's educational experience, we will now begin to examine the diverse forces at play in Kenya's system of edu- cation. Although Njeri is only a young girl, probably eight or nine years old , she yearns for an education, but even at this young age, she is quite skeptical regarding her future opportunities. our experiences and observations As we reflect on the above scenario, Njeri's experiences resonate with us, and we ask ourselves, How many Njeris are going through similar chal- lenges? We faced similar challenges when attending school in the 1960s and 1970s and believe we were able to excel in school not by being the smartest in class but by overcoming cultural, economic, and daily learn- ing challenges that defeated our less determined, and perhaps less lucky, peers. There were few or no writing facilities to record what we learned. Hence, we had to commit to memory all the new knowledge that we were learning in school. To learn and remember the relevant mathemat- ical times tables and the alphabet, for instance, we recited them over and over while walking to school or to the river to fetch water, while tilling the land or minding the young ones or searching for firewood. Many times we had to write on our hands or legs to help us remember anything new that we had learned. The standardized examinations were organized in such a way that one was expected to remember what was taught right from standard (grade) one to standard seven (now eight). What made it even more challenging was that most of the materials we were expected to learn (memorize) were foreign and reflected little of the world in which we lived. Our daily chores, in particular, often required us to seek the skills elsewhere, as school did not prepare us for these essen- tial tasks. We experienced contradictions and confusion. The knowledge we acquired in school had no relevance at all to our home life. And the more we learned about other countries and foreign languages, the more we became alienated from our roots (Wa Thiongo 1985). This created a sense of dissonance and confusion, as most of what we learned in school emphasized how primitive, backward, and evil our tra- ditional knowledges were. Our indigenous languages (mother tongues) and traditional beliefs were discounted - such 'primitive' practices were never allowed within our school compounds. At school, the sole medium of communication was English. Later, Kiswahili and religion were of- fered in some schools, depending on the religious denomination of the school - Catholic, Anglican, Presbyterian, Muslim, Hindu, etc. This rigid enforcement of language practices caused further complications for us, since we could not communicate with our parents in English at home, as they did not speak the language. Consequently, at home we had to switch back to our mother tongue. The situation became difficult when we attempted to discuss issues such as the biological functions of hu- man bodies, which we were learning about in school. According to our tradition, this was taboo. When we tried to question such practices as circumcision for girls, for example, we were alienated. This was because circumcision was a particularly thorny issue around which there was no consensus in the community. Often girls were withdrawn from school to be circumcised and were then barred from going back to school. Al- though others chose to run away from home to escape the ritual, remain- ing uncircumcised often resulted in the girl being ostracized by peers, family, and the community. Growing up as girls and attending school in the post-political independence era, we were among the few who broke many traditional norms both at school and home. Our respective parents were unusual, as they encouraged us to pursue education when it was not the norm. Many girls were married off as soon as they reached puberty. It was also rare to see parents sell their land to put girls through school or for the community to come together in the spirit of Harambee to raise funds to educate a girl. The expectation was that girls should bring in more property in the form of a dowry (cows and goats), not deplete the family wealth by attending school. Today, we find ourselves in North American institutions of higher learning, partic- ipating in the education not only of Kenyan children but also of children of the world. It may appear, at one level, as if we have relinquished our traditions and our cultural roots and embraced all that is Western. On the contrary - education has provided us with choices as well as chal- lenges. We are able to examine our culture from a different perspective, choosing to embrace and retain only those values which have significance for us. In order to explicate some of the dilemmas, we will briefly examine the systems discourse and anti-colonial thought to see how the two dis- cursive frameworks speak to the system of education in Kenya since the attainment of political education. a systems discourse A systems discourse is a discursive framework that illustrates the func- tioning and relationships of sub-systems within the larger society, il- lustrating systematic power imbalances, as well as methodical barriers that are embedded within the various sub-systems of the larger society. This discourse enables us to examine the ways in which social institu- tions both create and sustain interconnectedness and interdependency. Using this framework, we are able to explore more fully the dilemmas, tensions, and fears that educational institutions may experience as a re- sult of their multiple roles within given systems (Wane 2000b). In order to examine the Kenyan educational system, we believe that it is necessary to re-examine the wider socio-economic and political context and, in particular, the colonial and neo-colonial education structures that con- tinue to shape access to Kenyan education and quality patterns to the present day. Anti-Colonial Discursive Framework Anti-colonial discourse is rooted in 'recent movements for social change' that question concepts of'normative' and/or 'universal' standards by rec- ognizing that such concepts are limited and limit the perspectives of a particular gender, class, and/or race (Amadiume 1989,1997; Collins 1990; Dei 1999; Hooks 1994; Oyewumi 1997; Wane 2002). In this way, anti- colonialism is a social theory that interrogates power relations inherent in the interrelations between subordinate, colonized groups/societies and dominant, colonialist societies or cultures. Anti-colonial thought entails writing and speaking about the experiences of slavery, migration, suppression colonialism, neo-colonialism, and resistance (Dei 2000; Ashcroft 1995). The overall aim of an anti-colonial framework is to provide the critical tools for deconstruction of representations of neo- colonial structures (Dei 1999; Mudimbe and Appiah 1995). For instance, the academic imperial structures currently control and shape the destiny of African education development in general and education in Kenya in particular (Eshiwani 1990). The aforementioned critical tools may pro- vide a forum for theorizing some key challenges that have kept many Kenyan children from the doors of formal schooling. Interrogating various configurations of power relations embedded in knowledge production and currency is also a key component of anti- colonialism. The approach acknowledges the dual, and at times conflict- ing, roles of education in (re)producing and/or counteracting racial, eth- nic, religious, linguistic, gender, sexual, and class-based inequalities in society. Further, anti-colonial discourse problematizes the marginaliza- tion of certain voices and ideas in the educational system. It also critiques the pedagogic and communicative practices of schools and the delegiti- mation of the knowledge and experiences of subordinate groups. It is a framework within which schools are viewed as institutional structures, sanctioned by society and the state to serve particular material, political, and ideological interests. In this context, marginalized groups are treated as subjects of their own experiences and histories (Dei 2000). Critical ed- ucators argue that questions of difference (class, gender, sexuality, race, ethnicity, disability, religion, etc.) are consequential for schooling in to- day's contexts (see. e. g., Dei 2000). In order to contextualize these issues, we will now provide a brief his- torical overview of the Kenyan context, including the land, its people, and relevant socio-economic and political environments. Kenya at Independence and Beyond 'Everyone has the right to education,' states the Universal Declaration of Human Rights, adopted in 1948 (Republic of Kenya 1964/5,1988,1999). Even earlier, in 1963, the Kenyan government made a political commit- ment to Kenyans that education would be accessible to all, regardless of religion, ethnic background, gender, geographical location, race, and/or class (Republic of Kenya 1964/5,1988). Yet reports such as Oxfam Inter- national (2001), and unesco (2000), showed that in the years 2000 and 2001, respectively, more than 113 million children had no access to pri- mary education, in addition to 880 million illiterate adults. By the late 1990s, between 11% and 20% of the school-age population were out of school (Abagi 2000). In some regions, close to 80% of eligible children were out of school (Republic of Kenya 1998). Regional, gender, racial, and other socio-economic factors continue to permeate education sys- tems, resulting in inequitable access to quality education. Consequently, in many parts of the world, the quality of learning and the acquisition of human values and skills fall far short of the aspirations and needs of in- dividuals and respective societies. The Education for All (unesco 2000) assessment demonstrates that there has been significant progress in the educational development of many countries, including Kenya. However, the developing world is still too far away from achieving the efa goal and, like many others, may not do so by the newly set date of 2015. Despite these vast disparities across countries, education is interna- tionally recognized as a fundamental human right (unesco 2000). Ed- ucation has been identified as the key to sustainable development, peace, and stability within and among countries and thus is an indispensable means for effective participation in the societies and economies of the 21st century, which are affected by rapid globalization. Given the still extensive need for improvements, the timeline for achieving efa goals has been shifted from year 2000 to year 2015 (unesco 2000). We must question, however, the implications that these postponements will have for individual and societal development. When children are denied ba- sic education, their ability to support themselves as adults and to pro- vide for their basic needs and the needs of their families is compromised. For instance, the Education for All (unesco 2000) assessment for Sub- Sahara Africa indicates that, despite notable gains by various countries to expand education opportunities, nearly a half of these disadvantaged groups are in the region. It is estimated that in this region alone more than 41 million school-age children, 56% of them girls, are out of school (Abagi 2000). Njeri's scenario reflects the reality of what is happening in the educa- tion sector in Kenya (a Sub-Saharan African country) despite the noble goals of the efa. The expansion of educational opportunities has been a longstanding objective of the government since independence in 1963, as stakeholders continue to perceive formal education as a basic tool for individual and national progress. This belief is supported by research that has established the connection between formal education and socio- economic and political benefits (see, e. g., Abagi 2000). When formal ed- ucation opportunities are available to girls and women, the benefits are even greater. This wisdom is enshrined in a local Kenyan saying: Wath- omithia muiretu, ni wathomitha mbururi. ('When you educate a girl, you educate a whole nation.') Hence, the issue is not that people need to be convinced of the need to educate girls - rather, it is why, despite this ac- knowledgement, girls continue to be marginalized in terms of access to quality education. On the positive side, at the primary school level, girls' and boys' enrolments are almost at par. This is a significant achievement, given the large gender gaps in enrolments at the time of independence. At the post-primary levels, however, the strategies to improve girls' en- rolment and retention figures have not had as much impact as at the primary school level. This disparity may be attributed to the persistent belief system that posits girls as investments. In other words, girls are seen as temporary members of the family who will eventually move out as wives for the benefit of their new families. Consequently, girls' value to the family is associated with the dowry that they can expect to bring to the family when married. Within this socio-cultural environment, the cost of educating girls is not considered a wise investment. Hence, the less spent on the girl the better. Trends in the Education System Since 1963 The economic situation in Kenya has had a significant impact on the ed- ucational system. Within the last two decades, the living conditions of the vast majority of Kenyans have stagnated or worsened, while those of the few at the top have improved beyond anyone's dreams, thus further widening the gap between the extremely rich few and the extremely poor majority. This adverse socio-economic growth is reflected in the out- comes of the education system, where an increasing number of children do not attend school because many of them cannot afford to (see, e. g., Gathenya 2001, 2002; Oxfam International, 2001; Wane and Gathenya, 2001), and many school-leavers are unemployed (2002). In our discus- sions as authors, we often asked ourselves, What went wrong? What hap- pened to an education system whose growth was exemplary in the East and Central African regions up to the mid-1980s? To analyze how edu- cation services intertwined with the socio-economic and political set-up in shaping contemporary trends, we provide an overview of Kenya's ed- ucation system since 1963. The vision and national goals of education are expressed in the Kenya Education Commission Report of 1964 (a. k. a. Ominde Report, Republic of Kenya 1964/5), which provided a framework for operating a unified ed- ucation system in independent Kenya. The new nation inherited a colo- nial education that was described as a 'caste' system with rigid bound- aries for different communities, which meant that there were separate schools for Europeans, Asians (and Arabs), and Africans, in that order of priority. Within this racially segregated system, 99% of the public ed- ucation budget was spent on European and Asian schools, while 1% was allocated for the African schools (Republic of Kenya 1964), in a coun- try with a population that was predominantly African. Besides funding hierarchies, the education and training curricula were designed on these racial classifications within a philosophy of'education for one's station in life'. The African was educated/trained for manual labour and religious discipleship, the Asian for middle-level technical labour, and the Euro- pean for management and governorship of his/her colonial territory. It is no wonder, then, that at independence universal education access, equity, funding partnerships, standardization, and improvement of curriculum became key issues for policy planners and practitioners. The findings of the Ominde Commission (Republic of Kenya 1964/5) captured these is- sues and made recommendations that resulted in rapid expansion within a single national education system. But the inequities in access, quality, and relevance still exist despite many reforms designed to improve the provision of education for all. Since 1965, there have been subsequent education commissions (e. g., Republic of Kenya 1976, 1988, and 1999a, respectively, a. k. a. Gachathi, Mackay, Kamunge, and Koech Reports) that re-emphasize the six goals of education laid down in the 1964/5 Ominde Report and articulated in the 1999 Kenya Country Report (Republic of Kenya 1999b). These national educational goals are (1) to foster national unity; (2) to serve the needs of national development; (3) to promote social justice and morality, so- cial obligations and responsibilities; (4) to foster positive attitudes and consciousness towards other nations; (5) to provide for full development of talents and personality; and (6) to provide and equip the youth with knowledge, skills, and expertise to enable them to play an effective role in the life of the nation. We will now explore whether these goals have been attained, and if not, why not. Following recommendations by the above Commissions and other re- search/evaluation surveys (e.g., Republic of Kenya, 1995,1998; Republic of Kenya and unicef 1995), the Kenyan government has planned and implemented numerous structural and program reforms in attempts to meet these educational goals and to address identified challenges. The current 8: 4: 4 system of education (eight years of primary education, four years of secondary education, and four years for a basic bachelor de- gree) is one such systemic reform implemented since 1985. It re-shaped the previous system of 7: 4: 2: 3, modeled on the British system, that in- volved seven years of primary education, four years of ordinary level sec- ondary education, two years of advanced level secondary education for a small percentage, and three years of university education. Promotion between levels is based on merit, as measured by academic performance in national standardized terminal examinations. major educational reform: the 8 : 4 : 4 education system Until the end of 1984, at which time major reforms were implemented, formal education in Kenya was based on a 7: 4: 2: 3 system of education cycle. The concept of the 8: 4: 4 system of education was developed to re- spond to the challenges of national development with the youth as active participants. Besides the structural reforms, the 8: 4: 4 system of educa- tion was planned with a more vocational orientation (Republic of Kenya 1988). The systemic reform that resulted in the shift to the new model emanated from the Mackay Report. The broad-based changes to the ed- ucational system were introduced as a means of responding to the chal- lenges of national development. The Mackay Report formed the frame- work for the revamped system, although the report did not contain de- tails of when or how the new education system could be implemented. The most important changes that were introduced involved the reor- Table 1: Gross enrolment rates in primary school by gender, 1990-1998 1990 1991 1992 1993 1994 1995 1996 1997 1998 mf 101.8 91.4 91.0 87.8 88.5 86.8 86.4 87.7 88.8 m 104.0 93.4 92.0 88.9 89.1 87.4 87.3 88.7 89.4 f 99.6 89.5 90.0 86.7 87.8 86.4 85.5 86.8 88.2 Source: unesco 1999; Republic of Kenya 1994. Table 2 .: Primary school completion rates by gender, 1990-1998 1990 1991 1992 1993 1994 1995 1996 1997 1998 Boys 45.7 46.4 44.7 44.5 44.6 43.0 45.1 46.3 44.6 Girls 40.5 41.6 48.2 42.2 43.0 42.1 43.5 45.8 48.1 Total 43-2 44.1 46.4 43-4 43-9 42.6 44-3 46.1 47.2 Source: unesco 1999; Republic of Kenya 1994. ganizing of the system to an 8: 4: 4 structure, the creation of a second university, and an enhanced vocational program. Despite the country's budgetary constraints and local and international education and train- ing policy implications, soon after the Mackay Report was released, the government made a political announcement launching both the second university and the proposed 8: 4: 4 restructuring. Issues of policies, cost, inequity, relevance, efficiency, and effectiveness of the system were ques- tioned and reviewed (Abagi and Olweya 1999, 2000; Republic of Kenya, 1995,1998; Republic of Kenya and unicef 1995). It soon became appar- ent to most Kenyans that, although the goals of education are 'well' artic- ulated, they have not been realized or translated into meaningful sustain- able and quality programs accessible to all (see, e. g., Republic of Kenya 1998; Republic of Kenya and unicef 1995). Granted, many Kenyans, in particular Africans and women, have benefited from the reforms that have focused on access, equity, quality, and relevance. However, the sys- tem has been inefficient and ineffective on many fronts, despite the heavy investment in education within a framework of innovative funding part- nerships and shared management responsibilities. Waste through low enrolment, participation, and retention rates, coupled with high repe- tition and dropout rates, has been identified as a key indicator of the system's inefficiency by the government (Republic of Kenya 1998,1999a). Primary and secondary school gross enrolment rates, for example, have been on the decline from 1990, as indicated in Tables 1, 2, and 3. Table 3: Percentage distribution of secondary school enrolment by gender in selected years, 1963-1998 1963 1965 1970 1975 1980 1985 1990 1995 1998 Male 68.2 72.4 70.4 64.1 59.3 61.8 57.2 54.1 53.3 Female 31.8 27.6 29.6 35-9 40.7 38.2 42.8 45-9 46.7 Source: unesco 1999; Republic of Kenya 1994. As noted in Table 1, at the primary school level, the gross enrolment rate (ger) in 1990 was 104.0 for boys and 99.6 for girls. The average for both girls and boys was 101.8. There was a sharp decline in 1991 and 1993. In 1995 and 1996, it was 86.8 and 86.4, respectively. In 1998 and 1999, there was some improvement in ger. In 1997, ger was 86.6 for girls, 88.7 for boys, and an average of 87.7. In 1998, the figures were 88.2 for girls, 89.4 for boys, and 88.8 for both. Besides, primary school completion rates were consistently below the half - 50% mark. In 1995, it was 43% for boys and 43.5% for girls, with an average of 44.3%. In 1998, it was 46.4% for boys, 48.1% for girls, with an average of 47.2% for both boys and girls (Table 2). Boys' enrolment in secondary school has remained higher than that for girls over the years, as shown in Table 3, an indication of how girls in Kenya continue to remain at the bottom of the education ladder. Further still, the implementation of the 8: 4: 4 system introduced new pressures to the educational system, and the ramifications are still being felt. For instance, in 1990, after four years of secondary education, a dou- ble cohort entered university (the Form vi or 'a' level group). It is gener- ally believed that the public universities have not yet recovered from the administrative, space, class size, and curriculum challenges of the double intake, as enrolments never dropped to their previous levels thereafter. The demand remained high, leading to the entry of the private universi- ties (from zero to sixteen) into Kenya's higher education market and the expansion of public universities from one to five universities. The 8 : 4 : 4 curriculum was supposed to be more practically oriented, to curb the high unemployment rate generated by the high population growth rate in Kenya, by offering a wide range of employment opportunities to the school-leavers. The aim was to vocationalize education through a cur- riculum that provided relevant technical and vocational skills at the three levels of the schooling system for improved self-employment, salaried employment, and/or life-long education and training. Within the 8: 4: 4 system, Standard 8 school-leavers would have opportunities for further technical training, without necessarily going through the formal post- primary school system. This would be in line with the government de- velopment strategy of creating jobs and generating income by expanding the informal sector. However, policy planners did not anticipate the large number of students who would continue in the system. significant issues within Kenya's contemporary education system Drawing on Njeri's educational experience as a point of reference, the following will analyze the pertinent issues within Kenya's contemporary education system. Primary Education Primary education is the most 'general' of all kinds of formal education and is supposed to provide the foundation for further learning and for the long-term strategy of eliminating illiteracy. The basic goal of primary education is to prepare all children who attend school to participate fully in the social, economic, and political life of the nation. This stage of ed- ucation is supposed to be universal and free but not compulsory. The curriculum is uniform throughout the country and is developed by a national panel at the Kenya Institute of Education. Until 2001, all stu- dents were expected to take all eleven subjects, namely: Kiswahili, En- glish, Mathematics, Science and Agriculture, Home Science, Arts and Craft, Music, History and Civics, Geography, Religious Education, and Physical Education. At the end of Standard 8, students would be exam- ined in eight papers that incorporated all eleven subjects. At the time of writing this paper, we learned that this curriculum had been reviewed, resulting in fewer subject areas for study and examination. Once again, it is a frantic time as education policy-makers and practitioners adjust to the latest reforms, including the preparation of a new curriculum and new teaching and learning materials - and the training of teachers to implement the changes. The government aim and stated commitment is to provide education to all Kenyans; yet approximately 30% of the primary school-age chil- dren have no access to formal school education. This is because of lack of equitable distribution of the educational resources. In addition, the system is structured in such a way that only some (fewer than 50%) of those who complete primary education make it to the secondary level, and even fewer (approximately 20% of those who complete secondary schooling) have access to further education and/or training. Secondary Education Kenya's secondary education is organized around fully funded pub- lic/government schools, community or religious funded schools, and private, unaided schools. Parents and community members, through self-help Harambee efforts, built most of the public and community schools. Private schools are individually run and owned and are usu- ally very expensive and beyond the reach of most Kenyans. Since 1991, all schools have been categorized as either public or private, based on respective funding and management model options (Republic of Kenya 1998). In policy, the categorization made sense administratively but not practically. Ideally, this categorization should have been ratified through a revised Education Act soon after the 1991 policy statement. To date, there are still grey areas, as indicated by the fact that, while some schools are labeled private, they are managed by religious organizations and therefore receive partial public and community assistance. Although these schools could be labeled public, thereby reducing the confusion, many private proprietors fear that with the public label comes loss of controlling power in terms of planning, management, and accountabil- ity. Despite this innovative partnership in secondary education develop- ment, many children have no access to secondary education. In our vignette Nyokavi, Njeri's sister, has completed her primary education, missed a government secondary school, joined a Harambee one instead, and then dropped out. She has been out of school for the last two years. When Wane (one of the authors) interviewed her in 1998, she was tearful for most of the three-hour encounter. She kept repeating to herself: What can I do? Who can I turn to? I would like to buy my par- ents a bigger farm. They have sold everything to put my big sister, Wawira, through secondary school [Wawira completed four high school years] and pay for Nyokavi. It is sad that my parents could not afford to send Wawira to university. She was so desperate for higher education that would have meant a good job. Now she would like to come and live with us, but she feels she is better off on the streets of Nairobi. As for me, all I want is a secondary education. Cost-sharing and other resource demands mean that most families cannot afford to send their children to either the public or the private secondary schools. Within this policy, parents are expected to pay tuition and development/building funds (e. g., for construction of classrooms, workshops, laboratories, dormitories, staff houses, and kitchen/dining halls), buy expensive uniforms and books, and contribute towards meet- ing their respective schools' recurrent expenditures, including salaries for non-teaching staff and the purchase of school buses. Alternately, faced with increased fiscal challenges, some schools have discovered unique and rewarding cost-cutting strategies, which include income-generating and other self-reliance activities such as making their own uniforms, growing their own food, keeping livestock for school use, and marketing and applying shared-text-book policies. Other schools have introduced Parents and Teachers Associations' bursaries and scholarship schemes to assist children from poor families and/or orphans. But such efforts are like a drop in the ocean because the need for such assistance in all cases exceeds demand. University Education For a country that had only one constituent university college at the time of independence (in 1963), Kenya's university education has expanded remarkably, not only in terms of the number of institutions and enrol- ments but also in the scope of the degree and other programs, both on- location and long-distance. For example, the student population grew from 452 undergraduates in 1963 to over 40,000 by 1999. This unprece- dented growth is not without challenges. Following the structural and other systemic reforms of the mid-1980s, the double cohort intake of 1990, the cost of implementing the new curriculum, and putting up ad- ditional required physical facilities resulted in unparalleled costs to the government, individuals, and other stakeholders. The structural adjust- ments programs introduced in the 1990s that led to budget cuts in edu- cation and other services meant that the households had to bear most of the additional reform-driven costs. Student unrest has become almost an annual certainty of the public universities' life, in part due to space, human resource, and other short- ages. At least one or more of the five universities are closed each year due to student and/or staff strikes. While attending one of the universities, we (the authors) lost more than two years (each) due to extended closures. Students normally complain about congested and dilapidated learning conditions, curriculum, tuition hikes, and/or political unrest in Kenya or elsewhere in the world. In the 1970s, commemoration of the Soweto Massacre (in South Africa) often triggered student demonstrations that would begin peacefully and end in battles between police and students, leading to closures. With the entry of private universities into Kenya's education scenario, those families which can afford to do so send their children to these uni- versities or overseas, chiefly to India, Britain, and the us. In comparison, fewer students are sent to Canada, Australia, and Germany. The commu- nity Harambee efforts have been instrumental in enabling some children from the lower middle-income groups to attend public, private, and/or overseas universities. The government has also introduced a loan and bursary scheme at the university level to assist those who pass but can- not afford to meet the required payments to join university. However, as in the secondary education programs, the need for assistance exceeds demand. comments on curriculum The Kenyan school curriculum has been broadly criticized, as both the curriculum and assessment are modeled on mainstream, high-income groups' experiences, thereby further marginalizing many children, es- pecially those from remote rural areas and from the slums in the ur- ban towns. There is enormous pressure to succeed in the examination and selection-based system, which encourages many students to resort to examination-oriented rote learning, often at the expense of more critical learning. It has even been suggested that the school curricu- lum contributes to violence in schools due to the overwhelming pres- sure borne by students to pass examinations in a curriculum that is so examination/selection-driven. The system is structured in such a way that schools strive to compete in national examinations, sometimes at the expense of the health of students, teachers, and/or parents. Slow learners are prevented from proceeding to the next class and/or taking the national examination, so as not to lower their respective schools' standards. Many repeat one or more classes several times, and some of them give up altogether and drop out of school. Excelling in the educational system as it currently operates often re- quires extra tuition/coaching, special textbooks, and long hours of con- tinuous study at school and home. Those who cannot afford the extras are unlikely to succeed. As we reflected on our educational experiences, we concluded that it is no wonder that, in this context, the many Njeris, Nyokavis, or Wawiras never make it to college - not because they are not capable but because there are far too many systemic barriers that are beyond their control. The wonder is that any children from low-income groups, and particularly the girls, make it at all. barriers to education access and quality participation Prior to Kenya's political independence, women's access to formal ed- ucation was extremely limited, although we acknowledge that African men's access was hardly any better, given the British colonial policy that restricted Africans in general from acquiring a decent education. Spe- cific data are difficult to trace, however, as earlier education commissions (pre-1985) rarely focused on women as a special target group in educa- tional planning. As most statistical data were not recorded by gender, enrolment growth hid the disparities between boys' and girls' participa- tion in education. A new chapter in gender and diversity awareness was launched in 1985, as the end of the first International Women's Decade was marked in Nairobi, Kenya. Affirmative action strategies were put in place to ensure that girls and children from marginalized regions were better represented at all levels of education, training, and employment. There is evidence that, in some parts of Kenya, girls' enrolments in- creased at a faster rate than boys' enrolments during the affirmative ac- tion period (Republic of Kenya 1995; Republic of Kenya, 1998). At the primary school level, girls' enrolments are almost equal to boys' enrol- ments (49 girls : 50 boys), while in some districts within Eastern and Central Provinces, more girls than boys attend school. Regional differ- ences are marked, however. In the nomadic arid and semi-arid regions, total enrolments are much lower than in the rest of the country, and girls' enrolments still lag far behind (Republic of Kenya 1998). A number of significant factors contribute to the lower rate of aca- demic achievement by girls, limiting their access to competitive fields: cultural, structural, and other social barriers; lack of job incentives; and lack of proper role modeling and counseling, among others (see, e. g., Abagi 2000; Republic of Kenya and unicef 1995). Cultural values and cultural demands on girls' time may also inhibit many from getting qual- ity basic education. In Kenya, girls are socialized to believe that marriage comes first. Most girls in Kenya are married before the age of 21. By this age, only a few girls have been able to go through the formal edu- cation ladder and training to become professionals, and there are very few women role models. As a result, few girls are exposed to opportu- nities and few aspire to higher education and training and top manage- ment jobs. Although the government has stepped up counseling services in all schools, the effect of this has not yet been seen, because the sys- tem provides few support systems for girls to proceed from one level to the next. Many are shut out because they become pregnant, and there are few occasions where students are taught about female-male relation- ships, chiefly due to cultural and/or religious taboos that restrict individ- uals who could be entrusted with disseminating such personal informa- tion. In this context, the school is among the chief suspects, with parents fearing hidden agendas and the passing of culturally unacceptable sexual information to their children. Of those who go further in school, many opt for arts-based subjects, eschewing the sciences as overly masculine. Those girls who deviate from the norms by receiving higher education and/or entering male-type jobs are still seen as less likely to get married, or, if they do, as unlikely to make good wives and mothers. As a result of the aforementioned cultural beliefs, the majority of women choose academic paths, which limit their options later in life, often relegating them to a low status and low-paying jobs. impacts of systemic educational reforms The inherited colonial education posed many difficulties and challenges with respect to issues of access, quality, equity, relevance, and participa- tion within new policy/program structures and the philosophical shift. Despite frequent evaluation and research into the system, recommended reforms have not met many objectives. Most frustrating is not the failure to provide education to all children but that positive trends have been reversed since the late 1980s, a period that coincides quite closely with the era of the global economic structural adjustment programs. Further, resources allocated to education are not always effectively or efficiently utilized, leading to the exclusion of low-income groups while subsidiz- ing the public and private education accessible to children from middle- and upper-income families. For instance, communities have been known to collectively put up schools by Harambee efforts, only to find that some children in the same community are to be excluded from the same institutions because they cannot afford the policy-mandated fees and other levies within the cost-sharing service provision framework. Con- sequently, some parents who helped to put up community schools soon discover they cannot afford to send their children to the same schools. Since only those who can pay the required amounts gain admission, the poor end up supporting the rich. So while Kenya introduced cost-sharing (among the government, par- ents, and communities) in attempts to improve education access, quality, equity, and relevance, the outcomes have seen further marginalization of children from low socio-economic groups, including street, slum, and nomadic children, girls, and the disabled. As in the case of Njeri's family, passing the cost burden on to parents has had devastating impacts on some. Njeri's parents, having sold most of their land to send their chil- dren to school, were left almost landless, and yet none of the children had made it to the post-secondary level or found employment. In retrospect, considering our similarly disadvantaged backgrounds, we recognize that, had our communities not come to our aid through Harambee, we too would not have made it past primary education. We argue that, while individuals have responsibilities to bring up their chil- dren, government has a responsibility and is accountable to all citizens, particularly since every Kenyan household is subject to one form of tax- ation or another. Provision of free, quality education so that no children will be denied access because of their inability to pay is a policy commit- ment (Republic of Kenya 1988, 1999a; unesco 2000). The gap involves translating that commitment into practice. The future cost of not edu- cating any child far outweighs any current savings through budget cuts and the balancing of account books. Kenyan parents and communities are not abdicating their responsibilities; they have been supportive and contributed tirelessly to the growth in education and training. The onus is on the government and those in power to explore, perhaps more ac- tively, alternative, innovative ways of mobilizing resources available to support education for all and to develop clearly defined strategies for achieving this goal. The question should not be who should or should not access education, but rather how we can provide quality education to all. In recent years, there has been an alarming escalation in the number of children in Kenya who are homeless and/or who try to survive on the streets of large urban centres and rural towns (Bagayoko 1999; Gath- enya 2002). Many of these children have parents living below the national poverty line or are orphaned victims of ethnic clashes and/or hiv/aids. A 1994 estimate put the number of street children in Nairobi at 50,000. Table 4: Kenya's Human Development Index score, year 2003 Indicator Year Score Life expectancy at birth 2001 46.4 years Adult literacy (age 15 and above) 2001 83.3% Combined primary, secondary and tertiary gross enrolment 2000/01 52% gdp per capita 2001 $980 Life expectancy index 2001 0.36 Education index 2001 0.73 gdp index (hdi) value 2001 0.38 Human development index (hdi) value 2001 0.489 Overall ranking 2002 146 Source: United Nations Development Programme 2003. Kenya's ranking on the Global Human Development Index (hdi) has dropped from 113 in 1991 to 125 in 1994 and further declined to 146 in 2003 (see Table 4). This implies that the overall human development sta- tus of Kenyan people is declining, not only in absolute terms but also in relation to other nations. The population of poor people will most likely continue to rise, given the deteriorating economic climate, the loss of some donor agencies and ngo support, and the increased numbers of children being forced to leave school to support their families. The future economic and social development of Kenya is at risk unless the rights and needs of children for sufficient levels of health, education, and psycho-social growth and development are protected. Street children in Kenya range in age from the newborn to the young adult. Demographic data reveal that most street children had some education but that all had been forced to leave school early (that is, before completion of fourth grade) due largely to poverty, lack of support, and the need to provide income for other family members. When an informal education program was provided for them, they were eager to learn (Gathenya 2002). With support, some even re- turned to the formal schools, where they performed well, some proceed- ing to university and to other post-secondary education/training pro- grams. The education provision crisis is not unique to Kenya (unesco 2000) but is indicative of a global trend of non-participation by an in- creasing number of children that calls not simply for local and interna- tional innovative preventive and intervention strategies but for the com- mitment to transform these strategies into practice. Without resource commitment and political will, all local and global efforts to address the gaps turn into rhetoric. Solutions that address gaps in education alone have not worked before, and we now acknowledge the need for an inte- grated holistic approach that takes into account the basic human needs of excluded groups more broadly. Conclusion Throughout this article, we have reflected on our similar educational paths that brought us to Canada to pursue graduate studies and consid- ered how both of us could never have succeeded without the determina- tion, sacrifice, and support of our families and communities. As girls and the only children of our respective families with PhDs, we understand the opportunity lost when so many Njeris, Nyokavis, and other Kenyan children are denied such chances. To date, both of us continue to sup- port those among our siblings who did not make it to secondary school, despite the fact that some had passed the secondary entrance examina- tion and wanted to proceed but could not afford the required levies. This is common among Kenyan families, who often have to choose to edu- cate just one child - as this is all they can manage to do - with the hope that the one child will find employment and earn enough to look after the rest of the family. We also realize that we were among the lucky few not to have met the misfortunes of Nyokavi's and some of our peers, who were thrown out of school once it was known that they were preg- nant. As late as 1991, the education policy included pregnancy as one of the grounds for expulsion from school. Quite obviously, some poli- cies and strategies geared for educational improvement and articulated in Kenyan key policy documents (see, e. g., Republic of Kenya 1998) also contribute, perhaps often inadvertently, to the exclusion of children from certain socio-economic and cultural backgrounds. There is a powerful correlation between the incidence of poverty, low enrolment, poor retention, and unsatisfactory learning outcomes (Dei 2000). Ensuring that girls and boys benefit equally from education re- quires nothing less than the integration of gender, class, regional, and other equality concerns into the design and implementation of relevant inter-sector policies and strategies. The importance of gathering and carefully analyzing reliable desegregated data at local, national, and in- ternational level is evident. Further, ensuring that equity is enshrined in the educational system will require a firm commitment from all levels both within the educational system and governmental hierarchies. To achieve the efa's stated goals of educational improvement, the government of Kenya has acknowledged the need to rekindle the spirit of Harambee, self-reliance, in an environment of improved professional work ethics and with the commitment to providing basic services for both the individual and the public good. The African philosophy of mu- tual respect, responsibility, and accountability means that the govern- ment can count on its people's support, and vice versa, only if both par- ties are ready to keep their side of the bargain. 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The general findings from this study centred on training and experience related to administration of schools. Many first time principals in rural schools had limited specific preparation for the principalship, or other related administrative roles such as the vice principalship. Such findings have taken on more importance in the last several years as school districts find it increasingly difficult to recruit principals for smaller rural schools. Introduction Renihan (1999) reported, 'School systems everywhere are finding out that it is difficult to find candidates willing to assume leadership positions, particularly at the school level. People are not coming forward to ap- ply for school level administrative positions' (p. i). We know that the principalship is a complex role that involves a multitude of interdepen- dent factors and influences. Experienced principals have developed their skills through experience and training. Of course new principals need to Dr Keith Walker is Professor at the Department of Educational Administration, University of Saskatchewan, Canada. Dr Kirk Anderson is a Research Consultant/Associate with the Saskatchewan Educational Leadership Unit, Canada. Dr Larry Sackney is Professor at the Department of Educational Administration at the University of Saskatchewan, Canada. Jeff Woolf is a graduate of the Department of Educational Administration at the University of Saskatchewan, Canada. be aware of the factors that will most help them to establish patterns, at- titudes and behaviours of success as administrators. In this study, all the participants were new principals in rural schools, most of whom did not have the advantage of previous administrative experience. Also many of these new principals assumed their positions of first principalship with little, or no formal training in administration, as unlike many jurisdic- tions, preservice training for the role of the principalship was not the norm. Following a brief discussion on the purpose of the study and the methodology we provide the three main sections of this paper. For the purposes of this article we have selected several of the many themes of interest from the findings of the study to present to readers. The first of these selected themes relates to the unanticipated experiences of first time principals with respect to: the amount of work/time required, staff related issues, administrative tasks, leadership and role expectations, par- ent interactions and board office items, the impact on the principal's personal life, and personal skills required to do the work of principal. Secondly, we discuss the respondents' sense of unpreparedness as we de- scribe what our participants said were the most important things new principals could expect to deal with (and should learn about beforehand) during their first year in the role. Here we note their focus on particular administrative duties, especially the function of personnel supervision. Thirdly, we highlight some of the participants' views on what constitute factors and influences that had a significant impact on their success as first time principals. The Purpose of the Study The themes discussed in this paper were drawn from data collected as part of a larger study on the neophyte principal. The data for this article were gathered from a single province in Canada, as part of the Interna- tional Beginning Principals Study (ibps). The larger and ongoing project involves researchers and schools from seven countries in Asia, North American, and Europe. In several components of the ibps, researchers have used similar or equivalent methodologies and instruments to gather and compare findings. There are also aspects of the larger study where researchers have undertaken to experiment with the methodologies to either bring further description or explanation to the life-worlds of neo- phyte principals. The purpose of this particular study was to gain insights and under- standings into the perception of the neophyte rural principals' experi- ences as first time principals using an iterative, electronic and dialogi- cal inquiry methodology over a six-week period. The following research questions guided this study: What factors do principals see as the most important in establishing themselves successfully in their first principal- ship? Secondly, what examples from their experience might these princi- pals share to provide new administrators with insight into the means by which first principalships are most likely to be successful? Methodology For the purposes of the study a rural school was defined as one with 250 or fewer students and situated in a community of fewer than 10,000 people. Our participants were not known to each other. Superintendents of Education in rural districts were contacted and permission was ob- tained to contact the principals and ensure their participation. Respon- dents were first year and, in some instances, second year principals. In all cases we asked that these principals delimit their responses to their first year experiences as a neophyte principal. An initial list of neophyte principals was developed through soliciting contact information from various jurisdictions (school districts, profes- sional associations, and the provincial government). In all a total of 108 principals were asked to participate. Initial letters of invitation and ex- planation were faxed to qualifying principals, with 53 agreeing to par- ticipate. Data were gathered through four sessions of electronic inquiry, emails and faxes, to these 53 principals. We experienced a ten percent at- trition from the beginning of the study to the end of the fourth iteration (five principals dropped out after two iterations and one re-entered for the third session). Three of the participants preferred to receive our in- quiries and respond through facsimile rather than e-mail. We accommo- dated this preference. The first electronic inquiry asked the participants to respond to several initial questions concerning their first year of prin- cipalship. The three subsequent sessions of inquiry were built from the responses of the participants to the questions or syntheses of responses from the previous inquiry. The responses were gathered, summarized and analyzed for themes by a 'first reader.' Concurrent with this, a sec- ond reader reviewed the participant responses to questions to determine themes. A reconciliation of two 'readings' resulted in a synthetic sum- mary, which was provided to the participants in iteration, two, three and four, along with the next set of questions. The subsequent questions were ones that were derived from and related to the syntheses. We called these inquiries 'electronic Delphi' sessions, as the participants built on the responses and themes as these were developed through the recipro- cal nature of the sessions. The participants were not directly exposed or identified to each other, except through the synthesized and mediated information derived from the researchers-participants exchange. Our emphasis in this article is limited to the qualitative responses of principals. All of the themes presented, herein, are drawn from com- ments from the participating principals. However, the relative strength or force of articulation varied, qualitatively and quantitatively, from principal to principal and from theme to theme. These variations are not represented, as it is only our intention to bring the content of these themes forward in a largely descriptive, yet somewhat interpretive man- ner. Unanticipated Experiences In the commentary responses of several principals, it was recollected that the actual work and world of the principalship was quite different from what they had observed of others prior to becoming principals. In their own words, more than half of our participants indicated that they had not understood, as fully as they anticipated, what the role of the principal entailed. The reality was that those new to the role were often surprised by the complexity of the role and related demands. Their first year expe- riences were well beyond their initial perceptions and expectations of the principalship. unanticipated amount of work and time required In general, principals spoke about the unexpected amount of time re- quired to do their work. One principal commented, 'Time, time, time! You do not realize the time it will take.' Respondents identified the time required and frequency of meetings as an unanticipated expectation. One respondent stated, 'Meetings, meetings, and more meetings . . . . I didn't understand how much time meetings were going to take up.' An- other respondent was not aware of the 'amount of work that goes into planning a staff meeting.' Still another respondent spoke of the unantic- ipated amount of organizational skill required to be a principal. 'I was unaware of the organization skills that would be needed to run a school.' We found that principals had not anticipated that a certain amount of autonomy with respect to demands for their time was lost, upon assum- ing the principalship. This profound to subtle variation from their pre- vious educational experiences startled some and was softly resented by others. unanticipated staff related issues Respondents said that mediating for and between staff was an unantici- pated part of the job. One respondent commented that, 'the amount of mediation between staff members' was not expected. Other respondents stated that they did not expect that teachers would so easily attempt to give their discipline problems to them. One principal commented that the 'expectation of staff that you [as principal] can more effectively deal with problems of discipline than they themselves can,' was a surprise. An- other principal was surprised to find 'that I was responsible for situations that I did not create. This happened particularly in areas of discipline.' The participants identified other unexpected staff related items that cov- ered a wide range of areas from a perceived a lack of professionalism and being misunderstood by teachers. Of course, dealing with teachers' personal issues and facing resistance from some staff members cannot always be predicted, but the frequency and intensity of such 'dealings' was unanticipated by our study participants. Some principals did not anticipate the scope and complexity of teacher expectations. One principal suggested that teachers expect 'you will back them no matter what.' Another administrator was surprised how much 'direction and organization the teachers looked for.' In the area of teacher supervision, one principal was not aware of the 'procedures to be fol- lowed and put into place when teacher competency was questioned.' Instructional leadership was an area that principals felt they were ex- pected to have expertise in. One principal said there were 'expectations around instructional leadership (e. g., you are expected to be knowledge- able about all curricula from k-12 (every subject).' unanticipated administrative tasks Plant maintenance and facility issues, were identified as unanticipated duties by some respondents. One administrator did not know it would be necessary to have knowledge in 'construction and the general work- ings of maintenance.' Related to this task area another administrator had not anticipated the 'degree of time necessary for building and mainte- nance issues.' Yet another principal did not realize 'the time and effort de- voted to maintenance items.' This participant had 'furnaces ... replaced ... renovations ... [and] roofing projects' in the first year in his/her new role. A principal explained, 'the biggest change was being in charge of the school budget [although] I had good advice from our school district secretary.' Yet, another principal was not prepared for the program plan- ning process. 'Developing a program plan for the following year was also something I did not expect, especially in December when I had barely identified what was going on.' unanticipated parent and school board office items Respondents stated that dealing with difficult parents was unanticipated. It was not that these first time principals were oblivious to parental issues but rather they had not anticipated the tensions, angst and energy that each of these situations creates for the role of the principal, and all con- cerned. One respondent expressed surprise about the 'amount of "par- enting the parents" I have to do.' A further comment was that parents 'expect[ed] immediate answers.' Another principal identified the prob- lem of getting parents to talk to teachers. The principal 'never realized how upset parents could get over minor matters and how reluctant they were to see the teacher first.' Other respondents identified items relating to Boards of Education and central office. A principal commented, 'I did not think I'd find solace in senior administrators . . . [but] I did.' Other principals commented that they had not anticipated dealing with board members that had 'their own agendas.' Another principal was unaware of the significance of board policy and the expectation to follow it. Still another principal had questions about the limited background and experience of central office staff and board members. The principal's perception of competence re- quired of such staff had altered upon assuming the role of principal and observing these individuals more closely. unanticipated personal skills required Our study administrators identified different skills that they had not an- ticipated they would need. Of particular note were those skills related to respecting confidentiality, time scheduling, and mediation skills. These skill-sets were identified as ones not anticipated to the degree they were required. One principal stated that you had to 'think like an administra- tor, not a teacher.' This comment is consistent with Sigford's (1998) view that, 'new principals need to see themselves as administrators and not teachers anymore' (p. 14). Another principal spoke about needing highly developed skills of diplomacy. 'Whether it is a "job expectation" or not, one of the hardest things is being diplomatic . . . and keeping my mouth shut and some of my gut reactions to myself.' It is interesting that all our administrators would have observed prin- cipals in action from their more experienced perspective as teachers; yet, many were still surprised by the amount of work and time required as part of the position. Looking across the categories and combining re- sponses for the amount of work/time required and the learning of ad- ministrative tasks, these two categories represented 40% of the responses. For nearly half of the first time principals, there were feelings that they were less than adequately prepared, in part, because they had not had an adequate grasp of what the principalship would actually require of them. Sense of Unpreparedness for First Time Principals The unanticipated experiences drew us to the question of the new prin- cipals' sense of unpreparedness. We were interested to know what new principals felt least prepared for in their new role. An iteration of the electronic Delphi sought to generate a list of tasks/areas for prospective principals who might follow those in our study. We hoped that these in- sights might guide future beginning principals in their preparation for school administration. The main categories from the responses were re- lated to: Teachers and supervision, dealing with parents, and time/work. Slightly more than half of respondents identified teacher related tasks and supervision as something they were least prepared for. While super- vision will be discussed in greater detail later, here we will say that princi- pals related to us their difficulties when dealing with teacher competency issues. One principal recounted, 'dealing with weak teachers,' while an- other talked of, 'disciplining/investigating a teacher when a complaint has been made.' About one quarter of the responses were related to parent issues. Re- sponses recounted mostly negative experiences with parents, which in- cluded 'parent gripes,' 'difficult parents,' 'being bullied by some par- ents,' and 'irate parents.' Many of these new principals felt they were not prepared for negative aspects of dealing with parents. One principal summed up the lack of preparation for dealing with, 'the fury of parents when they are upset with a teacher,' and concluded that, 'nobody told me you needed a very thick skin and the negotiation skills of the United Nations.' Terry (1999) advised principals to clearly 'articulate their belief systems, to better prepare themselves to resolve parent conflicts' (p. 29). Twenty-five percent of the respondents cited work and time demands as areas in which they lacked adequate preparation. One principal re- counted being unprepared for the 'amount of work and the amount of time the work would take.' A further comment was that 'with very little administration time I worked to 11:00 or 11:30 every night, including Sat- urday ____I also worked Sunday afternoon and some Sunday evenings.' A principal of a k-12 school discussed the time demands and the effect in the classroom, as follows: 'The incredible demands on time ... all of the time. I felt I was always a very organized and effective teacher. My teach- ing time was often interrupted by admin demands thus affecting my abil- ity to maintain an atmosphere conducive to effective learning right in my own classroom.' It is interesting to note that the three main themes that principals iden- tified as areas they felt least prepared for are areas in which, as teachers, they would have had some exposure. Parent-related situations certainly would have occurred for these new principals during their times as teach- ers. Dealing with fellow staff members and the pressures of teachings are common to all typical teaching situations. Yet as beginning principals, these former teachers felt unprepared in these areas. These data suggest that many teachers really did not understand the duties, pressures, and challenges of their schools' principals and, perhaps we might even sug- gest that some have had unrealistic perceptions concerning the nature of the principalship. We asked first time principals what they felt were the most impor- tant tasks that they needed to get 'a handle on,' in order to be success- ful. Respondents submitted a variety of items that they felt were impor- tant for first time principals. For the purpose of this line of questions we will focus on specific tasks and not general ideas. The two most of- ten mentioned categories were administration-related and staff-related tasks. Fewer of our participants mentioned categories student-related, board related, community-related, and program-related than one might have expected. administrative tasks The question becomes, to what extent are first time principals prepared for these various critical tasks? Previous analysis in this study has shown that many first time principals did not have adequate administrative ex- perience or training. First time principals do not have the experience or training in these critical tasks will be challenged to effectively perform their duties. Should first time principals who do not have the experience and training be given additional administration time to develop the skills to perform these critical tasks effectively? Dealing with students, Community issues, and School Board tasks were also important issues for which first time principals needed tp de- velop skills in order to better address them. Student discipline was the main theme of the student related responses. One principal tied together student and staff related items by saying that 'developing a school disci- pline policy that is workable and that the staff has agreed to enforce' was an important task for first year principals. Other responses for important student-related tasks included: working with the student representative council (src), student team building, recognition of students, working with graduation committees, and being involved with special needs stu- dents and their programs. Other tasks identified were related to Boards of Education. Preparing for and attending board meetings were seen as important. One principal found this newly acquired knowledge shortened the time needed for the preparation of reports to the Board as he/she developed a 'template [to] enter any new information for each meeting.' One principal stated that it was important to 'work closely with parent councils and involve them in the school vision . . . or perhaps involve them in formulating the school vision!' Another administrator commented on the role of the local board of trustees and the skill needed to deal, ... with the local politics and how it impacts on decision mak- ing at both the Board of Education and Parent Council level. I am not used to dealing with decision-making in a non-rational environment and for the sake of small local groups as opposed to the common good. Having the tact to deal with that day after day takes practice and a real talent. The area of student discipline was mentioned a number of times. In fact, nearly half the responses in the student-related category concerned the successful establishment of effective student discipline. However, the most obvious and recurrent theme in our inquiries was that of staff su- pervision. Participants identified staff supervision as a critical task. Yet many new principals reported that staff supervision was perceived as one of their weakest areas. In the final section of this article we share some of our findings with respect to this supervisory role and related functions. staff supervision in the first principalship Twenty-one percent of the staff related tasks involved staff supervision. The number of responses indicates that staff supervision was seen an important task for new principals. One principal said, 'teacher staff su- pervision is still [the] number one' task for the new principal. Knowing that developing skills in staff supervision has been reported to be a critical skill, as identified by 450 principals in California (Schmi- eder and Cairns 1996, xvi). We asked our first time principals to describe their initial experiences with personnel supervision. We were also curi- ous about the types of training or experience that they brought into this aspect of their work. The respondents submitted a variety of items that were grouped into the following five categories: initial experiences, ex- pectations given, how did you feel, training received, and advice for new principal. Initial Experiences of Staff Supervision Several of our particular participants said they did not have much to do with staff supervision in their first year of principalship. Participants typically indicated that their superintendent of education was responsi- ble for staff supervision. One new principal said, 'It had never been done in the district.' A principal indicated the superintendent initially handled staff supervision but, 'as the years have gone on, more has fallen onto the principal.' The remaining participants had various levels of involvement in staff supervision. One principal said the expectation was for principals to supervise one-third of the staff each year. Another principal stated that the district, 'asked principals to do nearly all the supervision.' A further comment was that supervising new staff was not a problem but that it was, 'hard to be as open as needed for improvement when part of the process was a final report.' For the first-time principals in this study pop- ulation, the fact that they were in-scope and also considered teachers, with membership in the teachers' union, complicated this role and re- lated expectations. Expectations for Staff Supervision Slightly over half of the respondents stated that the expectations for staff supervision were outlined in Board-level policy. Fewer respondents made comments about having been simply 'given' expectations. Some respondents commented that they specifically received supervision ex- pectations from their respective superintendents of education. Irrespective of the source of the supervision expectations, and across the categories, almost half of the responses suggested these expectations were less than adequate. One principal said that, 'the only expectation from the superintendent was that I be in the classrooms.' Another prin- cipal cited that the only expectation given 'was when the reports [were] due.' Further comments included not being given any specific instruc- tions regarding teacher supervision and that the 'expectations and pur- pose were poorly defined.' One administrator said, 'I was unclear as to why I was supervising.' A further comment by an administrator related to a frustration with the lack of clear direction and unclear expectations for supervision. Speaking about the supervision expectations one prin- cipal said, There were none, as we did not have a teacher supervision and appraisal policy at that time. There was an unwritten expecta- tion that I should immediately be able to improve the instruc- tional capabilities of some of the so-called 'worst teachers' in the school and if they did not improve then I was to 'fire' them. This of course is ludicrous but it was an expectation of both the superintendent and the board of education. Respondents indicated that the superintendent, or district policy, pro- vided adequate expectations for teacher supervision. One principal com- mented that the superintendent 'clearly expected that the principal su- pervised teachers and was an integral part of the evaluation.' Further comments were that 'expectations were to be consistent with district policy' and that expectations were 'set out by central office and teach- ers are aware of them.' Sergiovanni (1995) agrees the, 'principal's evalu- ation responsibilities . . . include reviewing and regulating performance, providing feedback, and otherwise tending to standards of goal attain- ment' (p. 4). How First Time Principals Felt About Staff Supervision Seventy four percent of our respondents stated that they initially felt un- comfortable in their supervisory role. One administrator recounted feel- ing, 'very unprepared and lacking in skills to effect change.' Another ad- ministrator said, '[I] felt out of my depth, especially with teachers who had more teaching experience than me.' Many of those who indicated that they felt uncomfortable at first, commented that they grew more confident in this role with experience. One principal was, 'scared at first but . . . grew confident with practice and encouragement . . . it would not have been successful without the support of my staff.' The minority of respondents stated they felt comfortable with staff su- pervision initially. While one administrator simply found, 'teacher/staff supervision has been both enjoyable and demanding.' Another first time principal felt better prepared as he/she was more 'comfortable in the role of teacher supervisor because I have had training.' Background Preparedness for Staff Supervision Almost sixty percent of the responses indicated that, as first time prin- cipals, they had received no training, or very little training in supervis- ing teachers. One principal felt she was, 'thrown into teacher supervi- sion with no training and [only] a bit of information that I received at the Principals' Short Course.' The training described included univer- sity graduate classes, provincial school-based training, and administra- tors' council training modules in supervision, curriculum-based inser- vices, district supervision seminars, and general comments about train- ing. One principal recounted taking a, 'supervision graduate class that was experiential and this was life saver.' A further theme was to keep 'eyes and ears open' all the time while working with staff. Working with staff and getting to know their teaching styles was offered as a way to gain specific insights into teachers' strengths and weaknesses. One suggestion was to pop into classes frequently to get a sense of what is happening in the classrooms. Another principal summed up the use of reflective supervision as follows: I started with 'walk-abouts' to get a sense of what was going on in classrooms. I then began full period visits in each teacher's classroom and wrote a 'report' on 'what was happening in the classroom'. The teacher and I discussed the lesson soon after- wards. From there, in a subsequent visit, I focused on creat- ing reflection questions for the teacher and used this as a ba- sis for encouraging professional growth. If there was a teacher who appeared to be having difficulties, I visited them again and when needed, I gave specific directions for areas to focus on. Robbins and Alvy (1995) reported that, 'if you think something is im- portant, like visiting classrooms, build it into your schedule' (p. 51). The data suggest that principals in districts that had board policies for staff supervision were more likely to see themselves as being successful in per- forming teacher supervision. However, nearly half the respondents saw the expectations for staff supervision as inadequate. Over half of the par- ticipants had little or no training in staff supervision. Many of the sug- gestions for staff supervision involved being visible and being aware of situations. The study data suggest that staff supervision was one area of weakness for first time principals; unclear expectations and insufficient training were factors linked to this perceived weakness. Responses to a specific question on supervision generated some can- did and revealing responses from the participants. Three of every four respondents said they were initially uncomfortable with the supervision expectations they had been given. Participants were concerned about su- pervising staff that were older and had more experience. Some partici- pants were concerned about the separation that they felt between them- selves and their staff because of the evaluative role in supervision. Almost one out of four of the respondents indicated that they had adjusted to their supervision role as time went on. Our respondents' comments on administrative preparation and sur- prising time demands caused us to wonder if first time principals in these rural schools had the background and administrative time to develop good staff relationships and be engaged in the supervisory process? Did principals who felt uncomfortable supervising feel that way because of a lack of role adjustment, lack of clear expectations, or a lack of prepara- tion for staff supervision? The data suggest that supervision expectations were not clearly com- municated to first time principals. Just over one half of the respondents indicated that their school districts had a policy for supervision. Four of every 10 respondents felt the expectations for supervision less than ade- quate. In those districts where there was a policy for staff supervision, a minority of the principals saw the expectations as inadequate. The data suggest that districts that have policy for staff supervision communicate their expectations adequately to new principals. The implication for the new administrator is that they should be clear on the supervision ex- pectations that the district and superintendent have for them. Beginning administrators need to realistically assess their supervision skills and ask for help if they are not prepared for supervision duties. Those adminis- trators who did not initially have staff supervision responsibilities found that they were now engaged in the supervisory process. The data suggest that a lack of training and preparation for the supervisory role was com- mon for first time rural principals. There was no indication in the data from this study that first time principals received such training through their boards of education. Factors in a Successful First Principalship We asked principals to think about the factors that they believed were the most significant in establishing a first principalship and to describe the five most significant factors that contributed to establishing themselves as a principal (e. g., training, experience, and personality). The responses were grouped into fourteen broad categories listed in order of frequency as: character traits, experience, leadership and interpersonal skills, per- sonality, training, support from central office, working with staff rela- tionships, personal motivation, support systems, situational considera- tions, support from colleagues, patience, and risk taking as related to standing on one's principles. Character traits were identified as: strong work ethic, imagination, ambition, confidence, and consistency. One respondent said 'A strong work ethic leads to credibility. This is especially true in a smaller/rural school. If you are not willing to lead by example, people will not be as likely to put in the extra effort.' Teschke (1995) agrees that effective lead- ers are those who are visible and prepared to put in the necessary effort to lead the school (p. 10). 'Experience' was the category attracting the second most responses, including: successful teaching, being a vice-principal, and being men- tored by an administrator. One respondent said that 'mentoring by an experienced principal' and having them 'available to talk over situa- tions and routine is important. Their experience in scheduling and pol- icy are invaluable to a beginning principal.' Another respondent had 'watched five previous principals work in the school' and had a year of vice-principal experience before taking the job. A former vice-principal thought 'the number one factor [for success] was mentorship through a vice-principalship.' These comments in support of mentoring new prin- cipals are consistent with the literature (Adams 1999; Ellis and Macrina 1994; Lovely 1999; Peel et al. 1998). Leadership skills and interpersonal skills were identified as includ- ing: organizational skills, communication, and leadership styles. Inter- personal skills, such as listening and empathy, were also indicated. One respondent said there must be a 'willingness to listen and persuade rather than dictate.' Another respondent talked about the importance of orga- nizational skills. 'It is very important to be on top of things especially so in your first year. If staff members see that you are organized and on top of things, I feel that things will go a lot smoother for you.' In discussing 'personality,' while repeat responses were not counted for frequency, it is worth noting that one respondent felt the need to list personality twice. That respondent said first time principals need a per- sonality that, 'is open to hearing others so that they feel heard' and 'is open to sharing decision making with the stakeholders of the decision.' Somewhat reflective of this view of first year principals is the viewpoint of Sergiovanni (1995) who spoke of principals as 'ministers to serve par- ents, teachers, and students' (p. 127). Training was seen as an important factor for success in a first prin- cipalship. Respondents expressed having university programs and other professional administration inservice in mind, under this category. There was no distinction made between preservice or inservice. One respon- dent stated that someone in a first principalship needs 'an academic background broad enough to have informed opinions about educational issues.' The same respondent cited the example of special education and the changes within that program. Bergh and Van der Linde (1996) added that principals 'need to take the initiative to learn about curriculum the- ories and issues' (p. 4). One principal stated: My graduate classes leading to my Masters Degree in admin- istration were invaluable in helping me adjust to the dynamic role of [the] principal. These [classes] provided me with the theoretical background to help me understand many of the things that were occurring in a much broader fashion. This depth and breath of understanding led to making higher qual- ity decisions, especially in stressful circumstances that in- evitably occur during that first year. The comments concerning training proved to be interesting in that a minority of the respondents downplayed training as a success factor. Some principals made comments such as, 'training has virtually nothing to do with the job' and 'I don't think you need a lot of post secondary training to be successful as an administrator.' Alvy and Robbins and Alvy (1998) have observed that the new principal, 'often feels unprepared for the role, despite extensive training' (p. 26). Notwithstanding this, those administrators with training seemed sup- portive of it, while those without seemed sceptical. We felt it would be interesting to investigate the types and qualities of training that these participants had in order to more fully explore the reasons for their not considering it of much value in their first principalship. Supports from central office, boards ofeducation, community/parents were identified as success factors by close to ten percent of the respon- dents. One respondent stated that support from the superintendent and local school board were important, but that 'expectations of each [should] be clearly spelled out in advance.' The literature supports the idea that the duties and roles of local advisory boards must be clear and well communicated (Ubben and Hughes 1997, 68; Bolman and Deal 1993, 30; Sergiovanni 1995, 68). Another principal spoke about 'knowing the community beforehand' as important. A further comment describing the support of the community was that 'in a smaller school it is impor- tant to build bridges with the community. You never know when you might need help from them.' The respondents who identified support and working with parents as a factor for success did not describe the ways that they perceived parents showing their support. Slightly less than ten percent of the participants raised working with staff and establishing a working relationship with them, as factors in their success. One principal stated, 'I learned to use the strengths that were already present... making the staff feel involved is very important.' An- other respondent spoke about expectations and said, 'I let my staff know what my expectations were____I take a very collaborative approach to leadership within my school and I had to communicate this early, so that staff members knew that their input, when requested, is important.' Fewer respondents mentioned the remaining categories: personal mo- tivation, support systems, and situational considerations, as factors lead- ing to a successful first principalship. Respondents discussed career ad- vancement and financial incentive as factors. Other respondents indi- cated that family support was an important factor. One principal said, 'I wasn't afraid to take a risk, which is partly to do with me and partly to do with the support of my family.' Another principal found his 'family was very supportive' when he had been considering the move to administra- tion. Daresh and Playko (1997) emphasize the importance of maintain- ing personal and family support and to 'keep a personal focus on what is truly important in your life' (p. 101). Respondents cited the support they had received from colleagues as a factor in applying for their first principalship. One principal commented, 'I was encouraged by my staff to apply for the job.' Another principal had been 'encouraged by... fellow staff members to apply.' Respondents agreed that an important factor for them had been that the previous principals had not done a very good job. Patience, taking risks and standing on one's principles each had gar- nered responses from our participants. One principal said it was impor- tant to 'above all... [to] be patient.' Another principal said it was im- portant to stay 'steadfast' to one's principles in the midst of all that is going on. In the area of risk taking, one principal felt the 'willingness to assume risk and its consequences' was an important strategy in estab- lishing a successful first principalship. Summary and Conclusions First time principals were often surprised by the high expectations re- lated to their new roles and the sense that they were expected to have answers to the many problems in the school (personal and well as profes- sional). The transition from being a staff member-teacher to becoming a staff member-principal resulted in considerable role confusion for some principals and for their teacher colleagues. Also unexpected, on becom- ing a principal, was the reality of dealing with difficult parents. These fac- tors contributed to a sense of unpreparedness in the face of unexpected demands on these neophyte principals. Many first-time principals re- acted strategically (some more than others) to address their newfound difficulties. A key learning for new principals was centred on concern about balancing work and family life. Many of the issues raised by our beginning principal informants are reflected and informed by the litera- ture. The general findings from this study centred on training and experi- ence related to administration of schools. Many of the first time prin- cipals in rural schools had limited specific preparation for the princi- palship and only a few had related administrative experience in others roles, such as the vice principalship. The majority of participants had no school-based administrative training prior to their first principalship. Most participants had little or no administrative experience other than their involvement in leadership roles as teachers and rarely as vice prin- cipals. The findings of the study indicate that the majority of new princi- pals who had vice-principal experience, or had a mentoring relationship, felt they were better prepared for their first principalship. As to the use of successful teacher leaders, Anderson (2003) raised the question of the school districts' misunderstanding of teacher leaders as too quickly see- ing these people as a ready pool of future administrators. Quite simply some are and some are not. We feel some teacher leaders may well be recruited into the principalship without due consideration given to their need for support in face of less than adequate preparation, or experience as an administrator. Clearly, prospective principals could better under- stand the role of the principal. The elimination of the vice-principal role in many rural schools may have contributed to the surprises and unan- ticipated learning experienced by our study participants. We think that exposing prospective principals to the descriptions of our study partici- pants and connecting them with the factors that are associated with suc- cess are ways of fostering the development of beginning principals. References Adams, J. 1999. Good schools, good principals. Trust for Educational Lead- ership 29 (1): 8-11. Alvy, H., and P. Robbins. 1998. If I only knew... Success strategies for navi- gating the principalship. Thousand Oaks, ca: Corwin. Anderson, K. 2003. Shared decision-making and the third continuum. Canadian Journal ofEducational Administration and Policy. http://www .umanitoba.ca/publications/cjeap/articles/anderson.html. Bergh, E., and P. Van der Linde. 1996. The principal's role in implementing curriculum. The Administrator 29 (2): 2-10. Bolman, L., and T. Deal. 1993. The path to school leadership: A portable mentor. Newbury Park, ca: Corwin. Daresh, J., and M. Playko. 1997. Beginning the principalship: A practical guide for new school leaders. Thousand Oaks, ca: Corwin. Ellis, A., and A. Macrina. 1994. Reflection and self-appraisal in preparing new principals. Journal of Staff Development 15 (1): 10-4. Lovely, S. 1999. Developing leaders from within. Trust for Educational Leadership 29 (1): 12-3. Peel, H., C. Wallace, K. Buckner, S. Wrenn, and R. Evans. 1998. Improv- ing leadership preparation programs through a school, university, and professional organization partnership. nassp Bulletin 82 (602): 26-34. Renihan, P. 1999. In-school leadership for Saskatchewan schools: Issues and strategies. Regina, sk: Saskatchewan School Trustees Association. Robbins, P., and H. Alvy. 1995. The principal's companion: Strategies and hints to make the job easier. Thousand Oaks, ca: Corwin. Schmieder, J., and D. Cairns. 1996. Ten skills of highly effective principals. Lancaster, pa: Technomic. Sergiovanni, T. 1995. The principalship: A reflective practice perspective. 3rd ed. Needham Heights, ma: Allyan and Bacon. Sigford, J. 1998. Who said administration would be fun? Thousand Oaks, ca: Corwin. Terry, P. 1999. Essential skills for principals. Trust for Educational Leader- ship 29 (1): 28-32. Teschke, S. 1995. Why means being yourself. Trust for Educational Leader- ship 24 (7): 8-11. Ubben, G., and L. Hughes. 1997. The principal: Creative leadership for ef- fective schools. Needham Heights, ma: Allyn and Bacon. Reflections on 'Management of Global Transitions' Alan Anov Receiving the first number of a new scientific research journal is always an interesting moment. I look at the front page, and immediately I was caught by the words Global and Inter- national and had to look at the con- tent. The journal proved to address issues that I find extremely impor- tant in the world of today and tomor- row, we see a growing internationali- sation of companies and the products available in the shops, the education of young is no longer taking place in their home country, we travel an study all over the world, we are more and more living in a 'Global Village or City'. The Education and training of children and young people has to cope with this and here this journal comes in with its articles on recent international research. Historically, the advancement of general education in a society has in- creased the standard of living (mea- sured by the economical yardstick); this has led to theses like the one stated in the oecd report from 1993 quoted on page 73 of the journal: Only a well-trained and highly adaptable labour force can pro- vide the capacity to adjust to structural changes and seize new employment opportunities cre- ated by technological progress. Achieving this will in many cases entail a re-examination, perhaps radical of the economic treat- ment of human resources and education. Developments in the educational systems in countries like Denmark over the last fifty years have enabled a larger and larger proportion of the population to obtain full secondary education by adding two to four years of academic studies. This is fully in line with the basic ideas of the thesis. Analysing the developments in the labour market in Europe over the re- cent years shows clearly that (as in all biological relateable issues) there is no guaranty that a thesis is correct (the truth, the one and only). At the same time as the educational systems devel- oped and introduced more schooling, training and specialisation, globalisa- tion made production and product development etc. leave the Western European countries for Eastern Eu- rope and Far East. The reason for this was that mass production and labour intensive production are much more sensitive to labour costs than to a gen- eral high level of education in the labour force. The needed number of highly skilled labour is either locally obtainable or can be 'imported'. We see that most of the textile work has left Europe, but also highly skilled work like computer programming is now being done in countries like In- dia. The latest developments show that companies are now moving their production activities from Eastern Europe to countries like Ukraine and China. Leaving Europe with its highly skilled labour force without work. In Denmark it is at present very difficult for the new graduates to get employ- ment, and unemployment especially among the higher educated is grow- ing. With the former in mind, reading the paper by David Oldroyd 'Educa- tional Leadership for Results or for Learning?' and David C. Dibbon's pa- per 'Creating a Culture of Innovation in Canadian Schools' puts emphasis on learning and education not as pro- cesses creating a labour force with certain fixed capacities able to man- age and carry out certain jobs or pro- cesses, but as a process of giving stu- dents knowledge and abilities (skills development) to be innovative and learn throughout life. This will even- tually also result in new inventions etc. Looking back in history to the early days of the introduction of tech- nology in craft and agriculture it is interesting to see the ingenuity of the 'common' farmer or craftsman. Very interesting examples can be found in the development of different ways of utilising the power of water as source of energy for sawmills, metal working and flour grinding etc. Living in the countryside of a Eu- rope that is becoming more and more urbanised, and at the same time los- ing more and more of the basic pro- duction (manufacturing), makes it difficult to see what should be the right direction of education and de- velopment in order to cope with the challenge. Let me suggest the follow- ing: Back in the latter part of last cen- tury there was an attitude to the fu- ture that the introduction of com- puters and technology would solve all problems. Time has shown that it was not quite as simple as that. New tech- nologies and methods etc. not only solve problems but give more new challenges and problems to solve. A decade ago a group of people partic- ipated in a series of educational con- ferences under the general heading of 'Children in the Information Age', discussing the impact and use of it etc. in education and training. Un- fortunately this work was interrupted (ended) by the changes in the polit- ical map of Europe taking place in the late eighties and beginning of the nineties. I clearly remember the feel- ing ofdirection and being on the right track we had at the last conference in Albena, Bulgaria discussing the de- velopment of 'High Level Learning Skills' in students as the target of all education from kindergarten to uni- versity. Reading through the papers of Volume one of the new International Research journal 'Managing Global Transitions,' as well as following the global trends, shows me that 'Learn- ing to Learn and Innovate' must be the target of education, enabling the individual as well as possible to adjust to and creatively utilise the possibili- ties available at any time and place. Once more, thank you for the ini- tiative and best of luck for the future. Managing Global Transitions International Research Journal aims and scope The journal Managing Global Transitions is aimed at providing a forum for disseminating scholarship focused on transitions. The journal seeks to publish ground breaking work in management research that will provide integrated and diverse perspectives on the processes of change and evolution in a broad range of disparate fields, including systems theory, leadership development, economics, education, sociology, informatics, technology, decision-making theory, and action learning. To further the understanding of transition environments internationally the journal aspires to enhance the availability of case studies and analysis of data from different cultural environments in public, non-profit, and corporate contexts. information for authors Manuscripts should be prepared following the style of The Chicago Manual of Style (University of Chicago Press 2003). Manuscript Style • Papers may be submitted electronically via e-mail. Manual submission (one hard copy plus one on ibm format disk) is also required. • Papers should be between 4000 and 5000 words in length, accompanied by a 100-150-word abstract and about five key words on a separate sheet. Book reviews should be between 1000 and 2000 words in length. • The title page must list full title, author(s) address, phone, fax, and e-mail. • Manuscripts must be printed on one side of A4 (or letter size) paper with double spacing and 25 mm (1 in) margins. Italics should be used for emphasis and bold for headings, which must be numbered (e.g. 1,1.1,1.2, etc.) and written using uppercase and lowercase letters. • Illustrations and tables must be printed on separate sheets. • We accept files created with all major word processing packages, but prefer ms Word and IATgX. Figures should be saved as separate files in tiff or eps format, and source files should be included. Author name should be used as file name (e.g. smith.doc for the main file and smith1.eps, smith2.eps, etc. for figures). Reference Style The author should make sure that there is a strict one-to-one correspondence between the names and years in the text and those on the list. The list of references should appear at the end of the main text. It should be listed in alphabetical order by author's name. References should appear as follows: Beech, M. H. 1982. The domestic realm in the lives of Hindu women in Calcutta. In Separate worlds: Studies of purdah in South Asia, ed. H. Papanek and G. Minault, 110-38. Delhi: Chanakya. Jackson, R. 1979. Running down the up-escalator: Regional inequality in Papua New Guinea. Australian Geographer 14 (May): 175-84. Lynd, R., and H. Lynd. 1929. Middletown: A study in American culture. New York: Harcourt, Brace and World. University of Chicago Press. 2003. The Chicago manual ofstyle. 15th ed. Chicago and London: University of Chicago Press. Articles are peer reviewed. copyright notice Copyright for all articles published in Managing Global Transitions is held by individual authors. subscriptions Annual subscription (two numbers): individual rate 9.600 sit (euro 40); institutional rate 14.400 sit (euro 60). Prices include postage. Managing Global Transitions International Research Journal volume 1 • number 2 • fall 2003 ' issn i58i-63ii 117 Competition and Oligopoly: A Case of uk Grocery Retailing Kevin A. Lawler Chih-Cheng Yang 135 Demand Functions for Services of Public Railway Passenger Transportation: An Empirical Analysis for Slovenia Jani Bekö 153 Analysis of the Nature of Economic Growth of Slovenian Economy Matjaž Novak 169 The Yokes of Gender and Class: The Policy Reforms and Implications for Equitable Access to Education in Kenya Njoki Nathani Wane Wambui T. Gathenya 195 Unexpected Learning by Neophyte Principals: Factors Related to Success of First Year Principals in Schools Keith Walker Kirk Anderson Larry Sackney Jeff Woolf VA FAKULTETA ZA | FACOLTÄ DI | FACULTY OF MANAGEMENT