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Business and Economics
There is an observable discrepancy between the real and virtual economy, as money stopped being the tool and essence of capitalism and the economy in the postmodern era. Money has become a purpose, a simulation, a viral virtual image. For this reason, we should rather say that it is no longer money, but the image of money that talks. The transparent digital convergence culture creates a borderless second world for the economy. This economy and our attitude towards it have never been so far removed from reality. Communication, information and economy have lost their referential nature. As soon as we get in contact with the virtual/digital world, we open our eyes onto the image and the transparency of images. A visual metaphor is a visual rhetorical tool that strives to express messages, to place emphasis on certain aspects of messages, and to convey a persuasive message. This paper aims to demonstrate visual metaphor chains that set a mirror between the real and virtual economy and that serve to show the changed attitude towards money. We illustrate our theoretical approach by analysing the multimodal metaphors that appear in a video clip from popular culture.
Metaphor plays a major role in the ways people speak and write about money and other economic concepts. One long-standing belief is that most verbal metaphors are clichéd or dead, and do not evoke active metaphoric thinking. However, research in cognitive linguistics and cognitive science demonstrates how verbal metaphors about money are pervasive in discourse, and emerge from vitally alive metaphoric concepts, most of which are rooted in pervasive patterns of embodied experience. An important part of embodied metaphoric language and thought is embodied simulation processes that enable people to talk about abstract concepts, such as money, via imaginative projections of themselves into the actions referred to in language. Studying the language of money and economic action demands examination of the bodily based metaphorical concepts that underlie these types of communication.
In the paper, I examine what English idioms related to money reveal about the conceptualization of money. Most money-related idioms in English are based on metaphor. Working with conceptual metaphor theory, I suggest that money idioms in English rely especially on two conceptual metaphors: MONEY IS A MOVING SUBSTANCE / OBJECT / LIQUID and MONEY IS A FORCE. It is well-known that both in everyday talk and expert communication money is conceived of as a MOVING SUBSTANCE / OBJECT / LIQUID. Several studies have dealt with this conceptual metaphor from a cognitive linguistic perspective. However, the FORCE metaphor has received much less attention in the metaphor literature, though it is the latter metaphor that captures the way we view our relationship to money, that is, the way we see the role of money in our life in society. Given this focus, I analyze the FORCE metaphor in some detail, raise the issue of what motivates the emergence of this metaphor, and, finally, address the question of what lends especial cultural significance to it.
The number of books published in a country reflects its economic, social and cultural development. Yet, all too often, the production of books is looked upon solely in economic terms, i.e. as a part of national income, or as a proxy for human capital which, in turn, might explain economic growth. In this paper, we aim to give books their day in court. Using a dataset with book titles per 1,000 inhabitants for a large number of countries since 1950, we find that the number of titles was mainly driven by the level of education and income in the lower quantiles. The reduction of printing after 1990 was, surprisingly, not caused by a rise in other media, such as the internet, but, mostly, by a reduction in the effect of education in the poorer countries.
The domination of the news media by the political sphere in Hungary is continuously debated in public and scientific discourses. The issue of migration has resurfaced on the Hungarian political and media agenda following the refugee crisis of 2015. The first part of the paper offers a theoretical overview of frame analysis. Framing refers to making an aspect of an issue salient, thus suggesting a certain interpretation and evaluation of the issue. In the second part, the methodology of frame analysis is used to explore representations of refugees and migrants in two parliamentary speeches of the Hungarian Prime Minister and three online media outlets of different political orientations (Híradó, Index, Origo) in September and November 2015. The results show that the PM framed the issue as a symbolic threat and political conflict, while the media emphasized realistic threats, the politically divided and humanitarian aspect of migration. The article highlights some of the instances where the media does not follow the political discourse.
This study examines the relationship between terrorism and economic openness that takes into account both the number and intensity of terrorist incidents and the impact of government military expenditures on trade-GDP and foreign direct investment-GDP ratios for both developed and developing countries. It uses the dynamic GMM method to account for endogeneity in the variables. Deaths caused by terrorism have a significant negative impact on FDI flows, and the number of terrorist attacks is also found to be significant in hampering the countries’ ability to trade with other nations. The study also demonstrates that the developing countries exhibit almost similar results to our main analysis. The developed countries exhibit a negative impact of terrorism, but the regression results are not significant.
The main aim of this paper is to measure the consequences of terrorist activities on capital flows of the developed countries. Capital flows are interpreted as FDI inflows and outflows. The methodology is based on the dynamic panel data models (System-2 step-GMM estimator) using a sample of 36 developed countries all over the world from 2000 to 2016. The key results indicate that the terrorist incidents have different impact on capital flows of the developed countries compared to impacts of economic and institutional variables. All the variables used in the paper show the level of their impact on capital flows. The results indicate that terrorist activities weaken economic activity of a country, while minimising capital flows in certain situations. The recommendations and proposals are given based on the results of research.
While workplace communication is a well-established field in communication studies, empirical research based on samples of communication processes taking place in actual organisations is still scarce. Although a distinct line of research on meetings has recently emerged and established itself as “meeting science”, another ubiquitous communication setting, regarding business presentations have received far less attention. In this paper, we argue that a general-purpose theory and a corresponding measuring instrument for the evaluation of the impression made by a presentation on the audience would greatly enhance our understanding of the factors that determine the efficiency of presentations. We present the theoretical framework and the indicators in such an inventory, which we have developed based on the educational literature on public speaking. The construction of this instrument also generated a set of hypotheses about how a speaker’s personality traits may be related to various aspects of the impression made by the speaker.
The paper seeks to show that the theory of strategic maneuvering, the most recent version of the pragma-dialectical approach to argumentation, can make vital contribution to understanding how commercials are designed and defended against legal challenges. If commercials can be subjected to argumentation-theoretic analysis, that would also show that the idea that commercials never constitute genuine arguments is mistaken. We will begin by sketching the pragma-dialectical approach and the theory of strategic maneuvering, then we apply the latter to two cases: the argument in a commercial aiming to persuade customers that Dove Intensive Cream moisturizes better than Nivea’s similar product, and the argument given by Dove’s manufacturer, Unilever, during the proceedings conducted by the Hungarian Competition Authority, which is intended to convince the Authority that the commercial is not deceptive.
The paper presents a research conducted in 2016 on the topic of relations between corruption perceptions and media usage patterns amongst Hungarian youth between 18 and 29 years. The main results can be summarised in three points. First, while half of the Y generation respondents in Hungary have already encountered corruption directly, they feel the presence of corruption stronger in the political sphere than in their everyday life. Second, 71% of the interviewees reported that honest people with a high level of integrity have less chance to prosper than their less honest peers. Third, media usage patterns of the Y generation are based mainly on social media, meanwhile print media use heavily declines. Young people reported to be overwhelmed by big corruption cases involving hardly imaginable sums of money and distant public figures. At the same time, they have very little knowledge of everyday corruption cases.
Institutional quality is commonly cited as a reason that investment infl ows still vary across European countries, despite their economic stabilization following the tumultuous years in the early 1990s. This article tests empirically whether institutional quality has any bearing on the level of investment infl ows into selected groups of European countries. The role of institutions is assessed using Economic Freedom indices from the Heritage Foundation. We construct a panel dataset from 2000–2015 for 35 European countries to apply a fixed-effects and generalized method of moments model framework in the regression benchmark with the metrics from the Heritage Foundation. Results show that although institutional quality has some impact on the level of investment, it is less significant than expected and far less than suggested by the existing theoretical literature. Macroeconomic fundamentals matter more than do institutional factors.
The aim of this case study is to analyze the historical and current state of the education and practice of futures studies (FS) in a country that was once a member of the Soviet Union: Estonia. There are other countries in Eastern Europe which used to be or currently are in a similar situation to Estonia, but futures studies developed in different ways, because politics and economies were driven by different strategies or interests, and futurists emphasized different aspects of their research (either the theoretical or the practical, along different paradigms). In certain countries, like in Estonia, FS fi rst achieved scientifi c (and educational) success after the political change of the early 90s, but this was followed by a long way down to a secondary (backing) position. It seems that an optimal share between education and practice may lead FS out from the pit in Estonia, and in other countries, too.
This paper analyses spatial impact of government expenditures on education on economic growth in the EU28 countries during the period 2004–2013. Employing a novel econometric technique that allows for the estimation of spatial spillovers, our results indicate that government expenditures on education significantly and positively infl uence GDP growth. Moreover, the indirect i.e. the spillover effects are quite large suggesting that the growth models should account for spatial interdependencies. Precisely, we find that education expenditures in one country affect GDP growth in the neighbouring countries, meaning that these spillovers are geographical in nature. Moreover, we find that the degree of interdependence among countries varies according to the average GDP per capita even if their geographical distances are identical. Additionally, immigration is found to be an important channel of spatial transmission.
This paper analyses the impact of public debt level and its (un)sustainability on fiscal policy in Croatia in the 2001–2015 period. A switching regression approach is used to distinguish different regimes when government spending, i.e. fiscal policy has more or less impact on economic growth during different cycles. In the second part, the structural VAR model is used to analyse the dynamic effects of government spending on domestic demand in Croatia. To observe the public debt effects on a fiscal policy, a “closed” model is compared with an “extended” model which includes a debtto- GDP indicator. Results show a negative impact of recession on public debt sustainability and confirm the main thesis that public debt level significantly affects and reduces the effectiveness of fiscal policy in Croatia.
Among the required skills of purchasers, communication is one of the most frequently mentioned ones. Information reception and processing are important elements of this skill. This paper focuses on how and through what channels purchasers process inputs and how they understand them. The literature revealed that there are differences in tasks between the two sectors, but differences in communication have not yet been addressed. Based on a survey among purchasers, the paper fi nds private sector purchasers tend to be more creative, more open to teamwork and more visual, while public purchasers tend to focus on facts and on proved solutions. Furthermore, they are more verbal than private sector purchasers. The results indicate that differences between private and public purchasing cultures stem from the task features of the two sectors, and from different personal skill sets. The results have strong relevance for organisations focusing on the training of purchasers.
This study examines the relationship between the existence and independence of internal audit and other corporate governance factors in an emerging market, building on disclosed data from Hungarian listed companies in 2011. The results indicate that almost half of the listed fi rms use internal audit, however, independence of the function is less common. Ordinal regression results confi rm the negative impact of concentrated foreign ownership on the need of internal audit, and the complementary relation between internal audit and supervisory board monitoring. The complementary role of internal audit to external one is partially evidenced. The results also indicate that larger fi rms are supposed to establish internal audit and strengthen its independence more than smaller ones. The fi ndings of the study have important implications for sound corporate governance in Hungary. The study, by assessing the institutional and regulatory context of an emerging market, contributes to the literature by providing an improved understanding of the existence and independence of internal audit.
The paper examines theories on the relationship of market and democracy. Four theorems may be distinguished: (1) The necessity theorem: market (M) is the necessary condition of democracy (D) ([M→D]+). (2) The inequality theorem: market undermines democracy ([M→D]–). (3) The optimality theorem: democracy is the optimal condition of market ([D→M]+). (4) The disability theorem: democracy undermines the market ([D→M]–). My question is whether these theorems include or exclude each other. After the reconstruction of the four theorems I examine the six possible combinations of them. My conclusion is that the theory stating that market and democracy mutually reinforce each other is compatible with the theory discussing the confl icts between market and democracy: the two theories do not constitute a logical contradiction. This analysis assists in understanding why the relationship of capitalism and democracy may be relatively stable: the selectivity of democracy and the political restrictions of market do not undermine, do not eliminate economic and political freedom, but sustain it in a modifi ed form.
The aim of this paper is to estimate the efficiency of Hungarian banks with several models and to calculate the Lerner index for both the household and the corporate credit market. We apply stochastic frontier analysis (SFA) and data envelopment analysis (DEA) models to estimate the efficiency and calculate profit and cost efficiency with and without taking credit losses into consideration. In terms of cost efficiency, banks are nearly homogeneous and improved their efficiency after the crisis. Banks, however, are extremely heterogeneous in terms of profit efficiency. During the crisis, a gradual improvement could be observed across the sector after the initial downturn. Since the operating conditions of the household and the corporate credit markets are different, we estimated the intensity of competition separately for both the markets. While the Lerner index showed strong market power in the household credit market, the corporate credit market was characterised by intense competition. Regarding efficiency, various models often resulted in different conclusions, especially in the case of cost efficiency. Therefore we recommend that the regulatory decision-making process should always consider the results of several models. Moreover, the Lerner indices demonstrate that it might be important to use disaggregated models when modelling the features of credit markets.
Food processing companies in the members of the Visegrad Group have had similar conditions to sustain and develop their business activities since entering the single European market in 2004. It is necessary above all to stress the levelling instruments of the Common Agricultural Policy within the context of negative external impacts, which diminish in relation to the economic status of businesses, specifi cally SMEs. The objective of this paper is to identify similarities and differences in the profi tability of foodstuff producers from the Visegrad countries during the global economic crisis between 2008 and 2012. The paper uses fi nancial and non-fi nancial factors and employs a multiple correspondence analysis approach. Corporate fi nancial data for the companies was sourced from the Amadeus of Bureau van Dijk database for 2008-2012. Non-fi nancial factors within the sample of business entities include economic size and residence. The fi ndings reveal similarities in corporate profi tability among observed countries of residence and other distinctive factors.
This paper empirically investigates the short and the long run impact of public debt on economic growth. We use annual data from both the central and the peripheral countries of the euro area (EA) for the 1961–2013 period and estimate a production function augmented with a debt stock term by applying the Autoregressive Distributed Lag (ARDL) bounds testing approach. Our results suggest different patterns across the EA countries and tend to support the view that public debt always has a negative impact on the long-run performance of EA member states, whilst its short-run effect may be positive depending on the country.
This article studies the determinants of pharmaceutical innovation diffusion among specialists. To this end, it investigates the infl uences of six categories of factors—social embeddedness, socio-demography, scientifi c orientation, prescribing patterns, practice characteristics, and patient panel composition—on the use of 11 new drugs for the treatment of type 2 diabetes mellitus in Hungary. The Cox proportional hazards model identifi es three determinants—social contagion (in the social embeddedness category) and prescribing portfolio and insulin prescribing ratio (in the prescribing pattern category). First, social contagion has a positive effect among geographically close colleagues—the higher the adoption ratio, the higher the likelihood of early adoption—but no infl uence among former classmates and scientifi c collaborators. Second, the wider the prescribing portfolio, the earlier the new drug uptake. Third, the lower the insulin prescribing ratio, the earlier the new drug uptake—physicians’ therapeutic convictions and patients’ socioeconomic statuses act as underlying infl uencers. However, this fi nding does not extend to opinion-leading physicians such as scientifi c leaders and hospital department and outpatient center managers. This article concludes by arguing that healthcare policy strategists and pharmaceutical companies may rely exclusively on practice location and prescription data to perfect interventions and optimize budgets.
The theory of economic motion was András Bródy’s main interest. This paper presents a simplifi ed framework of Bródy’s economics. His multi-sector production and price theory is based on the Marxian theory of value reinterpreted by using measurement considerations. Economic motion in this framework is driven by technology represented by the internal proportions of production, not by external shocks. Prices and proportions jointly determine the economic structure and its motion (duality of prices and volumes). We derive the laws of motion of production and use of goods (consumption and accumulation) based on technological accounting balances. These laws determine a cyclical pattern. Using numerical examples we demonstrate how external changes in technology and valuations are propagated in changing the cyclical pattern of motion.
The objective of this study is to quantify the value of a child born in 27 EU countries and Switzerland. The Human Capital (HC) approach was used to estimate the social benefit arising from an additional childbirth. The value of a newborn child was calculated by summing up the discounted value of all expected future gross earnings of the individual, including an imputed value for household production. The estimation takes into account life expectancy and the probability of being employed or in household production by age-groups. Input data was obtained from Eurostat and the Human Mortality Database. In 2012, the purchasing power parity adjusted present value (PV) of a newborn child was EUR 108.4 thousand in Bulgaria and EUR 803.6 thousand in Denmark. By applying the actual exchange rates, the difference between the lowest value (EUR 48.8 thousand in Bulgaria) and the highest value (EUR 1.1 million in Switzerland) was increased. The PV was highly sensitive to the discount rate. The fertility interventions are expected to gain popularities among other health priorities as a tool to counter generation ageing. However, in order to enhance fertility among other health priorities, policy-makers must take into account the full social value based on the local estimates.
This paper aims to present the role of Germany in the global value chains (GVCs) of 10 Central and Eastern European countries (CEECs) in 1995–2011. GVCs, being a result of the fragmentation of production processes, have changed the nature of economic globalisation. The study covers five Central European countries (CECs) (the Czech Republic, Hungary, Poland, Slovakia and Slovenia), the three Baltic States (Estonia, Lithuania and Latvia) as well as Bulgaria and Romania. Germany is chosen because it is the main trading partner of the majority of the CEECs. The illustration of the position of Germany in GVCs of the CEECs is based on trade statistics in value added terms. The research results show that Germany has become an engine of increasing integration of the CECs in the GVCs. The role of Germany as a supplier of inputs to the CECs’ exports (backward linkages) is larger than its role as an exporter of value added originating from the CECs (forward linkages).
The paper presents a project based on the complex case management model aimed at improving the labour market position of permanently unemployed clients. The aim of the case management is to improve the employee skills and capabilities of the clients in order to assist them in getting a job on the open labor market. The model builds on fast, action-oriented interventions, and the principle of the voluntary participation of clients. The process is time-limited, which the goal of reaching certain developmental objectives during a defined time period. We present a case study as an example of this model.
Companies of different size and sector regularly publish sustainability reports in order to record and disseminate their activities aimed at contributing to sustainable development and to refl ect their corporate social responsibility. From the various existing suggestions for such reports, the principles and guidelines of the Global Reporting Initiative are most widely used – at least among large companies. The very detailed guidelines and indicator system aim at supporting companies to provide relevant, balanced, comparable, accurate, timely, clear and reliable information on corporate activities and performance, while focusing on sustainability-context and stakeholder inclusiveness in their “non-financial” reporting. However, based on research into the content and quality of non-financial reporting, it is difficult to clearly conclude just how comparable and transparent the reports are, as well as to decide whether they truly refl ect the sustainability performance of the reporting companies. The paper provides a literature review and a qualitative analysis on the reporting practice of 37 large companies.
Debts, crises and competitiveness
Interview with Ángel Gurría, Secretary-General of the OECD
In this interview, Ángel Gurría looks back at a decade of financial and economic crisis and draws conclusions for macroeconomic policy. What concerns the European Economic and Monetary Union, he stresses the need to further improve the shock absorption capacity of the single currency. He insists that the OECD remains committed to going beyond GDP, and this is particularly relevant at a time when a new Jobs Strategy is being developed. He also highlights some key chapters in the 22 year long cooperation between the OECD and Hungary.
This article attempts to estimate the total factor productivity (TFP) for 35 NUTS-2 regions of the Visegrad Group countries and to identify its determinants. The TFP values are estimated on the basis of the Cobb-Douglas production function, with the assumption of regional differences in productivity. The parameters of the productivity function were analysed with panel data, using a fixed effects model.
There are many economic variables that influence the TFP level. Some of them are highly correlated, and therefore the factor analysis was applied to extract the common factors – the latent variables that capture the common variance among those observed variables that have similar patterns of responses. This statistical procedure uses an orthogonal transformation to convert a set of observations of possibly correlated variables into a set of values of linearly uncorrelated variables called principal components. Each component is interpreted using the contributions of variables to the respective component.
I estimated a dynamic panel data model describing TFP formation by regions. An attempt was made to incorporate the common factors among the model’s explanatory variables. One of them, representing the effects of research activity, proved to be significant.
The aim of the paper is to analyze economic convergence of the Western Balkan countries towards the European Union member states with two types of measurement methodology, sigma and beta convergence. Sigma convergence measures the dispersion of real per capita GDP among the countries and beta convergence is based on the neoclassical growth theory. The main hypothesis of the paper is that the recent financial crisis has negatively affected the convergence process of the Western Balkan countries towards the twenty-eight member states of the European Union (EU-28). The relationship between selected macroeconomic variables and the rate of per capita GDP growth are econometrically tested. Sigma and beta convergence are estimated for the period 2004-2013 and two sub-periods: 2004-2008 and 2009-2013. The empirical findings support the hypothesis of economic convergence. The negative effects of the crisis on per capita GDP growth are confirmed, resulting in a slower convergence process. Dissimilarities between the growth patterns of the analyzed groups show the considerable heterogeneity of growth, i.e. the convergence clubs.
The article contributes to the debate on how land prices are affected by production values, by farming subsidies and by environmental amenities. The authors carried out a comprehensive review of the literature on the actual determinants of land value and made an attempt to classify different approaches to this matter. Then they performed an empirical case study of the drivers of agricultural land values in a leading agricultural region of Poland. The aim of the study is to establish how the use values of land, amenities and policy payments contribute to land values in the Single Area Payment Scheme (SAPS), which operates in Poland. The study is based on a sample of 653 transactions during the years 2010–2013. A hierarchical regression (ML-IGLS method) was used, where the unobserved heterogeneity is attributed to the location-specific factors at different levels of analysis. Results indicate that the policy payments for public goods decapitalise the value of land, whereas the environmental amenities have a relatively strong influence on farmland prices.
For over half a decade, Syria, one of the key states in the Middle Eastern region has been experiencing turmoil. Many consider ethnic and religious differences as the main source of the confl ict. While this starting point is correct, analysts have failed to emphasize the energy confl icts in the background of the international and regional frontlines. The paper aims to investigate the energy related motivations of the most important regional and global actors amidst the confl ict in Syria.
This paper highlights the need to limit resource use, especially energy resource use in the global economy. First, the scientific literature on capping resource use in light of three primary issues (sustainable scale, fair distribution, efficient allocation) is reviewed, as ecological economics suggests that these concerns must be addressed to move towards sustainability. Second, the paper examines how several tools proposed for capping energy use can or cannot deliver effective responses to the three primary concerns in ecological economics. Finally, recommendations are provided for future research on understanding and analysing energy capping tools to effectively achieve both environmental and social goals.
The aspiration of this research paper is to investigate the impact of international gold prices on the equity returns of Karachi Stock Index (KSE100 index) of Pakistan Stock Exchange. The daily observations from January 1, 2000 – June 30, 2016 have been divided into three sub-periods along with the full sample period on the basis of structural breaks. Descriptive analysis used to calculate the average returns, which showed significant returns of KSE100 for the full sample, the first and the third sample periods as compared to gold returns. Standard deviation depicted the higher volatility in all the sample periods. Correlation analysis has shown an inverse relationship amid equity returns and gold returns, whereas, Philips-Perron and Augmented Dickey-Fuller tests have been employed, and time series data became stationary after taking the first difference. Johansen cointegration results have shown that the series are cointegrated in the full-sample and the first sample periods. Thus, this has demonstrated the long run association amid equity returns and gold returns in the first sub-sample and the full-sample periods. However, the second and the third sub-sample periods do not exhibit long-term association amid equity returns of KSE100 and gold returns. The outcomes of Granger causality approach identified bidirectional causation amid equity returns and gold returns in the full sample period in lag 2, and unidirectional causality has been observed from gold prices to stock prices in the full sample and the first sub-sample periods in lag 1 and lag 2 respectively.
This study examines the relationship between ethical culture and work motivation, whereby specific dimensions of ethical culture are measured by employing the Corporate Ethical Virtues Model (CEV) developed by Muel Kaptein and his associates. The analysis is based on data collected by means of an online survey conducted in Croatia on a sample of 400 employees of private and public sector organizations. The results presented in the paper show that clarity is rated the highest, while supportability is the lowest-rated ethical virtue in the aforementioned organizations. Ethical culture as a whole is a good predictor of work motivation, with congruence of the management being the most important predictor. An interesting fi nding of this study is also a negative association between sanctionability and work motivation when all other predictors are being held constant. It is thus concluded that the CEV model represents a good measurement tool with a proven construct validity outside its original social and cultural context. The paper closes with suggestions for future research, especially for a possible broadening of the application of the CEV model.
Perception of tax evasion by individual citizens is of considerable interest to politicians, since people’s perceived attitudes affect the approach to tax compliance throughout the society. It is thus worth identifying personal characteristics that are related to a higher degree of tolerance and justification for tax evasion. Based on the 2008 European Values Survey data and using descriptive statistics, the paper discusses the relationship between the respondents’ characteristics and their tendency to justify tax evasion. The study finds a strong relationship between this tendency and age, educational attainment and economic activity, the two other variables (parenthood and income) indicating only a weak relationship. Moreover, the current issue allows us to convincingly argue against the regression analysis stereotypes which often yield biased and confl icting results. The paper confirms our constructive criticism, thus opening up space for an extended discussion of a more balanced use of both descriptive statistics and regression models.
This article aims to explore the relationship of the shadow economy with the institutional environment and develop practical recommendations for government policies around the world, and particularly in Russia. The urgency of the issue under research is caused by the existing need to study the shadow economy in order to find ways to reduce its scale and level out its negative externalities. Despite the fact that most of the papers focus on tax burden as a fundamental determinant of the shadow economy, the authors of this article believe that institutional tools can expand the boundaries of research on the content of the shadow economy as an economic category. Statistical analysis of 105 countries with different development levels revealed a stronger correlation between the quality of institutions and the size of the shadow economy than the one between total tax burden and the size of the shadow economy. The findings of this article can be useful in developing state strategies for combating the shadow economy and carrying out economic policies of the state as a whole.
Oil-abundant countries, Iran, Iraq and the Gulf Cooperation Council (GCC) countries try to improve democratic institutions and to manage their chronically big governments, while experiencing decreased world oil prices. These countries pursue open door policies. Most of the foreign revenues of the region stem from oil and gas exports. Thus, how to manage the production and exports of fossil resources is of great importance. This study aims to analyse the effects of quality of democracy, government size, and the degree of openness in explaining depletion of reserves between 1985 and 2015. After testing for panel unit root and co-integration, a panel data model was estimated considering random effects. The results indicate that democratisation and political stability causes higher depletion of oil. In addition, government size affects depletion in a non-linear form, so that oil production is maximised, when government expenditure accounts for nearly 14% of GDP, on average. Furthermore, trade openness positively impacts on the oil depletion. In this case study, higher oil depletion follows strengthening democratic foundations, resizing the public sector, expanding politico-economic ties with trade partners, and applying the modern technology in the upstream oil industries.
A stronger Central Europe means a stronger EU and transatlantic community: Croatia’s contribution to our cohesion and resilience
President of the Republic of Croatia: Kolinda Grabar-Kitarović
This article examines volatility spillover among Western Balkan’s stock markets and selected developed markets. If there is an evidence of weak linkage between various markets, then there are potential benefits that could arise from international diversification. However, if we analyse the relationship between two markets that are different in terms of their economic development, and if there is a strong connection between them, market shocks from the developed markets can have an impact on the frontier/emerging markets. Market integration can be indicated with returns linkage and transmission of shocks and volatility between markets. Hence, this can have implications for investment strategies. It is found that there is statistically significant regional spillover between countries of the Western Balkan region. Also, there is global spillover between developed markets and this region as well. Furthermore, there is evidence that Western Balkan’s markets are late in response to important market events, and that can be used when formulating investment strategy.
In our paper we focus on situations when central banks have to conduct monetary policy in a world in which they cannot rely fully on what is regarded the best practice and they have to cope with financial system inherent tendency to be unstable. Both phenomena are rooted in János Kornai’s intellectual heritage highlighting that economy tends to divert from equilibrium and that soft budget constraint erodes economic actors’ behavior.
It is argued that increased freedom to run economic activities combined with the growing impotence of national governments (i.e., globalization) have contributed to the secular growth slowdown at the global level. Fast globalisation-driven growth of international trade has unleashed the global race for economic surpluses. The process involves the suppression of wages and widening income inequalities – restricting aggregate demand globally. A “beggar-thy-neighbor” tactics of keeping large trade surpluses by countries successfully suppressing wages and domestic demand is likely to be unproductive. Overcoming the secular stagnation may not be possible without safeguarding equilibrium (or balance) in international transactions between major industrial countries – even if this may necessitate that in most (or all) of them the public sectors run large fiscal deficits permanently.
In 2002, János Kornai and the author organized a project that sought to confront distrust, corruption, and dishonesty in the transition economies of Eastern Europe. In reflecting on that project, this essay highlights present-day weaknesses in the region’s transition and stresses equally troubling developments in the United States that could make government less open to input from civil society groups and low-income individuals. Building a trustworthy state and creating social trust remain challenges for committed democrats in both developed and developing societies.
The economic challenges countries face when adopting personalized medicine technologies provide an important illustration of many of the concepts articulated by János Kornai in his pioneering research on innovation in market-driven, capitalist surplus economies. In Chinese philosophy, Yin and Yang often represent contradictory yet inseparable opposites – two forces that not merely coexist, but are synergistic and mutually dependent. This concept is an apt analogy for the relationship between innovation and shortage in the health sector. Dangers arise from over-emphasizing the Yin of innovation over the Yang of access, and vice versa. If we over-constrain innovation, we die needlessly early and forfeit quality of life that innovations might have enabled. If we do not distribute access to innovations equitably, we diminish our humanity, suffer backlashes from populism and distrust of science and expertise, and risk social instability, even violent conflict.
This paper explores the evolution of Kornai’s thought on general equilibrium theory (GET) and his position on mainstream economics. Three moments in this evolution will be highlighted, starting by his rejection of GET and advocating disequilibrium in Anti-Equilibrium (1971). While Kornai does not treat the “equilibrium paradigm” as irrelevant, he suggests an alternative paradigm, namely economic systems theory that he further develops in the 1980s as “system paradigm”. Economics of Shortage (1980) marks a second phase in which Kornai distinguishes Walrasian equilibrium from normal state or Marshallian equilibrium. In this phase, he supports Marshallian equilibrium rather than disequilibrium. Finally, By Force of Thought (2006) is a critical self-appraisal in which Kornai considers Anti-Equilibrium as a “failure” and acknowledges GET as a benchmark of an ideal competitive market. He now advocates a Walrasian equilibrium as an abstract reference model, but refuses to consider this model as a description of reality. In this sense, he rejects the New Classical economics. Paradoxically, however, his original heterodox concept of “soft budget constraint”, irreconcilable with standard microeconomics, has been integrated into new microeconomics as an optimal intertemporal strategy of a maximizing agent in the absence of credible commitments. It will be argued that Kornai’s so-called failure is rather related to his half-in, half-out mainstream position, while his institutionalist system paradigm is still a heterodox research project of the future.
János Kornai rejected the relevance of Walrasian equilibrium and considered only disequilibrium states to be compatible with reality in his Anti-Equilibrium. His research was guided by the belief that reality and theory should form an integral unit. Neoclassical economists did not accept his anti-equilibrium theory, which motivated Kornai to relentlessly provide additional evidences. The article follows this exciting and noble struggle from a new perspective in the context of scientific theory.
Although writing as an economist, János Kornai addressed fundamental questions of political economy throughout his career. These considerations began with his model of state socialist economies, but were explicit in his work on transitions and the political economy of reform as well. This paper provides an overview of those contributions, with a particular attention to the relationship between regime type – democracy and authoritarian rule – and economic structures, processes, and outcomes.
