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Business and Economics
Abstract
This paper investigates the role of extra-regional capabilities in regional economic development in a Central and Eastern European context. This is done by analysing the association between the related variety of manufacturing import and export of domestic- and foreign-owned firms on the one hand, and regional employment in manufacturing export on the other. By means of a panel regression framework applied to the Hungarian microregions between 2000 and 2011, we find that domestic firms, in particular, benefit from the related variety of export activities in the regions, while import related to existing export activities is beneficial amongst both foreign and domestic firms. Furthermore, bridging the technological gap between foreign companies and the host economy requires stronger technological relatedness, unless domestic firms have experience in importing.
Abstract
Both the level and composition of public expenditures and revenues have implications for economic development, as argued by the ‘fiscal multiplier’ and the ‘quality of public finance’ literature. Public finance decisions also influence the distribution of income. By reviewing the literature, I argue for a fair distribution of income as reflected in low income inequality, not particularly because of the impact of income inequality on long-term growth (which is a controversial issue), but primarily because income inequality typically implies inequality of opportunity. European Union countries have very diverse public finance structures and different levels of effectiveness, and there is room for improvement in growth and equality impacts in all countries. A general guideline would be that the most effective approach comprises progressive taxes and inheritance taxes, spending on education, health and public infrastructure, and better government effectiveness. At the height of the 2008 global and the subsequent European financial and economic crises, the fiscal consolidation strategies of EU countries largely relied on cutting public investment and social spending (except pensions), which is the opposite of what is suggested in the literature. Better fiscal rules and good fiscal institutions are needed to safeguard growth- and distribution friendly expenditures in a crisis.
Abstract
Kosovo is one of the poorest countries in Europe, despite the various poverty alleviation programs implemented by the authorities and the international funding community. This study aims to analyze income distribution inequality and factors behind rural households' poverty in Kosovo. Data on farm income, nonfarm income, unearned income, and socio-economic characteristics were collected using a semi-structured questionnaire from 203 randomly selected households in Kosovo. Linear regression, one-way ANOVA, and different versions of poverty indexes were used to examine the data. One-quarter of households' income comes from nonfarm activities. The middle-income households had the highest potential to find alternative employment in the nonfarm sector. Years of education, household size, number of family members above the age of 18, and total income had a positive impact on nonfarm revenues. The poorest rural households had the highest share of income from farm activities (77.52%). Nonfarm revenues have a positive impact on poverty alleviation; thus, the study suggests adopting suitable rural policies to enhance nonfarm employment for vulnerable rural households. The agro-tourism sector and circular economy approaches in agriculture with the focus on renewable energy can be considered as potential sources of nonfarm income, which could lead to sustainable poverty reduction.
Abstract
The hegemony of the Western higher education institutions in the global university market is being challenged by China. The top Chinese universities have significantly improved their international ranking positions. When it comes, however, to the ability of universities to attract foreign students and faculty, the Chinese higher education institutions' performance raises questions. The International Outlook scores of these universities, although showing an increasing trend, are still lacking behind the U.S. or Western European top universities. China is primarily a student ‘exporter.’ It also became a leading destination country for students from Asia or Africa, but it is still far from reaching the ‘international openness’ level of the U.S. or the UK universities. The publication networks of the top Chinese higher education institutions indicate that these universities prefer to publish with other Chinese institutions or the U.S. universities.
Abstract
This essay joins in the international controversy about the nature and sustainability of the economic system in China. While official ideology continues to stick to the concept of ‘socialist market economy,’ albeit with changing contents, international observers are split. One group considers China as a de facto market economy, which is in line with the top-down tradition of ruling in the region. Others consider it as a sui generis system. And a third line takes it as yet another case of hybrid regime which proliferated globally in the new millennium. I try to create a link between these readings and the empirics of Chinese growth. This may help interpret the slowdown, exacerbated by the COVID-19 epidemics on Chinese output.
Abstract
The paper examines the importance of the ‘Chinese factor’ in today's world from the perspective of current phenomena such as particular political and economic uncertainty and also examines them against the background of processes of global cooperation and parallel unprecedented competition at the same level. Complex phenomena occurring in this area have recently been additionally disrupted by the outbreak of the COVID-19 pandemic. Will the world be different?
Globalization processes have taken place over the centuries but have gained particular importance in our present times, because we left ‘the golden age’ of globalization (1990–2010) already behind us. China, ever louder, talks about the need for a ‘new’ globalization, in line with its new aspirations as a pretender to the leadership position in the global economy. The Belt and Road Initiative, launched in 2013, has been in the centre of its vision. It has become the foundation for China's foreign policy in the horizon of at least the middle of XXI century. It was designed to re-confirm China's unprecedented economic success of the past four decades, which to a great extent could be derived from a skilful use of the ‘traditional’ mechanisms of globalization.
Abstract
After the collapse of the Berlin Wall it was conceivable that China would follow the path towards the cessation of communism, as it happened in the successor states of the USSR, Yugoslavia and the East European satellite states of the Soviet Union. But the Communist Party of China (CPC) managed to retain control and avoided the Russian and East European collapse, a full-fledged transition to capitalism and liberal democracy. For a while, China was on its way to market capitalism with the possible outcome to turn eventually into a liberal democracy. This was a rocky road, with backs-and-forth. But the shift to liberal democracy did not happen. The massacre at Tiananmen Square in 1989, approved by Deng Xiaoping, was a more alarming setback than the contemporary Western observers were willing to realize. This paper presents an interpretation of the changes under present Chinese leader, Xi Jinping in a post-communist comparative perspective.
Abstract
The recent successes of the Chinese modernisation strategy are substantiated by an array of indicators showing an impressive improvement. Irrespective of China's current growth deceleration, these indicators suggest a highly effective implementation of an ambitious roadmap that can ultimately help China to catch up and achieve a global technological leadership. Still, some scholars point to deep structural deficiencies, and maintain that these indicators – however impressive they are – merely scratch the surface, while much deeper change is required in order to maintain economic growth. Therefore, the purpose of this paper (finalized before the ongoing COVID-19 crisis) is to contribute to this burgeoning literature – documenting the outcome and analysing the implications of China's efforts to embrace a new growth model – and analyse the chances of the Chinese digital great leap forward, that is the radical transformation of its prior modernisation trajectory. Drawing on a systematic review of the literature, the author maps, presents and analyses existing indicators quantifying China's progress in shifting to this new development trajectory, identifying also the gaps in the conventional measurement approaches. According to the findings of this paper, there are several easy-to-measure indicators, often used in international comparisons, that indeed confirm the optimistic scenario of China's development prospects in the near future. On the other hand, some hard-to-quantify factors, such as the localization of knowledge and the spreading of innovation, need to be also considered. These latter show a closer association with countries' development level as well as development potential. With regards to these latter particularities, China still has a long way to go.
Abstract
In the era of irreversible globalisation, the worldwide economic and political rules of play must take into account of the growing importance of China. Rather than fight the country, one should pragmatically cooperate on solving the mounting global problems. Contemporarily, both China should adapt to the external world and the world itself should adapt to China. There is no possibility of imposing on it a model developed elsewhere, especially that these days liberal democracy is experiencing a systemic crisis in many countries. Neither is there a chance to impose the Chinese model on others, though it seems tempting to a country; it is not an exportable ‘commodity,’ but its elements may prove useful elsewhere. China is not aiming for global domination; instead, it is consistently integrating with the world to maintain its own development. The only reasonable way forward is thorough observation, mutual learning and pragmatic collaboration based on the non-orthodox economic thought.
Abstract
In the 1990s and early 2000s, comparison of transition strategies of China versus those in Central and Eastern Europe raised controversies in the economic and political science literature. However, differences between China and the countries of the former Soviet bloc in their transition strategies resulted not necessarily from a deliberate political choice but from different initial conditions. Low-income and largely rural China, after its first radical step (de-collectivisation of agriculture in 1978), could move more gradually due to its under-industrialisation and retaining administrative control over the economy. The over-industrialised Central and Eastern Europe (CEE) and former Soviet Union (FSU) countries where the previous command system of economic management spontaneously collapsed at the end of 1980s, did not have such an option. They had to conduct market-oriented reforms as quickly as they could, with all the associated economic and social pain. Regardless of speed and strategy of transition, almost all previously centrally-planned economies, including China, completed building basic foundations of a market system by the early 2000s although the quality of economic and political institutions and policies differ between the sub-regional groups and individual countries.
Abstract
Recently, the middle-income trap (MIT) has gained considerable attention – besides European countries, several African, Asian, and Latin-American developing countries are also affected. Many countries have remained in the middle-income bracket for decades, whilst only a few have advanced to high-income status. Felipe et al. in 2012 showed that an annual growth rate of at least 3.5 and 4.7% sustained for a period of 14 and 28 years is required respectively for upper-middle-income and lower-middle-income countries to escape the MIT. Economic growth is influenced by several factors including foreign aid received. Thus, in this study, we aim to answer the question of how aid affects economic growth in middle-income countries and whether aid may contribute to escaping the MIT. Focusing on the countries that have remained in the middle-income group between 1990 and 2017, our analysis confirms that aid contributes to economic growth; however, the impact is positive in the upper-middle-income countries and negative in the lower-middle-income countries. Aid is therefore, likely to be more effective in helping the upper-middle income countries to escape the MIT but not the lower-middle income countries.
Abstract
There is a sharp contradiction between the economic performance of the Hungarian government of Victor Orbán and the institutional framework (toolkit) by which the seemingly stellar performance of the Hungarian economy has been achieved. It looks like as if the economic playground of the government (disciplined fiscal policy, unorthodox monetary policy and contradictory institutional system) and political-institutional order built by the same government during the last ten years, represent two different worlds. This paper provides a possible explanation to resolve this contradiction by identifying reversed relationship between tools and goals of economic policies. The genuine, hidden but most important goal of the present Hungarian government is to make Orbán and his political family wealthy and make their enrichment legitimate. In disguise of a public policy to achieve this (private, personal) goal, this government needs absolute and uncontrolled power certified by the scenery of the parliamentarian democracy. This private effort should be falsified, which could be achieved if his government pretends that it wants to pursue a disciplined economic policy.
Abstract
We investigate the relationship between economic growth and real exchange rate (RER) misalignments within the European Union (EU) during the period of 1995–2016. In addition to the relative price level of GDP, we quantify an alternative indicator for the RER: the internal relative price of services to goods. We interpret RER misalignments as deviations from the levels consistent with the levels of economic development among the EU countries. Using pooled OLS and dynamic panel techniques, we find that within the EU over- (under-) valuations are associated with lower (higher) growth. This is mainly due to developments in the countries operating under the fixed exchange rate regimes. Our results indicate that the level of development does not influence the strength of the growth-misalignment relationship within the EU. Regarding the price level of GDP, we find that the positive relationship between undervaluation and growth diminishes with the degree of undervaluation. We find that overvaluation has a statistically significant negative effect on export market shares and private investments, indicating that both the competitiveness and the investment channels play a role in the relationship between growth and RER misalignments. As an extension, we show that the effects of “wage misalignments” from levels consistent with productivity are also negatively related to economic growth. The policy implications of the analysis point to the importance of a growth strategy avoiding overvaluation on the one hand, and to the futility of aiming at excessive undervaluation, on the other.
Abstract
Are governments able to continuously boost economic growth by spending for decades? Can the state be a more efficient user of income by improving the structure of public spending? The paper analyses the correlation between various types of public expenditures and GDP growth in different countries of the EU. The database was composed from the Classification of the Functions of Government (COFOG) classification of public spending, which contains data of 25 EU economies in the period 1996–2017. Three econometric models were applied in accordance with the empirical practice found in the literature: first-differences general method of moment (GMM), fixed effects panel and ordinary least squares (OLS) models. The expenditures on social protection proved to have a negative, statistically significant and robust impact on GDP growth. The results are similar for general public spending, and while spending on public order also has a significant and robust coefficient, its sign is ambiguous. The novelty of the article relate to the findings on lagged education and health spending, which have a positive impact on GDP growth.
Abstract
The purpose of this article is to study the impact of fiscal policy on economic growth in Bulgaria for the period 1995–2018. The descriptive analysis is focused on the general trends in fiscal policy and tax structure. The influence of government spending and taxation on economic growth is studied through regressions on time-series data. The empirical estimates prove that taxation is a more reliable instrument of fiscal policy than government spending in terms of a small open emerging-market economy. The dilution of the effect of public spending is probably caused by the high negative values of the current account balance that have been maintained for long periods. Thus, when domestic supply is weak, government expenditure cannot stimulate domestic production, as supply is dominated by import goods. Public investments demonstrate a negative effect on economic growth, which suggests a low productivity of investment spending. A factor of great importance is the level of corruption, which is strongly correlated with government investments, but is harmful to their efficiency. The Bulgarian tax system demonstrates consistency with economic growth. The receipts from value-added tax seems growth-conductive. The decrease of the corporate income tax rate exerts a positive impact on economc performance during the analyzed period, while personal income taxation demonstrates a negative effect. Property taxation has no significant relation with the growth of the Bulgarian economy.
Abstract
The growth impact of tax reforms is probably one of the most controversial issues in economic policy discussions, reflecting deep beliefs in the way economic agents are expected to react to policy changes. The optimal tax theory literature provides a wide array of arguments to identify the mechanisms through which tax reforms might influence growth, depending on the tax category considered and the circumstances under which tax reforms are implemented. The empirical literature has relied on the use of cross-country growth regressions and provided general results leading to normative conclusions on the desirability of specific tax reform options. However, recent research has shown that this approach yields inconclusive results, notably due to identification and endogeneity issues, and the difficulty to account for the true determinants of governments' actions. The dynamic scoring approach combining microsimulation and macro models proves more useful in this respect, especially in order to draw policy recommendations while accounting for the second-round effects of tax reforms. I illustrate these arguments by analysing the growth impact of a hypothetical change from the current flat personal income tax (PIT) rates to progressive taxes in Central and Eastern European (CEE) countries. I find that the estimated impact of such a reform would be rather small but positive when using the dynamic scoring method, while the less-reliable traditional growth regressions would suggest adverse growth effects.
Abstract
This article concentrates on the transformative potential of the Millennial generation within the framework of the political landscapes of the United States, several European countries and Russia. Generational experiences frame the context for the comparative examination of the democratic order and the perspectives for democratic transition. In Western countries, the group is a potentially powerful political force, yet its members do not pursue traditional forms of civic engagement – they are sceptical about institutional forms of participation and have little trust in public authority. Embedded in a youth-marginalization discourse, the public identities of the Millennials are seen rather as a manifestation of the failures of democratic representation, rather than as forms of agency seeking new ways of political expression. The orientations of this distinct group also present a puzzle when the future of authoritarian regimes is discussed: Millennials’ openness to political change is often questioned, despite the prominent role they play in the rise of the opposition forces that gained influence during Vladimir Putin’s third term. Nevertheless, in both contexts, the ongoing generational shift has become an increasingly important area for social-scientific investigation and it is being directly related to broader arguments about the nature of political change.
Abstract
Although Ethiopia is one of the Heavily Indebted Poor Countries (HIPC), there is a lack of empirical studies about the determinants of its external indebtedness. This paper aims to fill this gap by examining the macroeconomic determinants of the external indebtedness of Ethiopia between 1981 and 2016, using the two- and three-gap models as a theoretical framework and an autoregressive distributed lag bound testing approach. The result shows that in the long run, the savings-investment gap, trade deficit, fiscal deficit, and debt service have a positive and significant impact on external indebtedness. However, the growth rate of gross domestic product, trade openness, and inflation negatively and significantly affect the external indebtedness of the country. These results coincide with the predictions of the two- and three-gap models of the theoretical framework. The study argues that appropriate macroeconomic, social, and supply-side policies are essential to reducing the external indebtedness of Ethiopia.
Abstract
The South African Ministry of Health has recognized experiences of care as key to strengthen patient-centred care. This case study aims to measure patient-reported experiences of care at a clinic in South Africa, and its associations with the respondents' sociodemographic characteristics. A survey was conducted in 2019 on a convenience sample of 179 respondents. Questions on experiences of care were based on a standardised set of questions by the Organization for Economic Co-operation and Development (OECD). Logistic regression was used to examine the effects of respondents' characteristics on their experiences. The proportion of respondents who reported that a nurse spent adequate time with them during consultation was significantly higher among literate respondents (92.3 vs. 79.5%). Those who reported past negative experiences were significantly more likely to report a positive experience in regard to perceiving adequate consulting time (odds ratio = 3.865, with a 95% confidence interval between 1.555 and 9.607), receiving easy-to-understand explanations (4.308; 1.665–11.145), being given the opportunity to ask questions (2.156; 1.013–4.589) and shared decision–making (3.822; 1.728–8.457). The results can spur comparisons with other clinics in a similar setting and inform key stakeholders on aspects of the care experience that need greater improvement within the national framework for quality and safety assurance and patient experience measurement.
Abstract
The expected future impact of the fourth industrial revolution is a hotly debated issue in the literature. The majority of papers focus on quantifying the expected impacts on labour demand, or on a specific country, or on huge macro-regions – and the estimates differ widely. Our paper focuses on the impact assessment of Industry 4.0 on the expected structure of employment, wages and inequalities in Hungary. We built a static microsimulation model for our analysis, where the “EU Survey of Income and Living Conditions Hungary 2017” dataset was used as a starting point. Projections by the European Centre for the Development of Vocational Training (CEDEFOP) were used for policy simulations on future employment by sector and by occupational group for each European Union (EU) member state. The analysis also elaborates our own augmented vision about the expected labour demand changes and expected wage trends. Based on this information, the spill-over effects were calculated regarding wage structure and inequalities by sector, region and the highest educational attainment.
Abstract
The main characteristics of intra-EU labour mobility are well documented. There is less focus, however, on the pattern of mobility of the East European (EU-13) EU-mobile citizens. This group constitutes more than half (57%) of all the EU movers and show, to some extent, other features than the rest of the EU mobile citizens (EU-15). The first part of this paper gives a brief overview of some key demographic and labour market characteristics of the East European mobile citizens in the most important destination countries. The perspectives of the sending countries are not analysed frequently enough, and thus the second part of the paper focuses on this issue in the case of Hungary, by asking to what extent the serious labour shortages, ensuing from the outflow of Hungarians, could be compensated by the recent increase of immigration of third country nationals. Using OECD data, the paper quantifies the balance of labour gains and losses for Hungary and compares this with Czechia, Poland, and Slovakia. The analysis concludes that despite the substantial recent inflow of third country nationals into Hungary, it remains to be seen whether this has a real substitution effect for the lost domestic labour force.
Abstract
The aim of this paper is to analyse the relationship between unemployment benefits and durations of unemployment with respect to different approaches in social policy. The hypothesis of the research is that unemployment benefits negatively affect the duration of unemployment. An analysis of the relationship concerning unemployment benefits and duration of unemployment within the European Union Member States (EU-28) between 2006–2018 using panel data regression approach was conducted. The sample was split into sub-samples in order to get more homogeneous groups of EU-28 countries. Estimation results suggest that the more generous a social policy, the more prevalent the negative relationship between unemployment duration and unemployment benefits. Our results also revealed that the better the economic situation, the less pressure is put on unemployment benefits and on the duration of unemployment.
Abstract
Rating the reliability of banks has always been an important practical problem for businesses and the economic policy makers. The best way to do this is the CAMEL analysis. The aim of this paper was to create a bank-rating indicator from the five fields of the CAMEL analysis using two-two indicators for each field for the Turkish Islamic banking system. According to the results of the analysis, we could rank the Turkish Islamic banks. Beside the widespread use of the CAMEL analysis, we applied the Similarity Analysis as a new method. We compared the results from the two methods and came to the conclusion that the CAMEL analysis does not adequately provide a fairly shaded picture about the banks. The Component-based Object Comparison for Objectivity (COCO) method gave us the yearly results in time series form. The comparison of the time series data leads to the problem of deciding about what is more important for us – average, standard deviation or the slope. For handling this problem, we used Analytic Hierarchy Process, which gave weights to these indicators.
The sustainability of an unfunded pension system depends highly on demographic and labour market trends, i.e. how fertility, mortality, and employment rates change. In this paper we provide a brief summary of recent developments in these fields in Hungary and draw up a picture of the current situation. Then, we forecast the path of the economic old-age dependency ratio, i.e. the ratio of the elderly and employed populations. We make different alternative assumptions about fertility, mortality, and employment rates. According to our baseline scenario the dependency ratio is expected to rise from 40.6% to 77% by 2050. Such a sharp increase makes policy intervention inevitable. Based on our sensitivity analysis, the only viable remedy is increasing the retirement age.
Free movement of persons is one of the fundamental values and achievements of the European Union, however, intentions towards mobility vary across and within the member states. Economic literature has remarkable theories to explain migration flows and individual selection factors of potential migrants, but it ignores major achievements of other social sciences. This paper builds an economic framework to incorporate the Hirschmanian concept of loyalty into the microeconomic (human capital) model of international migration by using interdependent preferences. Hirschman assumes that even after exiting, loyal people care about their previous communities, thus it imposes a certain psychological ‘exit tax’ on them. Based on this concept, it is hypothesized that people with altruistic motives have weaker intentions to migrate, so the presence of loyalty towards others makes international migration less likely, conveying that loyalty towards local or national community may be responsible for moderate labor mobility among EU member states. Results show that attachment to one's country makes one's intention to move abroad in the near future less likely, while loyalty towards one's city has more moderate impact on their intentions.
Abstract
We present an application preference, list-based framework to Hungarian universities, which allows different type of flexible aggregation, and hence, analysis and clustering of application data. A novel mathematical method is developed by which preference lists can be converted into scored rankings. The proposed approach is demonstrated in the case of Hungary covering the period of 2006–2015. Our method reveals that the efforts to leverage the geographical center–periphery differences did not fulfil the expectations of policy makers. Also, it turns out that a student's top preference is very difficult to influence, while recruiters may build their strategy on the information of the first but one choice.
The paper provides a brief description of the Active Ageing Index (AAI). This indicator, introduced in 2012, aims to measure the potential of older people for active and healthy ageing. The indicator is constructed from European Union survey data, and these results are weighted with coefficients determined by experts. One of the variables from the surveys measures the proportion of older people using the internet at least once a week. We argue that such regular internet usage does not show too much variation in this era of the ubiquitous internet, so a more sophisticated definition of internet usage must be taken into consideration. Our discussion contains three different AAI variants: the original expert-based, the Djurovic et al. (2017) I-distance indicator, and our factor-based index.
Abstract
Shape analysis has special importance in the detection of manipulated redistricting, which is called gerrymandering. In most of the US states, this process is made by non-independent actors and often causes debates about partisan manipulation. The somewhat ambiguous concept of compactness is a standard criterion for legislative districts. In the literature, circularity is widely used as a measure of compactness, since it is a natural requirement for a district to be as circular as possible. In this paper, we introduce a novel and parameter-free circularity measure that is based on Hu moment invariants. This new measure provides a powerful tool to detect districts with abnormal shapes. We examined some districts of Arkansas, Iowa, Kansas, and Utah over several consecutive periods and redistricting plans, and also compared the results with classical circularity indexes. We found that the fall of the average circularity value of the new measure indicates potential gerrymandering.
A number of megatrends are hitting the world of work at the same time. These include the digital revolution, globalisation and rapid population ageing, which are all having a profound impact on the types of jobs that are being created and how and where they are performed. This paper examines the challenges confronting the Visegrad Group of countries and the broad policy responses that will be required. It looks at the risk of job automation, how the structure of employment is changing by skill level and the rise of the gig economy. These changes will require a combination of policy responses in the areas of employment regulation, measures to facilitate labour mobility and lifelong learning, social protection and social dialogue. In many cases, this will not require a complete paradigm shift in policies but an adaptation and strengthening of existing polices.
Abstract
The aim of this study is to analyse the impact of board size on a firms' operational and market performance at the largest East Central European listed non-financial, non-public utility firms. The literature debates the effects of the size of the board. While the resource dependency theory supports a positive effect, the agency theory supports a negative impact on firm value. This question is rarely investigated in two-tiered corporate governance models. This paper estimates the effects of management board and supervisory board size, between 2007 and 2016. The results indicate that the effect of management board size depends heavily on the size of the observed company. In both fixed effects and GMM-type dynamic panel regression models, using Tobin's Q, market-to-book ratio, total shareholder value and ROA as firm performance measures, increase in management board size has a significant positive impact on firm performance; however, in the case of larger firms, the effect is significantly negative. Moreover, the increase in the ratio of outside directors has a positive impact on the firm's performance in all dynamic panel regression models and this effect is even more significant in Tobin's Q and market-to-book ratio models. This can indicate the effective monitoring role of the supervisory board.
Abstract
The Confucian doctrine of the Mean teaches that too much is as bad as too little. The Aristotelian doctrine of the Mean coincidently articulates that there can be too much or too little of nearly every human passion and action. In neoclassical economics, it is assumed that people tend to take any action at the optimal (not too much and not too little) level to maximise the net happiness from the action. This article argues that the Confucian doctrine of the Mean concurs with the optimality principle, and therefore that the optimality principle is a representation of human nature and can be understood as universal human wisdom. It follows that people can adopt both the Confucian doctrine of the Mean and the optimality principle as worldly common wisdom beyond the blunt dichotomy of spiritual orientalism and materialistic individualism. Too much emphasis on the technical differentials between the two has undermined the common wisdom embedded in them.
Abstract
In 2017, Korea became an ‘aged society,’ with the proportion of people aged 65 or older exceeding 14%, while the ratio of the working-age population declined for the first time. This study uses data from the Korean Longitudinal Study of Ageing (KLOSA) to examine the effects of public pension on the labour supply of older people and discusses ways of preparing for this ageing problem. The study uses the Heckman sample selection model for analysing both the extensive and intensive margins of older people's labour supply. Our results show that the effects of public pensions in Korea are very different from that in other countries. It can be inferred that these differences are a consequence of the less developed social security system and limited experience from its short period of implementation. Hence, encouraging older people to work could be a way of solving the problem of relatively high poverty among the older population in a society that is likely to age even more. This is considered an optimal solution in light of increasing life expectancy, a poor social security system, and a decrease in private income transfers from children to their ageing parents.
Abstract
Evidence from the global financial crisis (2007–2008) and the Asian financial crisis (1997) have taught policymakers valuable lessons. The contagious effects of these crises have proven unavoidable and have led to negative economic development. However, South Korea, unlike other countries, has recovered remarkably from both episodes of financial turmoil and proved their ability to maintain positive growth throughout the two periods. This study investigates the correlation between the evolution of South Korean banking and corporate sector before, during and after these crises. A VAR model was employed to test the effectiveness of the South Korean government's policies, in response to the financial crisis from 1997 to 2017, using macroeconomic variables as proxies for newly introduced policies, and non-performing loans for controlled risks. The empirical results indicate impulse response functions which suggest that changes in macroeconomic variables as a representation for the policies resulted in a reduction of non-performing loans. This implies successful risk reduction and an overall economic recovery.
Abstract
This study focuses on the level of interdependence across the Central and Eastern European (CEE) foreign exchange markets (Hungary, Poland, the Czech Republic, Romania and Croatia) from September 2008 to September 2017, using the return spillover measure proposed by Diebold and Yilmaz (2009; 2012). We mainly find a bidirectional volatility spillover among these assets and the cross-market linkages in the CEE region have become stronger over time. Furthermore, the Czech exchange market has a significant influence on the rest of the foreign exchange markets. The total spillover remained very high over the periods 2010–2012 and 2015–2017, despite the noteworthy fluctuations in other periods. These results would also be useful for portfolio managers, policy makers and speculative traders to develop exploitable strategies, by providing knowledge of the transmission mechanisms of the volatility of foreign exchange markets. The results may support the distribution of assets in a financial portfolio, especially after financial integration.
Abstract
The high rate of increase of ruling politicians' wealth has been empirically proven many times. However, in the literature it is almost always assumed that politicians grew rich faster due to political rent-seeking or corruption. The aim of this article is to discuss the assumption whether corruption and rent-seeking is indeed the only possible cause, and to present empirical findings undermining the assumption. The results of the analysis of levels and rate of growth of Polish politicians' wealth clearly show that the other explanation is the selection of people exercising authority. Based on statistical analysis of 2024 asset declarations of 689 councillors from Polish voivodeship assemblies from two terms in the period of 2010–2018, the paper demonstrates that the different rates of changes of the value of assets of coalition and opposition councillors are at least partly the effect of the selection bias.
The paper applies a variant of the gravity model to test whether there is a positive link between the size of trade flows and the extent to which they follow the pattern of comparative advantage. Using UNCTAD's 2016 trade data for every country in the world, and 255 merchandise items, we show that countries trading more with each other tend to follow the patterns of comparative advantages more than countries with smaller mutual trade flows. While smaller trade flows can be easily influenced by business decisions of individual companies or one-off trade contracts going against trade pattern predictions, this is not the case with larger flows. We also find signs that holding trade volume constant, more distant countries trade less than geographically proximate countries, in line with predictions from comparative advantage. The results are valid for the whole database of all country pairs in world trade, but the goodness of fit increases with the number of items these country pairs trade in. The paper is the first insight into the topic and can be expanded to a higher level of disaggregation and more variables in future research.
The operations of the cooperative organization are an actively debated issue. The efficiency and viability of this organizational form still pose many unanswered questions. The literature is not unequivocal in evaluating the merits and drawbacks of this organization. This article provides empirical evidence from research about cooperatives covering three countries (Canada, France and Hungary) and tests theoretical hypotheses in the framework of organizational economics and cooperative theory. The findings point towards the positive influence of the social environment and cooperative values on organizational choice. The results prove the continued relevance of this type of organization in the 21st century in agriculture in all three researched countries.
Croatia is faced with a low response to cancer-screening programs, especially the national cervical cancer screening program, which ultimately resulted in its suspension. If judged solely on the basis of revealed preferences, such a poor response would imply that the population assigns a low social value to preventive screening programs. However, the question arises as to whether revealed preferences (the population's response), in the case of the absence of response to a preventive program, provide insight into its value (utility). Therefore, the objective of this paper is to determine the value that respondents assign to different attributes of cervical screening and, in a broader sense, to decide whether the best-worst scaling (BWS) approach is appropriate for determining the marginal willingness to pay (MWTP) for public health programs. The MWTP for certain attributes of cervical cancer screening is derived from the results of a BWS study conducted in Primorje-Gorski Kotar County, Croatia. The cost function was estimated by regressing the conditional logit coefficients (level of utility) of three levels of the cost attribute on its corresponding values, that is, the hypothetical price. Because the sum of the MWTP corresponds with the market price of a gynecological examination in private practice, we conclude that the results obtained by the BWS confirm the revealed preferences (the market value of the service).
The paper analyses the impact of the simultaneous occurrence of external debt and capital flight on economic policy effectiveness in Heavily Indebted Poor Countries (HIPCs) in sub-Saharan Africa, employing the Panel-Corrected Standard Error regression model for the period 1990 to 2015. The empirical results reveal that both monetary and fiscal policies in the region had been undermined in achieving their intended purposes because of increasing capital flight and external debt. Also, the concurrent occurrence of capital flight and external debt has been a hindrance to progress on the continent, particularly by undermining domestic investment. These results call for more practical measures in addressing the issues of foreign debt and capital flight, given the critical importance of domestic private investment for both short- and long-run growth.
The focus of our research is the internationalisation of the small-medium size family firms in Hungary, with particular attention to the effect of generational change on internationalisation. Our examination is based on interviews with the current management of six family firms from different industries. We had two research propositions: First, we analysed if and how successors in the family businesses were more open to the internationalisation of the company. Our results provide insights reflecting that the predecessors are usually quite open, and successors are not always as open when they assume control over the company, unlike the existing internationalisation patterns of family firms would suggest. Potential explanations reveal related characteristics of the Central-Eastern European (CEE) region. Secondly, in terms of how and why the leadership style and approach of the predecessors affect the internationalisation of family firms, our findings from different cases vary. The historical and cultural background of the family firms' founders and early-generation successors exert notable influence on the internationalisation process, while the role of predecessors' personal characteristics may not be as strong a driver of internationalisation as previously suggested. The management implications of our findings suggest that the Hungarian family firms show regional patterns in terms of their internationalisation, and generic approaches to generational change and succession may not explain the process as much as extant literature on international family business suggests.
Editor's Note: This essay paper of Professor Kornai with an unusually provoking title consists of two parts. Part I is the slightly edited, non-abridged version of his writing published as an oped in The Financial Times (FT) on 11 July 2019, the world's leading global business publication (Kornai 2019a). Subsequently, the full text of this paper was published in the Hungarian weekly magazine Élet és Irodalom (Life and Literature; Kornai 2019b), which in turn generated a number of commenting articles published in the same weekly. Still in the month of July, the original essay was translated into Chinese by a Hong Kong newspaper and into Vietnamese. An influential multilingual Chinese newspaper gave an extensive summary of the FT essay (Street 2019). The latter one, according to our best knowledge, was disseminated only on the internet. Part II is the translated and slightly edited version of Kornai's second article, published in September this year on the same topic (Kornai 2019c). In this second essay he responded to his critiques both in Hungary and world-wide. This piece was published in its original form in Hungarian by the previous mentioned Hungarian weekly. 1 We, the Editors of Acta Oeconomica, are proud to publish the complete English translation of this second essay first time. We thank for the opportunity given to us by Professor Kornai to publish the Frankenstein-papers in an integrated form, together with all the necessary bibliographic references.
This paper addresses the hottest potato of economics today, namely why the profession seems to have been lulled into a sense of false security in spite of flourishing economic models as well as subfield-knowledge in various disciplines? The embarrassing question of the Queen of England ‘why did nobody see the crisis of 2008 coming’ emblematically signalled the failure of the collective imagination of the entire profession to understand the system and its emerging patterns. The present paper can be seen therefore as a clarion call for grounding a shift towards an economics barded with the lessons learnt in complexity science in shaping modern governance.
Have we reached the point where more spending on health care and other forms of social protection is not producing better health as measured by reductions in population mortality? Drawing on two decades of research and mortality statistics (1995–2015) for 17 OECD countries, our analysis confirms and builds on the observed relationship between the returns and investments in health and social welfare spending. First, the results suggest that there is a differential effect of socioeconomic, lifestyle and demography variables on total and cause-specific mortality rates. Second, the basic premise of an association between health care expenditure and mortality rates is reinforced in models that take into account public-only health expenditure and its impact on older age groups. Third, a strong protective effect of government-sponsored welfare expenditure on infant mortality was observed. This effect is weaker on other causes of death and suggests that older individuals, in this sample of developed countries, may have reached a stage of the epidemiological transition in which health improvement is indifferent to government assistance and depends largely on behavioural change.
Guarantees of origin are tradeable energy certificates defined by directives 2009/28/EC and 2018/2001/EU of the European Union. They serve the aim of informing final consumers on energy sources used for their electricity supply. They are also expected to encourage new investments in renewable electricity generation. This paper investigates how the use of guarantees of origin meets these expectations. A literature review, an analysis of related regulations and an evaluation of empirical data shows that there are regulatory failures both at national and the European Union levels. Furthermore, due to a contradiction between certain rules in European Union level regulation, consumers receive unreliable information on their electricity consumption mix. Therefore, although national rules should be improved, the problem of reliability cannot be resolved until the Union level framework is modified. Furthermore, the present framework does not incentivise investments in renewable energy technologies either. Accordingly, recommendations are formulated for policy makers to ensure reliable and sufficient operation of the certificate system.
There has been an increase in outward foreign direct investment (FDI) and in the number of locally-owned or controlled multinationals in the Czech Republic and Hungary. However, data problems hinder to determine accurately the underlying trends and the main factors behind the changes. Data on outward FDI contain investment realised by all locally operational firms, regardless of their ownership. We rely on newly available balance of payments manual 6 (BPM) data and on company case studies. We show that outward investment by Czech firms must be much higher than what balance of payments data show. Hungary's case is the opposite. The leading Czech and Hungarian foreign investor firms can be categorised as “virtual indirect” foreign investors: they are in majority foreign ownership, but under domestic control. The reason for this special type of firms dominating in outward foreign direct investments can be found in the privatisation technique applied in these countries during the transition process.
