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What Economics of Shortage and The Socialist System have to say to the (Hungarian) readers today

An introductory study to the first two volumes of the life’s work series

Author: János Kornai
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Authors: Milena Pavlova, Marzena Tambor, Tetiana Stepurko, Godefridus Merode and Wim Groot

The lack of systematic research on the assessment of patient payment policies emphasizes the need to evaluate the mechanisms of official patient charges. This paper aims to contribute to this research area by outlining a comprehensive framework for the assessment of patient payment policies, and by validating it on data for six CEE countries (Bulgaria, Hungary, Lithuania, Poland, Romania and Ukraine). Three broad groups of assessment criteria are included in the framework: policy context, policy content and policy effects. Within each of these groups, several sub-groups of criteria are defined. Our application of the assessment framework to the six CEE countries shows its relevance for the comparison of patient payment policy across countries, and for outlining common policy options. At the same time, it also reveals the need of collecting data on other relevant indicators that are not included in this paper, as well as for updating indicators already included. Research on patient payments will be essential for a continuous monitoring of patient payment policies (e.g. those in CEE) and their prompt adjustment.

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Authors: Péter Mihályi and Blagoy Kitanov
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Over the past two decades, international bond markets have become the chief disciplinarian of fiscal policy, displacing the International Monetary Fund and the European Union in this role. This trend culminated in the wake of the global financial crisis, as countries that had indulged in moral hazard and fiscal profligacy during the Great Moderation were vulnerable to a sharp rise in sovereign risk premium and in some cases to loss of market access. The article compares the response of new governments in Hungary and United Kingdom to restore policy credibility. A major lesson is that governments that adopt a rules-based fiscal framework, including fiscal watchdogs and transparency norms, are far more successful in anchoring fiscal expectations and in achieving fiscal sovereignty than those that do not.

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We analyze the determinants of capital structure and its choice by small and medium-sized enterprises in Central and Eastern Europe from 2002 to 2007. We test the relevance of the three main theories: the Static Trade-off Theory, the Pecking Order Theory, and the Agency Theory, which have been derived primarily for developed markets, because our knowledge on their validity for emerging European countries is limited. We confirm the positive impact of size and asset tangibility on the leverage, while rejecting both the positive impact of profitability and tax, as well as the negative impact of business risk and non-debt tax shields. We report that SMEs behave homogeneously, and the relevant capital structure determinants show remarkable steadiness. Our results show a special time varying behaviour, in which the relevant determinants become stronger, while most of the country-specific factors present weakening effects. We argue that firms of the CEE countries remarkably converged their financial decision-making procedure to that of developed countries through the investigated period. The relevance of the Trade-off Theory is weak, as firms respect a one-sided upper threshold rather than converging to a fixed target on both sides, while they are not indifferent to the hierarchy of financing alternatives.

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The paper reviews the existing cost-sharing practices in four Central European countries namely the Czech Republic, Hungary, Poland and Slovakia focusing on patient co-payments for pharmaceuticals and services covered by the social health insurance. The aim is to examine the role of cost-sharing arrangements and to evaluate them in terms of efficiency, equity and public acceptance to support policy making on patient payments in Central Europe. Our results suggest that the share of out-of-pocket payments in total health care expenditure is relatively high (24–27%) in the countries examined. The main driver of these payments is the expenditure on pharmaceuticals and medical devices, which share exceeds 70% of the household expenditure on health care. The four countries use similar cost-sharing techniques for pharmaceuticals, however there are differences concerning the measure of exemption mechanisms for vulnerable social groups. Patient payment policies for health care services covered by the social health insurance are also converging. All the four countries apply co-payments for dental care, some hotel services or in the case of free choice of physician. Also the countries (except for Poland) tried to extend co-payments for physician services and hospital care. However, their introduction met strong political opposition and unpopularity among public.

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Discussion on methodological problems of corporate survival and solvency prediction is enjoying a renaissance in the era of financial and economic crisis. Within the framework of this article, the most frequently applied bankruptcy prediction methods are competed on a Hungarian corporate database. Model reliability is evaluated by Receiver Operating Characteristic (ROC) curve analysis. The article attempts to answer the question of whether the simultaneous application of data reduction and univariate splitting (or just one of them) improves model performance, and for which methods it is worth applying such transformations.

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Authors: Milena Pavlova, Wim Groot and Godefridus Merode
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This paper evaluates income convergence in the European Union, between “old” (EU15) and “new” member states from Central and East Europe (CEE10), and among the countries within these two groups. The GDP per capita convergence should be expected according to the exogenous economic growth model and neoclassical trade theory. The presence of σ-convergence and both absolute and conditional β-convergence is tested for on a sample of 25 European Union countries (EU25). Results confirm the existence of β-convergence of GDP per capita at purchasing power parity among EU25, but not among EU15 and CEE10 countries. σ-convergence has been confirmed among EU25 and CEE10 countries, while GDP per capita has been diverging in the EU15 group of countries. Moreover, the results reveal that recent economic crisis has reversed long-term tendencies and led to income convergence within EU15 and divergence within CEE10. During the crisis, the income differences among the EU25 countries have increased, but the scope and duration of this effect has been limited and has not affected the long term convergence path. However, the obtained long term speed of convergence is significantly lower compared with the previous researches.

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One of the motivations for a country to join the European Union is the belief that this will boost short- and long-run incomes. Researchers have tested the hypothesis of income convergence in different settings using either regression or unit root analysis, with mixed results. In this paper, we use both methods on the same samples over a significant time period. This allows us to judge differences in results across varied time-frames and methodologies. The focus of these tests is on convergence to German and EMU average incomes by Eastern European countries and those within the Euro-zone from 1971–2007. The evidence for convergence is mixed. Among the Euro-zone countries, there is more evidence of convergence in the 1970s and 1980s than recently. There is significant evidence that Eastern Europe experienced convergence and that capital formation was one of the root causes. While the results do not support the hypothesis that joining the EU increases convergence, reforms undertaken in the 1990s by Eastern European countries in preparation for joining may have helped them to “catch up”, even if the act of joining the EU did not directly impact convergence.

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The principle of free-of-charge health care services is written in the Ukrainian Constitution. However, the state fails to implement this principle in practice. Our analysis confirms that in spite of the proclaimed free-of-charge health care services, many Ukrainian patients pay for health care services and these payments are considerable. As much as 57% and 73% of patients using out-patient and in-patient services respectively reported having spent money for this. Among those who paid for health care services, the average annual expenditure is 636 UAH for out-patient services and 2,019 UAH for hospital services. Patients who paid formally on average spent 555 UAH for out-patient services per year, while those who paid informally, spent about 337 UAH. This unregulated patient payment system is a threat to the population’s health as it prevents many patients from obtaining the health care that they need. Hence, the current’ free-of-charge’ system does not work properly and cannot sustain the health of the nation any more. There is a need for a thoroughly designed official and transparent payment system as well as structural financial reforms.

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In Poland, the low level of health care financing from public funds is becoming increasingly voiced and accepted as an argument not only for increasing health insurance contributions, but also for extending the scope of private funding. The objective of this paper is to analyze the level and structure of out-of-pocket expenditure in Poland as well as health care consumer characteristics influencing payments for health care and willingness to pay. The analysis relies on two main sources of micro data: the household budget surveys of the Central Statistical Office of Poland and a representative survey carried out in Poland in 2010. The results indicate that in the structure of out-of-pocket expenditure, spending on pharmaceuticals dominates (up to 80% of total out-of-pocket expenditure on health). The out-of-pocket expenditure on services most often refers to paying for out-patient specialists’ services, rehabilitation services and dental care, often in the private sector. Out-of-pocket expenditures are highest among population groups with high health needs (elderly, disabled, chronically ill) but also among individuals with high income. Polish consumers do not object to co-payments for health services with good quality and quick access. Greater stated willingness to pay characterizes younger people, those with higher income and better health.

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Authors: Elka Atanasova, Milena Pavlova, Emanuela Moutafova, Todorka Kostadinova and Wim Groot

The implementation or amendment of patient charges in a country could benefit from preliminary analyses of their potential effects on health care demand. This paper focuses on hospital care. The paper aims to identify strategies for the empirical analysis of the demand for hospital services that are useful for the assessment of patient charges in the hospital sector, and to compare these strategies using empirical data for Bulgaria. The data were collected in 2010 in a representative survey among consumers. We apply both revealed- and stated-preference approaches. Within the framework of revealed preferences, we use data on various types of patient payments (total payments, formal payments and informal payments) as dependent variables to define three empirical models. Within the framework of stated preferences, we use data on stated willingness to pay for a hospitalization for different sub-samples (current users, users and all respondents), which also results in three empirical models. We observe some similarities and differences between the models based on stated-preference data and those based on revealed-preference data. Although our findings need to be studied further to establish how rigorous they are, they can be useful for setting up new studies on the convergent validity of the two approaches.

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In 2010, a household survey was carried out in Hungary among 1037 respondents to study consumer preferences and willingness to pay for health care services. In this paper, we use the data from the discrete choice experiments included in the survey, to elicit the preferences of health care consumers about the choice of health care providers. Regression analysis is used to estimate the effect of the improvement of service attributes (quality, access, and price) on patients’ choice, as well as the differences among the socio-demographic groups. We also estimate the marginal willingness to pay for the improvement in attribute levels by calculating marginal rates of substitution. The results show that respondents from a village or the capital, with low education and bad health status are more driven by the changes in the price attribute when choosing between health care providers. Respondents value the good skills and reputation of the physician and the attitude of the personnel most, followed by modern equipment and maintenance of the office/hospital. Access attributes (travelling and waiting time) are less important. The method of discrete choice experiment is useful to reveal patients’ preferences, and might support the development of an evidence-based and sustainable health policy on patient payments.

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Questions concerning the use of evidence in policy making increasingly attract the interest of both policymakers and researchers. It is broadly recognized that the development of integrated policy frameworks can be facilitated by the use of quantitative analytical methods, such as system modeling, computer simulation, trend analysis, and scenario analysis. Although policy projections based on these methods cannot provide direct solutions to policy problems, they can help to minimize the undesirable effects of a policy choice. This paper presents the concept design of a policy projection tool that estimates the macro-level effects of patient charges. In particular, the paper explores the usefulness of system dynamics modeling for the development of the projection tool. The overall objective of the policy projection tool is to generate evidence relevant for the analysis of patient payment policies. Based on the concept projection tool, a simplified consumption-revenue module is developed for the estimation of the annual health care consumption and the revenue from patient payments during one year. The module is applied to data from six Central and Eastern European countries to test its accuracy. The results from the module testing provide directions for further modeling steps.

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Patient payments have not been studied systematically in Lithuania. This limits the use of empirical evidence in policy making. More systematic and detailed evidence on the patient payments phenomena in Lithuania are needed to clarify who is seeking and paying for health care services, why, and how. This paper presents the main findings from a quantitative representative population survey on patient payments in Lithuania. The study results confirm the significant scope of the patient payment practices as well as the complexity of the issue. Overall attitudes towards informal cash payments are negative but there is a rather tolerant view on gifts-in-kind. In case of health problems, access to proper (good quality) treatment is crucial. When treatment is needed, Lithuanian patients are ready to pay irrespective of the legitimacy of the payments and despite of the significant financial burden that these payments may cause. Priorities for the quality of care and the protection of vulnerable groups against financial risks are important and should be addressed when discussing the design of patient payment policies in Lithuania. The lack of a transparent political and organizational arrangements and the failure to communicate properly with the general public are the main challenges for future policy.

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Discrete choice experiments (DCE) and contingent valuation (CV) are often applied to value health care benefits. However, whether the two techniques yield converging willingness-to-pay (WTP) estimates is not studied well. This study aims to compare at a disaggregated level WTP estimates for physician services obtained from DCE and CV estimates. We study the consistency between the estimates and whether there are systematic differences between the two. The analysis is based on data from a household survey in Ukraine that includes 303 respondents and is taken to be representative of the Ukrainian population. The respondents participated in both DCE (16 choice tasks) and CV (4 valuation scenarios) in a form of payment scale followed by open-ended questions about the exact maximum WTP. We find that DCE produces higher WTP estimates than CV does, and the estimates are not consistent across the two techniques. A difference between the WTP estimates from DCE over those derived from the CV technique is found (i) for respondents who do not discriminate well between the profiles, and (ii) for an increase in the presented attribute level changes. The implications for achieving better convergence between the WTP estimates from the two techniques are discussed.

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Authors: Ilias Anthopoulos and Anna Péczeli
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Social network analysis (SNA) is one of the fields in the social sciences which went through a huge development in the last two decades. With the availability of new tools and methods, in-depth analysis of huge networks became possible resulting in important results at various fields. Despite this advancement, the strength of a tie — a foundation of this theory — is still a hot topic in SNA. This paper aims to show that there is a connection between the extent of fair behaviour and friendship and thus to suggest that the extent of fairness may be used as another measure for tie strength. An analytical utility model is introduced including fairness and tie strength. The model is analyzed and an experimental method is shown to test the model. The paper also introduces pilot results.

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Laudatio and Introduction

Prof. Dr. Dr.H.C.Mult. György Jenei

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China is the second biggest trading nation in the world — number one as trade exporter and number two as trade importer. Behind the USA, China has the second strongest economy with a gross domestic product of almost 5 trillion USD in 2009. Despite the global financial crisis the Chinese economy was and is still drastically growing with three main focus areas: increase in labor costs; increasing demand for qualified labor; and a high grade of technology. Linked to the future 12th five-year-plan, China is going to spend 1.5 billion dollars in key-technologies like nuclear power, high speed railway systems, aerospace, energy efficiency, environmental friendly technologies, biotechnologies and information technology. China is trying to change its status from distributor to a leading high-tech provider with high potential. This implicitly means a higher consumption of natural resources and more highly qualified employees. However, the shortage of natural resources poses a great question. Prognoses say that we will need two Earths to cover our steadily rising resource consumption in 2030. To provide this, the economy has to work much more efficiently and regarding climate and resource protection even a total change is necessary. Due to this, Europe’s and China’s future will need a common economic and ecologic strategy to fulfill international requirements of sustainable growth within balanced natural circumstances.

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Spillovers from foreign direct investment in Central and Eastern Europe

An index for measuring a country’s potential to benefit from technology spillovers

Authors: Balázs Szent-Iványi and Gábor Vigvári

In the paper, we construct a composite indicator to estimate the potential of four Central and Eastern European countries (the Czech Republic, Hungary, Poland and Slovakia) to benefit from productivity spillovers from foreign direct investment (FDI) in the manufacturing sector. Such transfers of technology are one of the main benefits of FDI for the host country, and should also be one of the main determinants of FDI incentives offered to investing multinationals by governments, but they are difficult to assess ex ante. For our composite index, we use six components to proxy the main channels and determinants of these spillovers. We have tried several weighting and aggregation methods, and we consider our results robust. According to the analysis of our results, between 2003 and 2007 all four countries were able to increase their potential to benefit from such spillovers, although there are large differences between them. The Czech Republic clearly has the most potential to benefit from productivity spillovers, while Poland has the least. The relative positions of Hungary and Slovakia depend to some extent on the exact weighting and aggregation method of the individual components of the index, but the differences are not large. These conclusions have important implications both the investment strategies of multinationals and government FDI policies.

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Ukraine belongs among those young countries where the beginnings of democratisation and nation-building approximately coincided. While the development of nation states in Central Europe was usually preceded by the development of nations, the biggest dilemma in the Ukraine is whether a nation-state programme — parallel to the aim of state-building — is able to bring unfinished nation-building to completion. Ukraine sways between the EU and Russia with enormous amplitude. The alternating orientation between the West and the East can be ascribed to superpower ambitions reaching beyond Ukraine. Eventually, internal and external determinants are intertwined and mutually interact with one another. The aim of the paper is to explain the dilemmas arising from identity problems behind the Ukraine’s internal and external orientation.

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The paper compares incomes of Czech rural and non-rural households and identifies households persisting below the poverty line. The data were taken from the statistical research entitled “Statistics on Income and Living Conditions for 2005 and 2008”. Households were classified according to the municipality size (up to 2,000 inhabitants is rural). Household incomes were assessed according to net annual income per consumer unit. Positive skewness and high kurtosis is a typical feature of household incomes; a similarity with log-normal distribution can be presumed. The difference between rural and non-rural household incomes was significant. In 2005, the share of households with incomes below the poverty line did not significantly differ in rural and non-rural areas. The probability of escape from the group with the lowest incomes seems to be higher in the Czech Republic compared to foreign countries.

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Youth are becoming the frontiers and catalysts of positive social changes through their participation. This paper examines youth involvement in the society to get a better understanding of the process of youth participation in development programs, and to investigate the perceptions of youth regarding the poverty issue in the world. Two different methods were applied in the study: a critical in-depth literature review was conducted followed by a validation process to better elaborate the process of youth participation in development programs. Questionnaires and an analysis of the findings were also used. The results show that the youth who live in poor countries are more used to poverty and consider it as an inevitable part of their lives. Besides, the more that youth think about and are aware of poverty in the world, the more responsible they feel towards it. Also, those youth who believed in the important role of holding conferences and events in making young people aware of the necessary actions to eradicate poverty had also taken more actions to tackle it.

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Authors: Péter Felcsuti, György Csáki and Lela Rekhviashvili
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The sovereign debt crisis in Greece represents a very interesting case in which the Greek government succeeded in transforming domestic fiscal deficit problem, overspending and fear of free market reforms into a European challenge consistent with justifiable concerns about the sustainability of the euro-project and its likely future. In this paper, the roots of the crisis and the way of addressing it are discussed. In particular the features, drawbacks, missed opportunities and pitfalls of the €110 billion EU/IMF rescue package granted to Greece are examined. It is argued that the government’s focus on taxation rather than on politically costly privatization and cutbacks in the public sector undermined economic activity in the country, decreased the government’s revenue, and spawned disincentives for investment, without generating growth and without improving competitiveness. In brief, rather than contributing to economic recovery, the opposite was achieved as a result of the measures implemented by the government.

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How much is intellectual capital worth for the organization?

Separating the measurement and evaluation of intellectual capital elements with evaluator functions at EMS companies

Authors: János Kövesi, Zsuzsanna Tóth and Tamás Jónás

The purpose of the paper is to contribute to the use of evaluator and utility functions in order to increase the reliability of scorecard based intellectual capital (IC) measurement methods and to express and aggregate the utility of IC components to an organization. The conducted field experiment integrates the results of interviews with 23 brand name customers by examining the customer satisfaction measuring practice of service provider companies. Our main finding is that adequately calibrated evaluator functions assign perceived customer satisfaction to its scorecard based measured values and reduce the distortions of scorecard based measurements. The originality of the research lies in expressing and aggregating the utilities of IC components to the organization by interpreting the evaluator function as a kind of utility function. This application allows the joint use of financial valuation and scorecard based measurement in the same performance management system.

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Authors: Ádám Török and Péter Mihályi
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This paper investigates the attitudes of political parties to international trade in 23 OECD countries in the period 1972–2004. Employing different datasets and various measures of trade openness, we examine how government ideology affects trade policy preferences and whether this relationship depends on international and domestic factors by employing the panel data techniques. Our main findings are that an increase in the leftist orientation of the government leads to more restrictive or less open trade policies, while right-oriented parties are likely to express more favor to trade openness. Secondly, international factors such as globalization in political and social dimension as well as financial openness, have a strong positive influence on a given party’s trade policy preferences. Thirdly, we offer clear evidence that a political party will change its partisan positions due to the influence of the domestic economic and institutional environment.

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Author: Grzegorz Kolodko

One of the most often committed mistakes in economic reasoning is the supposition about the continuity of economic processes. However, what dominates in reality is a process of permanent changes, which sometimes proceed in a cascading manner rather than linearly. It must be acknowledged that the capitalist market economy by its very nature is involved in periodical crises. They must occur from time to time, yet the magnitude of the recent crisis is a result of inappropriate institutions and wrong macroeconomic policies based on neoliberalism. While the underlying causes of the crisis and the ways out of it at the era of interdependent global economy is discussed vividly in countless books and papers, yet it ought to be clear that the world is moving from one crisis to another. Thus, one must consider not only the economics of crisis, but also a kind of crisis of economics. There is a need for a New Pragmatism, based on the better understanding of economics as science, describing the economy as a system of forces and flows which contantly give feedback and influence each other.

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The links between operational practices and performance are well studied in the literature, both theoretically and empirically. However, it is mostly internal factors that are inspected more closely as the basis of operational performance, even if the impact of external, environmental factors is often emphasized. Our research fills a part of this existing gap in the literature. We examine how two environmental factors, market dynamism and competition impact the use of some operational practices (such as quality improvement, product development, automation, etc.) and the resulting operations and business performance. The method of path analysis is used. Data were acquired through the International Manufacturing Strategy Survey, which was carried out in 2005 in 23 participating countries in so called “innovative” industries with a sample of 711 firms. Results show that both market dynamism and competition have a large impact on business performance, but the indirect effects, through operations practices are rather weak compared to direct ones. The most influential practices are from the area of process and control, and quality management.

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In parallel with the change of the political-economic regime, the Hungarian system of public administration faced new challenges. Under state socialism, medium-level public administration was represented by the counties, which exercised strong control over the local governments of settlements in the hierarchic system of public administration. During the reforms of the public administration after the change of the political regime, the administrative roles of counties were withdrawn, and their functions were minimised upon the pressure of the settlements. Hungary came to witness a rather rare situation where in between the state and thousands of local governments no medium-level units of public administration with real powers existed. Nevertheless, the country’s accession to the European Union in 2004 brought about a change: it was necessary to create regions that were in line with the regional policy of the Community, but missing from the territorial structure of Hungary. As a result, on the medium level, in addition to counties and cities of county rank there emerged regions that were higher in the territorial hierarchy, but lacked local governments. Yet, the structural reform of public administration system did not stop at this point, because for years now the elevation of the county-based, deconcentrated bodies of public administration mediating governmental functions to the regional level has been in progress. It is clear for the larger cities of county rank that if the political and public administration is decentralised in Hungary, it will be an evident consequence to designate those cities that will serve as the seats of the regional governments, in practice the capitals of the regions. There is a sharp competition taking place for the possession of these regional functions, while the state is decreasing the number of potential actors via public administration and regional development. This study aims to answer which cities are suitable for acting as regional centres by the regional decentralisation of governmental functions and top-bottom regional planning.

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The global recession has put society to the verge of chaos and changed many aspects of life — in technology, in communication networks, globalization itself, and at the same time also exposed the inefficiency of relationships and values. All this demands finding new approaches to life in all domains. This paper discusses that creativity is a tool that might help to find new ways. During its history, creativity research has accumulated vast factual material. However, there is no general framework that would systematize explorations in the field. The aim of the study is to elaborate a systemic model of creativity as a subject of exploration in any domain. The framework might serve as an instrument in an attempt to solve problems in many different fields.

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Transition economies that formerly were within the Soviet Union’s political and economic sphere exhibited high economic growth before the crisis. In part, increasing total-factor productivity (TFP), a’ residual’ growth factor commonly interpreted as reflecting technological progress, was behind higher growth rates. This paper zooms in on TFP’s contribution to growth in the transition countries of Central and Eastern Europe, the Caucasus and Central Asia, in order to identify which countries have established a knowledge-based growth path or have the potential to develop one in the near future. We start by looking at how the transition countries covered by the paper measure up according to traditional innovation input and output indicators. But the major part of our analysis focuses on identifying countries’ potential for future knowledge-based growth. Few transition economies have highly-developed innovation profiles. Analysis of the prerequisites for knowledge-based growth indicates that transition countries are at a systemic disadvantage relative to the US, the EU-15 and Japan, and have limited potential for knowledge-based growth.

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Authors: László Csaba, Csilla Bónis and Matthew Lloyd-Cape
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Authors: Prateik Dalmia and Krzysztof Bandasz
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The healthcare reform package submitted to the Polish parliament could lead to a radical and fundamental change in existing business models and in the rules on marketing activities. The most important provisions introduced by the new Reimbursement Act are: fixed markups and prices of reimbursed medicines, introduction of a pay-back system, risk-sharing mechanisms, tax on income from reimbursements, a maximum (total) reimbursement budget, new therapeutic and economic criteria for various levels of reimbursement. Undoubtedly the planned changes will improve the functioning of the reimbursement procedure by increasing the transparency of the process. Challenges facing health policy in Poland are not unique: similar have been identified in Hungary. Owing to the similarities between both countries in healthcare systems, clinical practice patterns and economic indicators, it seems to be reasonable to develop partnerships in creating relevant regional databases and registries, and in examination of the generalisability and transferability of health technology assessment findings.

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Collaboration between researchers from academic and non-academic organisations

A case study of co-authorship in 12 Hungarian universities

Authors: A. Inzelt and A. Schubert

Throughout the reform process of the European university system, the importance of collaboration between actors at the academy and other areas of the economy and society are ever increasing, as evidenced by a growing number of co-authored articles and the number of citations to such works.This article analyses the characteristics of publications co-authored by Hungarian university researchers with non-academic partners. Scientometric indicators are used as primary methodological tools. Our sample was the publication output of 12 universities, which covers 90% of the university sphere’s publications, between 2001 and 2005 and was taken from the publications of Hungarian institutions of higher education appearing in the Web of Science database. The authors employed a new, important aspect in the cooperation activity of Hungarian universities: their connection with the non-academic partners. The selection and the institutional location of the co-authors resulted in an important database for further analysis. Based on the empirical analysis of the publication and citation performance data of 12 such universities the authors concluded that the proportion of citations to publications co-authored with either academic or non-academic partners is significantly higher for international partners than it is for Hungarian ones. For one publication, the proportion of citations to articles co-authored with foreign non-academic partners, such as firms or health care institutions, was five times higher than the number relating to papers co-authored with Hungarian firms or health care institutions. Higher citedness of the joint articles with the foreign country institutes than domestic partners are in harmony with observation in other countries. Generally the rate of the co-authored articles with non-academic partners is rather low. However it scatters to a great extent concerning the different universities. The presence or absence of medicine in the profile of the universities seems an important factor of that difference.

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Crisis and economic growth in the EU

Medium and long-term trends

Authors: P. Halmai and V. Vásáry

The study analyses the impacts of the financial and economic crisis on potential growth in the European Union. It identifies the main channels of impact mechanism and carries out quantitative estimations in order to reveal the medium and long-term trends. According to over findings the impacts of the crisis are significantly different in the main country-groups of the EU. The basic structural problem of the EU is considered the decreasing trend in potential growth which might be further strengthened through the lasting consequences of the crisis.

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This paper presents a duopoly model of firm rivalry in a vertically differentiated industry when market dynamics is explicitly accounted for. It shows how the interplay between demand (degree of product differentiation, demand elasticity) and cost (fixed and quality costs) factors determine firms’ relative strength when quality is irreversible. The main strategic choices are product quality, price and the timing of entry and exit. Further, firms incur sunk quality costs at time of entry and operating fixed costs of maintaining quality. Although the low quality firm may outlast its rival in the declining phase, both firms wish to be the “quality leader”.

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The case for taxing financial transactions merely to raise more revenues from the financial sector is not particularly strong. Better alternatives to tax the financial sector are likely to be available. However, a tax on financial transactions could be justified in order to limit socially undesirable transactions when more direct means of doing so are unavailable for political or practical reasons. Some financial transactions are indeed likely to do more harm than good, especially when they contribute to the systemic risk of the financial system. However, such a financial transaction tax should be very small, much smaller than the negative externalities in question, because it is a blunt instrument that also drives out socially useful transactions. There is a case for taxing over-the-counter derivative transactions at a somewhat higher rate than exchange-based derivative transactions. More targeted remedies to drive out socially undesirable transactions should be sought in parallel, which would allow, after their implementation, to reduce or even phase out financial transaction taxes.

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This paper uses a multi-region DSGE model with collateral constrained households and residential investment to examine the effectiveness of fiscal policy stimulus measures in a credit crisis. The paper explores alternative scenarios which differ by the type of budgetary measure, their length, the degree of monetary accommodation and the level of international coordination. In particular we provide estimates for New EU Member States where we take into account two aspects. First, debt denomination in foreign currency and second, higher nominal interest rates, which makes it less likely that the Central Bank is restricted by the zero bound and will consequently not accommodate a fiscal stimulus. We also compare our results to other recent results obtained in the literature on fiscal policy which generally do not consider credit constrained households.

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The essay poses the question whether the so-called Arab spring offers the potential to complete the 1989 revolutions. It first discusses what was hoped to be achieved in 1989, and it then argues that the post-1989 arrangements failed to prevent new security challenges from emerging. The Islamist threat came to play the role that the Communist threat had played to the West or the Western threat had played to the East. The essay then turns to the question on what needs to happen if current events are to lead to something better. It argues that there is a need to overcome the legacies of the past and adapt institutions to the global present. The world must move away from nationalist and bloc thinking towards a concept of human security — a concept which came out of the Helsinki Agreements in 1975. The case of the recent intervention in Libya illustrates the need for a human security approach in practice.

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Private pension funds were thought to be an important pillar of old-age provision when they were introduced throughout (Emerging) Europe. As different as these funds are in different countries with regards to their regulation, their ownership structure and operation, none were immune to the sub-prime led financial crisis. The Hungarian private pension funds are unique amongst the defined contribution (DC) funds. With their decade old recent history, they are maturing to the payout period in a few years’ time; however, their demise appears ever more realistic by means of political decision. This makes uncovering their investment policy during the crises very timely. Examining such a period is of importance in shedding light on the behaviour of traditional financial concepts in periods of stress. In this paper, we assess the optimality of diversification, hedging and short sales decision possibilities of the Hungarian pension funds in the equity investments environment. Was the net asset value (NAV) erosion suffered by the Hungarian private pension funds a result of their investment decision? We examine this question of diversification through a hypothetical simulation of model investment portfolios. Our results show that international diversification yields better risk-adjusted returns only in case of perfect hindsight of future market movements. The high correlation of the stock indices globally in times of crises limits the benefits of diversification.

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Is globalization a driver of economic growth and social development?

A cross-national, quantitative perspective on current, pro-globalist strategies of the European Union

Author: Arno Tausch

This article starts from the assumptions that the world can learn a lot from the empirical and theoretical debates and research results of dependency and world systems research. The European ‘political class’ seems to react more slowly to the implications of the global economic crisis. The policy package currently offered by the Commission still relies on open economies as pillar number 1 of any conceivable strategy. A rediscovery of this radical ‘dependency perspective’, first introduced by the Argentine economist Raúl Prebisch and other Latin American thinkers during the Great Depression of the 1930s, and more fully developed in the so-called Latin American ‘dependency debate’ of the late 1960s and 1970s; and the current empirical ‘world systems theory’ mean a fundamental break with the existing dominant thinking on the subject of economic and social convergence. Continuing critical perspectives, initiated by Polanyi, and developed in Hungary by Andor, Inotai and Szentes, and above all in the quantitative investigations by the Swiss sociologist Volker Bornschier and his associates, we show that on a global cross-national scale, very important indicators of the future and well-being of our continent, ranging from the famous ‘European social model’ to tertiary educational enrolment, infant mortality, rule of law, female survival rates, economic growth, inequality, unemployment, and environmental security are significantly being determined by our models, and all the explanations point in the direction of the penetration of multinational corporations (MNCs) and its growth over time as constituting a major and important development bottleneck. Our dependency approach thus re-iterates the substantial findings, proposed by the Bornschier sociological school. A thorough re-thinking of basic premises of policy-making in Europe is thus necessary. In our opinion, European policy-making finally should dare to take the globalization-critical organizations of ‘civil society’ seriously.

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The protracted sovereign debt crisis within the Eurozone has given rise to new policy questions. In a paradoxical way, the dilemmas confronting the contemporary EU/EMU reformers are similar to those which Socialist planners faced 30–40 years ago. This will be illustrated by two examples: the inherent contradictions of ex ante coordination, and the difficulties in hardening the soft budget constraint mechanism. Deep and far-reaching reforms are not possible without a consensus among those experts who have the ear of the elected leaders. This condition is not fulfilled today, due to the lack of consensus on the diagnosis.

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Authors: Balázs Sághy, Zbigniew Truchlewski and Blagoy Kitanov
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In the future, competitors will have more and more opportunities to buy the same information; therefore the companies’ competitiveness will not primarily depend on how much information they possess, but rather on how they can “translate” it to their own language. This study aims to examine those factors that have the most significant impact on the degree to which market studies are utilised by companies. Most of the work in this area has studied the use of information in strategic decisions a priori. This paper — while reflecting on the findings of research on organisational theories of information processing — aims to bridge this gap. It proposes and tests a new conceptual framework that examines the use of managerial market research information in decision-making and knowledge creation within one single model. Collected survey data, including all the top-income business enterprises in Hungary indicate that market research findings are efficiently incorporated into the marketing information system only if the marketing manager has trust in the researcher, and believes that the market study is of high quality. Decision-makers are more likely to learn from market studies facilitating the resolution of some specific problem than descriptive studies of a more general nature.

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We are immersed in a knowledge society that calls for indicators to go beyond economic factors to measure the development of a country. In this paper we use an adapted microeconomic model that determines the value of a country’s intellectual capital. For this, we consider intangibles such as human development, economic structure, international trade, foreign image and innovation. This measurement of intellectual capital is divided into human and structural capital and is used to analyse the relationship between these capitals and the economic development of the 27 countries in the European Union (EU27). The results show that when we consider aspects other than economic variables, the differences between countries are larger. Moreover, there is an inverse relationship between the management of intangibles and economic growth, which is why the former progresses after the latter have occurred.

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Act 77 of 1993 on the rights of national and ethnic minorities defines the rights of all minority groups in Hungary in compliance with EU legislation. The Roma minority is the only officially acknowledged ethnic minority of Hungary. It is difficult to provide an accurate picture on the situation of the Roma population because ethnic status is officially regarded as sensitive and therefore data collection is not permitted (Act 63 of 1992). The paper highlights the failures and the promising attempts of Hungary’s Roma integration policies, and the great efforts taken in this country and the difficulties of progress. It also demonstrates the importance of local initiatives and the contribution of civil organisations, the support which they would deserve, because without human solidarity and compassion no top down initiative can be rewarding.

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To devalue or not to devalue?

How East European countries responded to the outflow of capital in 1997–99 and in 2008–09

Author: V. Popov

If there is a negative terms of trade or financial shock leading to the deterioration in the balance of payments, there are two basic options for a country that has limited foreign exchange reserves. First, a country can maintain a fixed exchange rate (or even a currency board) and wait until the reduction of foreign exchange reserves leads to the reduction of money supply: this will drive domestic prices down and stimulate exports, raise interest rates and stimulate the inflow of capital, and finally will correct the balance of payments. Second, the country can allow the devaluation of national currency — flexible exchange rate will automatically bring the balance of payments back into the equilibrium. Because national prices are less flexible than exchange rates, the first type of adjustment is associated with the greater reduction of output.The empirical evidence on East European countries and other transition economies for the 1998–99 period (outflow of capital after the 1997 Asian and 1998 Russian currency crises and slowdown of output growth rates) suggests that the second type of policy response (devaluation) was associated with smaller loss of output than the first type (monetary contraction). The 2008–09 developments provide additional evidence for this hypothesis.

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The Justice and Development Party (AKP) government between 2002 and 2007 managed to accomplish unprecedented economic reforms, maintaining 8% growth and passed legislation to change Turkey into a more democratic country in line with the Copenhagen political conditions. After being rewarded with the start of accession negotiations in 2005 and an electoral landslide in 2007, AKP’s second term in office is in stark contrast with its earlier days of glory. AKP disengaged itself from the IMF agreement, and took EU reforms off the top of its agenda, bringing half a decade of political and economic reforms to a halt. The paper argues that AKP utilized the credibility of IMF and EU support to defeat its domestic rivals, but once the external incentives lessened, AKP turned inwards to consolidate its power and cared for little else. The first part of the paper explores how AKP managed to construct such a broad reform consensus and assesses the role of the external influence. The second part explores why and how this reform consensus fell apart.

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The paper builds on recent approaches in institutional theory on the co-existence of logics to analyse how field actors handle competing institutional demands in their practices. Business schools’ reactions to the critique that their research is not sufficiently relevant is analysed empirically. The logic of research in professional schools has been suggested as an alternative logic which is supposed to produce more relevant research than is possible under the logic that nowadays dominates management science in business schools: the logic of basic research. A contribution is made to institutional theory by showing how these two logics, even though competing, co-exist on the field level. The results of this exploratory study indicate that management scholars contribute to the co-existence of competing logics by separating the social spheres associated with a particular logic from each other, and by symbolically referring to a conflicting demand. The analysis of publication practices suggests decoupling as an underlying mechanism enabling the co-existence of two competing logics in the field of management science.

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Authors: Jody Jensen, Ferenc Miszlivetz and Zbigniew Truchlewski
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