Showing papers by "National Research University – Higher School of Economics published in 1999"

Black Cash Tax Evasion in Russia: Its Forms, Incentives and Consequences at Firm Level

Abstract: This paper discusses Russia's "black cash" economy. Using interviews and survey data, we examine the mechanics of several distinctly Russian tax evasion schemes and attempt a rough estimate of the scale and dynamics involved in tax evasion based on black cash. Entrepreneurs' opinions are also used to get an idea of the incentives and costs of black cash tax evasion. We next describe the apparent economic consequences of black cash tax evasion and formulate general formal conditions for successful evasion at firm level. Finally, we recommend several policy measures to reduce the incentives to such behaviour and discuss questions for future research.

Avoiding health risks from drinking water in Moscow: An empirical analysis

Abstract: Casual observation suggests that many households in Moscow boil water, settle water in pans for some periods (e.g., overnight) before consuming, filter water, and buy bottled water. To date, there has been little empirical analysis of such avoidance behavior. Based on a recently completed survey of 615 households in Moscow, this paper investigates the types and amounts of avoidance measures that are used by households in Moscow to adjust drinking water quality. Survey results show that this is clearly the case: over 88 per cent of the sample boil water regularly due to concerns about water quality; 23 per cent filter water regularly; over 30 per cent settle water regularly; and about 13 per cent buy bottled water regularly. On the other hand, residents are generally content with their cold water supply and quality of delivery. Based on a microeconomic model of household avoidance behavior, logit regression results show how avoidance decisions relate to income, opinions of water quality, and location in the city. It is expected that this analysis from Moscow can also be used as a guide for future studies in other cities in Russia to evaluate opinions of quality, avoidance measures, and citizens' willingness to support public infrastructure projects designed to improve water supply.

Arrovian aggregation models

Abstract: Foreword. 1. Aggregation: A General Description. 2. Rationality of Individual Opinions and Social Decisions. 3. Social Decision Functions. 4. Functional Aggregation Rules. 5. Social Choice Correspondences. Bibliography. Index.

Decentralization in regional fiscal systems in Russia - trends and links to economic performance

Abstract: Considering the positive impact decentralization has had on regional economic performance and expenditure structure, Russia's federal government should: - Decisively protect local self-governance and budget autonomy. - Make intergovernmental fiscal relations more transparent. - Develop universal models of interactions between regional and municipal governments. - Impose stricter limits on total debt and budget deficits of subnational governments. To shed light on decentralization in Russia, Freinkman and Yossifov examine intergovernmental fiscal relations within regions. To analyze trends, they review channels of fiscal allocation within regions-tax sharing and local transfer schemes. To evaluate the potential impact of various fiscal decentralization patterns on regional economic performance (including growth and the budget deficit), they study data on the structure of 89 Russian consolidated regional budgets for 1992-96. They find that local governments' relative share of Russia's consolidated budget, although substantive (roughly a quarter of the total budget), did not expand after 1994. The federal government's relative role in financing public goods and services declined as the relative role of local governments increased substantially. Local governments collected more revenues in 1996 (6.4 percent of GDP) and spent more than regional governments. They also substantially increased social financing (including health, education, and social protection). Russia made no progress toward a more transparent system for tax assignments. The average level of expenditure decentralization is similar for ethnically Russian regions and national republics and okrugs but revenue arrangements differ greatly. True decentralization has taken place in oblasts and krais, where local authorities are provided with a bigger share of subnational tax revenues. A redistribution model applies in republics and autonomous okrugs, where greater local outlays have been financed through larger transfers from regional governments. Regions near each other tend to have similar budget arrangements - the result of intensive interactions between neighbors and probably supported by the activities of regional associations. The size of a region's territory does not influence decentralization outcomes. Fiscal decentralization seems positively related to the share of education spending in regional budgets. And regions with more decentralized finances tend to experience less economic decline. But budget control is weaker in more decentralized regions. Instability and lack of transparency in intergovernmental fiscal relations provide subnational governments little incentive for responsible fiscal policy. Further decentralization without greater transparency could bring greater debt and deficits. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - is part of a larger effort in the unit to study fiscal decentralization in transition economies. Lev Freinkman may be contacted at lfreinkman@worldbank.org.

Subnational Budgeting in Russia: Preempting a Potential Crisis

Abstract: Reforms of Russia's budgetary system at the subnational level are vital to preserve macroeconomic stability, improve the efficiency and accountability of government, and enhance incentives for local and regional governments to vigorously support economic growth. This report reviews recent trends in fiscal adjustment, budgeting, and government debt at the subnational level in Russia. Most previous fiscal reforms in Russia have focused on problems at the federal level or in the system of federal transfers to the regional governments. This report focuses instead on opportunities for reform at the subnational level. It analyzes major problems in the fiscal area, and suggest a number of measures and performance indicators that could form part of a reform strategy initiated by the Government of Russia. Key directions for subnational fiscal reform include: clarification of subnational government functions; developing a regulatory framework; budget consolidation; budget preparation and expenditure management; accelerate expenditure restructuring; debt management; reform of local taxation; and capital building.

Different strategies of transition to a market economy : how do they work in practice?

Abstract: The government's ability to act fast and with determination is more important to radical economic reform than technical perfection in designing new policy instruments. Political consent to reform measures lasts a short time, so it should be used in full. If the window of opportunity is ignored, the next one may be a long time coming. In 1989, the former communist countries embarked on a transition from centrally planned command economies to market economies (and from repressive dictatorships to Western-style democracies). In addressing the question, What is the optimal strategy for this transformation? Dabrowski revisits the controversy about how quickly and radically the new market rules and their components should be adopted in the former communist countries and discusses the economic and political problems associated with different strategies. Among his conclusions: Generally, the faster and more comprehensive the economic reform, the more chance there is to minimize its economic, social, and political costs, and to avoid chronic macroeconomic mismanagement. A more radical and disciplined path of transition is all the more important when initial conditions are less favorable and negative external shocks are greater. Only countries such as Hungary - which had made some progress in market-oriented reform before communism's collapse and which experienced less macroeconomic disequilibrium - could go more slowly. Political liberalization and democratization helps the economic transition succeed mainly because it helps weaken the political positions of the traditional communist oligarchy (nomenclatura), which is interested mainly in rent-seeking. Unless stabilization and liberalization are achieved quickly, microeconomic restructuring cannot be expected to progress quickly, even if privatization does (as it has in Russia). Other aspects of the transition may take more time. For privatization to succeed, for example, a legal base and organizational infrastructure must be created. But even with privatization, a rapid transition is less risky for restructuring and for complex institutional reform than a slow transition. There is no way to avoid a relatively large decline in output, especially of industrial production in the state sector. Granting concessions to, and bargaining with, various pressure groups does not produce the expected political results or increase social acceptance of reform. Governments should not be afraid of aiming too high in embarking on a stabilization program or any other component of transformation. Most post-communist governments do the opposite: Dilute the program so much it becomes ineffective. This paper - a product of the Transition Economics Division, Policy Research Department - is part of a larger effort in the department to look at progress on macroeconomic reforms in former communist countries as they move to a market economy.

Child Care and Women's Labor Force Participation in Romania

Abstract: The authors model the household demand for child care, the mother's participation in the labor force, and her working hours in Romania. Their model estimates the effects of the price of child care, the mother's wage, and household income on household behavior relating to child care and mothers working outside the home. They find that: Both the maternal decision to take a job and the decision to use out-of-home care are sensitive to the price of child care. A decrease in the price of child care can increase the number of mothers who work and thus reduce poverty in some households. The potential market wage of the mother has a significant positive effect on the decision to purchase market care and the decision to engage in paid employment. The level of household nonwage income has little effect on maternal employment and the demand for child care. In addition to facilitating women's work, kindergartens and cr�hes appear to provide educational and social benefits for children. Close to half the children in these facilities have mothers who do not work. Further research is needed to assess the cost and nature of these benefits and to determine the appropriate roles for the private and public sectors in providing, financing, and regulating such services for working and nonworking mothers.

Household Childcare Choices and Women's Work Behavior in Russia

Abstract: Replacing family allowances with childcare subsidies in Russia might have a strong positive effect on women's participation in the labor force and thus could be effective in reducing poverty. Lokshin models mothers' participation in the labor force, their working hours, and household demand for childcare in Russia. The model estimates the effects of the price of childcare, mothers' wages, and household income on household behavior and well-being. The theoretical model yields several predictions. To test these, reduced-form equations of the discrete and continuous household choices are estimated jointly using the method of semi-parametric full information maximum likelihood. This method controls for the correlation of error terms across outcomes, and the correlation of error terms that can result when panel data are used. The results of this analysis indicate that the extent to which mothers participate in the labor force, and for how many hours, depends on the costs of childcare and on what level of hourly wage is available to them and to other members of the household. Lokshin's simulations show that family allowances - intended to reduce poverty - do not significantly affect the household choice of childcare arrangements. Replacing family allowances with childcare subsidies might have a strong positive effect on women's participation in the labor force and thus could be effective in reducing poverty. This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand the role of gender in the context of the household, institutions, and society. The author may be contacted at mlokshin@worldbank.org.

On finite order invariants of triple point free plane curves.

Abstract: We describe some regular techniques of calculating finite degree invariants of triple points free smooth plane curves $S^1 \to R^2$. They are a direct analog of similar techniques for knot invariants and are based on the calculus of {\em triangular diagrams} and {\em connected hypergraphs} in the same way as the calculation of knot invariants is based on the study of chord diagrams and connected graphs. E.g., the simplest such invariant is of degree 4 and corresponds to the diagram consisting of two triangles with alternating vertices in a circle in the same way as the simplest knot invariant (of degree 2) corresponds to the 2-chord diagram $\bigoplus$. Also, following V.I.Arnold and other authors we consider invariants of {\em immersed} triple points free curves and describe similar techniques also for this problem, and, more generally, for the calculation of homology groups of the space of immersed plane curves without points of multiplicity $\ge k$ for any $k \ge 3.$

Training Needs in Russian Industrial Companies: Assessment by CEOs

Abstract: The article reports on the results of a recent survey of 740 Russian CEOs on their attitudes towards business education. It was found that the implied demand of Russian CEOs for managerial retraining is consistent, as retraining is seen as a remedy for current rather than fundamental problems in managerial efficiency, and it is insolvent as Russian companies currently are not ready for serious investment in human resources. In addition, there are low chances for dissemination of knowledge and skills within the company as Russian CEOs do not value coaching and mentoring. Some policy recommendations are provided.

Permanent Crisis in Russia: Selected Problems of Macroeconomic Performance

Abstract: The Russian experience of reforming the economy in the 1990s gives an instructive example of mishandling macroeconomic policy which led to the August 1998 crisis, collapse of the financial markets, devaluation of national currency and shattered the myth of stabilization that had appeared in 1997.

Macroeconomic and Fiscal Challenges Facing Central European Countries During the EU Accession Process

Abstract: At the end of 1997 five transition countries - the Czech Republic, Estonia, Hungary, Poland, and Slovenia - were invited to start negotiations on their accession to the EU. Three other countries - Latvia, Lithuania, and Slovakia - may still join the first group. Two other countries - Bulgaria and Romania - have concluded free trade and association treaties with the EU and have less clear accession perspectives, as their transition performance has lagged behind the frontrunners. The purpose of this paper is to present an overview of the main macroeconomic and fiscal challenges that may appear during the accession process, and indeed post-accession. Attention will be concentrated on fiscal problems, since fiscal performance plays a crucial role in determining of macroeconomic balances. At the same time, it also often reflects the progress achieved in structural and institutional reforms. The paper summarizes the results of the comparative ACEPHARE research project on "Medium and Long-Term Perspectives of Fiscal Adjustment of Selected Central European Countries" (P96-6089-R), which covered four Central European countries: the Czech Republic, Hungary, Poland, and Romania.

Analysis of Structural Development of Petroleum and Sugar Markets in the Russian Economy

Abstract: This paper results from the research in the framework of the project "Market developments under transition (applied to the petrol and sugar industries)" and its policy implications. A general definition of the problem, the hypothesis and the research methodology are presented in the Introduction. Part 1 includes characteristics of the markets chosen. Part 2 deals with the tolling contracts and their structural effects. The results of the factorial analysis are given in Part 3. The authors analyze specific contracts of Russian enterprises, in particular, tolling contracts, which are the main determinants of the market evolution under transition

Demographic changes in Russia -- past and future.

Abstract: Many of Russias demographic indices have changed dramatically during the last 10 years. Fertility in Russia fell below replacement level several decades ago subsequently a negative natural population increase emerged. This was predicted by population forecasts elaborated in the 1980s and accelerated by the sharp fertility decline in the 1990s. However such a decline was not specific in Russia it was typical for many European countries. As to the level of mortality and its trends the Russian position is poor compared to all the Western industrial countries. It is uncharacteristic for such countries to increase in mortality rates. Stabilization of the size of the Russian population in the first decades of the 21st century will be possible only when net migration is positive for Russia and of significant proportion. Nevertheless it is unlikely that this condition will be realized taking into consideration the economic and political realities of Russia. A decline in the size of the population is more probable.

Regional power in contemporary Russia: institutions, regimes, and practice

Abstract: The radical transformation of the Russian political system that occurred from the late eighties to the mid-nineties led to a fundamental change in regional bodies of state power. Although the changes in the realm of normative and legal regulation of these institutions, as well as in the practices underlying their functioning, were a direct result of political reforms that affected Russia as a whole, there was nonetheless substantial regional variation. Such variation must be viewed from three directions, or vectors, of the overall process of transformation: federalization, democratization, and diversification.

Defeat or Retreat?: (Reforms and the Financial Crisis)

Abstract: Contrary to the prevailing view, the financial crisis that struck on August 17, 1998, has virtually nothing to do with market reforms, provided, of course, we ignore the fact that such crises occur in general only in market economies.

Russian Enterprises after the August Shock

Abstract: The financial crisis of August 17, 1998, has created a unique situation in domestic industry. The operating conditions of virtually all business entities have been radically altered. The new "rules of the game" are being formed "as they go along," since the macro level is not providing the requisite signals regarding the directions and methods of pursuing any new industrial policy, and there are no points of reference. The enterprises that experienced the August shock are independently setting up rules for interaction befitting the situation that has taken shape. What goals are they setting for themselves? What opportunities do they have? How have they perceived the changes, and what further changes are they expecting? These are the main questions that researchers of enterprise behavior must answer today.(This abstract was borrowed from another version of this item.)