Showing papers by "National Research University – Higher School of Economics published in 2004"

Culture, Law, and Corporate Governance

Abstract: This article advances a new framework for investigating a simple yet fundamental question: In what ways does the law on the books reflect cultural values? We analyze relations between indices of investors' legal rights - as coded by La Porta et al. (LLSV) - and national cultural profiles. These indices correlate with cultural priorities that are consistent with societal acceptance of litigation. Indices of formalism in civil procedure exhibit similar correlations. Such societal stance may be related to a heritage of British rule. Grouping countries according to legal families - the cornerstone of LLSV's legal approach - provides only a partial depiction of the universe of corporate governance regimes. Our findings cast doubt on the alleged general supremacy of statutes in common law countries. These findings have implications for understanding diversity and convergence in corporate governance systems and for a systematic analysis of the interface between law and social institutions.

Gainers and losers from trade reform in Morocco

Abstract: We use Morocco’s national survey of living standards to measure the welfare impacts of the price changes attributed to various agricultural trade reform scenarios for de-protecting cereals — the country’s main foodstaple. We find small impacts on mean consumption and inequality in the aggregate. There are both gainers and losers and (contrary to past claims), the rural poor are worse off on average after de-protection. We decompose the aggregate impact on inequality into a “vertical” component (between people at different pre-reform welfare levels) and “horizontal” component (between people at the same prereform welfare). The vertical component of full de-protection is inequality reducing, while the (dominant) horizontal component is inequality increasing. The diverse impacts reflect a degree of observable heterogeneity in consumption behavior and income sources, with implications for social protection policies.

Trade Performance and Regional Integration of the Cis Countries

Abstract: Trade Performance and Regional Integration of the CIS Countries is part of the World Bank Working Paper series. These papers are published to communicate the results of the Bank's ongoing research and to stimulate public discussion. The CIS free trade area is, on balance, a beneficial, trade facilitating bloc. However, the potential benefits of CIS trade integration remain badly underutilized. Based on standard econometric models, the study provides a detailed quantitative analysis of the trends and the configuration of trade of the CIS countries.

Selections of bounded variation

Abstract: The paper presents recent results concerning the problem of the existence of those selections, which preserve the properties of a given set-valued mapping of one real variable taking on compact values from a metric space. The properties considered are the boundedness of Jordan, essential or generalized variation, Lipschitz or absolute continu- ity. Selection theorems are obtained by virtue of a single compactness argument, which is the exact generalization of the Helly selection prin- ciple. For set-valued mappings with the above properties we obtain a Castaing-type representation and prove the existence of multivalued se- lections and selections which pass through the boundaries of the images of the set-valued mapping and which are nearest in variation to a given mapping. Multivalued Lipschitzian superposition operators acting on mappings of bounded generalized variation are characterized, and so- lutions of bounded generalized variation to functional inclusions and embeddings, including variable set-valued operators in the right hand side, are obtained. Bibliography contains 113 items.

How Trust is Established in Economic Relationships when Institutions and Individuals Are Not Trustworthy: The Case of Russia

Abstract: Market relations are not confined to free competition and price-making mechanisms. The market is an instituted process (Polanyi 1992). It is constituted by sets of rules, regulations, and other institutional arrangements, including relations of trust. Starting with this general notion, we define trust as a belief that other agents will act in a predictable way and fulfill their obligations without special sanctions (Coleman 1988). Specifying this notion, we differentiate between two levels through which trust relationships can develop. The first level is achieved through the predictability of the behavior of other actors. The second level is reached through mutual obligations to follow accepted conventions, which are voluntarily taken by market actors.We also employ the distinction between one-sided trust in institutions and reciprocal trust among business actors (Rose-Ackerman 2001 a,b).

Probability of Default Models of Russian Banks

Abstract: This paper presents results from an econometric analysis of Russian bank defaults during the period 1997-2003, focusing on the extent to which publicly available information from quarterly bank balance sheets is useful in predicting future defaults. Binary choice models are estimated to construct the probability of default model. We find that preliminary expert clustering or automatic clustering improves the predictive power of the models and incor-poration of macrovariables into the models is useful. Heuristic criteria are suggested to help compare model performance from the perspectives of investors or banks supervision authorities. Russian banking system trends after the crisis 1998 are analyzed with rolling regressions.

Household Strategies of Coping with Shocks in Post-crisis Russia

Abstract: The paper looks at the subjective evaluations of a number of coping strategies that respondents undertook to mitigate the effect on their welfare of the Russian financial crisis. Given the dramatic drop in formal cash incomes, how are people able to adapt? What are the relative importance and effectiveness of coping strategies to resist hardship in reducing poverty for different groups of households? The results of the analysis indicate that the choices of survival strategies are determined by the level of human capital in the household. The higher the household human capital, the more likely the household is to choose active strategies. Households with low human capital, households headed by pensioners, and low-educated households are more likely to be socially excluded. A specific set of policy interventions should be targeted on such households to avoid the entrenchment of poverty, and the trend toward marginalization and impoverishment of these groups should be expressly monitored.

The size, composition, and dynamics of the Russian state bureaucracy in the 1990s

Abstract: In this paper Robert J. Brym and Vladimir Gimpelson analyze changes in the size and social composition of the Russian state bureaucracy in the 1990s based on official data. Although the Russian state bureaucracy grew somewhat at the regional level in the 1990s, it actually shrank at the federal level. Comparing the Russian state bureaucracy to the Weberian ideal type of bureaucratic efficiency, the authors also demonstrate the existence of strong gender and age segregation, with women and young people concentrated at lower levels and men and older people concentrated at higher levels. Furthermore, because many public officials were formally educated in the pre-perestroika era, they are poorly adapted to the needs of a modern state. Finally, circulation of new personnel through the bureaucracy, or bureaucratic “renewal,” is slow and occurs mainly at low-status levels. Circulation of personnel at high-status levels is practically nonexistent. Consequentiy, young recruits have little incentive to remain in state service and older officials confront little competition from either below or outside the state bureaucracy. Much of the inefficiency of the Russian state bureaucracy stems from these realities.

Information Acquisition, Coordination, and Fundamentals in a Financial Crisis

Abstract: This paper reconciles the two explanations of a financial crisis, the self-fulfilling prophecy and the fundamental causes, in an empirically-relevant framework, by explicitly modeling the costly voluntary acquisition of information about fundamentals in a variant of Diamond and Dybvig (1983). In the run equilibrium, investors engage in costly evaluation of projects, so that banks with lower-return projects fail. In the no-run equilibrium, there is no project evaluation. Investors' coordination on a specific equilibrium is triggered by a self-fulfilling prophecy. So, financial crises are seen as both, fundamentals-based and self-fulfilling prophecies-based phenomena.

Evolution of corporate governance in Russia: government policy vs. real incentives of economic agents

Abstract: Corporate governance mechanisms in Russia are the result of a large-scale institutional experiment performed by the Russian government in the early 1990s with vigorous support of international financial institutions. The purpose of this experiment was to bring a certain a priori defined model of interaction between enterprises and investors, owners and managers to the Russian environment. The logic of law making -from defining a general privatization framework to specific activities to develop stock market infrastructure — was strongly influenced by the idea to create this model. Multi-billion loans were extended to the Russian government by the World Bank and International Monetary Fund (IMF) to pursue these objectives. Leading Russian reformers and many foreign consultants were involved in practical implementation of this model. And until the middle of the 1990s, despite all inconsistency of the Russian government’s economic policy in the other areas, its activities in terms of institutional reform, especially the launch and implementation of the mass privatization, were very highly estimated (Aslund, 1995; Radygin, 1995, etc.). Besides, many experts believed that speed of implementing would compensate for the shortfalls in the institutional design of reforms. In particular, speed of privatization was thought to be critical to ensure that market reforms would be irreversible (Boycko et al., 1995).

Globalization and the transformation of the national political space: Switzerland and France compared

Abstract: In this paper, we present the basic ideas, the design and some preliminary results of a current research project on the transformation of the national political space in Western Europe. e project starts with the assumption that the current process of globalization or denationalization leads to the formation of a new structural conflict in Western European countries, opposing those who benefit from this process to those who tend to lose in the course of the events. e structural opposition between globalization “winners” and “losers” is expected to constitute potentials for political mobilization within national political contexts. We examine how these potentials are articulated at the level of political parties. In order to understand this process, it is crucial to focus not only on transformations in the electorate (the demand side of electoral competition), but to also consider the strategies adopted by political parties and their success (the supply side of politics). In this preliminary analysis, we focus on the supply side. Based on data about the positioning of political parties during four electoral campaigns in the national press, we show that the national political space is two-dimensional, including a dimension directly related to the expected new conflict, and very similarly configured in both France and Switzerland. About this Issue

Business Innovation in Russian Industry

Abstract: This article reports the results of a quasi-longitudinal survey of 2,800 top corporate executives of Russian industrial enterprises, presenting a snapshot of current innovation attempts in Russian enterprises and indicating economic and institutional factors that foster or hinder innovation. Russian CEOs see the necessity of profound changes in many areas of enterprise management and are not afraid of such changes, as innovations are perceived to be the best competitive weapon. However, their resources for radical innovation are rather limited. Beside lack of finance, the superimposed narrower strategic focus, the rigidities of local business networks, the weakness of external infrastructure for innovation and the absence of state support seriously impede attempts to implement radical changes. However, in every Russian industry surveyed there is a visible presence of innovative companies, which constitute 15–30% of all large and medium-size companies. Moreover, increasing imports and the growing number of foreign subsidiaries in Russia will continue to push Russian companies towards more intensive changes in all areas of enterprise management. Since the beginning of 1999 the Russian economy has displayed clear signs of recovery. Stable growth of industrial output, improving living standards of the population and intensified flows of foreign direct investment signify a new stage of economic development. However, the current macroeconomic successes do not guarantee sustainable economic development in the future, which is largely dependent on qualitative transformation of enterprises in order to regain competitiveness in national and international markets. Moreover, while in Eastern Europe on the eve of EU accession companies have clear benchmarks for organisation of business processes, Russian companies continue their search for original development paths. It is time to look more deeply into changes in local business and management practices, which may sustain the current positive macroeconomic trends. Most changes may be called innovations in the broad sense of ‘insertion of new business and management practices within a firm’. 1 Therefore, we decided to examine the current innovative practices of Russian enterprises with respect to two main issues:

What Insights Can Multi-Country Surveys Provide About People and Societies?

Abstract: "Large-N cross-national surveys can provide insight into human behavior that is otherwise unobtainable. They make it possible to perform empirical analyses of cross-level linkages, testing such questions as: "Are specific individual-level beliefs conducive to the emergence and flourishing of democratic institutions?" or, "Is economic development linked with declining religious beliefs and more secular worldviews?" Or "Are certain individual-level beliefs conducive to economic growth?" These are questions that students of political culture, secularization and modernization have debated for decades. Since they involve individual-level beliefs, any conclusive answer requires survey data; since they also involve system-level variables such as democratic institutions, or levels of economic development, they also require data from a broad range of societies and in so far as they involve changes over time, they also require data from multiple waves of surveys. Only recently have such cross-national survey projects as the various Barometer surveys now being carried out in Europe, Asia, Latin America and Africa, the ISSP surveys, the Comparative Election Surveys and the World Values Survey (which has just released an 80-nation dataset) begun to provide the data needed to answer such questions. The availability of cross-nationally comparable survey data from countries covering the full range of economic, political and cultural variation will not end these debates, but it will make it possible to move away from relying on stereotypes and guesswork, and base one's arguments on replicable evidence..."

Decision under Multiple Estimates for the Importance Coefficients of Criteria and Probabilities of Values of Uncertain Factors in the Aim Function

Abstract: Papers on the construction of preference relations by an additive aim function having multiple inexact (interval) estimates for its coefficients are briefly reviewed. Conditions for the nondominance and potential optimality of variants are stated. New results on the relations between two basic definitions of preference relations and qualitative criteria are given.

Businessman Candidates: Special-Interest Politics in Weakly Institutionalized Environments

Abstract: We initiate examination of the political boundaries of the firm by exploring the phenomenon of 'businessman candidates': business owners and managers who bypass conventional means of political influence to run for public office themselves. We argue that in-house production of political influence will be more likely in institutional environments where candidates find it difficult to make binding campaign promises. When campaign promises are binding, then a businessman may always pay a professional politician to run on the platform that political competition would otherwise compel the businessman to adopt. In contrast, when commitment to a campaign platform is impossible, then candidate identity matters for the policies that will be adopted ex post, implying that a businessman may choose to run for office if the stakes are sufficiently large. We illustrate our arguments through discussion of gubernatorial elections in postcommunist Russia, where businessmen frequently run for public office, institutions to encourage elected officials to keep their campaign promises are weak, and competition for rents is intense.

On the nature of changes in the optical characterization produced in sapphire on its irradiation with a pulsed powerful stream of hydrogen ions

Abstract: Changes in the optical characteristics in synthetic sapphire specimens produced by microsecond pulse irradiation with a stream of hydrogen ions of energies ranging up to tens keV have been observed. Data on decrease in the optical reflection, measured within the wavelength range of 200−900 nm, are presented. This characterization is compared with the data received by optical and atomic force microscopy as well as by lattice structure analysis performed with X-rays. The measurements indicate that the changes of optical parameters are not a consequence of absorption increase and/or sapphire decomposition. They result from modifications of the morphology and structure of surface layer of the sapphire samples, induced by irradiation.

The Quantitative Importance of Criteria with Discrete First-Order Metric Scale

Abstract: Theoretical principles underlying the description of preferences in discrete multicriteria models for decision making from quantitative estimates for the relative importance of criteria and information indicating that increment of preferences decreases with the increasing gradations of their common scale are described.

Business-groups in Russian industries

Abstract: The chapter of lInstitutional Economicsr textbook is devoted to the development of business-groups as a specific feature of industrial organization in the Russian economy. The main determinants of forming and functioning of business-groups such as allocation of property rights in Soviet enterprises, networks of directors and executive authorities in the Soviet economic system as well as import of new institutes and inefficient state enforcement are in the center of analysis. Origins, structure, organization and management within the groups and the role of shareholding and informal control rights are considered.

Normal Form of Autonomous Systems with One Zero Eigenvalue

Abstract: We consider smooth normalization problems for systems of ordinary differential equations whose linear part has one zero eigenvalue, while the other eigenvalues lie outside the imaginary axis.

Tax Britannica: Nineteenth Century Tariffs And British National Income

Abstract: The literature on British economic history presumes that Britain was a free trader after the repeal of the Corn Laws Thus her tariff levels were below those which were optimal for maximizing utility Presumably, if the optimal British tariff was positive and greater than the levels established by mid-century, a reduction to zero of all tariffs that remained would have lowered British welfare even further In this paper, we use a simple computable general equilibrium model to simulate a drop in all British tariffs to zero The resulting substantial net increase in British welfare suggests that British tariffs were much higher than would be consistent with an optimum tariff policy More important, the size of British losses from her high tariff levels suggest that British policy was not consistent with the stance of an ideological free trader

'Trojan Horse' Teaching in Economic Behavior

Abstract: Development of individuals, social groups and societies is considered under the influence of two opposite and interrelated types of social interactions: (a) support of, and (b) counteraction and inhibition of learning, instruction, education and development. The latter type of social interaction is illustrated by an advanced strategic behavior, which we term, Trojan horse teaching. In this type of counteractive behavior, a teacher, ostensibly helping his or her rival to learn something, really teaches the rival useless or disadvantageous things. This interaction is an object of interdisciplinary research related to the theory of human capital, the theory of agency, knowledge management, the theory of conflict, and to social and educational psychology. Economic reasons for Trojan horse teaching (THT) have been considered. It has been shown that THT can be interpreted in the context of moral hazard, which relates to attempts to influence the human capital of others by using strategic disorientation in teaching. The concepts of perfect teaching/learning technologies, and a qualitative model of competitive relations between teachers and learners, have been introduced. Results of experiential studies, including the administration of a survey concerning people's beliefs about teaching with evil intent, and a set of experiments with participation of adults and children, have been described. The studies show that the metaphoric rule to give a rod, not a fish, often declared in education, can be understood and applied in different ways, depending on a person's attitude to another person and the competition between them. The significance of strategic thinking and of the independent exploratory activity for the protection from THT is underlined. Both negative and positive effects of counteraction to development, and some possible trends, have been discussed.

Конкурентоспособность и модернизация российской экономики

Abstract: Having analyzed the present state of the Russian economy the authors come to the conclusion that the only reasonable goal of its modernization is achieving high competitive capacity of production. External and internal competitive capacity is analysed in detail basing on broad statistics as well as competitive capacity of institutions and their changes, the adaptive model of transition economy. According to the authors implementation of competitive capacity policy as a national idea should take into account long-term perspective.

What explains the product differentiation of Russian companies: competitive pressure or technological spillovers?

Abstract: The empirical literature devoted to the estimation of competitive pressure and spillovers from imports and FDI is concentrated on the effect on the labor productivity of domestic companies and is mostly silent on the introduction of new products. We focus on comparing the influence of competitive pressure and spillovers imports and FDI on the product innovation of Russian companies. Empirical estimation is based on a previously developed theoretical model. The model allows for the identification of several groups of factors that influence product innovation and product variety in domestic companies: characteristics of demand (size, new market segment), firm characteristics (employment, educational level of employees, technological gap with the market leader), competition pressure (from domestic, importing and foreign-owned firms), and technology transfer channels. We find that Russian firms perform product, rather than process or managerial, innovations. Among the former, horizontal product innovations (introduction of new product variety rather than improving quality) account for the largest share. We find that competitive pressure from the domestic companies, demand change, product and process technology transfer contribute the most to the innovation activity at the firms. Moreover, the innovation rate is higher for larger than for smaller firms. Competitive pressure is a more significant factor for product innovation than spillovers.

Dictators and their Viziers: Agency Problems in Dictatorships

Abstract: The possibility of treason by a close associate has been a nightmare of most dictators throughout history. Better informed viziers are also better able to discriminate among potential plotters, and this makes them more risky subordinates for the dictator. To avoid this, dictators - especially those which are weak and vulnerable - sacrifice the competence of their agents, hiring mediocre but loyal subordinates. One reason why democracies generally witness more talented people in the government is the dictator's inability to commit to the optimal (less than the capital) punishment for those who unsuccessfully plotted to remove him from power. Furthermore, any use of incentive schemes by a dictator is limited by the fact that rewards are conditional on dictator's own willingness to keep his promises, while punishments are conditional on dictator's own survival. We model a principal-agent game between a dictator and his (probably, few) viziers both in static and dynamic perspectives. The dynamic model allows us to focus on the succession problem the insecure dictators face.

Competitive Strategies of Countries and Firms under Export Oriented Growth

Abstract: This paper develops a framework for analysis of international competitive strategies at country and firm levels under export-oriented growth The framework accounts for technical progress and competitors' reaction It is argued that attracting foreign private investment is the least profitable strategy for Russia, while copying East Asian "catching-up" strategies is shown to be infeasible given the present state of science and technology The conditions for implementation of the strategy of leadership in R&D-intensive industries are formulated