Showing papers by "National Research University – Higher School of Economics published in 2006"

The evolution of business-state interaction in Russia: From State Capture to Business Capture

Abstract: This article discusses two basic strategies of Russian companies—isolation from, and close cooperation with the state. The author analyses several ways in which companies realise these strategies, drawing analogies with the ‘exit’ and ‘voice’ strategies suggested by A. Hirschman. It is shown that under the conditions of a weak state these strategies lead either to an expansion of the shadow economy or to ‘state capture’. Both the privatisation of the state and the lack of its privatisation result in budget crises as well as drastic social and political shocks, leading to calls for a ‘strong hand’ in the business community itself. However, as there is little political competition and the mechanisms of democratic control are weak, state consolidation takes place as a bureaucratic consolidation accompanied by new opportunities for informal ‘business capture’ by the authorities. Nevertheless, the high degree of openness of the economy and the remaining heterogeneity of political actors provide busine...

News media and power in Russia

Abstract: The end of communist rule in the Soviet Union brought with it a brave new world of media and commerce. Formerly state-owned enterprises were transformed, often through private ownership, and new corporations sprung up overnight to take advantage of the new atmosphere of freedom. Until now, most research on media and news production in Russia has focused on the scope of government control and comparisons with the communist era. However, extra-governmental controls and the challenges of operating in a newly capitalist environment have been just as important – if not more so – in the formation of the new media climate. Filling the gap in the literature, this book examines the various agents who ‘make’ the news, and discusses the fierce struggle among the various agents of power involved. Drawing on existing theories and scholarship, the book provides a wealth of detail on the actual daily practices of news production in Russia. Original research is combined with compelling first-hand accounts of news production and dissemination to provide an incisive look at the issues and power structures Russian journalists face on a daily basis.

Fiscal Federalism in Rentier Regions: Evidence from Russia

Abstract: When does sub-national fiscal autonomy prompt regional growth and recovery and, under what conditions, does it have adverse effects? We argue that unearned income streams, particularly in the form of revenues from natural resource production or from budgetary transfers from the central government, transform regions dependent on these income sources into rentier regions. Governments in these regions can use local control over revenues and expenditures to shelter certain firms, i.e., natural resource producers or loss-making enterprises, from market forces. Using fiscal data from 80 Russian regions from 1996 to 1999, we test this hypothesis in both cross-sectional and panel specifications. Our results indicate that tax retention, which is a proxy for fiscal autonomy, has had a positive effect on regional reform and investment since the break-up of the Soviet Union. However, we also find that this effect decreases as rentable income streams to regions increase.

Towards concise representation for taxonomies of epistemic communities

Abstract: We present an application of formal concept analysis aimed at representing a meaningful structure of knowledge communities in the form of a lattice-based taxonomy The taxonomy groups together agents (community members) who interact and/or develop a set of notions--ie cognitive properties of group members In the absence of appropriate constraints on how it is built, a knowledge community taxonomy is in danger of becoming extremely complex, and thus difficult to comprehend We consider two approaches to building a concise representation that respects the underlying structural relationships, while hiding uninteresting and/or superfluous information The first is a pruning strategy that is based on the notion of concept stability, and the second is a representational improvement based on nested line diagrams We illustrate the method with a small sample of a community of embryologists

Why Not in Your Backyard? On the Location and Size of a Public Facility

Abstract: In this paper, we tackle the issue of locating a public facility which provides a public good in a closed and populated territory. This facility generates differentiated benefits to neighborhoods depending on their distance from it. In the case of a Nimby facility, the smaller is the distance, the lower is the individual benefit. The opposite is true in the case of an anti-Nimby facility. We first characterize the optimal location which would be chosen by a social planner. Then we introduce a common-agency lobbying game, where agents attempt to influence the location and provision decisions by the government. Some interesting results arise in the case where only a subset of neighborhoods lobby. First, the solution of the lobbying game can replicate the optimal solution. Second, under-provision and over-provision of the public good may be obtained both in the Nimby and the anti-Nimby cases. The provision outcome depends on the presence of either a congestion effect or an agglomeration effect. Third, some non-lobbying neighborhoods may be better off than in the case where all neighborhoods lobby, which raises the possibility of free-riding at the lobbying stage.

Dynamic Copula Modelling for Value at Risk

Abstract: This paper proposes dynamic copula and marginals functions to model the joint distribution of risk factor returns affecting portfolios profit and loss distribution over a specified holding period. By using copulas, we can separate the marginal distributions from the dependence structure and estimate portfolio Value-at-Risk, assuming for the risk factors a multivariate distribution that can be different from the conditional normal one. Moreover, we consider marginal functions able to model higher moments than the second, as in the normal. This enables us to better understand why VaR estimates are too aggressive or too conservative. We apply this methodology to estimate the 95%, 99% VaR by using Monte-Carlo simulation, for portfolios made of the SP500 stock index, the Dax Index and the Nikkei225 Index. We use the initial part of the sample to estimate the models, and the the remaining part to compare the out-of-sample performances of the different approaches, using various back-testing techniques.

A dictionary of nonprofit terms and concepts

Abstract: Preface Acknowledgments Lexicographic Note Introduction: Defining Nonprofit/Voluntary Sector Terms and Concepts Dictionary of Terms and Concepts Bibliography

Copulae and Operational Risks

Abstract: The management of Operational Risks has always been difficult due to the high number of variables to work with and their complex multivariate distribution. A Copula is a statistic tool which has been recently used in finance and engineering to build flexible joint distributions in order to model a high number of variables. The goal of this paper is to propose its use to model Operational Risks, by showing its benefits with an empirical example.

Dictators, Repression and the Median Citizen: An 'Eliminations Model' of Stalin's Terror (Data from the NKVD Archives)

Abstract: We posit a rational choice model of dictatorship to explain the tendency of dictators to repress innocent citizens This model demonstrates that, when the quality of information about regime enemies is low, a rational dictator will knowingly kill and imprison citizens who are not real enemies We use the formerly secret Stalin archives to test this proposition against the stylized facts of Stalin’s three major repressions

Balancing State, Market and Social Justice: Russian Experiences and Lessons to Learn

Abstract: This article deals with the relations in the triangle state–society–business in modern Russia. It is shown against Russian historical background, that the absolutist state in this country could never be identified with the society and these relations were shaped under its strong domination. The ethics of rule-following characteristic for market economy in general did not develop in Russia. The breakdown of communist Russia and market reforms proceeding since 1992 did not change this situation significantly. The period of political alliance between big business and government was followed by restoration of state dominance in somewhat modified forms. Both periods were characterized by corruption, which contrary to Putin’s slogans, increases in Russia. In the article I show the evolution of Putin administration’s policy which changed from emphasizing and improving legal institutions to selective use of legal norms depending on personal loyalty. Main forms of state exploitation of Russian business are described. The conclusion is that Russian experience of balancing state and market should be called negative.

”Some like it hot”: On the semantics of temperature adjectives in Russian and Swedish

Abstract: Abstract The paper focuses on the main temperature adjectives in Russian and Swedish, which are analysed and compared to each other on the basis of their combinability with nouns. Each of the two linguistic systems is strongly rooted in human experience of temperature. First, temperature attributes are chosen relatively to several temperature values or parameters, that are important and salient for humans and have only very approximate physical correlates. Second, physical objects differ considerably as to whether their temperature properties are ever registered by humans, or considered as important and worth mentioning, primarily depending on their function in the human life.

Did the Soviets Collude? A Statistical Analysis of Championship Chess 1940-64

Abstract: We expand the set of outcomes considered by the tournament literature to include draws and use games from post-war chess tournaments to see whether strategic behavior is important in such scenarios. In particular, we examine whether players from the former Soviet Union acted as a cartel in international tournaments - intentionally drawing against one another in order to focus effort on non-Soviet opponents - to maximize the chance of some Soviet winning. Using data from international qualifying tournaments as well as USSR national tournaments, we estimate models to test for collusion. Our results are consistent with Soviet draw-collusion and inconsistent with Soviet competition. Simulations of the period's five premier international competitions (the FIDE Candidates tournaments) suggest that the observed Soviet sweep was a 75%-probability event under collusion but only a 25%-probability event had the Soviet players not colluded.

The World System Urbanization Dynamics: A Quantitative Analysis

Abstract: One can single out in a rather distinct way three periods of relatively fast world urban population growth: (A1) the second half of the 4th millennium BCE – the first half of the 3rd millennium BCE, (A2) the 1st millennium BCE and (A3) the 19th-21st centuries CE. In addition to this, one can see two periods of relatively slow growth of the world urban population: (B1) the mid 3rd millennium BCE – the late 2nd millennium BCE and (B2) the 1st-18th centuries CE. Two other periods turn out to be essentially close to these epochs: Period (B0) immediately preceding the mid 4th millennium (when the world urban population did not grow simply because the cities had not appeared yet and no cities existed on the Earth), and Period (B3) that is expected to begin in the 22nd century, when, according to forecasts, the world urban population will stop again to grow in any significant way (in connection with the World System urbanization reaching the saturation level and the stabilization of the world population). The detected world urbanization dynamics correlates rather well with the dynamics of the World System political organization. Similar phase transitions appear to be observed with respect to the world literacy macrodynamics. Indeed, during Period A1 we observe the appearance of the first literate people whose proportion had reached the level of decimals of one per cent by the end of this period and fluctuated at this level during Period В1. During Period А2. world literacy grew by an order of magnitude and reached the level of several per cent of the total population of the world, it fluctuated at this level during Period B2 till the late 18th century when Period A3 started; during this period the world literacy has reached the level of dozens per cent, and by the beginning of Period B3 (presumably in the 22nd century) it is likely to stabilize at the 100% level. In fact, the above mentioned phase transitions can be regarded as different aspects of a series of unified phase transitions: Phase Transition A1 from medium complexity agrarian societies to complex agrarian ones, Phase Transition A2 from complex agrarian societies to supercomplex ones, and, finally, Phase Transition A3 from supercomplex agrarian societies to postindustrial ones (within this perspective, the period of industrial societies turns out to be a period of phase transition В2-В3).

Coherent algebras and noncommutative projective lines

Abstract: A well-known conjecture says that every one-relator group is coherent. We state and partly prove an analogous statement for graded associative algebras. In particular, we show that every Gorenstein algebra $A$ of global dimension 2 is graded coherent. This allows us to define a noncommutative analogue of the projective line $\PP^1$ as a noncommutative scheme based on the coherent noncommutative spectrum $\cohp A$ of such an algebra $A$, that is, the category of coherent $A$-modules modulo the torsion ones. This category is always abelian Ext-finite hereditary with Serre duality, like the category of coherent sheaves on $\PP^1$. In this way, we obtain a sequence $\PP^1_n $ ($n\ge 2$) of pairwise non-isomorphic noncommutative schemes which generalize the scheme $\PP^1 = \PP^1_2$.

Can Oil Prices Explain the Real Appreciation of the Russian Ruble in 1998-2005?

Abstract: The paper investigates whether the 80% real appreciation of the Russian ruble in 1998-2005 can be explained by the increase in oil revenues in a calibrated general equilibrium model. It is shown that the oil prices alone cannot account for the appreciation with forward-looking permanent-income consumers, unless the oil price increase is assumed permanent. Accounting for the increase in the volume of oil exports, however, can help, provided that the increase is assumed to be permanent.

The Urbanization and Political Development of the World System: A Comparative Quantitative Analysis

Abstract: Because the relationship between urbanization and the evolution of statehood is a rather voluminous subject, we shall only consider a few aspects of this relationship . First of all, it appears necessary to note that the very formation of the state is connected with urbanization directly, or indirectly . Among factors that contribute to both state formation and urbanization the following, appear to have been especially important: а) population growth; b) development of trade; and c) growth of wealth. It also appears necessary to note that the "urban" way of the early state formation was one of the most important ones. Urbanization was connected with the concentration of people as a re-sult of the compulsory merger of a few settlements due, usually, to pressure from a military threat.

Coalition Formation in Political Games

Abstract: We study the formation of a ruling coalition in political environments. Each individual is endowed with a level of political power. The ruling coalition consists of a subset of the individuals in the society and decides the distribution of resources. A ruling coalition needs to contain enough powerful members to win against any alternative coalition that may challenge it, and it needs to be self-enforcing, in the sense that none of its sub-coalitions should be able to secede and become the new ruling coalition. We first present an axiomatic approach that captures these notions and determines a (generically) unique ruling coalition. We then construct a simple dynamic game that encompasses these ideas and prove that the sequentially weakly dominant equilibria (and the Markovian trembling hand perfect equilibria) of this game coincide with the set of ruling coalitions of the axiomatic approach. We also show the equivalence of these notions to the core of a related non-transferable utility cooperative game. In all cases, the nature of the ruling coalition is determined by the power constraint, which requires that the ruling coalition be powerful enough, and by the enforcement constraint, which imposes that no sub-coalition of the ruling coalition that commands a majority is self-enforcing. The key insight that emerges from this characterization is that the coalition is made self-enforcing precisely by the failure of its winning sub-coalitions to be self-enforcing. This is most simply illustrated by the following simple finding: with a simple majority rule, while three-person (or larger) coalitions can be self-enforcing, two-person coalitions are generically not self-enforcing. Therefore, the reasoning in this paper suggests that three-person juntas or councils should be more common than two-person ones. In addition, we provide conditions under which the grand coalition will be the ruling coalition and conditions under which the most powerful individuals will not be included in the ruling coalition. We also use this framework to discuss endogenous party formation.

Forced labour in the Russian Federation today: irregular migration and trafficking in human beings

Abstract: Russia faces complex challenges as both a sender and destination country of trafficked persons. Migration management has presented obvious difficulties, as new regulations are put in place for access of individuals from the former Soviet Union countries to the Russian labour market. As in other industrialized countries with major demand for seasonal and temporary labour, there is a risk that unprotected migrant workers can be subject to coercive labour conditions unless adequate safeguards are in place.

Lobbying at the Local Level: Social Assets in Russian Firms

Abstract: In the planned economy firms were made responsible for providing their workers with so-cial services, such as housing, day care and medical care. In the transforming Russia of the 1990s, social assets were to be transferred from industrial enterprises to the public sector. The law on divestment provided little more than general principles. Thus, for a period of several years, property rights concerning a major part of social assets, most notably hous-ing, were not properly defined, as transfer decisions were largely left to the local level players. Strikingly, the time when assets were divested varied considerably across firms. In this paper we utilize recent survey data from 404 medium and large industrial enterprises in 40 Russian regions and apply survival data analysis to explore the determinants of dives-titure timing. Our results show that in municipalities with higher shares of own revenues in their budget and thus weaker fiscal incentives, firms used their social assets as leverage to extract budget assistance and other forms of preferential treatment from local authorities. We also find evidence that less competitive firms were using social assets to cushion them-selves from product market competition. At the same time, we do not find any role for lo-cal labor market conditions in the divestment process.

Russian Constitutionalism : Historical and Contemporary Development

Abstract: 1. Constitutionalism as a Theoretical Problem in Transitional Societies 2. Proto-Constitutionalism in Russian Traditional Society 3. Constitutional Programme of Russian Liberalism and its Implementation in the Period of Transition from Monarchy to Republic 4. Nominal Constitutionalism of the Soviet Dictatorship 5. Contemporary Model of Russian Constitutionalism in Comparative Perspective. Conclusion

Fiscal Challenges Facing the EU New Member States

Abstract: This paper provides an analysis of the fiscal challenges faced by the eight transition economies, which joined the European Union (EU) in May 2004. More than half of them run excessive fiscal deficits being partly a legacy of an early transition period, partly – a consequence of additional accession-related costs. In addition, the long-term fiscal outlook, connected with the consequences of population ageing, is dramatic. On the other hand, the perspective of Economic and Monetary Union entry should provide the new member states with a strong incentive to reduce their deficits now because waiting (and postponing both fiscal adjustment and the adoption of the euro) will only result in higher cumulative fiscal costs.

Wage Inequality in Russia (1994–2003)

Abstract: The paper documents the changes in the size of the wage distribution in Russia over the period 1994–2003. Developments in wage inequality varied a lot by sub-periods: overall wage inequality stayed stable in 1994–1996, then it jumped following the 1998 crisis and remained at higher levels for three years. In 2002 the trend reversed again and in the course of a single year wage inequality fell back to the level of the mid-1990s. We find that evolution wage inequality was largely driven by changes in the upper end of the wage distribution. Decomposition of wage inequality by population sub-groups shows that inequality has been higher for men, younger and low-educated workers, and rural inhabitants. The structure of inequality did not change much over the period from 1994 to 2003. Demographic variables (mainly gender and region) explain the largest proportion of wage dispersion (over 40% of the explained variation and 15% of total variation). Nearly equivalent is the contribution of firm characteristics with industry affiliation of employer playing the leading role. Our results show that returns to education continued to rise at all percentiles of the wage distribution converging at the level of about 8–9% of wage increase for an additional year of schooling.

The inflationary consequences of real exchange rate targeting via accumulation of reserves

Abstract: The paper investigates the ability of monetary authorities to keep the real exchange rate undervalued over the long run by implementing a policy of accumulating foreign exchange reserves. We consider a model of a three-sector, small, open economy, where the central bank continuously purchases foreign currency reserves and compare them to Russian and Chinese economies in recent years. Both countries appear to pursue reserve accumulation policies. We find a clear trade-off between the steady state levels of the real exchange rate and inflation. After calibration, the model predicts an 8.5% real undervaluation of the Russian currency and a 13.7% undervaluation of the Chinese currency. Predicted inflation is found to match observed levels.

Innovative Actions and Innovation (In)capabilities of Russian Industrial Companies — An Extension of a Quasi-longitudinal Study

Abstract: This article reports the results of an extension of a quasi-longitudinal survey among top corporate executives in Russian industry, presenting a snapshot of current innovation actions and innovation capabilities of Russian enterprises. Through comparison between the situations in 2002 and 2004, changes in the business and management of Russian companies in recent years are examined. The intensity of innovation significantly increased in 2003–04, but the resources for innovation at Russian CEOs' disposal became even more limited than before as the traditional lack of finance coincided with a growing shortage of qualified labour. Moreover, the intensity of past innovations has little impact on further successes as there is minimal accumulation of routines of innovative action within companies. Further accumulation of innovative capabilities by Russian industrial enterprises will be a rather slow and painful process. The successes in innovative development of some export-oriented ‘national champions’ will be...

Non-Wage Benefits, Costs of Turnover, and Labor Attachment: Evidence from Russian Firms

Abstract: Just as in established market economies, many Russian firms provide non-wage benefits such as housing, medical care or day care to their employees. Interpreting this as a strategic choice of firms in an imperfect labor market, this paper examines unique survey data for 404 large and medium-size industrial establishments from 40 Russian regions. We find strong evidence that Russian industrial firms use social services to reduce the costs of labor turnover in the face of tight labor markets. The strongest effect is observed for blue-collar workers. We also find that the share of non-monetary compensation decreases with improved access to local social services.

Foreign Currency Pricing

Abstract: A special case of dollarization is analyzed: quotation of prices in dollars. The proposed explanation is price stickiness: when price adjustment is costly, firms prefer to fix their prices in a stable foreign currency in order to avoid frequent price changes.The proposed model demonstrates that there are often two Nash equilibria in an economy populated by symmetric firms: an equilibrium with uniform domestic currency pricing and one with uniform dollar pricing. Hence, foreign currency pricing may exhibit hysteresis. The model also demonstrates that the degree of competition in the economy is important in determining the pricing currency.

Russia: Political and Institutional Determinants of Economic Reforms

Abstract: The purpose of this chapter is to analyze the course, determinants and political economy of economic reforms in Russia conducted in the period 1985–2005. The year 1985 can be considered an important turning point in Soviet and Russian history, marked as it was by the election of Mikhail Gorbachev to the position of General Secretary of the Communist Party of the Soviet Union (CPSU) and (de facto) leader of the USSR. This nomination brought an end to two decades of political consolidation of the Communist regime connected with the name of General Secretary Leonid Brezhnev and his short-lived successors (Yurii Andropov and Konstantin Chernenko), often referred to ex post as ‘the stagnation period’ (vremya zastoya). Gorbachev initiated a series of important political and (to a lesser extent) economic reforms, which led eventually to the collapse of the communist regime and the disintegration of the Soviet empire in 1991. Thus, 1991 must be seen as another dramatic turning point in Russia’s contemporary history. From the end of 1991 onwards political and economic reforms have been carried out by the new Russian state that emerged after the disintegration of the USSR.