Economic transition and the rise of alternative institutions

The economic transition from socialism in Russia has not resulted in the emergence of impersonal, rule-based institutions. Instead, the natural demand for institutions that protect property rights has led to the emergence of alternative, inefficient institutions such as that of cronyism – the practice of appointing personal acquaintances of the political leader to key positions. A political leader not constrained by institutions appoints cronies, as competent subordinates are more prone to switching allegiance to a potential challenger. As competence makes a bigger difference in a rule-based environment, such a leader has no interest in any institutional development. In a simple empirical exercise, using a dataset that covers the richest Russians, we find a positive and significant effect of direct connections to the personal circle of President Putin on the wealth of businessmen. The magnitude of the effect varies at different levels of rents available for redistribution and ‘network centrality of a businessman’: it is higher during the years of high oil prices, but is attenuated by the prominence of the businessman in the network.     

Measuring regional inequality: to weight or not to weight?

Measuring regional inequality: to weight or not to weight? Spatial Economic Analysis. When estimating regional inequality, many economists use inequality indices weighted by regions’ proportion of the national population. Although this approach is widespread, its adequacy has not received attention in the regional science literature. This paper proves that such an approach is conceptually inconsistent, yielding an estimate of interpersonal inequality among the whole population of the country rather than an estimate of regional inequality. Nevertheless, as a measure of interpersonal inequality, such an estimate is very rough (even misleading) and does not always have an intuitive interpretation. Moreover, population-weighted inequality indices do not meet the requirements for an adequate measure of inequality.     

Understanding Dutch visitors’ motivations to concentration camp memorials

This study examined the motivations to visit concentration camp memorial sites in the Netherlands. Nine hundred and seventy-five Dutch respondents participated in a panel survey. The data were analysed by means of an exploratory factor analysis, to yield underlying motivational factors. The findings revealed that potential visitors were motivated to visit Holocaust concentration camp memorial sites for “memory”, “gaining knowledge and awareness”, and “exclusivity”. We generalize the motivations from Dutch concentration camp memorial sites to a universal level and discuss the future stages to achieve a universally valid motivation scale for visits to concentration camp memorial sites.     

Measuring the Carbon Intensity of the South African Economy

We estimate the carbon intensity of industries, products and households in South Africa using data from a high resolution supply‐use table. Direct and indirect carbon usage is measured using multiplier methods that capture inter‐industry linkages and multi‐product supply chains. Carbon intensity is found to be high for exports but low for major employing sectors. Middle‐income households are the most carbon‐intensive consumers. These results suggest that carbon pricing policies (without border tax adjustments) would adversely affect export earnings, but should not disproportionately hurt workers or poorer households. Seven percent of emissions arise through marketing margins, implying that carbon pricing should be accompanied by supporting public policies and investments.     

On the determinants of SME capital structure in Central and Eastern Europe: A dynamic panel analysis

The purpose of this paper is to test how firm characteristics affect SMEs’ capital structure using a unique dataset of micro, small, and medium-sized firms (SMEs) in Central and Eastern Europe (CEE). We carry out a panel data analysis of 3175 SMEs from seven CEE countries during the period 2001–2005, modeling the leverage ratio as a function of firm specific characteristics hypothesized by capital structure theory. By using the cash flow as an explanatory variable, we test some of the predictions of the pecking order theory. According to this theory, firms with more available internal funds should use less external funding. We do find strong evidence in favor of the pecking order theory, given that there is a negative and significant correlation between profitability and leverage. When we control for other firm specific characteristics such as future growth opportunities, liquidity, sales growth, size and assets structure, the cash flow is found to be a strong determinant of firm leverage. We also argue that the determinants of firm leverage may be considerably different depending on firms’ size and age. The empirical results show that cash flow coefficient remains negative and statistically significant only for medium-sized firms, thus suggesting that larger firms with sufficient internal funds use less external funding than comparable smaller firms. We obtain similar results when we estimate the model by firm age; older firms demonstrate similar behavior as larger firms.     

Mackinder and the Heartland Theory in Post-Soviet Geopolitical Discourse

This paper considers the ways in which Halford Mackinder's ideas are represented and mobilized in geopolitical discourses in post-Soviet Russia. Mackinder is broadly recognized as the most important proponent of ‘classical’ geopolitics, and his teachings about the Pivot of History and Heartland are referred to in virtually all geopolitical texts. Not all of this attention however is positive. We examine the very different ways in which Mackinder is deployed in this literature, and how he is re-signified to make his ideas relevant for contemporary Russia     

THE ‘REST OF THE WORLD’ – ESTIMATING THE ECONOMIC STRUCTURE OF MISSING REGIONS IN GLOBAL MULTI-REGIONAL INPUT–OUTPUT TABLES

Incomplete data for the economic structure of numerous countries hamper the compilation of global multi-regional input–output (MRIO) tables. By themselves, most of these countries are of only limited importance for the global economy and incumbent environmental issues. Hence, in most recent global MRIO tables these countries are either roughly estimated or summarised in one rest of the world (RoW) region. Combining a wide range of countries, this RoW region may play a significant role in global economic and environmental accounts. We conceptualise the importance of RoW in several environmental footprint accounts and present algorithms to estimate the structure of RoW. The approach utilises the information of the economic structure within known parts of the MRIO table to estimate the unknown structure. Using this method, global warming potential and employment footprints remain stable irrespective of the chosen initial estimates, whereas natural land use footprints and individual product impacts vary significantly.     

Rational dictators and the killing of innocents: Data from Stalin’s archives

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.     

Collusive Market Sharing and Corruption in Procurement

This paper investigates links between corruption and collusion in procurement. A first-price multiple-object auction is administered by an agent who has legal discretion to allow for a readjustment of (all) submitted offers before the official opening. The agent may be corrupt, that is, willing to "sell" his decision in exchange for a bribe. Our main result shows that the corrupt agent's incentives to extract rents are closely linked with that of a cartel of bidders. First, collusive bidding conveys value to the agent's decision power. Second, self-interested abuse of discretion to extract rents (corruption) provides a mechanism to enforce collusion. A second result is that package bidding can facilitate collusion. We also find that with corruption, collusion is more likely in auctions where firms are small relative to the market. Our main message to auction designers, competition authorities and criminal courts is that risks of collusion and of corruption must be addressed simultaneously. Some other policy implications for the design of tender procedures are discussed.     

Dictators and oligarchs: A dynamic theory of contested property rights

In an economy with weak economic and political institutions, the major institutional choices are made strategically by oligarchs and dictators. The conventional wisdom presumes that as rent-seeking is harmful for oligarchs themselves, institutions such as property rights will emerge spontaneously. We explicitly model a dynamic game between the oligarchs and a dictator who can contain rent-seeking. The oligarchs choose either a weak dictator (who can be overthrown by an individual oligarch) or a strong dictator (who can only be replaced via a consensus of oligarchs). In equilibrium, no dictator can commit to both: (i) protecting the oligarchs' property rights from the other oligarchs and (ii) not expropriating oligarchs himself. We show that a weak dictator does not limit rent-seeking. A strong dictator does reduce rent-seeking but also expropriates individual oligarchs. We show that even though eliminating rent-seeking is Pareto optimal, weak dictators do get appointed in equilibrium and rent-seeking continues. This outcome is especially likely when economic environment is highly volatile.