How ‘exact’ are exact measures of welfare loss?

This paper examines the sensitivity of exact measures of welfare loss to changes in the assumed form of the underlying utility function.     

What explains indirect exports of goods and services in Eastern Europe and Central Asia?

This paper investigates the determinants of indirect exporting, using firm-level data for 27 countries in Eastern Europe and Central Asia. Indirect exporting depends on a combination of fixed and variable trade cost factors. We first hypothesize that firms that perceive customs, transportation, crime and legal systems as severe obstacles anticipate higher fixed costs and are more likely to export indirectly. The second hypothesis is that indirect exporting tends to be a temporary strategy. Econometric models are used to test the first hypothesis and transition matrices to test the second. In particular, probit, Heckman-probit and fractional response models are estimated to analyse the determinants of the export mode and the share of indirect exports. The results indicate that the factors that account for the fixed cost of exporting, mainly affect the decision to export indirectly (extensive margin), but some of them also affect, to a lesser extent, the amount exported indirectly (intensive margin). More specifically, factors such as customs and trade restrictions and transportation obstacles affect the extensive margin only, whereas crime affects both margins. Secondly, trade agreement membership mainly affects trade in manufactured goods, while exchange rate volatility affects positively the extensive and intensive margin of indirect exports of services. The results also indicate that firms are more likely to change their status as an indirect exporter than they are to change their status as a direct exporter or a non-exporter, which provides support to the second hypothesis.     

What are the ethics of welfare economics? And,are welfare economists utilitarians?

Four questions: (1) What is welfare economics? (2) Is it an ethical system?  (3) How do welfare economists differ from one another? And (4), how do they differ from other economic ethicists? Then utilitarianism is discussed. I was taught, and have inferred to others, that welfare economists are utilitarians. They are not. Welfare economics is an atypical form of welfare consequentialism: consequentialist in that whether an act or policy is right or wrong is a function of only its consequences—the adjective “welfare” because the only consequences that matter are the welfare (well-faring) consequences. Most welfare consequentialists are neither welfare economists nor utilitarians. And, most moral philosophers are not welfare consequentialists—neither are most normal folk.     

Do capital flows drive credit growth and consumption in Central and Eastern Europe?

Domestic credit expansion in CEE economies, fuelled in part by foreign capital inflows, helped increase household welfare before the 2008 financial crisis caused a contraction across the region. How strong are the linkages between the current account, domestic credit and consumer spending? This study compiles a quarterly dataset of domestic credit as a share of GDP for 11 CEE European Union members and isolates structural breaks in the series’ growth rates that often align with the 2008 crisis. Vector autoregressive methods, particularly impulse response functions, show that increased current-account deficits lead to increased consumption in six of the 11 countries and increased credit growth in three, and that shocks to credit growth increase consumption in six countries. Capital inflows significantly increase consumption through domestic credit in Slovenia, while the Baltics show a large share of significant effects.     

How do telecommunications reforms affect labour market arrangements? Evidence from Central and Western Europe

This paper exploits variations in the timing of telecommunications reforms across Europe to investigate the relationship between the rise of alternative work arrangements and the emergence of the Internet. We evaluate whether sectors that are technologically more dependent on information and communication technologies (ICT) experienced disproportionately larger changes in their employment outcomes after telecommunications reforms were introduced. Our main results point to a disproportionate increase in total employment, part‐time work and home‐based work among ICT‐dependent sectors after the implementation of telecommunications reforms. These results suggest that telecommunications reforms affected labour market arrangements by fostering the adoption of ICT. The results are robust to several specifications.     

Limitations of Chinese “Soft Power” in Its Population and Language Policies in Central Asia

The purpose of this study is to investigate the importance of population and language for China’s Central Asian policy through soft power resources. This article will evaluate the steps China has taken since the disintegration of the USSR to remove the perception of threat felt by the peoples of the region. We will argue that China is trying to turn its population, which is seen as the biggest threat it poses, into an advantage for itself. Moreover, it will be pointed out that China is actively using its spiritual heritage to eliminate these negative perceptions and in this regard the objectives of Confucius schools will be assessed. The study will elaborate on the fact that China is using these schools and its population as important tools in expanding its area of influence in regional and international platforms. As a result of the study, it was revealed that although the soft power of China, which is popular in academic circles and with officials, was sometimes successful in practice, there were certain limitations in its population and language policies.     

Regional clusters of innovative activity in Europe: are social capital and geographical proximity key determinants?

Finding proper policy instruments to promote productivity growth features prominently in the Europe 2020 strategy and is central in many national as well as European policy debates. In view of the increased mobility of high-skilled workers in Europe, ongoing globalization and increased interregional and international co-operation, location patterns of innovative activity may be subject to drastic changes. A proper understanding of location patterns of innovative outputs can enhance the effectiveness and efficiency of national and European placed-based innovation policies. Building on the literature on the knowledge production function, the aim of this article is to explain the observed differences in the production of innovative outputs across European regions. Our main research question is whether geographical proximity and social capital are important vehicles of knowledge transmission in Europe. Several other variables are used to control for structural differences across European regions. We find support for the hypothesis that both social capital and geographical proximity are important factors in explaining the observed differences in the production of innovative output across European regions.     

Lower coverage but stronger unions? Institutional changes and union wage premia in Central Europe

In this paper we use the national samples from the European Structure of Earnings Survey (ESES) to analyze the evolution of the wage premium of firm- and industry-level agreements in the Czech Republic, Hungary, and Poland (the CE3) around the time of their accession to the EU. We find that despite a generalized reduction in union coverage in these countries, the union wage premium after accession to the EU became bigger and statistically more significant for Poland and Hungary, particularly for industry-level agreements. We interpret these findings in terms of the institutional reforms that occurred in the CE3 between 2002 and 2006. These reforms, which were prompted by the EU Commission's requirements for EU accession, increased the social partners' ability to bargain and enforce wage agreements, and made industry-level unions more effective in guaranteeing the protections provided by labor standards. Results are less conclusive for the Czech Republic, probably due to factors that attenuate the effect of bargaining coverage upon wages, e.g. a smaller effect of institutional reforms, a greater use of mandatory extension mechanisms, the more radical firm restructuring during transition in that country.     

Back to Buchanan? Explorations of welfare and subjectivism in behavioral economics

In light of behavioral findings regarding inconsistent individual decision-making, economists have begun to re-conceptualize the notion of welfare. One prominent account is the preference purification approach (PP), which attempts to reconstruct preferences from choice data based on a normative understanding of neoclassical rationality. Using Buchanan’s notion of creative choice, this paper criticizes PP’s epistemic, ontological, and psychological assumptions. It identifies PP as a static position that assumes the satisfaction of given ‘true preferences’ as the normative standard for welfare. However, following Buchanan, choice should be understood dynamically as a process whereby preferences constantly regenerate. Accordingly, the meaning of welfare emerges from an ongoing quest for individual self-constitution. If this holds true, then rationality axioms cannot serve as a priori normative standards. Instead, creative imagination and learning processes must remain central to any understanding of welfare in economics.     

The End of ‘Central Europe’? The Rise of the Radical Right and the Contestation of Identities in Slovakia and the Visegrad Four

ABSTRACT

The article analyses the effects of the migration crisis and the parallel rise of right wing parties on national and regional identities in Slovakia and the broader subregion of the Visegrad Four. It argues that the recent right wing political discourse around migration has been reshaping the meaning of ‘Central Europe’ as a normative project and an identity shared by the V4 countries. The post-Cold War narrative of Central Europe was a story of ‘returning to the West’, which in practice meant that normative conformity with the West was a precondition of membership in key Western institution. The situation has changed visibly after the migrant crisis, as the V4 political elites have now been constructing new identities, in partial juxtaposition with Western European liberalism. These new identities favour a culturalist, conservative interpretation of the nation and reject humanitarian universalism, epitomized by the European Union’s decision to welcome the refugees. This arguably devaluates the previous notion of ‘Central Europe’ as a region that seeks to identify itself firmly with the West. Slovakia is chosen as a case study because of the recent success of the radical right in the 2016 parliamentary elections. The article concludes that although the situation of being structurally locked into the EU does not allow the V4 countries to openly challenge its main principles, the V4 political elites pursue a counter-hegemonic strategy, subverting and resignifying some of its key political notions. One should, therefore, speak not of an end of ‘Central Europe’ but rather of its evolution into a new, hybrid stage, where normative conformity and identification with the West will only be partial. The article makes use of Laclau and Mouffe’s theory of discourse and related concepts as well as insights from constructivist geopolitics literature to track articulatory practices of the regional establishments. The study relies on evidence from recent political campaigning in Slovakia as well as official Visegrad Group documents from 2015 to 2016.     

How large are wage differentials in Austria?

The OECD has repeatedly recommended that wage bargaining in Austria be decentralised to allow wage diferentials to widen. But the status quo itself is in question. While studies of aggregate industry data indicate a high degree of wage dispersion, research based on data from household surveys seems suggest that income inequality in Austria is as small as in the Scandinavian countries. This paper seeks to reconcile these opposing views. It shows that data from the household surveys underestimate the size of inter-industry wage differentials. An analysis of the structure of contractual wage rates supports the view that wage inequality is very pronounced in Austria and that a narrowing of the wage gap would lead both to an increase in productive efficiency and an increase in income equality.     

How important are school principals in the production of student achievement?

As school leaders, principals can influence student achievement in a number of ways, such as hiring and firing of teachers, monitoring instruction and maintaining student discipline, among many others. We measure the effect of individual principals on gains in math and reading achievement between grades 4 and 7 using a value‐added framework. We estimate that a one standard deviation improvement in principal quality can boost student performance by 0.289 to 0.408 standard deviations in reading and math, while the principal at the 75th percentile improves scores by 0.170 to 0.193 relative to the median principal. Our results imply that isolating the most effective principals and allocating them accordingly between schools can have a significant positive effect on reducing achievement gaps.     

How anchored are inflation expectations in EMU countries?

Anchored inflation expectations help stabilize inflation. Previous results indicate that monetary policy has been effective in breaking the link between actual and expected inflation at the euro area level. In this paper we examine whether this is also true at the national level. We define the ‘disconnect’ between inflation and inflation expectations and then proceed to examine the extent to which this disconnect exists for a number of euro area countries. Our findings suggest that for some countries, their own inflation experiences still affect national inflation expectations, and certainly more by comparison to how they affect the aggregate euro area level.     

An empirical test of the regional innovation paradox: can smart specialisation overcome the paradox in Central and Eastern Europe?

The regional innovation paradox is the greater need of lagging regions to invest in innovation and their relatively lower capacity to absorb funding compared to more advanced regions. Using data on regional public spending, industry composition and economic performance, we test empirically whether there is a differential impact of European funding on regional economic growth between Eastern and Western European regions. We conclude that the paradox is proven and consider the extent to which smart specialisation strategies may help to improve the quality of governance of regional innovation systems.     

How far from the Euro Area? Measuring convergence of inflation rates in Eastern Europe

We present a common factor framework of convergence which we implement using principal components analysis. We apply this technique to a dataset of monthly inflation rates of EMU and the Eastern European New Member Countries (NMC) over 1996–2007. In the earlier years, the NMC rates moved independently from an average of the three best performing countries over the past twelve months, while they moved somewhat closer in line with them in the later years. Looking at the sample of the EMU and NMC countries as a whole, there is evidence of a formation of convergence clubs across the two groups.     

How useful are measured expectations in estimation and simulation of a conventional small New Keynesian macro model?

This paper examines how measured expectations (survey data) affect the basic properties of a conventional small New Keynesian macro model. In particular, how do survey expectations change the role of persistence of inflation and output (i.e. coefficients of the corresponding lagged terms)? Survey data are modeled in several different ways, to facilitate an analysis of different relationships with rational expectations. The model is estimated by means of a Bayesian estimator from quarterly euro area data using both aggregated and micro level data from the ECB Survey of Professional Forecasters for 1999Q1–2012Q3. The broad finding is that the use of measured expectations produces more economically meaningful results than does the standard use of model-consistent rational expectations. In particular, survey expectations also reduce the relative weights of the lagged dependent variables in the Phillips curve and the IS curve. All this shows up in impulse responses that turn out to be quite different suggesting that measured expectations are not only proxies of rational expectations. By contrast, measured expectations are related to rational expectations with a way that may well reflect different adjustment and learning processes.     

How do middle-aged children allocate time and money transfers to their older parents in Europe?

This paper analyses the determinants of financial and time transfers from adult children to their older parents using the Survey of Health, Ageing and Retirement in Europe (SHARE). It is the first survey containing rich comparable interdisciplinary information about individuals aged 50+ from ten European countries (Austria, Denmark, France, Germany, Greece, Italy, the Netherlands, Spain, Sweden and Switzerland). The first part of the paper highlights the differences in the provision of upward private intergenerational transfers (in terms of both time and money) across the ten European countries. The second part describes the different determinants in the decision to provide time or money transfers to parents and evaluates whether these two types of assistance are substitutes or complements. Results highlight the existence of a substitution between time and money in relation to geographical distance and the existence of a weak substitution regarding the employment status of the middle-aged children.

Well-being and the Wealth of Nations: How are They to Be Defined?

Questions relating to well-being have recently returned to the limelight, notably with the publication in September 2009 of the Stiglitz-Sen-Fitoussi commission report on the measurement of economic performance and social progress. Has this commission changed the terms of the debate on what a society's wealth and well-being are? Has it proposed new paradigms? In accepting the limitations of GDP as a key indicator of well-being, has it developed a new theoretical foundation and new evaluation criteria suited to a very different situation and to very different priorities from those that prevailed at the time when GDP first became established as a measure of national economic performance? These are the main questions raised and reviewed by this paper.