Human capital externalities Evidence from the transition economy of Russia1

The paper tests for the existence of human capital externalities using a micro‐level approach: the Mincerian wage regression augmented with the average level of education in cities. To solve identification problems arising from the endogeneity of average education, the study exploits a natural experiment provided by the process of economic transition: average education at the end of communism can be seen as exogenous in respect of wages prevailing after the start of transition. Our empirical results based on the RLMS data show that a 1 percentage point increase in the share of city residents with a university degree results in an increase of wages of city residents by about 1 percent.     

Evidence of Information Spillovers in the Production of Investment Banking Services

We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on the experience of their primary market contemporaries. Moreover, while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. Our findings are consistent with investment banks implicitly bundling offerings subject to a common valuation factor to achieve more equitable internalization of information production costs and thereby preventing coordination failures in primary equity markets.     

Book reviews

Review of Industrial Organization -     

Transformation of Local Power Elites: the Institutionalization of Social Movements in St Petersburg

Starting from the elections of 1990, the renewal of St Petersburg's political elite has developed in two stages. During the first stage, activists of social movement organizations were established in the city representative body (institutionalization of social movements). In the second stage, authoritative bodies within the city Soviet were formed from the deputy corps (whose members we have identified as the elite). Having progressed from their role of challenging the institutionalized political process to participating in it, the new city political leadership at first followed the patterns of social movement behaviour. There has been, however, a shift in activity patterns and an estrangement from challenging groups. There is also evidence of a change in the concept of city authorities' functioning. The desire for a union of representative and executive power, typical of an initial introduction to politics, is giving way to recognition of the need for a division of power. But the admission of leaders of challenging social movements to city power structures has not entailed their conversion to the new city elite. Depuis les élections de 1990, le renouvellement des élites de Saint Pétersbourg s'est produit en deux étapes. Durant la première phase, les activistes des organisations de mouvements sociaux s'établirent dans le corps représentatif de la ville (l'institutionalisation des mouvements sociaux). Durant la deuxième phase, les organisations autoritaires de la ville furent formées par le corps des fondés de pouvoir (dont nous avons identifiés les membres comme étant l'élite). Ayant progressé de leur position de contestation du processus politique institutionaliséà celle de participant dans ce processus, les nouveaux dirigeants politiques de la ville suivirent, au début, le modèle de comportement du mouvement social. Il y a cependant eu un changement dans les types d'activités et un retrait des groupes contestataires. Il y a aussi des indications de changement dans les concepts de fonctionnement des autorités de la ville. Le désir d'unir les pouvoirs représentatifs et exécutifs, caractéristique d'une introduction initiale à la politique, cède la place à une reconnaissance qu'une division du pouvoir est nécessaire. Mais l'entrée des dirigeants des mouvements sociaux contestataires dans les structures du pouvoir de la ville n'a pas été suivie par leur transformation en nouvelles élites.     

Immigration, Unemployment and Pensions

This paper examines the impact of immigration on a host country with welfare state arrangements that support both the unemployed and the elderly. It is shown that low‐skilled immigration increases the unemployment rate. Furthermore, it harms the low‐skilled native population and benefits the high‐skilled natives and pensioners. Nevertheless, as under competitive labor markets, immigration generates an unambiguous gain for the native population as a whole. However, in contrast to the findings under full employment, this gain can be dampened by an expansion of the pension system.     

The role of hostile stakes in German corporate governance

This article uses clinical evidence to show how the German system of corporate control and governance is both more active and more hostile than has previously been suggested. It provides a complete breakdown of ownership and takeover defence patterns in German listed companies and finds highly fragmented (but not dispersed) ownership in non-majority controlled firms. We document how the accumulation of hostile stakes can be used to gain control of target companies given these ownership patterns. The article also suggests an important role for banks in helping predators accumulate, and avoid the disclosure of, large stakes.     

Does Motivation Matter When Assessing Trade Performance? An Analysis of Mutual Funds

We relate the performance of mutual fund trades to their motivation.A fund manager who buys stocks when there are heavy investoroutflows is likely to be motivated by the belief that the stocksare significantly undervalued. In contrast, when there are heavyinflows, the manager is likely to be motivated to work off excessliquidity by buying stocks. Our analysis reveals that managersmaking purely valuation-motivated purchases substantially beatthe market but are unable to do so when compelled to investexcess cash from investor inflows. A similar, but weaker, patternis found for stocks that are sold. (JEL G11, G29)     

The Russian tax reform

In the years 2000 and 2001 the Russian parliament passed tax laws which revolutionised the tax system. The laws on both direct and indirect taxes were substantially altered—with the result that Russia today has a modern and internationally competitive tax system which may even serve as a model for tax reform in the industrialised countries of the West. The following article describes the old tax system, its evolution and its economic effects, outlines the main features of the new system, gives examples for the positive effects it has already had and, finally, makes some propositions for further reform.