On the mechanisms of achieving fiscal (un)sustainability: the case of Poland

Aim of this paper is to assess empirically the sustainability of budgetary policy in Poland in years 1992–2006. Our results show that structural surplus did respond to fiscal shocks in a way that stabilizes debt. However, the debt-stabilizing mechanism relied entirely on the revenue side, while the expenditures moved independently from debt and in a way that is close to non-stationarity. Given numerous bounds on increasing fiscal revenues, such an asymmetric mechanism of ensuring sustainability of Polish public finances is likely to fail if pressure on increasing public expenditures remains high over prolonged periods.     

Consumer debt attitudes: The role of gender,debt knowledge and skills

The link between financial attitudes and consumer financial market behaviour is well documented. However, little is known about the role of financial knowledge and skills—the main components of the financial literacy construct—in shaping debt attitudes. This link is especially absent from the gender perspective. This study focuses on consumer debt literacy and debt attitudes. A representative sample of adult Poles (N = 1,004) was participated in a computer‐assisted telephone interview. Latent class analysis was employed to reveal their debt attitudes, and subsequently, links between debt literacy and debt attitudes were studied with multinomial regression models. The results show that respondents in Poland can be grouped into five classes exhibiting different attitude profiles. The structure of debt attitudes is complex and differs from a simple unidimensional pro‐debt/ anti‐debt construct. Although this study did not find significant gender differences either in the conceptualization of debt attitudes or in their drivers, the results showed that in all but one class, consumer attitudes are strongly linked to either debt knowledge or debt skills or to both. Debt skills were revealed to be a particularly strong predictor of consumer debt attitudes.     

Attitudes toward protecting endangered species: The impact of perceived physical attractiveness of animals and political ideology

The current research examined how the perceived physical attractiveness (by humans) of an endangered species, the Dead Leaf Butterfly (Kallima inachus), political orientation, and political ideology impacted participants' attitudes toward supporting and protecting a species. Three experiments were conducted where the physical attractiveness of the Dead Leaf Butterfly was manipulated. Two of the experiments used a representative American sample, while one of the experiments used a Polish sample. In all three studies: (1) Participants rated the Dead Leaf Butterfly as more physically attractive when its wings were open and displayed a black apex, an orange discal band, and a deep blue base than when its wings were closed and resembled a dried leaf with dark veins; and (2) those who scored high in humanitarianism-egalitarianism provided more support for protection from harm for the Dead Leaf Butterfly compared to those who scored low in humanitarianism-egalitarianism. Only in the studies where Americans participated did we find (1) those who were politically liberal indicated more support for the Dead Leaf Butterfly regardless of physical attractiveness as compared to those who were politically conservative, and (2) those who scored low in right-wing authoritarianism provided more support for protection from harm for the Dead Leaf Butterfly compared to those who scored high in right-wing authoritarianism. The differences observed between the American and Polish samples suggest that environmental attitudes are more polarized in the United States compared to Poland. These studies advance our knowledge of how attitudes toward animals are affected by the polarization of political attitudes toward the environment and provide insight for marketers when creating marketing strategies and designing appropriate messaging.     

The heterogeneous regional effects of minimum wages in Poland

We evaluate the impact of large minimum wage hikes on employment and wage growth in Poland between 2004 and 2018. We estimate panel data models utilizing the considerable variation in wage levels, and in minimum wage bites, across 73 Polish NUTS 3 regions. We find that minimum wage hikes had a significant positive effect on wage growth and a significant negative effect on employment growth only in regions of Poland that were in the first tercile of the regional wage distribution in 2007. These effects were moderate in size, and appear to be more relevant for wages. Specifically, if the ratio of minimum wage to average wage had remained constant after 2007, by 2018, the average wages in these regions would have been 3.2% lower, while employment would have been 1.2% higher. In the remaining two-thirds of Polish regions, we find no significant effects of minimum wage hikes on average wages or on employment.     

Higher-order learning

Experimental Economics - We design a novel experiment to study how subjects update their beliefs about the beliefs of others. Three players receive sequential signals about an unknown state of the...     

Pension funds and IPO pricing. Evidence from a quasi-experiment

We exploit a quasi-experiment arising from the government-forced changes to the assets under management and investment policy of the Polish pension funds. We test whether this new regulation and its resultant demand shock on the investors' side, leads to changes in the IPO pricing and the subsequent stock's performance. We report material and a statistically significant decrease in the IPO proceeds (IPO size) in the post-treatment period equal to over 107 million PLN (34 million USD). We find no empirical evidence that the treatment had a significant effect on the first-day IPO underpricing or on the long-term underperformance. We conclude that the demand shock resulting from the pension system reform that primarily aimed at solving fiscal problems effectively eliminated the so-called ‘pension premium’ of higher IPO valuations. Thus, it indirectly impaired companies' power of raising money in the public stock market. Furthermore, we report a decrease in the average first-day IPO returns among big issuers that is consistent with the book building literature.     

In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment

Using a standard New Keynesian model, we show that moderate side effects of zero lower bound (ZLB) policy suffice for positive lower bound (PLB) policy to pay off in terms of welfare, especially when central banks fail to commit. For given side effects of the ZLB, as the shock that makes the ZLB bind becomes larger and more persistent, the dominance of PLB policy over ZLB policy becomes more likely. The findings hold for flexible and rigid economies with both fast and slow potential output growth and low and high inflation targets.     

Why does shareholder protection matter for abnormal returns after reported insider purchases and sales?

We use a unique data set of more than 240,000 reported insider transactions across 15 European countries and the USA to analyze the link between country-level shareholder protection and abnormal returns following insider trades. We show that abnormal returns after insider transactions are positively correlated with country-level shareholder protection against expropriation by corporate insiders, which supports the information-content hypothesis. Market reaction to insider purchases increases with shareholder protection because shareholder protection enhances the transparency and trustworthiness of insiders’ actions, and limits possibilities for direct profit diversion, so that more information is eventually reflected in stock prices. For insider sales, shareholder protection decreases their negative information content. We conjecture that this is due to the effect of greater transparency and trustworthiness strengthening the diversification and liquidity reasons for selling in better shareholder protection countries. We find limited support for the rent-extraction hypothesis that conjectures that shareholder protection is associated with insider trading dollar profits.     

Psychopathic traits of corporate leadership as predictors of future stock returns

This paper examines whether it is possible to forecast 1‐year‐ahead returns of individual companies based on the observed ‘psychopathic’ characteristics of their top management team. We find that language characteristic of psychopaths present in annual report narratives, questionable integrity, excessive risk‐taking, and failure to contribute to charitable undertakings tend to reduce future shareholder wealth. These findings imply that firms could benefit from incorporating psychological evaluation in their recruitment processes, especially when seeking to fill senior management posts. While the return predictability described in this paper supports the upper echelons perspective, it simultaneously challenges the notion of informationally efficient stock prices.     

HOW TRADE UNIONS ARE A ROADBLOCK TO POLAND'S ECONOMIC RENAISSANCE

The trade union movement has played an important role in the modern history of Poland. Its activism precipitated the fall of communism. Yet, with the transition to a free-market economy gaining momentum, it turned out that Solidarity embraced a vision of a new socio-economic model. Its leaders understood it as being a variant of Franco-German welfarism rather than Anglo-Saxon liberalism. Hence, as the union movement grew in power, it started to influence economic policy along interventionist lines, which not only affected labour market performance, but also the structure of the economy and the transformation processes. In consequence, Poland began to turn increasingly dirigiste. Thus the article – pointing to analogies, toutes proportions gardées, between trade union activism in the UK (1970–85) and in Poland (1990–2005) – argues that reducing the power of Polish labour organisations is a prerequisite of free-market reform and economic advancement.