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The Basel III regulation raised the minimum capital requirements for banks. However, its implementation may not have reduced systemic risks. Academicians investigating optimal banking regulations do not have a consensus on whether to increase or decrease capital requirements. Here, we use the agent-based approach to study capital regulation and its implications on the evolution of the banking system. We chose the Russian banking system to proxy key model parameters. We find that lower capital requirements imply higher financial stability than the Basel III regime, where the regulator requires banks to have capital over 10% of its risk-weighted assets’ amount. However, the regulatory rule to merely have a non-negative capital is the simplest solution that best fits heterogeneous economies. It produces the highest ratio of capital to assets, the least number of bank bankruptcies, and the lowest demand of banks to enter the interbank market to cover liquidity problems for all systems.
The personal role of sub-national rulers is crucial for regional development in countries with weak institutions. This paper studies the impact of regional governors’ tenure in ofﬁce and their local ties on procurement performance in Russia. To identify the causal effect, we construct instruments for governor’s tenure by exploiting the regional vote share of ruling party in past parliament elections. We ﬁnd the evidence that governors who do not have pre-governing local ties in the region (outsiders) demonstrate predatory behaviour, compared to governors with local ties (insiders). Namely, governors-outsiders restrict the competition at awarding stage signiﬁcantly more than governors-insiders. Moreover, for governors-outsiders this restriction becomes stronger with tenure in ofﬁce, while governors-insiders do not demonstrate such negative tenure effect. We argue that this restriction of competition by governors-outsiders cannot be explained by the intention of better contracts execution: the delays in execution and the probability of contract termination either increase or keep stable with tenure for governors-outsiders and these outcomes decrease with tenure for governors-insiders.
What characteristics of firms give them the confidence to invest in settings rife with expropriation by local officials? Empirically, firms in the developing world often face the threat of expropriation from local agents of the state rather than a centralized autocrat. Because policing local officials is costly, the state cannot easily credibly commit to doing so. This has negative consequences for investment. We argue that one solution is to allow firms to approach the state directly to ask for intervention. Not all firms are equally able to successfully get the attention of the state, however, so this mechanism only works for some. We develop an argument about the firm-level characteristics – large-scale employment, political connections, foreign ownership, and business association membership – that should make the central state more attentive to calls for help. Because firm with these characteristics are more likely to secure intervention against predatory bureaucrats, the latter are less likely to try to expropriate them. These firms’ investment decisions should be less sensitive to local expropriation than other firms. We test this argument using data on cases of decentralized expropriation across Russia’s regions and firm-level data from a cross-regional, large scale survey of Russian firms.
The moderate extent to which many competition authorities (CAs) worldwide apply concepts, tools and techniques developed by modern economic theory remains a puzzle for both academics and authorities themselves. In the model of reputation-maximizing CA developed by Katsoulacos (2019), in which decisions are subject to judicial review, the choice of the legal standard (LS) in a particular case is explained by the cost of litigation and anticipation of the LS adopted by the appeal courts. In this article, we empirically test, using a dataset of decisions reached by the Russian CA, the relation between the LS adopted and the annulment rate of appealed decisions and show that this is consistent with the assumptions of reputation-maximization choice. The implications of the analysis allow us to conclude that, first, the model of rational reputation-maximizing authority can explain the extent of economics utilized by CAs; second, the role that courts play in the administrative (in contrast to prosecutorial) model of competition enforcement is higher than is widely believed.
Trends and Issues in Doctoral Education: A Global Perspective serves two simple yet complex purposes—to understand the current realities in doctoral education in key countries and to examine current and proposed reforms. Fourteen country case studies and one regional case study present a range of global practices and focus on key issues facing doctoral education worldwide. Together with the literature review and the analysis of changes in doctoral education around the world over the past three decades by Maresi Nerad, the case studies provide the basis for this concluding discussion of the broader issues and themes suggested by the previous chapters.
On the eve of transition in the late 1980’s the perspectives of the economic development for most economies of the Soviet Bloc in Central, Southern and Eastern Europe seemed optimistic. They had been already industrialized; their labor force was relatively healthy and educated. Being technological backwards in many industries these countries had lots of opportunities for catch up, extending international trade and allowing the inflow of foreign direct investments. However, after two decades of transition these expectations did not materialize to the fullest extent. On the one hand, by 2008, the last year before the global financial crisis, GDP per capita of all post-transition economies grew, except Moldova and Ukraine. On the other hand, six of the twenty economies of the region increased the lag behind the twelve advanced West European economies (EU12). A reasonable question in this context is to what extent is this backward take-off caused by the command-economy past or some myopic country-specific issues of the post-transition development?
With the growth accounting framework this study confirms the leading role of total factor productivity in late transition at the aggregate level. Delving into industry levels the literature shows that, at least, for some East European economies the key driver of TFP growth in most CEE economies was manufacturing. This is not surprising, because manufacturing was also one of the most technologically backward sectors of the economy in early transition with multiple opportunities for improvements through adaptation of better practices and ways of production from the West. So, catching up in technologies seems to be the most essential driver of the post transition growth.
At the same time, this exposition of the story of growth in transition critically depends on data quality, essential for measurement of economic growth and productivity. That is why it is important also to take into account that transition in economies of the region coincided with the transition in state statistics from the Material Product System of national accounts to the United Nations System of National Accounts. All this is important for understanding of the limitations of existing data and suggested interpretations, especially in the comparative perspective with developed economies.
The transition from a short-term cost-plus tariff regulation to either a long-term rate-of-return or long-term price cap regulation in Russia started in 2009 and was completed in 2012, causing substantial changes in investment over the course of the reform. We estimate panel data of 46 Russian electricity distribution entities with a dynamic investment model using the system generalized method of moments and addressing potential endogeneity issues. We show that, despite the noncredible regulatory policy, the transition from short-to long-term regulation had a positive and significant effect on the investment rate of regulated entities. The specific long-term regulation design applied in Russia from 2008 to 2017 (either rate-of-return or price cap) had no effect on the investment rate. These results are important for the introduction of changes in regulatory frameworks in developing countries.
This paper analyses the link between the efficiency of regional higher education systems and the rates of regional economic development between 2012 and 2015 in Russia. The efficiency scores are calculated at the institutional level using Two-stage Semi-parametric data envelopment analysis. Then, the scores are aggregated at the regional level. We formulate an economic growth model that considers the efficiency of regional higher education systems as one of the explanatory variables. As an econometric method, we employ a robust GMM estimator. The findings highlight a positive, and statistically significant effect of higher education institutions efficiency on the regional economic growth. We also found negative spillover effects.
Since the 1980s, the share of emerging markets in a global economy has been systematically increasing. This results from faster economic growth of this group as compared to advanced economies. China and India and a few other Asian countries have been the main contributors to this faster growth. In the 1980s and 1990s, emerging markets suffered from several rounds of macroeconomic and financial crises, a result of unsustainable policies. In the first two decades of the twenty-first century their macroeconomic performance markedly improved. However, macroeconomic instability did not disappear completely: emerging markets suffered from both the spillover effects of the global financial crisis of 2008–2009 and commodity price decline in 2014–2015. The crises in Argentina and Turkey in 2018–2019 also suggest that unsustainable policies are still the problem. Looking ahead, emerging markets can suffer from the recent wave of trade and investment protectionism, slower growth in advanced economies, and normalization of their monetary policies.
The present article follows two objectives. First, to apply a recently developed spatial interaction model and discuss its power in explaining social developments. Second, to obtain information on internal migration'sdeterminants in Russia by taking into account that its eastern and western regions differ in many respects. Two alternative panel specifications are considered, labelled “spatial interaction specification with exogenous spatial lags” and “gravity-type specification with network effects”. While both specifications are designed to capture the impacts of neighbouring regions in migration dynamics, they differ with respect to the implementation of fixed effects. It is argued that neighbourhood impacts manifest themselves either as spillover effects, which amplify a variable's impact, or competition effects, which attenuate them. The results show that variables indeed differ from each other in these respects, demonstrating how migration patterns are subject to events beyond the directly involved regions, and that these are furthermore influenced by the distances between regions. In addition, the results provide further evidence that migration determinants differ for Eastern and Western Russia.
Noncooperative discounted stochastic n-person games are considered; the payoffs at each step are represented by trapezoidal fuzzy numbers. The existence of stationary Nash equilibrium strategies is proved.
Background: In recent years, Russia has seen a decline in alcohol consumption per capita (APC) accompanied by a significant reduction in the share of spirits in total APC. Our aim was to investigate regional variation in alcohol consumption and the association between the share of spirits in APC, and recorded and unrecorded APC.
Methods: Data on recorded APC were taken from Rosstat. Our estimates on unrecorded APC were based on the guidelines of the Ministry of Health of the Russian Federation and data on alcoholic psychoses and mortality from external causes (546 observations for 78 regions from 2010 to 2016). We estimated fixed effects models with the dependent variables of recorded and unrecorded APC of the population 15+. Independent variables included share of spirits in recorded APC, vodka prices, average income, duration of alcohol sales hours, and others.
Results: During the 2010–2016 period, recorded APC varied by regions from 1.1 to 17.8 litres; unrecorded – from almost zero to 21 litres; the share of spirits in recorded APC – from 20.6% to 89.3%. A 1% increase in the share of spirits was attributed to a 0.2% increase in recorded APC and to a 2.1% increase in unrecorded APC. Various factors were related to regional APC: vodka prices (with elasticity coefficient −0.46 for recorded and 1.67 for unrecorded APC); income (0.23 for recorded and −2.23 for unrecorded APC); duration of sales hours (−0.9 for unrecorded APC); and shares of working age and of urban population.
Conclusion: Taking into account a strong correlation between the share of spirits in the recorded APC and consumption of recorded and unrecorded APC, the price of spirits should be increased. In the regions with pronounced preference for spirits, stricter availability restrictions on the alcohol sales are needed, along with strict control of shadow markets.
This paper examines the factors of interregional migration in Russia for people of different ages. Basing on 2010 census data, we estimate negative binomial regression models for total migration flows and migration flows disaggregated by age with socio-economic, demographic, geographical factors of the regions of departure and arrival. The analysis showed that only two flows: migrants of economically active age and families react correctly (from an economic point of view) to the variables of the labor market, incomes, the economic situation of the regions of departure and arrival, and housing indicators. Pensioners tend to minimize the costs of living, moving to poorer regions with high unemployment, where the cost of living is cheaper, and to regions with a favorable climate, thus saving on housing maintenance and having opportunity for subsistence farming. Students and young people are rational in their relocation in a different way, they are motivated by the possibility of building up human capital and opportunities for starting a career, while other factors are insignificant for them. The study also confirmed the hypothesis that in Russia, as in other countries, migrant flows of different ages move in opposite directions.
We investigate alcohol consumption as one of the main factors contributing to variation in the gender gap in life expectancy in the Russian regions. We consider the socioeconomic indicators and mortality coefficients that enable us to capture the causes of death related primarily to alcohol abuse and smoking. We assume that macroeconomic situation, coupled with alcohol consumption are substantial determinants of the gender gap in life expectancy in the Russian regions. A panel data analysis confirms that alcohol consumption has a significant influence on the gender gap in life expectancy and reduces the life expectancy of men first and foremost, as they are more inclined toward unhealthy behaviours. We have determined that employment and income support policies should be conducted in conjunction with the anti-alcohol policy. Social policy aimed at reducing alcohol consumption should be vigorously reinforced during an economic recovery.
The debate on the increasing income and wealth inequalities in the USA and some other advanced economies often disregards the opposite trend, i.e. decreasing income inequalities between individuals throughout the entire world. The purpose of this chapter is to examine the potential trade-off between both trends and the role of globalisation in such a trade-off. Another important question relates to the impact of this trade-off on global governance. On the one hand, catch-up growth in emerging-market economies and the resulting decrease in global inequality can help reduce the economic and social sources of political conflicts and tensions between countries and enable their cooperation on various issues such as trade, environment, climate change, health, fighting terrorism, managing migration and many others. On the other hand, growing income inequalities within advanced economies can undermine the existing global political and economic order and boost protectionism and nationalistic egoism in many areas.
In December 2019 the Basel Committee has launched the consolidated Basel framework. The framework inherits the Basel II internal ratings-based (IRB) approach for the credit risk with mostly no changes. The absence of the material methodological changes is unexpected given the fact that the key shortcomings of the IRB approach stay unresolved. The paper objective is therefore to list its earlier discussed shortcomings and to address the new ones. Latter include the unbalanced treatment of PD and LGD parameters, as well as methodological inconsistency in expected and unexpected loss treatment.
We study the world largest credit risk losses from the year of 1972 when the predecessor of the Basel Committee on Banking Supervision was established. By choosing a round threshold of current USD 100m equivalent of loss amount and the entity total assets in excess of current USD 500m as of the loss announcement date, we collected the dataset of 56 cases with the total loss of the current USD 700bn (or ca. 900 constant 2018 USD bn) which occurred during the last half of a century. The two most unexpected findings are the following. First, we verified the announced loss amounts by analysis of stock quotes dynamics around the loss announcement dates. Thus we were able to trace three cases where announced by mass media losses may seem to have been exaggerated. Second, there is a series of events when there was a disclosure combination of credit risk loss and operational one. It seems the latter might have been used to partially cover the former.