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Latest Issue № 4, 2020



Archive / 2019

№ 3

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DEMOGRAPHIC POLICY

pdfRostislav Kapeliushnikov
8-53
 

Abstract

Today most countries are experiencing fast population aging, which is going to last the entire 21st century. Its economic effects are multifarious and will in large part shape further dynamics of the global economy not only in the short or medium but also in the long run. Unfortunately, Russian economists and politicians are hardly aware of how diverse economic consequences of population aging are since their attention is focused on its narrow, purely pragmatic, dimensions (such as the raising of pension age, the deficit of the Russian Pension Fund etc.). The paper provides a broad overview of major economic effects of population aging from both theoretical and empirical perspectives. It examines the place of aging in the process of demographic transition, and forecasts its expected trends in subsequent decades for a few countries including Russia. Next, it critically reviews different versions of dependency/support ratios: demographic and economic; chronological and prospective; non-adjusted and adjusted for differences by age in labor income and per capita consumption. Special attention is paid to a basic scheme of relationships between key demographic and macroeconomic variables that highlights how population aging might affect employment, labor productivity, capital intensity, wages, returns to capital, investment and savings. Some additional effects are also analyzed, such as prospective changes in labor supply, human capital accumulation, technological change, real interest, and inflation. A general conclusion is that population aging is not per se a fundamental economic challenge that should endanger society’s welfare. Real dangers arise from existing institutions providing support for the elderly, which were established in the early to mid 20th century under completely different demographic and economic conditions.

Keywords: demography, population aging, dependency ratios, consumption, saving, labor market, pension systems.

JEL: H55, J10, J11, J14, J21, J26.

Rostislav I. Kapeliushnikov, Corresponding Member of the RAS. Primakov National Research Institute of World Economy and International Relations, RAS (23, Profsoyuznaya ul., Moscow, 117997, Russian Fede ration); Centre for Labour Market Studies, National Research University Higher School of Economics (4/2, Slavyanskaya pl., Moscow, 103074, Russian Federation).

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SOCIAL POLICY

pdfTatiana Maleva, Elena Grishina
54-69
 

Abstract

The article analyzes the reasons for the lack of a significant impact on poverty of the existing social assistance system and shows the need to improve the latter for families with children. The paper reveals that households with children have significant risks of poverty and constitute more than 70% of all poor households. The article notes that for a sustained increase in population income and poverty reduction, it is necessary to ensure accelerated economic growth as well as growth in real wages, pensions and social benefits. At the same time, effective tools of social protection are needed to bring certain groups of people with a significant poverty depth out of poverty. The article argues that the existing family and child allowances reduce the poverty of families with children only slightly. This is due to several reasons. Firstly, a significant part of benefits to families with children is paid without means testing. Secondly, a considerable proportion of families with children receiving targeted social benefits are not poor. Thirdly, a significant proportion of poor families with children are not covered by social assistance. And finally, the size of most targeted benefits is small. It is obvious that the preservation of the old paradigm of paying child benefits is ineffective and does not contribute to the achievement of the national goal of reducing poverty. The paper shows that the introduction of targeted benefits to low-income families with children under a social contract, bringing the average per capita family income to the subsistence minimum, would increase the targeting of social assistance and its effectiveness in poverty reduction both among families with children and among the population.

Keywords: poverty reduction, social assistance, families with children.

JEL: I32, I38.

Tatiana M. MALEVA, Cand. Sci. (Econ.), DBA. Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 101000, Russian Federation).

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Elena E. GRISHINA, Cand. Sci. (Econ.). Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 101000, Russian Federation).

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UNIVERSAL BASIC INCOME

pdfEvgeny Gontmakher
70-79
 

Abstract

The idea of universal basic income first emerged in the Late Middle Ages. In the second half of the 20th century, it began to be actively discussed as a political al become very popular. In a number of countries, such as Canada, Finland and the Netherlands, local experiments involving basic income have been taking place. This article addresses the main arguments for and against basic income. Some authors regard basic income as a populist and paternalist policy, which is an incorrect judgment, as its adequate implementation could lead to budgetary savings, reduce the size of government, and lower state interference in the lives of citizens. Another objection is that basic income would discourage labor and stimulate social dependency; however, local experiments in partial introduction of basic income and similar benefits have not confirmed this statement. The claim that basic income is too expensive of a measure does not consider that it is supposed to replace numerous other social benefits and would therefore most likely result in reduced administrative costs. Basic income is a social welfare measure most compatible with the nature of labor and the labor market under the technological revolution that has begun, where labor has been getting increasingly distributed and aimed at the workers’ self-realization rather than their survival. In practice, basic income is to be implemented gradually, only covering selected groups of individuals at first and expanding the range of recipients over time. In basic income administration, a certain role can be played by municipal governments.

Keywords: universal basic income, social welfare, labor market, social benefits administration, paternalism.

JEL: H53.

Evgeny Sh. GONTMAKHER, Dr. Sci. (Econ.), Professor. National Research University Higher School of Economics (3, Krivokolennyy per., Moscow, 101000, Russian Federation); Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (23, Profsoyuznaya ul., Moscow, 117997, Russian Federation); Institute of Contemporary Development (12, Nauchnyy proezd, Moscow, 117246, Russian Federation); Member of the European Dialogue Expert Group.

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pdfYury Kuznetsov
80-95
 

Abstract

This article focuses on economic analysis of the concept of universal basic income. This social assistance scheme is regarded as an alternative to traditional targeted, means-tested, social benefits. The paper elaborates on what distinguishes universal basic income from other forms of social benefits, and analyzes some of the most widespread arguments in its favor. A hypothetical implementation of basic income could not only generate social and economic gains, but would also inevitably be associated with certain costs. In particular, given that for some individuals with medium and high incomes basic income payments would in essence be a tax deduction, taxes would need to be raised in order to balance out the state budget. This would lead to additional administration costs. As demonstrated in the article, they should be interpreted as costs of reduction of information asymmetry, which inevitably arises in the relation between the state and recipients of social assistance. It is shown that the economic side of a number of key arguments for basic income boils down to the latter making it possible to reduce information asymmetry. These arguments include the assertions that universal basic income would make the welfare system simpler and more manageable, eliminate poverty traps and expand the freedom of choice among social benefit recipients. The information asymmetry approach is applied to the analysis of preliminary results of the basic income experiment conducted in Finland in 2017–2018. The paper provides evidence that basic income is only one of the many possible approaches to reducing information asymmetry in welfare systems.

Keywords: universal basic income, welfare programs, information asymmetry, basic income pilots.

JEL: H53, D82.

Yury V. KUZNETSOV, Cand. Sci. (Econ.). Financial Research Institute of the Ministry of Finance of the Russian Federation (3/2, Nastas’inskiy per., Moscow, 127006, Russian Federation); Editorial Board of the Journal “Economic Policy” (3–5, str. 1, Gazetny per., Moscow, 125009, Russian Federation).

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FINANCIAL MARKETS

pdfSergei Mayorov
96-109
 

Abstract

The article gives an overview of the market microstructure approach, where modern financial infrastructure (trading, clearing and settlement) has for the first time become an object of dedicated research, contrary to traditional microeconomic models dealing with abstract demand, supply etc. apart from market realities. The market microstructure approach focuses on analysis of market frictions impacting on how new equilibriums are being come upon. Market frictions exist due to fragmented market structure and information asymmetries. Respectively, the article (Part 1) compares “market microstructure” and “market structure”; reveals drivers of spatial and temporal fragmentation (including breakdown of modern trading protocols and participation models); analyzes information (self-)learning of market and adverse selection; makes distinctions between “market quality”, “market efficiency” and “market liquidity”; and traces how the market efficiency and equilibrium concepts were evolving when market frictions drew attention. How the market microstructure approach may work is demonstrated in the course of a high-frequency trading (HFT) case study in Part 2 of the article. HFT has brought new evidence that market structure matters—both as an environment where tech innovations are only possible and as mechanisms to be adjusted to new challenges—and has outlined directions for further elaborations on basic microstructural concepts. The article associates HFT with market fragmentation, describes the impact of HFT on participation structure and market quality, summarizes predatory and similar practices of HFT and instruments to mitigate them, and clarifies the specifics of information asymmetry and adverse selection within the HFT framework.

Keywords: market microstructure, market structure, market quality, efficiency and liquidity, information asymmetry, high-frequency trading.

JEL: D01, D47, D53, D82.

Sergei I. MAYOROV, Cand. Sci. (Econ.). Strategy Department, Moscow Exchange (13, Bol’shoy Kislovskiy per., Moscow, 125009, Russian Federation).

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INTERNATIONAL ECONOMICS

pdfYan Rudakovski
110-131
 

Abstract

The research assesses the process of liberalization of trade policy of Belarus after the creation of the Customs Union (CU) due to the liberalization of non-tariff barriers. Evaluation is carried out using an error correction model with relative price changes based on the theory of purchasing power parity (PPP). In the first part of the article, a global classification of non-tariff measures developed on the basis of UNCTAD is given, and so are examples of non-tariff restrictions applied by Russia, Belarus, and Kazakhstan. It also describes the research aiming to assess the impact of trade liberalization on wealth and economic growth. The second part contains a theoretical rationale for the model, construction of which is based on purchasing power parity in violation of the “law of one price”. The third part of the work contains a direct econometric estimation of the model. Before estimation the model is applied to prove model assumptions: in particular, the significance of the dummy variable implies liberalization of non-tariff measures, rather than a reduction of the customs tariff; non-tradable sectors are the same in the partner countries, and therefore the change of their prices is not evaluated. The result of the empirical analysis is the revealed inertness of the liberalization of non-tariff barriers in Belarus, as evidenced by the liberalization not since the creation of the Customs Union, but after several quarters. It also revealed the stimulation of consumption of imported products as a result of a decrease in their price due to liberalization.

Keywords: customs union, single economic space, customs and tariff regulation, non-tariff regulation, liberalization of trade policy, real effective rate, terms of trade, error correction model.

JEL: F13, F53.

Yan S. RUDAKOVSKI. Faculty of Economic Sciences, National Research University Higher School of Economics (20, Myasnitskaya ul., Moscow, 101000, Russian Federation)

 

INDUSTRIAL ECONOMICS

pdfViktor Malein, Yuriy Ponomarev
132-151
 

Abstract

Identification of positive conditions for structural transformation of industries in the Russian economy and also formation of a scientific base for development of practical recommendations for industrial policy are extremely important for the fulfillment of national goals set forth in the Presidential Decree No. 204 dated May 7, 2018. From the early 2000s up till now, development of the Russian metal industry has been characterized by gradual abandonment of the traditional method of steelmaking in open-hearth furnaces as well as transition to a more progressive electric melting technology. The article assesses the impact of this technology change on total factor productivity (TFP) of metallurgical enterprises and on the functional form of the production function in the industry for the period 2008–2017, as well as the factors of transition to the new technology for metallurgical companies. The results show that the transition to the new technology was accompanied by a 24–28% increase in TFP as well as changes in the parameters of the production function, in particular, a decrease in labor and material intensity of production. An analysis of the factors influencing the likelihood of transition to the new technology has confirmed our hypotheses: the process of assets consolidation in the metallurgical industry under the control of several holdings in the 2000s was accompanied by technological re-equipment of production and construction of new facilities. Enterprises that are part of a single financial and industrial group with higher productivity and access to the world market are characterized by a higher probability of transition to the new technology. In addition, estimates of the likelihood of transition to the new technology are higher for enterprises with higher levels of productivity.

Keywords: metallurgy, total factor productivity, technological changes.

JEL: D24, L23, M11, O33.

Viktor M. MALEIN, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (84/9, Vernadskogo pr., Moscow, 119571, Russian Federation).

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Yuriy Yu. PONOMAREV, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (84/9, Vernadskogo pr., Moscow, 119571, Russian Federation); Gaidar Institute for Economic Policy (str. 1, 3-5, Gazetny per., Moscow, 125993, Russian Federation).

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pdfValery Verbus, Alexander Osharin
152-175
 

Abstract

The paper builds a two-sector monopolistic competition model featuring multi-product firms and heterogeneous consumers endowed with a Cobb–Douglas utility nesting a generalized CES function. In contrast to the standard CES, the generalized CES function includes both the love of variety and the love for product quality, which makes it possible to distinguish consumers differing in their product quality perception. The industrial sector encompasses firms producing differentiated products of varied quality, targeting a certain type of consumer. In such a case, firms set the price and quality for a particular product so as to maximize their profits, while consumers find the optimum price-quality combination, which may be different for groups of consumers having different preferences. The model allows one to derive the demand functions of heterogeneous consumers for goods of different quality and makes it possible to analyze different strategies of firms in their choice of the optimal price-quality ratio for their products. It also allows the formulation of conditions for screening in the case of incomplete information about the type of consumers. The main difference between the equations for screening in the model of monopolistic competition and the standard screening models in theory of contracts lies in the absence of individual rationality restrictions in the monopolistically competitive setting, where only the incentive compatibility is taken into account for both groups of consumers. As a result, in the absence of additional restrictions on the part of the regulatory authorities, the screening procedure in the monopolistic competition setting leads to a decrease in welfare for less affluent consumers.

Keywords: heterogeneous consumers, monopolistic competition, CES utility function, quality of goods.

JEL: L11, D11, D21, D43.

Valery A. VERBUS, Cand. Sci. (Phys.-Math.), Assistant Professor. National Research University Higher School of Economics (25/12, Bol’shaya Pecherskaya ul., Nizhny Novgorod, 603155, Russian Federation); Institute for Physics of Microstructures of the Russian Academy of Sciences (7, Akademicheskaya ul., Afonino, Kstovsky District, Nizhny Novgorod Region, 603087, Russian Federation).

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Alexander М. OSHARIN, Cand. Sci. (Phys.-Math.), Assistant Professor. National Research University Higher School of Economics (25/12, Bol’shaya Pecherskaya ul., Nizhny Novgorod, 603155, Russian Federation).

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ECONOMIC HISTORY

pdfAndrei Belykh
176-191
 

 

Abstract

The article states the necessity of creating an economic chronicle of Alexander Pushkin’s life. His economic life includes four aspects: publishing activity, estate management, playing cards, and life in the city. It is mentioned that the existing literature lacks accurate data on Pushkin’s incomes and expenses. The article studies a notorious episode concerning Pushkin’s loan received from the Moscow Savings Treasury. It is shown that there are certain questions connected with distribution of the money received and with Pushkin’s deposit in the Moscow Savings Treasury. Besides, the article analyses Pushkin’s loans from the State Treasury. The role of Egor Kankrin, Minister of Finance, in providing to Pushkin his credit conditions, and the attitude of Emperor Nicholas I towards the poet are emphasized. They resulted in the lending conditions being extremely soft: the loans were long-term and interest-free. However, Pushkin still needed money and had to borrow large sums from private persons. After his death, debts to the State Treasury and to private persons amounted to 138,988 rubles 33 kopeks. The author raises the question: did Pushkin have a real opportunity to repay his debts? Data from a Pushkin Trust report concerning incomes collected from the posthumous edition are analyzed. The article provides calculations confirming that Pushkin’s financial bankruptcy was far from being inevitable. Had he survived after the duel with d’Anthès, Pushkin would have been exiled to his village. He would have continued his literary work and, according to the optimistic estimate, could have repaid his debts within approximately four years.

Keywords: Alexander Pushkin, debts, Treasury, Egor Kankrin.

JEL: A12, G21, Z11

Andrei A. BELYKH, Dr. Sci. (Econ). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo pr., Moscow, 119571, Russian Federation).

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