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Contents of issue 3/2006

Michał Mackiewicz - The Public Finance Deficit From the Perspective of the New Political Economics, summary, article

Bogna Gawrońska-Nowak, Katarzyna Skorupińska - Labor Market Flexibility and Institutions in European Countries, summary, article

Krystyna Przybylska - Methods to Measure Enterprise Internationalization, summary, article

Marek Szczepaniec - Financing Investments in Small and Medium-Sized Enterprises, summary, article


WARSAW SCHOOL OF ECONOMICS 1906-2006

Jacek Luszniewicz - Jan Drewnowski (1908-2000): An Economist in Public Service, summary, article


CONFRENCES - POLEMICS - REVIEWS

Book Review: Marian Gorynia (ed.), Strategie firm polskich wobec ekspansji inwestorów z zagranicy (Polish Business Strategies in the Face of Foreign Investment), Polskie Wydawnictwo Ekonomiczne, Warsaw 2005, 327 pp. - reviewed by Andrzej Sznajder

Economics - Politics - Ethics II - Tadeusz Smuga





Michał Mackiewicz - The Public Finance Deficit From the Perspective of the New Political Economics

The article examines mechanisms governing public finance and budget deficits in democratic countries as well as tendencies toward an increase in the overall level of public spending.
The analysis is based on a dynamic theoretical model that focuses on households and their behaviors to maximize benefits resulting from the consumption of public goods. Households are divided into two groups depending on their preference for a specific type of public goods. The point of reference is an analysis of a social planning procedure designed to maximize social benefits by choosing an appropriate level of the deficit and spending on individual public goods. The institutional framework of the model is subsequently modified in two ways. The first method involves a decision-making process based on an independent choice of the consumption level for public goods by individual groups of households. The second method involves decisions made by authorities and politicians motivated by a desire to secure reelection. At the same time, the author examines what he calls “information asymmetry” in the budgetary process.
An analysis of the presented model reveals that both modifications lead to an excessive/suboptimal budget deficit. The first option may additionally cause an excessive level of public spending in the economy.
The study points to the existence of two important mechanisms behind an excessive public finance deficit and the consequent accumulation of debt in democratic countries. The first mechanism is based on a situation in which decisions are made by many independent entities in a decentralized budgetary process. These entities are not fully responsible for the consequences of their decisions. The second mechanism involves the problem of proper representation of the people under the information asymmetry between voters and fiscal policy makers.

Keywords: deficit, public finance, information asymmetry
Article: PDF



Bogna Gawrońska-Nowak, Katarzyna Skorupińska - Labor Market Flexibility and Institutions in European Countries

Labor market inflexibility has long been seen as an important factor with a negative influence on European labor markets. The article aims to present factors determining the flexibility of labor markets in OECD countries, with a special focus on “old” EU member states. The analysis covers both a traditional approach to labor market flexibility based on the relationship between real wages and productivity and an approach covering the institutional aspect of labor market flexibility.
The first part of the study examines the growth of flexibility in real wages in relation to labor productivity. The authors make use of data applying to 22 OECD countries. Because economic integration took place in stages, the comparison of wage flexibility was made for two periods, 1970-1986 and 1987-2002. In the next part of the study, with the use of a composite labor market flexibility indicator—based on Strahl’s taxonomy—the authors present the diversification of labor market flexibility in EU countries. The eventual flexibility indicator is based on the following four institutional variables: part-time employment, trade union influence, tax system and compensation. The choice of variables for the labor market flexibility indicator was largely determined by limited access to data. Definitive annual figures for the variables in question were only available for the 1998-2003 period for 16 EU countries (EU-15 plus Poland).
The study reveals that there is no significant relationship between real wages and labor productivity in most countries in Europe. However, wage flexibility in relation to labor productivity varies considerably from one country to another depending on the analyzed period. This applies to not only highly developed EU countries, but also the Czech Republic, Hungary and Poland. The results of the taxonomy confirm the widespread opinion that Great Britain has the highest labor market flexibility indicator. Denmark, Finland, Belgium and Poland, on the other hand, were classified into a group of countries with the lowest flexibility. Labor market inflexibility in Denmark, Finland and Belgium is additionally confirmed by research conducted by Blanchard and Wolfers (2000) and Dicks and Papadavid (2002).

Keywords: flexibility, labor market, institutions
Article: PDF



Krystyna Przybylska - Methods to Measure Enterprise Internationalization

The degree of internationalization of enterprises is determined by the intensity and scope of their business activity on foreign markets. Enterprises are subject to increasing internationalization in the context of globalization, which also applies to Polish enterprises. However, the actual level of internationalization is unknown because it has not been the subject of research so far. The article consequently sets out to:
- review scientific achievements in measuring enterprise internationalization to date
- verify and assess the usefulness of the most popular indicator known as the transnationality index (TNI)
- propose modifications in this index
- promote interest among researchers and businesspeople in methods to measure the internationalization of Polish enterprises.
In the empirical part of the article, on the basis of a list of the world’s 100 largest corporations compiled by UNCTAD in 2004, the author developed six analytical indicators and one composite indicator to measure the internationalization of enterprises. A comparison of the results of the research shows that there is no relationship between the analytical measures and the composite indicator. This calls for a search for better methods to measure enterprise internationalization, hence the proposal to modify the method for calculating the ITA, ITS and ITZ analytical indices, which make up the TNI index. The principal difference is based on changing the content of these indices so that the internationalization of assets, sales and employment in a given corporation is measured in relation to the corresponding values for all transnational corporations.
The analytical indices of internationalization calculated in this way as the basis for the TNI index should better reflect the actual level of internationalization.

Keywords: internationalization of enterprises, measurement, level
Article: PDF



Marek Szczepaniec - Financing Investments in Small and Medium-Sized Enterprises

The article contributes to the overall body of knowledge about investments made by small and medium-sized enterprises (SMEs) and their sources of financing. The author conducts an empirical research through a direct interview method on two samples: a sample of 1,001 microbusinesses (meaning those with up to nine employees) and a sample of 1,202 SMEs with 10 to 249 employees.
The research shows that only 41 percent of Poland’s SMEs carried out investments in 2004. Investment indicators were the highest among medium-sized enterprises (74 percent), while microbusinesses showed the lowest indicators (41 percent). In the case of individual types of investments (day-to-day maintenance and modernization, purchase of computer hardware and software, purchase of individual machines and equipment, purchase of means of transportation, construction of new plants and purchase of turnkey production lines), the highest investment indicators were invariably recorded among medium-sized enterprises. The percentage of investing companies increased with an increase in employment. The same is true of the percentage of companies declaring investment plans for the next 12 months.
Most of the companies polled used their own funds to finance their investments. An important (though usually only supportive) role in financing some investments (in particular, the purchases of means of transportation, turnkey production lines, machines and equipment) was played by loans and leasing. In analyses by market segment, the following rule was observed: companies with a higher level of employment displayed a greater tendency to use loans and leasing programs. Other sources of funds for investment projects in the SME sector were of marginal importance.
Comparative analyses reveal that the use of external sources of funds to finance SME investment projects in Poland is usually two to three times lower than in other EU countries and the United States. However, no evidence of discrimination against SMEs in lending by banks was obtained. Only 2.5 percent of the companies polled have been refused bank loans over the past three years.
An increased propensity to invest among Polish SMEs could be stimulated by appropriate activities of the government, banks and entrepreneurs themselves.

Keywords: financing, investment, small and medium-sized enterprises
Article: PDF



Jacek Luszniewicz - Jan Drewnowski (1908-2000): An Economist in Public Service

The article is dedicated to Jan Drewnowski, a Polish economist who was born in Vilnius in 1908 and died in London in 2000.
Drewnowski studied at the Warsaw School of Economics (SGH) from 1926. The starting point for his research career was his two-year scholarship at the London School of Economics in 1993-1935. After returning to Warsaw, Drewnowski took a job at SGH. In 1938, he earned a postdoctoral degree. After World War II, which he spent in German captivity, Drewnowski returned to communist Poland. He became a professor at SGH and assumed a high post at the Central Planning Office (CUP). He was linked with the Polish Socialist Party at the time. After the “CUP debate” in 1948 and the nationalization of SGH in 1949, Drewnowski was progressively sidelined. Eventually, he lost his CUP job and the possibility of teaching at SGH. The breakthrough came in 1956 when Drewnowski regained his teaching rights, joined the Economic Council and the Planning Commission and was allowed to travel abroad. His many foreign trips included a yearlong scholarship in the United States. In the late 1950s, the situation in Poland began to deteriorate again. As a result, Drewnowski accepted a job offer abroad. In 1961-1964 he worked at the University of Ghana in Legon and in 1964-1969 he was employed in Geneva at the United Nations Research Institute for Social Development (UNRISD). Problems with extending his passport led to a situation in which Drewnowski finally decided to choose political emigration in 1969. He first lived in the Hague working at the Institute of Social Sciences, and then moved to London in 1979 where was linked with the Polish University-in-Exile. After 1989 he visited Poland several times. In 1994 he received an honorary doctorate from SGH.
As an economist, Drewnowski represented the tradition of the “Lausanne school.” In the initial period, he was primarily involved in the theory of economics, and his main objective was to make it more realistic. He specifically attempted to do so in reference to the theory of demand, enterprise, central planning and socialist economy. In the following period, from 1964 (when he was employed at UNRISD), he became concerned with social statistics, specifically the methods and application of what were called social indicators. At the time, Drewnowski was widely seen as the creator of the “Geneva method” for examining the standard of living and prosperity. In the last years of his life, Drewnowski took an interest in social prosperity issues.
During his political emigration starting in 1970 Drewnowski also worked as a political columnist and expert on Soviet affairs. In his articles, he developed concepts of the “autonomous distribution of Soviet-type systems” and “degradation of the economic fabric” as the main factor behind the decline of economic systems. After 1989 he wrote extensively about the transition in former East Bloc countries, chiefly Poland.

Article: PDF

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