Contents of issue 2/2015
Jacek Prokop, Michał Ramsza, Bartłomiej Wiśnicki - A Note on Bertrand Competition under Quadratic Cost Functions, summary
Katarzyna Mroczek, Andrzej Nowosad, Tomasz Tokarski - The Gravity Effect and Its Impact on Labor Productivity in Balkan Economies, summary
Andrzej Cieślik, Łukasz Goczek - Firm-Level Perception of Corruption in Postcommunist Countries, summary
Michał Kałdoński - Tax Avoidance in Family Firms Listed on the Warsaw Stock Exchange, summary
Anna Białek-Jaworska, Aneta Dzik-Walczak, Natalia Nehrebecka - Why Do Firms Turn to Leasing?, summary
Arkadiusz Świadek - The Innovation Activity of Foreign and Domestic Enterprises in Poland, summary
Jakub Growiec, Michał Gradzewicz, Jan Hagemejer, Zofia Jankiewicz, Piotr Popowski, Katarzyna Puchalska, Paweł Strzelecki, Joanna Tyrowicz - The Role of Market Services in the Polish Economy, summary
Book Review: Maciej Bałtowski, Piotr Kozarzewski, Zmiana własnościowa polskiej gospodarki 1989-2013
(Ownership Changes in the Polish Economy in 1989-2013), Polskie Wydawnictwo Ekonomiczne, Warsaw 2014, 429 pp. - reviewed by Barbara Błaszczyk
Book Review: Piotr Albiński, Marek Chrzanowski, Krzysztof Marczewski, Zbigniew Polański, Katarzyna Waćko-Jasińska (eds.), Kryzys a polityka stabilizacyjna w Unii Europejskiej
(The Crisis and Stabilization Policy in the European Union), Oficyna Wydawnicza SGH, Warsaw 2014, 276 pp. - reviewed by Elżbieta Kawecka-Wyrzykowska
Jacek Prokop, Michał Ramsza, Bartłomiej Wiśnicki - A Note on Bertrand Competition under Quadratic Cost Functions
The authors focus on a model of competition known in economics as Bertrand competition. They investigate how the outcome of Bertrand competition changes when linear cost functions are replaced by quadratic functions in the model.
Named after French mathematician Joseph Louis Francois Bertrand (1822-1900), Bertrand competition describes interactions among firms and a market situation in which firms make their output and pricing decisions based on the assumption that their competitors will not change their own prices.
Prokop, Ramsza and Wiśnicki show that the introduction of quadratic cost functions in the model leads to a qualitative change in competition between firms. In this case, the standard assumption that a firm with a lower price is interested in taking over the entire market is not only unrealistic (even in the absence of capacity constraints), but also irrational from the profit-maximization viewpoint, the authors say. Therefore the results of previous studies are misleading, according to Prokop, Ramsza and Wiśnicki. They argue that the so-called Bertrand duopoly model should be adjusted to better capture the behavior of firms under quadratic cost functions. The authors relax the assumption that the output of firms is determined by existing demand. They offer a modified Bertrand duopoly model in which firms competing in prices are free to choose their level of production depending on the market demand for their products at specific prices. “Under the modified assumptions, the static price competition game of identical duopolists has no symmetric equilibrium in pure stra- tegies,” the authors conclude. Their research shows that, under quadratic cost functions, it is possible to expect price fluctuations on oligopolistic markets rather than a stable equilibrium situation described by the standard model of price competition.Keywords
: Bertrand competition, quadratic cost functions, static price competitionJEL classification codes
: L13, L41, O31Article
Katarzyna Mroczek, Andrzej Nowosad, Tomasz Tokarski - The Gravity Effect and Its Impact on Labor Productivity in Balkan Economies
The authors explore what they define as gravity effect and its impact on regional disparities in labor productivity in 11 Balkan countries from 2000 to 2013.
The gravity effect, which is a reference to Newton’s gravity law, is based on the assumption that regions have some economic influence on one another. The strength of these relationships is proportional to the size of the regional economies and inversely proportional to the distance between them. The model of economic growth applied by Mroczek, Nowosad and Tokarski draws from the neoclassical models of Solow; Mankiw, Romer and Weil; and Nonneman and Vanhoud.
The research looks at how Balkan countries are distinct from other European economies in terms of the capital-labor ratio and regional disparities in labor productivity. The authors discuss the specific features of the Balkan political system and examine why the region has followed a different path of political and economic development than the rest of postwar Europe. The Balkan region is distinct for its authoritarian regimes, military conflicts and public acceptance of corruption, the authors say. They compare the political and economic systems of individual Balkan countries and their development paths from the end of World War II to the end of 2013.
In their research, the authors use a method based on numerical simulations of a long-term equilibrium in labor productivity in Balkan economies. The model developed by the authors has an “asymptomatically stable steady state point regarded as a point of long-term equilibrium.” The research includes an analysis of statistical data on physical capital resources. The research shows that Greece, Slovenia, Croatia and Albania have high capital-labor ratios, while Romania, Serbia, Bulgaria, and Macedonia have low ratios. The impact of the capital-labor ratio on labor productivity in the region is almost three times stronger than the influence of the gravity effect, the authors say. They add that Albania and Croatia have the highest levels of labor productivity, while Romania and Turkey are at the opposite end of the spectrum. Macedonia and Bosnia-and-Hercegovina are the worst off in terms of the labor market situation and unemployment. Joblessness is the lowest in Romania, Turkey and Slovenia, according to the authors. Their research shows that Slovenia is the most affluent country in the Balkan region and the only one with a GDP per capita above the EU average.
Several Balkan countries are associated with the European Union and seeking to join the bloc. According to Mroczek, Nowosad and Tokarski, EU accession would benefit these Balkan economies because it would reinforce the gravity effect and lead to a stronger convergence process, thus contributing to greater political and economic stability in the region.Keywords
: Balkans, gravity effect, labor productivity, unemploymentJEL classification codes
: C02, C23, C62, F13, F14, F15, N14, N34, O52, R11Article
Andrzej Cieślik, Łukasz Goczek - Firm-Level Perception of Corruption in Postcommunist Countries
The article looks at how Polish firms view corruption and whether they see it as a major obstacle to doing business. The authors investigate the relationship between the characteristic features of firms and their perception of corruption.
The authors examine the findings of previous studies in the field. They conduct an empirical analysis using panel data on 25,000 firms in 27 postcommunist countries from 1999 to 2010. The research makes it possible to identify companies for which corruption is a major obstacle to doing business. The authors conclude that corruption is especially troublesome for companies producing goods for the domestic market and for private companies based on domestic capital. The study also finds that corruption poses a problem to companies regardless of their efficiency and size. The authors’ key recommendation for economic policy makers is that they should depersonalize businesses’ contacts with the government administration and reduce their frequency.Keywords
: corruption, postcommunist countries, firm-level panel dataJEL classification codes
: D22, D23, D73Article
Michał Kałdoński - Tax Avoidance in Family Firms Listed on the Warsaw Stock Exchange
The article seeks to establish whether and why family firms listed on the Warsaw Stock Exchange (WSE) are more likely to avoid paying taxes than other companies.
The author examines the tax avoidance practices of listed firms, using a long-run measure of tax avoidance drawn from the literature: the so-called three-year cash effective tax rate (“cash tax paid divided by pre-tax book income”). The author demonstrates that family firms exhibit greater tax avoidance than their non-family counterparts, as shown by their lower cash effective tax rate. The difference in the effective tax rate between family and non-family firms is more than 4.0%, the author says.
The research validates the hypothesis that family firms are ready to seek tax savings even at the expense of potential fines imposed by tax inspectors and reputation damage.
The author also finds that diversified family firms and family firms that do not depend on external finance exhibit greater tax avoidance. Among family firms, a higher level of tax avoidance is characteristic of “opaque” firms and firms using dual-class shares, Kałdoński says. This indicates that diversification and financial independence tend to lower the costs of tax avoidance, while a lack of transparency and dual-class shares can be used for tax avoidance purposes, the author adds.Keywords
: tax avoidance, family firms, agency problemsJEL classification codes
: G32, H26Article
Anna Białek-Jaworska, Aneta Dzik-Walczak, Natalia Nehrebecka - Why Do Firms Turn to Leasing?
The paper seeks to establish why companies use all kinds of leasing programs to finance their operations. The authors analyze determinants such as debt level, profitability, liquidity, company size, and tax incentives. They conduct a quantitative literature review (meta-analysis) using vote-counting procedures in order to systematize findings on why companies decide to finance their operations through leasing.
The authors have reviewed more than 130 studies on how businesses finance their operations. Of this, 27 studies focused on leasing programs. The authors analyzed a total of 254 econometric models focusing on the determinants of financing business operations with leasing programs.
While conducting their meta-analysis, Białek-Jaworska, Dzik-Walczak and Nehrebecka estimated special logit models to identify specific factors determining the significance of the predictors used. The authors found that “study characteristics such as the year of publication, the studied period and the sample size significantly influence the relationship between a company’s debt and financing through leasing.”
The authors also conclude that “the variable determining the relevance of the results for the relationship between profitability and the use of leasing is the number of observations in the sample, as well as the year of publication, number of observations in the sample, and the length of the sample in the period relevant to the construction of the model.”Keywords
: leasing, debt, meta-analysis, corporate financeJEL classification codes
: G32, E52, G21, C83Article
Arkadiusz Świadek - The Innovation Activity of Foreign and Domestic Enterprises in Poland
The article examines the innovation activity of Polish industrial enterprises and probes whether and to what extent their eagerness to innovate depends on who owns them. Specifically, the author seeks to establish, first, whether enterprises with different ownership structures pursue different forms of innovation activity; second, whether such differences mean that innovation policy in Poland should be modified; and, third, whether or not industrial enterprises in Poland behave in the same way as their counterparts in highly developed economies.
According to the author, most transition economies suffer from a shortage of capital that makes it difficult for them to accelerate economic growth in the long term. Foreign companies, however, can exert a tangible impact on economic processes, including innovation in industry, through foreign direct investment.
The methodological part of the study includes a probit model based on probability theory. The research shows that the key to accelerating the development of innovation in Poland is to stimulate this activity in foreign-owned companies. Domestic enterprises display a low level of risk acceptance and tend to focus on passive channels of technology transfer, according to Świadek. In a new trend, however, innovation activity in Poland is increasingly moving from foreign-owned enterprises to those with mixed ownership, the author says.Keywords
: innovation, system, industry, enterprise, ownershipJEL classification codes
: C25, E61, L16, O38, O52Article
Jakub Growiec, Michał Gradzewicz, Jan Hagemejer, Zofia Jankiewicz, Piotr Popowski, Katarzyna Puchalska, Paweł Strzelecki, Joanna Tyrowicz - The Role of Market Services in the Polish Economy
The study aims to either validate or disprove the hypothesis that market services, alongside industry, played a key role in spurring the development of the Polish economy in 1995-2012. The authors conduct a multifaceted empirical analysis that addresses a range of research questions related to the role of structural change and variations in relative prices in economic growth. The article also examines the behavior of industry and services during a business cycle and the internal differentiation of market services.
The results of the authors’ macroeconomic analyses are based on national accounts data from 1995-2012. The article scrutinizes differences across service sectors in terms of the levels and dynamics of labor productivity and employment, based on firm-level data from 2005-2012.
The authors find that the role of market services in employment in Poland steadily increased in 1995-2012. At the same time, due to technological change, industry enjoyed stronger growth in labor productivity and total factor productivity (TFP). The prices of manufactured goods steadily fell compared with services. However, the cyclical variability of employment and value added was clearly lower in market services. Due to substantial heterogeneity across firms within the considered categories, the authors say they were “unable to identify significantly higher dynamics of exports-intensive, capital-intensive, business-to-business (B2B) or knowledge-based services.” On the basis of their research, the authors predict that, due to the increasing role of market services, Poland’s economic growth will be slower but more stable in the future.Keywords
: market services, sector, structure, economy, labor productivity, economic growth, business cycleJEL classification codes
: J24, L80, L90, O47Article