We investigate how the regional institutional environment-in particular, the political environment-affects Russian new firm entry across regions, industries, firm size classes, and time. We find that entry rates in Russia are explained by natural entry rates and the institutional environment. Industries that are characterized by low entry barriers in developed market economies are found to have lower entry rates in regions subject to greater political fluidity, as in the case of gubernatorial change. We also find that higher levels of political fluidity and democracy increase relative entry rates for small-sized firms but reduce them for medium-sized or large ones.
We explore the relationship between development policies, finance and growth as approached by New Structural Economics (NSE) with special reference to Transition Economies (TEs). On a sample of 164 economies for 1963-2009, our analysis confirms NSE propositions that the type of development policies, as captured by the Technology Choice Index (TCI), has a significant effect on long-term growth. However, this differs for TEs as a whole and its subgroups. Further to this, using a sample of 94 countries for 1985-2009, we provide a first empirical test of the relationship between growth, TCI and financial structure distortions and we show that there is a negative relationship between financial distortions and TCI on the one hand and medium-term growth on the other hand. We also find that the negative effect of a higher ratio of TCI on medium-term growth is partly mitigated, although not eliminated, by moderate level of financial sector distortions. This points towards some positive externalities of simultaneous financial and industrial sector distortions, at least in the medium run. However, TEs are shown to differ from the rest of the sample as financial distortions play a more pronounced direct negative effect on medium-term growth in these countries.
In this paper, we summarise, combine and explain recent findings from firm‐level empirical literature focusing on the indirect impact of foreign direct investment (FDI) on economic performance, measured as productivity, in the Enlarged Europe. We have reviewed 52 quantitative studies, released between 2000 and 2015 and codified 1,133 estimates. We run a regression of regressions which measures the strength of the FDI–productivity relationship. Taking advantage of large number of high‐quality studies on FDI and its role in explaining the growth in firms’ productivity in Europe, we adopt recent meta‐regression analysis methods—funnel asymmetry and precision estimate tests and precision‐effect estimate with standard errors—to explain the heterogeneous impact of FDI. This paper assesses the country‐specific impact of FDI on firms’ performance, after taking publication selection bias, econometric modelling and the individual studies’ characteristics fully into account. Our results show that on average FDI has a positive indirect impact on productivity. The impact is especially significant in selected European countries, and we interpret this as a sign of better absorptive capacities in those countries.
The empirical literature has not reached a conclusion as to whether foreign direct investment (FDI) yields spillovers when the host economies are emerging. Instead, the results are often viewed as conditional. For macro studies, this means that the existence and scale of spillover effects is contingent on the levels of institutional, financial or human capital development attained by the host economies. For enterprise level studies, conditionality relates to the type of inter-firm linkages; forwards, backwards, or horizontal. In this paper, we conduct a systematic meta-analysis on emerging economies to summarize these effects and throw light on the strength and heterogeneity of these conditionalities. We propose a new methodological framework that allows country-and firm-level effects to be combined. We handcollected information from 175 studies and around 1100 estimates in Eastern Europe, Asia, Latin America and Africa from 1940 to 2008. The two main findings are that: (a) "macro" effects are much larger than enterprise-level ones, by a factor of at least six; and (b) the benefits from FDI into emerging economies are substantially less "conditional" than commonly thought. Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth, European Economic Review, 48(2), 285-306.
Schneider and Enste [2000] report a detailed taxonomy of underground economic activities (Table 1): monetary vs. non-monetary transactions, illegal vs. legal activities and tax avoidance vs. tax evasion. Tax evasion is further broken down into 'unreported income from self-employment, wages and salaries and assets from unreported work.
We propose a novel procedure, built within a Generalized Method of Moments framework, which exploits unpaired observations (singletons) to increase the efficiency of longitudinal fixed effect estimates. The approach allows increasing estimation efficiency, while properly tackling the bias due to unobserved time-invariant characteristics. We assess its properties by means of Monte Carlo simulations, and apply it to a traditional Total Factor Productivity regression, showing efficiency gains of approximately 8-9 percent. JEL Classification Numbers: C23, C33, C51.
Citizens' tax compliance should not only respond to the quality of formal institutions, but might also be culturally driven. We contribute to this literature by investigating whether tax morale, an individual's intrinsic non-pecuniary motivation to comply with taxes, is associated with the cultural values (following Hofstede's typology) held by this individual. The analysis exploits four waves of the European Values Survey (1981–2010) across 48 countries. The cultural dimensions are constructed through a polychoric principal component analysis on a set of relevant survey items consistent with Hofstede's definitions. Ordered logit estimations suggest that although values of individualism and femininity are associated with higher individual's tax morale, power distance and uncertainty avoidance are associated with lower tax morale. These results remain consistent as we increase the level of granularity of our investigation through within-region analyses and, subsequently, within-cohort analyses. We argue that these results inevitably enrich the emerging debate about cultural values and citizens' compliance with formal institutions. They also indicate that societal culture as well as individual values should be considered when designing policies aiming to improve tax compliance.
This article explores the impact of EU membership on foreign direct investment (FDI). It analyses empirically how the effects of such deep integration differ from other forms and investigates what drives these effects. Using a structural gravity framework on annual bilateral FDI data for almost every country in the world from 1985 to 2018, we find EU membership leads to about 60 per cent higher FDI investment into the host economy from outside the EU, and around 50 per cent higher intra-EU FDI. Moreover, we find that the effect of EU membership on FDI is larger than from membership of the North American Free Trade Agreement, the European Free Trade Association and the Southern Common Market, and that the single market is the cornerstone of this differential impact.
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