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Institutions, laws and informal practices: analysis of the behavior of economic agents

Priority areas of development: economics
2019
The project has been carried out as part of the HSE Program of Fundamental Studies.

The research goal of this project is to analyze the main mechanisms to adapt to uncertainty and instability of the economy in banking and procurement sectors, and to estimate the main channels of influence on incentives of economic agents to improve economic efficiency of individual economic entities and the regions.

Methods

It is an empirical project and it is based on the implementation of different statistical and econometrics techniques. The hypotheses are based on the theory of contracts, auctions, human capital, institutions and industrial organizational theory.

Empirical basis

There was used the following data: RLMS-HSE (Russian Longitudinal Monitoring Survey); Russian Federal State Statistics Service (Rosstat); clearspending.ru (GovernmentSpendings/GosZatraty); SPARK (Verification, analysis and monitoring of companies); World Values Survey; LITS I, II (Life in Transition Survey); Monitoring the Quality of Enrollment in Russian Universities; Analytics Platform «Banks and Finance» (Mobile); bankovedenie.ru; guidebooks of petroleum bases of the Russian Federation; “Russian Oil Refineries” guidebooks; information from the public procurement and public contractors websites, data from INFOCULTURE (https://www.infoculture.ru/); vkontakte; lists of prisoners of the Second World War, students of Moscow State University, the Higher School of Economics and USSR deputies; resources of the Bank of Russia (www.cbr.ru); data from the World Bank (World Development Indicators (WDI); Doing Business; Global Financial Development; Worldwide Governance Indicators; WDI Database Archives).

Results

Analyzing the agent strategies in banking markets, we, firstly, address the problem of the possible influence of tonality (positive or negative) of Bank of Russia speeches and statements on lending to the non-financial firms by Russian banks. Using the tonality variables constructed using the text analysis of 51 official CBR communications (quarterly monetary policy announcements, press releases from CBR meetings) for 2013-2017 and quarterly financial data on 822 Russian banks, we show that the relationship between tonality and lending is negative and unstable for long-term loans and positive and stable (in terms of using different dictionaries when encoding words for tonality variables) for short-term ones. Secondly, based on country-level data collected from five World Bank databases for 2004-2015, we showed that the relationship between the depth of disclosure of information about borrowers by credit bureaus and credit registers and the credit risk of the banking sector is non-linear: credit risk is minimal at the lowest and the highest levels of disclosure depth index. With the values of the depth of disclosure index of 3-4 out of 6 (or 8, depending on the approach to index construction used by the World Bank in particular year), the credit risk is at the highest level. The results we obtained can be used to fine-tune the regulatory policy in this area.

Although extensive academic research has explored economies in transition, much less attention is devoted to the laws of wealth and market values formation in Russia. Several cross-section and time-series aspects have remained understudied so far. First, it is not clear enough how socio-economic status is correlated across generation in the long run. Second, little research has been carried out the effect of predetermined (i.e. prenatal) characteristics on subjective well-being. Third, only a few studies have attempted to evaluate spatial gaps in human capital, income and market values. Our hypotheses and quantitative predictions are tested using different methods and data bases. In particular, RLMS-HSE, WVS, LITS, and EVS data sets are utilized. Following Gregory Clark (2014), we show that Russia exhibits lower rates of social mobility. This is striking compared to China, UK or US, where higher indices of intergenerational correlation are detected. The most conclusive results are obtained for the digit ratios (a biomarker for prenatal testosterone and estrogens) of women's right hands. Both linear negative and inverse U-shaped associations are significant subject to multiple controls. Spatial differences between countries do not eliminate the positive role of education in the process of market values creation. Education reduces urban-rural gaps in demand for price regulation, making Russian rural respondents more liberal. Education also increases the chances of employment and income diversification in rural areas. Nonetheless, urban-rural gaps in human capital accumulation demonstrate long-term persistence. In conclusion, we have discussed the ways of reducing these gaps and enhancing the quality of related statistical information.

Public procurement auctions are often plagued by favoritism and rent extraction. We develop a new methodology to identify potential favoritism in public procurement auctions based on manipulation of reserve prices and apply it to Russian public procurement auctions of gasoline in 2011-2013. Reserve prices are set prior to the auction and thus should be independent from the identity of the winning seller. We estimate reserve prices as a function of the local market price, contract features, procurer's specifics, time controls, and procurer-seller fixed effects. A procurer-seller pair is labelled as corrupt if its pair fixed effect is significantly larger than the average procurer fixed effect in this reserve price regression. Restrictions are the main instrument to transform high reserve prices in high contract prices and to rise winning probability of favored firm. The inflationary effect of reserve price manipulation by corrupt procurer-seller pairs on final auction prices is mitigated by higher competition and fully offset by e-auctions with sufficient competition. Then we turn to the analysis of the procurer’s characteristics. Firstly, we introduce dynamic measure of experience estimating number of successfully closed contracts weighted by the size of the contract (large, medium, small) at the day of the current procedure. Using data on different types of road construction contracts in Russian Federation in the period from 2011 till 2014, we show that irrelevant experience increases probability to choose ‘wrong’ seller and probability to terminate the contract. So, we argue that it is crucial to hire consultant when procurer plan to run purchase at first time in certain price category. Secondly, we compare two procurers from the same field with different quality of provided services. We took two hospitals and compare the procurement processes. In term of delays, competition and reduction there is some difference but it mostly explained by external factors that influenced on the hospitals. Procure with better quality services attracts less bidders, probably he tried to establish long term relations through procurement process. We plan to continue our research including financial characteristics of the hospitals.

Extent of implementation, recommendations on implementation or results of implementation of the research results

The results obtained for the banking sector could be used by financial regulators (including the Bank of Russia) to develop and enhance the regulatory measures aimed at stimulating lending to the non-financial companies, as well as to improve the information sharing systems in the credit markets without adding to the credit risks there. In the part of the analysis of pro-market values, economic growth, and social mobility on the microeconomic level, our findings are important for the policy measures aiming at the improvement of the informational basis for social surveys, and for the programs designed to increase access to education in rural areas. The results of the analysis of public procurement can be used to develop measures to improve the regulation of the public procurement system and to improve mechanisms to reveal deviations from the implementation of rules.

The results of all studies within the framework of this report are used in courses of Institutional Economics, Econometrics and Public Procurement.

Publications:


Chiades P., Greco L., Mengotto V., Moretti L., Valbonesi P. Fiscal consolidation by intergovernmental transfers cuts? The unpleasant effect on expenditure arrears // Economic Modelling. 2019. Vol. 77. P. 266-275. doi
Corazzini L., Galavotti S., Valbonesi P. An experimental study on sequential auctions with privately known capacities // Games and Economic Behavior. 2019. Vol. 117. P. 289-315. doi
Schoors K., Hoefman K., Bramson A., Ryckebusch J. The impact of functional and social value on the price of goods // Plos One. 2018. Vol. 13. No. 11. P. 1-12. doi
Semenova M., Shapkin A. Currency Shifts as a Market Discipline Device: The Case of the Russian Market for Personal Deposits // Emerging Markets Finance and Trade. 2019. Vol. 55. No. 10. P. 2149-2163. doi
Milan van den H., Van Soom M., Ryckebusch J., Schoors K. Loan maturity aggregation in interbank lending networks obscures mesoscale structure and economic functions // Scientific Reports. 2019. Vol. 9. P. 1-14. doi
Schoors K., Semenova M., Zubanov A. Depositor discipline during crisis: Flight to familiarity or trust in local authorities? // Journal of Financial Stability. 2019. Vol. 43. P. 25-39. doi
Schoors K., Semenova M., Zubanov A. Depositor discipline during crisis: Flight to familiarity or trust in local authorities? // Journal of Financial Stability. 2019. Vol. 43. P. 25-39. doi
Nye J. V., Bruhanov M., Polyachenko S. S. 2D:4D and individual satisfaction: Evidence from the Russian social survey // Personality and Individual Differences. 2019. Vol. 142. No. 1 May. P. 85-89. doi
Nye J. V., Bruhanov M., Polyachenko S. S. Patterns of 2D:4D and measures of subjective well-being (DATA ARTICLE) / Figshare. Series Data article for research article "2D:4D and individual satisfaction: Evidence from the Russian social survey". 2019. doi
Sümeyra A., Podkolzina E., Schoors K. Corrupt Reserve Prices / Ghent University, Belgium. Series 19/961 "Working Papers of Faculty of Economics and Business Administration". 2019.