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Regular version of the site

Cross-Country Study of Behaviour in Banking Product Markets

2011
Department: International Laboratory for Institutional Analysis of Economic Reforms (LIA)
The project has been carried out as part of the HSE Program of Fundamental Studies.

The project combines two lines of research: banking product markets analysis and government order mechanisms analysis. Strategies of the agents functioning at the markets of banking products under different institutional conditions across regions and countries are the target of research.

Research objective is to define the unique features of formal and informal institutions at such markets (as exemplified in government orders and banking product markets), and the way they affect economic agents’ strategies and incentives, as well as to find their efficiency determinants across countries. Empirically, the research is based on: Round 17 of  (Russia Longitudinal Monitoring Survey, Monitoring of the Social and Economic Changes, data by Rosstat (Russian Federal State Statistics Service) and the Bank of Russia, Sberbank data, a database with all the government orders for the past three years compiled by the participants of the project, and a number of issue-related databases: on pharmaceutical procurement in Saint Petersburg, on the road works commissioned in Novosibirsk region, on petrol purchases in 10 Russian regions, and finally official information on government orders from the web-sites of the Russian government, Russian regions, Federal Antimonopoly Service, and the Ministry for Economic Developmemnt.

Research results are as follows. 

The banking part of the survey presents the analysis of the factors that affect saving and loaning strategies of Russian households. It is shown that their financial strategies are influenced not only by the factors predicted by intemporal choice theory (such as current income and expected future income) but also by personal traits of character (acumen, readiness to help others), attitude towards one’s financial situation (of the household itself and its place as compared to other households), and institutional factors (such as financial literacy). The effect of the institutional framework on the depositors’ behaviour under crisis have also been analysed; regional differences in the depositors’ saving strategies under crisis have been shows (on the example of the 1998 crisis), in particular in the perception of Sberbank as the bank with special reputational features (being a “warrantor of reliability”). It is shown that the depositors, having no trust for the local authorities, choose Sberbank for its reputation as a bank supported by the federal authorities. It is also shown that such institutional factors as the level of corruption, the extent to which the state interferes with a region’s economy, electoral activity, etc., explain over 40% of regional variation in the increase of deposits at Sberbank. As part of the government orders research, transparency index calculation method has been developed; a number of correlations between regional indicators of the government orders system and their transparency index have been found. In particular, it is shown that availability of information has a positive effect on the number of monitoring tools used to control government orders, though the transparency of information doesn’t affect the functioning of controlling agency; bidding usually is more competitive in the regions where information if more transparent; the level of transparency in a region has significant correlation with the level of corruption. Petrol purchases have been analysed for a number of Russian regions to show that the relative price of governmental contract at a regional petrol purchase depends on the number of participants, specifications of the contract (scope and type of supply), and transparency level in the region.

Final results are of interest both for the academic community, since they complement the existing academic sources on the issues concerned, and for the regulating authorities in the sphere of government orders and retail banking services. Moreover, research results are used as part of the courses ‘Microeconomic Analysis in Banking: The Institutional Aspect’, and ‘Institutional Economics’ for the departments of Economics and Public Administration.

Foreign Partners

1)  Koen Schoors, Centre for Russian International Socio-Political and Economic Studies (CERISE), Gent University — co-author of the project “Market Discipline and Institutional Environment in Russian Regions”

2)  Bank of Finland Institute for Economies in Transition (BOFIT) — partner in the project “Russians’ Financial Strategies: Savings and Loans” (providing consultations, editing the final text, publishing preprint)

3)  John Nye, Economics Department at George Mason University — expert and consultant for the project on government orders in Russia Carine Staropoli and Anne Yvrande-Billon, Paris 1, Centre d’Economie de la Sorbonne) — experts and consultants for the project on government orders in Russia.