nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒04‒16
twenty-one papers chosen by
J. David Brown
Heriot-Watt University

  1. Revealed Informal Activity By Dimova, Ralitza; Gang, Ira N.; Landon-Lane, John
  2. Financial Literacy and Retirement Planning in View of a Growing Youth Demographic: The Russian Case By Leora Klapper; Georgios A. Panos
  3. Can Economic Crises Be Good for Your Diet? By Dimova, Ralitza; Gang, Ira N.; Gbakou, Monnet Benoit Patrick; Hoffman, Daniel
  4. The Europeanisation of Parliaments in Central and Eastern Europe By Petra Guasti
  5. Personal Earnings Inequality in the Czech Republic By Martina Mysíková
  6. Regional Growth Dynamics in Central and Eastern Europe By Vassilis Monastiriotis
  7. How big is the 'German locomotive'? A perpective from Central and Eastern Europen countries' unemployment rates By Juan Carlos Cuestas; Mercedes Monfort; Javier Ordóñez
  8. Market integration in China By Chen, Qingqing; Goh, Chor-Ching; Sun, Bo; Xu, Lixin Colin
  9. Present and Future of the Chinese labour Marke By Michele Bruni; Claudio Tabacchi
  10. The determinants of cross-border bank flows to emerging markets: New empirical evidence on the spread of financial crises By Herrmann, Sabine; Mihaljek, Dubravko
  11. Dairy value chain management in Bulgaria By Bachev, Hrabrin
  12. Regional Inequality of Higher Education in China and the Role of Unequal Economic Development By Frank Bickenbach; Wan-Hsin LIU
  13. Market reforms, legal changes and bank risk-taking – evidence from transition economies By Fang , Yiwei; Hasan, Iftekhar; Marton, Katherin
  14. Foreign ownership in Vietnam stock markets - an empirical analysis By Vo, Xuan Vinh
  15. Got (Safe) Milk? Chinese Consumersâ Valuation for Select Food Safety Attributes By Ortega, David L.; Wang, H. Holly; Wu, Laping; Bai, Junfei; Olynk, Nicole J.
  16. Ethnic Dimensions of Suburbanisation in Estonia By Tammaru, Tiit; van Ham, Maarten; Leetmaa, Kadri; Kährik, Anneli
  17. European countries with a diagnosis of financial default: expectancy and fear of its announcement in Ukraine By Konchyn, Vadym
  18. Assessing the Anti-corruption Strategies: Theoretical and Empirical Models By Matei, Ani; Matei, Lucica
  19. Exports and Credit Constraints Under Incomplete Information: Theory and Evidence from China By Robert C. Feenstra; Zhiyuan Li; Miaojie Yu
  20. Perspectives on Fulfilling the Nominal and Real Convergence Criteria by Romania for the Adoption of Euro Currency By Geza, Paula; Giurca Vasilescu, Laura
  21. Earning and saving competences of individuals in a local community in Poland By Barbara Liberda; Magdalena Szymczak

  1. By: Dimova, Ralitza (University of Manchester); Gang, Ira N. (Rutgers University); Landon-Lane, John (Rutgers University)
    Abstract: What does it mean to be in the informal sector? Many characterizations have been used in the literature, for example, firms that are unregistered or employ a small workforce or firms/economic enterprises that do not have access to formal capital markets. But many people participate in both formal and informal activities, while classification of participation is often based on primary employment. This creates limitations to the analytical power of existing measures of informality. We develop a method for assigning households to the informal sector by inferring informal sector activity using income and expenditure surveys. We apply this method to the case of Bulgaria using LSMS income and expenditure surveys before and after a significant economic reform and compare it to those made using other indicators of informal sector activity. Our work shows that the informal sector acts as a buffer for households during periods of crisis when formal sector employment opportunities are limited. It shows the limitations of alternative stylized measures of informality in assessing the vulnerability of households involved in the informal sector, especially during periods of extreme economic hardship.
    Keywords: informal labour markets, crisis, Bulgaria
    JEL: O17
    Date: 2011–03
  2. By: Leora Klapper (Development Research Group, the World Bank); Georgios A. Panos (Essex Business School, University of Essex)
    Abstract: Our study contributes to the financial literacy literature by examining its association with retirement planning in an interesting and novel context, i.e. that of a country with a relatively old and rapidly ageing population, large regional disparities and a rapidly emerging financial market. Even though consumer borrowing is increasing very rapidly in Russia, we find that only 36.3% of respondents in our sample know about the working of interest compounding and only half can answer a simple question about inflation. In a country with pervasive public pension provision, we find that financial literacy is significantly and positively related to retirement planning using private pension funds and schemes. Residents in rural areas are much more reliant on the public provision and invest less in private schemes and savings. The results of our study have a clear policy implication; along with encouraging the availability of private retirement plans and financial products, efforts to improve financial literacy can be pivotal to the expansion in the use of such schemes.
    Keywords: Financial literacy; Retirement Planning; Pensions; Russia
    JEL: D91 G11 G23
    Date: 2011–03
  3. By: Dimova, Ralitza (University of Manchester); Gang, Ira N. (Rutgers University); Gbakou, Monnet Benoit Patrick (University of Hohenheim); Hoffman, Daniel (Rutgers University)
    Abstract: With fortuitously timed data – collected before, during and after a major macro-financial crisis in Bulgaria – we revisit several hypotheses in the economics and nutritional literature related to the tendency of households to smooth their nutritional status over time. We explore the dietary impact of both falling real incomes in the context of hyperinflation and crisis and changing relative prices and the changing responsiveness of different groups of people to these incomes and prices over six year of fundamental structural reforms of the economy. Our results highlight large and dramatically changing food and nutrient elasticities, which challenge the perception of household ability to smooth their nutrient stream during economic crises and transitions.
    Keywords: crisis, diet, fluctuation, health, nutrition
    JEL: E32 I12 P23 P24 P36
    Date: 2011–03
  4. By: Petra Guasti
    Abstract: The role and functioning of the upper chambers of Central and Eastern European (CEE) parliaments have for a long time been a minor topic on the research agenda of legislative specialists. This paper seeks to fill the gap in existing research by aiming to determine the main effects caused by the process of Europeanisation on the relationships between the upper and lower chambers of parliaments in four CEE countries; the Czech Republic, Poland, Romania and Slovenia. The paper identifies these changes on two levels – the institutional and the individual. The institutional level analysis examines changes in the formal and informal structures of CEE bicameral legislatures and their functioning. The individual level analysis focuses on changes within the recruitment and career patterns of parliamentarians within the expanded multilevel governance system. The aim of the paper is to determine whether the process of Europeanisation and EU accession establishes a common ground for formal and informal cooperation between the chambers (and their respective members) at the national level, or whether this process operates as a further constraint for the successful consolidation of parliaments in Central and Eastern Europe.
    Keywords: Czech Republic; European Parliament; institutionalisation; legislative procedure; MEPs; national parliaments; Poland; political representation; Romania; Slovenia
    Date: 2011–04–15
  5. By: Martina Mysíková (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper analyzes the inequality of personal earnings in the Czech Republic since the early transition from communism, using relative distribution method. It applies data from two surveys, Microcensus and Living Conditions, covering the period from 1988 to 2008. The trend suggested by many recent empirics, “hollowing of the middle”, was confirmed in the early stages of transition, but later subsided. Earnings polarization was apparent for all sex and education subgroups between the years 1988 and 1996. For international comparison the European dataset EU-SILC 2008 has been used, focusing on four countries: Austria, Germany, Hungary, and Poland. Earnings distributions by gender and education have been analyzed, establishing that male earnings distribution is more homogenous than female, and earnings of highly educated people are more concentrated in the middle than earnings of less educated people.
    Keywords: earnings distribution, inequality, transition
    JEL: D31 J39 O15
    Date: 2011–04
  6. By: Vassilis Monastiriotis
    Abstract: This paper examines the regional growth process of the countries of Central and Eastern Europe since the start of their transition to market economies. It relates this to three distinctive explanations of regional growth and examines empirically their relevance in explaining the patterns of disparity and polarisation that have emerged in these countries over the last two decades. The collapse of communism and the early transition shock that followed created in many respects an experiment-like situation with a set of ‘initial conditions’ conducive for analysing patterns of convergence and divergence in the processes of national economic development and cross-national catch-up growth. The path to EU accession intensified the speed of these processes at the national level thus making the corresponding regional evolutions more marked. Our empirical analysis unveils a complex pattern of non-linear regional growth dynamics with convergence tendencies largely swaddled by processes of cumulative causation. Despite the process of national catch-up growth, regional evolutions are on the whole divergent, with a pattern of convergence at the middle- and lower-ends of the distribution and a slower tendency for club formation at the higher end, and thus overall an increasing trend of polarisation.
    Date: 2011–04–04
  7. By: Juan Carlos Cuestas (Department of Economics, The University of Sheffield); Mercedes Monfort (Department of Economics, Jaume I University); Javier Ordóñez (Department of Economics, Jaume I University)
    Abstract: Countries from Central and Eastern Europe have undergone a process of transition from communism to markets economies. The economic convergence, in terms of income, that these countries have achieved in recent years has been one of the cornerstones in the economic integration with Western Europe. In this paper we aim to analyze the degree of co-movement of unemployment rates in a sample of Central and Eastern European transition economies, and the role of German as the 'locomotive' in this process. We intend to test two hypotheses; first, is it possible to identify common patterns that are possibly linked to the economic convergence process in the unemployment rates cycles for this group of countries? And, second, is it possible to identify one of the main economic fundamentals that has acted as an attractor towards economic convergence? By means of nonlinear logistic smooth transition autoregressions and co-movement analysis we found that the German business cycle has acted as a common factor affecting the cyclical behavior of the unemployment rates in these countries.
    JEL: C32 E22 F15
    Date: 2011–04
  8. By: Chen, Qingqing; Goh, Chor-Ching; Sun, Bo; Xu, Lixin Colin
    Abstract: Over the last three decades, China's product, labor, and capital markets have become gradually more integrated within its borders, although integration has been significantly slower for capital markets. There remains a significant urban-rural divide, and Chinese cities tend to be under-sized by international standards. China has also integrated globally, initially through the Special Economic Zones on the coast as launching grounds to connect with world markets, and subsequently through the accession to the World Trade Organization. For future policy considerations, this paper argues that its economic production needs to be spatially concentrated, and its social services need to be spread out to the interior to ensure harmonious development and domestic integration (through inclusive rural-urban transformations and effective territorial development).
    Keywords: Economic Theory&Research,Banks&Banking Reform,Debt Markets,Emerging Markets,Access to Finance
    Date: 2011–04–01
  9. By: Michele Bruni; Claudio Tabacchi
    Abstract: The paper aims to provide a representation, as rich and complete as possible, of the Chinese labour market, both in terms of stock and flow, despite the fact that the statistical information is still rather poor and often inconsistent. It does then document the increasing differences in the level and trends of the main labour market variables at the provincial level. In order to reach a deeper comprehension of the dynamic of the Chinese labour market, the paper analyses two other extremely relevant phenomena: the so called “floating population” and the labour shortages that are more and more frequently affecting the coastal regions. After having provided a demographic background to the Lewis model of development with unlimited supply of labour, the paper shows in which periods China has been obliged to accumulate a large labour surplus, mainly in the agricultural sector, and in which periods and through which mechanisms, including ageing and internal migration, the process of deaccumulation has taken place. More specifically, the paper shows how up to now internal migrations have provided urban areas and coastal regions with an unlimited supply of labour, a factor that has played a major role in boosting the Chinese economic development and determining its typology. In order to reach this result, simple demographic tools have been utilized to estimate the net migration balance of each province and in each province of rural and urban areas, and therefore to define areas of departures and areas of arrival, information not provided by the literature on the floating population. Finally the paper provides a rough estimate of the disguised unemployment in agriculture and of its geographical distribution. After assessing which percentage can represent a possible supply of labour for the modern sector, it will be maintained that China not only is very close to the Lewis turning point (a situation that has already been reached in many coastal areas), but is going to become the world biggest importer of labour. In order to provide its population with living standards comparable to that of the western world, in a reasonable time interval, China needs to continue to grow at an extremely high rate. This will require the capacity to deal with a series of structural problems. Limiting our concerns to the labour market, that is characterized by increasing complexity and regional differentiation, high priority should be given to improve the collection, analysis and dissemination of labour market data; to abolish the one child policy that is totally obsolete in a situation that will be soon characterized by a structural lack of labour supply; to give to the Chinese citizens the right to freely move and change residence, while rapidly regularizing the existing floating population; to raise the legal age of retirement; to plan and implement a structure of t entries in vocational courses and higher educational paths coherent with the expected structure of the labour demand in terms of flows by occupation; to strengthen the Employment service system in order to improve skills matching at the local level, and facilitate the correct allocation of human resources over the national territory, in order to minimize the human and economic costs of future unavoidable internal migrations.
    Keywords: China; labour market; stock and flow; demography; internal migration; Lewis turning point
    Date: 2011–03
  10. By: Herrmann, Sabine (BOFIT); Mihaljek, Dubravko (BOFIT)
    Abstract: This paper studies the nature of spillover effects in bank lending flows from advanced to the emerging market economies and identifies specific channels through which such effects occur. We examine a panel data set of cross-border bank flows from 17 advanced to 28 emerging market economies in Asia, Latin America and central and eastern Europe from 1993 to 2008. Our empirical framework is based on a gravity model of financial flows. We augment this model with global, lender and borrower country risk factors, as well as financial and monetary integration variables. The empirical analysis suggests that global as well as country specific factors are significant determinants of cross-border bank flows. Greater global risk aversion and expected financial market volatility have been the most important factors behind the decrease in cross-border bank flows during the crisis of 2007–08. The decrease in cross-border loans to central and eastern Europe was more limited compared to Asia and Latin America, in large measure because of the higher degree of financial and monetary integration in Europe, and relatively sound banking systems in the region. These results are robust to various specification, sub-samples and econometric methodologies.
    Keywords: gravity model; cross-border bank flows; financial crises; emerging market economies; spillover effects; panel data
    JEL: C23 F34 F36 O57
    Date: 2011–04–05
  11. By: Bachev, Hrabrin
    Abstract: The dairy sector is among the most fundamentally affected by post-communist transition and EU integration of Bulgaria. This paper presents the dairy chain management in the country at current present stage of development. First, it analyses the state and forms of dairy value chain management identifying the dominant and prospective models of dairy chain management. Second, it outlines the features, factors and efficiency of a new business model of dairy farms inclusion in supply chain.
    Keywords: value chain management; market; private and public governance; dairy sector; Bulgaria
    JEL: D21 L11 O13 L66 Q18 L16 D23 L14 M31 O17 Q13 L23 L22
    Date: 2011–03–01
  12. By: Frank Bickenbach; Wan-Hsin LIU
    Abstract: Over the past decade the scale of higher education in China has expanded substantially. Regional development policies attempted to make use of the scale expansion as a tool to reduce the inequality of higher education among different regions with different development levels through providing the poor regions preferential treatment and support in this regard. This paper analyses a provincial dataset (1997-2008), aiming to provide comprehensive quantitative evidence for the development of inequality of higher education opportunities across provinces in China over the period of the scale expansion, taking different sizes and economic development levels of provinces into account. Results show that the regional inequality of higher education relative to provinces’ different population sizes clearly decreased over the research period. Accompanying the reduction in overall inequality across provinces, the inequality between the poor and the rich regions actually increased over the same period. However, the increase was realised in favour of the poor region. The empirical results are consistent with the policy orientation of reforming the higher education system and of promoting regional development in China over the past decade
    Keywords: higher education, regional inequality, China, Theil index
    JEL: C43 I23 I28 R53 R58
    Date: 2011–04
  13. By: Fang , Yiwei (Lally School of Management and Technology, New York); Hasan, Iftekhar (Lally School of Management and Technology, New York, and Bank of Finland,); Marton, Katherin (Fordham University, New York)
    Abstract: The policy changes and structural reforms in transition economies over the past two decades have created exogenous variations in institutional development, which offers us an ideal natural experiment to analyse the causal effects of institutions on bank risk-taking behaviour. This paper examines a wide array of institutional reforms in respect of law and legal institutions, banking liberalization, and enterprise restructuring in privatization and corporate governance. Using a difference-in-difference approach, we find that banks’ financial stability has increased substantially subsequent to the institutional reforms. Further analysis suggests that the enhancement of financial stability mostly comes from the reduction of asset risk. Moreover, the effects of institutional reforms on bank risk are more pronounced for domestic banks than foreign banks. From the policy consideration, our study sheds light on the risk implications of different institutional reforms that have been characterizing transition countries.
    Keywords: institutional development; bank risk; transition banking; foreign ownership
    JEL: G21 P30 P34 P52
    Date: 2011–03–23
  14. By: Vo, Xuan Vinh
    Abstract: This paper investigates foreign ownership in the Vietnam stock market from 2007 to 2009 employing a rich and detailed dataset. From the perspective of informational asymmetry, the paper examines the relationship between the foreign ownership level and attributes of Vietnamese listed firm in Ho Chi Minh City Stock Exchange. The findings of the paper indicate that foreign investors have preference for large firms, firms with high book-to-market ratio and firms with low leverage. Foreign investors also avoid firms with dominant shareholders and prefer to invest in firms where they can have influence. The results imply that foreign investors favor to invest in firms where they can avoid informational asymmetry.
    Keywords: foreign ownership; firm attributes; foreign investors; Vietnam
    JEL: G12 G11 G10
    Date: 2010–02–02
  15. By: Ortega, David L.; Wang, H. Holly; Wu, Laping; Bai, Junfei; Olynk, Nicole J.
    Abstract: Food safety issues often arise from problems of asymmetric information between consumers and suppliers of food with regards to product-specific attributes or characteristics. Food safety concerns in China are having a drastic impact on consumer behavior, commodity markets, international trade and food security. An additional challenge to the problem of asymmetric information lies in the inherent structure of the governing bodies which oversee food safety and quality. Unlike the United States and other developed countries, Chinaâs food safety is regulated by several government entities with different and sometimes overlapping responsibilities. As a result consumers donât have a comprehensive food safety and quality system on which to base their economic decisions. In an effort to maintain the food supply of the worldâs largest economy safe, Chinaâs government has approved a series of tougher food safety laws and regulations. Although publicized as a tough approach to food safety, it is unclear whether this latest effort will make Chinaâs food safer to eat and improve the countryâs image to its agricultural trading partners. While much attention has focused on the problems plaguing Chinaâs food inspection system, little research has been dedicated to analyze consumersâ concerns over food safety. In this paper we measure consumer preferences for select food safety attributes in milk. More specifically we estimate consumerâs willingness to pay for government certification, an independent (third party) certification program, national brand, and a productâs shelf-life using a choice experiment approach. We compare and contrast several modeling strategies to capture heterogeneity of consumer preferences. The data used in this study was collected from a choice experiment administered in seven major metropolitan cities in China, yielding a statistical sample of 6,720 observations. Our results suggest that Chinese consumers have the highest willingness-to-pay for a government certification program, followed by national brand, private certification, and longer shelf-life products. We find that Chinese consumers are very concerned about the safety of the milk they purchase and are willing to pay a high premium to assure that their food is safe. The high level of concern regarding milk safety is linked to recent food safety incidents involving dairy products, most notably the Melamine-adulterated milk products. Heterogeneity of consumer preferences and willingness to pay for the select food safety attributes was found by implementing a latent class logit model based on attitudinal responses as well as a mixed logit model. Although it might appear that Chinese consumersâ confidence on the government is eroding, as reported in the wake of recent food safety scandals, our research found that consumers were less confident on non-government food safety control measures. This result indicates that there is a strong need for the Chinese government to provide adequate food safety and quality control. Our findings call upon the direct involvement of the Chinese government in the food safety system. A more strict monitoring system via certification is necessary. If realized, such government efforts will provide higher welfare to consumers in the short-run and will restore consumersâ trust increasing social welfare in the long run. Policy implications of our results are discussed with particular attention given to food safety and security issues.
    Keywords: China, Choice experiment, Mixed logit, Latent class logit, Food safety, Preference heterogeneity, Willingness-to-pay, Food Consumption/Nutrition/Food Safety, International Relations/Trade, Marketing, Q11, Q18,
    Date: 2011
  16. By: Tammaru, Tiit (University of Tartu); van Ham, Maarten (University of St. Andrews); Leetmaa, Kadri (University of Tartu); Kährik, Anneli (University of Tartu)
    Abstract: Large scale suburbanisation is a relatively recent phenomenon in East Central Europe and responsible for major socio-spatial changes in metropolitan areas. Little is known about the ethnic dimensions of this process. However, large minority population groups, mainly ethnic Russians, remained into the former member states of the Soviet Union after its dissolution in 1991. We use individual level Estonia Census data in order to investigate the ethnic dimensions of suburbanisation. The results show that ethnic minorities have a considerably lower probability to suburbanise compared to the majority population, and minorities are less likely to move to rural municipalities – the main sites of suburban change – in the suburban ring of cities. Individual characteristics that measure strong ties with the majority population and host society exert a positive effect on ethnic minority suburbanization, and on settling in rural municipalities.
    Keywords: suburbanisation, ethnicity, Census data, East Central Europe, Estonia
    JEL: J61 R21 R23
    Date: 2011–04
  17. By: Konchyn, Vadym
    Abstract: Abstract. This paper reviews the economic situation of European countries that today are in deep external debt crisis and drew close to financial default, that can be announced by the foreign creditors and investors who can not for some reason get in time or on demand their money (the principal amount provided for use funds and (or) interest on them). However, in the article the situation of Ukraine's foreign debt is considered, which significantly increased as a result of financial management of banks, business entities and due to government and central bank policies during the Orange epoch. The prospects for economic development in Ukraine are outlined in view of external debt problem after coming into power the command of the Party of Regions.
    Keywords: Key words: total external debt of country, governmental external debt, external debt of monetary authority, private external debt, international investment position, balance of payments, foreign exchange reserves, financial default, toxic assets, PIGS-countries, restrictive fiscal policy, restructuring of external debt.
    JEL: E62 E58 E42 G15
    Date: 2011–03–30
  18. By: Matei, Ani; Matei, Lucica
    Abstract: The preoccupations about conceiving and promoting efficient anti-corruption strategies exist in most states, especially in the developing countries. The opportunity of such strategies derives from the direct link, demonstrated theoretically and empirically, between the effects of the anti-corruption strategies and government performance, translated both in the economic and social results and living standard, welfare etc. In the last decades, the transnational actors – UN, World Bank, OECD, EU etc. - have affirmed as promoters of own anti-corruption strategies, directing the states’ efforts, conferring adequate levels of relevance, effectiveness, efficiency or sustainability. The South-Eastern European states incorporate own anti-corruption strategies in the framework of general strategies, aiming the government reform in the context of the European integration process. Strengthening the public integrity, reducing corruption, developing a genuine climate of economic freedom become important objectives concerning the impact on government performance. The paper incorporates briefly the main characteristics of anti-corruption strategies, developed by transnational actors and it aims to shape theoretical and empirical frameworks for the assessment of anti-corruption strategies. The focus on some South-Eastern European states has a demonstrative character, as the presented analyses may be extended to various geo-political areas
    Keywords: Anti-corruption strategies; Assessment; Impact; Government performance
    JEL: D73 A13 C42
    Date: 2010–09–13
  19. By: Robert C. Feenstra; Zhiyuan Li; Miaojie Yu
    Abstract: This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive-compatibility, banks lend below the amount needed for first-best production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms, even in the exporters' home market. Greater risk faced by exporters also affects the credit extended by banks. Extra fixed costs reduce exports on the extensive margin, but can be offset by collateral held by exporting firms. The empirical application to Chinese firms strongly supports these theoretical results, and we find a sizable impact of the financial crisis in reducing exports.
    JEL: D8 F1 G2
    Date: 2011–04
  20. By: Geza, Paula; Giurca Vasilescu, Laura
    Abstract: In the present, Romania is considered a fragile state. While the lowest point of recession seems to have been exceed, the instability continues to characterize for a period all efforts and steps taken for economic recovery. Regarding the real convergence criteria, on December 2010 Romania presently continues to meet only the criterion regarding the sustainability of fiscal position while the assessment of the criterion related to the stability of the exchange rate cannot be performed accurately as long as the national currency – Leu - does not participate to the Exchange Rate Mechanism II (ERM II).
    Keywords: Real convergence criteria; Nominal convergence criteria; Euro adoption; Romania
    JEL: E42 F36
    Date: 2011–04–01
  21. By: Barbara Liberda (Faculty of Economic Sciences, University of Warsaw); Magdalena Szymczak (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The aim of this paper is to identify variables that affect the capability of an individual to earn and save income. Our hypothesis is that besides demographic and human capital determinants, social, cultural and psychological variables affect strongly the individual’s earning and saving competences. We test our hypothesis using a method of decision tree (Exhaustive search Chi – squared Automatic Interaction Detection) to identify the earning and saving competences of individuals in Poland. In the decision tree analysis we found factors that are conducive for earning and saving. These factors includes: fairness, attitude towards cheating at exams, tolerance towards persons of different religion and different skin color, trust in judges and scientists, social risk aversion, evaluating own health status, asking for advice. This theoretical approach is applied to micro data from a Survey on Civilization Competences of individuals in local communities conducted in July-September 2009 in five regions of Poland.
    Keywords: earning, saving, capability, competence, income, municipality
    JEL: D11 D12 D14
    Date: 2011

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