nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒07‒28
twenty-one papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Foreign direct investment into transition economies: Are the Balkans different? By Saul Estrin & Milica Uvalic
  2. China's 2008 labor contract law : implementation and implications for China's workers By Gallagher, Mary; Giles, John; Park, Albert; Wang, Meiyan
  3. How Does China's New Labor Contract Law Affect Floating Workers? By Richard B. Freeman; Xiaoying Li
  4. Heterogeneity of the effects of health insurance on household savings: Evidence from rural China. By Diana Cheung; Ysaline Padieu
  5. Microblogs in China: Bringing the State Back In By Nele Noesselt
  6. Do economic crises lead to health and nutrition behavior responses ? analysis using longitudinal data from Russia By Nikoloski, Zlatko; Ajwad, Mohamed Ihsan
  7. Relative Deprivation in China By Chen, Xi
  8. Risks, responsibility and public respect: Cases of entrepreneurs elected in the USA and in Russia By Konstanin Yanovsky; Sergey Zhavoronkov; Daniel Shestakov
  9. The "resurrection" of industrial policy in the European Union and its impact on industrial policy in the New Member Countries By Ádám Török; Gyöngyi Csuka; Bernadett Kovács; Anita Veres
  10. Social Policies in China and India: the Role of Land Ownership and of Economic Size By Minquan Liu
  11. The Reform of China‘s Energy Policies By Joachim Betz
  12. Формиране на човешкия капитал през комунизма: България By Simeonova-Ganeva, Ralitsa
  13. Technological Innovation, Entrepreneurship, and Development By Wim Naudé; Adam Szirmai
  14. Do Trust-Based Relations Improve Firm’s Performance? Evidence from Transition Economies By Berulava, George
  16. An Empirical Analysis of the Shanghai and Shenzhen Limit Order Books By Huimin Chung; Cheng Gao; Jie Lu; Bruce Mizrach
  17. Міжнародні злиття та поглинання у фінансовому секторі: світові тенденції та особливості прояву в Україні By Shumska, Svitlana; Stepanenko-Lypovyk, Bohdana
  18. Analysis of the impact of Croatia's accession to the EU on the agri-food sectors. A focus on trade and agricultural policies. By Pierre Boulanger; Emanuele Ferrari; Jerzy Michalek; Cristina Vinyes
  19. Ефекти от политиките, финансирани от европейските фондове: оценяване на въздействието на инвестициите в образование и наука в България By Simeonova-Ganeva, Ralitsa; Ganev, Kaloyan
  20. Моделиране на възвращаемостта от образование и реализация на притежателите на докторски степени на пазара на труда в България By Simeonova-Ganeva, Ralitsa; Panayotova, Nataliya; Ganev, Kaloyan

  1. By: Saul Estrin & Milica Uvalic
    Abstract: The paper explores the determination of foreign direct investment (FDI) into the Balkan transition economies – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania and Serbia. Detailed FDI inflows to Southeast Europe (SEE) are analysed to determine the main differences in the volume, timing and sectoral structure of FDI within the region and in comparison to the Central East European countries. A gravity model to all transition economies during 1990-2011 is then estimated to assess whether the factors driving FDI to the Western Balkans are different. They are found to be so; even when size of their economy, distance, institutional quality and prospects of EU membership are taken into account, Western Balkans countries receive less FDI. These issues are of high policy relevance for the Balkan economies and ought to contribute to the current debate on the ‘new growth model’.
    Keywords: foreign direct investment; EU-South-Eastern Europe; transition processes
    Date: 2013–07–12
  2. By: Gallagher, Mary; Giles, John; Park, Albert; Wang, Meiyan
    Abstract: This paper presents empirical evidence from household and firm survey data collected during 2009-2010 on the implementation of the 2008 Labor Contract Law and its effects on China's workers. The government and local labor bureaus have made substantial efforts to enforce the provisions of the new law, which has likely contributed to reversing a trend toward increasing informalization of the urban labor market. Enforcement of the law, however, varies substantially across cities. The paper analyzes the determinants of worker satisfaction with the enforcement of the law, the propensity of workers to have a labor contract, workers'awareness of the content of the law, and their likelihood of initiating disputes. The paper finds that all of these factors are highly correlated with the level of education, especially for migrants. Although higher labor costs may have had a negative impact on manufacturing employment growth, this has not led to an overall increase in aggregate unemployment or prevented the rapid growth of real wages. Less progress has been made in increasing social insurance coverage, although signing a labor contract is more likely to be associated with participation in social insurance programs than in the past, particularly for migrant workers.
    Keywords: Labor Markets,Labor Policies,Labor Standards,Work&Working Conditions,Labor Law
    Date: 2013–07–01
  3. By: Richard B. Freeman; Xiaoying Li
    Abstract: China’s new Labor Contract Law took effect on January 2008 and required firms to give migrant workers written contracts, strengthened labor protections for workers and contained penalties for firms that did not follow the labor code. This paper uses survey data of migrant workers in the Pearl River Delta before and after the law and a retrospective question on when workers received their first labor contract to assess the effects of the law on labor outcomes. The evidence shows that the new law increased the percentage of migrant workers with written contracts, which in turn raised social insurance coverage, reduced the likelihood of wage arrears, and raised the likelihood that the worker had a union at their workplace.
    JEL: J01 J28 J53 K31
    Date: 2013–07
  4. By: Diana Cheung (Centre d'Economie de la Sorbonne); Ysaline Padieu (Centre d'Economie de la Sorbonne)
    Abstract: This paper estimates the impact of the New Cooperative Medical Scheme (NCMS) on household saving across income quartiles in rural China. We use data from the China Health and Nutrition Survey for the 2006 wave and we run an ordinary least squares regression. We control for the endogeneity of NCMS participation by using an instrumental variable strategy. We find evidence that NCMS has a negative impact on savings of lower-middle-income participants, while it does not affect the poorest households. The negative effect of NCMS on savings of middle-income participants holds when we use propensity score matching estimations as a robustness check.
    Keywords: Rural China, New Cooperative Medical Scheme, health insurance, Chinese savings and consumption, propensity score matching.
    JEL: C21 D1 I18 O53
    Date: 2013–07
  5. By: Nele Noesselt (GIGA Institute of Asian Studies)
    Abstract: This paper reflects the adaptation and transformation of the Chinese party-state’s governing strategy in the digital era. Through a discourse analysis of the current Chinese debate on the role of microblogs in China, it argues that China’s political elites have revised their social management strategy. They now tend to base their political decision-making on strategic calculations that reflect online public opinion in order to increase the system’s efficiency and to generate a new kind of performance-based legitimacy. This turn to a more responsive mode of governance has been driven by the findings of Internet surveys and reports provided by Chinese research institutes and advisory bodies. A close reading of these documents and reports helps to answer the question of why authoritarian states such as China do not prohibit the spread of new communication technologies, even though these are said to have triggered or at least facilitated the rebellions of the Arab Spring.
    Keywords: governance in China, e-government, e-governance, deliberation
    Date: 2013–02
  6. By: Nikoloski, Zlatko; Ajwad, Mohamed Ihsan
    Abstract: Using longitudinal data on more than 2,000 Russian families spanning the period between 2007 and 2010, this paper estimates the impact of the 2009 global financial crisis on food expenditures, health care expenditures, and doctor visits in Russia. The primary estimation strategy adopted is the semi-parametric difference-in-difference with propensity score matching technique. The analysis finds that household health and nutritional behavior indicators do not vary statistically between households that were crisis-affected and households that were not affected by the crisis. However, the analysis finds that crisis-affected poor families curtailed their out-of-pocket health expenditures during and after the crisis more than poor families that were not affected by the crisis did. In addition, crisis-affected vulnerable groups changed their health behavior. In particular, households with low educational attainment of household heads and households with more elderly people changed their health and nutrition behavior response when affected by the crisis. The results are invariant to the propensity score matching techniques and parametric fixed effects estimation models.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Regional Economic Development,Population Policies,Rural Poverty Reduction
    Date: 2013–07–01
  7. By: Chen, Xi
    Abstract: Relative deprivation (RD), also known as relative poverty , an idea implicitly put forward by Adam Smith in The Wealth of Nations and formally conceptualized by Runciman (1966), refers to the discontent people feel when they compare their positions to others and realize that others in the group possess something that they do not have. RD is important to Chinese people as reflected in the traditional saying “it is better to be the head of a chicken than the tail of a phoenix”, indicating that taking a relatively good position benefits people in the Chinese society. RD is also a pressing issue for China after its three decade unprecedented economic growth accompanied by inequalities at historically high levels. This entry reviews key measures of RD and empirical findings for China. I also discuss some of the most pressing policy issues with regard to RD.
    Keywords: Relative Deprivation, Inequality, Poverty, China
    JEL: B4 D1 D3 I1 I3 O2
    Date: 2013–01–08
  8. By: Konstanin Yanovsky (Gaidar Institute for Economic Policy); Sergey Zhavoronkov (Gaidar Institute for Economic Policy); Daniel Shestakov (Gaidar Institute for Economic Policy)
    Abstract: Adam Smith pointed out public respect, prestige as significant component of compensation "for some employment" ("honorableness... of employment"). We assumed, the public moral sanction on success (Weber), public demand for "self-made man" should correlate positively with number of businessmen elected (US Senators, Russian governors and State Duma Deputies). Expressive voting of this sort could support positive pro-market patterns (create positive externalities) - contrary to the "expressive policy (behavior) trap" (Hillman, 2010). During the USA "classical" period ("First 150 years" M. Friedman recommended to take as a model for underdeveloped countries), successful entrepreneurs enjoyed obvious advantages in elections. The same was true for outstanding military-men, for civilian experienced in combat and decorated with awards it also greatly improved their chances to be elected. To hold military heroes in public respect was equivalent of public demand for more quality pure public good "defense" provision. Arising of leftist parties and coalitions, standing for mixed public goods priority provision, accompanied by sensible changes in public respect distribution. Lawyers, businessmen and army officers (military heroes) are crowded out by public servants, "social activists", public school teachers since "Universal Suffrage" institution introduction. In Russia, entrepreneurial status, especially a successful entrepreneurs status, is accompanied by no tangible public recognition. However, the self-esteem of individuals employed in business remains relatively high. The officers "ahead start" was almost unobservable in Russia after very first elections. With our data we also found that economic freedom indicators associated with greater prestige of entrepreneurs within society are positively correlated with voting for pro-market parties and negatively correlated with voting for left.
    Keywords: employment prestige, business prestige, public respect, roving anti-business bandit, stationary anti-business bandit, and leftists' electoral support measured negative perception of business
    JEL: D72 K22 P16 Z13
    Date: 2013
  9. By: Ádám Török; Gyöngyi Csuka; Bernadett Kovács; Anita Veres
    Abstract: The aim of this study is to consider the main factors affecting the industrial policy in Central and Eastern European Countries (CEECs) by elucidating the issues such as; the connection between competitiveness and industrial policy, innovation, manufacturing, green growth and environment. The objective is to inspire thought in the reader and to highlight the necessity for a new industrial policy, which considers regional differences and specializations in the catching up economies of the CEECs. The ultimate question is what kind of industrial policy development is required in the CEECs in the future that could enable an even more successful catching up, or convergence, with the Western economies. This study includes an analysis of the countries that have been more successful in transition. A measurement was made of the export market shares as well as the industrial structure (primarily in manufacturing). The first step towards accomplishing this task was to examine the export competitiveness of CEECs, the concept of export competitiveness, and the role of exports in competitiveness-oriented growth strategies during the financial crisis. The question was how the effectiveness of policies that enhance export competitiveness could be improved in these countries. The second step was to examine and differentiate the variety of industrial politics in the CEECs, with special emphasis on tools used in order to promote incoming foreign direct investment and technological development. The third step was an assessment of CEECs innovation and R&D policies, and their linkages with competitiveness, for a better understanding of future options in the CEECs. It is outside the scope of this study to formulate a new industrial policy for certain countries since there is a wide variation in the level of development, workforce structure and industrial specialization of the countries examined in this study. Making predictions that are generally applicable to all member countries of the European Union (EU) is not possible in the international economic environment of June 2013. This study highlights that there is a need for a country specific industrial policy for each member country. During the development of industrial policy, the decision makers of each country must make complex decisions which consider all past and current economic factors. It is the intention of this study to inspire deeper, new ways of thinking about industrial policies in the CEECs.
    Keywords: Industrial policy, clusters, green growth, innovation, manufacturing, competitiveness, Central and Eastern Europe
    JEL: O14 O25 L16 L50 L52
    Date: 2013–07
  10. By: Minquan Liu (Asian Development Bank Institute)
    Abstract: Issues of social policy? their evolution, role in ensuring minimum equity, developmental functions and future directions? are especially worth exploring in respect of China and India. The two countries are sufficiently similar in terms of economic size, developmental stage and the challenges they face, but are dissimilar enough in terms of the larger socio-economic and political institutions and systems, history and culture as to make them natural candidates for an in-depth comparative study of developmental experiences. Focusing on social policy, Arjan De Haan (2013) makes a useful attempt in that direction. (?)
    Keywords: Social Policies in China and India: the Role of Land Ownership and of Economic Size
    Date: 2013–06
  11. By: Joachim Betz (GIGA Institute of Asian Studies)
    Abstract: China’s shift in energy policies has been broader, deeper and more successful than that of most other emerging economies, although the economic costs of this transition are tremendous because China is an over-industrialized country whose production is highly energy-intense and it depends on emission-intensive coal as main energy source. Factors that have influenced energy reforms, which focus on saving and conserving energy, developing renewable sources and nuclear power, are – on the international level – the impact of climate change on India, the desire to be recognized as a responsible power in the international community, China’s dangerously growing dependence on energy imports, and the uncertain prospects of equity oil abroad for energy security. Domestic factors are the growing assertiveness of environmental NGOs, relatively effective sectorial governance, and the embedding of energy policies in a blueprint for industrial upgrading.
    Keywords: energy policy, climate change, energy institutions, international climate summits, political system, civil society
    Date: 2013–02
  12. By: Simeonova-Ganeva, Ralitsa
    Abstract: The question raised in the present paper is: What is the human capital during the communism and which are the key political and economic determinants of its formation during this period? Firstly, a measurement of the human capital is conducted on the basis of quantitative educational indicators. The empirical analysis suggests twelve new time series on human capital, which are consistent with the modern approaches of human capital measurement. Secondly, key political and economic determinants are identified following a survey on relevant documents in the State Archives and social science research from the period. We observe a considerable improvement in human capital stocks over the period. Significant changes occur at the end of 50s and during the 60s. Later, at the end of the 70s and during the 80s of 20th century we observe decline in participation in the educational ysytem. In the beginning of the transition to market economy about 60% of the population in Bulgaria has attained basic or lower educational level. In spite of the fact that during the whole period the government has been trying to provide favorable conditions for human capital formation, its policies fail to improve the educational structure of the population in the long run. We assume that an explanation of the phenomenon is the lack of economic incentives for the individuals to pursue higher education.
    Keywords: human capital, communism, determinants of human capital formation
    JEL: I2 I28 P2
    Date: 2012
  13. By: Wim Naudé (Maastricht School of Management, UNU-MERIT, University of Maastricht and IZA- Institute for the Study of Labour); Adam Szirmai (UNU-MERIT and Maastricht Graduate School of Governance, University of Maastricht)
    Abstract: What is the relationship between technological innovation, entrepreneurship and development? Is it better for developing countries to coping and adapt existing technologies from richer countries rather than undertake or promote intensive research and development (R&D) of their own? We tackle these perennial issues afresh by considering the relationship between knowledge, innovation and growth in the past and by identifying whether and how the scope for catch-up growth exists. We focus on the interesting case of technological innovation in the comparative economic performance of China; we draw some lessons for development elsewhere.
    Keywords: innovation, entrepreneurship, development, knowledge, China, BRICS
    JEL: F23 L52 L53 O25 O40 O33 O34
    Date: 2013–07
  14. By: Berulava, George
    Abstract: The purpose of this paper is to analyze the impact of trust-based relations on firm’s performance in transition economies. The trade credit variable is used as a proxy of trust-based relations and the propensity score matching method is employed to establish casual link between relational governance and business performance in the study. The research is conducted using data from a large survey of firms across 28 transition economies. The results of the study suggest that informal trust-based institutions of contract governance represent an important way for enhancing of business performance. To say distinctly, our findings indicate that in transition economies trade credits positively affect firms’ sales growth. They provide incentives for more intensive innovation activities and ensure higher labor productivity rates. The firms that trust their partners are characterized by larger proportions of reinvested profits as well. The main contribution of this paper is that it provides new empirical insights into the casual link between trust-based relations and business performance of firms in transition economies.
    Keywords: Keywords: trust-based relations, trade credit, networks, propensity score matching, business performance, transition economies
    JEL: D23 L14 P31 Z13
    Date: 2013–07–18
  15. By: Konstanin Yanovsky (Gaidar Institute for Economic Policy); Sergey Zhavoronkov (Gaidar Institute for Economic Policy); Vladimir Mau (Gaidar Institute for Economic Policy)
    Abstract: In this chapter we are addressing the numerous cases of government failures in countries with transit economies and weak democratic traditions when the state is called upon to provide “pure public goods” (defense, security, and justice). In other words, the subject matter of this chapter involves those institutions which create the very possibility of the existence of real, rather than merely nominal, private property. The modern understanding of genuine private property includes the assumption of the inviolability of the person of the property owner. Without this, the difference between private property and medieval “conditional tenure” becomes negligible. The inviolability of the person of the property owner is assured by the state’s supplying three classic “pure public goods”: defense (protection of the property owner from aggression from abroad); security, and justice (protection of the property owner against arbitrary action and coercion within the country). The creation and maintenance of a combat ready military, uncorrupted law enforcement government agencies, and an independent court system subject only to the law, are duties of primary importance when reforms are under way. These “pure public goods” are extremely important for long term economic growth. An independent court presumes the independence of judges, their irremovability, and high costs of their dismissal. Court independence is provided and ensured by laws and traditions, and finds its expression in the fact that the state, as represented by high ranking officials and agencies of the government, can lose in court to a private individual in the course of a litigation of some significance to society as a whole. The availability or absence of independent courts is treated as a logical variable. In Russia, the quality of the court system and the law enforcing agencies of the government continues to remain low, despite an entire series of attempts at reform and disparate achievements here and there. In the early 1990s, reformers’ attention was principally focused on economic transformations: their objective was achieving financial stability and privatization. The absence of financial stability posed the imminent threat of social explosion and economic collapse. Privatization was already outfitted with ready-to-use options for implementation, which had been tested by other post-socialist countries. An understanding of the importance of reforming the court system and law enforcing and judicial government agencies came in the late 1990s. Significant and lasting achievements in the area of creating an atmosphere favorable to the growth of business and the economy turned out to be impossible without such reforms..
    Keywords: Rule of Law, Rule of Force, Personal Rights, Private Property Protection; Pure public goods
    JEL: D73 D78 K40 N44 O43 P26
    Date: 2013
  16. By: Huimin Chung (National Chiao Tung University); Cheng Gao (Rutgers University); Jie Lu (Rutgers University); Bruce Mizrach (Rutgers University)
    Abstract: This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Exchanges. The two major Chinese stock markets are pure order-driven trading mechanisms without market makers, and we analyze empirically both limit order books. We begin our empirical modeling using the vector autoregressive model of Hasbrouck and extend the model to incorporate other information in the limit order book. We also study the market impact on A shares, B shares and H shares, and analyze how the market impact of stocks varies cross sectionally with market capitalization, tick frequencies, and turnover. Furthermore, we find that market impact is increasing in trade size. Order imbalances predict the next day's returns, with small order imbalances having a negative effect.
    Keywords: limit order book, Chinese stock market, microstructure, VAR model
    JEL: G14
    Date: 2013–07–16
  17. By: Shumska, Svitlana; Stepanenko-Lypovyk, Bohdana
    Abstract: Specific feature of the present stage of financial markets development is strengthening of internationalization processes, manifested in erasing national borders between states, formation of international financial market, establishment of transnational financial corporations as well as growing inflows of foreign capital in the financial sector of emerging markets. Due to the financial crisis of 2008 strengthening of internationalization of financial markets led to increased risks associated with the presence of foreign capital in the financial system. Expansion of the crisis in Ukraine's financial sector was supported by the presence in the banking system of a significant share of the capital of foreign banks, parent institutions of which were affected by the global financial crisis and became one of the channels of its expansion. The article’s object is to summarize features and trends of mergers and acquisitions (M&A) processes on both the global financial market and Ukrainian banking sector. Also, the likely reasons of reducing of the number and value of M&A deals in Europe and Ukraine in 2006-2011 were denoted. The change of qualitative characteristics of mergers and acquisitions in the Ukrainian banking sector was shown on the basis of the value evaluation of banks that were sold to foreign investors. The countries of origin of capital directed on M&A transactions with Ukrainian banking institutions were determined, which made possible to detect changes in the geographical structure of the inflow of foreign capital in the domestic banking sector. The impact of financial crisis of 2008 on the financial stability of banks with both Ukrainian and foreign capital was shown. On the base of the conducted research the threats that are distinctive for the current stage of development of the financial market of Ukraine were substantiated.
    Keywords: Mergers and acquisitions, foreign capital, financial market, banking sector, capital outflows.
    JEL: G10 G34
    Date: 2012–12
  18. By: Pierre Boulanger (European Commission – JRC - IPTS); Emanuele Ferrari (Oxford Brookes University); Jerzy Michalek (freelance researcher); Cristina Vinyes (European Commission – JRC - IPTS)
    Abstract: This report analyses the likely effects of Croatia's accession to the European Union (EU) on the agricultural and food sectors in terms of trade, production, employment and GDP for Croatia, the EU-27 and their main trading partners. Using a multi-country Computable General Equilibrium model (MAGNET) this study evaluates the impacts of the harmonisation of trade and agricultural policies that occur after this enlargement on July 1st, 2013. The results show that both Croatia's GDP and employment will slightly increase. The main conclusions point out significant market price effects as well as changes in trade patterns.
    Keywords: CGE, European integration, agricultural trade, agricultural policy
    JEL: C68 Q17 Q18
    Date: 2013–07
  19. By: Simeonova-Ganeva, Ralitsa; Ganev, Kaloyan
    Abstract: The main objective of the paper is to provide an estimation of the impact of the investments in education and science in Bulgaria, financed by the European structural instruments. It provides net impact assessment as of end of 2012 as well as projections of potential effect until 2020. The methodology used is based on application of SIBILA model (Vasilev, Ganev, Simeonova-Ganeva, Chobanov & Tsvetkov, 2011).
    Keywords: economic policies, impact assessment, european funds, human capital, technological capital
    JEL: E6 H5 I2
    Date: 2013
  20. By: Simeonova-Ganeva, Ralitsa; Panayotova, Nataliya; Ganev, Kaloyan
    Abstract: In this study we present the theoretical framework of the so called Mincerian equations used for modelling returns to education. Then, we construct a conceptual framework which allows us to answer the question “What happens to doctoral degree holders in the labour market?”. We analyse data for about 45,000 PhD graduates in Bulgaria from the NSI survey Career development of PhD degree holders run in 2007, 2009, and 2010. An attempt is made to measure pay gaps in terms of gender and major of study. Using Mincerian equations, we calculate these pay gaps, and thus we answer the question whether there are any income differences among doctoral degree holders. We find out that a doctoral degree holder in natural or technical science has a significantly higher return than a degree holder in social or humanitarian studies. Another finding is that the greatest gender pay gaps are observed in social and humanitarian studies while the smallest gap is in natural and technical sciences.
    Keywords: returns to education, doctoral degree holders, labour market income, gender pay gap, pay gaps by field of study
    JEL: I2 J3
    Date: 2013
  21. By: Konstanin Yanovsky (Gaidar Institute for Economic Policy); Dmitry Cherney (RANEPA); Artem Shadrin (RF Ministry Economic Development)
    Abstract: Small well-motivated groups, including state officials, public and community activists, politicians etc proved their capacity to impose burden on economy. The power to do so in modern Market Democracies could be reached without “unsheathing the sword”. Old fashioned redistribution experts - roving bandits are crowded out by modern ones. The most common way is to use the whole of the state apparatus as a “sword,” and to resort for cover to care for the needy and protection of the vulnerable, the ill-informed, the weak, the sick, or the “unwise” economic agents from all kinds of possible dangers. The longer list of the categories of persons in need of protection because of their “weakness,” "underprivileged statute in the past" etc, the easier it becomes to justify regulatory interference, the growth of the state apparatus, the increase in state insurance programming, and other budgetary expenses. Classical liberal epoch's legislator presumed the economic agent is reasonable, rational and responsible. This assumption had been gradually substituting for the last century, by the implicit assumption of citizen's' limited capacity. The mechanism of the impact upon economic growth achieved by means of special interests groups’ expansion has been described by M. Olson. “Protection” takes place by means of market entry barriers placed in the way of agents or by means of various controls and regulations. One who imposes heavy Regulatory burden in the emerging markets, in transitional economies with weak property protection makes running fair business almost unaffordable.
    Keywords: special interest groups, personal capacity assumptions, excessive regulation, regulations' reproduction
    JEL: D73 K20 N14 O43
    Date: 2013

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