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Top 15 Most Interesting Reports of the HSE's XV April International Academic Conference

Russians are failing to cope with debt; small town economies are lagging behind; the Russian market is not favourable for a defined-contribution pension system, and Russian statistics are unsuitable for analysis – these were the top 15 most interesting papers from the HSE's XV April Conference, according to Opec.ru

A total of 624 papers were presented at the HSE's XV April Conference. The following 15 are a must read for those interested in economic policy; a few of them will also be interesting to those whose fields lie in the humanities. In most cases, preference was given to papers with the full text, as well as abstract, posted on the conference website. The list below does not include papers from the 2013 top lists (see 1, 2 and 3).

'Interesting' is a subjective notion; no two top lists of the most interesting academic papers are exactly alike. We have selected those which may be relevant, engaging, and helpful for researchers of related fields, policymakers in the socio-economic sphere, and a broad audience of people interested in economic and social issues.

1. Olga Kuzina (HSE)
Use of Bank Loans and Debt Rates in Russia (2009-2013)

It may appear that most Russians do not have too great a debt burden: loan coverage and loan size are quite low in Russia compared to other countries. However, outstanding individual debt in Russia is dominated by short-term consumer loans with exorbitant interest rates; therefore, the proportion of borrowers facing loan service charges equal to or exceeding 50% of their current income is higher in Russia than in other countries, and it is particularly high in Russia’s small towns. In 2013, 58% of borrowers considered loan repayment to be a heavy burden for their households, and 41% found that their per capita income dropped below the subsistence level after loan payments were made. Olga Kuzina's findings suggest one possible scenario of a banking crisis in Russia: as incomes decline, more borrowers will default on their loans.

2. Bekkhan Chokaev, Alexander Knobel (both from the Gaidar Institute)
Estimated Economic Effects of an FTA with the European Union

One of the reasons behind the conflict escalationbetween Russia and Ukraine was the latter's intention to sign a free trade agreement with the European Union, which Russian politicians regard as contrary to Russian interests. But perhaps Russia should consider signing a similar agreement with the EU? The paper concludes that it could be a forward-looking decision, particularly given the high trade surplus in the Russia-EU trade. A free trade agreement with the EU could benefit Russia's GDP in the short and long term, while Kazakstan's GDP would benefit less from a duty-free trade zone with Europe, and Belarus would be the only member of the Customs Union to gain nothing from such an agreement. As for Russia's industries, only automakers and wood and paper product manufacturers would find a free trade agreement with the EU unprofitable.

The paper, unfortunately, has only theoretical value. Russia is not party to either the Eastern Partnership or the EU Neighbourhood Policy, notes another paper from the XV April Conference by Kirill Entin (HSE). As a result of the conflict with Ukraine, Russia's integration projects have been taken off the agenda, while Russia's relations with the EU have fallen into deep crisis.

3. Alexander Nepp (Ural Federal University), Polina Kryuchkova (MSU, HSE), Alexander Semin (Ekaterinburg, RGPPU)
Investment Risks in the Institutional Environment of Russia's Pension Insurance System: A Comparison with the OECD Countries

Defined-contribution pension systems can create investment risks, and when risks are high and investment income low, such systems are not feasible. In 2004-2011, the Russian national pension system faced a 61.9% real reduction in the cost of savings, and only four of the 68 managing companies achieved a rate of return higher than the rate of inflation. Unreasonable regulation and incompetent management are not the only reasons, although index investing could bring better results. In 2004-2011, the real rate of return in Russian NPFs was positive, but lower than in all OECD countries. The reason is that NPFs in Russia prefer low-risk assets due to higher volatility of Russian bond and stock markets compared to China, India, and Brazil, let alone the OECD countries; it is an unfavourable environment for pension investments.

4. Vladimir Bessonov (HSE)
Limitations of Russian Statistics

Russian statistics are scarce, inaccurate, and lacking. Like prisoners in Plato's Allegory of the Cave, users of Russian statistics are forced to judge reality by shadows projected on the cave wall. Individual indicators are not comparable, time series are broken or interrupted even for the most important variables, such as GDP, inflation, industrial production, and investment. Russian statistics are therefore misleading: the observed declines in investment in early 2002 and in 2011 were actually caused by changes in the methodology for assessing the value of investments. The same reason was at least partially behind the inflation leap in the first half of 2013 and the concurrent economic slowdown. The Russian Federal Statistics Service (aka Rosstat) neglects to inform users in time of any changes in its procedures; time series and data comparability over time are very low on their list of concerns. Statistical publications show only chunks of the time series data from recent years, while little is left of decade-old statistics.

Even worse is the situation with monthly and quarterly figures reflectingimportant dynamics and short-term trends. Such data are essential for analyzing crises and abrupt changes in the economy. Data from previous periods are not always published, making it impossible to construct long time series. In 2012, month-on-month data show a 13% growth in agricultural production compared to 2011, but year-on-year data suggest a 4.8% drop over the same period. Which of these are true?

Inherited from the old Soviet system, Russian statistics continue to focus on annual economic growth indicators (required for reporting) and treat short-term statistics as secondary (who cared about the domestic market conjuncture in Soviet times anyway?). Presenting economic indicators in relation to a baseline measure could solve the problem once and for all.

5. Konstantin Krinichansky, Alexander Unrau (both from the South Ural State University)
Urban Development Trends and the Russian City

Russian cities make a limited contribution to the country's economic development. Is it possible thatglobal trends in urban development have not yet affected Russia? Russia's largest cities make a major contribution to its GDP, but the 'second-largest' group of cities with 150,000 inhabitants or more are not showing any visible growth. Researchers from the South Ural University have made an attempt to calculate the gross municipal product of 165 Russian cities with more than 100,000 inhabitants; they adjusted the official data using statistics on individual investments in housing and small business investments.

They found that Russia's two largest cities are over-developed, while most others have severely underdeveloped economies and attract relatively few people. The 'second-largest' group of cities contribute just 27.6% to Russia's GDP, in contrast to 74% in the U.S. and 36% in western Europe.

The cities they found to be the most successful inturning investments into economic growth included Magnitogorsk, Belgorod, Tyumen, Perm, Krasnoyarsk, Ufa, Omsk, and Murmansk, while the least successful included Naberezhnye Chelny, Smolensk, Ivanovo, Voronezh, Tver, Astrakhan, and Lipetsk.

Russia's current policies are not likely to enable fast-track growth of 'second-largest' cities in the near future, and it is not a coincidence that the population of most Russian cities, except those with more than a million inhabitants, continues to decline. Albrecht Kauffmann (Halle Institute for Economic Research), Leonid Limonov, and Marina Nesena (both from Leontief Centre) came to similar conclusions. They categorized Russian cities by economic and demographic growth rates and found evidence of an agglomeration effect only in cities with a million or more inhabitants, in the largest cities of Russia's central and southern regions, and in Moscow suburbs. Proximity to mining operations was found to be the single biggest driver of urban development. Most Russian cities have not yet learned how to live in a free-market economy, suggests Evgenia Kolomak (RAS Institute of Economics and Industrial Engineering); therefore, the largest cities attract all economic actors, while medium-sized communities remain underdeveloped.

6. Paul Dower (NES), Egor Malkov, Leonid Polishchuk (both from HSE), and William Pyle (Middlebury College)
De Soto Revisited: Land Ownership and Performance of Russian Firms

Famous Peruvian economist Hernando de Soto is known for his theory suggesting that providing many small entrepreneurs with legal ownership of their property (particularly land) is a crucial step towards building a capitalist economy; property ownership will facilitate access to long-term investment andloans.

For a decade, Russian officials have been urging entrepreneurs to buy out the land under their private enterprises and buildings. De Soto's rule, however, does not apply in Russia, where property rights are poorly enforced and property owners become attractive targets for hostile takeovers. This is particularly true for small business – de Soto's main concern.

Another reason is that by selling its property to business owners, the state automatically reduces its stake in their businesses, making it easier to cut off their access to administrative resources, state contracts, and even infrastructure.

7. Oksana Sinyavskaya (HSE)
Winners and Losers in the New Pension Reform

Twelve years since the launch of pensionreform in Russia, the country’s pension system is deep in crisis. Therecent legislative package adopted in 2013 is making things even worse. Russia's pension system is extremely inefficient, suffers strong pressure from the country's worsening demographic and macroeconomic positions, and is overwhelmed by excessive liabilities. Pension coverage rules are nontransparent and changeable, and the new pension formula will provide only temporary relief to the system which is not likely to extend beyond 2020.

People who stand to lose from the new pension formula are the poor (in informal employment or unemployed) and the upper middle class, while the likely winners are the current pensioners and the state's budget. No quick and good solution for Russia's pension challenges exist today, and one should expect to see the rules of the game change again and again. People with left-wing views are also dissatisfied with the new pension system, and their sentiments are reflected in a paperby Lyudmila Rzhanitsyna (RAS Institute of Economics). While pension coverage is declining, the new formula is destroying every working element of the current system. In addition, it isnontransparent and is potentially leading to pension inequality.

8. Vladimir Gimpelson (HSE), Galina Monusova (RAS IMEMO and HSE)
Societal Attitudes towards Inequality: Is There a 'Tunnel Effect'?

It is generally agreed that inequality, to a certain extent, is a feature of all modern societies. But people in different countries have different perspectives on what kind of inequality is 'excessive' or 'necessary', acceptable or unacceptable. The authors examine the hypothesis that people's perception of inequality depends on whether or not society allows for upward mobility; societies which are more segmented and less mobile, where people have fewer opportunities to change their socioeconomic status, are less tolerant of inequality. Thefindings confirm the hypothesis – the more widespread the non-meritocratic rewards, the stronger the popular support for wealth redistribution policies.

9. Jouko Rautava (BOFIT)
Oil Prices, Excess Uncertainty and Trend Growth: A Forecasting Model for Russia's Economy

The sharp decline of Russia's economy in 2008-2009 came as a surprise to policymakers and economists. We already know that despiteany pre-crisis declarations made by Russian officials, the country is still strongly dependent on international oil prices. Increased uncertainty also had an impact on Russia's recession. The country is unlikely to return to its pre-crisis growth rates in the coming years, as its long-term trend of GDP growth has dropped from 4% to 2% per annum. A sudden collapse of oil prices can cause a significant deceleration of economic growth down to zero, and combined with increased uncertainty (and suspension of international loans) it can cause Russia's GDP to decrease by 5%.

In their paper 'Estimating Sustainable Output Growth in Emerging Market Economies', Anna Krupkina, Elena Deryugina, and Alexey Ponomarenko (all from the Russian Central Bank) estimate the potential growth and output gap. Estimating potential growth rates is important for monetary policy. The CBR analysts also found a sharp decline in potential growth rates compared to the pre-crisis level (from 5% to 3%).

10. Ruben Enikolopov (UPF), Alexey Makarin (Northwestern University), Maria Petrova(UPF), and Leonid Polishchuk (HSE)
Social Media and Protest Participation: Cross-City Evidence from Russia

Has social media penetration in recent years increased people's incentive to engage in political protest? For the Arab Spring, yes, but what about Russia? Measuring the role of social media is difficult, because people choose a social media platform which they like to begin with, and it is often unclear whether their social media of choice, in turn,influence their own views and actions. The authors examine this question using the Russian VKontakte as an example and show that Russian 2011-2012 protests were more numerous in areas with higher VKontakte penetration. A paper by Olesya Koltsova and Andrei Scherbak (HSE, St. Petersburg) shows the role of Livejournal in political mobilization. The authors found that oppositional bloggers dominate the blogosphere, and their political activism is having an impact on the ratings of oppositional parties and presidential candidates. The blogosphere's sentiments, in turn, are determined by the unchanging leader's long rule and by the growing concentration of power.

11. Aleksandr Chashchukhin (HSE, Perm)
Soviet School Teachers and Students of the 1950s as Portrayed in the Board of Education Inspection Reports

How did Soviet people living in Stalin's era perceive the official ideology and its political slogans? In an attempt to reconstruct this mentality, Chashchukhin uses reports from school inspections carried out by the Perm Regional Board of Education in 1949 and 1950; the purpose of such inspections was to evaluate schoolteachers' performance in teaching classes in Soviet history and the Soviet Constitution. The inspectors attended lessons, interviewed teachers and students, and checked that all required teacher's guides and textbooks were available. As follows from the inspection reports, the students believed, for example, that the Soviet authorities suppressed rich farmers, landowners, and capitalists in 1936 and 1937, even though it occurred much earlier. The inspectors had expected both teachers and students to reproduce the textbook material more or less accurately, but instead discovered numerous myths and misconceptions.

Other aspects of Stalinist propaganda are described in the paper 'The Role of Stalin's Canvassers in the 1946-47 Election Campaigns' by Anna Kimerling(HSE, Perm). The canvassers' job was to study the local situation, to propagate the Communist Party's messages, and to make sure that 100% of voters showed up at the polls.

12. Olga Troitskaya (MSU)
Russia's Migration Policy Scenarios: Tightening vs. Liberalization

Russia’s migration policy is hanging in a precarious balance between the liberal and tough approaches. On the one hand, Russia maintains visa-free regimes with CIS countries and supports freedom of movement in the region, but on the other hand, it enforces restrictions on CIS nationals' employment in Russia, even though few people come to Russia from neighbouring countries for reasons other than work.

This mixed approach to immigration works well between developed countries, such as the U.S. and Canada or the U.S. and the EU, by allowing free migration, but protecting locals' access to jobs. Failing to find a job abroad, immigrants from developed countries will move back home. In Russia, however, such a system will not work, as the benefits of moving from a poor country to a rich country outweigh the potential costs of violating the law, and immigrants from poorer CIS countries prefer informal employment in Russia to going back home. Russia, therefore, has to make a choice – either to restrict immigration or to facilitate immigrants' movement and employment in Russia. In her paper, Troitskaya looks at various pros and cons of the restrictive and the liberal scenarios.

13. Igor Okunev (MGIMO)
The Role of Regional Differentiation in Constructing Russia's National Identity

The author proposes an original historiosophical theory explaining the role of territorial expansion in Russian history. While normally a country's expansion and its growing ethnic, religious, socioeconomic, and political diversity leads to decentralization, the opposite is true for Russia: the larger it grows, the greater the role of the centre is and the regional development disproportions in favour of the centre. Okunev explains this paradox by suggesting that in Russia's case, the mechanisms of nation building and defense against external threats are complemented by a strategy of allocating and maintaining internal semiperipheries serving as colonial buffer zones (Wallerstein's term). As a result, centrally subsidizeddistant areas are autonomous, while regions with the highest development potential – such as the Volga Region, Siberia, and the Ural – end up being part of the ‘internal periphery’.

14. Alexander Chepurenko (HSE)
Varieties of Transition, Varieties of Entrepreneurship

Early in the process of transition from socialism to capitalism, experts had hoped for fast growth of entrepreneurial economy in eastern Europe and the CIS. In most countries, however, entrepreneurial activity was lower than expected, while privatization did not lead to SME expansion. Countries vary widely in this respect – from very high entrepreneurial activity in Slovenia and Latvia to very low in Hungary and Russia, which Chepurenko explains using the concept of open societies and limited access orders (Douglass North).

15. Rostislav Turovsky (HSE)
Electoral Competition at the Subnational Level in Russia: Legitimacy, Centralization, and Clientelism

Russia's federal centre promotes a manageable electoral competition (needed for the legitimacy of the vote), but these attempts often conflict with local authorities’ interest in obtaining the largest vote possible for their candidate. The centrally-promoted policy of procedural legitimation of the 2012-2013 elections failed due to a lack of interest from the political parties and the voters, and the 'systemic' opposition's participation in elections has remained a mere formality. Instead of the classical 'ruling party vs. opposition' system, in Russia we see a group of political actors of varying degrees of influence negotiating for access to available resources.

 

April 04, 2014