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HSE's Top 13 Most Interesting Studies in Economics in 2013

Elite motorists pose a mortal threat to the public; Russians are blowing their chances of building good public institutions; social media can bury politicians; reasons why our society is morally unstable and why expensive medical equipment is available but unused – these were the HSE's 13 most interesting and relevant research projects in 2013, according to Opec.ru.

‘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. Where possible, we have included links to research papers available online. Some papers, first published in 2012, were widely discussed at seminars and conferences in 2013.

1. Mikhail Blinkin et al. Road Safety in Russia: The Current Status and Immediate Measures for Improvements

Russia has one of the highest rates of road fatalities in the world. A temporary drop in road fatalities between 2003 and 2008 was followed by another rise that can be explained by the fact that 20% to 40% of Moscow’s motorists and up to 10% of the country’s remaining motorists can do whatever they want on the road. These elites disregard the traffic police who risk serious repercussions if they attempt to intervene. So many people are virtually exempt from Russia’s traffic rules that promoting road safety no longer makes sense.

The only way to change the situation is first, to instill in the public’s mind – as well as the law – that all road users have equal rights, obligations, and responsibilities, and second, to ban dangerous drivers from roads regardless of their rank or privileges. Impunity is the main reason for Russia’s high road fatality rates. See also an article on Opec.ru and a presentation of a survey conducted as part of this research project.

2. Leonid Polishchuk. Outsourced Institutions

Since the onset of free market reforms, Russian society has failed to participate actively in creating new public institutions. Instead, paternalistically minded citizens outsourced the establishment and operation of institutions to political elites – making the latter happy because Russian society in the early 1990s was perceived as averse to reforms, and dismantling democratic control and accountability seemed to be the only way towards change. As a result, too much power was concentrated in the hands of oligarchs whose interests often conflicted with those of Russian society.

In the 2000s, new political elites squeezed business tycoons out of public institutions, yet the latter still lacked accountability and left little room for public participation. Eventually, this led to the declining quality of institutions, booming corruption, and an authoritarian bureaucracy. Russian society has become disillusioned with both democracy and the free market. However, today the country's future depends on citizens' active involvement in institutional change. See an article about Leonid Polishchuk's paper at Opec.ru.

In another paper, Polishchuk et al discuss the perceived lack of citizen involvement using Homeowners' Associations as a case study – such associations are doomed if people refuse to participate (see the article on Opec.ru).

3. Dmitry Dagaev, Natalia Lamberova (University of Maryland), Anton Sobolev (UCLA), and Konstantin Sonin. The Technological Foundation of Political Instability

There existsthe widespread belief that elections following the removal of an oppressive dictator should lead to the establishment of a government that is invulnerable to mass protest. At the same time, most of the post-World War II, non-constitutional exits of recently installed autocratic leaders were caused by elite coups, rather than popular protests. The recent experience of Egypt, where the democratic post-Mubarak government, produced by the Arab Spring, collapsed under protests that had been going on since its first day in office, offers a striking counterexample. It’s not surprising that social media facilitated the authoritarian leader's collapse by drastically reducing the cost of collective action (sharing ideasand making arrangements). A powerful wave of social media-supported protests caused Mubarak's fall, but the protestors did not quit immediately afterwards and continued building an opposition to the subsequent democratic government. The shock wave from the social media explosion did not dissipate instantly but continues to generate political instability nationwide even after the victory over the dictator.

4. Christopher S. Swader and Leonid Kosals. Post-Socialist Anomie through the Lens of Economic Modernization and the Formalization of Social Control

Anomie refers to uncertainty in social norms, social roles, and behavior. It signifies the lack of a framework for people to understand what is happening and what to do about it. Anomie often occurs in periods of rapid transition between different types of societies – traditional to industrial (Durkheim), and socialist to capitalist. Anomie is associated with a lack of informal normative control which is more important than formal regulations. Social anomie helps authoritarian regimes hold on to their power. Based on the World Values ​​Survey (WVS), Swader and Kosals found anomie to be more common in women, people with low education and income, and non-religious people. Anomie is higher when a society is changing rapidly but decreases with economic growth. See the article at Opec.ru.

5. Lyudmila Zasimova and Sergei Shishkin. Adopting New Medical Technologies in Russian Public Hospitals: What Causes Inefficiency?

Extending more government funding to Russian hospitals for the purchase of new medical technology and equipment does not guarantee their efficient use. Procured at inflated prices, new medical equipment is not always needed – 30% to 40% of newly installed technology is rarely, if at all, used in patient care. Zasimova and Shishkin explain some of the causes.

The purchase price is the primary concern of the medical bureaucracy supervising the providers: the higher the price, the more substantial the informal payoff officials expect to receive. Bureaucrats care much less as to whether or not the new equipment is relevant, can be operated by the hospital staff, and has a chance of being put to good use. In turn, the hospital management team making the decision to purchase specific equipment is thinking about adding to their own, their staff’s, and their facility's revenues, and therefore prefer equipment that allows them to charge patients extra (formally and informally) for additional services. The new equipment’s operation and maintenance costs are also important for medical providers,but neither hospitals nor bureaucrats engage in any comparative analysis or try to select the technology best suited for their purpose. The inefficiency caused by the conflict between bureaucrats' and institutions' different financial incentives is made even worse by the highly centralized procurement process – even though medical facilities may use their own funds to purchase technology, they must seek official approval anyway.

6. Israel Marques, Evgenia Nazrullaeva, and Andrei Yakovlev. Money Instead of Growth: Federal Transfers and Electoral Support in Russia, 2001-2008.

Politicians can provide their supporters with consumer benefits either through good economic performance or through budget transfers. Having analysed nine years of data from 78 regions, the researchers found that funding goes to hesitant voters when the economy is booming and to loyal supporters in times of economic recess. Indeed, when the economy is strong andthe supporters are happy, extra resources may be used to 'buy' more voters, but an economic downturn shifts priorities towards keeping the core electoral base satisfied. Other things being equal, regions with higher rates of support for the ruling party get more federal transfers, and the federal elections voting results serve as a major test for regional governments. View the article at Opec.ru.

7. Svetlana Avdasheva, Paulina Kryuchkova. Why Oversight Costs Increase As Compliance Decreases: An Economic Analysis of Administrative Law Enforcement in Russia.

The direct costs of the audits conducted by the Russian authorities in 2011 totaled 47 billion rubles, while the combined cost to the government and business for oversight and monitoring exceeded 800 billion rubles. Despite the growing spending on oversight, compliance has not improved; the authorities have to handle too many complaints, resulting in numerous errors. Legally permitted practices are often misinterpreted as violations, while real violations go unnoticed. A combination of private action and government-initiated enforcement makes Russia's administrative law very ineffective.

8. Vladimir Magun and Maxim Rudnev. Basic Human Values ​​of Russians

Russians' basic values ​are much closer to those of post-communist and Mediterranean countries than those of Western European and Nordic countries. Values such as caring for others and the environment, and being tolerant are far less commonly shared in Russia than in Western Europe. However, a larger proportion of Russians share values such as​ personal success, wealth, and power. Russians tend to be conservative and largely opposed to the values ​​of openness and change, and such values are an important cultural barrier to reforming the country's socio-economic structure. Most Russians support a strong state capable of protecting them rather than a political regime that encourages change, creativity, freedom, and risk-taking. Perhaps the worst thing is that ​Russians' valuesare trending even more towards conservatism and basic survival values, according to Eduard Ponarin of the HSE LCSR HSE (view the article here). The values ​​of openness and caring for others are shared by a significant minority – 19% of Russians; this fairly large group of people has many traits in common with Western Europeans and sometimes feels like outsiders in their own country.

9. Igor Gurkov et al. Culture Shock: A Series of Reports on Management Practices in Russian Subsidiaries of International Corporations (see 1, 2, 3, 4, 5)

Learning about management practices in Russia-based subsidiaries of transnational corporations was nothing short of culture shock for Gurkov and his coauthors – Sergei Filippov, Vladimir Kossov, and Yevgeny Morgunov. They found a maniacal attention to production safety, careful accumulation of best practices, and consistent benchmarking in technology and finance. They also found production lines operated by decent, hardworking, and friendly people. These companies do not engage in crisis management, putting out fires and engaging in the last-minute rushes that are so characteristic of Soviet industry. They do not seem to have lazy and careless workers. Russian specialists are involved in the development of long-term corporate strategic plans.

However, generating more sales requires substantial and growing capital investment, while Russian subsidiaries continue to be profit centres rather than centres for innovation. Incapable of becoming more competitive through innovative technology and management, they risk being outperformed by Russian firms adopting the best managerial solutions. See also an article about Gurkov's report on Opec.ru and its discussion at Evgeny Yasin's seminar.

10. Philip Altbach (Boston College), Grigory Andrushchak, Yaroslav Kuzminov, Maria Yudkevich, and Liz Reisberg (Reisberg & Associates). The Future of Higher Education and the Academic Profession: BRIC and the U.S. Moscow, HSE Publishers, 2013.

Higher education is growing rapidly in the BRIC countries. China and India are the world’s two leaders in terms of the number of students studying abroad (their combined share in the global migration of students is close to 50%). While higher education in BRIC is becoming more widespread, the quality of education is substandard and its funding is inadequate. The BRIC countries are significantly behind the OECD countries in terms of spending on education and R&D. Academic independence is at risk in all BRIC countries. In India, the salaries of teachers and professors (PPP) approach those in the U.S., but in the other three countries salaries are two to 20 times lower. The situation is worst in China and Russia. The domestic market for teachers is underdeveloped, and academic inbreeding – a university's hiring of its own graduates to be teachers – is common. Chinese universities have already started responding more flexibly to the economic challenges (see Kai Ming Cheng’sreport from the Conference 'University Tradition: Resource or Burden?'), but Russian universities have yet to do so.

11. William Zimmerman, Ronald Inglehart, Eduard Ponarin, Yegor Lazarev, et al. The Russian Elite in 2020.

A consensus among the elites may contribute to the democratization of authoritarian regimes or restrain the public’s drive for democracy. In 2011, urban protests were mounting in Russia but did not significantly affect the country's elites. In recent years, Russia’ selites have become suspicious about a liberal democracy and view government control over property more favorably. They increasingly distrust a multiparty system, while the share of those who believe in human rights as an absolute priority is dwindling. Authoritarianism and technocracy are considered appropriate forms of government for Russia, in a way no less acceptable than democracy. Anti-Americanism is even more prevalent in Russian elites than in the general population. A growing proportion of the Russian elites consider the use of force in international relations acceptable – signalling a higher likelihood of Russia using force in international conflicts in the coming years. There is perhaps a liberal minority within the Russian elites, but it is not obvious. See an article at Opec.ru.

12. Svetlana Mareeva. A Fairness Concept in the Perceptions of Russians.

Fairness plays an important part of Russian people's vision for their country, as confirmed by 45% of the author’s survey respondents. The concepts of democracy, social stability, and of Russia being a great power enjoy 1.7 times less support. As a personal vision, living in a fair society ranks just below that of living in abundance and has the same perceived value as good health. For most Russians, the concept of fairness includes equal opportunities, social security provided by the state to all who need it, and income differentiation within reasonable limits (lower than it is today). Forty percent of the respondents agree that "fairness is more important than the law" (and 34% agree with the opposite statement). All social groups, including the affluent ones, find the existing inequalities excessive. Most (59%) Russians believe that fairness means equality of opportunity rather than income, and have a high tolerance of social inequality based on skills and education. However, 46% to 48% of respondents consider unequal access to health care and education to be unfair. See the article about this research at Opec.ru.

13. Vladimir Bessonov and Anna Petronevich. Seasonal Adjustment as a Source of Spurious Signals

Seasonal adjustment is used in economic data analysis, because by comparing yearly data, we can only see the cumulative results and miss the changing dynamics of the most recent couple of months. Seasonal adjustment is particularly useful during an economic crisis because it allows analysts to determine whether a downturn has ended and whether growth has slowed down, and to observe short-term trends in real time.

Yet the method of seasonal adjustment, i.e. removing calendar, seasonal, and irregular components, is imperfect and may distort the way the data is understood, particularly during a crisis when such information is crucial, explain Bessonov and Petronevich. This side-effect of seasonal adjustment may produce false harbingers of a crisis, and its second and third waves. In particular, distortions may occur following the beginning of a sharp downturn, as in the 2008 crisis, producing a blind spot which makes monitoring short-term trends extremely problematic. The distortion may also affectthe post-crisis recovery period. The authors offer advice on reducing this side-effect of seasonal adjustment.

 

December 26, 2013