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National Research University Higher School of EconomicsIQNews'Normal Is Not Ridiculous': Most Interesting Reports Presented at the HSE's XVII April International Academic Conference

'Normal Is Not Ridiculous': Most Interesting Reports Presented at the HSE's XVII April International Academic Conference

A total of 900 papers were presented at the HSE's XVII April Conference in Moscow. We consider the following selection to be must-reads.
May 11, 2016

Preference was given to papers with the full text posted in the public domain. Not included here are papers mentioned in other top lists at IQ.hse.ru (see a full listing below).

1. Daniel Treisman (UCLA).What makes governments popular?

Judging by the extended description, this as yet unpublished paper promises to be extremely interesting. Treisman has come up with the first-ever global comparison of political leader ratings, having examined data from 128 countries over the years 2006-2014 to explore the impact of economic conditions, wars and crises on leader popularity; whether patterns of government approval differ in democracies and non-democracies, and the role of propaganda, censorship and political repression in the expression of approval and disapproval.

To hold politicians accountable, citizens must be able to assess their performance. If citizens’ evaluations track actual government effectiveness, then elections may motivate incumbents to work harder. If, by contrast, citizens are swayed by state propaganda, elections will not promote responsive government. Leaders’ ratings provide hints about their political future: officials may change their policies when losing ground in polls; low approval may also prompt challenges to the leader from within their own party, etc. High poll numbers constitute a form of 'political capital' that can be 'spent' on enacting reforms.

Treisman argues that contrary to popular belief, ratings can matter even more in authoritarian regimes than in democracies. It is not always true that force can compensate for low approval. Instead, low approval can make it hard for the leader to use force. Police and security officers may hesitate to follow orders if they think the regime is about to fall. An unpopular leader in a democracy may worry about their replacement at the next election; an unpopular dictator needs to worry about it every day. Conversely, the belief that a leader is loved can silence potential critics, creating a self-fulfilling belief in the regime’s stability.

2. Elena Gaber, Leonid Polishchuk (HSE), Denis Stukal (NYU). Cultural Echo of Market Reforms: An Empirical Analysis

What was the impact of market transformations in the early 1990s on the norms and values of the post-Communist Russian society? At the time, the cultural repercussions of reforms were largely neglected, while the reform implementers were concerned about economic and political aspects and about creating the foundation of a market economy as promptly as possible – if necessary, by manipulating the democratic process.

Yet, it appears that the Russian reforms have produced long-lasting cultural echoes, including a cultural shift towards 'survival values' (Inglehart and Welzel). Thus, the level of trust in Russian society dropped by more than 50% between 1990 and 1996, and its subsequent recovery has so far been slow and only partial. Tolerance towards opportunistic behavior, such as corruption and tax evasion, has more than doubled and remains high. A shift from liberalism towards authoritarianism can be seen in the growing number of people who believe that children need to be taught obedience.

Russians have also developed scepticism towards civic and political involvement, while confidence in key institutions and services, such as the media and courts, has dropped. Those aged between 16 and 25 at the time of the reforms appear to be particularly affected by this cultural shift, contrary to the reformers' expectations that the younger generation would be the first to support the new economic and political order.

Overall, the experience of 1990s market reforms caused a deep cultural trauma, which will take decades to heal. The reform strategy that looked like a pragmatic choice and perhaps a lesser evil denied Russian society a sense of ownership of the new institutional order.

An important lesson from the 1990s market reforms in Russia is that in the absence of social participation, reforms cannot be sustained since societal attitudes remain incompatible with the institutions established as part of the reform.

Kira Lutsishina's paper Economic Growth in the Post-communist Transit: The Role of Economic Reform and Political Competition provides additional explanations of this phenomenon. Most post-socialist liberal reforms were initially focused on the redistribution of economic resources among interest groups.

While in some post-socialist countries economic transformation triggered political change by encouraging competition in political elites, in some others reformers were convinced that the political activity of those who stood to lose from the reforms needed to be restricted. A political regime where 'the winner takes it all' is not really a democracy; those who have won by suppressing political competition will resist further change in an effort to maintain the status quo, while others will continue to lose yet lack the momentum for political engagement.

For economic reforms to succeed, restrictions should be imposed on winners rather than the other way around, and this can be achieved by promoting political liberties and expanding the range of political forces involved in the decision-making process. However, the Russian reformers in the 1990s did exactly the opposite, leading to a redistribution of power among political elites.

While at first political competition can slow down the reform process, it eventually helps achieve a sustainable democracy and consistent progress.

3. Elena Berdysheva, Alexander Shmyrov (HSE). Normal Is Not Ridiculous: Price Normalisation Strategies Used by Consumers in 'Pay What You Want'

Pay What You Want (PWYW) is a pricing strategy where a seller does not establish any price for a commodity, and buyers can pay any amount, including zero. Consumers can find this practice unusual or 'abnormal'; the paper uses the data from 69 videotaped transactions taking place in the Dunyasha artisan market in Moscow between April and May 2015 to explore communicative strategies people use to normalise the situation.

Consumers tend to be confused when contrary to expectations, they are unable to find an established price for a commodity. Their first strategy is usually to try and make sense of the situation; they can assume at first that the offered product is unsafe (in the study, muffins were offered which could theoretically be spoiled) and the entire thing is a scam. Another strategy is to engage the seller in conversation and try to find out whether or not they can be trusted.

Once reassured of the product quality, buyers are often anxious about paying a fair price. As a result, for a cost of 35 rubles per muffin, the median price paid by the customers in the study stood at 50 rubles and the average price at 48 rubles.

PWYW can motivate buyers to pay more, as discovered by Radiohead after they released an album through the band's website using a PWYW system. The reason may be that the absence of a set price may be perceived to mean that the seller is not expecting to earn a profit and the entire transaction is a social act; then how much they pay is determined by the customer’s desire to feel good about practicing value-based behaviour rather than seeking a bargain.

4. Elena Rozhdestvenskaya (HSE). Fathers and Children: Business and Wealth Succession in Families of Big Business Owners in Russia

As post-Soviet Russia's pioneer moguls enter their fifties, their adult heirs are trying on the roles of business successors. Rozhdestvenskaya conducted semi-structured interviews with 40 business owners and 16 adult heirs and found that chances are high for the younger generation to successfully take over the parental business, since parents and children seem to share the same set of values (measured using Schwartz's theory of basic values) and most parents have invested heavily in both their children's education and the companies' future.

Dominant parental values include self-enhancement (achievement, power and wealth) and openness to change (independence, risk-taking/novelty and hedonism). Children tend to share the same set of dominant values, although with a much stronger social focus (caring for others as opposed to self-assertion). Another difference lies in children' attitudes to work: unlike workaholic fathers, they expect to retire in their forties. Gender-wise, most fathers clearly prefer to hand down their business to sons rather than daughters.

5. Evgeny Soroko (HSE). Limited Applicability of the United Nations Long-term Population Projections

According the UN's most recent projections, the world's population will reach 9.7 billion by 2050 and 11.2 billion by 2100. These estimates have caused a very strong reaction in both mass media and the academic community; many people consider them inaccurate. In the past, some revisions of UN projections have resulted in upward adjustments: the 2050 estimate was increased by 0.8 billion between 2002 and 2015, and the 2100 estimate was increased by 1.1 billion between 2010 and 2015.

The reasons for this included initial overestimation of infant mortality rates in poor countries and a slower than expected decline in birth rates.

While United Nations projections can be impeccable from a demographic perspective, they fail to address factors such as economic development, climate, sociopolitical evolution, inequality, national demographic policies, terrorist threat, technogenic catastrophes, progressively increasing population density, and some others. Short-terms projections tend to be more reliable – for example, that India's population will reach 1.5 billion and China's 1.4 billion by 2030. Political aspects should not be ignored either; e.g. if birthrates in Niger start to decline – as in China and Iran – population growth rates will be significantly lower than predicted.

6. Rostislav Turovsky (HSE). Gubernatorial Elections in Post-Soviet Russia: Change and Continuity

In post-Soviet Russia, gubernatorial election practices have evolved over the years to fine-tune the manipulative techniques aimed at suppressing competition and ensuring the victory of the current incumbent or a candidate supported by the federal centre. Very common in Russian regions from the start, such practices have gradually spread to the federal level, alongside manipulative techniques such as the use of dummy candidates and spoilers and obstructing opposition candidates.

Although back in the1990s, gubernatorial elections were regarded as a democratic institution in the context of Russia's transition to democracy, in reality, political elites have always used a variety of strategies to preselect candidates before the vote and have perfected this process over time, particularly after 2012.

The first Russian President Yeltsin's main objective was to ensure loyalty of regional elites as a way to strengthen presidential power. Therefore, most federal subjects did not have direct gubernatorial elections before 1996. In the second half of the 1990s, the federal centre adopted a more flexible strategy involving the co-opting of opposition candidates; the autonomy of regional governors was then at its highest. In contrast, in recent years, gubernatorial appointments have been particularly rigid and strictly controlled.

7. Gabriel Felbermayr (Ifo, University of Munich), Alexander Tarasov (HSE). Trade and Spatial Distribution of Transport Infrastructure

Trade is global, while infrastructure is local, and its development is subject to decisions taken by local authorities. Therefore, road connectivity tends to be worse in border regions, i.e. exactly where this infrastructure is needed most. One reason for underinvestment in trans-border roads is that most of the benefits are expected to go to businesses and consumers of other regions or countries, rather than the local community. This effect also manifests itself in Europe in the absence of internal borders.

8. Anastasia Kazun (HSE). Economic Sanctions: Who and How Produced the 'Rally ‘round the Flag' Effect in Contemporary Russia?

Despite the country’s political isolation and economic hardship, President Putin's rating remains high in Russia. In contrast to the 2000s, the economic situation is no longer a determining factor for the leader's popularity. The Russian President's actual approval rating is as high – or perhaps overestimated by no more than a few points – as publicly reported. What is causing this support?

The author examines the 'rally round the flag' effect – a concept used to explain increased popular support of leaders in periods of crises, particularly those related to foreign policy. Mass media play a key role in producing this effect, since people tend to perceive the events through media coverage.

Kazun uses the example of international sanctions to examine approaches exploited by mass media to achieve this effect.

Some of the media strategies listed by Kazun include:

•   anti-patterning (“sanctions are not causing us any harm”);

•   refuting stories (“sanctions were once imposed on X, only to make X stronger”);

•    counter-rhetoric of insincerity (“those who voice concern about sanctions are worried about their selfish interests rather than public good”);

•   counter-rhetoric of hysteria (“those who dare to impose sanctions on us are crazy and immoral”);

•   criticism of the tactics (“if we had not done what we did, people would have suffered terribly”), etc.

9. Natalia AkindinovaYaroslav KuzminovYevgeny Yasin (HSE). Russian Economy: Before the Long Transition

In the 1990s, Russia experienced a combination of an emerging market economy and a paternalistic distribution of handouts regardless of beneficiaries' actual need – eventually, this duality became an unbearable burden for the country. During Yeltsin's presidency, the government was forced to be a liberal player: lacking resources, they had to form coalitions with private actors to pursue their policies. After Putin came to power, however, the federal government decided to re-nationalize the country's key fuel and energy assets and thus avoid the need to coordinate their domestic policy with any other party.

According to the authors, now that oil prices have fallen, Russian businesses are gradually adapting to lower and more realistic rates of return. To facilitate such adaptation, the government needs to keep inflation at bay, recover access to global financial markets, avoid raising taxes, reduce political risks for entrepreneurs, and dismantle the existing system of government supervision. Without further inflow of oil rent, the construction of infrastructure and machinery is likely to come to a halt. At the same time, continued media and government attacks on unscrupulous offshore schemes combined with lower inflation may lead Russian businesses to adopt more realistic expectations in terms of potential profits.

The public budget will adapt to lower commodity prices causing various interest groups to compete for allocations. The social sector, however, is likely to lose from the situation. The increasing pressure on the budget could force the government either to reduce public spending by 3% to 4% of GDP or to introduce progressive income taxation. Indeed, Russia will have to make a tough choice: whether to support education, health care and pensions through voluntary private contributions or raise taxes. However, virtually any new tax initiative can have a chilling effect on economic activity. As the remaining reserves deplete, the prospect of emission financing will loom large, making business risks unacceptable. Since the government's performance in providing public goods is likely to deteriorate, service quality differentiation in spheres such as education and healthcare will increase.

Meanwhile, a small expert survey conducted by the authors reveals an inverse proportion between the desirability of a particular short-term economic policy scenario and the likelihood of it happening in Russia.

10. Oleg Sidorkin (CERGE-EI — a joint workplace of Charles University in Prague and the Economics Institute of the Academy of Sciences of the Czech Republic), Dmitry Vorobyev (Ural Federal University). Political Risk, Information and Corruption Cycles: Evidence from Russian Regions

Political budget cycles in Russian regions appear to follow a certain pattern. Based on BEEPS data, the authors found that corruption levels, as perceived by firms participating in public procurement tenders in different Russian regions, tend to be higher at the beginning and at the end of a regional governor’s term in office.

Where a governor expects to leave office once their current term has expired, they are more likely to engage in corruption in order to accumulate more wealth before they are out of the game. In contrast, where a governor expects to be in office for the next term, their rent extraction tends to decrease over time. According to Sidorkin and Vorobyev, Russian regional governors tend to be particularly active in extracting rent before the end of what they believe to be their last term in office.

11. Elena Bogdanova (Centre for Independent Social Research / University of Eastern Finland), Eleanor Bindman (Queen Mary, University of London). NGOs Protecting Children in Contemporary Russia: Policy Entrepreneurship under Regime Hybridity

In recent years, NGOs in Russia have been forced to function under what has been described as a hybrid authoritarian regime. On one hand, the state is supporting 'socially oriented' NGOs, but on the other hand, it is suppressing NGOs operating in areas such as human rights, environmental protection and civic education by labeling them 'foreign agents'. Further complicating the situation is the fact that civil society was essentially nonexistent in the Soviet Union where the state controlled most aspects of social life.

Based on interviews conducted in St. Petersburg and Samara, the authors explore the ways in which NGOs helping children are trying to adapt and engage with the authorities. The authors’ main finding is that the success and sustainable development of Russian NGOs depend entirely on cooperation with the authorities, and the reputation of many regional NGOs vis-a-vis external stakeholders is strongly associated with the frequency and intensity of contacts between these NGOs and government.

12. Alexei Kireyev (IMF), Andrei Leonidov (RAS Lebedev Institute of Physics and Technology). China's Imports Slowdown: Spillovers, Spillins, and Spillbacks

The paper models international spillovers from a hypothetical drop of China’s imports as a result of China’s rebalancing of its growth model. According to the authors, the impact on Asia and the Pacific will be the strongest, followed by the Middle East and Central Asia. China's slowdown is likely to have a serious effect on commodity exporters, as China is the world's largest importer of metals.

Boris Grozovsky