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TERRA ECONOMICUS

An analysis of the French non-financial private sector based on the Financial Instability Hypothesis


TERRA ECONOMICUS, , Vol. 20 (no. 1),

The article analyzes the dynamics of the financial fragility of French private non-financial firms using the Financial Instability Hypothesis developed by Hyman Philip Minsky. This hypothesis contains analytical tools to explore the relationship between the course of the business cycle and the dynamics of the structure of private firms’ financial flows. Our sample includes 208 private sector enterprises in France. The study covers time period from 1998 to 2018. The source of data is the Thomson Reuters platform. Related indicators are considered separately for three categories of companies depending on the size of their revenue – small, medium and large businesses – and for ten categories of companies depending on their industry affiliation. Three criteria are used to classify the companies into hedge firms, firms with speculative financing and Ponzi firms. Our empirical analysis showed that before the onset of the Great Recession in the French economy, the share of Ponzi firms grew, and reached its maximum at the peak of economic hardship. In line with the Financial Instability Hypothesis, the research findings confirm that the accumulation of financial fragility is associated with the onset of the Great Recession in France. It is further shown that small firms are much more financially fragile compared to medium and large businesses, and the real estate sector turned out to be the most financially fragile sector of the French economy.
Citation: Rozmainsky I., Mindubaeva K., Yakovleva E. (2022). An analysis of the French non-financial private sector based on the Financial Instability Hypothesis. Terra Economicus 20(1): 6–26. DOI: 10.18522/2073-6606-2022-20-1-6-26

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Mutual influence of institutions in the concept of Carl Menger


TERRA ECONOMICUS, , Vol. 20 (no. 1),

The article analyzes the mutual influence of institutions in the concept of Сarl Menger, the founder of the Austrian school of economics. Within the framework of his theory, institutions are organic orders, the emergence and evolution of which do not depend on the will and consciousness of individuals, but which are the result of unintentional human actions. The institutions of entrepreneurship and money, through mutual support and improvement, mitigate the negative impact of uncertainty on the economic system. The very origin of money is the result of entrepreneurship in the broad sense of the word (as an activity to find ways to improve one’s statement). Entrepreneurship is inconceivable without money prices, which provide the possibility of economic calculation. In addition, the monetary form allows the capital to develop intensively. The existence of system of relative prices and capital market shape a market order. The monetary system experienced both positive and negative influence of the state, and the development of entrepreneurship as such, as well as banking in particular, contributes to the optimization of the amount of money required, in accordance with the needs of the national economy.
Citation: Kavaliou A., Peniaz O. (2022). Mutual influence of institutions in the concept of Carl Menger. Terra Economicus 20(1): 27–37. DOI: 10.18522/2073-6606-2022-20-1-27-37

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Public choice with regard to merit goods: A case study of private bank deposits


TERRA ECONOMICUS, , Vol. 20 (no. 1),

This paper aims to extend Richard A. Musgrave’s concept of merit goods by introducing the notion of a quasi-merit good. By that, the author means a private commodity that acquires merit unjustifiably via a manipulated political process preceding public choice. It is argued that within the original concept of merit goods, specifics are left to public choice in each society. Public choice can, however, be affected by special interests or a misconception, opening the way to public financing for goods of questionable public merit. To illustrate the author’s theoretical claim, the paper brings up the case of private bank deposits. It is argued that bank stakeholders are the main beneficiaries of the uninterrupted supply of household savings. Exploiting the public desire for financial stability, bankers press for government intervention, mostly on paternalistic grounds, which are only partly justified. A government-backed deposit guarantee scheme nudges bank depositors to act in a manner beneficial for bank stakeholders, i.e., to keep supplying savings to banks. Private interests are pursued in the first place, which creates grounds for the claim that private bank deposits are a quasi-merit good rather than a genuine one. The proposed concept of quasimerit goods complements the theories of public finance and public choice and potentially applies to other goods and services.
Citation: Vernikov A. (2022). Public choice with regard to merit goods: A case study of private bank deposits. Terra Economicus 20(1): 38–51. DOI: 10.18522/2073-6606-2022-20-1-38-51
Acknowledgment: My thanks go to the conference participants at the HSE-University (Moscow), Southern Federal University (Rostov-on-Don), WINIR Conference on Institutions for Inclusive Societies (Lund, 2019), Society for Advancement of Socio-Economics (2019), Institute of Economics RAS (Moscow), Alexander Rubinstein, Timothy Spence, two anonymous reviewers, and the editor of Terra.

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Scientific and technological progress: An investment component


TERRA ECONOMICUS, , Vol. 20 (no. 1),

The overwhelming majority of modern Russian researchers concentrate their major efforts on the achievements of scientific and technological progress and innovative development while studying the possibilities of economic growth. At the same time, economists do not give any quantitative estimates of the cost of scientific and technological achievements and do not discuss the possibilities of modernizing the Russian economy on the basis of these achievements. The lack of cost estimates of advanced technological achievements gives rise to the illusion of the possibility of modernizing the Russian economy without a significant increase in investment and without material sacrifices on the part of the population. This article shows the high cost of modern technologies, using the example of two economic sectors: high-tech e-commerce and automated housing services. The factors restraining the emergence of modern innovative industries in the Russian economy are already known. In addition to the high cost of such industries, they include the need to restore the worn-out material base of the economy, as well as the absence of many necessary industries in previous technological paradigms. The low cost of labor is highlighted as a separate factor that hinders the emergence of scientific and technological achievements, motivating entrepreneurs to use cheap labor instead of using expensive machines. It is shown that the modern Russian economy does not have the necessary volume of investment resources, and thus is not capable of modernizing and creating modern production facilities.
Citation: Fomin D. (2022). Scientific and technological progress: An investment component. Terra Economicus 20(1): 52–64. DOI: 10.18522/2073-6606-2022-20-1-52-64

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The game-theoretic approach to modeling the conflict of interests: The economic sanctions


TERRA ECONOMICUS, , Vol. 20 (no. 1),

Since 2014, the United States, the EU and a number of other Western countries have been pursuing a policy of sanctions against Russia, which implies a set of financial, trade, economic, visa and other restrictions imposed on the activities of certain industries and sectors of the national economy, against individuals and companies in Russia, as well as their partners and counterparties abroad. To model the strategy of Russia in response to the sanctions, the methods of game theory are analyzed. This paper summarizes the main approaches of related game-theoretic models. Some varieties of classical games are used to analyze conflicts, conditions for changing the behavior of the target country, strategic interaction between institutions, the behavior of the population of the initiator countries and target countries. The areas of modeling multi-way games are the threat of using economic sanctions, evaluating the effectiveness of sanctions and determining the end of sanctions. We conclude that more dynamic approach to model the sanctions process, which could explain not only the result of sanctions actions, but also the evolution of strategic decisions taken by countries during sanctions activities and negotiations. Strategic games, the theory of moves and the adaptation of the Stackelberg oligopoly model are suggested as relevant analytical tools. As an example, a strategic game in a general form with a dynamic change of payment functions is proposed.
Citation: Belozerov S., Sokolovskaya E. (2022). The game-theoretic approach to modeling the conflict of interests: The economic sanctions. Terra Economicus 20(1): 65–80. DOI: 10.18522/2073- 6606-2022-20-1-65-80
Acknowledgment: The research is supported by St. Petersburg State University, project “Improvement of Insurance Coverage of the Population under Biological Threat“ (Pure ID: 92423693).

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Inequality perceptions and redistribution preferences: An international comparison


TERRA ECONOMICUS, , Vol. 20 (no. 1),

Our study aims at assessing the perceptions of inequality in Russia and European countries. We rely on empirical evidence provided by the European Social Survey (ESS8 2016). Research results show that the value of equality and the demand for the tools of redistribution are non-linearly dependent on the age of respondents. Our findings are in line with the hypothesis of multiple equilibria between individual perceptions of inequality and the demand for redistribution tools, as well as the hypothesis of “altruism of the rich”, with regard to older respondents in the Russian Federation. Russian equalization policy shows low efficiency, while both the level of inequality and demand for redistribution tools remain relatively high. The hypothesis about the impact of employment on estimates of inequality and redistribution policies has not been confirmed. We found no gender differences in estimates of inequality, the demand for redistribution, and the effectiveness of the equalization policy in Russia and European countries. There is a high level of solidarity among respondents in European countries regarding the values of equal chances and outcomes. However, there are significant differences in the demand for redistribution instruments, which can be explained by cultural and historical effects, the level of trust in government institutions, as well as by the model of country’s social policy. Our findings can contribute to public opinion monitoring and policy support for strengthened solidarity.
Citation: Frolova E.A., Malanina V.A., Klemasheva E.I., Kashapova E.R. (2022). Inequality perceptions and redistribution preferences: An international comparison. Terra Economicus 20(1): 81–101. DOI: 10.18522/2073-6606-2022-20-1-81-101
Acknowledgment: The study was supported by the Russian Science Foundation, project № 19-18-00282 “Developing a comprehensive system for assessing the inequality of the older adults and designing tools to strengthen their resilience”

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Demand for social and labor innovation in general education


TERRA ECONOMICUS, , Vol. 20 (no. 1),

The study focuses on social and labor innovation in the field of general education in Russia. We aim at analyzing the innovativeness of teachers’ workplaces, their compliance with time requirements, evaluating the implementation of innovation in the educational sphere and the impact of related innovative transformations on the regional economy. The data came from official statistics and surveys on socio-demographic issues by Rosstat, and sociological survey of the Vologda Oblast’s population “Economic and social well-being of teachers from comprehensive schools”. We apply correlation, cluster and factor analysis, as well as cross tables. The novelty of research consists in setting the problem (workplace innovation is considered as one of the varieties of innovation in the social and labor sphere); developing the innovativeness index of the teacher’s workplace; identifying the socio-economic effects of implementing workplace innovation in education. The low level of innovativeness of the teachers’ workplaces has been determined. At the same time, it has been confirmed that there is a request for innovation in the teaching environment. We identify the obvious social effects of introducing innovation in the labor process, including higher return from the teaching work, growing job satisfaction, higher level and quality of education and teaching, and improved quality of education in general. The economic effect from implementing workplace innovation involves growing labor potential, as well as higher wages which contributes to the regional economic development.
Citation: Leonidova G.V., Kabakova E.A. (2022). Demand for social and labor innovation in general education. Terra Economicus 20(1): 102–116. DOI: 10.18522/2073-6606-2022-20-1-102-116

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