Contemporary Economics supports GIKA


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Volume 6 Issue 3 (2012)

Linking Ethics and Economic Growth: a Comment on Hunt original article

pp. 4-9 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.46

Nicolai J. Foss


Hunt (2012) builds on his work concerning ethics and resource-advantage theory to link personal ethical standards, societal norms, and economic growth but offers few details concerning the precise mechanisms that link ethics and growth. This comment suggests a number of such mechanisms - for example, the influence of prevailing ethical norms on the aggregate elasticity of substitution and, therefore, total factor productivity and growth.

Keywords: ethics, trust, competition, productivity, economic growth, resource-advantage theory

Political Economy: Success or Failure? original article

pp. 10-21 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.47

Bruno S. Frey, Lasse Steiner


The Political Economy and Public Choice approaches have promoted the study of interactions between the economy and the polity for over 60 years now. The present paper endeavours to provide a critical discussion of this literature and its achievements. In particular, it begins with the different approaches based on empirically tested or politometric models and it then proceeds to discuss different studies of the effects that particular rules of the game have on politico-economic outcomes. The third section of the paper will address studies that take institutions to be endogenous and aims to explain why particular institutions emerge. Finally, the question of whether Political Economy has been a success or a failure will be tackled. While the success in terms of the position it has gained in economic research and teaching is undeniable, a look at one of the most thriving recent areas of economics, happiness research, will reveal that some of its fundamental lessons are all too often disregarded.

Better Safe than Sorry - Individual Risk-free Pension Schemes in the European Union original article

pp. 22-37 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.48

Marga Peeters


Variations among the diverse pension systems in the member states of the European Union (EU) hamper labor market mobility across national borders and also among firms within the countries of the EU. From a macroeconomic perspective, and in the light of demographic pressure, this paper argues that allowing individual pension accounts instead of collective pension plans would greatly improve labor market flexibility and would thus enhance the functioning of the monetary union. I argue that working citizens would benefit by having their pension funds accumulating in individual pension savings accounts for three reasons. First, citizens would have a clear picture of the accumulation of their own pension savings throughout their working lives. Second, they would pay minimal extra costs, and third, they would not be subject to the whims of governments or other pension fund managers after they retired. This paper investigates the feasibility of individual pension accumulation plans under various parameter settings by calculating the value of the pension saved during a working life and the amount of the pension dis-saved after retirement. The findings show that there are no reasons why the EU and the individual member states should not allow individual pension savings accounts. This approach, as an alternative to forcing workers to participate in one of the various mandatory collective pension schemes that exist in different countries in the EU, would have macroeconomic benefits and would also provide a solid pension program that can enhance mobility.

Keywords: pensions, labor market, monetary union

Fiscal Competition and the Composition of Public Expenditure: An Empirical Study original article

pp. 38-54 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.49

Hannes Winner


This paper investigates whether fiscal competition affects the structure of public spending, where theory predicts a shift from residential public goods to industrial public goods. We propose an empirical model that specifically accounts for the strategic nature and endogeneity of fiscal competition. Using data for 18 OECD countries and a time period with unprecedented tax competition (1980 to 2000), we find a significant impact of fiscal competition on the composition of public expenditure. This finding is in line with theoretical research, particularly that of Keen and Marchand (1997).

Keywords: Fiscal Competition, Public Expenditure, Panel Data Econometrics

Fractional Response Models - A Replication Exercise of Papke and Wooldridge (1996) original article

pp. 56-64 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.50

Harald Oberhofer, Michael Pfaffermayr


This paper replicates the estimates of a fractional response model for share data reported in the seminal paper of Leslie E. Papke and Jeffrey M. Wooldridge published in the Journal of Applied Econometrics 11(6), 1996, pp.619-632. We have been able to replicate all of the reported estimation results concerning the determinants of employee participation rates in 401(k) pension plans using the standard routines provided in Stata. As an alternative, we estimate a two-part model that is capable of coping with the excessive number of boundary values equalling one in the data. The estimated marginal effects are similar to those derived in the paper. A small-scale Monte Carlo simulation exercise suggests that the RESET tests proposed by Papke and Wooldridge in their robust form are useful for detecting neglected non-linearities in small samples.

Keywords: Replication Exercise, Fractional Response Models, Two-Part Models, Monte Carlo Simulation.

Financing Structure of Enterprises in the Metal Industry in Poland Between 2000 and 2010 original article

pp. 66-75 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.51

Piotr Rzeszowski, Maria Sierpińska


This paper presents research results regarding the direction of changes in financing structure adopted by enterprises in the metal industry in Poland. This sector of industry is extremely important in Poland. The main reason for undertaking this research was a desire to gain insight into the problems that enterprises experience in finding financing sources during economic crises because banks restrict lending, profit declines, and the ability to utilize capital derived from stock exchanges is limited. The assessment was based on an analysis of the structure of financing sources and the relationship of credits to own capital and to liabilities. The structure of financing sources adopted by companies in the metal industry underwent significant changes between 2000 and 2010. Enterprises in this industry began to utilize own capital more often during the period, while the proportion of external capital to total liabilities decreased. The increase in the proportion of internal capital influenced the improvement in financial liquidity but also contributed to an increase in the average cost of capital and limited the range of profitable investments. The results validate initial research hypotheses regarding an increase in the participation of internal capital in the financing of enterprises’ activities and a decrease in the amount of bank loans utilized by the companies.

Keywords: financing structure, selection of financing sources, financial crisis

An Empirical Study of the Factors Influencing Consumer Behaviour in the Electric Appliances Market original article

pp. 76-86 | First published in 29 September 2012 | DOI:10.5709/ce.1897-9254.52

Małgorzata Łatuszyńska, Fatimah Furaiji, Agata Wawrzyniak


This study contributes to a deeper understanding of the impact of different factors on consumer buying behaviour. It analyses the relationship between several independent variables, such as cultural, social, personal, psychological and marketing mix factors, and consumer behaviour (as the dependent variable) in the electric appliances market. The purpose of this study is to determine the factors affecting consumer preferences and behaviour in the electric appliances market in Iraq. The data employed to analyse the factors influencing consumers' purchase decision-making processes were obtained through a questionnaire that was conducted in December 2011 in Basra, a city in southern Iraq. The major findings of the study indicated that, overall, the set of independent variables are weakly associated with the dependent variable. However, the in-depth analysis found that social factors, physical factors, and marketing mix elements are strongly associated with consumer buying behaviour. These analyses make it possible to discover consumer decision-making rules. The results may assist producers and retailers in understanding consumer behaviour and improving consumer satisfaction.

Keywords: consumer behaviour, purchase decision making, decision-making process