Well-functioning Market Economy Research Articles

Social trust, audit quality and institutional investor herd behaviour

Trust is essential for a well-functioning market economy and is influenced by social institutions and technical advancement, not just cultural traditions. This paper examines how social trust affects institutional investor herd behaviour. Based on data from 2011 to 2021, this paper adopts a fixed effect model to explore the effects and underlying mechanisms. The findings indicate that increasing social trust can inhibit institutional investor herd behaviour, especially investor sell-side herd behaviour. The impact is achieved by enhancing audit quality, especially in the international Big Four. The findings advise the government on reducing institutional investors' herd behaviour from a macro perspective.

Calm before the storm: Market prices in a power market with an increasing share of wind power

Western Denmark is a separate bidding area in the North-Western European power market, Nord Pool. Wind power now exceeds 50% of production annually in Western Denmark. Hourly market data from 1999 onwards are publicly available from the Danish TSO. In this paper, we analyse these data for 2009–2021. Until the energy crisis began in 2021, the Nordic power market has shown relatively stable prices. While extreme events are moderately increasing, the value factor of wind is stable. Thus, the current infrastructure – flexible power plants, interconnectors and electrification of district heating – and market organisation can manage the amount of wind power installed. In other words: 2009–2021 show a well-functioning market economy of dispatch, operating on top of a planned economy of investment.

The dynamic efficiency of gifting

AbstractIn his Scroogenomics, Joel Waldfogel argues that gifting creates enormous deadweight loss, as individuals give one another gifts that they do not want or cannot use. He views efficiency as static, calculating the gains from trade (or gifting) at the moment of transaction. A puzzle arises, however, when one realizes that gifting has been a nearly ubiquitous institution throughout history. If gifting wastes valuable resources, why does it persist? We argue that gift giving is dynamically efficient despite the possibility of generating short-term deadweight loss. A well-functioning market economy requires expanded social networks and trustworthiness among anonymous and quasi-anonymous exchange partners. Gifting allows individuals to signal trustworthiness by offering ‘burnt sacrifices’. Gifting practices that include a willingness to sacrifice via reciprocity norms, public visibility and ritual will tend to promote generalized trust. We consider these four elements – sacrifice, reciprocity, publicness, and ritual – to be critical institutional design principles for fostering dynamic efficiency. Our essay contributes to the literature on institutional economics by prompting scholars to think about the long-term (dynamic) efficiencies generated by cultural practices that appear inexplicably inefficient.

Transparency of Financial Reports of Companies in The Republic of Kosovo

The financial reporting of any business entity wherever it operates is essential for the efficient management of that entity. Financial reporting in accordance with IFRS, international best practices and EU directives helps to create a more transparent business environment and enhances the credibility of other stakeholders. The financial reporting of companies in the Republic of Kosovo is important for a well-functioning market economy and provides some of the basic elements for a proper and sound financial system in Kosovo. The purpose of this research is to analyze whether the financial statements of companies in Kosovo are transparent, and each interested party can find their financial statements and other necessary information, as well as how they are prepared in accordance with IFRS/IAS requirements. Providing quality financial reporting helps users of that information to make important economic decisions. Financial information published and available to stakeholders in most cases to companies in Kosovo is considered not very reliable and not very transparent, as well as incomplete. The results of this research reflect the lack of transparency of financial information from companies in Kosovo, which is easily verified through the qualifications of the opinion of the auditor's report, clicks on the website, etc.

Correlation Analysis of Social Transition, Economic Management and Educational Reform in China and Europe

In the context of social transformation in China and Europe, economic management reform in China and Europe is struggling, and education development is in urgent need of innovation. Based on the above situation, this article puts forward a study on the economic management and education reform of China and Europe. With the continuous deepening of social transformation and economic management reform in China and Europe, this article analyzes the correlation between social transformation and economic management reform in China and Europe, and constructs a correlation matrix of social transformation and economic management in China and Europe in the form of input value or output value. Favorable conditions for the rapid economic growth of Central European countries: establish a well-functioning market economy system, implement export-oriented economic policies, promote economic growth, make full use of the geographical advantages of China and Europe in social transformation and economic management reform, and population growth in China and Europe The slow characteristic is conducive to economic management reform. In the context of the social transformation of China and Europe, it puts forward suggestions on China-EU education reform to promote the sound development of European social education. In the year of economic recovery in Europe, the situation of economic management and social production in China and Europe has gradually improved. The GDPs of Central and European countries have got rid of negative growth, the inflation rate has continued to decline, and the development potential of social and economic management reform in China and Europe has gradually emerged. This is of great significance to promoting regional and global stability and development.

Boltzmann-like income distribution in low and middle income classes: Evidence from the United Kingdom

We elucidate that a Boltzmann-like income distribution will emerge spontaneously in a long-run Arrow–Debreu economy, which is used to describe the well-functioning market economy. The emergence of such an income distribution can be regarded as a result of maximizing the entropy of the long-run Arrow–Debreu economy, which measures the extent of choice-freedom of permissible collective decisions offered to social members. By analyzing household income data of the United Kingdom from 2000 to 2015, we observe that the income structure of a market-economy country consists of three parts: super-low income class (i.e., unemployed households), low- and middle-income class, and top income class. The empirical analyses show that the low- and middle-income class (about 90%∼95% of populations) exactly obeys the Boltzmann-like income distribution. By contrast, top income class and super-low income class undermine the setting for Arrow–Debreu economy, and therefore do not conform to the Boltzmann-like distribution.

The Rocky Road of Western Balkan Countries toward European Integration: The Need for a Credible and Effective Approach

The EU enlargement has been considered as a one of EU’s most powerful policy tools which has helped to transform Central and Eastern European Countries from communist regimes to modern, well-functioning market economy and functional democracies. Such transformative power has not been replicated in the case of Western Balkan countries. Since 2003, when the EU leaders promised the European future to Western Balkan countries, save Croatia, which joined in 2013, other Western Balkan countries are backsliding on the rule of law, media freedoms, and democratic accountability. State capture and the growth of corrupt patronage networks are becoming more present in the society. Recently, with the legislative measures to prevent COVID-19, the Western Balkan countries are becoming more authoritarian. The paper argues that lack of EU to become a ‘transformative power’ in the Western Balkan countries hinders the risk of this region to return to authoritarianism and opens the ‘Pandora box’ for non-EU actors to advance their agenda, which impede NATO expansion and the EU enlargement. Therefore, the current enlargement strategy should be revised to address problems faced by Western Balkan countries and most importantly, EU Member States should not politicize enlargement process by exerting their veto power during accession process. A credible enlargement approach needs to be adopted where rules and principles are clearly set.

The Role of Big Data in Antitrust

There is an astounding amount of data generated every moment. While the use of data has always been essential for a well-functioning market economy, the current scale, scope, and speed at which data is collected, organized, and analyzed is unprecedented—leading to the apt label of “big data.” Importantly, an entire infrastructure has been built around data including cloud computing, machine learning, artificial intelligence, and the 5G wireless network. In this chapter, we discuss the role of big data in antitrust with a particular focus on the rise and success of large digital platforms—as the importance of data has caught the attention of various reports on the digital economy and also raises issues involving privacy. We begin with an economic overview of data and what sets it apart from other firm assets. In this discussion, we will also assess the question of whether big data represents a sizeable barrier to entry that hinders the ability of entrants to compete on equal footing. Next, we discuss data in the context of network effects. While network effects traditionally are associated with a network of people, some have hypothesized that the advantages that data confers to platforms can also be framed as type of network effect. The idea is that data creates a feedback loop of more data, which ultimately results in an impregnable bulwark against competition. We aim to demonstrate that, while there are commonalities between using data and network effects, there are important differences and distinctions worth highlighting. We also explore a number of relevant legal considerations involving big data and antitrust. Generally, should courts administer cases that involve big data differently? Should there be a stronger presumption of market power when a large platform possesses big data? On the other side of the coin, can combining big data assets result in merger-specific efficiencies? Finally, big data is increasingly discussed as a potential remedy for competition problems involving platforms. Proposals range from allowing users to more easily port their data across platforms to forced data sharing and interoperability. We examine the incentive effects from imposing such remedies and potential unintended consequences. Ultimately, these proposals are putting the cart before the horse, as remedies without an actual showing of an antitrust violation is not antitrust enforcement but sector regulation.

Behavioural politics: social insurance and mutual benefit in Robert Sugden’s The Community of Advantage

In The Community of Advantage, Robert Sugden advocates a system of universal social insurance to ensure that all citizens enjoy the benefits of market institutions. The Community of Advantage however does not shed light on the extent of redistribution that social insurance should provide. While the criterion of mutual advantage seems to licence only a minimal level of insurance, people’s expectations and collective bargaining power are likely to lead to a much more extensive redistribution. This is not necessarily a bad thing, since a well-functioning society is more than a well-functioning market economy. An extensive social insurance protects the rich, the poor, and, above all, the cooperative attitudes without which a democratic society cannot function well.

Will Central and Eastern European Countries Dismantle the European Union?—Contrasting European Developments to Current Trends in the US

This paper analyzes the historical background of the current developments in Central Eastern Europe, in other parts of Eastern Europe and in previously member countries of the former Soviet Union. The author concludes that the political and economic transformation of these countries to a solid democracy and well-functioning market economy have not been successful for most of them yet, and this may have serious consequences on the European Union, too.The paper contrasts these trends with what we can observe in the United States now. The author turns to the “hard facts” next, when he discusses the different factors of human and economic development and the issue of migration in the Central and East European post-socialist countries and in a selected group of advanced countries.

Social and Asocial Capital: Social Embeddedness and Government Intervention

How important is social capital for a market economy and what effect does government intervention have on social capital? By looking at how the market is embedded within an institutional framework that depends on certain norms, government intervention can distort certain signals and destroy the social capital necessary for a well-functioning market economy by channeling resources into unproductive anti-market activity. The following essay looks at the various definitions of social capital and then discusses how government intervention distorts social capital, networks, and norms, as well as provides a theory of when government intervention can lead to a pushback into reaffirming previous social norms instead of government leading to more and more government intervention.

Comments by Ding Lu, on Zombie Firms and the Crowding-Out of Private Investment in China

October 01 2016 Comments by Ding Lu, on Zombie Firms and the Crowding-Out of Private Investment in China Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2016 by the Earth Institute at Columbia University and the Massachusetts Institute of Technology2016Massachusetts Institute of Technology Asian Economic Papers (2016) 15 (3): 56–57. https://doi.org/10.1162/ASEP_a_00475 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn MailTo Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Comments by Ding Lu, on Zombie Firms and the Crowding-Out of Private Investment in China. Asian Economic Papers 2016; 15 (3): 56–57. doi: https://doi.org/10.1162/ASEP_a_00475 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsAsian Economic Papers Search Advanced Search Ding Lu: This paper scrutinizes the effects of state-led investment on economic efficiency in China at the microeconomic level. Since the early 1980s, China has achieved extraordinary success in economic development. A crucial feature of this developmental path is a proactive role played by the government. As observed by Lin (2012, 2013), while pursuing reforms to build a well-functioning market economy, the Chinese government has facilitated the development and upgrading of industries according to the economy's dynamic comparative advantages over years. The key elements of the government's proactive role include: (a) compensating for externalities created by pioneer firms in the process of industrial upgrading; (b) coordinating the desirable investments and improvements in soft and hard infrastructure; and (c) liberalizing entry into sectors in which the country has comparative advantages but at the same time providing some transitory supports and protections to unviable firms to maintain (social) stability.... You do not currently have access to this content.

Business influence on media news processing: a comparison of journalists’ perceptions in the Czech Republic and South Africa

Abstract. How do journalists in two formally authoritarian countries, the Czech Republic and South Africa, perceive the potential of media owners and other business people to influence their work? Multinomial ordinal regression analysis was applied to data collected in the Czech Republic and South Africa for the present 50 country-wide Worlds of Journalism (WoJ) Project. A total of 291 journalists in the Czech Republic and 371 journalists in South Africa were interviewed according to the WoJ protocol. Three aspects of media freedom, as perceived by the respondents, a r e discussed, namely the freedom journalists have to select news stories; to emphasize certain news aspects; and to participate in editorial discussion and decision making (news coordination). The results suggest that media owners as well as business people curb, but also support, journalists' freedom in dealing with the news. In the Czech Republic, a country in the global North and a former member of the Soviet bloc, the results show the influence of media owners and business owners supports the freedom of journalists in selecting their own stories. More influence of business people is associated with more freedom of journalists in aspects emphasized in the stories and in the frequency the journalists participate in newsroom coordination. In South Africa, a former white minority-ruled country in the global South, the results suggest that the influence of media owners seems to lessen journalists' freedom to select news and to emphasize certain news aspects, and coordination. Moreover, the perceived level of influence of business people in South Africa did not statistically significantly relate to all three aspects of journalists' freedom.Keywords: media economics, business ownership, freedom of press, Czech Republic, South Africa, news selectionJEL Classifications: L82, M20, P12, P26(ProQuest: ... denotes formula omitted.)IntroductionA long standing research issue in journalism and media studies is the influence, real or perceived, that media owners and businesses in general have on media freedom, more specifically on journalists' agency to select news stories; to emphasize certain news aspects and to participate in editorial discussion and decision making (news coordination) (e.g. Price, 2003; or Gilensa and Hertzmana, 2000).The interaction between business people and the media has been a standing topic of research, not the least because the results could also be of interest to business people and not only the academic sphere (see Tejkalova et al., 2015). For example, Dougal et al. (2012) used exogenous scheduling of Wall Street Journal columnists to identify a causal relationship between financial reporting and stock market performance. Moreover, it appears that more experienced, more trusted and reportedly independent journalists tend to have more influence over the stock market behavior (Li, 2014).The research question this paper addresses deal with the same question, but this time within the context of two formally authoritarian countries, the Czech Republic and South Africa, namely: How do journalists in these two countries perceive the potential of media owners and other business people to influence their work? Could one expect the situation in the two countries to be more or less the same after democratic independence was obtained in late 20th century?A fundamental question is of course whether one can compare the two previously authoritarian countries within the context of media freedom? The Czech Republic (then Czechoslovakia) was a Socialist country with a command economy and thorough and total control over mass media exerted by the ruling Communist Party, while South Africa was a well-functioning market economy, but distorted by its racial policy of apartheid and clampdowns on the free flow of information.Although the political change to a democratic dispensation happened in both countries roughly at the same time (1989 in the Czech case, and 1994 in the case of South Africa), the nature of the changes was relatively different. …

Book Reviews

Belton M. Fleisher of Ohio State University, Central University of Finance and Economics, and IZA reviews, “Demystifying the Chinese Economy “ by Justin Yifu Lin. The Econlit abstract of this book begins: “Originally published in Chinese in 2009. Updated English-language edition explores China's economic development and transition over the past few centuries and considers the reforms necessary for China to complete the transition to a well-functioning market economy. Discusses opportunities and challenges in China's economic development; why the Scientific and Industrial Revolutions bypassed China; the great humiliation and the Socialist Revolution; the comparative advantage-defying, catching-up strategy and the traditional economic system; enterprise viability and factor endowments; the comparative-advantage-following development strategy; rural reform and the three rural issues; urban reform and the remaining issues; reforming the state-owned enterprises; the financial reforms; deflationary expansion and building a new socialist countryside; improving the market system and promoting fairness and efficiency for harmonious development; and reflections on neoclassical theories. Lin is Senior Vice President and Chief Economist of the World Bank.”

Foreign Direct Investment In A Post-Communist Cuba: Overcoming Future Challenges

The history of economic transition since the collapse of communism in the late 1980s and early 1990s offers many lessons for what Cuba may expect when it eventually embarks on its transition path. The path of transition has been more difficult than was conceived immediately following the collapse of communism. The nearly exclusive policy focus on economic liberalization and privatization of public enterprises did not lead to sustained inflows of foreign capital and the rapid economic growth and development once promised for these economies. Current transition strategies have increasingly recognized the importance of well-functioning social institutions (good governance) as the necessary foundation of a well-functioning market economy. Building the institutional infrastructure required by a market economy and necessary for long-term success in attracting FDI has proven, however, to be a difficult and slow process.Foreign direct investment is accepted as one of the key supportive components of an economic transition strategy, but some of the key determinants of FDI are also ones that characterize an effective institutional infrastructure of a market economy. Additional factors related to systematic or market risks are also important determinants of FDI. A basic understanding of these determinants can aid future policy makers.This paper examines Cubas recent experience in attracting FDI, summarizes some of the empirical work that has been done regarding the link between well-functioning social institutions and FDI and draws lessons for a future Cuban government pursuing transition to a market economy. General policy recommendations are also developed.

The Role of Prices in Conserving Critical Natural Capital

Until recent decades, economic decision makers have largely ignored the nonmarket benefits provided by nature, resulting in unprecedented threats to ecological life-support functions. The economic challenge today is to decide how much ecosystem structure can be converted to economic production and how much must be conserved to provide essential ecosystem services. Many economists and a growing number of life scientists hope to address this challenge by estimating the marginal value of environmental benefits and then using this information to make economic decisions. I assessed this approach first by examining the role and effectiveness of the price mechanism in a well-functioning market economy, second by identifying the issues that prevent markets from pricing many ecological benefits, and third by focusing on problems inherent to valuing services generated by complex and poorly understood ecosystems subject to irreversible change. I then focus on critical natural capital (CNC), which generates benefits that are essential to human welfare and have few if any substitutes. When imminent ecological thresholds threaten CNC, conservation is essential and marginal valuation becomes inappropriate. Once conservation needs have been met, remaining ecosystem structure is potentially available for economic production. Demand for this available supply will determine prices. In other words, conservation needs should be price determining, not price determined. Conservation science must help identify CNC and the quantity and quality of ecosystem structure required to ensure its sustained provision.

The Duality of the Saudi Legal System and its Implications on Securitisations

When taking helicopter view over the Saudi legal system, one can observe clearly the existing legal duality within it. The duality is the result of various legal reforms undertaken by the Government in order to facil itate adopting market-oriented policies to which it committed itself in the recent revised policies and agreements of the Gulf Co-operation Council.1 Adopting such policies requires the developing and deepening of the financial system in order to have proper well-functioning market economy. To this effect, the Saudi government has recently promulgated the Capital Market Law of 2003 (CML).2 The aim of the CML is to deepen the Saudi financial system and in turn to facilitate the transition towards market economy. Financial related laws, however, are functioning within an Islamic Shari'a body of law. this sense, duality is created whereby the conventional financial system is functioning within an Islamic body of law (i.e. a system within system). This, in turn, has led to the duality of the Saudi judicial system where Islamic Shari'a courts have paramount general jurisdiction and other spe cialised committees have been established to hear financial and banking cases. Vogel describes this Saudi duality thus: In most Islamic states . . . the legal system is bifurcated: one part is based on man-made, positive (wadi) law; the other part is Islamic law. . . Saudi Arabia also has dual

The Determinants of Governance: A Cross‐Country Analysis

Drawing on insights from economic, political, and cultural theories of governance, this article investigates the determinants of governance for a large sample of countries, both developed and developing. The results indicate that countries with a history of Western European influence and with British common law origins have better governance. In addition to these exogenous and historically predetermined variables, economic factors such as openness to trade, resource‐intensity in exports, and levels of economic development have a significant impact on governance. (JEL D73, H11, K42)

The Case Against Intellectual Property

According to a common argument, the presence of strong intellectualproperty rights spurs innovation, which leads to higher economic growthand increasing benefits for all. The argument seems coherent: theestablishment of secure property rights is a fundamental pillar of a wellfunctioning market economy. No economic agent exercises productiveeffort without the certainty of controlling its fruits. What is true forphysical effort must be true for the intellectual one: if strong propertyrights provide good incentives for the production of potatoes, they mustalso provide good incentives for the production of ideas.Why then do we argue a “case against intellectual property?” Are wearguing that, while stealing potatoes is bad, stealing ideas is good? Weare not. Economic efficiency, and common sense, argue that ideasshould be protected and available for sale, just like any other commodity.But “intellectual property” has come to mean not only the right to ownand sell ideas, but also the right to regulate their use. This creates asocially inefficient monopoly, and what is commonly called intellectualproperty might be better called “intellectual monopoly.” When you buy apotato you can eat it, throw it away, plant it or make it into a sculpture.Current law allows producers of a CDs and books to take this freedomaway from you. When you buy a potato you can use the “idea” of a potatoembodied in it to make better potatoes or to invent french fries. Currentlaw allows producers of computer software or medical drugs to take thisfreedom away from you. It is against this distorted extension ofintellectual property rights that we argue.It is a long jump from the assertion that inventors deserve the fruits oftheir efforts to the conclusion that current patent and copyrightprotection are the best way of providing such reward. Statements such

Mass Privatization and Economic Reform in North Korea: Towards a Hard State Approach

As seen in Eastern European nations and former Soviet Union mass privatization is an intense political process that requires strong leadership from the top as well as bottom-up political support from workers, managers, and the population at large. Given that North Korea's productivity is likely to be in less than that of other former socialist nations, simultaneous restructuring and reform programs are essential. This makes mass privatization all the more critical. The primary goal of mass privatization plan should be to create well-functioning market economy, which is best achieved by selling off SOEs as quickly as possible. Other economic and social concerns should not detract the government. In sum, it is important to establish an economic reform agenda early; otherwise, the window of opportunity available in reforming transition economies might be lost, which will only make the reform process much harder to implement in future date.