Projects / Programmes
Comparative analysis of enterprises’ reactions to external shocks in countries of Southeast Europe, PIGS, and »core European countries«
| Code |
Science |
Field |
Subfield |
| 5.02.01 |
Social sciences |
Economics |
Economy sciences |
| Code |
Science |
Field |
| S180 |
Social sciences |
Economics, econometrics, economic theory, economic systems, economic policy |
| Code |
Science |
Field |
| 5.02 |
Social Sciences |
Economics and Business |
Ownership, debt accumulation, restructuring, Slovenia, productivity, Western Balkan countries, GIIPS, EU
Researchers (17)
Organisations (2)
Abstract
Goal. The objective is to study how labor and capital market frictions, and specific decision-making processes in firms, dependant on preferences of main stakeholders, affect firm competitiveness (TFP) in the Western Balkan countries (Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Kosovo, Montenegro, Macedonia, Albania). Firm performance in the Western Balkan countries before and after the crisis will be compared to firms in GIIPS countries (Greece, Italy, Ireland, Portugal and Spain) and reference countries (Germany, France, Austria, Czech Republic, Hungary and Slovakia). In the post-crisis period, the debate over competitiveness of firms and countries has become a key European issue. Slovenia is placed among Western Balkan countries due to its development model characteristics.
Research questions.
• What is the result of the decision-making processes in firms depending on main stakeholders’ preferences and bargaining power? If bargaining power of employees (labor market characteristics) or state (due to transition lag) is high, the usual economic assumption of profit maximization does not hold (it is expected that this largely applies to businesses in the Western Balkans and GIIPS states, contrary to the reference countries, and mostly to firms in the public ownership or in a “mixed” ownership firms rather than private firms).
• Frictions in the labor market (i.e. duality) lead to a weaker short-term (defensive) and long-term (structural) adjustment of firms to external shocks (crisis). To what extent did the lack of adjustment in the number of employees act inhibitory on business operations in the crisis and post-crisis period?
• Frictions in the financial market lead to inefficient markets and to information asymmetries. To what extent did it, in the period before the crisis, mark the functioning of the financial accelerator and emergence of the balance sheets crisis that hinders firm recovery in the post-crisis period?
• How did the occurrence of crisis (external shock) affect the productivity of enterprises (according to different ownership structures, export-orientation and industry of firms) in individual countries and regions, in the light of the first three facets?
Methodology. Due to highly volatile study period (2006-2010) we will use the Huber type of regression analysis. To overcome the problem of endogeneity, we will use instrumental variables.
Data. For each of the countries mentioned above, a sample of 500 largest firms (250 in tradable and 250 in non-tradable sector) for the period 2006 – 2010 will be gathered. Data sources are international and national databases.
Project management. The research will be conducted by a project team from the Faculty of Economics, Ljubljana (head: Janez Prašnikar) in cooperation with a project team from the Economic Institute of the Faculty of Law (Veljko Bole), top experts in the world (Jan Svejnar, Columbia University, USA), and by partner institutions in the reference countries (University of Bonn, Prague CERG), GIIPS countries (Barcelona Pompeu Fabra University, Seconda Universita di Napoli), and Western Balkan countries (the network includes universities from all countries). The network of participants enables complete coverage of problematic issues by experts from analyzed regions and ensures access to data.
Expected results. Expected results of the project are: 1) showing the importance of presented factors on the competitiveness of firms in the studied countries and regions, 2) placement of Slovenian firms beside relevant countries and groups of countries, and 3) suggestions for improvement.
Original contribution: 1) comparison of 'microeconomic foundations' of economies among individual countries and groups of countries within Europe, 2) illustrating the impact of stakeholder bargaining, and frictions in the labor market and capital market on corporate behavior in different environments as a basis for more realistic macroeconomic modeling.
Significance for science
Private ownership and free market are the defining constituencies of the capitalist economy. In a normative manner, their role is best illustrated or understood in an Arrow-Debreu perfect market economy, where the price mechanism systematically sustains or ensures economic efficiency. In a simple model of a capitalist economy, money is a nominal category, which is expected to grow at a fixed rate (monetarism), while the central bank targets the interest such as to achieve price stability, and the market mechanism ensures that the economy reaches the full employment equilibrium. Economic crises generally raise doubt regarding the actual efficiency of the free market economy. Besides its debatable ability to ensure economic and price stability, the free market is increasingly distrusted regarding its aptitude to ensuring stable economic growth, low unemployment, financial stability and a sustainable distribution of income and wealth. This project and its results directly contribute to the establishment of the “new” macroeconomic theory (e.g. Stiglitz, 2011, 2016; Blanchard, Dell’Ariccia, and Mauro, 2013; Romer, 2016), a theory that could on the one hand explain the economic changes and on the other hand formulate a set of efficient measures that could target economic problems and allow the aforementioned macroeconomic goals to be achieved (macro-prudential regulation). The project is especially important due to the contributions to science in the following fields: 1) modelling and assessing the broader economic impact of the frictions in the financial markets. We studied the frictions on both the demand and supply side of the credit market. On the demand side, we extended the financial accelerator model as a part of the theoretical model of the »balance sheet financial crisis« (Bernarke, Gertler & Gilchrist, 1999) by incorporating into the model industrial structure of the economy, regional and national diversity or by introducing a variety of financial instruments or investment types. When studying the frictions on the side of credit supply, an open economy model of credit supply, which explains the linkages between the banking sector, households and companies, was developed. Following the Mundell-Fleming tradition (Mundell, 1963; Fleming, 1962; Dornbusch, 1976; Magud and Vesperoni, 2015; Blanchard et al., 2015), the model introduces two sets of equations of credit dynamics (one for companies and one for households) in emerging markets, which are used for empirical testing, 2) The project also contributed to the field of labour economics. When studying the frictions in the labour market, we relied partially on the normative model of labour market flexibility (employment protection, hiring and firing costs, unemployment benefits /flexibility of employment/, work-hours flexibility, collective bargaining / wage flexibility/, Boeri et al., 2016). We extended the Svejnar (1986) generalized Nash bargaining model and empirically assessed it using a broad company level dataset for EU and Western Balkan economies. The impact of the financial crisis on the bargaining outcome or the developments of the wages, profits and employment at the company level was estimated. In contrary to the general trust in the efficiency of the liberal labour markets, the results show that the liberal model, primarily found in the peripheral European economies, fails to stimulate the employees to increase productivity, thereby enhance firm productivity and competitiveness. 3) The project also contributed to the field of transition economics, primarily understanding of the role of privatization, as well as fields of corporate governance and industrial policy analysis. These three aspects are also essential parts of the macro-prudential regulation. 4) The project actively analysed also the Western Balkan region, which are often left out of the more rigorous economic debate.
Significance for the country
1. The research project focuses on the topics, crucial for small open economies similar to Slovenia. In such economies, it should be central to the economic-policy makers to stabilize markets and to limit the consequences of external shocks on their functioning. Results of the project are thus directly applicable to run an effective macroprudential policy. This holds for both avenues of the research, for the evidence on the macroeconomic consequences of financial frictions in the credit market and also in the labour market before, during and after the crisis. The research group is also actively integrated in discussions on privatization process in Slovenia. The views on how to improve corporate governance are highly appreciated. Its impact is also visible through formation of proposals on industrial policy. 2. Regarded as a specialist response to the developments in the economy, research results are of a great use also in decision-making processes, thereby operations, of Slovenian financial and nonfinancial corporations and institutions. 3. The results of the research are communicated to the Slovenian general public on the Business conference Portorož (Poslovna konferenca Portorož). The annual conference, taking place at the end of the third week in November, is a joint project of the Faculty of economics and newspaper Finance. Each year the concept of the event is different and its preparations usually take place throughout the whole year. The programme of the conference encompasses around ten section (lectures with discussions, round tables, case studies, ...), lead by well established theorists and practioners from around the world and also from Slovenia. One of the partners of our project, mag. Velimir Bole from EIPF, gives a lecture on macroeconomic developments in the region every year. Professor Janez Prašnikar is a programme director of the conference throughout the period from 1999 to 2016, when all together 18 conference events has been organised. 4. Business conference Portorož is a central conference on the topic of business economics in Slovenia, visited by 500 to 700 participants from business, politics and academia. 5. Each year one of the conference sections is also devoted to the presentation of results of the research, which is a joint effort of research group and students of the International Full Time Master Programme in Business Administration (IMB), Faculty of Economics, University of Ljubljana. Results are also collated in a book, published on this occasion. Some papers serve as a starting point for research papers. Two aspects should be emphasized: a) research topic is evaluated on the basis of applicability in practice early in a process of preparation; b) research allows for continuity in research approach since younger colleagues actively participate. 6. With an aim of transmission of best practices and experiences between East and West being a key principle, the above approach to research is an integral part of the Faculty of Economics’ mission ("take the best from East and West"). Students on different levels of education and training are thereby acquainted with the most recent research achievements, which are of practical use but also imperative to professional development.
Most important scientific results
Annual report
2013,
2014,
2015,
final report
Most important socioeconomically and culturally relevant results
Annual report
2013,
2014,
2015,
final report
