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• Market institutions precede market beliefs: a test with cross-country regressions

  3-30

  Pál Czeglédi

  Views:

  301

  The paper examines the literature on culture, economic growth and institutions to derive hypotheses about the relationships between market beliefs, institutions, and productivity. It then tests these hypotheses with cross-country regressions. First, it points out that each of the four cause-and-effect hypotheses of the possible relationships have an economic literature, in that market beliefs are seen as parts of culture. Second, the paper tests these hypotheses by making use of the fact that they consider different variables as exogenous ones. Measures of market beliefs are the coefficients of the country-dummies in the regressions run with individual data from the World Values Survey. The tests support the two hypotheses which hold that it is institutions, not market beliefs, that are exogenous.

  Journal of Economic Literature (JEL) codes: L26, O43, P16

• Sustainability of growth in countries with diverse backgrounds in the light of main international indices

  145-168

  Tamas Borko

  Views:

  120

  The paper tries to answer why fossil fuel abundant countries with diverse backgrounds perform differently depending on the dominance of the advantages or disadvantages accruing from natural resource wealth. With the contribution of the most popular competitiveness and institutional indices the determining factors are indentified. The distinctive factors are market efficiency, the quality of the business environment, innovative capability, the quality and efficiency of governmental, market and judicial institutions, the low level of corruption and the existence of political and civil freedom.

  Journal of Economic Literature (JEL) codes: O13, O17, Q32

• Freedom of the Markets versus Good Governance: Experiences in Central Europe

  35-61

  László Muraközy

  Views:

  141

  The market and the state, operation and characteristics of two institutions of key importance in the modern mixed economies, are investigated for the former socialist countries in this study. After two decades it can be seen more clearly what system has been established in the region, how it operates, and what its characteristics are. In the first part of the with the help of international comparisons we examine how free the market is, how good the rules are, and how much they help, or hinder, the fulfilment of its function. From an other aspect we compare the scope of the good governance and the size, the freedom and efficiency of the state. According to the evidence of the international studies examined, the former socialist countries established the forms of the market institutional system relatively quickly, but the operation and quality of these lagged significantly behind those of the developed countries. Also important conclusion of the study is that by the first decade of the millennium the characteristics of the former socialist countries are increasingly diverging from one another. Both the characteristics of the earlier socialism, and the more distant historical past which can be caught in the act within it, had and have an effect on the economic and social systems now established in Eastern and Central Europe.

  Journal of Economic Literature (JEL) codes: H1, P17, P27, P35

• Policy (Institutional) Diversity and Economic Development

  5-31

  Daniel Daianu

  Views:

  103

  Diversity, or variety, is the essence of economic life in the sense of underlying choice; economic calculation gives numerical substance to how people make choices in their daily endeavours, either as consumers or entrepreneurs. How does variety/diversity takes shape in the realm of institutions and policy making? Is the range of choices open-ended? The last couple of decades has revealed an overwhelming offensive of the neo-liberal paradigm in
  terms of defining “best practices”. Even language was shaped accordingly with market reforms being seen in a quasi-single theoretical and policy framework. Are we heading towards increasing uniformity with regard to institutional and policy set ups, worldwide? An affirmative answer would underline the successful market based transformation of a series of command economies. Some convergence between institutional patterns in the USA and the
  EU economies might be alluded to in the same vein A supportive argument for this line of reasoning could be that what matters for individual achievement, in the end, are equal opportunities. But this argument can be turned around when debating the merits of various institutional set ups in terms of creating fair chances for people. A sceptical answer would highlight the mounting challenges which confront societies, whether rich and poor, and the international community in general –in spite of the high hopes of not long ago. The demise of the “New Economy”, the series of corporate scandals in wealthy economies and the subsequent recourse to new regulatory legislation, recurrent financial and currency crises throughout the world, and the controversies surrounding the activity of IFIs, should compel “ideologues”, of all sorts, to be more humble in their prescriptions. This essay argues that there is substantial scope for institutional and policy diversity to operate as a means to foster economic development; that there might be a paradigmatic cycle in the dynamic of economic policies.

• Are business relationships institutions?

  Tibor Mandjak

  Views:

  126

  The question is simple; the answer could be quite complicated. Inter-organisational marketing researchers define business relationships as interactive exchanges between two organisations. Does this mean anything for institutional economists? A business relationship is created by weaving actor bonds, resource ties and activity links. Business relationships exist and change through time. The establishment, development, maintenance, as well as termination of a business relationship all require investments from the participating parties. A business relationship does not exist in an isolated manner, but other market and non-market actors can equally influence it. In reality, numerous other relationships and actors affect business relationships. As a result, these actors indirectly influence business relationships through the change in behaviour of one of the parties within the business relationship. These directly and indirectly affected relationships create a business network. For an organisation business relationships have different functions. External resources needed
  for operation and value creation are fed by them. Value creation for the customer and value sharing with the customer take place in business relationships. They are forms of an organisation’s interdependence. A business relationship is a special form of governance of the partners’ mutual efforts. A business relationship has its own value for each organisation. Each organisation has several business relationships, each with different value. In business markets,
  where buyers are always organisations, the business relationship portfolio is the market itself. Inter-organisational marketing researchers use very different theoretical foundations to study business relationships. Modern contract law based research distinguishes about a dozen norms of behaviour in business relationships. Institutional economic-rooted studies argue that we should use the plural-forms approach (price, authority and trust must be employed together) to explain these very complex phenomena. Research using communication theory concluded that multiple periods of business negotiations were required to develop even primitive norms. The paper concludes with some elements of a possible answer to the title question.

• Reflections on the Role of Institutions on the Chinese Road to a Market Economy

  49-82

  Laszlo Csaba

  Views:

  114

  At the onset of transformation there has been a close to consensus view that the market system has no alternative. While this insight has found its place in the current mainstream on development economics, the so-called Washington consensus or post-Washington consensus (Kolodko, 2000, pp.119-141 andpp. 348-356; and Williamson, J, 2000, Srinivasan, T.N.,2000), very few would venture to repeat in an academic writing the once famous dictum of Vaclav Klaus: the third road leads to the third world. Much of western Europe has remained within the framework of the welfare state, despite its obvious limitations. Also in
  the transforming economies, the rollback of the state has proven to be much less than the tough normative language adopted by early reformers would have indicated. Actually, it is the structure rather than the size of public spending in these countries that may be a source of social and economic strains by providing less than optimal conditions for sustaining economic growth.

• Issues of the Regulation of Residential Credits

  44-51

  Tamas Prugberger

  Zoltan Nagy

  Views:

  198

  The study focuses on the theoretical and practical issues of lending from the legal regulation point of view. After the 90’s the consumer social model was set up in Hungary, and it was linked to a fairly broad consumer credit activity. However, the regulation of lending was insufficient in many areas; consumer protection has hardly existed in the financial services market. Debtors were unprotected when facing the financial institutions, which concluded contracts not in their favour and restricted their rights. The economic crisis, and the great number of insolvent debtors, has emerged as a social problem for legislators, thus enabling them to amend lending rules and strengthen consumer protection in this area.

  JEL classification: K 30

• The Rigidity of Labor Markets and the Unit Root in the Time Series of Unemployment rate: Raising a Problem

  103-114

  Janos Kormos

  Pal Czegledi

  Views:

  140

  The article is a review of the literature concerning the time series of the unemployment rate, and of the economic explanations behind the tests of these time series. We seek to identify the theoretical explanations behind a possible unit root in unemployment time series. We argue that the main difficulty faced by these unit root tests is the change in labor market institutions. The ffects of institutional changes make the traditional tests rather weak, while the panel unit root tests oversimplify the economics of the question. Our conclusion is that the possible application of the tests developed theoretically for nearly unit root processes seems to offer a way out of this dilemma.

  Journal of Economic Literature (JEL) classifications: C22, E24

• Regulatory Coherence and Economic Growth

  33-54

  Pal Czegledi

  Views:

  165

  The paper is aimed at examining differences in market regulation across countries. Its starting point is the puzzle that poor countries apply more regulatory measures than rich ones do, although it has been empirically shown that those countries that regulate less grow faster. To explain this contradiction, the paper introduces the concept of regulatory coherence, and tries to explain the differences in this concept, together with the differences in the general level of regulation. The main argument is that regulatory coherence as well as the general level of regulation is dependent on the external, broad institutional system, because this affects the incentives of the regulators. The paper tries to support this theiretical argument empirically by a cluster analysis.

  Journal of Economic Literature (JEL) classification: B53, M13, L51