Author: Anna Pluta
Health at Work (2008-2012)
Researchers: Alf Vanags, Ieva Moore, Marija Krūmiņa and Natalija Snapkauskaite
The HEALTH at WORK project aims to review current knowledge and issues related to the economic impact of health at work, to assemble, organise, analyse and synthesise data from national projects and surveys in the participant countries, and to recommend future actions for research and policy development aiming at improving health and safety at work in a changing labour market environment in the European Union. Read more about the project and the 7th Framework Programme (FP7).
Competition in the Latvian and Baltic Grocery Retail Markets
New SSE Riga/BICEPS occasional paper by Anders Paalzow (SSE Riga) and Alf Vanags (BICEPS).
Abstract. This report analyzes concentration in the grocery retail market in the three Baltic countries: Estonia, Latvia and Lithuania. The markets (including some comparator Eastern and Western European markets) are analyzed using two standard measures: the Herfindahl Hirschman Index and the four firm concentration ratio. By applying a standard classification as used, for example by the US Department of Justice, the analysis reveals that the Latvian grocery retail market is competitive, the Estonian moderately concentrated, and the Lithuanian market highly concentrated. Given this observation, it is surprising that Latvia, where the grocery retail market is the most competitive (out of the three Baltic countries), is the country where further regulatory measures against the grocery retailers have been discussed the most.
Furthermore, in the light of the Latvian discussion on how to strengthen suppliers vis-à-vis retailers, the report analyzes some of the arguments, which have been used in the Latvian discussion to support the need for the proposed amendments to the Latvian Competition Law. A theoretical analysis of the concept of countervailing power and its relevance in the Latvian context shows that it is far from obvious that strengthening suppliers relative to retailers will benefit Latvian consumers. The report also examines the argument that the level of market concentration in the Baltic grocery markets (in particular the Latvian one) contributes to the relatively high Baltic inflation levels. There seems to be no support whatsoever for such a claim.
Smoking in Russia: Estimating the Benefits of Reduced Prevalence
New SSE Riga/BICEPS research paper by Alf Vanags and Zane Cunska (BICEPS).
Executive summary. This study attempts to estimate the economic burden of tobacco smoking in Russia and hence to identify in money terms the economic benefits of smoking reduction in Russia.
The Russian smoking situation is located and analysed in the context of tobacco situation in Europe where using a base year of 2000 the percentage of regular daily smokers varied from 21% to close to 40% with the lowest rate observed in Sweden – just under 19%. In the same year the Russian Federation along with other former USSR republics had a total smoking prevalence rate of nearly 35%. The European situation is very different if male and female smoking prevalence rates are analyzed separately. The heaviest male smokers are found in Russia – more than 62%, whereas Sweden exhibits an especially low rate of just under 17%. Conversely, with a prevalence rate of only 12.6%, Russian women are among the least heavy smokers in the European region. The highest female smoking prevalence rates (22-36%) are observed in countries in the middle of Europe. Smoking prevalence among Swedish women is 21 %, well above minimum European rates.
The Russian Federation stands out with a steep, upward trend in smoking prevalence since 1991 and the trend suggests further increase in the future, whereas the average indicators of the EU and other CIS show downward trends, especially Sweden, where the smoking prevalence rate has dropped from 33% in 1980 to 19% in 2000 and to 16% in 2004.
In Russia smoking kills 332 thousand people a year, or 15% of all deaths. 240 thousand (231 thousand males + 9 thousand females) or 72% of them are still in middle age when they die. Men in Russia smoke more and are more severely affected by smoking hazard than women. One fourth of all deaths at all ages and one third at middle age are associated with tobacco smoking. For women, smoking causes 3% of all annual deaths. Significantly less – 3.5 thousand women vs. 47 thousand men (by a factor of 13) yearly die from lung cancer caused by smoking.
Smoking generates various financial and economic effects for society: increased health care expenditures, higher mortality, increased absenteeism from work and lower productivity by smokers, as well as implications for non-smokers via environmental tobacco smoke. In this report we have assessed in money terms the economic gain to Russian society if smoking prevalence rates for men in Russia were at the same levels as in Sweden.
Using a conservative estimate for smoking attributed health care expenditures (SAE) the estimated total sum spent yearly in Russia on the treatment of diseases that are caused by use of tobacco was found to be 3.4 billion USD, or 0.6% of GDP. At Swedish smoking prevalence rates SAE would be only 5% of current health expenditures or just over 1.5 billion USD. In other words reducing Russian smoking rates for men to Swedish levels would generate annual health care expenditure savings of nearly 1.9 billion USD.
A major gain from reduced smoking is the reduction in premature death among smokers. If Swedish male prevalence rates were reproduced in Russia 169 thousand people that currently die yearly from smoking caused illnesses would survive. This clearly is a benefit both directly for those who live longer and for society that cannot be measured in money terms. However, adopting a utilitarian approach to societal benefit means that the 169 thousand people would be in good health and working, producing on average 4106 US dollars per head of output. In other words reducing smoking prevalence among Russian men to Swedish rates would imply an economic benefit in terms of output gain equivalent to 693 million USD every year or 0.12% of GDP.
Putting these sums together implies that Russia would gain or save at least 2.57 billion USD or 0.43% of GDP a year if the smoking prevalence rates among men in Russia were reduced to the levels observed in Sweden in 2000. This is a conservative estimate of potential measurable benefits since it has not been possible to make reliable estimates of other important benefits of reduced smoking – most notably passive smoking.
Inflation in Latvia: Causes, Prospects and Consequences
New SSE Riga/BICEPS occasional paper by Morten Hansen (SSE Riga) and Alf Vanags (BICEPS).
Abstract. This report is the second in an annual series produced by BICEPS and SSE Riga on macro policy issues. The 2007 report is again on inflation but this time focusing only on Latvia. The inflation problem in Latvia has not gone away and if anything has intensified since early 2006 to the extent that the Latvian government was forced into action to set up a working group on inflation which eventually published an anti-inflation plan in early March 2007. The aims of the 2007 report include: to examine the most recent developments in consumer prices in Latvia and link them to developments in producer prices and wages and to make an assessment of the likely future course of inflation in Latvia; to propose and outline a framework for analysing macroeconomic policymaking in Latvia; and to examine the likely impact or effectiveness of the anti-inflation plan.
While it is well known that consumer inflation has been rising again in early 2007, reaching a 10 year high of 8.9% in April, the report draws attention to the accelerating pace of both wages (32.8% growth in the first quarter of 2007) and producer prices (which have been rising at between 16% and 18% in early 2007). We see wage growth as feeding into producer prices after a lag of approximately 15 months and this in turn feeds into export prices entailing a loss of competitiveness. The analysis of price and wage developments suggests that the inflation problem cannot be addressed separately from the imbalances in the labour market and neither can it be addressed separately from the imbalance in the external sector. Moreover, the recent surges in producer prices and wages point to further inflation in the pipeline and to the possibility that the Latvian economy has shifted from a position of simple overheating to something more serious in structural terms.
The analysis of inflation as such is followed by a proposed framework for policy analysis based upon the classic economic policy work of Tinbergen and its application to open economy macroeconomics by Swan. The Swan diagram is used to characterise Latvia’s economic policy problem in terms of internal and external balance. Evidence is provided on recent developments in export and import volumes as well as on real effective exchange rates which suggests the rapid emergence of a severe external imbalance. Since the internal situation is universally acknowledged as characterised by excess inflation Latvia is firmly located in the Deficit/Inflation zone of the Swan diagram and moreover with an uncompetitive real exchange rate.
Applying the Swan diagram framework to the government anti-inflation plan reveals that all the main proposed measures are equivalent to fiscal measures. This has the consequence that the plan can only generate a larger or smaller contraction of domestic demand depending on the severity of the fiscal contraction. This in turn means implementing the plan cannot simultaneously achieve acceptable inflation and growth together with external balance. Thus Latvia remains on the horns of a Tinbergen policy dilemma – by choosing to remain on the existing peg to the euro it has too few instruments to achieve its policy targets. Through a policy of ‘neglect’ the government has arrived at a situation where all realistic options will be painful.
Pirmais Latvijas radošo industriju apskats (2007)
Researchers: Anda Miķelsone, Alf Vanags, Sergejs Gubins
Projektu finansē Latvijas Republikas Kultūras ministrija
Bridging the Research Policy Gaps in Developing and Transition Countries: Analytical Lessons and Proposals for Action
Authors: Eric Livny (Economic Education and Research Consortium, Moscow, Russia), Archana Mehendale (Independent Researcher, Bangalore, India) and Alf Vanags (BICEPS).
A synthesis of findings from the Global Development Network`s Bridging Research and Policy Project.
Competition in Baltic Grocery Retail Markets
The report has been produced by a team consisting of Alf Vanags, Mark Chandler, Anders Paalzow, Indre Bajoraite, Arturs Kanepajs and Merlin Müür. We thank Morten Hansen for very helpful comments on an earlier draft. Financial support from the Competition Policy Centre at SSE Riga is acknowledged.
Exploring Entrepreneurship and SME Development in a Post Soviet Context
Jaunākais raksts nr. 5 TeliaSonera Institūta pētījumu sērijā ar nosaukumu “Exploring Entrepreneurship and SME Development in a Post Soviet Context”.
Autors: Friederike Welter
TeliaSonera Institūts, kas atrodas Rīgas Ekonomikas augstskolā, sadarbībā ar BICEPS pētniekiem publicē pētījumus par dažādām tēmām, saistītām ar politiku, uzņēmējdarbību un komunikācijām.
The Role of Personal and Family Background in Making Entrepreneurs in a Post-Socialist Environment
New SSE Riga/BICEPS research paper by V. Dombrovsky (BICEPS, SSE Riga) and F. Welter (University of Siegen, RWI-Essen, SSE Riga).
Abstract. This paper sets out to investigate entrepreneurs in Latvia, which is one of the most advanced transition countries, having joined the European Union in 2004. Empirically, the paper draws on results from a representative survey of the Latvian population, based on the method of the Global Entrepreneurship Monitor, and complemented with additional questions related to the background and experiences of Latvian entrepreneurs. Results suggest that there are significant differences between personal characteristics and family background of entrepreneurs and non-entrepreneurs in Latvia. The biggest effects on entering entrepreneurship come from having parent entrepreneurs, sibling entrepreneurs, and having higher education.
Access to Secondary Education in Albania: Incentives, Obstacles, and Policy Spillovers
New SSE Riga/BICEPS research paper by Mihails Hazans (BICEPS, University of Latvia) and Ija Trapeznikova (Northwestern University).
Abstract. When judged either by educational attainment of adult population or by secondary and tertiary enrollment rates, by 2002 Albania compared very unfavorably to most European countries, including its neighbors. This study examines the determinants of secondary enrollment applying unobserved family effect probit model to data from Living Standards Measurement Survey 20022003. The focus of the paper is to investigate the importance of access to school and to further education for enrollment. We find that both absence of a secondary school in the community and the distance from the residence location to a secondary school have strong negative effect on enrollment, controlling for family background. In order to alleviate potential endogeneity bias of distance and community characteristics effects, we control for migration history of individuals since 1990. In rural areas, enrollment is impeded also by absence of a pre-school in the community, and by higher transportation cost from the community to its “main” secondary school. Proximity to a university city (as opposed to other urban centers) substantially increases likelihood of secondary enrollment in rural areas. In urban areas, a similar effect has emerged in 2003, plausibly as a response to opening the market for private universities. The above findings suggest that developing tertiary education and child-care system may have positive spillover effects on secondary enrollment.
Keywords: school access, demand for schooling, opportunity costs, family background, Albania.
JEL classification codes: J24; J12; J13; O15.