A Natural Experiment

"He reminded that the conception, which provided 12 years education system, was adopted in 2001. As a result of transfer from 11 years system to 12 years system there will be no school-leavers in Ukraine in 2012.

He noted that school-leavers of 2011-2013 get into situation when there is no fair competition."

http://www.unian.net/eng/news/news-338758.html

This is an extremely interesting 'shock' to the system - in 2012, there are no people who will want to enroll at the universities - and 4 years later, there will be almost no university graduates entering the labor market

Wireless Laptops - Part 2

We had wireless internet, now Dell laptops have wireless electricity!

http://edition.cnn.com/2009/TECH/ptech/09/29/cnet.wireless.laptop.charging/index.html

Paying Politicians - the Article

My column on 'paying politicians' can be found here

http://www.kse.org.ua/events.htm?id_category=6&id=181

The Reservation Price

According to the wikipedia, the reservation price is defined as follows

"In negotiation, the reservation price is the point beyond which a negotiator is ready to walk away from a negotiated agreement. Taking a typical business negotiation as an example: a seller's reservation price is the least amount (the minimum) or bottom line the seller is prepared to accept."

http://en.wikipedia.org/wiki/Reservation_price

Ukraine just redefined the concept

"The starting price at the tender was 4 billion hryvna ($475 million or €325 million).

A Ukrainian company, Nortima, won the tender with a bid of 5 billion hryvna ($592 million or €405 million), but the nation's top privatization official said minutes later that the tender commission had voted unanimously to annul the results because the price was too low."

http://www.kyivpost.com/nation/49674

More Sweet Deals for Sugar Producers

Does anybody understand why, when the sugar price is historically high, the sugar industry needs subsidies?

"KYIV, September 24 /UKRINFORM/. The Cabinet of Ministers has allocated UAH 219 million (USD 1 - UAH 8.0) from the Stabilization Fund to pay subsidies for growing sugar beet, Agrarian Policy Minister Yuriy Melnyk announced.

According to him, farmers will get by UAH 750 of subsidies for every sugar beet-seeded hectare."

http://www.ukrinform.ua/eng/order/?id=170347

"KYIV, September 22 /UKRINFORM/. The draft state budget 2010 provides for special guarantees to purchase technical equipment for national sugar plants, Prime Minister Yulia Tymoshenko told a briefing after a visit to the Haisyn SugarPlant in Vinnytsia region.

In particular, according to her, purchase of technical equipment is envisaged on the leasing terms without making the first payment, the state will take on itself a part of interest payments on a credit.

The draft budget 2010 is made so that it will be a locomotive and will promote setting up new capacities in the sugar industry, Tymoshenko said emphasizing that special terms for crediting will be developed for the sugar sector, as well as special support on the part of the NBU and commercial banks."

http://www.ukrinform.ua/eng/order/?id=170190&ulq=sugar

"The Cabinet of Ministers of Ukraine is planning at a meeting on September 23 to make decision to cut the price of gas for Ukraine's sugar refineries, Ukrainian Premier Yulia Tymoshenko has said.

"I'd like to inform you that the government at its next meeting will take decisions regarding a cut in the price of natural gas for sugar refineries this season," Tymoshenko said during a working visit to Vinnytsia region on Tuesday.

According to Tymoshenko, the new price of gas for the sugar refineries could be set at a level of UAH 2,100 per 1,000 cubic meters."

http://www.kyivpost.com/business/49217

More on Curfews.

"For three months now teenagers in Ivano-Frankivsk and Zhytomyr have not been allowed to stay on the streets unaccompanied by parents after 10p.m.: these cities’ councils introduced a curfew for them. the Kyiv authorities are considering this measure at the moment."

http://day.kiev.ua/280441/

An academic view on the effectiveness of curfews can be found here

http://www.kse.org.ua/events.htm?id_category=6&id=174

Ukraine World Champion Football!

"Today Ukraine defeated Portugal 5-4 in the final of the Milan 2009 Homeless World Cup"

http://www.homelessworldcup.org/

Ukrainian Football Clubs Excel in Losing Money

"Of the top leagues in the world, the Premier League was by far in the worst position when it came to the number of clubs with major losses. Only Romania, Ukraine, the Czech Republic and Poland had more clubs losing money among Europe’s 53 federations."

http://sports.yahoo.com/sow/news?slug=ap-europe-moneytrouble&prov=ap&type=lgns

"In an attempt to contain such massive spending, UEFA has imposed new rules for clubs to break even on soccer-related businesses by 2012 or be stripped of their licenses."

see also

http://football.uk.reuters.com/european/news/LF445570.php

The general idea here is that some clubs excessively 'buy' success- it would be nice to get the list of clubs and their financial situation to test whether clubs with debts indeed do better on the field.

Pay of MPs

The proposal of Tymochenko to halve the salaries of MPs would reduce their pay to about 1000$ a month - which is low (for that money you can as well be an academic...) - hence, 'good and honest' people would have no more reason to be interested in running for office. In other words, you'd almost have to be an oligarch to be able to afford being an MP.

Such selection effects are potentially important if to be believe some recent research on

Brazil

http://ideas.repec.org/p/iza/izadps/dp4235.html

"Our main findings show that higher wages increases political competition and improves the quality of legislators, as measured by education, type of previous profession, and political experience in office. In addition to this positive selection, we find that wages also affect politicians’ performance, which is consistent with a behavioral response to a higher value of holding office."

the US

http://mitpress.mit.edu/journals/pdf/jeea_2_2-3_193_0.pdf

"The empirical results are weakly encouraging to the view that pay rates of politicians affect behavior of this sample of politicians either by changing incentives or by altering the pool of politicians who put themselves forward for office."

and finland

http://ideas.repec.org/p/iza/izadps/dp4235.html

"In this paper, we estimate the effect of pay for politicians on who wants to become a politician. We take advantage of a considerable 35 percent salary increase of Finnish MPs in the year 2000, intended to make the pay for parliamentarians more competitive. We have collected in- formation on the age, gender, education, and occupation of all parliamentary and municipal candidates in four parliamentary elections (1995, 1999, 2003 and 2007) and three municipal elections (1996, 2000 and 2004). Our preliminary results suggest that the salary increase would have increased the fraction of female parliamentary candidates with university-level education, while no effect is found for male candidates."

So, I'd advice Tymochenko to make it explicit that this reduction is conditional -i.e. that future good behavior will be rewarded by doubling or even tripling the salary- this would give both positive incentive effects and positive selection effects.

Independent Central Bank III

"Lanoviy said that the structure of the National Bank needs to be changed so that the supervisory council and board are not controlled by businessmen, or their representatives. “In France’s National Bank, for example, the supervisory board consists of people who work at scientific or educational institutions,” he said. “When bankers, members of parliament or government are appointed, it opens the door to abuse and lobbying of business interests.”

http://www.kyivpost.com/nation/48886

I already volunteered to provide some hints for possible candidates some posts ago!

Independent Central Bank Bis

The NBU deputy chairman who resigned criticizing the presidential administration, immediately becomes deputy minister in the Tymochenko government. A nice illustration of how 'independent' the NBU is.

http://www.kyivpost.com/nation/48776

Lies Damned Lies and Statistics

Ukrinform reports on Tymochenko claiming the following

http://www.ukrinform.ua/eng/order/?id=169648

"We expect that we will return to the pre-crisis level by the year-end," she said.

Tymoshenko showed a table pointing that an unemployment growth started after August 2008 and there were 509.5 thousand jobless. "We then saw a rapid growth and reached the peak in February (906.1 thousand). And from March we have been experiencing a positive dynamics, which means that people return to jobs," the Premier underscored.

The suggestion here is that employment will be back where it was before the crisis - if this would be true, it would mean that Ukraine produced say 15% less (the drop in GDP) with about the same number of people, which would not be a good signal

These strange unemployment statistics made me write an open ed for Economicheskie Izvestia at the end of July 2009 which you can find here

http://www.kse.org.ua/events.htm?id_category=6&id=168

Performance Related Pay for Politicians

MPs' salaries will be halved from January 1, 2010, says Tymoshenko

KYIV, September 14 /UKRINFORM/. Salaries of the people's deputies of Ukraine will be halved from January 1, 2010, Prime Minister Yulia Tymoshenko said at the Cabinet special meeting on Saturday.

"This year, the Cabinet of Ministers has reduced salaries for the ministers, and now, from January 1, we will cut salaries for the MPs, taking into account, in particular, that they work for the country insufficiently. So, there should be rather moderate approach to wage," she said.

At the same time, she noted that the government does not promise a considerable growth of social standards and salaries in 2010.

According to her, the main priority in 2010 will be support to the national economy. "At the same time, we are making a small step forward in raising social standards, but in a very conservative way," Tymoshenko added.

http://www.ukrinform.ua/eng/order/?id=169477

What's in a Name

my column in Investgazeta this week on how names affect behavior can be found here

http://www.kse.org.ua/events.htm?id_category=6&id=177

National Bank Independece

Not much independence in Ukraine, were some board members are Yuchenko supporters, other Tymochenko supporters

http://www.telegraph.co.uk/news/worldnews/europe/ukraine/6174295/Ukraine-probes-bank-bosses-over-suspected-theft.html

This lack of indepence is costly in terms of inflation, possibly economic growth

http://www.voxeu.org/index.php?q=node/575

Maybe it's time for the NBU to follow the example of some other countries and to appoint some good academics to the board? (http://tomcoupe.blogspot.com/2009/08/economists-as_9123.html)

Reducing Crime by Abolishing Law Enforcement?

According to the president, in 2008, there were 2.9 million complaints about crimes vs 1.5 million complaints about the actions of law enforcement authorities.

http://www.ukrinform.ua/eng/order/?id=169419

A Transparent Lack of Transparency

According to the data of the Investor Relations Online - Survey of Websites of the Ten Largest Listed Companies 

-which can be found here http://www.pfsprogram.org/capitalmarkets_research.php 

the Ukrainian top firms do not excell in transparency - several of them even have no website. The top firms of the BRIC countries do considerably better

Ukraine's Competitiveness Going Down

The World Economics Forum Global Competitiveness Report downgrades Ukraine to place 82.

http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm

They write "Ukraine drops by 10 spots to 82nd. With a steep fall in demand for export products, a devaluation of the currency, and a near breakdown of the financial system, Ukraine faces daunting challenges in the short term. Nonetheless, past reform efforts will have to continue, in particular aiming at upgrading the institutional environment (120th), strengthening financial

markets (106th), and rendering goods markets more efficient (109th)"

I'd say the devaluation has substantially boosted Ukraine's competitiveness - an employee who used to cost $1000 now costs $600 or so - so for a foreign investor, Ukraine has become cheap again.

Curfews

My column on the proposal to introduce a curfew for young people in Ukraine has today been published in Ekonomicheskie Izvestia. The English and Russian version can be found here:

http://www.kse.org.ua/events.htm?id_category=6&id=174

Extra-terrestrial Attention

A UFO recently has been seen in Ukraine

http://209.85.129.132/search?q=cache:http://www.allnewsweb.com/page8978971.php

From that site:

"The reader, from the town of Vinnitsa in the Ukraine, claimed that she and a friend were followed home by a UFO late at night:

'It was at around 11pm on Friday of July 31 when myself and a friend were walking home from a night out. We were walking through a rather dark street and we noticed that it was lighter than usual. We looked up and saw a large white light hovering above us. As we walked it seemed as if it was following us and we started to run away. Then it vanished instantly. It was much larger than a star and it was definitely moving plus we heard some sort of vibrating sound coming from it. I really think it was a UFO and we both saw it' "

Not really surprising, as one could expect aliens to be interested in visiting one of countries worst hit by the economic crisis.

For some economics analysis of UFO sightings, check out this post

http://freakonomics.blogs.nytimes.com/2008/09/01/the-x-files-economics-edition-a-guest-post/

Booming Ukraine Banking Sector

In the current market environment, one could easily mis-interprete the word 'booming' in the title of the below market research report.

http://www.prlog.org/10332939-booming-ukraine-banking-sector.html

From the press release

"Sep 05, 2009 – The market research report, “Booming Ukraine Banking Sector”, is an analytical study of the thriving banking industry of the southeastern European country, Ukraine.

...

Key Findings

- Ukraine is one of the fastest growing countries in Eastern Europe by assets, loans, deposits and profitability of the banking sector.
- The bank deposits in the Ukrainian banking sector are projected to grow at a CAGR of about 45.8% (in terms of national currency) during 2008-2012.
- The bank loans in the Ukrainian banking sector are forecasted to grow at a CAGR of about 66% (in terms of national currency) during 2008-2012.
- Economic entities accounts for majority of bank loans in Ukraine.
- It is forecasted that total number of payment cards will reach over 95 Million by the end of 2010 at a CAGR of 31%. "

In fact the quoted numbers '45.8% (in terms of national currency) during 2008-2012' or 'about 66%(in terms of national currency) during 2008-2012' look impressive until you compare them to the annual inflation level in Ukraine.

Eating Habits explained

From Dan Hamermesh's latest research

"Using the 2006-07 American Time Use Survey and its Eating and Health Module, I show that over half of adult Americans report grazing (secondary eating/drinking) on a typical day, with grazing time almost equaling primary eating/drinking time. An economic model predicts that higher wage rates (price of time) will lead to substitution of grazing for primary eating/drinking, especially by raising the number of grazing incidents relative to meals. This prediction is confirmed in these data. Eating meals more frequently is associated with lower BMI and better self-reported health, as is grazing more frequently. Food purchases are positively related to time spent eating—substitution of goods for time is difficult—but are lower when eating time is spread over more meals."

http://www.nber.org/papers/w15277

One Reason to Study at KSE

Traffic in Human Transplants

Ukraine regularly features in horror stories that involve transplants of organs - the most recent story can be found here

http://www.ukrinform.ua/eng/order/?id=168570

Some economists argue in favor of allowing the sale of human organs:

'But above all, the most effective answer to the critics of paying for organs is that the present system imposes an intolerable burden on many very ill individuals who cannot afford to wait years until suitable organs become available. Increasing supply through payment would largely eliminate this wait and thus enormously improve the efficiency of the transplant market.'

http://home.uchicago.edu/~gbecker/MarketforLiveandCadavericOrganDonations_Becker_Elias.pdf

A market for human organs thus in addition might be good for the reputation of Ukraine.