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International Scientific Conference― “Whither Our Economies” November 12-13 d., 2014 Proceedings, ISSN (online) 2029-8501

ISSN (online) 2029-8501 MYKOLAS ROMERIS UNIVERSITY

4th INTERNATIONAL SCIENTIFIC CONFERENCE

WHITHER OUR ECONOMIES – 2014 Conference Proceedings

Vilnius 2014 1

International Scientific Conference― “Whither Our Economies” November 12-13, 2014 Proceedings, ISSN (online) 2029-8501

October 24-25, 2014 ORGANIZED BY MYKOLAS ROMERIS UNIVERSITY Faculty of Economics and Finance Management IN COOPERATION WITH ULYANOVSK STATE UNIVERSITY (RUSSIA) Institute in Economics and Business

UNIVERSITY OF FOGGIA (ITALY) Department of Economics

VALENCIA POLYTECHNIC UNIVERSITY (SPAIN) Faculty of Business Administration and Management

INTERNATIONAL SCIENTIFIC COMMITTEE Chairperson:

Co-Chairs:

Daiva Jurevičienė (Lithuania)

Evgenij Bely (Russia) Ismael Moya (Spain) Pasquale Pazienza (Italy)

Members: Bruno Amann (France) Kiril Angelov (Bulgaria) Dusan Baran (Slovakia) Oleksandr Brovar (Ukraine) Francisco Carballo Cruz (Portugal) Francesco Conto’ (Italy) Ivan Dakov (Bulgaria) Caterina De Lucia (Italy) Fernando Garcia Garcia (Spain) Francisco Guijarro (Spain) Rimvydas Jasinavičius (Lithuania) Eglė Kazlauskienė (Lithuania) Grygorij Khoruzhyy (Ukraine) Alena Kocmanova (Czech Republic) Stanislava Kovacheva (Bulgaria) Todor Kralev (Macedonia) Aleksandras Krylovas (Lithuania) Natalia Lace (Latvia) Alfonsas Laurinavičius (Lithuania)

Hana Lostakova (Czech Republic) Irena Mačerinskienė (Lithuania) Algirdas Miškinis (Lithuania) Peter Nemecek (Czech Republic) Tomas Pavelka (Czech Republic) Tatjana Polajeva (Estonia) Irmantas Rotomskis (Lithuania) José António Cadima Ribeiro (Portugal) Andreea Claudia Serban (Romania) Iveta Šimberova (Czech Republic) Elena Šubertova (Slovakia) Rima Tamošiūnienė (Lithuania) Maria João Cabral Almeida Ribeiro Thompson (Portugal) Irina Teleshova (Rusia) Andrey Temichev (Belarussia) Sergey Vdovin (Russia) Vincenzo Vecchione (Italy) Natalia Volgina (Russia) Rima Žitkienė (Lithuania)

ORGANIZING COMMITTEE Chairperson:

Members:

Rima Žitkienė

Natalja Kosareva Eduardas Freitakas Artūras Balkevičius Nikolajus Markevičius Jusif Seiranov Joana Kastickaitė Simona Survilaitė Viktorija Skvarciany Olga Ranceva

Deputy chairs: Ilona Bartuševičienė Rasa Aleknavičiūtė Andrius Balčiūnas

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CONFERENCE PROCEEDINGS CONTAIN FULL PAPERS FROM SECTIONS: Economic and Social Development; Finance Management; Mathematical Modeling in Economics and Finance; Business Development; Business System Economics and Management; Financial Markets; International Trade and Services Quality of Life ALL PAPERS WERE PEER REVIEWED. LANGUAGE IS NOT EDITED. BOARD OF REVIEWERS Natalia Lace (Latvia) Aleksandras Krylovas (Lithuania) Alfonsas Laurinavičius (Lithuania) Andreea Claudia Serban (Romania) Caterina De Lucia (Italy) Daiva Jurevičienė (Lithuania) Darius Saikevičius (Lithuania) Dusan Baran (Slovakia) Eduardas Freitakas (Lithuania) Eglė Kazlauskienė (Lithuania) Egle Malinauskiene (Lithuania) Irena Mačerinskienė (Lithuania) Jekaterina Kartašova (Lithuania) José António Cadima Ribeiro (Portugal)

Margarita Išoraitė (Lithuania) Marius Lanskoronskis (Lithuania) Natalja Kosareva (Lithuania) Ona Gražina Rakauskienė (Lithuania) Raimonda Martinkutė-Kaulienė (Lithuania) Rima Tamošiūnienė (Lithuania) Rima Žitkienė (Lithuania) Rimantas Vaicenavičius (Lithuania) Rimvydas Jasinavičius (Lithuania) Rita Remeikienė (Lithuania) Stasys Puškorius (Lithuania) Tatjana Bilevičienė (Lithuania) Tomas Pavelka (Czech Republic) Žaneta Karazijienė (Lithuania)

The papers are abstracted/indexed by Business Source Corporate Plus database

Edited by Daiva Jurevičienė

Designed by Rasa Aleknavičiūtė

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CONTENT ECONOMIC AND SOCIAL DEVELOPMENT FINANCIAL MARKETS Réka Pusztai THE EFFECT OF GOVERNMENT’S REVEALED PREFERENCE ON DECISION MAKING OF HIGHER EDUCATION APPLICANTS

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Réka Pusztai, Zoltán Szabó THE NEW PATERNALISM

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Daiva Deimantaite-Gedmintiene, Rita Strazdiene THE STANDARD OF LIVING AND DECLINING IN EMPLOYMENT PROBLEM

27

Gediminas Davulis GLOBAL FINANCIAL CRISIS AND LITHUANIAN ECONOMY IN THE CONTEXT OF CRISIS

37

Karlis Ketners BUDGET PROCESS AND FISCAL RULES: ANALYSIS OF PAST PROGRESS AND FUTURE DEVELOPMENT

46

Rimvydas Jasinavičius, Vidmantas Ganiprauskas VIDUTINIO DARBO UŽMOKESČIO VERTĖS POKYČIŲ BALTIJOS ŠALYSE TYRIMAS

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Irena Mačerinskienė, Rima Tamošiūnienė, Rasa Aleknavičiūtė, Simona Survilaitė KNOWLEDGE TRANSFER PROCESS BETWEEN HIGHER EDUCATION INSTITUTIONS AND BUSINESS IN LITHUANIA Svilen Kolev EFFICIENCY OF THE OF THE STATE ADMINISTRATION DECISION-MAKING PROCESSES IN THE FIELD OF RURAL DEVELOPMENT POLICY:POSSIBLE SOLUTIONS Pasquale Pazienza, Donatello Caruso, Piermichele Lasala THE EFFECTIVENESS OF RURAL DEVELOPMENT POLICIES IN PUGLIA: SOME REFLECTIONS ON MEASURE 121 – AXES I Viktor Kozlovskij HOW MANY – 2, 3 OR 4 – EUROPEAN UNIONS DO WE HAVE: MACROECONOMIC APPROACH

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78

86

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FINANCE MANAGEMENT MATHEMATICAL MODELLING IN ECONOMICS AND FINANCE Jekaterina Kartašova, Rita Remeikienė, Ligita Gasparėnienė BEHAVIORAL FINANCE AND DIVIDEND POLICY ANALYSIS

102

Erdem Akkan, Kalender Ozcan Atilgan EFFECTS OF SERVICE EXPERIENCE AND WORD-OF-MOUTH ON REPURCHASE INTENTION: A LUXURY RESTAURANT CASE

107

Serhii Ziukov FUZZY MODELS OF INVENTORY MANAGEMENT: A REVIEW

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Katsiaryna Navitskaya EVALUATION OF SOCIO-ECONOMIC REGIONAL DEVELOPMENT: FUZZY CLUSTERS AND DINAMIC ANALYSIS Vasyl Grygorkiv, Igor Vinnychuk ANALYSIS OF SIMULATION EXPERIMENTS WITH SHADOW AND LEGAL ECONOMIES INTERACTION MODEL

124

132

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Olena Vinnychuk, Vasyl Grygorkiv, Ruslan Biloskurskii NONLINEAR MODEL OF OPTIMAL GROWTH IN ECOLOGICALLY BALANCED ECONOMY

142

BUSINESS DEVELOPMENT BUSINESS SYSTEM ECONOMICS AND MANAGEMENT INTERNATIONAL TRADE AND SERVICES Andris Vanags STRATEGIC PARTNERSHIP MULTI-FACTOR CASE ANALYSIS

152

Žaneta Karazijienė, Kristina Lapėnaitė Lapaitė RYŠIAI SU VISUOMENE: VEIKLOS EFEKTYVUMO TEORINIAI ASPEKTAI

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Rima Žitkienė, Ugnė Blusytė PASLAUGŲ ĮMONIŲ ŽMOGIŠKŲJŲ IŠTEKLIŲ UŽSAKOMOSIOS VEIKLOS VALDYMO MODELIS

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Elżbieta Jadwiga Szymańska FORMS OF INTEGRATION IN THE LIVE PIG MARKET IN POLAND AND SELECTED EU COUNTRIES Aleksandras Vytautas Rutkauskas, Irena Račinskaja, Viktorija Stasytytė THE UNIVERSAL SUSTAINABILITY OF DEVELOPMENT AS A TOOL OF CONSTRUCTIVE INTERACTION OF INTERESTS AND POSSIBILITIES OF DEVELOPMENT AND THE BALANCE OF GOALS AND RESOURCES Olavi Uusitalo LONG TERM IMPACTS OF INNOVATION ON THE INDUSTRIES – THE FINNISH FLAT GLASS, SAFETY GLASS AND INSULATION GLASS INDUSTRIES

185

195

207

Aurimas Rudžionis, Antonio Mihi-Ramírez, María del Mar Holgado-Molina SPAIN IN THE LITHUANIAN MARKET. THE EUROPEAN TRADE EXPECTATIONS

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Aleksandra Górecka THE CONDITION OF INFRASTRUCTURE AND ITS INFLUENCE ON THE LEVEL OF COMMUNESES INCOME PER CAPITA IN PODKARPACKIE REGION – REGRESSION TREE MODEL

231

QUALITY OF LIFE Nina Ivashinenko IMPROVING THE QUALITY OF LIFE FOR LOCAL COMMUNITIES: PARTICIPATORY APPROACH Robert Hall THE ECOVILLAGE EXPERIENCE AS AN EVIDENCE BASE FOR NATIONAL WELLBEING STRATEGIES Robert Bijl ECONOMIC DEVELOPMENT SOCIAL POLICY AND QUALITY OF LIFE: ANECESSARY ENGAGEMENT FOR A LIVABLE FUTURE Simon Elsborg Nygaard ECOLOGICALLY SUSTAINABLE LIFE QUALITY AS INDICATOR OF ECONOMIC POLICY EFFECTIVENESS?

240 248

249

250

Peggy Schyns PROMOTING INNOVATION IN THE SERVICES SECTOR: DECISIONS AND POSSIBILITIES

251

Aistė Diržytė PSYCHOLOGICAL CAPITAL

252

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Eglė Kazlauskienė STIMULATION OF POPULATION ENTREPRENEURSHIP - CHANGES IN THE QUALITY OF LIFE

253

Eglė Krinickienė QUALITY OF LIFE FROM A GENDER PERSPECTIVE

254

Marija Čaplinskienė THE EVALUATION OF HEALTH INDICATORS RELATED TO QUALITY OF LIFE: LITHUANIAN PERSPECTIVES AND CHALLENGES IN THE EUROPEAN CONTEXT

256

Ona Gražina Rakauskienė EVALUATION OF DISTRIBUTION INDICATORS RELATED TO QUALITY OF LIFE

257

Olga Ranceva DEMOGRAPHICS AND MIGRATION TENDENCIES IN EVALUATION OF QUALITY OF LIFE

258

Rima Žitkienė THE CHANGES IN CONSUMER SERVICES AND INFLUENCE OF LIFE QUALITY

259

Stasys Puškorius THE MODEL OF CALCULATION OF THE SUBJECTIVE INDEX OF QUALITY OF LIFE OF LITHUANIAN POPULATION

260

Šarūnas Legeckas PLACEILIVE.COM LIFE QUALITY INDEX BASED ON OPEN DATA

261

Tatjana Bilevičienė IMPACT OF EMPLOYMENT QUALITY TO LIFE QUALITY

262

Vaida Servetkienė IDENTIFICATION OF CRITICAL AREAS OF THE QUALITY OF LIFE IN FORMULATING STATE ECONOMIC POLICY Vladas Gaidys „RICH“ AND „POOR“ IN SOCIAL DEMOGRAPHIC GROUPS: JOINT PUBLIC OPINION SURVEYS DATA Alfonsas Laurinavičius SYSTEMATICALLY REGULATED LABOR RELATIONS IN REDUCING CORRUPTION IN THE PRIVATE SECTOR

263

264

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Algirdas Monkevičius SATISFACTION WITH EDUCATION AS INDICATOR OF THE QUALITY OF LIFE

266

Dalia Štreimikienė ENVIRONMENT AND HOUSING INDICATORS IN ASSESSMENT OF QUALITY OF LIFE

267

Rita Bieliauskienė HUMAN CAPITAL EDUCATION – THE ASSUMPTION THAT AFFECTS THE QUALITY OF LIFE

268

Tatjana Bilevičienė; Eglė Bilevičiūtė APPLICATION OF E-JUSTICE FOR IMPLEMENTATION OF PRINCIPLES OF SOCIETY INFORMATION IN ADMINISTRATIVE JUSTICE

269

Laima Okunevičiūtė Neverauskienė THE CHANGES OF SITUATION OF VULNERABLE GROUPS: ASPECTS OF QUALITY OF LIFE

270

Rima Žitkienė ES ŠALIŲ POLITIKA IR GEROJI PATIRTIS KOVOJE SU NELEGALIU DARBU

271

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SECTIONS: ECONOMICS AND SOCIAL DEVELOPMENT; FINANCIAL MARKETS;

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THE EFFECT OF GOVERNMENT’S REVEALED PREFERENCE ON DECISION MAKING OF HIGHER EDUCATION APPLICANTS Réka PUSZTAI1 University of Pécs, Faculty of Business and Economics E-mail: [email protected] Abstract. The aim of the study is to provide a deep analysis of Higher Education applicants’ course choices from a decision theory point of view. Our focus is on the government’s influence on these complex decisions. We used the data of the Hungarian Educational Authority and with the help of the series of the applicants’ choices in the last 13 years we track down, demonstrate the changing intentions of the government, and show how these intentions can reflect on future student choices. As well, our goal was to speculate on the legitimacy of this decision-steering activity of the government. Keywords: Governmental influence, higher education choices, libertarian paternalism JEL classification: I28, J24

The study is based on the data of the Hungarian Educational Authority. Introduction Can a high-school student make a sufficiently good decision concerning their higher education options? Are they able to choose the faculty or the courses that are the most adequate for them? If we think, they need a bit of help, who should support them in this decision? Either their parents or teachers, we would say, or the government maybe. We can suppose that parents, teachers and friends know the person better but the government has more information on present situation and future development of the labor market. Who should tell them what to choose – or reframed the question: who should help them at this decision? In the last decades, a large and still constantly growing and flourishing field of research focused on the characteristics of human’s judgment and decision making. It is a quite well established fact that we make decisions that apart from some satisfaction or pleasure now turn out to reduce our welfare in the long run. A sudden decision like this could be if a high-school senior’s choice for university or faculty driven by a momentary emotion or feeling. One can figure the potential consequences of a mistake like this: the student may not like her courses but she has to invest time and energy in them or she ends up not finding a job or realizing less income throughout her life span. If we accept the fact that we are not necessarily perfect at enforcing our true preferences, it is also possible that we could realize a huge increase in our welfare by including an outsider, a ‘third person’ into the situation. This kind of thinking lead to new ways of paternalism coming to the front, especially libertarian paternalism2 got more and more popular in recent years. The notion ‘libertarian paternalism’ refers to the action of this third person of

1

The author acknowledges the financial support of SROP-4.2.2.C-11/1/KONV-2012-0005, “Well-being in the Information Society". 2

The notion libertarian paternalism was created and conceptualized by Richard H. Thaler and Cass R. Sunstein (look up at e.g. Thaler and Sunstein, 2003, 2008).

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trying to steer one’s decision towards the most welfare-increasing option, while respecting freedom of choice at the same time. To test how these kinds of interventions work out and to examine their efficiency poses some serious problems because the real-life situations, where people have to make decisions, are complex. It is hard to separate the impact of a decision-support and even harder to quantify this impact. It is the reason why there is only a small number of studies about empirical findings in this field. In this study I try to find proofs whether a government’s intervention can reach its goal. I analyze a situation where the government (by changing the financing options) tries to influence the choices of independent decision-makers (high-school seniors deciding to which faculty/course to apply). The aim of this paper is to show wether the preference of the government i.e. the courses they think to be important can be tracked down in individual’s school choices. The paper is structured as follows. It starts with a short review of the most relevant part of the literature (Section 2), only to help by mapping the place of this study. After, I introduce the data used, present, and analyze the first empirical findings (Section 3). At the end of the study (Section 4), I conclude and show the options for further research. Literature review There is a large body of literature that discusses the presence of the state in Higher Education (HE). As well, the decision-making of HE applicants has been put under scope by numerous studies. In this paper, my wish is to provide a new approach though where I show wether the paternalistic attitude of the government can influence HE applicant’s choices. The related literature is here arbitrarily divided in two larger groups. In the first group, some articles from the field of public economics concerning the presence of governments in HE are presented; to the second topic, I assigned studies concerning student’s choices. Within this second group, there are two categories. In the first one there are articles listed that have a more aggregate point of view, i.e. they analyze the concept of university/course rankings based on student’s choices3. Then, I recite studies that investigate the formation of individuals’ school choices, covering also the cognitive processes of adolescents’ decision-making. The presence of the State in Higher Education: preferences and financing The actual intentions of the government are not necessarily articulated. At times, one can only infer from decisions about the changes in financing and then speculate about what the original intention could have been. It is the conclusion of several researchers that political arguments are predominant in these decisions and market based reasons are secondary factors (see e.g. Doyle 2012). Dar (2012) claims as well that educational policy decisions most f the time serve neither economic nor social goals. The author links the Higher Education financing decisions of US governments to ruling political-ideological directions and she finds proof for a ‘classic’ statement. Traditionally, the left-wing politicians put a large emphasis on the role of the state, so they are for supporting the Higher Education applicants as this way they help those who are in need and underrepresented. The right-wing party argues that financing Higher Education is 3

Only Hungarian studies are covered here as the scope of present study is on Hungarian applicants as well.

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really a transfer of resources: almost the entire population pays (by paying taxes) for the education of those who get access to universities and colleges. Peltzman’s findings (1973) can support the last claim he found that a free educational service substitutes more private consumption than a financial support of the same amount would (e.g. through scholarships and grants). Another dimension, Dar (2012) links the financing decisions, is how much one can consider higher education to be a public good. Liberals like to argue for a college degree to be a public good (as the number of people with a college degree comes together with economic development, better social indicators and high-qualified workforce etc.) and they are for state financing. Conservatives put a larger emphasis on the effect of a college degree on individual welfare (higher salary, better jobs, better health etc.) and so they are for private financing. Dar (2012) shows that changes in ideology can explain the privatization processes in U.S. Higher Education. In Europe, most universities are financed by the state and in most cases; the state is concerned to influence their functioning (Ferlie et al., 2008). In Hungary, all universities are centrally financed except one. In addition, similar to other European countries, the most notable universities are stately financed. The preferences of Higher Education applicants In Hungary, applicants to Higher Education can pick several universities/faculties/courses each February. There they have to sign the order of their most (and second most, etc.) preferred institution and course. They can make changes within their preferences until the beginning of July. The decision about admittance is made by the central office around the end of July and the students start their studies in September. After the end of July, their only option is to go to the first assigned institution (on their list) where their achievement proved to be sufficient, so they cannot change that order anymore. Rankings Higher Education applicants’ choices are frequently analyzed by investigating the meaning of the university rankings. These rankings are composed from different institutional factors (e.g. number and quality of lecturers and professors) and it is also included how many students chose the institution. Rankings are particularly important for three different groups (Kosztyán et al. 2013). First, the future students who seek information about colleges can obtain quite objective numbers. Second, the institutions themselves can get a feedback about their appearance and prestige (e.g. Török 2007). Third, the policy makers get information about effectiveness of the institutions in aspects of competitiveness. Of course, there are some methodological problems with the rankings. The total number of received applications in former years is an important factor in forming university rankings and at the same time, the present and future applicants decide based on the ranking. Therefore, the students use ranking as an important source of information when applying and then their applications form the rankings as well (Török 2006, 2008). Kosztyán et al. (2013) introduce a new approach to reveal the true preferences of the applicants. They use a framework of graph theory to create such rankings where each application is taken into account (i.e. each college, faculty or course a student picks matters,

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not only their first-place4 applications). It is already a step forward towards the examination of individual choices. Telcs et al. (2013) used a similar framework to investigate students’ preferences, but they controlled more for the decision making process and they conclude that applicants usually choose their most preferred place with more care and energy than their second-most or less preferred place. How does an individual choose? Let us turn to the decision making process of the Higher Education applicants now. The literature discussing students’ Higher Education choices usually defines several phases of decision-making the most frequent approach defines three phases. The first one is the formation of preferences, then the second one would be the gathering of information and exclusion of some of the alternatives; and the third phase is the actual choosing (see at e.g. DesJardins et al. 2006, James et al, 1999; Jackson, 1982). James and his co-authors (1999), in a questionnairebased research, tried to explore the significant factors in phase three. At deciding for university, they identified factors like university prestige, the offered program and personal fit in the culture of a particular institution. At course choices, applicants consider their own abilities and compare these to what is expected, they take perceived quality of the education and the advice of outsiders too into account. James et al. (1999) conclude that preferences for faculties and courses are stronger than preferences for a given institution. They also emphasize the fact that high-school students are under-informed. They use word-of-mouth information more than expected and form judgment based on their peers ‘opinion. This way, their decision can lead to some suboptimal results. Libertarian paternalists claim that students can be saved from these failures if a person from outside prevents the suboptimal choice or at least makes the less favorable option harder to reach. Choosing profession is a long-term decision, most of time it is made for a lifetime, its adcantags and disadvantages come out only when someone has put a lot of energy and money in it. It is made once (or only a few times throughout the lifetime) so we are not familiar with this decision. However, the stakes are quite high at this decision as the cost of going to university can be high depending on which school a student gets admitted. These are the characteristics of a situation when Sunstein and Thaler think a person can get better off after a slight nudge from a third person (Sunstein and Thaler, 2008). This third person can be (obviously) the government, as they should have more information about labor market processes and the structure of the economy.5 Of course, governments are overjoyed getting a theoretical basis for their paternalistic strivings, but there are numerous researchers who disapprove any kind of paternalism (e.g. Rizzo és Whitman, 2009a, 2009b). We may still easier accept government’s help at adolescents’ decision-making, aand we definitely accept parents intervention, assumed adolescents do not have sufficient experiences so they are not as competent decision makers as adults would be. But actually there are results from the field of cognitive development claiming that not only cognitive values and abilities develop as we get older but we start using more heuristics and we get mislead by more anomalies in our decision making (Klaczynski., 2001, Jacobs and Narloch, 2001). ‘First-place application’ refers to the students’ strongest preference. HE applicants put the most preferred institutions and courses in first place on their list on the application form. 5 In Hungary it is defined by law that the Government fixes the number of future entrants to HE, for each scientific field and course. (Higher Education Act CXXXIV of 2005). 4

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To avoid submerging in theoretical debate, I try to quantify government’s impact in HE choices. The quantitative approach is not as common as it is almost impossible to control for all the decision-factors in a complex situation like this. Jackson’s approach (1982) was also similar, he investigated students’ decision making to discover where government should intervene to e.g. increase the number of college students and then he could formulate some policy recommendations. That would be the final goal of this research as well, but first, it had to be proven that governmental influence could influence in any extent HE applicants’ decisions. Analysis of the applicants to the Hungarian Higher Education In this research, I used the data from the Educational Authority. Although, the true order of the preferences of the applicants cannot be revealed from this aggregate data (Kosztyán et al. 2013), the basic assumption is that the first-place applications show their strongest preference. As mentioned above, from former research we know that most of the applicants choose only the first course and institution with enough care. Advantage of using data on first-place application compared to using the total number of applications is that each applicant picks one institution and one course here, so we can see the total number of HE applicants and there are no multiplications in between them. What this research is based on is data on HE (first-place) applications since 2001 split by fields of study. During the last 13 years, there have been some changes in how the Educational Authority recorded and handled the applications, but as those changes were the same for all fields, they reckon effects that are controlled for. To gain more insight we should look at Figure 1. Figure 1 shows the (relative) distribution of the most popular fields of study that appear in first-place applications. It is easy to see that economics and business studies are the most preferred field, although the numbers show a decreasing weight of the field compared to others. Let us investigate the time series of applicants to faculties of Business and Economics. There is a steady decrease in the applications during the period 2001-2007. The story behind is that people who did not get a college degree earlier chose to study business and economics as this one can be used widely, the institutions multiplied fast so it was easy to find a location nearby and teaching form and methods are quite flexible. That is why it was the first choice of many who wanted to take a degree. The small peak in 2008 can be explained by the change to the Bologna-system, that means a student entered to the system twice from then on: once for BA/BSc and once for MA/MSc. As not all the faculties could divide their training structures in two (e.g. medicine, law), the ‘pseudo’ gain of the business and economic studies was significant. However, as we can see it did not change the trend permanently.

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Figure 1: Distribution of HE applicants’ first-place applications divided by fields of study

Source: Data from the Educational Authority, diagram by the author. One can see the rough history of each field in the Hungarian Higher Education in the last decade (as for their received applications). However, what this study concentrates on is the effects of governmental intervention in the autumn of 2011. Three years ago, the Hungarian government modified the Higher Education Act. The number of stately financed places on social science faculties (e.g. Business, Economics, Humanities and Law) was reduced significantly while there became more places available in fields like Technology and (Natural) Sciences. The aim was to steer more students towards Natural Sciences and Technology faculties. Considering the basic principles of libertarian paternalism making a ‘product/service’ significantly much more expensive to reduce consumption is already a more intrusive tool than e.g. paternalistic information telling (Jolls and Sunstein, 2006). The first group of applicants who were affected by the new directive was the year of 2012. As we can see it on the chart above, the ratio of the applications showed a huge fallback in case of Social Sciences, Economics and Law and a slight increase in Technology and Natural Sciences just as it was expected. Nevertheless, fact is that the absolute numbers of the applicants fell back as well – so some potential students did simply not apply6 under these circumstances. Of course, an intervention like this is not planned to exert full effect for the short run. However, if we look the first-place applications from last year, we can see return to the trends 7. That could mean that governmental intervention may have only tangled a bit the otherwise ongoing processes. Were there any high-school seniors who could change their planned field of study because of the modification of the Higher Education Act? This assumption seems to be quite unlikely and unrealistic. Based on the models of the development of individuals’ HE choices (e.g. James et al., 1999) the formation of interest and preferences are done by this time. Another problem is the early specialization in high schools that makes it close to impossible to respond 6 7

Or they might have applied to HE institutions abroad. About that figure we only have estimations. In favor of better visualization I only added the trend line for the Business and Economics.

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to this external change immediately. A possible answer on the applicants’ part could be to find cheaper options that are adjustable to their own knowledge. That means a solution for the highschool seniors after 2011 could be that besides their most preferred field e.g. economics, they tick faculties like Technology on second or third place as well. They can do this adjustment if the necessary knowledge (i.e. subjects in high school) is similar in both fields (in this case mathematics is needed to both fields). This way they can make sure they can enter HE, even though not on their most preferred field. I checked the aggregate numbers on applications to control for this option8. Nevertheless, there is no significant increase in the fields preferred by the government. The HE applicants seem to be single-minded and stick to their decisions. The return to the trend in 2013 does not seem to be convincing concerning the effect of government either. Chow-test was performed for checking whether there is structural break at any field, and it showed that despite of the outlier years there were no big breaks in the tendencies.9 As the time goes by, we will be able to repeat these tests. The cause of the return to the trends (from a decision theoretical point of view) could have been the indirect way the government regulated – attending faculties of Humanities was not banned only made more expensive. The system still had a kind of flexibility for potential applicants.

Overall, we can conclude that based on this numbers the government could not imply a significant change, not on short term for sure. This result can be supported from the side of developmental psychology as well, that claims HE applications to be quality decisions: they are made with enough care and that is why an extern intervention cannot have such an impact on them. Conclusions The aim of the study was to provide an explorative analysis about the possible effect of government interventions. After performing a line of statistical descriptions, even some that were only mentioned but not presented in this paper on account of the limits, the conclusion seems to be that government interventions in decision making processes are not effective, definitely not on the short run. In contrary, on the long run government can (and maybe should) consciously change the structure of HE based on the market demands they notice. Change has to be initiated in secondary school though, to provide students with sufficient information about future employment possibilities and with the basic knowledge, they will need to b accepted to faculties preferred by the government. To achieve a restructuring in HE, that means to have more students in technological and science faculties, the state should not have to reduce free places in other faculties but they should invest more in HE overall. There are further questions to discuss. For example to estimate more precisely the number and fields of study of the students starting their HE studies abroad because of the lack of financial aid in Hungary. As well, there are fields getting more and more popular as they offer a safe and successful carrier path – again: abroad – e.g. medical studies. The field of Medical studies stagnates and shows a slight gain in relative numbers (from 6.4% in 2006 it went up to 6.7-7% until 2013). Controlling for all the possible interacting processes and phenomena are further steps in this research. After all, it is still conceivable that in such a complex situation it is impossible to filter out the pure impact of government interventions on decisions. On the other 8

Because of the lack of space I would add a note only: the aggregate numbers refer to all the applications a field gets. A student can basically pick as many institutions/faculties/courses as he/she wants. 9 Although the author is conscious that this time series are too limited and that is why it is not the most appropriate method to find structural breaks.

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hand, if we concluded finally that an extern participant cannot steer decisions by the tools they use now, new suggestions for policies could be made. References Dar, L. (2012). The Political Dynamics of Higher Education Policy. The Journal of Higher Education, Volume 83, Number 6, pp. 769-794 DesJardins, S. L., Ahlburg, D. A., & McCall, B. P. (2006). An integrated model of application, admission, enrollment, and financial aid. The Journal of Higher Education, 77(3), 381–429. Doyle, W. R. (2012). The Politics of Public College Tuition and State Financial Aid. The Journal of Higher Education, 83 (5), pp. 617-647. Ferlie, E., Musselin, Ch., Andresani, G. (2008). The steering of higher education systems: a public management perspective, Higher Education, 56, pp. 325-348. Higher Education Act 2005. CXXXIX. Retrieved: 2014.02.20. from: http://net.jogtar.hu/jr/gen/hjegy_ doc.cgi?docid=a0500139.tv Higher Education Act 2011. CCIV. Retrieved: 2014.02.21. from: http://net.jogtar.hu/jr/gen/ hjegy_doc.cgi?docid=A1100204.TV Jackson, G. A. (1978): Financial Aid and Student Enrollment, The Journal of Higher Education. Vol. 49. No. 6.pp. 548-574. Jacobs, J. E.–Narloch, R. H. (2001). Children’s use of sample size and variability to make social inferences. Applied Developmental Psychology 22: 311–331. James, R., Baldwin, G., McInnis, C. (1999) Which University? The factors influencing the choices of prospective undergraduates; Department of Education, Trainig and Youth Affairs 99/3. Jolls, C., Sunstein, C. R. (2006). Debiasing through law. Journal of Legal Studies 35[199]: 199–241. Klaczynski, P. A. (2001). Framing effects on adolescent task representation, analytic and heuristic processing, and decision-making: Implications for the normative/descriptive gap. Applied Developmental Psychology 22: 289–309. Kosztyán, Zs. T., Telcs, A., Török, Á. (2013). Hallgatói preferencia-sorrendek készítése az egyetemi jelentkezések alapján; Közgazdasági Szemle, LX. évf. 2013. 290-317. Peltzman, S. (1973). The effect of government subsidies-in-kind on private expenditures: The case of higher education. The Journal of Political Economy, pp. 1-27. Rizzo, M. J., Whitman, D. G. (2009a). The knowledge problem of new paternalism. Brigham Young University Law Review. [4]: 904–968. o. Rizzo, M. J., Whitman, D. G. (2009b). Little brother is watching you: New paternalism on the slippery slopes. Arizona Law Review 51[3]: 685–739. o. Telcs, A., Kosztyán, Zs. T., Neumann-Virág, I., Katona, A., Török, Á. (2013). Analysis of Hungarian students’ college choices. In: Procedia – Social and Behavioral Sciences. 5th World Conference on Educational Sciences. Thaler, R. H., Sunstein, C. R. (2003). Libertarian paternalism. American Economic Review - Papers and Proceedings, pp. 175-179. Thaler, R. H., Sunstein, C. R. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness. Yale University Press, New Haven & London. Török Ádám (2006). Az európai felsőoktatás versenyképessége és a lisszaboni célkitűzések. Mennyire hihetünk a nemzetközi egyetemi rangsoroknak? In: Közgazdasági Szemle 53: 310-329.

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Török Ádám (2007). Tükör által - homályosan? Közgazdász szemmel a nemzetközi egyetemi rangsorokról. In. Felsőoktatási Műhely 2007 (ősz), 91-97 Török Ádám (2008): A mezőny és tükörképei. Megjegyzések a Magyar felsőoktatási rangsorok hasznáról és korlátairól. In: Közgazdasági Szemle, 2008. Október, 874-890. Data was retrieved from the Hungarian Education Authority.

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THE NEW PATERNALISM Zoltán SZABÓ University of Pécs, Faculty of Business and Economics E-mail: [email protected]

Réka PUSZTAI10 University of Pécs, Faculty of Business and Economics E-mail: [email protected]

Abstract. Our paper discusses the idea of new paternalism; including its development through the last decades, characteristics and the tools, it offers for governments to steer decisions. We present the theoretical debate about the topic: arguments for its widespread implementation, as well concerns for its legitimacy. Joining the critics, our theoretical investigation focuses specifically on self-control problems of boundedly rational citizens and we suggest alternative, market-based or individual solution for this problem, different from that recommended by new paternalists. Our approach integrates research in behavior economics and results from the field of social psychology as well. Keywords: Libertarian paternalism, self-control problems. JEL classification: H19, D10

Introduction The development of behavior economics is the consequence of the application of psychological approaches, methods and results in the field of economics. It became a popular research area, as it was able to explain phenomena that were inconsistent with the expected outcomes predicted by standard economic models. Interpreting findings and conclusions of behavior economics requires prudence though, because accepting results that support the unrealistic features of the homo oeconomicus is not equal to giving up the basic values of neoclassical economics. A misinterpretation of the findings of behavior economics can typically manifest in paternalism, i.e. in limitations of the autonomous endorsing of preferences while claiming it is for the person’s best interest. Classic paternalism, that has more authoritarian characteristics, is neither compatible with the values of neoclassical economics nor with the values of behavior economics. However, new paternalism is based on the need for slight corrections that help us follow our true preferences by preventing boundedly rational decisions. As new paternalism kept some core neoclassical values, e.g. it acknowledges the freedom of choice as an important safe-net against government failure; it seems to mitigate the antipathy towards its paternalistic features. The paper is structured in two main chapters. The first covers the theory, tools and criticism of the New Paternalism. The second chapter focuses on a psychological phenomenon, as selfcontrol issues can be a good example to justify the need for potential governmental intervention. We argue that there should be other and better solutions for this problem too, different from those offered by new paternalism. Our aim in this paper is not to provide clear answers to these phenomena rather to share our opinion and to provoke some thoughts on the topic.

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The authors acknowledge the financial support of SROP-4.2.2.C-11/1/KONV-2012-0005, “Well-being in the Information Society". 17


Economic Policy from Behavior Economics’ point of view: New Paternalism Most decisions of economic actors are based on forming expectations about uncertain future events. Behavior economics focuses on these decisions. Closer, it examines characteristics, functioning and consequences of main decision-influencing factors, like the presence of heuristics, cognitive biases, inconsistent time-preferences or the appearance of feelings and other visceral factors in judgments. The literature in the field of behavior economics is broad, so the aim of this section is only to word a few statements about the relationship of the neoclassical models and psychological findings. Based on findings, the behavior of economic actors can only be characterized by bounded rationality (e.g. Simon, 1955). It is safe to claim that humans cannot always follow self-interest and that their preferences are often contradictory. Despite of these non-rational features, human behavior is not considered as irrational or unpredictable. Aim of behavior economics is to reveal and to get to know the systematic errors of people’s thinking or activities. Then, taking these ‘failures’ into account a more realistic human being could be defined and put as central actor in economic models (Rabin, 1998, 2002; Kahneman, 2003; Camerer and Loewenstein, 2004). As for the purposes of Economic Policy, revealing the non-rational features of human behavior and thinking has always been an interesting topic for policy-makers and politicians. Rhetoric has always had a central role. That is why scientific results concerning the effects of framing on the acceptance of new programs or on understanding the importance of taxation gained constantly increasing attention (McCaffery and Slemrod, 2006). Advances on the field of behavioral law and economics made possible to measure the expected impact of different policies and actions (Jolls et al., 1998). Although new paternalism is not based on pure authority but on intentions to counter anomalies and biases of decision-making, the logical conclusion seems to be problematic: is any kind of paternalism really necessary to make us able to follow our preferences consequently?! Main characteristics of New Paternalism In case of classic or hard paternalism, the restriction of the autonomous implementation of individual’s preferences is based on the values (of the representatives) of each society. Neoclassical economics is not suitable to provide normative arguments for classic paternalism, apart from some cases of people who are restrained from decision making. In these cases people can be restricted either because they have bounded decision-making abilities (intellectually challenged people, younger generation an people living with mental disorders) or because of sanctions of the society (people under penal executions). Theory of bounded rationality and behavior related research brought a change in the theoretical argumentation about paternalism. This argument says that given the presence of cognitive barriers, individuals are not able to be consequent in their preferences so the task of the government is to ensure individuals act according to their real preferences. In the last one-anda-half decade new approaches to paternalism emerged. These approaches are based on behavioral economics’ arguments and they are called different names, like: asymmetric, light, behavioral or libertarian paternalism. Differences in naming already show clear demarcation from traditional ways of paternalism.

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The most known approach of new paternalism is libertarian paternalism, that is characterized by paying attention to libertarian values and principles while increasing welfare by applying paternalistic interventions by the government (Sunstein and Thaler, 2003; Thaler and Sunstein, 2003, 2008). The most famous authors of the field put large emphasis on intervention through creating default rules consciously. For example, participation in company’s saving program is much higher, if an employee is automatically enrolled (still having the right to opt out) than if enrolment is not automatic (but they can opt in any time) (Madrian and Shea, 2001). The default in this case was the option of automatic enrolment and the company has to define a default while preserving employees’ right to switch any time. Another type of new paternalism is asymmetric paternalism (Camerer et al., 2003). The name refers to the feature of new paternalism that while it provides support to non-rational individuals, rational decision-makers are not put at a disadvantage. Considering the example of automatic enrolment into savings program, thanks to the intervention, savings of non-rational employees increase while rational individuals are not affected at all. An interesting version of new paternalism is paternalistic information telling. It aims to apply behavior economics’ results so that they can really have an impact on decisions. In the opinion of related authors, as biases in decision making are coming from the non-rationality of human thinking, it is legitimate to use these non-rational characteristics to help people to get a clear picture about (e.g.) the real risks related to their activity (Jolls et al., 1998). Some tools for steering decisions For lack of practical experiences, the tools suggested by behavior economists are supported mostly by theoretical considerations and laboratory experiments. As mentioned before, the common feature of the applied tools is that they are created to influence decisions of others, not to make decisions instead of them. In the next few paragraphs the article provides a rough outline of the most important groups of tools. Just as neoclassical theory claims, information is needed to make rational decisions. New paternalism not only wants to put more emphasis on gathering adequate information about a situation, but it supports to rephrase information so people would perceive risks and opportunities more realistic. Rephrased information has to level off biases in perception and evaluation (Jolls et al., 1998; Tversky and Kahneman, 1981). Using framing effects can be useful at e.g. hindering health-impairing habits or gambling. As all humans are characterized by loss aversion, all a choice architect11 has to do is to highlight the negative outcomes in former mentioned activities instead of positive options. Paternalistic rephrasing can use results on heuristics like availability or representativeness as well. Human cognitive errors can be ‘used’ both ways, they can be reduced or strengthened, as situations require. For example, it is best to avoid providing information that increases the feeling of a person being above average. But saying that ‘road regulations are needed because of the other, under-average drivers’ helps to get these rules accepted exactly by increasing the perception of the self being an exception. Applying defaults is inevitable (Thaler and Sunstein, 2003; Sunstein and Thaler, 2003) and results on status quo bias (Samuelson and Zeckhauser, 1988) show that most of the decision 11

Thaler and Sunstein (2008) introduce the notion of choice architecture. Decision-making situations are planned/formed (by a third person) a way it makes it easy for humans to make rational decisions (e.g. by applying defaults).

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makers do not switch they stick to the default option. That makes planning defaults to a more serious task. Madrian and Shea’s (2001) research, quoted above, showed that one default can have serious long lasting impacts e.g. in the field of savings. In addition, the motivational system in a company can be based on the similar effects, like commitment effect (Thaler, 1980), i.e. owned privileges are valued higher than one would pay to purchase them. Mandatory cooling off periods is aimed to remove decision makers from situations where they would behave too intuitively (Loewenstein et al. 2001). Decisions made in an exaggerated state of mind can cause long-lasting negative effects. For example, in case of expensive purchases it is important to rethink consumer decisions (Camerer et al., 2003). Internalities (Gruber and Kőszegi, 2001) are negative effects related to non-rational consumer habits like smoking or eating unhealthy food. Sin taxes can be applied here that count as a bit more intrusive tool. Goal of sin taxes is to bring consumers closer the real costs they cause themselves. Because of the absence of sufficient self-control, people tend to undervalue future costs. Sin taxes highlight that problem for them. Criticism on New Paternalism Although new paternalism does not have authoritarian intentions, it has some similar features with the classic way of paternalism, which results in receiving similar arguments concerning criticism. This section forms two main groups of reviewed critics. The first big problem with the whole theory is getting to know one’s real preferences; the second is whether policy makers or government can be adequate actors for consciously influencing our decisions. Is it possible to reveal people’s true preferences? First, criticism on new paternalism refers to theoretical and practical problems of gathering necessary information about true preferences (Rizzo and Whitman, 2009a). Although it is clear that humans’ preferences are inconsistent in time12, there is no proof for them being cognizable (Waldfogel, 2005; Rizzo and Whitman, 2009a). Nevertheless, if new paternalists claim to act to help people follow their long-term goals, it has to be assumed that it is possible (at least for tem) to recognize and choose between one’s true preferences (Loewenstein and Haisley, 2008). If we consider the decision-influencing effect of framing, choosing the right one of a person’s preferences gets more problematic: people change their choices because of different phrasing. How would then anyone be able to say something about his or her real preferences? Most of the empirics in fields of behavior economics and new paternalism cover laboratory experiments. Nothing ensures these experiments are appropriate to infer to real life situations and people really react the expected way on external (e.g. governmental) interventions or default modifications. That is why arguments for asymmetric paternalism claim that choice architecture has to help boundedly rational humans while let rational actors do what they think to be best for them (Camerer et al., 2003, Sunstein and Thaler, 2003). Nevertheless, it is hard to accept and picture that interventions would not cause any costs to rational actors. Some actions as if mandatory cooling off periods could cause welfare reduction because consumers have to wait for goods they want to acquire right away (Kivetz and Keinan, 2006). The same thing stands for sin taxes. People who want/have to put on a bit flesh have to pay the

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Inconsistencies in preferences are further explained in the next section.

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taxes for unhealthy or fast foods too, although those taxes were imposed for obese people (Rizzo and Whitman, 2009a). In addition, attention has to be paid to other human characteristics that can change people’s thoughts about a former government intervention. Thanks to the hindsight, bias (Fischhoff, 1975) and self-attribution bias people interpret an event differently from as it happened. Understanding individual responsibility changes with changing context as well. This means that even if government was able to help people out in tough situations and got them better off, many people would consider this as their personal result. Rationality of politicians Assuming that policy makers or politicians are lead by noble principles of altruism is naivety. For decades, models in economics have already had the assumption of politicians who act based on their self-interest (e.g. Buchanan and Tullock, 1962). There are phenomena like lobbying and interest groups (Olson, 1965) or rent-seeking behavior (Buchanan, 1980); and these warn of the possibility that individual interest of politicians dominating public interests. Considering the basic assumptions of people being boundedly rational, the rationality of policy makers cannot be ensured either. Moreover, how could new paternalism even work effectively if neither the voters nor the politicians are rational? Non-rational voters can misjudge political actors and this leads to suboptimal results in elections. If we assume politicians who act for their own best interest together with non-rational voters, phenomena like political manipulation (McCaffery and Slemrod, 2006) or populism (Glaeser, 2006) seem to be logical inferences. Finally yet importantly, we have to cite the slippery slope argument here as well. There is a threat for the whole society if they legitimate any kind of paternalism. ‘Slippery’ refers to the fact that it is hard to stop in the middle if something got started. If people accept the application of light tools by the government with the aim of influencing their choices, there is a chance that government goes further and gradually hard paternalism evolves. Advancing gradually, applying harder and harder decision-steering tools will not provoke such a huge opposition from the members of the society (Rizzo and Whitman, 2009b). An example for paternalistic intervention: insufficient self-control Reviewed basic principles of new paternalism, let us now turn to a more concrete example. Self-control decisions are regarded as one type of intertemporal decisions. People’s decisions are inconsistent in time, which means they do not calculate with one specific discount rate but the applied discount rates are increasing exponentially (Frederick et al., 2002)13. Strotz (1955) already talked about changing time preferences earlier and he explained them with the phenomenon of changing tastes. Shelling (1960) and Buchanan (1975) discussed the simultaneous conflicts between preferences too. To picture a situation where preferences are conflicted one can think of an overweight person who wants to lose weight (in the end) but in the same time, she wants to eat sweets (right now) ruining her diet. Her preferences in this case are contradictory. Humans tend to systematically overvalue the present compared to the future. Paternalistic intervention is not necessarily needed though, since overvaluation of the present can be rational as well (Thaler and Shefrin, 13

This conclusion is based on mainly theoretical assumptions, so it is questionable whether there is a chance to find out about the true time preferences of the individuals.

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1981), e.g. if one do not want to feel regret about missed opportunities (Kievetz and Keinan, 2006). However, how can we really define self-control and what does it mean when we speak of selfcontrol failure. Hofman and Kotabe (2012) developed a model of preventive-interventive selfcontrol based on the great body of related literature in the topic. ‘Preventive’ self-control includes anticipated situations, whereas interventive self-control should be working at momentary decisions (it has to occur in ad-hoc situations). Within these two groups, they distinguish among seven basic components where self-control is needed or where it can fail. Their new taxonomy is useful for making a distinction among different self-control failures as well. From the new paternalistic point of view, knowing more about a cognitive-emotional process is important, as diverse decision-making situations need diverse support from outside. Let us have a closer look on Hofman and Kotabe’s (2012) model. The first component is the preventive part, it consists Preventive Strategies. They claim if these strategies are stable enough, self-control problems do not occur at all. Components of interventive self-control follow the steps of decision-making. Are we motivated to acquire a certain object or exercise a certain activity associated with pleasure? Then we can say that we desire that thing. If it is conflicted with any other preferences of ours then temptation occurs. Conflict is many times a trigger for attempts to control or correct behavior and for counteracting temptation. There are motivational and volitional factors that can influence the success of giving a more appropriate response to temptation. Finally, external Opportunity Constraints can at any outcome prevent or permit behavior enactment (Figure 1.) Figure 1: The seven basic components of the PI-Model of Self-Control

Source: Hofman and Kotabe (2012) Resisting to temptation is a definitely a central problem in the lives of many of us. Libertarian paternalists are keen on helping humans out in these situations. Where one can really intervene, seems to be the field of creating strong Preventive Strategies on the one hand, so people could avoid tempting situations and factors at all. On the other hand Opportunity Constraints can be set up if a person is considered (or if they consider themselves) to fail resisting momentary temptations. Self-control and conflicting preferences is from a neoclassical point of view a paradox phenomenon that is reasonable only if a dichotomy in humans’ thinking is assumed. Thaler and Shefrin (1981) explain this dichotomy with the help of a metaphor of the ‘mandators and agents problematic’. A Planner inside is the mandator, it is responsible for long-term goals and plans 22


for a lifetime. However, there is a Doer in our heads too, that actually makes all momentary decisions and takes only events in near future into account. It is similar to the agent in a company. The main question is how mandators can influence agents. We can be conscious of the fact that e.g. New Year’s Resolutions are going to be hard to keep. Nevertheless, what can we do, we try it, don’t we? How can the responsible Planner in our heads control the sudden decisions of the Doer? Thaler and Shefrin (1981) list a few possibilities that are partly close to the libertarian paternalistic solutions. An important difference is that this way a solution on the individual level is provided. Planners can modify the preferences of the Doers to some extent, introduce explicit incentives for them or simply take Doers away from decision-making situations. ‘Taking ourselves away from tough situations’ means introducing barriers (e.g. setting the limit on the credit card which is also an Opportunity Constraint) or interiorizing rules. Last mentioned option includes strong commitments to social and group norms and to own longterm goals. In Hofman and Kotabe’s model (2012), these limitations are counted as increasing Motivation and Volition that can help to counteract temptation. Libertarian paternalists (Thaler and Sunstein, 2008) claim choice architecture to be very helpful for individuals in these cases. However, we have to go back to an argument mentioned before whether too much self-control is welfare decreasing too. As introduced in last paragraphs, the most effective tools to affect insufficient self-control are external barriers and early commitments. These can be combined with sanctions as well to provide an even stronger motivation to ensure success. However, this way people might evite those momentary decisions too that would have increased their welfare. Market actors are usually thought to use humans’ self-control insufficiencies rather than help them. This fact would support the claim that governments have to defend consumers here. But because of using consumers’ cognitive biases negative consequence can occur for market actors as well (e.g. if clients are insolvent) and this exerts an inhibitory effect on companies. Changing and correcting behavior can be in the best interests of market actors as well. In addition, being aware of cognitive biases or of the lack of self-control can induce a demand for support from the part of citizens too; and this demand can be satisfied on the market leaving governmental sector totally out of picture. Of course, this depends on individual recognition of the problem – counteracting self-attribution bias, and on willingness and ability to pay for a market-based service. Instead of conclusion – Open-ended questions Summing up this short essay, we have to list a few general problems with the theories of new paternalism and show that it is still safer to not let more power to governments. Behavior economics and theories of new paternalism mostly ignore problems and questions related to the background of anomalies. There are no results that could provide biological or cognitive reasons for our judgment and decision making failures (Grüne-Yanoff, 2011). However, changes with age and development in decision-making were investigated. Here, researchers found that not only cognitive values develop by getting older but cognitive biases are going to be used more frequently by individuals (Jacobs and Narloch, 2001). Atypical mistakes are decreased and diminished by age, but heuristics and biases similar to those in adult decision making get more and more common among adolescents (Klaczynski, 2001). Growing up would mean to learn how to commit the same mistakes in decision making as our parents?

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Neither do we have a clear picture about the real economic effects of (in) sufficient self-control. That is why we lack empirics about useful tools to strengthen self-control, although we note the related literature is constantly growing (Heath and Soll, 1996; Rizzo and Whitman, 2009a, 2009b). As long as we do not have results that are more scientific on this topic, it is always safer to focus on solutions on the level of the individual than to let government solve problems. One last important result is that research in self-control concluded that there is a substitution effect between external control and self-control (Fishbach and Trope, 2005; Carlin et al., 2013). Increasing external control would reduce our internal, self-control. As a conclusion, we probably have to be thoughtful in both cases: if we are to consult others, as well if goodwill is tended towards us. References Buchanan, J. (1975). The Samaritan’s Dilemma, in: Altruism, Mortality and Economic Theory, edited Edmund S. Phelps, New York, Russel Sage. Buchanan, J. M. (1980). Rent-seeking and profit-seeking. In: Buchanan, J. M.Tollison, R. D.Tullock, G. (eds.): Toward a theory of the rent-seeking society. Texas A&M University Press, College Station, pp. 3–15. Buchanan, J. M.–Tullock, G. (1962). The Calculus of Consent. University of Michigan Press, Ann Arbor. Camerer, C. F., Issacharoff, S., Loewenstein, G., O’Donoghue, T., Rabin, M. (2003). Regulation for conservatives: Behavioral economics and the case for ’asymmetric paternalism’. University of Pennsylvania Law Review 151[3]: pp. 1211–1254. Camerer, C. F., Loewenstein, G. (2004). Behavioral economics: Past, present, future. In: Camerer, C. F.–Loewenstein, G.–Rabin, M. (eds.): Advances in Behavioral Economics. Russell Sage Foundation, New York, 2004, pp. 3–51. Carlin, B. I., Gervais, S., Manso, G. (2013). Libertarian paternalism, information production, and financial decision-making. Review of Financial Studies 26[9]: pp. 2204–2228. Fischhoff, B. (1975). Hindsight ≠ foresight: The effect of outcome knowledge on judgment under uncertainty. Journal of Experimental Psychology: Human Perception and Performance 1: pp. 288–299. Fishbach, A., Trope, Y. (2005). The substitutability of external control and self-control. Journal of Experimental Social Psychology 41: pp. 256–270. Frederick, S., Loewenstein, G., O’Donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of Economic Literature 40[2]: pp. 351–401. Glaeser, E. L. (2006). Paternalism and psychology. University of Chicago Law Review 73[87]: pp. 133– 156. Gruber, J., Kőszegi B. (2001). Is addiction rational? Theory and evidence. Quarterly Journal of Economics 116: pp. 1261–1303. Grüne-Yanoff, T. (2011). Old wine in new casks: Libertarian paternalism still violates liberal principles. Social Choice and Welfare 38: 635–645.. Heath, C., Soll, J. (1996). Mental budgeting and consumer decisions. Journal of Consumer Research 23: pp. 40–52. Hofmann, W., Kotabe, H. (2012). A general model of preventive and interventive self-control. Social and Personality Psychology Compass 6/10: pp. 707–722. Jacobs, J. E., Narloch, R. H. (2001). Children’s use of sample size and variability to make social inferences. Applied Developmental Psychology 22: 311–331.

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Jolls, C., Sunstein, C. R., Thaler, R. H. (1998). A behavioral approach to law and economics. Stanford Law Review 50[5]: pp. 1471–1550. Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. American Economic Review 93[5]: pp. 1449–1475. Kivetz, R., Keinan, A. (2006). Repenting hyperopia: An analysis of self-control regrets. Journal of Consumer Research 33. pp. 273–282. Klaczynski, P. A. (2001). Framing effects on adolescent task representation, analytic and heuristic processing, and decision making: Implications for the normative/deskriptive gap. Applied Developmental Psychology 22: 289–309. Loewenstein, G., Haisley, E. (2008). The economist as therapist: Methodological ramifications of „light” paternalism. In: Caplin, A.–Schotter, A. (eds.): Perspectives on the future of economics: Positive and normative foundations. Handbook of Economic Methodologies vol. 1, Oxford University Press, Oxford, England, 2008, pp. 210–245. Loewenstein, G., Weber, E. U., Hsee, C. K., Welch, N. (2001). Risk as feelings. Psychological Bulletin 127[2]: pp. 267–286. Madrian, B. C., Shea, D. (2001). The power of suggestion: Inertia in 401[k] participation and savings behavior. Quarterly Journal of Economics 66[4]: pp. 1149–1187. McCaffery, E. J., Slemrod, J. (2006). Toward an agenda for behavioral public finance. In: McCaffery, E. J., Slemrod, J. (eds.): Behavioral Public Finance. Russell Sage Publications, New York, 2006, 3–31. o. Olson, M. (1965). The Logic of Collective Action: Public Goods and the Theory of Groups. Harvard University Press, Cambridge, MA. Rabin, M. (1998). Psychology and economics. Journal of Economic Literature 36: pp. 11–46. Rabin, M. (2002). A perspective on psychology and economics. European Economic Review 46[4– 5]: pp. 657–685. Rizzo, M. J., Whitman, D. G. (2009a). The knowledge problem of new paternalism. Brigham Young University Law Review 2009[4]: pp. 904–968. Rizzo, M. J., Whitman, D. G. (2009b). Little brother is watching you: New paternalism on the slippery slopes. Arizona Law Review 51[3]: pp. 685–739. Samuelson, W., Zeckhauser, R. J. (1988). Status quo bias in decision making. Journal of Risk and Uncertainty. 1[1]: pp. 7–59. Shelling, T. C. (1960), The Strategy of Conflict, Cambridge, Mass., Harvard University Press. Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics 69[1]: pp. 99–118. Strotz, R. H. (1955-1956), Myopia and Inconsistency in Dynamic Utility Maximization, Review of Economic Studies, 23(3), pp. 165-180. Sunstein, C. R., Thaler, R. H. (2003). Libertarian paternalism is not an oxymoron. University of Chicago Law Review 70: pp. 1159–1202. Thaler, R. H. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization [1]: pp. 39–60. Thaler, R. H., Shefrin, H. M. (1981). An economic theory of self-control. Journal of Political Economy 89[2]: pp. 392–406. Thaler, R. H., Sunstein, C. R. (2003). Libertarian paternalism. American Economic Review Papers and Proceedings 93: pp. 175–179.

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Thaler, R. H., Sunstein, C. R. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness. Yale University Press, New Haven & London. Tversky, A.–Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science 211: pp. 453–58. Waldfogel, J. (2005) Does consumer irrationality trump consumer sovereignty? Review of Economics and Statistics 87: pp. 691–696.

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THE STANDARD OF LIVING AND DECLINING IN EMPLOYMENT PROBLEM Daiva DEIMANTAITE -GEDMINTIENE Mykolas Romeris University, Faculty of Economics and Financial Management Department of Finance and Taxation Ateities 20, LT-08303 Vilnius, Lithuania E-mail: [email protected]

Rita STRAZDIENE Vilnius College of Technologies and design Antakalnio g. 54, LT-10303 Vilnius, E–mail: r.strazdiene@ vtdko.lt

Abstract. The quality of life is determined by economic, political, legal, socio, demographic and psychological factors which directly and indirectly influence economic, social, demographic and family, health and environmental policy, science and education policies. The quality of life depends from the material and spiritual needs, from the level of the national economy development and problems of employment decision. Large quality of life choice will have in future social conflicts between poor and rich people. In order to create more and better jobs, Europe must have well-functioning labor market and the necessary skilled workforce. It is necessary to create the right conditions in order to ensure that all people could have staff employment opportunities and facilitate the integration of the development of European labor markets. These problems encouraged exploration of living standards differences and find ways to reduce them. Many countries solved this task. They direct their activities to improve the socio-economic situation and to reduce the standard of living. State launched a complex employment law reforms in order that the labor market could work better. Keywords: quality of life, standard of living, the unemployment rate, the employment rate,

increasing employment JEL classification: J24, J26, E24 Inroduction The standard of living is an economic and social criterion, which describes the material conditions of life and personal or household purchasing power. It is one of the most important indicators. Data for the standard of living is obtained from the household budget or income and expenditure surveys, which are carried out in all civilized countries. These studies include income and consumption expenditure, the quality of housing, sourcing of durable accessories and other important conditions. While assessing the standard of living other problems arise. That is the same level of income determines a different standard of living for a different number of people. The standard of living is also dependent on the opportunity to get the public services free and the natural and social environment. The assurance of the standard of living means setting a socially desired acceptable level of employment, which lifts the standard of living, reduces differences in living standards between urban and rural areas etc. (Valstybės žinios, 2006) The most important preconditions of human existence is a long and sufficiently healthy life, education, a high standard of living and political and civil possession of rights. Wealth inequality and poverty exist in most countries of the world. Standards of living not only differ between countries but also within them. In order to ensure a high standard of living the problem of employment must be addressed. The European Union is trying to overcome a severe crisis. After the financial crisis of 2008, a deep political emergency is shaking some European countries such as Greece, Spain and so on. 27


Only now, the situation in the labor market and the social field is begining to recover. In 2013, the unemployment rate in the EU reached 10.9 percent level whilst in April 2014 it was 10.4 percent. Youth unemployment has also started to decline but not too significantly. In April 2014, the European youth unemployment accounted for 22.5 percent and - 23.5 percent in the Euro zone. The improvement of the annual rate of employment is not yet reflected. In 2013 the employment in the EU decreased by 0.4 percent (-0.8 percent in the Euro zone) European countries are experiencing more difficulties in finding resources, formation of economic policy and application of the necessary reforms in order to support economic growth and employment efforts that ensure the resilience of the public finance and steady social protection systems. However, it is necessary to implement sound macroeconomic policies in Europe. In order to create more sound jobs, Europe needs to have a well-functioning labour market and an appropriately qualified workforce. It is essential to create the right opportunities for maximum employment and create conditions to facilitate the integration, preservation and improvement of the labour force in European job markets. (2012-2014 m. ES socialinio dialogo darbo programos projektas Socialinio dialogo specialiosios darbo grupės pasiūlymas, 2012 ) The purpose of article –. to investigate the standard of living and employment, identify declining in employment problems and provide the means of increasing the employment. To achieve this, presented following tasks: analyze the standard of living and employment and identify declining in employment problems and provide the means of increasing the employment Novelty of the research: This research covers direct and indirect determinant assessments of the standard of living and employment. Design/methodology/approach - analyses of the scientific literature. Living Standard Analysis Researchers who investigate and analyse standard of living explain and interpret the term differently. It depends not only from the purpose of object but also from the purpose of research, methods and problems as well as the subjective approach. Occasionally a term ‘level of subsistence’ is found in foreign standard of living surveys. It covers the minimum level of subsistence in Lithuania. Researchers of the standard of living often cover two main directions that are welfare and the level of social evolution. In 1997, the EU member states signed the European Community and the EU founding treaties and legislation replenishment contract in Amsterdam. Reference was made to the European Social Charter. One of the main objectives of EU social policy is to increase employment, to improve the living and working conditions in order to unify and set higher standards, promote adequate social protection, endorse the development of human capital, raise lasting high level of employment and fight against social exclusion (Amsterdamo sutartis, 1997). Welfare is a human or family satisfaction level of material and non-material goods, which can be both absolute and relative, compared with the accepted norms and standards of a society. Welfare State is an entirety of social institutions allowing the state to regulate the economy, trade, management, social sphere, relations between workers and employers, pricing, social and material welfare, residential construction, work, health and social protection, insurance, employment, culture and research. As Varkuleviciute stated (2009), one of the most difficult questions in the research is the selection of indicators. It is important to take into account indicators of ambiguity for example a low standard of living shows not only high but also low birth rates. Sometimes we have to use indicators, which show only material needs. Standard of living defines the satisfaction of spiritual needs but they are difficult to express statistically (Verkulevičiūtė, 2009) Increasing 28


employment is the main lever in solving all social problems. Various members of the EU understand and implement this goal differently and, therefore, chose different models of the welfare state Titmuss was the first to have created country classification in terms of social policy. He identified three social policy models that are marginal, applicable in USA, Social Policy, depending on the industry level, applicable in Germany, and institutional, applicable in Scandinavia. (Titmuss 1966). According to Sileika and Paskeviciute, at first the following ideas must be revealed, that is, the social - economic processes in the evolution of Lithuania. Later on a question if Lithuania is going on to a socially oriented state formation, which would ensure rational consumption of socio-economic resources within the country. According to research, income inequality is an important element for popular quality of life and overall socio-economic development of the country. (Atkinson, Bourguignon 2000) Income inequality exists in all societies and can be considered as a factor in social exclusion reduction of social justice in the society. High-income inequality is generally associated with an underground economy, increased crime, greater social exclusion and other adverse phenomena. Income inequality indicator is mentioned among the indicators of social exclusion of the EU. Lithuania is one of the countries where the level of income inequality is high in comparison to other European countries (Brazienė, 2005). Analysis is an integral part of the concept of individual well-being. Within the welfare economics, interpersonal comparison of individual welfare is a very important factor related to income inequality. As Skuciene stated (2008) that is a way to define norms of justice. In order to create a socially oriented state there must be a visible decline in a number of people living in poverty with respect to a relative weight of total population For this reason, a relative poverty rate is calculated. It shows the poverty level in the country. In order to compare income inequality one often needs to calculate income inequality and poverty ratio. Poverty exists because nobody can live by adopting the standard of living while experiencing the lack of resources. It may be a consequence of growing income inequality (Ackerman, Goodwin, Daugherty, Gallagher ir kt. (2000) Based on income and living conditions survey data, a risk of poverty rate in Lithuania was 18.6 percent in 2012 ( in 2010 it was 20.2 percent).In comparison in 2011 it fell by 0.6 percentage points. In 2012, about 560 thousand citizens lived below the poverty risk line. (http://www.socmodelis.lt/wp-content/uploads/II-8) Investigations revealed the situation that poverty threshold in 2010 was 701 litas per month per capita and 1472 litas for a family of two adults and two children under the age of 14. Compared to 2009, the poverty threshold fell by 15.6 percent this determined a reduction in the level of poverty risk. Meanwhile, the poverty threshold in 2012 was 749 litas per month per capita and 1572 litas for a family of 2 adults and 2 children under the age of 14. In comparison to 2011 poverty threshold increased by 12.5 percent. Due to an increase in revenue in 2011, lower unemployment and higher wages among 18-64 year-olds a risk of poverty rate decreased by 2.3 percentage points in 2012 and accounted for 17.9 percent compared to the previous year. In 2012 65 years-olds and older persons poverty risk rate accounted for 18.7 percent increased by 9 percentage points since 2011 (see figure 1).

Figure 1. Risk-of-poverty rate in Lithuania in 2011-2012

29


2011; All 2012; All population; 19,2 18,6 population;

2011; 0 - 17 2011 years; 2012; 25,2 0 - 17 years; 20,8

2012 2011; 18 - 64 years;2012; 20,2 18 - 64 years; 17,9

2012; 65 and older; 18,7 2011; 65 and older; 9,7

Source: Statistics Lithuania (2013) However, the index reliability with respect to the real poverty in the country is questionable because the relative values of indicator of poverty do not show real poverty but personal income distribution instead. According Sileika and Paskeviciute in order to fix a limit, an income size is taken as a part of the median. These members of society are relatively needy people whose personal income lag behind from the average level of income in the country. Therefore, calculation of the indicator of absolute poverty is based on a minimum budget of the low-skilled labour in uncomplicated conditions (Šileika, Paškevičiūtė 2013). Poverty pushes different social groups out of society. These results allow for income inequality calculation using the Gini coefficient. The Gini coefficient (also known as the Gini index or Gini ratio) is a measure of statistical dispersion intended to represent the income distribution of a nation's residents. This is the most commonly used measure of inequality. The coefficient varies between 0, which reflects complete equality and 100 (or 1), which indicates complete inequality (one person has all the income or consumption, all others have none). It was developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability".( http://www.oecd.org/eco/public-finance/49417295.pdf) Table 1. Income inequality and poverty rates in EU countries in the period 2008 – 2012 Gini Denmark Germany Estonia Ireland Greece Spain Latvia Lithuania Romania Slovenia UK Iceland Norway Switzeland

25,1 30,2 30,9 29,9 33,4 31,9 37,5 34 36 23,4 33,9 27,3 25,1 31,1

2008 The poverty rate 11,8 15,2 poverty19,5 poverty rate 15,5 20,1 20,8 25,9 20 23,4 12,3 18,7 10,1 11,4 15,7

Gini 28,1 28,3 32,5 : 34,3 35 35,7 32 33,2 23,7 32,8 24 22,6 28,7

2012 The poverty rate 13,1 rate poverty 16,1 17,5 : 23,1 22,2 19,2 18,6 22,6 13,5 16,2 7,9 10,1 15,9

Source: Eurostat (2013)

30


In Lithuania income inequality and poverty was higher than the EU-27 before the crisis and after the crisis. In 2008 Lithuania coefficient was 27th from 31 among the EU countries and according to the level of poverty in the 26th place by the Gini.. In 2012 according to the Gini coefficient Lithuania was in 23rd place, according to the level of poverty in 24th place (see table 1) Summarising Lithuanian income inequality and poverty are among the largest in Europe. It can be argued, that the assessment of inequalities of income and income inequalities elimination depend on social justice, other indicators of the country and international comparisons. According to the Gini coefficient, Lithuania is similar to Latvia and Portugal. (http://www.oecd.org/eco/public-finance/49417295.pdf) Problem of Employment and its Mitigation Solutions According to Martinkus and Berzinskiene, employment is determined by the relationship between labour and property, which conditions the theoretical economic analysis of employment (Martinkus ir kt., 2008). The function of the labour power changes depending on the level of period conditions related to development of society and treated as a survival necessity R Adamoniene attempts decoupling labour from the labour force and economic activity. Labour can be treated as a full human activity in physical and mental capacity of an individual, which is used to create value. Labour process gives a fledged satisfaction sense and a social status in society. If labour is an activity, then economic and legal relations form among people, therefore, it is appropriate to use the employment term. (Martinkus ir kt., 2008). Similar to other indicators employment is influenced by atmosphere factors i.e. demographic, geographic, social and psychological, and economic aspects. This proves that employment varies regionally. It has differences between urban and rural settings, among men and women and gets better or worse (see table 2). Table2: Labour force, employed, population changes in urban and rural areas

Dwelling place

City

Village

Year

Work force, thous.

Employed, thous.

2008

1098,1 1101,2 1086,6 1038,7 1032,9 1029,4

1035,4 962,1 914,3 904,9 922,5 931,6

2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013

417,3 426,9 431,4 442,9 439,7 435,9

391,7 355,3 333,3 348,7 353,2 361,1

Employed Population at dynamics the beginning Dynamics compared to of year, compared to thousand. previous, previous. percent year,percent

Year

2125,4 2099,1 2037,1 2005,6 1989,27 1974,6

2009 2010 2011 2012 2013 2014

100,0 92,99 95,0 99,0 101,9 101,0 42,0 90,7 93,8 104,6 101,3 102,2

1058,4 1042,9 1015,5 998,0 982,6 968,9

100,0 98,8 97,0 98,5 99,2 99,3 53,6 98,5 97,4 98,3 98,5 98,6

2009 2010 2011 2012 2013 2014

Source: Statistics Lithuania (2014)

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One of the most important economic and social problems is increasing employment, creating new jobs and reducing unemployment. Resolution of these questions is related to the level of economic development of a country and the growth of production. The most vulnerable and least resilient to social problems is the youth. Many social problems are relevant all over the world. These are employment of population, unemployment and others. It has become particularly relevant after the restoration of the Lithuanian independence. (http://ec.europa.eu/europe2020/index_lt.htm) Young person behaviour in the labour market depends on many factors. In order to increase employment opportunities motivation and learning accessibility should serve well. A solution for systematic youth unemployment problems is the most important prerequisite for success. That is why improvement in formation of youth labour and employment is important. We must not forget that the social costs of youth unemployment are very high and that the youth unemployment today translates to growing social problems tomorrow. Investigations revealed the situation those different types of youth unemployment starts forming before the young enter the labour exchange. Occasional social intervention does not solve the problem but softens it only. There is a need for a flexible integrated system to prevent the youth unemployment. At first, it should start in the secondary school and end with some benefits to employers who employ certain groups of young people. Youth unemployment is a much broader problem than labour market policy. This problem requires systematic approach to human development. In 2013 in EU-27 5.7 million young people were unemployed, 3.6 million of them lived in the euro zone. In 27 EU member states the youth unemployment rate was 23.5 percent, in the euro area it reached 24 percent, compared to 2012. It increased by 0.9 and 1.5 percentage points. The lowest unemployment rate was recorded in Germany and Austria (both 7.6 percent), the Netherlands (10.5 percent), while the highest in Greece (59.1 percent.), Spain (55.9 percent), Italy (38.4 percent) and Portugal (38.3 percent) in 2013.( ec.europa.eu/europe2020/pdf/csr2014/nrp2014_lithuania_lt.pdf) In 2012 the European Commission and eight member states with the highest youth unemployment (Ireland, Greece, Spain, Italy, Latvia, Lithuania, Portugal, Slovakia) set up action groups in order to use of EU Structural Funds to promote youth employment opportunities and reduce youth unemployment. Increasing Employment Programme 2014-2020 is designed to solve the currently topical employment issues combining business, education and labour market sectors together with the social partners and local authorities in employment policy-making. In 2013, the Labour Exchange specialists mediated in finding jobs for 197.4 thousand job seekers. Mediation service has been granted to approximately 36 thousand young people under 25 and accounted for 20.1 percent of all previosuly unemployed young people. Every fifth employed was a person in his/her 50s (18.7 percent) (Statistikos departamentas, 2013) Another problem of employment is a large level of low-skilled workers and long-term unemployment. According to the Lithuanian Department of Statistics, data in 2013 long-term unemployment amounted to 5.1 percent and was 1.5 percentage points lower than in 2012. In 2011, it amounted to 8.0 percent while in 2012 it reached 6.6 percent. The long-term unemployed and low-skilled workers form additionaly supported groups in the labour market. (www.socmin.lt/.../1%202%20programos%20aprasymas%202014%20t.p) In the analysis of long-term unemployment in the EU, a similar situation is observed. Longterm unemployment continues to rise due to the crisis of durability. In 2013, the long-term unemployment in the EU 28 countries was 12.5 million. (i.e. 5 percent of the working population) of long-term unemployed. Since 2008, long-term unemployment has doubled having increased in almost all EU member states The EU employment goal is to ensure that the age group of 20-64 would reach 75 percent employment by 2020. Since the beginning of the 32


crisis, the employment level of the 28 EU countries fell nearly by 2 percent and was 68 percent only at the end of 2012. From 2012 until 2013 the employment rate in the euro zone decreased by 0.6 percentage points while in the EU-28 it reduced by 0.42 percentage points. The research results showed significant differences among the average values of employment in countries taken into account. In the period of 2007-2013 a high average level of employment was witnessed in Sweden (79.4 percent); Finland (74 percent); Austria (75.1 percent); the Netherlands (77.6 percent); Germany (75.2 percent); Denmark (77 percent). Figure 3: Employment rate by age group, 2013, percent

Source:http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/File:Employment_rates_ by_age_group,_2013_%281%29_%28%25%29_YB15.png University data shows findings on employment trends within the EU countries that have reached a high level of economic development. For example, a very active, lifelong learning was observed in Sweden. However, despite the fact there was a very high level of employment. Inactivity and the level of part-time work is low, especially for women. Parental leave is rarely used as well (less than 30 hours per week). Lifelong learning and the level of adult education is significantly higher than in the EU. Meanwhile, the unemployment rate of young people in Finland is high. The level of the lowskilled unemployment is significantly lower than the overall unemployment rate. The pay gap between men and women is higher than average but lifelong learning is very active. The 55-59 age group is very active in the field. Many adults have a good education In Denmark, employment problems are revealed. The employment rate is relatively low in comparison to the EU employment levels. There is a visible decline in vocational education and training as well as a small number of graduates. (http://register.consilium.europa.eu/doc/srv?l=LT&f=ST 10373 2013 REV 1). In skilled Germany, the situation is even more acute. Level of activity is decreasing.. There is a high risk of poverty, especially for the unemployed. Only a little share of people become employed after 6 months of unemployment. A lower than required employment rate in Latvia is 69.6 percent, in Estonia it is 72.3 percent; in Czech Republic it reaches 71.5 percent. The worst indicators are in Italy that is 61. 5 percent; in Croatia it amounts to 58.8 percent; in Greece tops 61,5 percent and in Spain settles at 63,3 percent. Meanwhile, Lithuania needs to reach the level of 75 percent and lags by 6 points only. (http://register.consilium.europa.eu/doc/srv?l=LT&f=ST 10373 2013 REV 1). For example the 33


Latvian unemployment problem is reflected through the low level of male and the lowemployment.. The young people (aged 15-24) unemployment rate is higher than the EU average. The country has a high long-term level of unemployment. There is a low participation in active labour market policy. (http://register.consilium.europa.eu/doc/srv?l=LT&f=ST 10373 2013 REV 1). Conclusion Income inequality is a phenomenon in a society, which determines the growth of other adverse phenomena. These are inadequate consumption, inadequate housing conditions and so on. It is necessary to consider more people equality opportunities rather than inequality of income Employment is a difficult economic and social problem, which affects individuals and a country directly and strongly. When population employment decreases income declines resulting in falling living standards. In countries with high youth unemployment, job opportunities are not commensurate with he expectations created by the expansion of education systems. In addition, the active labor market programs needed to defuse social tensions in the short term may not do much for poverty reduction because many of the jobless come from middle-class families, and devoting public resources to finance them may reduce economic dynamism. Jobs have an impact on the well-being of the person who holds them, but they can also have an impact on the well-being of others. Some jobs bring more poverty reduction and, as such, benefit those who consider eradicating poverty to be a fundamental societal goal. During the analyzed period employment decreased in Lithuania This was influenced by the economic crisis which has reduced the demand for labour. 15-24 year-olds respond to the negative economic changes in the setting the most. That is the lack of work experience, which causes the effect. In order to increase the level of employment and mitigate the consequences of unemployment there is a need to introduce measures to help young people to meet the needs of the labour market better. Employment rates in the EU countries did not escape the downturn. The Baltic States found this problem the most challenging. Lithuania was in the third place according to a decline in employment. The main factors exerting influence on employment are economic factors. References Ackerman, F.; Goodwin, N. R.; Dougherty, L.; Gallagher, K. 2000. The Political Economy of Inequality.Washington, D. C. Covelo, California: Island Press. Adamonienė, R. 2004. Darbo išteklių pasiūlos ir paklausos derinimas Lietuvos žemės ūkyje: monografija. Kaunas: Lietuvos žemės ūkio universitetas. Amsterdamo sutartis. ABl. EG C 340, 117 straipsnis 1997. Atkinson, A. B.; Bourguignon, F. 2000. Handbook of Income Distribution. Amsterdam, Lausanne, New York, Oxford, Shannon, Singapore, Tokyo: Elsevier Science Brazienė, R. 2005. Socialinės stratifikacijos skaitiniai. Mokomoji knyga. Kaunas: Technologija. Kinderis, R . 2004. L i e t u v o s d a r b o i š t e k l i ų t y r i m a s . M o k o m o j i k n y g a . Vilnius: Ciklonas

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Lazutka R. 2004 Gyvenimo lygis. Visuotinė lietuvių enciklopedija, T. VI (Fau-Goris). – Vilnius: Mokslo ir enciklopedijų leidybos institutas. Martinkus, B.; Beržinskienė, D. monografija. Kaunas: Technologija

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Programme of Actions of the Conference. International Conference on Population and Development, Cairo, 5-13 September 1994, New York, 1996. Titmuss, R.,1966. Essays on WelfareState. London. Verkulevičiūtė D. Gyvenimo lygio teritoriniai skirtumai Lietuvoje pagal socialinius ekonominius rodiklius. Dartaro disertacija, 2009 Skučienė D., Pajamų nelygybė Lietuvoje, 2008 Šileika, A., Paškevičiūtė, J. Lietuvos tapsmo gerovės valstybe prieštaros, Ekonomika ir vadyba: aktualijos ir perspektyvos. 2013. 1 (29). 8–19 Valstybės žinios, 2006-06-17, Nr. 68-2497

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GLOBAL FINANCIAL CRISIS AND LITHUANIAN ECONOMY IN THE CONTEXT OF CRISIS Gediminas DAVULIS Vilnius University of Applied Sciences Business management faculty Didlaukio str. 49, LT-08303 Vilnius E.mail: [email protected] Abstract. The article deals with the economic situation and the state economic policy in Lithuania before and during the global crisis. The concrete factors that caused the economic crisis in the Lithuania are analyzed. These factors can be divided into internal, i.e. the burst of the “bubble” in the real estate market of the country and increasing of borrowing interest of banks, and external, i.e. decrease of export to foreign countries, that was one of the most important factors which determined the country’s economic depression. The economic situation of Lithuania in the context of the global crisis and tendencies of macroeconomic processes are discussed. The anti-crisis policy of Lithuanian governments is analyzed. Keywords: anti-crisis measures, economic policy, world finance crisis, macroeconomic processes.. JEL classification: E60.

Introduction The current financial crisis that struck the world has affected the majority of world countries on a larger or smaller degree and it amount in its measure to the crisis of 1929-1933. The onset of the current financial crisis is considered to be 2007, when the Federal Reserve System of the USA had to interfere and grant liquidity to the bank system (Soros, 2009). The current global crisis is not the only worldwide crisis in the new history of humanity. We are aware of such economic crises that have affected more than one state and therefore they can be called as worldwide crises (Dash, 2001; Feldstein, 1991; Sylla, 2009). The current global crisis stands out from the previous ones by its measures. It affected the majority of world countries. Economic cycles are on immanent feature of the market economy, because the evolution of the market economy is uneven and there is no other mechanism to equalize disproportions of uneven evolution than periodical shocks – crises. Thus, although crises entail great losses, both economic and social, they are inevitable. On the other hand, the proper economic policy is able to reduce the after- effects of crises. Although economic cycles, i.e. economic booms and recessions, in the market economy are inevitable, apart from common features, each economic cycle is different. Specific reasons that cause an economic recession are also different. Despite that, no economic cycle is apt to repeat, the analysis of its causes has a sense for the sole purpose of avoiding the economic policy errors made. For example, the available experience today enabled us to control the global crises much more expeditiously and faster than in 1929-1933. However, we have to accept the fact that today the world experiences less an economic depression on a no smaller scale indeed than that in the years of the Great Depression (Eichengreen, O Rourke, 2010). In the report, the main causes of the global financial crises as well as its effect on the Lithuanian economics are discussed. Based on statistical data, the economic state in Lithuania is analyzed in the period of the crisis and measures of the state economic policy: with a view to quit the 37


crisis, are discussed. Such investigation has a sense for the sole purpose of avoiding the economic policy errors made in the future. In Lithuania G Davulis (2012), S.Jakeliunas (2010), G.Rakauskiene, E.Krinickiene (2009), Simonaviciene Z., Kreizeriene E. (2010) are investigated problems connected with the impact of global crisis on Lithuanian economy. The objective of article is the economic situation in Lithuania before and during the economic crisis. The problem is considered in the article how to avoid or to soft the consequences of global crisis on economy of country. The objectives of the article are to investigate the changes of tendencies of macroeconomic processes in Lithuania before and during the crisis and assess the government measures of economic policy before and during the crisis. Methodology used for investigate is systemic analysis of scientist literature, legal acts and statistic data.

Characterization of the worldwide financial crisis and its main causes The current global crisis stands out from the previous ones by its measures. It affected the majority of world countries. In this respect, it surpassed even the Great depression of 19291933. On the other hand, both the crises have common features. Actually, both crises arose due to some troubles in the USA financial markets. Their major features are vast credit expansion and financial novelty. The truth in that the current crisis stand out by application of very complicated derivative financial measures and insufficient assessment of risk, though theses derivative measures were created namely to diversity and diminish the risk. It should be stressed, that the severe lessons of the Great Depression were not in vain and the governmental response to economic recession was much more expeditions than in 1929. The Great Depression impelled to create the economy regulatory theory the methods of which allowed us to manage the time challenge (Romer, 2009) Regarding the causes of the current crisis we can enumerate a lot of them, two aspects that, in our opinion, are essential, namely, disorder in stock exchange caused by collapse of real estate bubble and globalization of the world economics. The two aspects distinguish the current global crisis from other crises. In the current situation, namely the processes in the real estate market were the detonator that invoked the world crisis of finance and economy (Rosner, Mason, 2007). Other factors also facilitated the expansion of crisis. The consequence of globalization is integration of economics, finance, culture, and other spheres of world countries. Globalization has both positive and negative consequences. The intensifying integration of financial markets is related with the growing risk and uncertainty. Therefore, it is difficult to predict its consequences. On the one hand, the global financial integration opens possibilities for the new risk diversification and general stability strengthening of the financial environment. On the other hand, whit an increase of interrelations and dependences between global financial markets and economics, the risk of problem transmission increases as well. The stock market of the USA covers about 40% of the world stock market value, therefore the processes taking place in the USA financial markets have influence on stock markets in the whole world. Moreover, economic and financial interdependence of countries increases the spreading speed and dimensions of crisis. Global public relations (mass media) and widespread internet play the role without limiting and accelerative information spreading and forming decisions. Famous American economist wrote about a possible financial crisis in the USA before its onset. J. Stiglitz (2006) paid attention to a deteriorating economic situation of the country and 38


criticized the Central Bank of the USA with regard to their inflationary policy in progress. Rather long before 2007 indicators of the American economics such as inflation of wealth price, a high long-term deficiency of the current account and decreasing rates of economic growth of the country showed that the country is on the verge of financial crisis (Felton, Carman, 2008). The global crisis, though to a lesser extent than in the USA, had a bad effect on the EU countries as well. The crisis affected stock exchanges of many EU countries in which indices sank down rather markedly, though less than in the USA. The slump of indices in full swing of the crisis amounted up to 10%. Due to the economic crisis, the growth of economics in the EU countries considerably slowed down and the number of unemployed increased a great deal. The Baltic countries suffered perhaps most of all their economic depression was very painful (Andersen, 2008). In 2008, the European commission prepared a restoration plan of economics (Comission of the European Communities, 2008) which should be realized through the improvement of business conditions, investments into scientific research and technology development, and infrastructure projects, regarding the environment protection requirements. The largest states of EU – Germany and France have prepared their own plans for restarting economics of their countries, in which they concretized the regulations of the European commission plan and assigned (rather large) resources. Note that even the economic restoration plan, prepared by the European commission, is oriented to Keynessian regulations. The macroeconomic situation in Lithuania before and during the crisis 2004-2007 were the years of the fast economic growth in Lithuania which, according the Rosenberg, (2008) were unprecedented in postwar Europe. In this period, the country‘s GDP was constantly growing and in 2007 its growth rate reseached up to 9.8 percents (Fig. 1). Figure 1. The yearly alteration of Lithuanian real GDP in 2004-2011 (in percent). 15 10

7,4

4 7,8

7,8

9,8 5,9 2,9

1,4

5 0 -5 -10 -15

-14,7

-20 2004

2005

2006

2007

2008

2009

2010

2011

Source: Lithuanian Department of Statistics With the growth of economics from 2004 to 2007, unemployment also decreased constantly, the level of which diminished from 11.4 percents in 2004 to 4.3 percents in 2007 (Fig. 2). The improving economic situation in the country, increasing employment and wages, favourable prospects of the country‘s future slowed down emigration streams a little bit in 2004 – 2006 (Fig. 3).

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The growing country‘s economics, favourable conjuncture of the international market with the rising needs for importable production of other EU countries allowed us to uniformly increase the country‘s exported production volumes - in 2008, the country‘s export amounted up to 25.5 percent of its GDP level. Figure 2. The level of unemployment in Lithuania 2004-2011 (in percent of GDP). 20 18 16 14 12 10 8 6 4 2 0

17,8 14,5

13,7

11,4 8,3 5,6

2004

2005

2006

4,3

2007

5,8

2008

2009

2010

2011

Source: Lithuanian Department of Statistics Figure 3. The dynamic of emigration from Lithuania in 2004-2011 (in thousands of peoples). 30

25,3

25 16,17

20 15 10

4,4

4,6

3,7

4,1

5,1

2005

2006

2007

2008

6,6

5 0 2004

2009

2010

2011

Source: Lithuanian Department of Statistics Thus, to onset of the crisis Lithuanian economic increases. Decreasing unemployment, increasing income, hard currency and financial support of EU were the main factors of the growth. These factors laid the basis, as it is evident at present, to cherish grounded hopes as to the future of the country. Guided by these hopes, both enterprises and households began borrowing for consumption and business ever more and all the more that the banks granted loans with engaging interests. The largest share of loans received by a household was aimed at the real estate market. This process was stimulated by state given tax privileges for lodgings loans which established conditions of forming a real estate bubble. According to the data of the Bank of Lithuania, the volume of loans to acquire lodgings has grown from 50 million Lt in 2004 up to 720 million Lt in 2007. Such an expansion of credit had a decisive influence to form a ‘bubble’ in the Lithuanian real estate market. Thus from 2004 up to onset of the crisis Lithuanian economics was growing due to the growth of domestic demand, maintained by ungrounded future expectations. The growth of domestic demand stimulated increase of import as well. However the increase of import was not counterbalanced by an adequate export increase, i.e. export volumes lagyed behind from that of import until 2009 and thus the country‘s foreign trade balance was negative (Fig. 4). A constant foreign trade deficit also determined the growth of the current account deficit. In line 40


with the data of the Bank of Lithuania, the current account deficit in Lithuania has grown from 2004 to 2007 almost 300% and exceeded 14 billion Lt. The global financial crisis the first signs of which appeared in the USA in 2007 before long reached Lithuania, too. As shown the statistical data (Fig. 1), the rate of the country‘s GDP growth that reached almost 10 percent in 2007, fell down up to 3 percent in2008 and even 15 percent in 2009, thus pushing Lithuania among the states that suffered most from the crisis. Due to this reason the budget deficit in 2008 amounted up to 3,2 % and in 2009 amounted up to 9.5% of the country GDP, i.e. it exceeded the size set by the Mastricht agreement more three times. Only in the years of recovery country‘s economy state budget deficit began to decrease and at the end of 2011 it reached 5.5 percent of GDP, i.e. it exceed Mastricht criterion less than twice (Fig. 5). With a downturn of production unemployment began to grow in the country which amounted up even to 13.7 percent in 2009 (Fig. 2), which become a serious problem of country‘s economics. Emigration from the country started increasing again too and reached more than 25 thousands of emigrants in 2010 according to official data of the Lithuanian Department of Statistics (Fig 3). Lithuania was not ready for such a situation, - its strategy for economic development was based on the macroeconomic stability and on assumption of a uniform growth of economics. After the burst of the “bubble” in the real estate market of Lithuania, the credit interest, given by the banks acting in Lithuania, have grown as well. That affected negatively the subjects of Lithuanian economy and not so small part of enterprises went bankrupt. Only the processes in the county’s real estate market could invoke economic depression, however, mostly the outside factors have affected our economics. Because the balance foreign trade (Fig. 4) and Figure 4. The foreign trade balanse of Lithuania in 2004-2011 (in percent of GDP). 0 -2 -4 -6 -8 -10 -12 -14

-1,3

-5,7

-1,2 -4,9

-8,2 2004

2005

-9,9 2006

-12,9 2007

-11,5 2008

2009

2010

2011

Source: Lithuanian Department of Statistics the current account of country, was in deficit, thus in such a situation, the economic growth was feasible only by borrowing in the international finance market to cover the deficit. However, due to the global crisis, increased interests stopped the flow of foreign credits and shook the economic growth basis of the country. On the other hand, the global crisis predetermined slowdown of economic growth and consumption decrease of many world countries. Decreasing consumption of foreign countries restricted the chances of Lithuanian export and that was one of the most important factors, which determined the country’s economic depression. The domestic market of Lithuania is too small to maintain the growth of economics and to compensate the decrease in export. With the revival of markets of foreign countries, Lithuanian possibilities have made better as well. The 2010 years became years of beginning the recovery of Lithuanian economy – all main macroeconomic indicates slowly but constantly began to increase. The 2010 years became years of beginning the recovery of Lithuanian economy – all main macroeconomic indicates slowly but constantly began to increase. 41


Though the signs of global crisis were evident rather early, Lithuania met the crisis quite rivready. Such a situation was predetermind by insufficient competence of our goverment, lack of responsibility, and maybe political reasons. As a result, Lithuania met the crisis with the chrome foreign trade and current account deficit, with debts of the state and private sector and without any reserves accumulated. Seriuos erros of this goverment were associated with public finances. Despite rather high rates of GDP growth in the country, year after year expenditure of the goverment sector in 2004-2008 exceeded its revenues (Fig. 5), i.e there was a deficit state budget. Though the budget deficit before crisis was not so high (Fig. 5), under the conditions of fast economic growth, it increases the economy overheat. Figure 5. The Lithuanian state budget balanse in 2004-2011 (in percent of GDP). 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13

-1,5

-0,5

-0,4

-1 -3,2 -5,5 -7,1 -9,5

2004

2005

2006

2007

2008

2009

2010

2011

Source: Lithuanian Department of Statistics. On the other hand, the constant budget deficit increased the country’s debt which is unacceptable under the conditions of the economic growth. Meanwhile budget surplus would not allow economy overheating and would establish conditions for accumulating the necessary reserves and financing the angmented state liabilities under the cyclic conditions of recession. Anti-crisis measures of Lithuanian institutions In the presence of crisis the fical discipline, law in 2007, aimed at ensurance of financial stability and a stable development of economy, was adoption. The law has set that the deficitive teh govermental sector in 2008 can not be larger than 0,5 % of GDP. Unfortunately, this law was passed too late and its requirements could not be realized with the onset of the crisis. In 2008 the Bank of Lithuania and Parliament of Republic of Lithuania have made decisions: to diminish the mandatory reserve norm from 6 to 4 percent and to increase the deposit insurance sum up to 100.000 Euro with a view to vivify the domestic market using additional financial resources. Though these decisions were correct and adopted in time, unfortunately, their effect seemed to be insufficient. To maintain the market activity a more intensive promotion of economics was necessary. However, due to an inadvertent and irresponsible budget policy persuaded in the years of economic rise progress, these were no resources to stimulate the economics. Therefore there remained nothing else to do but to take measures that are usually applied not in the period of depression, but in up growth of economics. The newly elected Parliament of the Republic of Lithuania and Government undertook to apply the measure of a restrictive fiscal policy: to decrease expenditure and increase taxes in order to stabilize state finances, which was persistently recommended by the European Commission. At the end of 2008, decision were made to increase the rate of value-added taxes up to 19% (later on it was increased up to 21%), income-tax, excise duty on fuel, cigarettes and alcohol,

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as well as to eliminate the majority of reduced tariffs of the value-added tax. The so-called ‘night’ tax reform has come into force effect since January 1, 2009. This tax reform was aimed not so much with at neutralization of the crisis consequences to economics as at collection of more income to the budget with an expectation to stabilize the state finance system. However acording to the statistical data in 2009 much less income was collected to the state budget than in 2008. Certainly, such a result was mostly predestined by the economic downturn, however, there is little doubt that the night reform was not deliberate enough. Even the country‘s goverment acknowlidged that this reform was wrong in some aspects. Maybe there was some sence to increase the added-value tax tariff in the forever situation, however abolition of all privileges of this tax was a mistake: the budget lost not so small part of income that has left for the neighbouring countres. On principle the increase of the profit tax tariff was right, but it had to be differentiated according to economic branches and the volume of a company, which indeed has been done later on. The opponents‘ proposition that increase of the profit tax limits foreign investments is not so convurcing. The research has shown (Davulis, 2003) that tax privileges have, but a little influence on the volume of foreign investments in the country‘s economics. Attractiveness of objects to be invested in is much more important for inventors. Consequences of excise increasing are also not single-valued to economics. Thus, the government had to decide on an undersubscribed decision – to pursue the so-called retrenchment policy, i.e., to diminish government expenses by lowering the employers and officeholders salaries, pensions, and social pays such a policy in assessed ambiguously. On the one hand, it allows diminishing government expenses, on the other hand, it decreases income of the population and thereby consumers demand. The decrease in demand weakens the home market even more. The domestic market will revive only if income of the population starts growing and consumers demand increasing. Straight forward decreasing of expenses for all spheres can yield only a short-term effect. Decreasing expenses for the spheres of activities that predetermine the science and technology progress or development of infrastructure can cause long-term negative consequences for the country. Thus, the retrenchment policy would be deliberate enough and balanced. Though the macroeconomic situation in Lithuania started improving from 2010 years but in our opinion its improving not so which due to the actions of the goverment, as due to the improved situation in international markes and especially due to recovery in foreign countries that imported goods of Lithuanian producers. Conclusions Such a small country of open economics as Lithuania had no chance of avoiding the effect of the global crisis on the country’s economics. Thus, the domestic and external reasons, i.e. the burst of the “bubble” in the real estate market of the country and increasing of borrowing interest of banks, and. decrease of export to foreign countries, have invoked the country’s economic crisis.

Restriction of export possibilities was a terrible blow to Lithuanian economy, because the greater part of the country’s GDP is created through the foreign trade. An irresponsible and shortsighted economic policy of the country’s government especially in the sphere of state finances has intensified the crisis, too. The economic policy of the present government is estimated diversely. The measures taken to stabilize the state finances were necessary but these measures had a negative influence on the development of the domestic market. The economic revival of the country will depend both on the foreign market restoration and on the fact how the government will succeed to stabilize the state finances and to expand the domestic market.

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BUDGET PROCESS AND FISCAL RULES: ANALYSIS OF PAST PROGRESS AND FUTURE DEVELOPMENT Karlis KETNERS Riga Technical university E-mail: [email protected] Abstract. Fiscal rules are main legislative instruments to ensure long-term fiscal sustainability and realistic budget projections within budgetary process. Existing fiscal rules and budgetary planning elements are examined. Analysis of theoretical background and Latvian experience of recent changes in respective legislation is performed. It is concluded, that creation of long-term binding numerical fiscal rules was initiated as a response to economic downturn and as reaction to international requirements for having fiscal discipline framework. Proposals on strengthening of fiscal discipline are suggested aimed to simplify the legislative frame and way of appliance of fiscal targets. Keywords: fiscal discipline, fiscal rules, budget process JEL classification: H11, H61

Introduction Couple of years ago Latvia was the fastest developing country of the EU, and it was experienced the deepest economic crisis since recovery of its independence, and occurred to be hit by this crisis more severe than other countries in the region. Although the economic downturn of world scale will definitely have an impact on small and open economy, still the experience of neighbor countries show that policies implemented by national authorities, if wisely managed, can soften the shock and can raise the country towards a new period of economic development. Prudent fiscal policy is one of the tools on how to make a country if not immune, than at least less sensitive towards economic downturn. During the years of rapid economic growth, the government was performing pro-cyclical expenditure policy, thus contributing to the overheating of the economy and not using the opportunity to create sufficient reserves for case of economic emergency. Due to unavailability of significant financial resources for solution of problems connected with financial crisis government was forced to increase state borrowing. Number of reforms are being performed and planned to be performed in order to reduce expenditure in all possible fields, such as social funds, health, education, public administration etc, but it is not likely, that reforms performed in a hurry will produce positive results for the economy in the end. It is not possible to change expansive pre-crisis expenditure policy of the government, but it is possible to analyze the mistakes of the past, to enforce strict fiscal discipline and to establish economy cycle adjusted policy, which would show good results in protecting national economy during possible future crisis. The challenge for Latvia during last years was to complete requirements possessed within international lending program and its post-surveillance procedures. However, the challenges have not ended with successful refinancing of central government debt and improved economic growth. Fiscal rules are important institutional requirement for many countries in balancing their budgets and ensuring stable fiscal policy. While until 1990s, only few countries used fiscal rules and fiscal supervision in their budget procedures a comprehensive survey by IMF (2009) counts more than 80 countries having enacted balanced budget requirements on central or regional government level. Fiscal rules aim at constraining governments’ ability to run deficits and accumulate debt. However, fiscal rules also creates incentives for fiscal constraint avoidance through various forms of window-dressing measures. Introduction of fiscal rules can also alter 46


the bargaining situation in budget process and reduce necessity to understate projections of fiscal outcomes in negotiations with line ministers. In March 2012, Latvia has signed the Agreement on stability, coordination and governance in the economic and monetary union (Fiscal Compact), which beyond other issues addresses the need to maintain sound and sustainable public finances and to prevent a government deficit becoming excessive, accordingly introducing specific rules, including a balanced budget rule and an automatic mechanism to take corrective action. On November 2011, the European Council has adopted Directive on requirements for budgetary frameworks of the Member States. The Directive among all obliges Member States to have in place numerical fiscal rules, to establish a credible and effective medium-term budgetary framework providing for the adoption of a fiscal planning horizon of at least 3 years, to ensure that annual budget legislation of the Member States reflects country-specific numerical fiscal rules in force, and to perform the effective and timely monitoring of compliance with the rules, based on reliable and independent analysis carried out by independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States. On its way to prudent fiscal policy and introduction of euro, Latvia has adopted a Fiscal Responsibility Law on January 2013, which formulates national numerical fiscal rules, provides principles of linking annual budget to medium term budgetary plans, allows for justified escape clauses, and foresees long term stabilization mechanisms for budget balance. The Fiscal Responsibility Law provided creation of National Fiscal Council, which functioning from 1st January 2014, and whose main task is to monitor compliance to set fiscal rules, to provide evaluation of budgetary elements on different stages of budget processes, and to warn respective institutions in case of incompliance. The aim of the paper is to analyze existing theoretical framework on such methods of ensuring fiscal discipline as fiscal rules and medium term planning, explore the past development of legislation and guidelines on budget management and fiscal policy in Latvia, evaluate latest proposals of the governmental bodies on improvement of fiscal discipline, and highlight potential drawbacks of the aforementioned proposals. The object of the research is fiscal policy and subject is institutional and legal framework for sustainable fiscal policy. To achieve the aim of the paper, the review of the appropriate literature was performed, and issues most relevant for the analysis were systematized. Respective legislation, guidelines and conceptual proposals of the Republic of Latvia were analyzed, both changes in the past and proposals for future. Emphasis is put more on principle of the fiscal governance, rather than numerical data. Authors believe, that for comprehensive analysis it is necessary to view not only the results and outcomes of existing legal requirements, but also to view interim proposals in its development stage, which became (or did not become) incorporated into legislation, thus understanding why several sound proposals failed to root and what were the obstacles for that. In 1st Section framework of fiscal rules is analyzed, in the 2nd Section creation of fiscal council is described and concluding remarks are provided. Creation of fiscal rules and medium term expenditure framework as a precondition of prudent fiscal discipline In a number of countries possibilities to influence changes in the economy by monetary policy are limited, therefore fiscal policy instruments are used to stimulate growth of the economy and to weaken shocks of external factors. Sustainability of the public finances and stable macroeconomic development are set as primary goals of the economies in the Stability and Growth pact of the EU, in the convergence programs of the countries, and in a number of national declarations and policy guidelines. According to Calderon,C., Schmidt-Hebbel, K. 47


(2008) implementation of counter-cyclical fiscal policy can help to achieve the aforementioned goals, and fiscal policy regimes are increasingly adopted by governments that aim at contributing to stabilize business cycles and make public finances more resilient to political pressure. As shown in Kopits, Symansky (1998), it is important to ensure fiscal discipline that contributes to price stability and is conducive to sustained economic growth. During the recent crisis, the perceived need for fiscal stabilization has been unquestionably high: the resilience of national economies was impaired by the depth and the global nature of the shock. Studies confirm the conventional wisdom that a timely countercyclical response of fiscal policy to demand shocks is likely to deliver appreciably lower output and consumption volatility (see also Debrun, X., Kapoor, R. (2010)). According to Braun, M., Gadano N. (2007) in countries with low fiscal credibility and weak institutions, not only may rules prove completely ineffective in fiscal terms, but non-enforcement may further weaken the fragile institutional environment that undermined their effectiveness in the first place. The literature points out two main tools that can be considered as necessary preconditions for implementation and maintenance of fiscal discipline, especially if effectively used in conjunction with each other. These are creation of fiscal rules and development of medium term expenditure framework. Fiscal rule is a permanent (or lasting) constraint on fiscal policy expressed through fiscal results indicators such as the fiscal deficit, the debt level or some component of spending (Kopits, G., Symansky, S.A. (1998)). The key variables of the rules are the specific numerical target laid down by the rule (it must be clear, measurable and as broad as possible); the period over which the rule is to be applied (the longer the better); the legal instruments used (of the highest status possible, ideally, of constitutional level); the level of government to which they apply (the wider the better); the penalties for non-compliance (the harsher the better, ideally including criminal liability for officials). The rules usually include “escape clauses” as well, i.e., mechanisms that provide flexibility in special circumstances to forestall undesirable pro-cyclical effects. Major types of fiscal policy rules are balanced budget or deficit rules, borrowing rules, and debt or reserve rules (for more information see Kopits, G., Symansky, S.A. (1998)). While creating fiscal rules for such indicators of fiscal performance as budget balance or government borrowing, they must meet operational simplicity and flexibility. A critical feature of a fiscal rule is that regardless of the statutory instrument (international treaty, constitutional amendment, legal provisions, or policy guideline) it is intended for application on a permanent basis by successive governments in a given country at the national or sub-national levels. For policy rule to be credible, it must involve commitment over a reasonably long period. Thus, constraints that when adopted were meant to apply indefinitely can be viewed as rules, even if eventually they were abandoned or suspended. A key issue to be addressed in a decentralized system is the application of fiscal rules at the sub-national levels of government. The case for sub-national rules is particularly strong when a country is confronted with a major fiscal adjustment task that cannot be met by the central government alone. The smaller the share of the central or supranational government, the greater is the need for applying sub-national rules to counter the moral hazard that may arise among sub-national governments to incur fiscal imbalances with repercussions on the borrowing costs of the rest of the federal system. Establishment of medium term expenditure framework is seen as an important precondition for maintenance of fiscal discipline. Over the past decade, an increasing number of countries, especially developed ones, has been preparing a multi-year macro-budgetary framework as a part of an annual budget exercise. Such a medium term process is an important prerequisite for a well-informed policy debate. A rolling multi-year macro-budgetary process is an essential ingredient of effective fiscal rules, since it alerts the authorities and financial markets alike as to the policy adjustments or reform measures that may be necessary for compliance with the rule. It also disciplines policymakers and ensures that they are accountable for adhering to budget targets (Kopits, G. (2001)). According to Ketners K., Zvidriņa S.(2008), execution of 48


medium term expenditure framework by the government can enable formulation of fiscal policy goals in the medium term and proper understanding on how the government is going to achieve these goals And also greater financial stability and possibility to plan future expenditure based on realistic macroeconomics forecasts. Therefore, the implementation of medium term expenditure framework and compliance with carefully set fiscal rules contributes positively to the maintenance of fiscal discipline, ensuring sustainability of public finances and credibility of the government. Empirical studies (see Luechinger S., Schaltegger (2013), Ketners K., Jevcuka L. (2011)) show that likelihood of having a fiscal regime in place increases significantly with the government balance, government stability, and GDP per-capita, and declines with dependency ratio and expenditure pro-cyclicality. Not prepared countries are less likely to adopt a fiscal regime; hence, previous fiscal reforms are needed for implementing successfully fiscal rules. In countries with low fiscal credibility and weak institutions, not only may rules prove completely ineffective in fiscal terms, but also non-enforcement may further weaken the fragile institutional environment that undermined their effectiveness in the first place. Governments with a strong reputation of fiscal prudence do not have to be constrained by rules. However, in countries where such a reputation is lacking, fiscal rules can provide a useful policy framework and over time contribute to stability and growth. To enhance their usefulness, fiscal rules need to be well designed at national and sub-national levels of government, combining simplicity, flexibility, and growth oriented criteria. Finally, rules must be implemented in a transparent manner, with the support of appropriate institutional infrastructure, following careful preparation and convergence. The Fiscal Discipline Law was enacted in January 2013 and took effect from March 2013. The law lays down three fiscal rules that act to constrain the budget. Firstly, a balance rule requires that the general government budget structural balance for every particular year of a MediumTerm Budgetary Framework Draft Law shall not be lower than -0.5% of GDP (if the target is not attained, specified annual budgetary corrections are imposed until the deficit is back within this limit). Secondly, an expenditure growth rule limits medium-term expenditure growth (net of the GDP deflator), as set out in the Medium-Term Budgetary Framework Draft Law, to within the average potential GDP growth for the period. Thirdly, a binding expenditure ceiling for central Government is fixed in the Medium-Term Budgetary Framework Draft Law for every particular year, in compliance also with the limits arising under the previous two rules. A noteworthy feature of the fiscal rules is the inclusion of an automatic correction mechanism, along the lines of that included in the Swiss ‘debt brake’. Under this mechanism, any deviations of the structural balance from its planned targets are logged, and additional fiscal efforts must be made to ensure that the cumulative deviation–once it exceeds 0.5% of GDP–will be progressively corrected. Taken together, these rules should impose a rigorous constraint upon the medium-term evolution of the public finances–provided that forecasts are an accurate and reliable basis for budgetary planning. The analysis of past development of fiscal discipline measures in Latvia, expressed in terms of existence of fiscal rules and medium term expenditure planning, makes it possible to conclude that legislative framework on these issues has existed more for formal purposes than for real enforcement of fiscal discipline. The process of changes in respective legislation often appeared to be a repetition of previously expressed proposals, which indicates that, theoretically, these proposals were viable, but did not have a political support. Recent creation of Long-term stability reserve and Fiscal Responsibility Law can be rather viewed as a late response to crisis, than timely implementation of sound instruments of fiscal sustainability. However, at this point of time, the development of fiscal discipline is on its peak, since it is the first intention to express fiscal indicators as a function of economy’s growth rate.

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Fiscal Council for Sustainable Fiscal Policy An institutionary framework has an important role in setting, designing and implementing fiscal rules system. Institutionary framework can take form of independent fiscal authority or fiscal council. The task of independent fiscal authority would be to set the long term objectives and appropriate targets (for example, debt and deficit limits) in the context of fiscal rules, adjust some predetermined tax and expenditure packages, or could veto proposals at odds with a given fiscal rule. Fiscal council usually has consultative function, performing objective analysis of fiscal policies, providing independent budget forecasts, and providing normative assessment and recommendations. The desirable form of fiscal agencies is country specific. It would depend on the nature of the fiscal problem and on the country’s political environment, including the constitutional setup, the legal tradition, and policymaking customs. But institutions of whatever shape are not a panacea: their effectiveness ultimately rests on a government’s commitment to the mandate assigned to them. According to the analysed literature, there can be distinguished two types of fiscal agencies: independent fiscal authorities and fiscal councils (for detailed typology see Debrun et al (2008)) which differ by the degree of decision making and intervention into the budget process. Independent fiscal authorities are supposed to have a mandate to decide on specific aspects of fiscal policy within a general policy framework previously defined through the political process, namely, by setting binding long term and short term numerical fiscal targets, setting targets in the context of a particular fiscal rule, or performing binding adjustments to specific revenue and expenditure measures. Fiscal councils, in turn, have only consultative power, and they contribute to greater fiscal transparency and therefore accountability by raising the political cost of inappropriate uses of fiscal policy in terms of credibility of policymakers. Namely, fiscal councils may provide independent budget forecasts, perform independent analysis of fiscal policies and provide normative assessment and recommendations. The fiscal council is the most popular organisational form for countries which have established a fiscal agency (Debrun et al (2008)). Some authors (Debrun and Takahashi, 2011) claim that any non-partisan institution seeking to actively inform and foster the quality of the public debate on fiscal policy could qualify as a fiscal council. Hagemann (2010) defines fiscal council as a publicly funded entity staffed by non-elected professionals mandated to provide non-partisan oversight of fiscal performance and/or advice and guidance - from either a positive or normative perspective - on key aspects of fiscal policy (Hagemann, 2010). As cited by Kozluk et al (2012), a fiscal council can be defined as a body providing independent analysis and projections relating to the budget and macroeconomic and possibly normative assessment of fiscal policy in the light of governments’ own stated objectives. Strong fiscal council would increase the political costs of ‘bad’ fiscal behaviour and improve transparency of fiscal policymaking (Kozluk et al, 2012). Going into a deeper philosophy of fiscal councils, some claim that an ideal fiscal council would be a politically independent actor involved in the national budget process with the right to determine the annual maximum allowable deficit for the country as a whole and to impose across-the-board spending cuts if government do not comply with this limit (Harden and von Hagen, 1995). A weaker version would be a fiscal council that comments publicly on fiscal policies and engages the government in a public debate about its policies. Von Hagen explains that fiscal councils can do much to improve the transparency of fiscal plans and frameworks thus contributing to strengthening the ideology of Stability and Growth Pact at the national level (von Hagen, 2011). According to Debrun, X., et al. (2013), a variety of fiscal councils have been in operation in a number of countries. They range from organizations essentially mandated to provide independent projections of budgetary variables and general fiscal analysis to bodies assessing the consistency of a government’s budgetary policies with its own long-term objectives or 50


proposing specific fiscal adjustment measures in the context of fiscal rules (Debrun et al, 2008). Calmfors, L., Wren-Lewis, S. (2011) examined eleven fiscal councils and found absolute differences in variety of tasks, size (from no staff to 230), structure of boards (one director or 12-14 board members), and composition of members (academics or public-finance experts) (Calmfors, L., Wren-Lewis, S. (2011)). A couple of years later, assessment of 29 fiscal councils has shown that diversity is even growing (Debrun et al, 2013). The research in respective area concentrate findings on three main aspects of fiscal councils – tasks, political and budgetary independence, and impact on government’s fiscal policy and state fiscal performance. Also Hagemann (2010) classifies existing fiscal councils in OECD countries by tasks into three (nonexclusive) groups. The first group includes bodies that provide independent forecasts used in the formulation of the budget, or against which the official projections are, or can be, assessed. This group also includes entities that assess fiscal policy issues using positive rather than normative analysis such as assessing cyclical impacts on the budget or the fiscal implications of budgetary programs. The second group includes councils that are tasked with providing independent forecasts of macroeconomic and budgetary variables needed for the elaboration of the annual budget. The third group comprises entities with a mandate to provide normative views on the appropriateness of the overall stance of fiscal policy from, for example, a cyclical perspective or the desirable time line to restore fiscal sustainability (Hagemann, 2010). Experience and empirical evidence suggests that delegation of macroeconomic forecasting to an independent fiscal council can indeed reduce forecasting bias (Hagemann, 2011). Debrun and Takahashi (2011) outline the following tasks of fiscal councils: a) provision of unbiased analyses of the likely economic and budgetary consequences of alternative policy strategies with respect to ultimate societal objectives (growth, employment, equity, stability) and constraints (sustainability, possibly expressed as numerical fiscal rules); b) publishing of nonpartisan assessments on the extent to which current and planned policies contribute to achieve the government’s stated objectives; c) enhancement of transparency through unbiased macroeconomic and budgetary forecasts, including the costing of specific measures; d) fostering fiscal policy coordination among different government entities (central administrations, decentralized entities, social security, large public enterprises benefitting from explicit or implicit guarantees), and e) assessing of fiscal risks and proposing risk-mitigating strategies (Debrun and Takahashi, 2011). Calmfors and Wren-Lewis (2011) provide essentially similar but more detailed overview of classical tasks of fiscal councils. It is clearly emphasised that for the comprehensive assessment both ex-ante and ex-post assessment of fiscal policy is required, in order to reveal the intentions of government to move in a right direction and to compare real outcomes with the pre-set plans. Macroeconomic forecasting includes both provision (or at least endorsement) of independent macroeconomic forecasts and feedback on forecasts produced by the government. Fiscal councils are highly correlated with the provision of fiscal transparency via open communication with the public. Cost estimates of different policies are not very widespread, but still are seen as one of the classic tasks of fiscal council. The analysis of fiscal stance (sustainability) of the fiscal policy is essential. The fiscal council can provide either positive (general, overall, descriptive) or normative (analytical, focus oriented) recommendations on government activities at any stage of implementation of fiscal policy. Above-mentioned approach was used for creation of Latvian Fiscal council that is one of those institutions, which have opportunity to evaluate transparency, effectiveness and understandability of formulated fiscal requirements. Therefore, it is plausible that the Fiscal council has a right to recommend changes in existing legislation in the field of fiscal discipline, in this way, also contributing to the improvement of fiscal transparency. However, one must distinguish between recommendations that are oriented towards improvement of effectiveness and transparency of fiscal requirements and reflection of data, and those that would be oriented towards possible satisfaction of political interests or convenience of work of the Fiscal council. 51


It is not excluded that, during first years of operation of the Fiscal council, it would be necessary to formulate in legislation certain scope of issues that could or couldn’t be covered by aforementioned recommendations of the Fiscal council, for example, regarding weakening fiscal requirements, reducing scope of tasks, increasing spectrum of escape clauses etc. At the same time, government (Parliament) also should not feel free to change legislation on fiscal discipline freely, and it would be rational to foresee an obligation for government (Parliament) to ask an opinion of the Fiscal council on proposed changes in legislation, with a view to maintaining sustainability of public finances, meeting international requirements and reducing any possible fiscal risks. This way, the Fiscal council and government (Parliament) would “be watched” one by another, thus contributing to mutual responsibility in the field of state fiscal responsibility. Currently, the description of tasks of the Fiscal council stops at the point where the council submits its opinion to respective institutions, however, there is no word about what happens next. Most probably, respective institutions are assumed to consider opinion of the Fiscal council as additional information that can be used while evaluating possible decisions. The authors believe that even consultation and advice of the Fiscal council (especially of it is supposed to be an authority and possess expertise) must not be left without decent response from the government (Parliament). It would be a good practice to foresee the procedure in legal acts on how the Fiscal council is listened to, and how does government respond to an opinion of the Fiscal council, if it is negative or different. It seems just logical that if government has an opposite view it also has good arguments justifying its actions, and disclosure of those arguments would both strengthen the credibility of government in the eyes of society and the Parliament, and ensure a positive feedback and a productive dialogue with the Fiscal council. However, in any case, the dialogue on opposite views must be planned on time and must not disturb progress and approval of the budget package. Conclusion The Law on Fiscal Discipline lays down fiscal policy principles that apply at all levels of government in Latvia. In turn, the Law on Local Government Budgets outlines the procedure for local government budgeting (including for cities and municipalities), which takes place independently of central institutions. The creation of the Fiscal council was initiated as a response to international requirements of having independent fiscal body to perform effective and timely monitoring of compliance with the rules. However, while designing and developing fiscal requirements and respective legislation there can be observed a serious intention to make an effective use of such a fiscal body, taking into account specificities of national budget process. The Fiscal council possesses classical tasks of fiscal councils with some variations. The Fiscal council fulfill advisory tasks with no rights to execute power over fiscal policy implemented by the government. Formulation of tasks allows for provision of both positive and normative recommendations. The scope of tasks should be reassessed and revised soon after the start of its functioning, based on practical implications and newly introduced international requirements and reccomendations. Financial and statutory independence of the council is foreseen in the law. However, it does not fully exclude possibility to intervene politically in the work of the Council from the side of the Parliament. The need to re-evaluate the preset scope of expenditures and structure of staff of the council might arise after the first year of its operation.

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Clear description of procedures and timing of Fiscal council’s intervention would benefit substantially the process and quality of recommendations, credibility of the council and ability of the government to react. It refers to the distinction of ex-ante and ex-post evaluation of policies and assessment of fiscal stance and governmental macroeconomic projections. The evaluation of work of the Fiscal council is highly advisable, performed by the parliaments and international institutions. Political commitment to implementation fiscal policy is essential, in order for Fiscal council to be viable. References Braun, M., Gadano N. (2007) What are fiscal rules for? A critical analysis of the Argentine experience, CEPAL Review No. 91, 53 – 65. Calderon,C., Schmidt-Hebbel, K. (2008) The choice of fiscal regimes in the world, Central bank of Chile, Working paper No 497. Calmfors, L., Wren-Lewis, S. (2011) What should fiscal councils do?. CESifo Working Paper Series No. 3382. Debrun, X., et al. (2013). Fiscal Councils. Functions and Impact. IMF Working Paper. Data presented at “High-Level Seminar on Building Fiscal Institutions to Meet Post-Crisis Challenges”, Centre of Excellence in Finance (CEF), Slovenia, May 2013. Debrun, X., Hauner, D., Kumar, M. S. (2008). The Role for Fiscal Agencies [online]. In European Economy Occasional papers 37 (2008) “The Quality of Public Finances: Finding of the Economic Policy Commitee Working Group 2004-2007”, 129-148. Debrun, X., Kapoor, R. (2010) Fiscal Policy and Macroeconomic Stability: Automatic Stabilizers Work, Always and Everywhere, IMF Working paper No 111. Debrun, X., Kumar, M.S. (2007) Fiscal Rules, Fiscal Councils and All That: Commitment Devices, Signalling Tools, or Smokescreen?. Debrun, X., M. Gerard, and J. Harris. (2011) Fiscal Policies in Crisis Mode: Has the Time for Fiscal Councils Come at Last? [online] paper presented at the OECD Parliamentary Budget Officials and Independent Fiscal Institutions 4th Annual Meeting, at Paris, February 23-24, 2012. Retrieved from: http://www.oecd.org/gov/budgeting/49777890.pdf. Debrun, X., Takahashi, K. (2011). Independent Fiscal Councils in Continental Europe: Old Wine in New Bottles?. CESifo DICE Report 3/2011. Hagemann, R. (2010) Improving Fiscal Performance through Fiscal Councils. OECD Economics Department Working Papers, No. 829. Hagemann, R. (2011) How Can Fiscal Councils Strengthen Fiscal Performance?. OECD Journal: Economic Studies, Vol. 2011/1. International Monetary Fund (IMF) (2009) Fiscal rules – Anchoring expectations for sustainable public finances. Washington, D.C.: International Monetary Fund, Fiscal Affairs Department. Ketners, K., Jevčuka, L. (2011). Budget Process and Fiscal Discipline in Latvia: Analysis of Past Progress and Possible Future Development. Economics. Business Administration. Volume 771, 126-142. Ketners K., Zvidriņa S. (2008). Implementation of fiscal rules for improvement of fiscal discipline in Latvia, Economics and management-2008 International Scientific conference proceeding. Kaunas: Technologija, – 121-127, ISSN 1822-6515. Kopits, G. (2001). Fiscal Rules: Useful Policy Framework or Unnecessary Ornament?, IMF Working Paper No. 01/145.

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Kopits, G., Symansky, S.A. (1998). Fiscal Policy Rules, IMF Occasional Paper No 162. Koźluk, T., Jousten, A. and Høj, J. (2012). Bringing Belgian Public Finances to a Sustainable Path. OECD Economics Department Working Papers, No. 954. Luechinger, S., & Schaltegger, C. A. (2013). Fiscal rules, budget deficits and budget projections. International Tax and Public Finance, 20(5), 785-807. von Hagen, J. (2011). The Sustainability of Public Finances in the EMU. CESifo DICE Report 3/2011. von Hagen, J., Harden, I.J. (1995). Budget processes and commitment to fiscal discipline. European Economic Review 39 (1995) 771-779.

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VIDUTINIO DARBO UŽMOKESČIO VERTĖS POKYČIŲ BALTIJOS ŠALYSE TYRIMAS Rimvydas JASINAVIČIUS Mykolo Romerio universitetas E-mail: [email protected]

Vidmantas GANIPRAUSKAS Mykolo Romerio universitetas E-mail: [email protected]

Santrauka Remiantis Europos Sąjungos statistikos biuro (toliau – Eurostat) duomenimis vidutinis darbo užmokestis Baltijos šalyse (Estijoje, Latvijoje ir Lietuvoje) nuo 2004 m. kasmet padidėjo vidutiniškai atitinkamai 8,2; 10,3 ir 7,7 proc. per metus. Be to, šios šalys dėl sparčių Bendrojo vidaus produkto (BVP) augimo tempų buvo vadinamos „Baltijos tigrais“. Deja, daugelis tų šalių gyventojų savo kailiu nepajuto gyvenimo kokybės pagerėjimo. Tyrimo metu buvo parodyta, kad pinigine išraiška skaičiuojamo vidutinio darbo užmokesčio dydžių augimo tempai per pastarąjį dešimtmetį ženkliai atsiliko nuo faktinės to užmokesčio turtinės vertės (pagal Aukso standartą). Tyrime nustatyta, kad krentant Euro turtinei vertei ir didėjant kainų infliacijai Baltijos šalyse, nuo krizės pradžios 2008 m. tų šalių darbo žmonių pajamų perkamoji galia nuolat silpnėjo. Tai byloja, kad visų Baltijos dirbančiųjų pajamų finansinės galios sumenko, iš dalies skurdinant juos. Raktažodžiai: Pinigų vertė ir nuvertėjimas, pinigų perkamoji galia, pajamų vertės ir perkamosios galios skaičiavimas, vidutinio mėnesinio darbo užmokesčio vertė, infliacijos poveikis.

Įvadas Visuotinai pripažįstama, kad pagrindiniu veiksniu, lemiančiu gyventojų gyvenimo kokybę, yra jų pajamos. Pastarąsias sudaro jų gaunamas darbo užmokestis bei subsidijos iš socialinių fondų. Abu šie pajamų šaltiniai priklauso ir nuo bendrųjų valstybės ekonominių rezultatų, ir nuo žmonių darbo apmokėjimo lygio. Apie bendruosius valstybės ekonominius rezultatus dažniausiai sprendžiama pagal BVP (bendrojo vidaus produkto) rodiklį, o apie darbo pajamas – pagal vidutinį šalyje gaunamą darbo užmokestį. Kiekvienoje šalyje abu šie rodikliai ir jų pokyčiai vertinami (skaičiuojami) toje šalyje naudojamų pinigų nominalaus kiekio reikšmėmis, neatsižvelgiant į tų pinigų vertės bei perkamosios galios pokyčius. Baltijos šalių statistikos duomenimis Estijoje, Latvijoje ir Lietuvoje (toliau – Baltijos šalyse) vidutinis darbo užmokestis 2004-2013 m. laikotarpiu kasmet didėjo, BVP taip pat. Šie faktai skatina daryti prielaidą, kad ir žmonių gyvenimo kokybė atitinkamai tose šalyse gerėjo. Tačiau didelė dalis tų šalių gyventojų tvirtina priešingai – esą, jų gyvenimo kokybė nepagerėjo, dažnai net ir pablogėjo. Ekonomikos ekspertai nagrinėja faktinius arba santykinius darbo užmokesčio pokyčius, skaičiuojamus nacionalinės valiutos kiekiniais dydžiais (Žukauskas, 2008; Raškinis, 2005). Yra publikacijų ir tyrimų, kuriuose pradedama vertinti infliacijos įtaka gyventojų pajamų perkamajai galiai (Žukauskas, 2011, Jasinavičius, Ganiprauskas 2014). Tačiau kokiomis proporcijomis keičiasi gyventojų pajamų vertė, kintant vidutiniam mėnesio darbo užmokesčiui Baltijos šalyse, mokslinėje literatūroje nagrinėta nepakankamai. Analizuojant 2004-2013 m. laikotarpį, nuo 2004 m. kasmet kiekine reikšme vidutinis darbo užmokestis Estijoje, Latvijoje ir Lietuvoje padidėjo vidutiniškai atitinkamai 8,2; 10,3 ir 7,7 proc. per metus, tačiau, daugelio nuomone, šie augimo tempai neužtikrino proporcingo jo perkamosios galios pakilimo. Šis tyrimas apsiriboja analize, kaip pastarąjį dešimtmetį Baltijos šalyse keitėsi vidutinio darbo užmokesčio vertė ir perkamoji galia, vertinant pagal „Aukso standartą“ ir atsižvelgiant į standartinio infliacijos koeficiento kitimą. 55


Lietuvoje nuo 2014 m. spalio 1 d. minimali mėnesinė alga padidėjo iki 300 EUR. Yra nustatyta, kad pagrindinis darbuotojus motyvuojantis veiksnys yra darbo užmokestis, ir kylant asmeninio vartojimo prekių ir paslaugų kainoms, paprastai darbuotojai tikisi darbo užmokesčio augimo, atsižvelgiant į kainų lygio didėjimą (Žiogelytė, 2010). Tyrimo tikslas: kiekybiškai įvertinti vidutinio darbo užmokesčio vertės bei perkamosios galios pokyčius, atsižvelgiant ne tik į vidutinio darbo užmokesčio didėjimą, bet ir šalyse naudojamų pinigų dalinį nuvertėjimą bei tų pokyčių sąsajas su pagrindiniais ekonomikos rodikliais Baltijos šalyse. Tyrimo uždaviniai: 1. atskleisti pajamų vertės pokyčių skaičiavimo ypatumus; 2. įvertinti vidutinio mėnesinio darbo užmokesčio nuostolius dėl kainų infliacijos ir nuvertėjimo; 3. nustatyti vidutinio darbo užmokesčio sąsajos su pagrindiniais ekonomikos rodikliais. Analizuojant mokslinę literatūrą, publikuotas 2004-2013 metų laikotarpiu, nustatyta, kad L. ir T. Tanning analizavo darbo užmokesčio dydžius, darbo kainą ir produktyvumą Rytų Europoje ir Baltijos šalyse (Tanning, 2012 ir 2013), L. Žiogelytė vertino darbo užmokesčio pokytį Lietuvos darbo rinkoje (Žiogelytė, 2010), E. Paužinskaitė nagrinėjo gyventojų darbo užmokesčio apmokestinimo Baltijos šalyse ypatumus (Paužinskaitė, 2012), V. Gerikienė ir I. Blažienė analizavo Valstybinio sektoriaus darbuotojų darbo apmokėjimo reguliavimą Lietuvoje (Gerikienė, Blažienė, 2009), o A. Baležentis ir kiti, vertindami darbo užmokesčio pokyčius Lietuvos žemės ūkio sektoriuje ekonominio nuosmukio laikotarpiu, išskyrė tik konkretų sektorių (Baležentis, Misiūnas, 2011). V. Laidmäe ir kiti vertino pagyvenusių žmonių sėkmingą gyvenimą Estijoje (Laidmäe, Hansson, Leppik, Tulva, Lausvee, 2013). Nors jau yra keletas straipsnių, nagrinėjančių pinigų vertės matavimo ypatumus, tačiau mokslinių straipsnių, kuriuose nagrinėjami darbo užmokesčio vertės pokyčiai, trūksta. Šios problemos nagrinėjimas ir pateikimas mokslinėje literatūroje papildys moksliniais argumentais uždirbamų pajamų vertės sumažėjimą Baltijos šalyse. Kadangi gyventojų perkamoji galia priklauso ne tik nuo turimų pinigų kiekio, bet ir nuo jų vertės, ypatingas dėmesys tyrime yra skiriamas pajamų vertės pokyčių vertinimui. 1.

Pajamų vertės pokyčių tyrimas

Pajamas įprasta vertinti tiesiogiai atsižvelgiant į jų kiekį. Tokiu būdu laikoma, kad bet koks jų kiekio padidėjimas padidina jų vertę, o sumažėjimas – sumenkina. Tai būtų teisinga, jei naudojamų piniginių vienetų turtinė vertė bei jų perkamoji galia laike nesikeisdama išliktų pastovi: pvt  pvo  const , [1] čia: pvt , pvo – piniginio vieneto vertė duotuoju momentu t ir 0. Ši taisyklė galiojo, kai pinigais žmonėms tarnavo auksinės bei sidabrinės monetos. Iš dalies ši taisyklė veikė ir tada, kai apyvartoje naudojamais pinigais tapo popieriniai banknotai su aukso rezervais susieti Aukso standartu: kiekvienas popierinis banknotas buvo įvertinamas ir galėdavo būti keičiamas į konkretų aukso kiekį. Tas aukso kiekis nustatydavo turimų ir naudojamų pinigų turtinę vertę, kuri paskaičiuojama pagal formulę [2]: Pajvi  N pi  pvi , [2] čia

Pajvi

– pajamų vertė i-tuoju momentu; N – piniginių vienetų skaičius, gautas duotuoju pi

momentu i; pvi – piniginio vieneto vertė duotuoju momentu i.

56


Jei pinigų turtinė vertė skaičiuojama grynojo aukso svoriu, tai

Pajvi

ir pvi tampa aukso kiekiu, kurį galima įsigyti už turimus pinigų banknotus. Toks pinigų vertės skaičiavimas sąlyginai vadinamas Aukso standartu, reiškiančiu, kad gryno aukso standartinis kiekis – uncija – turi konkrečią ir nuolatinę pinigų kainą, išreikštą pasirinktais piniginiais vienetais. Aukso uncijos kainos kitimas rinkoje signalizuoja apie jos pirkimui naudojamų pinigų vertės pokyčius: „pabrangus“ auksui, galima tvirtinti, kad tai – nuvertėjusių pinigų pasekmė. Pinigų vertės pokytį aukso kainos atžvilgiu A0, toliau vadinamą pinigų nuvertėjimu pagal „Aukso standartą“, per nagrinėjamą periodą t, galima įvertinti išraiška [3]: F



A

A 0

 1,

[3]

At čia FA – pinigų infliacijos koeficientas pagal „Aukso standartą“, A0 ir At - aukso uncijos kainos pradiniu momentu 0 ir nagrinėjamu momentu t. Pajamų vertė pagal Aukso standartą PajvAt skaičiuojama remiantis 4 formule:

A  N pt  0 , [4] A t Po 1971 m., panaikinus rezervų valiutos – JAV dolerio sąsajas su Aukso standartu, visų valstybių pinigai prarado dalį jiems būtinų savybių, virsdami „piniginiais ženklais“, pagrinde atliekančiais apyvartos ir mokėjimų funkcijas lokaliose teritorijose bei ribotą laiko tarpą. Todėl juos naudojant į pirmąją vietą iškyla jų perkamosios galios savybė. Pinigų perkamoji galia ir jos pokyčiai gali būti skaičiuojami atsižvelgiant į įsigyjamų vertybių kainų pokyčius: žemės sklypų, žaliavų, kasdienio vartojimo prekių ir paslaugų. Pastarosios naudojamos pinigų perkamosios galios vertinimams naudojamam standartiniam infliacijos koeficientui nustatyti. Remiantis Lietuvos statistikos departamentu, infliacija apibūdinama kaip tęstinis bendrojo kainų lygio didėjimas, dėl kurio mažėja pinigų perkamoji galia (Statistikos departamentas). Kainų infliacija arba defliacija skaičiuojama pagal bazinių vertybių kainų pokyčius, t.y. statistikos departamento sudarytą prekių ir paslaugų krepšelį (statistinį krepšelį), kurį vien Lietuvoje sudaro 902 reprezentatyviosios prekės ir paslaugos. Į statistinio krepšelio sudėtį įeina prekės ir paslaugos, kurios reprezentuoja šalies namų ūkių vartojimo išlaidas (Statistikos departamentas).

PajvAt

I

N n

 (1  I I

čia:

I

N n –

N 1

N  n%

I

)  (1  I N n

)  (1  I )1 N  2 ... Nn

 100% ,

[5]

akumuliacinis infliacijos koeficientas per laikotarpį nuo bazinio laiko

momento o iki kito nagrinėjamo laiko momento t. Pajamų perkamoji galia pagal sandauginį standartinį infliacijos koeficientą skaičiuojama pagal 6 formulę: N pt PajvIt  , [6] 1 I Nn Siekiant įvertinti gaunamų ir kaupiamų pinigų turtinės vertės pokyčius, apsiriboti vien kainų infliacijos rodikliais nepakanka. Būtina papildomai nustatyti jų turtinę vertę aukso atžvilgiu. Tad Baltijos šalių vidutinio darbo užmokesčio pokyčių tyrimams ir buvo naudotos šios dvi nacionalinių valiutų vertinimo charakteristikos. 57


Vidutinio mėnesinio darbo užmokesčio perkamoji galia ir vertė nagrinėta tokiais požiūriais, atitinkamai pagal sandauginį standartinį infliacijos koeficientą bei „Aukso standartą“, naudojant išraišką [4]. Remiantis pajamų vertės skaičiavimo metodika, kurios dėka nustatytas pinigų nuvertėjimo dydis, nagrinėjamas vidutinio mėnesinio darbo užmokesčio nuvertėjimo mastas 2004-2013 metų laikotarpiu Baltijos šalyse (žr. 1 ir 2 paveikslus), (Jasinavičius, Ganiprauskas, 2012). Remiantis 1 paveikslu, Euro vertė pv2013 m. pagal aukso kainą biržoje (873 EUR/ Au oz) nuo 2004 m., nuvertėjo 2,72 kartus. Tai reiškia, kad 2004 m. už turėtą 10.000 EUR sumą buvo galima įsigyti 882,8 g aukso, o 2013 m. – tik 324,9 g. Atlikti skaičiavimai parodo, kad gautų prieš dešimtmetį 10.000 EUR pajamų vertė sumenko -66 proc. Tai akivaizdus pinigų nuvertėjimas įsigyjant nekintančios vertės ir svorio aukso kiekį. Jei vieno euro turtinė vertė nebūtų pasikeitusi: pv2013  pv2004  const , tai už tuos pačius 10.000 EUR nagrinėjamu laikotarpiu būtų galima įsigyti tokį patį kiekį aukso – 882,8 g. Tačiau už 10.000 EUR sumą nagrinėjamu laikotarpiu buvo įmanoma įsigyti tik 2,72 kartų mažesnį aukso kiekį. Kadangi bendrojo kainų lygio pokyčiai, vertinami standartiniu šalies infliacijos koeficientu, Baltijos šalyse buvo skirtingi, tai įtakojo skirtingus tose šalyse naudotų pinigų perkamosios galios pokyčius. Remiantis 2 paveikslu, Euro perkamoji galia pFv2013 Baltijos šalyse 2013 m. pagal sandauginį standartinį infliacijos koeficientą nuo 2004 m. nuvertėjo maždaug 1,4 karto. Tai reiškia, kad 2004 m. sukauptų 10.000 Eurų atsargų perkamoji galia Baltijos šalyse sumenko iki 6.961 EUR. 1 paveikslas: Euro vertė Baltijos šalyse pagal 2 paveikslas: Euro perkamoji galia Baltijos „Aukso standartą“ šalyse pagal sandauginį standartinį infliacijos koeficientą 120 100 80 60 40

Euro vertė pagal „Aukso standartą

2013

2012

2011

2010

2009

2008

2007

2006

2005

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

0

2004

20

Euro perkamoji galia Estijoje Euro perkamoji galia Latvijoje Euro perkamoji galia Lietuvoje

Šaltinis: sudaryta pagal Eurostat ir The London Bullion Market Association duomenis

2.

Baltijos šalių vidutinio mėnesinio darbo užmokesčio vertės analizė 2004-2013 metais

Daugelio žmonių pagrindinis poreikių tenkinimo šaltinis yra darbo užmokestis ir jis atspindi vidutinę šalies gyventojų uždirbamų pajamų tendenciją. Tyrimo metu vidutinis mėnesinis darbo 58


užmokestis buvo nagrinėtas 2004-2013 m. laikotarpiu Baltijos šalyse. Naudotasi statistiniais duomenimis iš Londono tauriųjų metalo rinkos asociacijos, Europos Sąjungos statistikos biuro (toliau – Eurostat). Remiantis 3 paveikslu pastebima, kad absoliutaus VDU Baltijos šalyse kitimas susideda iš 3 etapų: 1) prieš kriziniu laikotarpiu 2004-2008 m. VDU didėjo vidutiniškai po 18,8 proc. kasmet; 2) krizės metu 2008-2010 m. VDU vidutiniškai mažėjo 2,2 proc. kasmet; 3) pasibaigus krizei 2010-2013 m. VDU vėl pradėjo kasmet vidutiniškai augti po 4,5 proc. Tuo tarpu, atlikus statistinę lyginamąją analizę, absoliutus VDU Baltijos šalyse per 2004-2013 m. dešimtmetį kasmet vidutiniškai didėjo 8,7 proc. Pagal 4 paveikslo duomenis, 2013 m. absoliutūs VDU dydžiai Nn2013 Estijoje, Latvijoje ir Lietuvoje pasiekė atitinkamai 900, 716 ir 646 EUR/ mėn. Nagrinėjamu laikotarpiu tose šalyse VDU santykinė perkamoji galia, įvertinus sandauginį standartinio infliacijos koeficiento poveikį, Pv2013 sudarė atitinkamai tik 603, 455 ir 450 EUR/ mėn. 2013 m. VDU vertė pagal „Aukso standartą“, lyginant su absoliučiu VDU, nuvertėjo Baltijos šalyse 63 proc. Absoliutus VDU dydis Estijoje, Latvijoje ir Lietuvoje sudarė atitinkamai 900, 716 ir 646 EUR/ mėn., o VDU vertė PvA2013 pagal „Aukso standartą“ sudarė atitinkamai tik 331, 264 ir 238 EUR/ mėn., skaičiuojant prieš dešimtmetį buvusia pinigų verte. Taigi, visose Baltijos šalyse, gaunamo VDU vertė mažėjo nuo pat 2004 m., o perkamoji galia mažėjo nuo krizės pradžios 2008 m. Tai reiškia, kad už realiai didėjantį VDU po kriziniu laikotarpiu, tegalima įsigyti mažiau prekių bei paslaugų, nei ankščiau, o ateityje, esant Pasaulinės aukso kainos didėjimo tendencijai, už panašiais tempais augančio VDU dydį bus galima įsigyti dar mažiau prekių bei paslaugų. Išliekant VDU kiekinio augimo bei piniginio vieneto euro vertės ir perkamosios galios kitimų tendencijoms, didžiosios Baltijos gyventojų dalies pajamų vertė bei perkamoji galia mažės, sukeldama tų žmonių nuskurdimą. 3 paveikslas: Vidutinio mėnesinio darbo užmokesčio vertė ir perkamoji galia ir jų kaita Baltijos šalyse, įvertinus atitinkamai „Aukso standartą“ ir infliacijos poveikį 1000 900 800 700 600 500 400 300 200

Latvijos VDU, EUR Latvijos VDU perkamoji galia, EUR

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

Estijos VDU, EUR Estijos VDU perkamoji galia, EUR

2013

2012

2011

2010

2009

2008

2007

2006

2005

0

2004

100

Lietuvos VDU, EUR Lietuvos VDU perkamoji galia, EUR

Šaltinis: sudaryta pagal Eurostat ir The London Bullion Market Association duomenis 3 paveiksle pateikti skaičiavimų rezultatai akivaizdžiai liudija, kad nepaisant vidutinio darbo užmokesčio dydžių augimo (mėlyni stulpeliai vidutiniškai kasmet po 7,7; 8,7 ir 10,3 proc., šis pajamų kiekio padidėjimas neatsveria nei pajamų perkamosios galios mažėjimo pagal sandauginį standartinį infliacijos koeficientą (raudoni stulpeliai), nei pajamų vertės nuvertėjimo pagal „Aukso standartą“ (žali stulpeliai).

59


3.

Vidutinio darbo užmokesčio koreliacinė–regresinė analizė

Siekiant nustatyti įvairių statistinių rodiklių tarpusavio sąsajas, svarbu atlikti koreliacinę– regresijos analizę. Koreliacija apibūdina ryšio tarp kintamųjų stiprumą, o regresinė analizė įgalina nustatyti šio ryšio pobūdį ir aprašyti priklausomojo (pasekmės) kintamojo vidutinių reikšmių priklausomybę nuo vieno ar kelių nepriklausomųjų (priežasties) kintamųjų reikšmių matematine formule ir kartu — prognozuoti šio kintamojo reikšmes. Taikant koreliacinės–regresinės analizės metodą, dažnai naudojama regresijos lygties analitinė išraiška: y x  a0  a1 x , [7] čia: yx – priklausomajam požymiui įtaką darančio nepriklausomojo požymio išraiška; a0 – lygties parametrai, kurie skaičiuojami mažiausių kvadratų būdu; a1 – regresijos koeficientas. Regresijos koeficientas (a1) parodo, kiek vienetų (jo matavimo vienetais) pasikeis rezultatinis kintamasis, faktoriniam kintamajam padidėjus vienu vienetu (Weixin, Longhai, 2014). Jei šis koeficientas yra neigiamas, tai reiškia, kad ryšys tarp nagrinėjamų kintamųjų yra atvirkštinis, t. y. vienam didėjant, kitas mažėja. Parametrai a0 ir a1 gali būti apskaičiuoti 3 būdais pagal [8], [9], [10] formules: a) išsprendus lygčių sistemą:  na0  a1  x   y , [8]  2 a x  a x  xy   1  0 b) tiesiogiai pritaikius formules: n xy   x *  y ; [9] a1 = n ( x 2 )  ( x ) 2

1 a0  ( y  a1  x) , [10] n c) skaičiuojant programos „Microsoft Excel“ skaičiuokle (Shurong etc., 2014). Naudojamos statistinės funkcijos – CORREL, SLOPE, INTERCEPT, RSQ. Straipsnyje parametrai skaičiuoti taikant Microsoft Excel skaičiuoklės statistines funkcijas. Yra nustatyta, kad pagrindinis darbuotojus motyvuojantis veiksnys yra darbo užmokestis, ir kylant asmeninio vartojimo prekių ir paslaugų kainomis, paprastai darbuotojai tikisi darbo užmokesčio augimo, atsižvelgiant į kainų lygio didėjimą (Žiogelytė, 2011). Statistinės lyginamosios analizės dėka nustačius kasmetinį VDU 8,7 proc. padidėjimą 2004-2013 metų laikotarpiu Baltijos šalyse, svarbu įvertinti kokią įtaką daro pagrindiniams statistiniams Baltijos šalių bei verslo ekonominiams pajamų rodikliams – Bendrajam vidaus produktui bei Pridėtinei vertei. Analizėje tarpusavio kintamieji žymimi taip: faktoriniu (nepriklausomuoju) kintamuoju pasirinktas bendrąsias žmonių pajamas atspindintis dydis – vidutinis Estijos, Latvijos ir Lietuvos mėnesinis bruto darbo užmokestis (EUR), o rezultatiniais (priklausomaisiais) kintamaisiais pasirinkti Baltijos šalių ekonomikos ir verslo pajamų rodikliai: Bendrasis vidaus produktas (BVP) per mėnesį, ir verslo sukuriama pridėtinė vertė (PV) per mėnesį. Regresijos koeficientą galima apskaičiuoti tada, kai yra apskaičiuotas tiesinės koreliacijos koeficientas. Jis gali kisti intervale [-1;1]. Kuo regresijos koeficiento reikšmė artimesnė 1 arba minus 1, tuo ryšys yra stipresnis. Esant minusinei regresijos koeficiento reikšmei, ryšys tarp nagrinėjamų kintamųjų yra atvirkštinis (Valkauskas, 2005, Pabedinskaitė, 2005). Vidutinio darbo užmokesčio sąsajos su BVP ir PV rodo, kad nors Lietuvoje sukuriami BVP ir PV dydžiai ženkliai didesni nei Estijoje ir Latvijoje (BVP 1,9 ir PV 1,5 karto), tačiau Lietuvoje vidutinis darbo užmokesčio dydis mažesnis nei Estijoje (1,4 karto) ir Latvijoje (1,1 karto). Tai

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reiškia, kad Lietuvos dirbantieji uždirba mažiau sukurdami BVP ir generuodami PV, nei tai padaro Estijos ir Latvijos dirbantieji. 4 ir 5 paveiksluose statistinių rodiklių tarpusavio kintamųjų rezultatų taškai pažymėti trikampiais taškais, o kintamųjų visumos koncentracija pagal tiesę pažymėti vientisa linija. Analizuojant koreliacinį ryšį, papildomai įvertintas ryšys atsižvelgiant į „Aukso standarto“ poveikį vertinamų pajamų vertei. Paveiksluose šio poveikio kintamųjų rezultatų taškai pažymėti kvadratiniais taškais, o visumos koncentracija pagal tiesę pažymėti punktyrine linija. Nors darbdaviai verslo įmonėse darbo užmokestį darbuotojams moka iš gautosios pridėtinės vertės, svarbu įvertinti kokiu mastu darbo užmokesčio pokyčiai daro įtaką pridėtinei vertei. Vertinant Baltijos šalių vidutinio mėnesinio darbo užmokesčio (VDU) pokyčių įtaką pridėtinei vertei, nustatyta, kad ryšys tarp šių dviejų kintamųjų yra tiesioginis ir labai stiprus, nes tiesinės koreliacijos reikšmės (r=0,94) patenka tarp 0,91 – 1,00 intervalo. Remiantis regresijos lygties analitinėmis išraiškomis tarp VDU ir pridėtinių verčių, galima teigti, kad 1 EUR padidėjęs VDU, pridėtinę vertę Estijoje, Latvijoje ir Lietuvoje padidina atitinkamai 1,22; 1,91 ir 3,34 EUR. Paradoksalu, tačiau Lietuvoje mažiausias VDU dydis, tačiau jo padidėjimas padidina pridėtinę vertę didesne dalimi nei Estijoje ir Latvijoje. Be to, iš sukurtos PV dalies ir yra mokamas darbo užmokestis darbuotojams, įvairiems valstybės renkamiems mokesčiams, darbo vietų palaikymui. Gautasis elastingumo koeficientas rodo, kad VDU padidėjimas 1 procentu, pridėtinę vertę Estijoje, Latvijoje ir Lietuvoje padidina atitinkamai 0,81; 0,78; 0,85 procento. Koreliacijos indeksas (R2=0,87-0,89) parodo, kad ryšys tarp VDU ir pridėtinės vertės yra stiprus. Apskaičiuotasis determinacijos koeficientas (Dx) rodo, kad VDU kitimas labiausiai veikia pridėtinę vertę 47 Lietuvos dirbantieji, Latvijos – 40, o Estijos – 39 procentais. 4 paveiksle pateiktas koreliacinis ryšys įvertinus „Aukso standarto“ (paveiksle lygtyje pažymėta y(A)) poveikį. Abiem atvejais galima įžvelgti tiesioginę VDU ir pridėtinės vertės priklausomybę, o taškų, atitinkančių nagrinėjamus rezultatus, visuma koncentruojasi pagal tiesę. Galima teigti, kad VDU didėjimas tiesiogiai, o daugiausiai Lietuvoje, didina pridėtinę vertę tiek pagal absoliučius dydžius, tiek įvertinus „Aukso standarto“ poveikį.

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Pridėtinė vertė, mln. EUR

4 paveikslas: Vidutinio mėnesinio darbo užmokesčio ir pridėtinės vertės per mėnesį koreliacinis laukas su pavaizduota regresijos tiese y = 1,2236x + 205,92 R² = 0,8707

3.000 2.500

y = 1,9062x + 307,79 R² = 0,882

y = 3,338x + 309,58 R² = 0,8873

2.000 1.500 1.000 500

y(A) = 1,7877x 81,243 R² = 0,9487

0 0

500 1000 Estijos VDU, EUR

y(A) = 2,9868x - 118,38 R² = 0,8998

0

y(A) = 4,3066x - 82,808 R² = 0,9493

500 1000 Latvijos VDU, EUR

0

500 1000 Lietuvos VDU, EUR

Šaltinis: sudaryta autorių pagal Eurostat ir The London Bullion Market Association duomenis Žmonės, turėdami pajamų, įsigyja galimybę nusipirkti tam tikrų prekių ir paslaugų, tokiu būdu darydami įtaką bendrajam vidaus produktui (toliau – BVP). Analizės metu nustatyta, kad ryšys tarp šių dviejų kintamųjų Baltijos šalyse yra tiesioginis ir labai stiprus, nes tiesinės koreliacijos reikšmė (r=0,94) lygi 94 procentais. Šių kintamųjų ryšys pateiktas 5 paveiksle. 5 paveiksle įžvelgiama tiesioginė VDU ir BVP priklausomybė, o taškų, atitinkančių nagrinėjamus rezultatus Baltijos šalyse, visuma koncentruojasi šalia tiesės. Regresijos lygties analitinės išraiškos tarp VDU ir BVP Baltijos šalyse rodo, kad, VDU padidėjimas 1 EUR, BVP Estijoje, Latvijoje ir Lietuvoje padidina atitinkamai 1,42; 2,1; 3,74 EUR. VDU Baltijos šalyse padidėjus 1 procentu, BVP Estijoje, Latvijoje ir Lietuvoje padidėja atitinkamai 0,82; 0,76 ir 0,86 procento, kurį rodo elastingumo koeficientas. Koreliacijos indeksas (R2=0,86-0,89) rodo stiprų ryšį tarp VDU ir BVP Baltijos šalyse. Determinacijos koeficientas (Dx) rodo, kad Estijoje, Latvijoje ir Lietuvoje VDU kitimas lemia BVP atitinkamai 42; 33 ir 47 procentais. 5 paveikslas: Vidutinio mėnesinio darbo užmokesčio ir bendrojo vidaus produkto per mėnesį koreliacinis laukas su pavaizduota regresijos tiese 3.500

y = 1,4228x + 215,42 R² = 0,8816

BVP, mln. EUR

3.000

y = 2,0991x + 365,08 R² = 0,8653

y = 3,7432x + 325,21 R² = 0,8893

2.500 2.000 1.500 1.000 500

y(A) = 1,9998x - 80,901 R² = 0,9478

0

0

500 1000 Estijos VDU, EUR

0

y(A) = 3,3603x 135,52 R² = 0,8887

500 1000 Latvijos VDU, EUR

y(A) = 4,7773x - 90,923 R² = 0,9513

0

500 1000 Lietuvos VDU, EUR

Šaltinis: sudaryta autorių pagal Eurostat ir The London Bullion Market Association duomenis

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5 paveiksle pateiktas koreliacinis ryšys įvertinus „Aukso standarto“ (paveiksle lygtyje pateikta y(A)) poveikį. Abiem atvejais galima įžvelgiama tiesioginė VDU ir BVP priklausomybė, o taškų, atitinkančių nagrinėjamus rezultatus, visuma koncentruojasi pagal tiesę. VDU didėjimas tiesiogiai, o daugiausiai Lietuvoje, didina BVP tiek pagal absoliučius dydžius, tiek įvertinus „Aukso standarto“ poveikį. Išvados Nors absoliučiais dydžiais VDU Baltijos šalyse kasmet vidutiniškai didėjo po 8,7 proc., tačiau vertinant VDU tikrąja verte (aukso atžvilgiu) – mažėjo kasmet po 2,7 proc. Nuolatinis, beveik visų prekių ir paslaugų, kainų didėjimas Estijoje, Latvijoje ir Lietuvoje liudija apie Euro perkamosios galios Baltijos šalyse mažėjimą. Tyrimo metu, skaičiuojant „Aukso standarto“ principu (pagal aukso kainos kitimą), pastebėta, kad Euro turtinė vertė nuo 2004 iki 2013 sumenko 2,9 karto. Šio reiškinio priežastis – Eurų, kaip neturinčių konkrečios turtinės vertės atsiskaitymo priemonių, perteklinė emisija – sukėlusi šių pinigų infliaciją Skaičiavimai parodė, kad lito perkamoji galia Lietuvoje, vertinama pagal sandauginį standartinį infliacijos koeficientą, per tą patį laikotarpį, sumažėjo tik 1,4 karto. Tai 2 kartus mažiau, nei tikrosios Euro vertės kritimas. Šio fenomeno priežastį galima būtų grįsti hipoteze, kad didžioji Baltijos šalių rinkos subjektų dalis nepakankamai žino ir suvokia apie tikrosios gaunamų savo pajamų vertės smukimo tempus, kuriuos atskleidė šis tyrimas. Iliuzinis įtikėjimas, kad šiuolaikiniai pinigai turi pastovią ar bent lėtai besikeičiančią vertę, tampa vis stipresne jų turto ir kapitalo praradimo priežastimi. Vidutinio mėnesinio darbo užmokesčio Baltijos šalyse tikrosios vertės pokyčių analizė parodė, kad per 2004-2013 m. laikotarpį, vertė sumažėjo minus 63 proc., o jo perkamoji galia – minus 45 proc. Tai akivaizdžiai parodo, kad šalies darbuotojai faktiškai tapo skurdesni. Nors Lietuvoje sukuriamas BVP ir PV dydis ženkliai didesnis nei Estijoje ir Latvijoje (BVP 1,9 ir PV 1,5 karto), tačiau Lietuvoje vidutinis darbo užmokesčio dydis mažesnis nei Estijoje (1,4 karto) ir Latvijoje (1,1 karto). Koreliacijos-regresijos analizė parodė, kad VDU didėjimas (ypač Lietuvoje) tiesiogiai kelia šalies ekonomikos efektyvumą, didindamas šalyje sukuriamą pridėtinę vertę bei BVP tiek pagal absoliučius dydžius, tiek įvertinus „Aukso standarto“ poveikį. Literatūra Baležentis, A., Baležentis, T., Misiūnas, A. (2011). Darbo užmokesčio pokyčiai Lietuvos žemės ūkio sektoriuje ekonominio nuosmukio laikotarpiu. Management theory and studies for rural business and infrastructure development, 3(27): 14-22. Bank of Lithuania. (2014). Lietuvos bankas: Užsienio valiutų santykių statistika. Retrieved August 26, 2014, from http://lb.lt/uzsienio_valiutu_santykiu_statistika Bartosevičienė V. (2007). Ekonominė statistika (28-52). Kaunas: Technologija. Čekanavičius, V., Murauskas, G. (2002). Statistika ir jos taikymai, II dalis (106-133). Vilnius: TEV. Gardner, R, C., Neufeld, W., J. (2013). What the Correlation Coefficient Really Tells Us. Canadian Journal of Behavioural Science / Revue canadienne des sciences du comportement, 45(4): 313-319. Gerikienė, V., Blažienė, I. (2009). Valstybinio sektoriaus darbuotojų darbo apmokėjimo reguliavimas Lietuvoje. Jurisprudence: Research Papers. Vilnius: Mykolo Romerio Universiteto Leidybos centras, 4(118): 299-320. Gražytė – Molienė, O. (2004). Statistika: I dalis (38-67). Vilnius: Vilniaus verslo kolegija. Gronskas V. (2007). Ekonominė analizė (148-162). Kaunas: Technologija.

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Gruževskis, B., Orlova, U., L. (2012). Sąvokos „Gyvenimo kokybė“ raidos tendencijos. Social work. Mykolas Romeris university, 11(1): 7-18. Jasinavičius, R. (2012). Investavimo iliuzijos. Investuok: žurnalas norintiems investuoti. Kaunas: Leidybos studija, 4(51): 18-20. Jasinavičius, R., Ganiprauskas, V. (2011). Namų ūkių skolinimo ir valdžios skolinimosi priemonių įtaka Lietuvos ekonominei gerovei. Whither our economies: 1’st International scientific conference: conference proceedings. Mykolas Romeris university: 182-189. Jasinavičius, R., Ganiprauskas, V. (2012). Lietuvos pagrindinių pajamų ir socialinių išmokų vertės kitimo tyrimas. Practice and research in private and public sector - 2012: conference proceedings: international scientific conference, April 26 – 27. Mykolas Romeris university: 417-430. Laidmäe,V., Hansson, L., Leppik, P., Tulva, T., Lausvee, E. (2012). Later Life In Estonia: Satisfaction With Life And Intergenerational Support. The Internet Journal of Geriatrics and Gerontology,, Vol. 6, No. 1. Retrieved September 21, 2014, from http://ispub.com/IJGG/6/1/4401# Lithuanian Department of Statistics. (2014). Kas tai yra vartojimo prekių ir paslaugų statistinis krepšelis ir jo sudėtis? Retrieved September 14, 2014, from http://www.stat.gov.lt/lt/faq/view/?id=2120&page=0 Mačernytė-Panomariovienė, I. (2003). Apmokėjimas už darbą ir jo užtikrinimas. Vilnius: LTU Leidybos centras. Pabedinskaitė, A. (2005). Kiekybiniai sprendimų metodai: Koreliacinė regresinė analizė. Prognozavimas. I dalis (6-55). Vilnius: Technika. Paužinskaitė, E. (2012). Gyventojų darbo užmokesčio apmokestinimo Baltijos šalyse ypatumai. I'st international scientific conference „problems of tax policy“: 100-105. Raškinis, D. (2005). Minimalaus darbo užmokesčio padidinimo įtakos smulkiajam ir vidutiniam verslui analizė: Mokslinio tyrimo darbas. UAB “ETKC“ Statistical office of the European Union (Eurostat). (2014). Statistika (Duomenų bazės). Retrieved September 2, 2014, from http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/themes Shurong, Zh., Dandan, J., Zhidong, B., Xuming, H. (2014). Inference on multiple correlation coefficients with moderately high dimensional data. Biometrica. 101(3): 748-754. Tanning, L, Tanning, T. (2012). Labour Costs and Productivity Analysis of East-European Countries. International Journal of Business and Social Science, Vol. 3 No. 20. Retrieved September 21, 2014, from http://www.ijbssnet.com/journals/Vol_3_No_20_Special_Issue_October_2012/9.pdf Tanning, L, Tanning, T. (2013). An Analysis Of Eastern European And Baltic Countries Wages. International Journal of Arts and Commerce. Vol. 2, No. 3. Retrieved September 19, 2014, from http://www.ijac.org.uk/images/frontImages/gallery/Vol._2_No._3/13.pdf Tanning, L, Tanning, T. (2013). Estonian, Latvian, and Lithuanian Companies’ Working Efficiency before and after the Economic Crisis. International Journal of Business and Social Science. Vol. 4, No. 6. Retrieved September 19, 2014, from http://www.ijbssnet.com/journals/Vol_4_No_6_June_2013/16.pdf The London Bullion Market Association (2014). The Price of Gold, Retrieved August 29, 2014, http://www.lbma.org.uk/pricing-and-statistics Varanauskienė, J. (2012). Šalies ekonominės problemos kerta kiekvienam, bet nevienodai. Retrieved September 2, 2014, from http://www.delfi.lt/news/ringas/lit/jvaranauskiene-salies-ekonominesproblemos-kerta-kiekvienam-bet-nevienodai.d?id=59266385 Weixin, Y., Longhai, L. (2014). A New Regression Model: Modal Linear Regression. Scandinavian Journal of Statistics. 41(3): 656-671.

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Žiogelytė, L. (2011). Darbo apmokėjimui įtaką darančių vidinių ir išorinių veiksnių vertinimas. Contemporary issues in business, management and education 2011, Vilnius Gediminas Technical University Press Technika: 313-325. Žiogelytė, L. (2010). Darbo užmokesčio pokyčio vertinimas Lietuvos darbo rinkoje. Science – future of Lithuania, Vilnius Gediminas Technical University Press Technika, Vol.2, No.2: 119-125. Žukauskas, V. (2008). Įmonių pelnas ir darbo užmokestis: mitai ir realybė. Retrieved August 31, 2014, from http://www.lrinka.lt/index.php?act=main&item_id=4932 Žukauskas, V. (2011). Brangsta prekės? Pinga pinigai! Retrieved September 13, 2014 from http://www.lrinka.lt/index.php?act=main&item_id=6154

RESEARCH OF CHANGES IN THE AVERAGE WAGE VALUE IN THE BALTIC STATES Abstract. Before the financial crisis, the Baltic countries had the highest growth rate of the Gross domestic product (hereinafter – GDP) in the European Union. Also, these countries were called “the Baltic tigers”. During the crisis, the decline of GDP was the highest in the Baltic countries. After the crisis, economic indicators of Estonia economy had the highest growth rates in the European Union. Such progress and life quality in Estonia surprises the other two neighboring Baltic countries – Latvia and Lithuania. However, GDP of Lithuania exceeds the GDP indicator of Estonia almost twice in absolute value (Eurostat). Since October 1, 2014, the minimum monthly wage in Lithuania increased by 3.5 percent. Based on information provided by the European Union Statistics (hereinafter – Eurostat), from 2004, the average wage in the Baltic states on average increased by 8.2, 10.3, and 7.7 percent per annum. It should be emphasized that the growth rate of the average wage in monetary expression significantly fell behind the actual decline rate of the wage purchasing power. During the period of 20042013, the purchasing power and value of the average wage in the Baltic countries has decreasing in respectively assessing by the standard coefficient of inflation and the “Gold Standard”. Keywords: value of income and depreciation, value of income calculation, value of the average monthly wages, the effect of inflation. JEL classification: E31; E24

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KNOWLEDGE TRANSFER PROCESS BETWEEN HIGHER EDUCATION INSTITUTIONS AND BUSINESS IN LITHUANIA Irena MAČERINSKIENĖ prof. PhD, Mykolas Romeris University E-mail: [email protected] Rasa ALEKNAVIČIŪTĖ PhD candidate, Mykolas Romeris University E-mail: [email protected]

Rima TAMOŠIŪNIENĖ prof. PhD, Mykolas Romeris University E-mail: [email protected] Simona SURVILAITĖ PhD candidate, Mykolas Romeris University E-mail: [email protected]

Abstract. The role of higher education institutions has become more significant with emergence of the knowledge-based economy. This research paper explores knowledge transfer process between higher education institutions and business sector. The aim of this paper is to study the mechanism of knowledge transfer between higher education institutions and business sector and its importance for competitiveness of Lithuania, as well as to identify main obstacles of cooperation. Based on the review and analysis of the scientific literature, legislation and statistical data analysis a collaboration pattern is described. The paper provides an insight into drivers and potential barriers in higher education institutions and business collaborations. Keywords: knowledge transfer, Triple Helix, human capital, higher education institutions, innovation. JEL classification: O31

Introduction Higher education institutions are being viewed not only as source of high level human capital but also as the powerful drivers of innovation. More recent open innovation paradigm demonstrates the need to exploit both internal and external knowledge in order to remain competitive in a market pace. Effective higher education institutions and business cooperation could help to improve level of economic development in a region, level of innovation and the level of educational development in society. Knowledge is the source of change and development within the fields of economic, social, cultural and political life. Speed of knowledge production and dissemination has increased in contemporary society. Promoting knowledge partnerships and strengthening links between education, business, research and innovation is seen as key to competitiveness of economy („Europe 2020. A strategy for smart, sustainable and inclusive growth“ 2010). Businesses closely communicating with universities are conducting a fluent knowledge transfer process leading to successful daily activity. The ability to collaborate with higher education institutions enables companies to broaden their staff with new employees, who recently finished their studies and have a broader and innovative view. There are some authors (Carlsson and Stankiewicz, 1991; Carlsson et al. 2002; Malerba, 2002; Edquist, 2005; Bergek et al. 2005; Godin, 2007; Ranga and Etzkowitz, 2013) who present Triple Helix systems as a tool of discovering, maintaining and nourishing interaction between universities, industries and governments. Sweden has reasonable examples of higher education institutions and businesses collaboration. In 2000 Sweden implemented the mission VINNOVA (the Swedish Governmental Agency for Innovation Systems), which allowed to strengthen the links between different enterprises, research institutes or centres and universities. As a result, more innovative companies are being created. On a practical level, however, establishing relationships between companies and universities was never going to be easy, which may be due to the diverse interests and objectives of the two sides (Scherngell ir Hu 2011). One of weaknesses of Lithuania are the limited purchase of R&D results from universities, patenting, licensing, start-up companies and other innovation commercialization efforts (Paliokaite 2014). Cooperation is one of the ways to improve quality 66


of Lithuanian research and education to support innovations and business development. Aim of this paper is to identify universities and business knowledge transfer pattern in Lithuania. Objectives: to analyse knowledge transfer models and factors influencing knowledge transfer efficiency, to present Lithuanian knowledge transfer system components, their functions and relations. Knowledge transfer models The concept of Triple Helix systems investigates how university, industry and government are interacting with each other and what could be possible outcomes from this interaction. Ranga and Etzkowitz (2013) accentuated that Triple Helix systems can be understood “as a set of (i) components (the institutional spheres of University, Industry and Government, with a wide array of actors); (ii) relationships between components (collaboration and conflict moderation, collaborative leadership, substitution and networking); and (iii) functions, described as processes taking place in what we label the Knowledge, Innovation and Consensus Spaces”. Those components are applied on individual and institutional level. Within Knowledge, Innovation and Consensus elements local and regional objectives and new types of organizations are created. According to scientific literature, there are two main types of Triple Helix systems:



(Neo) institutional Triple Helix systems, which are investigated within regional and national level. Government, academia and industry are considered to be relative to each other and the movements between them create different types of modes depending on the leading sphere. Statist mode considers government as the leading sphere, which is influencing academia and industry sectors. Laissez-faire mode considers industry as the leading sphere, where academia sector is perceived as the knowledge provider through educated students becoming employees and employers. In this mode government plays role of regulator. In addition to this, balanced mode is such composition, which perfectly suits a knowledge society. In the balanced mode all elements are interacting with each other and can easily interfere. The process is considered to be creative and as a consequence of it new modern and innovative forms of enterprises are created. (Benner and Sandström, 2000; Inzelt, 2004; Boardman and Gray, 2010; Lawton Smith and Bagchi-Sen, 2010; Saad and Zawdie, 2011).



Neo (evolutionary) Triple Helix systems are exploring education institutions, businesses and governments as sub elements. Collaboration and interaction between government, academia and industry appear from dynamic networks and organizations. Communication and differentiation play an important role in such type of Triple Helix systems. In the neo (evolutionary) Triple Helix Systems there are two basic types of connections – first, between universities (science institutions, higher education institutions, and etc.) and businesses (markets, enterprises, individual entities, and etc.). Second connection is between all types of spheres, which are bounded and obliged with institutional ties. (Etzkowitz and Leydesdorff, 1995; Leydesdorff and Etzkowitz, 1998). According to Ranga and Etzkowitz (2013), “the Triple Helix thesis is that the potential for innovation and economic development in a Knowledge Society lies in a more prominent role for the university and in the hybridisation of elements from university, industry and government to generate new institutional and social formats for the production, transfer and application of knowledge“.

What factors influence effectiveness? 67


According to Ranga and Etzkowitz (2013), the Triple Helix systems can be perceived through “the set of: (i) Components: the institutional spheres of University, Industry and Government, each encompassing a wide-ranging set of actors; (ii) Relationships between components: collaboration and conflict moderation, collaborative leadership, substitution and networking; (iii) Functions: described as a set of activities specific to the “Triple Helix Spaces”: the Knowledge, Innovation and Consensus Spaces.” The components could be understood as the number of research and development innovators and non-research and development innovators, “single-sphere” and “multi-sphere” (hybrid) institutions, individual and institutional innovators. Research and development innovators are considered as codified knowledge, science, technology and innovation, while non-research and development innovators are understood as production, design, methods received (or bought) from other institutions, financing, negotiations and similar. The differences between “single-sphere” and “multi-sphere” (hybrid) institutions are comprehended through the functions of each institution. If an enterprise (or government) is performing its own functions, such enterprise (or government) can be understood as the “single-sphere” institution. On the contrary, company with research departments, knowledge transfer research centres, scientific and academic institutes and similar, can be named as a “multi-sphere” (hybrid) institution. Individual and institutional innovators are the part of Triple Helix systems components indicating and fostering the creation and implementation of innovations. The effective factor of innovations is considered to be learning. In order to receive a positive outcome the process should be implemented in the business sphere using other spheres as additional resources or as the basic and main ones. Depending on the purpose of learning the methodology must be introduced in order to achieve the best results. Jones and Saad (2003) presented main types of learning (Fig. 1) depending on the level of complexity and uncertainty. Authors indicated that level of complexity is increasing with the forms of learning and uncertainty is also extending. The highest level of learning is reached in the triple loop and is regarding the learning of how to learn. Figure. 1. Types of learning

Source: Jones and Saad (2003)

The process of learning is complex and diverse. Nevertheless, the Triple Helix model helps to share and transpose the knowledge not only within the company, but also outside it. Codifying and documenting the tacit and explicit knowledge helps to increase the effectiveness within network of three spheres. Baryniene and Krisciunas (2013) accentuate the importance of fluent communication and collaboration between Triple Helix model spheres. They warn that miscommunication between business sphere and universities can cause severe damages not only for businesses, but also for motivation and willingness of present and future students. Authors presented the model (Fig. 68


2) of changes in economic and social development leading to changes in KBE (Knowledge Based Economy). Figure. 2. The model of main changes in KBE

Source: Baryniene and Krisciunas (2013)

According to Baryniene and Krisciunas (2013), KBE is challenged with two basic changes: global transformations and technological development. This as a consequence affects business sphere with work changes, business management paradigm changes, customer and competence changes. As a result, requirements for human resources’ competence are also transformed. “In concluding it should be mentioned that in knowledge based economy and knowledge based society the discussion about the content of human resources competence takes the new implications. Obviously, business environment which is friendly to knowledge requires the new package of knowledge, abilities, skills, individual attributes. In the context of environmental and organizational changes, the employers require graduates with competences, which could allow them to react and respond to raising challenges (Baryniene and Krisciunas (2013)”. Research methodology Knowledge transfer between business and higher education institutions is analysed by applying logic of Triple Helix system. Knowledge transfer system in Lithuania is described by analysing its components, their relationships and functions. Communication system mode is identified by analysing prevailing Knowledge, Innovation and Consensus Spaces. Research methods include comparative analysis of legal documents and statistical data. Knowledge transfer system components In Lithuania is prevailing “single sphere” institutions which concentrates on performing its own functions. The main knowledge producers in the Lithuanian R&D are the universities along with a few government research institutes (Paliokaite 2014). University have access to intellectual resources and advanced research infrastructure, business have practical expertise, financial resources, internship and employment opportunities. Government acts as intermediary fostering closer cooperation and more rapid pace of innovations. Business cooperates with higher education institutions in R&D activities as well as contributes in the process of education. Business activities allow to commercialize knowledge as is seen as essential step of innovation. Business and universities cooperation score is reported as 69


component of competitiveness index published by World Economic Forum. In 2014-2015 global competitiveness report Lithuania ranked 27 place in the world (144 countries) by university-business cooperation and improved rank by one position comparing with last year. Latvia ranked 63 place and Estonia 34 place in the world by the same indicator. Cooperation activities in innovations are measured by The Community Innovation Survey (CSI) which is conducted every two years in Europe. Latest survey results reference period is from 2008 – 2010. Survey results show that 26 % of organizations are cooperating with higher education institutions, though this percent is much lower in Lithuania comparing with EU-27 results. Results are given in Fig 3. Figure 3 Enterprises co-operating with universities or other higher education institutions (2010)

Lithuania 26% 74%

EU 27 Enterprises cooperating with universities or other higher education institutions

42% 58%

Source: Eurostat 2014 During business representatives interview was identified key obstacles of closer cooperation, which includes: research programs results do not have practical applicability, closeness of higher education institutions and lack of information about current research, lack protection of business ideas (Bumelis et al. 2014). Business and higher education relations are based on conflicting objectives, lack of trust and required competence. Higher education institutions. The universities’ importance for development of knowledge society is substantial. Firstly, the university’s capability to provide students with new ideas, skills and entrepreneurial talent is essential in the Knowledge society. Secondly university’s involvement in socio-economic development, next to the traditional academic missions of teaching and research is the most notable (Etzkowitz, 2003). Thirdly, universities become a new source of technology generation and transfer, with ever increasing internal organizational capabilities to produce and formally transfer technologies rather than relying solely on informal ties. Cooperation of business and higher education institutions is important in every of those missions of higher education. It helps to ensure attractiveness and competitiveness of higher education institutions. 70


Traditional forms of higher education institutions and business cooperation in teaching process includes (Baryniene ir Krisciunas 2013):  Learning in workplaces, practices.  The involvement of representatives from business sector in the university’s governing bodies, groups of studies programmes’ preparation  The involvement of representatives from business sector in studies process  The involvement of representatives from universities (lecturers, professors) in business Those cooperation forms help to ensure quality of studies and sufficient graduates integration in labour market. Higher education influence in development of Lithuania human resources is very high. In Lithuania 29.8 % of population (from 15 to 64 years) has attained tertiary (levels 5 and 6) education (Eurostat 2014a). In EU-28 this indicator is lower than in Lithuania and is 25,3 %. Unemployment rate of population with tertiary education in Lithuania is lower than in EU-28 countries. According to 2013 years data unemployment of population with tertiary education (levels 5 and 6) in Lithuania was 5.1% as in EU-28 was 6.4 % (Eurostat 2014). Such indicators show higher education institutions importance in human capital development also quality of higher education in Lithuania. Another important mean of transferring knowledge is publication of scientific achievements. In Lithuania 2013 were published 2712 documents (data source: Scopus). According „SCImago Journal & Country Rank 1996-2013“ by number of published documents Lithuania ranked 58 place in the world (239 countries) or 12th place in Eastern Europe region (24 countries). H index of publications during 1996-2013 period is shown in Fig. 4. Figure 4 H index (1996-2013)

Source: „SCImago Journal & Country Rank“ 2014 The h index expresses the journal's number of articles (h) that have received at least h citations. It quantifies both journal scientific productivity and scientific impact. H Index in Lithuania is 122 and it is higher than in Latvia (94), but lower than in Estonia (148). In Baltic States number of publications was highest in Lithuania, though Estonia cites rate per document is higher. This influenced that h index value in Lithuania is lower than in Estonia. In Lithuania 70 % of publications were published with co-authors, from them 39 % was publications with co-authors representing same institution (Bumelis et al. 2014). Highest rate of publications published by more than one author was prepared by largest higher education institutions in Lithuania: Vilnius University (VU), Kaunas Technology University (KTU), Mykolas Romeris University (MRU), Vilnius Gediminas Technical University (VGTU) and Vytautas Magnus University (VDU). Strongest cooperation is between VU and MRU, KTU and MRU, VU and Center for Physical Sciences and Technology (FTMC), MRU and VGTU. Lowest rate of co-authorships is in humanities and highest rate is in physics and biomedicine (Bumelis et al. 2014). Publications with authors from different country in Lithuania consist 37% of all publications as in Estonia 54% („SCImago Journal & Country Rank“ 2013).

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Number of publications with business and higher education institution co-authorship in Lithuania is low. There is 3.1 publications per million capita as in EU there is on average 7.3 publications per capita (Bumelis et al. 2014). Relations of joint publishing activities are shown in Fig. 5.

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Figure 5 Publications with business and higher education institution co-authorship (2009-2010) Public administration

Foreign institutions

Other

University Institutes

Healthcare institutions

Source: "Web of Science"; Bumelis et al. 2014. Highest number of joint publications was in VU (26), KTU (21) and VGTU (12). From business most active companies was UAB “MGF Šviesos konversija” (7), UAB “Achema” and UAB “ACD Labs” (4). Publications with business and higher education institution co-authorship shows higher practical applicability and importance of topic investigated. Even in Lithuania coauthorship is common, it usually involves cooperation of authors from the same higher education institution or other education institutions. Lithuanian higher education institutions play significant role in development of human capital. Main weaknesses of Lithuania scientific publications is low cites rate also number of collaborative publications with business is low. Government plays important role in stimulating the cooperation of science and business leading to knowledge development and innovations. In Lithuania one of strategic goals is fostering of cooperation between business and science institutions in process of innovation. Such focus is noted in those main documents: Lithuanian “Long-Term Development Strategy of the State 2002”. Lithuania’s progress strategy “Lithuania 2030” Lithuanian innovation strategy for year 2010-2020 In those documents is stressed importance of interaction between science and business, which ensure more speedy progress of the country. As current Lithuania weaknesses are seen lack of systematic approach to innovation, poor culture of inter-institutional cooperation and a lack of cooperation traditions between business and science. It is encouraged to foster such values as 73


openness to positive initiatives, cooperation, and innovations. Cooperation of business and universities is seen as key component of smart growth. Lithuanian strategies and objectives are in line with European Union (EU) policy documents, such as „Europe 2020. A strategy for smart, sustainable and inclusive growth“, which stress importance of smart growth by improving performance in education, research/innovation and digital society. The European Regional Development Fund and European Social Fund allocate significant funding for these objectives (Ranga and Etzkowitz 2013). Support for business and science cooperation projects in Lithuania is implemented through five main initiatives (see table 1). Total value of projects is more than 135 million Eur. Table 1: Main support programmes fostering business and science cooperation Focus of programme Strengthening of R&D thematic networks and associations Intellect LT PRO-LT

Idea LT Inno-vouchers LT

aims to consolidate the institutional network of public science and research institutions, R&D associations and other organisations, which are involved in the implementation of Joint Research Programmes, Development Programmes for the Integrated Science, Studies and Business Centres (Valleys) or coordinate National Complex Programmes, National Technology Platforms focus to joint projects of SME’s, universities and research universities aimed at international R&D collaboration between foreign R&D intensive companies (IBM Research laboratories) and Lithuanian universities (closed after IBM cancelled agreement in 2012) supports the preparation for the implementation of R&D projects in enterprises promotes collaboration by providing small credit to buy R&D expertise or knowledge from research and educational institutions

Programme period 2008-2013

Total funding (EUR) 10.811.173

2009-2013 2011-2013

101.317.071 11.700.000

2008-2013

10.300.000

2012-2013

1.500.000

Source: „Erawatch Lithuania“ 2014 Those programmes stimulate interactions of science and business in R&D by providing financial support for specific projects. High part of funding comes from EU structural funds. In order to link academic research with business R&D, science and technology parks, clusters and technology platforms are created. Government initiated development of five science ‘valleys’, where is concentrated high quality research infrastructure. However most of funds are invested to buildings and laboratories, while the scale of support for professional innovation services, intellectual property rights and joint research projects is low (Paliokaite 2014). Government funding is important source of funds for R&D. Flows of funds for R&D are an indicator of investments for development of knowledge. Public financing of R&D forms a major part of R&D funding in Lithuania (see Fig. 6) Figure 6: Total intramural R&D expenditure (GERD) by source of funds (Euro per inhabitant, %, 2011)

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Lithuania 0,1; 0%

0,9; 1%

Business enterprise sector Government sector

26,3; 26,1; 29% 28%

Abroad Private non-profit sector

39,1; 42%

Higher education sector

EU 28 4,8;

8,2; 2% 47;

1%

9%

171,1 ; 33%

281,2 ; 55%

Source: Eurostat 2014 In Lithuania 42% of R&D expenditure is made by government sector. Business enterprise sector expenditures compose 28% of total R&D expenditures in Lithuania. As in EU-28 main part of financing (55%) comes from business enterprise sector and only 33% from government sector. The Business enterprise R&D expenditure (BERD) as a percentage of total GDP in Lithuania increased from 0.20% in 2009 to 0.24% in 2012 (Eurostat 2013). This is positive trend, which could help business to stay competitive by introducing innovations. Absolute numbers of R&D expenditure should grow in every sector of financing in order to come closer to EU average. As total expenditures to R&D per inhabitant in Lithuania constitute only 18% of EU 28 countries’ average. In absolute numbers Lithuania spends 92.6 Euro per inhabitant as in EU 28 countries it is spent 512.3 Euro per inhabitant. Which sectors of performance receive funds devoted to R&D is shown in Fig. 7. Figure 7 R&D expenditures by sectors of performance (Euro per inhabitant, %, 2012) EU-28

Lithuania

4,6; 1% 125; 24% 335,7; 63%

64,8; 12%

0; 0% 26,3; 26% 53,1; 54% 19,4; 20%

Private non-profit sector Higher education sector Government sector Business enterprise sector

Source: Eurostat 2014 In Lithuania highest part of expenditures are invested in higher education sector performed R&D projects. In EU 28 countries most R&D investments is coming to business enterprise

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sector. Such indicators show that business in Lithuania performs small part of R&D and more than a half R&D projects are performed by higher education institutions. In order to understand extent of transnational collaborations in governmental funded R&D projects it was selected to analyse government funding to transnationally coordinated R&D in Lithuania indicator (see Fig. 8). Figure 8: National public funding of transnationally coordinated R&D in Lithuania (Million euro) Mln. EUR

3,000 2,000 1,000 0,000 2007

2008

2009

2010

2011

2012

National public funding to transnationally coordinated R&D National contributions to Europe-wide transnational public R&D programmes National contributions to bilateral or multilateral public R&D programmes

Source: Eurostat 2014 It could be seen that largest government R&D expenditures to transnationally coordinated R&D projects was on 2009 and exceeded two million Euro (0,9 Euro per inhabitant). Such peek was associated with expansion of Europe-wide transnational public R&D programmes. Decrease of such programmes next years influenced decrease of total funding of transnationally coordinated R&D in Lithuania. National contributions to bilateral or multilateral R&D programs are very low. Government influence to fostering knowledge sharing and development is substantial. Main source of R&D funding comes from government. Important part of funding is EU structural funds support. Main sector which performs R&D projects is higher education institutions and only small part of R&D investments comes to business sector. Government is the leading sphere, which is influencing academia and industry sectors. Such relation structure describes statist triple helix mode. Conclusions Lithuania higher education institutions and business knowledge transfer could be described as statist mode of (neo) institutional Triple Helix system. In this system dominates “single sphere” institutions. The leading role in the system is played by government, which provides main part of funding, initiates various programmes to foster cooperation also initiated creation of development of five science ‘valleys’, which provides space for common R&D activities. EU support for fostering collaborative R&D is also substantial; most transnationally coordinated R&D in Lithuania is performed in Europe-wide transnational public R&D programmes. Business investment to development of new knowledge through R&D is low. Low level of investments could be offset by intense cooperation in R&D activities with higher education institutions and public research centres. Though, cooperative actions are not intense. Cooperation in innovative actions with higher education institutions is much lower than EU-28 average, publication with co-authorship of business and higher education institutions number is also low. Business and higher education relations are based on conflicting objectives and lack

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of trust. Such attitudes towards cooperation influence that patenting, licensing, start-up companies and other innovation commercialization efforts are weakness of Lithuania. Knowledge from higher education institutions to business is transferred mainly through teaching and preparation of human resource. Lithuania labour market is characterised by high rate of tertiary education attainment and comparative low unemployment of population with tertiary education. Both higher education institutions and business sector should be more active in collaborative activities and foster more open communication. As this is allows for higher education institutions to provide graduates with high quality of education and to increase practical applicability of scientific results. In knowledge society business needs high quality human capital and fast development of innovations to stay competitive. Collaboration with universities and public research centres could help business to reach this aim at lower costs. References Baryniene, J. and Krisciunas, K. (2013). Tuning of academic and business sectors’ positions for better competences of graduates. European Integration Studies, 7, 159-167. Benner, M., Sandström U. (2000). Institutionalizing the triple helix: research funding and norms in the academic system’. Research Policy, 29, 291-301. Bergek, A., Jacobsson, S., Carlsson, B., Lindmarki, S., Rickne A. (2005). Analysing the dynamics and functionality of sectoral innovation systems – a manual. 10 Year Anniversary DRUID Summer Conference, Copenhagen, June 27–29. Boardman, C., Gray, D. (2010). The new science and engineering management: cooperative research centers as government policies, industry strategies, and organizations. Journal of Technology Transfer, 35, 445-459. Bumelis, V. Masevičiūtė K., Reimeris R., Skirmantas R., and Tauginienė L. (2014). Lietuvos mokslo būklės apžvalga. Mokslo ir studijų stebėsenos ir analizės centras. http://www.mosta.lt/images/leidiniai/Lietuvos_mokslo_bukles_apzvalga_2014.pdf. Carlsson, B., Jacobsson, S., Holmén, M., Rickne, A. (2002). Innovation systems: analytical and methodological issues. Research Policy, 31, 233–245. Carlsson, B., Stankiewicz, R. (1991). On the nature, function, and composition of technological systems. Journal of Evolutionary Economics, 1, 93–118. Edquist, C., (2005). Systems of innovation: perspectives and challenges, in: Fagerberg, J., Mowery, D.C., Nelson, R.R. (Eds.), The Oxford Handbook of Innovation. Oxford University Press, New York, 181–208. Etzkowitz, H., Leydesdorff, L. (1995). The Triple Helix: University - Industry - Government Relations: A Laboratory for Knowledge-Based Economic Development. EASST Review 14, 14 - 19. Eurostat. (2013). „Science, technology and innovation in Europe“. http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-GN-13-001/EN/KS-GN-13-001-EN.PDF. Godin, B. (2007). National Innovation System: The System Approach in Historical Perspective. Working Paper no. 36 (downloaded on 7 October 2014 from http://www.csiic.ca/PDF/Godin_36.pdf). Inzelt, A. (2004). The evolution of university–industry–government relationships during transition. Research Policy, 33, 975–995 Lawton Smith, H., Bagchi-Sen Sharmistha, S. (2010). Triple helix and regional development: a perspective from Oxfordshire in the UK. Technology Analysis & Strategic Management, 22, 805-818. Leydesdorff, L. and Etzkowitz, H., (1998). The triple helix as a model for innovation studies. Science and Public Policy, 25, 195–203.

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Lithuania’s progress strategy “Lithuania 2030”. http://www.lrv.lt/bylos/veikla/lithuania2030.pdf. Lithuanian innovation strategy for year http://www.mita.lt/uploads/documents/innovation_en/strategy_20102020.pdf. Long-Term Development Strategy of http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=219184.

the

2010-2020. State.

(2002)

Malerba, F., (2002). Sectoral systems of innovation and production. Research Policy, 31, 247–264. Paliokaite, A. (2014). ERAWATCH Country Reports 2013: Lithuania. European Commission. ftp://ftp.jrc.es/pub/EURdoc/JRC83903.pdf. Ranga, M., Etzkowitz, H. (2013). Triple Helix Systems: An Analytical Framework for Innovation Policy and Practice in the Knowledge Society. Industry and Higher Education, 27(4), Special Issue (August 2013). Saad, M. (2004). Issues and challenges arising from the application of innovation strategies based on the triple helix culture. Experience of the incubation system in Algeria. International Journal of Technology Management and Sustainable Development, 3(1), 17-34. Saad, M., Zawdie, G. (2011). Introduction to special issue: The emerging role of universities in socioeconomic development through knowledge networking. Science and Public Policy, 38, 3-6. Scherngell, T., and Yuanjia Hu. (2011) Collaborative Knowledge Production in China: Regional Evidence from a Gravity Model Approach. Regional Studies 45 (6): 755–72. „Erawatch Lithuania“. (2014). Accesed on 2014 October http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/lt/country.

16.

„Europe 2020. A strategy for smart, sustainable and inclusive growth“. 2010. European Commission. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:2020:FIN:EN:PDF. „Eurostat - National public funding to transnationally coordinated R&D“. Accesed on 2014October 16. http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=gba_tncoor&lang=en. „SCImago Journal & Country Rank“. European Commission. Accesed on 2014 October 22. http://www.scimagojr.com/compare.php?un=countries&c1=LT&c2=Eastern%20Europe&c3=Western %20Europe&c4=&area=0&category=0&in=h.

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EFFICIENCY OF THE STATE ADMINISTRATION DECISIONMAKING PROCESSES IN THE FIELD OF RURAL DEVELOPMENT POLICY: POSSIBLE SOLUTIONS Svilen KOLEV14 University of National and World Economy (UNWE), Sofia, Bulgaria E-mail: [email protected] Abstract. The present report is intended to analyze and methods for the improvement of the process of management decision making in the field of agriculture in Bulgaria and to propose approaches to increase the efficiency on the basis of analysis of existing gaps and opportunities in the use of funding available under the Rural Development Programme. At the EU level Impact Assessment is used and it is well known as assessment of the potential economic, social and environmental consequences for new initiatives of the European Commission. At the Member State level ex-ante report is required, which is evaluation of the Rural Development Program (RDP). The goal of the article is to justify the need of analyses of the effects of the implementation of the RDP measures, the use of the Balanced Scorecard and Enterprise Resource Planning (ERP). Effects of the implementation of the RDP measures is a new element of analyses. This analyse have to include analyse of the impact as well as of the costs and benefits of the implementation of each measure. Еconomic efficiency in the implementation of the different measures of the program is considered and methods to achieve optimal management solutions that bring the highest added value for the country. Keywords: Decision-making process, Efficiency, Rural Development Programme, Bulgaria, Balanced Score, ERP JEL classification:Q10, Q14, Q18

Introduction Agricultural Policy is one of the state policies highly regulated on the one side from the EU and on the other side from the EU. Management policy decision making process needs improvement at the level of the Member State. For these reasons mix of evaluating and implementing tools are necessary which include: Impact assessment, Ex-ante report, effects of the implementation of the RDP measures, the Balanced Scorecard and ERP could increase the efficiency of the implementation of this policy. This policy implement would most of all be achieved through RDP. The Rural Development Program is part of the Common Agriculture Policy (CAP) of the European Union. The implementation in each Member State is based on the Partnership Agreement (PA). Through this Partnership Agreement the investments of all funds of the Common Strategic Framework (CSF) are directed to the respective EU’s Member State. 14

PhD Student; University of National and World Economy (UNWE), Sofia, Bulgaria; Department “Economics of Natural Resources”, Student Town; 8th December Blvd., Sofia1700, Bulgaria; E-mail: [email protected]

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The synchronized with the Partnership Agreement, Rural Development Program is a powerful tool for implementation of effective or ineffective investments in the rural areas. The program is designed by the Ministry of Agriculture but implementation of the Rural Development Program is carried out by the Implementing Agency. The management style of the Implementing Agency determines if the qualitative and the quantitative targets foreseen in the Rural Development Program will be met. The purpose of this publication is to analyze the process of decision making in Bulgaria regarding the Rural Development Program by the state administration. The report sets out possible options for improving the effectiveness of the decision making process. This approach is based on analysis of the impact of the measures of the Rural Development Program in terms of their effectiveness and value added at the level of Managing Authority of the Program. This approach aims to optimize management processes within of the Implementation Agency through Robert Kaplan and David Norton Balanced Scorecard Performance method. An option to use it in order to optimize the use of resources foreseen under the Rural Development Program is proposed. 1.

Analysis of the environment and instruments for management of the Rural Development Program as part of the Common Agriculture Policy

1.1. Common Agriculture Policy basic aspects EU have three broad intervention areas (direct payments, rural development and market measures). The Pillar I of Common Agriculture Policy (CAP) directs payments - the schemes are compulsory and voluntary. European Agricultural Guarantee Fund (EAGF). "Pillar I includes instruments related to the functioning of agricultural markets and the food supply chain (Council Regulation (EC) No 1234/2007) and to direct payments (Council Regulation (EC) No 73/2009) conditional upon statutory management Pillar I measures are mandatory for Member States and, with very few exceptions, there is no co-financing. This ensures the application of a common policy within the Single Market, monitored by an integrated administration and control system (IACS)."15 Mandatory schemes in all Member States (MS) are the basic payment scheme, environmental payments, and payments for young farmers. Voluntary schemes (optional for MS) are coupled aid, assistance in areas with natural constraints redistributive payments, multi-direct payments. This is a system of support schemes with different requirements for each scheme. The funding provided for a reduction in payments of 5% for payments above € 150,000. For young farmers provided 25% increase in payments for a maximum of five years for areas up to 100 hectares. For small farms provides a lump sum determined by MS between 500 to € 1250 The direct payments by 2016 is so called complementary national direct payments (or “top ups”). This is in addition to the European system of basic payments. The maximum amount of Bulgarian national payments for 2014 is € 150,186,000. For 2015 it is € 71,024,000. The

15

Commission Staff Working Paper Impact Assessment, Common Agricultural Policy Towards 2020, SEC(2011) 1153 final/2, page 13, 14

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maximum amount in 2014 of national payments for cotton in Bulgaria should not exceed - € 556,523 and for 2015 - 295,687 €. The Pillar I of the Common Agriculture Policy concerning market support provides the abolition of sugar quota, abolition of the planting of vines and dropping of the aid for: skimmed milk powder, silkworms and sorghum. Increase of intervention for beef is foreseen until 85% of the reference price is applied, introduction flexible crisis management reserves, elimination of milk quotas, removal of private scheme for the storage of butter, creation of marketing term to compensate for market failures is applied. The European Commission (EC) allows the introduction of measures by Member States to prevent crisis situations such as price fluctuations, natural disasters, and climate changes impacts. Risk management such as harvest and animals insurance is introduces (financial contributions to insurance contracts covering losses of agricultural producers (AP) and participation in mutual funds - a scheme accredited by member state allowing participating agricultural producers to receive compensation during crisis). The emphasis is on tools for stabilizing the income of agricultural produces. The Pillar II of the Common Agriculture Policy – European Agricultural Fund for Rural Development (EAFRD). "Pillar II – Rural Development Policy (Council Regulation (EC) No 1698/2005) - includes measures that aim at improving the competitiveness of the agriculture sector, delivering specific environmental public goods and promoting the diversification of economic activity and quality of life in rural areas. These measures are largely voluntary, contractual, co-financed and delivered within a strategic framework which links policy action to European, national, regional and local needs."16 The priorities for rural development at EU level 2014-2020 are fostering knowledge and innovation transfer in agriculture, forestry and rural areas. The aim is enhancement of the farms viability and competitiveness of all types of agriculture in the regions, promotion of innovative technologies in agriculture and sustainable management of forestry. Promotion of the good organization of the food chain is foreseen including agriculture products processing and marketing, animal welfare and risk (hazard) management in agriculture, as well as restoring, preserving and enhancing the ecosystems related to the agriculture and forestry. The Program promotes the resource efficiency and supports the shift towards a low-carbon economy and climate-resilient economy in the agriculture, forestry and food industry with 30% of the funds. Measures within the Common Agricultural Policy (CAP) for rural development have been developed. It is recommended to implement 17 measures + Leader approach, including strengthening cooperation, including pilot projects, shorting the supply chains, promoting local action groups, new tools for risk management, investments in physical assets for young farmers, collective investments, irrigation, development of small farms and enterprises, producer groups or clusters, organic farming, sharing knowledge - information and counseling schemes for quality of products - advertising campaigns and forest areas development. The framework of the implementation of the Rural Development Program 2014-2020 provides that each Member State have to determine milestones until 2018 for each priority Rural Development Program indicators achievements. If these are not a achieved the foreseen performance reserve of 6% of the budget of each of the structural and investment funds for each 16

Commission Staff Working Paper Impact Assessment, Common Agricultural Policy Towards 2020, SEC(2011) 1153 final/2, page 14

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Member State concerned will be relocated. Performance review will be made in 2019. The resources allocated for priorities for which targets have not been met, will be reallocated to priorities which targets have been achieved. This scheme will be implemented after respective member state proposal. In case of failing to achieve the goals suspension of payments is possible or financial corrections could be applied. The funding under Pillar I (European Agricultural Guarantee Fund ) is up to 100%, except for the market measures. Funding under Pillar II (European Agricultural Fund For Rural Development ) will range from 53% to 95%. For measures funded via transfer from Pillar I it is provided that funding will be 100%. 25% of the resources could be transferred from Pillar I and Pillar II. From Pillar II to Pillar I the transfer is limited to 10%. At least 30% of the funding under the Rural Development Program should be spent on measures that have a positive impact on the environment and climate change. At least 5% of the funding under the Rural Development Program should be spent on Leader approach. 1.2. Efficiency - Combination of evaluating and implementing tools to increase the efficiency of the implementation of this policy proposed include: Impact assessment, Exante report, effects of the implementation of the RDP measures, the Balanced Scorecard and ERP. The implementation of agricultural policy at the Member State level is mainly through the Rural Development Policy. At the EU level Impact Assessment which is an evaluation tool of the potential economic, social and environmental consequences is used before the European Commission proposes a new initiative. At the Member State level is ex-ante report is required, which is evaluation of the Rural Development Program. The goal of the paper is to use effects of the implementation of the RDP measures, the Balanced Scorecard and Enterprise Resource Planning. Effects of the implementation of the RDP measures is a new element of analyses. This analyse have to include analysis of the impact as well as of the costs and benefits of the implementation of each measure. What would the analyse of the effect of the implementation each of the measures of the Rural Development Program include? This is a detailed and systematic assessment of the potential impacts of each measure, in order to be evaluated if the measure is likely to achieve the desired objectives and impact. The need of analysis of effect of each of Rural Development Program measures stems from the fact that the implementation of the measures often have multiple effects and it is difficult to predict the results without detailed study for positive and negative effects in order to determine the value added. The economic approaches towards the implemention also highlight the risk that administrative costs may outweigh the benefits. From this perspective the main purpose of the analysis is that the implementation of each measure will contribute to the improvement of the welfare - i.e. the benefits will outweigh the costs. The analysis of impact of each Rural Development Program measures can be applied in comparative context with different means for achievement of the objective pursued by analyzing and comparing the results.

82


1.3. Decision making process in the agriculture sector in Bulgaria. Existing Gaps and opportunities in the use of funding available under the Rural Development Programme. The decision making process and management style of the Rural Development Program implementation are generally political. The political decisions determine the guidelines for the development and the methods of implementation of agreed policies. Economic viability of investments is not analysed during the implementation of the programme measures. This leads to a mismatch with the objectives set at national level, due to the relatively short planning period applied. The main objective is to report of the level of funds spend, not taking into account the long term positive perspective for the economy and population. This approach is lacking flexibility in Rural Development Program management. Complex management procedures are used that do not give a clear picture of the state of the organization. Generally mainly financial parameters in terms of funds spend are observed, not the overall situation for the effects of implementation. To a large extent the financial and accounting information available does not give a clear picture of the effects of the measures implemented. Concerning the information systems, a data base for Rural Development Program implementation is available. There is a general accounting system. Currently a multifunctional information system as Enterprise Resource Planning system is missing. The lack of ERP determines the absence and / or distortion of information in real time that prevents appropriate decisions making process at management level. Such system is recommended for effective Rural Development Program implementation. As a matrix for implementing the ERP model, it is possible to use Robert S.Kaplan and David P. Norton approach described in The Balanced Scorecard: Translating Strategy into Action. The balanced scorecard system includes "4 perspective": - "Financial"; - "Customer"; - "Internal Business Processes"; - "Learning and growth ". If necessary, to the main lines other directions can be added depending on the practical need. In his book Strategy Maps - Converting Intangible Assets into Tangible Outcomes Robert S. Kaplan and David P. Norton, points out that the strategy chosen for the application of different perspectives, must be adapted to the mode of implementation and "must be integrated and coordinated in order to lead to value proposition reflecting the strategy of the entire company"17. The Balance system through Enterprise Resource Planning could be set as a management module for Rural Development Program. It would be applicable for the financial state of the Implementing Agency as well as for the guidelines for the implementation of the respective measures of the Rural Development Program. The relations with beneficiaries(customer) should be set as part of the system. Electronic application, filling in information in the system and checking of measurable indicators as well as feed-back forms for standardized operations as issue of incoming number of the applications, checking of the business plan for financial compliance, implementation and reporting, have to

17

Kaplan, R.S. and Norton D.P (2006). Strategy Maps Converting Intangible Assets into Tangible Outcomes, Page 332

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be part of this module. A call center and facilities for processing of complaints could be added to the same module. The internal business processes would include establishing of different forums for communication and exchange of good practices, processing of tasks, establishing of ad-hock working groups, contact points with external organizations for problem solving at the management level. As Robert S.Kaplan and David P.Norton mention “The training and development in each organization are founded on three basic sources: Human resources, systems and organizational procedures”18.. In the context of this knowledge and development the perspective of learning and growth of the employees is fundamentally important for creating of the so called skeleton of the organization. This includes key experts as memory of the organisation. They are to develop knowledge and skills in specific areas. The training and self-education are composite parts of this process. The new knowledge and experience would give the opportunity for application of Rural Development Program in maximum flexible and simple form and at the same time would provide for the simplified application of Regulations, procedures and guides for work. The introduction of these methods would be the basis for the improvement of the effectiveness and efficiency of the state administration decision-making processes in the field of rural development policy. On the basis of this decision makers will have the data base on which to make also informed decisions to implement agricultural policy. Currently the system for implementation of agricultural policies and particularly the Rural Development Program is standardized in all Member States, with centralized control by the European Commission. The aim is to spend the Rural Development Program funds, broken down by measures and axes. During the mid-term evaluation of program implementation the extent of indicators achievement of the national program is measured. As a rule, regardless of the assessments, program alteration is not allowed. In fact, the programs achieve the planned indicators, increasing the capital investments, but does not contribute to the economic development of the region or country concerned. It is important to introduce the analyse of the effects of the implementation of the Rural Development Program measures on the regional economy. This analyse have to include analyse of the impact as well as of the costs and benefits of the implementation of each measure. What this mean? The implementation of a specific Rural Development Program policy requires resources - for salaries, benefits, training, jobs, software, hardware, and co-financing from the state. The analyse of the impact have to determine what will be expenses and benefits for the implementation. The principle can be very simple - including the unit for the administrative expenses and the administrative burden for beneficiaries under Rural Development Program plus Rural Development Program financing compared to the Rural Development Program financing impact. The analysis will show what is the positive effect of the investment for the community. If such analyse is in place measures for which positive effect of investment is low, will be scored at the end for implementation. Measures with high added value will be prioritised for implementation.

18

Kaplan, R.S. and Norton D.P (2005). The Balanced Scorecard: Translating Strategy into Action, Page.39

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The marker for positive measure 1 invested unit brings minimum 1 unit back. The negative marker will be if 1 unit of investment does not return 1 unit. Conclusions and recommendations The investment of public funds in activities that would bring less resource than invested is a waste of money. Loss of resources can not lead to long-term development of an area because the funds that are not recoverable, are a waste of opportunity for increase of welfare. On the basis of the above, it could be considered that implementing a method to improve the efficiency of the process of decision making, taking into account pratical implementation would lead to better management of public funds. Such method is already implemented by the City of Vienna.19 Frst of all, is a necessary to work with mix of evaluating and implementing tools including: Impact assessment, Ex-ante report, effects of the implementation of the RDP measures, the Balanced Scorecard and Enterprise Resource Planning to increase the efficiency of the implementation of this policy. Second on the base of need assessment it will be possible to evaluate the feasible effects of the implementation of the RDP measures - costs and benefits of the implementation of each measure. Effects of the implementation of the RDP measures is a new element of analyses. This analyse have to include analyse of the impact as well as of the costs and benefits for implementation of each measure. Third, it is necessary to introduce the Enterprise Resource Planning system at Implementing Agency level in order to ensure that the basis for analysis will be available which will lead to optimal resource management. This basis will give clear information about the state of the Program implementation and will allow for proper planning of future steps. The Enterprise Resource Planning therefore can be based on Balanced scorecard system20, taking into consideration the capability of that system for completeness of the scope. Finally recommend the introduction of the Enterprise Resource Planning and the analyse of the effect of each of the measures of the Rural Development Program, gives the economic effectiveness of application of different measures of Rural Development Program and leads to optimal decisions making that brings the highest value added for the country. This will positive reflect in efficiency of the state administration decision-making processes in the field of rural development policy.

References Kaplan, R.S., and Norton D.P(2005). The Balanced Scorecard: Translating Strategy into Action, Original work Copyright 1996 by the president and fellows of Harvard College Harvard Business School Press 19 20

http://www.wien.gv.at/english/politics/international/mdeui/publications/pdf/report06.pdf, accessed 06.11.2014 Kaplan, R.S. and Norton D.P(2005). The Balanced Scorecard: Translating Strategy into Action

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Kaplan, R.S., and Norton D.P(2006). Strategy Maps Converting Intangible Assets into Tangible Outcomes, Copyright 2004 Harvard Business School Publishing Corporation Electronic Sources: Program for Rural Development 2007-2013 Retrieved October 03, 2014 from http://www.prsr.bg/page/За-програмата/9/index.html/ http://www.prsr.bg http://prsr.government.bg Mid-term evaluation of the Rural Development Program 2007-2013 Retrieved October 13, 2014 from http://prsr.government.bg/index.php/bg/sections/l2/55 State Fund "Agriculture" Retrieved October 10, 2011 from - www.dfz.bg Ministry of Agriculture and Food - Retrieved October 06, 2011 from www.mzh.government.bg Commission Staff Working Paper Impact Assessment, Common Agricultural Policy Towards 2020, SEC(2011) 1153 final/2 date(20.10.2011) from http://ec.europa.eu/agriculture/policyperspectives/impact-assessment/cap-towards-2020/report/full-text_en.pdf Ex ante Final-Report Rural Development Program 2007-2013 Annual report on the implementation of the rural development programme 2007-2013 in the republic of Bulgaria. (in compliance with Art. 82(2) of Regulation (EC) No 1698/2005) http://ec.europa.eu/smart-regulation/impact/key_docs/key_docs_en.htm Assessing the costs and benefits of regulation study for the european commission, secretariat general final report Brussels, 10 December 2013 from http://ec.europa.eu/smartregulation/impact/commission_guidelines/docs/131210_cba_study_sg_final.pdf Final ex ante report BG RURAL DEVELOPMENT PROGRAM 2014-2020 Review 2006. International activities of the City of http://www.wien.gv.at/english/politics/international/mdeui/publications/pdf/report06.pdf

Vienna,

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THE EFFECTIVENESS OF RURAL DEVELOPMENT POLICIES IN PUGLIA: SOME REFLECTIONS ON MEASURE 121 – AXES I Pasquale Pazienza Donatello Caruso University of Foggia University of Foggia Email:pasquale.pazienza@uni Email:donatello.caruso@uni fg.it fg.it

Piermichele Lasala University of Foggia Email:pmichelelasala@yah oo.it

Abstract. This work represents an early attempt to build a framework to analyze how the Rural Development Plan decided by the Region of Puglia for the period 2007-2013 has actually affected the regional agriculture. More specifically, by referring to a specific measure of the rural development program (Measure 121 of Axes I), our aim is to verify whether the investment activity implemented under the measure in question has actually generated some positive results and the EU budget devoted to rural development is well spent. Although some more work needs to be done to build a database useful for our analysis purpose, in this work we develop some early considerations on the part of data received by the Puglia Region Authority and highlight what is required for the completion of a useful dataset. In addition, we take the advantage of this preliminary work to promote a comparative approach to investigate the issue here proposed. Keywords: local and rural development, investment appraisal, regional policy evaluation. JEL classification: H5; H7; O18; R11

Introduction Structural funds are financial instruments through which the European Union (EU) attempts to eliminate economic and social disparities existing in its regions. Between 2007 and 2013, the EU allocated almost 100 billion Euros to pursue its objectives in rural development (European Court of Auditors, 2013). Within this context, the Region of Puglia developed its operational plan through which, in addition to other objectives, a specific attention was paid to the strengthening of the competitiveness of the agricultural system of the region. In this sense, the regional plan identified some measures particularly devoted to the reorganization and modernization of regional farms with the aim of making them more capable of dealing with an increasing worldwide competition. It is exactly the case of Measure 121 (Axes I) of the Rural Development Program also adopted by the Region of Puglia whose main aim is – in accordance with art. 20(b)(i) of Council Regulation (EC) no. 1698/2005 – the modernization of agricultural holdings through grants for investments in farm machinery and equipment such as, for example, tractors, harvesters, farm buildings, manure storage, irrigation facilities, etc. More in details, the policy intervention within the context of this considered measure entails a co-financing mechanism on the basis of which the private capital (the risk capital) is called to cover at least 50% of the amount proposed as an investment. The remaining 50% represents the maximum quota of the non-repayable public grant given in support the quota of private capital.

87


Figure 1: Progress percentage of expenditure related to measure 121 on the total of the Rural Development Programme (ordinary, Health Check and Recovery Plan) – Apulian Region Program m a di Sviluppo Rurale approved by D ecision C (2013)9700 del 19/12/2012 at 31 December 2013

P LA N N E D PU B L IC E X PE N D ITU R E

A xes M is. D escription

of w hich FEA SR

in .0000 euro

E X PE N D P U B LIC D ISB U R SE D

PROG R ESS O F TH E EX PEND ITU RE O N THE TO TA L PRO G RAM (in % )

of w hich FEA SR

1 111 Formazione professionale e interventi informativi

15.078.123,00

8.669.921,00

7.398.796,92

4.254.308,23

111

1 112 Insediamento di giovani agricoltori

75.000.000,00

43.125.000,00

61.196.741,38

35.186.709,49

112

1 113 Prepensionamento

12.000.000,00

6.900.000,00

7.379.664,58

4.243.307,13

113

1 114 Utilizzo di servizi di consulenza

18.514.783,00

10.646.000,00

1.212.868,53

697.399,40

114

0,00

0,00

0,00

0,00

115

306.343.860,00

178.497.386,00

246.007.905,63

141.727.323,87

121

10.200.664,00

5.865.382,00

4.134.681,89

2.373.861,94

122

1 123 Accrescimento del valore aggiunto dei prodotti agric

145.585.861,00

83.711.870,00

116.688.957,88

67.096.150,78

123

1 124 Cooperazione per lo sviluppo di nuovi prodotti, proc

29.526.424,00

16.977.694,00

10.689.323,32

6.146.360,90

124

1 125 Infrastrutture connesse allo sviluppo ed all’adeguam

14.156.522,00

8.350.000,00

9.337.997,73

5.380.375,53

125

0,00

0,00

0,00

0,00

126

1 115 Avviamento di servizi di consulenza 1 121 Ammodernamento aziende agricole 1 122 Accrescimento del valore economico delle foreste

1 126 Recupero del potenziale di produzione agricola 1 131 Rispetto delle norme basate sulla legislazione Comu

0,00

0,00

0,00

0,00

131

1 132 Partecipazione degli agricoltori ai sistemi di qualità

1.788.899,00

1.028.617,00

4.536,17

2.608,30

132

1 133 Attività di informazione e promozione

4.325.443,00

2.487.130,00

283.349,11

162.925,74

133

1 141 Agricoltura di semisussistenza

0,00

0,00

0,00

0,00

141

1 142 Associazioni di produttori

0,00

0,00

0,00

0,00

142

1 144 Aziende Agricole in via di ristrutturazione in seguito

0,00

0,00

0,00

0,00

144

2 211 Indennità per svantaggi naturali a favore di agricolto

7.214.221,00

4.148.177,00

5.996.026,51

3.445.288,35

211

2 212 Indennità a favore di agricoltori in zone caratterizzat

12.602.831,00

7.246.628,00

10.406.220,45

5.983.035,47

212

2 213 Indennità Natura 2000 e indennità connesse alla Dir.

19.303.861,00

11.099.720,00

4.120.755,39

2.369.434,35

213

349.855.899,00

205.263.075,00

256.837.267,24

148.103.023,89

214

0,00

0,00

0,00

0,00

215

2 216 Investimenti non produttivi

68.781.812,00

40.061.475,00

83.502.041,69

48.038.803,65

216

2 221 Primo imboschimento di terreni agricoli

23.550.000,00

13.541.250,00

6.667.529,96

3.833.829,72

221

2 214 Pagamenti agroambientali 2 215 Pagamenti per il benessere degli animali

2 222 Primo impianto di sistemi agroforestali su terreni ag 2 223 Primo imboschimento di superfici non agricole 2 224 Indennità Natura 2000 2 225 Pagamenti per interventi silvoambientali

0,00

0,00

0,00

0,00

222

20.000.000,00

11.500.000,00

133.067,99

76.514,09

223

0,00

0,00

0,00

0,00

224

0,00

0,00

0,00

0,00

225

2 226 Ricostituzione del potenziale forestale e introduzion

40.000.000,00

23.000.000,00

16.697.918,59

9.601.303,19

226

2 227 Investimenti non produttivi

40.000.000,00

23.000.000,00

22.663.847,24

13.031.712,20

227

3 311 Diversificazione in attività non agricole

22.000.000,00

12.650.000,00

20.740.209,29

11.925.620,33

311

0,00

0,00

0,00

0,00

312

3 312 Creazione e sviluppo di imprese 3 313 Incentivazione delle attività turistiche

3.000.000,00

1.725.000,00

0,00

0,00

313

19.064.000,00

13.423.000,00

3.600.000,00

2.238.120,00

321

0,00

0,00

0,00

0,00

322

3 323 Tutela e riqualificazione del patrimonio rurale

7.000.000,00

4.025.000,00

0,00

0,00

323

3 331 Formazione e informazione

3.000.000,00

1.725.000,00

0,00

0,00

331

3 341 Acquisizione di competenze, animazione ed attuazio

0,00

0,00

0,00

0,00

341

4 411 Attuare strategie di sviluppo locale. C ompetitività

0,00

0,00

0,00

0,00

411

4 412 Attuare strategie di sviluppo locale. Ambiente/terren

0,00

0,00

0,00

0,00

412

4 413 Attuare strategie di sviluppo locale. Q ualità della vit

3 321 Servizi essenziali per l’economia e la popolazione r 3 322 Rinnovamento e sviluppo dei villaggi

216.795.015,00

125.681.000,00

77.500.948,23

44.563.045,25

413

4 421 Esecuzione dei progetti di cooperazione

12.000.000,00

6.900.000,00

0,00

0,00

421

4 431 Gestione del gruppo di azione locale, acquisizione d

54.000.000,00

31.050.000,00

32.234.401,46

18.534.780,82

431

5 511 Assistenza tecnica

44.397.696,00

25.528.675,00

25.697.611,16

14.776.126,43

511

1.595.085.914,00

927.827.000,00

49,07% 81,60% 61,50% 6,55% 0,00% 80,30% 40,53% 80,15% 36,20% 65,96% 0,00% 0,00% 0,25% 6,55% 0,00% 0,00% 0,00% 83,11% 82,57% 21,35% 73,41% 0,00% 121,40% 28,31% 0,00% 0,67% 0,00% 0,00% 41,74% 56,66% 94,27% 0,00% 0,00% 18,88% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 35,75% 0,00% 59,69% 57,88%

0,00%

Source: Ottaviani & Lafiandra (2014).

1.031.132.668,36

593.791.969,06

20,00% 40,00% 60,00% 80,00% 100,00% 120,00%

64,64%

73

This should help to overtake those limits reported in the supporting documents of the planning procedure, where it was observed how the farms belonging to the regional system are characterized by a very significant productive potential which is not yet fully expressed due to the existence of high production costs, a very modest diversification of farms’ production, a quality level of agricultural productions which can be the subject of further improvements, and a very modest horizontal and vertical sectoral aggregation. It can be observed how at the end of 2013 the measure in question has already employed about 80% of the financial resource available for the Puglia regional plan.

88


With regard to what has been said so far, however, the understanding of how such a kind of policy actually impacts on the agricultural system, at a first stage, and on the regional economy, as a consequence, becomes a relevant issue. As remarked in some official reports and scientific works, in fact, the observation of whether the European expenditure for rural development produces positive results is an open question for academics and policy makers (European Court of Auditors, 2013; Bradley at al., 2010). In this sense, authors such as Russo (2014), Shaxon (2011), Hodge & Midmore (2008) and Russo and Sabbatini (2005) highlight how more work should be done to produce a more precise assessment activity of this type of policy intervention. This would help to build a clearer view of whether and how the European policy for rural development in the various regions of its member states actually generates the expected results. With this in mind, this work is an early attempt to build a framework useful to analyze how the Rural Development Plan decided by the Region of Puglia for the period 2007-2013 has actually affected the regional agriculture. Hence, it refers on some data contained in a database received by the Puglia Region Authority and highlights the missing aspects needed to have a more complete picture which could be the subject of a quantitative investigation. The work is organized as follows. A general comment on the data we have gathered so far is reported in the next section. In this sense, a very simple descriptive – and preliminary – analysis of the data obtained is proposed. In a further section, we introduce the model we would work at to empirically assess the policy impact. In a concluding section we highlight the limit the database received by the Puglia Region Authority is characterized by and discuss some alternatives through which some information gaps might be covered with the aim of building a database useful for the purpose of our analysis. Material and methods In this work we conceptually approach to the identification of the impact of a policy as the quantitative modification of some specific variables (e.g. income or employment levels) in response to the implementation of policy initiatives aimed at redistributing financial resources to the end of enforcing the economic performance of considered territories. With this in mind, we have gathered data from the Management Authority of the Rural Development Plan of the Puglia Region which provided us with a database containing information at firms level. More specifically, the database contains information on those firms which requested to be admitted to the benefits of Measure 121, Axes I, of the Rural Development Plan 2007-2013 through the first public call of the 17th May 2012 no. 71. A first look at the data achieved by the Regional Authority above-mentioned enables us to observe how 1,321 firms out of 2,076 have actually been admitted to the benefits of the Measure in question. These firms are grouped in 25 different commodity sectors from agricultural plantation, horticulture and floriculture to livestock. For each firm the database reports the following further information recorded at the time of the application: a. amount of the proposed investment; b. public aid granted; c. number of family and extra-family workers; d. revenues; e. production costs; f. financial amortization of firm’s production goods; g. salary and income levels before the investment implementation. Having said this, we develop some considerations on the way the database is organized and carry out an early analysis of the information contained in it. First of all, it must be highlighted that the database does not help us to develop an analysis of how the financial resources granted through the implementation Measure 121 has impacted the agricultural sector in the Puglia region. This is due to the fact that the information gathered by the Management Authority of 89


the measure in question only regards the characteristics firms declare when they submit their application to participate in the public call. The database does not contain any information in relation to firms' income and/or employment levels recorded after a certain time from the implementation of the activities granted. Furthermore, the Management Authority does not run any follow-up analysis aimed at verifying how income and/or employment have performed in those firms admitted to the benefits of the public intervention. To overtake the severe problem represented by the lack of this type of data, which does not give us the possibility of carrying out a proper impact analysis of the policy in question, we have referred to another public institution of the financial administration of the Italian State (Agenzia delle entrate) to be supplied with information on income and employment levels declared in 2013 (the same will be done for 2014 and 2015) by the firms reported in the regional database. This should enable us to more properly analyze the aspect subject of our attention. More specifically, the statistical facts we would like to investigate in the analysis we intend to develop are schematically summarized in the table below (tab. 1): Table 1 - Statistical variables subject of observation. No.

Variable

1

Income

2

Public aid

3

Risk capital

4

Investment

5

Farm size

6

Work force

Description the income derived from the firm's agricultural activity as recorded before the investment implementation. amount associated to the contribution granted by the regional Authority. the private amount of the investment required for co-financing. the total amount of the investment proposed by the firm which derives from the sum between public aid and risk capital. the size of the firm in ha. amount of external workers except those belonging to the farmer's family.

The possibility of obtaining data on the employment level and the income declared by the firms in the regional database at t+1, t+2 and/or t+n time from the start of the program can enable us to econometrically analyse a cross-section database aiming at the estimation of the following functional form: y = α + β1 Incomei + β2 Investmenti + β3 Public aidi + β4 Risk capital + β5 Farm sizei + β6 Dummyi + ξ where: y is the dependent variable and can be thought to be either the income level or the amount of workforce (employment level) as recorded at time t+1 and t+2 and/or t+n from the start of the policy intervention; Dummy is the binary variable 0 or 1 to be used in the case of a comparative analysis between different territorial realities; ξ is the error term. The remaining variables are already explained in table 1 above. The estimation of such a functional form in log-log terms will give us the possibility of identifying the elasticities characterizing the relationships. However, pending the delivery of more updated income data from the Italian tax Agency (Agenzia delle entrate), we now develop some observation on the main features characterizing 90


the firms participating to the first public call of Measure 121 only. With regard to this, it must be first highlighted how a number of 5 firms have been eliminated from the database to avoid dangerous outliers rather than having interesting extremes. As a result, the number of firms subject of analysis becomes 1,314 from 1,321. The result of our descriptive analysis is reported in the table below (tab. 2). As can be observed through the values of the standard deviation, the information we consider in our database is characterized by a high level of variability. This tells us that it can adequately be made subject of econometric investigation. Furthermore, it can be observed how the mean values of the firms' income is equal to € 45,994, the size is about 42.24 ha. and the workforce is about 6. Broadly speaking, this means that we are dealing with firms basically characterized by a very modest dimension. Additionally, it can be noted that the total investment amount is also modest this being equal to about € 160,471 as an average. As a result, even the risk capital and the public aid quotas are quite small whose mean values are respectively equal to about € 88,000 and € 72,500 as an average. Table 2 - Results of the descriptive statistics analysis. Variable Income Public aid Risk capital Investment Farm size Work force

Observations 1,312 1,312 1,312 1,312 1,312 1,312

Mean 45,994.26 72,495.97 87,975.24 160,471.22 42.24 5.78

St. Deviation 79,818.32 1,12446E5 134,170.36 2,39661E5 58.27 9.50

Skeweness 0.12 5.61 5.18 5.11 5.04 3.88

Source: our elaboration on the Measure 121 database of the Puglia Region. The scatter plot (fig. 2) considering the two variables represented by income and the size of firms (this intended in terms of workforce) clearly shows the existence of a high concentration when they are both characterized by law values. Figure 2 – The relationship between income and workforce.

Even the relationship between income and the physical size of farms (in hectares) shows a very high concentration of farms in correspondence of their law levels. 91


Figure 3 – The relationship between income and farm physical dimension (in ha.).

These two figures would prove that the objectives pursued through the implementation of the policy intervention associated to Measure 121 are consistent with the main need of the agricultural sector in Puglia. It is generally thought, in fact, that its firms need go through a significant reorganization process to ensure a modernization of the sector and better capacity of generating higher income and employment levels. As has already been anticipated, whether this result has really been achieved and with what magnitude is something which should be verified through follow-up analysis based on the reflection developed above. Conclusions The ex-post evaluation of the implementation of public policies represents an issue of general interest. More specifically, an interesting scientific and political debate nowadays exists in relation to the observation of whether the European expenditure for rural development produces positive results. In this work we have presented and discussed the main aspects associated to a database built by the Management Authority of the Rural Development Plan of the Puglia Region. In addition, we have highlighted those aspects which do not make this database suitable to investigations aimed at analysing the impact generated by this type of policy. This is especially due to the fact that the Management Authority does not run any ex-post monitoring activity as a follow-up of the implementation of the considered policy. As a result, the lack of information on the income end employment levels characterizing the firms (which have received financial support) after a certain time from the start of the program does not help to carry out ex-post analysis aimed at understanding the impact derived from the investment implementation. As we have argued, this gap of information can be covered by recurring to other statistics which are managed by other national institutions (Agenzia delle entrate). As a consequence, we are now working at integrating the regional database with the information on income and employment levels firms have declared in the years after their admission to the development program of Measure 121. This will allow us to have a more complete set of statistical information on the basis of which a more adequate empirical investigation of the impact public funding generates can be carried out. Before concluding, we also take the advantage of this very preliminary work to ask for collaboration from other European countries so that the same issue can be investigated in relation to two or more different national territories with the aim of building a comparative analysis framework.

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References Bradley, D. Dwyer, J. Hill, B. (2010). The Evaluation of Rural Development Policy in the EU L’evaluation de la politique de developpement rural dans l’Union europeenne Die Evaluation der Politik zur Entwicklung des landlichen Raums in der EU. EuroChoices, 9: 15–20. Council Regulation (EC) no. 1698 (2005). Support for rural development by the European Agricultural Fund for Rural Development (EAFRD). European Court of Auditors (2013). Can the Commission and Member States Show That The EU Budget Allocated To The Rural Development Policy Is Well Spent?. Special Report no. 12. European Union, Luxembourg. Hodge, I. and Midmore, P. (2008). Models of rural development and approaches to analysis evaluation and decision-making. Economié Rurale, 307: 23-38. Ottaviani, L. and Lafiandra, S. (2014). Report sull'avanzamento del bilancio comunitario e della spesa pubblica. Rete Rurale Nazionale. http://www.reterurale.it/flex/cm/pages/ServeBLOB.php/L/IT/IDPagina/13506. Russo, C. (2014). Ex-post evalutaion of the impact of rural development policy using farm-level data. An example from the 2000-2006 program in the Lazio Region. Russo, C. and Sabbatini, M. (2005). Analisi esplorativa delle differenziazioni strategiche nelle aziende agricole. Rivista Economia Agraria. (vol. 4). Shaxon, L. (2011). Evidence-based agricultural and rural policy development - a view from the UK on linking research and policy. Proceedings of the 122th EAAE seminar: Evidence-based agricultural and rural policy making: methodological and empirical challenges of policy evaluation.

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HOW MANY – 2, 3 OR 4 – EUROPEAN UNIONS DO WE HAVE: MACROECONOMIC APPROACH Viktor KOZLOVSKIJ Mykolas Romeris university Vilniaus kolegija/University of Applied Sciences E-mail: [email protected]

Abstract. Two-speed or two-level European Union (EU) definition is not a novelty nowadays. We have Euro zone and not members; countries which comply with Maastricht criteria and not; more developed and less developed EU member states; new and old one member states and so on. In spite of mentioned allocations these days topical issues should become three-level or even four-level EU especially in case of economic recession and difficult recovering. Analysis of macroeconomic indicators (e.g. GDP and its growth, inflation, employment, investment level in GDP and etc.) shows that EU member states divide into three or even four evident groups by mentioned indicators’ trends. Keywords: European Union, two-speed, multi-level, GDP, investment, employment. JEL classification: E01; E22; E24.

Introduction Cohesion is a concept which importance is hard to overestimate. Sustainable development of European Union is impossible without convergence between Member States. Therefore definition of two-speed Europe appeared in scientific discussions long ago. Every join of new member raised questions about its proper integration into common structure. After 1992 Maastricht summit and there made decisions “two-speed Europe” got respective meaning. Both scientific and public publishers mostly presented it as Monetary Union part (e.g. Lambertini, 1992; Demertsiz, 1996; Beachill, 1998; Alesina, 2006; Gogas, 2009; Breuss, 2013). One more time attitude changed after great enlargement in 2004. Afterwards “two-speed Europe” starts to be associated not only with Monetary Union but together changed into discussion about Old and New Member States and their differences (e.g. Molle, 2006). Economic crisis brought its changes. After 2008 “multi-speed Europe” or “new two-speed Europe” explanations more and more loudly appears in scientific work papers (e.g. Dabrowski, 2010; Hadjimichalis, 2011; Breuss 2013). That’s why the idea of this research is through statistical analysis of macroeconomic indicators’ find out how many speed Europe do we have. This article is just a short presentation of main results. So the first part explains methodological background of research, main its steps: choice of countries, grouping this countries in different way, choice of time period, choice of indicators and one’s analysis methods. Another section shortly presents results and their explanation. All data is taken from EuroStat.

Methodological background 94


This part presents main steps of methodics of analysis: choice of countries, grouping these countries in different way, choice of time period, choice of indicators and one’s analysis methods. More over it must be mentioned that background of this research has two important attributes: viewing from cohesion position and macroeconomic level of analysis. The first methodological stage is choice of countries to analyze. It was impossible to include all 28 Member States, first of all, because of insufficient data (this was the main reason to refuse Croatia). Moreover three countries (Romania, Bulgaria and Croatia) became EU members after 2004. Mentioned reason is important in case of analysis terms, which will be explained further. At last, some countries’ data values diverge from EU average in such rates that simply has statistically unacceptable impact on counting. This is legal for Luxemburg, Romania and Bulgaria. That’s why this research includes analysis of 24 EU Member States. The next important stage in methodological background of this research is grouping of mentioned Member States. This article includes results of three grouping compositions. First of them is allocation into two till nowadays popular groups: more developed and less developed Member States (if considered by GDP per inhabitant by purchasing power parity) or, in other words, Old and New Member States. From this position there will be 14 countries which were in EU until 2004 and 10 countries which became members in 2004. So they’ll be called as EU14 and EU-10. Another splitting method, considered appropriate by other researchers and modified by author, is three way grouping (by the same GDP indicator): high developed countries (H-7 which include Netherlands, Austria, Ireland, Sweden, Denmark, Belgium and Finland – GDP higher than 110% of EU-28), medium developed countries (M-7: Italy, Greece, Spain, Portugal, Cyprus, Slovenia and Malta – GDP between 110% and 80%) and less developed countries (L7: Czech Republic, Slovakia, Estonia, Hungary, Poland, Lithuania and Latvia – under 80%). As it can be noticed three great economies (Germany, France and United Kingdom) are not included in any of mentioned groups. These countries are put into their own G-3 group. The last grouping which is offered by some researchers is distribution by cardinal directions. So four groups: North (Belgium, Denmark, Finland, Netherlands and Sweden), South (Cyprus, Greece, Italy, Malta, Portugal, Slovenia and Spain), East (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia) and West (Austria, France, Germany, Ireland and United Kingdom) Next stage is choice of time periods to analyze. Research includes 14 years period (2000-2013) divided into three timelines: 2000-2004 – before EU enlargement; 2005-2008 – period of economic growth; 2009-2013 – period of recession and recovery (or stagnation) – in other words period of economic difficulties. The last methodological step is choice of indicators. This paper includes three macroeconomic indicators: GDP per person counted by PPP, investment per person counted by PPP and employment. It should be mentioned that selected indicators are evaluated ambiguously. For example, GDP has its followers (strategic EU documents, Barry, 2003; Begg, 2003) and critics (Buiter, 1993; Foutussi, 2009). Because of grouped countries analysis all indicators were modified by author. At the beginning, GDP and investment indicators were counted as conditional values. This means that EU-28 value has been taken as a base (EU-28 equals 100%) and current country’s value recounted proportionally to this. Next step was data grouping. GDP growth values for groups were

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counted as simple average. GDP, investment and employment values for groups were counted by simplified standard deviation formula: n

1 𝑉 = ∑(Ci − X) n i=1

where V – grouped value, Ci – country indicator’s value, X – EU base value (100% for GDP and investment; current value for employment), n – number of countries in group. Received data was put into figures. Macroeconomic indicators’ analysis overview This paper includes three macroeconomic indicators: GDP per person counted by PPP, investment per person counted by PPP and employment. It should be mentioned that selected indicators are evaluated ambiguously. Gross Domestic Product In general permanent convergence process between Old and New Member states can be recognized. Figure 1 shows that both EU-14 and EU-10 are tending to European Union average during all analyzed periods. Especially high convergence can be noticed before economic crisis in late 2008. Although there can be seen some slowdown (from EU-10 position) convergence takes place even during time of economic difficulties. This is the first sign of cohesion weakness during economic recession. Figure 1. Consolidated modified standard deviation of GDP of EU-14 and EU-10. 20,0 10,0 0,0 -10,0 -20,0

EU-14

-30,0

EU-10

-40,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-50,0

I period

II period

III period

From the other hand situation is not so evident when countries are divided into smaller groups. In figure 2 it can be seen that convergence becomes possible mostly because of higher growth rate of less developed countries (L-7). At the same time medium developed countries, despite of their gap compared with EU average, show no or weak convergence in first two periods. Situation changes during the last period when M-7 countries start to divergence from EU-28.

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Figure 2. Consolidated modified standard deviation of GDP of Member States grouped by development level. 30,0 20,0 10,0 0,0 -10,0 -20,0 -30,0 -40,0 -50,0

H-7 G-3 M-7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

L-7

I period

II period

III period

More developed countries (H-7 and G-3) stay at relatively same level all last 14 years. It is interesting that the strongest convergence between higher and medium developed countries was exactly during economic crisis in 2008-2009. Simultaneously least developed EU countries stopped to draw closer. This happened mostly because of Baltic States where economic fall down was biggest in EU at the moment. So there are four levels of Member States development in EU. Figure 3. Consolidated modified standard deviation of GDP of Member States grouped by geographical position. 30,0 20,0 10,0 0,0 -10,0 -20,0 -30,0 -40,0 -50,0

North South East

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

West

I period

II period

III period

Although very similar image can be recognized when countries are grouped both by geographical sides and development level there are some differences. First of all, it can be seen that level of North and West countries is almost the same. At the same time H-7 and G-3 results differs detectably. In common it can be said that there is strong correlation between geographical position of the country and its development level. Moreover EU can be recognized as three-level combination. Investment In comparison with GDP trends grouping EU Member States by investment trends seems similar situation. Just four-level EU becomes more obvious from this point of view. When countries are divided into EU-14 and EU-10 groups their investment trends change in different ways during different periods (Figure 4). There is one way (EU-10) convergence at the first period when EU-14 relative numbers are not changing and EU-10 indicators are rocking to EU average. Everything changes at the second period. Both-side convergence can be recognized then. 97


Figure 4. Consolidated modified standard deviation of investment of EU-14 and EU-10. 25,0 15,0 5,0 -5,0 EU-14

-15,0

EU-10

-25,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-35,0

I etapas

II etapas

III etapas

Next change starts at the end of the second period in years of economic crisis. At the moment divergence process takes place: EU-14 results are being closer to EU average while huge decrease of relative investment indicator takes place in EU-10 countries. This is one more sign that less developed countries are more exposed to negative impact of economic difficulties. From the 2010 divergence process starts in both groups. This is nowadays’ challenge for EU. Figure 5. Consolidated modified standard deviation of investment of Member States grouped by development level. 30,0 20,0 10,0 0,0 -10,0 -20,0 -30,0 -40,0

H-7 G-3 M-7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

L-7

I period

II period

III period

Even more apparent differences can be seen if countries are grouped into more groups. Let’s look at situation when they are divided into groups by development level (Figure 5). First of all it must be noted that there is no clear convergence or divergence process during any period. During the first period L-7 and G-3 tends to EU average. At the same time H-7 and M-7 countries move away and upper from EU-28. Such processes continue till the middle of the second period. From 2007 starts convergence between H-7, G-3 and M-7, but divergence of L7. Dramatic divergence set in the third period, especially from year 2010. From this moment investment in relatively more developed countries start to increase when investment in M-7 significantly decreased. In L-7 countries convergence of relative investment indicator has stopped. Interesting fact is that before crisis M-7 countries’ investment level was similar to G-3 level. More over it can be set that more developed countries are more attractive for investment.

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Figure 6. Consolidated modified standard deviation of investment of Member States grouped by geographical position. 25,0 15,0 5,0

North

-5,0

South

-15,0

East

-25,0

West

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-35,0

I period

II period

III period

Quite similar picture can be seen when countries are divided into groups by their geographical position (Figure 6). The same more or less convergence process in the first period till the middle of the second period. Also similar changes appear from turning points at 2007 and 2010. It can be indicated just that North countries are stable in their possibility to attract investment, when West countries has had problem with this from the beginning of the second period, East countries from 2008 and South countries from 2010. Employment Although from the first view employment trends in EU Member States seem similar to already presented indicators’ trends four-level allocation cannot be surely expected. There are more obvious three-level or two-level tendencies. Figure 7. Consolidated modified standard deviation of employment of EU-14 and EU-10. 3,5 2,5 1,5 0,5 -0,5 -1,5 -2,5 -3,5

EU-14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU-10

I period

II period

III period

So convergence between EU-14 and EU-10 during all 14 years period, in essence, is unquestionable (Figure 7). Of course, excluding recession period of 2008-2010 when relative employment in EU-10 countries went far away of EU average while EU-14 rates continued to get closer. The opposite image arises when Member States are grouped in more than two groups. In H-GM-L composition mostly can be recognized two-level situation (Figure 8). More developed countries’ (H-7 and G-3) values are above EU average while less developed countries’ (M-7 and L-7) are under. Inside of mentioned pairs trends are the same for two first periods and in pair M-L differs during the last one.

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Figure 8. Consolidated modified standard deviation of employment of Member States grouped by development level. 6,0 4,0 2,0

H-7

0,0

G-3

-2,0

M-7

-4,0

L-7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-6,0

I period

II period

III period

From the other side, more significant difference between H-7 and M-7 in employment level when in GDP level can partly explain M-7 countries’ difficulties during the third period. As for convergence-divergence viewpoint convergence takes place in all four groups during the first period, in three of them (H-7, G-3 and L-7) during the second period. Divergence starts for all groups in 2008 and continues for three groups (H-7, G-3 and M-7) during whole period. Exception becomes L-7 group which get closer to EU-28 from 2010. It can be recognized as three-level EU during the third period. Figure 9. Consolidated modified standard deviation of employment of Member States grouped by geographical position. 9,0 7,0 5,0 3,0 1,0 -1,0 -3,0 -5,0 -7,0

North South East

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

West

I period

II period

III period

The similar picture appears if countries are divided into groups by geographical sides. There are two-level trends during the first period and three-level trends during the last two (Figure 9). It can be seen convergence tend between all groups during the first period. So it is both-side convergence. But it changes in the second period when South countries’ indicator’s value start to decrease. So it becomes both-side convergence to three groups (North, West and East) and divergence to South. From 2010 both-side divergence takes place for three groups (with exception for East). The main difference is that North and West countries’ employment relative values all the time go in parallel. So it is the same direction (the one level) just with some margin between. Conclusion

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Statistical data analysis lets to state that two-speed Europe represented by Old and New Member States takes place in reality. Two tendencies can be seen through all three used indicators. Moreover convergence process can be ascertained between these two groups of countries. From the other point of view, countries’ distribution into more groups lets propose multi-trend Europe. Discussion of three-level or even four-level EU should be admitted. In general it can be said that EU Member States are divided into three levels of economic development: relatively stable G-3, higher developed H-7 and less developed M-7 – with potential of last two to divergence. Choice of three period timeline seems to be important because of significant differences of trends during these periods. Usually first two periods shows tendency to convergence for all groups. However trends split into different directions during the last period – period of economic difficulties. This allows to state that multi-levelism of EU reveal itself most notably in times of economic crisis. This is one of the main cohesion policy challenges of the last years. References Alesina, A., Grilli, V. (2006). On The Feasibility of a One-Speed or Multispeed European Monetary Union. Economics & Politics, Vol. 5 (2). Barry, (2003). Economic Integration and Convergence Processes in the EU Cohesion Countries. JCMS, Vol. 41. Beachill, B., Pugh, G. (1998). Monetary Cooperation in Europe and the Problem of Differential Productivity Growth: an argument for a ‘two-speed’ Europe. International Review of Applied Economics. Vol. 12 (3). Begg, I. (2003). Complementing EMU: Rethinking Cohesion Policy. Oxford Review of Economic Policy, Vol. 19. Breuss, F. (2013). Towards a New EMU. WIFO Working Papers, No. 447. Buiter, W., Corsetti, G. and Roubini, N. (1993) ‘Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht’. Economic Policy, Vol. 16. Dabrowski, M. (2010). The global financial crisis: Lessons for European integration. Economic Systems, Vol. 34 (1). Demertzis, M., Hallett, A.H. (1996). Two-speed System in Europe the Answer to the Conflict between the German and the Anglo-Saxon Models of Monetary Control? CEPR Discussion Papers. Fitoussi, J.-P., Sen, A., Stiglitz., J. (2009). Report by the Commision on the Measurement of Economic Performance and Social Progress http://www.stiglitz-senfitoussi.fr/documents/rapport_anglais.pdf; Gogas, P., Kothroulas, G. (2009). Two speed Europe and business cycle synchronization in the European Union: The effect of the common currency. MPRA Paper No. 13909. Hadjimichalis, C. (2011). Uneven geographical development and socio-spatial justice and solidarity: European regions after the 2009 financial crisis. European Urban and Regional Studies, Vol. 18 No 3. Lambertini, L., Miller, M., Sutherland, A. (1992). Inflation Convergence with Realignments in a Twospeed Europe. The Economic Journal, Vol. 102, No 411. Molle, W. (2006). The Economics of European Integration– Theory, Practice, Policy. Ashgate Publishing Company, 337 p.

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SECTIONS: FINANCE MANAGEMENT MATHEMATICAL MODELLING IN ECONOMICS AND FINANCE

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BEHAVIORAL FINANCE AND DIVIDEND POLICY ANALYSIS Assoc. Prof. Dr. Jekaterina KARTAŠOVA Mykolas Romeris University E-mail: [email protected]

Assoc. Prof. Dr. Rita REMEIKIENĖ Mykolas Romeris University E-mail: [email protected]

Assoc. Prof. Dr. Ligita GASPARĖNIENĖ Mykolas Romeris University E-mail: [email protected] Abstract. The paper aims to identify the importance of dividend policy in the context of behavioural finance. In the introduction the purpose, aim and tasks of the research are presented as well as the method used are named. The basic part reviews the key theoretical aspects of dividend policy and behavioural finance. Through the years, a lot of theories that trying to explain the “dividend puzzle” have emerged and they all cannot be mentioned. The authors of the paper pay attention on most famous and recent of them: the firms life cycle theory and clientele theories. The conclusions section summarizes the basic findings of the theoretical research presented in the paper. Keywords: dividend policy, behavioural finance, psychological biases, irrationality, corporate finance JEL classification: G02

Introduction The question about dividend policy establishment and why managers decide to pay dividends was and is attracting attention of scientists over the world and in nearest past sixty years especially, because of the rapidly changing in dividend policy of most companies. In support of this assumption, from time when Miller and Modigliani (1961) submitted classic corporate finance theory, almost 80% of American firms has been paying dividends to their shareholders, but in the beginning of 21st century, there left approximately only 25% of firm accepting those payments. This article describes known empirical facts about dividends that researchers has discovered over the recent years and provides authors own conclusions. The purpose of the paper is to insure the complex and conceptual approach to dividend policy in the context of behavioural finance. The aim of the paper is to provide basic findings of the theoretical research held by the authors, presenting the dividend policy in the lights of behavioural finance theory. In order to achieve this aim, the following tasks being settled: To highlight the importance of discussion dividend policy and its implication in practice as an important scientific object, To explain basic assumptions of dividend policy and show the links to behavioural finance, To focus practical attention to the implementation of dividend policy in real business through the perspective of behavioural finance. During the research, authors used the following scientific methods: literature analyses, evaluation of theoretical insights, synthesis of different point of view and scientific discussion. The basic finding of the research are presented in the below going section of the paper and are summarised in the conclusions.

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Dividend policy in the context of behavioural finance As known, one of the first works that attracts attention to dividends problem was Yale University’s professor Robert Shiller’s article that became classic (1981). Shiller using empiric data proved that share price is not equal to the present value of the expected future flow of dividends. In 1984 Shefrin and Stateman used prospect theory to explain investors’ preference into getting dividends, because they derive less utility from one big gain (e.g., a large capital gain) than from a series of small gains (e.g., a small capital gain and a dividend). In addition, in this article authors offered some additional behavioral theories to explain the “dividend puzzle”: the self-control theory, regret aversion theory and the theory of the clientele effect. The last one has got support in academic world and still is under attention of scientists. Through the years, a lot of theories that trying to explain the “dividend puzzle” have emerged and they all cannot be mentioned. We are going to pay attention on most famous and recent of them: the firms life cycle theory and clientele theories. In accordance with the firms life cycle theory, most of firms that pay dividends are tend to be more mature and less volatile. Grullon et al. (2002) suggest that firms that increase (decrease) dividends will have a future decline (increase) in their profitability. According to these authors, firms that exhaust their investment opportunities increase their dividends, and thus dividends indicate firm maturity rather than signaling future profitability. Within the framework of this theory there are several paper paying attention to the link between dividends and idiosyncratic risk. Venkatesh (1989) reports that idiosyncratic risk and the informational content of earnings decline following dividend initiation. Means that if idiosyncratic risk is high and there is lack of information, in most cases that will cause refusal to pay dividends. Bradley, Capozza, and Seguin (1998) and Chay and Suh (2008) explain the link between dividends and volatility in selection: Only firms with low cash-flow uncertainty feel comfortable in committing to paying dividends, an attitude consistent with the conservative managerial views in Lintner (1956) and Brav et al. (2005). Fink, Fink, Grullon, and Weston (2006) document that dividend-paying firms have lower idiosyncratic volatility. Hoberg and Prabhala (2008) determine that the disappearance of dividends (Fama and French, 2001) is associated with an increase in idiosyncratic risk. Ferreira and Laux (2007) and Fink et al. (2006), supporting the view that the decline in idiosyncratic risk is related to firm maturity, find that idiosyncratic risk is negatively correlated with the firm governance and firm age respectively. DeAngelo, DeAngelo, and Stulz (2006) and Denis and Osobov (2008) also find supporting evidence for the life-cycle theory: Firms are more likely to pay out dividends when their equity is earned through operations, rather than contributed by investors. This means that in accordance to need of permanent development for firms it would be less noticeable to pay dividends from earned capital, distributing gains in this case, than pay dividends from contributed capital when dividend expenses would be accepted as some kind of losses. Von Eije and Megginson (2007) provide similar tests for firms in the European Union but without finding evidence that firms are more likely to pay dividends out of earned rather than contributed capital. Another point of view on “dividends puzzle” problem give the clientele theory. This line of thinking suggests that investors may have different reasons for favoring dividends as a result of institutional features such as regulatory requirements or tax differentials, or from behavioral preference. In particular, Shefrin and Thaler (1988) assume that investors’ personal life-cycle expectations determine the predilection for dividends: Older investors favor dividend-paying stocks because they substitute for a regular employment income. In accordance to that, at our point of view, older investors prefer dividend-paying stocks because they are more interested 104


to get money in it “physical appearance”, because it looks less risky and they may be not interested enough in future capital gains (in long-term period), because simply they can be not alive when stocks will reach that. As is known, most of investors act based on selfish intentions, so the previously mentioned assumption has the grain of truth. In support of assumption that institutional features such as regulatory requirements or tax differentials have influence on dividend policy, academic economics world give several studies that find that supporting evidence in clientele theories. Brav and Heaton (1997) identify a preference to dividend payouts using the prudent man rules that require certain types of institutional investors to hold mature and thus dividend-paying firms. Allen et al. (2000) present a model in which dividends attract institutional investors because they are taxed less than retail investors, which in turn imposes a better governance structure. Dhaliwal, Erickson, and Trezevant (1999) and Seida (2001) find empirical evidence that supports the existence of tax-based clientele for dividends, but as authors mention this influence is too weak to have a decisive impact on decision of investors. Perez-González´ (2003) presents evidence that investors’ tax status affects firm dividend policy. Author find that dividend valuation increased when dividends were less tax-disadvantaged, but only for firms with individual large shareholders, because they more interested in reducing tax expenses according to their share in firms capital. These results again confirm that personal income tax rates affect dividend decisions, and provide strong evidence of the existence of tax clienteles. Hotchkiss and Lawrence (2002) find complementary evidence that firm returns are higher following dividends announcements for firms with institutional investors who favor dividends. Furthermore, based on a managerial survey, Brav, Graham, Harvey, and Michaely (2005) report that managers consider their investor preferences toward dividends when making dividendrelated decisions. In a recent paper, Barclay, Holderness, and Sheehan (2009) investigate whether corporations that have the lowest dividend tax bracket favor dividends. In a contradiction of previous findings, they find that corporate shareholders do not induce firms to pay dividends, but rather are concerned with improving the firms’ operating business. In our point of view it’s related to recent unstable and changing market situation after world’s crisis and development of emerging markets of BRICS countries. That cause investors be oriented on dividend reinvesting to strengthen the capital structure and business development in whole. Brav et al. (2005) provide a comprehensive survey of managers according to which, managers are skeptical about the relation between dividends and investor clientele and believe that institutional investors are indifferent to dividend decisions. Other studies fail to find support for the clientele hypothesis among institutional investors. One of those studies is study of Grinstein and Michaely (2005), that do not find supporting evidence for the clientele theory. They investigate whether institutional investors do indeed favor dividend-paying firms and find that institutions avoid investing in nonpaying firms, but nevertheless favor firms that pay low dividends over high ones. Would like to note, that researchers also proved dividend clientele’s existence among retail investors. Using data about retail investors’ portfolio holdings, Graham and Kumar (2006) find that older and low-income retail investors tend to hold a larger fraction of dividend-paying stocks than other investors do. The authors argue that older investors’ preference for dividends results from their desire for faster income, as was mentioned earlier, and that low-income investors have an advantageous tax status that makes dividends preferable. The authors also find that these classes of investors purchase dividend-paying stocks after dividend announcements, in keeping with the behavioral attention hypothesis that news attracts investors’ attention (Lee, 1992; Barber and Odean, 2008). According to Becker, Ivkovic, and Weisbenner (2007), firms are more likely to distribute dividends if they are located in geographical areas where investors tend to hold shares of local firms and if the investor base is 105


older. This evidence lends further support to the dividend clientele hypothesis and the relationship between investor preference and firm payout policy. In addition, Rantapuska (2008) uses Finnish investor-level trading data to find that tax status is a major determinant in the holding and trading of dividend-paying stocks: Investors with a preferable tax status with respect to dividends tend to buy dividend-paying stocks before the ex-day and to sell after the ex-day. Author mentioned finds that tendency to reinvest is low, even for large and unexpected dividend payments. This is consistent with a default choice bias, and is not due to dividend clientele effects. Reinvestment of tender offer proceeds is significantly higher, controlling for other important factors. This is consistent with mental accounting, i.e., cash flows from different sources are treated differently. Conversely, Michaely (1991), using aggregate data, finds no evidence for the effects of trading by long-term retail investors around ex-dates following the 1986 Tax Reform Act. Conclusions Summarizing all the above we can make conclusion about that the dividends are more acceptable by investors in comparison to earnings based on increasing of share price, in spite of that dividends are still a subject for double taxation and it’s the basic inefficiency of this mean of paying out cash. Behavioral theories give a lot of explanations of why firms prefer pay dividends to their investors. In our point of view, investors are more interested in dividends, because individuals like to feel and see real earnings, which make them think they have gains. Stable dividends in this context seem more reliable and less risky than capital earnings. Nowadays market situation shows that nothing is permanent and question why investors like dividends and why firms distribute them remains unresolved. To solve “dividend puzzle” researchers should use different traditional methods of research as well as pay attention behavioral finance theories based on empiric evidence. References Allen, Franklin, Antonio E. Bernardo, and Ivo Welch. (2000). A theory of dividends based on tax clienteles. Journal of Finance 55:6, 2499–536. Barber, Brad M., and Terrance Odean. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors.Review of Financial Studies 21:2, 785–818. Barclay, Michael J., Clifford G. Holderness, and Dennis P. Sheehan. (2009). Dividends and corporate shareholders.Review of Financial Studies 22:6, 2423–455. Becker, Bo, Zoran Ivkovic, and Scott Weisbenner. (2007). Local dividend clienteles. Working Paper, Harvard Business School, University of Illinois at Urbana-Champaign, and Michigan State University. Bradley, Michael, Dennis R. Capozza, and Paul J. Seguin. (1998). Dividend policy and cash-flow uncertainty.Real Estate Economics 26:4, 555–80. Brav, Alon, and James B. Heaton. (1997). The economic effects of prudent man laws: Empirical evidence from stock ownership dynamics. Working Paper, Duke University. Brav, Alon, John R. Graham, Campbell R. Harvey, and Roni Michaely. (2005). Payout policy in the 21st century.Journal of Financial Economics 77:3, 483-527. Chay, Jong-Bom, and Jungwan Suh. (2008). Payout policy and cash-flow uncertainty.Journal of Financial Economics 93:1, 88–107. DeAngelo, Harry, Linda DeAngelo, and Rene Stulz. (2006). Dividend policy and the earned/contributed capital mix: A test of the lifecycle theory. Journal of Financial Economics 81:2, 227–54.

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Denis, David J., and Igor Osobov. (2008). Why do firms pay dividends? International evidence on the determinants of dividend policy.Journal of Financial Economics 89:1, 62–82. Dhaliwal, Dan, Merle Erickson, and Robert Trezevant. (1999). A test of the theory of tax clienteles for dividend policies. National Tax Journal 52:2, 179–94. Fama, Eugene F., and Kenneth R. French. (2001). Disappearing dividends: Changing firm characteristics or lower propensity to pay? Journal of Financial Economics 60:1, 3–43. Ferreira, Miguel A., and Paul A. Laux. (2007). Corporate governance, idiosyncratic risk, and information flow. Journal of Finance 62:2, 951–89. Fink, Jason, Kristin E. Fink, Gustavo Grullon, and James P. Weston. (2006). Firm age and fluctuations in idiosyncratic risk. Working Paper, James Madison University and Rice University. Grinstein, Yaniv, and Roni Michaely. (2005). Institutional holdings and payout policy.Journal of Finance 60:3, 1389–426. Grullon, Gustavo, Roni Michaely, and Bhaskaran Swaminathan. (2002). Are dividend changes a sign of firm maturity? Journal of Business 75:3, 387–424. Hoberg, Gerard, and Nagpurnanand R. Prabhala. (2009). Disappearing dividends, catering, and risk.Review of Financial Studies 22:1, 79–116. Hotchkiss, Edith S., and Stephen Lawrence. (2002). Empirical evidence on the existence of dividend clienteles. Working Paper, Boston College. Itzhak Ben-David. (2010). Dividend policy decisions. Working Paper, The Ohio State University. Lee, Charles M. C. (1992). Earnings news and small traders: An intraday analysis. Journal of Accounting and Economics 15:2-3, 265–302. Lintner, John. (1956). Distribution of incomes of corporations among dividends, retained earnings and taxes. American Economic Review 46:2, 97–113. Michaely, Roni. (1991). Ex-dividend day stock price behavior: The case of the 1986 tax reform act.Journal of Finance 46:3, 845–59. Miller, Merton, and Franco Modigliani. (1961). Dividend policy, growth and the valuation of shares. Journal of Business 34:4, 411–33. Perez-Gonz ´ alez, Francisco. (2003). Large shareholders and dividends: Evidence from U.S. tax reforms. Working Paper, Stanford Graduate School of Business. Rantapuska, Elias. (2008). Ex-dividend day trading: Who, how, and why? Evidence from the Finnish market.Journal of Financial Economics 88:2, 355–74. Seida, Jim A. (2001). Evidence of tax-clientele-related trading following dividend increases. Journal of the American Taxation Association 23:1, 1–21. Shefrin, Hersh M., and Meir Statman. (1984). Explaining investor preference for cash dividends. Journal of Financial Economics 13:2, 253−82 Shefrin, Hersh M., and Richard H. Thaler. (1988). The behavioral life-cycle hypothesis. Economic Inquiry 26:4, 609–43. Venkatesh, P. C. (1989). The impact of dividend initiation on the information content of earnings announcements and returns volatility.Journal of Business 62:2, 175–97. Von Eije, Henk, and William L. Megginson. (2007). Dividend policy in the European Union. Working Paper, University of Groningen and University of Oklahoma.

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EFFECTS OF SERVICE EXPERIENCE AND POSITIVE WORD OF MOUTH ON REPURCHASE INTENTIONS: EVIDENCE FROM A LUXURY RESTAURANT Erdem AKKAN Mersin University E-mail: [email protected]

Kalender Ozcan ATILGAN Mersin University E-mail: [email protected]

Abstract. Experience may be a key phenomenon for marketers to manage their customer relationships. Because of services’ intangible nature, services more likely provide experience for their customers. This study investigates the issue of the relationships among service experience, positive word-of-mouth (WOM), service satisfaction, and repurchase intention that has been left unanswered in studies of marketing in the restaurant services context. By using the social media website of a luxury restaurant brand in Turkey, 170 customers were surveyed through snowball sampling. Findings of this study may assist service marketers in directing relationships with their customers and WOM intentions in order to provide repurchase behaviors. Keywords: Service experience, word-of-mouth (WOM), service satisfaction, repurchase intention, luxury restaurant. JEL classification: M31

Introduction Since services are experienced rather than providing ownership, experiential marketing applications are pivotal role in the sector (Pullman and Gross, 2004; Schembri, 2006). Service marketers continuously make efforts to provide pleasant experiences that will create value which assist to obtain customer loyalty and satisfaction. Word of mouth (WOM), which can simply be defined as informal communication about the characteristics of a business or a product that occurs between consumers (Christiansen and Tax, 2000), stands out as a highly information source when consumers exposed to numerous-generated communications that are designed to gain attention and alter behavior (Ng et al., 2011). WOM seems particularly important for marketing services. Consumers have found to rely on WOM to reduce the level of perceived risk and the uncertainty that are often with service purchase decisions (Mangold et al, 1999). There is empirical evidence in the literature that WOM affects customer satisfaction (File et al., 1992; Anderson, 1998) and repurchase intention (Davidow, 2003; Riegner, 2007). Aim of this study is to reveal potential relationships among service experience, positive WOM, service satisfaction and repurchase intention in a restaurant context. The rest of the paper is organized as follows. In the first section, theoretical background regarding consumers’ service experience, positive WOM, service satisfaction, and repurchase intention are presented. This section is followed by the methodology and the results of the research. The last section concludes with the implications of the study, its limitations and directions for future research. Theoretical Background Experience has been an interesting scope for many years in the marketing literature (Holbrook and Hirschmann, 1982; Arnould and Price, 1993; Schembri and Sandberg, 2002). Experiences occur when consumers search for products, when they shop for them and receive service and when they consume them (Brakus et al., 2009). Within this emerging “experience economy” 108


(Pine and Gilmore, 1998), service experience is a unique phenomenon that service firms win loyalty of their customers by contributing value throughout the service process and thus satisfy them (Walter et al., 2010). Edvardsson et al. (2005) define service experience as a service process that creates the customer’s cognitive, emotional, and behavioural responses, resulting in a mental mark, a memory; while Olsson et al. (2012) define it as the cognitive and affective response to any direct or indirect contact with the company or its resources. Components of service experience vary in the literature especially due to the relevant research scope. For instance, Verhoef et al. (2009) suggest that, service experience consists nine contributing factors in the retail context such as retail experience, self service technology etc. whereas Otto and Ritchie (1996) suggest four factors as components of service experience: hedonics, peace of mind, involvement and recognition. Walter et al. (2010) define the service experience in a restaurant in eight subcategories: social interaction, core service, physical environment, the restaurant, paid and payment procedure, the atmosphere, the guest, and the occasion. Lastly, Grace and O’Cass (2004) indicate that core service, employee service and servicescape are the significant dimensions of service experience. According to their definition, core service represents the processes by which the service is delivered whereas the employee service refers to the behaviors or performances of the employees in the delivery of the service, and servicescape is the physical environment of service given. Since service experience scale of Grace and O’Cass (2004) seems to be lean and useful, we used it as service experience scale in this study. Satisfied or dissatisfied customers from a product, service or experience tend to spread it out. In marketing and related disciplines, it is called word of mouth (WOM). Anderson (1998) defines WOM as informal communications between private parties concerning evaluations of goods and services rather than formal complaints to firms and/or personnel. In WOM communication, consumers should not perceive any commercial or marketing intent behind the statements in these sources of recommendations, or these communications can be considered WOM (Goyette et al, 2010). Even though WOM has always been prevalent, its reach has been limited by geography and technology (Christensen and Tax, 2000). At the early times, WOM occurred mostly among neighbors exchanging news on what was being offered by neighbourhood stores (Whyte, 1954, as cited in Goyette et al., 2010). Murray (1991) found that service consumers were more confident in personal sources of information, and personal information had a greater influence on service purchase decisions compared to tangible goods. Similarly, Morgan et al. (2003) demonstrate that negative WOM can have an overwhelming impact upon a destination image, as dissatisfied visitors spread unflattering comments related to their experiences. After conceptually explaining service experience and positive WOM, following hypothesis is proposed for empirical testing: H1: Service experience positively affects positive WOM. H1a: Core service positively affects positive WOM. H1b: Employee service positively affects positive WOM. H1c: Servicescape positively affects positive WOM. Athanassopoulos et al. (2001) indicate that customer satisfaction is associated with positive WOM communications. As positive WOM considered a powerful marketing medium for companies to influence consumers (Jansen et at al., 2009), and WOM is suggested as a possible marketing strategy to solve intangibility related problems especially in the hospitality context (Bojanic, 2008) we wonder whether service satisfaction affects positive WOM in our case. Therefore following hypothesis is proposed for empirical testing: H2: Service satisfaction positively affects positive WOM. 109


As we mentioned early, experiences creates values, and values makes customer loyalty and satisfaction. Bolton (1998) suggests that satisfaction level depends on the length of customers’ prior experience with the organization. She also indicates that if customers’ experiences are not satisfactory, the relationship is likely to be short. Therefore following hypotheses are proposed for empirical testing: H3: Service experience positively affects service satisfaction. H3a: Core service positively affects service satisfaction. H3b: Employee service positively affects service satisfaction. H3c: Servicescape positively affects service satisfaction. Conceptually, satisfaction is a purchase outcome, whereby consumers compare rewards and costs with anticipated consequences (Maxham III, 2001). In many industries customer satisfaction might be an ultimate goal, because it plays an important role in achieving customer loyalty and profitability (Barksy and Nash, 2003). Besides, it can be said that satisfied consumers more likely buy/use same branded products or services again than unsatisfied ones. From the marketer side, given that the cost of retaining an existing customer is less expensive than prospecting for a new customer, purchase intention is a very important consideration for them (Maxham III, 2001). For marketers it is assumed that customer satisfaction and purchase intentions are related. In the marketing literature, there are some evidence on the relationship between customer satisfaction and purchase intentions. For instance, LaBarbera and Mazursky (1983) indicate that purchase intentions are directly influenced by customer satisfaction. Additionally, Davidow (2003) suggests that satisfaction has a significant effect on repurchase intention. Therefore, following hypothesis is proposed for empirical testing: H4: Service satisfaction positively affects repurchase intention. WOM has also a correlation with repurchase intention. There is evidence in the literature that supports that idea. According to Katz and Lazarsfeld (1955, as cited in Lam et al., 2009) WOM is the most influential source of information for the purchase of many households and food products. In another example that was conducted on undergraduate students’ air conditioner purchase decisions, Sundaram and Webster (1999) demonstrated that the student’s evaluation of an unfamiliar brand was more susceptible to change from WOM than was their attitude toward a familiar brand. Therefore, following hypothesis is proposed for empirical testing: H5: Positive WOM positively affects repurchase intention. Methodology In this study a questionnaire (primary data) was used to collect data, in order to provide an understanding into how consumers relate service experience, positive WOM, service satisfaction, and repurchase intention. The questionnaire is developed by using established scales. Investigated variables for the service experience included the three sub-dimensions: core service (four-items), employee service (seven-items), and servicescape (four-items) (Grace and O’Cass, 2004). A six-item scale from Goyette et al. (2010) that employed in online WOM context was adapted to measure positive WOM. Service satisfaction was measured by using Westbrook and Oliver’s (1981) six-item, seven-point bipolar scale. Repurchase intention was measured by asking “What is the percentage chance that you will visit this restaurant?” to the respondent to rate their intent as a percentage from 0% to 100% similar to the study of Rust and Williams (1994). 110


Data were collected by using an online survey software. It is known that the Internet opens new ways to investigate in social and behavioral sciences. Specifically, the Internet to capture the “hard to reach” or “hard to involve” population by expand the size and scope of the sample (Baltar and Brunet, 2012). Also, Bhutta (2012: 57) observed that “online social networking sites (SNSs) offer new ways for researchers to conduct studies quickly, cheaply, and singlehandedly-especially when seeking to construct snowball samples for exploratory work”. It is believed that by using the social network channel of the restaurant, most of the representative samples can be reached. Thus, the sample of the study included visitors of social media website (Facebook) of a luxury restaurant in Mersin, Turkey, especially who had an experience in this restaurant. Since food, physical setting and service components in a restaurant contribute to overall satisfaction with the dining experience (Sulek and Hensley, 2004) one of the leading luxurious restaurants of the city of Mersin has been chosen as the sample. Another reason to choose a restaurant as a sample is that restaurant services represent the most common services such as interactions, customer involvement etc. (Walter et al., 2010). Since luxury services might reflect much more experiences, it is thought that choosing a luxury restaurant as a sample would be logical. By the nature of social media site, it can be said that participants were selected through snowball sampling like method. In order to identify possible problems in terms of clarity and accuracy, the questionnaire was pretested prior to main study. Based on comments and feedback of pretest results, several changes were made. Data were collected by means of the online survey employed from August 2014 to October 2014. From the 182 on-line questionnaire responses, 170 are considered effective samples. Findings Close-ended questions were coded and analyzed by statistical package software. The research is primarily descriptive in nature, thus descriptive statistics, correlation analysis and regression analysis were applied. Participants (n=170) were all citizen of Turkey with a range of age from 18 to 40 and over years. Majority of the sample was men (57.1%). 72.4% of the respondents were in the age group from 25 to 44, with 70.6% of them having a university degree (bachelor, master, or Ph.D). Regarding income levels, 53.6% reported an income higher than 4000 Turkish Liras. In the study, data analysis was performed at two stages. Firstly, a descriptive analysis was performed by calculating statistical means, standard deviations and bivariate correlations of all dimensions. Secondly, three regression models were developed and hypotheses were tested. Exploratory factor analysis using Varimax rotation was adopted in order to investigate the dimensionality of the instrument. If an item has a communality of less than 0.40, it may not be related to the other items, or suggest an additional factor that should be explored (Costello and Osborne, 2005). An item measuring servicescape was eliminated due to low communality (below 0.4) and low factor loading. Thus the number of items of original servicescape dimension was reduced from four to three. The results of the analysis of dimensions/factors are shown in Table 1. It was proved that data set of this study failed to provide four distinct dimensions. As a rule of thumb, factor loadings 0.50 or greater are considered “very significant” when the sample size is 50 and over (Hair et al., 1987: 249). Table 1: Factor Structure of the Scale 111


Factor Loadings Variables

Factor 1

Factor 2

Factor 3

Factor 4

Core service (Meals of this restaurant) Suits my needs 0,677 Is reliable 0,856 Good core service 0,618 Quality core service is superior 0,694 Employee service Provides prompt service 0,585 Willing to help 0,810 Never too busy for me 0,841 I can trust employee 0,798 Feel safe in transactions 0,703 Employees are polite 0,686 Gives personal attention 0,754 Servicescape Up-to-date facilities 0,869 Facilities are attractive 0,916 Facility suits service type 0,620 Positive WOM I recommended this restaurant. 0,841 I speak of this restaurant’s good sides. 0,807 I am proud to say to others that I am 0,704 this restaurant’s customer. I strongly recommend people to eat in 0,837 this restaurant. I mostly say positive things to others. 0,839 I have spoken favourably of this 0,796 restaurant to others. Kaiser-Meyer-Olkin Measure of Sampling Adequacy: 0,916 Bartlett’s Test of Sphericity Approx. Chi-Square:3079,380 Significance:0,000

Initial Eigenvalues 10,508

Variance explained 52,541

Cronbach’s α

2,072

10,361

0,929

1,558

7,790

0,743

1,142

5,712

0,939

0,897

Since the Eigenvalue for the four components is having an aggregate 76.4%, these four dimensions account for 76.4% of the model’s total variation. Also, the Meyer–Olkin statistic was found to be 0.916 showing that variable’s factor analysis is a good idea and the results are appropriate. Finally, the Bartlett’s Test of Sphericity value is 3079.38 (Sig.=0.000) meaning that the correlation matrix is not an identity matrix, and so strength of the relationship among variables is strong. Table 2: Descriptive Statistics and Correlations of Model Variables Variables 1. Core service 2. Employee service 3. Servicescape 4. Positive WOM 5.Service satisfaction 6.Repurchase intention

# of items 4 7 3 6 6 1

Mean 4,59 4,40 4,40 4,29 5,87 78,41

Std. deviation 0,61 0,68 0,57 0,85 1,37 25,72

1

2

3

4

5

6

1 0,698* 0,081 0,699* 0,695* 0,647*

1 0,029 0,703* 0,695* 0,619*

1 0,059 -0,090 -0,075

1 0,764* 0,809*

1 0,826*

1

* Correlation is significant at the 0.01 level (2-tailed).

Cronbach’s α coefficient varies from 0 to 1.0 and as a common rule of thumb, the indicators should have a Cronbach's α of 0.6 to judge the scale as internally consistent or reliable (Hair et al., 2002: 397). As Cronbach’s α coefficient for each dimension exceeded value of 0.74, all dimensions in this study are reliable. In order to test the existence of any correlations among the variables, Pearson correlation analyses have been employed. As can be seen from Table 2, there were significant correlations among variables except servicescape. 112


After conducting correlation analysis, multiple regression analyses were used in order to reflect the explanatory nature of the variables and thus examine the effects of variables in models. As can be seen from Table 3, three models were produced to test the hypothesized relationships. Table 3: Results of Regression Analyses Models Model 1 (Dependent variable: Positive WOM) Model 2 (Dependent variable: Service satisfaction) Model 3 (Dependent variable: Repurchase intention)

Variables entered (Constant) Core service Employee service Servicescape Service satisfaction (Constant) Core service Employee service Servicescape (Constant) Positive WOM Service satisfaction

β -0,508 0,287 0,289 0,116 0,288 -0,582 0,946 0,809 -0,329 -32,032 12,890

p 0,211 0,003 0,001 0,093 0,000 0,423 0,000 0,000 0,007 0,000 0,000

9,396

0,000

R2 0,668

F 82,976

Sig. 0,000

0,588

78,933

0,000

0,759

262,581

0,000

According to the results of first regression model (see Table 3), effects of core service and employee service experiences and service satisfaction on positive WOM of customers are found to be significant. In the second model, effects of all service experience dimensions (core service, employee service, and servicescape) on service satisfaction are found to be significant. In the third and the last regression model, it is found that customer satisfaction with restaurant services and positive WOM significantly affect repurchase intention of customers’ restaurant services. Therefore, hypotheses of H1a, H1b, H2, H3, H4 and H5 are all supported at p < 0.05, while H1c is not supported at p < 0.05. Conclusion With new communication tools that technology turned into virtual reality such as e-mail, blogs, and mobile applications, the importance of WOM has risen upwards. After experiencing some successful examples, that are related with WOM practices, companies are increasingly wishing to use WOM practices as a communication medium, marketing channel or even as a viral marketing tool. In one of the pioneering studies on WOM, Whyte (1954, as cited in Goyette et al., 2010) suggested that WOM happens mainly among neighbors, but today it happens worldwide, and extremely fast. For instance in 2009 there were more than 2 million tweets per day; in 2012 that number exceeded 250 million (Sotiriadis and van Zyl, 2013). Aim of this study was to explore the relationships with service experience, positive WOM, service satisfaction, service experience and repurchase intentions. In a similar vein with most of previous study evidence, all hypotheses except H1c are supported. Thus, we can not find any evidence that that servicescape positively affects positive WOM. May be this is because there is only one restaurant to be included in the study. It can be suggested to test the hypotheses in studies that covering multiple restaurants. According to the results we can say that core service positively affects positive WOM (H1a), employee service positively affects positive WOM (H1b), and service satisfaction positively affects positive WOM. In the study of Ladhari (2007), which is conducted on moviegoers, satisfaction also affects positive WOM activities. From this point of view, it can be said that both Positive WOM and service satisfaction are interrelated. Service satisfaction positively 113


affects positive WOM (H2). Core service positively affects service satisfaction (H3a), employee service positively affects service satisfaction (H3b) and servicescape positively affects service satisfaction (H3c). Similar results have found in previous studies. For instance, 16 U.S. companies that get customer experience creation score higher than 70%, experience creates unique value to the customer, difficult to be imitated by competitors, and provide a strong affect on satisfaction (Andajani et al., 2005). Service satisfaction positively affects repurchase intention (H4), and positive WOM positively affects repurchase intention (H5). In order to direct customers’ intense word of mouth and to ensure satisfaction, gaining successful service experience (especially core service and employee service) may be a key issue to provide positive WOM, eventually positive WOM and service satisfaction may provide repurchase intention and loyalty to service marketer. Besides the implications of the results, contributions of methodological issues such as sampling frame building and model construction may be discussed. Beyond the traditional sampling methods, in this paper, a new approach that uses social media site for snowball sampling has been operationalized. Snowball sampling virtually provides time and cost savings to researcher and flexibility in the geographical scope of the study (Baltar and Brunet, 2012). Perhaps constructing a structural equation model (SEM) would be an appropriate way for this study, sample size limitations which is a prerequisite (n>200) for SEM models (Iacobucci, 2010) has not been met because of low return rates within limited time in this study. In future studies, it is offered to address the effects of WOM in the service sector of luxury restaurants in different countries. Comparing the effects of WOM between different social networks is also offered for future studies. Furthermore, comparing the effectiveness of positive WOM between online and offline networks seems an interesting topic for future research. References Andajani, E., Hadiwidjojo, D., Rahayu, M., and Djumahir (2005). Customer experience model: social environment, retail brand and positive WOM. Research in Business and Management, 2(1), 25-41. Anderson, E. W. (1998). Customer satisfaction and word of mouth. Journal of Service Research, 1(1), 5-17. Arnould, E. J., and Price, L. L. (1993). River magic: extraordinary experience and the extended service encounter. Journal of Consumer Research, 20(1), 24-45. Athanassopoulos, A., Gounaris, S., and Stathakopoulos, V. (2001). Behavioural responses to customer satisfaction: an empirical study. European Journal of Marketing, 35(5/6), 687-707. Barsky, J., and Nash, L. (2003). Customer satisfaction applying concepts to industry-wide measures. Cornell Hotel and Restaurant Administration Quarterly, 44(5-6), 173-183. Baltar, F., and Brunet, I. (2012). Social research 2.0: virtual snowball sampling method using Facebook. Internet Research, 22(1), 57-74. Bhutta, C. B. (2012). Not by the book: Facebook as a sampling frame. Sociological Methods and Research, 0049124112440795. Bojanic, D. C. (2008). Hospitality marketing mix and service marketing principles, Chapter 3 in Hospitality Marketing Management, Reid, R. D., and Bojanic, D. C.(ed.), John Wiley and Sons. Bolton, R. N. (1998). A dynamic model of the duration of the customer's relationship with a continuous service provider: the role of satisfaction. Marketing Science, 17(1), 45-65. Brakus, J.J., Schmitt, B.H., and Zarantonello, L. (2009). Brand Experience: What is it? How is it Measured? Does it Affect Loyalty? Journal of Marketing, 73, 52-68.

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Costello, A.B., and Osborne, J.W. (2005). Best practices in exploratory factor analysis: four recommendations for getting the most from your analysis. Practical Assessment, Research and Evaluation, 10(7), 1-9. Christiansen, T., and Tax, S. S. (2000). Measuring word of mouth: the questions of who and when?. Journal of Marketing Communications, 6(3), 185-199. Davidow, M. (2003). Have you heard the word? The effect of word of mouth on perceived justice, satisfaction and repurchase intentions following complaint handling. Journal of Consumer Satisfaction Dissatisfaction and Complaining Behavior, 16, 67-80. Edvardsson, B., Enquist, B., and Johnston, R. (2005). Cocreating customer value through hyperreality in the prepurchase service experience. Journal of Service Research, 8(2), 149-161. File, K. M., Judd, B. B., and Prince, R. A. (1992). Interactive marketing: the influence of participation on positive word-of-mouth and referrals. Journal of Services Marketing, 6(4), 5-14. Goyette, I., Ricard, L, Bergeron, J., and Marticotte, F. (2010). e-WOM Scale: Word of Mouth Measurement Scale for e-Services Context. Canadian Journal of Administrative Sciences, 27(1), 5-23. Grace, D., and O’Cass, A. (2004). Examining service experiences and post-consumption evaluations. Journal of Services Marketing, 18(6), 450-461. Hair, J.F., Anderson, R.E., and Tatham, R.L. (1987). Multivariate Data Analysis, Second Edition, New York: Macmillan Publishing Company. Hair , J.F., Bush, R.P, and Ortinau, D.J. (2002). Marketing Research: Within a Changing Information Environment, Second Edition, McGraw-Hill. Holbrook, M. B., and Hirschman, E. C. (1982). The experiential aspects of consumption: consumer fantasies, feelings, and fun. Journal of Consumer Research, 132-140. Iacobucci, D. (2010). Structural equations modeling: Fit indices, sample size, and advanced topics. Journal of Consumer Psychology, 20(1), 90-98. Jansen, B. J., Zhang, M., Sobel, K., and Chowdury, A. (2009). Twitter power: Tweets as electronic word of mouth. Journal of the American Society for Information Science and Technology, 60(11), 2169-2188. LaBarbera, P. A., and Mazursky, D. (1983). A longitudinal assessment of consumer satisfaction/dissatisfaction: the dynamic aspect of the cognitive process. Journal of marketing research, 393-404. Ladhari, R. (2007). The effect of consumption emotions on satisfaction and word‐ of‐ mouth communications. Psychology and Marketing, 24(12), 1085-1108. Lam, D., Lee, A., and Mizerski, R. (2009). The effects of cultural values in word-of-mouth communication. Journal of international marketing, 17(3), 55-70. Mangold, W. G., Miller, F., and Brockway, G. R. (1999). Word-of-mouth communication in the service marketplace. Journal of Services Marketing, 13(1), 73-89. Maxham III, J. G. (2001). Service recovery's influence on consumer satisfaction, positive word-ofmouth, and purchase intentions. Journal of Business Research, 54(1), 11-24. Morgan, N. J., Pritchard, A., and Piggott, R. (2003). Destination branding and the role of the stakeholders: The case of New Zealand. Journal of Vacation Marketing, 9(3), 285-299. Murray, K. B. (1991). A test of services marketing theory: consumer information acquisition activities. The journal of marketing, 10-25. Ng, S., David, M. E., and Dagger, T. S. (2011). Generating positive word-of-mouth in the service experience. Managing Service Quality, 21(2), 133-151. Otto, J. E., and Ritchie, J. R. (1996). The service experience in tourism. Tourism Management, 17(3), 165-174.

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Olsson, L. E., Friman, M., Pareigis, J., and Edvardsson, B. (2012). Measuring service experience: Applying the satisfaction with travel scale in public transport. Journal of Retailing and Consumer Services, 19(4), 413-418. Pine, B. J., and Gilmore, J. H. (1998). Welcome to the experience economy. Harvard Business Review, 76, 97-105. Pullman, M. E., and Gross, M. A. (2004). Ability of experience design elements to elicit emotions and loyalty behaviors. Decision Sciences, 35(3), 551-578. Riegner, C. (2007). Word of mouth on the web: The impact of Web 2.0 on consumer purchase decisions. Journal of Advertising Research, 47(4), 436-447. Rust, R.T. and Williams, D.C. (1994). How length of patronage affects the impact of customer satisfaction on repurchase intention. Journal of Customer Satisfaction, Dissatisfaction and Complaining Behavior, 7, 107-113. Schembri, S. (2006). Rationalizing service logic, or understanding services as experience? Marketing Theory, 6(3), 381-392. Schembri, S., and Sandberg, J. (2002). Service quality and the consumer's experience: towards an interpretive approach. Marketing theory, 2(2), 189-205. Sotiriadis, M. D., and van Zyl, C. (2013). Electronic word-of-mouth and online reviews in tourism services: the use of twitter by tourists. Electronic Commerce Research, 13(1), 103-124. Sulek, J. M., and Hensley, R. L. (2004). The Relative Importance of Food, Atmosphere, and Fairness of Wait The Case of a Full-service Restaurant. Cornell Hotel and Restaurant Administration Quarterly, 45(3), 235-247. Sundaram, D. S., and Webster, C. (1999). The role of brand familiarity on the impact of word-of-mouth communication on brand evaluations. Advances in Consumer Research, 26, 664-670. Verhoef, P. C., Lemon, K. N., Parasuraman, A., Roggeveen, A., Tsiros, M., and Schlesinger, L. A. (2009). Customer experience creation: Determinants, dynamics and management strategies. Journal of Retailing, 85(1), 31-41. Walter, U., Edvardsson, B., and Öström, Å. (2010). Drivers of customers' service experiences: a study in the restaurant industry. Managing Service Quality, 20(3), 236-258. Westbrook, R. A., and Oliver, R. L. (1981). Developing better measures of consumer satisfaction: Some preliminary results. Advances in Consumer Research, 8(1), 94-99.

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FUZZY MODELS OF INVENTORY MANAGEMENT: A REVIEW Serhii Ziukov Yuriy Fedkovych Chernivtsi National University E-mail: [email protected] Abstract. The consideration of uncertainty in inventory control supposes a great advance. Models of inventory control, which do not recognize the uncertainty, can be expected to generate inferior results as compared to models that explicitly account the uncertainty. This paper analyze possible parameters of existing models of inventory control, and reviews a literature, devoted to models of inventory control under uncertainty. A classification scheme if defined. Keywords: Inventory management, uncertainty modelling, fuzzy sets JEL classification: D890; G31; O21

Introduction In the global competitive business environment, manufacturers must maintain optimum quantity of inventory to reduce cost and to maximize the efficiency of supply chain. Companies aim to supply the required amount of finished goods in right place and at right time with right cost. In this regard, inventory management has received extensive attention among the researchers. However, there is a paradoxical situation in the inventory control theory, on the one hand, almost every textbook about logistics has sections on inventory management, on the other hand - most of the companies, practically do not use analytical methods of inventory management. To deal with such situation, is appropriate to focus on the status and history analysis of the status and development of the inventory management theory. Even though there are literally millions of different types of products manufactured in our society, there are only two fundamental decisions that you have to make when controlling inventory: 1.

How large should an inventory replenishment order be?

2.

When should an inventory replenishment order be placed?

These two decisions are integral in the support of an overall inventory management program that typically has the objective of providing a desired level of customer service at a minimal cost. Inventory models are distinguished by the assumptions made about the key variables: demand, the cost structure, physical characteristics of the system. These assumptions may not suit for the real environment. There is a great deal of uncertainty and variability. Conventional inventory management approaches usually handles this uncertainty with stochastic methods. On the other hand, fuzzy logic is mentioned to be a useful approach to study uncertainty and variability. This paper analyze possible parameters of existing models of inventory control, and reviews a literature, devoted to models of inventory control under uncertainty. Mathematical inventory models, like all management science/operations research models, require the assignment of numerical values to the input parameters of the model. There is widespread agreement among inventory analysts as to the need of assigning such numerical values; however, the process of estimating the parameters is of concern. Wagner (1980) presents a comprehensive review of the practical problems associated with implementing 117


inventory control systems. A key issue identified in this review is the need for a thoughtful and scientific investigation of the issues relating to the specification of demand forecasts and costs related to inventory modelling. Usually, inventory systems are characterized by several parameters such as cost coefficients, demands etc. Consideration of inventory models dimensions deserves a special attention. Dimensions of inventory models Any model is an abstraction of reality. The idea is to have the model capture the essence of the real world problem in a parsimonious fashion. Silver (2008) presents a number of dimensions that summarize the most important considerations in inventory management. Single versus Multiple Items. This dimension considers whether a single item can be used in isolation for calculations, or whether multiple interdependent products should be taken into account, as a result of collective budget or space constraints, coordinated control, or substitutability between items. Time duration. In some inventory management situations, the selling season for products is short, and excess stock at the end of the season cannot be used to satisfy the demand of the next season. In such cases, a single period model is required. When multiple periods need to be considered, a common approach is to use a rolling horizon implementation approach. Here, decisions consider only a relatively small number of future periods, and are made at the start of each period. The decisions are then implemented in the current period, and the problem resolved at the start of the subsequent period. Number of Stocking Points. Sometimes it is appropriate to treat a single stocking point in isolation. In many real world cases, inventories of the same item are kept at more than one location. In multi-echelon situations, the orders generated by one location (e.g., a branch warehouse) become part or all of the demand on another location (e.g., a central warehouse). In addition, one can have horizontal multiplicity, that is, several locations at the same echelon level (e.g., several branch warehouses) with the possibility of transhipments and redistributions. The nature of product. The product type dimension identifies and considers certain product characteristics. For instance, a product may be perishable, consumable, repairable, or recoverable. Deterioration of an item in the storage period is a natural process. Therefore, it cannot be ignored in inventory policy. It may be different in different storage places due to the difference in environment. Nature of demand. There are a number of possible choices in modelling the demand process.  Deterministic demand. This type of demand does not have any variation. The amount of demand known or can be computed with certainty.  Deterministic demand that may vary. This type of demand varies with time, but the way in which the demand varies is known with certainty.  Stationary distribution with known parameters. This type of demands follows a probability distribution that is known or estimated from historical data. Commonly used distributions include the normal, gamma, Poisson. 

Stationary distribution with unknown parameters.

 Unknown stationary distribution. This type of demand follows a certain probability distribution, but it is unknown what probability distribution it is. 118


 Non-stationary probabilistic demand. This type of demand behaves like a random walk that evolves over time, with regular changes in its direction and rate of growth or decline. Nature of supply process. The nature of the supply process refers to any restrictions or constraints that have been imposed on the inbound processes of the supply chain. Minimum or maximum order size, or replenishment lead times are examples of typical factors considered in this dimension. Silver (2008) identifies three possible forms of lead-time. The first form is where the lead-time of each replenishment is known; the second is where replenishments arrive after a random time; and the final form is where seasonal factors may affect the time it takes for an order to be fulfilled. A supplier usually has limited capacity; therefore, order size restrictions are taken into account in this dissertation. In addition, lead-time is assumed to be a constant and known value. Each model of inventory control try to take into account the parameters listed above, or make assumptions about their value. The more number of dimensions to be taken into account in the model the greater the model will meet the requirements of the real environment. Uncertainty in inventory control models It’s a challenging task to obtain realistic input values for the mathematical inventory model parameters. The decision-making person performing this task, is often operating in a environment, with unknown parameters. In inventory control, it is associated with uncertainty of customer demand rates, manufacturing, and delivery lead times. The models and methods of decision-making in existing theory of inventory management are usually focused on deterministic parameters and modules do not meet the full requirements of the real environment. In such cases, fuzzy models of inventory management take important place. Fuzzy set theory suggests methods of dealing with imprecision and uncertainty in quantitate way. Fuzzy logic is widely used in solving problems of riskology, problems of artificial intelligence as in building expert systems, and in combination with artificial neural networks. The theoretical basis of fuzzy logic constitute the fuzzy sets, proposed by Zadeh (1965). It has gained widespread prominence as a means to model vague data in production management applications. Galbraith (1973) defines uncertainty as the difference between the amount of information required to perform a task and the amount of information already possessed. In the real world, many forms of uncertainty affect production processes. Ho (1989) categorizes them into two groups: environmental uncertainty and system uncertainty. Environmental uncertainty includes uncertainties beyond the production process, such as demand uncertainty and supply uncertainty. System uncertainty is related to uncertainties within the production process, such as operation yield uncertainty, production lead-time uncertainty, and quality uncertainty, failure of production system and changes to product structure, to mention some. A new stage in the theory of inventory management is the emergence of models taking into account uncertainty. The classification of these models deserves a review (Figure 1).

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Figure 1: Fuzzy models of inventory control classification By purpose   

By period

Economic order quantity models Economic production quantity models Joint economic lot sizing models

 

By type of inventory monitoring  

Continuous review system models Periodic review system models

Single-period models Multi-period models

By quantity of items  

Single-item models Multi-item models

Source: J. Mula (2006). Economic order quantity models For the fixed order size inventory models, the economic order quantity (EOQ) model is most well-known. The task of calculating of economic order quantity lies in minimization of total costs, connected with product's order and stocking. However, the coefficients of model may be fuzzy. Park K.S. proposed one of the first single product inventory models with fuzzy parameters on the base of Harrison model (Park, 1987). Chen and Wang (1996), Roy and Maiti (1997), Yao et al. (2000) and Chang (2004), have extended the well-known EOQ inventory model to fuzzy versions. Table 1: Economic Order Quantity Model Model input parameters Model

Order Quantity

Order Cost

Holding Cost

Annual Demand

Park (1987)

Crisp

Fuzzy

Fuzzy

Crisp

Lee and Yao (1999)

Fuzzy

Crisp

Crisp

Crisp

Yao et al. (2000)

Fuzzy

Crisp

Crisp

Fuzzy

Yao and Chiang (2003)

Crisp

Crisp

Fuzzy

Fuzzy

Wang et al. (2007)

Crisp

Fuzzy

Fuzzy

Crisp

Source: Jaber M.Y. Inventory management: Non-classical view (2009).

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Economic production quantity models Economic Production Quantity model (EPQ model) determines the quantity a company or retailer should order to minimize the total inventory costs by balancing the inventory holding cost and average fixed ordering cost. An early treatment of the formulation of the EPQ model is found in Eilon (1956). Modified Economic Production Quantity models with different schemes of fuzzy input parameters have been proposed by Lee and Yao (1998), Chang (1999), Lin and Yao (2000), Hsieh (2002). Lee and Yao fuzzified the demand quantity and production quantity per day in the model (Lee, 1998). The purpose of this paper was to investigate a computing schema for the EPQ ‘n the fuzzy sense. Joint economic lot sizing models Inventory models that address issues of inventory coordination between a buyer and seller have been extensively studied in the literature. This class of inventory models is commonly referred to as joint economic lot sizing (JELS) models. The objective of these models is the development of a jointly coordinated buyer–seller inventory strategy that is more beneficial to each member’s individual noncoordinated inventory strategy. One of the first attempts was made by Lam and Wong (1996), extending the existing model of Dolan. They applied fuzzy mathematical programming to solve the joint economic lot size problem with multiple price breaks. Single and multiple incremental price discounts are modeled as fuzzy numbers. Das K., T. K. Roy, and M. Maiti. proposed a buyer-seller fuzzy inventory model for a deteriorating item, where deterioration is subject to discount (Das, 2004). In this paper, multiobjective joint economic lot size models are developed in both crisp and fuzzy environments. Here, the objectives are to minimize the buyers total average cost and to maximize the seller's average revenue. A fuzzy goal programming methodology is used to solve the model. Ouyang et al. (2006) introduced defective items into the JELS model. The study applies various modeling methods to manage the defective rate in an integrated vendor-buyer inventory model. Three cases are investigated: crisp defective rate, triangular fuzzy defective rate, and statistic fuzzy defective rate. In these two fuzzy cases, the signed distance procedure is applied to estimate the joint total expected cost in fuzzy sense. Yang presented a stylized model to find the optimal strategy for integrated vendor-buyer inventory model with fuzzy annual demand and fuzzy adjustable production rate (Yang, 2007). For the model, Signed distance's ranking method for fuzzy number is employed to find the estimation of the joint total expected annual cost in the fuzzy sense and the corresponding order quantity of the buyer derived accordingly. Single-period models The newsvendor model is a single-period, probabilistic inventory model whose objective is to determine the order quantity that minimizes expected underage costs (costs due to shortage) and overage costs (costs due to holding inventory). First single-period inventory models were designed by Petrovic D. (1996), who has formulated a conception of second level fuzzy set, methods of s-fuzzification and arithmetic defuzzification.

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Ishii, H., and T. Konno (1998) introduced fuzziness of shortage cost explicitly into the classical newsboy problem. They investigated the so-called fuzzy newsboy problem where its shortage cost is vague and given by an L shape fuzzy number. Then the total expected profit function considered to be a fuzzy number. An optimal ordering quantity realizing the fuzzy max order of the profit function (fuzzy min order considering the profit function) was found and compared with the optimal ordering quantity of the non-fuzzy newsboy problem. Kao and Hsu proposed a single-period inventory model with fuzzy demand (2002). This paper concentrates on possibilistic situations, in that the demands are described by subjectively determined membership functions. For each order quantity Q, a fuzzy total cost composed of the procurement cost, shortage cost, and holding cost is associated with it. Dutta et al. presents a single-period inventory problem in an imprecise and uncertain mixed environment (Dutta, 2005). The aim of the paper is to introduce demand as a fuzzy random variable. To determine the optimal order quantity a new methodology was developed for this model in presence of fuzzy random variable demand where the optimum is achieved using a graded mean integration representation. To illustrate the model the classical newsboy problem was considered. Multi-period models In real-world applications, inventory and production decisions are interdependent and temporal in nature. Fuzzy logic has been useful in formulating multi-period lot sizing models. The review of multi-period models is described in Table 2. Table 2: Fuzzy Multi-period Inventory Models Model Sommer (1981)

Kacprzyk and Staniewski (1982) Lee et al. (1990)

Lee et al. (1991) Liu (1999)

Key Model Attributes Uses fuzzy dynamic programming to determine optimal inventory and production levels in a real-world integrated multi-period inventory and production scheduling problem for an organization engaged in a planned withdrawal from a market. Applies fuzzy set theory to determine an optimal aggregate inventory replenishment strategy subject to a set of long-term management objectives. Introduces fuzzy logic into material requirements planning (MRP) by defining period demand as a fuzzy number. A fuzzy part period balancing algorithm is developed. Extends their previous research on multiperiod fuzzy lot sizing and introduces fuzzy versions of the Wagner–Whitin and Silver–Meal lot sizing models. Applies fuzzy decision making to investigate optimal inventory policy for a multiperiod inventory system with partial back orders.

Source: Jaber M.Y. Inventory management: non-classical view (2009).

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Conclusion In the past years, the efficiency of inventory management has become an area of major concern in business. New inventory models for managing the inventory levels are now available. This paper has presented a literature survey about models of inventory control under uncertainty. Analysis of fuzzy inventory control models was given. The features and disadvantages of their use as elements of the theory of inventory management. Most of fuzzy inventory control models focus on one type of product. The most common dimensions to be considered as fuzzy variables are demand, the cost of acquisition. Each model, based on some assumptions, has its benefits and disadvantages, but still many authors continue to design inventory control models using such approach as fuzzy logic. The existence of such quantity of models shows that fuzzy set theory is one of appropriate methods, which can suppose a great advance in inventory management. The emphasis in each review was to identify how fuzzy set theory was used in the formulation of the inventory model. The classification and review of models is quite general and can be extended. References Chang, S.-C. (1999). Fuzzy production inventory for fuzzy product quantity with triangular fuzzy number. Fuzzy Sets and Systems. 107(1):37–57. Chang, H.-C. (2004). An application of fuzzy sets theory to the EOQ model with imperfect quality items. Comput. Oper. Res. 31(12):2079–2092. Chen, S.H. and Wang, C. C., (1996) “Backorder Fuzzy Inventory Model Under Functional Principle", Inf. Sci., 95, 71-79 Das, K., T. K. Roy, and M. Maiti. (2004). Buyer-seller fuzzy inventory model for a deteriorating item with discount. Int J Syst Sci 35(8):457–466. Dutta, P., D. Chakraborty, and A. R. Roy. (2005). A single-period inventory model with fuzzy random variable demand. Math Comput Model 41(8/9):915–922. Eilon, S. 1956. Economic lot sizes in batch production. Engineering 182(4729):522–523. Galbraih, J., (1973) Designing Complex Organizations. Addison-Wesley, Reading, MA. Ho, C. (1989) Evaluating the impact of operating environments on MRP system nervousness. International Journal of Production Research 27: 1115-1135 Hsieh, C. H. (2002). Optimization of fuzzy production inventory models. Information Sciences 146(1/4):29–40. Ishii, H., and T. Konno. (1998). A stochastic inventory problem with fuzzy shortage cost. European Journal of Operational Research, 106(1):90–94. J. Mula, R. Poler, JP. Garcia-Sabater, FC. Lario. (2006). Models for production planning under uncertainty: A review. Int. J. Production economics 103 (1), 271-285 Jaber M.Y. (2009) Inventory management: non-classical view. Boca Raton:CRC Press, 228 p. Kacprzyk, J., and P. Staniewski. (1982). Long term inventory policy-making through fuzzy decision making. Fuzzy Set Syst 8:117–132. Kao. C. and W. K. Hsu, (2002) “A Single-period inventory model with fuzzy demand,” Computer and Mathematic with Application, 43,841-848.

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Lam, S. M., and D. S. Wong. (1996). A fuzzy mathematical model for joint economic lot size problem with multiple price breaks. European Journal of Operational Research. 95(3):611–622. Lee, H. M. and J. S. Yao, (1998) “Economic production quantity for fuzzy demand and fuzzy production quantity”, European Journal of Operational Research, 109, 203-211. Lee, H. M. and J. S. Yao, (1999) “Economic order quantity in fuzz sense for inventory without backorder model” Fuzzy Sets and Systems, 105, 13-31. Lee, Y. Y., B. A. Kramer, and C. L. Hwang. (1990). Part-period balancing with uncertainty: A fuzzy sets theory approach. International Journal of Production Research 28(10):1771–1778. Lee, Y. Y., B. A. Kramer, and C. L. Hwang. (1991). A comparative study of three lot-sizing methods for the case of fuzzy demand. Int J Oper Prod Manag 11(7):72–80. Lin, D.-C., and J.-S. Yao. (2000). Fuzzy economic production for production inventory. Fuzzy Sets and Systems. 111(3):465–495. Liu, B. (1999). Fuzzy criterion models for inventory systems with partial backorders. Ann Oper Res 87:117–126. Ouyang, L.-Y., K.-S. Wu, and C.-H. Ho. (2006). Analysis of optimal vendor–buyer integrated inventory policy involving defective items. Int J Adv Manuf Tech 29(11/12):1232–1245. Park, K. S, (1987) “Fuzzy-set theoretic interpretation of economic order quantity,” IEEE Trans. System, Man, Cybernetics, SMC-17, 1082-1084. Petrovic, D., R. Petrovic, and M. Vujosevic. (1996). Fuzzy models for the newsboy problem. International Journal of Production Economics, 45(1/3):435–441. Roy, T. K. and Maiti, M., (1997) “A Fuzzy EOQ model With Demand Dependent Unit Cost Under Limited Storage Capacity", European Journal of Operational Research, 99, 425-432. Silver, E. A. (2008). Inventory management: An overview, Canadian publications, practical applications and suggestions for future research. INFOR, 46(1):15-28. Sommer, G. (1981). Fuzzy inventory scheduling. In Applied systems and cybernetics, vol. VI, edited G. Lasker, 3052–3060. New York: Pergamon Press. Wagner, H. M. (1980). Research portfolio for inventory management and production planning systems. Operation Research 28(3):445–475. Wang, X., W. Tang, and R. Zhao. (2007). Fuzzy economic order quantity inventory models without backordering. Tsinghua Sci Tech 12(1):91–96. Yang, M. F. (2007). Optimal strategy for the integrated buyer-vendor model fuzzy annual demand and fuzzy adjustable production rate. Journal of Applied Science 7(7):1025–1029. Yao, J. S., Chang, S.C. and Su, J. S., (2000) “Fuzzy Inventory Without Backorder For Fuzzy Order Quantity and Fuzzy Total Demand Quantity", Comput. Oper. Res., 27, 935-962. Yao, J.-S., and J. Chiang. (2003). Inventory without backorder with fuzzy total cost and fuzzy storing cost defuzzified by centroid and signed distance. European Journal of Operational Research 148(2): 401–409. Zadeh, L.A., (1965) Fuzzy Sets. Information and Control 8: 338-353

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EVALUATION OF SOCIO-ECONOMIC REGIONAL DEVELOPMENT: FUZZY CLUSTERS AND DYNAMIC ANALYSIS Katsiaryna NAVITSKAYA Yanka Kupala State University of Grodno E-mail: [email protected]

Abstract. The paper presents the result of evaluation of Grodno socio-economic development in 20082012. The concept includes the estimation on lower level of regional economy (17 regions and the main city Grodno). We used two concepts and compare its results. At first we received fuzzy clusters of regions with similar socio-economic development and membership functions by one factor - gross regional product. Then we made multicriteria fuzzy clusters based on 28 indexes. We analyzed region’s transitions in dynamic by these two concepts and identified main factors of Grodno socio-economic regional development. Keywords: regional development, membership function, fuzzy clusters. JEL classification: C63

Introduction The management of regional socio-economic development attracts more attention nowadays. It’s connected with comprehension that methods of management of national development can’t be used without adaptation. Most of countries have a multitier system of regions and there’re specific methods of high regional management. But local regional development also has particularities which require a new approaches and techniques. The relevance of this topic in Belarus can be revealed by National Program of Socio-Economic development and National Strategy of Sustainable development. The increase of interest to local regional analyzes can be proof by a lot of research on this topic. L. Servillo and others (2012) explores territorial attractiveness for migration and it impact to the socio-economic development. J. Mawson (2007) presents the UK experience in local governance. B. Blazevic and A. Jelusic (2006) developed a model of regional economic and tourism development. All of the researchers confirm that local regional development as a system consists of complex and multidiscipline problems. The purpose of this research is to develop the method of analyze of socio-economic development on local regional level based on fuzzy clustering. The following problems should be solved for this purpose: to find out the particularities of local regional management, to develop the system of indexes, to collect data and to calculate integral indexes, to receive fuzzy clusters by multicriteria and by integral index, to compare results and make a conclusions. The test subject area of this research is local regions of Grodno (Belarus). We analyzed socioeconomic development in 2008-2012 based on 28 indexes of 17 region and city Grodno. The following methods were used in the research: fuzzy k-mean clustering, factor analysis, correlation analysis, principal component analysis. The analysis of competitiveness of Grodno’s region was made by V. Lialikova (2013). She used principal component analysis for receiving the integral index and then made 4 robust clusters with homogeneous groups of regions. But the absence of gradual transitions leads to sharp jumps of regional competitiveness rating. 125


In Section 1 the basic definition like local region, socio-economic development evaluation and regional competitiveness will be clarified. In section 2 data based on system of indexes of regional evaluation will be collected. We will analyze the data by correlation method and factor analysis. We will receive the integral index by principal component analysis and by calculating gross regional product. In section 3 the method of fuzzy clustering will be described and applied to Grodno data. We used two concepts: single and multi-dimensional fuzzy clustering. We will analyze membership functions and dynamic of socio-economic development. At the end we will draw some conclusions. 1. The Issue of Local Regional Development Before start the analysis of regional socio-economic development it’s important to clarify the definition of region and local region. In Russian and Belarusian science region can be present in two meanings. By one meaning, region is the territory limited by the existing administrative-territorial segmentation. By other, region is territory limited by any signs of interrelating (population, geographical conditions and others). In this paper region is considered in first meaning because only administrative segmentation has authorities and opportunities to manage of socio-economic development. The administrative-territorial segmentation in Belarus includes 6 high regions named oblast and city Minsk. Every oblast is divided in local regions named rajon. In Belarus there’re 118 rajons including 17 in Grodno’s oblast. Let’s consider the features of region governance. The region governance can be seen in two aspects. In one side region is seen as an independent system with its own resources and goal to increase the life’s quality of the local population. In other side the region is considered as a subsystem of the state (or the high regional formation). The aim of region’s functioning in this aspect is to find out resources for national economic growth. These two aspects relate and condition each other. So, when we are talking about competitiveness of region we should take into account that they are not only fighters for each other because they are elements of one system. But they are interesting in individual results of the local and high region the same time. The system of local government includes departments and agencies with dual subordination to the ministry and to the local executive committee. Therefore, the inter-departmental barriers may lead to a slowdown in decision-making although the linear submission to the chairman of the executive committee. Sometimes it leads to duplication of functions, data collection and absence of clear zones of control. The most of problems and issues of socio-economic regional development is complex, complicated and multiplex. It means that in regional decision-making we should take into account a lot of factors, indexes and constrains. The benchmark data for the analysis can be received from different sources: statistical data in official statistic collections, regional legislation, information of large enterprises and so on. But there’s not a single data source of regional socio-economic development for external users. 2. The System of Indexes for Evaluating Local Regional Development

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Regional socio-economic development as a complex concept should characterize by large number of different criteria combined in some groups. The structure of this system in high regional level is shown in figure 1. Figure 1: System of criteria of regional socio-economic development evaluation

Source: Navitskaya, 2014. We didn’t add any indexes of education (as Barkley, 2011) because in local regions (of Grodno) there’s not high education institutions and the secondary education is mandatory in Belarus. We haven’t open data about population with high education in local regions and there’re very small property of PhD’s in region. We received the data for the indexes for Grodno’s local regions in 2008-2012. Using of the principal components analysis makes it possible to receive factors which have the greatest impact for general variance. In this analysis we didn’t take into consideration city Grodno. We received that first principal component retains 51.99% of the variance. This is not enough for using the value of this component as a ranking value of regional development estimation (Aivazyan, 2001). This component is determined by following indexes: regional budget, investments, retail trade, paid services, receivables and payables, employment value, industrial production, goods turnover and value of constructions. All of these indexes are important factors of economic development in industrial society. It lets us to make a conclusion that Belarusian economy is not at the post-industrial step yet. The second principal component retains 13.3% of the variance. This component is mostly determined by rural factors (livestock capita and productivity of yield). We can see that in our system of indexes there’s not any criterion connecting with information and communication technologies. This is due to the absence of these indexes at local regional level. The gross regional product (GRP) isn’t calculated for local regions. It’s one of the most important criteria of socio-economic development (Vu, 2010). GRP is conceptually equivalent to Gross domestic product (GDP) but in practice it’s measured only by production approach. Let’s consider the final expenditure approach. It assumes the household’s and government’s expenditures, investments and net export. In statistical collection we can find data of investments, export and import in local regional level. The regional government’s expenditures can be measured as regional budget. Its value is enshrined in the regional legal acts approved by the local executive committees. The value of household’s expenditures can be evaluated as expenditures for goods and services. We can receive the values in statistical collections as 127


indexes of retail sales and the cost of paid services. We can see that all this factors (except export) were included in first principal component. For verifying our model we calculated gross regional product at high regional level and compare it with the official values. We applied this methodology for Belarus regions (6 oblasts and city Minsk) in 2008-2012. We received that there’s a discrepancy between two values (official and calculated). But when we analyzed the degree of each region in total (for official and calculated values) and compare it with non-parametric Wilcoxon criteria we went to the conclusion that there’s not a significant discrepancy between two samples. So we can use this methodology for evaluating the share of each local region in the economic reward of high region. Thus this index can be attested as the level of socio-economic development of the local region. 3. The Fuzzy Clustering of Local Regions. One-dimensional Fuzzy Clusters Fuzzy clustering is a tool for classification (grouping) of economic objects. Diaz B. and others (2006) applied it to the economy sectors and received the key sectors of Spanish economy. In this paper we apply techniques based on the use of fuzzy set theory and the method of fuzzy k-means cluster analysis. The calculations were made in MS Excel. The author’s software was used for construction of membership functions. The construction of membership functions often bases on expert opinion. This gives the share of subjectivity and requires a lot of time. There is a method (Shtovba, 2001), which offers the construction of the membership functions using fuzzy clustering results. The algorithm is iterative. Given the large number of samples and the number of the considered criteria (in multidimensional analysis), the software module for constructing membership functions using the method of fuzzy k-means was developed in the language of Visual Basic for Application of MS Excel for automation of calculations. As we have the share of each local region in the economic reward of high region, we divided all local region in clusters by this index firstly. One of the important questions is how many clusters should we have. In this research we make 4 clusters. We used this number because usually city Grodno has a huge result (over 33% of GRP) and the rest regions are divided into three groups: low, medium and high level of socio-economic development. It’s interesting to use fuzzy clusters because it’s impossible instantaneous transition from one group to another. The membership function shows the degree of membership of each local region to each group. The example of membership function is shown in the figure 2.

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Figure 2: The membership functions of fuzzy clusters of Grodno local regions in 2012. 1,2 1 0,8

Cluster 1

0,6

Cluster 2

0,4

Cluster 3

0,2

Cluster 4

0 0

5000

10000

15000

20000

25000

We can make a math model of each membership function for every year and compare its dynamics. For example the transformation of membership function for cluster with low and medium development in 2008-2012 is shown in the figure 3. Figure 3: The membership functions of first and second fuzzy cluster of Grodno local regions in 2008-2012. 1,2 1 2008

0,8

2009

0,6

2010 0,4

2011

0,2 0 -0,2

0

200

400

600

800

1000

1200

2012 st 1 2nd

The value of GRP was adjusted by price rising coefficient. We can see that membership functions were changed in dynamics. The result, which shows 80% of membership of second cluster (medium development) in 2011, is 80% of first cluster (low development) in 2008. We can see how the financial crises of 2009 and 2011 had impacted to the economy. And we can see a good result of all regions development in 2012. This type of analysis lets us to make historical conclusions. We can see that Belarusian economy wasn’t stabile last years. That’s why the results of membership function compiled by all data (2008-2012) will be not so good for prediction. In stable economy we can use membership functions for fuzzy clusters definition by value of GRP. We made this analysis for Grodno regions to show its possibilities. The results are shown in the figure 4.

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Figure 4: The membership functions of fuzzy clusters of Grodno local regions in 2008-2012. 1,2 1 0,8 0,6 0,4 0,2 0 0

2000

4000

6000

8000

-0,2 1,2 1 0,8

cluster 1 cluster 2

0,6

cluster 3

0,4

cluster 4

0,2 0 1 9 17 25 33 41 49 57 65 73 81 89

At the left figure we can see the value of membership functions by value of GRP, at the right – by serial number of the case. The right figure shows that most of cases belong to clusters with low and medium development. We can make a conclusion that over half cases belongs to the low development cluster. The mathematical equations for these functions are follows:

1, x  (0;360)  F1 ( x)   0,0031x  2,117, x  (360;680) 0, x  (680; )  0, x  (0;360) 0,0028 x  1,002, x  (360;715)  F2 ( x)  1, x  (715;840)  0,0014 x  2,177, x  (840;1600)  0, x  (1600; )

0, x  (0;887) 0,0013x  1,1531, x  (887;1650)  F3 ( x)    0,00034 x  1,5612, x  (1650;4590) 0, x  (4590; ) 0, x  (0;2300)  F2 ( x)  0,00042 x  0,95231, x  (2300;4650) 1, x  (4650; ) 

The research confirms that there is a high degree of differentiation of Grodno’s local regions development. Only Lida’s region’s development corresponds to the high level development 130


cluster in 2008-2012. But a good sign is that Volkovysks’s region has an attachment to this cluster (not more than 0,24) in 2010,2012 and Smorgon’s region belongs to it in 2012 for 0,07. Multi-dimensional Fuzzy Clusters We can compare our result with multi-dimensional fuzzy clustering. For this analysis we should use all the indexes (figure 1). Membership functions are based on the set of indexes. We can’t receive an analytical form of the functions, but only a set of points in the multi-dimensional space. The graphical display of the results based on the value of input data is impossible and their interpretations become difficult. The result was some different from one-dimensional clustering. As we include in our system some rural indexes, city Grodno, which hasn’t agriculture, received some attitudes to other clusters (in 2009 and 2011). In 2012 Lida’s region belong to the fourth cluster for 0,0034. When we analyzed the high development cluster we received that Volkovysk’s region in 2012 belonged to this cluster for 0,85. This region is two times smaller than Lida’s, but has a very good indexes in rural and social spheres. The attitude to this cluster was showed also by Slonim’s region (up to 0,48). This fact can be explained by the value of regional budget. Let’s compare these results with previous researches. V.Lialikova (2013) received more optimistic results. 6 regions are in the high development cluster in 2011. We received only 3 regions with more than 70% of membership and 1 with 50% membership to better cluster. So the fuzzy clusters can show the slow progressive in regional development. One of the drawbacks of this concept is that we take all indexes as equivalent. It would be interesting in future to complete the software by adding a possibility to take into account the importance of indexes. Moreover it makes sense to develop integrated criteria for the various areas of regional socioeconomic development and to construct a multi-dimensional membership functions based on a smaller number of baseline factors. We can make a conclusion that multi-dimensional fuzzy clusters better reflect the comparative level of socio-economic development. But high degree of interdependence between indexes does not allow receiving much different results. The difficulty of interpretation and using of the result of multi-dimensional fuzzy clustering in future leads to the need of building and using some integral criteria. Conclusion The method of fuzzy clustering was applied to regional socio-economic development evaluation. This allows receiving the affiliation of each region to groups of different level of development. The estimation was made based on system of indexes including social and economic criteria. Moreover it takes into account the dual nature of regions (its rivalry and cooperation). The analysis includes fuzzy clustering by multicriteria and by integral index. Although the using of a large number of factors lets to evaluate the development of local regions of the more multifaceted, its result is not much different from the analysis, using only one complex criterion. 131


This criterion is an integral indicator calculated by summing retail trade turnover and paid services to the population, the value of gross investment, the regional budget and net exports. We received some analog to gross regional product. Of course this criterion is not the same as gross regional product but the value of impact to the high regional formation economy it can show with a high degree of reliability. The local regional economy can characterize by strong correlation dependence between indexes. But the lacks of statistical data that characterize the current stage of development of the information economy don’t let us to receive the impact of services and knowledge to the result of socio-economic development. The local regional development in Belarus in these circumstances can be characterized only as industrial and labor-intensive. There’re inequalities in regional socio-economic development. Most local regions have a low and medium contribution to the socio-economic development. For changing this situation the government should attract investments to local regions. The using of fuzzy clusters in socio-economic development analysis can show gradual transition of regions. It’s possible to make a historical analysis based on this method or analyze factors of local regions evolution and use it in future for prediction of development. References Aivazyan, S. (2001) Межстрановой анализ интегральных категорий качества жизни населения (эконометрический подход) (60). М.: ЦЭМИ РАН. Barkley, D. and Dudensing R.M. (2011) Industrial Legacy Matters: Implications for the Development and Use of Indices of Regional Competitiveness. Economic Development Quarterly, vol. 25: pp. 130 142. Blaževic, B. and Jelušic A. (2006) Modelling regional economic development. Kybernetes, Vol. 35 Iss 7/8 pp. 1190 – 1202. Diaz, B. and Moniche, L. and Morillasa, A. (2006) Fuzzy Clustering Approach to the Key Sectors of the Spanish Economy. Economic Systems Research, Vol. 18, No. 3, pp. 299 – 318. Lialikova, V. and Maskolus A. (2013) Конкурентоспособность регионов Республики Беларусь: основные факторы и методика оценки. Проблемы развития экономики и сферы сервиса в регионе (77-80). Сыктывкар: Mатериалы VII Междунар. науч.-практ. конф. Mawson, J. (2007). Regional governance in England: past experience, future directions?. International Journal of Public Sector Management, Vol. 20 Iss 6 pp. 548 – 566. Navitskaya, K. (2014) Основные факторы прогнозирования ВРП Гродненской области. Экономика и управление, №1: pр.111-115. Servillo, L. and Atkinson, R. and Russo, A.P. (2012) Territorial attractiveness in EU urban and spatial policy: a critical review and future research agenda. European Urban and Regional Studies, vol. 19, 4: pp. 349-365. Shtovba, S. (2001) Введение в теорию нечетких множеств и нечеткую логику. Matlab & toolboxes. Retrieved April, 15, 2013 from http://matlab.exponenta.ru/fuzzylogic/book1/index.php Vu Quang Viet (2010) Gross regional product (GRP): an introduction. United Nations Statistics Division. Retrieved August 12, 2013 from http://unstats.un.org/unsd/economic_stat/China/background_paper_on_ GRP.pdf

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ANALYSIS OF SIMULATION EXPERIMENTS WITH SHADOW AND LEGAL ECONOMIES INTERACTION MODEL Vasyl GRYGORKIV Yurii Fedkovych Chernivtsi National University E-mail: [email protected]

Igor VINNYCHUK Yurii Fedkovych Chernivtsi National University E-mail: [email protected]

Abstract. In this paper the mathematical model of legal and shadow economies interaction with advanced economic structure of society is built. This model allows us to determine the dynamics of the savings of economically active population and prices on the shadow and legal products. The simulation experiments make it possible to investigate the factors of the shadow economy legalization. Keywords: shadow economy, the economic structure of society, savings, price, simulation JEL classification: O17; E26

Introduction Ukrainian economy analysis confirms that it has many negative effects, including illegal production and illegal wages, tax evasion, bribery, corruption. In the last years we could see many studies dedicated the shadow economy investigation, in which different approaches and instruments are used. One of the most common approaches is panel data usage to understanding what factors influence on shadow economy rate. Alm and Embaye used dynamic panel data model for estimating the shadow economy using the currency demand method (Alm and Embaye, 2013). They found that the currency to M2 ratio tends to be higher the higher the economic return from underreporting, the weaker the enforcement capacity of the tax administration and the higher the inflation rate. They also have the results that the estimated size of the shadow economy varies significantly by income level, with lower-income countries having a larger shadow economy. Gonzalez-Fernandez, M., and Gonzalez-Velasco, C. analyzed using panel data the relationship between the shadow economy and corruption as determinants of public debt (GonzalezFernandez and Gonzalez-Velasco, 2014). Their results show that the volume of the shadow economy and corruption both have positive and significant impact on regional public debt, but corruption impact is lower that of the shadow economy. Gomis-Porqueras, P. and other authors using dynamic general equilibrium model quantified the size of the shadow economy (Gomis-Porqueras et al., 2014). They founded the negative relationship between the size of the underground economy and inflation at a country level in most monetary models. Elgin C. and Uras B.R. studied the relationship between sovereign risk and size of the shadow economy (Elgin and Uras, 2013). The authors have proved that there is a strong casual relation between shadow economy and measures of sovereign default risk and country’s public indebtedness. In transitional societies, we can observe a high level of shadow economy. In this connection particular importance should be attached to modelling of the shadow and the legal economies interaction.

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Vitlinskii V. and Koliada Y. have constructed the mathematical model of dynamics of cooperation of corruption, shadow and legal economies (Vitlinskii and Koliada, 2010). They have got analytical expressions of majorant type in relation to the evaluation of component's volumes and a degree of risk of their coexistence. Koljada Y. and Semashko E. have extended stated above results using planar dynamic model which describes the economic state of society where coexist official and illegal economy (Koliada and Semashko, 2014). They obtained formulas for risk assessment coexistence of legal and shadow economies. The result can be used to predict at arbitrary time t. The quality of prediction depends on the coefficients of the mathematical model, initial conditions and scope of the legal economy. Gubarieva I. presented another methodical approach to the construction of scenarios of economic development of the regions of Ukraine that is based on the concept of system dynamics, takes into account the impact of the shadow economy and enables to select a set of government regulation instruments (Gubarieva, 2013). The proposed simulation model reflects the fundamental processes taking place in the region in forms of material, financial and information flows. Leaning on the results of the model operation, the author substantiated the choice of scenarios of socio-economic development of Kharkov region taking into account shadow economy. Svetunkov S. in his book “Complex-Valued Modeling in Economics and Finance” described the possibility of modeling the shadow economy by means of complex-valued functions (Svetunkov, 2012). Using the theory of complex numbers the model to estimate the cost of fixed assets used in illegal production, number of employees involved in the shadow economy and GDP of the shadow economy was constructed. However, calculations in this model are fairly arbitrary due to the lack of reliable data. These publications, as well as several others, are aimed or at assessing the impact of the shadow economy to economic development, or estimating quantities or determining how influence different social and economic changes to the shadow economy. The aim of this research is to study the direct interaction processes between legal and shadow economies taking into account the economic structure of society. For this goal, the mathematical model of the economy with shadow sector was constructed. Model of legal and shadow economies interaction with extended economic structure of society We have designed the general model for the legal and shadow economies interaction that develops and expands the results of the macroeconomic dynamics modeling (Cherniavskii et al., 2002), including the results obtained in previous works (Grygorkiv and Vinnychuk, 2008; Grygorkiv, 2008; Buyak and Vinnychuk, 2009; Vinnychuk and Ziukov, 2013). Let us assume that society can be structured by groups of its members (elements) that had or have relation to the economy and are divided into the following groups (clusters): non-working pensioners (their number is  n0  ); real sector workers  n1  ; business owners or entrepreneurs

 n2  ; workers of budget organizations (employees)  n3  ; pensioners working in the real sector  n4  ; pensioners working in budget organizations  n5  ; elite (high-ranking officials and executives)  n6  . 134


Let  i

 0  i  1





be a part of saving of the i -th group representatives i  0,5 , that they

use to buy legal products buying, аnd 1   i  be a part of savings used to buy illegal products.  x   x  Denote by Gi   i i  demand function for legal goods and services, and by Gi*  1   i  i  p  p  * demand function for shadow product or service, and Gi  0   Gi  0   0 . Note that the price of the aggregate good or service is considered to be the same everywhere. Businessman allocate their savings x2 into three parts, which are constants for the simulated period of time:  2 is a

part used for personal needs,  2 is a part used for bribes,  2 is a part used for production needs (  2   2   2  1 ). Part of the money  2 x2 goes to shadow production, and the rest

1    2 x2

goes to legal production ( 0    1).

The value of legal FL  L  and shadow FS  S  products is described by production functions that are dependent on capital intensity of the one workplace. Let us describe differential equations that model the changes in savings and goods prices. The rate of change of pensioners’ savings is equal to the difference between their income and consumption expenditures and possible bribes:   1   0  x0    x  dx0  p  r0  G0  0 0   G0*    .  dt p p     

(1)

Workers of real sector have a legal income (salary r1 ) and possible shadow income (salary r1* ). Their costs consist of the income tax kr1 ( k is the income tax rate in legal economy), “shadow taxes” k *r1* ( k * is the income tax rate in shadow economy; it could be a part of the income used for shadow structures), and costs for consumption and possible bribes. A variation of x2 can be modeled by the differential equation   1  1  x1    x  dx1  p  r1 1  k   G1  1 1   r1* 1  k *   G1*   . dt p   p    

(2)

Incomes of entrepreneurs depend on the product sales and corresponding costs. This volume consists of products sold in the market to consumers of all social groups and products ordered by government  . The first part of the legal sector expenditure includes expenses for salaries of workers of the second and fifth social groups (it is proportional to the production output in the legal economy with coefficient  ) and payroll tax ( k1 is the tax rate), and the other part of costs is production costs (  is the share of these costs) and the value-added tax ( k 2 is the tax rate). The similar situation we have in shadow economy, where the first part of the costs is the salary of second and fifth groups (it is proportional to the production output in the shadow economy with * coefficient  ) and “the shadow payroll tax” on “the shadow salary fund” ( k1* is the tax rate). The third part includes costs for bribes. The dynamics of x2 can be described by the next equation

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  n2  x   x  dx2 p  6 x    ni Gi  i i     G2*   2 2    n1  n4  F   2 1    2  1  k1   dt n2  i 0 p  p   p  n1  n4  i2  n2  n x  x   *  n1  n4  F *   2  2  1  k1*    n1  n4  F  2  2 1    2     k2   p p  n1  n4  n1  n4   n2 x     n1  n4  F *   2  2    *  k2*  p   n1  n4 

(3)

The officials income includes salary r3 reduced by the tax rate k , and smaller part  3 of the total amount of bribes and the value d 3* of the misappropriated state property. Their costs are composed of goods consumption and possible bribes. Thus, the dynamic equation for the savings of a person from the fourth group is as follows: 6   x  ni Gi*  (1   i ) xi / p   n2G2*   2 2    dx3   p   d*   p r3 1  k    3 i 0,i  2 3 dt  n3  n5  n6   

(4)

 x   (1   3 ) x3   G3  3 3   G3*   , p  p   

where d 3* is the amount of misappropriated public funds by this group members. Pensioners working in the real sector receive a taxable pension, legal salary and extra "shadow" income. Their costs include consumption and possible bribes. Changes of such pensioner savings can be described by the equation   1   4  x4    x  dx4  p  r0  r1 1  k   r1* 1  k *   G4  4 4   G4*    . (5) dt p   p    

Pensioners working in budget organizations receive nontaxable pensions r0 , taxable salaries, possible bribes (share  5 ) and misappropriated of public funds d 5* . Expenses consist of consumption and costs for possible bribes. The dynamics of their savings is formalized as follows:

  6 x2   * *    ni Gi  (1   i ) xi / p   n2G2   2   dx5   p    d*   p r0  r3 1  k    5  i 0,i  2   5 dt  n3  n5  n6       

 x   (1   5 ) x5   G5  5 5   G5*   p  p   

(6)

136


6

Elite savings x6 we can find from the condition of constancy

n x i 0

i i

 d of the total amount

of money d in society. The unit price of aggregate product may be considered as constant in the studied period of time, but also can be modeled using a differential equation that reflects its dependence on the supplydemand balance of goods in the market:

6  x dp   p  ni Gi  i i dt  p  i 0

    

  n2  n x  x    n1  n4  F   2 1    2    n1  n4  F *  2  2  2   p p   n1  n4  n1  n4 

(7)

де  p – proportionality factor describing the lag of the market. To solve the system of differential equations (1) – (7) it is necessary to specify the initial conditions. Consider x0  0  , x1  0  , x2  0  , x3  0  , x4  0  , x5  0  , p  0  are known, and to





have specific models of the functions F , F * , Gi , Gi* i  0, 6 and values of the parameters

 , ni  i  0, 6  , r0 . r1 , r3 , i  i  0, 6  , r1* , k , k * ,  ,  p , d 3* , d 5* ,  , k1 , k2 , k1* , k 2* ,  ,  * ,  , * , d . Empirical Analysis To analyze the interaction patterns of shadow and legal economies interaction information system "Shadow economy" was developed. It includes a core based on a MatLab functions and graphical user interface designed using Microsoft Visual Studio 2012. Information system "Shadow economy" is used to set the initial conditions of the model (1) - (7) and to construct trajectories of model's solutions. Let us consider some of the simulation results with the dynamics model and compare the results in two cases: a) the government actively combat the shadow economy, increasing the risk of liability for the conduct illegal business; b) state by its policy or inaction stimulates the development of the shadow economy. In fig. 1-a) the dynamic of non-working pensioners savings in the first case is shown and in the fig. 1-b) the dynamic in the second case is shown. As shown in fig. 1, in the first case pensioners’ savings grow rapidly first and then slowly approach the horizontal asymptote. The dynamic of the pensioners’ savings is affected by the emergence of demand for products of the second category that is visible at the point t  1 . This follows from the inflection analysis in fig. 1-a and 1-b.

137


Figure 1: The dynamic of non-working pensioners savings

а) b) Source: generated by authors using information system “Shadow economy” In fig. 2 the dynamic of workers savings is shown. This dynamic is completely dependent on the price of the aggregate product. In the first case, workers savings have only one inflection point and then approach a horizontal asymptote. The shadow wage is, usually, higher than regular due to the lower taxes in the shadow economy, so the savings in the second case will increase rapidly. Figure 2: The dynamic of non-working pensioners savings

а) b) Source: generated by authors using information system “Shadow economy” Comparing with workers who work in the real sector, pensioners (group 4) have similar fluctuations in the saving’s dynamic (fig. 3-a, 3-b). However, pensioners working in the real sector, in addition to salaries receive incomes in the form of pensions. Thus, the dynamic of their savings has a smooth character of oscillations in comparison with workers who do not receive pensions (Fig. 2-a, 2-b).

138


Figure 3: The dynamic of pensioners working in the real sector savings

а) b) Source: generated by authors using information system “Shadow economy” Figure 4 shows the dynamics of businessman savings. Figure 5: The dynamic of businessman savings

а) b) Source: generated by authors using information system “Shadow economy” The model solutions show that the businessman savings grow steadily throughout a given period of time. In the first case (fig. 5-a) there is a point of inflection, which slows the growth of businessman savings. This point coincides with the inflection point of decrease of aggregated product price. As we can see, faster growth is the main reason for businessman to take part in the shadow economy (fig. 5-b). This is especially due to the possibility of tax evasion. The shadow tax accounted in the model is, usually, less than legal, that is why the transfer of the shadow economy in the legal one should be based on tax adjustment policy. The graphs of model solutions simulating employees of budget organizations savings (fig. 6) and pensioners working in budget organizations savings (fig. 7) show the same patterns. These graphs have characteristic inflection in growth area, which is associated with the emergence of demand for the products of the second category. The common trend in savings of employees working in the public sector is fluctuating increase to the local maximum followed by a decrease in savings to a horizontal asymptote. The savings of pensioners working in budget organizations grow more slowly than other employees of budget organizations because of additional benefits in the form of pensions. In addition, as it is mentioned in the assumptions, pensioners working in budget organizations receive a larger part of bribes, which also affects the smoothness of the savings dynamic.

139


Figure 6: The savings dynamic of employees of budget organizations

а) b) Source: generated by authors using information system “Shadow economy” The comparison of the savings dynamic (fig. 6, fig. 7) shows that savings in terms of legalization in the short term grows more slowly than the savings in terms of shadowing. However, in the long-run period in terms of the economy legalization we can see further increase after a slight slowdown. Figure 7: The savings dynamic of pensioners working in budget organizations

а) b) Source: generated by authors using information system “Shadow economy” In Fig. 8 graph that simulates the dynamic of price of the aggregated product is shown. In the developed model in terms of the growth of the shadow economy the price of the aggregated product first increases rapidly, then decreases and again increases monotonically (fig. 8-b). Figure 8: The price of the aggregated product dynamics

а) b) Source: generated by authors using information system “Shadow economy” Fig. 8-b shows the decrease of the price that it is caused due to the partial production in the shadow sector. It is noteworthy that the price starts to increase at the same time when savings 140


of public sector employees achieving its maximum value. This effect can be observed in the case of the crisis, when prices begin to rise and the state cannot at the same pace raise salaries of public sector employees. Conclusion Based on computational experiments with a complex of models of the legal and shadow economies interaction the dynamics of solutions was analyzed. In the case of the shadow economy, we can observe a significant decrease of savings in all groups. This fact refutes the myth that the shadow economy is cost-efficient to employees of budget organizations and promotes their welfare. Such situation is observed only in the short term. Therefore, it can be argued that an active policy regarding legalization of the economy will improve the welfare of people with constant income. Economic analysis of simulation results shows that the shadow economy can be overcome. It is necessary to implement a set of measures that take into account the general macroeconomic trends of legal and shadow sectors interaction. References Alm, J., and Embaye, A. (2013) Using Dynamic Panel Methods to Estimate Shadow Economies Around the World, 1984–2006, Public Finance Review, 41(5): 510-543. Buyak, L., Vinnychuk, I., (2009) Modelling of shadow economic activity in Ukraine, Scientific Bulletin Of Chernivtsi University: Series “Economics”, 456: 130 – 138. Chernavskii, D.S., Starkov, N.I., Shcherbakov, A.V., (2002) On some problems of physical economics, Physics-Uspekhi. 45 (9): 1045 – 1066. Elgin, C., Uras, B.R., Public debt, sovereign default risk and shadow economy, Journal of Financial Stability, 9 (4): 628–640. Gomis-Porqueras, P., Peralta-Alva, A., Waller, C., (2014) The shadow economy as an equilibrium outcome, Journal of Economic Dynamics & Control, 41: 1–19. Gonzalez-Fernandez, M., and Gonzalez-Velasco, C. (2014) Shadow economy, corruption and public debt in Spain, Journal of Policy Modeling Grygorkiv, V., Vinnychuk, I., (2008) Mathematical modeling of the shadow economy, The twelve’s International Scientific Conference devoted to the memory of Academician M. Kravchuk, Kyiv: 43 (Ukrainian). Grygorkiv, V. S., Buyak, L. M., Pauchok, V. K. (2008) Modeling the interaction of legal and shadow economies at the macrolevel, Cybernetics and Systems Analysis, 44(1) : 100-106. Gubarieva, I. (2013) Dynamic simulation of the regional socio-economic development scenarios under the shadow economy impact, Izvestiya of Irkutsk State Economics Academy, №5 (91) : 57-61. Koljada, Y., Semashko, E. (2014) Dynamic risk coexistence legal and shadow economy through plane nonlinear mathematical model of economic dynamics, “Young Scientist”, № 6 (9) : 145-147 Svetunkov S. (2012) Complex-Valued Modeling in Economics and Finance. – New York : Springer : 318 p.

141


Vinnychuk, I., Ziukov, S. (2013) Shadow economy in Ukraine: modelling and analysis, Business Systems & Economics, 3(2) : 141-152. Vitlinskii, V., Koliada, Y. (2010) Analytical evaluation of dynamics of risk of economic evolution taking into account corruption and shadow economy, Scientific Bulletin Of Zaporizhzhya National University, №1(5): 84 – 88.

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NONLINEAR MODEL OF OPTIMAL GROWTH IN ECOLOGICALLY BALANCED ECONOMY Olena VINNYCHUK Yurii Fedkovych Chernivtsi National University E-mail: [email protected]

Vasyl GRYGORKIV Yurii Fedkovych Chernivtsi National University E-mail: [email protected]

Ruslan BILOSKURSKII Yurii Fedkovych Chernivtsi National University E-mail: [email protected] Abstract. Economic growth is one of the key tasks for leading and developing countries. The influence of environmental factors on the economic growth is so significant that it should be taken into account in the economic growth modeling. The presented paper suggests a nonlinear model of economic growth considering the ecological balance. The mathematical theory of optimal control has been selected for the research of economic growth model. This theory allows us to build the desired control system, that shows in what ways it is possible to influence the behavior of economic growth model. Keywords: economic growth, sustainable development, ecological balance, optimal control JEL classification: O44; E27 Introduction Economic growth is an extremely complex socio-economic phenomenon. The main purpose of economic growth is to increase the economic benefits, which improves people's lives, creating a stable favorable socio-political situation in the country, increasing its international prestige. The authors of economic growth theories do not claim to create an universal theory. Because each theory or model have appropriate assumptions and abstractions that allow to highlight and explore various aspects of economic growth. Models of economic growth play an essential role in economic and mathematical studies since the 30s of the twentieth century. In particular, E. Domar (Domar, 1957), R. Harrod (Harrod, 2002), P. Samuelson (Samuelson, 1947), R. Solou (Solow, 1956), F. Ramsey (Ramsey, 1928) were engaged in specification on issues of economic growth by developing appropriate models. It should be noted that different aspects of economic growth modeling are described in (Acemoglu, 2008; Charles, 1998; Novales & Ruiz, 2014). Given the ecological situation in the world and the problem of natural resources scarcity, we can claim that economic growth of any country should be based on the principles of sustainable development. This fact determines the relevance and significance of the methodology development problem for long-term economic growth in terms of ecological and economic balance, i.e. sustainable development. Such interaction of the environment and human factors should be considered within a single eco-economic system on any level and combine economic, natural and social processes interrelated to each other. There is a huge amount of literature on economic development problem and environmental sustainability analysis (Cuaresma, 2010; Shieh, 2014; Cherniwchan, 2012; Wan Lee, 2011). 143


The literature concerns problems of measuring and implementation of sustainable development in eco-economic and environmental policies. Nevertheless, complexity and diversity of the ecoeconomic systems and sustainable development require further investigation with the aim of new methods construction (or perfection the existing ones) for the solving socioeconomic tasks and saving natural-resources potential to ensure economic growth. Thus, the aim of the article is modeling of economic growth involving environmental constraints (taking into account the conditions of the ecological balance of the system, i.e., compliance with sustainable development) and software development using Matlab for solving and analyzing the model. A large number of constructed models addresses various issues of sustainable development. Among these models we can single out some devoted to mathematical modeling of ecological and economic interactions (Onishchenko, 2006; Lyashenko et al., 2006; Rumina, 2000). In this article, the nonlinear model of economic growth of ecologically balanced economy is proposed (Hryhorkiv, 2004). To investigate the model mathematical theory of optimal control was chosen (Krotov, 1990). The transition of control system from one state to another can be done in many ways. This fact raises the question of choosing a path that from some points of view would be most beneficial. The optimal solution must provide information about marginal economic potential, knowledge of which allows setting realistic goals and formulating the problem of managing of the economic system. Тhe nonlinear model of optimal growth in ecologically balanced economy Let the economy consists of basic (material) and secondary (auxiliary) productions. Auxiliary production destroys the pollutants that are formed during the functioning of basic production. Primary production associated with a production including pollution and auxiliary production (treatment plant) is concerned only with the destruction of pollutants. The dynamics of this economy will be described by following variables:

t is the time variable, W  t  is the industrial consumption (the part of gross production that is recycled), X  t  is the gross product, Y  t  is the final product, C  t  is the unproductive consumption, I  t  are the total investments, I b  t  are the investments in basic (material) production, I z  t  are the investments in auxiliary production (treatment plants), Kb  t  is the capital of basic (material) production, K z  t  is the capital of auxiliary production, L  t  is the manpower, Z  t  is the pollution (e.g., the amount of pollutants in the environment at the moment t ), Ab  t  are the amortization charges to basic production assets, Az  t  are the amortization charges to auxiliary production assets. To build a model of ecological-economic dynamics let us form the following basic assumptions: 1. The industrial consumption expenditures are directly proportional to the value of gross production by a factor a  0  a  1 :

W  t   aX  t 

(1)

144


2. The gross production output is determined by the neoclassical production function that is considered to be doubly continuously differentiable and linearly homogeneous: X  t   F  Kb  t  , L  t   (2) 3. The manpower is exogenous variable with sustainable growth rate  const :

L  t   L0et 4. The total investment are allocated to primary and secondary production: I  t   Ib  t   I z t 

(3)

(4)

5. The investments in basic and secondary (auxiliary) production are completely used for the increment of the corresponding capital depreciation: Ib  t   Kb  t   Ab  t  , (5)

I z  t   K z  t   Az  t  ;

(6)

6. The amortization charges are directly proportional to the corresponding capital value at any time: Ab  t   b Kb  t  , (7)

Az  t   z K z  t 

(8)

where:

b ,  z are amortization coefficients  b , z   0,1  7. The criterion of economic development on a fixed time period  0,T  is the maximization of the integrated non-productive consumption T

J   e t C  t  dt

(9)

0

where   const  0 . 8. The economy being considered is developed under stable ecological balance conditions (Crelle, 1988). That is the state when the volume of contamination is independent of the time: Z  t   Z min  const (10) Ecological balance (10) is formalized as follows:

  X  t      K z  t      Z t     0  const ,

(11)

where   X  t   is the function of produced pollution,   K z  t   is the function of eliminated pollution,   Z  t   is the function of the self-purifying pollution.

Moreover, let us assume that the functions   X  t   and   K z  t   are linear:

  X  t    0  1 X  t  ,

(12)

  K z  t    0  1K z  t  ,

(13)

145


where the constants  0 ,  0 , 1 , 1 and  0 play an important role in actual estimation of the influence of the ecological factor on economic development. Substituting (12) and (13) in (11), we obtain a formula

1 X  t   1K z  t    0 ,

(14)

where  0   0  0  0 (  0 is the pollution in the absence of economic activity,  0 is the purification in the absence of economic activity,  0 is the natural purification). The aim of the construction of economic dynamics model under stable ecological balance (14) reduced to the construction of the capital dynamics equations, which is involved in the basic producing Kâ  t  . Let us assign specific indicators:

k

Kb C X , c  , x   F  k ,1  f  k  , F  Kb , L   Lf  k  . L L L

Then F F  f k ,  f  k   kf   k  , f   k   0, f   k   0, lim f   k   , lim f   k   0. k 0 k  Kb L

In the capacity of a control parameter, we use the fraction of non-production consumption in C the final production ( u   0  u  1 . ) Y Let us set the initial and final states for the capital-labor ratio k  t  when t  0 and t  T . Let us assume that planning horizon T is a final and sufficiently large. After converting the basic assumptions and entering the specific parameters, the final version of optimal economic dynamics model under ecological balance will be as follows:

 T  t   e u  t 1  a  f  k  dt 0 k   t , k  t  ,      0 T   k  0   k , k T   k , 0  u  t   1, 

max, (15)

where k  0 and k T  are positive values. Dynamic equation of productive capital takes the form:     k    t , k    1  u  t   1  a   1   z     f  k    b    k  1    1

  z 0et   1  f k  .   1  1L0   1 

146


Thus, model (15) is mathematically an optimal control problem, which aim is to build process  *  t    u*  t  , k *  t   , t [0, T ], that is acceptable and maximizes functional (9), which controls the phase variable (Krotov, 1990). By determined terms of an optimal process existence  u*  t  , k *  t   , t  0, T  , the algorithm of optimal control problems solution was built. This algorithm allows writing all components of the optimal process in explicit analytic form under certain constraints on the parameters of the model. To control the computational experiments and display the finding results of the ecological and economic model (15) a software using Matlab was built. The algorithm for finding solutions of the model As a software core the algorithm for finding responsible solution to the problem of optimal control is used. This algorithm allows to write all the components of the optimal process in explicit analytic form and consist of the following steps: 1. Select the type of production function f  k  , set the parameters, determine the derivatives f   k  , f   k  . 2.

Check the conditions: f (k )  0 ; f (k )  0 ; lim f (k )   ; lim f (k )  0 .

3.

Set the parameters values a , 1 , 1 ,  , b , μz,  0 / L0 , δ ( a , b ,  z  (0,1) , 1 >0 ,

k 0

k 

1  0 ,   0 ,  0  0 ,   0 ). 4.

Check the condition: (1  a) 

1        0 . 1 z

   Solve an equation  (1  a)  1   z       f (k )   b       0 for k using 1   numerical method and find the value of capital-labor ratio k , that defines the main plot of the optimal trajectory. 6. Find the values u0 , u1 and control circuit u  t  according to next equation: 5.

u  t   u0  u1et , where u1 

 z 0

1L0 1  a  f  k 

, u0  1 

(16)

1   z     â    k  . 1 1  a  1  a  f  k 

7.

Check the conditions u0  0 ; u0  u1  1 according to determined value k .

8.

Set initial state, i.e., time t0 , and initial value of capital-labor ratio k  0 .

9. Set desired final conditions t  T and k T  . 10. Determine maximum attainable value of capital-labor ratio k , solving an equation   f (k ) 1   â     0 .  (1  a)    z     1   k 11. Check whether described dynamic ecological-economic system achieves the planned value of capital-labor ratio 0  max k , k (T )  k .





147


12.



 z 0 1       f  k    b    k 1L0 1 z



Determine k  min k , k (0) and check condition

. 13. If k  0 < k T  , then choose control circuit u  0 , that leads to an increase in capital-labor ratio (otherwise choose u  1 ). 14. Solving the differential equation k  t     t , k  t   with initial conditions t0 , k  0 and

t  t0 , determine limiting trajectory k  t  . 15.

Solving the differential equation k  t     t , k  t   with initial conditions t  T , k T 

and t  T , determine limiting trajectory k  t  . 16.

Using spline approximation k  t  , using a numerical method to solve the equation

k  t   k for t . This solution is left-handed moment  * of switching optimal control. 17.

Using spline approximation k  t  , using a numerical method to solve the equation

k  t   k for t . This solution is right-handed moment  ** of switching optimal control. 18. Develop optimal process according to the next rules: selecting the control value under paragraph 13, transfer the system from a state *  0 t0 , k for a period of time t0 ,  in state  * , k  *   k ;













selecting the control value u  t  transfer the system from a state  * , k  *  for

-





* ** a period of time  ,  in state  ** , k  **   k ; selecting the control value under paragraph 13, transfer the system from a state ** **  , k   for a period of time  ** ,T  in state T , k T  .









The above algorithm specifies the procedure for computing the boundaries of time intervals t0 , *  ,  * , **  ,  ** ,T  . During these three periods you must choose three different control values, which allows to an optimal control system transition from the initial state to the final Empirical Analysis of the model using Matlab To find the solution of the nonlinear model of economic growth in ecologically balanced economy and to analyze simulation experiments the software using Matlab language with interactive graphical tools was built. For the simulation we used a specific example in which 0,4225 production function was based on the real statistics on Ukraine f  k   0,9714k (State Statistics Service of Ukraine, 2014).

Designed user interface for computational experiments with the model (15) is shown in fig. 1.

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Figure 1: User interface for managing the numerical experiment of the model (15)

Source: designed by authors Optimal trajectory of the model (15) was build based on the input data that satisfy all constraints that were formulated for the model (fig. 2). Figure 2: Illustration of the optimal trajectory for ecological-economic model (15)

Source: generated by authors From the economic point of view, the essence of the optimal control of ecological-economic dynamics is the planning of share of non-production costs in unit value of final production. During the first and third periods, this share is either maximum or minimum. During the middle period of time (passing on the line) the value of non-production costs must be planned according (16). The nonlinear model of optimal growth in ecologically balanced economy allows us to plan experiments to investigate dependencies of optimal solutions on the parameters that are included in the model: the parameters of the production functions, the parameters of the equations system, the initial conditions, the final value of control parameter. Conclusions Based on the known hypotheses of Ramsey-type growth model, supplemented with the hypothesis that the investment must be distributed both in material production and in auxiliary production and ecological balance condition nonlinear model of optimal growth in ecologically balanced economy was developed. The model can be used to analyze the final state of the economic dynamics trajectory and to make relevant economic decisions. These decisions concerning the dynamics of capital and its distribution at a specified level taking into account ecological and economic balance. The computer monitoring system can be used as a tool for decision support and is the basis for the 149


construction of research complex of environmental and economic effects, particularly in designing business plans of industrial enterprises in terms of ecological balance and developing of state policy in environmental and economic area. References Acemoglu, D. (2008). Introduction to Modern Economic Growth. Department of Economics, Massachusetts Institute of Technology : 1008. Charles, I. Jones (1997). Introduction to Economic Growth. W.W. Norton & Company : 202. Cherniwchan, J. (2012). Economic growth, industrialization, and the environment. Resource and Energy Economics, 34 : 442-467. Crelle, V. (1988). Economic growth in the depletion of natural resources and environmental protection, Moscow : 198-228. Cuaresma, J. C., Palokangas, T., Tarasyev, A. (2010). Dynamic Systems, Economic Growth, and the Environment. Springer-Verlag Berlin Heidelberg : 290. Domar, E. D. (1957). Esays in the Theory of Economic Growth. Oxford University Press, Oxford : 272 p. Grygorkiv, V.S. (2001) On the problem of economic-mathematical modeling of eco-economic interaction and sustainable development, Scientific Bulletin Of Chernivtsi University: Series “Economics”, 113: 106 – 110. Harrod, R. (2000). On the theory of economic dynamics. Radio and Communications, Moscow : 160 p. Hryhorkyv, V.S, Yakutova, E.Yu, Tymku S.N. (2004). Modelling economic dynamics in the ecological balance, Cybernetics and Systems Analysis, 40 (3) : 130-138. Jhy-yuan Shieh, Jhy-hwa Chen, Shu-hua Chang, Ching-chong Lai (2014). Environmental consciousness, economic growth, and macroeconomic instability. International Review of Economics and Finance, 34 : 151–160. Krotov, V. F, Lagosha, B. A, Lobanov, S. M. (1990). Foundations of Optimal Control Theory, Moscow : 430. Lyashenko, I.M. (2006). Fundamentals of mathematical modeling of economic, ecological and social processes: teach. guidances. / I.M., Lyashenko, M.V., Korobov, A. Carpenter. – Stockholm: Training book. Bogdan : 304 p. Novales, A., Fernandez, E., Ruiz, J. (2014). Economic Growth : Theory and Numerical Solution Methods. Springer-Verlag Berlin Heidelberg: 558. Onishchenko, А.M. (2006). Research optimal trajectories of ecological-economic system in the case of uniform distribution of human resources between sectors of material production and environmental, Economy: Problems of theory and practice, Vol. 216: 931-938. Ramsey, F. A. (1928). Mathematical Theory of Saving. Economic Journal, 38 (152): 543–559. Rumina, E.V. (2006) Analysis of ecological and economic interactions. – Moscow: Nauka : 159 p. Samuelson, P. A. (1947). Foundations of Economic Analysis. Cambridge, Harvard University Press : 460 p. Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70 (1): 65-94. State Statistics Service of Ukraine (2014). National Accounts. Retrieved October 1, 2014 from: http://www.ukrstat.gov.ua.

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Wan Lee, J., Brahmasrene, T. (2011) Environment, energy and sustainable economic growth. Procedia Engineering, 21 : 513-519.

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SECTIONS: BUSINESS DEVELOPMENT BUSINESS SYSTEM ECONOMICS AND MANAGEMENT INTERNATIONAL TRADE AND SERVICES

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STRATEGIC PARTNERSHIP MULTI-FACTOR CASE ANALYSIS Andris VANAGS Turiba University E-mail: [email protected]

Abstract. The present paper is part of doctoral studies and based on the study carried out in

the international construction material production company Sakret. The research, which covered the employees, managers and partner organisations, highlighted the importance of not only managers’ knowledge and skills in all aspects of their work, but also of their attitudes as they themselves are an integral part of a strategic management system both developing and implementing it. The paper reviews the findings of the multivariate analysis of the managers’ attitudes towards 14 sets of strategic partnership-related factors with the goal to establish the correlations applicable in further research on strategic management and partnership development. Key Words: business administration, strategic partnerships, strategic management JEL: M21, L21, L74

Introduction Strategic partnerships are commonly regarded as arrangements between two or more businesses to combine strategic management with internal and external partnerships, whereas formal or informal, with the key stakeholders – ‘individuals or groups that can materially affect or be affected by a company’s actions, decisions, goals, policies, or practices […], vital to the organization and to the specific set of opportunities and threats that it faces at any specific point in time.’ (Fleisher & Bensoussan, 2003) The concept of partnership is also used to describe an approach characterized by [...] a strong desire to harness the energy and commitment of employees to the flexibility and change orientation necessary for business survival’ (Tyson & York, 2000). Partnership development leads to integration of external partners into the company’s quality management system, where they become internal partners (Dale, 2003) and contribute to strategic learning (Grundy, 1994; in Carnall, 2003), which subsequently creates a new resource (Drucker, 1985, 2011). The recent study on construction industry in Latvia (Zariņa et.al.; 2014) shows that the partnerships differ both by their structure (extent of integration, level of the formalization of the partnership) and the strategic goals (focus on increased profits, business opportunities, or customer satisfaction), often cooperating horizontally by sharing their resources when needed on semi-formal or even informal basis. Regarding duration, partnerships tend to fall under one of the three categories with different characteristics: short-term profit-focused, medium-term business opportunity-focused and long-term customer-focused partnerships. As highlighted by Kaplan and Norton, any strategic partnership and its underlying strategy is perceived as successful, if they meet the stated goals – whether increased profit, business or customer satisfaction. It is often argued that the implementation of a strategy is more important than its elaboration (Kaplan & Norton, 2001); nevertheless the author of the present paper believes that a company strategy is not a fixed plan, but a constantly developing system dependant on both the implementation process and changes in the business environment.

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The present paper is elaborated as part of doctoral studies and is based on the study carried out in the international construction material production company Sakret, with the holding company based in Latvia and subsidiaries in Lithuania and Estonia. In the previous research on the subject of strategic partnerships in the construction industry, the author established the significance of the cross-partnership integration of the mission, vision and goals, substantiated that the need for cooperation derives from inability to reach the goals individually and highlighted the need for the analysis of the internal context regarding the factors influencing partnership development. The previous research also highlighted the importance of not only managers’ knowledge and skills in all aspects of their work, but also of their attitudes as they themselves are an integral part of a strategic management system both developing and implementing it. (Vanags, 2013) Thus, the present paper reflects the additional in-depth study of the factors in the context of managerial attitudes and is based on the survey carried out with the goal to establish the correlations of these attitudes that would help in further design of the internal context module for a strategic partnership sustainability model.

Managerial attitude correlations During the research there were established 14 sets of factors that influence strategic partnership development and can be classified under one or several of the four general categories according their perceived level of relevance and formalisation in the company in question. Figure 1: Perceived significance of factors in Sakret (by author)

As seen in Figure 1, for overall management the company strategy is one of the priorities, yet the partnership development is less significant than the internal issues, e.g. current process management and work efficiency. Thus, it may also be concluded that activities carried out on daily basis are perceived as more important than those carried out less frequently. Regarding strategy-related factors, the same set can be seen where only the four main factors have changed slightly their level of significance, which allows concluding that strategic management of the 154


company is perceived as closely related to that of the general company management, while the partnership development is clearly not the key factor for strategic management. This trend becomes more pronounced in organisational unit-related factor category, where partnering is not perceived as an independent factor but forms a small part of current process management as well as strategic planning, the later by itself not being a priority. It is noteworthy that even in the category ‘partners’ the company strategy is rated as the priority factor, and the company administration and planning process and efficiency are also rated higher than knowledge management, which is core to any partnership establishment and development. Figure 2: Factor value in Sakret (by author)

Figure 2 shows the managers’ evaluation of the 14 factors (from 1 ‘poor’ to 5 ‘very good’), with the values being the weighted averages of the total of 56 indicators (4 for each factor). In general, the company conforms with the classic production company model, where all the traditional factors are well advanced – processes and efficiency, production and administration; and the level of managerial knowledge is valued higher than the total knowledge management. Yet, there is insufficient development on strategy and partnership side, which allows concluding that the mistrust in partner reliability may be the main factor hindering the advancement of the other underdeveloped partner-related factors, e.g. partnership duration and development, company strategy and process management. With the purpose of correlation approximation, all indicators were divided in three larger groups focused on company operation in general, internal partnering and external partnering, and weighted against the perceived level of managerial knowledge, which was set as the average of four skill-based indicators – problem solving, language, strategic planning and risk analysis skills. As shown in figure 3, the risk analysis competence had the most linear increase, with language and problem solving competences having a slightly larger increase trend. Yet, the most notable trend had strategic knowledge competence, which rose exponentially from very poor reaching the mark very good even before other indicators. This allows concluding that not only there is a significant current need in improvement of this competence among the managers of the given company, but also the level of this competence may influence partnership development at a proportionally larger scale than others.

Figure 3: Indicators in managerial knowledge factor (by author)

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Figure 4 shows the correlations between increase in managerial knowledge and organisationrelated factors. As it can be seen, traditional planning process, organisation structure and administration values increase quite insignificantly, whereas, on contrary, planning efficiency and strategy factors have a very rapid growth rate. These two later factors should be paid a closer attention, as the planning efficiency, which is closely related to company strategy, reaches maximum values even at the point where managers have rated their managerial competences between good and very good, while the other indicator – strategy, despite its fast growth, even at the maximum managerial competence score, reaches only just above ‘good’ score – the same level as the traditional factors at their best. This allows concluding that managers believe that perfect managerial competences are not needed to reach very good results in planning efficiency, while even very good managerial competences are not enough for creation of a very good strategy. Figure 4: Managerial knowledge and organisation-related factors (by author)

Figure 5 shows the correlations between the perceived level of managerial knowledge and the internal partner-related factors. As the company itself does not perceive the suppliers and customers as part of its strategic management system, only the employee-related indicators were included in this set. At it can be seen, all four indicators correlate linearly with the managerial competences and, while the lowest scores differ largely, the highest scores reach nearly the same level just above ‘good’. This allows concluding that the higher level of managers’ evaluation of own competence, the higher (or perhaps, more realistically) they value their employee and unit’s success. On the other hand, attention should be paid to the knowledge management indicator, which shows a slightly lower increase trend than others, which may highlight deficiencies in information flow both to and from the employees. This factor consists of four indicators, where only the awareness of quality measurement system and of company performance results have received scores ‘good’ – 4.08 and 3.92 respectively, while the two others - information on problems in company operations and timely provision of information needed for carrying out duties – both have been rated 3.62, with about one third of managers evaluating them as ‘poor’. As this seemingly does not influence each unit’s work efficiency and as employee responsibility also increases, it may be concluded that more responsibility for operations and results is delegated to the employees themselves, which may subsequently contribute to the increased scores for process management.

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Figure 5: Managerial knowledge and internal partner-related factors (by author)

Figure 6 illustrates the importance of external partner-related factors in relation to the perceived level of managerial knowledge. As it can be seen, three of the factors have a growing trend, while the partner reliability has a decreasing trend. It is notable, that while partnership development is perceived as becoming more and more important, partner choice criteria score much higher at any point, and both trends have nearly the same increase rate. At the same time, partnership duration increases exponentially and correlates reversely with the partner reliability. This allows concluding that more advanced managerial competences allow for more durable relations with less reliable partners, as the managers have increased strategic planning, risk analysis and problem solving skills. Figure 6: Managerial knowledge and external partner-related factors (by author)

Regarding external partnership development, three sets of indicators were analysed – attitudes towards partner reliability, partner choice criteria and partnership duration. These indicators were compared with the perceived significance of partnership development. As seen in figure 7, the average attitude towards partnership development itself among the managers in the company in question is somewhere between slightly negative (score 2.75) and quite positive (score 4.25), which allows concluding that there does not exist clearly pronounced wish to devote resources to partnership development as such, and the company deals with its suppliers and customers on current demand basis. The little effort invested in searching for business opportunities explains the gradually increasing trends in significance of personal contact and financial stability, which both remain among the most important criteria. The increasing importance of the partner’s market share is characteristic for business opportunity-focused companies, yet even more notable is the dramatic increase trend in the importance of both good reputation and social responsibility of the prospective partner. These two indicators are vital for strategic partnership development with both external and internal partners, whereas companies or individuals, as the management attitude may influence also the existing relationships with employees and clients and thus have impact on overall operation from productivity to customer loyalty. Figure 7: Partnership development and partner choice-related indicators (by author) 157


In terms of partner reliability (see Figure 8), it is notable that despite increasing trust in organisations, the perceived partnering potential with both public institutions and other companies rises only slightly. Regarding public institutions, this can be explained by the fact, that the company in question produces construction materials and deals with public institutions as customers only through intermediaries such as construction companies. On the other hand, more in-depth analysis is needed on the subject of investment in innovations on the side of public institutions to approximate whether or not there exists partnering potential. In terms of research and education, there exists strong linear correlation between the reliability of the institution and partnership development. Thus, it may be concluded that partner reliability is a factor which significantly influences relationships with research and educational institutions, but only slightly partnerships with other companies. Figure 8: Partnership development in relation to partner reliability (by author)

And finally, there were established the correlations between the willingness to develop partnerships and the prospective partnership duration. As seen in figure 9, both project-based and short-term partnerships remained with negative scores regardless the managers’ willingness to engage in a partnership. On the other hand, the more positive they were about partnering, the higher scores gained long-term projects. It is notable, that also 1 year or longer partnerships were perceived negatively by 2/3 of the managers, which could be explained by lack of such individual projects in the given company, as well as the operations specifics where individual customers with specific wishes are hardly ever served. Thus, it may be concluded that there exists a direct correlation between the willingness to develop partnerships and the approval of long-term partnerships, while more detailed analysis is needed on the subject whether there exist unused business diversification opportunities.

Figure 9: Project duration in relation to partnership development (by author)

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Conclusion The research of the 14 sets of factors influencing strategic partnership development shows that in the given company strategic management by itself is formalised and perceived as one of the priorities. Though in the four category factor scorecard the company strategy development and implementation is well integrated on all sides (including organisational units), the same cannot be concluded about the partnership-related factors as none of them is among the key factors for strategic management. At organisational unit level, partnering forms a small part of current process management and strategic planning. Regarding factor values, a clear correlation exists between company strategy, knowledge management and partnership development, where insufficient knowledge management leads to inferior strategic planning and subsequently underdeveloped partner relationships. The review of managerial competence indicators shows a huge difference in strategic planning skills among the managers of the given company, which correlates closely with planning efficiency. In general, the company conforms to the classic production company model where all the traditional factors are well developed and some of the modern production management methods, i.e. responsibility delegation and knowledge management system, are implemented. At the same time, the company has a closed structure in terms of strategic partnership development, as all partners are regarded as external partners and none of them is integrated in the strategic management system. In terms of strategic partnership development, the given company can be classified as being in transition from short-term profit-focused to medium-term business opportunity-focused, as both the internal and external partner-related factors are still developing, yet there are many indicators and trends highlighting the advancement. As the major ones there should be noted the decrease in the significance of prospective partner reliability, as well as the dramatic increase in the significance of their good reputation and social responsibility, which allow concluding that though the company is becoming more flexible in terms of choosing partners, it also increases its standards of conduct, which with time may lead to long-term customer-focused strategy. This trend is also substantiated by the management level regard towards the long-term duration of the prospective partnerships. The correlative analysis of the managerial attitudes towards the 14 sets of factors influencing the development of strategic partnerships shows that these factors are perceived as having different value in different perspectives. Firstly, the company strategy, which includes formal or informal guidelines for partnership establishment and development, is valued lower at lower organizational levels. Secondly, in the context of company strategy, all factors related to partnerships are valued as secondary to company operation-related factors. This diversity in attitudes in different context allows concluding that not only the managerial attitudes towards 159


the partnership development in general should be improved, but also further research is needed on the reasons for the existence of the change in these attitudes dependent on different contexts, and to what scope the context influences the inter-company relationships. References Carnall, Colin A. (2003) Managing change in organizations, 4th ed.; UK: Pearson Education Limited Dale, Barrie G. (2003) Managing Quality, 4th ed.; Blackwell Publishing Ltd Drucker, Peter F. (2011) Innovation and entrepreneurship, The Classic Drucker Collection ed.; New York: Routledge Fleisher, Craig S. and Bensoussan, Babette E. (2003) Strategic and Competitive Analysis; Pearson Education Inc Kaplan, Robert S. and Norton, David P. (2001) The Strategy-Focused Organization: how balanced scorecard companies thrive in the new business environment; Harvard Business School Publishing Corporation Tyson, Shaun and York, Alfred (2000) Essentials of HRM, 4th ed.; Oxford: Butterworth-Heinemann Zariņa V., Begec S., Vanags A. (2014) Strategic partnerships in the Construction Industry in Latvia; 13th EBES Conference proceedings, ISBN: 978-605-64002-7-8, www.ebesveb.com Vanags, Andris (2013) Development of partnerships in construction material production, Proceedings of the XIV International scientific conference of Turiba University, 30.05.2013, ISSN 1691-6069

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RYŠIAI SU VISUOMENE: VEIKLOS EFEKTYVUMO TEORINIAI ASPEKTAI Žaneta KARAZIJIENĖ Mykolo Romerio universitetas E-mail: [email protected]

Kristina LAPĖNAITĖ LAPAITĖ Mykolo Romerio universiteto studentė E-mail: [email protected]

Abstract. Šiame straipsnyje pateikiami ryšių su visuomene vertinimo teoriniai aspektai. Pirmiausia, pateikiant pagrindinių sąvokų analizę ir išryškinant jų akcentus, identifikuojant panašumus ir skirtumus, suformuluojama ryšių su visuomene koncepcija. Straipsnyje taip pat analizuojami ryšių su visuomene modeliai, trumpai aptariant kiekvieno iš jų esmę, pritaikymo galimybes. Identifikuojama ryšių su visuomene procesų svarba bei išskiriami ryšių su visuomene veiklos efektyvumo vertinimo modeliai, kuriais remiantis įmonės gali vertinti kaip valdoma komunikacija su jos tikslinėmis auditorijomis. Iškelta mokslinė problema – išskirti ir pagrįsti pagrindines teorines mintis, leidžiančias išryškinti ryšių su visuomene veiklos efektyvumo vertinimo galimybes. Pagrindiniai žodžiai: Ryšiai su visuomene, ryšių su visuomene procesai, ryšių su visuomene vertinimas JEL classification: M1; M14; M31

Įvadas Šiame greitai besikeičiančiame pasaulyje, ryšių su visuomene palaikymo organizacijose vaidmuo tapo ypač svarbus. Intensyvėjanti konkurencija, produktų pasiūla, didėjantis vartotojo dėmesys įmonės reputacijai vis labiau skatina įmones komunikuoti su plačiąja visuomene. Todėl, ryšiai su visuomene jau tampa strategine priemone įmonei siekiant savo tikslų. Užmegzti ryšius su visuomene reikia pastangų, tam tikros veiklos, kuri yra vadinama ryšiais su visuomene. Mokslinėje literatūroje ryšiai su visuomene apibrėžiami ir suprantami įvairiai. Tai rodo, kad ryšių su visuomene samprata yra suvokiama pakankamai skirtingai ir ši sritis dar vis vystosi. Dažnai jie apibūdinami kaip organizacijos komunikacija su jai svarbiais adresatais ar kaip organizacijos reputacijos, patikimumo ir įvaizdžio kūrimo bei palaikymo funkcija. Organizacijos, norėdamos palaikyti efektyvius ryšius su visuomene turi suprasti tikrąją ryšių su visuomene esmę bei suvokti, kokia yra šio proceso svarba bei nauda. Taip pat, organizacijos užmegzdamos bei palaikydamos ryšius su visuomene, ne visada tai daro sėkmingai. Tai leidžia suformuluoti mokslinę problemą – išskirti ir pagrįsti pagrindines teorines mintis, leidžiančias išryškinti ryšių su visuomene veiklos efektyvumo vertinimo galimybes. Tyrimo objektas - ryšiai su visuomene. Tyrimo uždaviniai: 1) atskleisti ryšių su visuomene sampratą bei bendruosius aspektus; 2) identifikuoti ryšių su visuomene proceso svarbą įmonėje; 3) išanalizuoti ryšių su visuomene veiklos efektyvumo vertinimo modelius. Tyrimo metodai – mokslinės literatūros analizė, lyginamoji analizė, apibendrinimas. Ryšių su visuomene koncepcijos apžvalga Ryšiai su visuomene pastaruoju metu minimi itin dažnai. Tačiau jie apibrėžiami gana skirtingai. „S. M. Cutlip A. H. Center ir G. M. Broom (2000) teigimu, skirtingas ryšių su visuomene sąvokų atsiradimas atspindi šios funkcijos evoliuciją organizacijose bei visuomenėje“ (Bivainienė, Šiaudkulytė, 2007). 161


Svarbu atkreipti dėmesį į tai, kad terminas „Public Relations“ į lietuvių kalbą yra verčiamas kaip „ryšiai su visuomene“ ir/arba „viešieji ryšiai“. Tačiau R. Matkevičienė (2005) teigia, kad terminas „ryšiai su visuomene“ yra platesnis ir juo įvardijami organizacijos ryšiai ir su išorinėmis, ir su vidinėmis jos auditorijomis. O štai „viešieji ryšiai“ apima tik išorines organizacijos auditorijas. Augustinaitis (2006) šiuos terminus aiškina panašiai teigdamas, kad viešųjų ryšių terminas vartojamas kaip ryšių su visuomene sinonimas, tačiau viešieji yra labiau koreliuojami su viešumo raiškomis ir visuotinumu. Pastebėta, kad ryšiai su visuomene apibrėžiami akcentuojant informacijos keitimosi bei interesų suderinimo svarbą. L. Kazokienė, J. Stravinskienė (2014) ir V. Skvarčinskienė (2011) ryšius su visuomene apibūdina teigdamos, kad ryšiai su visuomene – tai vadybos komunikacinė funkcija, kuri padeda palaikyti ryšius su organizacijos auditorijomis, tokiu būdu kuriama ir puoselėjama organizacijai reikalinga aplinka, kuri sudaro sąlygas organizacijos iškeltiems tikslams įgyvendinti. B. Čereška (2004) apibūdindamas ryšius su visuomene cituoja anglų tyrinėtoją S. Black‘ą - „ryšiai su visuomene – tai planuojamos ilgalaikės pastangos, nukreiptos sukurti ir palaikyti geranoriškus santykius ir tarpusavio supratimą tarp organizacijų ir visuomenės“. Štai Wilcox ir kt. (2007) apibūdindami ryšius su visuomene akcentuoja šios veiklos sudėtingumą, paminėdami, kad tai yra ne tik bendradarbiavimas su įvairiomis auditorijomis ir grįžtamasis jų ryšys, bet ir moksliniai tyrimai bei analizę, taip pat politikos formavimas, programų sudarymas. Dar kiti autoriai apibūdindami ryšius su visuomene pabrėžia ir palankaus organizacijai įvaizdžio kūrimą. Kaip teigia G. Drūkteinienė (2007) organizacijos įvaizdžio kūrimo svarbą pripažįstantys autoriai daugiau dėmesio teikia pačiai organizacijos įvaizdžio sampratai, jo kūrimui naudojant tokias priemones kaip organizacijos reklama, ryšiai su visuomene ir kitos. Pasak Pajuodžio (2005) „ryšiai su visuomene – tai veikla, kuria siekiama visuomenėje bei tikrose jos grupėse suformuoti teigiamą įmonės įvaizdį ir sukurti pasitikėjimo bei supratimo atmosferą. Curri – Memeti (2011) apibūdindama ryšius su visuomene pabrėžia įvaizdžio kūrimo reikšmę,toliau paaiškindama, kad įvaizdis kuriamas ne tik tinkamai palaikant ryšius su išorinėmis auditorijomis, tačiau teigiamą įvaizdį padeda sukurti ir pačios organizacijos darbuotojų pasitenkinimas organizacija. Iš šio apibrėžimo matyti, jog Curri – Memeti (2011), kaip ir R. Matkevičienė (2005) pabrėžia, kad ryšiai su visuomene nėra tik ryšiai su organizacijos išorinėmis auditorijomis. Į ryšių su visuomene sąvoką įeina ir ryšių palaikymas su organizacijos su vidinėmis auditorijomis – pavyzdžiui, su darbuotojais. Panašiai teigia ir J.Cornelissen (2001), nurodydamas, kad RsV tai komunikacinė vadybos funkcija, kuri atsakinga už vidinių ir išorinių ryšių koordinavimą ir priežiūrą. Apibendrinant galime teigti, kad visos įmonės ir institucijos veikia visuomenėje ir kiekviena iš jų palaiko ryšius su ja. Plačiąja prasme, viskas, ką daro įmonės ir institucijos, yra ryšiai su visuomene, nes kiekvienas veiksmas ir elgesys sukelia tam tikras – teigiamas ar neigiamas – visuomenės reakcijas ir vertinimus. Todėl galime išskirti pagrindinius ryšius su visuomene apibūdinančius elementus - patikimumas, pasitikėjimas, komunikacija bei abipusio supratimo siekimas. Ryšių su visuomene modeliai Ryšių su visuomene (RsV) modelius nagrinėja įvairūs autoriai. Štai Ulevičius (2006) analizuodamas RsV modelius teigia, kad RsV modeliai yra skirstomi atsižvelgiant į organizacijos bendruosius tikslus. Jais vadovaujantis yra planuojami ryšių su visuomene užmezgimo, palaikymo veiksmai. Remiantis Ulevičiumi (2006) galima išskirti šiuos RsV modelius:

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Viešasis komunikacija.

modelis.

Šaltinis (institucija)

Čia skleidžiama propaganda, ryšiai

Propaganda

grindžiami

vienpuse

Gavėjas (auditorija)

Šio modelio esmė – skleisti informaciją viena kryptimi. Čia, nėra atsižvelgiama į visuomenės ir kitų auditorijų nuomonę, pageidavimus. Pateikiama informacija nėra tiksli, gali būti iškreipta, be to, pabrėžiami tik norimi aspektai. Informacinis modelis. Pagrindinis tikslas yra informuoti, pateikti teisingą informaciją, nėra stengiamasi įtikinti. Šaltinis (institucija)

Išsami, teisinga informacija


Pirmojo ir antrojo modelio skirtumas – požiūris į visuomenę. Informacijos modeliu pabrėžiama, kad ryšių su visuomene atstovai atsakingi už teisingos ir išsamios informacijos tinkamą pateikimą apie tam tikrą instituciją ar kitą objektą. Šis modelis populiariausias ir naudojamas verslo, vyriausybinių, nevyriausybinių ir pelno nesiekiančių organizacijų. Dvipusis asimetrinis modelis. Šio modelio paskirtis – įtikinti. Komunikacija vykdoma dialogo būdu, tačiau nepastoviai. Yra vertinamas poveikis visuomenei. Šaltinis (institucija)

Įtikinimas Grįžtamoji reakcija


Čia, tyrimai atliekami institucijos reikmėms tenkinti. Renkama tik tokia informacija, kuri parodo veiklos poveikį. Tokiu būdu siekiama įtikinti visuomenę pritarti institucijos požiūriui bei elgtis taip, kad institucijai tai būtų naudinga. Dvipusis simetrinis modelis. Jo tikslas – bendradarbiauti, įgyti tarpusavio supratimą. Vykdoma komunikacija yra nuolatinė. Šaltinis (institucija)

Tarpusavio supratimas Atsakomoji reakcija


Institucijos, atsižvelgdamos į visuomenės nuomonę, nevengia pokyčių savo veikloje. Atliekami tyrimai, kuriais sužinoma, kokia yra institucijos reputacija, kokia yra jos svarba. Modelio privalumas institucijos atžvilgiu – skatinamas palankumas, užtikrinamas nuolatinis dialogas su tam tikra auditorija, taip pat, gerinamas institucijos įvaizdis. Priklausomai nuo to, kokie yra organizacijos tikslai, gali būti naudojamas kiekvienas iš aukščiau pateiktų modelių. Todėl svarbu, kad organizacija tinkamai įvertintų savo ir savo tikslus, ir būdus, kaip tie tikslai bus pasiekiami. Ryšių su visuomene proceso svarba įmonėje

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Ryšiai su visuomene grindžiami paprastu požiūriu – suformavus teigiamą nuomonę apie įmonę daug lengviau yra sėkmingai siekti tikslų, negu tuomet, kai visuomenė priešinasi įmonės tikslams. Informacijos apie įmonę žinojimas sukuria pagrindinį ryšių su visuomene tikslą – supratimą tarp visuomenės ir įmonės. Wilcox et al. (2007) pateikia Amerikos ryšių su visuomene organizacijos lyderio ir ryšių su visuomene patarėjo Jungtinėse Valstijose Patricko Jacksono, nuomonę, atspindinčią ryšių su visuomene indėlį į organizacijos sėkmę (žr. 1 lent.): 1 lentelė. Ryšių su visuomene procesų rezultatai PROCESAS Žinomumas Organizacinė motyvacija Problemų nustatymas Galimybių nustatymas Krizių valdymas Vadovų informavimas Pokyčių vadyba

Socialinė atsakomybė Įtaka viešajai politikai

PAGRINDINIAI VEIKSMAI

REZULTATAI

Populiarinimas, rėmimas, tikslinės auditorijos nustatymas, pranešimas spaudai Vidiniai ryšiai ir komunikacija

Paruošiama dirva pardavimų augimui, labdarai ir kt.

Tyrimai, sąveika su įvairiomis visuomenės grupėmis, problemų numatymo komandos Sąveika su vidinėmis ir išorinėmis auditorijomis, „verslo išmanymas“ Reagavimas į problemas, nelaimes ar išpuolius ir jų sprendimas; koalicijų kūrimas Aukščiausio rango vadovų konsultavimas apie esamą situaciją, tyrimai Bendrovės kultūra, panašūs metodai, tyrimai Socialinė atsakomybė, tyrimai, su viešaisiais interesais susijusių projektų ir reklamų organizavimas integruojant įvairias žiniasklaidos priemones ir kt. Ryšiai su klientais, koalicijų kūrimas, lobizmas, piliečių kampanijos

Kuriami moralės pricipai, skatinamas komandinis darbas, produktyvumas, bendrovės kultūra; kuriamas vieningas įmonės įvaizdis Iš anksto įspėjama apie problemas, socialinius ir politinius pokyčius, šalininkų nepasitenkinimą Atrandamos naujos rinkos – gaminiai metodai rėmėjai, naudingos temos Apginamos pozicijos, išlaikomi rėmėjai ir šalininkai, užtikrinama normali bendrovės veikla nepaisant problemų Realistiški, konkurencingi ir protingi sprendimai Sumažina pasipriešinimą pokyčiams, padeda susidoroti su pereinamojo laikotarpio problemos, užtikrina paveiktus asmenis, jog kaita reikalinga Kuriamas geras vardas, didinama ekonominė sėkmė „padvigubinant“ pelną, garantuojamas pasitikėjimas bendrove Užsitikrinimas visuomenės pritarimas veiklai, bendrovės gaminiams bei jos politikai; panaikinamos kliūtys

Šaltinis: sudaryta pagal Wilcox et al., 2007, 31 p. 1 lentelėje pateikiamas ryšių su visuomene proceso indėlis RsV veiklai ir visuomenei. RsV pateikiami kaip įvairiapusiška veikla, kuri apima tiek vidinę, tiek išorinę komunikaciją, kas padeda organizacijai sėkmingai pasiekti norimų tikslų. Kaip matyti iš lentelės, RsV procese nėra apsiribojama tik ryšių palaikymu su tikslinėmis organizacijos auditorijomis, RsV procese taip pat siekiama formuoti palankią organizacinę kultūrą, kuri, kaip buvo minėta, turi įtakos išorinės organizacijos komunikavimo efektyvumui. Štai 2001 metais viešųjų ryšių kompanija „Holl and Knowlton“ apklausė kelis šimtus geriausių pasaulio organizacijų vadovų. Šia apklausa buvo norėta išsiaiškinti kaip organizacijos vadovai suvokia įvaizdžio reikšmę. Rezultatai parodė, kad net 94 proc. apklaustųjų manė, kad įmonės komunikacija labai svarbi siekiant strateginių verslo tikslų (Viešieji ryšiai versle, 2004). Panašiai mano Nikolic ir kt. (2014), kurie teigia, kad suvokimas, jog organizacijos sėkmė labai priklauso nuo jos sugebėjimo valdyti komunikaciją, informacijos keitimąsi su visuomene – šiandien skatina

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domėtis RsV veikl visame pasaulyje. Tai parodo, kiek ryšių su visuomene palaikymo veikla yra aktuali ir svarbi kiekvienai organizacijai. Ryšių su visuomene veiklos efektyvumo vertinimo modelių analizė Kiekviena organizacija norėdama pastoviai palaikyti sklandžius ryšius su visuomene, privalo vertinti kaip efektyviai yra valdoma komunikacija. Kaip teigia Kazokienė ir Stravinskienė (2014) RsV efektyvumas – RsV sprendimų vertė organizacijai, kuri išreiškiama RsV programų efektyvumu (lyginant iškeltą tikslą bei pasiektą rezultatą) ir organizacijos santykių su suinteresuotomis šalimis pažangą). Bivainienė ir Šiaudkulytė (2007) teigia, kad efektyvumą gali patikrinti pati organizacija naudodamasi atitinkamais metodais arba pasitelkti į pagalbą kompetentingus specialistus. Įvertinus RsV priemonių poveikį, galimi nauji RsV veiksmai. Mokslinėje literatūroje yra pateikiami įvairūs modeliai, kurie skirti RsV veiklos efektyvumo vertinimui. 1 paveiksle pateikiamas S.M. Cutlip ir kt., (2008) RsV efektyvumo modelis (sutrumpintai - PII modelis nuo angl. Preparation, Implementation, Impact). 1 paveikslas. Ryšių su visuomene efektyvumo modelis (PII)

Įvestis

•Pranešimo pateikimo kokybė •RsV programos ir pranešimo turinio atitikmuo •Informacijos adekvatumas kuriamai RsV programai

•Į pranešimą atkreipusių dėmesį dalis •Gavusiųjų pranešimą dalis •Žiniasklaidoje išplatintų pranešimų dalis Įgyvendin •Masinėmis informavimo priemonėmis perduotų pranešimų skč. ir suplanuoti imas RsV veiksmai

Poveikis

•Socialinės ir kultūrinės sričių pokyčiai •Tikslinės auditorijos dalis, pakartotinai pasielgusi pagal programos planą •Tikslinės auditorijos dalis, pasielgusi pagal programos planą •Pakeitusių savo nusistatymus dalis •Išstudijavusių pranešimo turinį dalis

Šaltinis: S. M. Cutlip ir kt., 2006, 296 p. Šio modelio esmė – skirtingas kriterijų vertinimas pagal įvesties, įgyvendinimo, poveikio vertinimo etapus. PII modelis gali pasitarnauti kaip testas arba atmintinė planuojant RsV, jeigu taikomas skirtingose RsV programose ar skirtingų RsV specialistų. Pabrėžtina, kad vieno etapo rezultatai įtakoja kito etapo rezultatus. Įvesties etape analizuojama gautos informacijos tinkamumas. Įgyvendinimo etape, pagrindžiamas RsV taktikos tinkamumas. Poveikio etapas apima vertinimą. J. Macnamara (1999) rekomenduoja piramidės modelį (žr. 2 pav.). Šiame modelyje atsispindi visas RsV vertinimo procesas, kuris prasideda informacijos rinkimo ir analizavimo etapu, toliau vertinamas pasirinktų priemonių produktyvumas ir galiausiai vertinami galutiniai rezultatai.

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2 paveikslas. Apibendrintas J.Macnamaros piramidės modelis 3. REZULTATŲ vertinimas 2. IŠTRANSLIAVIMAI: procesų ir programų vertinimas 1. ĮEITIS: moksliniai tyrimai

Šaltinis: Macnamara, 2006 J.Macnamara (2006) pirmame etape siūlo vertinti informacijos bei pasirinktų masinių informavimo priemonių patikimumą, pranešimo turinį ir jo prezentavimo kokybę. Antrame etape vertintina išsiųstų, o vėliau iš ištransliuotų per masines komunikavimo priemones pranešimų skaičius, bei auditorijos dalis gavusi pranešimą ir auditorijos dalis atkreipusi dėmesį į pranešimą. Rezultatų vertinimo etape vertinama visuomenės dalis susipažinusi su pranešimu, analizuojama ar auditorija pakeitė savo nuostatas, ir ar pakeitė nuostatas įmonei palankia linkme ir galiausiai įvertinama ar buvo pasiektas keltas tikslas/arba išspręsta problema. Šis modelis yra naudingas taikant jį praktiškai, nes apima ir RsV planavimą, ir RsV valdymą. 3 paveikslas. RsV planavimo, tyrimų ir vertinimo modelis

2 Tikslai 1 Auditas Kur esame dabar?

Kur reikia būti?

3 Strategija ir planas Kaip ten patekti?

4 Įvertinimas ir analizė

5 Rezultatas

Ar pasiekti tikslai?

Kaip pavyko?

Šaltinis: Watson, Noble, 2007, 89 p. Tiek ryšių su visuomene efektyvumo, tiek piramidės modelis yra kritikuotini dėl to, kad nevertina bendro pranešimo poveikio ir trūksta grįžtamojo ryšio. Tačiau jų privalumas – kompleksiškumas. Kitas modelis vertinantis RsV veiklos efektyvumą - procesinis modelis (sutrumpintai - PRE, verčiant iš anglų kalbos – planavimas, tyrimas, vertinimas) (žr. 3 pav.). Planavimo, tyrimų ir vertinimo modelis (PRE) parodo, kad RsV vertinimas yra pasikartojantis procesas, kuriame numatoma ryšių su visuomene palaikymo ir naudojamų priemonių plėtra. Čia atskleidžiama RsV vertinimo svarba, kadangi baigiamasis RsV vertinimas nukreipia link naujų RsV veiksmų. A. Gregory (2001) pateikia modelį (žr. 4 pav.), kuriame atsispindi ir prieš tai pateikto modelio (PRE) esmė - RsV planavimas, tyrimai ir vertinimas, o A.Gregory išplečia šį modelį 166


integruodamas RsV sprendimų vertinimą. Taikant šį modelį reikia nuolatos analizuoti ir peržiūrėti RsV programų naudą, nes tai svarbu nuolatos besikeičiančioje aplinkoje. Modelio autoriai teigia, kad RsV tiksluose turi atsispindėti ir pačios įmonės tikslai. 4 paveikslas. RsV vertinimo pagal tikslus modelis

Šaltinis: Gregory, 2001, 178 p. Analizuojant RsV efektyvumo vertinimo modelius verta paminėti ir T. Watson pateikiamą trumpalaikį RsV vertinimo modelį (žr. 5 pav.), kuriuo vertinant neanalizuojamas grįžtamasis ryšys, o koncentruojamasi ties pranešimų stebėjimu ir jų analize. 5 paveikslas. Trumpalaikis RsV vertinimo modelis

Suvokimo užduotis

Strategija ir taktika: ryšiai su žiniasklaida

Žiniasklaidos analizė/ Tikslinių adresatų reakcijosanalizė

Taip/Ne

Šaltinis: adaptuota pagal Watson, Noble, 2007, 97 p. Kaip matyti iš paveikslo, šis modelis padeda įvertinti RsV efektyvumą, tačiau jame nėra grįžtamojo ryšio, kuris būtinas, norint pastoviai ir nuosekliai vertinti RsV efektyvumą. Todėl T.Watson kolega P.Noble pasiūlė modelį apimantį ir grįžtamojo ryšio vertinimą (žr. 6 pav.). 6 paveikslas. Nuolat veikiantis RsV vertinimo modelis 167


Tyrimas

Tyrimas

Tyrimas

Tyrimas

Tyrimas

Daugialypė formali ir neformali analizė

Tikslo pasiekimo nustatymas

Programos gyvybingumo nustatymas

Šaltinis: Watson, Noble, 2007, 97 p. Šiame modelyje stebimas grįžtamasis ryšys ir pranešimų kaita, dėl to šis procesas yra pasikartojantis. Apibendrinant, reikėtų pabrėžti, kad tiek T.Watson, tiek P.Noble pasiūlyti modeliai gali būti pritaikyti visose RsV programų stadijose, tačiau galima įvardinti ir pagrindinį šių modelių trūkumą – šiais modeliais faktiškai neįmanoma įvertinti RsV programų, kuriose siekiama kelių ar net daugiau tikslų. Bet kuriuo atveju, svarbu nepamiršti, kad norint palaikyti efektyvius ryšius su visuomene svarbūs tokie elementai – suprantama informacija bei nuolatinis informacijos pateikimas. Analizuojant lietuvių autorių mokslinę literatūrą svarbu paminėti į L.Kazokienės siūlomą struktūrinį verslo įmonių RsV efektyvumo vertinimo modelį, kuris apima keturis etapus – įvesties, įgyvendinimo, tarpinio vertinimo ir poveikio vertinimo. Vėliau šis modelis bendradarbiaujant su J.Stavinskiene išplečiamas ir autorės pateikia sisteminį RsV programų vertinimo modelį apjungiantį ilgalaikį ir trumpalaikį RsV efektyvumo vertinimą (žr. 7 pav.). Šis modelis parodo, kad turi būti atliktas išsamus RsV vertinimas, kuriuo nustatoma RsV veiksmų vertė trumpalaikėje ir ilgalaikėje perspektyvoje, taip pat įvertinamos praeities ir ateities RsV programų kryptys. Pabrėžtina, kad vertinant RsV efektyvumą, svarbu nustatyti tikslus, aiškiai įvardinant tikslų dedamuosius elementus, tokius kaip įgyvendinimo laikotarpis, kokie yra laukiami išmatuojamieji rezultatai, kokia yra tikslinė auditorija, numatomas pokytis, taip pat šiame etape jau yra numatomi kriterijai bei metodai, kuriais bus vertinami pasiekti rezultatai (Kazokienė ir Stravinskienė, 2009; Čereška, 2006). Kazokienė ir Stravinskienė (2009) išskyrė RsV trumpalaikio ir ilgalaikio efektyvumo pagrindinius vertinimo kriterijus. Autorės pagrindiniais komunikacinių pranešimų kokybės vertinimo kriterijais įvardina pranešimo skaitymą ir klausymo patogumą bei pranešimo sudėtingumą. Vertinant RsV produktyvumą, pagrindiniai kriterijai yra pranešimų sklaida ir komunikacinių priemonių vertinimas. Štai tikslinės auditorijos, jos reakcijos į gautą informaciją vertinimas priskiriamas pesėkmių vertinimo kriterijams. Vertinant ilgalaikį RsV efektyvumą orientuojamasi į organizacijos ir jos auditorijų santykių kokybę. Tuo tarpu trumpalaikio RsV efektyvumo vertinimas sietinas su trumpalaikiais RsV rezultatais. Autorės akcentuoja, kad ilgalaikį RsV efektyvumą nusako trumpalaikių RsV rezultatų sąlygotas ilgalaikių RsV rezultatų pokytis. 7 paveikslas. Sisteminis RsV programos efektyvumo vertinimas

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Grįštamasis ryšys RsV tikslų turinys: - Numatomas pokytis - Tikslinė auditorija - Išmatuojamas laukiamas rezultatas - Laikotarpis

Grįštamasis ryšys

Trumpalaikio RsV efektyvumo vertinimas Komunikacinių pranešimų kokybės vertinimo kriterijai: - Pranešimo skaitymo patogumo indeksas - Pranešimo sudėtingumo indeksas

RsV produktyvumo vertinimo kriterijai: - Pranešimų sklaidos kiekis - Komunikacinių priemonių geografinis pasiekiamumas, tiražas, reitingai

RsV pasekmių vertinimo kriterijai: Tikslinės auditorijos dalis: gavęs, supratęs, įsiminęs pranešimą.

Trumpalaikių RsV rezultatų vertinimo kriterijai: - Tikslinės auditorijos: nuomonės, požiūrio, preferencijos pokyčiai

Santykių kokybės vertinimo kriterijai: - Pasitikėjimo lygis - Pasitenkinimo lygis - Kontrolės abipusiškumo lygis - Įsipareigojimo lygis

Šaltinis: Kazokienė, Stravinskienė, 2009, 427 p. Apibendrinant galime teigti, kad visi analizuoti modeliai skirti vertinti ryšių su visuomene veiklos efektyvumą. Ryšių su visuomene efektyvumo modelis (PII) gali pasitarnauti kaip testas arba atmintinė planuojant RsV, jeigu taikomas skirtingose RsV programose ar skirtingų RsV specialistų. J.Macnamaros piramidės modelis atspindi visą RsV vertinimo procesą, t.y. nuo pirminės informacijos rinkimo, duomenų analizės iki gautų rezultatų vertinimo. Būtent šį modelį rekomenduojama taikyti praktikoje, nes jis apima RsV planavimą ir RsV valdymą. Tačiau nepaisant šių privalumų galima įvardinti ir pagrindinį trūkumą (tiek PII modeliui, tiek J.Macnamaros piramidės modeliui) – tai grįžtamojo ryšio trūkumas. Straipsnyje analizuotame RsV planavimo, tyrimų ir vertinimo modelyje akcentuojama, kad RsV vertinimas turi būti pasikartojantis procesas, kuriame numatoma ryšių su visuomene palaikymo ir naudojamų priemonių plėtra. Šį modelį vėliau papildė A.Gregory integruodamas RsV sprendimų vertinimą ir pabrėždamas, kad svarbu nuolatos besikeičiančioje aplinkoje analizuoti ir peržiūrėti RsV programų naudą (RsV vertinimo pagal tikslus modelis). Analizuoti T.Watson (trumpalaikis RsV vertinimo modelis) ir P.Noble (nuolat veikiantis RsV vertinimo modelis) modeliai gali būti pritaikyti visose RsV programų stadijose, tačiau galima įvardinti ir pagrindinį šių modelių trūkumą – šiais modeliais faktiškai neįmanoma įvertinti RsV programų, kuriose siekiama kelių ar net daugiau tikslų. Straipsnio autorių nuomone, praktikoje tikslingiausia RsV vertinti remiantis L.Kazokienės ir J.Straviskienės pasiūlytu sisteminiu RsV programos efektyvumo vertinimo modeliu. Remiantis šiuo modeliu atliekamas išsamus RsV vertinimas, kuriame atsispindi veiksmų analizė trumpalaikėje ir ilgalaikėje perspektyvoje bei vertinamos praeities ir ateities RsV programų kryptys. Išvados

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Apibendrinant galima teigti, kad ryšių su visuomene koncepcijos aiškinimas ir supratimas iki dabar išlieka sudėtingas ir probleminis, nes pats terminas iš anglų kalbos verčiamas skirtingai, o tai ir įtakoja sampratos skirtumus mokslinėje literatūroje. Išanalizavus pateikiamų sampratų aiškinimą, nustatyta, kad ryšiai su visuomene apibrėžiami akcentuojant informacijos keitimosi bei interesų suderinimo svarbą. Plačiąja prasme, viskas, ką daro įmonės ir institucijos, yra ryšiai su visuomene, nes kiekvienas veiksmas ir elgesys sukelia tam tikras – teigiamas ar neigiamas – visuomenės reakcijas ir vertinimus. Todėl išskyrėme pagrindinius ryšius su visuomene apibūdinančius elementus - patikimumas, pasitikėjimas, komunikacija bei abipusio supratimo siekimas. Analizuojant RsV proceso svarbą įmonėms, svarbu išskirti, kad suformavus teigiamą nuomonę apie įmonę daug lengviau yra sėkmingai siekti tikslų, negu tuomet, kai visuomenė priešinasi įmonės tikslams. Todėl galime teigti, kad informacijos apie įmonę žinojimas sukuria pagrindinį ryšių su visuomene tikslą – supratimą tarp visuomenės ir įmonės. Apibendrinant galime teigti, kad visi straipsnyje analizuoti modeliai skirti vertinti ryšių su visuomene veiklos efektyvumą. Analizuoti modeliai Ryšių su visuomene efektyvumo modelis (PII); J.Macnamaros piramidės modelis; RsV planavimo, tyrimų ir vertinimo modelis; RsV vertinimo pagal tikslus modelis; trumpalaikis RsV vertinimo modelis, nuolat veikiantis RsV vertinimo modelis bei L.Kazokienės ir J.Straviskienės sisteminis RsV programos efektyvumo vertinimo modelis. Nustatyta, kad remiantis pastaruoju modeliu atliekamas išsamus RsV vertinimas, kuriame atsispindi veiksmų analizė trumpalaikėje ir ilgalaikėje perspektyvoje bei vertinamos praeities ir ateities RsV programų kryptys. Literatūra Augustinaitis A. (2006). Viešieji ir viešybės valdymas žinių visuomenėje. Informacijos mokslai, 38. Žiūrėta 2014 09 18. Prieiga per internetą: http://araugust.home.mruni.eu/?attachment_id=43 Bivainienė L., Šiaudkulytė G. (2007). Teoriniai ir praktiniai ryšių su visuomene veiklos aspektai. Ekonomika ir vadyba: aktualijos ir perspektyvos, 9. Žiūrėta: 2014 08 29. Prieiga per internetą: http://bit.ly/ZQx7ug Cornelissen, J.P. (2011). Corporate Communication: a Guide to Theory and Practice (3th ed.). Sage Publications Ltd., p. 296 Curri - Memeti A., (2011). Public relations as promotional activity. Theoretical and Applied Economics. Volume XVIII. No. 11(564), p. 21-26. Žiūrėta: 2014 10 07. Prieiga per internetą: http://bit.ly/1oO0Ji3 Cutlip S., Center H. A. (2006). Effective Public Relations, USA, Prentice Hall, 9th ed. 486 p. Čereška B. (2004). Reklama: teorija ir praktika. – Vilnius: Homo liber, 376 p. Drūkteinienė G. (2007). Organizacijos įvaizdžio valdymas. – Vilnius: Vilniaus universiteto leidykla, 99 p. Gregory, A. (2001). Public relations and evaluation:does the reality match the rhetoric? Journal of Marketing Communications No. 7. 171-189 p. Kazokienė L., Stravinskienė J. (2014). Ryšiai su visuomene. – Kaunas: Technologija, 193 p. Kazokienė L., Stravinskienė J. (2009). Ryšių su visuomene programų efektyvumo vertinimas. Ekonomika ir vadyba, 14. Žiūrėta: 2014 09 26. Prieiga per internetą: http://bit.ly/1n7aPz8 Kotler P., Keller L. K. (2007) Marketingo valdymo pagrindai. – Kaunas: Logitema, 436 p.

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Macnamara, J. (1999). Research in Public Relations: a Review of the use of Evaluation and Formative Research. Asia Pacific Relations Jornal, vol. 1, No. 2, 99-103. Macnamara, J. (2006). PR METRICS – Research for Planning & Evaluation of PR & Corporate Communication. Žiūrėta 2014-0915. Prieiga per internetą: http://195.130.87.21:8080/dspace/bitstream/123456789/231/1/Macnamara-PR%20metrics.pdf Mamedaitytė S. (2003). Ryšiai su visuomene. Autorizuota metodinė medžiaga, 52 p. Žiūrėta: 2014 09 18. Prieiga per internetą: http://ebiblioteka.eu/mediabv/resursai/vrstudija/Rysiai_su_visuomene_S.Mamedaityte.pdf Matkevičienė R. (2005). Ryšiai su visuomene. – Vilnius: Švietimo aprūpinimo centras, 95 p. Nikolic et al. (2014). Research into the evaluation of PR activities in companies from Serbia. Vol. 16 Issue 2, p. 107-123. 17p. 2 Charts. Žiūrėta: 2014 10 08. Prieiga per internetą: http://bit.ly/1nZ52MF Pajuodis A. (2005). Prekybos Marketingas. – Vilnius: Eugrimas, 391 p. Skvarčinskienė V. (2011). Ryšiai su visuomene kultūrinės veiklos vadybininkams. – Kaunas: „Vitae Litera“ leidykla, 185 p. Šliburytė L. (2001). Ryšiai su visuomene ir jų svarba marketinge. Organizacijų vadyba: sisteminiai tyrimai, 19. Žiūrėta: 2014 09 04. Prieiga per internetą: http://bit.ly/1vkB7gs Ulevičius L. (2006). Kaip tapti žinomam. Etiški ryšiai su visuomene. – Kaunas: „Smaltijos“ leidykla, 320 p. Viešųjų ryšių partneriai (2004). Viešieji ryšiai versle. – Vilnius: Verslo žinios. Watson, T., Noble P. Evaluating Public Relations (2nd ed.). London: Kogan Page. – 2007. Wilcox L. ir kt. (2007). Ryšiai su visuomene: strategija ir taktika. - Kaunas: Poligrafija ir informatika, 496 p.

PUBLIC RELATIONS: THEORETICAL ASPECTS OF PERFORMANCE Abstract. This paper presents theoretical aspects of evaluation of public relations. First of all, the concept of public relations is formulated by the analysis of the key concepts and highlighting of their focus, and identification of similarities and differences. The paper also examines the models of public relations, briefly discusses the essence of each of them, the application options. The importance of public relations is identified and models of performance evaluation effectiveness are distinguished. The scientific problem of the paper – to identify and justify the main theoretical ideas that allow to highlight the concept of public relations and the possibilities of performance effectiveness of public relations. The models analysed in the article are for the evaluation of performance effectiveness of public relations. The effectiveness model of public relations (PII) can be used as a test or a memory in planning PR when it is applied in different PR programs or by different PR professionals. J.Macnamara pyramid model reflects all process of PR assessment, i.e. from the initial information gathering, data analysis to the evaluation of results. In planning, research and evaluation of PR model analysed in the article, it is emphasized that the PR assessment should be an iterative process, which measures the development of public relations support, and the used. This model was subsequently complemented by A. Gregory who integrated PR evaluation and emphasized the importance of analysis and reviewing of benefits of PR programs in constantly changing environment (the model of PR evaluation according to purposes). Models proposed by T.Watson (short-term PR assessment model) and P.Noble (continuously operating PR evaluation model) were analysed, they can be applied to all stages of the PR program. According to the authors of the article, in practice, the evaluation of PR models is the most

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purposeful according to systematic PR program effectiveness evaluation models proposed by L.Kazokienė and J.Straviskienė. Key words: public relations, the processes of public relations, the evaluation of public relations.

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PASLAUGŲ ĮMONIŲ ŽMOGIŠKŲJŲ IŠTEKLIŲ UŽSAKOMOSIOS VEIKLOS VALDYMO MODELIS Rima ŽITKIENĖ Mykolo Romerio universitetas E-mail: [email protected]

Ugnė BLUSYTĖ Mykolo Romerio universiteto studentė E-mail: [email protected]

Anotacija. Didėjant užsakomosios veiklos raiškai ne tik gamyboje, bet ir paslaugose, sudėtinga vertinti jos žmogiškųjų išteklių valdymą. Mokslininkų studijose paslaugų užsakomosios veiklos raiška pradėta analizuoti gamyboje, kai veiklos funkcijos perduodamos subrangovams. Praktikoje užsakomoji veikla įmonėse susijusi su taktiniais, strateginiais ir pertvarkos sprendimais. Todėl straipsnyje išryškinami žmogiškųjų išteklių užsakomosios veiklos privalumai, užsakomosios veiklos modeliai, kurių pagrindu sudarytas ir patikrintas paslaugų įmonėse šios veiklos valdymo modelis. Pagrindiniai žodžiai: žmogiškųjų išteklių užsakomoji veikla, paslaugos, valdymo modelis. JEL klasifikacija: D21

Įvadas Cobbertt (2004) teigimu, nors užsakomoji veikla atsirado Amerikoje apie 1970 metus, jos pradžia nėra moksliškai fiksuota. Amiti,Wei (2004) pastebi, kad pirmą kartą užsakomosios veiklos terminas paminėtas 1979 metais, automobilių pramonės kontekste, žurnale „ Journal of Royal Society of Arts, Vol CXXVII, 141/1“. Straipsnyje pateikiama britų automobilių pramonės atstovų sprendimai tam tikrus darbus perduoti vokiečių specialistams. Blumberg (1998) daro prielaidą, kad užsakomoji veikla atsirado apie 1980 metus IT sektoriuje. Gerbl M. et. al. (2009) aptarė užsakomosios veiklos ištakas ir apibendrino, kad egzistuoja gamybos užsakomoji veikla (angl. manufacturing outsourcing) ir paslaugų užsakomoji veikla (angl. service outsourcing). Pasak autorių, gamybos užsakomoji veikla atsirado pramonės sektoriuje, kuomet gamybos įmonės tam tikras gamybos funkcijas pradėjo perduoti subrangovams. Tuo tarpu paslaugų užsakomoji veikla atsirado kiek vėliau, ir prasidėjo nuo specializuotos teisinės veiklos, po kurios sekė IT paslaugų užsakomoji veikla. Bakanauskienė, Brasaitė (2011) pažymi, kad daugiau nei dešimtmetį vadybos mokslinėje literatūroje nagrinėjamas procesas, kai organizacijos tam tikras vadybos funkcijas, procesus ar veiklas, kurios anksčiau būdavo atliekamos jos viduje, perduoda išorės organizacijoms. Viena iš užsakomosios veiklos rūšių – žmogiškųjų išteklių užsakomoji veikla. Ši užsakomosios veiklos rūšis pasaulinėje įmonių praktikoje egzistuoja jau beveik pusšimtį metų, tačiau jos praktinis taikymas vis auga. Brown ir Wilson (2005) teigia kad, užsakomoji veikla gali būtų skirstoma ir įmonių praktikoje taikoma trimis lygiais - taktiniu, strateginiu ir pertvarkos. Bloomberg (1998), McIvor (2000), Franchesi et al. (2003) sudarinėja užsakomosios veiklos sprendimo priėmimo modelius, kurių vieni taikomi universaliai (Franchesi et al., 2003, McIvor 2000), kiti taikomi konkrečiose srityse – paslaugų įmonėse (Bloomberg, 1998). Mokslininkai pabrėžė užsakomosios veiklos motyvus: Zhu et. al (2001) akcentuoja rinkos pokyčių motyvus, Edgell et al. (2008) ekonominio ciklo priežastis, Espino-Rodrigues, Pardon-Robaina (2004) aptaria motyvus paslaugų įmonėse. Autoriai (Arias-Arand, 2011, Bakanauskienė, 2011, Bartkus, 2009, Gomez ir kt., 2009, Mclvor, 2005, Koszevska, 2004, Quelin, 2003, Blumberg, 1998, ir kt.) išskiria privalumus ir trūkumus, kuriuos organizacijoms teikia užsakomoji veikla. Užsakomosios veiklos vertinimo problematiką tyrinėja Horgos (2007), Rajan, Sirvastava (2006), Amiti, Wei (2004). Tačiau ir užsakomosios veiklos valdymo, ir žmogiškųjų išteklių 173


užsakomoji veikla, paslaugų sektoriuje išnagrinėta nepakankamai. Įvertinant paslaugų sektoriaus įvairovę ir paslaugų įmonių skaičiaus didėjimą pasaulyje, kyla mokslinė problema: kaip žmogiškųjų išteklių užsakomoji veikla funkcionuoja ir kaip ją valdyti paslaugų įmonėse? Tyrimo objektas - žmogiškųjų išteklių užsakomoji veikla paslaugų įmonėse. Tyrimo dalykas - žmogiškųjų išteklių užsakomosios veiklos valdymas paslaugų įmonėse. Tyrimo tikslas – atskleisti žmogiškųjų išteklių užsakomosios veiklos valdymo problemas paslaugose ir sudaryti bei patikrinti valdymo modelį paslaugų įmonėse. Žmogiškųjų išteklių užsakomosios veiklos raiška paslaugose

Remiantis moksline literatūra, galima teigti, kad augant užsakomosios veiklos mastams, ji tapo sudėtingesnė ir apimanti vis daugiau ir įvairesnių paslaugų. Dėl šių priežasčių ir menko užsakomosios veiklos apibrėžtumo, užsakomosios veiklos studijose nuolat susiduriama su įvairiomis problemomis. Visų pirma, pastebimos klasifikavimo problemos. Nors yra mėginimų užsakomąją veiklą klasifikuoti įvairiai, tačiau autorių nuomone, šiuolaikiniai klasifikatoriai negali pilnai apimti užsakomosios veiklos spektro. Gerbl M. et. al. (2009) ir Ok (2011) nuomone ir EVRK 2008 klasifikacija, galima užsakomąją veiklą pergrupuoti išskiriant gamybos ir paslaugų tipus. Visų antra, lig šios nenustatytas užsakomosios veiklos apimčių matavimo būdas. Amiti ir Wei (2004) nurodo, kad užsakomąją veiklą paprastai sunku vertinti, nes trūksta informacijos, kurioje gamybos stadijoje buvo pasinaudota užsakomąja veikla. Todėl reikia pasitikėti tik netiesioginiais rodikliais. Rajan ir Srivastava (2006) taip pat pažymi užsakomosios veiklos vertinimo sudėtingumą, nes nepakanka išsamios ir tarptautiškai harmonizuotos informacijos. Horgos (2007) teigia, kad pastaraisiais metais buvos sukurta nemažai rodiklių, kuriais mėginama pamatuoti tarptautinę užsakomąją veiklą. Rodiklius sudarinėjo: Yeats (2001) Egger ir Egger (2002) Chen et al. (2005) Amiti ir Wei (2004) Bardhanand, Kroll (2003) Eggerand, Egger (2003) Geisheckerand, Görg (2005), tačiau visi jie yra riboti ir gali būti taikomi ne tik užsakomajai veiklai vertinti. Nors makro lygyje užsakomoji sunkiai apibrėžiama ir išmatuojama, tačiau studijose, atliktose mikro lygyje, galima įžvelgti tam tikrus dėsningumus ir formuoti tam tikras prielaidas. Žvelgiant į užsakomąją veiklą iš vadybinės prizmės, Lankford, Parsa (1999) išskyrė užsakomosios veiklos lygius – operatyvinis ir strateginis. Operatyviniame lygyje organizacijos naudodamos užsakomąją veiklą siekia išspręsti trumpalaikes problemas, tuo tarpu strateginiame lygyje siekiama ilgalaikės naudos, maksimizuojant įmonės galimybes. Brown ir Wilson (2005) teigia kad, užsakomoji veikla gali būtų skirstoma į tris lygius - taktinį, strateginį ir pertvarkos. Taktiniame lygyje organizacija dažniausiai jau turi tam tikrų rūpesčių, kuriuos reikia nedelsiant spręsti. Tokių rūpesčių pavyzdžiai dažniausiai būna lėšų trūkumas, nekompetetingas valdymas, specialistų trūkumas arba personalo mažinimo poreikis. Tokiu atveju užsakomoji veikla tampa vienu iš sprendimų: yra užsakomos valdymo, žmogiškųjų išteklių administravimo ir panašios paslaugos. Strateginės užsakomosios veiklos atveju, tikslas yra sukurti ilgalaikę pridėtinę vertę (Ghodeswar, Vaidyanath, 2008). Sudaromos ilgalaikės sutartys su patikimais paslaugų teikėjais. Tokiu būdu organizacija nepagrindines veiklas perduoda vykdyti tokios veiklos vykdymo paslaugas teikiančiai įmonei, o savo išteklius nukreipia vykdyti pagrindinę įmonės veiklą. Pertvarkos užsakomoji veikla pasitelkiama pertvarkant įmonę. Brown, Wilson (2005) nurodo, kad pertvarkyti įmonę būtina, norint užimti lyderiaujančią poziciją rinkoje. Įmonės pertvarkymas pagrįstas užsakomąją veikla, leidžia įmonėms naudotis patirtimi specialistų, teikiančių užsakomąsias paslaugas ir kiekvienoje srityje turėti tik geriausius specialistus kurie specializuojasi tik konkrečioje veikloje. 174


Nors, kaip manoma, užsakomoji veikla kilo IT sektoriuje, remiantis Blumberg (1998) galima teigti, kad kiekviena veikla gali tapti nuomos objektu. Užsakomoji veikla apima daug veiklos rūšių iš kurių mokslo darbuose dažniausia nagrinėjamos yra trys grupės: informacinių technologijų (angl. Information technology - IT) užsakomoji veikla, verslo procesų valdymo užsakomoji veikla (angl. Business process outsourcing - BPO) ir gamybos užsakomoji veikla. Verslo procesų užsakomoji veikla (BPO) tai viena iš užsakomosios veiklos veiklų, kuri apima tam tikrų procesų, vykdomų įmonėje perdavimą kitai įmonei vykdyti. Ji, mokslininkų darbuose, kategorizuojama įvairiai. Halvey ir Murphy (2007) išskiria 7 verslo procesų užsakomosios veiklos rūšis. Pasak autorių, į šias rūšis patenka visos veiklos, kurios gali būti priskiriamos verslo procesų užsakomajai veiklai: 1. Finansai ir apskaita; 2. Investicijų ir kapitalo valdymas; 3. Žmogiškieji ištekliai; 4. Pirkimai; 5. Logistika; 6. Nekilnojamojo turto valdymas; 7. Įvairūs kiti (energetikos paslaugos, klientų valdymo paslaugos, el. pašto teikimas, maisto tiekimas). Remiantis moksliniais darbais galima išryškinti gamybos ir paslaugų užsakomosios veiklos tipus ir lygius (žr. pav. 1).

Taktinė

Strateginė

Pertvarkos

UŽSAKOMOJI VEIKLA Gamybos UV Gamybos UV

Paslaugų IT paslaugų UV Verslo procesų UV Finansai ir apskaita Investic. ir kapit. valdymas Žmogiškieji ištekliai Pirkimai Logistika NT valdymas Kita

1 pav. Užsakomosios veiklos tipai ir lygiai Šaltinis: Sudaryta autorių Kaip matyti 1 pav. žmogiškųjų išteklių užsakomoji veikla pasireiškia paslaugų verslo procese valdant kitas veiklas. Be to, ŽIUV gali būti reikšmingas visiems paslaugų sektoriaus dalyviams, bet kuriame organizacijos lygyje (taktiniame, strateginiame, pertvarkos). Norint analizuoti paslaugų užsakomąją veiklą, visų pirma, reikia apsibrėžti kas yra paslaugos ir kuo jos skiriasi nuo prekių. Langvinienė, Žitkienė (2011) nurodo, kad paslaugos nuo prekių 175


skiriasi dėt tokių savybių, kaip: neapčiuopiamumas, heterogeniškumas, gamybos ir vartojimo vienovė, kliento dalyvavimas, nuosavybės perdavimo nebuvimas, neįmanomas kaupimas ir sandėliavimas. Tačiau praktikoje atskirtis tarp prekių ir paslaugų atrandama daug sudėtingiau, tik savybių išskyrimo nepakanka. Pirma, kai kurios paslaugos gali turėti apčiuopiamumą (tarkim, kai konsultantas atspausdina ataskaitą), būti matoma (teatras) arba kaupiama (balso paštas). Antra, didžioji dalis prekių yra skirtos atlikti kokią nors paslaugą ar funkciją. Trečia, dauguma prekių apima netiesioginį paslaugų dalyvavimą ir taip pat, daugumai paslaugų reikia materialaus turto ir tarpinių prekių. Neretai prekės ir paslaugos yra teikiamos kartu (UNCAD, 2004). Paslaugos paprastai yra gaminamos toje vietoje ir tuo metu, kai yra vartojamos. Tačiau pastaraisiais dešimtmečiais vykusi informacijos ir komunikacijos pažanga sukūrė galimybes paslaugas gaminti ir vartoti skirtingose vietose, tai leido vystytis prekybai paslaugomis, taip pat ir paslaugų užsakomajai veiklai. Mokslininkai Bardhan ir Kroll (2003) išskiria tam tikras sąlygas, kurių reikia paslaugų užsakomajai veiklai:  Nebūtinas tiesioginis bendravimas;  Darbo proceso įgyvendinimas pasitelkiant telekomunikacijas arba internetą;  Dideli darbo užmokesčio skirtumai;  Nedideli steigimosi reikalavimai;  Maži socialinių tinklų reikalavimai. Tačiau galima pastebėti, kad šios sąlygos artimos ne tik paslaugų užsakomajai veiklai, bet ir apskritai paslaugų įmonių veiklai. Tačiau, apribojimai, veikiantys paslaugų užsakomąją veiklą, suteikia jai daugiau išskirtinumo. Ne visos paslaugos gali būti užsakomosios veiklos objektu (Stare, Rubalaba 2009). UNCAD 2004 nurodo tokius apribojimus:  Technologiniai. Ne visos paslaugos gali būti suskaitmenintos ir atskirtos nuo susijusios veiklos;  Tiesioginis „akis į akį“ bendravimas. Tai vis dar būtinas procesas daugelyje vertės grandinės kūrimo etapų, prekyboje, teikiant ir palaikant paslaugas;  Kai kuriuos procesus sudėtinga atlikti nuotoliniu būdu. Pavyzdžiui kūrybinė ir inovacinė veikla, reikalauja glaudaus ryšio, tad ją sunku atskirti ir perduoti;  Informacijos asmeniškumas, slaptumas;  Draudimai įsigyti paslaugas iš kitose šalyse esančių tiekėjų;  Vietinių įstatymų niuansai (fizinio antspaudo būtinumas). Taigi informacinių technologijų tobulėjimas suteikė pagreitį paslaugų užsakomosios veiklos plėtrai. Nepaisant egzistuojančių ribojimų, paslaugų užsakomosios veiklos mąstai didėja. Vienas iš reikšmingiausių išteklių kiekvienoje įmonėje, tai žmogiškieji ištekliai (ŽI). Pažangių technologijų laikais nei viena įmonė neišsivers be žmonių, gebančių valdyti technologijas ir procesus. Organizacijų sėkmę lemia, jose dirbantys darbuotojai, todėl labai svarbu, kad įmonėje dirbtų tinkami žmonės, turintys reikiamą kvalifikaciją ir jų darbui būtinus įgūdžius, kad įmonės veiklos procesai būtų vykdomi kuo efektyviau. Žmogiškųjų išteklių užsakomoji veikla, kaip verslo paslaugų užsakomosios veiklos rūšis apima visas su darbuotojais susijusias funkcijas, pradedant įdarbinimu ir baigiant darbo užmokesčiu ir kt. išmokomis (Halvey, 2007). Bartkaus ir kt. (2009) teigimu, žmogiškųjų išteklių užsakomoji veikla leidžia organizacijoms lanksčiai ir efektyviai valdyti savo žmonių išteklius.

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Bakanauskienės (2009) nuomone, žmogiškųjų išteklių užsakomoji veikla gali būti visiška arba dalinė. Visiškos metu atsakomybė už visas funkcijas susijusias su ŽI yra perduodama organizacijoje nedirbančių asmenų grupei – tai reiškia visapusišką ir visateisį pareigų perėmimą. Dalinė žmogiškųjų išteklių užsakomoji veikla gali pasireikšti dvejopai. Pirma, nuolatinė atskiros ŽI valdymo veiklos ar kelių veiklų nuoma – tai beveik tas pat, kas visiška nuoma, tik apima ne visų veiklų perdavimą, o kelių ar vienos. Antra, vienkartinis atskiros ŽI valdymo veiklos ar jos dalies nuoma – trunka trumpą laikotarpį ir apima vienkartinį ŽI veiklos atlikimą išorėje. Tai reiškia, kad įmonė apsisprendžia, kaip valdys savo žmogiškuosius išteklius – pati ar perduos išorinei įmonei. Taip pat organizacija nusprendžia, kiek kišis į perduotų veiklų valdymą. Analizuojant mokslininkų tyrimus, žmogiškųjų išteklių užsakomosios veiklos klausimais, išryškinami privalumai, kuriuos įmonės įgyja priėmusios sprendimą valdyti žmogiškuosius išteklius pasitelkiant žmogiškųjų išteklių užsakomąją veiklą (Adler, 2005, Sanjeev ir Kevika, 2010, Seth ir Sethi, 2011, Baranauskienės, 2009, Bartkus ir kt., 2009, Woodall et al., 2009, Cooke et al., 2005). Privalumai, kuriuos įmonės tikisi įgyti besinaudodamos ŽIUV yra tiesioginiai motyvai skatinantys pasitelkti ŽIUV. ŽI užsakomoji veikla leidžia įmonei taupyti laiką ir lėšas. Obloj (2010) teigia, kad naudojantis laikinojo įdarbinimo paslauga, galima sumažinti įmonės kaštus. Tyrimų bendrovės „Hewitt Associates“ 2009 metais atlikto tyrimo metu, iš 65% tyrime dalyvavusių įmonių nurodė, kad pagrindinė priežastis, dėl kurios jos pasirinko žmogiškųjų išteklių užsakomosios veiklos teikėjų paslaugas, tai galimybė sumažinti sąnaudas ir joms pavyko pasiekti užsibrėžto tikslo per vykdytas ŽI užsakomosios veiklos programas. Kaštai mažinami perduodant įmonės žmogiškųjų išteklių valdymą, motyvavimą, darbo vietų išlaikymą paslaugos tiekėjui. Perdavus ŽI valdymą išorės organizacijoms, įmonės viduje galima susikoncentruoti ties pagrindine įmonės veikla, eliminuoti nenaudojamus išteklius ir padidinti konkurencingumą. Taip pat žmogiškųjų išteklių užsakomoji veikla leidžia sumažinti riziką, kad bus įdarbintas netinkamas darbuotojas. ŽI užsakomosios veiklos įmonės yra savo srities specialistės, jos naudoja naujausias technologijas darbuotojų paieškai, atrankai ir mokymams. Dėka tokios specifikos, kuomet darbuotojai valdomi pasitelkiant naujausias technologijas ir dirba laikinai įvairiose įmonėse, darbuotojai atvykstantys dirbti pas įmonę klientę atsineša nemažą patirtį ir novatoriškų idėjų, sukauptų dirbant vis kitoje įmonėje. Taip pat tampa įmanoma fiksuotas išlaidas (susijusias su darbuotojais) paversti kintamomis, atsižvelgiant į darbo jėgos poreikį. Tai reiškia, kad organizacijos imasi inovatyvios žmogiškųjų išteklių valdymo strategijos. Tačiau žvelgiant iš paslaugų įmonių perspektyvos, autoriai Sani et al. (2013), EspinoRodriguez, Pardon-Robaina (2004), Arias-aranda et al. (2010), Rahim et al. (2010) ir kt. nurodo, kad įmonės turėtų naudotis užsakomąja veikla toms veikloms, kurios įmonėje yra nepagrindinės. Viešbučiuose, nepagrindinėmis veiklomis laikomos - kambarių ir patalpų valymo veiklos, skalbimas, apsauga, aplinkos priežiūra (Espino-Rodriguez, Pardon-Robaina, 2004, Sani et al., 2013 ), sveikatos priežiūroje – valymo veikla, apsauga, maitinimas, medicininės įrangos priežiūra (Rahim et al. 2010). Kaip matyti iš pateiktų veiklų, paslaugų sektoriuje žmogiškųjų išteklių užsakomoji veikla užima ypatingą vietą. Espino-Rodriguez, Pardon-Robaina, (2004) teigia, kad naujos technologijos, kintanti vartotojų kultūra ir nuožmi konkurencija, taip pat nuolat kintanti aplinka, skatina viešbučius sumažinti vertikalios integracijos lygį ir susitelkti į pagrindines veiklas. O ŽIUV leidžia tai padaryti paprastai ir efektyviai. Žmogiškųjų išteklių užsakomosios veiklos valdymo modelis

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Žmogiškųjų išteklių užsakomoji veikla yra inovatyvi valdymo strategija orientuota į visas sritis, kurios susijusios su žmogiškaisiais ištekliai, jų valdymu. Taigi ŽI užsakomoji veikla įmonei gali turėti tiek neigiamos, tiek ir teigiamos įtakos. Tačiau nepaisant egzistuojančių trūkumų ir įvertinant teikiamą naudą ŽI užsakomosios veiklos naudojimo apimtys didėja. Todėl svarbu šią veiklą tinkamai valdyti, ypač paslaugų įmonėse, kuriose labai reikšmingas žmogiškasis faktorius. Mokslininkai tyrinėjantys paslaugas yra sudarę modelius atskiroms paslaugų grupėms: IT užsakomajai veiklai (Manju A. et al. 2011, Robinson, Kalakota 2004), logistikos užsakomajai veiklai (De Boer et al. 2006, Sink, Langely 1997, Bagchi, Virum 1998), Žmogiškųjų išteklių užsakomajai veiklai (Lilly J.D. 2005), verslo paslaugų užsakomajai veiklai (Kim, Won 2007) ir kt. Modeliai gali būti teorinio arba praktinio pobūdžio, pagrįsti įvairiais požiūriais: strateginio valdymo (Bloomberg 1998, Ordoobadi 2005), tiekimo grandinės valdymo (De Boer et al. 2006), sandorio kaštų ekonomika (Vasiliauskienė ir kt. 2011). Bloomberg (1998) akcentuoja, kad analizuojant veiklas, reikia remtis galutinio vartotojo požiūriu į jas. Jei vartotojas laiko jas išskirtinomis ir svarbiomis produktui, tuomet įmonė turėtų jas vykdyti pati. Tuo tarpu McIvor (2000) teigia, kad veiklas reikėtų vertinti per pridėtinės vertės ir konkurencinio pranašumo prizmę. O Franchesi ir kt. (2003) nurodo, kad pagrindines veiklas reikia išskirti lyginant su konkurentų veiklomis, išryškinant galimą pinigų švaistymą ir įgūdžių trūkumą. Kitaip nei minėti autoriai, Franchesi ir kt. (2003) pačiame modelyje pabrėžė užsakomosios veiklos proceso valdymą. Tiek Bloomberg (1998), tiek Franchesi ir kt. (2003) pabrėžė, kad priimant užsakomosios veiklos sprendimą, reikia išanalizuoti vidinę ir išorinę įmonės aplinkas. Tačiau nesutapo autorių išorinės aplinkos apibrėžtis. Bloomberg teigimu išorinės aplinkos analizė, tai rinkos, konkurencijos ir pan. tendencijos, tuo tarpu Franchesi ir kt. įvardina, kad tai paslaugų teikėjų analizė. Kaip teigia De Boer et al. (2006), daugelį modelių sudaro ribotas kiekis etapų ir kai kuriuose iš jų, pastebimi tam tikri pasikartojantys aspektai: pagrindinių kompetencijų ir strategijų nustatymas; kaštų vertinimas; tiekėjų ir konkurentų analizė. Analizuojant Bloomberg (1998), McIvor (2000), Franchesi ir kt. (2003) modelius buvo palyginti jų bruožai, ir taikymo galimybės (žr. Lent. 1). Lentelė 1. Užsakomosios veiklos modelių palyginimas Pagrindiniai bruožai

Pagrindinė orientacija Modelio taikymo sritis

Franchesi ir kt. (2003) Remiasi užsakovo požiūriu Užsakomosios veiklos įgyvendinimo proceso valdymas. Universalus

McIvor (2000)

Bloomberg (1998)

Efektyvaus užsakomosios veiklos sprendimo formavimas Kaštai ir veiklos efektyvumas

Remiasi galutinio vartotojo požiūriu į paslaugas

Universalus / gamyba

Pagrindinių veiklų nustatymas ir jų perdavimo būdai Paslaugos

Šaltinis: sudaryta autorių Visuose trijuose modeliuose galima pastebėti vadybos funkcijas, paties proceso identiškumą: Nustatyti pagrindines ir nepragrindinės įmonės veiklas; nuspręsti kurioms veikloms vykdyti pasitelkiama užsakomoji veikla; išanalizuoti galimus paslaugų tiekėjus ir ryšius su jais; sudaryti kontraktą; kontroliuoti užsakomąją veiklą.

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Autoriai akcentuoja, kad nustačius pagrindines ir nepagrindines veiklas, įvertinus jų vykdymo įmonėje efektyvumą, reikėtų perduoti išoriniams tiekėjams nepagrindines veiklas. Tam būtina analizė, kuri atskleistų, kas (įmonės darbuotojai ar išoriniai teikėjai) gali geriau atlikti ir pagrindines veiklas. Po to būtina išanalizuoti rinkoje esančius paslaugų teikėjus ir galimus bendradarbiavimo būdus. Visi autoriai nurodė, kad bendradarbiavimo su išoriniais tiekėjais yra ne vienas būdas. Galiausiai sudaryti kontraktą ir stebėti, kaip vykdomi procesai. Žmogiškųjų išteklių užsakomoji veikla, tai sudėtinis procesas reikalaujantis nuodugnaus tyrimo. Jau vien sprendimas naudotis ŽIUV yra ŽI valdymo priemonė. Remiantis nagrinėta moksline literatūra buvo sudarytas žmogiškųjų išteklių užsakomosios veiklos valdymo modelis. Modelį sudaro trys etapai: planavimas/analizė, sprendimo priėmimas, valdymas. Pradiniame ŽI užsakomosios veiklos etape – planavimas/analizė, reikia išnagrinėti visas šios veiklos teikiamas naudas ir tai ko pasiekti tikisi organizacija. Motyvai, lemiantys ŽIUV gali nuolat kisti dėl kintančios vidinės ir išorinės aplinkos. Sprendimo priėmimas apima tam tikrus etapus, kuriuos įgyvendinus gali būti priimtas optimaliausias sprendimas. Remiantis De Boer et al. (2006) sprendimo priėmimo etape pritaikyti bendriniai sprendimo priėmimo žingsniai, kurie buvo iškirti analizuojant užsakomosios veiklos sprendimo priėmimo modelius. Šie žingsniai turėtų būti vienodi, nepaisant organizacijos tipo ar vykdomos veiklos. Svarbu išanalizuoti įmonės veiklas susijusias su žmogiškaisiais ištekliais. Tačiau, paslaugų įmonėse priimant sprendimą, rekomenduojama pasiremti mokslininkų nuomone: Sani et al. (2013), Espino-Rodriguez, Pardon-Robaina (2004), Arias-aranda et al. (2010), Rahim et al. (2010), kurie akcentuoja, kad įmonės turėtų naudotis užsakomąja veikla toms veikloms, kurios įmonėje yra nepagrindinės. Trečiajame etape, svarbu stebėti žmogiškųjų išteklių užsakomąją veiklą. Priklausomai nuo priežasčių lėmusių žmogiškųjų išteklių užsakomosios veiklos pasitelkimą, šios veiklos vertinimo kriterijai ir valdymas gali būti įvairūs ir keistis, priklausomai nuo laiko, kaštų, efektyvumo, lankstumo ar kt. Organizacijos turi analizuoti ar pasiekė tikėtosios naudos, nes priešingu atveju turėtų būti peržiūrimi ankstesni etapai ir priimami nauji sprendimai. Šį etapą įtakoja ankstesni etapai ir tik individuali įmonės veiklos specifika nulemia, kokiais rodikliais ir kaip bus vertinama ir valdoma ŽIUV.

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1 ETAPAS - PLANAVIMAS/ANALIZĖ

Priežastys skatinančios ŽIUV

Priežastys stabdančios ŽIUV

Lėšų taupymas; Laiko taupymas; Sezoniškas darbuotojų poreikio svyravimas; Rizikos mažinimas; Efektyvumo didinimas; Išorinės patirties poreikis; Kokybės gerinimas; Koncentracija į pagrindinę veiklą; Lankstumas, dėl galimybės laviruoti darbuotojais; Administracinės naštos mažinimas.

Kontrolės praradimas; Įgūdžių praradimas; Nekokybiškos paslaugos; Informacijos nutekėjimas; Kokybės prastėjimas; Didesnės nei tikėtasi išlaidos.

2 ETAPAS – SPRENDIMO PRIĖMIMAS

ŽIUV sprendimo priėmimas 1. Įvertinti įmonės veiklas susijusias su ŽI Pagrindinės

Nepagrindinės

2. ŽIUV funkcijos Atranka; Įdarbinimas ir atleidimas; Laikinasis įdarbinimas; Mokymai; Saugių sveikatai sąlygų sudarymas ir priežiūra; Darbo taisyklių sudarymas ir įgyvendinimas, kitos. Visiškas

Dalinis 3. Kaštų analizė

Veiklos vykdymo įmonėje

ŽIUV vykdymo

4. Galimų ŽIUV tiekėjų analizė Tinkami

Netinkami

3 ETAPAS – VALDYMAS

Žmogiškųjų išteklių užsakomosios veiklos stebėsena ir elementų vertinimas

Efektyvumas

Lankstumas

Laikas

Kaštai

Kita

2 pav. ŽIUV valdymo teorinis modelis Šaltinis: sudaryta autorių

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Žmogiškųjų išteklių užsakomosios veiklos tyrimas paslaugų įmonėse Siekiant patikrinti teorines nuostatas ir pateiktą modelį, buvo atliktas empirinis tyrimas paslaugų įmonėse. Bandomasis tyrimas buvo vykdomas 2013 metų spalio mėnesį, Vilniuje, o anketa buvo siunčiama paslaugų įmonių vadovams. Pasitelkiant internetinį informacinį katalogą www.info.lt ir pasirinkus filtrus – „Vilniaus miestas“ ir „turi el. paštą“, buvo surinkta 1607 įmonių el. pašto adresai: 107 viešbučių, 279 turizmo paslaugas teikiančių įmonių, 176 interneto paslaugas teikiančių įmonių, 81 patalpų valymo paslaugas teikiančių įmonių, 168 pramogų ir poilsio paslaugas teikiančių įmonių, 150 restoranų, 54 logistikos paslaugas teikiančių įmonių, 59 informacijos paslaugas teikiančių įmonių, 170 ryšių ir telekomunikacijos paslaugas teikiančių įmonių, 712 verslo konsultacijų paslaugas teikiančių įmonių. Iš įmonėms siųstų anketų, adresatą pasiekė 1270, iš kurių užpildytos buvo 8,8 % arba 112 anketų. Apibendrinant tyrimo rezultatus, galima teigti, kad žmogiškųjų išteklių užsakomąja veikla naudojasi trečdalis tyrime dalyvavusių įmonių. Tačiau, turint omenyje, kad tiriamos buvo paslaugų įmonės, ŽIUV beveik pusė apklaustųjų naudojama nepagrindinėms veikloms vykdyti – 46, 3%. Tačiau taip pat buvo nustatyta, kad nemaža dalis respondentų (24,4%) ŽIUV naudoja ir pagrindinėms veikloms vykdyti. Tikrinant pirmojo modelio etapo praktinį tinkamumą, tyrimas parodė, kad priežasčių, lemiančių ŽIUV pasitelkimą, spektras labai platus. Šią variaciją, galima paaiškinti skirtingomis tyrime dalyvavusių įmonių veiklomis ir jų specifika. Visgi, dažniausia priežastimi buvo išskirtas laiko taupymas, priešingai nei mokslinėje literatūroje dažniausia priežastimi laikomą lėšų taupymą. Analizuojant duomenis, taip pat buvo pastebėta, kad nors modelis ir gali būti taikomas universaliai paslaugų įmonėms, tačiau patikimus duomenis galima gauti tik skirstant duomenis, pagal paslaugų įmonių veiklos sritis. Todėl tyrime dalyvavę respondentai, pagal susijusias veiklas, sąlyginai buvo suskirstyti į tris grupes. Pagal veiklas: I grupė – viešbučiai, restoranai, turizmo ir poilsio organizavimas. II grupė – statyba, transportavimas ir sandėliavimas, III grupė – kompiuteriai ir su jais susijusi veikla. Tikrinant antrąjį modelio etapą – sprendimo priėmimas, šio tyrimo metu buvo patikrinti, tik pirmi du ( įvertinti įmonės veiklas susijusias su ŽI ir pasirinkti funkcijas) jo elementai iš keturių. Respondentai pabrėžė, kad ŽIUV dažniausiai taiko nepagrindinėms veikloms. Tačiau sugrupavus respondentus į grupes pagal jų veiklas, pavyko nustatyti, kad įmonių veiklos specifika lemia, kokios veikloms vykdyti pasitelkiama ŽIUV. Įmonėms kurioms būdingas dažnas bendravimas su klientu akis į akį, tokios kaip viešbučiai, restoranai, turizmo ir poilsio organizatoriai, dažniau ŽIUV taiko nepagrindinėms veikloms vykdyti. Tuo tarpu kompiuterių ir su jais susijusios veiklos įmonės ŽIUV naudojasi pagrindinėms veikloms. Taigi, teorijoje išskirta prielaida apie ŽIUV naudojimą paslaugų įmonėse nepagrindinėms veikloms, tinkama ne visais atvejais. Įmonių skirstymas atskleidė, kad veiklos specifika lemia ir ŽIUV funkcijų pasirinkimą. Pavyzdžiui 80% tyrime dalyvavusių viešbučių ir 100% poilsio organizatorių, bei 33% restoranų naudojasi laikinojo įdarbinimo paslaugomis, tai gali lemti veiklos sezoniškumas. 57 % kompiuterių ir su jais susijusia veikla, 60% viešbučių veiklą vykdančių ir tyrime dalyvavusių įmonių naudojasi darbuotojų paieškos ir atrankos paslaugomis. Priežasčių galima atrasti įvairių, tarkim darbuotojų trūkumas. Bet, taip pat pagrįstai, visas šias priežastis gali lemti tyrimo metu atskleistas laiko taupymo motyvas. Tuo tarpu 50% tyrime dalyvavusių transportavimo, sandėliavimo ir 75% tyrime dalyvavusių statybų įmonių naudojosi saugių sveikatai sąlygų sudarymo ir įgyvendinimo paslaugomis. Šiuo atveju įtakos gali turėti veiklos rizikingumas. Todėl ŽIUV modelio antrasis etapas taip pat tinkamas taikyti praktikoje, tačiau sprendimo priėmimui daro įtaką paslaugų įmonių veiklos sritis ir pobūdis. 181


ŽIUV valdymo modelio pirmieji du etapai sudaro prielaidas trečiajam etapui – valdymui. Priklausomai nuo priežasčių lėmusių ŽIUV pasirinkimą, bei nuo pasirinktų ŽIUV funkcijų, kiekviena organizacija individualiai išskiria valdymo priemones. Jei ŽIUV lėmė laiko taupymas, tokiu atveju pagrindinis vertinimo rodiklis turėtų būti laikas. Trečiasis modelio etapas sudaromas ir taikomas konkrečios įmonės atžvilgiu. Visgi, buvo pastebėti ir tam tikri tobulintini instrumentarijaus aspektai. Tiriant priežastis, lėmusias nesinaudojimą ŽIUV arba priešingai - naudojimąsi ir koks tų priežasčių reikšmingumas, buvo pateikti atsakymų variantai, tarp jų, paskutinis – “kita” (penktadalis tyrime dalyvavusiųjų jį pasirinko). Tobulinant anketą ir siekiant gauti kuo išsamesnės informacijos, šį atsakymo variantą reikėtų transformuoti į atvirąjį klausimą, kad respondentas galėtų įrašyti savo atsakymą. Tokiu būdu būtų galimybė išsiaiškinti tikrąsias priežastis ar motyvus. Tokia pati problema susijusi ir su trečiu klausimu. Be to, analizuojant gautus duomenis, buvo pastebėta, kad tik sugrupavus respondentus, buvo nustatyti tam tikrus būdingumus konkrečioms grupėms. Tad ateityje vykdant tyrimus ir naudojantis šiuo instrumentarijumi, reikėtų jį pritaikyti konkrečioms paslaugų įmonių grupėms ir tik tuomet analizuoti ir lyginti duomenis. Išvados Žmogiškųjų išteklių užsakomoji veikla populiarėja organizacijų tarpe. Ypač aktuali ŽIUV yra paslaugų įmonėms, nes būtent jose itin svarbus yra žmogiškasis faktorius. Kadangi, kaip teigia mokslininkai, paslaugų įmonėms labai svarbus kokybės aspektas ir jos turi koncentruotis į pagrindines veiklas, ŽIUV suteikia galimybę nepagrindines veiklas perduoti šių paslaugų teikėjams, taip gerinant veiklos efektyvumą. ŽIUV gali būti taikoma keliais lygmenimis – taktiniu, strateginiu ar pertvarkos. Tačiau kad ir kokiame lygmenyje bus mėginama pasitelkti ŽIUV, šis procesas turi būti kruopščiai planuojamas ir nuolatos valdomas. Yra sudarytas nevienas modelis taikomas užsakomajai veiklai paslaugose. Remiantis nagrinėtais modeliais buvo sudarytas ŽIUV valdymo modelis, kuris patikrintas paslaugų įmonių tarpe. Tyrimas atskleidė, kad modelis gali būti taikomas praktikoje ir padeda įvertinti visus užsakomosios veiklos įgyvendinimui ir valdymui būtinus etapus. Tačiau taip pat paaiškėjo, kad modelis neatspindi visų paslaugų įmonių tendencijų. Bandomojo tyrimo vykdymas ir rezultatai parodė, kad būtinas anketos tobulinimas. Be to, gauti rezultatai tampa prasmingi, tik analizuojant tarpusavyje susijusias paslaugų įmones, tiksliau jas sugrupavus į tam tikrus klasterius. ŽIUV valdymo modelio pirmieji du etapai sudaro prielaidas trečiajam etapui – valdymui. Priklausomai nuo priežasčių lėmusių ŽIUV pasirinkimą, bei nuo pasirinktų ŽIUV funkcijų, kiekviena organizacija individualiai išskiria valdymo priemones. Jei ŽIUV lėmė laiko taupymas, tokiu atveju pagrindinis vertinimo rodiklis turėtų būti laikas. Trečiasis modelio etapas sudaromas ir taikomas konkrečios įmonės atžvilgiu. Šaltiniai Adler P.S. (2005) Making the HR outsourcing bcf.usc.edu/~padler/research/HR-BPO(SMR)-1.pdf

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THEORETICAL MODEL OF HUMAN RESOURCE MANAGENT IN SERVICE COMPANIES Rima ŽITKIENĖ Mykolo Romerio universitetas E-mail: [email protected]

Ugnė BLUSYTĖ Mykolo Romerio universiteto studentė E-mail: [email protected]

There are many theories about beginning of outsourcing. But mainly it is stated that outsourcing became from manufacturing sector. However, because of globalization and spread of technologies outsourcing spread in service sector as well. Service sector is very wide and constantly changing, so there are many problematic issues about outsourcing and its management in service sector. This article consist of four parts. First part is analyzing, what problems occurs discussing about outsourcing. There are reviled problematic of outsourcing classification and measuring, also shown structure of outsourcing, marked where is the place of human resource outsourcing between other outsourcing activities. Second part describes service outsourcing and note human resource outsourcing importance in service companies. There is disclosed that human factor is very important for service companies and management of HR outsourcing is necessary to manage. Third part presents outsourcing models, key points of outsourcing models. Based on that there is done and presented theoretical human resource outsourcing management model. Fourth part of article present result of empirical research which were based on model described in third part and research done among service companies. Research results showed that model can be used in practice. Research results become meaningful, only after grouping companies according their activity field. First two stages of model makes premises for third stage – management. Based on reasons, why companies choose to use HR outsourcing, and what functions of it they choose – each companies individually sets management tools. If reason of outsourcing was saving of time, so main measurement tool should be time. The third stage of the model is set up and applied specifically to each company. Key words: human resource outsourcing, services, management model.

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FORMS OF INTEGRATION IN THE LIVE PIG MARKET IN POLAND AND SELECTED EU COUNTRIES Elżbieta Jadwiga SZYMAŃSKA Warsaw University of Life Sciences – SGGW E-mail: [email protected] Abstract. The research aimed at identifying the forms of vertical integration in the live pig market in Poland and in selected EU countries. The analysis comprised two different systems present in the German and in the Spanish live pig markets and then compared them with solutions used in Poland. The research has been based on the study of selected reference books, data storage statistics and information provided by 20 meat sector companies. Due to a significant dispersion of operators in the Polish live pig market, it is expedient to increase vertical integration in the country. Adopting the solutions implemented in Germany or Spain poses some difficulty as their special characteristics and conditions differ from Polish ones. It is more appropriate to provide for mechanisms facilitating the formation of the so called "meat agro-clusters" i.e. a cooperative interconnection of operators in the pork supply chain. Keywords: vertical integration, contracting, live pig market. JEL classification: Q13, L22. Introduction In order to reduce the weaknesses of live pig market and achieve a competitive advantage there are used different forms of cooperation between operators in the supply chain, one of the most advanced being vertical integration which is to combine all production stages i.e. from raw material to the finished product. It occurs when a single firm can produce complementary products and services more profitably than a number of firms. Activities are complementary when carrying out one activity reduces the cost of doing the other (Berlin 2001). Vertical integration is most often realised within one company clustering several production stages and even the whole production process, starting from the feed production, breeding material and live pigs, through the production of meats to finish with wholesalers and company stores. This type of cooperation may be carried out in accordance with the bottom-up principle (integration directed forward) and with the top-down principle (backwards-oriented integration). In the former, the integrators are farmers or horizontal associations of farmers (such as producer groups, cooperatives or capital companies). The top-down integration, on the other hand, is to integrate different production stages by food-processing establishments, trade companies (wholesalers, chain stores), stock exchanges and even banks and financial institutions (Łącka 2012) . Whatever is the integrator, the very process of integration may be indirect (partial) or complete. Indirect integration results from contractual relationships that protect the economic and legal separation of the partners. These practices are exemplified by agricultural procurement contracts, unions (associations) of cooperating agricultural and non-agricultural companies joined in the production of a final product as well as by unions (associations) of agricultural companies creating common processing or service entities (Pepliński 2009). The complete integration involves the creation of agro-industrial establishments combining production and distribution of products. The success of the biggest groups of companies like Animex and Sokołów (with foreign capital) or PKM DUDA shows that complete integration allows establishments to achieve strong competitive advantage as well as growth and development in the long term.

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In the countries of the EU 15 the combining of agriculture and processing basing on procurement contracts is widespread. It is the Common Agricultural Policy that has contributed to it. What is more, the EU 15 farmers are unwilling to start the livestock production without first having signed an agricultural procurement contract for the supply of raw material. The pig market in Poland is characterised by large fragmentation of both the agricultural holdings producing live pigs and meat sector companies but also by loose connections between the production and the slaughter establishments. There is also no capital linkages between producers of pork and meat processing companies .Lack of cooperation increases the risk and cost of operations at all levels of the food chain. The international competitiveness of individual households and businesses is limited, as well as the sector as a whole. A significant number of entities demonstrate the good cause and need to develop all forms of cooperation (Szymańska 2014). Experiences of the largest producers of pork farms in the EU proves that cooperation with customers ( slaughterhouses, meat processing ) brings measurable economic effects . The aim of the study was to determine the forms of vertical integration in the live pig market in Poland and in selected EU countries. The primary source of information on the integration of operators in the market has been the study of Polish and foreign reference books. The research considers different forms of integration, their advantages and disadvantages. The analysis comprised two different systems which are present in the German and in the Spanish live pig markets and then they were compared with solutions used in Poland. As far as different conditions and constraints of domestic market integration are concerned, there were used the data from the Central Statistical Office of Poland. A survey has been carried out among 20 establishments dispersed all over the country in order to identify the sources of raw material in the slaughter plants. The objects of study were selected purposefully and the information data on the surveyed establishments were taken from the list published by the General Veterinary Inspectorate as of 05 July 2012. The main criterion for the division of the surveyed entities was their slaughter capacity. Thus, there have been distinguished 10 establishments with the slaughter capacity lower than 1000 units per week and 10 large ones with a weekly slaughter capacity of 1000 and more animal units. The results of the analyses are presented in a narrative description, using graphical and tabular methods as well. Integration solutions in the live pig market The growing requirements of modern customers and the ongoing competitiveness in the live pig market made producers focus on the possibilities of reducing costs of their operations and increasing the efficiency of their actions. One of such possible solutions has become the integration of operators. In the pig market, there are currently different forms of relations and cooperation between the establishments and their suppliers and customers (table 1). The key ones are: buying and selling on the market from independent companies, long-term contracts with independent customers and suppliers, quasi-vertical integration, complete vertical integration. First-degree relationships are purely market relations occurring between independent companies acting in the market. The customers and suppliers are joined through the market thus being combined to some degree. This can be seen in a specific adjustment between customers and their suppliers and in the knowledge of ins and outs of a given market as well as in a certain experience and expertise. The degree of integration of customers and suppliers, that is of vertically related units, is the lowest in this respect. 187


Short or long-term procurement contracts concluded between a customer and a supplier and limiting to some extent the play of market forces are considered to be an example of a higher level of integration between customers and suppliers. These contractual agreements do not require changes in the ownership relationships and are easily acceptable by farmers. This form of integration is developing because of imperfections or failure of the raw materials and foods market but also due to the fact that it is supported by public and legal institutions shaping the market infrastructure. Development of contractual integration has been stimulated by the increasing production risks, the increase in capital productivity and labour productivity, price fluctuations and competition as well as legal regulation regarding integration relations (Cramer, Jensen 1991). Table 1. Vertical coordination in terms of decision-making and pricing Type of outlet Spot transactions Marketing contracts

Production contracts

Vertical integration

Who makes production decisions? The agricultural producer makes all production and sales decisions individually. Decisions concerning assets and production are made individually by each agricultural producer. The contract may specify the quality and quantity of raw material as well as the delivery dates. The recipient of agricultural raw material controls production decisions and those relating to the assets. The contract may specify the type of production, quantity and delivery dates. The integrator controls both the decisions made at a farm level and those relating to processing the material.

How is the price of goods determined? The price negotiated at the time of the transaction. The price is negotiated in advance or during the agricultural production.

The agricultural producer receives payment for his work for the contractor.

The agricultural producer receives payment for his work and possible additional profits (dividends) as a shareholder in a processing company.

Source: developed basing on (MacDonald, Korb 2006; Stępień 2009). There can be distinguished two basic types of contracts: production contracts and marketing contracts (table 2). The former are concluded before the production process begins and they specify in details the responsibilities of a farmer and a contractor regarding production inputs, production methods and forms of payment. As for the contracts for the supply of livestock, a farmer provides equipment, farm buildings and undertakes to provide work, while the contractor provides feed, livestock, medicines and veterinary services as well as ensures the transport of animals. There are often included specific requirements for the production, concerning the use of a given technology, compliance with certain requirements etc. At the same time a contractor has the right to control the producer and to withdraw from the contract should the contractual terms and conditions be violated. Payment for the supplied raw material is based on the costs incurred by the farmer (including remuneration for the work) and the amount of procured material. In most cases, this is the contractor who is the owner of the livestock animals for the entire duration of the contract.

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Marketing contracts determine the selling price and the amount and conditions of supply. Features of the contract are determined before the completion of production. The price formation mechanism generally reduces the risk incurred by a farmer by limiting the influence of price fluctuations on the contract price. Unlike production contracts, marketing contracts provide that a farmer is the owner of the assets for the entire duration of the contract and also has a key impact on the production. Table 2. The elements of production and marketing contracts. The elements of a production contract.

The elements of a marketing contract.

1. The scope of responsibilities - what measures are taken by an agricultural producer and what is supposed to be provided by a contractor. 2. Subject of the contract - livestock of a particular race and age. 3. Remuneration - based on the information on the costs incurred by a farmer, plus a bonus/penalty for the quality, feed consumption, low mortality rates of livestock. 4. Contract length - in practice from 2 months to 10 years. 5. The number of supplied livestock.

1. The number of supplied livestock - often as a share of total production of an agricultural farm. 2. Specificity of tthe raw material. 3. Specified production technologies. 4. Remuneration - calculated on the base price, taking into account the risk of price change due to market fluctuations.

Source: developed basing on (MacDonald, Korb 2006; Stępień 2009). The quasi-vertical integration refers to indirect relations between establishments related vertically, placing between a long-term agreement and a total incorporation of a supplier into a given establishment. Typical forms of quasi-integration include: purchasing a minority block of stock of suppliers or customers. providing loans and loan guarantees to related operator by the base entity, granting loans before buying, exclusive supply agreements, supplies of specialized equipment, joint research and development works. The most advanced form of vertical coordination is a complete vertical integration. It means a combination of different stages of the production process within one company. It is characterised by controlling subsequent stages in the marketing chain. In this situation the damages incurred by a farmer due to a weak bargaining position are minimized and the surplus is taken over to be passed on to the processing sector, provided the market economy. In the absence of capital, pig producers may alternatively to creating private slaughterhouses and processing plants, become shareholders (on the basis of membership) in such companies. The distribution of profit is then a form of compensation for lower prices of livestock. This system of cooperation is widespread in Denmark. Danish slaughterhouses are responsible for planning and coordination of the entire pig production. Owing to that the sector is able to respond quickly to market changes (Stępień 2009). Vertical integration may lead to certain benefits, such as (Janasz and el. 2010): better possibilities to diversify the product, favourable access to distribution channels, greater opportunities of access to market information, reduction in costs resulting from the combination of production, sales and control, 189


access to technological processes and patents of the incorporated entities, ensuring supply through difficult times and outlets in case of lower demand. There are two prevailing solutions in the worldwide production of pigs. In many European countries such as Germany, the Netherlands, France, the level of integration is rather small with dominating spot transactions supplemented by informal long-term agreements and marketing contracts determining the conditions of purchase or sale of the raw material (Traupe, 2002; Boston et al, 2004; Spiller et al. 2005). In other countries like Denmark, the USA, Spain, it is vertical coordination that is widespread, at least partly replacing free market rules. In these countries production contracts restrict the freedom of farms, making them subordinate to centralized decisions of processing plants (Schulze et al, 2006a). Agricultural producers must comply with the guidelines specifying breeding methods, the use of feed, veterinary treatments, etc.., so that the resulting product can be identical in terms of quality, which makes it easier for the processors to achieve selected market segments (e.g. Danish slaughterhouses offer specially selected goods for the British and Japanese markets). In that context it is also stressed that such a system of food production brings considerable benefits from exports. It can be undoubtedly proved by the expansion of Denmark and the United States in the international market. Forms of cooperation in the Polish live pig market In 2012 there were around 260.1 thousand pig farms in Poland (Strategia…2013). The domestic stocking density decreased to 11.6 million animal units and was 12% lower than a year before (Rocznik 2013). According to the General Veterinary Inspectorate at the beginning of April 2013 1158 operators were active in the country, 658 of which were active in pigs slaughtering. The number of plants cutting the meat and those producing meat products was considerably bigger and totalled 1026 and 951 respectively. A dispersed production of live pigs does not foster the creation of sustainable economic relations neither between the farmers as producers of slaughter animals nor between farmers and slaughterhouses or meat processing plants. Thus, a characteristic feature of the Polish live pig market are loose relations between the pig producers and the slaughtering establishments. It may be due to:  the multiplicity of meat processing plants on the market, most of which are characterized by low production capacity and prefer direct forms of buying live pigs from farmers,  limited range of contracting finishers,  dispersion in pig breeding. Freedom of relations between producers of live pigs and meat processing plants implies inter alia that the sale and purchase transactions do not entail additional rights and obligations (Gawrońska 2007). This is the farmer who largely decides what number of livestock animals he wants to sell and to which processor. Direct supplies of pork raw material to meat establishments are limited to informal agreements between producers and the owners of establishments. Most transactions are concluded with the same suppliers but they rarely result in strengthening business relationships. Dominant relations in the Polish chain in live pig market have been shown in figure1. Due to a large dispersion of suppliers, slaughter plants most often use professional intermediary services. The main place of contact for the farmer and the agent is the local marketplace where the farmer receives a slightly higher price and/or immediate payment for the goods sold. The intermediary, however helpful in situations of dispersed livestock production, makes it more difficult to strengthen relations between the partners in the food chain. The basis for its settlement with the slaughterhouse are the results of the carcases' evaluation. Therefore, its interest is to purchase the highest quality of livestock. Not always, however, this high quality is reflected in the price paid to the farmer since that price is based on live weight. In this way, 190


the intermediary captures the margin for higher quality of raw material. What is more, supplies are usually random and the raw material is not standardized. As a processing establishment develops, the role of intermediaries in the supplies of live pigs decreases. Figure. 1. Economic relations in the supply chain in the live pig market Integrated slaughterhouses

PRODUCERS OF LIVE PIG

INTER MEDI ARIES

Written contracts

SLAUG HTER

PROCES SING

Repetitive transactions with the same partner samym partnerem

WHOLE SALE

DETAIL

Written contracts long and medium-term

- spot markets Source: own elaboration based on (Dybowski, Kobuszyńska, Woźniak 2006). Procurement contract in the live pig market are still rare. They are most often concluded by larger meat establishments which cannot afford to rely on unstable supplies of raw material associated with pigs upturns and downturns. Big establishments have their own raw material services whose role is decisive in the purchase of live pigs for processing. They receive live pigs from large suppliers, either directly from farms or from their own buying stations. Producer groups are considered to be increasingly important in supplying pork raw material for meat processing. They lead joint sale of livestock and their relations with the processing plants do not necessitate an intermediary, which allows for the margin to be directed to the farmer. What is more, the representatives of producer groups take part in the evaluation of carcases, they can negotiate conditions as well as payment dates with meat establishments . The cooperation with producer groups can be observed most often in case of bigger plants, which is also related to the scale of raw material supplies. As part of cooperation meat plants build facilities for raw material by opening their own farms and supplying farmers with weaners having specific genetic characteristics. Furthermore, farmers can rely on varied credit, zootechnical and nutritional aid from the processors. According to Mroczek (2002) cooperation develops because of:  unstable agricultural production (hog cycle),  changes in eating patterns,  a large competitiveness between meat establishments,  Polish accession to the EU and keeping abreast of market competition,  ensuring food safety for consumers. The research carried out at the beginning of July 2012 showed that 65.0% of surveyed establishments do not purchase raw material on the basis of procurement contracts. In other plants mixed systems were used - both the purchase of raw material under contracts and buying pigs from the free market. The procurement contracts were more common with larger 191


establishments which were oriented towards receiving a large amount of raw material from producers. Of 10 establishments with the slaughter capacity of more than 1000 units, 60.0% used procurement contracts, among the smaller operators the purchase based on contracts was carried out by only one slaughtering establishment. Integration in the Spanish live pig market Integration became an important factor in the development and improvement of pig production efficiency in Spain. The integration model specific for this country has been developed and improved for 40 years. Under the current, widely applied model the farmer introduces into the integrated system his land, buildings and labour. The company (an integrator) charges the farmer with an interim management of sows or piglets, provides him with feed and medicine, ensures the purchase of produced piglets or finishers, arranges transportation, marketing, sales, and provides free consultation and veterinary services as well as medicine. Integrator also takes care of the ongoing training of producers. The farmer receives remuneration for the produced livestock animals which is not conditioned on the current price of finishers. The producers of finishers operating within the closed pig cycle receive salary on a monthly basis, whereas producers of finishers within the open pig cycle - those who receive piglets from the integrator - receive their salary at the end of fattening cycle. Remuneration represents a determined minimum rate per unit of production plus a possible bonus for efficiency determined on the basis of such factors as the rate of feed consumption and the number of weaned piglets. Salary paid to the farmer does not allow him to rely in his production entirely on wage labour. It has been calculated that the production volume required for the maintenance of the farmer's family accounts for at least 500 sows in case of closed livestocks and for 3500 units in one cycle when the open production of finishers is concerned. Around 40% of Spanish production of finishers comes from the integrated systems. When admitting new stakeholders in the group the integrator draws attention to the appropriate location for the facility to ensure biosafety and epizootic security of the herd. Veterinary supervision over breeding and production of pigs is exercised by the state and private veterinary services (Pejsak 2013). A large part of finishers - approximately 17% - is reared by farmers associated in production cooperatives. The functioning of cooperatives in Spain is comparable to that applied in Poland. Due to not always consistent interests of the cooperating producers and to the complexity of decision-making the efficiency of production in cooperatives is lower. As a consequence the scale of cooperative forms of activity decreases in favour of private integrated systems. The base price of sale is determined every Thursday. It is the basis for further negotiations between the parties - the seller and buyer of finishers. The price is set by a 16-person group of experts representing producers of pigs and the meat industry. When setting the price a number of factors is taken into consideration, those being mainly: supply of finishers estimated for the following week and the expected scale of exports as well as the situation on the EU market. Additionally, the account is taken of the feed costs that are applicable during the finishers breeding.

Integration in the German live pig market All the producers of live pigs in Germany belong to the German Farmers Association. Notwithstanding this, around 12.0 thousand of producers are organised in the association of pig producers (ISN). The ISN management board is composed of 6 pig producers. The main scope of activities of this association includes: 192


gathering information about the pig market, including price forecasting and conducting an on-line stock exchange for trading piglets and finishers. influencing the policy on the rules of production and administrative provisions related to breeding pigs. influencing the pricing policy together with setting every Friday the pig price that is recommended for the whole country for another week. The finishers in the German market are sold following the base price announced every Friday. The price is determined by "the organisation" associating different cooperatives of pig producers. It is indicated by 30 different cooperatives, each cooperative introducing its price and the number of finishers offered to be sold. The "organisation" determines the median which is then recommended throughout the country. Depending on the situation, however, the purchase price may be 2-3% higher or lower than recommended (Pejsak 2012). In the last decade, there could be observed a quickly progressing concentration among the meat plants. At present the slaughtering plants number about 250. In the four largest ones there were slaughtered more than 38.1 million pig units which accounted for 63.2% of all finishers, both reared in the country and purchased mostly in the Netherlands. Additionally, there are approximately 600 cutting plants and 2300 processing plants in Germany. The rules of entering into procurement contracts in the German live pig market are very transparent. Contract producers are obliged to sell to the slaughterhouse 100% of their production. Whereas the slaughterhouse must purchase all finishers reared by the producer and can not pay for the pigs from the free market more than it pays to its shareholders. Furthermore, except of the finishers fee, shareholders receive a dividend from meat plants at the end of the year. German slaughterhouses show a high rate of slaughter yield, reaching 80%. It results from underfeeding pigs before shipment, which shows capital integration of pig producers and slaughterhouses. Carcass classification is usually carried out by a company independent of slaughterhouses and producers. Farmers with a certificate of German quality system - QS and meeting all the requirements of animal welfare receive a higher payment for their products. Veterinary supervision over the slaughter is carried out by the state veterinary inspection. Summary and conclusions Vertical integration is generally considered to be the best solution in the Polish live pig market. Some producers and operators conclude procurement contracts and support integrated systems but the majority prefer to be free when choosing suppliers and customers. Notwithstanding the existence of cooperative relations or their absence, the most important is to provide for the development of all operators involved in the supply chain of pork. Solutions used in Germany, Spain or Denmark have been implemented and developed for many years. Thanks to the high efficiency of the applied forms of vertical integration these countries became the largest producers of pork in the EU. However, due to different economic determinants, they cannot be simply copied into Polish conditions. They remain interesting and instructive for pig producers all over he world but should be implemented with regard to the domestic situation of each country. In Poland, they also hinder the implementation of a bad experience with the operation of the centrally planned economy. In Poland, considering a large dispersion of producers as well as slaughterhouses and meat processing plants, it is expedient to increase vertical integration in the live pig market. Thus, it is advisable to create economic mechanisms facilitating this process. Of utmost importance is the vertical integration of piglet and finisher production sectors, that is the establishment of the

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so called "meat agro-clusters". In its most basic version, an agro-cluster may include a group or groups of agricultural producers cooperatively combined with selected processing plants, and in its more developed version it is also combined with research and consulting units as well as local governments. The formation of agro-clusters should be supported primarily by the biggest shareholders but also by state institutions, especially the Ministry of Agriculture and Rural Development. It is also important for the first newly created agro-clusters to be successful as it would set the best example for other operators. On the basis of such structures, there could develop, as if automatically, further mechanisms improving production efficiency and product quality. Acknowledgements The project was funded by the National Science Centre on the basis of decision DEC2013/09/B/HS4/03606. References Berlin, M. (2001). "We control the vertical": three theories of the firm. Federal Reserve Bank of Philadelphia Business Review (Third Quarter): 13 - 22. Boston, C., C. (2004). Ondersteijn and G. Giesen, 2004. Using stakeholder views to develop strategies for the Dutch pork supply chain. Paper presented at the 14th Annual IAMA Conference, June 12-15, 2004, Montreux. Chorób, R. (2011). Zróżnicowane powiązania integracyjne w agrobiznesie a rozwój regionalny i lokalny. Zeszyty Naukowe nr XXV, J. Gołota (red.), Ostrołęckie Towarzystwo Naukowe im. Adama Chętnika, Ostrołęka: 41-52. Cramer, G.L., Jensen C.W. (1991). Agricultural Economics and Agribusiness, J. Wiley & Sons, Inc, New York. Dybowski, G. Kobuszyńska, M. Woźniak, J. (2006). Główne czynniki wpływające na relacje ekonomiczne i komunikację w europejskich łańcuchach żywnościowych. IERiGŻ, Warszawa, http://www.foodcomm.ierigz.waw.pl/wwp2.htm (04.07.2012) Gawrońska, A. (2007). Sektor wieprzowy w Polsce-stan obecny i perspektywy rozwoju, Rozprawy naukowe 388, Poznań. Janasz, K. Janasz, W. Kozioł, K. Szopik-Depczyńska, K. (2010). Zarządzanie strategiczne. Koncepcje. Metody. Strategie, Difin, Warszawa. Łącka, I. (2012). Integracja pionowa w przetwórstwie drobiu szansą na wzrost i rozwój firmy we współczesnej gospodarce (na przykładzie GK Indykpol S.A.) Roczniki Ekonomii Rolnictwa i Rozwoju Obszarów Wiejskich, t. 99, z. 2: 94-103. MacDonald, J. Korb, P. (2006). Agricultural Contracting Update:Contracts in 2003, Economic information Bulletin No. 9, USDA, Washington. Mroczek, R. (2002). System powiązań między producentami a zakładami przetwórczymi na rynku żywca wieprzowego, Roczniki Naukowe SERiA, t. IV, z. 3: 136-140. Pejsak, Z. (2012). Produkcja świń i wieprzowiny w Niemczech – źródła sukcesu branży. Trzoda Chlewna Vol. 50, nr 12: 17-22. Pejsak, Z. (2013). Produkcja świń w Hiszpanii. Integracja oraz wykorzystywanie osiągnięć naukowych – czynniki determinujące dynamiczny rozwój. Trzoda Chlewna Vol. 51, nr 1: 17-21. Pepliński, B. (2009). Agrobiznes. Podstawy ekonomiki, WSiP, Warszawa.

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Rocznik Statystyczny Rolnictwa (2012). GUS, Warszawa 2013. Schulze, B., Spiller, A. and Theuvsen L., (2006a). Is more vertical integration the future of food supply chains? Empirical evidence and theoretical considerations from German pork production. In: Omta, O., J. Trienekens, J. Wijnands and E. Wubben (eds), International agri-food chain and networks: Management and organization. Wageningen Academic Publishers, forthcoming. Spiller, A. Theuvsen, L. Recke, G. Schulze, B. (2005). Sicherstellung der Wertschoepfung In der Schweineerzeugung: Perspektiven des Nordwestdeutschen Modells, Moenster. Stępień, S. (2009). Kwestia kosztów transakcyjnych w aspekcie ograniczania ryzyka i stabilizacji produkcji trzody chlewnej. Roczniki Ekonomiczne Kujawsko-Pomorskiej Szkoły Wyższej w Bydgoszczy nr 2. Wydawnictwo Kujawsko-Pomorskiej Szkoły Wyższej, Bydgoszcz: 153-164. Strategia odbudowy i rozwoju produkcji trzody chlewnej w Polsce do roku 2030. [red.] Blicharski, T. Hammermeister, A. Polski Związek Hodowców i Producentów Trzody Chlewnej „POLSUS”, Warszawa 2013. Szymańska, E.J. (2014). Konkurencyjność polskiej wieprzowiny na rynku Unii Europejskiej. Roczniki Naukowe SERiA, t. 16. z. 4: 298-303. Traupe, C. (2002). Schlachtschweinevermarktung Entwicklungsmoeglichkeiten. Cuvillier.

in

Niedersachsen

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Stand,

Defizite,

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THE UNIVERSAL SUSTAINABILITY OF DEVELOPMENT AS A TOOL OF CONSTRUCTIVE INTERACTION OF INTERESTS AND POSSIBILITIES OF DEVELOPMENT AND THE BALANCE OF GOALS AND RESOURCES Aleksandras Vytautas RUTKAUSKAS Vilnius Gediminas technical university E-mail: [email protected]

Irena RAČINSKAJA Vilnius Gediminas technical university E-mail: [email protected]

Viktorija STASYTYTĖ Vilnius Gediminas technical university E-mail: [email protected] Abstract. Considering about possibilities of long opportunities for countries or regions, here is a problem of challenges and barriers of existence even for the most economically strongest countries or regions. The abundance and extent of problems even in the near term indicates orders for interdisciplinary science explaining, that here is a need for examining the effects caused by both physical and biological, economic and social processes and problems, also problems of identification of information process, and it would be done under condition of uncertainty, which makes a huge havoc at numerous problematic situations. The abundance, diversity and scale of these problems syndicate about interdisciplinary orders for studies, trying to generate information, which is necessary for processes management, which belongs from interaction or inconsistencies of various parameters: physical, biological, economic, social and other parameters. This article will give the universal realization of the goals of sustainable development challenges of knowledge in the country, innovation and technology cluster, focusing on the potential cost of cluster preservation through the practices of investment resource allocation. Keywords: universal sustainability, universally sustainable development, intelligent strategy, interests, resources of the universal development JEL classification: Q01; F63; O32

1. Does universal sustainability generate new potential? More and more often it is emphasized in the literature that when discussing the problems of state or development sustainability of a country, region, city or any other geographical or organizational unit, it is difficult to stay within the directly economical, ecological and social triangle. This happens not because there are no longer any unsolved problems remaining, but primarily because this triangle does not contain enough interests, arguments and resources to investigate and solve the outstanding problems. Of course, this has to be understood directly, because it can be said that the aforementioned triangle contains all the elements of our surroundings. However, one has to agree that, for example, when designing the resources for maintaining development sustainability in the aforementioned subsystems, when those are used for investigation of sustainability issues, the circle of interests and subjects does not encompass the whole analysis of problems of sustainable development and state. Clearly, ever more often together with the category of sustainability we hear a variant of universal sustainability and new functions addressed to it. When discussing the fundamental documents of Post 2015 Agenda and EU Future programs, universal sustainability is directed more towards the applicability of the category of universality to all the objects and processes investigated in these documents – global ones, those of separate 196


countries, separate regions and so on. Often these are very complicated problems, where it is extremely important to have the facts of not only the integral effect, but also of the intended effects of separate components. Universality is often granted a property of whole of interests and efforts when solving the formulated problems. For example, when formulating the sustainability of a country's development, integration of the opportunities of all subjects representing the major interests is taken into account in order to reach a solution to the formulated problem (Rutkauskas 2012a; 2012b; Rutkauskas, Stasytytė 2012, Rutkauskas, Račinskaja 2013). Of course, there are more radical assumptions (Willard 2005; Lattimer 2008; Werbach 2009; Bouglet et al. 2012; Antal, van den Bergh 2013) stating that the framework of universal sustainability touches upon the factually approaching wave of globalization of business variety, innovations and growth. Here universal sustainability is given a requirement of creating a relationship between competitiveness-maintaining interests and political behavior. There are even appeals made toward a new model of capitalism – that is, toward new forms of competitiveness (Soderbaum 2008; Lattimer 2011; Schor 2010). The concept of universal sustainability widens the scope of the concept of sustainability, which investigates only the consequences of economic activity upon the social and ecological processes. The structure defining universal sustainability is often presented with the content provided in Figure 1. When discussing the arguments for the creation of universal sustainability principles, it is often asserted that nowadays there is intense revelation of facts illustrating a conflict between previous and the current generation, even though the declared slogan of sustainable development is that each generation should satisfy its needs in such a way that the following generations would be able to satisfy theirs. The content of the conflict is determined by the progressively more exhausted natural environment, which cannot adequately serve a safe and quality lifestyle for a significant fraction of the planet's population, which in turn experiences a threat of non-decreasing differentiation of opportunity, to be left behind a threshold of inadequate opportunities. Here some authors (Anderson et al. 1978; Accenture Consulting 2010; Edwards 2011) unequivocally support the opinion that the principles of economic competitiveness favored in today's business are based on the possibility of short-sighted competitiveness, when both ecology and social state standards are destroyed. It is the authors' opinion that universal sustainability is a state of affairs which should be ensured by the operational scheme of making and implementing decisions nurturing universal sustainability, as well as the principles of developing universal sustainability. Further we will provide the scheme of the universally sustainable development, which was experimentally based on statistical and expert data of Lithuanian statistics. 2. The Projection of Country Universally Sustainable Development Sustainability can be defined as an ability of a subject to retain certain functions. The concept of sustainability and especially sustainable development dominates in the literature among the most ambitious and controversial concepts (Bartelmus 2010; Fiksel 2006; Montesharrei et al. 2014; Tukker 2013). The knowledge and researches of evolution or development become not only the original means of generation of socio-economic science knowledge, but also an alternative in analyzing especially sophisticated development problems – such as survival, effective changes, avoidance of huge losses, etc. Finding the ways of such knowledge conversion into the field of science is complex, but there is no alternative. Researches of

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development have already become mass, and thus the objects of cognition should be structured, possibilities should be consolidated and the efficiency of the use of resources must be elevated (Rutkauskas et al. 2014a). The paper analyses the following problem – how to select an optimal structure of investment resources in order to retain and ensure the development sustainability for a small country that does not possess abundant natural resources and, as a result, can use mainly intellectual resources while nurturing its own development. 2.1. The analysis of the structure of sustainable development system The strategies of retention or development of sustainable system of Lithuania as an independent country constitute the particular object of the conducted research, where these strategies are grounded by the historically formed need for the retention of country self-sufficiency and ability to generate and implement the intelligent development strategies. The guarantee and motto of survival of Lithuania as a self-sufficient country is the historically formed intelligence of selfsufficiency retention and development. Immediate assumption of country self-sufficiency survival and successful implementation of development strategies is the intelligent use of natural, as well as human-possessed and created resources. The main guarantee context of country development effectiveness and success is a universally sustainable development. Here in order to touch more thoroughly all the peculiarities of development, as well as to use all the created powers, the following subsystems of country sustainable development are distinguished: religious, political, social-demographic, economic, ecological, educationalprofessional, creative and cultural, innovative-technological, integrative, marketing, financial and investment. In Fig. 1 the conception of interaction among subsystems’ and the whole of instruments for decision formulation and search is presented: the information systems of knowledge, decisions management, uncertainty evaluation, as well as stochastic models of quantitative decisions and expert evaluation. However, the evaluation of separate problems should be recognized here as the exceptional moment, when with the help of the gathered and generated information a search for the compatibility of different aspects of development is performed.

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Figure 1: Formation of components delivering the development sustainability and preparation of the means of knowledge and expert valuations pursuing the possibilities of development sustainability management and the idea of the round table

Source: Rutkauskas (2012) As a separate challenge while analyzing the sustainable development problems in the context of systems’ methodology a question arises on the unification of measuring dimensions of separate subsystems and the effectiveness of the whole system. First of all, let us remind that sustainability measurement is related with two-dimensional measures – effectiveness and reliability. Reliability has an undimensional way of measurement, but while measuring the effectiveness one cannot get along without the indicators expressing the content of existence of subsystems or the whole system, such as created product, grown harvest, etc. Also, in complex systems it is accepted that in the reality serving as the object of their cognition the possibilities exist that the state of one subsystem can be a factor of the other subsystem’s state, that ultimate indicator of the state of the whole system or its generated effect can be a complex function of separate subsystems’ indicators. But the most difficult problems arise when it is necessary to solve the key economic problem – how to allocate rationally the possessed scarce resources with the objective to orient the system’s movement to the optimal state or trajectory. 2.2. Intelligence of the sustainable development system Thus we approach the perception of intelligence. Intelligence uses the definition of knowledge as a system to form a vision of potential development ways and methods that help to select the unique manner of work. In order to know or accept this contradictory situation, we should admit the dialectics of scientific knowledge and engineering, as cognition methodology: the science reveals the possibilities of what can be, while engineering focuses on what and how to do it. 199


Treating knowledge, innovation and technology set as an integrated system, it is necessary to understand the diversity of situations, trying to make their integration be directed towards achieving the strategies. In the performed study the particular objects are sustainable strategies of system maintenance and development for Lithuania as an independent country. These strategies are based on historically developed national self-maintenance needs and the ability to generate and implement intelligent development strategies. The guarantees and motto of survival for Lithuania as an independent country is historically formed intelligence of self-maintenance and development. Immediate premise of country independent survival and successful implementation of its development strategies is intelligent use of natural and human, available and emerging resources. The main context of country development efficiency and guarantee of success is universally sustainable development (Singh et al. 2009). For a more detailed analysis of all development accents and application of developed powers, the four sustainable development subsystems of a country are distinguished: PIM, SEE, ECR and FII (Fig. 1), and their primary detailed description is presented in the article of Rutkauskas (2012b) that is intended to explain the concept of universally sustainable development. Further, each subsystem will be shortly described, highlighting the role of intelligence: PIM. This group is described through the possibilities to guarantee the representation of public interests in international institutions. The intelligent integration of a country into the local, regional or global organizations of national or economic security that guarantee safety under acceptable costs for a country is projected. Also, using the principles of marketing, the sustainable flow of import-export should be ensured along with the development of the utility provided by the results of general social and economic programs. SEE. This group describes the ability to match the interests of different social groups relying on scientifically proved consistent patterns. Also, it is aimed to use rationally the internal and external resources in order to reach the desired value, in the same time maintaining diversity and efficiency of country’s biological systems. ECR. This group is described through the ability to combine learning and creativity while training business analytics and knowledge economics and striving for the balance of supply and demand in the labor market, as well as through the recognition of spiritual values of humanity. The ability to create something new and valuable using intelligence is trained. FII. This group describes the ability to ensure the use of modern technologies based on the most efficient innovations. The power of financial system is attained, which allows for a public sector to ensure the required financial resources to implement the international liabilities. Thus considering the nurturance of country universal sustainability it is necessary to pay attention to the ability to integrate intelligence, knowledge, innovation and technology management while solving the issues of small country development. 3.3. The assumptions of optimization experiment on resource allocation Based on the assumption that sustainability of national development, sustainability (Alam, Kabir 2013; Veugelers et al. 2010) can be examined using a model of a complex system, we have to admit that the corpus of elements existing in reality would have the following characteristic features: 

a very complex system;

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

high sensitivity to even the smallest changes in dependencies between components;

 its identification and verification is difficult even with the knowledge of its design or function, or both; 

it is characterized by abundant interactions between different components;



with time, it may reveal new features or states (Rutkauskas et al. 2014b).

There is no doubt that all of these characteristics are particular to the phenomenon of national sustainable development. However, if it needs to remain an open and self-regulating system, the functioning of which required resources, which may not only lead to changes in internal dependencies but also in the effect created by individual subsystems or even the entire system whilst turned into input elements, then, there should be an agreement that the system, the content of which is comprised of above-mentioned features, requires the design of adequate possibilities for its understanding and management (Plummer, Armitage 2007). The study conception of interaction between the subsystems, formulation of solutions and the set of instruments for solution search: the systems of information knowledge, management solutions, uncertainty assessment and the models of stochastic quantitative solutions and expert evaluation, is presented in the previous author’s articles (Rutkauskas, Stasytytė 2011; Rutkauskas 2012b). But at exceptional moment here we have to recognize the assessment of separate problems, when on the basis of collected and generated information is searched interoperability between different aspects of the development. And the fact that here invoked so-called stochastic informative examination methods for expert evaluation. Examining sustainable development problems in the context of methodology for complex systems, a question emerges regarding the alignment of performance measurement dimensions used for separate subsystems and the entire system. It should be reminded that sustainability measurement is two-dimensional, namely, aimed at efficiency and reliability. Reliability has a dimensionless measurement method; however, the measurement of efficiency is impossible without indicators that represent subsystems or the content of the entire system (Rutkauskas 2014b). However, the most difficult problem arises when dealing with the fundamental economic problem of rational allocation of scarce resources aiming to direct the system toward the optimal state or trajectory. 2.4. Illustration of experimental situation solution Further temporarily simplifying the situation let us suppose that the state of every subsystem can be measured with undimensional indicator and that using the stochastically informed expert valuation one can determine the effectiveness of marginal investment unit, if it is used for the training of i-th subsystem functioning. Then we can form a task – how one should search for the optimal allocation of resources among the subsystems under the conditions of uncertainty. To solve the mentioned problems the logics and technique of adequate portfolio will be used, that is created, described and further developed by Rutkauskas (2012a). The adequate portfolio can be treated as natural extension of the modern or Markowitz portfolio (Markowitz 1952), because instead of the mean value of the effect of possibilities all the possibilities are used and the parameter of reliability is introduced (Rutkauskas, Stasytytė 2011). Let us say that expert valuation evidences that the possibilities of the use of marginal investment unit under the certain investment proportions among the distinguished subsystems, as well as 201


inside the formed subsystems, to change the index of every subsystem’s state (which is a priori treated as one) can increase along the following stochastic multipliers: D1 (a1, S1 ), D2 (a2 , S2 ), D3 (a3 , S3 ), D4 (a4 , S4 ),

where ai, Si are the mean values and standard deviations of the random variables. Let us try to determine by what proportions we should divide the marginal investment among the distinguished subsystems if the indicator I of the whole system’s state is being formed as a weighted average of subsystems’ indicators Ii: I = w1I1 + w2I2 + w3I3 + w4I4. Let us analyse the following case: 1. When the situation is complex and the mentioned variables achieve specific forms that are typical for these subsystems: D1 becomes Gumbel, D2 – LaPlace, D3 – stays as Normal and D4 as Lognormal probability distribution. 2. The selected probability distributions are described by the following mean values and standard deviations: a1 = 0,94, s1 = 0,03; a2 = 1,22, s2 = 0,06; a3 = 0,99, s3 = 0,05; a4 = 0,90, s4 = 0,02. The results of finding the optimal investment portfolio are presented in Fig. 2. Figure 2: Optimal allocation of resources among the four subsystems

a) The general scheme of decision search

b) The surface of possibilities

c) Finding the solution

202


PIM subsystem

SEE subsystem

ECR subsystem

FII subsystem

Gumbel probability La Place probability Normal probability Lognormal probability distribution distribution distribution distribution 0.26

0.32

0.2

0.22

Parameters: ex – 1,151202; px – 0,57; rx – 0,029649 d) The structure and parameters of the solution point Source: created by authors The section a shows the general scheme of solution, when indifference curves approach the surface of efficient possibilities. The surface of possibilities itself is presented in section b. Section c shows the point of optimal solution in the two-dimensional plane. And section d presents the parameters of solution. The values of the four subsystems show the structure of allocation of investment unit among the development subsystems. In the analyzed case the biggest part of the investment is given to the second (SEE) subsystem – 0.32. Further the parameters of solution are presented: e – efficiency (profitability), p – reliability and r – riskiness. 3. KNIT cluster as a self-organizing complex system in the projection of sustainable development In this section an attempt is made to reveal the possibilities of integral KNIT cluster, both after becoming the source of country’s universally sustainable development and when choosing this cluster as an adaptive complex system technology. 3.1. Integral KNIT cluster as a main source of universally sustainable development factors pertaining to a country Considering the development projects of many countries, especially if they do not possess abundant natural resources, the idea is being unambiguously revealed that the main and inexhaustible resource for their development becomes an integral cluster of scientific knowledge, innovation and technologies. The concept “inexhaustible” in the last sentence requires special attention. Since this factor is both naturally evolving and purposefully improved, there is probably no need to talk about its inexhaustibility. However, on the other hand, recognizing that future problems become more sophisticated, and negative processes in many areas of human existence obtain catastrophic speed, we need to understand that even if the resource remains everlasting, for many subjects, including individual countries, it may become unattainable. There is no doubt that the integral KNIT cluster efficiency evaluation problem should become the object of exclusive attention of national and global science. Unfortunately, little work aims to 202


propose a pragmatic solution for the latter problem. What should be the structure of the integral KNIT cluster, recognizing that the categories of knowledge, innovation and technologies mean the implementation of different functions, and the need for financial resources is also formed in different ways? In our experiment the object of integral KNIT cluster is the projection of universally sustainable development pertaining to a country (Fig. 3). The concept of universally sustainable development is quite extensively presented for the scientific community (see examples in Rutkauskas 2006; Rutkauskas et al. 2011; Rutkauskas et al. 2014c), so there is no need to talk about its content and constructivism. It is only worth to mention the structure of each of the four subsystems of country development sustainability. Figure 3: The hierarchical formation of components for sustainability development System level

THE INTEGRAL INDEX OF COUNTRY DEVELOPMENT SUSTAINABILITY Subsystem level

I Component 1 level

2

II 3

4

5

III 6

7

8

IV 9

10

11

12

Source: created by authors  1st subsystem PIM, composed of political (1), integration (2) and managerial (3) components; 

2nd subsystem SEE, composed of social (4), economic (5) and ecological (6) components;



3rd subsystem ECR, composed of educational (7), cultural (8) and religious (9) components;

 4th subsystem FII, composed of financial (10), investment (11) and innovation (12) components. The schemes, positions and contents of the components are also extensively described in (Navickas, Ruškytė 2014; Rutkauskas, Navickas 2013; Rutkauskas et al. 2014a). The title of this section appeals to the fact that the integral KNIT cluster should be a key source of the universally sustainable development factors. Fig. 3 illustrates the fact that all components of universal development sustainability require the help of KNIT for generation of required knowledge, innovation and technologies. It is evident that the cluster has to be adapted to meet the needs of a specific object – the projection of universally sustainable development pertaining to a country. 203


The title of Fig. 3, the idea of a round table, highlights the fact that in the selection of final solution the interests of all development sustainability components or just the experts representing those interests should participate. Otherwise there should be adequately formulated criteria. The idea of the round table helps to express a provision that there should be a possibility to quantify and coordinate these interests. The solution of such task in details can be found in (Rutkauskas et al. 2014c). Conclusion and suggestions 1. Universally sustainable development is a concept that is still under formation, and it accumulates the experience of research and practical application of long-term development sustainability concepts. It broadens the formation of sustainability itself by crediting it with attributes of quantitative measurement, by broadening the area of subjects, by revealing the interaction under uncertainty conditions, by stressing the optimal allocation of development resources along the criteria of multifunction analysis and adapting them to adequate evaluation of networks with regard to uncertainty. 2. Exceptional attention for many subjects, including small countries, should be intended for the formation of adequate cluster of scientific knowledge, innovation and technologies. The cluster should be credited not only with key development resources, but also with the status of technologies of development objectives’ transformation. Still the special attention should be given to the optimization of SKNIT value structure. 3. For the practical approval of the solution the interactive assessment of subject’s goals should be performed, with regard to integrated ratios of economic efficiency, nature and social capital improvement. Also, the development strategies of social civilization and ecological accumulation subjects’ goals should be taken into account, and the mentioned approval must be oriented towards coopetition. 4. The selected development strategies should become the object of intentionally developed monitoring allowing to assess the reasons of strategic management mistakes or failures, as well as to react to the revealing effects of globalization and uncertainty. Probably, for this reason a dynamic multidimensional ideology of stochastic networks should be adapted. And also it should be understood that this is the scientifically reasoned instrumentary of group management of various development. References Accenture Consulting (2010). A new era of sustainability. UN Global Compact-Accenture CEO Study. Alam, S.; Kabir, N. (2013). Economic growth and environmental sustainability: empirical evidence from East and South-East Asia, International Journal of Economics and Finance 5(2): 86–97. Anderson, R. D.; Engledow, J. L.; Becker, H. (1978). How consumer reports subscribers see advertising, Journal of Advertising Research 18(6): 29-34.

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Antal, M.; van den Bergh, J. (2013). Macroeconomics, financial crisis and the environment: strategies for a sustainability transition, Environmental Innovation and Societal Transitions 6: 47-66. Bartelmus, P. (2010). Use and usefulness of sustainability economics, Ecological Economics 69: 2053– 2055. Bouglet, J.; Joffre, O.; Simon, E. (2012). How to reconcile business with sustainable development: an innovation approach, Society and Business Review 7 (3): 212-222. Edwards, A. (2011). Building common knowledge at the boundaries between professional practices: Relational agency and relational expertise in systems of distributed expertise, International Journal of Educational Research 50 (1), 33-39. Fiksel, J. (2006). Sustainability and resilience: towards a systems approach, Sustainability: Science, Practice & Policy 2(2): 14–21. Lattimer, R. L. (2008). Transformational strategy and competitiveness. Competition Forum 6(1). Lattimer, R. L. (2011). Universal Sustainability: The Next Form of Competitiveness, Competition Forum 9(2): 399-405. Markowitz, H. M. (1952). Portfolio selection, Journal of Finance 7(1): 77–91. Motesharrei, S.; Rivas, J.; Kalnay E. (2014). Human and nature dynamics (HANDY): Modeling inequality and use of resources in the collapse or sustainability of societies“, Ecological Economics 101: 90–102 Navickas, V.; Ruškytė, D. (2014). Indicators of sustainable economic growth and their management, The 8th International Scientific Conference “Business and Management 2014”, May 15-16, 2014, Vilnius, Lithuania, 849-857. Plummer, R.; Armitage, D. (2007). A resistance-based framework for evaluation adaptive comanagement: linking ecology, economics and society in a complex word, Ecological Economics 61: 62–74. Rutkauskas, A. V. (2006). Adequate Investment Portfolio Anatomy and Decisions, Applying Imitative Technologies, Economics 75: 52–76. Rutkauskas, A. V.; Stasytytė, V. (2011). Optimal Portfolio Search Using Efficient Surface and ThreeDimentional Utulity Function, Technological and Economic Development of Economy 17(2): 291-312. Rutkauskas, A. V.; Stasytytė, V.; Lapinskaitė, I. (2011). Sustainabilities Portfolio as System to Envisage and Manage Universal Sustainability, In Proceedings of the 1st World Sustainability Forum, November 130, 2011: 1-7. Rutkauskas, A. V. (2012a). Sustainability as valid composition of efficiency and reliability, Contemporary issues in business, management and education'2012, selected papers: conference proceedings. Vilnius: Technika, 444-458. Rutkauskas, A. V. (2012b). Using sustainability engineering to gain universal sustainability efficiency, Sustainability 4: 1135–1153. Rutkauskas, A. V.; Stasytytė, V. (2012). With sustainability engineering to sustainability efficiency, The 7th international scientific conference "Business and Management 2012" : selected papers. May 10-11, 2012. Vilnius: Technika, 2012: 173-184. Rutkauskas, A. V.; Navickas, V. (2013). Projection of country universally sustainable development, Studies of Entrepreneurship and Competitiveness. Studies of Economic and Social Policy: collection of scientific papers (X), Vilnius: Edukologija, 11-51. Rutkauskas, A. V.; Račinskaja, I. (2013). Integrated intelligence and knowledge, innovation and technology management, nurturing country universal sustainable development, in 2nd international scientific

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conference “Problems of modern economy: global, national and regional context”, May 23–24, 2013, Grodno, Belarus. Grodno: Yanka Kupala State University of Grodno, 1–6. Rutkauskas, A. V.; Navickas, V.; Stasytytė, V. (2014a). Universally sustainable development as a framework of small countries’ economic efficiency and national self-sufficiency, The 8th International Scientific Conference “Business and Management 2014”, May 15-16, 2014, Vilnius, Lithuania, 877-885. Rutkauskas, A. V.; Račinskaja, I.; Kvietkauskienė, A, (2014b). The technology of adaptive complex systems as an adequate synergy tool of knowledge, innovation and technology features designing universal sustainable development of country, Int. J. Transitions and Innovation Systems 3(2): 104-114. Rutkauskas, A. V.; Račinskaja, I.; Stasytytė, V. (2014c). Optimization of integral knowledge, innovation and technologies cluster structure, Asian Journal of Business and Management 2 (1): 42-52. Schor, J. (2010). Plenitude, The New Economics of True Wealth, New York. Singh, R. K.; Murty, H. R.; Gupta, S. K.; Dikshit, A. K. (2009). An overview of sustainability assessment methodologies, Ecological Indicators 9: 189-212. Söderbaum, F. (2008). Consolidating Comparative Regionalism: From Euro-centrism to Global Comparison, GARNET Annual Conference, University of Bordeaux. Tukker, A. (2013). Knowledge collaboration and learning by aligning global sustainability programs: reflections in the context of Rio+20“, Journal of Cleaner Production 48: 272-279. Veugelers, M.; Bury, J.; Viaene, S. (2010). Linking technology intelligence to open innovation, Technological Forecasting and Social Change 77(2): 335–343. Werbach, A. (2009). When sustainability means more than green, McKinsey Quarterly 4: 74-79. Willard, B. (2005). The next sustainability wave: Building boardroom buy-in, New Society Pub.

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LONG TERM IMPACTS OF INNOVATIONS – THE FINNISH FLAT GLASS AND RELATED INDUSTRIES Olavi UUSITALO Tampere University of Technology E-mail: [email protected]

Abstract. Technological innovation plays an important role in the process of long-run growth. There are a lot of studies on country and aggregate level innovativeness, patents etc. This paper on the contrary focuses on two individual innovations, float glass and safety glass manufacturing technology, introduced in the late 1950s and their impact on the Finnish economy. The flat glass and safety glass industries were both international and very tightly interlinked. We illustrated the evolution of the flat glass industry and its related industries. The government policy towards foreign companies is tracked, as well. The study period is from 1950- 2000. Keywords: innovation, networks, government policy, flat glass JEL classification: L16, M16, O33, O38,

Introduction Technological innovation plays an important role in the process of long-run growth (Furman and Porter, 2002). There is a lot of studies on country level innovativeness, patents etc. (Furman and Porter, 2002) The focus of this paper is on two individual innovations, float glass and Lamino safety glass technologies, and their impact on a small economy, that of Finland. Float glass was introduced in 1959 in the UK while Lamino safety glass technology in the late 1950s in Finland. We also track the change caused by two innovations in related industries and the role of policymakers. The study period is 50 years from 1950-2000. The aim of the paper is to get a comprehensive view of the Finnish flat glass and its related industries after the introduction of two innovations, float glass and safety glass machinery. The Finnish industries were compact, had international contacts and were relatively well documented. From the innovations perspective the linkages with neighboring countries are thus crucial and they should also be facilitated by policy-makers (Boschma, 2004). A European multinational company (MNC), Pilkington has been identified as the key change agent shaping the evolution of the industries in the 1970s and the 1980s, Uusitalo (1995, 1997a&b and 2009), Uusitalo and Mikkola (2010) and Mikkola and Uusitalo (2010). We use evolutionary economics (Boschma and Sotarauta, 2007) in analyzing the policy aspects. We have the following research questions: - What are long term impacts of innovations in a small economy? - What is the role of government in the evolution of industries?

207


The research methodology for studying long term impacts of innovations is a longitudinal, historical case study (Yin, 1984). Since there are inter-linkages between industries and between countries and regions a rich contextual case study works. The rest of the paper is developed in three sections. At the beginning a brief literature review is done on the connectedness of firms and industries, national system of innovation (NSI) and evolutionary economics. Then, a discussion on methodology follows. The empirical part includes first, a brief history of the Finnish national system of innovation and second, the evolution of the Finnish flat glass industry and its related industries such as safety glass including safety glass manufacturing machinery, multi glass unit (MGU) and batch dosing and weighing solutions. Finally, the impact of innovations on small economy illustrated and the role and way of the Government discussed. This section includes theoretical and managerial implications plus further research avenues. Literature Håkansson and Snehota (1989) emphasize the interdependence between the companies and the networks: “no business is an island”. According to them in strategic management business is primarily seen as a production function focusing to operate (internal resources) based on the criterion of efficiency. Instead, companies should be seen as transaction functions and they should shift focus “away from the control of resources towards the integration of resources and away from the management of acting towards the management of reacting”. There exists a rich literature on national system of innovation (NSI), which also includes the government innovations policy (Lundvall, 2010b, Freeman, 1982/2004). Dosi, Pavitt and Soete (1990) related the innovation to the foreign trade while Freeman and Soete (1988) analyzed employment issues related to technical innovation. Pavitt’s (1984) taxonomy helped to understand how different sectors interact and fulfil different functions in the whole innovation process. Etzkowitz and Leydesdorff (2000) introduced Triple Helix model to combine universities, companies and the government. Porter (1990) has argued that competitive advantage is created and sustained through a localized process. Evolutionary economists claim that nations and regions sooner or later will face decline in their economies (Maskell and Malmberg, 1999). The long-term competitiveness of a country and a region rests on its capabilities to upgrade the economic base by creating variety, to phase out variety-destroying processes due to exits and imitation (Boschma, 2004). According to evolutionary theory the emergence of new basic variety (such as new sectors) is very hard to predict. New paths cannot be planned and foreseen. They emerge quite spontaneously and unexpectedly (Boschma and Lambooy, 1999). Thus, policy-makers have to cope with uncertainty when promoting economic renewal and restructuring in their countries and regions (Moreau, 2004). The history of countries and regions will have an impact on available options and probable outcomes of policies that focus on developing new growth paths (Boschma, 2005). Thus, growth trajectories will not come out of the blue, but will reveal patterns of historical continuity (Boschma and Sotarauta, 2007). Evolutionary economy theory sees that in policy-making one should be more sensitive to identifying the potential of emergent developments and routes to the future, and to finding the best 208


possible policy-making ways to each situation, location and time in question, recognizing the emerging processes and not creating totally new invented policies from scratch. In fact this suggests that policy-makers ought to know much better what is going in their own region to build on existing strengths and capabilities in regions to stimulate innovation (Lambooy and Boschma, 2001). Another key aim of evolutionary innovation policy is to connect agents with the purpose of facilitating knowledge transfer. Evolutionary policy should provide access to information. Access to variety is important for innovations, because it triggers new ideas, but it provides complementary assets needed for the development of innovations, as well. Policy should focus on facilitating connections with non-local agents. The higher the number of connections with the outside world, the more information and the more variety is brought into the region through extra-territorial linkages (Boschma, 2004). Thus, the access to variety and information, internal and external to the respective region, is crucial in development. Research methodology Our case study may be described as longitudinal, historical and contextual. We use multiple case study method and multiple data sources (such as industry and company histories, business, trade and academic journals plus interviews with the industry experts) in this study (Yin, 1984). The single case can represent a significant contribution to knowledge and theory building. A longitudinal case study can usually better capture firm dynamics over time (Pettigrew, 1990; Siggelkow, 2007). The most important is the depth of the analysis, both in terms of the number of factors studied and sources of information used (Yin, 1984). A single case analysis is the best way to get a holistic picture and understanding of the research problem. Patton (1990, p. 95) has argued that "qualitative inquiry is highly appropriate in studying processes because depicting a process requires detailed description”. Porter (1980) points out that in an industry analysis there are important benefits in getting an overview of the industry first, and only then focusing on the specifics. According to him, experience has shown that a broad understanding can help the researcher to spot important items of data when studying sources and organize data more effectively as they are collected. Porter (1981: 449-451) also stresses the value of in-depth industry histories in understanding industry environments and identifying firms' strategic interactions on a longitudinal basis. To improve the validity of our “analysis” we used the triangulation methods described by Jick (1979) and Pettigrew (1990) to construct case studies from a variety of information sources: personal interviews in 1993-2012 (business managers in Pilkington for instance Sir Antony Pilkington, Chairman of Pilkington, Jonas Borup, MD of Lahti Glass Works, Erkki Artama, Lamino Pilkington Automotive; Prof. Barker, the author of three histories, and Prof. Pearson, a former Pilkington employee), company and industry histories written by professional historians (Barker, 1977 and 1994; Hast, 1991; Daviet, 1989; PPG, 1967 and 1983; Spoerer et al., 1987), industry and technology studies or books (Berg, 1984; Doyle, 1979; Persson, 1969; Pilkington, 1963 and 1976; Takahashi and Ichinose, 1980), business periodicals (Mushakoji, 1986; Salmans, 1980; Wierzynski, 1968), books written by businessmen, company correspondence, academic studies (Frederiksen, 1974; Skeddle, 1977) and journals, news clippings from the mass media, statistics and trade journals (The Glass Industry and Ceramic Industry Magazine; all from the area 1950-1984). 209


Archival records (i.e. industry statistics, production volumes, import and export) were also used (Uusitalo, 1997a&b). The statistics can be regarded as reliable source. The documentation of the data and archival records are filed in chronological order. The analysis of the data is important in the case of explanatory and causal studies. Internal validity can be enhanced by doing pattern recognition (Mintzberg, 1979) or seeing evidence through multiple lenses (Eisenhardt, 1989). Table 1 provides a list of different perspectives. Table 1. Viewing the research phenomenon from different perspectives Perspective

Focus of analysis

Technology

Plate, sheet and float glass manufacturing processes Safety glass manufacturing technologies Wholly-owned subsidiary, licensing or joint venture The plate glass, sheet glass and safety glass industries

Technology transfer Industry Economy large small Global Company large (MNC) small Vertical integration

The UK, France, Germany Scandinavian countries Licensing of float glass Pilkington, St. Gobain, PPG, Asahi Glass Sheet glass and safety glass manufacturers The safety glass and MGU -industries

Flat glass industry, innovations and related industries This chapter provides an empirical illustration first of the Finnish national innovation system (NSI) or policy and then the flat glass technologies and processed products. Two innovations, float glass and safety glass machinery, are also discussed briefly. This chapter also includes the description the evolution of the flat glass, safety glass, and MGU industries, glass tempering solutions plus weighing and dosing solutions. The Finnish national system of innovation (NSI) There is always an interaction between industrial, economic and social structure and public policy orientation that impact on the structure of the innovation system and policies (Lemola, 2002). The basic foundations of technology and science policies or NSI were partly built in the 1960s, but mainly in the 1970s and 1980s. The aim of them was to lift the technological level of Finnish industries and to reduce the dependence on raw material-driven production and exports. The Finnish National Fund for Research and Development (Sitra), was established in 1967 to support industrial R&D. Moreover, the Ministry of Trade and Industry began in 1968 to support the research and product development of firms, and it also received an additional appropriation for 210


goal-oriented technical research. At the end of the 1970s Finland’s research and development (R&D) expenditure relative to gross domestic product (GDP) was one of the lowest in the industrialized countries. A key matter in the early 1980s was to make technology policy more target-orientated and systematic. (Hermans et al., 2005) To fulfill these tasks, Tekes (The National Technology Agency) was founded in 1983. In Oulu, for example, the first technology center of the Nordic Countries was established in 1984 (Lemola, 2002). During the 1990s there was a clear shift of emphasis in innovation and industrial policies. While in the 1980s policy thinking was more or less based on the idea of picking the winner’s, policies adopted in the 1990s can be labeled as enabling policies. The emphasis moved towards indirect measures in influencing firm behavior, avoiding direct interventions in the product market, promoting competition, and providing a stable macroeconomic environment. (Hermans et al., 2005) In 1990 the concept of a NSI as a framework for science and technology policies was introduced to illustrate the systemic nature of innovation. The innovation process and policies should be looked from a broad perspective ranging from education and science to innovative activities of firms and commercialization of technological innovations (Miettinen, 2002). Finland can be regarded as one of the few countries that have developed a consistent approach towards a network and cluster facilitating innovation policy (Schienstock and Hämäläinen 2001). Flat glass technologies and processed product with their raw materials As late as the mid-1970s two different sub-industries existed in the flat glass industry (see Figure 1). The plate glass industry was much more concentrated and companies were larger than those in the sheet glass (window glass is used as a synonym) sub-industry. Every plate glass manufacturer made also sheet glass, which did not have such expensive machinery. Although the large plate glass manufacturers were also large sheet glass producers, the peripheral markets, such as Scandinavia, were fragmented, and producers operated in national markets. Float glass was introduced in the plate glass and the sheet glass industries in 1959 and in 1968-70, respectively. In the late 1960s and the mid-1970s float glass overtook the plate glass and the sheet glass processes, respectively (see Figure 2 for the case in the US). The flat glass industry became a single industry. Safety glass (both laminated and tempered) and MGUs are two types of processed flat glass products (see Figure 3). Less expensive tempered safety glass is used in the side and rear windows of cars and carriages, while laminated glass is for security and for windshields. Safety glass was invented in the 1926s. Single glazing gives unsatisfactory insulation against cold and sound in windows. Prefabricated insulating glass units are preferred to two or three individual panes of glass in a window. The MGU units were developed in the US and Germany in the 1930s.

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Figure 1: The Division of flat glass (industries) F L A T G L A S S D r a w n s h e e t g l a s s ( t h e 1 9 1 0 s )

F l o a t g l a s s ( t h e 1 9 5 9 )

S H E E T G L A S S

P L A T E G L A S S

F L O A T G L A S S

c h e a p p r o d u c t s u b j e c t t o i n h o m o g e n e i t i e s a n d o p t i c a l d i s t o r t i o n ´ f i r e f i n i s h e d ' s m a l l s c a l e f o r o r d i n a r y c o n s t r u c t i o n

e x p e n s i v e p r o d u c t n o o p t i c a l f a u l t s a l l o w e d c a p i t a l a n d l a b o r i n t e n s i v e l a r g e s c a l e r e q u i r e d g r i n d i n g a n d p o l i s h i n g f o r m o r e s o p h i s t i c a t e d a p p l i c a t i o n s ( a r c h i t e c t u r a l u s e a n d f o r s a t e y g l a s s )

c h e a p p r o d u c t c o m b i n e s t h e b e s t c h a r a c t e r i s t i c s o f b o t h s h e e t a n d p l a t e g l a s s l a r g e s c a l e p a t e n t p r o t e c t e d

1 9 5 9 1 9 6 8 7 0

Source: Uusitalo (1995) Figure 2: The US flat glass production in 1959 to 1977

Flat Glass Production (millions of Sq. Ft.)

4 000

3 000

2 000

Sheet

1 000

Float

Plate 0 1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

Year

Source: Uusitalo (2014)

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Figure 3: Processed value added products and their raw material

Raw material

Processed products

Sheet

Multi glass unit

Plate

Float

Safety glass

Source: Uusitalo (1995) Flat glass industry This chapter illustrates the flat glass industry in four areas plus the float glass innovation. Europe Two large companies, Pilkington (founded in 1826) from the UK and St. Gobain (founded in 1665) from France have produced both in sheet and plate glass throughout the twentieth century. In the mid-1920s both of them began to produce plate glass with a continuous casting, grinding and polishing methods. At the same time they entered the safety glass business. The float glass innovation The production line of plat glass was noisy, dirty because grinding powder and used a lot of energy to grind 10 percent off each side of the plate glass ribbon. Sir Alastair Pilkington developed float glass a seven years until the company could introduce it in 1959 (Barker, 1994). Float glass gave Pilkington a competitive edge. Eventually the company decided to license the technology. In the late 1960s and in the early 1970s, St. Gobain invested in nine float glass lines. By 1970 Pilkington and St. Gobain introduced float glass in the sheet glass industry. They also became interested in the Scandinavian sheet glass market. Concentration in the flat glass industry took place. Since 1970 the German flat glass industry was owned by foreign companies. BSN (Boussois-SouchonNeuvesel) acquired the Belgian plate and sheet glass manufacturer, Glaverbel, in 1972. In 1979 BSN withdrew from the flat glass industry by selling its French operation to PPG, its German operations (Flachglas) to Pilkington, and its Belgian operations (Glaverbel) to Asahi Glass from Japan. 213


Scandinavia In 1960 in Scandinavia there were seven independent sheet glass manufacturers (Emmaboda and Gränges/Oxelösund in Sweden, Drammen in Norway, Korsör in Denmark and Lahti Glass Works (LGW), Riihimäki and Valke in Finland). In the 1960s all companies, except Valke, used internally sheet glass to manufacture MGUs. Plate glass has never been manufactured in Scandinavian. In the 1950s all Scandinavian manufacturers used Fourcault technology. In 1959 (added capacity 1968) and in 1966 Emmaboda and Drammen started PPG machines, respectively. In 1969 in Denmark Scanglas (a merger between Öxelösund and Korsör) and in Finland LGW started sheet production at new PPG plants. In 1974 LGW added two more PPG machines. In 1974, Riihimäki licensed technology from the Japanese Asahi Glass (Takahashi and Ichinose, 1980) to modernize its Fourcault machines. At the same time the Scandinavian safety glass and MGU industries grew. In 1973, local sheet glass producers tried to form, together with either St. Gobain or Pilkington, a joint float glass manufacturing company, Scandifloat. However, the project failed, since Pilkington wanted the majority ownership in the project and Emmaboda was sold to St. Gobain in 1974. In Spring 1974, Pilkington started massive imports into Scandinavia to achieve a market share for its float glass plant (started in 1976) in Sweden. The struggle for capacity in the market created a price war. There was a Great Glass War in Scandinavia in the mid-1970s. By 1978 St. Gobain had bought the Swedish, Norwegian and Danish flat glass producers. In 1978 Pilkington acquired a 50 per cent share in LGW. By 1984 sheet glass production was terminated in Scandinavia. Finland In 1967, the domestic supply of flat glass was 45,000 tons and it was produced by LGW 58%, Riihimäki 22% and Valke 20 %. Five powerful central wholesalers took care of sales. Around 7.5% of the demand was imported. Import duties and the lack of size standardization prevented imports. Finnglas was a joint exporter (accounted 13% of production). In the 1950s and 1960s the European as well as the Finnish sheet glass producers exported successfully to the U.S. Overall, the flat glass industry was characterized by slow growth, dependence on the building sector and cost increases in labor and raw materials (Sitra, 1970). In 1969 LGW and Riihimäki shared the market; the former made MGUs and the latter safety glass for the construction industry. With its new plant LGW was able to meet all demand in Finland. In the early 1970s the export to the U.S. slowed down because float glass was introduced there. In 1972 Valke withdrew from the industry. In 1974 LGW bought a local safety glass manufacturer, Autolasi. At the same time LGW had troubles to mount two additional machines. The production was delayed for five months which brought a shortage of flat glass. Meanwhile Finnish wholesaler owned by Finnish glaziers, Lasitukku, imported huge amounts of Pilkington's float glass. It also controlled a large part of the distribution system. The huge overcapacity in the market presaged a price war. Large investments, warehouses full of glass and rapidly changed market conditions put LGW in a crisis. It had to two options: to quit or cooperate with a European MNC. In 1975 Riihimäki ceased its production. In spring 1976 the Finnish Government made neither LGW a state-owned company and nor protected the flat glass industry against imports. In 1976 LGW agreed with Pilkington to lower its 214


production and to continue its sheet glass production for three years. After then LGW would concentrate on MGU. The Government allowed the price of flat glass to increase by 25%. In 1977 a committee evaluating the flat glass industry suggested that only LGW would continue its sheet glass production. In 1978 Pilkington, the Finnish Government and LGW’s bank arranged the ownership (Pilkington 50%, the bank 25%, two Finnish private companies 10% and a government 5%) of LGW. Bror Wahlroos, Secretary General, Ministry of Trade and Industry, was conducting the two year long negotiations. The furnace underwent major repair and sheet glass production continued until 1984, when a float glass plant investment decision of €50 million was made. The float glass line (70,000 tons/year) was inaugurated in 1987. The company was owned by Pilkington (44%), the Finnish Government (33%) and Finnish private companies (23%). Wahlroos represented again the Finnish Government. Appendix 1 summarizes the events in the flat glass and its related industries. The Finnish safety glass industry Here the safety glass machinery innovation and the evolutions of the safety glass industry and safety glass tempering solutions. The safety glass machinery innovation The Finnish safety glass industry has grown remarkably within thirty years (see Appendix 2). Lamino was found in 1949 and eight years later the first laminated curved windows for busses were delivered. In the 1960s Lamino sold several safety glass lines to Europe and South America. It also licensed manufacturing technology to Sweden. In the early-1970s Lamino concentrated on safety glass manufacturing. In 1975 Lamino as the largest manufacture in Scandinavia was sold to Pilkington with the approval of the Government. Bror Wahlroos, arranged the sale of Lamino to Pilkington. The raw material supply was the main reasons for the sale. LGW was also interested in Lamino. Under the new ownership Lamino grew rapidly. In 1979 it acquired Nordlamex, a Finnish safety glass producer. In the late 1980s Lamino had 50 per cent share in the European windshield market for buses and it also delivered windscreens as genuine spare parts to the Japanese cars in Europe. In 1992 Lamino’s turnover was €75 million, it had 900 employees and exported 87 per cent of its production to 35 countries. Tamglass / Glaston safety glass tempering solution In 1970 two persons from Lamino founded Tamglass to make machinery for windshield manufacturing. Later on Tamglass started to produce windshields. In the late 1970s all of the machinery was exported. In 1981 Tamglass (turnover €9 million and 150 employees) was sold to Kyrö, one Finnish forest industry company. Tamglass exported 93% of its production. In 1986 it was the largest manufacturer of tempered glass production lines in the world. In 1991 Tamglass bought a U.S. tempered glass machinery manufacturer. The company had sales and maintenance subsidiaries in the U.K., Germany, France, the U.S., Hong Kong and Japan. In 1992 Tamglass organized for the first time the Glass Processing Days conference which nowadays is the leading 215


safety glass conference in the world. In 1996 and 2003 it acquired tempered glass machinery manufacturers in Switzerland and Italy, respectively. In the early 2000 Tamglass started safety glass machinery production in China and Brazil. In 2005 the name was changed to Glaston. It is the world’s largest deliverer of integrated safety glass manufacturing lines or solutions having turnover of €150 million and €136 million in 2008 and 2010, respectively. Finnish MGU industry

The MGU-product market expanded at the beginning of the 1970s. LGW had a monopoly role in this industry after acquiring a sublicense for Polarpane products from Sweden in the mid-1960s. Through advertisements and promotion campaigns, LGW created demand for MGU products. However, many glaziers, LGW's customers, and other companies also became interested in MGU products. After float glass was introduced in Finland the power of local flat glass manufacturers was diluted and new comers entered the industry (see Table 2)

Table 2: Largest MGU-producers in 1975-76

(Source: Talouselämä 26/1975)

216

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Weighing and dosing solutions In 2008 and 2010 Lahti Precision’s turnover was €47 million and €28 million, respectively. Lahti Precision (founded in 1913) has long experience in manufacturing and selling of industrial scales and weighing components. Since the 1950s it had sold to local glass manufacturers. The company is in the flat glass industry the #1 provided of a complete chain of services - from single dosing units to turnkey project deliveries of complete batch plants. Lahti Precision’s solution sales to the flat glass industry started in 1986-1987 when it delivered the complete batch plant to LGW. The float glass production requires accurate dosing and mixing of the raw materials to achieve good batch homogeneity and overall efficiency. Lahti Precision was the only supplier of a complete solution. The reputation of good quality of the LGW batch system (as an excellent reference) quickly diffused within the international industry. The next project was sold to Japanese Asahi Glass in North Canada as ‘An Arctic Batch System’. In 1993 – 1997 the sales (€) to the flat glass industry were 5, 10, 3, 16, and 14 million, respectively. The innovations and the impacts of them or the evolution of the flat glass and its related industries is illustrated in Appendix 1. Discussions and conclusions In the 1950s two pertinent innovations took place. In Finland Lamino started working on flat glass to manufacture windscreens. Lamino’s consistent quality of windscreens provided real customer value for the local bus manufacturer. From Lamino three other windscreen manufacturers, Muotolasi, Autolasi and Nordlamex, emerged in Finland as spin-offs. Lamino’s manufacturing technology was well known word-wide. The safety glass industry grew in the 1960s. In the meantime Pilkington invented float glass process which accelerated globalization of the flat glass industry. Large flat glass producers became interested in safety glass firms as distribution outlets. In 1968 and 1973 Pilkington acquired two Swedish firms. Lamino and Nordlamex were sold to Pilkington in 1975 and 1979, respectively Under Pilkington these firms grew rapidly (see Appendix 2). Glaston (earlier Tamglass) focused on manufacturing of tempered safety glass production lines / solutions and created a world-wide position there. After imported float glass became available in Finland the MGU industry was no more LGW’s monopoly. Float glass broke the existing rigid value chain. The era by the mid-1970s was called as the Glass War throughout Scandinavia. In 1987 Lahti Precision entered the international flat glass industry by offering weighing and dosing solutions (see Appendix 1). With the help of the Finnish Government sheet glass manufacturing was kept in Finland until 1984. For some reason Pilkington continued sheet glass production. Again partly financed by the Government and Finnish firms Pilkington built a new float glass plant for LGW in Finland. In that occasion Lahti Precision got an excellent opportunity to enter the global network of the flat glass industry. The company used its opportunity window well and it is at the moment one of the largest suppliers of weighing and dosing solutions to the flat glass industry. The LGW project acted as a pertinent first customer reference in Pilkington and elsewhere in the industry, as well. As was mentioned Bror Wahlroos, Secretary General, Ministry of Trade and Industry, was involved in the arrangement of the Finnish flat glass and safety glass industries. Already in 1970 just after joining the Ministry of Trade he was involved in at the end state of Sitra’s (1970) study of the 217


Finnish flat glass industry. Very soon Wahlroos created a vision that the flat glass and safety glass industries were closely linked. Moreover, the Finnish markets would be linked to European market, as well. Wahlroos arranged the sale of Lamino to Pilkington. He waited for the moment to have the right ministers present to approve the sale. In 1977 he was the chairman of the committee to evaluate what is the further arrangement in the Finnish flat glass industry. After LGW was in March 1976 close to bankruptcy Wahlroos conducted a two years long negotiation between Pilkington, Finnish companies and the Government in order to continue the sheet glass manufacturing in Finland. In the mid-1980s he was again conducting the negotiations between Pilkington, the Finnish companies and the Government. Wahlroos was a well-educated person, had industrial background and was an eager reader. He must have been also diplomatic since he had to get along with 25 ministers during his career in the Ministry of Trade and Industry. As we saw the Finnish national system of innovation was basically developed not until the 1990s, which means that the models / taxonomies created by Lundvall (2010b), Freeman, (1982/2004), Dosi, Pavitt and Soete (1990), Pavitt (1984) and Freeman and Soete (1988) do not explain the involvement of the policy-maker in the Finnish flat glass industry. Etzkowitz and Leydesdorff’s (2000) Triple Helix model combining universities, companies and the government is not valid either since such kind of co-operation did not exist in Finland in the 1970s and 1980s. According to Porter (1990) competitive advantage of nations is created and sustained through a localized process. Porter’s (1990) diamond for success includes 1) factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry, 2) the nature of homemarket demand for the industry's products, 3) the presences or absence of related and supporting industries and 4) firm strategy, structure, and rivalry. It seems that in the case of the Finnish safety glass industry and glass tempering solutions the Porter’s (1990) does not explain the success of them. As we saw individual entrepreneurs have started the industry without any local skilled labor or infrastructure, without home-market demand (no for instance car manufacturing), without related industries (the flat glass industry was busy with the construction industry) and competition. Wahlroos had a fresh vision of the inter-linkages between the flat glass and safety glass industries and their belonging to a larger international context. He also recognized the emerging safety glass industry as a new developing sector as mentioned by Lambooy and Boschma (2001). He enhanced the existing connections of Finnish firms to foreign firms such as Pilkington and facilitated also new connections as (Boschma, 2004) emphasized. It seems that Wahlroos personally was executing evolutionary policy (Boschma and Sotarauta, 2007) himself. In this kind of study a longitudinal, contextual case study with rich data is utmost important to give a comprehensive view of the evolution of the industry. Studies executed purely on quantitative methods may have traps in understanding all events in the evolution of industries. One example of comparison between quantitative and qualitative research methods is provided by Uusitalo (2014). Further research includes two ideas. Since Porter’s (1990) diamond did not explain the emergence and growth of the Finnish safety glass industry and glass tempering solutions since the 1960s it would be interesting to study what were the enabling factors. Second, recently several Finnish firms have been sold to foreign large MNCs (Vacon to the Danish Danfoss, VTI Technologies to the Japanese Murata Electronics) such as Lamino to Pilkington in 1975. Lamino’s acquisition was successful as we can see its development in 1975 to 1992 (Appendix 2). Lamino got resources for production investments and responsibility to take care certain markets. It would be interesting to

218


study how to find a good home for a local well performing small firm. How the acquired company can take a strong position in the factory network of the acquiring firm? References Barker, T. C. (1977). The Glassmakers. Pilkington: the Rise of an International Company 1826-1976, London: Weidenfeld and Nicholson. Barker, T. C (1994). An Age of Glass. Pilkington. The Illustrated History, London: Boxtree. Berg, B. (1984). Det Stora Glaskriget (The Glass War), Huddinge: Glasmästeribranschens Service. Boschma, R. A. (2004). Competitiveness of regions from an evolutionary perspective, Regional Studies, 38(9), 1001-1014. Boschma, R. A. (2005). Rethinking regional innovation policy. The making and breaking of regional history, in G. Fuchs and Shapira, P. (eds.), Rethinking regional innovation and change. Path dependency or regional breakthrough, New York: Springer, 249-271. Boschma, R. A. and Lambooy, J. G. (1999). Evolutionary economics and economic geography, Journal of Evolutionary Economics, 9, 411-429. Boschma, R. A. and Sotarauta, M. (2007). Economic policy from an evolutionary perspective: the case of Finland, International Journal of Entrepreneurship and Innovation Management, 7 (2-5), 156-173. Daviet, J-P. (1989). Une multinational a la Française. Paris: Histoire de Saint-Gobain 1665-1989, Fayard. Dosi, G., Pavitt, K. and Soete, L. (1990). The Economics of Technical Change and lnternational Trade. Hemel Hempstead: Harvester Wheatsheaf. Eisenhardt, K. M. (1989). Building theories from case study research, Academy of Management Review, 14, 532–550. Etzkowitz, H. and Leydesdorff, L. (2000). The dynamics of innovation: from National Systems and “Mode 2” to a Triple Helix of university–industry–government relations, Research Policy, 29(2): 109–123 Frederiksen, P. C. (1974). Prospects of Competition from Abroad in Major Manufacturing Oligopolies: Case Studies of Flat Glass, Primary Aluminum, Typewriters, and Wheel Tractors, unpublished Ph.D. dissertation, Washington State University. Freeman, C. (1982). The Economics of industrial innovation. London: Pinter Publishers. Freeman, C. (2004). Technological infrastructure and international competitiveness, Industrial and Corporate Change, 13(3): 540-52. Freeman, C. and Soete, L. (Eds.) (1988). Technical change and full employment. Oxford: Basil Blackwell. Furman, J. L., Porter, M. E. and Stern, S. (2002). The determinants of national innovative capacity, Research Policy, 31, 899–933. Hast, A. (ed.) (1991). International Directory of Company Histories, Volume III, London: St James Press. Hermans, R., Kulvik, M. and Ylä-Anttila, P. (2005) International mega-trends and growth prospects of the Finnish biotechnology industry: Recent economic research and policy implications. Journal Of Commercial Biotechnology, 11(2), 134–145. Håkansson, H. and Snehota, I. (1989). No Business is an Island: The Network Concept of Business Strategy, Scandinavian Journal of Management, 4 (3): 187-200.

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Jick, T. D. (1979). Mixing Qualitative and Quantitative Methods: Triangulation in Action, Administrative Science Quarterly, 24, 602-611. Lambooy, J. G. and Boschma, R. A. (2001). Evolutionary economics and regional policy, The Annals of Regional Science 35, 113-131. Lemola, T. (2002). Convergence of national science and technology policies: the case of Finland. Research Policy. 31, 1481–1490 Lundvall, B.-Å. (2010a). Chapter 15 Post script: Innovation system research – where it came from and where it might go, in Lundvall, B.-Å. (Ed.), National systems of innovation: Toward a theory of innovation and interactive learning (317-349). London: Pinter. Lundvall, B.-Å. (2010b). (Ed.) National systems of innovation: Toward a theory of innovation and interactive learning. London: Pinter. Maskell, P. and Malmberg, A. (1999). The competitiveness of firms and regions. ‘Ubiquitification’ and the importance of localized learning, European Urban and Regional Studies, 6(1), 9-25. Miettinen, R. (2002). National Innovation System: Scientific Concept or Political Rhetoric. Edita. Helsinki. Mikkola, T. and Uusitalo, O. (2010). Making strategic decisions in the changing networks - observations from the Scandinavian flat glass industry, the 26th IMP Conference, 2nd-4th of September 2010, Budapest, Hungary. Mintzberg H. (1979). An Emerging Strategy of ”Direct” Research, Administrative Science Quarterly, 24, 683-589. Moreau, F. (2004). The role of the state in evolutionary economics, Cambridge Journal of Economics, 28, 847-874. Mushakoji, K. (1986). The Process of Internationalization at Asahi Glass, International Management, March, 73-74 and 79-80. Pavitt, K. (1984). Sectoral Patterns of Technical Change: Towards a Taxonomy and a Theory. Research Policy, 13, Patton, Q. M. (1990). Qualitative Evaluation and Research Methods, Newbury Park: Sage Publications. Persson, R. (1969). Flat Glass Technology, London: Butterworths. Pilkington, A. (1963). The Development of Float Glass, The Glass Industry, February, 80-81 and 100-2. Pilkington, A. (1976). Flat Glass - Evolution and Revolution Over 60 Years, Glass Technology, 17, 182193. Porter, M. (1980). Competitive Strategy, New York: Free Press. Porter, M. (1981). Strategic Interaction: Some Lessons from Industry Histories for Theory and Anti-trust Policy. In Steven C. Salop (ed.) Strategy, Predation and Anti-trust Analysis, Washington, D.C.: Federal Trade Commission, 449-506. Porter, M. (1990). The Competitive Advantage of Nations. London: Macmillan Press Ltd. PPG (1967) Romance of Glass, Public Relations Department, Pittsburgh. PPG (1983) A Century of Achievement, PPG Products Magazine, Volume 91, 2, pp. 1-33. Salmans, S. (1980). Pilkington's Progressive Shift, Management Today, September, 66-73. Schienstock, G. and Hämäläinen, T. (2001). Transformation of the Finnish innovation system: A network approach, Sitra Reports series 7, Helsinki: Sitra.

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Siggelkow, N. (2007). Persuasion with case studies. Academy of Management Journal, 50(1), 20-24. Sitra (1970). Research on the International Competitiveness of the Finnish Glass Industry (in Finnish), Helsinki: The Finnish Innovation Fund. Skeddle, R.W. (1977). Empirical Perspective on Major Capital Decisions, unpublished Ph.D. Dissertation, Case Western Reserve University. Spoerer, M., Busi, A. and Krewinkel, H. W. (1987). 500 Jahre Flachglas, 1487-1987 Von der Waldhütte zum Konzern (in German) Schorndorf: Karl Hofmann Verlag. Takahashi, S. and Ichinose, M. (1980). New Vertical Draw Process for Sheet Glass, The Glass Industry, April, 24, 29-30 and 32. Uusitalo, O. (1995). A Revolutionary Dominant Design - The Float Glass Innovation in the Flat Glass Industry. Dissertation A:108. Helsinki: Helsinki School of Economics. Uusitalo, O. (1997a). Development of the Flat Glass Industry in Scandinavia 1910-1990: the Impact of Technological Change. Scandinavian Economic History Review, (3): 276-295. Uusitalo, O. (1997b). Globalization of an Industry – a Network Perspective. The Case of the Scandinavian Flat Glass Industry, IMP Paper, Lyon 1997. Uusitalo, O. (2009). Lasinteon tärkeät päätökset. Etelä-Suomen Sanomat, Vierailija, 22.3.2009, p. 13. Uusitalo, O. (2014). Float Glass on the Flat Glass Industry. SpringerBriefs in Applied Sciences, Heidelberg: Springer. Uusitalo, O. and Mikkola, T. (2010) Revisiting the case of float glass – Understanding the industrial revolution through the design envelope, European Journal of Innovation Management, 13(1): 24-45. Wierzynski, G. H. (1968), The Eccentric Lords of Float, Fortune, July, 90-2, 121-4. Yin, R. K. (1984) Case Study Research, Design and Methods, Sage Publications.

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Appendix 1. Impact of two innovations on the industries. Glass tempering solutions Tamglass / Glaston (a world wide supplier)

Safety glass

Three spin offs

Windscreens (safety glass)

The sale of Lamino to Pilkington (1975)

- Lamino / Finland - machines to make windscreens for buses

- the Gov.

Licensing / dominant design / globalizing

Float glass (1959) - Pilkington/UK

Import of float (Lasitukku)

Multi Glass Units Sitra’s study

MGUs

Neg.

1987

Sheet glass; - arrogant, powerful, cartel;

Float glass

Pilkington/the Gov.

Collapse Pilkington/ the Gov.

Weighing and dosing solutions Lahti Precision (a world wide supplier)

1950

1960

1980

1970

1990

2000

Time

Laminated Safety Glass Export

Appendix 2. Laminated safety glass(for export from Finland (for cars and other vehicles) cars and other vehicles) 92 90 88

Swe

86

Nor

Year

Den 84

I-B

82

Nethr Bel

Nordlamex/Finland

80

Italy

Flachglas/Germany

Switc

78

Fra 76

Lamino/Finland

Spain W-G

74

USA

The Monetary value of Export in 1992 was 45 milliom FIM

72

Hun

70 0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

tons Arrows indicate time when companies were acquired by Pilkington

222


SPAIN IN THE LITHUANIAN MARKET. THE EUROPEAN TRADE EXPECTATIONS Aurimas RUDŽIONIS Kaunas University of Technology E-mail: [email protected]

Antonio MIHI-RAMÍREZ Granada University E-mail: [email protected] María del MarHOLGADO-MOLINA Granada University E-mail: [email protected]

Abstract. The integration process of European Union implied tariff dismantlement between Spain and Lithuania which has generated an important effect on commercial relations between both countries through the creation or diversion of trade. This research focuses on how the absence of tariff barriers in Spanish and Lithuanian economy affect their exports and their major competitors, analyzing which sectors could increase its market share, their comparative advantages and their positioning. Our results show that although the Spanish market share remains small in Lithuania, it grows more than in the other countries of the European Union due to different comparative advantages. Keywords: trade integration, intraindustry trade, comparative advantages, JEL classification: F1

Introduction The progressive establishment of the European Union (EU) implied a tariff dismantling of the Spanish and European markets. The mentioned integration process generates a commercial impact between Spain and Lithuania through the predictable creation or trade diversion, in favor or in the detriment of Spanish products. The aim of this work is to evaluate what impact can generate Spanish-Lithuanian trade to Spanish economy after tariffs removal, according to the specificities which presents their exportations to Lithuania compared with its major competitors in the market (other EU countries) specifying in which sectors market share in Spain increases or no. To reach this objective it is necessary to start from the consideration of the potential repercussions that are provided by the theories of international economic integration. According to these, the elimination of trade barriers between member countries stimulates an adjustment in trade flows (including flows of productive factors) within the integrated area and third countries, which usually involves an increase in the importance of relations with member countries in the detriment of the rest of the world. Trade diversion towards the integrated area is a logical consequence of reduction of prices of imported products from the member countries, both on imports from the third countries and the domestic products that are cheaper derivative because of the disappearance of trade barriers. This reorientation of imports, after the incorporation of Lithuania into the EU could lead into increased exports from Spain to the Lithuanian market. Not of its imports, since the EU does not provide changes in the business that offers manufacturing in Lithuania which is fully liberalized before some decades. Therefore, it is possible that this trade diversion benefits Spain and reverts in correcting the chronic Spanish trade deficit with Lithuania. Similarly, trade creation will be generating results from competition with Lithuanian producers, which could also provide great 223


opportunities in a market with a large number of potential consumers for industrialization and modernization of the economic structure that requires a large volume of imports. Nevertheless, Spain-Lithuania integration could also lead to an increase in exports from other EU countries (Aturupane et al., 1999). There is a risk that these markets are most benefited by diversion or creation of trade than the Spanish, an effect would only occur in the case if Spanish products become less competitive, the aspect that is being analyzed. Theories of international trade argue that the results of the integration are closely linked to the market structures (Aiginger, 1997). Thus, to predict the business impact on Spain is necessary to analyze the structure of comparative advantages and disadvantages in Spanish trade with Lithuania. This analysis will allow us to discern the degree of competitiveness of Spanish exports and the expected impact of free trade on the EU. Through the use of trading indicators is conducted a comparative analysis of the specificities of Spanish exports to Lithuania against the strong and weak points of Spain's main competitors in this market. This will allow us to determine the degree and the type of existing competition (Gabszewicz et al., 1981), as well as to discern the impact of free trade in the EU in Spanish exports. Specific features of Spanish exports to Lithuania against its European competitors The opportunities offered by the incorporation of Lithuania market to the EU, for Spain are not only a consequence of the trade policy of the EU (Blanes and Martín, 2000) but also the competition that develops the Spanish economy over other markets that have started in a legitimate struggle in order to greater market share in the Baltic country. For this reason, for reaching the objective set in this research, to evaluate the commercial impact generated by trade exchanges to Spain, we need to analyze the Spanish export specialization and the structure of comparative advantages and disadvantages in its trade with Lithuania, i.e., their strengths and weaknesses compared to the mentioned competitive markets. Commercial significance of each partner The first conclusion we can make from the analysis of the evolution of the various export flows to Lithuania during the analyzed period, from 2000 to 2013 is that in all cases a significant increase in sales volume is observed. As shown in table 1, although the average European sales growth is positive and logically higher than in Spain because the UE includes more countries, however an analysis of the annual growth rates of the Spanish sales showed that it is 27.34% annually since the 2000s, in comparison with other EU countries (16,1%). Therefore, the Spanish exports to Lithuania experienced an average annual growth greater than in rest of the UE, with further growth in the phases of upturns in the business cycle and a further contraction during economic recession in the case of Spain.

224


Table 1:Exports to Lithuania from Spain and the UE2000-2013 SPAIN

1999

EUROPEAN UNION Increase Import Increase Increase Export Import of Export Increase Export Value of import Export Value of export Market Value import Value of export Market (thousand in the (thousands in the shared (thousands in the (thousands in the shared s of period of euros) period (%) of euros) period of euros) period (%) (%) euros) (%) (%) (%) 41.003,79 62815,08 2.101.683,60 3266161

2000

90041,78

120%

66811,71

6,36%

0,05%

2850841,93

36%

4.839.448,20

48,17%

1,32%

2001

166984,57

85%

150768,26

125,66%

0,12%

3441475,42

21%

5.612.790,70

15,98%

1,16%

2002

165998,83

-1%

160565,81

6,50%

0,12%

3594896,86

4%

6.230.958,63

11,01%

1,10%

2003

190581,24

15%

112862,04

-29,71%

0,08%

4005190

11%

6.632.746,39

6,45%

1,08%

2004

98991,34

-48%

99768,96

-11,60%

0,07%

4780929,12

19%

8.629.662,72

30,11%

1,47%

2005

181914,96

84%

129640,20

29,94%

0,08%

5569867,52

17%

10.689.924,35

23,87%

1,63%

2006

237033,84

30%

178694,70

37,84%

0,10%

6226075,69

12%

12.279.291,53

14,87%

1,39%

2007

138569,47

-42%

324922,79

81,83%

0,18%

7451245,86

20%

14.015.780,12

14,14%

1,26%

2008

371755,99

168%

282829,21

-12,95%

0,15%

9114753,52

22%

16.539.611,24

18,01%

1,48%

2009

194444,83

-48%

164016,93

-42,01%

0,10%

6732211,33

-26%

13.060.596,56

-21,03%

1,84%

2010

197047,37

1%

182655,41

11,36%

0,10%

8884730,48

32%

16.277.719,11

24,63%

1,79%

2011

274937,78

40%

219820,33

20,35%

0,10%

11887026,5

34%

21.469.656,42

31,9%

1,82%

2012

304638,63

11%

274075,76

24,68%

0,12%

12956872,7

9%

23.908.831,01

11,36%

1,84%

2013

741979,34

144%

642688,52

134,49%

0,33%

12775057,8

-1%

22.923.099,36

-4,12%

1,65%

average

40%

27,34%

15%

16,1%

Source: Adapted from U.E. Trade statistics, Ministry of Economics of Spain, Datacomex (2014) Regarding average growth of imports to Lithuania from Spain, it is much higher the growth of export, 40% versus 27.34%, and also with respect to the EU, 40% versus 15%, and has a greater variation in periods of economic expansion. Although the Spanish market share in the Baltic country has increased, however, in none of these cases has been an increase in the relative significance of Lithuania as a customer. In the case of Spain, the market share represents approximately 0.33% of the Spanish sales (1.65% of the EU sales), due to the greater progression experienced by the overall volume of Spanish foreign trade, mainly oriented towards other European partners. Following the requirements of the theoretical models of integration, it shows that since the incorporation of Lithuania into the EU, the Spain–Lithuania trade has been more active than in previous years(although this has not resulted in a great increase of the market share), contrary to what happened in other European countries as a whole. Maybe this is because the closest countries to Lithuania than to Spain (Russia, Germany, Poland, Latvia, the Netherlands), have reoriented their trade to their geographically closest partner countries. Therefore, taking into consideration the geographical variable, it is expected that these countries will continue to be partners that increase their volume of trade with Lithuania, which will be further encouraged by the gradual liberalization of its market. We cannot forget that the geographic factor is one of the variables that influence the intensity of trade between trading partners. In accordance with the proposals of recent international 225


trade models that are grouped under the name "geography and trade models", trade data indicates that geographic proximity stimulates trade, and here Spain do not have the biggest advantage (Helpman and Krugman, 1985). Strengths of Spain against its European competitors Despite what has been said above, it is not prudent to make a prediction without considering other variables. In this regard, we know that countries trade according to their comparative advantages, basic concept that justifies international specialization was initially introduced by David Ricardo, and, in a general way, is defined by comparing relative prices of different goods in different countries. Each country specializes and exports those goods in which the country gets comparatively higher productivity, while imports those where the country is relatively less productive. Therefore, the logical counterpart of exports and imports are both sources of profit for the trade. To explain the structure of comparative advantages of countries many hypotheses are used, among which is the Heckscher-Ohlin-Samuelson (HOS):Disparities of their endowments of productive factors, capital and work (Bergstrand, 1990). According to this model, the response of the elimination of trade barriers linked to the Association Agreement would be the specialization of countries involved in the production and export of goods that intensively use a relative greater productive factor. Therefore, the extension would result in an increase in inter-industry trade (exchange of goods in different sectors). Although it does not have the necessary data to identify the true sources of comparative advantage of a country as defined by the theory, if it is possible to approximate them by trade data that largely reflects these advantages21.It was developed a series of indicators of revealed comparative advantage, following the initial concept of Balassa and Nolan (1989), which provides an overview of the pattern of trade of a country. The index of revealed comparative advantage (RCA) used in this research22, refers to the contribution to the bilateral trade balance of each sector expressed in terms of bilateral trade volume unlike other alternative indices which refer to the data on total trade of a country relative to GDP. Therefore, the rate used reflects the pattern of bilateral trade, but do not boast the strengths or weaknesses of an economy in general. Thus, we calculated the RCA for all Spanish trade (Table 21

Obviously, this is an approximation, since trade flows are influenced by other factors such as trade policy or exchange rate. In this regard, we can specify that our goal is to compare the competitiveness of Lithuanian market of Spanish products with the rest of EU products, thereby altering the type of the trade does not affect the relative competitiveness between different markets of euro area, although it may itself result in the replacement of European imports for most Lithuanian national consumption. 22 RCA:translates the comparative advantages and disadvantages reflected by the trade between two partners measuring the contribution to the trade balance of each sector (Lafay, 1987). The VCR for sector j can be estimated by:



IVC j  1000  X  M    X j  M j    X  M   X j  M j 

 X  M   being

respectively X, Xj and

total exports of sector j, and M, Mj total imports and the sector j. Considers that trade in a sector j has a comparative advantage (or disadvantage) if the trade balance is greater (or lower) than the reference balance, and this is where you obtain to distribute the country's total trade balance between all sectors according to their relative weight in total trade. Thus, its contribution to the trade balance is the difference between the actual balance and the theoretical balance. A positive (negative) contribution is interpreted as a revealed comparative advantage (disadvantage) for this sector.

226


2) and for the EU as a reference for the study of the specialization profile of Spain in its trade with Lithuania. Table 2: Intensity of the comparative advantage / disadvantage revealed from Spain in its trade with Lithuania, 2000 -2013. Moderated revealed comparative disadvantage (between 0 and -30‰) Miscellaneous manufactured articles -23.79

High revealed comparative disadvantage (lower than -30 ‰)

Live animals; animal products -3.43 Mineral products Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus -4.54 Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting materials; basket ware and wickerwork. Base metals and articles of base metal -1.65

-194.49

-36.74

Raw hides and skins, leather, fur skins and articles thereof; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut -0.61 Works of art, collectors’ pieces and antiques -0.16

Moderated revealed comparative advantage (between 0 and 30‰) Miscellaneous manufactured articles 25.39

High revealed comparative advantage (greater than 30‰) Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles

Vehicles, aircraft, vessels and associated transport equipment 24.96

76.57

Products of the chemical or allied industries 15.67 Commodities which are classified according special requirements 22.90 Textiles and textile articles

Prepared foodstuffs; beverages, spirits and 6.13vinegar; tobacco

Plastics and articles thereof; rubber and similar 5.65 Pulp of wood or of other fibrous cellulosic material; recovered paper or paperboard; paper and paperboard and articles 2.61 Natural or cultured pearls, precious or semiprecious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin 0.12

45.31

Source: Calculated from U.E. Trade statistics, Ministry of Economics of Spain, Datacomex (2014) A comparative examination of the structure of the advantages and disadvantages of trade in Spain in the Lithuanian market, initially shows that Spain has a very high comparative advantage in Machinery and mechanical appliances sections; electrical equipment; parts thereof; sound 227


recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of Such articles; and to a lower extent in the sectors: Prepared foodstuffs; beverages, spirits and vinegar; tobacco (Table 2). Therefore, there is no foreseeable risk of trade diversion to the detriment of Spanish products for the rest of the EU in these sections, which represents around 15% of Spanish exports to Lithuania (Datacomex, 2014). Table 3: Spain’s comparative advantage in trade with Lithuania. Comparison with Spain and the EU, 2000 -201323 SPAIN/LI 1. ANIMAL 2. VEGETABLE 3. FAT AND 5. MINERAL 6.CHEMICALS 4. BEBERAGES 7.PLASTICS THUANIA PRODUCTS PRODUCT OIL PRODUCTS PRODUCTS

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

18,65% -16,34% -17,48% 10,74% 8,95% -34,90% 1,03% 3,97% 19,88% 41,03% 38,51% 33,97% 30,60% -14,31%

-148,95% -287,69% -311,21% -51,96% -35,37% -132,37% -49,82% -45,67% -44,44% 1,01% -14,17% -56,96% -8,19% -3,79%

-20,93% -17,75% -5,82% -4,32% -18,57% -5,20% -11,09% -2,98% -0,63% 2,22% -0,06% 0,08% 0,02% -1,43%

9,48% -27,40% -17,51% 9,45% 4,76% 16,58% 6,12% 0,91% 7,14% 12,89% 11,59% 10,97% 3,74% -26,11%

-27,50% -71,38% -23,58% 9,35% 7,73% 2,71% 5,83% 3,46% 14,44% 11,64% 20,13% 14,54% 8,01% -29,44%

-0,36% -2,99% -3,45% 0,15% -0,16% 0,69% 0,68% -0,44% 0,80% 0,86% 1,93% 2,67% 0,88% -2,39%

-0,37% -3,96% -4,18% 0,10% -0,31% 0,10% 0,25% -0,45% 0,63% 1,64% 1,43% 0,12% -3,04% -6,20%

UE/LITHU 1. ANIMAL 2. VEGETABLE 3. FAT AND 5. MINERAL 6.CHEMICALS 4. BEBERAGES 7.PLASTICS ANIA PRODUCTS PRODUCT OIL PRODUCTS PRODUCTS

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

-9,51% -14,20% -19,54% -18,65% -9,28% -8,78% -19,04% -24,99% -11,66% -6,15% -3,45% 0,33% -1,78% -6,93%

-55,50% -73,27% -60,63% -53,60% -80,18% -84,64% -69,63% -51,07% -96,36% -64,88% -83,68% -115,07% -111,64% -76,13%

-4,78% -3,80% -5,26% -4,52% -3,95% -3,49% -3,78% -5,08% -4,53% -4,00% -3,99% -4,01% -3,89% -4,35%

-6,85% -13,14% -24,18% -23,45% -2,98% -1,60% -21,32% -33,92% -14,08% 4,11% 6,56% 11,92% 11,03% -0,97%

-3,31% -8,78% -18,28% -16,64% 5,83% 10,09% -7,12% -13,89% 4,11% 7,39% 11,90% 16,45% 15,58% 8,44%

-3,62% -6,03% -9,56% -7,71% -2,98% -2,28% -6,07% -7,27% -3,03% -0,44% 0,01% 0,82% 0,51% -0,78%

-6,36% -9,09% -14,18% -17,77% -8,34% -6,05% -11,22% -12,00% -5,55% -2,66% -1,83% -0,67% -1,06% -3,13%

8.RAW HIDES

9.WOOD ARTICLES

-22,44% -0,07% -18,22% -0,51% 1,68% -0,24% -2,13% -0,01% -9,40% -0,03% -0,43% 0,23% 3,96% 10,09% 0,04% 24,41% 4,36% 14,44% 10,64% 12,49% 9,09% 8,51% 7,43% 2,92% 4,12% 0,99% -6,88% -238,36% 8.RAW HIDES

9.WOOD ARTICLES

-29,90% -34,09% -42,70% -36,39% -15,16% -10,03% -17,57% -17,26% -6,57% -0,66% 0,12% 1,24% 0,79% -1,81%

-2,51% -2,87% -3,87% -3,67% -2,45% -2,54% -7,15% -8,62% -3,77% -0,74% 0,07% 0,20% 0,00% -3,81%

Source: Calculated from U.E. Trade statistics, Ministry of Economics of Spain, Datacomex (2014)

23

Sections: 1 Live animals; animal products; 2 Vegetable products; 3 Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes; 4 Prepared foodstuffs; beverages, spirits and vinegar; tobacco; 5 Mineral products; 6 Products of the chemical or allied industries; 7 Plastics and articles thereof; rubber and articles thereof; 8 Raw hides and skins, leather, fur skins and articles thereof; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut; 9 Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork

228


In the case of animals products, Prepared foodstuffs; beverages, spirits and vinegar; travel goods, handbags and similar containers; articles of the animal gut, Spain has greater advantage than other European countries that trade with Lithuania. However, this may be because many European companies are developing outsourcing contracts primarily with the Eastern countries, keeping their margins in the phases of trade. Gradually, the EU has developed this strategy as well as a specialization of higher quality products, design, etc.(Grossman and Helpman, 1991), to slow the inevitable decline of an industry that do not require well-qualified labor force and therefore is an interesting market to countries with lower labor costs as Lithuania. After the incorporation of Lithuania into the EU, the progressive elimination of restrictions on trade in Lithuania regarding its EU imports can generate a reorientation of their purchases to other European markets. This reorientation can be managed towards the countries in those sections where the comparative advantage is greater than the Spanish. This risk is higher for Mineral products, Base metals and articles of base metal. Conclusion After several years of integration, trade liberalization in Lithuania is a good opportunity for Spain if the products take advantage of their potential or, opposite, may lead to loss of market share in benefit of other EU countries. Theories of international trade argue that the results of the integration are closely linked to market structures, and these are reflected in the nature of commercial. In light of the analysis of the changing patterns of Spanish exports to Lithuania and its comparison with trade flows from the rest of the EU, we can argue that Spain seems to be able to increase its export share in Lithuania on certain products. In fact, Spanish sales are recording a higher growth than its European competitors. Despite the significant growth of Spanish exports, the importance of Spain as Lithuanian supplier is still insignificant. The Spanish specialization profile is different from the whole of the EU, as evidenced by the indicator of comparative advantage. The sectors that positively contribute to the Spanish trade balance with Lithuania are mainly these sectors: Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles; while the whole EU records advantages in the most capital-intensive industries. In addition, the evolution of export specialization index shows that this situation tends to increase. Therefore, there is no foreseeable risk of trade diversion to the detriment of Spanish products and for the rest of the EU in these sectors, which implies around 15% of Spanish exports to Lithuania; on the contrary, Spain maintains a dominant position that could increase its market share. Sections with greater potential risks are:“Mineral products” and „Base metals and articles of base metal” where Spain has lower advantage.

References 229


Aiginger, K. (1997). The use of unit values to discriminate between price and quality competitions, Cambridge Journal of Economics, 21: 571-592. Aturupane, C., Djankov, S. and Hoekman, B. (1999). Horizontal and vertical intra-industry trade between Eastern Europe and the European Union, Weltwirtschaftliches Archiv, 135(1): 62-81. Balassa, B. and Nolan, M. (1989). Revealed comparative advantage in Japan and the United States, JournalofInternational Economic 27, 4(2): 8-22. Bergstrand, J. H. (1990). The Heckscher-Ohlin-Samuelson Model, The Linder Hypothesis and the Determinants of Bilateral Intra-Industry Trade, The Economic Journal, 100 (403): 1216-1229. Blanes, J. V. and Martín, C. (2000): “The Nature and Causes of Intra-Industry Trade: Back to the Comparative Advantage Explanation? The Case of Spain,Weltwirtschaftliches Archiv, 136(3): 423-441. Gabszewicz, J., Shaked, A. and Sutton, J.(1981). International Trade in Differentiated Products, International Economic Review, 22(3): 527-534. Helpman, E. and Krugman, P.R. (1985).Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and International Economy, Cambridge: MIT Press. U.E. Trade statistics, Ministry of Economics of Spain, Datacomex (2014). Retrieved June 23, 2014 from http://datacomex.comercio.es/

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THE CONDITION OF INFRASTRUCTURE AND ITS INFLUENCE ON THE LEVEL OF COMMUNESES INCOME PER CAPITA IN PODKARPACKIE REGION – REGRESSION TREE MODEL Aleksandra GÓRECKA Faculty of Economic Sciences, Warsaw University of Life Sciences E-mail: [email protected] Abstract. This article attempts to establish elements of technical infrastructure that have a statistically significant effect on the income per capita at rural areas. Research involved rural and urban-rural communes in Podkarpackie Province. Results regression tree model indicated that five infrastructural elements have an especially significant effect on the income of a commune: share of population served with sewage treatment, length of water supply network in km per 1000 citizens, density of roads, length of municipal gas supply network in km per 1000 citizens, and the share of investment in total expenditure of the commune. Keywords: technical infrastructure, income of a commune, multiple regression, regression trees. JEL classification: R58; R53

Introduction The importance of infrastructure for the amount and cost of production as well as for economic growth is a widely discussed subject (Aschauer, 1989; Gramlich, 1994; Nadiri & Mamuneas, 1994; Lynde & Richmond, 1993; Easterly, 1993; Day & Zou, 1994; Holtz-Eakin & Schwartz, 1994; Ferreira & Issler, 1995). Authors frequently point to the significant effect that infrastructure has on the development of individual economy branches, such as construction or tourism (Ratajczak, 2000; Stawicki, 2012; Brelik, 2012). Researchers agree unanimously that infrastructure, or at least its minimal foundations, is indispensable for the optimal use a given area. For this reason, one can only agree with the opinion that infrastructure is a necessary element of economic development. Equipping rural areas with facilities of broadly defined socioeconomic infrastructure is one of the most significant aspects that affects regional development. A well-developed infrastructure constitutes the basic condition for socioeconomic development. It aids the growth of both small and medium enterprises as well as economic initiatives, especially non-agricultural business activity. It attracts investors, thus securing the influx of external capital, both national and foreign, and constitutes an important element in the process of improving the competitiveness of rural areas as places for living and conducting business activity. In respect to rural areas, infrastructure is defined as the total amount of facilities and equipment located in these areas and can be divided (Smoleń, 2009) into sectors categorized as technical (equipment related to sewage treatment, irrigation, communication, telecommunication, waste management, water management, power supply management, and road network), economic (services, trade, gastronomy, banking, buying stations, and supply chains), and social (facilities related to health care, culture, education, recreation, etc.). Underdevelopment of rural infrastructure discourages potential investors from establishing business activities in rural areas. Especially 231


severe infrastructural underdevelopment can be seen in net-works related to communication, sewerage, and water and power. Taking into consideration the importance of infrastructure in regional growth, even in in-direct way, the aim of this article is to identify elements of infrastructure in rural areas that have the greatest influence on the municipalities' incomes per capita and present the homogenous groups of the communes divided based on income per capita and infrastructural indexes. The hypothesis claims that the most important factor that divides the municipalities of Podkarpackie region due to the income per capita is road infrastructure, and other variables are not statistically significant. The area and research methods This research presented in this article was conducted in 2012 and involved 143 communes in Podkarpackie Province, including 112 rural communes and 31 rural-urban communes (fig.1). Figure 1: Division of Podkarpackie region (2012)

Rural communes Urban-rural communes Cities

Source: own elaboration based on Main Statistical Office in Poland (2013) This border area is aggregated of low growth because of its historical conditions (DuczkowskaMalysz, Duczkowska-Piasecka, 2009). However, since 1999 when the administrative region was 232


created, it is searching for the opportunity of development, being still at the end of list of the best developed regions in Poland. A measure of economic growth are, in-habitants skills, as well as the promotion of entrepreneurship which is a magnet for external technology solutions, research, innovations, etc. (Czudec, 2009). Thus, if an area is strengthening endogenous factors, and there are at least two external factors such as the demand for the resources of the region and the possibility of using external, then the lagging regions can reduce disparities and development distance to the more developed regions. One of the many measures indicating the economic situation of the area is income of commune per capita. Research material was collected using both primary and secondary data sources. Primary sources comprised telephone interviews with employees of Municipal Offices, while secondary sources comprised data from the Local Data Bank of the Central Statistical Office of Poland. Thus, a database was created with variables that described the state of technical infra-structure in each commune involved in the research. These variables were as follows: Dependent variable: y – income per capita in commune Independent variables: x1 road density (in km per km2) x2 frequency of train arrivals per year x3 cable telephony subscribers per 1000 citizens x4 length of water supply network in km per 1000 citizens x5 length of water supply network in km per km2 x6 length of sewerage network in km per 1000 citizens x7 length of sewerage network in km per km2 x8 length of municipal gas supply network in km per 1000 citizens x9 share of population served with sewage treatment x10 share of investment in the expenditures of a commune Collected data were subjected to one- and multi-dimensional multiple regression analysis in the following form: y = a + b1*x1 + b2*x2 + ... + bp*zp where: y - dependent variable, a - random component x1, x2, ..., xp - explanatory variables, b1, b2, ..., bp - the parameters of the regression function (model parameters). The main statistical method used in this article was the regression tree model representing the process of dividing a set of objects into uniform classes. Internal nodes of a regression tree describe the way to conduct the division based on the values of the characteristics of objects, while its leaves represent the classes to which these objects belong (Nowak-Brzezińska, 2010). Exactly one path connects each leaf to the root. A set of all such paths can be transformed into a set of rules that classify objects in the same manner as the tree does. Therefore, the decision tree can be converted into a set of rules (fig.2). Regression tree models are used to solve regressive problems in which

233


the dependent variable is a quantitative characteristic (Breiman et al., 1984; Loh et al., 1997; Łabczyński, 2005). In the statistical analysis of the conditions for the development of the tourist function, the CART method was used. In CART, the tree is a fully-grown tree and its individual branches can be truncated to increase the ability to generalize results. Because of the quantitative character of data collected during the research process, the author of this article used a model with parameters determined through the formula:

k 

1  yi N (k ) x1 Rk

where: N(k) – the number of observations belonging to segment Rk,

Figure 2: The regression path in regression tree model

Source: Nowak-Brzezińska (2010) The above parameter is the mean value of “y” for observations located in the (Rk) leaf. Assessment of homogeneity (the quality of division) of individual subspaces, into which the space of variables is divided, was conducted using a function that evaluates the diversity of observations located in the Rk leaf. For the regressive model, the function has a quadratic form: Q( Rk ) 

1  ( yi   k )2 N ( k ) x i R k

In addition to grouping the communes, the regression tree model determines the importance of variables used in it. One is able to determine which infrastructure elements affect the per capita income of a commune.

234


Results and discussion Multiple regression analysis indicated that one variable, x9, had a statistically significant effect on the per capita income of communes (y). Based on the values of parameters of natural assets, the regression model that presents the per capita income (y) can be expressed with the following equation: As far as the amount of per capita income in the studied communes is concerned, the model above proved that the infrastructure element with the greatest effect on the per capita income of communes was the share of population served with sewage treatment (x9). Other variables were not included in the general linear model due to their P values exceeding 0.1 (tab. 1). Table 1: One-dimensional tests of significance for the municipal income per capita "y" for the general regression model Effect Absolute expression Density of roads (in km per km2) (x1) Frequency of train arrivals in a year (x2 Cable telephony subscribers per 1000 citizens (x3) Length of water supply network in km per 1000 citizens (x4) Length of water supply network in km per km2 (x5) Length of sewerage network in km per 1000 citizens (x6) Length of sewerage network in km per km2 (x7) Length of municipal gas supply network in km per 1000 citizens (x8) Share of population served with sewage treatment (x9) Share of investments in expenditures of the commune (x10)

One-dimensional significance tests for y Sigma-restricted parameterization Effective hypotheses decomposition p 0.0004 0.4378 0.6944 0.2324 0.8016 0.8872 0.6214 0.4247 0.1330 0.0520 0.1986

Source: own elaboration (2013) A more detailed analysis of variables included in the regression model indicated that the x9 variable does not have to be considered a key variable. Using the regression trees method, a model was developed that presented the division of the studied communes into nodes (leaves) based on the value of indicators of individual infrastructural elements. The mean value, as well as variance for the per capita income, was calculated for each node. The entire sample (ID = 1) comprised 143 administrative units (N = 143). Mean per capita income in all studied communes was PLN 281.93. The sample was divided into five terminal nodes (leaves), i.e., the communes were divided into five groups (fig. 3). The first value that determined the inclusion of a given commune into its appropriate leaf was the indicator of the share of investments in the expenditures of the commune (x10); thus, the sample was divided into two basic groups according to income: [1] the first group (ID = 3) comprised nine communes in which the share of investments in their expenditures was x10 > 0.478548. The mean per capita income in these communes amounted to y  PLN 1,500.67 and was higher than the mean value for all 143 areas by almost PLN 679; 235


[2] the second group (ID = 2) comprised 134 communes in which the share of investments in their expenditures was x10 ≤ 0.478548 and the mean per capita income amounted to , which was considerably lower than the mean value for all 143 administrative units. These communes showed relatively high differences in y values (Var  PLN 213656.26). Due to high variance, communes in ID = 2 were divided one by one to create four terminal nodes of the tree: ID = 5, ID = 6, ID = 8, and ID = 9. Figure 3: Regression tree model for the levels of income per capita (y) in rural areas of Podkarpackie region

Source: own elaboration (2013)

236


The regression tree was divided according to four indicators that constitute infrastructure elements of the communes: share of population served with sewage treatment, length of water supply network in km per 1000 citizens, density of roads, and length of municipal gas supply network in km per 1000 citizens. That overthrows the hypothesis of the paper. Not only road infrastructure is important, but also basic one. The values for the terminal nodes indicate that the greatest mean per capita income occurred in the ID = 5 node, which comprised two communes. An interesting fact that can be noted based on the regression tree is that in these communes, one of the classifying indicators is low (x10), while another one (x4) is very high. This result can be considered an inversely proportional correlation. Summary The widely discussed importance of infrastructure for local development can be investigated using numerous available statistical methods. However, we need to bear in mind that we should not limit ourselves to only using a single method and generalizing it for all administrative units. This article presented the indirect effect of elements of local technical infrastructure on the values of per capita income in communes in Podkarpackie Province. Out of ten variables included in the two applied models, the most statistically important ones proved to be: a) the share of population served with sewage treatment, b) length of water supply network in km per 1000 citizens, c) density of roads, d) length of municipal gas supply network in km per 1000 citizens, and the share of investment in the expenditures of the commune (in the case of the linear model). Infrastructure elements may show either a proportional or inversely proportional correlation with the per capita income of a commune. Regardless of the quality of correlation, the two models presented above justified undertaking research on the effect of infra-structure on the income of communes and, by extension, on the potential for local development. Improving the quality of the road network in rural areas and expanding it determines access to education and the labour market. Developing the road network contributes to the improvement of conditions for conducting business activity by facilitating both sales and the acquisition of supplies. Therefore, density of roads is an important indicator from the view-point of the attractiveness of areas to investors. Infrastructure elements which contribute to the growth of communes income in indirect way, which is why investigation into the subject should not involve answering the question of whether infrastructure is important for the growth of income in administrative units, but rather, which infrastructural elements should be systematically resupplied and improved to ensure such growth. However, it has to be remembered that infrastructure is only one out of numerous groups of indicators which influence on communes income per capita. References Aschauer, D.A. (1989). Is public infrastructure productive? Journal of Monetary Economics 23, 177–200.

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Breiman, L. Friedman, J.H., Olsen, R.A., Stone, C.J. (1984). Classification and regression trees, Wadsworth & Brooks/Cole Advanced Books & Software, Monterey, CA 1984. Brelik, A. (2012), Sustainable tourism development – case of the Wolin region, Acta, Oeconomia 11 (2) 2012, pp. 19–27. Czudec, A. (2009). Ekonomiczne uwarunkowania rozwoju wielofunkcyjnego rolnictwa, Wyd. Uniwersytetu Rzeszowskiego, Rzeszów. Day, R.H., Zou, G., (1994). Infrastructure, restricted factor substitution and economic growth. Journal of Economic Behaviour and Organization 23, pp. 149–166. Duczkowska-Małysz, K., Duczkowska-Piasecka, M. (2009). Konkurencyjność i innowacyjność regionów przygranicznych. Nowe impulsy w zarządzaniu Podkarpaciem. Rozwój regionu Podkarpacia po akcesji Polski do Unii Europejskiej, Chojka J., Pakulska J. (Ed.), Wyd. WSE w Stalowej Woli, Stalowa Wola, pp. 57-88. Easterly, W.R. (1993). Endogenous growth in developing countries with government induced distortions. In: Corbo,V., Fisher, S.,Webb, S. (Ed), Adjustment Lending Revisited: Policies to Restore Growth. World Bank, pp. 160–176. Ferreira, P.C., Issler, J.V. (1995). Growth, increasing returns, and public infrastructure: time series evidence. Getulio Vargas Foundation, Mimeo, (paper presented at the Econometrics Society World Congress, Tokyo, August 1995). Gramlich, E.M. 1994. Infrastructure investment: a review essay. Journal of Economic Literature 32, pp. 1176–1196. Holtz-Eakin, D., Schwartz, A.E. (1994). Infrastructure in a structural model of economic growth. NBER Working Paper No. 4824. Nadiri, M.I., Mamuneas, T.P. (1994). The effects of public infrastructure and R&D capital on the cost structure and performance of US manufacturing industries. The Review of Economics and Statistics 76, pp. 22–37. Nowak-Brzezińska A. (2010). Drzewa klasyfikacyjne, Statystyczne metody analizy danych, maszynopis. Loh W., Shih Y. (1997). Split selection methods for classification Trees, Statistica Sinica nr 7, pp. 815-840. Lynde, C., Richmond, J. (1993). Public capital and long-run costs in UK manufacturing. The Economic Journal 103, pp. 880–893. Łabczyński M. (2005). Podejście regresyjne w budowie drzew klasyfikacyjnych CART, Zeszyty Naukowe Akademii Ekonomicznej w Krakowie Nr 680, Kraków, pp. 135-151. Ratajczak M. (2000), Infrastruktura a wzrost i rozwój gospodarczy, ruch prawniczy, ekonomiczny i socjologiczny Rok LXII — zeszyt 4 — 2000, 83-103. Smoleń, M. (2009). Procesy zmian rozwojowych w gospodarce regionu Podkarpacia. Difin, Warszawa. Stawicki, M. (2012). Factors of success in raising European funds by selected communes in the eastern part of Poland, Acta, Oeconomia 11 (2) 2012, 67–74.

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SECTION: QUALITY OF LIFE

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IMPROVING THE QUALITY OF LIFE FOR LOCAL COMMUNITIES: PARTICIPATORY APPROACH Nina IVASHINENKO Lobachevsky State University of N.Novgorod University of Glasgow [email protected]; [email protected] Abstract. This paper represents employing the participatory approach for improving the quality of life for the local community based on the example of a small Russian town. Research was carried out by an international collective: Economic Sociology Chair NNGU; ISEPN RAN; Universities of Glasgow and Uppsala. The received material allows us to argue that the adaptation and employment of participatory technologies in the practice development of interaction between local society, authorities and other stakeholders could be effectively used for solving problems of the local community. Keywords: participatory approach, social interaction in solving problems of the population JEL classification: I32; I38

Introduction Rapid changes taking place in the society, because the emergence of new challenges related to changes in the relationship between the population and the government and public structures. In fact, people acquire a new quality, the ability to form new social networks, network structures that exist quite independently of the existing institutions. New social structures mostly depend on the local situation. As the development of the socio- political situation in the post-Soviet space shows, the sources of new structures are often the social conflicts, anger and dissatisfaction with various aspects of management. These new practices of instant people’s integration into networks and their successfulness, in turn, causes the creation of new superstructure formations which can actively influence such institutions as government structures of different levels. To manage such situations requires update and adequate knowledge of potential sources of conflict as well as ways of positive integration. Historically, negative integration is more spontaneous, whereas for the positive one needs special efforts to construct it. The first step here is to change the attitude to the information on the population’s quality of life. Under the conception of the information society there’s a long time discussion reflected by business management, while there is a noticeable lag in case of social management (Castells, 2004). Socio-political decisions are often based on out-of-date information gathered in different economic and political situation. Second, new networks connecting people, at times grow up in local places far from concentration of power resources. To understand what is happening is necessary to revise the traditional methods of study, both at the level of territories, social groups, and individuals, and to meet a new scientific challenge. Economic approach to social management, using indicators of economic growth and income per capita as the main indicators of development of territories, is displacing now with the understanding of the mutual relationship of material and subjective indicators (Lokosov, 2009). Social management, defined today as activities aiming the development of social and human resources of 240


the territories, needs new methods for evaluation of its effectiveness. Simple distribution function of local budgets, redirecting financial flows from production sphere into non-productive one, becomes clearly insufficient to achieve sustainable development of territories (Stiglitz, Sen & Fitoussi, 2009). No doubt, state funding continues to be the basis of functioning social sphere. However, population’s assessment of level and quality of life become more important indicators of territories’ development and the effectiveness of government and administration. It’s important not only to attract financial and other resources, but also to take into account what is improving the quality of life for the local communities. So effectiveness of social management is to be measured not by the amount of funds distributed and implemented to social services, but by the creation of institutional conditions for the implementation of the population’s needs in self-development (Sen, 1985). The sustained growth of territories is determined by the proportion of the population aware of their needs for self-development and capable to realize itself in the institutional space. Participatory approach Participation became part of mainstream policy discourse and practice in the field of International development in the 1980s and 90s when it was strongly promoted by the World Bank and other key institutional players (Hickey & Mohan, 2004: 5-9). Almost simultaneously it also became popular as ‘community consultation and engagement’ in approaches to poverty reduction and urban regeneration in ‘first world’ contexts such as Great Britain, Australia and the United States (Power, 1996; Goode & Maskovsky, 2001). In either guise and in a range of contexts, the proclaimed goals of participation have been to enhance the empowerment and facilitate the transformative potential of marginalised people (Hickey & Mohan, 2004: 3). It has been suggested that participatory approaches are better suited to engage with ‘real needs’ and to develop context specific solutions which poor people themselves could take part in at all stages. Yet in the early 2000s strong criticisms emerged warning of a ‘tyranny of participation’ in International Development (Cooke & Kathari, 2001). It was argued that policies and projects claiming to empower the poor and allow their voices to be heard might in fact simply facilitate ‘the illegitimate and/or unjust exercise of power’ (Cooke & Kothari 2001: 4), or reinforce existing hierarchies and exclusions (Mosse, 2001: 17). Moreover, it has been argued that participation might act as a mechanism for handing down those problems, which states are unable or unwilling to resolve, impoverished communities, without the injection of sufficient resources and political support (Goode & Maskovsky, 2001: 20). Nonetheless, in the context of widespread welfare retrenchment the political commitment to participation remains (Taylor, 2007:298) and has been exported in policy advice to many of the countries which once formed part of the state-socialist bloc. This persistent reality has led some scholars to call for the development of a more nuanced approach to understanding both the potential and the pitfalls of participation. In their response to Cooke and Kothari’s earlier work on ‘tyranny’. Hickey and Mohan argue for more detailed, empirical and theoretical engagement with and analysis of participation in specific contexts rather than generalised stances ‘for’ or ‘against’ (Hickey & Mohan, 2004: 4). Participation itself has been subject to deeper scrutiny and a range of forms of participation with their own potentials and limitations have been identified. Cornwall for example, discusses participation, ‘less as a singular, coherent, set of ideas or prescriptions as a configuration of strategies and practices on constantly shifting ground’ (2004: 81). She reminds us that spaces of participation can range from those ‘claimed’ or created by movements from below, into those 241


which are produced through established mechanisms of power, into which various actors and groups may be ‘invited’, or not (ibid.). Power’s work on social disadvantage in the UK stresses that initiatives are usually experimental, draw on existing organisations and networks, but require significant and consistent support in order to be successful. She suggests that a ‘patchwork approach based on bottom-up experiments and services’ is required (Power, 1996: 1560). Whilst work of this kind continues to negate over-idealistic claims it does so by shifting the focus of analysis away from any expectation of ‘pure’ participation or idealisation of ‘community’ (Taylor 2007: 300) to one which acknowledges participation as always imperfect, partial and contested, but nonetheless seeks to understand and appraise its transformative potential in a range of contexts and for the diverse actors involved (Taylor, 2007; Power, 1996; Tippett et al., 2007). In the empirical argument which follows, we make no claims to the emergence of an all-inclusive or perfect participatory mechanism, but rather seek to understand for whom which areas of potential exist. Public and academic debates about the advantages and disadvantages of the participatory approach reflect the moving cycle of attitudes towards this concept, from raised expectations to negotiation. The participatory approach, which was created as a result of the interrelation between the macro transformation of the democratic idea and reform of society on a micro level, one where learners are involved in learning processes, at present has many applications and academic scholarship employs various interpretations (Kapoor& Jordan, 2009). In spite of criticism of the participatory approach, it is generally recognized that modern social technologies. An example is Renfrewshire Council, which is one of 32 Councils in Scotland. The 2013 population for Renfrewshire is about 173,900 (NRS, 2014). The 2010 population of working age was 63%, children under 18 year – 17%, pensioners – 20%. Of the working population 47% are in employment, including full time workers – 71.6% and part time workers – 28.4%, 4.9% receive job seeker allowance. Despite a higher level of third sector activity, compared with post soviet countries, the problems of involving the population in the implementation of local community improvement strategies remains actual. In 2011 Renfrewshire Community Planning Partnership begun to use Ketso for gathering input into their future action plans. Renfrewshire’s Annual Community Planning Conference gives residents a voice in the Council’s future activities. The 10th Annual Conference in Sept. 2011 attracted 458 individuals, community groups and charitable organisations. “Evidence drawn from written submissions to the Commission, public discussion events and stakeholder meetings, demonstrates that some new approaches –characterised by collaboration between organisations and partnerships with people and communities – are making a real difference and can provide positive models for the future. The priorities we identified include:  Recognising that effective services must be designed with and for people and communities – not delivered ‘top down’ for administrative convenience  Maximising scarce resources by utilising all available resources from the public, private and third sectors, individuals, groups and communities  Working closely with individuals and communities to understand their needs, maximise talents and resources, support self reliance, and build resilience 

Concentrating the efforts of all services on delivering integrated services that deliver results



Prioritising preventative measures to reduce demand and lessen inequalities 242


 Identifying and targeting the underlying causes of inter-generational deprivation and low aspiration  Driving continuing reform across all public services based on outcomes, improved performance and cost reduction  Implementing better long-term strategic planning, including greater transparency around major budget decisions like universal entitlements” (Commission On The Future Delivery Of Public Services) The participatory approach could address several complex issues, such as; organizing intercommunication, the overlapping education of official bodies and social security service clients, making decisions and their subsequent implementation which could force citizens to use their own potential and resources for improving the quality of their life and assume a shared responsibility for these decisions (Satre, Ivashinenko & Teodorovich, 2010). However, a participatory approach does not propose that governmental responsibility be redirected so that socially vulnerable groups take more responsibility and their commitments increase. At present, community consultations do not have the status of compulsory requests to direct state social policy. One of the significant preconditions for the implementation of participatory interactions is that all stakeholders have the relevant features and attitudes to starting work which are oriented towards increasing the social security of the whole population. Methodology of research project An investigation into the potential of employing participatory approaches for improving the quality of social life was conducted within a complex international research programme 24. The main research questions were:  How can the level of quality of life in local community combining objective and subjective indicators be measured? 

Is the participatory approach appropriate for understanding the life quality?

 Can the participatory technologies be implemented in community life for solving some problems of improvement of social cooperation? The term ‘local community’ is widely employed in Western research practice but rarely defined in Post-soviet society as an academic definition. For the purpose of our study we choose a small Russian town for two reasons. First of all, according to the National statistics, Russian towns with a population less than 50,000, are in a risk zone because 29% of poor people live in these areas.

24

Research is carried out by an international collective including Economic Sociology Chair Nizhni Novgorod State University (Prof. Nina Ivashinenko, Dr. Michael Teodorovich, PhD Candidate Alla Varyzgina, PhD Alexander Soldatkin, Mres student Margarita Lobanova); Research Centre for Social Systems (PhD Dmitry Strelkov); Institute of social-economic problem of population the Russian Academy of Sciences, Moscow, (Natalya Rimashevskaya, Ludmila Migranova, Lidiya Prpkof’eva, Irina Korchagina); University of Glasgow (Prof. Rebecca Kay); University of Uppsala (Associate professor Ann-Mari Satre)

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Second, these places have more dense social networks than bigger cities (Shanin, 2002), that provides better conditions for participatory actions. As a field site the small Russian town Pavlovo located in Nizegorodskaya region was chosen. Compared with the social-demographic structure of other Russian towns, Pavlovo can be classified as a typical small town that allows one to extrapolate these research results to other Russian towns officially designated ‘small’. For the purposes of the investigation a mix of methods was used including:  household surveys involving 500 families with the sample chosen to represent the general structure of the Pavlovo population;  17 open-ended semi-structured 'expert' interviews with: professionals involved in welfare policy implementation and provision, the leaders of local NGOs and advocacy groups, and local entrepreneurs involved in 'socially responsible business' programmes  18 ethnographic interviews with families experiencing poverty  participant observation - researchers attended regular activities and events organised by a range of state and non-state support structures, NGOs and advocacy groups working on poverty issues in the town  In addition, one participatory consultation event was organised bringing together a range of stakeholders from policy makers, social service professionals, current and former welfare recipients etc. This workshop was facilitated using Ketso. The choice of a mixed methodological approach with quantitates and qualitative methods are based on the understanding of the complicated nature of participatory action involving different social groups. The social nature of the research subject requires a set of methods which allows analyses of measuring the quality of life, as a reflective and negotiating process. This article is focused on one aspect of participatory technology called KETSO. The full results of this project can be found in ‘Participatory approach in improving the life quality of population’ (Rimashevskaya & Ivashinenko, 2013). Organisation of public consultations: KETSO Participatory techniques seem to provide the best way of involving people in the decision-making processes that influence their lives. A participatory approach is based on the assumption that members of a local community should be involved in the solution of significant problems, which should be fixed with consideration of their interests (Greenwood & Levin, 2007). The participatory approach is used for community development and a wide range of problems, from ecological issues to poverty reduction and increasing life quality. KETSO is one example of such techniques which has developed the principles of Design Ways, created for the organization of communication between professionals and locals (Neighbourhood Initiative Foundation, 2003), and also the methodology “Future Search”, widely employed for strategic planning (Tippett, Handley, & Ravetz 2007). The main target of these methodologies is to create conditions which allow for group decisions where every member contributes equally to the efforts to form a new idea. KETSO employs a metaphor about trees, which organize group thinking. The tree has a branch which is associated 244


with the direction of the discussion (Weisbord et. all). At first, every participant makes their own decision then writes it on the leaves and afterwards shows other people and discusses with them. All ideas and thoughts are collected in a common picture, which allows coordinated group thinking and enriches the participants with new ideas. The discussion involves several teams each of which has the possibility to compare their points of view with others and to exchange successful ideas. Ranking of the ideas given provides the basis for group and intergroup discussion. During the research project in Pavlovo, two community consultations using KETSO were conducted with people and experts who represented various social organizations. The role of community consultation in creating a participatory process During the process of doing in-depth interviews, it was revealed that those organizations which provide social services for the population do not effectively interact due to interdepartmental barriers. The levels of governmental hierarchy build a lot of barriers, which are usually overcome by employing the personal networks and relationships between civil servants from different departments. The organization of consultations for the community on the problem of improving the quality of life in Pavlovo was an attempt to bring together different specialists who represented a wide range of official bodies. Initial analysis of the interviews revealed the following primary topics for discussion: human resources, financial resources, projects/initiatives and structures. During group discussions, the theme of spirituality and culture was raised. Given this fact, it can be argued that social security is a complex phenomenon which is also linked to values. During the discussion, governmental discourse dominated the debate about activities of structures that affect the life quality of the population. The main critics and global purposes of poverty reduction have concentrated around this topic. In spite of the fact that in individual interviews financial issues were very popular, in group sessions these aspects did not provoke special discussion because it was perceived as obvious and did not need comments. Most discussion occurred around topics about initiatives and projects. Participants in group discussions revealed what kinds of things were associated with this direction. As a result of that, the first group started with an idea about a federal programme that supports small mono towns, then followed to an idea about the necessity of improving town infrastructure. Instead of that, the second group paid more attention to existing local initiatives, such as school clubs for funny and quick-witted students. Both groups formed very similar ideas about improving town life. In addition, the second group noted the necessity of collaboration between the state and the general population in the decision-making process Two overlapping group discussions showed how the process of knowledge exchange takes place. The representatives of official bodies have more deep and detailed information about different structures. Hence, they have more ability to structure current resources. In spite of that, the representatives of NGOs, schools, medical services and enterprises were less concerned about the possibility of the implementation of their ideas and paid more attention to new ideas and initiatives. After the group discussions these ideas were submitted by civil servants who preferred to transform creative views into pragmatic measures.

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After the common sessions, participants exchanged not only information but also social resources. The representatives of NGOs felt that they could be heard by the official bodies and receive positive feedback for their initiatives. In spite of that, representatives of the official bodies also received social approval and understanding of the necessity and demands of their work instead of the traditional criticism that is directed at civil servants’ work. Conclusion Full participation of the active groups in decision-making and the process of implementing their ideas is an important condition for effective social change. The participatory approach could be especially fruitful for making and implementing decisions with reference to integration of local community and could stimulate a synergetic effect by involving people in the process of improving their life quality. It is essential that many forms of participation, such as decisions at micro levels, cannot be copied automatically. However using the recommended scenario it is possible to transfer from one group to another as a model. The organization of community consultations employing a participatory approach could be the first stage in starting an interacting project between the state and communities, which is directed towards increasing the population’s quality of life. The implementation of these social technologies requires further investigation and a review of the practices, which will allow the advantages and disadvantages of participatory approaches for life quality improvement to be revealed. References Castells, M (2004). The Power of Identity, The Information Age: Economy, Society and Culture, Vol. II. Malden, MA; Oxford, UK: Blackwell Commission On The Future Delivery Of Public Services. www. publicservicescommission.org access Cooke, B., & Kothari, U. (2001). The case for participation as tyranny. In B. Cooke & U. Kothari (Eds.), Participation: The new tyranny? (pp. 1-15). London: Zed Books Cornwall, A. (2004) ‘Spaces for transformation? Reflections on issues of power and difference in participation in development’, in S. Hickey and G. Mohan (Eds.) Participation: From Tyranny to Transformation?, London and New York: Zed Books. Greenwood, D. J. and Levin, M. (2007) Introduction to action research: social research for social change, Thousand Oaks, CA.; London: SAGE Publications Goode, J. and Maskovsky, J. (2001) The New Poverty Studies: The Ethnography of Power, Politics and Impoverished People in the United States, New York and London: New York University Press. Hickey, S. and Mohan, G. (Eds) (2004) Participation: From Tyranny to Transformation? - Exploring New Approaches to Participation in Development, London: Zed Books. Kapoor, D. and Jordan, S. (eds) (2009) Education, participatory action research and social change: international perspectives, New York, NY: Palgrave Macmillan

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Lokosov V. In Prospects of scientific activity of ISEPN RAN://Narodonaselenie No. 1 (59) – 2013 (January – March) Mosse, D. (2001) “People’s knowledge”, participation and patronage: Operations and representations in rural development’, in B. Cooke and U. Kothari (Eds) Participation the New Tyrany? London: Zed Books. National Records of Scotland (2014) Renfrewshire Council Area - Demographic Factsheet. Retrieved October 30, 2014 from http://www.gro-scotland.gov.uk/files2/stats/council-area-data-sheets/renfrewshirefactsheet.pdf Neighbourhood Initiative Foundation (2003) Planning for Real. Accessed: October 13, 2003. /http://www.nifonline.org.uk/S. Power, A. (1996) ‘Area-based Poverty and Resident Empowerment’, Urban Studies, 33 (9), pp. 1535-1564. Taylor, M. (2007) ‘Community Participation in the Real World: Opportunities and Pitfalls in New Governance Spaces’, Urban Studies, 44 (2) 297-317 Tippett, J., Handley, J.F. and Ravetz, J., (2007) Meeting the challenges of sustainable development—A conceptual appraisal of a new methodology for participatory ecological planning’, Progress in Planning, 67 (2–98) Rimashevskaya N.M., Ivashinenko N.N. (eds.) Participatory approach in improving the life quality of population. Monograph. Publishing house Lobachevsky State University of N.Novgorod, 2013, pp. 268 Retrieved October 30, 2014 from http://www.isesp-ras.ru/publications/monograph/ Sen, Amartya K. (1985), Commodities and Capabilities, Oxford: Elsevier Science Publishers Stiglitz, J. E., Sen, A., & Fitoussi, J.-P. (2009). Report by the Commission on the Measurement of Economic Performance and Social Progress . http://www.stiglitz-sen-fi toussi.fr/en/index.htm. Sätre А.M., Ivashinenko N & Teodorovich, M. (2010) New Groups of Poor and Prospects for Using a Participatory Approach as a Strategy for Poverty Reduction in Russia // CBEES’ Working paper 2:2012 ISBN: 978-91-980920-1-1 Retrieved October 30, 2014 from http://webappl.web.sh.se/p3/ext/content.nsf/aget?openagent&key=about_us_1301902860317#!/p3/ext/con tent.nsf/aget?openagent&key=list_of_cbees_working_papers_1349686825440 Shanin T. (2002) ‘The Common Law of Russia’s Peasants Communities’, in. T. Zaslavskaya (Ed.) Kuda idet Rossiya? Formalnie instituty I realnye practiki, Мoscow: МVSHSEN. Weisbord, M. R. & 35 contributing authors. (1993) Discovering Common Ground: How Future Search Conferences Bring People Together to Achieve Breakthrough Innovation, Empowerment, Shared Vision, and Collaborative Action. Berrett-Koehler, San Francisco

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THE ECOVILLAGE EXPERIENCE AS AN EVIDENCE BASE FOR NATIONAL WELLBEING STRATEGIES Robert HALL Global Ecovillage Network E-mail: [email protected] Abstract. The provision of wellbeing to its inhabitants should be the obvious aim of a democratic society. Overarching policy objectives for national wellbeing are currently being developed by national governments replacing the growing consensus of the failure of the still predominant policy objective of economic growth. Maximising the quality of people's lives, their happiness or subjective wellbeing has however been the conscious strategy of ecovillages, in some cases these strategies and associated practices have evolved based on community dialogue and participatory decision-making. With up to a half-century of experience, ecovillages have evidence-based cross-sectoral governance that can be utilised to benefit the wider society. Due to their set-up, ecovillages have been shown to contribute higher wellbeing than other communities. Ecovillages are designed as high wellbeing places with consideration taken for a pleasant working and living environment, social cohesion, promoted physical activity, reliance on sustainable transport. As built, human, natural, and social capital are important factors explaining subjective wellbeing, ecovillages have been able to develop optimal reallocation of resources to achieve aims. Ecovillages can reduce material and energy throughput and produce higher wellbeing. In order to facilitate needed research on appropriate government policy for delivering high national wellbeing this paper attempts to illuminate some of the common policies and practices of ecovillages which have allowed them to succeed in this endeavour. Further research suggested can enable telescoping the process of achieving higher wellbeing and sustainable development of the wider society. Keywords: (wellbeing, ecovillages, quality of life, happiness, sustainable development) JEL classification: D63; I3; O35; Q01; Q56

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ECONOMIC DEVELOPMENT SOCIAL POLICY AND QUALITY OF LIFE: ANECESSARY ENGAGEMENT FOR A LIVABLE FUTURE Robert BIJL The Netherlands Institute for SocialResearch The Hague, The Netherlands E-mail: [email protected] Abstract. This presentation is about quality of life, not only from the perspective of being a potential indicator of economic development or success, but also as a condition to economic development. Economic development can improve QoL or make it worse, and the level of QoL in a society may influence the economic potential of that society. There is a lot of literature showing that economic prosperity is related to QoL, but that is not sufficient explanation. Other conditions also contribute to QoL. And they explain why countries with apparently similar economic development might have very different levels of QoL. Governments can play ancrucial rol in improving QoL and happiness, in a sense that they can organize favourable conditions for individuals and groups of citizen sto make their lives better. QoL is a goal in itself for citizens, but also beneficial for social and economic development. There is a broad range of evidence showing the people who are emotionally happier, who have more satisfying lives, and who live in happier communities, are more likely both now and later to be healthy, productive, and socially connected. These benefits in turn flow more broadly to their families, workplaces and communities, to the advantage of all. Keywords: quality of life, social policy, happiness, sustainability JEL classification: I 31

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ECOLOGICALLY SUSTAINABLE LIFE QUALITY AS INDICATOR OF ECONOMIC POLICY EFFECTIVENESS? Simon ELSBORG NYGAARD Psychology, Aarhus Uni., Denmark E-mail: [email protected] Abstract. In Denmark there is a high degree of subjective wellbeing, which can be seen as a positive indicator of life quality. Unfortunately, there is at the same time a use of natural resources, which is not ecologically sustainable. If everyone lived like and average Dane, we would globally need 4 planets earth´s to support our lifestyle. Globally we now use natural resources corresponding to a use of 1,5 earth. If not changed, this level of resource use can affect subjective well-being negatively. A measure of subjective wellbeing should therefore be put in a frame of ecological sustainability. Humans need to find out, how to combine a high degree of subjective wellbeing with ecologically sustainable lifestyle. This could be an indicator of economic policy effectiveness. The purpose of the study is to identify a group of people who simultaneously have a high degree of sustainable behavior and a high degree of subjective well-being and to evaluate cognitive, behavioral, and emotional characteristics of this group. The results reported here are only a part of the overall study, analyses are still ongoing. This study used a test design utilizing a heterogeneous sample of 1225 Danish adults. Subjective wellbeing was measured as life satisfaction and happiness on a scale from 1-10 (1 item for Happiness, and 1 item for Life Satisfaction evaluation, inspired by Gundelach, 2008, European Values Study). Sustainable behavior was measured as positive environmental behavior or activities with 21 items on areas of recycling, purchasing environmentally-friendly products, educating oneself and sharing information (inspired by Brown and Kasser, 2005; Green-Demers et al, 1997) and participating in organizations or social activities to foster sustainability. The sustainable well-being group was defined as participants who reported above the 80 percentile in both subjective well-being and sustainable behavior. As experiencing meaningfulness is associated with subjective wellbeing, it was hypothesized, that experiencing sustainability as meaningful would be associated with both high subjective wellbeing and a high degree of sustainable behavior. Therefore, a 1-item questionnaire ranging from 1-9 inspired by Authentic Happiness theory and Meaning in Life Questionnaire (Seligman, 2004; Steger et al, 2006) was developed. Ninety-six participants were identified as belonging to the sustainable wellbeing group. Independent T-tests showed that the sustainable wellbeing group reported a significantly (p < 0.000) higher degree of experiencing meaningfulness by promoting sustainability (M = 8.5417) compared to the rest of the group (M = 6.9973). From the findings it can be concluded, that it is possible to have a high degree of sustainable behavior and at the same time a high degree of subjective wellbeing. Secondly, the results have demonstrated that a high degree of sustainable wellbeing is associated with finding sustainability promoting behavior significantly more meaningful. Therefore, if we want to develop a measure of life quality and include subjective wellbeing in a sustainability framework, working with experiencing of meaningfulness from promoting sustainability could possibly contribute to sustainable wellbeing. However, the sample is not representative of the Danish or global population. The research does not indicate causality. Keywords: sustainable well-being, sustainability, wellbeing. JEL classification: I 31

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PROMOTING INNOVATION IN THE SERVICES SECTOR: DECISIONS AND POSSIBILITIES Peggy SCHYNS The Netherlands Institute for SocialResearch The Hague, The Netherlands E-mail: [email protected] Abstract. This presentation addresses what quality of life is and which dimensions can be distinguished. Next, a description is given of how it has been measured in the Netherlands over the past decades and in Amsterdam since 2002. Moreover, a selection of Dutch and Amsterdam results is presented, including GISapplications to show the results graphically. Finally, in the discussion issues are raised such as the multidimensionality of the concept of quality of life, the multimode measurement of the phenomenon, the lack of sustainability indicators within indices, and problems with policy relevance of some quality of life indices. Keywords: quality of life, dimensions, measurement JEL classification: NOT APPLICABLE E31; D86

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PSYCHOLOGICAL CAPITAL Aistė DIRŽYTĖ Mykolas Romeris University E-mail: [email protected] Abstract. Various surveys indicate that for the last two decades Lithuania has been among the countries demonstrating the highest rates of unhappiness and suicides in the World. Lithuanians’ cognitions towards life as well as suicidal ideation, which are the primary markers for future suicidal behavior, have not been explored thoroughly. Based on the theory building and research to date on F. Luthans’ concept of Psychological Capital and the related constructs, the research aimed at analyzing relationship between Psychological Capital and psychological wellbeing of Lithuanian population. It was hypothesized that (1) there is a statistically significant relationship between Psychological Capital and psychological wellbeing in Lithuanian population, and (2) Psychological Capital is positively related to positive emotions, and is negatively related to negative emotions, and (3) Psychological Capital is positively related to positive life perceptions, and negatively related to suicidal ideation. This study used a test design utilizing a heterogeneous random sample of 1002 persons representing Lithuanian population. This research was funded by the European Social Fund under the Global Grant measure (No. VP1-3.1-ŠMM-07-K-03-032). The measures used in this study included: 1) The Satisfaction with Life Scale (to assess psychological wellbeing; Diener, Emmons, et al., 1985); 2) Psychological Capital or PsyCap Scale (to assess positive psychological capital, Luthans et al., 2007). 3) Positive, Negative and Suicidal risk related states scale. All the scales demonstrated acceptable reliability in this study. The present study confirmed all the hypotheses and revealed various relations between Lithuanians’ psychological capital, wellbeing, attitudes towards life, emotional states, and suicidal ideation. The results demonstrated statistically significant strong relationship between PsyCap and subjective wellbeing (r=.577, p