Happiness in transition: the case of Kyrgyzstan

We analyse self-reported measures of satisfaction with life in a transition country, Kyrgyzstan, using 1993 household survey data. We test whether higher levels of satisfaction are associated with greater economic well-being. This hypothesis is strongly supported by the data. Unhappiness is prevalent among older people, the unemployed, and those who are divorced. There appears to be little correlation between happiness and either gender or education level. We find some evidence that income relativities, as measured by perceived position on the wealth ladder, also have a strong effect on life satisfaction

Earnings Inequality and the Informal Economy: Evidence from Serbia

We analyse the extent and evolution of informality and inequality in the Serbian labour market between 2002 and 2007, using data from the Living Standard Measurement Surveys (LSMS). Two surprising results emerge. First, the level of informal employment has risen significantly over the period, despite strong economic growth and the introduction of a range of market-oriented reforms. Second, the level of inequality in earnings seems to have remained more or less constant over the period, in contrast to the experience of other countries at a similar stage of transition. We show that informal employees earn significantly less than those in the formal sector, controlling for a range of other variables, and informality plays an increasingly important role in explaining earnings inequality.informal economy; inequality; Serbia

Happiness in Transition: The Case of Kyrgyzstan

We analyse self-reported measures of satisfaction with life in a transition country, Kyrgyzstan, using 1993 household survey data. We test whether higher levels of satisfaction are associated with greater economic well-being. This hypothesis is strongly supported by the data. Unhappiness is prevalent among older people, the unemployed, and those who are divorced. There appears to be little correlation between happiness and either gender or education level. We find some evidence that income relativities, as measured by perceived position on the wealth ladder, also have a strong effect on life satisfaction.Happiness, Kyrgyzstan, transition, welfare

Wages, profits and rent-sharing

The paper suggests a new test for rent-sharing in the U.S. labor market. Using an unbalanced panel from the manufacturing sector, it shows that a rise in a sector's profitability leads after some years to an increase in the long-run level of wages in that sector. The paper controls for workers' characteristics, for industry fixed-effects, and for unionism. Lester's range of wages is estimated, for rent-sharing reasons alone, at approximately 24 per cent of the mean wage

In memoriam Chris (Krsto) Cviić (1930-2010) - Remaking the Balkans

Chris (Krsto) Cviić (1930-2010) had a long and distinguished career as a writer, broadcaster, journalist and political adviser. Born in Croatia in 1930, Chris came to the UK in 1954 to work for the BBC, initially in the Yugoslav language section. He joined The Economist in 1969 and served as their correspondent for central and south-eastern Europe for 21 years. He also edited The World Today, the journal of the Royal Institute for International Affairs (Chatham House) from the mid-1980s until 1995. In 1999, Chris joined the EBRD as a Senior Political Counsellor for central Europe, the Baltic states and south-eastern Europe. Following his retirement from the EBRD in 2007, he published regular articles in various media outlets in Croatia and also served on an advisory council for the Croatian President, Ivo Josipović. Chris authored two books in English on the Balkans: Remaking the Balkans, published in 1991, and In Search of the Balkan Recovery: the Political and Economic Re-emergence of South-Eastern Europe (co-authored with Peter Sanfey), published in 2010. He was awarded an OBE in 2001 for his work on promoting democracy in central and eastern Europe

Private Sector and Labour Market Developments in Albania: Formal versus Informal

This paper examines the structure of the formal and informal sectors in Albania. The paper outlines the size and development of the formal private sector in Albania, and assesses the obstacles faced by businesses, especially in the SME sector, and how these have changed in recent years. Although the business climate appears to have improved since 1999, Albanian enterprises still face a variety of difficulties, which act as an inducement to operate in the informal sector instead. We attempt to estimate the size of the informal sector, using a variety of methods. None of them provides a very reliable method of estimation, but the results confirm previous work that shows that the informal sector accounts for between 30 and 60 per cent of official GDP. We also show that there is a significant gap between registered unemployment and the number of unemployed based on labour force surveys. Part of this gap is due to large-scale emigration flows.

Wages, Profits and Rent-Sharing

The paper uses CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, Using an unbalanced panel from the manufacturing sector, and random-effects and fixed-effects specifications, the paper finds that changes in wages are explained by movements in lagged levels of profitability and unemployment. The results appear to be consistent with rent-sharing theory (or a labor contract framework with risk-averse firms) and to be inconsistent with the competitive labor market model. The paper estimates the unemployment elasticity of pay at approximately -0.03, and the profit elasticity of pay at between 0.02 and 0.05.

European Transition at Twenty

This study gauges the status of transition in the formerly centrally planned economies of Eastern Europe and Central Asia, using a broad approach that compares countries with respect to their business environment, competition, and managerial practices; and assesses transition progress at the level of 13 economic sectors. The largest transition gaps remain in Central Asia and some Eastern European and Western Balkans countries. However, significant reform needs also remain in some Central European and Baltic countries, particularly in energy efficiency, transport, and in the financial sector where regulatory regimes require strengthening and local capital markets need to be developed.transition, economic reform, managerial practices, competition, business environment

Group-based biases influence learning about individual trustworthiness

People often have generalised expectations of trustworthiness about ingroup and outgroup members, based on previous direct and indirect experience with these groups. How do these prior biases interact with new experiences when learning about individual group members’ trustworthiness? These three studies are the first to examine the effect of group-level biases on learning about individuals’ trustworthiness. Participants from the Netherlands and the United Kingdom played iterated Trust Games with trustworthy and untrustworthy members of both ingroups and outgroups. We show that the influence of group membership on trust decisions depended on the valence of the interactions with individual group members. When interacting with trustworthy partners, people displayed outgroup favouritism throughout the game, investing higher in outgroup members than ingroup members. However, for untrustworthy partners, initial outgroup favouritism disappeared, and ingroup and outgroup members were equally distrusted by the end of the game. Our work suggests that when individual experience is integrated with group-based biases, group membership influences trust decisions over time, but mostly when experiences are positive. These findings are discussed in relation to complexity-extremity theory and previous work on learning in the Trust Game

Individual differences in decision making: Drive and reward responsiveness affect strategic bargaining in economic games

BACKGROUND: In the growing body of literature on economic decision making, the main focus has typically been on explaining aggregate behavior, with little interest in individual differences despite considerable between-subject variability in decision responses. In this study, we were interested in asking to what degree individual differences in fundamental psychological processes can mediate economic decision-making behavior. METHODS: Specifically, we studied a personality dimension that may influence economic decision-making, the Behavioral Activation System, (BAS) which is composed of three components: Reward Responsiveness, Drive, and Fun Seeking. In order to assess economic decision making, we utilized two commonly-used tasks, the Ultimatum Game and Dictator Game. Individual differences in BAS were measured by completion of the BIS/BAS Scales, and correlations between the BAS scales and monetary offers made in the two tasks were computed. RESULTS: We found that higher scores on BAS Drive and on BAS Reward Responsiveness were associated with a pattern of higher offers on the Ultimatum Game, lower offers on the Dictator Game, and a correspondingly larger discrepancy between Ultimatum Game and Dictator Game offers. CONCLUSION: These findings are consistent with an interpretation that high scores on Drive and Reward Responsiveness are associated with a strategy that first seeks to maximize the likelihood of reward, and then to maximize the amount of reward. More generally, these results suggest that there are additional factors other than empathy, fairness and selfishness that contribute to strategic decision-making