Project: FREE policy brief
Changes in Oil Price and Economic Impacts
Authors: Chloé Le Coq and Zorica Trkulja, SITE.
Oil has for decades been perceived as a necessary and highly addictive energy commodity, fueling the world economy. It is a crucial input good for most of the net-oil consumer countries, and it is an important source of revenue for the net-oil supplier countries. This means that any changes in the oil price will affect the entire world economy. However, the extent to which the oil-price fluctuations matter for the economy depends on the perspective (e.g. whether it is that of the macro economy, international trade, firm strategies, or the climate economy). In this policy brief, we outline the answers to this question that were provided at the 9th SITE Energy Day, held at the Stockholm School of Economics on November 5, 2015.
Is War Good for a Country’s Political Institutions?
Author: Tom Coupe, KSE.
Recent research suggests that experiencing war violence might make people more likely to turn out during elections. Using data from the conflict in Eastern Ukraine, we show, however, that people who were injured or had close friends or relatives killed or injured were less likely to turn out at the 2014 parliamentary elections. We also show that the impact of violence on turn out and political views depends on the type of violence one experienced.
Does Social Media Promote Protests?
Author: Ruben Enikolopov, CEFIR.
Despite a lot of speculations about the role of social media in recent political protests throughout the world, there is still no persuasive empirical evidence to support these claims. We fill this gap by providing evidence that social media indeed played an important role in promoting political protests in Russia in 2011-2012. Using data on the dominant Russian online social network, VKontakte, we show that higher penetration of the social network across cities increased the likelihood of protest occurrence and the number of participants in these protests. Additional evidence suggests that reducing the costs of coordination is a mechanism behind social media influence.
Latvia Stumbling Towards Progressive Income Taxation
The 2016 budget includes measures aimed at increasing the progressivity of the Latvian income tax system. In this brief we report some exercise on the impact of these measures using the Latvian EUROMOD tax-benefit microsimulation model. We show that by their design, the reforms are aimed at a reduction in income inequality and an increase in the progressivity of the tax system. However, there are risks that the behavioural response of the tax payers will subvert the intended impact of the reforms.
Ever since it was introduced in 1994 the Latvian personal income tax has been applied at a flat rate, albeit varying over time, mitigated only by a small untaxed personal allowance. Partly as a result of this, the Latvian tax-benefit system redistributes less original income than most other EU countries. Is this all about to change? The 2016 budget currently being debated in the Parliament contains two proposals aimed at introducing more progressivity in the personal income tax. These are the introduction of a “solidarity tax” aimed at high earners and the introduction of an earnings differentiated non-taxable allowance. The stated aims of these measures are to reduce inequality and help low wage-earners.
Description of the Reforms
Solidarity Tax
The solidarity tax foresees that income above 48,600 EUR per year will be taxed at a rate of 10.5% (employee’s part), plus 23.59% (employer’s part). The new tax will affect a very small share of wage earners. According to Finance ministry’s estimate, this tax will affect 4.7 thousand persons, whose income in 2015 exceeded this threshold, or 0.59% of all employed individuals (Finance Ministry, 2015).
Differentiated Non-Taxable Personal Allowance
The differentiated non-taxable personal allowance will be introduced gradually between 2016 and 2020. The basic idea is to make the allowance dependent on income: individuals receiving income below a certain threshold are eligible for the maximum possible allowance, then the allowance gradually declines with income until it is zero. The system will be introduced gradually in the sense that the minimum allowance will not reach zero until 2020 – it will be gradually reduced from 85 EUR in 2016 to 0 EUR in 2020.
The way the system will be implemented foresees that during a fiscal year, all individuals will be taxed applying the minimum non-taxable allowance (e.g., 85 EUR in 2016). At the beginning of the next year, people eligible for a higher tax allowance will have the opportunity to apply for a tax refund, by making an income declaration, and to get the overpaid tax back.
Simulations of Reforms: Inequality
Below we present simulation results from EUROMOD, which is an EU-wide tax-benefit microsimulation model (for more details see Jara and Leventi, 2014). The results show the first-round effect of the simulated policies, i.e., they show the pure effect of the proposed reforms abstracting from any behavioural responses that these reforms might induce. We simulate the effect of five reform scenarios: two scenarios of differentiated non-taxable allowance (one scenario reflects the system that is planned to be introduced in 2016, the second scenario represents the system that is planned to be introduced in 2020), one scenario that simulates introduction of the solidarity tax, and two scenarios that combine the solidarity tax with the new non-taxable allowances. We compare these reforms with the baseline system, which describes the tax-benefit rules that are in place in 2015.
It is important to note that we assume in the simulations that everyone who is eligible for a tax refund under the new non-taxable allowance rules does in fact apply for the refund, which means that we estimate the maximum possible effect from the introduction of the higher tax allowances.
Table 1 summarizes the effect of the proposed reforms on income inequality as measured by the Gini coefficient. All the proposed reforms reduce income inequality, but the solidarity tax achieves higher equality by reducing incomes in the top decile. The non-taxable allowance mainly affects people in the middle of the income distribution, as the bottom deciles contain proportionally fewer employed individuals, while in the top deciles the allowance, which is set in absolute terms, makes a smaller share of the income – hence, a weaker effect. Pensioners, who mainly belong to the lower deciles of the income distribution, do not gain from a higher allowance, because of a special taxation regime for pensions that already provides for a higher personal allowance. All major benefits (unemployment benefit, social assistance, child-related benefits) are not subject to personal income tax, hence benefit recipients also do not gain from the proposed changes (see Figure 1).
Table 1. Gini Coefficient Associated with the Reforms
| Baseline | ST* | 2016 allowance | 2020 allowance | ST + 2016 allowance | ST + 2020 allowance | |
| Gini | 0.361 | 0.358 | 0.360 | 0.357 | 0.357 | 0.355 |
Source: authors’ calculations using EUROMOD
Note: ST – solidarity tax
Figure 1. Deviation of Equivalised Disposable Income from the Baseline Scenario, %
Source: authors’ calculations using EUROMOD
Figure 1 also shows that the losers from the solidarity tax are in the highest decile, though it should be borne in mind that enterprises are also losers because they now have to pay part of the solidarity tax. The solidarity tax generates no direct gainers.
Impact on Progressivity
The progressivity of a tax or system is typically measured by the Kakwani index. The Kakwani index (Kakwani, 1977) can vary between −1 and 1 and the larger the index, the more progressive is the tax. A positive index indicates that the tax is progressive and a negative index indicates it is regressive. Table 2 shows the calculated Kakwani index for all major direct taxes (which include personal income tax, social contributions and the newly introduced solidarity tax) and separately for personal income tax (PIT) for each of the postulated scenarios. The results suggest that all of the proposed reforms increase the progressivity of the tax system.
Table 2. The Kakwani Index for the Six Scenarios
| Baseline | ST* | 2016 allowance | 2020 allowance | ST + 2016 allowance | ST + 2020 allowance | |
| All income taxes* | 0.034 | 0.040 | 0.048 | 0.058 | 0.054 | 0.064 |
| PIT | 0.07 | 0.07 | 0.10 | 0.12 | 0.10 | 0.12 |
Source: authors’ calculations using EUROMOD
Note: ST – solidarity tax; income taxes include personal income tax, social contributions and the newly introduced solidarity tax
Qualifications and Risks
The above results capture the so-called first round impact of the tax changes. In practice people will react to the changed incentives by changing behaviour and thereby changing the impacts. For example, the higher net reward for working in low wage jobs may increase the supply of workers willing to work in such jobs thereby possibly having a bigger positive effect on the incomes of low income households than implied by the simulations.
Perhaps more significant is the potential effect of the solidarity tax on the behaviour of high earners and of the enterprises that employ them. This effect is captured by the concept of the elasticity of taxable income – defined as the change in taxable income in response to a change in the marginal tax rate. The taxable income elasticity concept takes into account all the behavioural aspects of the taxpayer in response to a change in the tax rate. As well as labour supply responses it includes other responses e.g. switching the form in which income is received as well as simple tax evasion (Saez et al., 2012). It is the switching of the form in which income is received, away from wage income towards other less-taxed forms of income that can be expected here. Thus according to an internal Latvian Employers Confederation employer survey, if the solidarity tax is implemented one third of employers will consider using legal tax optimization tools such as dividends or the microenterprise tax to avoid paying the tax. Here, employers are important as well as employees, because employers will pay the larger share of the tax. If this happens on a significant scale (high elasticity of taxable income) then the intention of the solidarity tax will be subverted.
There are also risks with the differentiated personal allowance. If the burden of annual reporting of income is too high then many may simply not do it and suffer the loss of income or find a way of recouping through shadow earnings.
Concluding Remarks
The Latvian authorities should be applauded for grasping the nettle of progressive taxation but perhaps only with one hand for the way they have chosen to do it. Thus, the solidarity tax creates an incentive for both employers and employees to find ways of avoiding it and find they surely will. A tax accountant once said of the 80% supertax applied to high earnings in pre-Thatcher UK that it was a ‘voluntary tax’. This is also the likely fate of Latvia’s solidarity tax.
The differentiated personal allowance will clearly benefit low earners, if they claim it. In fact it will also benefit people earning well over the average wage. But will the low earners claim? Very few people in Latvia have ever filed an income declaration and we fear that many low earners will not do so now.
Thus at the top end progressivity is likely to be largely avoided and at the bottom end may not be fully claimed.
References
- Finance Ministry (2015). “Solidaritātes nodokli maksās tikai personas ar algu virs 48 600 eiro gadā,” available at http://www.fm.gov.lv/lv/aktualitates/jaunumi/nodokli/51253-solidaritates-nodokli-maksas-tikai-personas-ar-algu-virs-48-600-eiro-gada
- Kakwani, Nanak C. (1977). “Measurement of Tax Progressivity: An International Comparison”. Economic Journal 87 (345): 71–80
- Jara, X. and Leventi, C. (2014). “Baseline results from the EU27 EUROMOD (2009-2013),” EUROMOD Working Papers EM18/14, EUROMOD at the Institute for Social and Economic Research.
- Saez, E., J. Slemrod, and S. H. Giertz, (2012). “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review.” Journal of Economic Literature, 50(1): 3-50
Buyer Heterogeneity in Public Procurement
Authors: Elena Paltseva and Giancarlo Spagnolo, SITE.
We show that different types of contracting authorities exhibit rather different behavior in public procurement. In particular, in Sweden strategic bunching below the EU threshold is only observed for a certain type of authorities. The identity of the strategically behaving group is also non-uniform across different types of procurement contracts or geographic localities. Similarly, in Italy’s public works procurement only a specific type of public buyer seems related to bunching below the threshold. This suggests that the type of public buyer, and associated differences in incentives and outcomes, should be taken into consideration in designing procurement regulation and more general policy-making.
Examining Social Exclusion among the 50+ in Europe – Evidence from the Fifth Wave of the SHARE Survey
Though intuitive, the concept of social exclusion is complex and hard to measure. Recently, however, we have witnessed policymakers and international institutions increasingly pay attention to better understand material and social distress and to identify the means to improve a broadly defined standard of living. In this brief, we summarize some of the results and conclusions from a recently published First Results Book based on the latest data from the Survey of Health, Ageing and Retirement in Europe (SHARE). We discuss the approach adopted to measure material and social deprivation, and the subsequent identification of risk of social exclusion. We show that Europeans increasingly value the quality of their social life as they grow older and that factors, such as worsening health, unmet long-term care needs, loneliness or lack of social cohesion are important determinants of social exclusion among the 50+ population. If socio-economic policies are to respond effectively to the needs of older Europeans, then broader aspects of their lives need to be taken into account and public policy should go beyond simple targets of income-defined poverty.
The Survey of Health Ageing and Retirement in Europe (SHARE) is an international research project focused on the European 50+ population, and combines information on key areas of life including health, labour market activity, financial situation, social involvement as well as family and social networks. The fifth wave of this panel study took place in 2013 with detailed interviews conducted in 15 European countries. The survey included a special set of questions aiming to improve the understanding of the degree of financial difficulties faced by the 50+, and to address the question of the extent of social exclusion in different European countries. The First Results Book documenting details of the survey has just been published by the international research team involved in the SHARE project. In this brief, we discuss some key results reported in this publication with focus on the analysis of deprivation and social exclusion in Europe among the 50+.
Capturing a Complex Concept of Social Exclusion in Socio-Economic Data
In recent years, the notion of “social exclusion” has been gaining importance as a reference in academic and policy circles with regards to the goals and conduct of socio-economic policy. In fact, in the Europe 2020 strategy, the European Union has made a formal commitment to “recognise the fundamental rights of people experiencing poverty and social exclusion, enabling them to live in dignity and take an active part in society” (European Commission, 2010). Yet, while the concept has an intuitive appeal, the approach to its measurement and analysis has been far from formalised and continues to leave room for a high degree of arbitrariness. This flexibility in the treatment of social exclusion, given the nature of the concept, may seem necessary and in fact desired, but at the same time requires a lot of care at the level of analysis and caution with regard to conclusions drawn from it.
The recent increase in the popularity of broad measures of financial circumstances, going beyond the simple income-based poverty indicators, reflects a number of limitations of the latter as far as it reflects overall material conditions and welfare of individuals. These limitations may be particularly important in the case of older individuals, for whom material wellbeing will be strongly affected by health status or disability, as well as by the extent of accumulated assets at their disposal (e.g. Laferrère and Van den Bosch, 2015; Bonfatti et al., 2015). With this in mind, the fifth wave of the SHARE survey was enriched with a set of additional questions aimed at identifying different sources of deprivation that 50+ individuals are especially exposed to. Based on available data we developed two SHARE-specific measures to assess material and social aspects of deprivation, which were further combined into a single indicator of social exclusion. 13 items from the SHARE questionnaire, exploring affordability of basic needs and financial difficulties among SHARE respondents, were brought together into an aggregate indicator of material conditions (Bertoni et al. 2015). The measure of social deprivation was derived from 15 SHARE items investigating social isolation, quality of neighbourhood and social involvement (Myck et al. 2015). In both cases, so-called hedonic weights were applied to individual items (weights based on the relationship of deprivation items with life satisfaction measure). Based on the threshold of the 75th percentile of total distribution of each of the two indices, individuals with high levels of deprivation in both dimensions were classified as at risk of social exclusion. The scientific value of developed measures has been validated by Najsztub et al. (2015), who found a good compliance in the cross-country variation of material and social deprivation and with common welfare indicators, such as the Human Development Index or income per capita.
Ageing and Social Exclusion among Older Europeans
Comparing material and social deprivation between those aged 50-64 years old and respondents aged 65+ shows that while the level of social deprivation is higher for the older group, the opposite is true for material deprivation (Myck et al. 2015). This suggests that social deprivation grows with age; on the one hand because of increased isolation of older people, and on the other, because older individuals may value their social circumstances more. This conclusion is supported in Shiovitz-Ezra (2015), who reports that, with regards to loneliness, social cohesion and neighbourhood quality play an increasingly important role among older respondents.
Figure 1 Proportion of Individuals at Risk of Social Exclusion by Country
Source: Myck et al. (2015)
When analysing country variation of the two-dimensional indicator of being at risk of social exclusion, we can see that the proportion of the 50+ population exposed to this risk is the highest in Estonia (27.1%), Israel (25.5%) and Italy (23.1%; see Figure 1). On the other hand, countries with the lowest proportion of individuals at risk of social exclusion are Denmark, Sweden and Switzerland. In these countries the proportion is lower than 4%. Naturally, there is important variation in the risk of exclusion also within countries. For example, the results of Hunkler et al. (2015) show that compared to a native born, migrants suffer much higher degree of exclusion in their present country, which, to a lesser extent, is also true for their children.
An analysis of factors that affect the risk of social exclusion reveals that higher education, being employed or retired, and living with a partner substantially limit this probability (Myck et al., 2015). There is also a strong correlation between social exclusion and poor health status. Older people in poor health and those with limited ability to carry out activities of daily living are more vulnerable to both material and social deprivation (Laferrère and Van den Bosch, 2015). People requiring long-term care but reporting unmet needs in this domain are more likely to suffer from deprivation in the social dimension. Importantly from a policy point of view, Bertoni et al. (2015) provide evidence that eyesight and hearing loss contribute to a higher probability of social exclusion, and among the oldest old lead to reduced actual social participation.
Conclusion
Since the importance of different aspects of social life increases when people grow older, policy instruments targeted at income-defined poverty will be ineffective in addressing important aspects of older people’s welfare. It therefore seems important that broader aspects of everyday life are taken into account when constructing socio-economic policies aimed at reducing social exclusion among older Europeans.
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References
- Adena, M., Myck, M., Oczkowska, M. (2015) Material deprivation items in SHARE Wave 5 data: a contribution to a better understanding of differences in material conditions in later life. In: Börsch-Supan et al. (2015).
- Bertoni, M., Cavapozzi, D., Celidoni, M., Trevisan, E. (2015) Development and validation of a material deprivation index. In: Börsch-Supan et al. (2015).
- Bertoni, M., Celidoni, M., Weber, G., Kneip, T. (2015) Does hearing impairment lead to social exclusion?. In: Börsch-Supan et al. (2015).
- Bonfatti, A., Celidoni, M., Weber, G., Börsch-Supan, A. (2015) Coping with risks during the Great Recession. In: Börsch-Supan et al. (2015).
- Börsch-Supan, A., Kneip, T., Litwin, H., Myck, M., Weber, G. (eds) (2015) Ageing in Europe – Supporting Policies for an Inclusive Society. De Gruyter.
- European Commission (2010) EUROPE 2020: A European strategy for smart, sustainable and inclusive growth.
- Hunkler, C., Kneip, T., Sand, G., Schuth, M. (2015) Growing old abroad: social and material deprivation among first- and secondgeneration migrants in Europe. In: Börsch-Supan et al. (2015).
- Laferrère, A., Van den Bosch, K. (2015) Unmet need for long-term care and social exclusion. In: Börsch-Supan et al. (2015).
- Myck, M., Najsztub, M., Oczkowska, M., (2015) Measuring social deprivation and social exclusion. In: Börsch-Supan et al. (2015).
- Najsztub, M., Bonfatti, A., Duda, D. (2015) Material and social deprivation in the macroeconomic context. In: Börsch-Supan et al. (2015).
- Shiovitz-Ezra, S. (2015) Loneliness in Europe: do perceived neighbourhood characteristics matter? In: Börsch-Supan et al. (2015).
Environmental Implications of Russia’s Accession to the WTO
Authors: David G. Tarr, NES and Natalia Turdyeva, CEFIR.
We investigate the environmental impacts of Russia’s World Trade Organization (WTO) accession with a computable general equilibrium model incorporating imperfectly competitive firms, foreign direct investment and endogenous productivity. The WTO accession affects CO2 emissions through technique (−), composition (+) and scale (+) effects. We consider three complementary policies to limit CO2 emissions: cap and trade, emission intensity standards, and energy efficiency standards. With imperfectly competitive firms, gains from WTO accession result with any of these policies.
Taxes and Benefits in the Polish Parliamentary Election Campaigns
Authors: Michal Myck and Monika Oczkowska, CenEA.
The upcoming parliamentary elections in Poland, scheduled for the 25th of October 2015, have on the one hand stimulated debate on the record of the current coalition government, and on the other opened the debate on the nature of socio-economic policy to be conducted in the coming years. In this brief, we draw on two recent pre-election reports published by the Centre for Economic Analysis, CenEA. We discuss developments in tax and benefit policies under the coalition of the Civic Platform and the Polish People’s Party over the last eight years, as well as the pre-election pledges regarding tax and benefit policies to be implemented after the elections. We show a significant shift in policy priorities with respect to the distributional effect of the tax-benefit policies between the first (2007-2011) and the second (2011-2015) term in office, towards more support for low-income families. We also argue that, judging by the presented electoral pledges, Polish voters face a difficult choice between the promises of the opposition parties, which seem too costly to be realistic, and an enigmatic tax overhaul reform proposed by the governing Civic Platform, which is supposed to substantially benefit nearly all working households at a low cost for the state budget, with details of the reform design, however, kept away from public scrutiny.
Russia: Increasing Concentration of the Economy and Low Investment
Author: Oleg Shibanov, New Economic School and Corporate University of Sberbank.
The Russian economy became more concentrated in 2014. The new RBC-500 rating shows that the 643 largest companies in Russia produce 77% of the country’s GDP. Moreover, 94% of the net profit of these companies was generated in the oil and gas sector. This is up from 71% in 2013. This increasing concentration appears unstable at times of huge external shocks on commodity prices.
Does Gender Matter for the Innovativeness of SMEs?
This policy brief summarizes the results of an on-going research project on the gender aspect of companies’ innovativeness in transition countries. The aim of this work is to examine whether there is a gender gap in innovative behavior within the sector of small and medium-sized enterprises (SMEs). The results suggest that the propensity to innovate is higher among companies with a presence of a female owner. This finding preserves for 5 measures of innovativeness. Thus, female involvement in business might be beneficial for the innovative sustainable development of economy.
The role of small and medium-sized enterprises (SMEs) has increased lately and they are considered one of the main engines of economic growth (Radas and Bosic, 2009). Research on transition economies and development has emphasized the need for strong a SME sector, since it often acts as the backbone of the economy (Lukasc, 2005) and is the largest contributor of employment (Omar et al., 2009). Another important channel through which the SME sector contributes to development is through their innovative activities. Sustainable economic development requires competitive and successful industries. Being innovative is one way to achieve this goal. However, the innovativeness of sectors and industries depends not only on the actions of the largest companies, but also on the SME sector and individual entrepreneurs. Indeed, the latter are often argued to be more dynamic and more ambitious (Chalmers, 1989; Li and Rama, 2015).
The decision to follow an innovative strategy often depends on the company’s leader, their experience and other managerial characteristics. However, the experience of the leader is not the only factor affecting managerial actions – gender also appears to matter (Daunfeldt and Rudholm, 2012). In the absence of clear answers and knowledge about female managerial characteristics, including their innovativeness (Alsos et al., 2013), it is difficult to evaluate their role in modernizing the business society and to distinguish their competitive advantages or disadvantages over male managers and business owners.
The role becomes even more ambiguous for the transition, post-communist economies. The labor market under USSR officially provided equal rights to women. However, in practice women were treated differently than men. While women often had to do the same work as men, the patriarchal society remained with men being regarded as the main decision makers, and women being fully responsible for housework and childcare. This can explain the low presence of women in top-managerial positions and women’s weaker business ties and networks (Welter et al., 2004).
The question of gender and innovation in entrepreneurship has recently starting to attract attention. Earlier, innovativeness was strongly connected and associated with high-tech companies. Thus, innovation research mostly focused on technology-based and capital-intensive industries (Dauzenberg, 2012; Marlow and McAdam, 2012). As a result, innovation behavior in less capital-intensive SMEs was almost entirely overlooked. This can also explain the lack of focus on gender, as men usually dominated the capital-intensive industries (Ljunggren et al., 2010). In an ongoing research project, I am trying to expand the understanding of gender differences in innovation and SME entrepreneurship with a focus on transition economies and the CIS block in particular.
The idea is to estimate owners’ and CEOs propensity to implement innovations in the organization. The specification of the model follows the literature and uses a probit technique that allows for an estimation of these propensities while taking into account other influencing factors and individual characteristics of firms, their owners and CEOs, which likely affect innovative decisions. The data I use come from the 5th wave of the Business Environment and Enterprise Performance Survey (BEEPS) conducted in 2012-2013. The final dataset covered 5254 SMEs from 30 European and East Asia countries.
The main variable of interest is the innovativeness of the enterprise, proxied by 5 different indicators. The measures of implemented innovative activities are: 1) whether the firms introduced a new product or service during the last 3 years; 2) whether there was any new production process implemented; 3) whether there were any spending on research and development; 4) whether were was an introduction of a new marketing strategy and method; and 5) whether an enterprise implemented new methods in operational management. The usage of 5 indicators instead of one allows me to see whether there is any specific feature of innovativeness that differs by gender.
The list of control variables covers information on the gender of the CEO and owners, number of years of experience of the CEO, age of the firm, type of ownership, focus on internal and external markets, as well as the usage of foreign technologies and certification. I also have information on the share of skilled labor force, the share of females in the organization, and whether the organization bears additional costs on external consulting services and training of employees. Information on industry, country, size of the organization and type of residence is also available.
Unfortunately, the data lacks information on the number of owners, which will prohibit me from estimating the clear gender effects and limits the analysis to the effect of gender diversity among owners.
The obtained results (see Table 1) show that having a female as the only, or one of the, owner(s) increases the propensity of going into uncertainty and implementation of a new good/service by 4.5% in the CIS region and 6.7% in the non-CIS block. However, the effect of having a female CEO is insignificant. This finding contradicts the literature on gender differences in the willingness to take on risk (Wagner, 2001; He et al., 2007; Eckel et al., 2008; Croson and Gneezy, 2009) that mostly demonstrates that women, on average, are more risk-averse than men.
A similar effect is observed for the implementation of a new business process or marketing strategy. The only insignificant difference is the spending on R&D in CIS countries and new managerial methods in non-CIS block. However, these measures of innovativeness raise doubts regarding its applicability for SME sector. A shift from high-intense productions towards services makes it less useful to spend enormous sums of money on technological research. Instead, other innovative actions like the development of human capital are of greater importance.
Table 1. Propensity to innovate
Source: Author’s own estimation.
Conclusion
The results show that having a female owner or gender diversity in the ownership structure positively affects the propensity of the organization to follow innovative behaviors and strategies. Therefore, promoting female entrepreneurship and gender equality in ownership seem positive for increasing the innovativeness of companies, and the economy in general, in both the CIS and non-CIS block.
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References
- Alsos, G.A., Hytti, U., and Ljunggren, E. 2013.Gender and Innovation: State of the Art and a Research Agenda.International Journal of Gender and Entrepreneurship, 5(3):236-256.
- Chalmers, N. 1989. Industrial Relations in Japan: The Peripheral Workforce. London: Routledge.
- Croson, R. and Gneezy, U. 2009. “Gender Differences in Preferences”.Journal of Economic Literature.Volume 47, #2.
- Daunfeldt, S., O., and Rudholm, N., (2012). Does gender diversity in the boardroom improve firm performance? Department of Economics, Dalarna University, SE-781 88 Borlänge, Sweden; and HUI Research, SE-103 29 Stockholm, Sweden.
- Dautzenberg, K. 2012. Gender differences of business owners in technology-based firms.International Journal of Gender & Entrepreneurship,4:79–98.
- Eckel, C. and Grossman, P. 2008. “Men, Women and Risk Aversion: Experimental Evidence”. Handbook of Experimental Economic Results.Elsevier.Volume 1, #7.
- He, X., Inman, J.J. and Mittal, V. (2007), “Gender jeopardy in financial risk taking”, Journal of Marketing Research, 44: 414-24.
- Li, Y., and Rama, M. 2015. Firm Dynamics, Productivity Growth, and Job Creation in Developing Countries: The Role of Micro- and Small Enterprises. The World Bank Research Observer, 30: 3-38.
- Ljundggren, E., Alsos, G.A., Amble, N., Ervik, R., Kvidal, T., Wiik, R. 2010. Gender and innovation: Learning from regional VRI projects. Nordland Research Institute, Norway.
- Lukacs, E. 2005. The economic role of SMEs in world economy, especially in Europe. European Integration Studies, 4(1): 3-12.
- McAdam, M. and Marlow, S. 2008.The Business Incubator and the Female High-Technology Entrepreneur: A Perfect Match? Paper presented at the 2008 International Council for Small Business World Confrence, recipient of the 2008 Best Paper Award for Women Entrepreneurship.
- Omar, S. S., Arokiasamy, L., & Ismail, M. 2009. The background and challenges faced by the small and medium enterprises. A human resources development perspectives. International Journal of Business and Management, 4(10): 95-102.
- Radas, S., and Božić, Lj. 2009.The Antecedents of SME Innovativeness in an Emerging Transition Economy. Technovation, 29: 438-450.
- Wagner, M.K. (2001), “Behavioral characteristics related to substance abuse and risk-taking, sensation-seeking, anxiety sensitivity and self-reinforcement”, Addictive Behaviors , Vol. 26, pp. 115-20.
- Welter, F., Smallbone, D., Isakova, N., Aculai, E. and Schakirova, N. 2004. Social Capital and Women Entrepreneurship in Fragile Environments: Does Networking Matter? Paper presented at Babson College-Kauffman Foundation Entrepreneurship Research Conference, University of Strathclyde.