How do firms enter international markets?

In February, a recent paper of Gábor Békés and Balázs Muraközy was published in the international journal Review of World Economics to answer this question.

In their publication named The ladder of internationalization modes: evidence from European firms, the authors use a unique multi-country firm-level dataset which, besides direct exporting and FDI, provides explicit information on a number of internationalization modes: indirect exporting, outsourced manufacturing and service FDI. Békés and Muraközy present a theoretical framework in which modes requiring higher and higher commitment have progressively higher fixed and lower marginal costs. By estimating multinomial and ordered logit models, they also present evidence in line with such a sorting framework with respect to TFP and innovativeness.

The authors identify three ’clusters’ of modes: indirect exporters are similar to non-exporters, direct exporters and outsourced manufacturers constitute a second cluster while service and manufacturing FDI are the most demanding internationalization modes.

Balázs Muraközy on the book launch of David Ricardo’s Principles of Political Economy and Taxation Balázs Muraközy on the book launch of David Ricardo’s Principles of Political Economy and Taxation

Balázs Muraközy on the book launch of David Ricardo’s Principles of Political Economy and Taxation

On 14th February, a book launch of David Ricardo’s On the Principles of Political Economy and Taxation was held at the Central European University. A new Hungarian translation of the original book has been published by the publisher Napvilág Kiadó. As novelty, the new volume also contains a compilation of Ricardo’s financial and value theory publications, besides several parliamentary speeches of the author, which has been available in Hungarian for the first time. After the book launch, a discussion was held about the book and the David Ricardo, in which Balázs Muraközy also took part. The discussion was moderated by Júlia Király (IBS), while the further participants were János Atkári (the translator of the book), Miklós Koren (CEU) and Aladár Madarász (IEHAS, BCE; the author of the Introduction and the editor of the volume).

The book is available here on the publisher’s webpage.

Our researchers on the yearly conference of Hungarian Society of Economics

On 18th and 19th of December 2017, the Hungarian Society of Economics organized its traditional yearly conference. The event was held in the Centre of Human Sciences of Hungarian Academy of Sciences and more members of our research group was among the participants.

In the section named Labour market I., Balázs Muraközy presented his paper called “Innovation and firm-level wage inequality” (co-authored by Attila Lindner and Balázs Reizer). In their study, the researchers examined the effect of various innovation types on firm-level skill premium by using detailed data on firms’ innovation policies and on their worker’s wages from Hungary.

On the second day, Márta Bisztray took part in the section named Foreign trade and FDI. Márti presented her paper “Do friends follow each other? FDI network effects in Central Europe” (co-authored by Gábor Békés). In this paper, using extensive data on FDI investments, the researchers investigated if co-location is more frequent among connected firms such as members of business groups as well as firms sharing similar background.

The working paper of Gábor Békés and Márta Bisztray can be downloaded from here.

How much do Hungarian firms pay in taxes per worker?

A new paper by Balázs Muraközy and Balázs Reizer was published in the December issue of Közgazdasági Szemle. In the study named “The heterogeneity of corporate taxation in Hungary”, the authors used microdata at firm level to investigate the heterogeneity of three types of taxes levied on firms: corporation tax, payroll tax and local business tax. In their paper, they show that the business taxes per worker and per unit of value added vary significantly among different types of firms and that tax incomes are highly concentrated. The most important predictor of corporate taxation is productivity, which correlates positively with tax income per capita and negatively with the value-added tax wedge. Furthermore, the authors also examined a case study: they used static microsimulation to study the effect of Hungarian corporate tax reduction in 2017 on tax income and the distribution of tax burdens. They calculated how much large enterprises had benefited from the tax reduction, and how the concentration of tax income had been reduced by the corporate tax change.

An article summarizing the results of the paper was also published by the authors in the online newspaper G-7.hu. (Only in Hungarian)

Presentation on innovation at REKK’s Energy Futures series

The last event of Regional Centre for Energy Policy Research’s (REKK) Energy Futures series was held on 7th December, where Balázs Muraközy took part as a speaker. The topic of the event series, held at the Corvinus University Budapest, was innovation in the energy sector linked to the emerging “energy transition”. Balázs presented about the concept and theory of innovation, furthermore he discussed the mainstream methodological frameworks applied to the energy sector to better incorporate the changing dynamics of the sector.

The presentation slides can be downloaded from here. (Only in Hungarian)

Presentation by Balázs Muraközy at HARS’s Computational Social Science conference

Is it possible that machine learning and big data will dethrone „traditional” economic and econometric modelling? This was the main question of the presentation held by Balázs Muraközy, director of the Firms, Strategy and Performance Research Group, at the Computational Social Science Conference organized by the Hungarian Academy of Sciences on November 14, 2017, in Budapest, Hungary. During the one-day conference researchers explained how the latest big data trends could be channeled into the different fields of social sciences. The speech held by Muraközy highlighted the fact that machine learning and big data methods will not replace „traditional” econometrics, but they rather will complement each other, mainly because of their different goals during economic analysis.

Márta Bisztray at the 10th „Forschungsschwerpunkt Internationale Wirtschaft (FIW)“ Research Conference on International Economics

The “FIW” conference took place in Vienna, Austria in November 2017. The main objective of the event is to provide a platform for economists working in the field of International Economics in Austria and in its neighboring countries to present recent research. Márta Bisztray introduced her joint work with Gábor Békés, a working paper entitled „Do friends follow each other?  FDI network effects in Central Europe”.  The main research question of the paper is whether existing investments of connected firms make it more likely for a new foreign direct investment to locate close. Looking at FDI inflows to five Central-Eastern European countries, Bisztray and Békés find suggestive evidence for this pattern both for firms in the same business group and for firms with a shared background.

Márta Bisztray paricipated in the 19th Annual Conference of the European Trade Study Group (ETSG) in Florence, Italy

The European Trade Study Group (ETSG) is a forum for academic discussion and research on international trade among universities and research institutes. The presentation held by Márta Bisztray introduced her joint work with Miklós Koren and Adam Szeidl, entitled: „Learning to Import from Your Peers”. The presentation was built around the main research question of the paper, whether firms are more likely to start importing from a country if they have peers with country-specific trade experience. Their results show that there are significant knowledge spillovers among peers and highlight the benefit of the presence of business and spatial networks to facilitate the diffusion of business practices.

Paper about reference-dependent job search in Hungary in the Quarterly Journal of Economics

A paper  by Stefano DellaVigna, Attila Lindner, Balázs Reizer and Johannes F. Schmieder was published in the 2017 November issue of the Quarterly Journal of Economics.  The study, titled “Reference-dependent Job Search: Evidence from Hungary”,  propose a model of job search with reference-dependent preferences, with loss aversion relative to recent income (the reference point). In this model, they find that newly unemployed individuals search hard since consumption is below their reference point. Over time, though, they get used to lower income and thus reduce their search effort. In anticipation of a benefit cut, their search effort rises again, then declines once they get accustomed to the lower postcut benefit level.To distinguish between this and other models, the authors use a unique reform, introduced in 2005 in Hungary, in the unemployment insurance (UI) benefit path. A model with optimal consumption, endogenous search effort, and unobserved heterogeneity is estimated. The results indicate a slow-adjusting reference point and substantial impatience, likely reflecting present-bias.