Vonnák Dzsamilla (2018). Why do firms default on their foreign currency loans? The case of Hungary

Journal of International Money and Finance, 86, 207-222.

I isolate the effect of the choice of foreign currency on the loan performance of firms borrowing in different currencies in crisis times. I use a novel micro-level dataset from Hungary to decompose the factors contributing to the worse loan performance of foreign currency borrowers compared to local currency debtors. I find that foreign currency denomination can worsen loan performance considerably, while selection also contributes significantly to the default differences. On the one hand, per se less creditworthy firms borrowed in foreign currency and during the crisis the foreign currency shocks further weakened their loan performances. On the other hand, more creditworthy firms that were also well-prepared for the currency risks also borrowed in foreign currency. My results suggest that not the institution of foreign currency lending per se that should be blamed for the bad loan performance of foreign currency borrowers, instead one should consider the characteristics of the borrowers.

Vonnák Dzsamilla (2018). Multidimensional global games and some applications

IEHAS Discussion Papers, MT-DP 2018/3.

I extend the standard global games framework by introducing an addition target on which agents can coordinate on. I compare this multidimensional case to the standard global games problem. Furthermore, I investigate the effects of consolidating the multiple targets. I find that introducing an additional option generates a negative strategic correlation between the options and thus weakens the coordination. However, unifying the options eliminates the endogenous correlation and thus restores the coordination. I also show two potential applications to be modeled by these kinds of games.

Békés, Gábor & Balázs Muraközy (2018). The ladder of internationalization modes: evidence from European firms

Review of World Economics, DOI: 10.1007/s10290-018-0305-9

How do firms enter international markets? To answer this question, this paper uses 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. We 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, we present evidence in line with such a sorting framework with respect to TFP and innovativeness. We 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.

Hornok, Cecília & Balázs Muraközy (2015). Markups of Exporters and Importers: Evidence from Hungary

Scandinavian Journal of Economics, DOI: 10.1111/sjoe.12292

This paper studies the relationship between different proxies of firm-level markups and trade status using balance sheet information linked to detailed trade data from Hungary between 1995-2003. We find that importing is strongly positively correlated with markup measures both across and within firms. We argue that this correlation can reflect three channels: self-selection, higher physical productivity resulting from access to a larger variety of inputs and quality upgrading based on high-quality imported intermediate inputs. We present evidence for the relevance of the latter channel by showing that importers’ markup premium is higher when inputs arrive from developed countries and that importing is correlated with higher quality (price-adjusted revenue) exports. We find no robust evidence for exporter premium when controlling for importing. We argue that the nonexistent exporter premium may result from the stronger competition in export markets relative to domestic ones.

Békés, Gábor, & Péter Harasztosi (2018). Grid and shake: spatial aggregation and the robustness of regionally estimated elasticities

The Annals of Regional Science, 60(1), 143-170., DOI: 10.1007/s00168-017-0849-y

This paper proposes a simple and transparent method for measuring spatial robustness of regionally estimated coefficients and considers the role of the administrative districts and of the size of regions. The procedure offers a new solution for a practical empirical issue: comparing the variables of interest across spatially aggregated units. It improves upon existing methods, especially when spatial units are heterogeneous. To illustrate the method, we use Hungarian data and compare estimates of agglomeration externalities at various levels of aggregation. Using the procedure, we find that the method of spatial aggregation seems to be of equal importance to the specification of the econometric model.


Muraközy, Balázs, & Balázs Reizer (2017). The heterogeneity of corporate taxation in Hungary

Közgazdasági Szemle, 64(12), 1233-1264., DOI: 10.18414/KSZ.2017.12.1233

The study uses microdata at firm level to investigate the heterogeneity of three types of taxes levied on firms: corporation tax, payroll tax and local business tax. It emerges 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. The authors use static microsimulation to study the effect of Hungarian corporate tax reduction in 2017 on tax income and the distribution of tax burdens. They calculate how much large enterprises have benefited from the tax reduction, and how the concentration of tax income has been reduced by the corporate tax change.

DellaVigna, Stefano, Attila Lindner, Balázs Reizer & Johannes F. Schmieder (2017). Reference-Dependent Job Search: Evidence from Hungary

The Quarterly Journal of Economics, 132(4), 1969–2018., DOI: 10.1093/qje/qjx015

We propose a model of job search with reference-dependent preferences, with loss aversion relative to recent income (the reference point). In this model, 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. The model fits the typical pattern of exit from unemployment, even with no unobserved heterogeneity. To distinguish between this and other models, we use a unique reform in the unemployment insurance (UI) benefit path. In 2005, Hungary switched from a single-step UI system to a two-step system, with overall generosity unchanged. The system generated increased hazard rates in anticipation of, and especially following, benefit cuts in ways the standard model has a hard time explaining. We estimate a model with optimal consumption, endogenous search effort, and unobserved heterogeneity. The reference-dependent model fits the hazard rates substantially better than plausible versions of the standard model, including habit formation. Our estimates indicate a slow-adjusting reference point and substantial impatience, likely reflecting present-bias.

Békés, Gábor, Lionel Fontagné, Balázs Muraközy, & Vincent Vicard (2017). Shipment frequency of exporters and demand uncertainty

Review of World Economics, 153(4), 779-807., DOI: 10.1007/s10290-017-0286-0

This paper examines how exporting firms adapt to the uncertainty stemming from demand volatility. By using monthly customs data from France, we decompose exports into different extensive and intensive margins including two novel margins: the number of months the firms exported (frequency) and the average export value per month. We establish four empirical patterns. First, firms export less to markets with higher demand volatility. Second, this effect is mainly explained by the frequency margin. Third, volatility affects the frequency margin through two channels: indirectly through lower trade volume and directly through logistics re-optimization. In particular, our results suggest that firms send less frequent, larger shipments to more uncertain markets conditional on total exports. Fourth, the effect of demand volatility is magnified on markets with longer time-to-ship. We propose that these observations are in line with simple stochastic inventory management approaches.

  • Earlier versions:

Békés, Gábor, Lionel Fontagné, Balázs Muraközy, Vincent Vicard (2015). Shipment frequency of exporters and demand uncertainty: An inventory management approach. CEPR Discussion Papers 11013.

Békés, Gábor, Lionel Fontagné, Balázs Muraközy, Vincent Vicard (2015). Shipment frequency of exporters and demand uncertainty: An inventory management approach. Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01315615.

Békés, Gábor, Lionel Fontagné, Balázs Muraközy, Vincent Vicard (2014). Shipment frequency of exporters and demand uncertainty. Banque de France Working Papers 479.

Békés, Gábor, Lionel Fontagné, Balázs Muraközy, Vincent Vicard (2014). Shipment frequency of exporters and demand uncertainty. CESifo Working Paper Series 4734.

Görg, Holger, László Halpern, & Balázs Muraközy (2017). Why do within-firm–product export prices differ across markets? Evidence from Hungary

The World Economy 40(6), 1233–1246, DOI: 10.1111/twec.12442

In this study, we analyse the relationship between distance and f.o.b. export unit values using firm–product–destination data from Hungarian manufacturing. Using 10-digit Harmonized System data, we show that a doubling of distance is associated with about 7.5 per cent increase in the average product-level price, from which five percentage points can be attributed to within-firm–product variation. We run a number of tests to look for heterogeneity in this pattern. Interestingly, the measured effect is very similar for domestic and foreign firms but distance seems to matter somewhat more for EU countries than outside the EU. We do not find much evidence for heterogeneity across product categories based on measures of vertical differentiation. The level of product aggregation matters; the distance coefficient is larger when products are aggregate to the eight or six-digit level.


Békés, Gábor, Áron Horváth & Zoltán Sápi (2016). Housing Prices and Differences in Location

Közgazdasági Szemle, 63(12), 1289-1323., DOI:10.18414/KSZ.2016.12.1289

This paper analyses the factors affecting the price level of Hungarian residential real estate using individual sales data. We focus on the role of the location of the property. We show that geographical factors are relevant in explaining housing prices using traditional type groups constructed from mentioned factors. Our study makes two contributions. First, we find that every group of variables may be important in disentangling real estate prices; individual factors explain 2-5% of the variance of housing prices, while together they account for 15% of the variance. Second, our results imply that in estimating a hedonic model, in addition to agglomeration and income effects, geographical factors are essential to consider.

Békés, Gábor, & Balázs Muraközy (2016). Supplier products in Hungarian manufacturing

Közgazdasági Szemle, 63(10), 1046-1073., DOI:10.18414/KSZ.2016.10.1046

Global value chains play an increasing role in production and exports in modern economies. Being part of such chains can radically affect the performance of a firm, country or industry. The study analyses the production and export of intermediate products and capital goods by Hungarian manufacturing firms, using firm-level production and export data. The authors show that such products account for two-thirds of production and three-quarters of exports. The share of such products is fundamentally determined by the industry concerned, and so an economic policy focusing on the appropriate industries can target potential suppliers effectively. Regression analysis is used to show firms producing intermediate goods as more productive than those producing consumer goods, which is in line with the potential presence of knowledge spillovers.

Muraközy, Balázs & Álmos Telegdy (2016). Political incentives and state subsidy allocation: Evidence from Hungarian municipalities

European Economic Review, 89, 324-344.

Using application-level data on successful and rejected applications for the European Union’s Structural and Cohesion Funds between 2004 and 2012 in Hungary, we study which grant types are susceptible to political favoritism and how this is achieved. With fixed-effects and matching estimators we study whether applicants from municipalities with a mayor endorsed by the governing coalition won a higher grant value than applicants where the mayor was affiliated with the opposition. We find limited evidence for such a difference for total grant value, but in cases when the applicant is a public entity or the purpose of the project is construction and, therefore, visible to voters and thus may bring about electoral benefits, we do find effects of 16-21 percent. The decomposition of the township alignment effect suggests that favoritism plays a role both in the application and the decision making process as applicants from aligned townships apply in larger numbers and have higher acceptance rates. When analyzing the effect of grants on votes, we show that voters indeed reward construction and public projects but not the other grant types.

Bisztray, Márta (2016). The effect of foreign-owned large plant closures on nearby firms

KTI Műhelytanulmányok MT-DP 2016/23.

I estimate the impact of foreign-owned large plant closures on local firms. I identify 41 such events in Hungary and assign comparable control cities with foreign-owned large plants operating in the same industry and not closing. I use a firm-level panel database of Hungarian firms between 1992 and 2012. I do a difference-in-differences estimation comparing outcomes of firms in the treated and control areas, before and after the plant closure. I find that after the foreign-owned large plant closures sales of nearby firms decreased by 6 percentage points and employment decreased by 3 percentage points on average. Firms operating in local services were hurt even more, suggesting that reduced local purchasing power due to the layoffs is a significant channel of the local plant closure effect. Firms operating in the supplier industry of the closing plant also decreased employment more than average, suggesting that input-output linkages play an important role in the propagation of negative shocks. In contrast, firms in the industry of the closing plant increased their employment, suggesting that they could benefit from the increased local labor supply. I also find that low-productivity firms were hurt more by the plant closures than high-productivity firms.

Bisztray, Márta (2016). The effect of FDI on local suppliers: Evidence from Audi in Hungary

KTI Műhelytanulmányok MT-DP 2016/22.

In 1993 Audi opened a new plant in Hungary. This paper examines the long-term effects of this large foreign direct investment on local firms operating in supplier industries. I use firmlevel panel data with long time series. Using the method of triple difference-in-differences I compare outcomes of firms in supplier and control industries, close and far from the Audi plant, before and after the entry. My main findings are: (1) after the Audi entry the average annual growth rate of local firms increased by 3 percentage points for sales and 2 percentage points for employment. The effect is visible only five years after the entry of Audi. I find no positive effect on productivity. (2) Firms with foreign owners account for all the positive effect on sales and employment, suggesting a foreign-to-foreign complementarity in investments. Firms with higher productivity gained more. Consequently, the low initial productivity of domestic firms may explain the lack of an effect in this group. (3) New entrants in the supplier industry locating close to Audi are larger and grow faster, suggesting that Audi also had an effect on the extensive margin.

Békés, Gábor, Áron Horváth & Zoltán Sápi (2016). Flood risk and housing prices: evidence from Hungary

KTI Műhelytanulmányok MT-DP 2016/20.

This study employs the hedonic property price method to analyze the flood risk effect on a rich set of data. The analysis is carried out on Hungary, but as the control variables are extremely elaborated, our results have general importance. The paper finds a significant reduction in housing prices accounted to ZIP code level flood risk even after controlling for a wide range of geographical and socio-economic features. This paper finds that flood risk reduces housing prices substantially. It turns out that the average elasticity is driven by being in close proximity of major rivers. While riverside areas have an overall price premium in Hungary, risky areas loose this advantage to flood risk. In ZIP code areas where the inundation depths are 10% higher, housing prices tend to be 1% lower on average plus another 1% lower along the major rivers.

Békés, Gábor, Cecília Hornok & Balázs Muraközy (2016). Globalization and the markups of European firms.

IEHAS Discussion Papers MT-DP 2016/18.

We use a unique cross-section survey of manufacturing firms from four European countries (France, Germany, Italy, Spain) linked with balance sheet data to study the relationship between key aspects of globalization and firm-level markups. The main results are: (i) Exporting is positively correlated with markups; (ii) Importing intermediate inputs and outsourcing are also positively correlated with markups; (iii) Firms with affiliates have higher markups than other firms, while simply membership in a group or being foreign-owned seem to be less important; (iv) Perceived competition from low-cost markets is negatively correlated with markups; (v) Higher quality production and innovation, especially if it results in IP, has a strong positive relationship with markups; (vi) While these variables are correlated, they are significant in a joint model including all four groups, and `fully globalized’ firms tend to charge around 100% higher markups than non-globalized firms.

Bakonyi, Zoltán & Balázs Muraközy (2016). Centralization of strategic decisions during the Great Recession: An empirical analysis of European manufacturing firms

KTI Műhelytanulmányok MT-DP 2016/17.

This study analyzes which types of firm-level shocks were associated with the centralization of strategic decision-making during the recession of 2008-09. We use a unique survey dataset of more than 14000 manufacturing firms from seven European countries which includes direct information on whether the firms centralized or decentralized their strategic decision-making process. Motivated by theoretical approaches claiming that organizations under considerable stress are more likely to centralize, we use multinomial logit models to test whether firms facing a larger fall in turnover, employment, investment or having to postpone their innovations were more likely to change their decision-making process. We find evidence that employment change and postponing innovations are indeed associated with centralization even when we control for ownership, group structure, financing, management, and strategy.

DeRemer, David R. (2016). Income Effects and Trade Agreements

KTI Műhelytanulmányok MT-DP 2016/16.

This paper considers trade agreements in a sufficiently general framework to encompass both imperfectly competitive market structures and income effects in government objectives. We show that governments choose globally efficient policies if they act as if they do not value the impact of their policies on their terms of trade. The results confirm that additional international externalities that arise in imperfectly competitive settings are the result of government failure to equate markups between sectors with domestic policies, not demandside factors.

DeRemer, David R. (2016). The principle of reciprocity in the 21st century

IEHAS Discussion Papers MT-DP 2016/13.

The principle of reciprocity is central to trade cooperation. Economic theory characterizes reciprocal policy changes that guide nations from noncooperative policies to the Pareto efficiency frontier. This paper extends the theory of reciprocity to a wide range of settings relevant for 21st century trade negotiations. Global value chains and rigid institutional constraints can lead to nations lacking the policy space necessary to influence relevant local prices abroad. Trade agreements then have a role in addressing these local price externalities in addition to the usual terms-of-trade externality. Yet we show that the standard concept of reciprocity—policy changes that equally increase net export value at world prices—can nonetheless guide nations toward the efficiency frontier. The crucial condition for reciprocity’s application is that the policy changes which undo the terms-of-trade inefficiencies also undo the other inefficiencies. We find a set of policies such that no nation can gain from any reciprocal unwinding of trade commitments, and we show that these policies are globally efficient. Such stable policies are then a suitable prediction for trade negotiation outcomes when local price externalities matter. We derive the new predicted outcome and explore its relevance for existing theory and empirics of trade cooperation, including settings with imperfect competition, political economy, and global value chains.

Reizer, Balázs (2016). Do firms pay bonuses to protect jobs?

IEHAS Discussion Papers MT-DP 2016/12.

A large share of workers receives bonus payments besides their base wage. The benefits of flexible wage components in remuneration are twofold: they can incentivize workers and make it easier to adjust wages downward in response to negative shocks. Using data on bonus payments of Hungarian workers from linked employer-employee data, I disentangle the importance of these two factors to assess their respective importance. First, I show that bonus payments flexibly adjust to the revenue shocks of firms. At the same time, the separation rate of workers without bonuses do not react more to revenue changes than the separation rate of workers with bonuses. Bonus paying firms are shown to be financially more stable, larger and more productive, and they have less volatile revenue than firms not paying bonuses. These facts are consistent with a wage posting model with incentive contracting, but they are hard to reconcile with models emphasizing the role of bonus payments in alleviating wage rigidity. These results indicate that wage flexibility regulations may not affect the employment responses of firms to negative shocks.

Békés, Gábor, & Balázs Muraközy (2016). Measuring productivity premia with many modes of internationalization

Economics Letters, 139, 61-64.

This paper shows that estimating productivity premia for internationalization modes requires information compression when firms can choose from many modes. The different approaches are illustrated using unique survey data on European firms. The authors suggest that researchers should deliberately choose from them and check robustness.

Békés, Gábor & Gianmarco I.P. Ottaviano (2016). Micro-founded measurement of regional competitiveness in Europe

In Altomonte, Carlo & Gábor Békés (Eds.), Measuring competitiveness in Europe: resource allocation, granularity and trade (26-46), Bruegel Blueprint Series #24. Brussels: Bruegel.

Enhancing competitiveness is a popular target in economic policy making – not only at the national, but at the regional level as well despite neither generally accepted definition nor any strong agreement on how to measure it. In this chapter we discuss the conceptual underpinnings of why it is interesting to unpack the economic performance of a country into the economic performance of its regions. We argue that as firms compete; measuring regional competitiveness should be also based on comparing firm performance across EU regions. Given available data, we propose a new way to gauge how firms fare is to look at their ability to access and penetrate world markets. The key index is export per worker from a region to non-EU destinations relative to the EU average – a „regional competitiveness‟ index that captures the capacity of a region‟s firms to outperform the firms of the average EU region in terms of exports.


Hornok, Cecília, & Balázs Muraközy (2015). Magyar vállalatok haszonkulcsai [Mark-ups of Hungarian firms; in Hungarian]

Közgazdasági Szemle [Hungarian Economic Review], 62(10), 1048-1069.

This paper presents the methods for estimating firm-level markups, with special emphasis on that of De Loecker and Warzynski (2012), which calls for relatively little data and relies on few assumptions. Firm mark-ups are estimated by this method using 2001-2012 data from Hungarian manufacturing firms with at least five employees. Then the way the mark-ups relate to the characteristics of the firm are analysed. It is shown that firms charge higher mark-ups relative to other firms in the same industry if they have larger market shares, are younger, charge lower wages, or are based in a more developed region. Also discussed is the role of foreign trade. It is shown that importing is associated with a higher mark-ups even after taking the firm’s productivity into account, whereas the mark-up premium for exporters is due to self-selection for exporting by firms that are more productive.

Hornok, Cecília, & Miklós Koren (2015). Administrative barriers to trade

Journal of International Economics, 96(S1), S110-S122.

We build a model of administrative barriers to trade to understand how they affect trade volumes, shipping decisions and welfare. We derive a gravity equation in our model and show that administrative costs can be expressed as bilateral ad-valorem trade costs. We estimate the ad-valorem equivalent in Spanish shipment-level export data and find it to be large. A 50% reduction in per-shipment costs is equivalent to a 9 percentage point reduction in tariffs. Our model and estimates help explain why policy makers emphasize trade facilitation and why trade within customs unions is larger than trade within free trade areas.

Muraközy, Balázs & Katheryn N. Russ (2015). Competition with multinational firms: Theory and evidence

IEHAS Discussion Papers MT-DP 2015/34.

Do multinational firms wield more market power than their domestic counterparts? Using Hungarian firm-level data between 1993 and 2007, we find that markups are 19 percent higher for foreign-owned firms than for domestically owned firms. Moreover, markups for domestically owned firms are significantly lower in industries where multinationals have a greater technological edge, suggesting that Ricardian differences in technology and endogenous markups constitute important dimensions for models of foreign direct investment. We innovate within a canonical Ricardian model of endogenous markups and heterogeneous firms to provide analytical distributions of market shares and markups when goods are imperfect substitutes to provide structure for our empirical analysis. Our model explains about half of the multinational markup premium identified in the empirical analysis.

DeRemer, David R. (2015). Opportunities for cooperation in removing prohibitive trade barriers

IEHAS Discussion Papers MT-DP 2015/33.

Much potential for trade liberalization exists in industries and markets with trade barriers that are prohibitive for all or many firms. In standard political economic theories of trade policy, observed prohibitive barriers must be globally optimal according to static government preferences, leaving no possibility for a trade agreement. This paper shows that for prohibitive policies in imperfectly competitive markets, a trade agreement can still play a role even without any changes in governments’ policy preferences. Theory can then further identify market characteristics for which liberalization is most likely to be feasible. To illustrate the simplest case, we consider a two-country model with firms engaged in Cournot competition in segmented markets. For plausible ranges of political weights on firm profits, there is a role for a trade agreement in eliminating prohibitive trade barriers. We then consider how the potential for cooperation varies with trade costs and competition. Industries with more firm heterogeneity have greater potential for cooperation, provided that the lower productivity firms are sufficiently competitive. The implications of these results are discussed for negotiations involving either developing country exporters or services trade, two areas in which prohibitive trade barriers remain important.

Muraközy, Balázs (2015). How do exporters react to the prices of their competitors?

IEHAS Discussion Papers MT-DP 2015/32.

This paper uses firm-product-destination level trade data from Hungary linked to Eurostat data on unit values and quantities in production, imports and exports of products in EU member states to see how firms react following price and exchange rate changes in their export markets. The results show that exchange rate pass-through is similar to that found in other countries, but the elasticity with respect to changes in the market price is only about a precisely estimated 0.02, suggesting that firms adjust their markups very differently following exchange rate and price shocks. In addition, quantity reaction after a change in the market price is quite small, suggesting a very low residual demand elasticity. Regarding heterogeneity, the paper finds that exchange rate pass-through is more incomplete for larger firms, while reaction to price changes is stronger for products which Hungary competes with low price competitors. These results are not easy to explain in a flexible price model, but can be in line with multi-year contracts which handle different shocks differently.

Hornok, Cecília & Balázs Muraközy (2015). Markup and productivity of exporters and importers

IEHAS Discussion Papers MT-DP 2015/30.

This paper studies the relationship between firm markups and importing intermediate inputs and exporting using detailed firm-level data from Hungary in 1995-2003. We estimate production functions structurally to obtain firm-year-level productivity and markup estimates. We find that importing intermediate inputs is associated with large markup premium, while the exporter markup premium is nonexistent when we control for the importer status. We interpret our results in a simple theoretical framework, where firms lower their markup when exporting to more competitive foreign markets and where importing intermediate inputs leads to higher-quality products.

Békés, Gábor (2015). Measuring regional competitiveness: A survey of approaches, measurement and data

IEHAS Discussion Papers MT-DP 2015/29.

This paper reviews a set of issues related to the concept and measurement of regional competitiveness. First, the concept of growth and competitiveness is argued to be different at regional level from the national level. In particular, the relationship between agglomeration and performance, the role of FDI in regions, and the key aspect of local institutions are analyzed. Second, a detailed review is carried out on potential data sources to gauge regional competitiveness using official, private sector as well as academic datasets.

Vonnák, Dzsamila (2015). Decomposing the riskiness of corporate foreign currency lending: the case of Hungary

IEHAS Discussion Papers MT-DP 2015/28.

I decompose the factors contributing to the riskiness of foreign currency borrowers. I compare counterfactual default probabilities of local and foreign currency borrowers estimated on disaggregated data. My results suggest that the currency mismatch with the depreciation of the local currency is the most important factor contributing to the riskiness of foreign currency borrowers, though boom-period excessive risk taking of banks is also concentrated in foreign currency lending.

Conconi, Paola, David R. DeRemer, Egorg Kirchsteiger, Lorenzo Trimarchi & Maurizio Zanardi (2015). Suspiciously timed trade disputes

IEHAS Discussion Papers MT-DP 2015/23.

This paper shows that electoral incentives affect the occurrence of trade disputes. Focusing on WTO disputes filed by the United States during the 1995-2012 period, we show that U.S. presidents are more likely to initiate a dispute in the year preceding their re-election date. Moreover, disputes filed by the U.S. tend to target industries that are important to swing states in the presidential election. To explain these regularities, we develop a theoretical model in which an incumbent can file a trade dispute to appeal to voters motivated by reciprocity. The incumbent’s ability to initiate a dispute during the re-election campaign provides an advantage over the challenger, who cannot commit to file the dispute if elected. If voters’ ideological preferences are not too strong in favor of either candidate, the incumbent will file a trade dispute to increase his re-election chances.

    • Other versions:

Conconi, Paola, David R. DeRemer, Egorg Kirchsteiger, Lorenzo Trimarchi & Maurizio Zanardi (2015). Suspiciously timed trade disputes. ECARES Working Paper 2015-16.

Conconi, Paola, David R. DeRemer, Egorg Kirchsteiger, Lorenzo Trimarchi & Maurizio Zanardi (2015). Suspiciously timed trade disputes. CEPR Discussion Papers 10582.

Conconi, Paola, David R. DeRemer, Egorg Kirchsteiger, Lorenzo Trimarchi & Maurizio Zanardi (2015). Suspiciously timed trade disputes. Lancaster University Economics Working Paper Series 2015/010.

Hornok, Cecília, & Miklós Koren (2015). Per-shipment costs and the lumpiness of international trade

Review of Economics and Statistics, 97(2), 525-530.

Using detailed U.S. and Spanish export data, we document that trade costs of a per-shipment nature are associated with less frequent and larger shipments, i.e. more lumpiness, in international trade. This finding is pervasive across broad product categories, but most apparent for industrial supplies, parts and accessories and food products.

Békés, Gábor, & Zsuzsa Holler (2015). Barriers to data access and matching in Europe

In Castellani, Davide & Andreas Koch (Eds.), Mapping competitiveness with European data (104-117), Bruegel Blueprint Series #23. Brussels: Bruegel.

Chapter 4 of the report presenting the results of the MAPCOMPETE project summarizes what has been learned about availability, matchability, accessibility, and quality of microdata needed to calculate bottom-up competitiveness indicators. The project revealed substantial differences between EU member states, due to reasons such as different practices of national statistical offices, rules of confidentiality, and technical constraints. Both research and policy formation would benefit from better data matching opportunities within and between countries. Moreover, availability of metadata and rules of access needs to be improved substantially to meet existing international standards.


Ackerberg, Daniel A., David R. DeRemer, Michael H. Riordan, Gregory L. Rosston, & Bradley S. Wimmer (2014). Estimating the impact of low-income universal service programs

International Journal of Industrial Organization, 37, 84–98.

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for households below the poverty line. Our results suggest that Linkup is more cost-effective than Lifeline, which calls into question a recent FCC (2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Ongena, Steven, Ibolya Schindele & Dzsamila Vonnák (2014). In lands of foreign currency credit, bank lending channels run through?

IEHAS Discussion Papers MT-DP 2014/24.

We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for time-varying firm-specific heterogeneity in loan demand, we find that a lower domestic interest rate expands the supply of credit in the domestic but not in the foreign currency. A lower foreign interest rate on the other hand expands lending by lowly versus highly capitalized banks relatively more in the foreign than in the domestic currency.

Bakonyi, Zoltán (2014). Miként befolyásolják a stratégiai gondolkodásmódok a vállalat innovativitását? [How do ways of strategic thinking influence firm innovativity?; in Hungarian]

Vezetéstudomány [Budapest Management Review], 45(6), 37-48.

Strategic thinking is the set of cognitive schemes of individuals working in an organization, which fundamentally affect their assumptions about the business opportunities of the organization, and, as a result, strategy and innovation in the firm. The article identifies four basic ways of strategic thinking with respect to relation to innovation. Three hypotheses are developed for future empirical investigation. First, the more dynamic the strategic thinking of the firm, the more radical innovation initiatives it supports. Second, firms tend towards more static strategic thinking with time due to their pursuit of stability. Third, the more consistent the strategic thinking of the firm, the more the planned strategy is realized.


Altomonte, Carlo, Tommaso Aquilante, Gábor Békés, & Gianmarco I.P. Ottaviano (2013). Internationalization and innovation of firms: Evidence and policy

Economic Policy, 28(76), 663-700.

Using a representative and cross-country comparable sample of manufacturing firms (EFIGE) in seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom), we find strong evidence of positive association among firm-level internationalization, innovation and productivity across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization. We recommend coordination and integration of internationalization and innovation policies ‘under one roof’ at both the national and EU levels, and propose a bigger coordinating role for EU institutions.

Békés, Gábor, Balázs Muraközy, Zsuzsa Munkácsi & Gábor Oblath (2013). Unit values, unit labor costs and trade performance in four Central European countries

IEHAS Discussion Papers MT-DP 2013/29.

Our paper, relying on product and industry level data, analyses factors behind divergences in aggregate export price changes in four Central European countries, Poland, Hungary, Czech Republic and Slovakia. We focus on exports to Germany, their largest trading partner and observe the period 2000-2010. As our hypothesis is that divergence in changes may be explained by convergence in levels, we construct relative level indices of export unit values (UVs, as proxies of export prices) and unit labor costs (ULCs), based on the COMEXT and EU KLEMS databases, respectively. By merging the relative level indices with trade performance indicators (export volumes, market shares, extensive and intensive margins), we investigate the relation between UVs and ULCs, their changes, as well as their respective impact on trade performance. Our results suggest that (i) there is convergence in the four countries’ export UV levels, (ii) changes in UVs were positively correlated with changes in ULCs, (iii) a higher UV increase was associated with lower growth in export volume, (iv) the level of ULC and that of labor productivity does not show convergence, but the level of labor costs and wage shares do. The results indicate that our approach helps understanding factors contributing to changes in UVs, as well as trade performance of countries. However, to reach more general results, the approach should be extended to more countries and markets.

Békés, Gábor, & Péter Harasztosi (2013). Agglomeration premium and trading activity of firms

Regional Science and Urban Economics, 43(1), 51–64.

In this paper we argue that externalities that determine density premium for firms will be affected by the firms’ involvement in trade. Firms active in international trade may employ a different bundle of resources and be organized differently so that they would appreciate inputs and information in a different fashion and intensity. Using Hungarian manufacturing firm level data from 1992 to 2003 at a 150 micro-region level, we show that the elasticity of agglomeration on productivity is much larger for traders than for non-traders and the estimated gap is well above the gap suggested by simple self-selection models.

Békés, Gábor, László Halpern, & Balázs Muraközy (2013). Külkereskedelem és a vállalatok közötti különbségek [Foreign trade and firm heterogeneity; in Hungarian]

Közgazdasági Szemle [Hungarian Economic Review], 60(1), 1-24.

Our paper presents the general properties of Hungarian foreign trade using balance sheet and product-level trade data. Our empirical analysis is based on models with heterogeneous firms and we find that foreign trade is highly concentrated. Firms involved in foreign trade are more productive than similar non-trading firms. Trade status is more important in explaining differences between firms than foreign or Hungarian ownership. Based on the results on the relation of export and import, the role of innovation, the stability of foreign trade, it can be stated that entering in foreign markets is key in competitiveness and growth. Economic policy has to consider this and support entry to foreign markets with the appropriate measures.


Görg, Holger, Richard Kneller, & Balázs Muraközy (2012). What makes a successful export?: Evidence from firm-product-level data

Canadian Journal of Economics/Revue canadienne d’économique, 45(4), 1332-1368.

A stylized fact in the data is that many firms add as well as drop products from the export mix in any given year. In this paper we investigate what determines the survival of products in the export mix using a very rich panel database which provides information on exports at the firm-product level. Estimating hazard models we find evidence that is consistent with the view that characteristics of the product as well as that of the firm matter.

Békés, Gábor & Péter Harasztosi (2012). Tax credit, exports and regional disparity: microevidence from Hungary 

EFIGE Working Paper 56.

Hungary applied a generous corporate tax credit scheme for the 1998-2000 period. Over 40% of all manufacturing firms received subsidy by applying a deduction from its payable corporate tax. As the tax credit was related to investment, firms could use these funds to expand into foreign markets. Using a new firm level data from Hungary, with direct information on tax credit use, we investigate how this tax credit affected entry into exporting. We find that a firm is about 4% more likely to start exporting if it had received a tax credit. In terms of the policy’s regional impact, we find that the impact of tax credit regarding export market entry is not strongly dependent on regional disparity.

Békés, Gábor, & Balázs Muraközy (2012). Temporary trade and heterogeneous firms

Journal of International Economics, 87(2), 232–246.

Using Hungarian firm-transaction level export data, we show that about one third of firm–destination and about one half of firm–product–destination export spells are short-lived, or temporary, each year. We build a model in which the likelihood of temporary trade depends on productivity and capital cost of the firm as well as well-known gravity variables of destinations. We show how endogenous choice between variable and sunk cost trade technologies can explain the empirical importance and some characteristics of temporary trade.

Halpern, László, & Balázs Muraközy (2012). Innovation, productivity and exports: the case of Hungary

Economics of Innovation and New Technology, 21(2), 151-173.

This paper estimates the relationship between innovation and firm performance by using Community Innovation Survey data for Hungary linked to ownership and disaggregated trade data. We find that innovative firms are more productive, more likely to trade and export more products to more countries. We also test for differences in innovative behavior in high- and low-tech industries, and study whether domestic and foreign firms differ in this respect.

Békés, Gábor, Lionel Fontagné, Balázs Muraközy, & Vincent Vicard (2012). How frequently firms export? Evidence from France 

CeFiG Working Papers, no. 18

This paper proposes studying export frequency as an additional margin of international trade. While extensive margins of products and destination define the scope of firm’s export, export shipment frequency is determined by sale method choice and cost structure of the trade technology in our model. Using monthly firm-product-destination level export data from France, we show that key predictions of the model are validated in a gravity model setting that also allows for comparing various margins of trade.

Békés, Gábor, & Balázs Muraközy (2012). Magyar gazellák: A gyors növekedésű vállalatok jellemzői és kialakulásuk elemzése [Hungarian gazelles: Characteristics of rapidly growing firms and an analysis of their emergence; in Hungarian]

Közgazdasági Szemle [Hungarian Economic Review], 59(3), 233—262.

In this study we analyze the properties of rapidly growing Hungarian firms – gazelles – using balance sheet and profit and loss account data. Our investigation shows that the major part of job creation can be attributed to a couple of firms. Firms become gazelles with similar probability across industries and regions in Hungary. Using probit regressions we show that young firms with better financing position, employing well-educated people, growing rapidly in previous periods become gazelles with higher probability. According to the results, rapid growth can be only weakly predicted from financial statements.


Békés, Gábor, László Halpern, Miklós Koren & Balázs Muraközy (2011). Still standing: how European firms weathered the crisis — The third EFIGE policy report

Bruegel Blueprint Series #15. Brussels: Bruegel.

This research output confirms the strength of the approach underpinning the EFIGE project, which is based on the recognition that firms are heterogeneous in the extent and the pattern of their internationalisation, as they are in many other respects.
The project provides more, and more precise, evidence of what makes firms successful and therefore also what makes countries successful in the context of globalisation. Internationalisation, however, also makes firms vulnerable to shocks affecting international trade and may transform them into agents of propagation of global downturns.
At the time of the Great Recession of 2009, there was intense speculation about the reasons why trade collapsed much more than output. It was sometimes claimed that global supply chains were not only propagators, but also multipliers of international fluctuations.
This report by László Halpern and his colleagues makes use of the fact that the EFIGE survey was – by accident – conducted in 2009 and – by design – included questions about the firms’ response to the global crisis. It provides a fascinating account of what happened to them in an especially turbulent environment. The stylised facts presented in this report are important to bear in mind at a time when Europe is heading for another severe downturn.

Hornok, Cecília (2011). Gravity or dummies? The limits of identification in gravity estimations

CeFiG Working Papers, no. 15

In this paper I argue that in a gravity model the identifiability of policy parameters that capture the effect of certain ”club memberships” (EU, NAFTA, euro area, WTO, etc.) on trade flows is limited if exporter-time and importer-time fixed effects in a panel, or exporter and importer fixed effects in a cross section estimation are included. I illustrate the findings with estimating the effect of EU enlargement in 2004 on the trade flows of new and old members. Finally, I discuss potential solutions.

Hornok, Cecília, & Miklós Koren (2011). Lumpy trade and the welfare fffects of administrative barriers

CeFiG Working Papers, no. 14

Using detailed U.S. and Spanish export data, we document that administrative trade costs of per shipment nature (documentation, customs clearance and inspection) lead to less frequent and larger-sized shipments, i.e. more lumpiness, in international trade. In our model exporters decide not only how much to sell at a given price, but also how to break up total trade into individual shipments, and consumers value frequent shipments, because they enable them to consume close to their preferred dates. Calibrating the model to observed shipping frequencies and per-shipment costs, we show that countries would gain 2-3 percent of their GDP by eliminating such barriers.

Békés, Gábor, Miklós Koren & Péter Zsohár (2011). Benzinárak földrajzi meghatározása [Geographical pricing of retail petrol prices; in Hungarian]

IEHAS Discussion Papers MT-DP 2011/30.

The theory of geographical markets is based on the notion that economic activity is not evenly spread and regional inequalities have an impact on the decisions of economic agents. Retail gasoline markets are almost perfect examples of geographical markets. The gasoline sold by the stations is a fairly homogeneous good and hence, stations compete for customers locally only. In this study we analyze how market structure, geographical attributes and in particular, demand will influence prices. Our work is a natural follow-up to the study of Csorba et al. (2009) who showed that Hungarian retail gasoline prices are affected by conditions of market competition. Compared to the related literature there are two novelties in this study. First, the dataset allows us combining station specific and local attributes to explain prices. With some chains applying different strategies compared to smaller firms, this is an important complementary feature compared to the studies relying on purely region/local market specific attributes. Second, we extend the estimation of the demand side and partly use it as instruments. Local GDP and population density are two common proxies for demand. We extend the analysis from households to contain firms’ and transit traffic demand. To estimate the elasticity of demand we use quantitative (population, number of firms and tourists) and income-effect (per capita income, ratio of big firms and foreign tourists) variables. This methodology enables us to instrument station density, used in classical price estimation models, (partly) with demand factors. We find that demand influences prices mainly through the number of stations. There is some local price variation across chains, and the composition of station has a small impact as well. It is an interesting result, which, along with highways and country borders, has an effect on price determination.

Békés, Gábor, Péter Harasztosi, & Balázs Muraközy (2011). Firms and products in international trade: Evidence from Hungary

Economic Systems, 35(1), 4-24.

This paper provides a detailed description of Hungarian trade data and key patterns drawn at the firm and product level using the IEHAS-CEFiG Hungary dataset, an almost universal panel of balance sheet information (1992–2006) merged with firm-product-country level customs data (1992–2003) taken until the 2004 EU accession. Statistics describe the prevalence of trading activity, typology of firms by internationalization, and concentration of trade volume within and across sectors both for exports and imports. Furthermore, firm heterogeneity is also studied in terms of traded products as well as partner countries. With some transition-related differences, we find Hungarian trade activity to broadly match most open economy evidence.

Békés, Gábor, László Halpern, & Balázs Muraközy (2011). A teremtő rombolás szerepe a vállalati termelékenység alakulásában Magyarországon [The effect of creative destruction on firm productivity in Hungary; in Hungarian]

Közgazdasági Szemle [Hungarian Economic Review], 58(2), 111-132.

In this paper we examine the relationship between the productivity growth of the corporate sector and firm dynamics using firm-level data in the period between 1992 and 2006. Theories involving firm heterogeneity show that sectoral productivity growth may, beside productivity growth of certain firms, arise from the realignment of firms’ weight, creative destruction. We show that the productivity growth of Hungarian industries is mainly caused by the improvement of continuing firms; creative destruction is also a significant factor.


Altomonte, Carlo, & Gábor Békés (2010). Trade complexity and productivity

CeFiG Working Papers, no. 12

We exploit a panel dataset of Hungarian firms merged with country and product-level trade data for the period 1992-2003 to investigate the relation between firms’ trading activities (importing, exporting or both) and productivity. We measure some characteristics of the traded bundles associated to various technological and relationship-specific dimensions of the trade activity, which we generally refer to as ‘trade complexity’. We find that our indicators of complexity are jointly correlated to the ex-ante productivity of trading firms but the elasticity of productivity to a change in the trade complexity indicators varies with different indicators of complexity and with the trade status of the firm.

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Halpern, László, & Balázs Muraközy (2010). Innováció és vállalati teljesítmény Magyarországon [Innovation and firm performance in Hungary; in Hungarian]

Közgazdasági Szemle [Hungarian Economic Review], 57(4), 293-317.

In this study we examine the connection between corporate performance and innovation with the help of Hungarian data of the Community Innovation Survey (CIS). We concord the innovation data with balance sheet and trade data. The innovative firms are more productive, take part in foreign trade with greater probability and export to a larger number of countries. The proportion of firms with foreign ownership conducting innovation is larger than that of domestic-owned firms. The connection between R&D spending and the outcome of innovation is weak.

Görg, Holger, László Halpern & Balázs Muraközy (2010). Why do within firm-product export prices differ across markets?

IEHAS Discussion Papers MT-DP 2010/3.

In this paper we analyse the relationship between gravity variables and f.o.b. export unit values using Hungarian firm-product-destination data. By taking firm-product level selection into account we show that export unit values increase with distance even for particular firm-product combinations. This cannot be explained by models assuming firm- or even firm-product level selection and constant markups. The differences are important quantitatively; price differences in Hungarian exports between Germany and the US are about 30%. We also show that unit values are positively related to GDP/capita and that there is a weak negative relationship between unit values and market size. We propose two possible explanations: first, firms may export different quality versions of the same product to different markets. Secondly, directly exporting firms may capture part of the markups on transport costs in their f.o.b. prices.


Békés, Gábor, Jörn Kleinert, & Farid Toubal (2009). Spillovers from multinationals to heterogeneous domestic firms: Evidence from Hungary

The World Economy, 32(10), 1408-1433.

Technological and informational spillovers through the entry of multinational firms can be particularly beneficial to domestic firms. Yet, the importance of foreign firm’s spillovers might depend on two key features of domestic firms: their productivity level and export status. We argue on the basis of an empirical analysis of Hungarian firms that – in line with the theories – larger and more productive firms are more able to reap spillovers from multinational firms than smaller firms, while export status turns out to be of minor importance.

Görg, Holger, Alexander Hijzen, & Balázs Muraközy (2009). The role of production technology for productivity spillovers from multinationals: Firm-level evidence for Hungary

Aussenwirtschaft: schweizerische Zeitschrift für internationale Wirtschaftsbeziehungen, 64(1), 19-44.

This paper analyses the potential for productivity spillovers from inward foreign direct investment using administrative panel data on firms for Hungary. We find that 1) firms that relocate labor-intensive activities to Hungary to exploit differences in labor costs are unlikely to generate productivity spillovers, while spillovers increase in the capital intensity of foreign affiliates, 2) spillovers differ markedly in the early and later stages of transition, and that there are differences between small and large firms, 3) foreign presence tends to affect the productivity of domestic firms negatively whenever MNEs produce for the domestic market.


Halpern, László & Balázs Muraközy (2007). Does distance matter in spillover?

Economics of Transition, 15(4), 781-805.

Our aim in this paper is twofold: to find whether FDI causes horizontal or vertical productivity spillovers to domestically-owned Hungarian manufacturing firms, and to see if distance matters in spillovers. For this exercise we use a large panel of Hungarian firms and different panel models. Consistently with previous research, at the country level, we find positive vertical spillovers but no evidence of positive horizontal spillovers. By taking distance into consideration, however, we find positive horizontal spillovers for domestic firms close to foreign-owned firms. By constructing spillover measures weighted by distance, we find similar patterns. Our results underline the importance of labour market rigidity and the local nature of knowledge in the case of horizontal spillovers.


Békés, Gábor (2005). Location of manufacturing FDI in Hungary: How important are inter-company relationships?

MNB Working Papers MT-DP 2005/7.

In a new economic geography framework with input-output linkages, this study analyses decisions made by foreign firms about their location within Hungary. These firm-to-firm contacts are modelled by creating several corporate customer and supplier access measures for all new foreign corporations. In order to see the impact of these variables other forces of agglomeration such as distance to Western European markets and dispersion forces such as high wages are taken into account. Investigation is carried out on a small-to-medium sized European economy that has just gone through economic transition involving almost unprecedented rapid market liberalisation. A rich dataset of corporate tax returns of Hungarian firms between 1992 and 2002 as well as annual labor surveys are used to get location, sales and wage data. Various econometric specifications of both discrete choice and count data models are applied to provide robustness of results that may be crucial when working with firm level data.

Békés, Gábor & Balázs Muraközy (2005). Firm behaviour and public infrastructure: the case of Hungary

IEHAS Discussion Papers MT-DP 2005/4.

In the paper, we test the effect of local development, regional and local policies on the location decisions and productivity of firms. Development indicators include local research and development activity or education while policy decisions used in this study encompass for example tax rates, investment incentives or road construction. The study builds upon a large national panel of firms. Importantly, such a rich dataset has rarely been employed for productivity and location choice exercises. The paper is composed of two sections dealing with location choice and productivity, respectively and we compare the effect of variables used in both sections. Among others, we find that density of road network positively influenced location choice and productivity as well, while a somewhat larger size of administration helps new firms to settle but later on, it has no effect on productivity.


Békés, Gábor (2004). Motives of corporate location choice

In Károly Fazekas, Jenő Koltay & Zsombor Cseres-Gergely (Eds.), The Hungarian labour market: Review and analysis 2004 (pp. 115-125). Budapest: Institute of Economics HAS & National Employment Foundation.

Chapter 4 of the report presenting the results of the MAPCOMPETE project summarizes what has been learned about availability, matchability, accessibility, and quality of microdata needed to calculate bottom-up competitiveness indicators. The project revealed substantial differences between EU member states, due to reasons such as different practices of national statistical offices, rules of confidentiality, and technical constraints. Both research and policy formation would benefit from better data matching opportunities within and between countries. Moreover, availability of metadata and rules of access needs to be improved substantially to meet existing international standards.


Békés, Gábor (1998). Optimális valutaövezetek, gazdasági integráltság és hasonlatosság: az Európai Unió példája [Optimum currency areas, economic integration and similarity: the case of the EU; in Hungarian]

Közgazdasági Szemle [Hungarian Economic Review], 45(7-8), 709-737.

The process of European monetary integration and the disintegration of currency unions due to the transitions in Eastern-Europe raise important questions related to monetary policy. Therefore, it is not incidental that the theory of optimal currency areas has become one of the major issues in international monetary economics. This field examines the conditions for regions and countries to adopt a common currency. This study presents the role similarity and integration play in economic preferences, inflation, external trade, production structure, the mobility of production factors and fiscal sector. Besides drawing attention to theoretical results, we present the experience of the European integration.