Political Determinants of Subsidies. The Case of Hungary

Participants: Balázs Muraközy and Álmos Telegdy
Funding: GDN

This research studies whether political concerns affected the allocation of grants financed by the EU Cohesion Fund in Hungary between 2005 and 2011. Understanding the logic of the allocation of these funds is important in itself, as these grant programs are intended to help Hungarian regions to catch-up and they constitute a significant part of the EU’s effort to help the economic convergence of new member states. The research may also shed light on the working of political institutions in Hungary and similar countries. For this exercise, we use data about applications for these funds (both successfully and unsuccessfully), and merge it with data on election results and regional development at the municipality level. Motivated by the literature on distributive politics, we ask whether electoral districts of more important incumbent politicians or with harsher political competition received more funds.

Economics analysis and merger control

Participants: Gergely Csorba, Alíz McLean and Balázs Muraközy
Funding: OTKA

This research aims to describe the effects of the growing importance of economic analysis in competition policy, specifically in the possibly most important field of merger control. The transparent decision making system and large number of merger cases of the European Commission provides a good opportunity for such empirical research.
Besides policy relevance, this question is also strongly related to important theoretical questions on the incentives for mergers in Industrial Organization and on the optimal design of policy enforcement framework in Law and Economics. Understanding the nature of these changing incentives and their impact requires the deep analysis of the changes in competition policy, which is the main goal of this research.

Markups and the scope of trade

Participants: Cecília Hornok and Balázs Muraközy

We explore the relationship between foreign trade activity (exporting and material imports) of the firm and its markup over marginal cost. The scope of trade is captured by the number of traded products and of partner countries. We estimate firm-level markups for the Hungarian manufacturing sector following De Loecker and Warzynski (Markups and Firm-Level Export Status, AER 2012). The preliminary findings reveal a strong positive relationship between markups and the importing activity, while results on the scope are mixed. The exporting activity and export scope do not associate with higher markups after controlling for imports.

Bank shocks and trade

Participants: Dzsamila Vonnák

There was a credit expansion in the lead up to the 2008 financial crisis, which then followed by a credit crunch in the crisis years. The credit cycle affect the economy activity of firms and thus their trade decisions. In this research I analyze how bank shocks affect domestic and international trade using disaggregated trade data.

Spatial structure, regional competitiveness and firm behavior in open economies

Participants: Gábor Békés
Funding: MTA Bolyai Grant

This research aims at understanding the role spatial structure in explaining regional inequality. We extensively consider firm behavior and activities, analyzing spatial consequences of location choice as well as trading activities. The project calculates various measures of spatial concentration, introduces methodological novelties, defines regional competitiveness and analyzes the relationship between local determinants of business conditions and firm decisions. The project uses Hungarian as well as EU data.

Mapping European Competitiveness

Participants: Gábor Békés, László Halpern
Funding: EU FP7

“Mapping European Competitiveness” (MAPCOMPETE) is an FP7 project of six European universities and research centers to provide an assessment of data opportunities and requirements in order to analyze and compare competitiveness in European countries. Competitiveness is at the heart of policy making at the Union level. Therefore, the definition of new country-level competitiveness indicators is an essential task. The aim of this project is to provide a thorough assessment of data opportunities and requirements for the analysis of comparative competitiveness in European countries. The project aims at identifying gaps in available datasets and key data requirements for constructing better competitiveness indicators at different levels of aggregation. A key objective is to analyze the combined use of three types of resources: census-type quantitative data (e.g. national tax authority), quantitative survey data (e.g. EFIGE survey), and qualitative (interview-based) information. Integrating these sources may allow for a deeper understanding of a wide range of topics related to competitiveness. Indeed, in terms of competitiveness analysis, our primary focus is on firm performance. However, we approach this from a wider angle. Hence, the data analyzed do not only cover traditional balance sheet figures, but they also include areas such as R&D, innovation, non-tangible assets, data on stakeholders (entrepreneur/owner characteristics, social capital, state/local government), or information about global value chains.

Corporate strategy in crisis

Participants: Zoltán Bakonyi

The main aim of this research is the identification and description of specific corporate strategies implemented during and after the economic crises. Its three main focuses are strategic management; centralization; and innovation.
In the strategic management part the most important strategic patterns (e.g. downsizing; cost-saving; diversification; investment etc.) are linked to specific firm characteristics (e.g. region; size; sector; profitability etc.). The second part is dedicated to describe why specific firms centralize or decentralize during the time of crisis. The innovation part describes how innovation activities are reshaped in downturn.
The research is mainly based on EFIGE and Amadeus databases.