Limits and prospects of institutional liberalization for S&T research policies: Russia case Svetlana Kirdina Russian Academy of Sciences, Institute of

Limits and prospects Limits and prospects of institutional liberalizationof institutional liberalization for S&T for S&T

research policiesresearch policies: : Russia caseRussia case

Svetlana KirdinaRussian Academy of

Sciences, Institute of Economics

Moscow Russia

India, Kanpur, February 4-6, 2009

Main parts of presentationMain parts of presentation

MethodologyMethodology

ResultsResults

ExplanationsExplanations


Institutional matrices theoryInstitutional matrices theory

Economy, politics and ideology in the society are Economy, politics and ideology in the society are strongly interrelated strongly interrelated

Economic, political and ideological institutions Economic, political and ideological institutions comprise comprise

the “institutional matrix” of the societythe “institutional matrix” of the society Two types of institutional matrices can be singled Two types of institutional matrices can be singled

out: an X-matrix and an Y-matrixout: an X-matrix and an Y-matrix (in details see Kirdina S. in (in details see Kirdina S. in Proceedings of Hawaii Proceedings of Hawaii

International Conference on Social Sciences, 2003 International Conference on Social Sciences, 2003 or or www.kirdina.ru) www.kirdina.ru)


X- and Y-matricesX- and Y-matrices

XY

redistribution economy

com

munit

ari

an

ideolo

gy

unitary-

centralize

d

political o

rder

feder

ativ

e-

subsi

dia

ry p

olit

ical

ord

er

ideolo

gy o

f

subsid

iarity

market economy


Combinations of X- and Y-matricesCombinations of X- and Y-matrices

Russia, China, the USA andRussia, China, the USA and most Asian and European most Asian and European Latin America countries countries Latin America countries countries

Y

X X

Y


X- and Y-institutions X- and Y-institutions in economyin economy and their functions and their functions Functions of institutions

X-institutions Y-institutions

Fixing of goods (property rights system)

Supreme conditional ownership

Private ownership

Transfer of goods Redistribution (accumulation-concordance-distribution)

Exchange (buying-selling)

Interactions between economic agents

Cooperation Competition

Labor system Employed labor Contract labor

Feed-back signals (effectiveness indexes)

Cost reduction (Х-efficiency)

Gaining profit (Y- efficiency)


Causes of economic reformsCauses of economic reforms By the middle 1980s on the eve of By the middle 1980s on the eve of

perestroikaperestroika (in terminology of the Soviet (in terminology of the Soviet Union) or Union) or transition economytransition economy (in terms of (in terms of world social sciences) Russia had the world social sciences) Russia had the unbalanced institutional economic structure. unbalanced institutional economic structure.

Only redistribution X-institutions Only redistribution X-institutions predominated. Necessary market Y-predominated. Necessary market Y-institutions were undeveloped and performed institutions were undeveloped and performed as latent, shadow or illegal forms. as latent, shadow or illegal forms.

Such disbalance resulted in the non-Such disbalance resulted in the non-efficiency of the social system and the deep efficiency of the social system and the deep decrease of its economic and social decrease of its economic and social parameters. parameters.


The first phase The first phase of institutional reforms-1of institutional reforms-1

In the middle of 1980s new political leadership In the middle of 1980s new political leadership began to develop the market Y-institutions on began to develop the market Y-institutions on the legislative basis:the legislative basis:

the privatization of the majority of the state the privatization of the majority of the state enterprises put into practice to create enterprises put into practice to create the the private propertyprivate property;;

the decentralization in the economic the decentralization in the economic governance system was realized to develop governance system was realized to develop the exchangethe exchange transactions instead of transactions instead of redistribution. The state planning system redistribution. The state planning system (“Gosplan”) was eliminated. The price (“Gosplan”) was eliminated. The price management was stopped;management was stopped;


The first phase The first phase of institutional reforms-2of institutional reforms-2

new laws about the creation and liquidation of new laws about the creation and liquidation of business in all branches of economy were passed business in all branches of economy were passed to promote to promote the competition;the competition;

the contract labor institutionthe contract labor institution substitutes for the substitutes for the employed labor because the state system of employed labor because the state system of manpower training and distribution was liquidated. manpower training and distribution was liquidated. The relationships between employees and The relationships between employees and employers became the subject of the contract. The employers became the subject of the contract. The state salary management was canceled;state salary management was canceled;

gaining profit (Y-efficiencygaining profit (Y-efficiency)) becomes the main becomes the main criteria for new enterprises and their owners acting criteria for new enterprises and their owners acting in open and competitive market environment. in open and competitive market environment.


The result of first phase of reformsThe result of first phase of reforms

The attempt to replace the redistribution The attempt to replace the redistribution institutions by the market ones was not institutions by the market ones was not very successful very successful

It was neither growth of the total efficiency It was neither growth of the total efficiency in economy nor expected efficiency in economy nor expected efficiency increase of the new companies increase of the new companies

In 1998 after In 1998 after the defaultthe default the state the state economic policy was turned to the search economic policy was turned to the search for the optimal and balanced combination for the optimal and balanced combination of related market and redistribution of related market and redistribution economic institutions.economic institutions.


The second phase The second phase of institutional reforms - 1 of institutional reforms - 1

Since late 1990s – early 2000s new political leaders Since late 1990s – early 2000s new political leaders paid more attention to the paid more attention to the modernization of modernization of redistribution X-institutionsredistribution X-institutions rather than to the rather than to the implementation of market Y-institution as it was implementation of market Y-institution as it was before: before:

the supreme conditional property the supreme conditional property - the creation - the creation of the large-scale joint-stock companies and holding of the large-scale joint-stock companies and holding structures under the management (or with control structures under the management (or with control share in capital) of federal or regional governments; share in capital) of federal or regional governments;

the redistributionthe redistribution - - new new National ProjectsNational Projects and and State CorporationsState Corporations under the federal governance and under the federal governance and supported by the federal budget. The centralized supported by the federal budget. The centralized structure of them on the new level puts the structure of them on the new level puts the redistribution scheme into life; redistribution scheme into life;


The second phase The second phase of institutional reforms - 2 of institutional reforms - 2

the cooperationthe cooperation - state bodies involve different - state bodies involve different business structures into the decision-making process business structures into the decision-making process of the development of the country (investment of the development of the country (investment participation including) and encourage the participation including) and encourage the establishment of different forms of cooperation with establishment of different forms of cooperation with business structures; business structures;

the employed labor institutionthe employed labor institution - the organization of - the organization of the industry specialists education system on the basis the industry specialists education system on the basis of private-and-state partnership with the state in of private-and-state partnership with the state in leading position and the growth of non-monetary social leading position and the growth of non-monetary social factors of labor reward;factors of labor reward;

cost reduction (X-efficiency)cost reduction (X-efficiency) - price and tariffs - price and tariffs regulation both on federal and regional levels. The main regulation both on federal and regional levels. The main objective of the corresponding commissions is not the objective of the corresponding commissions is not the revenue of the companies but the decrease of general revenue of the companies but the decrease of general resources use as well as national product expenditure.resources use as well as national product expenditure.


Picture of the institutional dynamics Picture of the institutional dynamics

0

t

1

1985

1998 (default) X

Redistribution institutions

YMarket

institutions

2007


Actual result of Russian reformsActual result of Russian reforms The new balance of redistribution and The new balance of redistribution and

market institutions is being created in market institutions is being created in Russia in favor of the former. Russia in favor of the former.

It goes along with the recent growth It goes along with the recent growth of economic and social development of economic and social development indexes in Russia. In 2006 Russia indexes in Russia. In 2006 Russia occupied the 10-th(compare to the 18-occupied the 10-th(compare to the 18-th in 2005) place on the GDP index in th in 2005) place on the GDP index in the world.the world.


Why the redistribution model Why the redistribution model dominates?dominates?

The prevailing of redistribution The prevailing of redistribution institutions in Russian economy is not institutions in Russian economy is not the result of the malicious intent of the result of the malicious intent of some political forces or the some political forces or the consequence of traditional and consequence of traditional and undeveloped Russian society. undeveloped Russian society.

Marshall’ marginal approach explains Marshall’ marginal approach explains the objective and pragmatic reasons for the objective and pragmatic reasons for the redistribution model dominating. the redistribution model dominating.


Equilibrium of supply and demand Equilibrium of supply and demand for branches for branches

with increasing marginal returnswith increasing marginal returns

S

OQ

P

D

E

Qe

Pe


Equilibrium of supply and demand Equilibrium of supply and demand for branches for branches

with diminishing marginal returnswith diminishing marginal returns

S

OQ

P

DE

Qe

Pe

P1

Q1

C

G


The conclusionThe conclusion

In Russia the share of branches with In Russia the share of branches with diminishing marginal returns such as diminishing marginal returns such as transportation, energetic complex, housing transportation, energetic complex, housing and social spheres is more than a half and social spheres is more than a half (57 per cent of fixed assets in 2006). (57 per cent of fixed assets in 2006).

According to the marginal costs theory here According to the marginal costs theory here the redistribution institutional structure is the redistribution institutional structure is more preferable than the market one. more preferable than the market one.

New balance of redistribution and market New balance of redistribution and market institutions in modern Russian economy institutions in modern Russian economy confirms it.confirms it.


Thank you for your attention.Thank you for your attention.

www.kirdina.ruwww.kirdina.ru

[email protected] [email protected]

Documents

Limits and prospects of institutional liberalization for S&T research policies: Russia case Svetlana Kirdina Russian Academy of Sciences, Institute of