Uncertainty and the demand for redistribution in Hungary
The main objective determinants of demand for redistribution are labour-market participation, education, family structure (to some extent), and income mobility. Demand from people of low education and living on the border between activity and inactivity – the unemployed, disability pensioners, casual workers, and people living on benefits – is higher than from others, irrespective of income level. Redistribution is favoured to a less than average extent by entrepreneurs, managers and chief executives. Long-term downwardly mobile people favour income redistribution more than others, but long-term upward mobility does not decrease demand and may even increase it. The authors analyse systematic differences between factual relative and subjective income mobility. This mobility perception difference shows that perceived, not actual relative income position is the strong determinant. Underestimation of relative income position can be an important cause of high demand. A very low proportion of people are strongly opposed to redistribution. Those dissatisfied are more favourably inclined. Labour-market expectations are crucial influences on demand; the greater the employment anxiety, the greater the support for redistribution. The same applies to belief that inequalities are increasing. The most frustrated are the indecisive, with no clear idea of their future, and they are the most averse to the rich. It emerges that perception of income mobility is state-dependent and influenced mostly by uncertainty. The main policy conclusion is that reducing uncertainty on the labour market and raising educational attainment may be the most efficient government tools for lowering demand for redistribution, rather than directly increasing income.
The wealth of the nation
The study presents an estimate of Hungary’s national wealth that builds on the pioneering work of Frigyes Fellner. It is based on a multi-sectoral wave-matrix model of the nation’s cyclic growth, which leads to exploitation of the sectoral detail available in inputoutput tables and other national accounts data. Part 1 demonstrates the algebraic equivalence of the wave-matrix model and a double-entry bookkeeping matrix that corresponds to the national accounts. Part 2 describes the empirical implementation and findings. A 21-sector table for 2000 is aggregated into three productive branches and then augmented by rows and columns to represent the government and household sectors. Sectoral capital accumulation is estimated on the basis of costs and yields, while keeping consistent account of the origin and destination of funds. The national wealth is estimated to be close to EUR 1012. The most important finding is that the value of human capital (not yet considered in Fellner’s time) surpassed that of tangible wealth in Hungary. The author speculates that the relative importance of human capital will continue to increase for the foreseeable future, due to greater emphasis on education and to longer life spans.
The effect of higher-education environment on choice of entrepreneurial career. An international comparative analysis in 2006
Present-day international research shows that future economic growth and job creation depend on the “gazelles” – a small proportion of newly founded firms. One feature of the entrepreneurs who start and run these gazelles is that they have higher educational qualifications. Many other newly started firms, possibly with smaller growth potential, are also in graduate ownership. This is one important reason to know what proportion of university and college students intend to start a business after graduating. The study is based on data on entrepreneurial ambitions among 3346 students in eight Hungarian universities, taken from the “Collegiate Entrepreneurship 2006” international survey of over 37,000 students in 14 countries. The survey shows that Hungarian students score within the international average, but below average if quality criteria are taken into account. However, the survey showed that attending entrepreneurial courses had a positive effect on entrepreneurial career choice, although further investigations are needed to prove the causal connection conclusively and gauge the strength of the connection. The study also makes economic recommendations for education policy. The entrepreurial careers of graduates would be assisted by making entrepreneurial courses compulsory in higher economic education and adult training, in line with world tendencies and the ideas of students themselves.
Social confidence and budget deficit
The study examines how confidence in the state affects the establishment and maintenance of budget equilibrium. The main supposition is that in countries where society’s confidence in the political system is low there are factors contributing to budget deficit on the revenue and expenditure sides: on the revenue side, there is a greater inclination to evade tax, and on the expenditure side, a temptation to populism and difficulty in obtaining a consensus for reform. The positive link between confidence and budget equilibrium is explored first through statistical analysis of experience so far in the Euro zone, and secondly through qualitative comparison of consolidation in Sweden and in Hungary in the mid-1990s. The main conclusion drawn from recognizing the relation between confidence and equilibrium is that the chance of durable budget equilibrium is small in a low-confidence environment, where cycles of overspending and restriction can be expected instead.