2018

1. Kseniia Alekankina: AGE COHORTS AND HAPPINESS IN UKRAINE: WHAT MATTERS IN WHAT AGE

This work tests the connections between different economic, social and demographic factors and level of happiness among Ukrainians. There is a lot of in-depth studies that analyze happiness and social determinants across age cohorts in different countries, but there are no such papers for Ukraine. My hypothesis is that the same factors are significant for Ukraine. To test it, I use the data from 18 waves of the survey conducted by KIIS (2005-2017). The analysis shows that only some of the factors (in particular those linked with family and income) that were used in researches for other countries have a predictable power for Ukrainians, while others are not significant or have opposite direction.

2. Kostiantyn Zahorulko: DO UKRAINIAN MANUFACTURING FIRMS BENEFIT FROM AGGLOMERATION? 

Why do Ukrainian firms make sense to cluster near one another? We test Marshall’s theories of industrial agglomeration by examining four manufacturing industries. We constructed intra-industry and potential market`s effects, which consider the difference in location, industry, year and cluster`s size. These effects represent linkages inside each industry separately and the whole manufacturing market together. The agglomeration effects showed significant influence on firm’s productivity. So, Ukrainian firms could benefit from these effects by cooperating with the local authority to reduce transfer cost of goods, ideas, and labor. Nevertheless, the overall effect of the increasing distance between firms inside one industry or within all manufacturing firms could be controversial. For the small town or villages, the increase of distance would show that these small location produces for the big regional market and has a benefit from this.

3. Maryna Tonkoshkur: DETECTING SUSPICIOUS BEHAVIOR IN PUBLIC PROCUREMENT AUCTIONS 

This purpose of this work is to build a model to assess the factors, which are associated with the suspicious behavior of firms in the Ukrainian public procurement auctions. The dependent variable in this analysis is constructed using the sequential pattern mining algorithm and indicator of the constant bids during all rounds of auction. Next, the logistic regression is used to evaluate lots and participants characteristics associated with suspicious behavior. The main data source is the electronic public procurement system “ProZorro” with information on tenders held in 2016 for three categories of goods: Agricultural and related products; Petroleum and other sources of energy; Food and related products.

The results of estimations suggest that firms with suspicious behavior in agricultural and food industries tend to choose the lots with the estimated value, which is slightly above the threshold of 200 thousand UAH or significantly below the threshold value in the case of open competitive procedures. Also in those industries suspicious firms almost never participate in lots only with members of bidding ring. However, in the industry of “Petroleum products, fuel, electricity and other sources of energy” suspicious firms tend to choose below threshold lots with higher estimated values. The entities, which were previously investigated by Antimonopoly Committee of Ukraine tend to possess more suspicious behavior only in Petroleum products, fuel, electricity and other sources of energy industry, while in the other two industries such firms are less suspicious.

4. Andrii Tarasenko: LEARNING BY EXPORTING IN UKRAINE: DOES INTERNATIONAL TRADE IMPROVE PRODUCTIVITY?  

Entering export markets is a challenge, rewarding winners in numerous ways. One of them is productivity development through “Learning by Exporting”. The main goal of this research is to investigate whether Ukrainian exporters receive productivity improvements from international trade and investigating persistence and magnitude of these effects for different export destinations and industries. Using firm-level data on Ukrainian firms and official customs data we found out that Ukrainian firms receive persistent and statistically significant productivity developments, meanwhile, learning as growth of productivity premium over time works only for exporters to high income countries. Exporters to Russia only reduce their productivity superiority while exporting to offshore countries gives only one-time positive productivity effect.

5. Oleksandr Sukhomlyn: ASYMMETRIC INFORMATION IN THE UKRAINIAN BANKING SYSTEM: EVIDENCE FROM INDEPENDENT AUDITOR REPORTS 

This research, based on the quantitative content analysis, examines the information asymmetry in the Ukrainian banking system, i.e. shows how the Tone and Readability of Independent Auditor Reports are associated with a bank’s performance in the next financial year. The fixed-effects estimator within the regression is applied to unbalanced panel dataset of Ukrainian banks. The variable, which indicates the Tone of Report, is constructed with the help of Loughran and McDonald’s Financial Sentiment Word Lists, while the Readability variable is estimated using FOG and Flesch—Kincaid Indices. Based on the estimations of 2012-2016, it is found that the Readability of the Auditor Report has no relationship with bank’s profitability in the next year. However, worse Tone of Auditor Report is associated with the increase in both ROA and ROE of the banking institution in the next period. The study aims to contribute to the existing literature about the determinants of bank’s profitability, the quantitative content analysis, and the phenomenon of the asymmetric information in the banking system through the analysis of the Independent Auditor Report’s Communicating Value. The research concludes with some policy implications and remarks on the practicality and implementability of the findings.

6. Vladyslav Shovkovyi: WHAT INVESTMENT OPPORTUNITIES DO CRYPTOCURRENCIES PROVIDE? 

The study investigates the potential gains from considering crypto currencies as an investment opportunity. Specifically, we explore the ability of the most traded crypto tokens to be a strong hedge instrument against downfall movements in the traditional assets. Moreover, we quantify the potential gains to the global and local investors from including crypto currencies in its portfolio of traditional assets. Using maximum Sharpe ratio approach to build the optimal portfolio based on the CVaR as a coherent risk measure, paper suggests that the diversification of portfolio by crypto currencies is profitable both for global and Ukrainian investors. However, the difference of the wealth allocated to crypto market by global and local investors is ponderable, meaning clearly underdeveloped financial markets in Ukraine. While Ukrainians may allocate more than 90% of its wealth in the crypto market, it is crucial issue for Central Bank of Ukraine to create law regulation system for crypto.

7. Anton Shmihel: SPILLOVER EFFECT OF QUANTITATIVE EASING: CASE OF UKRAINE  

This thesis examines the spillover effect of quantitative easing adopted by the Fed and ECB on Ukrainian sovereign bond yields. Ukraine since 2008 experienced immense economic volatility due to the global financial crisis, the war in the Eastern part of the country, political crisis and external debt restructuring (technical default), which makes the impact not apparent. Using OLS regression, we found the statistically significant impact on yield of Ukrainian bonds by the Fed’s quantitative easing during 2009-2013. However, our results indicate that after events on Maidan starting from November 2013 this effect deteriorate.

8. Oleksii Romanko: OPTION PRICING WITH FRACTALS: AN EMPIRICAL ANALYSIS 

Classical Black – Scholes model, however still widely used in the financial circles, is known for its inconsistencies in modeling actual option markets. Besides assumption of the normal distribution of the underlying assets and perfect liquidity of the market, classical Black-Scholes provides poor modeling of in-the-money and out-of-the money the options, as well as does not account for the term structure of the options. Current work concentrates on the Fractional Black-Scholes option pricing model, that relaxes classical assumptions and provides theoretically valid modeling of volatility smile and term structure of options. Following the first empirical work, concerning application of the model to the actual options data, appeared in Mare et al  (2017), current work provides further investigation of the Fractional Black- Scholes model, as well as it’s comparison with classical Black - Scholes and Stochastic Alpha Betha Rho models. The estimation of FBS model parameters are closely studied, as well as statistical tests to prove the significance of the model estimated. Model is fitted to the S&P500 index options data and the performance is compared with classical BS model and SABR model in terms of root mean squared error and mean average percentage error. 

Results give an evidence that fractional model have better accuracy then classical Black-Scholes model in terms of prediction error, and is comparable to the SABR model. Among other advantages of FBS modes, is strong heuristical approach to the model parameters, which allows to interpret them in order to understand the market behavior. Solid mathematical background behind FBS model allows researcher to execute statistical testing of the model validity. Closed-form pricing formula of Fractional Black-Sholes model provides simplicity of estimation procedure.

9. Anna Pylypchuk: THE IMPACT OF DIFFERENT TYPES OF CHILD CARE ON MOTHERS’ LABOR SUPPLY: THE CASE OF UKRAINE  

This work examines the impact of different types of child care on mothers’ labor supply in Ukraine. A lot of researches have revealed that the lack of high-quality, accessible childcare services places significant constraints on female labor supply, and is among the key factors that weaken women’s labor market attachment. This work examines the impact on mothers’ labor supply of two most frequently used in Ukraine types of childcare – public (kindergartens) and informal (availability of grandparents to take care of grandchildren) childcare services. The estimations are based on the data from the Ukrainian Longitudinal Monitoring Survey 2012.

The results show that the likelihood to work for young mothers who live in the same household with only grandfathers on retirement is negatively associated. Grandmothers who are not restricted by retirement eligibility is found to have positive effect. The availability of kindergartens in the region, according to the obtained results, appears to have no significant effect on mothers’ labor supply.

10. Daryna Pustovoit: ROLE OF TRUST FOR THE DECISION TO START ENTREPRENEURIAL ACTIVITY. CASE OF UKRAINE  

The paper investigates the size of the effects, which trust and distrust in various institutions in Ukraine have on the decision of an individual to start up his/her own business. The data for the research comes from the Life in Transition Surveys available for 2010 and 2016. It allows capturing the difference in various institutions and observe these distinctions between years and gender. The results demonstrate the importance of the role of trust and the decision to become entrepreneurs as well as highlights the difference between male and female of trusting various authorities. Men are more concerned with feeling secure, while the financial support plays important role in a decision to become entrepreneurs for women. In general the trust in military forces positively influence the probability of male to start an own business, while for women it is the trust in investments and non-governmental organization that introduces positive influence. The distrust in local government and financial system tend to negatively influence the probability to become entrepreneur. The marital status of a person also have a strong influence on a decision to start up a business and it different for both genders. For example, the study confirm that the separated woman has very low probability to become an entrepreneur. 

The obtained results may be used for the further policy decisions, since it indicates the types of institutions the trust of which should be improved if policy makers desire to increase the level of entrepreneurial activity in the country.

11. Anita Molodtsova: DETERMINANTS OF EXPORT SURVIVAL: EMPIRICAL EVIDENCE FROM UKRAINE

International trade plays a crucial role in economic development. Ukraine is not an exception with over 40% export share in the GDP structure. However, more than a half of Ukrainian firms cease their export activities after the first several years from entering a foreign market. Such situation was found to be an important issue not only for Ukraine but for other developing countries as well.

The purpose of our study is to explore what factors influence export duration the most. We conducted the survival analysis on the sample of 8,414 Ukrainian manufacturing firms during 2001-2013. We found that the most significant factor that increases export duration is the intensive margin, while the extensive margin is the second important factor. Productivity is the third by the positive impact on the survival rate of exporting. In addition, we showed that the firm's size should be considered as a major factor in choosing which region to export. The results are generally consistent with the empirical studies for other countries, though industry-specific characteristics do not seem that important for survival as in other similar findings.

12. Anastasiia Moiseieva: FORMATION OF INFLATION EXPECTATIONS: CASE OF UKRAINIAN FIRMS 

This study examines the inflation expectations of Ukrainian firms, their rationality and main factors used during the formation. For this purpose, I use the data from the survey of business entities conducted by the National Bank of Ukraine. Surveys are collected quarterly from the 1st quarter 2011 until 2nd quarter 2016. For examining expectations of firms, firms’ own characteristics, such as occupied industry, firms’ size and the access to the international market. Also, variables of firms’ success in operation and macroeconomic indicators are included. From the literature, main macroeconomic indicators, which affect firms’ expectations: current interest rate, the rate of currency depreciation, lagged inflation rate, lagged unemployment rate and lagged GDP growth rate. Using multinomial logit and OLS regression models, I found that firms’ expectations are irrational, firms tend to overestimate future inflation rate and only the rate of currency depreciation is examined efficiently. However, the hypothesis about different expectations according to the differently characterized firms proved, while the effect of macroeconomic variables is unexpected: interest rate has no impact on the firms’ expectations, as the effect have only inflation rate. Thus, for keeping expectations in the target, the efficient way is to do not let the high volatility in the inflation rate and to correct it using the key policy rate.

13. David Menabdishvili: THE IMPACT OF AGRICULTURAL COMMODITY MARKETS ON BOND YIELDS: THE CASE OF UKRAINE  

Emerging markets are often characterized by a high share of commodities in their total exports and imports, respectively, by a dependence on the global commodities price fluctuations. A rapid fall in key export commodity prices can lead to a fall in exports revenues thus having a negative impact on the economic stability of such economy, which may increase credit risk of a country and decrease its ability to service its external debt. When making an investment decision on buying international bonds of an emerging country, the global investor will likely adjust his/her expectations accordingly and require higher yield. 

The main hypothesis of the research is that Ukrainian bond yields are positively related to the price returns on the key export agricultural  commodities, such as sunflower oil, corn and wheat. I estimate the OLS- model, using monthly data on Ukrainian bond yields and controlling for a set  of macroeconomic, country-specific and international factors from February, 2011 to April, 2018. I obtained no significant impact of agricultural commodity price returns on Ukrainian bond yields.

14. Mykhailo Matvieiev: LAND REFORM IN THE CREDIT CYCLE FRAMEWORK: THE CASE OF UKRAINE 

In the present work I state that the land reform may affect the business cycle dynamics through the financial accelerator. For this purpose, I embedded agricultural land in a conventional framework for Dynamic Stochastic General Equilibrium models with collateral constraints. The model was estimated based on the Ukrainian data and examined with the impulse response function analysis.

I found that collateralization of agricultural land leads to a quantitatively significant additional loan-to-value shock amplification compared to the case when the land cannot be used to secure loans.

15. Kateryna Marushchak: PERFECT BAYESIAN EQUILIBRIA IN A CLASS OF TWO-STAGE AUCTIONS 

This research investigates perfect Bayesian equilibria of a two-stage ProZorro-type auction with two asymmetric bidders. We examine the possibility of interpreting the second stage of the auction as the resale stage of the corresponding asymmetric first-price sealed-bid auction with resale. It is shown that the equilibrium exists and is unique. Furthermore, the equilibrium strategies in the asymmetric two-stage auction differ from the equilibrium strategies in the asymmetric first-price sealed-bid auction with resale. In addition, contrasting to the auction model with resale, the second stage of the ProZorro-type auction does not symmetrize the auction with initially asymmetric bidders.

16. Serhii Liutov: ALTERNATIVE PORTFOLIO DIVERSIFICATION APPROACHES: AN EMPIRICAL COMPARISON  

In this study, we consider the multi-period portfolio optimization problem applying two methods: mean-variance (MV) and hierarchical risk parity (HRP). We intend to perform the comparative analysis of two approaches using 30 stocks of the DJIA over the years from 1990 to 2017. We take into account proportional transaction fees and assume that investor rebalances his portfolio each week with 5% threshold.

A studentized stationary circular bootstrap approach is applied to show that the difference between a particular indicator of MV and HRP is statistically significant.

The comparative analysis is conducted in three steps. First, we compare two methods over the entire period. Secondly, we repeat the previous procedure for four sub-periods. Lastly, we make the sensitivity analysis of portfolio performance depending on brokerage fees and thresholds. This allows us to make a deep comparative analysis.

17. Anton Liutov: RESERVE PRICE DETERMINANTS IN PROZORRO AUCTIONS IN  UKRAINE 

This paper examines allocations between reserve prices and winning bids in ProZorro auctions. The main objective of this study is to show how a one percent change in reserve price affects winning bids and vice versa, how a one percent change in winning bid affects reserve prices. We also introduce a number of variables which explain the observed fluctuations of reserve prices and winning bids.

18. Valentyna Sinichenko: WAGE AND UNEMPLOYMENT EFFECTS OF GRADUATING IN A RECESSION: THE CASE OF UKRAINE  

I study the effect of initial labor market conditions on subsequent wages and unemployment of the youth in Ukraine, a country in transition with a relatively flexible labor market. Estimates are based on 2013 and 2015 survey waves of School-to-Work Transition Survey of 15 to 29-year-old men and women. The study revealed that individuals who graduated in 2008 or 2010 were earning 19-20% less on interview day than the 2006 cohort, controlling for other characteristics. An increase in the local unemployment rate by 1 percentage point decreases wage on interview day by 2-3 % for all individuals. This effect is larger than for the most flexible labor markets but smaller than for the most rigid ones. University graduates’ unemployment is sensitive to initial macroeconomic conditions, while this is not the case for the less educated. Indirect evidence indicates that wage effects on initial labor market condition last for at least five years since graduation, while unemployment effects last for less than three years.

19. Anastasiya Ivanova: FORECASTING BANKRUPTCY PROBABILITY OF UKRAINIAN FIRMS 

Firm`s bankruptcy stands for the inability of an enterprise to satisfy creditors' claims. The primary reasons of bankruptcy are monetary problems, weak management, and large debt burden. Consequently, firm`s failure affects creditors, suppliers, and employees. There is a topical discussion among researchers as to which factors have impact on the firms` failure. The results of previous studies differ substantially between more and less developed economies. Hence, the relationship between financial problems and firms’ failure requires additional studies, especially for Ukraine.

We investigated which factors influence bankruptcy risk in Ukraine and analyzed which industry was the most vulnerable in 2011-2016. We estimated different specifications of logit regressions using panel microdata from that period. The main variables of interest were the lagged value of investments and investment opportunities. The latter showed a significant negative marginal effect. Thus, increase in investment opportunities reduces the likelihood of bankruptcy. We conclude that with acquiring new capital a firm has more opportunities for growth which diminishes risk of failure.

20. Olha Havrylyshyn: RELATIONSHIP BETWEEN TAX BURDEN AND TAX EVASION: FLIGHT TO THE OFFSHORE  

The study focuses on investigating the influence of tax policy on the capital outflow to the offshore countries. According to the literature, one major reason for these capital outflows is tax evasion. We use corporate tax rate as one possible measure of tax policy burden. The results show that tax rates do not have a high effect on the deposit on the offshore countries, more precisely, the corporate tax rate has a very small impact on the tax evading, and meanwhile increasing personal income tax rate can force wealthy individuals to relocate their income to the deposits in the offshore accounts.

21. Adam Hashchyshyn: RURAL RESIDENCE AND HOUSEHOLD HEALTH EXPENDITURE IN UKRAINE 

This work examines if there is a link between residency (urban/rural) and household out-of-pocket expenditure in Ukraine. It investigates main predictors of high health spending and discusses how they differ in rural and urban households. Based on LiTS III data for Ukraine we ran simple linear regressions for a full sample as well as rural and urban subsamples. It is shown that keeping all other characteristics of household constant Ukraine families from rural settlements on average spend on healthcare 49% more than urban. Households with “bad” health status spend twice more on health comparing to households with “good” health. Health expenditures significantly increase with a size of a family only in the rural subsample. 10% increase in income of urban families is associated with a 4% increase in health spending while a similar effect for rural families is insignificant. An education level of a household head is associated with higher healthcare expenditures, but only for rural families.

22. Oleksii Hamaniuk: PARTY POLITICS AND BUDGET TRANSFERS TO REGIONS  

The paper is aimed to investigate whether there is a problem of a “pork-barrel” spending in Ukraine and whether decentralization has eliminated it. The literature considers both theoretical models and empirical studies. Theoretical ones confirm that politicians have incentives for “pork-barrel” allocation to preferable regions. Empirical ones show that this actually happens in different countries. In order to test the presence of the “pork barrel” spending in Ukraine the dummy for local ruling party being the same as party of coalition in Parliament was created. Also the dummy on decentralization equal to 1 for periods after 2014 was created. The interaction term of these dummies measured the effect of decentralization on the “pork barrel” spending. Social and economic factors were included into the model as controls. The key subvention used as a dependent variable is a subvention on social and economic development, as it is distributed discretely between the regions. The results show the presence of the “pork-barrel” allocation in Ukraine. If the local party of the region is the same as any coalition party, the amount of subvention allocated to oblast is higher on 31,69 UAH of 2017 per capita. However, decentralization seems to have no significant impact on this effect. Also the electoral cycles were found in Ukrainian budget transfers.

23. Oleksandra Chmel: PROZORRO E-AUCTIONS: SAVINGS ON PUBLIC PROCUREMENT OF MEDICINES IN UKRAINE 

This thesis assesses the effect of the introduction of the PROZORRO electronic system in the field of public procurement of medicines in Ukraine. The electronic system started to work from 2015 in test mode simultaneously with the non-electronic system, and since August, 2016 participation in the e-auction has become obligatory for all participants and purchasers.

The period 2013-2017 is considered, thus there is a base for comparison, which covers the period up to 2015. According to the results of the OLS model, the savings from the appearance of the PROZORRO system are higher than from the non-electronic auction. At the same time, savings from using the PROZORRO system in an obligatory mode are larger than in previous periods.

Also, the analysis of 10 groups of medicines for the price lower than 35 UAH, as well as the investigation of some selected drugs (Analgin, Atropine, L-Lysine Aescinat, Dithylin, and Vicasolum) is studied separately.

24. Kateryna Chernoknyzhna: EFFICIENCY ESTIMATION OF THE UKRAINIAN PUBLIC HIGHER EDUCATION INSTITUTIONS: INSIDE AND OUT 

This thesis intends to investigate the efficiency of the individual Ukrainian higher education institutions to set up a benchmark for further development. First, the analysis focuses on 14 Ukrainian medical universities to analyze an input – oriented technical efficiency. Next, under the current integration processes between European Union and Ukraine, the analysis of the efficiency of the Ukrainian education system with EU member – courtiers and 6 non- EU members allows determining the position of Ukrainian HEI among the developed countries. The Data Envelopment Analysis is one of the widespread to analyze the efficiency of education and healthcare systems due to the homogeneity in inputs and outputs. The heterogeneous bootstrapping procedure allows to obtain the reliable scores analyzing the Ukrainian universities and smoothed homogeneous were used for the cross-country estimation. The Zaporizhia State Medical University demonstrates the best results inside the country and could be used as a benchmark for Ukrainian medical universities. The comparison with the developed countries displays that Bulgaria, Turkey and Ukraine are the most prosperous countries that use the resources most efficiently way with the number of enrolled students as the output. Change in output for the next model indicates that Ukraine became the most efficient country under all assumptions. The Bulgaria, Turkey and United Kingdom are efficient under the different mix of assumptions.

25. Mariia Chebanova: ANALYSIS OF THE DETERMINANTS OF QUALIFICATION MISMATCH IN UKRAINE IN 2011-2015 

Efficient labor allocation constantly attracts attention of economists due to its important link to such concepts as long-term unemployment, productivity, technological advance and others. High incidence of qualification mismatch is one of the crucial representations of labor misallocation. Because of large structural changes and high economic turbulence, economies in transition, including Ukraine, are especially vulnerable to mismatch. This thesis focuses on the issue of identifying main determinants of qualification mismatch at the individual level. Despite the expectations, we do not find a great increase in undereducation and horizontal mismatch in 2014-2015 as compared to 2011-2013. We find that statuses of employment are associated with higher probabilities of qualification mismatch when compared to employees, which is especially profound for those working in self-employed in agriculture. Employees in small firms, those who enter into verbal agreements, females and younger workers are at the highest risk of qualification mismatch. These groups of workers are generally considered among the most vulnerable labor market participants. Therefore targeted government policies should be developed to prevent the further aggravation of labor misallocation in Ukraine.

26. Nataliia Bybko: DETERMINANTS OF THE PARTY LOYALTY: VOTING PATTERNS OF THE UKRAINIAN MPs  

This work investigates the determinants of the deputies’ loyalty to the faction/group the member he/she is of, when voting on economic policy related laws in the parliament. To evaluate the determinants of party loyalty we use data the roll call votes from VIII convocation of the parliament and information on personal and demographic characteristics, political activity and financial wellbeing of the parliament members (MPs). In addition, we extend the Hix (2005) Agreement index for measuring the party loyalty in the countries like Ukraine where the options “did not vote” and “absent” are often used strategically by the MPs. The econometric analysis shows that the following factors seem to increase deputies’ loyalty to the faction/group: being elected under the proportional representation system, the party size, the number on the party list, previous position in business and public sectors, usage of a Facebook account. The family wealth exceeding one million UAH and higher number of the convocations served in the parliament are associated with a lower loyalty.

27. Olga Bondarenko: THE REDISTRIBUTIVE EFFECTS OF MONETARY POLICY ACROSS GENERATIONS 

The paper revises the redistributive channels of monetary policy transmission and their impact on income and wealth distributions in a New-Keynesian Overlapping Generations (OLG) model. The model mimics total asset holdings and earnings processes of several types of households across generations, based on their attitude to saving and income group. In this environment, expansionary monetary shocks stimulate capital and debt accumulation to a larger extent for middle-aged individuals, contributing to intergenerational inequality. Heterogeneity of labor income augments this effect, benefitting richer and more productive workers.