Irena Grosfeld

The emerging aversion to inequality

This paper provides evidence of the changing attitudes to inequality during transition to the market in Poland. Using repeated cross-sections of the population, it identifies a structural break in the relationship between income inequality and satisfaction. Whereas in the first stage of the transition process, an increase in income inequality was interpreted by the population as a positive signal of wider opportunities, later in the transition period increased inequality became a factor in dissatisfaction with the countrys economic situation. This was accompanied by increasing public sentiment that the process of income distribution is flawed and corrupt. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.

Competition and Corporate Governance: Substitutes or Complements? Evidence from the Warsaw Stock Exchange

In this paper we analyse the impact of product market competition and ownership structure on corporate performance. We focus on the firms listed on the Warsaw Stock Exchange, which are either privatised or newly created firms. First, we study the separate effects of competition and ownership concentration on firm level productivity growth. Next, we investigate their interaction: are they substitutes or complements?

Wage and Investment Behavior in Transition: Evidence from a Polish Panel Data Set

This paper looks at the behaviour of large industrial firms in Poland in 1988–94. Using a longitudinal enterprise-level data set, we are able to test systematically various hypotheses concerning firms’ reactions to the change in their environment. The results confirm a structural break after the introduction of the package of reforms in 1990. Labour market conditions and product market competition exert important downward pressure on wages. After 1993, however, this initially strong response is weakened. Comparison of wage-setting behaviour across different types of firms confirms important differences in wage negotiation. In state-owned enterprises (SOEs) insiders capture an important part of productivity increases, while in privatized firms there is no positive relationship between firms’ ability to pay and wage increases. Privatization appears important for the strategic dimension of enterprise restructuring. Privatized firms invest more and have greater capacity to ensure higher output growth.

Ownership Concentration and Firm Performance: Evidence from an Emerging Market

The initial view of the advantages of ownership concentration in joint stock companies was determined by the concern about the opportunistic managerial behavior. The growing importance of knowledge and human capital in the operation of firms shifts the focus of concern: excessive ownership concentration may stifle managerial initiative. This may be particularly true, and the results obtained in this paper support this hypothesis, in firms with high share of knowledge related activities. I explore the determinants of ownership concentration and the relationship between ownership structure and firm value in the context of a transition economy, i.e. an economy undergoing important changes in its legal and regulatory framework, in macroeconomic policy and most of all, in its property rights allocation. I focus on all non-financial companies traded on the Warsaw Stock Exchange since its inception in 1991 and up to 2003. We can observe that ownership of companies becomes more dispersed with the number of years of listing. The results reported in this paper suggest that firm adjust their ownership structure to firm specific characteristics and that firms belonging to the sector of high technology tend to have lower ownership concentration. The positive impact of ownership concentration on firm value detected in OLS regressions becomes even stronger when we control for the endogeneity of ownership.

Mass Privatisation, Corporate Governance and Endogenous Ownership Structure

We compare the change in ownership concentration in firms privatized through two different programs of mass privatization: the Czech voucher scheme and the Polish program of National Investment Funds. Despite important differences in ownership structure at the start of the process and in the quality of legal and regulatory environments, the emerging ownership patterns are remarkably similar: in the two groups of firms we observe high concentration and the emergence of industrial corporations and individuals as important dominant shareholders. Given the important evolution of ownership, we take ownership structure as endogenous and look at its determinants. We find in particular that ownership concentration depends on the degree of uncertainty in the firms environment. In a more risky environment firms tend to have more dispersed ownership. We interpret this result in the light of the recent theories of the firm stressing the trade-off between managerial initiative and shareholder control.

The Emerging Aversion to Inequality: Evidence from Poland 1992-2005

This paper provides an illustration of the changing tolerance for inequality in a context of radical political and economic transformation and rapid economic growth. We focus on the Polish experience of transition and explore self-declared attitudes of the citizens. Using monthly representative surveys of the population, realized by the Polish poll institute (CBOS) from 1992 to 2005, we identify a structural break in the relation between income inequality and subjective evaluation of well-being. The downturn in the tolerance for inequality (1997) coincides with the increasing distrust of political elites.

The Evolution of Ownership Structure in Firms Privatized through Wholesale Schemes in the Czech Republic and Poland

We compare the change in ownership concentration in firms privatized through two different programs of mass privatization: the Czech voucher scheme and the Polish program of National Investment Funds. Despite important differences in ownership structure at the start of the process and in the quality of legal and regulatory environments, the emerging ownership patterns are remarkably similar in the two groups of firms: high concentration and the emergence of industrial corporations and individuals as important dominant shareholders. Given the important evolution of ownership, we take ownership structure as endogenous and look at its determinants. We find in particular that ownership concentration depends on the degree of uncertainty in the firms environment. In a more risky environment firms tend to have more dispersed ownership. We interpret this result in the light of the recent theories of the firm stressing the trade-off between managerial initiative and shareholder control.

Middleman Minorities and Ethnic Violence: Anti-Jewish Pogroms in the Russian Empire

All over the world market-dominant minorities are victims of ethno-religious hatred and violence. This paper aims to test the theory that ethnic violence had pragmatic economic roots and ethnic violence was directly related to occupational segregation across ethnicities against the alternative “scapegoat theory,” according to which Jews were blamed for all economic misfortunes of the majority. In order to test these theories, we focus on pogroms between 1800 and 1939, i.e., episodes of anti-Jewish violence, in the Pale of Settlement, where Jews were confined to live within the Russian Empire. We combine a novel data set on pogroms and the professional and ethnic composition of the Russian Empire with data on historical climate and yield data. Using fixed-effects model, we document that heat stress in growing season, i.e., spring, leads to a fall in grain yield. Then, we exploit heat stress in spring as an exogenous source of variation in income and find that negative income shocks increase the likelihood of violence against Jews, but only during pogrom waves that are triggered by political turmoil. We find that the likelihood of anti-Jewish violence in the face of an income shock is higher in localities with a greater Jewish concentration among creditors. Our findings show that the ethno-economic segregation is an important determinant of violence against minorities.

Forced Migration and Human Capital: Evidence from Post-WWII Population Transfers

We exploit a unique historical setting to study the long-run effects of forced migration on investment in education. After World War II, the Polish borders were redrawn, resulting in large-scale migration. Poles were forced to move from the Kresy territories in the East (taken over by the USSR) and were resettled mostly to the newly acquired Western Territories, from which Germans were expelled. We combine historical censuses with newly collected survey data to show that, while there were no pre-WWII differences in education, Poles with a family history of forced migration are significantly more educated today. Descendants of forced migrants have on average one extra year of schooling, driven by a higher propensity to finish secondary or higher education. This result holds when we restrict ancestral locations to a subsample around the Kresy border and include fixed effects for the destination of migrants. Since Kresy migrants were of the same ethnicity and religion as other Poles, we bypass confounding factors of other cases of forced migration. We show that labor market competition with natives and selection of migrants are also unlikely to drive our results. Survey evidence suggests that forced migration led to a shift in preferences, away from material possessions and towards investment in a mobile asset – human capital. The effects persist over three generations.