Delia-Raluca Șancariuc

This paper analyses the influence of trade on democracy, aiming to understand whether becoming more open to trade also makes a country more democratic. So far, the scientific literature that investigate this topic is scarce, and has not reached any solid consensus: while some papers find a positive effect of trade openness on democracy levels, others find a negative effect, or no effect at all. Moreover, the empirical literature on this topic is also very prone to technical problems of the research design, such as endogeneity, which increases the risk of obtaining biased estimates. This paper uses an instrumental variable approach, this way avoiding any omitted variable bias and reverse causality problems. More precisely, we instrument trade openness with its natural, geography-determined rate, based on the gravity equation of trade; we then use the predicted rate of trade openness to capture its effect on democracy, employing an OLS regression on a panel sample of 27 post-communist countries across a period of 24 years. Democracy is measured using the polity index (from Polity V dataset), and also five other variables that capture different facets of democracy – electoral, liberal, participatory, deliberative and egalitarian dimension (from V-Dem dataset). Empirical results suggest that trade openness has a significant, positive effect on democracy. The effect is only marginally higher for the liberal dimension of democracy, and rather similar in magnitude for the rest of four dimensions.

This paper analyzes the influence of the fiscal framework on entrepreneurship, seeking to quantify the magnitude of this influence. It starts by reviewing the main findings of the literature, showing that, while there is consensus that both tax levels and the bureaucracy that surrounds tax payments have a negative effect on entrepreneurship, there is no unanimity regarding which of the two have a stronger effect. It then continues with an empirical approach, which resides in estimating an OLS regression of two measures of entrepreneurship activity (the number of enterprises that are newly created during one year, and the total number of enterprises that exist in one year in a country) on three fiscal explanatory variables (profit tax levels, labor tax levels, and the time spent to pay taxes), using a panel sample of 27 post-communist countries across a period of 15 years. Empirical results suggest that both tax levels and the bureaucracy that surrounds tax compliance have a negative effect on entrepreneurial activity. The level of the profit tax exerts the strongest negative influence on both the number of newly created enterprises, and the total number of enterprises that exist in a country, while the level of the labor tax exerts a negative, albeit weaker influence, which is significant only for the total number of enterprises. The time spent to pay taxes (expressed as the number of hours per year) returns the lowest coefficient, yet it has a statistically significant negative effect on both the number of newly created and the total number of enterprises.

The European Union (EU) remains one of the leading-edge jurisdictions on the planet in legislating and enforcing the circular economy, a token of its forthright environmental awareness. Still, given that the level of economic development across the EU member states is heterogenous, this concern, however generous it may be, looks too beyond “their” means and too ahead of “its” times. What the European policymakers seem to disregard is that top-down institutional constructions, as is the case with the EU’s overambitious environmental legislation, can end up in severe distortions. Imposing/importing an institutionalized arrangement without due preparation may fuel resistance to (even positive) change, as the biases it engenders translate into considerable costs and selective benefits. The present article attempts a novel approach within the literature, where the failure to achieve recycling targets is usually considered the fault of private businesses. Instead, our study explains suboptimal environmental results by the institutionalization of spiraling governmental interventions in markets, meant to make the arbitrarily set recycling/reuse targets artificially viable. Subject to EU rules, Romania’s packaging waste recycling market is a textbook case in revealing this outcome predicted by economic theory, as our statistical data suggest. The conclusion is that it is equally perilous to neglect the calibration of legislative targets according to institutional and economic development as it is to reject environmental claims based on their costs.