Destabilizing Effects of Market Size in the Dynamics of Innovation
We investigate the geographical distribution of economic activity and wages in a general equilibrium model with many asymmetric regions and costly trade. As shown by extensive simulations on random networks, local market size better explains a region's industry share, whereas accessibility better explains a region's wage. The correlation between equilibrium wages and industry shares is low, thus suggesting that the two variables operate largely independently. The model replicates well the spatial distribution of industry using Spanish data, yet overpredict changes in that distribution due to changes in 'generalized transport costs'. The latter had only small impacts on changes in the geographical distribution of economic activity in Spain from 1980 to 2007.
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.