161 10 3494 https://omeka.ibu.edu.ba/files/original/44dc0e3678f7c77a4fa05aca5a59a5f1.pdf 44b9179e1875ad7ca10f6ccf0cd87152 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Analyzing Macroeconomic Indicators of Economic Growth Using Panel Data Nihat Taş İstanbul University, İstanbul, Turkey tasnihat@gmail.com Ali Hepşen İstanbul University, İstanbul, Turkey alihepsen@yahoo.com Emrah Önder İstanbul University, İstanbul, Turkey emrah@İstanbul.edu.tr During last 10 years some EU countries had economic instability. They have short and long term challenges such as unemployment, population ageing, globalization etc. In this study it is aimed to analyze macroeconomic indicators of EU countries’ economic growth using panel data approach. Static and dynamic panel data models were used for determining the effects of independent macro-economic variables on gross domestic product (GDP) of EU member countries including Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom; acceding country: Croatia; and candidate countries: Iceland, Montenegro, Serbia, The former Yugoslav Republic of Macedonia and Turkey. While dependent variable of analyze is gross domestic product (volume), the independent variables are current account balance, general government gross debt, general government revenue, general government total expenditure, gross national savings, inflation, average consumer prices, population, total investment, unemployment rate, volume of exports of goods and services, volume of imports of goods and services. The analysis proposed is based on a panel data (cross sectional time series data) approach. The dataset of this research involves 33 EU member and EU candidate countries (units). The effects of 12 macroeconomic indicators on gross domestic product volume were examined. The paper also empirically analyzes the negative impacts of global financial crisis (the 2007 U.S. Subprime Financial Crisis) into EU member and candidate countries’ economic growth during the 2002–2012 230 �International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo periods (time series). In this context, the paper explains what a financial crisis is, the factors that promote a financial crisis, and the dynamics of a financial crisis. Thus, the effects of macroeconomic parameters are analyzed using panel data series. The findings of this research are especially useful for EU candidate countries such as Iceland, Montenegro, Serbia, The Former Yugoslav Republic of Macedonia and Turkey for developing convenient economic strategies. Keywords: European Union and Candidate Countries, Financial Crisis, Macro Economic Parameters, Panel Data Analysis, Gross Domestic Product, Economic Growth. 231 � https://omeka.ibu.edu.ba/files/original/313b264817e8ad3b4462e90bc049b9ed.docx 22cff80ee2dd758b6438f989e4945b30 https://omeka.ibu.edu.ba/files/original/ee3538ef63cc16655be29848ab003edf.pdf d34f239016fa6d644c0d3694bfdd3a86 PDF Text Text International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Analyzing Macroeconomic Indicators of Economic Growth Using Panel Data Nihat Taş Istanbul University, Istanbul, Turkey tasnihat@gmail.com Ali Hepşen Istanbul University, Istanbul, Turkey alihepsen@yahoo.com Emrah Önder Istanbul University, Istanbul, Turkey emrah@istanbul.edu.tr Abstract During last 10 years some EU countries had economic instability. They have short and long term challenges such as unemployment, population ageing, globalization etc. In this study it is aimed to analyze macroeconomic indicators of EU countries’ economic growth using panel data approach. Static linear panel data models were used for determining the effects of independent macro-economic variables on gross domestic product (GDP) of EU member countries including Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom; acceding country: Croatia; and candidate countries: Iceland, Serbia and Turkey. While dependent variable of analyze is gross domestic product (volume), the independent variables are current account balance, general government gross debt, general government revenue, general government total expenditure, gross national savings, inflation (average consumer prices), population, total investment, unemployment rate, volume of exports of goods and services, volume of imports of goods and services. The analysis proposed is based on a panel data (cross sectional time series data) approach. The dataset of this research involves 31 EU member and EU candidate countries (cross sectional units). The effects of 11 macroeconomic indicators on gross domestic product volume were examined. The paper also empirically analyzes the negative impacts of global financial crisis (the 2007 U.S. Subprime Financial Crisis) into EU member and candidate countries’ economic growth during the 2002–2012 periods (time series). In this context, the paper explains what a financial crisis is, the factors that promote a financial crisis, and the dynamics of a financial crisis. Thus, the effects of macroeconomic parameters are analyzed using panel data series. The findings of this research are especially useful for EU candidate countries such as Iceland, Serbia and Turkey for developing convenient economic strategies. Keywords: European Union and Candidate Countries, Financial Crisis, Macro Economic Parameters, Panel Data Analysis, Gross Domestic Product, Economic Growth Introduction The relationship between economic growth and macroeconomic indicators has long been a popular issue of debate in the literature of economic development. In this content, the primary purpose of this research is to analyze macroeconomic indicators of EU member, acceding and candidate countries’ economic growth using panel data approach. Annual 1 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo data are used for the period 2002 to 2012. The sample period is dependent on annual data availability. The data was gathered from the International Monetary Fund world economic outlook data base. Beine et al. (2011) proposed new panel data approach for examined the impact of skilled emigration on human capital accumulation. The data was covering 147 countries during the period 1975–2000. Predictions were tested using dynamic regression models. They found that skilled migration prospects foster human capital accumulation in low-income countries. Bortolotti et al. (2003) determined the reasons why governments privatize, and the size and extent of privatization processes around the world with using a panel of 34 countries over the 1977 – 1999 period. They identified market, budget and institutional constraints affecting privatization. Lee and Chang (2007) applied a new panel data stationary testing procedure in order to re-investigate the dynamic interactions between energy consumption per capita and real GDP per capita in 22 developed and 18 developing countries. They found that in individual countries, structural breaks occur near other variables in both developed and developing countries because of a tight relationship between energy consumption and GDP. Sukiassyan (2007) attempted to empirically evaluate that relationship with data from the transition economies of Central and Eastern Europe and the Commonwealth of Independent States. He examined various dimensions of the growth-inequality debate. His findings for transition countries indicated a strong, negative contemporaneous growth-inequality relationship. Lee and Chang (2008) applied the new heterogeneous panel cointegration technique to re-investigate the long-run movements and causal relationships between tourism development and economic growth for OECD and nonOECD countries for the 1990–2002 period. They determined that tourism development has a greater impact on GDP in nonOECD countries than in OECD countries. Haas and Lelyveld (2006) examined whether foreign and domestic banks in Central and Eastern Europe react differently to business cycles and banking crises. Their panel dataset comprised data of more than 250 banks for the period 1993–2000. They showed that during crisis periods domestic banks contract their credit. In contrast, Greenfield foreign banks play a stabilizing role by keeping their credit base stable. Also they found a significant and negative relationship between home country economic growth and host country credit by foreign bank subsidiaries. Tsoukas (2011) used a panel of five Asian economies – Indonesia, Korea, Malaysia, Singapore and Thailand – over the period 1995–2007 for analyzing the links between firm survival and financial development. He found that country-level indicators of financial development have an important role to play in influencing firm survival and large firms would benefit the most from developments in the stock market, while small firms are most severely affected from high levels of financial intermediation. Macro-Economic Indicators Our model comprises twelve variables: while dependent variable of analyze is gross domestic product (GDP); the independent variables are current account balance, general government gross debt, general government revenue, general government total expenditure, gross national savings, inflation (average consumer prices), population, total investment, unemployment rate, volume of exports of goods and services, volume of imports of goods and services. Gross Domestic Product represents the economic health of a country. It presents a sum of a country's production which consists of all purchases of goods and services produced by a country and services used by individuals, firms, foreigners and the governing bodies. GDP consists of consumer spending, investment 2 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo expenditure, government spending and net exports hence it portrays an all-inclusive picture of an economy because of which it provides an insight to investors which highlights the trend of the economy by comparing GDP levels as an index. GDP is not only used as an indicator for most governments and economic decision-makers for planning and policy formulation; but also it helps the investors to manage their portfolios by providing them with guidance about the state of the economy. On the other hand, it is good measure for an economy and with improvement in research and quality of data, statisticians and governments are trying to find out measures to strengthen GDP and make it a comprehensive indicator of national income. International standards regarding the compilation of balance of payments statistics are described in the fifth edition of the Balance of Payments Manual prepared by the International Monetary Fund (IMF) in order to provide guidance to member countries. In a general sense, the balance of payments is a statistical statement that systematically records all the economic transactions between residents of a country (Central Government, monetary authority, banks, other sector) and nonresidents for a specific time period. The balance of payments statistics are classified under two major groups: “Current Account” and “Capital and Financial Account”. In summary, the current account covers all transactions that involve real sources (including volume of exports and imports of goods and services,) and current transfers; the capital and financial accounts show how these transactions are financed (by means of capital transfer or investment in financial instruments). As mentioned in the European Economic series (Current Account Surpluses in the EU, 9/2012, p.10), current account deficits and surpluses are not necessarily macroeconomic imbalances in the sense of developments which are adversely affecting, or have the potential to affect the proper functioning of economies, of the monetary union, or on a wider scale. Deficits and surpluses are a natural consequence of economic interactions between countries. They show to which extent a country relies on borrowing from the rest of the world or how much of its resources it lends abroad. In this way, external borrowing and lending allows countries to trade consumption over time: a country with a current account surplus transfers consumption from today to tomorrow by investing abroad. In turn, a country with a current account deficit can increase its consumption or investment today but must transfer future income abroad to redeem its external debt. Deficits and surpluses can thus simply be the result of an appropriate allocation of savings, taking into account different investment opportunities across countries. Differences in economic prospects lead to differences in saving behavior, with brighter expectations reducing the tendency of economic agents to save and hence contributing to the accumulation of deficits. In particular, countries with a rapidly ageing population may find it opportune to save today (i.e. run surpluses) to smooth consumption over time. On the other hand, current account deficits and surpluses are part of the adjustment process in a monetary union. They absorb asymmetric shocks in the absence of independent monetary policy and nominal exchange rate adjustment. This paper also attempts to analyze the correlation that exists between GDP and inflation. It is widely believed that there is a relationship between the two. The problem is that there are disagreements as to what that relationship is or how it operates. As a result, when governments make decisions based on these pieces of information, the outcome often cannot be guaranteed. Exploration of the relationship between GDP and inflation is best begun by developing an understanding of each term individually. As mentioned above, GDP is an acronym for gross domestic product, which is the value of a nation's goods and services during a specified period. This figure is generally regarded as an important 3 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo indicator of an economy's health. Inflation refers the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. In determining the economic position of a country is through a comparison of general government gross debt, revenue, total expenditure, national savings and total investments to the gross domestic product of the country. For instance, a low government gross debt to GDP percentage is usually an indication of economic health, while a high debt to GDP percentage can indicate financial trouble for a country. Panel Data Analysis "Panel Data" is set of data obtained by observation of the characteristics of a variety of units (cross-sectional variables) over time (Ahn and Moon, 2001). Panel data set have both cross-sectional and time-series dimensions. The size of the time series is formed by monitoring the same cross-section units during a given period (Wooldridge, 2009). When each subject (cross sectional unit) has the same number of obsevations, this type of panel is called a balanced panel data set. If some subjects have different number of observations, this situation is known as the unbalanced data case (Wooldridge, 2009). Panel data sets that thousands of cross sectional units observed through the time are used in many micro-economic researches (Hill et al., 2008). Panel data provide more informative data, more variability, more degrees of freedom, less collinearity among the variables and more efficiency (Baltagi, 2010). Panel data analysis can be considered as a combination of regression and time series analysis (Frees, 2004). This analysis is based on repetitive variance models because the observations of the units are repetitive through time dimension (Pazarlıoğlu, 2001). The main superiority of panel data due to working with the one dimensional crosssectional series or repeated cross sectional series that same units are not observed through the time is to loosen the standard assumptions (Maddala and Lahiri, 2009). By studying the repeated cross section of observations Panel data can better detect and measure effects that cannot be observed in pure cross section or pure time series data (Gujarati and Porter, 2009). Analyzing the observations of cross section and time series provide more flexibility compared to when used them separately by increasing the quantity and quality of data. In panel data analysis, the cross-sectional units are considered to be heterogeneous and controlled for the variation (heterogeneity). Pure time series or cross section studies which are not controlling this heterogeneity there run the risk of obtaining biased results. Panel data are able to control variables which are subject or time invariant (Baltagi, 2010). Because panel data has time based dynamics with the observations of cross sectional data repeated through time, the effect of unmeasured variables can be controlled (Hsiao, 2003). With the use of cross-sectional observations over time, panel data analysis provides more clarification character, less collinearity and more degrees of freedom and efficiency than only cross sectional analysis or time series analysis (Tarı, 2010). 4 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo In static panel data models, the covariance estimators (pooled panel data), fixed effects and random effects estimators are widely used. When the cross-sectional units are homogenous, pooled ordinary least squares panel model is used. In the presence of unitspecific or time-specific effects, in the case of assuming these effects to be fixed parameters to be estimated, model is called as the fixed effects. The term “fixed effects” expresses nonrandom quantities are accounted for the heterogeneity. If the subject specific effects are assumed random and not correlated with the regressors (independent variables), the model becomes random effects. These effects are included to the random effects model as a component of the error term (Baltagi, 2010). The panel models that do not have any lagged values of the dependent or/and independent variables in the model as a regressor are called “static models”. Fixed effects model and random effects model can be shown as follow: Fixes Effects Model: K yit  i    k xkit  uit , i  1,..., N , t  1,..., T (1) i  1,..., N , t  1,..., T (2) k 1 Random Effects Model K yit    k xkit  i  uit  , k 1 Index i differentiates the subjects and ranges from 1 to N. N is the number of subjects. Each subject is observed T times and the index t differentiates the observation times through 1 to T. K is the number of the explanatory (independent) variables. Analyzing Macro Economic Indicators in Turkey Using Panel Data Variables and Descriptive Statistics In this study, used database consists of the panel data set of 31 countries for the 2002-2012 term. Dataset is a balanced panel and has NxTxk = 31x11x12 = 4092 observations. Each variable has NxT = 31x11 = 341 observations. Dependent variable is ngdp (Gross domestic product, *billion dollars) and there are 11 independent variables. Average value of ngdp for 31 countries is 504 billion dollars. Independent variables and measuring units are listed in Table 1. 5 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Table 1: Independent Variables and Measuring Units Code bca_ngdpd lp lur Variable Current account balance Population (*10,000,000) Unemployment rate pcpipch tx_rpch tm_rpch ggxwdg_gr Inflation, average consumer prices Volume of exports of goods and services Volume of imports of goods and services Growth rate in general government gross debt Growth rate in general government revenue Growth rate in general government total expenditure Gross national savings Total investment ggr_gr ggx_gr ngsd_ngd nid_ngdp Units Percent of GDP Persons Percent of total labor force Percent change Percent change Percent change Rate Rate Rate Percent of GDP Percent of GDP Descriptive statistics for the variables used in the analysis are shown below in Table 2. Descriptive statistics values are ordinary and there are not exceptional values in the dataset. Table 2: Summary Statistics Variable Obs Mean ngdp bca_ngdpd lp lur pcpipch tx_rpch 341 341 341 341 341 341 503.9614 -.029675 1.858403 .0883615 .0366609 .0511077 tm_rpch ggxwdg_gr ggr_gr ggx_gr ngsd_ngd nid_ngdp 341 341 341 341 341 341 .0469935 1.097167 1.063697 1.066551 .1909255 .2206239 Std. Dev. Min Max 800.7973 .067328 2.357604 .0435064 .0385439 .0796323 4.303 -.28352 .0288 .01014 -.01706 -.23794 3640.727 .11852 8.252 .25552 .45134 .31648 .0990369 .1719402 .0779949 .0766898 .058724 .0508613 -.33327 .814583 .8267854 .7331372 -.04103 .09755 .29259 2.736609 1.470259 1.604453 .34076 .39959 Table 3 below displays the correlation coefficiencies between the variables. Highest correlations among the independent variables are coefficient between tx_rpch and tm_rpch which is 0.80; between bca_ngdpd and ngsd_ngd which is 0.68 and between ggr_gr and ggx_gr which is 0.67. 6 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Table 3: Correlation Coefficiencies Between the Variables ngdp bca_ng~d ngdp bca_ngdpd lp lur pcpipch tx_rpch tm_rpch ggxwdg_gr ggr_gr ggx_gr ngsd_ngd nid_ngdp 1.0000 0.2523 0.8671 -0.0561 -0.1781 -0.1143 -0.0812 -0.0745 -0.2088 -0.2049 0.0662 -0.2582 1.0000 0.1296 -0.1418 -0.3444 -0.1263 -0.1587 -0.1186 -0.4142 -0.4468 0.6783 -0.5400 lp lur pcpipch tx_rpch tm_rpch ggxwdg~r 1.0000 0.0814 0.0712 -0.0300 0.0121 -0.0601 -0.0224 -0.0700 -0.0444 -0.2228 1.0000 0.0973 0.0952 -0.0401 0.0332 -0.0132 -0.0945 -0.2647 -0.1154 1.0000 0.2085 0.1792 0.2055 0.5445 0.4881 -0.2286 0.1894 1.0000 0.8007 -0.1519 0.5022 0.1830 0.0428 0.2140 1.0000 -0.3249 0.6518 0.3087 0.1004 0.3200 1.0000 -0.1608 0.1003 -0.1634 -0.0270 ggr_gr 1.0000 0.6678 -0.1201 0.4066 Table 4 (continued) ggx_gr ngsd_ngd nid_ngdp ggx_gr ngsd_ngd nid_ngdp 1.0000 -0.1760 0.3872 1.0000 0.2491 1.0000 Figure 1 shows the panel line graph for the dependent variable ngdp. 0 ngdp 1000 2000 3000 4000 Figure 1: Panel Line Graph for the Dependent Variable ngdp. 2002 2004 2006 2008 2010 2012 t id = 1/id = 16/id = 31 id = 2/id = 17 id = 3/id = 18 id = 4/id = 19 id = 5/id = 20 id = 6/id = 21 Static Linear Panel Data Models id = 7/id = 22 id = 8/id = 23 id = 9/id = 24 id = 10/id = 25 To determine the relationship idbetween the ngdp and the independent variables, the = 11/id = 26 id = 12/id = 27 effects model and the random effects model static linear id = 13/id = 28 which are the most id common = 14/id = 29 data analysis models are used.id ngdp is modeled as a function of 11 factors. The = 15/id = 30 fixed panel fixed effects model is ngdpit  i  1bca _ ngdpdit  2lpit  3lurit   4 pcpipchit  5tx _ rpchit  6tm _ rpchit  7 ggxwdg _ grit  8 ggr _ grit  9 ggx _ grit  10 ngsd _ ngdit  11nid _ ngdpit  uit 7 (3) �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo and the random effects model is ngdpit  1bca _ ngdpdit  2lpit  3lurit  4 pcpipchit  5tx _ rpchit  6tm _ rpchit  7 ggxwdg _ grit  8 ggr _ grit  9 ggx _ grit  10 ngsd _ ngdit  11nid _ ngdpit  i  uit  (4) i stands for the country number, t stands for the year, uit is the error term for the fixed effects model and  i  uit  is the composite error term for the random effects model. If the country effects are uncorrelated with the regressors, they are known as random effects. In the random effects model, because there is no correlation between the country specific effects and the regressors, country specific effects are parameterized as additional random disturbances. If the country effects are correlated with the regressors, then they are known as fixed effects. If there is no country specific effect in the model, then the model becomes as the pooled ordinary least squares regression which is ngdpit    1bca _ ngdpdit  2lpit  3lurit  4 pcpipchit  5tx _ rpchit  6tm _ rpchit  7 ggxwdg _ grit  8 ggr _ grit  9 ggx _ grit  10 ngsd _ ngdit  11nid _ ngdpit  uit Firstly, the null hypothesis that constant terms are equal across countries is tested to determine if the pooled ols regression will produce inconsistent estimates. Pooling test examines whether the intercepts take on a common value α and also known as the test for heterogeneity. Hypothesis is tested with F test Table 5: Testing for the Country Specific Effects H 0 : 1   2  ...   N  0 F  30; 299   53.51 prob  F  0.0000 The p value is 0.0000. Null hypothesis is rejected. This provides strong evidence for the case for retaining country specific effects in the model specification. So, the pooled ordinary least squares model is inconsistent. The Pooled ols model (OLS_ALL), the fixed effects model (FE_ALL) and the random effects model (RE_ALL) results are shown respectively in the Table 6. 8 (5) �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Table 6: Pooled OLS, Fixed Effects and Random Effects Models Variable bca_ngdpd lp lur pcpipch tx_rpch tm_rpch ggxwdg_gr ggr_gr ggx_gr ngsd_ngd nid_ngdp _cons OLS_ALL -2262.4661 4370.5294 0.6050 301.64765 8.1437477 0.0000 -1999.2071 453.07528 0.0000 -3815.9149 637.28187 0.0000 300.14161 410.33191 0.4650 -322.03228 394.86506 0.4153 28.853357 123.78207 0.8158 -719.79669 461.1889 0.1195 -5.9833848 356.36172 0.9866 2695.1518 4356.2346 0.5365 -2437.9341 4385.0456 0.5786 956.24528 473.76334 0.0444 FE_ALL RE_ALL -226.33522 1857.8225 0.9031 1307.4635 117.2346 0.0000 -1265.4896 423.61627 0.0030 433.10129 315.38152 0.1707 -96.767791 178.34864 0.5878 53.95787 170.45905 0.7518 64.067478 58.362333 0.2732 80.987428 201.15488 0.6875 -297.12541 160.88146 0.0658 799.33888 1837.575 0.6639 -535.27354 1876.4762 0.7756 -1708.2562 350.40975 0.0000 -1109.0438 2124.4992 0.6017 321.11738 21.354954 0.0000 -1035.926 445.29327 0.0200 -511.81024 345.09672 0.1380 7.3488318 203.62366 0.9712 -49.725872 194.31987 0.7980 50.45071 66.448925 0.4477 -85.169113 229.66851 0.7108 -270.85056 183.05769 0.1390 1138.2268 2106.3063 0.5889 -1057.3717 2146.4956 0.6223 326.62786 303.98464 0.2826 Also, the null hypothesis that the variances of the country specific effects are equal to zero is tested by the Lagrange Multiplier test and the null hypothesis that the standard deviations of the country specific effects are equal to zero is tested by the Likelihood Ratio test. Results are given in the Table 7. Table 7: The Lagrange Multiplier and the Likelihood Ratio Test Results Lagrange Multiplier Test Likelihood Ratio Test H 0 :    0 (Pooled ols regression is H 0 :    0 (Pooled ols regression is appropriate.) appropriate.) 2 i i LM 12  1014.36 12  460.78 prob   2  0.0000 9 prob   2  0.0000 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Because there is country specific effects, pooled ols model shown in the first column is inappropriate. Most of the regressors are not significant. Finally 3 of all independent variables are significant and by using these regressors which are lp, lur and ggx_gr, the fixed and the random effects models are estimated and the results are shown in the first two coloumns of the Table 8 below. Table 8: Static Linear Panel Data Models Variable lp lur ggx_gr _cons FE RE FE_RB 1197.3581 106.32105 0.0000 -1184.4394 333.84411 0.0004 -280.13589 135.07513 0.0389 -1317.7746 252.77713 0.0000 341.39549 26.803482 0.0000 -929.58167 357.12541 0.0092 -349.138 147.50442 0.0179 324.02372 192.98142 0.0931 1197.3581 403.34191 0.0058 -1184.4394 494.79103 0.0231 -280.13589 108.78589 0.0152 -1317.7746 721.32216 0.0777 FE_PCSE 285.99362 23.468885 0.0000 -1825.0088 353.80452 0.0000 -396.77413 124.34375 0.0014 542.47688 150.79341 0.0003 FE_DK 1197.3581 248.13309 0.0000 -1184.4394 230.59185 0.0000 -280.13589 71.993731 0.0005 -1317.7746 474.06457 0.0093 The random effects model specifies the country specific effects as a random draw that is uncorrelated with the regressors and the overall error term. The random effects estimator uses the assumption that the country specific effects are uncorrelated with the regressors and the extra orthogonality conditions are valid. This assumption is tested by using Hausman test and the results are given in Table 9. Table 9: Hausman Specification Test Results Variable Fixed Effects (b) Random Effects (B) Difference (b-B) lp lur ggx_gr 1197.36 -1184.44 -280.14 .341.40 -929.58 -349.14 855.96 -254.86 69.00 H 0 : Differences in coefficients are not systematic. (the RE estimator is consistent) 1 32   b  B  Vb  VB    b  B   67.83 prob   2  0.0000 The Hausman test’s null hypothesis is rejected. Country specific effects are correlated with the regressors. Because the random effects estimator is inconsistent, the fixed effects model is the appropriate one. 10 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Before using the fixed effects model, diagnostic tests for the model assumption must be performed. The most important assumptions of the fixed effects estimator are homoscedasticity, no serial correlation and no contemporaneous correlation. Testing for homoscedasticity is performed by using modified Wald test for the null hypothesis of homoscedasticity against the heteroscedastic alternative. Testing for serial correlation is performed by using Baltagi-Wu locally best invariant test, modified Bhargava et.al. Durbin Watson test and Wooldridge’s serial correlation test respectively. For testing the absence of the contemporaneous correlation assumption, Breusch-Pagan Lagrange Multiplier test, Pesaran CD test, Friedman’s R test and Frees’ Q test are performed. Test results are given below in Table 10. Table 10: Results of the Diagnostic Tests Test Homoscedasticity Modified Wald Hypothesis Test Statistic Probability H 0 :  i2   2 312  5.8*105 Baltagi-Wu LBI. H0 :   0 LBI  0.8299 Modif. Bhargavaet.al. DW H0 :   0 DW  0.4144 Wooldridge’s Serial Correlation H 0 : No first order serial F1;30  909.67 p  F1;30  0.0000 2  465  1838.14 2 p   465  0.0000 p  312  0.0000 Serial Correlation correlation Contemporaneous Correlation Breusch-Pagan LM H 0 : No contemporaneous Pesaran CD correlation H 0 : No contemporaneous CD  22.53 p  CD  0.0000 Friedman’s R correlation H 0 : No contemporaneous R  106.31 p  R  0.0000 Frees’ Q correlation H 0 : No contemporaneous Qtest  7.89 correlation Critical Values from Frees’ Q distribution:   0.10 : 0.2333   0.05 : 0.3103   0.01 : 0.4649 Because the Modified Wald test p value is 0.0000, the null hypothesis is rejected and the model has heteroscedasticity. For serial correlation, Wooldridge’ serial correlation F test statistic is 909.67 and the p value is 0.0000. Model has serial correlation problem. Additionally both Baltagi-Wu LBI. and modified Bhargava et. al. DW serial correlation test statistics which are 0.8299 and 0.4144 respectively indicate that the model has serial correlation problem. All tests performed for the contemporenaous correlation point that there is cross sectional correlation in the model. 11 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo The last three columns of the Table 6 shows the fixed effects model with the Huber-White standard errors that is robust to heteroscedasticity and serial correlation (FE_RB); the fixed effects model with panel corrected standard errors that is robust to heteroscedasticity and the cross sectional (contemporaneous) correlation (FE_PCSE); the fixed effects model with the Driskoll-Kraay standard errors that is robust to the heteroscedasticity, serial correlation and to the cross sectional correlation (FE_DK). FE, FE_RB and the FE_DK models have the same coefficient estimates with the different standard errors. The FE_PCSE model has different coefficient estimates from the other three models. Finally, because of the violations of the assumptions and the nature of the model estimators, the last model can be used to interpret the relationship between the dependent variable and the regressors (independent variables). The coefficient of lp (1197.36) indicates that if the population increases 10 million, the dependent variable gross domestic product (ngdp) increases about 1.2 billion dollars. Because the coefficient of lur is -1184.44, if the unemployment rate increases 1%, the gross domestic product decreases about -11.84 billion dollars. The estimated coefficient of the ggx_gr is -280.14 and it can be interpreted as if the growth rate in general government total expenditures increases 1%, the gross domestic product decreases about -2.80 billion dollars. Conclusion and suggestions In this paper the authors used panel data approach to analyze the individual effect of some of the key macroeconomic indicators (current account balance, general government gross debt, general government revenue, general government total expenditure, gross national savings, inflation (average consumer prices), population, total investment, unemployment rate, volume of exports of goods and services, volume of imports of goods and services) on economic growth (GDP) of EU, acceding and candidate countries over during the 2002– 2012 period. The main findings of static model indicate that level of population positively affects economic growth. That is, 10 million increase in population leads to rise in GDP over 1.2 trillion dollars. Whereas the level of unemployment rate and total expenditure negatively affect economic growth. One percent increase in the unemployment rate decreases GDP by 11.8 billion dollars and one percent increase in the total expenditure decreases GDP by 2.80 billion dollars. References Ahn, S. C., Moon, H. R. (2001). Large-N and Large-T Properties of Panel Data Estimators and the Hausman Test”, USC CLEO Research Paper, No. C01-20. Baltagi, B. H. (2010). Econometric Analysis of Panel Data, Fourth Edition, John Wiley&Sons Ltd, 2010. Beine, M., Docquier, F., Oden-Defoort, C. (2011). A Panel Data Analysis of the Brain Gain. World Development (39), 4, 523–532. 12 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Bortolotti, B., Fantini, M., Siniscalco, D. (2003). Privatisation around the world: evidence from panel data. Journal of Public Economics, 88, 305 – 332. Frees, E. W. (2004). Longitudinal and Panel Data, Analysis and Applications in the Social Sciences, New York, Cambridge University Press. Gujarati, D. N., Porter, D. C., (2009). Basic Econometrics, Fifth Edition, McGraw Hill, New York. Haas, R. de, Lelyveld, I. van, (2006). Foreign banks and credit stability in Central and Eastern Europe. A panel data analysis. Journal of Banking & Finance 30, 1927– 1952. Hill, R. C., Griffiths, W. E., Lim, G. C. (2008). Principles of Econometrics, 3rd press, John Wiley & Sons. Hsiao, C. (2003). Analysis of Panel Data, 2nd press, New York, Cambridge University Press, 2003. Maddala, G.S., Lahiri, K. (2009). Introduction to Econometrics, 4th press., West Sussex, John Wiley & Sons. Lee, C. C., Chang, C. P., (2007). Energy consumption and GDP revisited: A panel analysis of developed and developing countries. Energy Economics, 29, 1206 – 1223. Lee, C. C., Chang, C. P., (2008). Tourism development and economic growth: A closer look at panels. Tourism Management 29 (2008) 180 – 192. Pazarlıoğlu, M.V. (2001). 1980-1990 Döneminde Türkiye’de İç Göç Üzerine Ekonometrik Model Çalışması”, V. Ulusal Ekonometri ve İstatistik Sempozyumu, Çukurova Üniversitesi, Adana (In Turkish). Sukiassyan, G. (2007). Inequality and growth: What does the transition economy data say? Journal of Comparative Economics, 35, 35–56. Tari, R. (2010). Ekonometri, Extended 6th press, Umuttepe Kitabevi, Kocaeli, (In Turkish). Tsoukas, S., (2011). Firm survival and financial development: Evidence from a panel of emerging Asian economies. Journal of Banking & Finance, 35, 1736–1752. Wooldridge, J. M. (2009). Introductory Econometrics, 4th press, Canada, South Western 13 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1585 Title A name given to the resource Analyzing Macroeconomic Indicators of Economic Growth Using Panel Data Author Author TAS, Nihat HEPSEN, Ali ONDER, Emrah Abstract A summary of the resource. During last 10 years some EU countries had economic instability. They have short and long term challenges such as unemployment, population ageing, globalization etc. In this study it is aimed to analyze macroeconomic indicators of EU countries’ economic growth using panel data approach. Static and dynamic panel data models were used for determining the effects of independent macro-economic variables on gross domestic product (GDP) of EU member countries including Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom; acceding country: Croatia; and candidate countries: Iceland, Montenegro, Serbia, The former Yugoslav Republic of Macedonia and Turkey. While dependent variable of analyze is gross domestic product (volume), the independent variables are current account balance, general government gross debt, general government revenue, general government total expenditure, gross national savings, inflation, average consumer prices, population, total investment, unemployment rate, volume of exports of goods and services, volume of imports of goods and services. The analysis proposed is based on a panel data (cross sectional time series data) approach. The dataset of this research involves 33 EU member and EU candidate countries (units). The effects of 12 macroeconomic indicators on gross domestic product volume were examined. The paper also empirically analyzes the negative impacts of global financial crisis (the 2007 U.S. Subprime Financial Crisis) into EU member and candidate countries’ economic growth during the 2002–2012 crisis is, the factors that promote a financial crisis, and the dynamics of a financial crisis. Thus, the effects of macroeconomic parameters are analyzed using panel data series. The findings of this research are especially useful for EU candidate countries such as Iceland, Montenegro, Serbia, The Former Yugoslav Republic of Macedonia and Turkey for developing convenient economic strategies. Keywords: European Union and Candidate Countries, Financial Crisis, Macro Economic Parameters, Panel Data Analysis, Gross Domestic Product, Economic Growth. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 978-9958-834-23-3 https://omeka.ibu.edu.ba/files/original/ce32a89e61e93d7e9de3864961585bb9.pdf 959254c62f9259249b4d032aaa2a8f4c PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo A Research on Beck Hopelessness Scale of the Students in Vocational School of Higher Education Sebahattin Taş Akdeniz University, Antalya, Turkey Yusuf Yılmaz Akdeniz University, Antalya, Turkey yusufyilmaz@akdeniz.edu.tr Osman Nuri Demirel Akdeniz University, Antalya, Turkey onuridemirel@mynet.com Hakan Çetin Akdeniz University, Antalya, Turkey hakanc@akdeniz.edu.tr Engin Üngüren Akdeniz University, Antalya, Turkey enginunguren@akdeniz.edu.tr In this research, it has been investigated the hopelessness levels of students who study at Akdeniz University Vocational School of Social Sciences and whether some demographic variables affect the hopelessness levels of students. 376 students have participated in the research. Beck Hopelessness Scale (BDS) and a personal questionnaire have been utilized in data collection. According to the characteristics of the study group, descriptive frequency and percentage tables of the variables collected by the data collection tools have been created. To investigate the differences between two groups Independent Sample T Test, to compare more than two groups, one-way ANOVA have been applied. To determine which group causes the obtained difference, LSD test from post hoc analysis has been applied. Keywords: Beck Hopelessness Scale, Hopelessness Level, Hopelessness, Vocational School Students, Management. 249 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1579 Title A name given to the resource A Research on Beck Hopelessness Scale of the Students in Vocational School of Higher Education Author Author TAS, Sebahattin YILMAZ, Yusuf NURI DEMIREL, Osman CETIN, Hakan Unguren, Engin Abstract A summary of the resource. In this research, it has been investigated the hopelessness levels of students who study at Akdeniz University Vocational School of Social Sciences and whether some demographic variables affect the hopelessness levels of students. 376 students have participated in the research. Beck Hopelessness Scale (BDS) and a personal questionnaire have been utilized in data collection. According to the characteristics of the study group, descriptive frequency and percentage tables of the variables collected by the data collection tools have been created. To investigate the differences between two groups Independent Sample T Test, to compare more than two groups, one-way ANOVA have been applied. To determine which group causes the obtained difference, LSD test from post hoc analysis has been applied. Keywords: Beck Hopelessness Scale, Hopelessness Level, Hopelessness, Vocational School Students, Management. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 https://omeka.ibu.edu.ba/files/original/6720f74b8c1b163a24e90cd2be7c207c.pdf 3769cc50c1ab5a3397a100cd76bb98b5 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo The Effects of Cultural Differences and Politics on Tax Morale: The Case of Italy and Turkey Recep Tekeli University of Adnan Menderes, Turkey rtekeli@adu.edu.tr In this paper we analyze the tax morale in Turkey and Italy, using data from the fifth wave of World Values Surveys. Using Survey data for comparative analysis we can see the differences in several factors affecting Tax Morale between Italy (mainly composed of Catholics) and Turkey (mainly composed of Muslims). The results for the magnitude of tax morale show that Italy and Turkey rank in the highest as compared to other countries within their regions. Thus, this gives a task to explain why tax morale is very high in these two countries which differ in cultures and politics; what determines tax morale and are there any similarities between these two countries in the determination of tax morale level. We empirically test what shapes tax morale by using Ordered Probit model. We have followed the literature but used additional variables to see what determines the notion “intrinsic motivation to pay taxes i.e. tax morale”. Most of our findings are in line with the earlier works in tax morale literature. We agree with the statement that not only trust in the government might have an effect on tax morale (Turkey), but also trust in the court, or the legal system (Italy), and hence the way the relationship between the state and its citizens is established. Also our findings indicate that older individuals tend to exhibit higher tax morale. In line with the previous findings in the literature pride has positive effect on tax morale level in the study countries. The results on religion, indicates that while tax cheating is immoral for Religious individuals in Turkey, we cannot make the same conclusion for the religious individuals in Italy. Keywords: Tax morale; Tax compliance. JEL classification: H26; H30 245 � https://omeka.ibu.edu.ba/files/original/7de7da90b79f4fc17f72b968e96aa0e6.docx d657571bb968a223ba4ad4f3521400fc https://omeka.ibu.edu.ba/files/original/9a34697a8795269288be5c6039fd0920.pdf 79af557814badaac84190e89231ccfbc PDF Text Text International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo The Effects of Cultural Differences and Politics on Tax Morale: The Case of Italy and Turkey RecepTekeli Adnan Menderes University, Nazilli, Turkey rtekeli@adu.edu.tr Abstract In this paper we analyze the tax morale in Turkey and Italy, using data from the fifth wave of World Values Surveys. Using Survey data for comparative analysis we can see the differences in several factors affecting Tax Morale between Italy (mainly composed of Catholics) and Turkey (mainly composed of Muslims). The results for the magnitude of tax morale show that Italy and Turkey are rank in the highest as compared to other countries within their regions. Thus, this gives a task to explain why tax morale is very high in these two countries which differ in cultures and politics; what determines tax morale and are there any similarities between these two countries in the determination of tax morale level. We empirically test what shapes tax morale by using Ordered Probit model. We have followed the literature but used additional variables to see what determines the notion “intrinsic motivation to pay taxes i.e. tax morale”. Most of our findings are in line with the earlier works in tax morale literature. We agree with the statement that not only trust in the government might have an effect on tax morale (Turkey), but also trust in the court, or the legal system (Italy), and hence the way the relationship between the state and its citizens is established. Also our findings indicate that older individuals tend to exhibit higher tax morale. In line with the previous findings in the literature pride has positive effect on tax morale level in the study countries. The results on religion indicate that while tax cheating is immoral for Religious individuals in Turkey, we cannot make the same conclusion for the religious individuals in Italy. Keywords: Tax morale; Tax compliance JEL classification: H26; H30 Introduction Why do people pay taxes? This question recently has started to be pronounced more often and attracted increased attention in the tax (non)compliance literature over the last few years. It is supposed that nobody likes to pay taxes but governments can still generate tax revenues. One possible answer among the scholars is to force people to pay their taxes by establishing a deterrence policy. In line with the economics-of-crime approach, Allingham and Sandmo‟s (1972) model shows that the extent of tax evasion is negatively correlated with the probability of detection and the degree of punishment. However, because of the empirical and experimental findings, their seminal model has attracted many criticisms by researchers. These deterrence models predict a comparatively high incidence of tax evasion; even in many countries, the actual level of deterrence is found to be too low to explain the high degree of tax compliance(see Torgler et al 2010:294; Torgler and Shaltegger, 2006:396). 1 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo In the tax compliance literature this seemed to be a “puzzle”, or in other words, it is indeed an avenue to study further for the scholars. To resolve this puzzle of tax compliance, many researchers have tried to link tax morale to the high degree of tax compliance (e.g., Frey and Feld 2002; Feld and Tyran 2002; Torgler 2001 and Torgler and Schneider 2009). In this perspective, Torgler, (2003:290) argued that Erard and Feinstein‟s work (1994) “demonstrates the relevance of integrating moral sentiments into the models to provide a reasonable explanation of actual compliance behavior”. Also while reviewing the tax compliance, Andreoni et al. (1998:852) suggest that “adding moral and social dynamics to models of tax compliance is as yet a largely undeveloped area of research” (see Torgler Schneider and Shaltegger 2010:294). Following Torgler‟s researches into the field of tax morale, rather than treating tax morale as a black box, or a residuum, many papers have analyzed which factors shape or maintain tax morale (see Torgler and Schneider 2007ab; Torgler and Murphy 2004; and Torgler et al 2010). In addition, this puzzle concerns policymakers because they need to know the driving forces of tax morale and the possibility that it influences willingness to pay taxes so that they can design efficient tax system. In the literature, tax morale is defined as “a moral obligation to pay taxes”, or “a belief in contributing to society by paying taxes”. It is also defined as “the existence of an intrinsic motivation to pay taxes” (Torgler 2003; 2004; Torgler and Schneider 2009; Cummings et al 2009; Torgler 2005). This is not an output variable like the size of shadow economy; it measures individual attitude not individual behavior (Torgler 2004; Torgler and Schneider 2009). Tax morale is also closely linked to the term taxpayer ethics by Alm and Torgler (2006:228) and Torgler and Schneider (2007a:10; 2007b:444) and used the definition by Song and Yarbrough (1978:443) that, “the norms of behaviour governing citizens as taxpayers in their relationship with the government”. Torgler and Murphy(2004:301) defines the concept as “tax morale can generally be understood to describe the moral principles or values individuals hold about paying their tax”1 Why Tax Morale is Important? Stemming from German scholars in the 1960s, Torgler and Schneider (2007a:10-11) argue that values and attitudes can affect individual behavior: Apart from sanctions, Spicer and Lundstedt (1976) argued that a set of attitudes and norms might have effect on the choice between tax compliance and evasion. Lewis (1982) points out that “it could be that tax evasion is the only channel through which taxpayers can express their antipathy … we can be confident in our general prediction that if tax attitudes become worse, tax evasion will increase” (p. 165, 177).” (excerpted from Torgler and Schneider 2007a:10-11). Therefore, we can state that values and attitudes can affect individual‟s behavior. Tax noncompliance is actually inevitable fact in all societies (see Schneider 2005; Schneider et al 2010 and Schneider and Buehn 2013). Schneider (2005:598) argues that most societies attempt to control shadow economic activities “through measures such as punishment and prosecution, or by relying on economic growth or education”. Schnieder (2005), Schneider et al (2010) ) and Schneider and Buehn (2013) have provided estimates of the size of the shadow economies for OECD countries over the periods of time. The first conclusion from these results is that for all countries investigated the shadow economy has 1 Tax morale is sometimes related to the term tax culture. Although it is not well conceptually organized yet, tax culture is defined as all residual factors that have not been considered to explain the behavior of tax compliance. In this aspect, Nerre (2008:155) defines tax culture as follows: “A country-specific tax culture is the entirety of all relevant formal and informal institutions connected with the national tax system and its practical execution, which are historically embedded within the country‟s culture, including the dependencies and ties resulting from their ongoing interaction.” 2 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo reached a remarkably large size and increasing over the years. Also, the empirical results convincingly demonstrate that an increasing burden of taxation and social security payments, combined with rising state regulatory activities, are the major driving forces underlying the size and growth of the shadow economy. In Graph 1, the lowest shadow economies have Austria, Luxembourg and Britain with the size of shadow economy around 10 to 12 percent in 2010. The size of shadow economy in Italy was 26.74% in 2010. The highest shadow economies among 26 EU countries have Romania with 30.9 and Bulgaria 31.9 percent. These countries‟ sizes of shadow economy are above Turkey‟s size in 2010 i.e 29%. The comparison of shadow economies in EU shows an important phenomenon for some countries to deal with. The main problem in the shadow economy, or black economy, is the fact that individuals are behaving dishonestly by providing false information. If so, what would lead citizens to behave more honestly, provide correct information and improve the tax compliance rate? Some believe that tax morale is an answer to this question (see Feld and Frey 2002). Also, Torgler and Schneider (2007b) argue that a reduction of tax morale reduces the moral costs of behaving illegally and increases the incentives to work in the black economy. Shadow, %GDP, 31.9 29 26.7 35 30 25 20 15 9.6 10 5 0 Romania Malta Lithuania Poland Spain Estonia Latvia Mean Finland Denmark Czech… France 20.5 UK Luxemb… Axis Title Graph 1: Size of the Shadow Economy in 26 EU Countries and Turkey (2010) Source: Graph 1 is prepared by using shadow economy estimates of Schneider et al (2013) According to Alm, et al (2004), a negative correlation between the size of the shadow economy, which is a measure of the extent of tax evasion, and tax morale indicates the extent to which individuals‟ revealed actions are related to their attitudes about paying taxes (Torgler and Schneider 2009:230; 2007b). In this extent, a number of previous studies have investigated the simple correlation between tax morale and the size of shadow economy. For example, Alm and Torgler (2006:242) focusing on Europe and the United States find a strong negative correlation (r=-0.460). Alm et al (2006) focused on transition countries and their results indicate a strong negative correlation between both variables (0.657) (see Torgler and Schneider, 2009:230). Torgler (2005) studied in Latin America, and found a strong negative correlation between both variables (-0.511). Torgler and Schneider (2009) find a significant correlation between tax morale and the size of shadow economy. Also, the beta coefficients show that its quantitative impact is comparable to other determinants. Schneider and Buehn (2013) show that average relative impact of the 3 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo tax morale on the shadow economy of 38 OECD countries over 1999 to 2010 is 9,5% and its effect on the shadow economy is -0.21. The conclusion is that higher tax morale leads to a smaller shadow economy. It has been argued that if tax authority places a taxman under every bed it is highly likely to achieve a high level of tax compliance rate but with high costs to the tax authority. Torgler and Shaltegger (2006:397) argues that “even though taxation is enforced by law, there is a moral dimension in paying taxes for many people”. For example, Slemrod (1992:7) “states that methods that reinforce and encourage taxpayers‟ devotion to their responsibilities as citizens play an important role in the tax collection process” (excerpted from Torgler and Shaltegger 2006:397). If tax morale is thought to be an explanation for why tax compliance rates are so high, it would be interesting to analyze what may shape tax morale among taxpayers. Next section examines the magnitude and determinants of Tax Morale. Model and variables which are considered to be important explaining tax morale are presented as well. Section 3 gives the empirical results in Turkish and Italian experience i.e. those countries differ in culture, religion and politics. Last section concludes the paper. Magnitude and Determinants of Tax Morale 1 Magnitude If tax morale is seen as an important factor to understand the puzzle of tax compliance and plays a significant role in determining the levels of shadow economy, then it is necessary to investigate the determinants of tax morale. Thus, this section focuses on the magnitude and determinants of tax morale in the study countries: Turkey and Italy. We define tax morale as “the intrinsic motivation to pay taxes” as defined by Torgler in his papers. This is not physical output variable such as tax evasion or the size of shadow economy. It measures an individual‟s willingness to pay taxes, in other words, “the moral obligation to pay taxes” or “the belief that paying taxes contributes to society”. Data for the tax morale variable are extracted from the World Values Survey (WVS) (see Inglehart et al., 2000). The World Value Survey is a worldwide investigation of socio-cultural and political change, which includes the case of Turkey and Italy. In the 2005 wave of the survey, a total of 1346 Turkish citizens and 1012 Italian citizens agreed to participate in the study. In the survey, our main concern is the question number 200 which is about the attitudes toward cheating on taxation. This attitude was measured with the 10 different scales, where the value of one (1) indicates that cheating on taxation is never justifiable and the value of ten (10) means it is always justifiable. The general question to assess the level of tax morale in World Values Survey is that: “Please tell me for each of the following statements whether you think it can always be justified, never be justified, or something in between”: V200. Cheating on tax if you have the chance. 1 2 3 4 5 6 never justified 7 8 9 10 always justified Following the literature, the tax morale variable is generated by recoding this ten-point scale into a four point scale (0,1,2, and 3), with the value 3 standing for “never justifiable”. As usual, the value of 0 is an aggregation of the last 7 scale points (4-10), which were rarely chosen (ie, 0 = “always justifiable” to 3 = “never justifiable”; original scores of 4-10 were recoded into 0 = “always justifiable”). 4 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo We should point Elffers et al. (1987) that their findings indicate the differences between actual evasion assessed and evasion reported in survey responses. This result shows that subjective surveys are always prone to significant reporting errors. As argued by some researchers, tax morale is also measured with subjective survey responses in WWS, thus the measurement of tax morale is not free of bias (e.g. Torgler 2004; Torgler and Schneider 2007; Torgler et al 2010). Because the available data from surveys are based on selfreports in which respondents may tend to overstate their degree of compliance (Andreoni et al. 1998), no objective or directly observable measure of tax morale is available. However, the degree of honesty is expected to be higher because in the WWS the tax morale is defined less sensitive than directly asking whether a person has evaded taxes. Moreover, the dataset is based on wide-ranging surveys (based on more than two hundred questions) it was assumed to reduce the probability of respondent suspicion and the framing effects of other tax context questions. However, it can still be argued that a taxpayer who has evaded in the past will tend to excuse this kind of behavior and report a higher degree of tax morale in the survey. As no sanctions are involved in the survey many respondents might overstate their willingness to pay taxes or degree of honesty( see Torgler and Schneider 2007a; 2007b; Torgler and Shaltegger 2006).2 On the other hand, it was further argued that the use of such a single question (single item value) has the advantage of reducing problems of index construction complexity, especially in regard to measurement procedure or low correlation between items (see Torgler 2003; 2004; Alm and Torgler 2006; Torgler and Schneider 2007a). According to Torgler and Schneider (2007a:450) “tax morale is a multi-dimensional concept that requires a multi-item measurement tool and the likelihood of a multi-item index being adversely affected by random errors will produce more reliable measures. However, several previous studies have found consistent results using single-item survey measurements and laboratory experiments”. Despite these criticisms our approach to measuring tax morale is consistent with the previous studies in this area (Torgler 2003; 2004; Alm and Torgler2006; Torgler and Schneider 2007a). Never Justifiable: Cheating on Taxes, 80.50% Turkey Romania Netherlands Great Britain EU Mean Germany Finland Poland Sweden Bulgaria Norway 2 Spain 61.50% 56.93% Italy 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% France Tax Morale Graph 2 Tax Morale in EU Countries(12 EU Countries and Turkey) We should also indicate another disadvantage of working with survey data as argued by Alm and Torgler (2006:237-238) that “we cannot control for such traditional factors as the audit probability (because this is not known for each individual) and the fine rate (because this is identical for all individuals in a country)”. 5 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Graph 2 provides a comparison of tax morale levels of 12 EU countries with the same method. It shows the frequency of response for “tax cheating is never justifiable” with respect to the total respondents and the EU average value for scaled response. The descriptive analysis reveals the percentage of individuals in each EU country stating that „tax evasion is never justifiable‟ (i.e., those with the highest level of tax morale) and the mean level of tax morale among EU countries. Turkey with 80.50% shows a higher proportion of never justifiable response than that of EU average (57%). Italy‟s level of tax morale was above EU average. The lowest level of tax morale is observed for France and Norway. In sum, the results for the magnitude of tax morale show that Italy and Turkey rank in the highest as compared to other countries within their regions. Thus, this gives a task to explain why tax morale is high in these two countries; what determines tax morale and are there any similarities between these two countries in the determination of tax morale level. Although two countries with very different cultures and a different history and politics, a comparison of tax morale and compliance between Turkey and Italy as a member of OECD constitutes a good experiment. 2 Determinants After having discussed the magnitude of tax morale in EU countries, the question of the determinants of tax morale in Turkey and in Italy arises. 2.1 Model and Variables The empirical analysis in this paper focuses on tax morale which is influenced by a variety of factors. In empirical analysis social, demographic and economic factors as well as national pride or religiosity play a role in determining tax morale in a society. Also, “there is the institutional arrangement in which the government works. Here, the extent of democratic participation (possibilities) by taxpayers as well as the level of institutional and political trust is decisive. Tax morale is driven by the acceptance of government decisions.” (see Torgler and Shaltegger 2006:397). Our main model for predicting tax morale in the study countries has the following structure: TM i   1 TRUSTi   2 PRIDEi   3 POLi   3 HAPPYi   X  k k i 1 where TM denotes the individual degree of tax morale in a respected country; Our key independent variables TRUST denotes individual‟s trust in authority; PRIDE denotes pride of individual; POL is individual‟s political and pro-democratic attitudes, HAPPY denotes individual‟s wellbeing (happiness) and Xis a vector of variables whichdenotes numerous socioeconomics and control variables such as age, gender, marital status, education, awareness, employment and occupational status. Our choice of independent variables is in line with the literature. Torgler and Shaltegger (2006) discuss the studies using the factors to explain the determinants of tax morale in various countries. The dependent variable in our study is Tax Morale (TMi) and the applied econometric method is Ordered Probit models. The tax morale variable is scaled dependent variable and hence the ordered probit models help to analyze the ranking information of this variable (Torgler 2006). Following Cummings et al (2009) answers of “don‟t know” and missing values were not coded and dropped from the sample. As the estimated equation has a nonlinear form only the sign of the coefficient can be directly interpreted. Calculating the marginal effects is therefore a method to find the quantitative effect of independent variable has on tax morale. The marginal effect indicates the change in the share of 6 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo taxpayers (or the probability of) belonging to a specific tax morale level (i.e. 0,1,2,3) when the independent variable increases by exactly one unit. We will present only the marginal effects for the highest value - i.e. tax evasion is never justified- from the ordered probit estimation. Table 1 shows the frequency of response for “tax cheating is never justifiable” with respect to the total respondents. Turkey shows a higher proportion of never justifiable response than that of Italy. The Italian sample had the lowest percentage (61.50%) response for that position but both countries had responses for the “never justifiable” position above sixty percent. The following hypothesis is going to be tested by using main variables: Hypothesis 1. The more extensive the citizens‟ trust in the government, in the parliament and the legal system (justice or the court), the higher the tax morale. Hypothesis 2. The greater the citizens‟ national pride, the higher the tax morale. Hypothesis 3. A stronger pro democratic attitude leads to higher tax morale. Hypothesis 4. Tax morale increases with individual‟s wellbeing. In addition to the main independent variables discussed above we also use additional independent variables as controls to more fully explore what factors might determine tax morale in the study countries. Each of these variables, the questions to be answered and expected coefficient are discussed below: 1. Age (+) We will use age as a continuous variable and also treat age as a categorical variable (three classes are formed in the survey: 18-29, 30-49, 50+ with 18-29 as the reference group): Do older people have higher tax morale than younger? 2. Gender (+) (categorical variable: 1= male (the reference group), 2=otherwise): Do gender differences affect the level of tax morale? 3. Marital status (+) [married (in the reference group), single, living together, divorced, separated, widowed]: Do married people have different levels of tax morale than others? 4. Education (+/-)[continuous variable for higher educational level attained: 1= low (never gone to the school), 10 = higher education)]: Do more educated people have higher tax morale level than less educated people? Besides using formal education as a proxy of such awareness, we also constructed a variable to measure awareness to see its effect on tax morale (see Torgler and Shaltegger 2006). Awareness is a categorical variable and measured by following question: People use different sources to learn what is going on in their country and the world. For each of the following sources, please indicate whether you used it last week or did not use it last week to obtain information: Daily newspaper? (categorical variable: 1=yes, 2=no) 5. Occupation status (-) [full time employed (in the reference group), part time employed, selfemployed,unemployed, housewife, student, retired, other]: Does the occupation status of individual influence tax morale? 6. Economic class (-)[we used scale of incomes: 1=low income, 10=high income].: Do the levels of tax morale vary with the level of tax payers‟ income? 7. Religiosity (+): Does the religion make any differences to the levels of tax morale? Empirical results We observe for WVS data that tax morale is lower in Italy than in Turkey. However this purely descriptive analysis gives information about the raw effects and not the partial effects. The observed differences between Italy and Turkey might be explained in terms of differences in socio-economic, political and socio-demographic factors. Thus multiple 7 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo regressions in the next section help us to separate the effects of several socio-economic and socio-demographic factors from a possible culture difference. We estimate separately the determinants of Tax Morale at the individual level for Italy and Turkey.3 1 Empirical results on tax morale in Turkey Table 2 presents the estimation results for Turkey, focusing only on ordered probit models.4. In a next step we test Hypotheses 1–4. We use three trust variables, (i.e Trust in Legal System, Trust in Government and Trust in Parliament), to check the robustness of the trust variables. These variables allow us to analyze trust at the constitutional level (e.g., trust in the legal system/justice), thereby focusing on how the relationship between the state and its citizens is established; they also allow us to analyze trust more closely at the current politico-economic level (e.g., trust in the parliament and government) (see Alm and Torgler 2006). Trust in Legal System/Justice and Trust in Government are found highly significant. However Trust in Parliament in some estimations is not significant while in some estimations it is significant but with a negative coefficient implying that for those who does not have confidence in parliament they have higher tax morale. Notes: Dependent variable: tax morale on a four-point scale. In the reference group: fulltime employed, married, read newspaper, male, lower age group (18-29), Marg.: marginal effect. The marginal effect is calculated at the highest TAX MORALE score. Significance levels are: *0.05 < p < 0.10, **0.01 < p < 0.05, ***p < 0.01 . dy/dx is for discrete change of dummy variable from 0 to 1 and dy/dx for factor levels is the discrete change from the base level. In this table and following tables, variables Happiness, Trust Justice, Trust Parliament, Trust Government, Religious Service Attendance, Pride are rescaled in order to interpret the result straightforward. For example, in the survey, pride is measured on a 4 point scale i.e 1 for very proud 4 for not all. This was recoded into 4 for very proud and 1 for not all proud. In all estimations both trust variables have a significantly positive effect on tax morale with marginal effects varying between 2.5 and 4.7 (Trust in Government) and between 2.6 and 3.6 (Trust in Justice/Legal System) percentage points. Therefore, our study finds support for the notion that trust matters for tax morale in Turkey. An increase in the trust in government (trust in legal system) scale by one unit increases the share of subjects indicating the highest tax morale by 2.5 to 4.7 (2.6 to 3.6) percentage points. As trust is highly and positively correlated with tax morale, Hypothesis 1 cannot be rejected. Specifications show the relative importance of Pride in tax morale determination. In five estimations we have significant coefficient on this variable. As can be seen from the tables, there is a positive correlation between Pride and tax morale. The coefficient is always positive and the marginal effects indicate that an increase in Pride by one point raises the share of persons indicating the highest tax morale value by 3 to 4 percentage points. Thus, the results show that we cannot reject our main hypothesis. The results in Tables also indicate that Hypothesis 3 is rejected. We observe a significant correlation between a prodemocracy attitude and tax morale. As Tables show, a one-point increase in the prodemocracy index reduces the share of persons with the highest tax morale by 2 percentage points, meaning that a higher degree of democracy leads to lower tax morale for the reference group. However, calculating the marginal effects at the lowest tax morale level (i.e, 0 scale) we observe that an increase in the democracy index by one 3 The empirical results on the tax morale can be given on request from the author. See also Tekeli (2011). After the first estimation we have not included variables “trust in the government” and “trust in the Parliament” in the same model because there is a strong correlation between these two variables (r=0.60) that makes it impossible to clearly separate the effects of the two variables if they were included in one model. 4 8 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo unit reduces the probability of stating that tax evasion is always justified to less than one percentage point. Political attitude was tested by the variable ideology, the self-placement in a left-right ideological scale from 1 (left) to 10 (right). It has positive sign but insignificant effect on tax morale. We did not find any evidence to support the view that individual‟s political alignments affect his/her behavior toward taxes. To get a broader view and to consider the fact that a considerable number of citizens have a low living standard (as argued by Torgler 2004), we also include the variable happiness. In all specifications this variable does not significantly affect tax morale. The happiness variablehas interestingly, negative marginal effects but it is insignificant to derive any conclusion from it. Thus our hypothesis 4 cannot be proved statistically. As argued by Torgler (2004:249) it was expected that “if the financial situation of a household is bad, the tax payments might be seen as a hard restriction of their possibility set, which might reduce tax honesty”. In line with this argument we included income variable to test whether individuals in lower income classes are more likely to engage in criminal activities due to their lower opportunity costs, or not. However, in all estimations income variable did not have significant coefficient. We include different employment status such as part time employed, self-employed, retired, and unemployed. In the tax compliance literature, it was argued that self-employed persons have higher compliance costs than employed (e.g., Lewis, 1982). Therefore, Torgler and Schneider (2007b:452) argued that “taxes are more visible for the selfemployed, who have a higher opportunity to evade or avoid them. Moreover, pensions of retired individuals are incomes provided or at least heavily regulated by the state, so transparency is higher and the control better”. However, we did not find significant coefficient on self-employed. On the other hand we have significant coefficients on unemployed and housewife. An increase in Housewife by one point reduces the share of persons indicating the highest tax morale value by 8 percentage points. Our results indicate that the proportion of unemployed who report the highest tax morale is approximately 10 percentage points lower than the one of full-time employees. An increase in unemployment by one point reduces the share of persons indicating the highest tax morale value by almost 10 percentage points. Unemployed individuals might have a higher incentive to act in the shadow economy, which might influence their attitude regarding tax evasion. Table presents evidence regarding the variable religiosity, measured as frequency of Mosque attendance. We first included the variable measured as frequency of Mosque attendance. The result in the first specification indicates that an increase in the religious attendance increases the tax morale around 2 percentage points. To make a comparison between Italy and Turkey we included the variable religiosity, measured as Religious person on a three point scale (i.e 1 for religious 3 for atheist). Robust across all 8 specifications is the negative correlation between Tax Morale and Religiosity variables. We would expect that religiosity might influence people‟s habits, and might make individuals reluctant to engage in tax evasion. Our findings are consistent with those of Alm and Torgler (2006) and Torgler and Murphy (2004), who find that a higher religiosity is correlated with a higher tax morale. Our results indicate that an increase in religiosity increases the tax morale between 8 and 10 percentage points. McGee (1998) reports that the coefficient on Muslim is mostly not significant and also argues that Muslims are not always obligated to pay all taxes. Torgler (2006:94) points that “If the government engages in activities that are not legitimated, tax evasion might not be immoral (for a list of possible immoral state activities, see Yusuf, 1971). It would not be 9 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo immoral for a Muslim not to pay indirect taxes, to avoid paying tariffs, to evade income taxes, or not to comply with a law that causes prices to rise”. Our results on religiosity in Turkey do not seem to support McGee‟s (2006:23) argument that “the Muslim view toward tax evasion seemingly falls under category three that evasion is sometimes ethical”. The result rather seems to fit under McGee‟s first category that “tax evasion is never ethical”. The positive coefficients on education and negative coefficients on gender (woman) deserve special attention. In the models we have run, women do not seem to have stronger tax morale than men but this argument is not proved statistically. Our results show that education does not have any significant effects.5 However, we found that if the reading daily newspaper rate decreases tax morale increases by 8 to 10 percentage points. This result indicates that unawareness has significantly positive effect on tax morale. This result does not change even if we drop education variable from the estimation. It seems that reading newspaper makes individual‟s behavior somehow deteriorated. We cannot say that individuals‟ constraints by their social networks affect tax morale. In tables our results indicate that married people having higher tax morale than singles is not supported by the evidence from Turkey. Actually marital status did not have any effect on tax morale in all estimations. Also, older individuals (third age group in the estimation) tend to exhibit higher tax morale, but the coefficients on age group are not statistically significant in all estimations. 2 Empirical results on tax morale in Italy Next we present the results of ordered probit models in Italy6. In Table 3 Trust in Parliament and Trust in Government are found insignificant. In all estimations Trust in Parliament and Trust in Government did not have significant effects on tax morale. However Trust in Legal System/Justice was found significant in all estimations with positive coefficient implying that for those who does have confidence in Legal System/Justice they have higher tax morale. An increase in trust in Legal System/Justice scale by one unit increases the share of subjects indicating the highest tax morale by 4 to 5 percentage points. Therefore, our study finds support for the notion that trust matters for tax morale in Italy. As trust is highly and positively correlated with tax morale, Hypothesis 1 cannot be rejected for Italian case. Specification (1-5) shows the relative importance of Pride in tax morale determination. Only in one specification we did not have significant coefficient on this variable. We find that there is a positive correlation between Pride and tax morale. The marginal effects indicate that an increase in Pride by one point raises the share of persons indicating the highest tax morale value by 3 to 5 percentage points. Thus, the results show that we cannot reject our main hypothesis. The results in Table 3 also indicate that Hypothesis 3 is rejected. We do not observe a significant correlation between a prodemocracy attitude and tax morale. Thus we dropped this variable from the models for Italy. Political attitude was tested by the variable ideology, the self-placement in a left-right ideological scale from 1 (left) to 10 (right). We did not find any evidence to support the view that individual‟s political alignments affect his/her behavior toward taxes in Italy.7 In all specifications in preliminary regressions the variable happiness does not significantly affect tax morale. The happiness variable has positive marginal effects but it 5 The result on education did not change even if we used education as a continuous variable. See footnote 5, as r=0.67. 7 It has negative sign but insignificant effect on tax morale except for the preliminary estimates. 6 10 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo is insignificant to derive any conclusion from it. Thus our hypothesis 4 cannot be proved statistically. We also dropped this variable from various estimations. As previously stated, we included income variable to test whether individuals in lower income classes are more likely to engage in criminal activities due to their lower opportunity costs, or not. As in the Turkish case, income variable did not have significant coefficient. As argued above we include different employment status to see if it affects tax morale. Robust to all estimations is significant coefficient on self-employed. Our results indicate that the proportion of self-employed who reports the highest tax morale is approximately 15 percentage points lower than the one of full-time employees. The result indicates that an increase in self-employee by one point reduces the share of persons indicating the highest tax morale value by 14 to 18 percentage points. The results are in line with the argumentation that higher compliance costs reduce tax morale. Notes: See also notes in Tables for Turkey. We also included both religiosity variables in separate estimations but the results did not change very much. Also with age and age group separate regressions were run but the results did not change. Table presents evidence regarding the variable religiosity, we also included the variable measured as frequency of Religious attendance it was statistically insignificant but it has positive sign indicating that religious attendance increases the level of tax morale. In addition, to make a comparison between Italy and Turkey, we included the variable religiosity, measured as Religious person on a 3 point scale (i.e. 1 for religious 3 for atheist). Robust across all specifications is the insignificant correlation between Tax Morale and Religiosity variables. As argued above we would expect that religiosity might influence people‟s habits, and might make individuals reluctant to engage in tax evasion. However our findings for Italy are not consistent with those of Alm and Torgler (2006) and Torgler and Murphy (2004), who fined that a higher religiosity is correlated with higher tax morale. We found the positive coefficients on education and gender (woman). In the models we have run, women seem to have stronger tax morale than men in Italy. Robust across all 5 specifications is the significant correlation between Tax Morale and Education variables. Our results show that education has significant effects. We found that if the individual‟s education level increases tax morale increases by 2 to 3 percentage points. However, we found that awareness does not have significant effect on tax morale.8 Also, older individuals (third age group in the estimations) tend to exhibit higher tax morale than younger age groups; the coefficients on higher age group are statistically significant in all estimations9. The proportion of people aged over 50 who report the highest tax morale is approximately 18 percentage points higher than the 18-29 year old reference group (lower age category). The result indicates that an increase in old age category by one point increase the share of persons indicating the highest tax morale value by 14 to 18 percentage points. The proportion of people of the age 30-49 who report the highest level of tax morale is around 12 percentage points higher than for the 18-29 reference groups. In fact we can see from the tables that the marginal effects increase with an increase in age. For example 50+ age group reports the highest tax morale higher than the other age groups. We can state that individuals‟ constraints by their social networks affect tax morale. In tables our results indicate that married people having higher tax morale than singles 8 9 This result does not change even if we drop education variable from the preliminary regressions we run. The result on age did not change even if we used age as a continuous variable. 11 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo supported by the evidence from Italy. Actually, marital status did have effect on tax morale in 2 estimations. The proportion of singles who report the highest tax morale is 8 percentage points lower than the married people. The results also indicate that the proportion of the separated people who report the highest level of tax morale is 18 to 20 percentage points lower than the one of the married people. Conclusions It has been argued in the tax compliance literature that audit rate, tax fine and tax rates have effects on tax payers‟ decision to comply. However over last decades researchers have argued that individual‟s tax compliance behavior cannot be explained by traditional economic analysis considering entirely deterrence components of tax compliance. Tax morale has been used as a residual while searching the reasons why people pay taxes. Several studies argued that tax morale, or „„the intrinsic motivation to pay taxes‟‟, might help to explain the puzzle of why so many individuals pay their taxes. Instead of taking tax morale as a black box or a residuum, a number of studies have examined the determinants of tax morale, and what shapes tax morale or has it being changed over the time in a specific country and/or across the countries over the world. Many social, institutional and economic factors have been found to explain the notion of tax morale, or intrinsic motivation to pay taxes. We attempt to bring together the numerous insights from the earlier works on tax morale by examining many social, economic and institutional factors in Turkey and in Italy. By analyzing tax morale as a dependent variable, our findings give further evidence in tax morale literature. We report a large number of alternative specifications in the tables, and all specifications show the marginal effects of the explanatory variables on the highest value of tax morale (i.e tax cheating is never justified). We found that there are not many similarities between Turkey and Italy in determination of tax morale. While variables pride (+), trust (trust in justice system) (+), marital status [separated (-), singles (-)], self-employment (-), education (+), gender (women) (+) and age (+) are significant to explain tax morale level in Italy, trust (trust in the government and trust in legal system) (+), pride (+), religiosity (+), the prodemocracy (-), unemployment (-), house wife (-) and reading daily newspaper rate (-) are found significant in Turkey. The effects of trust on tax morale were analyzed on two different levels: (i) at the constitutional level (trust in the legal system, or in the court/justice system) and (ii) at the current politico-economic level (trust in the government and trust in parliament). We agree with the statement that not only trust in the government might have an effect on tax morale (Turkey), but also trust in the court, or the legal system (Italy), and hence the way the relationship between the state and its citizens is established. Also our findings indicate that older individuals tend to exhibit higher tax morale. In line with the previous findings in the literature pride has positive effect on tax morale level in the study countries. The results on religion, indicates that while tax cheating is immoral for Religious individuals in Turkey, we cannot make the same conclusion for the religious individuals in Italy. References Allingham, Michael G & Sandmo, Agnar (1972), „„Income Tax Evasion: A Theoretical Analysis.‟‟ Journal of Public Economics 1:323–38. Alm, J., & Torgler, B. (2006), “Culture Differences and Tax Morale in the United States and Europe”, Journal of Economic Psychology, 27:224-246. 12 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Alm, J., J. Martinez-Vazquez & Torgler B. (2006) “Russian Attitudes Toward Paying Taxes - Before, During, and After the Transition”, International Journal of Social Economics, 33: 832-857. Alm, J., Martinez-Vazquez, J. & Schneider F. (2004), “Sizing the Problem of the Hard-ToTax”. Working Paper. Georgia State University: USA. Andreoni, James, Erard, Brian & Feinstein, J.,(1998), “Tax Compliance”, Journal of Economic Literature 36:818–60. Cummings, R. G., Martinez-Vazquez, J., McKee, M., & Torgler, B. (2009), “Tax Morale Affects Tax Compliance: Evidence from Surveys and an Artefactual Field Experiment”, Journal of Economic Behavior and Organization, 70:447-457 Elffers, H, Russell H. W, & Dick, H (1987), “The Consequences of Different Strategies for Measuring Tax Evasion Behavior”, Journal of Economic Psychology 8:311-37. Erard, B. and Feinstein, J. S. (1994), “The Role of Moral Sentiments and Audit Perceptions in Tax Compliance”, Public Finance, 49: 70-89. Feld, L. P., & Frey, B. S. (2002), “Trust Breeds Trust: How Taxpayers Are Treated”, Working paper98, Institute of Empirical Research in Economics, University of Zurich. Feld, L. P., & Tyran, J.-R. (2002), “Tax Evasion and Voting: An Experimental Analysis”, KYKLOS, 55:197-222. Frey, B. S. and Feld, L. P. (2002), “Deterrence and Morale in Taxation: An Empirical Analysis”, CESifo Working Paper No. 760, August 2002. Inglehart, R (2000), “Codebook for World Values Survey”, Ann Arbor: Institute for Social Research. Lewis, A. (1982), “The Psychology of Taxation”, Martin Robertson, Oxford. McGee, R.W. (1998), “The ethics of tax evasion in Islam”, in: McGee, R.W. (Ed.), The Ethics of Tax Evasion. The Dumont Institute for Public Policy Research, South Orange, pp. 214-219. McGee, R.W. (2006), “Three Views on the Ethics of Tax Evasion”, Journal of Business Ethics, (DOI 10.1007/s10551-006-9002-z), 67:15–35 Nerre, B. (2008), “Tax Culture: A Basic Concept for Tax Politics”, Economic Analysis & Policy, 38 (No. 1): 153-167. Schneider, F. (2005), “Shadow Economies Around the World: What do we Really Know?”, European Journal of Political Economy, 21(3): 598–642. 13 �International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo Schneider, F., Buehn, A. & Montenegro, CE. (2010), “Shadow Economies all over the World: New Estimates for 162 Countries from 1999 to 2007 Submitted to the EPCS 2010”, Izmir, Turkey Schneider, F., & Buehn, A. (2013) Shadow Economies in highly developed OECD countries: What are the driving forces?, The 2013 Meetng of The European Public Choice Society Zurich Switzerland, 3-7 April. Slemrod (ed.) (1992), “Why People Pay Taxes”, Tax Compliance and Enforcement. Ann Arbor University of Michigan Press. Song, Y. & Yarbrough, Y. E. (1978), “Tax Ethics and Taxpayer Attitudes: A Survey”, Public Administration Review 38: 442-457. Spicer, M. W. & Lundstedt, S. B. (1976), “Understanding Tax Evasion”, Public Finance 31: 295-304. Tekeli, R (2011) The Determinants of Tax Morale: the Effects of Cultural Differences and Politics PRI Discussion Paper Series (No.11A-10) Torgler, B., (2001), “What Do We Know about Tax Morale and Tax Compliance?”, RISEC: International Review of Economics and Business 48:395–419. Torgler, B., (2003), “To Evade Taxes or Not: That is the Question”, Journal of SocioEconomics, 32:283-302. Torgler, B (2004),“Tax Morale in Asian Countries”, Journal of Asian Economics,15:237266. Torgler, B., (2005), “Tax morale in Latin America”, Public Choice, 122: 133-157. Torgler, B., (2006), “The Importance of Faith: Tax Morale and Religiosity”, Journal of Economic Behavior & Organization, 61: 81-109. Torgler, B., & Murphy, K (2004), “Tax Morale in Australia: What Factors Shape It and Has It Changed Over Time?”, Journal of Australian Taxation, 7: 298-335. Torgler, B & Schaltegger, C. 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Muhammad Ashraf, Lahore. 15 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1647 Title A name given to the resource The Effects of Cultural Differences and Politics on Tax Morale: The Case of Italy and Turkey Author Author TEKELI, Recep Abstract A summary of the resource. In this paper we analyze the tax morale in Turkey and Italy, using data from the fifth wave of World Values Surveys. Using Survey data for comparative analysis we can see the differences in several factors affecting Tax Morale between Italy (mainly composed of Catholics) and Turkey (mainly composed of Muslims). The results for the magnitude of tax morale show that Italy and Turkey rank in the highest as compared to other countries within their regions. Thus, this gives a task to explain why tax morale is very high in these two countries which differ in cultures and politics; what determines tax morale and are there any similarities between these two countries in the determination of tax morale level. We empirically test what shapes tax morale by using Ordered Probit model. We have followed the literature but used additional variables to see what determines the notion “intrinsic motivation to pay taxes i.e. tax morale”. Most of our findings are in line with the earlier works in tax morale literature. We agree with the statement that not only trust in the government might have an effect on tax morale (Turkey), but also trust in the court, or the legal system (Italy), and hence the way the relationship between the state and its citizens is established. Also our findings indicate that older individuals tend to exhibit higher tax morale. In line with the previous findings in the literature pride has positive effect on tax morale level in the study countries. The results on religion, indicates that while tax cheating is immoral for Religious individuals in Turkey, we cannot make the same conclusion for the religious individuals in Italy. Keywords: Tax morale; Tax compliance. JEL classification: H26; H30 Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 978-9958-834-23-3 https://omeka.ibu.edu.ba/files/original/be9ee1d641005cc3d4a9d381f4e5a06c.pdf b9d79a0721772203bfe7b96765e3ce47 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Tax Policy within Fiscal Policies: Evaluation of Tax Measures Taken Against Economic Crises Recep Tekeli Adnan Menderes University, Aydın, Turkey rtekeli@adu.edu.tr Hakan Arslaner Adnan Menderes University, Aydın, Turkey hakanarslaner@yahoo.com Tarık Ilıman Adnan Menderes University, Aydın, Turkey tarik.iliman@adu.edu.tr Through the history the countries have been examined by economic crises all over the world. After the Great Depression of 1929, the beginning of which is named as ‘’ Black Tuesday ‘’, we again experienced a new world-wide crisis that broke out in the United States in 2008. When it comes to explaining the economic crisis, it is simply a sudden and unexpected downturn in the economy of a country. Primarily, The United States, and then the all countries in the world have been severely influenced by the negative effects of this crisis. With the Great Depression in the United States, it was obvious that ‘’ Market Economy ‘’ that maintained by classical economists couldn’t be competent by itself alone. In that period, Keynesian economists which emphasized the ’’ State Intervention’’ emerged against their classical counterparts. According to Keynesians, ‘’ State Intervention ‘’ is so essential in depression eras. Governments can interfere with ongoing period of depression in two different ways. These are monetary policies and fiscal policies. If a decisive struggle and respond to the crisis are desired, both of these policies must be enforced simultaneously. On the other hand, governments are more efficient to use fiscal policies in comparison with monetary policies, in an effort to control the economy at that cyclical period. However, it is known that fiscal policies have their own instruments which may be listed as tax policy, spending policy and budget policy. Tax policy is the most effective way of all fiscal policies in stages of recession. As one of the main purposes of fiscal policy is to sustain economic stability, tax policies are often used to achieve the mentioned purpose. Hence, this study focuses on the tax measures taken by the governments to deal with the economic crises by giving inner examination of some countries severely hit by the recent global crisis. Overall, the study will elaborate the significance and the impact level of tax policies in crises periods. Keywords: Economic Crisis, Cyclical periods, Fiscal Policy, Tax Policy. 244 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1642 Title A name given to the resource Tax Policy within Fiscal Policies: Evaluation of Tax Measures Taken Against Economic Crises Author Author TEKELI, Recep ARSLANER, Hakan ILIMAN, Tarik Abstract A summary of the resource. Through the history the countries have been examined by economic crises all over the world. After the Great Depression of 1929, the beginning of which is named as ‘’ Black Tuesday ‘’, we again experienced a new world-wide crisis that broke out in the United States in 2008. When it comes to explaining the economic crisis, it is simply a sudden and unexpected downturn in the economy of a country. Primarily, The United States, and then the all countries in the world have been severely influenced by the negative effects of this crisis. With the Great Depression in the United States, it was obvious that ‘’ Market Economy ‘’ that maintained by classical economists couldn’t be competent by itself alone. In that period, Keynesian economists which emphasized the ’’ State Intervention’’ emerged against their classical counterparts. According to Keynesians, ‘’ State Intervention ‘’ is so essential in depression eras. Governments can interfere with ongoing period of depression in two different ways. These are monetary policies and fiscal policies. If a decisive struggle and respond to the crisis are desired, both of these policies must be enforced simultaneously. On the other hand, governments are more efficient to use fiscal policies in comparison with monetary policies, in an effort to control the economy at that cyclical period. However, it is known that fiscal policies have their own instruments which may be listed as tax policy, spending policy and budget policy. Tax policy is the most effective way of all fiscal policies in stages of recession. As one of the main purposes of fiscal policy is to sustain economic stability, tax policies are often used to achieve the mentioned purpose. Hence, this study focuses on the tax measures taken by the governments to deal with the economic crises by giving inner examination of some countries severely hit by the recent global crisis. Overall, the study will elaborate the significance and the impact level of tax policies in crises periods. Keywords: Economic Crisis, Cyclical periods, Fiscal Policy, Tax Policy. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 https://omeka.ibu.edu.ba/files/original/1a5844dd51c8f7a33cb74c77c55f3aca.pdf 67c1c9375d6003f8755a3ee36d5d2215 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Financial Crises and Derivatives Market: An Application of Factor Analysis Bilgehan Tekin Çankırı Karatekin University, Çankırı, Turkey bilgehantn@hotmail.com Yusuf Gör Çankırı Karatekin University, Çankırı, Turkey yusufgor23@gmail.com Countries that come even closer with each other every passing day, both economically and socially, went through and have been going through various financial crises in the past and present centuries. The close relationships of countries cause a crisis suffered by one country to expand within a short time and infect other countries. With the collapse of the Bretton Woods system and the transition from fixed rate policy to floating rate policy, the risk involved in inflation and interest rates increased, and derivatives were brought forward as one of the protection methods against the increasing risk ratio. The derivatives markets, which expanded by means of structured products used in 1990s, reached huge sizes, leading to a more risky financial structure. Although protection against risks is the main objective, derivatives offer speculative profit and arbitrage opportunity to their users. Intensely used for investment purposes, derivatives create bubble economies when they reach high volumes and influence crises by expanding the financial risk environment. The purpose of this study is to analyze financial crises, the effective factors on the emergence of crises and the derivatives market, and to reveal their inter-relations. In this study, firstly, the financial crises suffered throughout history will be mentioned, and, then, the financial crises that broke out since the periods when derivatives were started to be used will be addressed. To this end, focus will be on derivatives risks and the five most significant financial crises experienced in late history will be emphasized by analyzing the trading volumes realized in the derivatives market during the crisis periods; the 2008 global financial crisis, the 2001 economic crisis in Turkey, the 2001 crisis in Argentine, the 1997 East Asian Financial crisis and the 1994 economic crisis in Mexico. Data will be gathered from online 63 �International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo reports of the related countries, public records, Central Banks, IMF and World Bank reports and previous studies carried out on the same subjects. The study will start with a literature review that involves examining the financial crises and identifying the variables accepted as the leading indicators of these crises. Then these variables will be converted into less number of groups of variables, by using factor analysis which is a quantitative data reduction method. This new leading indicator factor groups will be compared for each crisis, and a model will be suggested on the basis of possible differences and similarities. Finally, focus will be on how derivative instruments affect crises and their effects on the created model. This study aims at uncovering similar or different aspects of leading indicators during each crisis period, by examining the five most significant financial crises suffered recently, and determining whether derivatives are a preventive or triggering factor on the same crises. Keywords: Financial Crisis, Bretton Woods System, Leading Indicators, Derivatives, Factor Analysis. 64 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1503 Title A name given to the resource Financial Crises and Derivatives Market: An Application of Factor Analysis Author Author TEKIN, Bilgehan GOR, Yusuf Abstract A summary of the resource. Countries that come even closer with each other every passing day, both economically and socially, went through and have been going through various financial crises in the past and present centuries. The close relationships of countries cause a crisis suffered by one country to expand within a short time and infect other countries. With the collapse of the Bretton Woods system and the transition from fixed rate policy to floating rate policy, the risk involved in inflation and interest rates increased, and derivatives were brought forward as one of the protection methods against the increasing risk ratio. The derivatives markets, which expanded by means of structured products used in 1990s, reached huge sizes, leading to a more risky financial structure. Although protection against risks is the main objective, derivatives offer speculative profit and arbitrage opportunity to their users. Intensely used for investment purposes, derivatives create bubble economies when they reach high volumes and influence crises by expanding the financial risk environment. The purpose of this study is to analyze financial crises, the effective factors on the emergence of crises and the derivatives market, and to reveal their inter-relations. In this study, firstly, the financial crises suffered throughout history will be mentioned, and, then, the financial crises that broke out since the periods when derivatives were started to be used will be addressed. To this end, focus will be on derivatives risks and the five most significant financial crises experienced in late history will be emphasized by analyzing the trading volumes realized in the derivatives market during the crisis periods; the 2008 global financial crisis, the 2001 economic crisis in Turkey, the 2001 crisis in Argentine, the 1997 East Asian Financial crisis and the 1994 economic crisis in Mexico. Data will be gathered from online reports of the related countries, public records, Central Banks, IMF and World Bank reports and previous studies carried out on the same subjects. The study will start with a literature review that involves examining the financial crises and identifying the variables accepted as the leading indicators of these crises. Then these variables will be converted into less number of groups of variables, by using factor analysis which is a quantitative data reduction method. This new leading indicator factor groups will be compared for each crisis, and a model will be suggested on the basis of possible differences and similarities. Finally, focus will be on how derivative instruments affect crises and their effects on the created model. This study aims at uncovering similar or different aspects of leading indicators during each crisis period, by examining the five most significant financial crises suffered recently, and determining whether derivatives are a preventive or triggering factor on the same crises. Keywords: Financial Crisis, Bretton Woods System, Leading Indicators, Derivatives, Factor Analysis. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 https://omeka.ibu.edu.ba/files/original/330138e930bf1dc48a493eebfe2305c7.pdf 540f834119fecc503a3523088e6683a9 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo The Use of Statistics in the Agricultural Sector in the Province of Kutahya Süleyman Tiryaki Kütahya Vocational School of Social Sciences, Kütahya, Turkey suleyman.tiryaki@dpu.edu.tr Murat Kurt Kütahya Vocational School of Social Sciences, Kütahya, Turkey murat.kurt@dpu.edu.tr Kenan Alp Balıkesir University Manyas Vocational School, Balıkesir, Turkey kenanalp83@gmail.com Aydın Kahraman Balıkesir University Havran Vocational School, Balıkesir, Turkey aydin1975@gmail.com Turkey has a structure that is growing and developing with each passing day in the agricultural sector. Because consciousness occurred that agriculture cannot be done with daily approaches, but with strategic planning and approaches. Turkey is in the 7th range the list of world agricultural economies and the 1st in Europe range in terms of the size of the agricultural economy. Kütahya is one of the cities that affect the results significantly. Kütahya has been one of the major centers in the agricultural field from past to present. The world's first stock exchange was established in the town of Çavdarhisar that has 4900 hectares of agricultural area. The reason for this is the period between 0 and 1000, agricultural and livestock is being done widely in this area. A questionnaire is prepared to determine whether the statistics, which is very important nowadays, is used enough or not in Kütahya. The questionnaire sent to 35 companies via fax, e-mail and personally, by who are working in agricultural sector. 22 of these companies filled out our questionnaire. The statistics using level and R&D activities were asked to the companies with 8 items in this questionnaire. The obtained data were entered to the packaged software and then analyzed with these data. The results of this analysis are interpreted. The companies believe that the use of statistics is important for developing but important part of the companies has not recorded the statistics of their companies till now. Also they do not follow the TÜİK istatistics published by Ministry of Agriculture. Keywords: Statistics, Research & Development (R&D), Agriculture. 263 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1670 Title A name given to the resource The Use of Statistics in the Agricultural Sector in the Province of Kutahya Author Author TIRYAKI, Suleyman KURT, Murat ALP, Kenan KAHRAMAN, Aydin Abstract A summary of the resource. Turkey has a structure that is growing and developing with each passing day in the agricultural sector. Because consciousness occurred that agriculture cannot be done with daily approaches, but with strategic planning and approaches. Turkey is in the 7th range the list of world agricultural economies and the 1st in Europe range in terms of the size of the agricultural economy. Kütahya is one of the cities that affect the results significantly. Kütahya has been one of the major centers in the agricultural field from past to present. The world's first stock exchange was established in the town of Çavdarhisar that has 4900 hectares of agricultural area. The reason for this is the period between 0 and 1000, agricultural and livestock is being done widely in this area. A questionnaire is prepared to determine whether the statistics, which is very important nowadays, is used enough or not in Kütahya. The questionnaire sent to 35 companies via fax, e-mail and personally, by who are working in agricultural sector. 22 of these companies filled out our questionnaire. The statistics using level and R&D activities were asked to the companies with 8 items in this questionnaire. The obtained data were entered to the packaged software and then analyzed with these data. The results of this analysis are interpreted. The companies believe that the use of statistics is important for developing but important part of the companies has not recorded the statistics of their companies till now. Also they do not follow the TÜİK istatistics published by Ministry of Agriculture. Keywords: Statistics, Research & Development (R&D), Agriculture. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 https://omeka.ibu.edu.ba/files/original/bfabbff0aa9d97fbdfe3e0059f6444e7.pdf d129e73df43ebeab532e23971065c271 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Europe’s Energy Security and Caspian Oil and Natural Gas Ahmet Tolga Türker İstanbul Arel University, İstanbul, Turkey atturker@arel.edu.tr For the countries in the Caspian region, whether they have been endowed with large resources of oil and natural gas or not, the energy politics and energy security has been at the heart of their efforts to build sovereign and prosperous states. To this end, oil and gas producing countries in the region have established arrangements governing the exploration and transportation of their resources to world markets as a central element of their foreign policies, whereas consumer countries carefully crafted their levels of dependence on energy-endowed powers since it is vitally important in determining their ability to formulate their domestic and foreign policies independently. For Europe, on the other hand, the discovery of the importance of energy security has been more recent, and mainly linked to the increasingly assertive policies that the Russian government and its monopolistic subsidiary, Gazprom, have adopted over the past years. As the European Union countries have begun to realize their problem and look for ways to diversify its supply of energy, the potential role of the Caspian region has inevitably emerged on the agenda. However, member countries seem to pursue their own energy policy, which only decrease the overall security of the Union and limit the EU’s foreign policy options. Apart from this observation, this project explores several aspects of European energy security particularly its dependence on Russia and the role of Caspian states as a source of alterative supply and argue that European countries must establish a European level energy strategy. Accordingly this study will unfold in four sections. First section will review Europe’s energy vulnerability along with the similarities between European and Caspian states in terms of energy politics. Second section will provide an analysis of emerging Russian energy diplomacy and the role of Gazprom in the light of recent developments. Third section will put forward the Caspian and the Black Sea as a future hub of energy for Europe and will discuss the role and importance of Nabucco and Trans-Caspian pipelines as the two most important infrastructure projects. Final section will critically review the EU’s approach to energy security and discuss the need to develop a more cohesive EU approach towards Caspian countries as well as issues of energy security. Even though certain individual decisions can be made by member states alone, these decisions should be made in accordance with the greater strategy goals set by the European Union. Keywords: European Union, Caspian Sea, Energy, Security. 20 � https://omeka.ibu.edu.ba/files/original/b68b495f36bcd76d11b422e1ac5a956a.docx a9da7b2eee5f9b52b8392c82c9d1b92b https://omeka.ibu.edu.ba/files/original/9a1ad1b9c8930a47f8ec7d8c96eff548.pdf bec986f06c15aa93d047879f09b69bbe PDF Text Text International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Europe’s Energy Security and Caspian Oil and Natural Gas AhmetTolgaTürker İstanbul Arel University, İstanbul, Turkey atturker@arel.edu.tr Abstract For the countries in the Caspian region, whether they have been endowed with large resources of oil and natural gas or not, the energy politics and energy security has been at the heart of their efforts to build sovereign and prosperous states. To this end, oil and gas producing countries in the region have established arrangements governing the exploration and transportation of their resources to world markets as a central element of their foreign policies, whereas consumer countries carefully crafted their levels of dependence on energy-endowed powers since it is vitally important in determining their ability to formulate their domestic and foreign policies independently. For Europe, on the other hand, the discovery of the importance of energy security has been more recent, and mainly linked to the increasingly assertive policies that the Russian government and its monopolistic subsidiary, Gazprom, have adopted over the past years. As the European Union countries have begun to realize their problem and look for ways to diversify its supply of energy, the potential role of the Caspian region has inevitably emerged on the agenda. However, member countries seem to pursue their own energy policy, which only decrease the overall security of the Union and limit the EU’s foreign policy options. Apart from this observation, this project explores several aspects of European energy security particularly its dependence on Russia and the role of Caspian states as a source of alterative supply and argue that European countries must establish a European level energy strategy. Accordingly, this study will unfold in four sections. First section will discuss the paradox of European energy dependency on Russia given that the EU has three and half times as many people, spends seven times as much on its military, and has a GDP fifteen times larger than Russia review Europe’s energy vulnerability along with the similarities between European and Caspian states in terms of energy politics. Second section will review Europe’s energy vulnerability along with the similarities between European and Caspian states in terms of energy politics. Third section will examine the policy alternatives for the EU in order to gain greater cohesion regarding their external energy policy and upper hand in dealing with Russia. Overall the EU must critically review its approach to energy security and look for ways to develop a more cohesive EU approach towards Caspian countries as well as issues of energy security. Even though certain individual decisions can be made by member states alone, these decisions should be made in accordance with the greater strategy goals set by the European Union. Keywords: European Union, Caspian Sea, Energy Security, Oil, Natural Gas Introduction Up until the early 1990s, due to relatively low prices, energy issues did not receive much attention from the policymakers and the scholars of political science. However two events have changed the outlook of global energy politics. First, the Gulf War alerted policymakers when a significant portion of Middle Eastern energy supplies faced the threats of an Iraqi invasion of Kuwait. Second, the collapse of the Soviet Union was a 19 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo welcome development as it suddenly provided the possibility of an alternative source of energy supply to the world. By the twenty-first century energy studies consolidated its position as high priority when oil and gas prices started to rise in 1999. Over the last decade global oil prices have increased by more than five times from 20USD per barrel in August 1999 to 116USD per barrel in March 2013 (Indexmundi, 2013). The world is facing serious economic security challenges, predominantly determined by the growing population and growing need of resources in developing countries. The world’s population will increase to 8 billion by 2030 from the current population of 6.5 billion, and 95 percent of that growth will be in developing countries. If this population growth is supported by growing economic potential and standard of living, more and more resources, and in particular energy resources, will be required. The International Energy Agency predicts a 50% increase in energy demand by 2030, even if efficiency is increased. About 70 percent of this increase is going to be in developing countries, and those countries are relying primarily on fossil fuels because of the very significant cost advantage (IEA, 2010). These numbers indicate the inevitability of increased pressure on the European economy. Today, it has become even clearer that energy security has proved to be a significant source of power in foreign policymaking. Accordingly, this paper argues that Europe’s high and rising energy demand is highlighting the security problems associated with its dependence on especially Russian gas supplies, and the need for diversifying European energy supply. The EU’s vulnerability in this regard is the result of dealing bilaterally with Russia on energy issues and thus granting Russia the capacity to have the upper hand among EU states. Therefore, in order to overcome its energy dependence on Russia, the EU needs to establish a European-level external energy strategy, become more cohesive regarding its external energy policy. In this regard, the strategic location of the Caucasus and Central Asia make it an area of growing importance in the contemporary security environment, particularly given regional instability and the potential threat to Western economic interests because of its energy resources and transport infrastructure. The Caspian region provides the most accessible alternative, provided that the region’s resources are transported through the Caucasian corridor, which also requires significant infrastructure investments (Sokolsky&Charlick-Pailey, 1999, p. 10). A more formal framework between the EU and the Caspian region states should be established to streamline EU policies on energy (Dağdemir, 2007, p. 249). European states must realize that working together on issues of energy security, especially when dealing with Russia, will be mutually beneficial in the long term. The rest of this paper is organized in following sections: First section will discuss the paradox of European energy dependency on Russia given that the EU has three and half times as many people, spends seven times as much on its military, and has a GDP fifteen times larger than Russia review Europe’s energy vulnerability along with the similarities between European and Caspian states in terms of energy politics. Second section will review Europe’s energy vulnerability along with the similarities between European and Caspian states in terms of energy politics. Third section will examine the policy alternatives for the EU in order to gain greater cohesion regarding their external energy policy and upper hand in dealing with Russia. 20 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo The Paradox of European Energy Policy Recent developments in Europe and Central Eurasia, as well as growing tensions between the EU and Russia over energy issues, have brought new opportunities for alternative suppliers of energy and transit corridors (Baskan&Bac, 2011, p. 361). Table 1 demonstrates that the EU relies on Russia for third of its oil and natural gas and thus diversification of routes and sources is a strategic priority. Moreover the energy disputes of early January 2006, when the disruption in Russian gas supplies to European countries, including Germany and Italy, reaffirmed Europe’s vulnerability in its dependence on imported Russian gas (Egerhofer et al., 2006). Russia’s political decision to cut off gas supplies to Ukraine, the main transit country for Russian gas headed to Europe, amid a dispute over prices, awakened the EU. The Russian government seemingly replicated this incident in early 2007 when a price and transit fee dispute with Belarus caused another crisis. These incidents have shown the weakness of the European Union and are troubling because, under the leadership of President Vladimir Putin, the Kremlin has pursued a strategy whereby European reliance on Russian energy is leveraged into economic and political gains for Moscow. Table 1. The EU’s Dependence on Few Suppliers for Its Oil and Natural Gas Source: Eurostat May 2011, Intra- EU trade excluded. However the assumption that Russia is able to ―out-leverage‖ the EU paradoxical since, after all, by nearly every measure of soft and hard power, Europe would seem to have the upper hand. For instance, the EU has three and half times as many people, spends seven times as much on its military, and has a GDP fifteen times larger than Russia. Even in EURussia energy trade, the balance of power appears to favor the European Union. While the gas the EU gets from Russia comprises 25 percent of European consumption, it also represents a full 70 percent of Russia’s exports (Leonard and Popescu, 2007). Moreover, due to limitations in export infrastructure to any other region, Moscow currently has limited alternatives to the EU market. In that sense, Russia is more dependent on the European market than Europe is on Russian supplies. However, so far Russia is successful in maintaining a high level of dependency in Europe. Moreover, the Kremlin has demonstrated that it has few hesitations in manipulating energy supply volumes in an effort to change a state’s policies. In July 2006, Russian oil pipeline operator Transneft shut down its pipeline to Lithuania shortly after the Lithuanian government sold its highly profitable MazeikiuNafta oil refinery to a Polish firm instead of 21 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Russia’s Lukoil (Egerhofer et al. 2006). Transneft claimed that the shut-down was solely due to technical problems along the route but steadfastly refused all outside offers of assistance in repairing or assessing the damage—and even hinted that the pipeline might remain closed regardless. The July 2006 incident is hardly the first time that Moscow has shut down pipelines in attempt to influence countries it considers to be in its backyard. Several times in 1990 and 1991, Russia cut supplies to the Baltic states in a blatant attempt to quash—and later exact revenge for—their independence movements. Later, in 2003, Transneft shut down its pipeline into Latvia after the Latvian government did not sell its VentspilsNafta export terminal to the Russian company…Transneft Vice President Sergei Grigorev spelled this out very clearly, saying ―Oil can only flow from Russia. [Latvia] can of course sell [the port] to Westerners. But what are they going to do with it? Turn it into a beach?‖ (Lelyveld, 2003). Many Western countries chose to interpret the VentspilsNafta debacle as a normal takeover attempt between two economic entities, ignoring the clear political implications. The energy sector, particularly in the former Soviet Union, lies at the intersection of business and politics. Political motivations clearly lie behind Russian gas cut-offs to non-EU countries like Georgia in 2001 and 2006, as well as recent price hikes to Ukraine, Georgia, and Azerbaijan. The dependence of these and other countries on Russia for such a vital commodity gives the Kremlin tremendous leverage. Moscow further increases its leverage in Europe by acquiring ownership (partial or otherwise) of downstream energy assets. Baran (2008, p. 160) states that in the past two years, Gazprom has signed deals with Eni (Italy), Gasunie (the Netherlands), BASF (Germany), E.ON Ruhrgas (Germany), and Gaz de France, supplementing the company’s already significant holdings in Eastern European countries. Although Gazprom can often buy a stake in downstream assets outright, its preferred method of acquisition is through a trade for access to Russian oil and gas fields— with the Russian energy company naturally always retaining a controlling stake (Cornell, 2008, p. 149). This type of assets-for-access swap is highly beneficial for Russia, since it gains a presence in downstream European markets without giving up majority control over its own resources (Baran, 2008, p. 160). On the other hand Europe’s dependency on Russian gas also undermines many of its foreign policy goals. Specifically, EU members are forced to limit their criticisms of Moscow, lest they be given a raw deal at the bargaining table—or become the next victim of a Kremlin-orchestrated supply disruption. Although mere sermonizing is not likely to be productive, Europe would have a freer hand to criticize Russia’s increasingly tainted record on transparency, responsible governance, and human rights if it were not so dependent on Russian energy. As Europe has begun to explore ways to diversify its supply of energy, the potential role of the Caspian region has inevitably emerged on the agenda (Estrada, 2009). Indeed, the Caspian Sea region is the most obvious candidate to serve as a new and relatively untapped source of natural gas and oil for Europe. Geographically, the region is located in Europe’s vicinity, and both the states of the region and those that link it to Europe are largely friendly to, and seeking greater integration with, Europe. 22 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo The European Energy Needs and Caspian Region Resources A variety of different products and commodities are vital for the functioning of the European economy, but it is energy resources, notably oil and gas, that are of critical importance for the region in the immediate future. As the Table 1 suggests Europe produces only 48% of its energy needs and is a net importer of energy, and according to a European Commission report, two-thirds of the EU’s total energy requirements will be imported by 2020, with natural gas imports estimated to rise to 75% (Tesereteli, 2008, p. 42). The fact that there is a growing demand for energy resources in the world further adds strain to the issue of access. Unlike the United States, China, or Japan, Europe’s geography endows it with a geographic proximity to major sources of energy. Europe currently has three major sources of energy: the Northern Sea region and the potential Norwegian arctic sector from the north, Russia from the east, and the Middle East and North Africa from the south (Larsson, 2008, p. 19). Potential new players to join this list are the Caspian states, which have the potential to help Europe diversify away from its growing dependence on Russian oil and gas. In fact, some of the oil already flows from the Caspian region to European refineries via the Baku-Tbilisi-Ceyhan pipeline and other transportation links. Table 1. EU energy dependency Source: Eurostat May 2011. Energy production includes primary energy product and recovered products Europe faces competition for resources from consumers that are larger and increasingly ambitious. Like in Europe, the United States’ internal production share in the consumption of oil is declining rapidly, which means that U.S. dependence on imported oil will rise and, according to different estimates, may reach 68%, with an increased share of imports coming from the Gulf States (Tsereteli, 2008, p. 45). As the United States began to take pro-active steps toward diversifying its energy supplies in the early 1990s, Central Eurasian resources attracted increasing attention. There is a growing demand for energy in Asia, and in particular in China, and Chinese state-sponsored companies are aggressively pursuing opportunities in Kazakhstan and Turkmenistan at whatever cost. This tactic has worked for them elsewhere in the world, particularly in Africa and Latin America. 23 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo On the backdrop of this strategic energy picture, the security of energy supplies has become a dominant issue for European consumers. According to Olcott (2010: 257) the Caspian Sea and Central Asian resources have a substantial role to play in the future oil supplies of the world. It is estimated that the Caspian will provide at least 10 percent of the expected increased production capacity in the next decade. Based on the assumption that current oil prices will remain stable, oil production from the Caspian may reach 6 million bpd by 2020 (Olcott: 2010: 258-259). The problem of the region is that it is land-locked and requires the development of new infrastructure, which would allow the potential of the region to be fully opened for the region itself, as well as for the broader European, and world energy security (Marketos, 2009: 3). Since maritime connections to the region are limited, the pipeline options for access to these markets are of critical importance for the region. Most often used for transcontinental oil movements, pipelines are critical for landlocked areas. They also complement maritime transportation by providing bypasses or shortcuts. In general, pipelines are the primary option for transcontinental transportation since these are cheaper than railroad, barge, or road alternatives (German, 2008: 65). Pipelines constitute a safe mode of transportation if operating within a nation's borders, or between neighbors such as the United States and Canada, Norway and the EU, or between allied countries such as Azerbaijan, Georgia, and Turkey. On the other hand, pipelines may carry vulnerabilities if crossing politically unstable areas (Estrada, 2009). Moreover, political factors often play significant roles even in relatively stable areas, such as Russia. The political turmoil and price war with Ukraine was an issue of concern for European energy security, as a significant share of Europe’s oil and natural gas supplies from Russia arrive via Ukraine. Previous to the recent crisis over Russian gas, Europe was generally a passive observer of developments in the Central Eurasian region. The Baku-Tbilisi- Ceyhan pipeline (BTC), which connects Azerbaijan’s offshore oil fields to the Turkish Mediterranean port of Ceyhan via Georgia, was developed only through strong U.S. support to the project (German, 2008: 68). With the BTC pipeline now in operation, and the development of Caspian natural gas pipeline shipments through Turkey a reality, Europe is acquiring additional supply routes, without major political efforts on its own part. In addition to existing supply routes, Europe now has a Caspian-Caucasus-Turkey-Mediterranean oil pipeline, which can ship light Caspian crude oil directly to the Mediterranean, and then to the refineries in Southern Europe, avoiding the congested chokepoints (Pipinashvili, 2011: 145). The BTC pipeline stands as an example of how strategic planning, coupled with well-designed policies, and effective implementation can help commercially viable projects materialize. It is obvious that the potential entry of Caspian natural gas to Europe through the South Caucasus and Turkey would help Europe diversify its energy supplies, and to reduce dependence on the state-owned Russian monopoly Gazprom (Kısacık, 2010). Indeed, there appears to be little reason for Europe to access the same resources via Russia, allowing Gazprom as a monopolist to control prices, while making Europe vulnerable to voluntary as well as involuntary supply interruptions. Developing pipelines directly to the Caspian region will perfectly complement major reforms planned in the European gas sector, aiming at the creation of a competitive market of multiple operators with the interest of having different options of delivery routes. Such a competitive market is in the long-term interest of Europe; but it is objectively speaking in Russia’s interest, too (Cornell, 2008, p. 24 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo 154). Diversification of supply routes and gas sector reform in Europe will eventually drive the Russian monopolistic supplier, Gazprom, as well as the Russian gas sector in general, toward much-needed reforms and transparency that will give it sustainability and stability. European Policy Options For Europe, the key to overcoming its dependency on Russia lies on its ability to achieve greater cohesion regarding external energy policy. According to Baran (2008, p. 161), Moscow can only extract favorable conditions when it deals with states bilaterally and plays them against each other. Obviously, a collection of twenty-seven independent states, can never hope to be as strongly coordinated as Russia, a self-described ―sovereign democracy‖ whose government increasingly resembles that of the Soviet state from which it descended. Nevertheless, a more formal framework should be established to streamline EU policies on energy. Several European leaders, particularly the EU Energy Commissioner AndrisPiebalgs have supported such a position in his speech at the 12 th Turkmenistan International Oil and gas Conference (2007). Unfortunately, formalizing a common European energy policy is quite difficult. Member states are far more reluctant to cede sovereignty to Brussels on energy policy than they are on trade tariffs or visa regulations. At the very least, however, European states must realize that working together on issues of energy security, especially when dealing with Russia, will be mutually beneficial in the long term. For one thing, greater competition in the market will help reduce gas prices; the higher prices that Gazprom recently agreed to pay Turkmenistan and Kazakhstan will inevitably be passed on to European consumers. While many states in the European Union may be wary of ―getting tough‖ with Russia, it should hardly be contentious for them to demand reciprocity in their interactions with Russia (Paillard, 2006, p. 66). This would mean increasing transparency, allowing third-party investment in the energy sector, and respecting the rule of law. For a long time, the only efforts undertaken by the EU to move Russia toward greater reciprocity was to passively insist that the country ratify the Energy Charter Treaty and associated Transit Protocol (Baran, 2008, p. 164). These entreaties were repeatedly brushed aside by Moscow. Now, however, Brussels appears to be taking more robust steps to ensure reciprocity. The EU also has the legislative tools at its disposal to prosecute companies like Gazprom or Transneft for their monopoly power (Paillard, 2006, p. 46). In fact, the European Commission’s Directorate-General for Competition has already used its antitrust laws to prosecute Microsoft and block a proposed merger between General Electric and Honeywell (Bobelian, 2013). It is well within its authority to do the same to Gazprom, which is not a simple business monopoly, but a state owned strategic one. It is vital that the EU diversify its energy supply by establishing a Southern Corridor. Thanks to the completion of the Turkey-Greece pipeline, gas can now travel all the way from Azerbaijan to the European Union without traversing Russia. This is an important first step, one that must be supplemented by the Greece-Italy connection, Nabucco, and a trans-Caspian gas pipeline, as well as possibly the White Stream project (Emadi&Nezhad, 2011, p. 29). Building a robust non-Russian-controlled transit route from Central Asia and the Caucasus will break Russia’s leverage, both in Europe and in the Central AsiaCaucasus region. But for this to happen, the EU must demonstrate its firm support for states in that region. After all, these states are much more vulnerable to Russian pressure 25 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo than are most European states. Before leaders like Turkmenistan’s GurbangulyBerdymuhamedov or Kazakhstan’s NursultanNazarbayev will commit to a project such as a trans-Caspian gas pipeline, they must have a firm and steady political commitment from the entire EU. Conclusion: What to do? The EU and its member states can do several things for energy development in the region, and by extension for itself. The first would be to strongly support the Nabucco project, understanding that this commercial project is dependent on political support and cannot be left to market forces alone; since all its competitors are politically supported and not market-oriented, and energy issues are by nature political (Cornell, 2008, p. 153). Second, Europe could invest in supporting the Turkmen-Azerbaijani dialogue, which would be a requirement for a Trans-Caspian linkage. Promising signs of a rapprochement have been observed, but the two states may need some additional incentive to put their differences aside. Supporting joint development fields and ensuring the westward export of its resources would be one such element, which would have the added benefit of de facto building half the Trans-Caspian pipeline (Cornell, 2008, p. 154). Third, Europe could engage directly with the new Turkmen leadership to a higher degree. While far from a democracy, Turkmenistan is exhibiting rapid progress by regional standards, though it has a long road to travel (Piebalg, 2007). Engaging the country, if the process is conceived of correctly by the EU, would encourage this process. Finally, it is clear that when dealing with the region, Europe would be well advised to realize that it is in no position to put conditions on energy- or other relationships. Central Asian states are not devoid of options; quite to the contrary, both Russia and China are in a more advantageous position both politically and geographically in the region (Zhengang, 2009, p. 4). Indeed, should Europe not move rapidly to devise a coherent policy and to increase its engagement with the region, the energy resources of Central Asia are likely to reach Chinese and not European consumers. References Baran, Z. (2008).Developing a Cohesive EU Approach to Energy Security. . In Cornell, S., & Nilsson, N. (eds.) Europe’s Energy Security: Gazprom’s Dominance and Caspian Supply Alternatives (155- 166). Singapore: Central Asia- Caucasus Institute & Silk Road Studies Program. Baskan, D. &Muftuler-Bac, M. (2011). The Future of Energy Security for Europe: Turkey’s role as an Energy Corridor. Middle Eastern Studies, 47(2), 361- 378. Bobelian, M. (2013). EU Antitrust Regulators Continue Tough Line With Microsoft Fine. Forbes. Retrieved March 15, 2013 from, http://www.forbes.com/sites/michaelbobelian/2013/03/06/eu-antitrust-regulatorscontinue-tough-line-with-microsoft-fine/ Cornell, S. E. (2008). Trans-Caspian Pipelines and Europe’s Energy Security.In Cornell, S., & Nilsson, N. (eds.) Europe’s Energy Security: Gazprom’s Dominance and 26 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Caspian Supply Alternatives (141- 154). Singapore: Central Asia- Caucasus Institute & Silk Road Studies Program. Dağdemir, E. U. (2007). AvrupaBirliği'ninEnerjiArzGüvenliğiİçinDışEnerjiPolitikasıArayışları. EskişehirOsmangaziÜniversitesiSosyalBilimlerDergisi, 8(1), 247-268. Egenhofer, C., Grigoriev, L., Socor, V. & Riley, A. (2006). European Energy Security: What Should it Mean? What To Do? European Security Forum Working Paper, 23. Emadi, S. E. &Nezhad, H. (2011).Energy Market for Caspian Sea Oil and its Supply. International Black Sea University Scientific Journal, 5 (2), 21-34. Estrada, A. M. (2009). Central Asia: Moving Towards Alternative Vision of Energy Relations. Elcano Royal Institute, Asia-Pasific/ Central Asia Observatory Working Paper 56. Madrid: Elcano Royal Institute. German, T. C. (2008) Corridor of Power: The Caucasus and Energy Security. Caucasus Review of International Affairs, 2 (2), 64-72. Indexmundi. (2013). Retrieved March 30, 2013, http://www.indexmundi.com/commodities/?commodity=crude-oilbrent&months=300 from International Energy Agency.(2008). World Energy Outlook 2008.Retrieved August 8, 2012 from http://www.iea.org/w/bookshop/add.aspx?id=353. International Energy Agency.(2010). World Energy Outlook 2009.Retrieved August 8, 2012, from http://www.iea.org/W/bookshop/add.aspx?id=388. Kısacık, S. (2010).AvrupaEnerjiGüvenliğiveTürkiye.BilgesamBeyinFırtınası, Sunum 4 (June 29, 2010). Retrieved January 15, 2012 from http://www.bilgesam.org/tr/index.php?option=com_content&view=article&id=753:b eyin-frtnas-avrupa-enerji-guevenlii-ve-tuerkiye&catid=139:toplantlar Larsson, R. L. (2008). Europe and Caspian Energy: Dodging Russia, Tackling China, and Engaging the U.S. In Cornell, S., & Nilsson, N. (eds.) Europe’s Energy Security: Gazprom’s Dominance and Caspian Supply Alternatives (pp. 41-56). Singapore: Central Asia- Caucasus Institute & Silk Road Studies Program. Lelyveld, M. (2003, February 12). Moscow Seeks Takeover of Latvian Oil Port. RFE/RL. Retrieved March 11, 2013, from http://www.rferl.org/content/article/1102205.html. Leonard, M. &Popescu, N. (2007).A Power Audit of EU-Russia Relations.European Council on Foreign Relations.Retrieved November 21, 2012 from [http://ecfr.eu/page/-/documents/ECFR-EU-Russiapower-audit.pdf]. Marketos, T. N. (2009). Eastern Caspian Sea Energy Geopolitics: A Litmus Test for the U.S. – Russia – China Struggle for the Geostrategic Control of Eurasia. Caucasian review of International Affairs, 3 (1), 2-19. 27 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Norling, N. (2008). The Nabucco Pipeline: Reemerging Momentum in Europe’s Front Yard. In Cornell, S., & Nilsson, N. (eds.) Europe’s Energy Security: Gazprom’s Dominance and Caspian Supply Alternatives (pp. 127- 140). Singapore: Central Asia- Caucasus Institute & Silk Road Studies Program. Olcott, M. B. (2010). Central Asia’s Oil and Gas Reserves: To Whom Do They Matter? Global Journal of Emerging M arket Economies, 2 (3), 257-300. Paillard, C. A. (2006). Rethinking Russia : Russia and Europe’s Mutual Energy Dependence. Journal of International Affairs, 63 (2), 65-84. Piebalg, A. (2007). Turkmenistan and the EU: Why we need an increased co-operation in the Energy Field? Speech at the 12th Turkmenistan International Oil and Gas Conference, Ashgabat, Turkmenistan. 15 November 2007. Retrieved March 7, 2013 from http://europa.eu/rapid/press-release_SPEECH-07-720_en.htm. Pipinashvili, D. (2011). Sino-Russian Geopolitical Interest in Central Asia and South Caucasus. Bulletin of the Georgian National Academy of Sciences, 5 (2), 144-148. Sokolsky, R. &Charlick-Pailey, T. (1999). Caspian Security: A mission too far? Rand Cooperation. Washington D.C.: Rand Cooperation. Retrieved August 7, 2012 from http://www.rand.org/pubs/monograph_reports/MR1074.html. Tsereteli, M. (2008) The Black Sea/ Caspian Region in Europe’s Economic and Energy Security.In Cornell, S., & Nilsson, N. (eds.) Europe’s Energy Security: Gazprom’s Dominance and Caspian Supply Alternatives (41-56). Singapore: Central AsiaCaucasus Institute & Silk Road Studies Program. Zhengang, M. (2009).A Brief review of current international situation and China’s Diplomacy. China International Studies, 15 (2), 4-15. 28 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1474 Title A name given to the resource Europe’s Energy Security and Caspian Oil and Natural Gas Author Author TOLGA TURKER, Ahmet Abstract A summary of the resource. For the countries in the Caspian region, whether they have been endowed with large resources of oil and natural gas or not, the energy politics and energy security has been at the heart of their efforts to build sovereign and prosperous states. To this end, oil and gas producing countries in the region have established arrangements governing the exploration and transportation of their resources to world markets as a central element of their foreign policies, whereas consumer countries carefully crafted their levels of dependence on energy-endowed powers since it is vitally important in determining their ability to formulate their domestic and foreign policies independently. For Europe, on the other hand, the discovery of the importance of energy security has been more recent, and mainly linked to the increasingly assertive policies that the Russian government and its monopolistic subsidiary, Gazprom, have adopted over the past years. As the European Union countries have begun to realize their problem and look for ways to diversify its supply of energy, the potential role of the Caspian region has inevitably emerged on the agenda. However, member countries seem to pursue their own energy policy, which only decrease the overall security of the Union and limit the EU’s foreign policy options. Apart from this observation, this project explores several aspects of European energy security particularly its dependence on Russia and the role of Caspian states as a source of alterative supply and argue that European countries must establish a European level energy strategy. Accordingly this study will unfold in four sections. First section will review Europe’s energy vulnerability along with the similarities between European and Caspian states in terms of energy politics. Second section will provide an analysis of emerging Russian energy diplomacy and the role of Gazprom in the light of recent developments. Third section will put forward the Caspian and the Black Sea as a future hub of energy for Europe and will discuss the role and importance of Nabucco and Trans-Caspian pipelines as the two most important infrastructure projects. Final section will critically review the EU’s approach to energy security and discuss the need to develop a more cohesive EU approach towards Caspian countries as well as issues of energy security. Even though certain individual decisions can be made by member states alone, these decisions should be made in accordance with the greater strategy goals set by the European Union. Keywords: European Union, Caspian Sea, Energy, Security. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 978-9958-834-23-3 https://omeka.ibu.edu.ba/files/original/3dede4e3f591dcda0c386b9fd6211831.pdf ebf52ecb1acc5779ff8d97269e96c1f0 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Leverage Effect of Marketing in Uncertainty Condition: Examination of ISE-100 Tülay Top Mehmet Akif Ersoy University, Burdur, Türkiye tlytop@mehmetakif.edu.tr Economic sense of uncertainty / risk concept was started to use at the time of transition from traditional society to modern society. Uncertainty means, “the probability of events that adversely affect the economic decision makers' return on their decisions, in other words the situation that known the possibility of occurrence of events. Giddens distinguished the uncertainty into two parts. They’re “external risks” that originated from external, custom of tradition, or unchanging of nature; “produced risks” produced by absolute effect of developed information about the world. Realization possibility of external risks varies from year to year and cannot be predicted. However when the ignored risks are analyzed, it’s seen that the modern capitalism reckons the future profits and losses so it organizes future by uncertainties produced by itself, marginalizes and dominates the future. Multiplicity of produced risks almost keeps a barrage of metaphor the businesses. Even businesses provide against any uncertainty, in case of emergence of an unpredicted and coming from another side they can’t provide against it. With the economic crisis experienced businesses in Turkey started to attach importance to “how they provide against to crisis period” topic. For this a lot of precaution can be said like borrowing/un borrowing with currency or gold, project and confirmation before investing, rating criterion of banks etc. Namely management after crisis, management at the time of crisis and management after crisis is an issue that needs to be known and hold up as an example. In this study, it is aimed to investigate the difference between the company performance and marketing effectiveness by using ISE-100 data. To achieve this aim, first of all, kind of economic crisis and the crisis in turkey will be examined. At the last part, companies marketing and companies performances will be analyzed with the help of financial tables and by using ISE-100 data. On the earth surface, manufactured risks, not only affects the manufactured region but also effects the transnational. In this context, by considering the Turkey’s geopolitical and economic cooperation, the crisis in the Europe and in any other community, affects the ISE-100 firms. Contribution to the literature will be provided with the determination of the leverage effect of the companies which are traded in ISE-100 in uncertainty condition which are placed in Turkey. Keywords: Risk, Crisis, Turkey, ISE-100, Marketing, Company Performances. 266 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1624 Title A name given to the resource Leverage Effect of Marketing in Uncertainty Condition: Examination of ISE-100 Author Author TOP, Tulay Abstract A summary of the resource. Economic sense of uncertainty / risk concept was started to use at the time of transition from traditional society to modern society. Uncertainty means, “the probability of events that adversely affect the economic decision makers' return on their decisions, in other words the situation that known the possibility of occurrence of events. Giddens distinguished the uncertainty into two parts. They’re “external risks” that originated from external, custom of tradition, or unchanging of nature; “produced risks” produced by absolute effect of developed information about the world. Realization possibility of external risks varies from year to year and cannot be predicted. However when the ignored risks are analyzed, it’s seen that the modern capitalism reckons the future profits and losses so it organizes future by uncertainties produced by itself, marginalizes and dominates the future. Multiplicity of produced risks almost keeps a barrage of metaphor the businesses. Even businesses provide against any uncertainty, in case of emergence of an unpredicted and coming from another side they can’t provide against it. With the economic crisis experienced businesses in Turkey started to attach importance to “how they provide against to crisis period” topic. For this a lot of precaution can be said like borrowing/un borrowing with currency or gold, project and confirmation before investing, rating criterion of banks etc. Namely management after crisis, management at the time of crisis and management after crisis is an issue that needs to be known and hold up as an example. In this study, it is aimed to investigate the difference between the company performance and marketing effectiveness by using ISE-100 data. To achieve this aim, first of all, kind of economic crisis and the crisis in turkey will be examined. At the last part, companies marketing and companies performances will be analyzed with the help of financial tables and by using ISE-100 data. On the earth surface, manufactured risks, not only affects the manufactured region but also effects the transnational. In this context, by considering the Turkey’s geopolitical and economic cooperation, the crisis in the Europe and in any other community, affects the ISE-100 firms. Contribution to the literature will be provided with the determination of the leverage effect of the companies which are traded in ISE-100 in uncertainty condition which are placed in Turkey. Keywords: Risk, Crisis, Turkey, ISE-100, Marketing, Company Performances. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 https://omeka.ibu.edu.ba/files/original/9427d736f3a7084393f68af42235e50f.pdf 900956a09dd749af39a68040a6180356 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo The Students’ Awareness about TAS and TFRS who are Educated in Business Administration: An Example of Afyon Kocatepe University Yusuf Topal Afyon Kocatepe University, Afyon, Turkey ytopal75@hotmail.com Zübeyde Kaya Afyon Kocatepe University, Afyon, Turkey zkaya64@hotmail.com When we look over to the history of Turkish Accounting Standards (TAS) and Turkish Financial Reporting Standards (TFRS), it is predicated on the World Accounting Conference which was performed in Australia–Sydney in 1972. Because of these accounting standards that are shaped by making many changes until now are far out from recent accounting standards and bring many innovations, there are difficulties in implementing of the standards. In the study, it is aimed to measure the level of students’ interest and awareness about Turkish Accounting Standards and Turkish Financial Reporting Standards who are educated in Accounting and Finance Program in Afyon Kocatepe University. In this purpose, a survey was applied to the students. The results obtained from survey were analysed by using SPSS Package program. At the end of the study, by grouping the students, it was tried to determine which group has high level of awareness. Keywords: Turkish Accounting Standards; Turkish Financial Reporting Standards. 276 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1687 Title A name given to the resource The Students’ Awareness about TAS and TFRS who are Educated in Business Administration: An Example of Afyon Kocatepe University Author Author TOPAL, Yusuf KAYA, Zubeyde Abstract A summary of the resource. When we look over to the history of Turkish Accounting Standards (TAS) and Turkish Financial Reporting Standards (TFRS), it is predicated on the World Accounting Conference which was performed in Australia–Sydney in 1972. Because of these accounting standards that are shaped by making many changes until now are far out from recent accounting standards and bring many innovations, there are difficulties in implementing of the standards. In the study, it is aimed to measure the level of students’ interest and awareness about Turkish Accounting Standards and Turkish Financial Reporting Standards who are educated in Accounting and Finance Program in Afyon Kocatepe University. In this purpose, a survey was applied to the students. The results obtained from survey were analysed by using SPSS Package program. At the end of the study, by grouping the students, it was tried to determine which group has high level of awareness. Keywords: Turkish Accounting Standards; Turkish Financial Reporting Standards. Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 2303-4564 https://omeka.ibu.edu.ba/files/original/0ec57e2b4b4b7043267e9f578a611ad7.pdf 2fb88ad937a8fff27388d3c9de8a1b26 PDF Text Text International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo Event Marketing – A Powerfull Tool Case : Red Bull Šinomobil Event Damir Topalovid International Burch University, Sarajevo, Bosnia and Herzegovina damirto@hotmail.com In the today's society, it is very challenging to keep up with the marketing trends. There are a lot of factors that should be considered in the pursuit for the potenitial consumers. The chase is spiced even more, if we consider that consumers are slightly evolving with every next generation, as should evolve our approach to them. This paper discovers the idea of Event Marketing and the opportunities that are available to everyone who plans the desired activity creatively, and considering all important elements, in order to reach the target group. The case study of Red Bull Šinomobil event was the suitable as the Best Practice event, that prooves the idea and shows the awareness about the brand created. The successful organization resulted with the high media coverage and 8.25 mil people reached in total, plus the enormous WOM created. Keywords: Event Marketing, Powerfull Tool, Red Bull Šinomobil, Best Practice event 83 � https://omeka.ibu.edu.ba/files/original/e42962e2ce63bdb739942f6f253d4c21.docx 7e1377bef799b24bcd7e85771e965706 https://omeka.ibu.edu.ba/files/original/a321d1ca3957ca8142d3480e8c34a57a.pdf e7c952b0fb1485ecebef7ef6f90fdaf7 PDF Text Text International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Event Marketing – A PowerfullToolCase : Red Bull ŠinomobilEvent DamirTopalović International Burch University, Sarajevo, Bosnia and Herzegovina damirto@hotmail.com Abstract In today's society, it is very challenging to keep up with the marketing trends. There are a lot of factors that should be considered in the pursuit for the potenitial consumers. The chase is spiced even more, if we consider that consumers are slightly evolving with every next generation, as should evolve our approach to them. This paper discovers the idea of Event Marketing and the opportunities that are available to everyone who plans the desired activity creatively, and considering all important elements, in order to reach the target group. The case study of Red Bull Šinomobil Race event was the suitable as the Best Practice event, that prooves the idea and shows the awareness about the brand created. The successful organization resulted with the high media coverage and 8.25 mil people reached in total, plus the enormous WOM created. Keywords: Event Marketing, Red Bull®, Word of Mouth. Introduction How much does the organized event effect the popularization of a product, service or brand? Is it a sustainable way of advertising and for how long it can stay memorized in the heads of consumers? Is it expensive to organize an event? Those are the questions that I tried to answer in this paper. Advertising is a model of communication in marketing which tries to inform the potential consumers and awake their interest towards the product or service. A company that would like to advertise its service or product, chooses the type of media as a transmitter of their message to the public, which can be: television, radio, newspaper, magazine, movie, internet, mobile phone, event (conference, fair, etc...), poster, bilboard, etc... Selection of the media is highly important and it should intend to reach as much of our potential consumers as it can. Of course, there are certain rules and restrictions by the valid laws that should be obeyed. Marketing Marketing is a social, calculated, and controlled process, which helps the individals or groups to get what they need, by creating the offer and the opportunity to exchange goods. Traditionally, marketing represents the activities which help the product or service to meet the consumer, user or client. Application of marketing at the market can be represented trough the process of four steps, which starts with the analysis of the ''universum'' of potential conusmers. After that, 146 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo commes the attracting their Attention\Awareness to your product or service, which turns into the Interest to know more about it. In the third phase, you would convincethepotentialconsumersthattheyDesiretheproductor service, whichwillsatisfytheirneeds, sothey can completetheprocessbyAction of purchase of a product, subscription, download, ortheuse of otherservices. (AIDA model, E. St. ElmoLewis, 1898) Generally, themarketingrepresentsthepursuit of discoveringtheneedsandinterests of consumers, whicharedevelopedandsatisfied in theend. It is a civilizedtype of a combat, whereyouwinwiththewords, ideasandstrategicthinking. Event Event is a moment in time, when something special is happening, happened or it is above to happen. Considering the dimension of gathering, event can be: - celebration (wedding) - competition (sports) - conference - exhibition (photo, car show) - festival - media event - party Managing an event would include a lot of factors and details that should be considered, in order to make it successful. Engagement of an external body, an event agancy, turns out as one of our options. After defining the goal of the event, a good event organizer will carefully select the location of the organization, which will fit to the type of the event. In this case, the functionality of the space is one of the crucial factors, where the size, the commodity of the event visitors, and the circularization of the people is unnegotiable. Responsible approach to the organization of the event such as, conference, meeting, fair, round table, fashion show, or even the competition usually includes: - budget plan - location selection - team definition, event staff (task distribution) - event concept writting - promotion materials preparation (posters, flyers, presents...) - person for the public relations and media - event coordinator - manager - collecting necessary permits by law - program definition and writting (exact timing definition) - definition of the best technical solution for the event - scenery definition and set up - audio, video, lighting equipment - engagement of the ambulance, fire dept. and the police - engagement of the security officers (according to the valid laws) - registration of the participants (info desk and the people) - engagement of experts (refrees, waiters, translators, hostesses, DJs, dancers, animators, announcers) 147 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo - guests coordination - VIP guests program - welcome drink (cocktail) - addressing to the guests, audience (speach writting) - catering (lunch, dinner...) - transportation and parking - other logistics issues - weather forecast (for outdoor events) - regulation of the payments towards the services used It is strongly recommended to find the different solution for every event, in the way that the main idea comes as the result of the market research and that follows the latest event trends. Only in that case the success will not stay away. It would be an advantage if the organized event was the part of the overal marketing plan, since the events reach the consumers face to face, in more relaxed manner, which is a good chance to make them feel connected to the product of service. Red Bull Red Bull® wasintroduced in 1984 in Austria, Europe. Afterthejust 13 yearsyoucould buy it in almostallEuropeancountries, USA, Africa, South America, andThe Caribbean. Thecompany is located in Salzburg, Austria, wheretheproduct is cannedanddistributedtoallparts of theworld. That is the 100% guaranteeforthesamecontent in each can. RedBull® EnergyDrink is a functionaldrinkwiththespecialformulaandthecombination of ingredients, developedforthesituations of extremephysicalandmentalactivities. Itseffectsarerecognizedbythesportsmen, workingprofessionals, activestudents, driversandallotherswhoneedtheenergy. EventsorganizedbyRedBullaregenerallydivided in twogroups: - Small Fire Events (small) - BrandBuildingEvents (big) Bigeventsareopenedforthewholepopulation of consumers, theyareinterestingtoallpeople, andtheyresult in highpublicity. Small eventsaretargetingthespecificgroup of consumersforexample, students, workingpeople, etc. RedbullŠinomobilRaceeventwasorganized in theSeptember 26, 2010 in Sarajevo, on thetramrails. Itwasthecompetitionwhereyouneededtomake a railoperatingvehicle, accordingtotheprescribedstandards, andwinthedragraceagainstyouopponenttogettothenextroundbyknock-outsystem. Calculation May – September, 2010 - 8000 flayers, 300 posters distributed, Facebook Spent: EUR 450,00 - September, 2010: 148 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Radioannouncements: - 2 radiojingles, 8 radiostations, 2 weeks Spent: EUR 4.350,00 Outdoor media: - 20 City Light posters, 4 weeks Spent: EUR 4.700,00 - 6 branded tram stops Spent: EUR 5.700,00 - 60 posters inside the operating trams Spent: EUR 950,00 Internet announcements: - 4 web portals, 2 weeks Spent: EUR 4.300,00 Bluetooth City Network: - 60.000 SMS messages, 2 weeks Spent: EUR2.300,00 TOTAL SPENT ON EVENT ADVERTISING: EUR 22.750,00 During the applications of contestors in May, 2010 4 top TV stations in the country emitted 15 minutes of highlight news about the forthcoming Red Bull Sinomobil Race. Top 5 TV stations emitted 40 minutes of news about the event in September. On line medias showed the great interest about the event. More than 20 articles were talking about the incoming event. The Red Bull Sinomobil Race event ended successfuly, with 10.000 people in the audience on the spot. Most of the TV channels infomed the public about the winners of the Race. All popular web portals transmited the news also. You could find the articles about the Šinomobil in most of the tomorrow’s newspaper. Table 1: Total Media Outcome of the Event 1. RED BULL SINOMOBIL MEDIA OUTCOME TV SEP 5 mil contacts & May 2 mil. WEB 0,5 mil Radio 0,5 mil listners. Print Total: 0,25 mil 8,25 mil 149 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo Just for the comparision, I have calculated the cost of the overal free TV broadcast about the Race in total. Recollect, there were no paid TV advertisements of the event. Table 2: Calculation of the total cost of the TV broadcast Number of TV Number stations minutes 5 140 minutes of Number of Average second AMOUNT seconds price in BiH 8400 seconds EUR 12,00 EUR 100.800,00 EVENT ADVERTISING COSTS: EUR 22.750,00 FREE TV MEDIA BROADCAST (Approx.): EUR 100.800,00 Conclusion There is no need to add the free web and newspaper publications about the Race, and to calculate other logistic expenses of the event, to conclude that Red Bull Šinomobil Race event was a true success. It is a true trophy to create an event interesting enough for the people and the media, which talks only the best about your company, in this case the brand. Of course, we must not forget the 10,000 spectators and 68 participants, which were directly introduced with the Race and the Red Bull brand, on the spot. All of them participated in the creation of massive WOM1 after the event, by spreading the news and their experience with the third parties, which increases the total number of contacts much more then 8,25 mil. This paper prooves that WOM effect lasts even three years after. Event preparation and execution is a demanding job, and requires the certain number of factor that should be put together in harmony. But, if the competence, experience, hard work and a bit of luck is on your side, the success is guaranteed. Considering the current period of economic crisis and the fact that all budgets are decreased, I wanted to proove that Event Marketing is a powerful and sustainable marketing and communication tool. References 1. 2. 3. 4. 5. 6. 1 Haton, A.,“Planiranje u marketingu”,Clio (2003), Beograd Abraham, H. M., “A Theory of Human Motivation”, PsychologicalReview Brkić, N., “Upravljanje marketing komuniciranjem”, Ekonomskifakultet (2003), Sarajevo Kotler, P., “Upravljanje marketingom-Marketing Menagement”, Informator (1994), Zagreb Spahić, B., ”Dizajn-ekonomski, društveni i politički aspekti oblikovanja”, MIB (2002), Sarajevo Sparling, K., ”Organizacija i funkcija marketinga”, Clio (1994), Beograd WOM – Word of Mouth (www.merriam-webster.com) 150 �International Conference on EconomicandSocialStudies (ICESoS’13), 10-11 May, 2013, Sarajevo 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. Smith, P.,„Marketinškekomunikacije“,Clio (2002), Beograd Tracy, B., „Zlatna pravila uspeha“ , Finesa (2005), Beograd Tucaković Š.,”Leksikon mas-medija”, Prosperitet (2004), Sarajevo Lammiman, J. & Syrett, M., ’’Cool generacija – Nova poslovna filozofija’’, Naklada ljevak (2005), Zagreb www.marketingmagazine.co.uk/ http://www.marketing-odjel.com/marketing http://www.economy.rs/biznis-mali/27/saveti/osnove-marketinga/Sta-jemarketing-.html http://www.biggraphicimpressions.com/event-marketing.cfm http://ds178-77-125-83.dedicated.hosteurope.de/ http://www.executivevisions.com/event-marketing.asp http://www.pierceevents.net http://www.marketlikeachick.com/virtual-event-marketing-with-social-media/ http://en.wikipedia.org/wiki/Word_of_mouth http://www.nidus.org/ https://infonet.redbull.com/Infonet/CommunicationsModule/ShowStartPage http://www.merriam-webster.com/dictionary/word-of-mouth http://www.pink.co.ba/marketing/ http://www.hayat.ba/marketing/113-cjenovnik-oglaavanja-u-programu-tv-hayat http://www.rtvfbih.ba/doc/Cjenovnik-FTV-2011-za-web.pdf http://www.obn.ba/download/cjenovnik%20usluga.pdf http://tvsa.ba/Cjenovnik_marketinskih_usluga_TVSA.pdf www.facetv.ba/downloads/market3.xls 151 � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Extent The size or duration of the resource. 1523 Title A name given to the resource Event Marketing – A Powerfull Tool Case : Red Bull Šinomobil Event Author Author TOPALOVIĆ, Damir Abstract A summary of the resource. In the today's society, it is very challenging to keep up with the marketing trends. There are a lot of factors that should be considered in the pursuit for the potenitial consumers. The chase is spiced even more, if we consider that consumers are slightly evolving with every next generation, as should evolve our approach to them. This paper discovers the idea of Event Marketing and the opportunities that are available to everyone who plans the desired activity creatively, and considering all important elements, in order to reach the target group. The case study of Red Bull Šinomobil event was the suitable as the Best Practice event, that prooves the idea and shows the awareness about the brand created. The successful organization resulted with the high media coverage and 8.25 mil people reached in total, plus the enormous WOM created. Keywords: Event Marketing, Powerfull Tool, Red Bull Šinomobil, Best Practice event Publisher An entity responsible for making the resource available International Burch University Date A point or period of time associated with an event in the lifecycle of the resource 2013-05-10 Keywords Keywords. Article PeerReviewed Identifier An unambiguous reference to the resource within a given context ISSN 978-9958-834-23-3