Service industries and service economy

The study analyses the role of services in modern and less-developed economies. It shows the different meanings of the value, definition and classification of service activities found in economic literature. It discusses the relation between service production growth and economic development observing the role of these activities in the dynamics of economic restructuring. Further, it also examines the differences between private and public sector service restructuring and the consequences of internationalization of services. It concludes that economic restructuring also caused by changes in the nature of goods and services has important regional effects.

Labor supply, risk aversion and economic refrom in China

Economic reform in China has created a small, but fast-growing private sector that has spurred rapid productivity growth. Growth of the private sector is predicated upon continued labor movements away from state-run industries and into private firms. This paper presents a theory of labor market sectoral choice demonstrating that three factors determine private sector labor supply-the difference in wages between the state and private sectors, private sector wage risk and risk aversion. Estimation of the model using survey data provides strong support for the theory. We find that the riskiness of private sector earnings has a greater effect in discouraging workers from taking jobs in private firms than the wage premi um has in attracting workers.

The BRICS: some historical experiences, growth challenges and opportunities

The acronym BRICS was a fad among the media and global investors. Now, the acronym sounds passé. However, the group of countries remains important, from both political and economic reasons. They have a large aggregate size, 28% of the global GDP and 42% of the world’s population, high growth potential due to the current significant misallocation of resources and relatively low stock of human capital, structural transformation is in progress and one of them, China, is taking steps to become a global power and a challenger to the US dominance. This paper provides a brief overview of the five economies, Brazil, Russia, India, China and South Africa. We focus on some aspects of their history, the Chinese initiatives in international finance and geopolitical strategic moves, their growth experience and structural transformation over the last 35 years, trade and investment integration into the global economy and among themselves, the growth challenges faced by their economies and the potential gains to the Brazilian economy from a stronger integration with the other BRICS. In association with its efforts to be a global power, China aims to become a major player in global finance and to achieve the status of global currency for the renminbi, which would be the first currency of an emerging economy to attain such position. Despite the similarities, the BRICS encompass very diverse economies. In the recent decades, China and India showed stellar growth rates. On the other hand, Brazil, Russia and South Africa have expanded just in line with global output growth with the Russian economy exhibiting high volatility. China is by far the largest economy, and South Africa the smallest, the only BRICS economy with a GDP lower than US$ 1 trillion. Russia abandoned communism almost 25 years ago, but reversed many of the privatizations of 90’s. China is still ruled by communism, but has a vibrant private sector and recently has officially declared market forces to play a dominant role in its economy. Brazil, Russia and South Africa are global natural resources powerhouses and commodity exporters while China and India are large commodity importers. Brazil is relatively closed to international trade of goods and services, in marked contrast to the other four economies. Brazil, India and South Africa are dependent on external capital flows whereas China and Russia are capital exporters. India and South Africa have younger populations and a large portion living below the poverty line. Despite its extraordinary growth experience that lifted many millions from poverty, China still has 28% of its population classified as poor. Russia and China have much older populations and one of their challenges is to deal with the effects of a declining labor force in the near future. India, China and South Africa face a long way to urbanization, while Brazil and Russia are already urbanized countries. China is an industrial economy but its primary sector still absorbs a large pool of workers. India is not, but the primary sector employs also a large share of the labor force. China’s aggregate demand structure is biased towards investment that has been driving its expansion. Brazil and South Africa have an aggregate demand structure similar to the developed economies, with private consumption accounting for approximately 70%. The same similarity applies to the supply side, as in both economies the share of services nears 70%. The development problem is a productivity problem, so microeconomic reforms are badly needed to foster long-term growth of the BRICS economies since they have lost steam due a variety of factors, but fundamentally due to slower total factor productivity growth. China and India are implementing ambitious reform programs, while Brazil is dealing with macroeconomic disequilibria. Russia and South Africa remain mute about structural reforms. There are some potential benefits to Brazil to be extracted from a greater economic integration with the BRICS, particularly in natural resources intensive industries and services. Necessary conditions to the materialization of those gains are the removal of the several sources of resource misallocation and strong investment in human capital.

Comparison and analysis of corporate social responsibility (CSR) reports of the top five companies ranked on the 2013 CSR RepTrak

In the 1970s, Corporate Social Responsibility (CSR) was discussed by Nobel laureate Milton Friedman in his article “The Social Responsibility of Business Is to Increase Its Profits.” (Friedman, 1970). His view on CSR was contemptuous as he referred to it as “hypocritical window-dressing” a reflection of the view of Corporate America on CSR back then. For a long time short-term maximization of shareholder value was the only maxim for top management across industries and companies. Over the last decade, CSR has become a more important and relevant factor of a company’s reputation, shifting the discussion from whether CSR is necessary to how best CSR commitments should be done (Smith, 2003). Inevitably, companies do have an environmental, social and economic impact, thereby imposing social costs on current and future generations. In 2013, 50 of the world biggest companies have been responsible for 73 percent of the total carbon dioxide (CO2) emission (Global 500 Climate Change Report 2013). Post et al. (2002) refer to these social costs as a company’s need to retain its “license to operate”. In the late 1990s, CSR reporting was nearly unknown, which drastically changed during the last decade. Allen White, co-founder of the Global Reporting Initiative (GRI), said that CSR reporting”… has evolved from the extraordinary to the exceptional to the expected” (Confino, 2013). In confirmation of this, virtually all of the world’s largest 250 companies report on CSR (93%) and reporting by now appears to be business standard (KPMG, 2013). CSR reports are a medium for transparency which may lead to an improved company reputation (Noked, 2013; Thorne et al, 2008; Wilburn and Wilburn, 2013). In addition, it may be used as part of an ongoing shareholder relations campaign, which may prevent shareholders from submitting Environmental and Social (E&S)1 proposals (Noked, 2013), based on an Ernst & Young report 1 The top five E&S proposal topic areas in 2013 were: 1. Political spending/ lobbying; 2. Environmental sustainability; 3. Corporate diversity/ EEO; 4.Labor/ human rights and 5. Animal testing/ animal welfare. Three groups of environmental sustainability proposal topics of sub-category number two (environmental sustainability) 6 2013, representing the largest category of shareholder proposals submitted. PricewaterhouseCoopers (PwC) even goes as far as to claim that CSR reports are “…becoming critical to a company’s credibility, transparency and endurance.” (PwC, 2013).