Icesba2014

PROCEDI A of Ec onomi c s and Bus i ne s sAdmi ni s t r at i on I SSN2392-8174 I SSNL2392-8166

Buc har e s t ,2014

Available online at www.icesba.eu Procedia of Economics and Business Administrations ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Table of Content

1. ACIKALIN Suleyman, UĞURLU Erginbay - Oil Price Fluctuations and Trade Balance of Turkey………….……………………….………………………………………………….…………………………………..…..6 2. AKDOĞAN Habib, HİÇYORULMAZ Ela - The Importance of the Sustainability of Environmental Accounting…………………………………………….…………………………………………………14 3. BASCI Esref Savas, MEMIS Fatih - A Comparison of the Performances of Type A Mutual Funds Before and After 2008 Global Economic Crisis in Turkey…………..…………………………..26 4. BASCI Esref Savas, SAKINC Oznur - Determinants of Bank Profitability in Turkey: An Empirical Analysis on Types of Banking from 2002 to 2012………………………………………………32 5. BAYRAM Ali, BAYRAMOĞLU Gökben -The Effect of Human Resource Practices on Burn-Out and the Mediating Role of Perceived Organizational Justice……………………………………..……37 6. BĂLUȚĂ Aurelian Virgil, ANDRONIE Maria, RAICU ILIOARA Sofia - Improvement Practice of the Students in a EU Project. Economic and Social Importance and Lessons for the Future.

Case study of Spiru Haret University……………………………………….……………………………………….46 7. CAGIRAN KENDIRLI Hulya, GULEN Tugba, KUMBUL Tuba - The Women Employees within the Frame of Social Responsability and a Study of the Women Employees at HITIT University…………………………………………………………………………………………………………………………53 8. CAGIRAN KENDIRLI Hulya, ULUSOY Gurkan - Food Quality Certificates and a Research on Effect of Food Quality Certificates to Determinate Ignored Level of Buying Behavioral: A Case Study in HITIT University Feas Business Department………………………………………………..60 9. ÇAĞLAR Mustafa Emre - The Predictable Future of Bio-Economic Society………………..…….68 10. ÇAĞLAR İrfan, KARABAB Reyhan A., HAGOOD William J. - Postmodernist Identity Construction and Consumption…………….………………………………………………………………………….73 11. COPCEA Gheorghe Bogdan, TRIFU Sorin, VILCEANU Dan - Agglomeration and Economic Growth. A New Economic Geography Approach for Romania’s Counties………………………..77 12. CRĂCIUNAŞ Diana-Virginia - The Necessity of Statistics as a Part of Globalization Process.

International Comparability in Statistical Analysis……………..……..……………………………………..85

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13. DALDAL Kübra Küge, KILIÇ Sabiha - Factors Affecting Mobıle Taggıng Awareness; A Research on Socıal Medıa Consumers………………………………….…………………………………………..87 14. DELISTAVROU Antonia, TILIKIDOU Irene - Ethical Unconcern Scale: Construction and Validation……………………………………………………………………………………………………………………….104 15. DOGAN Burcu - The Portrait of Child Labour In Turkey………………………………………………….114 16. EPURE Manuela, GURAN Liliana - Socio-Economic Characteristics of the Elderly Population in Romania……………………………………………………………………………………………………………………..128 17. EPURE Manuela, MIHAES Lorena - Youth and Social Cohesion………………….…………………..136 18. GEORGESCU Floarea - The State of Knowing in the Field of Enterprise Treasury- Notional Cash, Content, Scope………….………………………………………………………………………………………….142 19. GHENTA Mihaela, MLADEN Luise - The Partnership between the Public Authorities and NGOs: An Effective Way of Covering the Need for Social Services in Romania…….…………152 20. GRUIA George Cristian, GRUIA George - Sustainable growth with the help of Quality Scheduling Index…………………………………………………………………………………………………………….160 21. GURAN Liliana, MARIN Cornelia - The Impact of Forest Degradation on Rural Communities in Romania……………………………………………………………………………………………………………………..168 22. GURGU Elena, SAVU Cosmina Silviana - Eco-Bio-Management of Global Risks - A Necessity in a World of Vulnerabilities Where Eco-Bio-Economy Is Required to Accomplish Eco-Sano-Genesis…………………………………………………………………………………………………………..176 23. KONAK Fatih, KENDIRLI Selçuk - Impact of R&D Expenses on Firm Performance: Empirical Evidence from the BIST Information Technology Index…………………………….…………………….192 24. KUSGOZOGLU Sedat, BASARAN M. Sakir, KENDIRLI Selcuk - Expansion for Who, Markets or the Poor?..................................................................................................................198 25. MAREȘ Daniel Marius, MAREȘ Valerica, ILINCUȚĂ Lucian Dorel - The Process of Globalization of Businesses and Opportunities Offered by the new Technology on Ethics and Responsibility in Business………………..………………………………………………………………………206 26. OZTURK Mustafa, EROGLU Nadir, EROGLU İlhan, AYDIN Halil Ibrahim - Development Agencies on the Way to the Regıonal Development: Comparison of Turkey and Românıa…………………………………………………………….…………………………………………………………..214 27. PASNICU Daniela, PARCIOG Speranța, GHINARARU Cătălin, TUDOSE Gabriela - Cluster Analysis of the EU Countries in Terms of Labor Market Indicators………………………………..222 28. PISTOL Luminița, ȚONIȘ (BUCEA-MANEA) Rocsana - Model for Innovation through Information Network Sharing……………….………………………………………………………………………..230 29. SAKINC Ilker, GULEN Merve - The Performance Comparison of the Participation Banks Acting In Turkey Grey Relations Analysis Method………………………..…………………………………238 30. SARICA Salih Ozgur - Regional Economic Growth; Socio-Economic Disparities among Counties…………………………………………………………………………………………………………………………245 31. SAVSAR Cihat - From Performance Measurement to Strategic Management Model: Balanced Scorecard…………………………………………………………………………………………………….….255

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32. ŞAHIN Menekşe, DEMIRCI Doğan - Perceptions of Disabled Rights in Global Governance Models……………………………………………………………..……………………………………………………………263 33. ȘTEFANESCU-MIHĂILĂ Ramona Olivia - Publicity, Advertising and Spirituality………………270 34. ȘTEȚ Mihaela - Private Management in Romanian State Owned Companies from Transportation Field……………………………………………….……………………………………………………..278 35. TUNA Muharrem, TÜRKMEN Fatih - Conflict Management Methods of Managers: An Empirical Study of the Turkish Tourism Industry………………..…………………………………………..284 36. TUTULMAZ Onur - A ‘modern’ approach to the macroeconomic accounting: Potential advantages of including the monetary part in macro accounting…………………………………..296 37. UĞURLU Erginbay - Forecasting Volatility: Evidence from the Bucharest Stock Exchange………………………………………………………………………………………………………………………..302 38. UĞURLU Erginbay, JINDRICHOVSKA Irena, KUBICKOVA Dana - Working Capital Management in Czech SMEs: An Econometric Approach…………………………………………………………….311 39. UNAL Gunes, BASARAN M. Sakir, KENDIRLI Selcuk - Sustainable Environment and in the Context of Environment Economy Necessary and an Analyze………………………………………318 40. UNGUREANU Dragoș Mihai - The Budget of the European Union - Opportunity or Burden for Romania?..................................................................................................................327 41. ZEYBEK Ömer, UĞURLU Erginbay - Nowcasting Credit Demand in Turkey with Google Trends Data……………………………………………………………………………………………………………………333 42. ZORZOLIU Raluca, STANCIU Vasile Miltiade - From the Eco-Bio-Economy to the Health of the Whole Living Entity……………………………………………………………………………..……………………341

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Oil Price Fluctuations and Trade Balance of Turkey Suleyman AÇIKALIN1, Assoc Prof. Erginbay UĞURLU2 Hitit University, FEAS, Department of Economics, Çorum, 19030, Turkey Tel: +903642257700, Fax: +903642257710, e-mail: suleymanacikalin@hitit.edu.tr 1

2

Abstract: The relationship between oil price fluctuations and the trade balance of Turkey is the main concern of this paper. Economic growth performance of Turkey depends on imported capital goods as well as imported oil. Oil price increases bring a heavy burden for Turkish economy. Therefore, it is important to analyze the effects of oil price increases on external balances as well as on economic growth rate. We aim to examine the effects of imported oil price fluctuations on Turkey’s trade balance using structural vector autoregression (VAR) model.

The variables used in this model are imported crude oil price, imports of crude oil, industrial production index, and trade balance to GDP ratio. Monthly data set for the period of September 2009-June 2014 is used in this study. The results show that the oil price shock creates a negative impact on trade balance and this effect continues while declining for more than 10 months.

Most of the variation in forecast error of trade balance ratio is explained by the shock on itself and only a limited variation, around 4%, is explained by oil price for a 10 months period.

Keywords: Oil price; trade balance; structural VAR; Turkish Economy JEL classification: F14, C32, F41

1. Introduction The relationship between increasing oil prices and macroeconomic indicators such as economic growth rate, inflation rate, and external balances has been an important area of study in economics.

The interest on the topic mainly started after the drastic oil price increases experienced during the oil shocks of 1970s. Inıtial studies after 1970s focused on the effects of increasing oil prices on macroeconomic performance of industrialized economies. As expected, ıt was mainly concluded that increasing oil prices lowered the GDP growth rate and contributed to inflation problem.

Studies showed that the degree of oil price impact on macroeconomic variables varied over time.

Hamilton (1983) showed that while the negative impact of oil prices on explaining US recession 1

Hitit University, FEAS, Department of Economics, Çorum, 19030, Turkey, Tel: +903642257700, Fax: +903642257710, e-mail: suleymanacikalin@hitit.edu.tr 2 Assoc, Prof. Hitit University, FEAS, Department of Economics, Çorum, 19030, Turkey, Tel: +903642257700, Fax: +903642257710, e-mail: erginbayugurlu@hitit.edu.tr

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during 1949 – 1972 was significant, its size weakened in 1973 – 1980. Later studies argued that not all oil shocks were the same in terms of their nature and also in terms of their effects on related economies. Some of the studies agreed that oil shocks of 1970s and early 1980s were supply side shocks while the ones after 1980s including the ones after 2000 were demand side shocks [Archanskia et al., 2012; Hamilton 1983] in which oil prices are determined endogenously. However, other studies reached to different results for the same periods [Kilian, 2002; Kilian 2009]. For the oil shocks experienced after most of the studies agreed on the opinion that these shocks are not supply side shocks [Archanskaia et al., 2012; Hamilton, 2009; Kilian 2009]. Determining the nature of oil price increase and therefore the nature of the shocks is important for the policymakers to take appropriate precautionary actions for their economies in a timely manner.

The issue of increasing oil prices and oil price fluctuations captured the attention of economists one more time after the year 2000 as oil prices started to fluctuate considerably one more time. Small number of studies conducted on emerging economies during this period. The response of economic growth rate and inflation rates of oil importing countries to the surge in world oil prices was one of the related research .topics during this period [Ghosh, 2009; Barsky and Kilian 2004; Hamilton, 2005].

Studies on the external balances of oil importing countries were very limited in numbers [Bodenstein et al., 2011; Kilian et al., 2009; Narayan et al., 2014]. Ghosh (2009) estimate the relationship between import demand of crude oil and economic growth for India by using the autoregressive distributed lag (ARDL) model.

As Turkey moved to export oriented growth strategy after 1980, external balances, trade and current account balances namely, gained importance in evaluation of Turkey’s economic performance.

According to the new growth strategy, export became the new engine of growth in Turkey. As an oil importing developing country, oil price fluctuations have always created significant results for Turkey. Moreover, Turkish growth experience showed that there is a significant correlation between Turkish economic growth rate and imports. This fact made trade and current account deficits quite serious problems for the economy.

This paper is organized as follows. Section 2 reviews the previous literature on oil shocks and their effects on macroeconomic indicators such as growth rate and external balances. Section 3 gives brief information about the empirical methodology used in the paper and the main findings. Section 4 includes the concluding remarks.

2. Literature Review The results of oil shocks for both oil exporting and oil importing countries as well as the main factors behind oil shocks are studied especially after oil shocks of 1970s. As the oil price stayed relatively stable during the period of 1985 to 2000 the interest on the subject subsided. As the oil prices started to increase again after 2002 the interest on the topic of the effects of oil prices on macroeconomic variables is on the rise again.

Most of the literature consists of studies analyzing the association between external balances of developed economies such as the US and the world oil prices. Le and Chang (2013) differs from this tradition and includes Malaysia as an oil exporter, Singapore with oil refinery and Japan as an oil importer to see the oil price increase on countries with different economic conditions relating oil.

Archanskaia, Creel, and Huert (2012) wanted to determine the driving force behind oil shocks in 1970-2006 with the distinction of supply side and demand side shocks in their model. They argued that while supply side oil shocks have created negative external balance effects, demand driven oil shocks did not have such negative effects.

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Kilian (2010) uses five variables which are the percent change of world production of crude oil, the measure of global real economic activity, the real price of imported crude oil, the real price of gasoline in the U.S., and the percent growth rate of the quantity of gasoline consumed in the U.S. Kilian and Murphy (2014) argue unobservable shifts in expectations about future oil demand and supply conditions must be reflected in shifts in the demand for above-ground crude oil inventories.

They find that traditional estimates of the short-run price elasticity of oil demand are downward biased because of ignoring the endogeneity of the real price of oil.

Peersman and Robays (2011) analyzed the effects of oil price shocks on macroeconomic indicators using various countries. They concluded that the impact of oil shock depends on the nature of the shock on one hand and show different results depending on the country whether oil importer or exporter as expected.

Turkey is an oil-importing emerging economy. Strong dependence on imported oil as an important energy source contributes to high trade deficit problem of Turkey. This issue of oil prices and economic growth relationship is covered by a number of studies [Erdal et al., 2013; Ozlale and Pekkurnaz, 2010; AydÄąn and Acar, 2011; Sozen and Nalbant, 2007; Lise and Van Montfort, 2005].

Erdal et al. (2013) questioned the nature of the energy consumption and economic growth performance using Granger causality framework. They found a bidirectional relationship between energy consumption and economic growth for the period of 1970-2006. Similar conclusion was reached by Lise and Montfort (2005) as the found a co-integration between oil price and GDP for the period of 1970-2003 and concluded that it possibly shows a bi-directional causality relationship between these two variables. Irhan, H. B. et al (2011) could not find any significant effect created by oil price on Turkey’s trade balance based on 1990-2007 quarterly data using ARDL bounds testing analyses. Ozlale and Pekkurnaz (2010), after controlling for exchange rate misalignment and output gap, based on 1999-2008 monthly data, concluded that oil price shocks played a role on affecting Turkish current account balance but it was short term in nature. Ugurlu and Unsal (2009) studied on 1971-2007 to see the relationship between crude oil import and economic growth for Turkey and found no long run relationship between these variables.

3. Empirical Methodology Structural Vector Autoregressions (SVARs) are a multivariate, linear representation of a vector of variables on its own lags. This approach is used by econometricians to recover economics shocks from variables by imposing a minimum of assumptions compatible with a large class of models.

Kilian et al., (2009) propose a decomposition of shocks to the real price of crude oil into three components as follows:

where is the percent change in global crude oil production, rea denotes the index of real economic activity and rpot defers to the real price of oil. The author finds that oil price increases due to surging global demand produce and positive but small effect on real economic activity.

Kilian (2010) decompose the error as follows:

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3.1 Data For this study, monthly data is collected that cover the sample period of 2009:01- 2014:06. We investigate the effect of crude oil import price on trade balance. As an oil-importing emerging economy oil prices play a crucial role in Turkey’s economic performance. Turkey has a high unemployment and high trade deficit problems. In order grow at desirable and sustainable rates Turkey has to depend on imported capital goods and oil.

While studying the oil price and trade balance dynamics, GDP performance of the country is also imported as total imports, oil imports play a significant role in determining Turkish GDP. To capture the production activity we choose to use Industrial Production Index (IPI) as a proxy. IPI is also useful since GDP values are not available on a monthly basis. We use crude oil import (COI), industrial production index (IPI), crude oil price (COP) and trade balance (TB) as important variables of the model. See Appendix for the detailed definition and the source of data.

COI

IPI

2,400,000

130 120

2,000,000

110 1,600,000 100 1,200,000 90 800,000

80

400,000

70 I II III IV I II III IV I II III IV I II III IV I II III IV I II 2009

2010

2011

2012

2013

I II III IV I II III IV I II III IV I II III IV I II III IV I II

2014

2009

2010

COP

2011

2012

2013

2014

TB

140

.00 -.01

120 -.02 100

-.03

80

-.04 -.05

60 -.06 40

-.07 I II III IV I II III IV I II III IV I II III IV I II III IV I II 2009

2010

2011

2012

2013

I II III IV I II III IV I II III IV I II III IV I II III IV I II

2014

2009

2010

2011

2012

2013

2014

Figure 1

3.2 Unit Root Tests Time series properties of our data are investigated by using ADF and DF-GLS tests. Table 1shows the results of unit root tests. The null hypothesis of existence of unit root is rejected for COI and TB variables in level thus these variables are stationary. The other variables, namely COP and COI are non-stationary. We concluded that IPI and TB are I(0) and COP and COI are I (1).

Table 1: Unit Root Tests Results Level Variable COI

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Model Constant

ADF -3.0565(1)**

DF-GLS -1.7326(1)

First Difference ADF DF-GLS -15.3418(0)*** -4.8383(2)***

IPI COP TB COI IPI COP TB

Constant +Trend

-1.9258(1) -2.5200(0) -3.0306(0)** -3.1239(1) -6.6772(0)*** -2.0157(0) -3.8800(0)**

-1.4377(1) -0.2005(0) -2.8192(0) -2.8170(1) -4.0868(1)*** -1.3638(0) -3.1430(0)**

-6.2519(10)*** -7.4265(0)*** -13,5153(0)*** -15.2954(0)*** -6.0803(10)*** -7.6222(0)*** -13.4749(0)***

-14.2207(0)*** -2.3874(0)*** -3.1433(0)*** -6.5781*** -14.3071(0)*** -3.9253(0)*** -12.0322(0)***

Values between parentheses show the value of lag in terms of SIC criterion. ***,**,* shows that rejection of H0 in 1%, 5% and 10% significance level respectively. Null hypothesis is “the series has a unit root”

3.3 The Model Structural VAR models require imposing two kinds of restrictions on the system of equations which are short-run and long-run restrictions. Previous researches imposed on short run restrictions on residuals. We use crude oil import variable as an oil supply and following Kilian (2009), the oil import (supply) shocks are defined as unpredictable innovations to global oil production.

Before the SVAR model is estimated VAR model must be constructed. We estimate VAR model with 1 lag length based on SIC (See: Appendix).

The structural VAR representation is as follows:

where p is the lag length

denotes the vector of serially and mutually uncorrelated structural

innovations. Given the identifying assumptions above

has a recursive structure. Thus the

reduced form errors ( ) is as follows: Then we employ only short-run restrictions on residuals as follows:

Table 2 shows the estimates of coefficients of

matrix.

Table 2: Structural VAR Estimates C(1) C(2) C(3) C(4) C(5) C(6) C(7) C(8) C(9) C(10)

Coefficient 246843.1*** 0.330996 8.505045*** 0.802635 -0.715162 5.089349*** -0.000819 -0.002846*** -0.001083 0.006143***

Std. Error 21484.94 1.047295 0.740269 0.636456 0.629541 0.442971 0.000847 0.000807 0.000762 0.000535

***,**,* shows ; 1%, 5% and 10% significance level respectively.

Source: Authors’ calculations

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Table 2 shows that c2, c4, c5, c7, c9 are not statistically significant. Then oil supply (c2) has no effect on Industrial Production Index, itself, crude oil import (c4) and IPI (c5) have no impact on oil import price, crude oil import (c7) and crude oil import price have no effect on crude oil price.

3.4 Impulse Responses After the model was estimated, responses to a shock in the crude oil price are examined through impulse response functions by using error-terms of the model.

Response to Structural One S.D. Innovations Âą 2 S.E. Response of TB to Shock2

Response of TB to Shock1 .004

.004

.002

.002

.000

.000

-.002

-.002

-.004

-.004 -.006

-.006 1

2

3

4

5

6

7

8

9

1

10

2

3

4

9

10

5

6

7

8

9

10

Response of TB to Shock3 .004 .002 .000 -.002 -.004 -.006 1

2

3

4

5

6

7

8

Figure 2: Impulse Response Functions Source: Authors’ Calculation

Figure 2 shows that the response of Trade Balance (TB) to shocks of other variables: crude oil import (COI), industrial production index (IPI), and crude oil price (COP).

Response of TB to crude oil import shock shows a negative effect in the first month and turns into a positive effect in the second period and stays positive but at a very low level after the 4th period.

Shock of IPI has a negative but declining effect until the 7th period and stays at a positive but very low level for more than 10 months. Response of TB to crude oil price shock stays always negative.

This negative effect is the highest during the first period and gradually declines for the 10 months period.

3.5 Variance Decomposition Analysis In addition to impulse response functions, variance decomposition analysis can be carried out in structural VAR models as in VAR models. Variance decomposition determines which variable is the most effective in explaining the variation in the forecast error for the model under investigation.

Table 3: Variance Decomposition Variable Period 1 2 3 4 5

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TB Shock1 1.405077 1.286806 1.041880 0.996234 0.919658

Shock2 16.98784 14.36913 12.63608 11.38398 10.54433

Shock3 2.460597 2.830862 3.100812 3.260545 3.383520

Shock4 79.14649 81.51320 83.22123 84.35924 85.15249

6 7 8 9 10

0.901920 0.877778 0.870946 0.863332 0.860844

9.976387 9.606863 9.367587 9.216827 9.122899

3.467889 3.531703 3.577322 3.611302 3.635960

85.65380 85.98366 86.18414 86.30854 86.38030

Source: Authors’ calculation

Shock 1, shock 2, shock 3 and shock 4 refer to shocks given to the crude oil import, industrial production index, crude oil price and trade balance. Most of the variation in the forecast error of TB comes from shocks to itself which is %79 in the first period and increases to %86 in the tenth period.

Second variable which effects on TB is IPI with %17 in the first period and decreases to %9 by the 10th period. Price shock has only a very limited effect of the variation in the forecast error of TB with 2.4% in the first and 3.63% in the tenth period.

4. Conclusion In this paper we investigate the relationship between imported oil price and trade balance of Turkey for the January 2009 – June 2014. We use the trade balance (TB), crude oil import (COI), industrial production index (IPI), and crude oil price (COP) as the variables of the model in the interested question of effects of oil price shocks of trade balance dynamics.

The empirical application is started with the unit root tests. Based on the unit root tests, we use difference of COI and COP and the level of IPI and TB. After the structural VAR model was constructed, the impulse response function and variance decomposition results are evaluated.

These results show that imported oil price shock has a negative effect on TB. The trade balance values of Turkey were all negative during the investigated period. Meaning all monthly trade deficit values showed a trade deficit. Therefore, the negative effect meant that the trade deficit was worsened. Most of the variation in the trade balance is explained by itself. IPI was the other variable with the second highest explanatory power. The variation explained in the trade balance by the oil price was very low. We can conclude that oil price fluctuations have a negative but weak effect on Turkish trade balance in the short run.

References [1] Archanskaia, E., et al. (2012) The Nature of Oil Shocks and the Global Economy, Energy Policy 42 (2012), 509-512.

[2] Aydın, L. and Acar, M., (2011) Economic Impact of Oil Price Shocks on the Turkish Economy in the Coming Decades: A Dynamic CGE Analysis, Energy Policy 39 (2011), 1722 – 1731.

[3] Barsky, R.B. and Kilian, L., (2004) Oil and the Macroeconomy Since 1970s, Journal of Economic Perspectives, Vol. 18, No. 4, Fall 2004, 115 – 134.

[4] Bodenstein et al., (2011) Oil Shocks and External Adjustment, Journal of International Economics 83 (2011), 168-184.

[5] Erdal et al., (2006) The Causality between Energy Consumption and Economic Growth in Turkey, Energy Policy 36 (2008), 3838-3842.

[6] Ghosh, S. (2009) Import demand of crude oil and economic growth: Evidence from India Energy Policy 37 (2009) 699– 702 [7] Hamilton, J.D., (2005), Oil and the Macroeconomy, In: Durlauf, D., Blume, L. (Eds.), The New Palgrave Dictionary of nd Economics, 2 Edition, MacMillan, 2006, London.

[8] Hamilton, J.D., (1983) Oil and the Macroeconomy Since World War II, The Journal of Political Economy, Vol.91, No. 2 (Apr., 1983), pp. 228 – 248.

[9] Irhan, H. B. et al., (2011) An Empirical Model for the Turkish Trade Balance: New Evidence from ARDL Bounds Testing Analyses, Ekonometri ve İstatistik Sayı: 14, 2011, 38 - 61.

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[10] Kilian, L. (2010) Explaining Fluctuations in Gasoline Prices: A Joint Model of the Global Crude Oil Market and the U.S. Retail Gasoline Market, The Energy Journal, Vol. 31, No. 2, 103-128 [11] Kilian, L. et al., (2009) Oil Shocks and External Balances, Journal of International Economics, Energy Policy [12] Kilian, L. (2009). Not all oil price shocks are alike: Disentangling demand and supply shocks in the crude oil market, American Economic Review 99: 1053-1069.

[13] Kilian, L., and D.P. Murphy (2014) The Role of Inventories and Speculative Trading in the Global Market for Crude Oil, Journal of Applied Econometrics. 29: 454–478 [14] Le, T. and Chang, Y., (2013) Oil Price Changes and Trade Imbalances, Energy Economics 36 (2013), 78-96.

[15] Lise, W. and Van Moontfort, K. (2005) Energy Consumption and GDP in Turkey: Is There a Co-integration Relationship, EcoMod2005 International Conference on Policy Modeling, June 29 – July 2, 2005, Istanbul, Turkey [16] Narayan et al. (2014) Do Oil Prices Predict Economic Growth? New Global Evidence, Energy Economics 41 (2014), 137– 146.

[17] Ozlale, U. and Pekkurnaz, D. (2010) Oil prices and current account: A structural analysis for the Turkish economy, Energy Policy 38 (2010) 4489–4496 [18] Peersman G. and Van Robays, I., (2012) Cross Country Differences in the Effects of Oil Shocks, Energy Economics 32 (2012) 1532 – 1547.

[19] Sozen, A. and Nalbant, M., (2007) Situation of Turkey’s Energy Indicators among the EU Member States, Energy Policy 35 (2007), 4993-5002.

[20]Ugurlu, Erginbay ve Ünsal, Aydın.,2009. “Ham Petrol http://iletisim.atauni.edu.tr/eisemp/html/tammetinler/144.pdf

İthalatı

ve

Ekonomik

Büyüme:

Appendix

Definition and Source of the Variables IPI

Industrial Production Index (2010=100)(TÜİK)(Monthly)(NACE REV.2)

TCMB

COI

Imports of crude petroleum, 1996-2014

TÜİK

COP

Europe Brent Spot Price FOB (Dollars per Barrel)

EİA

GDP

Gross Domestic Product (Quarterly) (Current) (Thousand TL)

TCMB

ER

USD Exchange Rate (Sale) Monthly

TCMB

TBraw

Foreign trade by months Balance (Thousand US$)

TÜİK

TB

TBraw/(GDP*ER)

Authors Calculation

VAR Lag Order Selection Criteria Endogenous variables: D(COI) IPI D(COP) TB Exogenous variables: C Sample: 2009M01 2014M06 Included observations: 66 Lag LogL LR FPE AIC 0 -1180.098 NA 4.50e+10 35.88177 1 -1096.265 154.9639 5.77e+09 33.82623 2 -1066.479 51.44962* 3.82e+09* 33.40845* 3 -1054.270 19.60850 4.35e+09 33.52333 4 -1041.935 18.31472 4.99e+09 33.63441 5 -1026.540 20.99357 5.31e+09 33.65273 6 -1012.009 18.05386 5.94e+09 33.69724 * indicates lag order selected by the criterion LR: sequential modified LR test statistic (each test at 5% level) FPE: Final prediction error AIC: Akaike information criterion SC: Schwarz information criterion HQ: Hannan-Quinn information criterion

13

SC 36.01448 34.48976* 34.60281 35.24851 35.89041 36.43956 37.01490

HQ 35.93421 34.08842 33.88040* 34.20503 34.52586 34.75394 35.00821

Türkiye”,

Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

The Importance of the Sustainability of Environmental Accounting Habib AKDOĞAN1, Ela HİÇYORULMAZ2 1 Hitit University Faculty of Economics and Administrative Sciences, Corum, Turkey Tel: +9003642257700, Fax: +9003642257700, e-mail: habibakdogan@hitit.edu.tr 2

Abstract: Rapid population growth, industrialization, unplanned urbanization, global warming, tourism activities and natural disasters have resulted in environmental issues that have reached global dimensions and started to threaten the life of creatures. For the permanent protection of ecological balance and sustainability, massive national and international regulations are needed. Threatening the life of creatures has not been considered in the system consisting of the establishment of equilibrium between man and nature as required. At this point businesses have important responsibilities. Businesses, for example, in order to prevent environmental pollution waste control systems, filtration systems, recycling methods etc. endured environmental costs in a variety of ways, as these costs are incurred also causes more businesses to see the value of protecting the environment. The result of the activities of environmental impacts of enterprises can be considered, to be taken in the preparation of the necessary data to guide decisions, contacts and presentation of the stages of the environmental accounting system. In this study, we first examine the concepts of environmental accounting, sustainability and environmental costs and then in the cement factories located in Turkey the environmental costs and environmental accounting will be given in the results of a survey made for the calculation of the sensitivity.

Keywords: Environmental Accounting; Sustainability; Environmental Costs JEL classification: M40, M49

1 2

Hitit University, Institute of Social Sciences, Corum, Turkey, Tel: +90 0364 226 18 31, Fax: +90 0364 225 77 00e-mail: ehicyorulmaz_2@hotmail.com

14

1.Introduction Nowadays, both developed and developing nations are faced with environmental problems.

Environmental problems are not just for today’s people and, countries but even pose a threat to future generations. Therefore, global warming, industrialization, excessive consumption of natural resources, environmental pollution factors must be addressed as a whole. To leave a liveable world to future generations, it is necessary to ensure sustainability. When we talk of sustainable development, only environmental sustainability comes to mind. However, in order to ensure sustainability; the nature and level of goods and services, produced and used by a society, employer’s perception, poverty and sensitivity to the environment must be dealt with together. Here is sustainability; we can conclude that linked with environmental concerns in broader competitiveness and employment concerns [Ashford & Caldart, 2008:1044].

Therefore, economic and ecological balance are considered as a whole and for the welfare of people, increasing levels of social, economic and cultural sustainability must be provided together.

In the 1960s, the first studies related to the environment in terms of accounting began, then in the 1980s, was considered as a separate title [Korukoğlu, 2011:81]. Today, the environmental protection work is done beyond just a fad. The increasing damage to the environment, along with the environmental protection work has become a necessity.

Together with an understanding of the dynamics of environmentalism, businesses also began to assume their responsibilities. How business uses of the environment or how much damage given to the environment, is of great importance in terms of strategies to be implemented. Environmental costs of documenting, reporting and controlling, including issues of environmental accounting as an accounting branch has been developed.

The implementation of environmental accounting of the monetary value of the environmental information needs to be determined. Today, only a fiscal nature in accounting system which processes are recorded and apart from the remaining operations cannot be recorded [Kırlıoğlu & Can, 1998:103]. However, at this point international financial reporting standards (IFRS’s) not only emphasize the necessity of non-financial information to be also reported. This development is a big step in terms of environmental accounting. It is difficult to apply, the nature of non-financial reporting in terms of the application of environmental accounting. However, the basic concepts of accounting system taken from the concept of social responsibility (carrying financial and non-financial qualifications) must be reported to the appropriate people. When the information of the non-financial qualifications is ignored, this system constitutes a short fall of missing information.

2. Literature Summary It is seen that a lot of scientific studies about environmental accounting, sustainability and environmental cost issues have been conducted. In this area there are many definitions have been made in environmental accounting. Some of these include; All activities of a business to be classified as environmental, inventory holding, monitoring of changes in inventory, monetary or physical size of these changes is to provided and in addition, by integrating them with business balance sheet, the actual profitability of the business in the direction of the regulations are to be introduced [TUSIAD, 2005:25]. In

15

another definition; green accounting represents ‘a process of identification, calculation, control, analysis and reporting of the costs generated by the enterprise-environment relationship, resulting from the prevention, the limitation and the elimination of the effects of ecological disasters with a favourable impact over the company and the environment [Vasile, 2008:1387]. In yet another definition; operating costs related to the environment in the process of keeping them under control, whether in business activities of environmental expenditures, how much carbon and gas emissions resulting from the activities of that operation, activities that may be causing air pollution, or such as of the stages in the process of ensuring an effective environmental protection, must be reflected in the financial statements is defined [Bezirci transferred from Crawford et al., 2011:64].

Considering the definitions above regarding environmental accounting, environmental costs that occur during activities of enterprises, showing financial statements the relevant persons and institutions come to the forefront is to be presented in the form of reports.

The concept of sustainability has gained importance after the inclusion in the United Nations Brundtland Commission's report, in 1987. According to the definition of sustainable development contained in the report; preserving the ability to meet the needs of future generations, is to meet the needs of the present generation. [Yanık & Türker, 2012:292].

According to [Başkaya 2001:213] sustainable development model is founded on three basics. These are; 1. Consists of the current growth is unsustainable, 2. By meeting the needs of today, attaining a minimum level of prosperity of all people and the eradication of poverty, 3. Also life and welfare of future generations to secure work and during these studies, the pressure on the environment, is to keep a level that will not threaten civilization.

When examining this matter of implementation of the concept of sustainability seems to be quite difficult. Therefore in 1992, at the environmental development conference held in Rio de Janeiro along with other unnamed meetings after the Rio Summit sustainability was evaluated as global.

The concept of environmental costs, to sustain the activities of enterprises in the name of protecting the environment is considered as one of the folded costs [Melek & Ozbirecikli, 2002:84]. According to another definition, as a result of the business's production process, environmental quality affects negatively to reduce the cost [Graff & the others, 1998:4] Therefore according to the environmental costs they arise as; 1. Prevention Costs 2. Use Costs 3. Loss Costs are divided into three main groups.

So far, environmental costs and environmental accounting issues have remained at the level of literature, what is happening in practice has not been studied very much. As a result, businesses, that is working towards protecting the environment and how that reporting is an issue of concern. In this study that was conducted on examining the situation in cement factories, determining their attitudes towards environmental accounting and environmental accounting in order to reveal the importance of the sustainability.

16

3. This is a Research about Evaluation of Sustainability of Environmental Accounting in Cement Factories 3.1. Research Objectives The purpose of the study is the approaches by cement factories operating in Turkey to the environmental problems and to evaluate the sustainability of environmental accounting.

In order to reach the goal of the study was established two hypotheses. They are as follows; 1-There is no relationship between environmental problems and the causes of environmental problems.

2-There is no relationship between the activity durations in the cements factories with environmental accounting and sustainability.

3.2. Research Methods In this study, the survey method was used. To the preparation of the survey questions relevant to literature and studies on this subject have been examined previously. The data collection survey questions used consists of three sections. In the first chapter an overview of cement factories, environment-related opinions in the second chapter, and the third section of the participants thought about the concept of environmental accounting are mentioned. With this survey we tried to form an idea about cement factories. In order to implement the survey, 25 cement factories which have continuously operated in Turkey were selected randomly.

Under the analysis of the data obtained from SPSS 21 software was used. Five-point Likert scale was used in the study. The answer to each item codes varies between 1, 00 and 5, 00. Respondents to each question of: absolutely agree, agree undecided, disagree, strongly disagree, selected one of the categories stating their opinions on the topic. The survey sample used in application was presented in the appendix.

3.3. Reliability of Research The consistency of the statements contained in the survey and to what extent the scale used to reflect the problems that reliability was tested with SPSS 21 program. When carrying out this analysis alpha (Cronbach) method was used. In the third part of the survey there contained questions for the reliability analysis results in the following Table1 and Table-2 is located.

Table-1 Reliability Statistics Cronbach's Alpha 0.853

N of Items 23

Table-2 Item-Total Statistics

Question1 Question2 Question3 Question4 Question5 Question6 Question7 Question8

17

Scale Mean if Item

Scale Variance if Item

Corrected Item-Total

Cronbach's Alpha if Item

Deleted

Deleted

Correlation .453 .339 .392 .369 .437 .357 .611 .497

Deleted

88.6800 88.6000 89.1200 89.4400 88.7200 89.2800 89.0400 89.2000

109.893 112.167 106.693 104.757 109.960 106.043 102.873 102.667

.848 .851 .848 .850 .848 .850 .840 .844

Question9 Question10 Question11 Question13 Question14 Question15 Question16 Question17 Question18 Question19 Question20 Question21 Question23 Question24 Question25

88.9200 88.8800 89.2000 88.5600 89.6400 89.9600 90.1600 89.4000 89.8400 89.7200 89.0800 90.6800 88.6800 89.4400 89.6800

107.660 111.443 103.917 111.257 106.990 99.540 99.140 104.667 103.890 104.877 109.743 106.477 109.310 104.507 108.060

.454 .235 .527 .472 .282 .572 .571 .493 .517 .527 .248 .326 .504 .490 .257

.847 .853 .843 .849 .854 .841 .841 .845 .844 .844 .853 .852 .847 .845 .854

As a result of the analysis, contained in Table-1 Cronbach's alpha the coefficient=0,853 respectively. Analysis of the obtained values of the scale shows that of a highly reliable. In Table-2 the results of reliability analysis for each question are located separately.

Questions when evaluated separately in the analysis are seen to be highly reliable.

3.4. Research Results and Evaluation Of the importance of sustainability in terms of environmental accounting for disclosing all the surveyed factories was answering the questions. The analysis results are as follows; cement factories surveyed, as long as it operates in Table-3 ‘are also shown.

Table-3 Cement Factories Operating Times Valid

0-10 11-20 21-30 31-40 40 -> Total

Frequency 2 1 3 3 16 25

Percent 8.0 4.0 12.0 12.0 64.0 100.0

Valid Percent 8.0 4.0 12.0 12.0 64.0 100.0

Analysing Table-3, 64% of surveyed cement factories have been operating for more than 40 years continuously. However, the average lifespan of business in turkey is 34 years [www.capital.com.tr]. When viewed from this perspective, a large portion of the cement factories in Turkey, are above average activity time. The factory number, which operating time between 21-30 years and 31-40 years have equal zone of 12%. The activities range from 11 to 20 years’ time has the lowest zone (4%). The 8% Zone shows up to 10 years duration of activity. Cement factories number established a new or in operation for a short time is quite low. Considering both the number and activity times required, cement factories have the importance of environmental awareness.

They have documentation of cement factories; TSE, ISO 9001, ISO 14001, CE, EC and were grouped as other. In Table 4, having these documents and certificates are given the percentages of cement factories.

Table-4 Cement Factories Owned Documents TSE

% 96,6

ISO 9001

% 92

ISO 14001

% 100

CE

% 56

EC

% 72

18

Other

% 48

As a result of the research; in the world, known as the ISO 14001 environmental management system certification it is seen that the survey taken by all who attended the cement factories. Some of the objectives of ISO 14001; to improve environmental performance, reduce pollution and to take control starting from the source is to provide input materials and energy-saving. Therefore, business having ISO 14001 certification, said that environmentally sensitive policies apply. In addition, cement factories have rate of 96,6% TSE certificate, 92% of the ISO 9001 certificate, 56% of the CE and 72% have a certificate of EC. ISO 9001 certificate means a quality management system. This is a system that covers all stages and seeks continuous improvement for businesses from assembling, manufacturing, and marketing along with after-sales services. It could be called a kind of kaizen approach. The CE marking is not a quality mark. This sign of health and safety has been created in order to ensure the free movement of goods among the Member States of the EU. It means the product on which it has been affixed meets all the requirements of the related directive. EU countries considered to be sensitive to the environment, this document can be said to become even more important. The EC mark certificate of conformity is issued by quality and environment committee. Considering Table-4, which have these documents it is seen that high rates for cement factories. Legal requirements and preferences to be more environmentally conscious businesses have provided this high rating. Also the surveyed factories have answered to other groups; TS 18001 (OHSAS) for occupational health and safety management systems, ISO 50001 energy management system, ISO 10002 management systems consist of customer satisfaction. Cement factories which have these documents percentage is 48%.

Significance of the documents described above has been tested by ANOVA test. Table-5 the results obtained in is located.

Table-5 ANOVA Test Results

TSE

ISO 9001

CE

EC

Other

19

Sum of Squares

df

Mean Square

F

Sig.

Between Groups

.293

4

.073

2.200

.106

Within Groups

.667

20

.033

Total Between Groups

.960

24

.903

4

.226

4.813

.007

Within Groups

.937

20

.047

Total Between Groups

1.840

24

.577

4

.144

.516

.725

Within Groups

5.583

20

.279

Total Between Groups

6.160

24

1.373

4

.343

1.873

.155

Within Groups

3.667

20

.183

Total Between Groups

5.040

24

.969

4

.242

.919

.472

Within Groups

5.271

20

.264

Total

6.240

24

ANOVA test results; have shown that sensitivity to the environment of cement factories are seen to be significant. ISO 14001 certification is received by all respondents who were excluded from the analysis.

In Table-6, SPSS 21 program tested with the Correlation Method 'Environmental Problems and Causes of Environmental Problems' is shown. The numeric ‘sig. value’ shows the level of significance.

Table-6 Comparison of Environmental Issues and Causes of Environmental Problems

0,215

Water Pollution 0,241

Soil Pollution 0,487

Noise Pollution 0,076

Visual Pollution 0,219

Radioactive Pollution 0,010

0,256

0,265

0,331

0,197

0,287

0,165

0,065

0,088

0,083

0,062

0,351

0,229

0,210

0,244

0,205

0,490

0,343

0,411

0,577 0,295 0,218

0,603 0,374 0,223

0,253 0,151 0,366

0,298 0,223 0,192

0,314 0,147 0,151

0,230 0,150 0,059

Air Pollution Population Growth Unplanned Urbanization İndustrialization Luxury Living Standards Climate Changes Nuclear Tests Wars

Our first hypothesis established as ‘there is no relationship between environmental problems and the causes of environmental problems’ but the results of significance level of 5%, which is shown above were that environmental problems and causes of environmental problems among have a relationship.

Examining Table-6, population growth has led to soil pollution the most. Because of increasing population, natural resources are becoming extinct, environmental quality decreases along with the quality of the soil, impaired for agricultural production practices [Mazı & Tan, 2009:5]. Unplanned urbanization problems have emerged due to, uncontrolled and unplanned growth of cities over rural areas. Due to unplanned urbanization, natural, historical and cultural structures are damaged. Therefore, soil pollution caused by urban sprawl is the most. Industrialization is expected to cause most of the water pollution. Because in our country, water pollution due to industry associations, liquid waste ranks first among the factors that are influenced [www.cevreonline.com]. Luxury living standards are causing the most noise pollution. For example; such as people using private cars instead of choosing public transport, and noise is caused as a result of heavy traffic. Another ingredient contained in Table-6 is climate change. According to the results climate change has led to most of the water pollution. However, in the second rating air pollution is very high. This revealed that the greenhouse gas effect is too large to be ignored as the results indicate. Nuclear test causes radioactive pollution on the air, water, and land. Therefore, the resulting values are close to each other. However, respondents stated that the most is water pollution caused by nuclear test. Our last items contained in Table-6 are from wars. According to the analysis result, war is the largest cause soil pollution.

In Table-7, below we find the activities of the cement factories and the environmental accounting concepts are evaluation with the 25 questions.

Table-7 Comparison of Cement Factory Activity Durations and Environmental Accounting

Question1* Activity Durations Question2* Activity Durations

Sum of Squares

Mean Square

F

Sig.

1,773

,443

1,565

,222

1,060

,265

1,514

,236

20

Question3* Activity Durations Question4* Activity Durations

6,977

1,744

2,239

,101

6,236

1,559

1,053

,405

Question5* Activity Durations

3,823

,956

4,854

,007

Question6* Activity Durations

8,757

2,189

2,077

,122

Question7* Activity Durations

5,190

1,297

1,597

,214

Question8* Activity Durations

6,277

1,569

1,251

,322

Question9* Activity Durations

5,556

1,389

3,229

,034

Question10* Activity Durations

5,469

1,367

4,039

,015

Question11* Activity Durations

1,423

,356

,324

,858

Question12* Activity Durations

7,523

1,881

1,278

,312

1,083

,271

1,857

,158

Question14* Activity Durations

2,123

,531

,323

,860

Question15* Activity Durations

2,833

,708

,403

,804

1,167

,292

,150

,961

Question13* Activity Durations

Question16* Activity Durations Question17* Activity Durations

1,356

,339

,314

,865

Question18* Activity Durations

5,573

1,393

1,493

,242

Question19* Activity Durations

1,343

,336

,365

,831

Question20* Activity Durations

1,769

,442

,459

,765

Question21* Activity Durations

2,336

,584

,401

,805

2,269

,567

2,378

,086

Question22* Activity Durations Question23* Activity Durations

,607

,152

,444

,775

Question24* Activity Durations

4,090

1,022

1,035

,413

7,0234

1,756

1,438

,258

Question25* Activity Durations

‘There is no relationship between the activity durations in cement factories with environmental accounting and sustainability’ was established as our second hypothesis; from the analysis results included in Table-7. As a result of the analysis of activity time, environmental accounting and sustainability issues have been shown to have effect. A difference could not be seen between a long time ongoing cement factories and a new cement factory operation. All the factories surveyed show the same care about the environmental sensitivity and the sustainability.

Conclusion A lot of health problems have emerged with natural habitat reduction and reached the global dimensions of environmental issues. This society should be more sensitive to the environment as an indicator. To protect the ecological balance and sustainability; businesses and consumers must act together; and permanent arrangements at national and international levels are necessary.

Businesses who prefer the concept of environmental management are replacing traditional businesses that continue its operations only for economic growth and profit.

The purpose of environmentally sensitive business is to ensure sustainability and to improve the quality of life [Cetin, 2011:12]. To ensure sustainability, economic, cultural and social considerations must be made together. The aspect of executed applications is not sufficient.

Therefore, it is important for the concepts of unity and harmony.

In order to prevent environmental problems, from the accounting systems are also utilized. The concept of social responsibility in accordance with the basic concepts of accounting, business operations must be compatible with the natural environment. The cost of any damage to the environment should be a consideration. Older accounting systems ignored these

21

environmental costs, environmental accounting systems are important. Because of environmental costs is %20 of the total costs [Ergin & OkutmuĹ&#x;, 2007:154]. This ratio must be considered. The purpose of environmental accounting is to establish a relationship between environment and economy, where environmental costs are ensured that the financial statements of the environmental accounting are examined.

Some of the countries use environmental accounting system in the world; Britain, Denmark, USA, Sweden and Japan. Environmentally sensitive businesses, especially in Japan, are more preferred. Therefore, depending on the Tokyo Stock Exchange from 80% in 1430, is applied to environmental accounting [TUSIAD, 2005:60].

In Turkey, a country rich in natural resources, businesses are becoming conscious of environmental issues. Especially cement plants acts more susceptible to environmental effects.

However, environmental accounting system is a new concept in Turkey. Therefore, the study of the cement factories awareness of environmental accounting, information levels, environmental costs and opinions about sustainability were examined. According to research results the statement that; 'There are sufficient sources about the concept of environmental accounting'; a total of 80% strongly disagree, disagree and undecided answers are given. So 80% of the cement plants cannot find the resources. This ratio can benefit those businesses that do not have enough scientific resources in environmental accounting. Research on environmental accounting, academic level and implementation phase has led to these results remains weak. In this study, the expression with environmental awareness and environmental protection activities are examined, for cement factories, 76% strongly agree, 24% agree, giving an environmentally friendly policy in response was stated. In addition, for the cement factories; 92% allocated regular resources for environmental protection activities, 96% of these studies should be done for sustainability and 93% stated that they want to be environmental protection business. These rations, environmental accounting system to be implemented incomplete, does not show that cement plants are insensitive to the environment. Now with international financial reporting standards (IFRS) being, applicable at the international level treatment is more sensitive to environmental issues. For example, IFRS 41 standard implicitly drew attention to environmental costs. Standard net realizable value based on the valuation of biological assets and agricultural products to the identification guides. As seen, accounting standards takes into account the environmental costs. However, today, to be not taken into account in the accounting system standards, environmental protection costs incurred on behalf of, the investments are recorded at a different account groups and is offered to the person concerned. This information cannot provide sufficient information to users reporting. In addition, in cement plants, 80% strongly agree, 20% agree, giving the answer that worked for waste management and 96% for sustainability afforded to incur various costs stated. Along with the steady increase in the amount of waste, storage of these substances is constantly increasing the damage to the environment.

Therefore, the businesses are acting more sensitive about waste management. Waste management provides, the reduction of carbon dioxide emissions, saving from fossil fuel and waste disposal completely, leaving little or no residue. Research in other statements an ‘environmental accounting system for the development, Institutions and government agencies are required to cooperate with the relevant sectors’ was in the form. When this statement analysed; 76% strongly agree, 24% agree was obtained. In line with these results, we can say

that cement factories are ready and willing to cooperate to ensure the sustainability.

As a result of the survey, in Turkey for the implementation of environmental accounting system, the state and consumers as well as businesses need to act together to cooperate to create a result.

22

In this regard the following may be recommended;

 As consumers in Japan, eco-friendly businesses the choice of their products can make a big difference in terms of competition. Awareness of consumers to choose environmentally friendly products is provided with training form educational institutions. Therefore, students should be indoctrinated in awareness to prefer environmentally friendly products.  Recycling should be an encouraged subject. Re-evaluation of waste, the tax refund method

may be preferred.  Creating incentives zones.  Providing credit facility for investments.  Supporting resource usage.  Subsidies to enterprises that can provide ease of instituting environmental accounting.  Environmental accounting can bring the legal obligation to affect.

By completing this phase of 'green business' businesses who deserves the title, they have achieved more comfortable in the market will compete with dignity.

References: [1] Ashford, A.N. and Caldart, C.C., (2008). Environmental Law, Policy, and Economics: Reclaiming the Environmental Agenda, MIT Press, pp: 1043-1051 [2] Baskaya, Fikret (2001). The Rise and Fall of Development Economics, Imge Bookstore, İstanbul ISBN:

9755330798 [3] Bezirci, Muhammet, OzpeynircI, Rabia and Duman, Haluk (2011). “Sosyal Sorumluluk Kavramı Bağlamında Yeşil Muhasebe Eğitimi: Bir Alan Araştırması”, Wolrd of Accounting Science, vol: 13, issue: 3, pp: 61-79.

[4] Cetin Eray, (2011). The İmportance Production Businesses Pay to Green Accounting as a Social Responsibility: An Application on Production Businesses Running İn Mersin-Tarsus Organized Industrial Zone, Master's thesis, Karamanoğlu Mehmetbey Univesity, Karaman-Turkey [5] Graff, Robert,-Reiskin, Edward,D- White,Allen,L- Bidwell, Katherine. (1998). ‘Snapshots of Environmental Cost Accounting’, Tellus Institute, Environmental Accounting Project USEPA May 1998. http://nepis.epa.gov/Exe/ZyNET.exe/200011B1.TXT?ZyActionD=ZyDocument&Client=EPA&Index=1995+T hrPage=x&ZyPURL (access date: 16.07.2014) [6] Kirlioğlu, Hilmi and Can, Ahmet Vecdi (1998). Environmental Accounting, Değişim Yayınları, Adapazarı [7] Korukoğlu, Aysen (2011). Environmental Accounting in Business: Application of İzmir Province, Ege Academic Review, vol: 11, ıssue: 1, pp: 81-89 [8] MazI, Fikret and Tan, Mehmet (2009). Population Growth, Resource Exhaustion and Environment, ıssue: 136, April. http://www.mevzuatdergisi.com/2009/04a/02.htm (access date: 14.07.2014) [9] Ozbirecikli, Mehmet and Melek, Zeynep (2002). Environmental Accounting Environmental Costs Impact on Cost Accounting System, Journal of Accounting and Finance (AAFA), ıssue: 14 [10] TUSIAD June 2005 Report, ‘Company of the New Management Tool: Environmental Accounting’, no: TUSIAD-T/2005-06/404 [11] Vasile, Patruţ; Cristina, Ciuraru - Andrica; Mihaela, Luca (2008). Green Accounting– a Challenge for the Accountant Specialist, Annals of the University of Oradea, Economic Science Series; vol: 17, ıssue: 3, p: 1387 [12] Yanik, Serhat and TURKER, Ipek (2012). Developments in Sustainability and Social Responsibility Reporting (Integrated Reporting), İ.Ü. Journal of the Faculty of Political Sciences, no: 47, pp: 291-308, October [13] www.cevreonline.com/CevreKR/su%20kirlilik%20etmenleri (access date: 16.07.2014) [14] www.capital.com.tr (access date: 16.07.2014) [15] www.tse.org.tr (access date: 17.07.2014)

23

SURVEY FORM SENSITIVITY OF CEMENT FACTORIES WITH ENVIRONMENTAL ACCOUNTING Mrs. Participant and Mr. Participant; Businesses effects about environment has gained importance belong to environmental problems cannot be ignored. In this master's degree thesis we have been doing about sensivity of cement factories with environmental accounting, we will be trying to evaluate. The information you provide will be used entirely for scientific purposes and will be treated according to the rules of scientific ethics. Thank you for the interest you have shown and the time you reserve in our research. We offer our respect.

Associate Professor Habib AKDOĞAN Hitit University Faculty of Economics and Administrative Sciences, Corum, Turkey Ela HİÇYORULMAZ Hitit University Institute of Social Sciences, Corum, Turkey 1. General Information About to Business 1.1. How many years has your business been operating?

1-10

11-20

21-30

31-40

41 and over

1.2. What is the number of staff employed in your business?

10-49

50-249

250 And Over

1.3. What are certificates that you have?

TSE

ISO 9001

ISO 14001

CE

EC

THE OTHERS

2. Opinions About The Environment 2.1. Cement Factory, the following please indicate the degree of environmental issues of importance to you.

Environmental Issues Very Very Unimportant Undecided Important Unimportant Important 1. Air Pollution 2.Water Pollution 3.Soil Pollution 4.Noise Pollution 5.Visual Pollution 6.Radioactive Pollution 2.2. The following causes of environmental problems please indicate the degree of importance to you.

Causes of Environmental Very Unimportant Undecided Important Very Important Problems Unimportant 1.Population Growth 2.Unplanned Urbanization 3.Industrialization 4.Luxury Living Standards 5.Climate Changes 6.Nuclear Tests 7.Wars 3. Environmental Costing and Environmental Accounting Concepts 3.1. The following judgments express the degree of importance to you please rate from 1 to 5.

24

25

Undecided

Agree

2

3

4

Absolutely Agree

Disagree

Strongly Disagree 1 1. Our business is folded into the various costs on behalf of environmental protection.

2. Our businesses, environmentally sensitive policies are followed.

3. Businesses, environmental protection activities related to R&D activities, regular resource allocation is required.

4. Studies in the business environment provide the long-term reduction in the cost.

5. Our business is committed to protecting the environment for sustainability.

6. Our customers to be environmentally sensitive environmental policies affect our business.

7. Environmental issues indicate the status of development of the countries.

8. Increased environmental problems affect the future of businesses.

9. Investment decisions retrieving businesses need to consider environmental sensitivity.

10. Enterprises must design their products in such a way that will not harm the environment.

11. Businesses use environmentally friendly products and services, providing competitive advantage.

12. Our business in the production phase of solid, liquid and gaseous wastes are formed.

13. Our business activities are carried out on waste management.

14. Due to increased environmental problems, the concept of environmental accounting has emerged.

15. The social responsibilities of business must be necessary for environmental costs are used as a separate account group 16. Existing environmental laws are sufficient to protect the environment.

17. Environmental reporting should be made mandatory legal regulations.

18. Use of natural resources must be accounted.

19. Environmental costs in the uniform accounting system should be included as a separate group of accounts.

20. The use of environmental accounting will contribute to the image of our business.

21. There are sufficient sources about the concept of environmental accounting.

22. Business employees are trained in environmental protection.

23. Even if made mandatory environmental accounting, the accounting department will easily adapt.

24. Environmental accounting system for the development, Institutions and government agencies are required to cooperate with the relevant sectors.

25. In order to prevent environmental problems, the science of accounting is required to conduct research related to the environment.

5

Available online at www.icesba.eu Procedia of Economics and Business ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

A Comparison of the Performances of Type A Mutual Funds Before And After 2008 Global Economic Crisis in Turkey Esref Savas BASCI1, Fatih MEMIS2 1 Hitit University, Faculty of Economics and Adm. Sciences, Corum, Turkey Abstract: Looking from a historical perspective, financial activities contain many crises in itself. This situation seems to be a feature inherent in the existing economic system and as long as this system continues, it becomes inevitable being faced with the crisis. Especially in recent years, with the increasing globalization, the risk of being faced with a crisis has also increased. In the financial markets, savers who wish to evaluate the accumulation by investing in different investment tools may encounter some difficulties in the face of a variety of financial products and in times of crisis.

Mutual funds consist of investment tools which have increasing importance in the capital market and give professional management services to savers in accordance with certain principles. Especially in recent years, mutual funds market is rapidly evolving in Turkey, as well as in the international market. Due to these developments, consideration of growing number of investors and growing portfolios of mutual funds emerges as a necessity.

The purpose of this study is to compare the performances of type A mutual funds in Turkey for the period before and after the 2008 crisis. The pre-crisis period have been determined as 2005-2007 and the post-crisis period as 2009-2011. Within the scope of application, there are 74 mutual funds of type A, which continuously operated between January 2005 - December 2007 and January 2009 - December 2011, not joined with another fund, not taken over by another fund, not being in liquidation and having complete data. These mutual funds were analyzed by using performance measurement methods.

Keywords: Crisis, 2008 Economic Crisis in Turkey, Mutual Funds, Performance Measurement Methods JEL classification: L25, G2, G17, H12

1

Hitit University, Faculty of Economics and Administrative Science, Banking and Finance Department, Akkent 3. Cad. No:3, Corum, Turkey Tel: +90 364 2257700 , Email:esavasbasci@hitit.edu.tr (Corresponding Author), 2 Hitit University, Social Sciences Institute, Email:fatihmemis19@hotmail.com

26

1. Introduction Looking from a historical perspective, financial activities contain many crises in itself. This situation seems to be a feature inherent in the existing economic system and as long as this system continues, it becomes inevitable being faced with the crisis. Especially in recent years, with the increasing globalization, the risk of being faced with a crisis has also increased. In the financial markets, savers who wish to evaluate the accumulation by investing in different investment tools may encounter some difficulties in the face of a variety of financial products and in times of crisis.

Mutual funds consist of investment tools which have increasing importance in the capital market and give professional management services to savers in accordance with certain principles. Especially in recent years, mutual funds market is rapidly evolving in Turkey, as well as in the international market. Due to these developments, consideration of growing number of investors and growing portfolios of mutual funds emerges as a necessity.

2. Data and Methodology In this study, we examined to calculate performance of type A mutual Funds in Turkey between 2005 and 2011. These Mutual Funds are totally 84 funds in that period. Within the scope of application, there are 74 mutual funds of type A, which continuously operated between January 2005 - December 2007 and January 2009 - December 2011, not joined with another fund, not taken over by another fund, not being in liquidation and having complete data. These mutual funds were analyzed by using performance measurement methods.

We split 2 period according to crisis. It has taken into account 2008 year for crisis year in Turkey. Therefore we used one part of time series as a before crisis period from 2005 to 2007. We break out to 2008 year against any change during the crisis period. After that, we used the second part of time series as an after crisis period from 2009 to 2011.

However, we calculated monthly return, Sharpe Ratio, Treynor Ratio and Jensen Alpha for mutual funds during to all time series. We assume that is there any changes before and after crisis due to performance criteria. First calculation of return has applied to mutual funds as below formula: Vt  Vt 1 (1) Vt 1 Rp: Return of mutual fund Vt: Return in end of period Vt-1: Return in beginning of period Rp 

Sharpe Ratio is the first measurement ratio that it can be calculated as below in this study. r -r Sp = p f (2)

p

Sp: Sharpe performance ratio rp: Mutual fund’s return in period rf: Risk free rate in period

27

p:Standart Deviation of mutual funds returns in period Treynor Index can be calculated as below: (r  r ) Treynor Index = a f (3)

a

ra: Return of mutual funds in this period rf: Risk free rate in this period a: Beta coefficient of the mutual fund Jensen’s Alfa can be calculated as below also. i = Ri – (Rf + i(Rp - Rf))

(4)

i: Jensen’s Alpha of mutual fund Ri: return of mutual fund in this period Rf: Risk free rate in this period i: Beta coefficient of mutual fund Rp: Expected market return in this period

3. Research Findings We analysed each parameters to calculate performance during period before and after crisis. It has shown below results of descriptive statistics and results of paired sample t tests.

Table 1: Descriptive Statistics for Mean Before and After Crisis Period

Mean_1 and Mean_2 Before Crisis

a

After Crisisb a b

Min.

Maximum

Mean

Std.Dev.

-3,257500

5,199167

1,172639

1,188016

-3,946667

9,802500

1,327267

2,559488

Years between from 2005 to 2007 Years between from 2009 to 2011 Table 2: Results of Paired Sample t Test for Mean

Mean Mean_1 – Mean_2 -,154 *Mean_1: Before Crisis (2005-2007) *Mean_2: After Crisis (2009-2011)

Std. Dev. 2,634

Std. Err. ,176

t -,875

Prob. ,383

Table 2 shows comparing means for each period above. According to result of paired sample t Test for mean is shown that there are not statistically differences between two periods. In the other word, means of mutual funds are the same in before and after crisis.

28

Table 3: Descriptive Statistics for Sharpe Ratio Before and After Crisis Period

Sharpe_1 and Sharpe_2 Before Crisis

a

After Crisisb a b

Min.

Max.

Mean

Std. Dev.

-119,941747

-1,213160

-5,751805

13,719238

-58,702956

-0,383010

-2,872903

6,138513

Years between from 2005 to 2007 Years between from 2009 to 2011 Table 4: Results of Paired Sample t Test for Sharpe Ratio

Mean Sharpe_1 – Sharpe_2 -2,878 * Sharpe_1: Before Crisis (2005-2007) * Sharpe_2: After Crisis (2009-2011)

Std. Dev. 8,007

Std. Err. ,537

t -5,357

Prob. ,000

Table 4 shows comparing Sharpe Ratios for each period above. According to result of paired sample t Test for Sharpe Ratio is shown that there are statistically differences between two periods at 1% level (p<0.000). In the other word, Sharpe Ratios of mutual funds are difference in before and after crisis.

Table 5: Descriptive Statistics for Treynor Index Before and After Crisis Period

Treynor_1 and Treynor_2 Before Crisis

a

After Crisisb a b

Min.

Max.

Mean

Std. Dev.

-663,685497

2545,912522

-31,068429

221,962274

-385,931878

6410,082660

39,497474

542,898624

Years between from 2005 to 2007 Years between from 2009 to 2011 Table 6: Results of Paired Sample t Test for Treynor Index

Mean Treynor_1 – Treynor _2 -70,565 * Treynor _1: Before Crisis (2005-2007) * Treynor _2: After Crisis (2009-2011)

Std. Dev. 599,667

Std. Err. 40,247

t -1,753

Prob. ,081

Table 6 shows comparing Treynor Index for each period above. According to result of paired sample t Test for Treynor Index is shown that there are statistically differences between two periods at 10% level (p<0.10). In the other word, Sharpe Ratios of mutual funds are difference in before and after crisis.

Table 7: Descriptive Statistics for Jensen’s Alpha Before and After Crisis Period

Jensen_1 and Jensen_2 Before Crisis

a

After Crisisb

29

Min.

Max.

Mean

Std. Dev.

-18,289629

12,085477

-3,469304

5,902632

-12,206041

15,783187

-0,725283

4,409264

a b

Years between from 2005 to 2007 Years between from 2009 to 2011 Table 8: Results of Paired Sample t Test for Jensen’s Alpha

Mean Jensen _1 – Jensen _2 -2,744 * Jensen _1: Before Crisis (2005-2007) * Jensen _2: After Crisis (2009-2011)

Std. Dev. 3,231

Std. Err. ,216

t -12,653

Prob. ,000

Table 8 shows comparing Jensen’s Alpha for each period above. According to result of paired sample t Test for Jensen’s Alpha is shown that there are statistically differences between two periods at 1% level (p<0.000). In the other word, Sharpe Ratios of mutual funds are difference in before and after crisis.

Table 9: Summarize of Paired Sample t Test Results

Mean

Std. Dev.

Std. Err.

t

Prob.

Mean_1 – Mean_2

-,154

2,634

,176

-,875

,383

Sharpe_1 – Sharpe_2

-2,878

8,007

,537

-5,357

,000***

Treynor_1 – Treynor _2

-70,565

599,66

40,247

-1,753

,081*

Jensen_1 – Jensen_2

-2,744

3,231

,216

-12,65

,000***

*, ** and *** denote significantly difference from zero at 10%, 5% and 1% level, respectively

Table 9 shows comparing each of calculated and analysed performance criteria. According to these results 3 of performance measurements have statistically differences between two period at difference level, although there are not statistically differences in Means between two periods.

Conclusions The purpose of this study is to compare the performances of type A mutual funds in Turkey for the period before and after the 2008 crisis. The pre-crisis period have been determined as 2005-2007 and the post-crisis period as 2009-2011. Within the scope of application, there are 74 mutual funds of type A, which continuously operated between January 2005 December 2007 and January 2009 - December 2011, not joined with another fund, not taken over by another fund, not being in liquidation and having complete data. These mutual funds were analyzed by using performance measurement methods like as Sharpe Ratio, Treynor Index, Jensen’s Alpha.

According to these results shows that means is not enough to compare two periods as a statistically aspects. Actually, summarizes of performance criteria between before and after crisis has shown in Table 9. These means each of performance measurements are very important to understand mutual funds go on. As we see in this research, just focused on means for evaluating performance between two periods is limited to understand how mutual funds must be evaluated between periods.

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References [ 1 ] Jensen, M. (1968). The performance of mutual funds in the Period 1945 -1964. Journal of Finance 23 [ 2 ] Sharpe, W.F. (1996). Mutual fund performance. Journal of Business, Vol. 1 [3 ] Treynor, J. L. (1965). How to rate management of investment funds. Harward Business Review, 15 [4] Tural, Ahmet Orçun (2011), Türkiye’deki A ve B Tipi Yatırım Fonlarının 2004-2010 Yılları Arasındaki Performans Değerlendirmesi, Anakara: Atılım Üniversitesi Sosyal Bilimler Enstitüsü, Yüksek Lisans Tezi.

[5] Arslan, M., & Arslan, S. (2010). Comparative analysis of A, B type and exchange traded funds performances with mutual fund performance measures, regression analysis and Manova technique. İşletme Araştırmaları Dergisi, Vol. 2 [6] Karan, Mehmet Baha. (2004), Yatırım Analizi ve Portföy Yönetimi, Ankara: Gazi Kitabevi.

[7] Korkmaz, Turhan. Ali Ceylan (2012), Sermaye Piyasası ve Menkul Değer Analizi, Bursa: Ekin Yayınevi.

[8] Türkiye Sermaye Piyasası Aracı Kuruluşları Birliği. (2013), “Türkiye Sermaye Piyasası 2012”, Kaynak: http://www.tspakb.org.tr/tr/Portals/0/AIM_Yillik/TSP2012.pdf [9]

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Yılmaz, Durmuş (2009), “Küresel kriz ve Para Politikası http://www.tcmb.gov.tr/yeni/duyuru/2009/Baskan_Bogazici.php

Uygulamaları”,

Kaynak:

Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 â&#x20AC;&#x201C; 8174, ISSN-L: 2392 â&#x20AC;&#x201C; 8166

Determinants of Bank Profitability in Turkey: An Empirical Analysis on Types of Banking from 2002 to 2012 Esref Savas BASCI1, Oznur SAKINC2 1 Hitit University, Faculty of Economics and Adm. Sciences, Corum, Turkey Abstract: In this study, we investigate the determinants of banking profitability related to their financial statements. A profitable banking sector is better able effect to stability of the financial system. The profitability of a financial institution is affected by a lot of factors. These factors include elements internal to each financial institution and several important external forces shaping earnings performance. In this study we analyses effects from financial statements to their profitability of each types of banks. With this current emphasis on financial statements are very important to both managing future and making new decision to guide.

In Turkey, during from 2002 to 2012 period, bankâ&#x20AC;&#x2122;s profitability approaches has been changed to new phenomenon. Because of regulative decisions and competitive market has to change profitability of banking sectors. It is therefore important to understand the determinants of banking sector profitability in Turkey between all types of banks. This is essentially important in the light of the above notable changes that have occurred in the operating environment of banks in Turkey. An overview of previous studies indicates various ways that profitability was examined. Some studies were country specific and few of them considered panel of countries reviewing the determinants of profitability. In this study we examines types of banks as follows: 3 banks in state-owned banks, 12 banks in Private banks, 6 banks in foreign banks which has a branches in Turkey. In total 21 banks and 3 types analyses with cross-sectional panel data method during the from 2002 to 2012 period. In this study, we obtained data from Income Statements and Balance Sheets. As a result of panel data regression are statistically significant which Interest Income / Total Income and Consumer Loan / Total Loan are highly important to estimate ROE than estimating ROA. Keywords: Determinants of Banking Sector, Profitability, Turkey Banking Sector JEL classification: P17, P34, P52 1,2

Hitit University, Faculty of Economics and Administrative Science, Banking and Finance Department, Akkent 3. Cad. No:3, Corum, Turkey Tel: +90 364 2257700 , Email:esavasbasci@hitit.edu.tr (Corresponding Author), Email :soznursakinc@hitit.edu.tr

32

1. Introduction According to regulation on banking system around the world, it has been a numerous change in the banking industry such as types of instruments and focused on strategy about competiveness.

Along the nationalization of the huge commercial banks in 1969, different regulatory measures were also undertaken to protect and preserve the domestic banks from foreign banks [Nandi, 2013]. Restrictions of application to work with foreign banks would impose on the expansion of private banks.

While commercial banks have to change their short and medium term of financial requirements according to expansion of private banks. Public, private and foreign banks in finance sector, they are relatively used of quality of service as a weapon [Swar and Sahoo, 2012].

Efficiency comparison between all types of banks which are include domestic privately owned banks (private), domestic state owned banks (public) and foreign owned banks (foreign) are bulky in emerging economies because the banks can operate in different institutional habitats like the constant full deposit insurance normally enjoyed by public banks may not cover to private banks. [Karas et al., 2010] A profitable banking sector is better able effect to stability of the financial system. The profitability of a financial institution is affected by a lot of factors. These factors include elements internal to each financial institution and several important external forces shaping earnings performance. In this study we analyses effects from financial statements to their profitability of each types of banks. With this current emphasis on financial statements are very important to both managing future and making new decision to guide.

2. Data and Methodology In this study we analysed Turkeyâ&#x20AC;&#x2122;s Banking system during from 2002 to 2012 period in terms of bankâ&#x20AC;&#x2122;s financial tables. It is therefore important to understand the determinants of banking sector profitability in Turkey between all types of banks. This is essentially important in the light of the above notable changes that have occurred in the operating environment of banks in Turkey. An overview of previous studies indicates various ways that profitability was examined. Some studies were country specific and few of them considered panel of countries reviewing the determinants of profitability. In this study we examine types of banks as follows: 3 banks in state-owned banks, 12 banks in Private banks, 6 banks in foreign banks which has a branches in Turkey. In total 21 banks and 3 types analyses with cross-sectional panel data method during the 2002 to 2012 period.

In this study, we obtained and calculated data from Income Statements and Balance Sheets as below:

33

Table 1: Variables and Explanation

Variables

Explanation

Role in Model

ROA

Return on Assets

Dependent Variable

ROE

Return on Equity

Dependent Variable

Interest Income in Total Income Index of loan to Deposit Level of Consumer Loan to Total Loan

Independent Variable Independent Variable Independent Variable

Is loan_deposit Consloan

Equaiton Net Profit / Total Assets Net Profit / Total Equity Interest Income / Total Income Loan / Deposit Consumer Loan / Total Loan

In addition to this, obtained data was used in cross sectional panel regression analyse to estimate model with the variables. We have to determine which type of effect in panel data can estimate coefficient correctly. Initially, we analysed fixed and random effect each model to estimate panel regression model. According to the Hausman test, we accepted H0 whether estimator of statistically significant in difference between fixed and random effect or not.

Conclusions We analyzed two dependent variables separately on panel regression with independent variables is listed below.

Table 2 : Result of Panel Regression Anaysis for ROA in Random Effect

Variables

Coefficient

Z

P Value

Is

-.0203831

-1.89

0.059*

loan_deposit

-.0146343

-3.26

0.001***

Consloan

.0351617

2.38

0.017**

Constant

3.516672

3.64

0.000***

Dependent Variable: ROA R-sq: 0.288 F Test (11,73)*** *, ** and *** denote significantly difference from zero at 10%, 5% and 1% level, respectively Table 3: Result of Panel Regression Anaysis for ROE in Random Effect

Variables

Coefficient

Z

P Value

Is

.2249583

2.01

0.044**

loan_deposit

-.148507

-3.19

0.001***

Consloan

.2698751

1.76

0.078*

Constant

-.4861802

-0.05

0.961

Dependent Variable: ROE R-sq : 0.408 F Test (20,05)*** *, ** and *** denotes significantly differences from zero at 10%, 5% and 1% level, respectively 34

Table 4 : Result of Hausman Test for Panel Regression

Chi2

Prob

2.92

0.4035

H0: Difference in coefficients not systematic It is clear from Table 2 and Table 3 that are significant results in their P values among the variables. Is is refers to Interest Income / Total Income. When we analyzed Is to estimate in both ROA and ROE, the sign of coefficients are difference in each results. This expected sign and power of coefficient means percentage of Interest Income in Total Income is more important on Return on Equity than Return on Assets.

Second variable in Tables is Loan / Deposit and it obtained from Balance Sheets of Banks during the years. This variable represents main role of banking whether banks are successfully to get deposit and give credit or not. Expected result of this variable is much more credit level than loan. In analyse, we finds same level of each estimation on ROA and ROE. Last variable of this analyse is Consumer Loan / Total Loan which represents in Consloan on Tables. Result of this variable from panel data analyse is difference in each result.

Coefficient of this variable in estimating for ROE is higher than estimating for ROA. This expected result means level of Consumer Loan in Total Loan is more important to take account into calculate total income. Therefore, estimating the ROE is more important to all types of banks.

Consequently, In this study, we examined to understand the determinants of banking sector profitability in Turkey between all types of banks. An overview of previous studies indicates various ways that profitability was examined. Some studies were country specific and few of them considered panel of countries reviewing the determinants of profitability.

In total 21 banks and 3 types analyses with cross-sectional panel data method during the from 2002 to 2012 period. In this study, we obtained data from Income Statements and Balance Sheets. As a result of panel data regression are statistically significant which Interest Income / Total Income and Consumer Loan / Total Loan are highly important to estimate ROE than estimating ROA.

References [1] Hau, H., & Thum, M. (2010). Subprime Crisis and Board (In-)Competence: Private vs. Public Banks in Germany. INSEAD Working Papers Collection, (45), 1-33.

[2] Jain, S., Binduarora, & Nangia, V. K. (2012). A Comparative Study Of Performance Of Public Sector, New Private Sector And Old Private Sector Banks In India. Asia Pacific Journal Of Research In Business Management, 3(10), 1-2.

[3] Karas, A., Schoors, K., & Weill, L. (2010). Are private banks more efficient than public banks?. Economics Of Transition, 18(1), 209-244.

[4] Khan, N. A., & Fozia, M. S. (2013). Customer Satisfaction In E-Banking: A Comparative Study Of Public And Private Banks Of India. Asia Pacific Journal Of Research In Business Management, 4(4), 1-2.

[5] Matthey, A. (2010). Do public banks have a competitive advantage?. European Journal Of Finance, 16(1), 45-55

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[6] Nandi, J. (2013). Comparative Performance Analysis of Select Public and Private Sector Banks in India: An Application of CAMEL Model. Journal Of Institute Of Public Enterprise, 36(3/4), 1-28.

[7] Shobhna, G., & Kaur, J. (2014). A Comparative Study of the Performance of Selected Indian Private and Public Sector Banks. IUP Journal Of Bank Management, 13(2), 64-83 [8] Swar, B., & Sahoo, P. (2012). Determinants of Effective Service Delivery: A Study of Selected Public, Private and Foreign Sector Banks in Odisha. Business Perspectives & Research, 47-59.

[9] Vyas, R., & Math, N. (2006). A comparative study of cross-selling practices in public and private sector banks in India. Journal Of Financial Services Marketing, 10(4), 123-134 [10] World Bank Reports Public-Private Sector Partnership Narrow Digital Divide. (2005). I-Ways, 28(2), 96100.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

The Effect of Human Resource Practices on Burn-Out and the Mediating Role of Perceived Organizational Justice Ali BAYRAM1, Gökben BAYRAMOĞLU 2

Abstract: The purpose of this study was to investigate the effect of human resource practices on burn-out and the mediating role of perceived organizational justice.

Data was collected through questionnaires from the employees of six different firms. In order to test the hypothesis, correlation and regression analysis were conducted. The results of the research clearly show that there are significant relationships between human resource practices burn-out and perceived organizational justice. Besides, perceived organizational justice has a partial mediating role at the effect of human resource practices on burn-out.

Consequently, this research will contribute greatly to the literature and administrators in terms of perceived organizational justice and effective practises of human resources that diminish burn-out.

Keywords: Human Resource Practices, Perceived Organizational Justice, Burnout

1. Introduction Due to changes and developments in information and communication technology, businesses have begun to stain to compete. In this period, the importance of human resources in achieving a competitive advantage began to be understood by managers and researches. Within the framework of these dynamic changes, human resource policies and practices implemented by enterprises in order to achieve competitive advantage can be an important input, which would allow for better health of employees in the physical and mental aspects that are considered a strategic resource. At the same time, human resources policies and practices are contributing to effective and efficient work of employees. Employees who are not satisfied in terms of meeting the demands and 1 Hitit University, FEAS, Department of Business Administration, Çorum/Turkey, +903642257700 2 Hitit University, FEAS, Department of Business Administration, Çorum/Turkey, +903642257700

37

expectations of their business will feel negatively towards the business. For this reason, the physical and mental health of employees will deteriorate. Therefore, if human resource practices are applied correctly, they have the power to increase employees’ sense of justice and reduce the feeling of burnout of employees.

2. Burnout Maslach and Jackson defined the concept of burnout as emotional exhaustion and cynicism that are seen frequently in business. Job burnout is a syndrome that includes emotional distress, depersonalization and reduced sense of personal acceptance [Lambert, 2010]. Leiter and Maslach (2005) explain the basic features of burnout as follows:  Burnout is a waste of energy: Person feels constantly tired, stressed and overwhelmed.  Burnout is the loss of enthusiasm: Previous ideals of individual are lost and then replaced by cynicism.  Burnout is lost confidence: Person who feels self-inefficient perceives himself/herself as worthless.

Emotional exhaustion arises as a result of extreme psychological and emotional demands of work life [Rutherford et. All, 2001] and is described as a feeling of tiredness, lack of energy, and generally negative and inactive emotion [Rogelberg, 2007]. Because emotional exhaustion can result in cynicism toward one’s work and colleagues and low efficacy levels, it is accepted to be the most important element of job burnout [Leiter et al.

1998, Leiter & Maslach 2004, Laschinger et al.]. Another dimension of burnout is depersonalization. This term focuses on negative behavior or feelings towards others [Vladut & Kallay, 2011]. Reduced personal accomplishment, the last dimension of burnout, refers to an individual’s feeling of inefficacy about doing his/her job well [Kutcher et. Al, 2010]. Quality of life is very closely linked with an individual’s working life, and it has been suggested that it should also be evaluated in studies of occupational health [Soler et all. 2013]. The consequences can include: diminished job performance, desire to leave a job, absenteeism, marital and familial disharmony, diminished self-esteem, difficulties in concentration, social isolation, adverse physical symptoms (sleep disorders, headache, and so on), alcohol and drug abuse, and psychological disorders (such as anger, depression, anxiety, and apathy) (Kuruüzüm vd, 2008: 189-190).

2.1. Organizational justice The model of organizational justice focuses on personnel’s perceived level of fairness in the workplace [Loerbroks vs., 2014]. Thibaut and Walker suggest two types of organizational justice: distribution and procedural justice. Distribution justice arises when the outputs are distributed to the parties according to their level of participation or inputs that cause strife between the parties [Thibaut & Walker, 1977]. Later research focused on procedural justice that is concerned with decision outcomes. Procedural justice is stimulated through voice during a decision making process or influence over the outcome or by loyalty to fairness criteria in the process, such as consistency, lack of bias, representation, or accuracy [Colquitt, 2001, p: 386]. Procedural justice is very important for organizations, because members of organization who believe that processes in the organization are unfair are likely to be dissatisfied with rewards, even if they are beneficial to the members [Kim et al, 2012]. Bies expressed that people felt fairly treated when they 38

had the opportunity to present themselves to the interviewers, while people felt unfairly treated in the opposite case. Different from procedural justice, they also pointed out interactional considerations such as perceived reassuring of the interviewer’s communication and respectful treatment [Bies and Shapiro, 1987]. Moreover, some researchers accept that there are two types of organizational justice (procedural and distributive justice) while other research accept three types of organizational justice (including interactional justice) or even four types of organizational justice (detaching interactional justice into interpersonal and informational justice) [Cole et al, 2010]. İnteractional justice focuses on how employees are treated, especially by the supervisors (e.g., politely, with dignity or reassuring) [Loerbroks et al., 2014]. Thus interactional justice requires managers’ dignity and the respectful explanation to employees the reasons behind decision making [Bowen&Ostroff, 2004]. Table-1 summarizes components of organizational justice.

Table-1: Components of Organizational Justice DISTRIBUTIVE JUSTICE: PROCEDURAL JUSTICE: INTERACİTONAL JUSTİCE: appropriateness of appropriateness of allocation appropriateness of behavior of outcomes process superiors  Reward distribution is  Consistency: equal treatment of  Interpersonal justice: treating an made to the extent of the all staff employee with politeness, courtesy employee’s contribution  Lack of bias: don’t discriminate and respect between all staff  Equal pay for equal work  Informational justice: sharing  Meeting individual needs  Accuracy: decisions based on relevant information with employees current information  Representation of all stakeholders  Correction: Processes or mechanisms for error correction  Ethics: ethical norms are not violated Source: Cropanzano et. Al, 2007

An employee’s capacity to shape their work experience is closely associated with their perceptions of organizational justice. When they are treated fairly, employees can make reasonable assessments when interacting with organizational procedures. Both control and fairness can affect an employee’s capacity to cope with struggles in the workplace [Leiter et. Al 2010]. For example, violation of a psychological contract can cause many negative work outcomes such as intent to leave the job, high turnover rate, absenteeism and burnout [Taris et. All, 2004]. Many researches who studied the effect of organizational justice on health accept organizational injustice as the most important stress factor [Robins et. Al, 2011]. Liljegren and Ekberg [2008] concluded that a positive correlation exists between organizational justice, better self-rated health, and lower rates of burnout.

Bowen and Ostroff [2004] argue that the perceived fairness of HRM affects how positively HRM activity is viewed and the capability of the HRM system to influence employee attitudes and behaviors. Despite this fact, the role of management in creating workplace (in)justice, which in turn influences burnout syndrome, has been neglected [Frenkel et. Al, 2012].

2.2. Human resource practices on burnout Table 2 shows the causes and consequences of employee burnout.

39

Table-2: Causes and Consequences of Employee Burnout Causes Psychological reactions Consequence Organizational conditions Emotional exhaustion Withdrawal Depersonalization Interpersonal controversy  Lack of rewards Low personal accomplishment Low performance  Lack of initiative Family problems  Lack of clarification Health problems  Lack of organizational support Personal conditions  Unrealistic expectations  Personal responsibility Source: Jackson& Schuler 1983

Although there are different aspects of social environment factors in work life, the most important issue is the power dynamic between workers and employers. In workplaces where more management structures are more authoritarian, employees will participate less in decision-making processes. As a result, employees will be exposed to less favorable work policies, practices or behavioral norms [Cheng & Chen, 2014]. As shown in Table 2, some organizational conditions can trigger employee burnout. At the same time, several personal characteristics increase the impact of organizational factors. Organizations can develop a variety of strategies to prevent employee burnout, especially by modifying conditions that cause burnout. For example, supervisors could be trained to provide more contingent (based on performance) rewards to employees, or to redesign the structure of the organization to enable employees to have the right of initiative [Jackson & Schuler 1983]. Also “role conflict” had high mean score in most of survey. A person who receives conflicting information about how he or she is expected to behave may feel a role conflict.

This uncertainty makes it difficult to define what correct behavior is. The solution is clarification. In other words, job descriptions should be defined clearly and specifically [Lee & Akthar, 2007].

3. Methodology 3.1. Research Aim The aim of this study is to explore the relationship between human resource practices and burn-out to reveal the mediating role of organizational justice. We develop several hypotheses regarding the relationship among human resource practices, burn-out and organizational justice. We test our hypotheses with correlation and regression analysis, using data collected from 231 employees working for different firms. Research hypotheses are as following; H1: Human resource practices have an impact on burn-out.

H2: Human resource practices have an impact on organizational justice.

H3: Organizational justice has an impact on burn-out.

H4: Organizational justice has a mediating role in the impact of human resource practices on burn-out.

3.2. Research Model In accordance with the aim of exploring the mediating role of organizational justice and the effect of human resource practices on burn-out, the research model that has been developed is shown in Figure-1.

40

H4

HUMAN RESOURCE PRACTICES

H2

ORGANIZATIONAL JUSTICE

H3

BURN-OUT

H1

Figure 1: The hypothesized proposed model

3.3. Sample and Data Collection The population of the current study consists of 231 employees working for 6 different firms in Kayseri, Turkey. Although the survey aimed to reach 384, only 231 returned the usable questionnaires (245 returned questionnaires, but 14 questionnaires are not included due to missing answers).

3.4. Measures To be able to investigate the relationship between human resource practices, burn-out, and the mediating role of organizational justice, a survey was developed and conducted.

The questionnaire consists of two parts: (a) the first part was related to the human resource practices, burn-out and organizational justice (b) the second part was related to the demographics of the respondents. The first part has 58 statements on a five-point Likert type ordinal scale (1=strongly disagree and 5=strongly agree). The questionnaire was applied through face to face interviews and the drop-collect survey. To measure human resource practices, we used a 16-item scale developed by Christopher J. Collinsand and Ken G.Smith (2006). Organizational justice was measured using a 20-item scale developed

by Niehoff and Moorman (1993). Burn-out was measured using a 22-item scale with Maslach Burn-out Inventory.

4. Analyses and Results 4.1. Characteristics of the Respondents Demographic characteristics of employee’ are shown Table -3 Table-3: Characteristics of the respondents Educational Level Primary Secondary Associate and Bachelor’s University Degrees Master’s and Doctorate Degrees TOTAL Age 20-25 26-30 31-35 36-40 41-45 46 + TOTAL Gender Female Male

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n 20 61 144 6 231 n 137 54 25 7 7 1 231 n 102 129

% 8,7 26,4 62,3 2,6 100 % 59,4 23,4 10,8 3,0 3,0 ,4 100 % 44,2 55,8

TOTAL

231

100

4.2. Reliability of Scales The reliability analysis was carried out before testing the research hypothesis. Scale reliability was determined by the method of internal consistency. â&#x20AC;&#x153;Alpha coefficientâ&#x20AC;? is the implementation of the internal consistency method. The 16-item human resource practices scale had the reliability of 0,867. The 20-item organizational justice scale had a reliability of 0,846 and the 22-item burn-out scale had a reliability of 0,840 (Table-4).

Table-4: Reliability of scales Scales adapted from Cronbach Îą of this study Human Resource Practices 0,867 Organizational Justice 0,846 Burn-Out 0,840

4.3. Mean, Standard Deviations and Correlation value of Research Variables Mean, standard deviation and correlation coefficients were computed for each of the variables (Human Resource Practices, Burn-Out and Organizational Justice). These descriptive statistics are included in Table-5.

Table-5: Mean, standard deviation and correlation value of variables Mean Standard 1 2 Deviations Human Resource Practices 3,06 ,639 1 ** Burn-Out 2,72 ,546 -,492 1 ** ** Organizational Justice 3,31 ,568 ,385 -,633 Variables

3

1

In order to determine the relationships between variables, correlation analysis was conducted. The correlation analysis results show that a positive correlation between human resource practices and organizational justice, a negative correlation between human resource practices and burn-out and a negative correlation between burn-out and organizational justice were found significant at the 0.01 significance level.

4.4. Regression Analysis In order to test our hypotheses, regression analysis was conducted. Regression analysis, a statistical tool for the investigation of relationships between variables, is used to test the relationships between a dependent variable and one or more independent variable.

(Nakip, 2003: 227-247).

Table-6: Results of Regression Analysis For the Hypothesis 2 Variables Beta T Sig. R R F H1: Human resource practices has an impact on burn-out Constant 4,007 13,815 ,000 Human resource -,421 -8,555 ,000 practices ,429 ,242 73,195 Regression Model Y= 4,007 - ,421 (Human Resource Practices) H2: Human resource practices have an impact on organizational justice.

Constant 2,299 13,815 ,000 Human resource ,336 6,311 ,000 practices

Sig.f

,000

Result

Accepted

42

,385

,148

39,825

,000

Accepted

,633

,400

152,855

,000

Accepted

Regression Model Y=2,299 + ,336 (Human Resource Practices) H3: Organizational justice has an impact on burn-out.

Constant 4,782 28,238 ,000 Organizational Justice -,621 -12,362 ,000 Regression Model Y= 4,782 - 621 (Organizational Justice)

Firstly, our hypotheses were tested in terms of statistical validity and significance. Anova analysis results show that the F value for the first model was 73,195, for the second model it was 39,825, and for the third model the value was 152,855. The significance value for all models was 0,000. The models proved to be significant and the hypothesis valid because the F value measuring the validity of the hypothesis was higher than ±1,96 and P measuring the significance of the hypothesis was lower than 0,05.

After analyzing the significance and validity of the hypotheses for the three models, regression coefficients R, showing relationships between independent variables and the dependent variable and adjusted R2, explaining the change of the independent variables on the dependent variables were investigate. The results of regression are shown in Table 4. The first stage model was statistically significant and the adjusted R2 of the model was 0,242, which explains about %24 of the model. The second and third models were statistically significant. The adjusted R2 of the second model was 0,148, which explains about %14 of the model. The adjusted R2 of the third model was 0,400, explaining %40 of the model. In this case, it is possible to state that for three models there was an intermediate level of relationship between the independent variables and dependent variables. Since R is expected to have a value between 0 and 1, it is estimated that there was a strong relationship when the R value is close to “1” and a weak relationship when the R value is close to “0”. On the other hand, our research results of the validity of the hypothesis indicated that there was a relationship between independent variables and dependent variables according to Beta coefficients for three hypotheses. Therefore, hypotheses H1, H2 and H3 are accepted.

Multiple (Four-stage) regression analysis was conducted to explain the effect of human resource practices on burn-out and the mediating of organizational justice, proposed by Baron and Kenny (1986). According to this method, to establish mediation, the following conditions are required (Baron & Kenny 1986: 1173-1182): 1- The independent variable must have an effect on the mediator variable.

2- The independent variable must have an effect on the dependent variable 3- The mediator variable must have an effect on the dependent variable 4- When the mediator variable, whose effect was controlled, and the independent variable were included in the regression analysis, the regression coefficient (Beta value) of the independent variable on the dependent variable must decrease compared to the first equation and the mediator variable (organizational justice) must have a significant effect on the dependent variable (burn-out). The first three requirements were accomplished by the former regression analysis. In order to see if the fourth condition is met, multiple regression analysis was conducted for burn-out as the dependent variable, while human resource practices and organizational justice were independent variables. The results of regression are shown in Table-7.

Table-7: Results of Regression Analysis for the Hypothesis 2 Variables Beta t Sig. R R F Sig.F Result H4: Organizational justice has a mediating role in the impact of human resource practices on burn-out.

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Constant Human resource practices Organizational justice

5,180 -,250 -,758

29,725 -,5,603 -,9,987

,000 ,000 ,000

,688 ,473 102,247 Regression model Y= 5,180 - ,250 (Human Resource Practices) - 510 (Organizational Justice)

,000

Accepted

Firstly, hypotheses were tested in terms of statistical validity and significance through ANOVA analysis. As a result, F value was 102,247 and the significance value p was 0,000.

The hypothesis was statistically significant and valid because the F value measuring the validity of the hypothesis was higher than ±1,96 and P measuring the significance of the hypothesis was lower than 0,05. After analyzing the significance and validity of hypotheses for the model, regression coefficients R, showing relationships between independent variables and the dependent variable and adjusted R2, explaining the change of the independent variables on the dependent variables, were investigated. The results of regression are shown in Table 5. The R value was calculated as 0,688 and adjusted R2 was calculated as 0,473 for our hypothesis. Thus, it is possible to state that there was an intermediate level of relationship between the independent variables and the dependent variables, because R was expected to have a value ranging from 0 to 1. Also, it is supposed that there exists a strong relationship when the R value is close to “1” and a weak relationship when it is close to “0”. Regression coefficient (Beta value) was examined between the independent variable (human resource practices) and the dependent variable (burn-out) of H1 and H4 hypothesis to investigate the effect of mediator variable.

Accordingly, beta confidence of H4 (-,250) was found to be lower than the beta coefficient of H1 (-,421). As a result, it is possible to state that organizational justice has a partialmediating role in the relationship between human resource practices and burn-out.

Conclusion Human resource practices are important variables in achieving business objectives and allowing employees to contribute to the business. In this study, the effect of human resource practices on burn-out and the mediating role of perceived organizational justice were investigated. As a result of our regression analysis, it is determined that human resource practices have a positive effect on organizational justice and a negative effect on employee burnout. These results support previous empirical studies. In addition, it has been determined that organizational justice has a partial mediating role in the relationship between human resource practices and burnout. In this respect, it is expected that this study will contribute to the literature. However due to the difficulties of sampling and data collection (as is the case in all social research), the sample group selected from a particular region shows constraints of our study. Because of these constraints, it is recommended that further studies be done to test new groups using different mediating variables (e.g. organizational affiliation, work engagement, perceived organizational support, organizational commitment, etc.).

References [1] Bies R. J., Shapiro D.L. (1987), Interactional Fairness Judgments: The Influence of Causal Account, Social Justice Research, Vol:1, No:2, p:199-219 [2] Bowen D. E., Ostroff C. (2004), Understanding HRM-Firm Performance Linkages: The Role of the “Strength” of the HRM System, Academy of Management Review, vol:29, No:2, pp:203-221

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[3] Cheng Y., Chen C.J., (2014), Modifying Effects of Gender, Age and Enterprise Size on Associations between Workplace Justice and Health, Int. Arch. Occup Environ Health, vol:87, pp: 29-39 [4] Cole M.S., Bernerth J. B., Walter F., Daniel T. Holt, “Organizational Justice and Indıviduals’ Withdrawal Unlocking the Influence of Emotional Exhaustion”, Journal of Management Studies, Vol:47, no:3, May, 2010, p: 367-390 [5] Colquitt J. A., (2001), On the Dimensionality of Organizational Justice: A Construct Validation of a Measure, Journal of Applied Psychology, Vol:86, no:3, p:386-400 [6] Cropanzano R., Bowen D., Gilliland W., (2007) The Management of Organizational Justice, Academy of Management Perspectives, November, p:34-50 [7] Frenkel S.J.., Li M., Restubog L.D. (2012), Management, Organizational Justice and Emotional Exhaustion among Chinese Migrant Workers: Evidence from two Manufacturing Firm, An International Journal of Employment Relations, Vol: 50, No:1, pp:212-147 [8] Jackson S.E., Schuler R.S. (1983), Preventing Employee Burnout, Personnel, March-April, and p:57-68 [9] Kim T. K., Solomon P., Jang C., (2012) Organizational Justice and Social Workers’ Intentions to Leave Agency Positions, Social Work Research, pp: 31-38 [10] Lambert E. G. (2010), the Relationship of Organizational Citizenship Behavior with Job Satisfaction, Turnover Intent, Life Satisfaction, and Burnout among Correctional Staff”, Criminal Justice Studies, Vol: 23, No:4, December , P:361-380 [11] Laschinger H.K.S, Leiter M., Day A., Gilin D.(2009) ,Workplace Empowerment, Incivility, and Burnout: Impact on Staff Nurse Recruitment and Retention Outcomes, Journal of Nursing Management, vol:17, p:302-311 [12] Lee J.S.Y.. Akhtar S., (2007) Job Burnout among Nurses in Hong Kong: Implication for Human Resource Practices and Interventions, Asia Pacific Journal of Human Resources, vol:45, no:1, p:63-84 [13] Leiter M. P., Maslach C., (2005), Banishing Burnout: Six Strategies for Improving Your Relationship with Work, Jossey-Bass, San Francisco, [14] Leiter M.P., Gascon S., Jarret B.M, (2010), Making Sense of Work Life: A Structural Model of Burnout, Journal of Applied Social Psychology, vol:40, No:1, pp: 57-75 [15] Liljegren M., Ekberg K. (2008), the Longitudinal Relationship between Job Mobility, Perceived Organizational Justice and Health, BMC Public Health, Vol:8 [16] Loerbroks A., Meng H., Chen M.L, Herr R., Angerer P. , Li J., (2014), Primary School Teachers in China: Associations of Organizational Justice and Effort-Reward Imbalance with Burnout and Intentions to Leave the Profession in a Cross-Sectional Sample, Int Arc Occup Environ Health, Vol:87, pp: 695-703 [17] Plooy J.D., Roodt G., (2010), Work Engagement, Burnout and Related Construct as Predictors of Turnover Intentions, SA Journal of Industrial Psychology, vol:36, no:1 [18] Kutcher E. J., Bragger J. D., Srednicki O. R., Masco J.L. (2010), The Role of Religiosity in Stress, Job Attitudes, and Organizational Citizenship Behavior, Journal of Business Ethics, Vol:95, pp:319-337 [19] Rogelberg S.G.(2007), Encyclopedia of Industrial Organizational Psychology, Sage Publication, London [20] Taris T. W., Horn J.E.V., Schaufeli W.B., Schreurs P.J.G. (2004), Inequity, Burnout and Psychological Withdrawal among Teachers: A Dynamic Exchange Model, Anxiety, Stress, and Coping, March, Vol:17, No:1, pp.103-122 [21] Vlᾰdut C. I., Kallay Έ (2011), Psycho-Emotional and Organizational Aspects of Burnout in a Sample of Romanian Teachers, Cognition Brain&Behavior, Vol: XV, No:3, September, pp:331-358 [22] Rutherford B.N, Hamwi G. A., Friend S. B., Hartman N. N. (2011), Journal of Personal Selling&Sales Management, Vol: XXXI, No: 4, Fall, pp:429-440 [23] Soller R. S., Martin A.G., Mayolas S.F., Gras M.E.., Bertran C., Sullman M.J.M. (2013), Burnout and Quality of Life among Spanish Healthcare Personnel, Journal of Psychiatric and Mental Health Nursing, Vol:20, pp: 305-313

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 â&#x20AC;&#x201C; 8174, ISSN-L: 2392 â&#x20AC;&#x201C; 8166

Improvement Practice of the Students in a EU Project. Economic and Social Importance and Lessons for the Future. Case study of Spiru Haret University Baluta AURELIAN VIRGIL1, Andronie MARIA2, Raicu ILIOARA Sofia3 1, 2 Spiru Haret University, I Ghica, 2, Bucharest, Romania Tel 0040 728282803, Fax 0040 21 31766251 Abstract: The paper is a case study for the project < Student practitioners- students active and integrated> financed by Social European Fund. The project was developed in Romania in the Social Operational Program for Development Human Resources. The project has as objective to improve the practice of the students. The aim of the research is to identify and to indicate the economic and social importance of the practice in universities, how much may this to change in the society. The focus on skills and entrepreneurship will be analysed from the point of view of knowledge economy and society. In accordance with the theory in economics and labour market are evaluated direct and indirect impact on economy and society of a better equilibrium between demand and supply of labour market in the segment of higher qualifications. In these paper we pass from theoretic concepts to practice computation in a concrete projects. Our paper expects to start de applicative studies regarding the economic and social impact of different project and to put together the theory and the social practice in the field of EU funds. We also want to disseminate some ideas for a best practice of the students received in this project. The paper will help public authorities in a better design of official documents of EU funds calls and the tools for their monitoring, controlling. The paper is a part of research included in project activities.

Keywords: project; economic impact; economic and social incomes, costs of the project; best practice idea.

JEL classification: A 23

13

MNA ProdCom SRL , Bucharest, Romania, Tel 0040 723508389

46

1. Introduction In the paper we want to explain and to disseminate the value of a project in accordance with the rules of EU. We prove that such a project is part of social innovation and after this new steps are possible to develop social practice.

With this paper we e add a new method to disseminate the results of innovative projects for the society. We extend the standard area of presentation the projects with <internal> elements linked to contain, not only to public dissemination.

The modern world is faced with practical challenges. The IT explosion has opened huge perspectives for theoretical development, but at the same time made us forget that not everything can be done in front of the computer. In this moment of the technological development, theory and practice is situated in a bi-univocal relationship, inseparable.

Following the implementation of our project, by holding a contest with prizes between its beneficiaries, we wanted identifying the best solutions to improve in future of carrying out internships for students, so that with balanced funds, but with a lot of intelligence, to obtain maximum efficiency. One of the most popular ideas has shown a degree of generality extensive applicability and sustainability, proposing the creation of a virtual enterprise as a tool that gives to the student practitioners the opportunity to gain knowledge without disrupting the current activity of guardians, by simulating various commercial activities.

2. Economic and social importance of the practice in the university. How answer the project of Spiru Haret University The correlation between knowledge acquired in school and requirements of work market was a permanent problem for secondary and university level of studies. In Romania at the beginning of transition to economic market a study say, on the basis of a study financed by Ministry of education in Romania, that < exist an inactivity between school and labour market, between education and qualification> (Rotaru T., and others, 1995). We observe that was the problem on no communication, not the problem of differences between what need labour mark and what offers education institutions.

In the field of labour market, the equality between demand and supply is a trend, a an ideal, economic and social. The welfare of people is depending of this equilibrium (Ciutacu C., Vasile V., 1991).

Our existence in the world and the covering of the needs are depending of knowledge. For every kind of knowledge are cost and efforts of the people. Many human and intellectual resources are involved in generating and transfer knowledge. These means time and money (Brﾄフianu C., 2006). If we need knowledge and we spent money for this, we hope to generate the knowledge useful for pupils and students.

In modern literature in management field there are accepted that are some skills that the companies need: evaluation of situation, have a vision about the future path of the company, efficient communication, negotiation, solve problems in dead line, involved human resources at maxim potential, action with determination, corporative ethics ( Gordon M, 2012). Usually these skills are necessary for managers and entrepreneurs. Such skills must be included in the personality of the graduates. At this stage the science reached after a way from short definition of the entrepreneur to large definition of the entrepreneur. In accordance with the large definition, the entrepreneur is somebody <that

47

start a project or on important activity> (Drucker P, 1993). Following this definition, the skills of a entrepreneur are necessary for an efficient manager and for a proficient employee. These kinds of skills exceed the area of a shareholders or owners of individual companies. For these reason the formation of skills for entrepreneurship was part of students practice in our project. In their evaluation they had to suggest the future path of the companies were they performed stage of practice. They have to decide if the field and the politic of the company are sustainable and if they like to receive a job in such a company.

Starting the theory of Schumpeter regarding entrepreneurship we may accept that a project like < Student practitioners- students active and integrated > is multi-dimensional and has a multi-impact. This project changes the static student into dynamic future graduate. The new graduate wants to change the things because he knows now enough about the real stage of economy and society. Maybe he will perform new activities or will perform the old activities in a new manner. That is a change of category of human resources available and, in accordance with the definition of Schumpeter < will force to move the economy in new direction> (Schumpeter, 1911).

The correlation between skills that available jobs involve and the background of graduates is a problem of efficiency of the activity. From the point of view of the companies this correlation at a high level means big productivity and small cost for training. We can explain the option of companies for graduates may be explained with the theory of preferences. In accordance with this theory, the preferences for economic goods of the companies (including for services and activities) are in inverse with the costs. In fact there are memories of opportunities costs of the companies (Fudulu P, 2007).

In accordance with the new trends of economic thinking, the neo-classical liberal theory, is important for all kind of consumers, including companies, the marginal utility. So, for companies is more important for the utility of graduates that their results in the universities (notes, other previous work of the graduates).

No important if the knowledge is a special factor of economic growth or it is part of human resources, in new era is clear that to put in work knowledge is a condition for progress.

The knowledge acquired by experience is so more important as knowledge acquired by formal education (Dobrota and Serban, 2008). Practice for students is in fact to put together formal and informal education, formal and informal knowledge, to generate synergies between them.

What we want to solve with best practice of the students. First of all, to reduce unemployment, mainly of the graduates. O couple of economic and social theories show the difference between what the companies need and what the graduates offer. The liberal doctrine, as an example, put the unemployment causes on this factor. <The unemployment may be, of course, the consequence of the difference between the distribution of the work and the distribution of de request>.( Hayek F, 2013).

The analyse of a project financed by public funds help the evaluation of the public policies that generated that fund and the correlation between objective of the politic and the concrete results. In our case is possible to see how Social European Fund generates financial flows to reach the main objectives of the European Social Model. In fact the evaluation of social politics is both a <judge about the results and a tool to improve the process> (Radoi M, 2005). For this reason, in our paper we include the method to compute the economic and social result of such a project and the ideas to improve the same kind of 48

projects in the future. The ideas are draw up by one author as directly beneficiary of the project and was done as part of the project.

As part of a big community, the graduates have to combine in the knowledge economy the technical innovation, economic innovation and social innovation. Spiru Haret University and its partner, UNAP, wanted to see faster the innovator of the new age. This graduate does not wait special inspiration, he act as soon as possible to valorise the opportunities and to search the change for new times (Vlasceanu M, 2010). More than it, we know that <Within the knowledge based society and economy, the defining elements of the new economy have put creativity and innovation (including social innovation) at the center of success and long run sustainable competitive advantage> (Suciu, 2012). The creativity, so important in the new economy and in the new society, is impossible to teach. The creativity must be included in a special training, like practice programs for students organized in the case-study project . The changes in society and economy make more and more difficult adapting of people as new rules. To be creative is much more difficult, because the whole society is changing and to be innovative means to know the next point 9 the next stage) of this fast evolution.

How has designed and implemented, the project was an answer to all of 5 main fields of Social European Fund. (Table 1) Table 1: Covering main fields of Social European Fund in the project < Student practitioners- students active and integrated> No 0 1 2 3

4

5

Main field of Social European Fund 1 Development and promoting an active politic on labour market Promoting equal chances for access on labour market Promoting and improvement of training, education and consulting as part of continuous adapting of labour force Promoting a high qualified labour force

How is covered in the project 2 Graduate obtain skills for labour market, not money to wait a better job In practice program had access all students, depending on their professional results Practice for students is in the same time training ( adapting to special conditions of the companies), education ( practice of the students is part of curricula in all universities) and professional consulting ( the students receive consulting for different kind of branches acting the companies) The practice put the university qualification on a higher level, in accordance with the needs of companies; It is a promoting of high qualified labour force with focus on skills; More than 50% of students involved in practice program represented woman.

Promoting measures to improve the access of woman to labour market Source : ( for column 1) Profiroiu M, Popescu I, 2003, pp255.

The concept regarding the impact of higher education on economic development exceeded the UE borders. Now is an asset of economic thinking and of the managerial practice in education institution to forecast the future of a nation according to quality of universities. Russian Federation is as an example of country that uses EU concepts.

Promotion of the development of higher education as the major resource of socioeconomic development of the country is one of criteria of the independent Ranking Agency of Russian Federation (2009).

3. Lessons for the future. How to organize better programs of practice for students People are the ones who give value and energy to an organization. They represent the soul and driving force propelling the company towards development through their creative ideas. One of the important points to keep yourself in a market with continuous expansion

49

and specialization trend is attracting a talented workforce, well prepared and resultoriented.

To identify ideas, significant improvement solutions to any human activity, one of the most efficiently means used is to achieve at the outset of a SWOT analysis, which will clearly show the image / picture of the current situation and the development prospects, the identification of strengths and weaknesses, opportunities and threats coming from the external environment and will lead us to outline a development strategy to achieve the objective, of the goals.

The advantages of conducting a practical traineeship, still in school, are undisputed: the acquisition and development of professional skills applied, learning of team work and project management, the chance to win real professional experience and, ultimately, to obtain a permanent job working in particular are just some of the highlights.

The internship is an ideal opportunity for participants to interact with professionals in the field, the opportunity to attend theoretical and practical training sessions, work in the competitive teams and focus on results. There are important companies who in collaboration with Spiru Haret University, provide and propose internships in various areas such as finance, banking, IT, human resources, administrative, accounting, sales and legal.

Experience gained along of such an internship is essential, especially since today matters more experience than countless diplomas or courses you attended. Most employers look for people with experience or at least willing to learn and gain as much information in a short time.

Starting from all of these general considerations and organizing them in a common matrix, using theoretical knowledge gained during attending of the Faculty of Financial and Accounting Management, specializing in Accounting and Management Information Systems, as well as personal experience, one of the most popular ideas for improving the internship program started from the SWOT analysis of activities in accounting practice.

It is noteworthy that this model is applicable to all activities and adapts according to the peculiarities of each one.

The most difficult obstacle to overcome in the case of the accounting activity was the confidential nature of the documents to be processed. To remove this bottleneck it has proposed a solution as can be simple, clear and easy to apply, with minimal costs, but requiring in advance an innovative design, a careful preparation by the guardian and the coordinating teacher. This idea at the time of carrying out the program "Students practitioners - Students active and integrated", presented a significant degree of novelty.

By applying this solution was possible defense the character of confidentiality of the accounting documents of partner companies, and at the same time the formation of the participants abilities in the accounting profession and capable of competing successfully in the labor market.

Creating a virtual enterprise by means of which can perform the simulation of the commercial activities: accounting, legal, financial and full traceability of documents. Thus privacy nature of accounting documents of the partner by practice would be protected, and students would be able to draw up all kinds of documents: to draw up a bill of sale towards a virtual client; to record the purchase of raw materials based on the invoice: some inventory and so on; to draw up data sheet of a acquired fixed asset and recording it in the accounting, achieving the payment and its registration based on the purchase 50

receipt. Then step by step, under the guidance of tutor to switch to their enrollment in the cumulative documents, Cash Registers, Bank Register and so on; make entries in the Cash Register, to learn what meaning an Accounting Note and making it effectively, to draw up trial balance based on General Ledger (T-s).

Is this a sustainable idea? The answer is certainly yes? Especially as it was applied at the experimental level even by one who came up with this proposal, and it was successfully taken over by other entities.

For training it might use role-play technique, often used in the sales, making simulations based on concrete situations. Group of participants at the internship will be organized into work teams, as follows: team A will play the seller and team B will play the purchaser and so on under a scheme previously designed, the team C will be the raw material supplier, team D buys an asset from the team A, for example, then the internship is organized in a fun and exciting way and thereby the direct beneficiaries, students, would gain important skills in the shaping her chosen profession.

The idea of creating a virtual enterprise allows working in the simulation regime of some real situations basically can be extended in the any field. We can only think in creating a Virtual General Court. Students assisted by computer, tutors and teachers coordinators could sustain plea, could present evidence, could interact with a virtual judge Thus, once in the courtroom, integrating in the real legal life could be more easily, imperceptibly.

Consider only the facility could provide such a tool, with a permanent database updated in the study of comparative law.

A simple idea, original, with a high level of generalization can lead to getting a practical training with high quality and low costs. Of course, allocating resources and defining the procedures required to implement practical systems will be different depending on the specialization of the participants.

Acknowledgements For Mr. Prof Mircea Boulescu and Mr. Prof Constantin Mecu. They wanted so much involving the graduates in research.

References [1] Bratianu Constantin, The dynamic of generating and transfer of knowledge, in The society of [2] [3] [4] [5] [6] [7] [8] [9]

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knowledge, Publishing House < Editura Economica>, Bucharest, 2006, pp.81; Ciutacu Constantin, Vasile Valentina ( 1991), The equilibrium of demand and supply of labour force, in Studies and economic research, no 6/1991, The Centre of Information and Documentary, Bucharest, pp. 125; Dobrota Nita and Serban Andreea Claudia, Work- essentially, forms, structures and finality, Publishing House < ASE>, Bucharest, 2008, pp.115; Drucker P, Innovation and entrepreneurship, Harper Business, New York, 1993; Fudulu Paul, Economic theory of cultures and institutions, Publising House < Editura Universitara> Bucharest, 2007, pp.53; Gordon E. Michael, The entrepreneur, Publishing House < Curtea veche>, Bucharest, 2012, pp.34; Hayek Friederich August von, Studies on philosophy, politic and economics, Publishing House of the University < Alexandru Ioan Cuza>, Iassi, 2013, pp.298; Radoi Mireille, The evaluation of public policies, Publishing House Tritonic, Bucharest, 2005, pp.44; Profiroiu M, Popescu I, (2003), European policies, Publishing House < Editura Economica>, Bucharest, pp.255

[10] Rotariu Traian, Dan Maria, Mezei Elemer, Veres Eniko ( 1995) Higher education between inertia and change, in Review of social research, no 2/1995, pp.51;

[11] Schumpeter Joseph Alois, The theory of economic development, Leipzig, 1911,pp,189, Publishing House [12] [13] [14]

<Duncker and Humblot>, Translated by R. Opine. Cambridge: Harvard University Press, 1934. Reprint.

New York: Oxford University Press, 1961; Suciu Marta Christina, ( 2009), Creative economy and creative cities, in Romanian Journal of Regional Science/ The Journal of the Romanian Regional Science Association, available on http://www.rrsa.ro/rjrs/V314.SUCIU.PDF; Vlasceanu Mihaela (2010) Social economy and entrepreneurship, Publishing House <Polirom>, Bucharest, pp.164; Artyushina Irina, Troyan Vladimir, (2009), Strategic principles of building word- class universities in the Russian Federation, in The world-class university as part of a new higher education paradigm: from institutional qualities to systemic excellence, Publishing House < Presa Universitara Clujeana/ UNESCO CEPES>, Cluj-Napoca, 2009, pp.225.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

The Women Employees within the Frame of Social Responsibility and an Analyse Hülya ÇAĞIRAN KENDİRLİ 1, Tuğba GÜLEN 2 ,Tuba KÜMBÜL 3 1 Hitit University, Çorum, TürkiyeTel: +90 364 219 19 19, Fax: +90 364 219 19 38 Email: hulyacagirankendirli@hitit.edu.tr, tugbagulen@hitit.edu.tr, tubakumbul@hitit.edu.tr Abstract: In many resources, corporate social responsibility is defined as an organization's ethic and responsible attitude towards all the partners in and outside of the instruction, it’s taking the decisions accordingly and apply them.

In the researches that have been carried out recently, the concept of "partner" stands out. Institutions have relations with some certain partners such as consumers, advertisers and workers and so on as these groups include women as well. That is the reason why the studies should be carried out considering the women.

This concept has a great role in increasing the number of the social responsibility projects of the institutions that put emphasize on women.

Although Turkey signed CEDAW (Committee on the Elimination of Discrimination against Women) which is a legally binding contract and many contracts of ILO which aimed at protecting the equality of men and women, and made some certain laws to protect the equality, it was the 126th country of 130 countries according to the Index of Gender Mainstreaming report published by WEF (World Economic Forum) in 2013. In this regard, the need to replace women in the centre of social responsibility projects is inevitable.

JEL Codes: M14, M19 Key Words: corporate social responsibility, gender equality, women

2

Hitit University, Çorum, TürkiyeTel: +90 364 219 19 19, Fax: +90 364 219 19 38Email: hulyacagirankendirli@hitit.edu.tr, tugbagulen@hitit.edu.tr, tubakumbul@hitit.edu.tr,

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1. Introduction It has been widely observed that the concept of social responsibility has been the agenda both in daily conversations and academic work lately. Various establishments and organizations carry out a lot of a activities under the name of social responsibility projects or support many events which could be of help for society. In this scope, the works related to women have reached to quite a remarkable level.

Social responsibility is one of the main commitments which form the social structure of modern societies, local administration, organizations and establishments. The social responsibility concept is related to take the whole society into account in terms of the decisions taken for external environment. With its most common definition, social responsibility could be described as the a person’s evaluation about positive and negative effects s/he created on communal life and taking precaution against negative effects.

(Kaya, 2008:15).

Nowadays the success of an establishment has increasingly been related to determining appropriate policies compatible with the society’s values and continuing its activities without maximising its profit. Since the establishments are part of the system in their environment, their survival is bound to their adaptation to the changes in the system. (www.kurumsalsosyal.com). On the other hand, the establishments are the entities created by the society and general economic order. An establishment could live and become helpful and fruitful only if the society and economic order believe its necessity. It is valid for every establishment and organization whether it be big or small. Therefore, business administration has to observe the effects of the establishment on economic and social environment and their reactions (Akal, 2000, 41).

2. Social Responsibility Concept and Corporate Social Responsibility Corporate social responsibility appeared in H. Bowen’s “Social Responsibilitiesof the Businessman” book which was published in 1953 for the first time as a concept. Bowen suggested that businessmen should be interested in social responsibility projects compatible with the society’s values and aims.

According to the definition made by European Commission, corporate social responsibility is a concept which the establishmets can integrate the social and environmental issues on voluntary basis with their interactions via organizational activities and social shareholders.

Having social responsibility is not to meet official expectations rather invest in the relations of human capital, environment and shareholders by going beyond volunteerism (Commision of the European Communities, 2001:6).

United Nations Conference on Trade and Development (UNCTAD) approaches the corporate social responsibility from to what extent the establishments are concerned with the society’s needs and aims perspective. According to UNCTAD, all the social groups expect certain roles and functions to be fulfilled in order to change the time through their own social change and evolution.

The expectations related to the establishments and especially the multinational ones undergo a tremendous change in an unexpected manner with the increase of their roles in the globalized society. Thus, discussions related to the social responsibility standards of multinational extablishments and their applications is an integral part of developing a globalized society (UNCTAD, 1999:1).

Knowsn as ISO, strategic consultant group of International Standardization Organization on coporate social responsibility discusses corporate social responsibility as an approach 54

which the organizations point at economic, social and environmental problems in way to promote the benefit for the people and society (Aktan andBörü ,2007:11-13) It is possible to mention four common elements which are found in the definitions concerning corporate social responsibility concept in different sources (Sönmez andBircan, 2004: 476‐490): 1. Establishments have responsibilities beyond producing goods and service in order to make profit.

2. Among these responsibilities, contributing to the solution of social problems caused by the establishments themselves is present.

3.Establishments are not only in charge with their shareolders but also the environment which is their social shareholder.

4. Establishments do not only focus on economic values, they serve for humanistic values in a broad sense.

The point to take into consideration in these explanations is that corporate social responsibility could be realized not only in financial terms but in a non-financial manner, such as goods and and service. Moreover, since it reflects the responsibility towards everyone who is directly or indirectly in interaction with, the establisments should take the society’s needs and expectations from the development of the selection of social responsibility initiatives to the application of them into account. On the other hand, the social needs and expectations have constantly changed as a result of the conditions experienced throughout history. (Sert,2012:34) When the emergence and progress of social responsibility concept are investigated, the development of social responsibility concept starts with the appearance of civilizations and religions. The prime power which determined the behaviours of the people who made a living from trade was moral approaches. Social rules and laws were accepted as the secondary power. Humanity headed for endeavouring and dynamism from austerity and obedience with the effect of Renaissance and Reform and this transformation paved the way for discoveries and inventions. The common commercial custom during mercantilist period was shaped by measuring a country’s wealth with its precious metals. In this period, helping the poor, finding a job for the unemployed were defined as the responsibilities of a state. As the Oriental society is viewed in the same period, it is possible to observe that the ideas were shaped by the effect of religious beliefs similar to Occidental society. However, it could be said that the social responsibilities progressed to a considerable extent in the East as a result of the Islamic regulations of certain topics, such as cooperation and social solidarity compared to the West. Serial production, which surfaced with Industrial Revolution occurring as a result of the use of steam power as an energy resource by James, made new management methods possible and the production gravitated from agriculture to industry. The technological developments in this era made the production of machines, which could produce at a sophisticated level, possible and mechanization created the need for manufacturization. Along with the increase of the big factories’ numbers in 1800s social responsibilities started to be defined in conceptual terms. Unionization movements increased and a transformation from the view which put the emphasis on the problems of workers rather than management solely based on industrialization was experienced. Social philosophy replaced individualistic philosophy.

Industrial Revolution caused significant changes in the social habits and the responsibility concept became a focal point (Korkmaz,2009:28-29).

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People not only met their needs along with the increase in the production thanks to the industrialization but also they met other people’s needs by starting in trade life. These developmets started to form the social conscience and responsibility concepts in the USA and Europe. The concept of social responsibility became apparent with the emergence of industrialization and big establishments. Being one of the most significant econonomic depressions in the history and breaking out in 1929, the Great Depression led to unemployement and loss of production in many countries primarily the USA and the ones in western Europe. It is seen in this period that the developments in social responsibility concept accelerated. The first meetings in which top-ranking managers attended were organized in order to discuss the social responsibilities and behaviour types by Sears Company in 1936. Non-governmental organizations which became important in 1960s and social movements like women rights and environmentalism shed light upon the development of social responsibilities (Göztaşve Baytekin,2009:1999).

The establishments which collect energy, material and information and serve them as goods and service output and other establishments are obliged to get into contact with certain organizations and consumers. The elements such as cohabiting with the environment, the changes in social expectations, the relationship between corporate social responsibility and dignity of an establishment have a driving force in terms of the establishments’ acting in accordance with social responsibility understanding.

In this context, the establishments are no long regarded as the organizations which solely produce goods and services, but organisms which take the worker’s well-being into consideration, protect the environment and aim to provide the best service for the consumer. So to speak, everybody see eye to eye about the fact that the establishments are not only technical and economic organizations, on the contrary they are of a social dimension (Peltekoğlu, 2012: 190).

When the social responsibility defined, it is generally understood as an establishment which take precautions for protecting the nature and environment towards a sustainable growth. In fact, it is quite a deficient definition. An establishment is responsible for all the shareholders who could severely be affected by the decisions and activities it is involved in a direct or indirect relationship as well as the environment and society. It should be dwelled upon “stakeholder theory” in order to correctly understand the concept of corporatesocial responsibility. The establishmets are in a relationship with different sectors, which form the society, in these days and their success depends on how successfully these relationships are managed. This concept is called “stake”olders" which describe this issue in the literature. It is possible to group the stakeholders into two: “inhouse stakeholders” and “non-house stakeholders”. In-house stakeholders consist of founder principal owners, shareholders, managers and employees. On the other hand, non-house stakeholders comprise of the sections, such as society, government, customers, suppliers, rivals and so forth.

3.

Corporate Social Responsibility in Turkey and Woman

The society, among the stakeholders whom the establishments should treat socially and ethically, and the woman phenomenon in the society are undeniable realities which cannot be ignored. This phenomenon has a huge impact on the increase in the number of projects which put the women in the centre (Aktan-Börü,2007,p.13-14).

However, despite Turkey has taken several steps for protecting the equality of woman and man through laws, such as signing CEDAW (Convention on the Elimination of All Forms of Discrimination against Women), which has a legal binding, in 1985, various conventions of

56

ILO for ensuring the equality of woman and man, and the Istanbul Convention (Convention on preventing and combating violence against women and domestic violence) in 2010, it was ranked as 120 out of 136 countries according to 2013 Social Institution Gender Inequality Index in a report prepared by World Economic Forum (WEF).

Women constitute 81% of the illiterate in Turkey. The representation rates of women in decision-making mechanisms are very low both in public and private sector. The rate of women in Grand National Assembly is only 14 (according to the results of general elections in 2011). Violence towards women still remains as a problem on the agenda. Inhome care services are carried out by women to a great extent. In this context, the fact that women are in the centre of corporate social responsibility projects in Turkey appears both as a necessary and an unavoidable issue (Şenerve Demirdirek,2014,p.3).

The “Corporate Social Responsibility Leaders” research, carried out by Capital magazine for 8th times and being one of the leading studies which we could clearly see the data about the concept of social responsibility in Turkey has an important place. The research displays both the public’s and business world’s points of view about the CSR (Corporate Social Responsibility) studies performed by companies. As a result of plebiscite, Sabancı Holding is on the peak of responsibility league this year. Turkcell, Koç Holding, Yıldız Holding and Arçelik follow it respectively. It is highly striking to see that the top five has not changed for the last three years besides it shows that these companies have an established perception with regards to social responsibility field in the public eye.

GfKTürkiye General Director FulyaDurmuş states that “ The research results show that almost half of the people still cannot make a definition of corporate social responsibility.

The aids provided by CSR corporations are perceived as their activities in social and cultural fields. Every two people out of three think that companies have social responsibilities in this respect, but the rate of the people who finds these activities sufficient is quite low. While education and health are on the top of the fields which are expected to be invested, she also emphasized that there has been increase in the expectations of the public about the projects such as domestic violonce, women-children rights. (http://www.pazarlamasyon. com/ 2013/04/capital-dergisi-kurumsal-sosyalsorumluluk-arastirmasini-yayimladi/) Table 1: The first 20 companies in the Corporate Social Responsibility Index in Turkey The first 20 companies in CSR according to the Business World CSR Leaders according to the Business World 2013

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2012

Company

Point

1

1

Turkcell

19,05

2

2

Koç Holding

9,58

3

3

EczacıbaşıTopluluğu

6,9

4

4

Sabancı Holding

6,49

5

7

Borusan Holding

4,17

6 7 8 9 10 11

8 5 6 9 10 12

Coca-Cola GarantiBankası İşBankası Vodafone Yıldız Holding Akbank

4,05 3,51 2,74 2,32 1,73 1,37

12 13 14 15 16 17

11 14 * 13 15

Türk Telekom Unilever Doğuş Holding Eti Procter&Gamble Arçelik

1,19 1,01 0,89 0,83 0,77 0,65

18

19

AnadoluSigorta

0,6

19

*/18

Doğan Holding/DoğuşOtomotiv 20 18/16 EfesPilsen/Opet *Not on last year’s list

0,54 0,48

As shown by the research results, the companies which work on issues like “domestic violonce” and “womenchildren rights” within the context of Corporate Social Responsibility become prominent both in business world and public opinion.

When the projects of Turkcell, which came first in this research, on women and children are invesitegated, there are rip-roaring projects such as “Kardelen”, providing scholarship for 95,000 girls, Women Power for Economy, and Zero Tolerance for Violonce towards Women. Following this, there are striking projects of Koç Holding as follows: For my country and Vocational School: A matter of country as well as Let the hearts be together, Smiling eyes, We will grow thanks to Science, P&G Prima Conscience Mother Healthy Baby by Eczacıbaşı Holding and Pink Ribbon against Breast Cancer by Avon.

When we look at other inspiring social responsibility project examples in Turkey, we see the subjects related to family and child are treated more closely than other topics. These campaigns are as follows: Stop Domestic Violonce by Doğan Holding, Daddy, Send me School; Harmony in Education by Arçelik; Attentive Child, Warns you against Home Accidents by Aygaz; Brisa- My headlights are on, so is my way by Sabancı Holding; Doğuş Automotive- Traffic is Life by Doğuş Holding; HSBC Lovers Project by HSBC , and Clean Toilet by OPET.

Conclusions Besides the concept of Social Responsibility in Turkey, the concept of increasing the woman’s political, economic and social value in the society appears as an important issue wchih should be embraced by the society in the first place. Determining the women as a focal point in the social responsibility projects carried out by the corporations in Turkey will lend impetus to this movement.

Today, that the corporations focusing solely on profit tarnishes the image of them to a great extent and it is a fact reflecting on the studies. The data reveal that the establishments develop, globalise and sustain their development as long as the society in which they live prospers. Moreover, it has been observed in the studies carried out in Turkey that the social responsibility projects which centre upon the protection and development of women attract more attention and become more successful compared to the others.

References [1] Peltekoğlu, F.B. (2012), HalklaİlişkilerNedir?, Beta Basımevi , 7. Baskı, İstanbul [2] Aktan, C.C.andBörü, D. (2007) KurumsalSosyalsorumlulukİşletmelerveSosyalSorumluluklar, Editör :Çoşkun Can Aktan ,KurumsalSosyalSorumluluk , İGİAD Yayınları ,İstanbul [3]

Sönmez, F. and Bircan, K. (2004). İşletmelerinSosyalSorumluluğuveÇevre EkonomikYaklaşımlar. YaklaşımDergisi. Yıl:12, Sayı:133, s.476‐490

Sorunlarında

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[4] ÇorumİşGücüPiyasasıAnalizRaporu, (2013), ÇorumÇalışmaveİşKurum İl Müdürlüğü, Çorum [5] Petenkaya, Z.I. (2010)DevletinDeğişimiveÖzelSektör: DünyadaveTürkiye’deSosyalSorumlulukAnlayışı ,AnakaraÜniversitesiSosyalBilimlerEnstitüsü, YüksekLisansTezi [6] Commision of the European Communities, (2001), ec.europa.eu/.../lb_com_2001_0370_en.pdf [7] Türkiye’deÖzelSektörünKurumsalSosyalSorumlukAnlayışınaİlişkinYararAlgısı: KurumsalSosyalSorumluluk Faaliyetlerinin Duyurulmasında Web Sitelerinin Kullanılması, Dr.NurayYılmazSert http://www.ajit‐e.org/?menu=pages&p=details_of_article&id=56 35 [8] SosyalSorumlulukKampanyaları İle ÇocuklarınBilinçlendirilmesiveEğitimiTürkiye’denBirUygulamaÖrneği: AygazDikkatliçocukkazalarakarşıbilinçlendirmekampanyası [9]

GÖZTAŞ, A. and BAYTEKİN, P., (2009), SosyalSorumlulukKampanyalari İle ÇocuklarinBilinçlendirilmesiVeEğitimiTürkiye’denBirUygulamaÖrneği: Aygaz ‘DikkatliÇocuk’ KazalaraKarşiBilinçlendirmeKampanyasi”, Journal of YaşarUniversty, No.13. Vol 4, ss.1997-2015.

[10] Şener, Ü. And Demirdirek, H. (2014), ToplumsalCinsiyeteDuyarlıVeri Çalışması, 01.01.2014 http://www.tepav.org.tr/upload/files/haber/1399033411-7.TCDV_ Toplumsal_ Cinsiyete_ Duyarli_ Veri_ Calismasi_Egitimi.pdfErişim tarihi13.07.2014 [11] AKAL, Z.,(2000) İşletmelerdePerformansÖlçümveDenetimi, MilliProdüktiviteMerkezi, Yayın No:173, Anakara.

[12] KAYA, S. (2008) İşletmelerdeSosyalSorumlulukve SA 8000 (Social Accountability) Standardı, AR- GE, http://www.izto.org.tr, ErişimTarihi: 29.09.2014

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Food Quality Certificates and a Research on Effect of Food Quality Certificates to Determinate Ignored Level of Buying Behavioral: A Case Study in HITIT University Feas Business Department Hülya ÇAĞIRAN KENDİRLİ1, Gürkan ULUSOY2 1 Faculty of Economics and Administrative Sciences, Hitit University, Çorum, Turkey Tel: +90 364 225 77 00, Fax: +90 364 225 77 00, Email: hulyacagirankendirli@hitit.edu.tr1 Abstract: Nowadays, food and food industry has become one of the most important sectors for manufacturers and consumers. Many countries of the world including Turkey have been developed and implemented many standards for food safety and presentation of food to ensure safe consumption. In this study, we studied on the most common of these standards through HACCP and ISO 22000 standards. The purpose of this study is, to determine students' awareness and ignores of level of food quality and food quality certification during their food shopping. This research has conducted with survey in the Hittite University, Faculty of Economics and Administrative Sciences, Business Administration by 256 students are attending to this department. Department student number is 775 in totally. We have determined some hypotheses in the context of research and we applied cluster analysis, chi‐square analysis and correlation analysis to the research.

According to results of a significant relationship was found between hypotheses.

We considered 260 students. After calculating with 0,95 confidence interval and 0,05 tolerance we have to reach 258 students. We used the Cronbach’s Alfa for testing the reliability of survey. Cronbach’s Alfa is settled between 0 and 1 and for reliability of scale and it must be over 0,60 for acceptance to survey. Our survey’s scale has been 0,79 and we can said that, it is a reliable scale for this survey study.

According to result of research, there is no relationship between demographic specialties of students and ignored of food and quality legislation. But there is relationship between sexuality and ignored of food and quality legislation.

Keywords: Quality, Food Safety, Food Quality Certificates, HACCP, ISO 22000.

JEL classification: M31, M39 1 2

Institute of Social Sciences, Hitit University, Çorum, Turkey, Tel: +90 368 30 61, Fax: +90 36830 61, Email: gurkan.ulusoy@windowslive.com

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1. Introduction Quality stems etymologically from the word ‘qualis‘in Latin. The first information about the quality prevails in the laws of Hammurabi. Accordingly, in Turkish history, it begins to appear in the activities of ‘Ahi‘community and municipal laws. The concept of standard, with its most basic sense, is a way that is repeatable and agreed on doing something.

Under today’s conditions, it is quite difficult to make a generic definition of quality.

Developing technology, personal‐cultural differences and changing consumer demands are some of the underlying reasons of that difficulty. In Turkey and other countries of the World, food industry is leading among the industries in which quality is given much significance. Food is a primary affordable resource for people to sustain their biological and physiological assets. Therefore, the protection of quality in the food products is a necessity in our era. This study aims to determine consumers’ awareness of the food quality certificates and the levels of noticing the food quality certificates in their food shopping.

2. Food Quality Certificates In the last quarter of 1990s, food safety and quality gained importance to a great extent.

Consumers paid more attention to the fact that the food, which they buy or consume, be produced in accordance with certain standards [Koç & Bolluk, 2008]. Today’s consumers’ demands potentially highest quality from the producers, food companies and retailers [Alpay, 2001]. Law, by‐law and regulations implemented to provide food quality are defined as food legislations [Halaç, 2002]. There are many national and international standards in the areas of food safety and quality. In the study, the primary focus will be on HACCP and ISO 22000 standards which are the most known and applied among those national and international standards.  Hazard Analysis and Critical Control Point (HACCP) HACCP is a systematic approach to be formed for the purpose of identifying hazards, determining and controlling pests [Aran, 1993]. HACCP, firstly, was developed by a group in the Pillsbury Company which produces healthy food for the space programme named ‘Apollo’ in USA [Boyacıoğlu, 1993]. HACCP focuses on the control of producing process, and it is essentially a quality control system. Known widely in the food industry, HACCP aims to control or eliminate hazards to food safety [Unnevehr and Jensen, 1998]. However, HACCP applications between those who produce the same group of product and even the businesses producing the same product may differ, because critical control points are determined by in‐house experts, but not universal.  ISO 22000 Food Safety Management System Prepared by ISO and released in 2005, ISO 22000 standards is the first international standard to be released as ‘Food Safety Management System’. ISO 22000 standard has been developed to meet some needs such as giving consumers necessary information as result of enhancing of the traceability concept, and increasing pressure of all commercial organizations and supreme board, also known as non‐commercial organizations, on producing companies to ensure food safety. On the other hand, another reason is that it is compulsory to get HACCP certificate from different sources for HACCP certificates used in foreign trade, and as a consequence of this, the firms’ costs have increased [Frost, 2005]. While HACCP standards are used generally by food producers, ISO 22000 standards are aimed to be used with the

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intention of being applied and certified by the firms in food chain ( supplier, storing, distributor, and etc.) as well as food producers [Frost, 2005]. That is, ISO 22000 standards is a programme applied to all units being in relation with agricultural production and food production. With this aspect, it differs from HACCP standard having similar aim.

2.1. A Research on Determining the Level of Caring Food Quality Certificates in Food Shopping In this section of the study, the results of a field research will be present, having been applied to the students who study in the Department of Business Administration, Faculty of Economics and Administrative Sciences, Hitit University. The main purpose of the study is to determine the awareness of consumers on the quality legislations and the levels of consumers’ noticing the food quality certificates in their food shopping. In this sense the field research was carried out with 260 students, who study in the Department of Business Administration, by using face‐to‐face questionnaire technique. The most appropriate model has been developed in accordance with the study’s purpose. The hypotheses have been determined relating to the model developed. In the study, there are 6 hypotheses. In this sense, the hypotheses determined are as follows: H1: There is a significant correlation between the students’ demographic characteristics and their awareness of the food quality legislations.

H1a: There is a significant correlation between the students’ gender and their awareness of the food quality legislations.

H1b: There is a significant correlation between the students’ ages and their awareness of the food quality legislations.

H1c: There is a significant correlation between the students’ food expense groups and their awareness of the food quality legislations.

H2: There is a significant correlation between the students’ demographic characteristics and the levels of noticing the food quality certificates in their food shopping.

H2a: There is a significant correlation between the students’ gender and the level of noticing the food quality certificates in their food shopping.

H2b: There is a significant correlation between the students’ age groups and the levels of noticing the food quality certificates in their food shopping.

H3: There is a significant correlation between the students’ levels of awareness of the food quality legislations and their level of noticing the food quality certificates in their food shopping.

2.1.1. Methodology The questionnaire form has been developed by being inspired from the scale that Asoglu (2009) used in his study. A preliminary test has been done on 25 people before applying items in the questionnaire, and the questionnaire has taken its final shape after removing shortcomings. In order to conduct research, 760 students who study in the Department of Business Administration is based on. For 760 students, the sample size is 260, which is calculated in the confidence interval of 95% and has margin of error of 0.05. In this section of the study, the results of the questionnaire which is applied to the students are present.

256 questionnaires have been evaluated after removing the faulty ones out of the questionnaires applied 260 people via face‐to‐face questionnaire technique.

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Cronbach’s Alfa Analysis Cronbach's alpha coefficient has been used in testing scale reliability. According to Cronbach's alpha analysis, the reliability value of the variable of the level of the food quality legislations awareness is 0.69. The reliability analysis results of the variable of the level of noticing the food quality certificates in food shopping is calculated as 0,75. Based on Cronbach Alpha analysis results, it can be inferred that the scaled has high reliability.

Cronbach’s Alfa Analysis

Table 1:The Scale’s Cronbach’s Alpha Analysis The Scale’s General Reliability

0,79

 Cluster Analysis Cluster analysis is a multivariate statistical analysis that aims for individuals or objects to be collected in groups or clusters according to their similarities [Kurtuluş, 1998]. So it aims to classify the answers, which individuals in the research sample give to the items of questionnaire, according to their similarities. The clusters relating to the variable of the students’ levels of the food quality legislations awareness has been calculated as 51,9% for high level of awareness; 48,1% for low level of awareness. Whereas there are 133 students in the cluster of High Level Awareness, there are 123 students in the cluster of Low Level Awareness.

Clusters

Table 2: Levels Of The Food Quality Legislations Awareness High Level Of Awareness Low Level Of Awareness 51,9%

48,1%

Anova P 0,001

3 clusters have been formed relating to the variable of the level of noticing the food quality certificates in food shopping. 36,7% of the students are at a high level of noticing; 50,8% at a mid level of noticing; 12,5% at a low level of noticing.

Clusters

Table 3: Levels of Noticing the Food Quality Certificates High Level of Mid Level of Low Level of Noticing Noticing Noticing 36,7% 50,8% 12,5%

Anova p 0,000

Anova values relating to all clusters are less than 0,05. It has been determined that the clusters are different from each other.

2.2. Testing Research Hypotheses In this section, hypotheses and the presence‐absence of correlation between variables will be analysed by chi‐square test. Research hypotheses and test results are as follows: 2.2.1. Hypotheses 1: H1: There is a significant correlation between the students’ demographic characteristics and their awareness of the food quality legislations.  Hypotheses 1a sub‐Hypotheses

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H1a: There is a significant correlation between the students’ gender and their awareness of the food quality legislations.

Related to the variables, Chi‐square test results are included in Table 4. Chi‐square value is 2,957, which is calculated at a significance level of 0,01 and degree of freedom of 1. On the other hand, the critical value is 58.14, which is calculated again at a significance level of 0,01 and degree of freedom of 1.

Chi‐square sig. value is, however, calculated as 0,085. Since the value is more than 0,05, it will be accepted as an absence hypothesis. In this context, H1a sub‐hypothesis will be rejected. It means that there is not any significant difference between the students’ gender and their level of noticing the food quality certificates.

Table 4: Corelation Between The Students’ Gender And The Awareness Level Of Food Quality Legislations Awareness Level Total High Level of Low Level Of Awareness Awareness Women Number 56 65 121 GENDER Men Number 77 58 135 Total Number Expected value is not less than 5 in any cell.



133 D.F: 1

123 Chi Square χ2: 2,957

Hypotheses 1b and 1c

H1b: There is a significant corelation between the students’ ages and their awareness of the food quality legislations.

H1c: There is a significant corelation between the students’ food expense groups and their awareness of the food quality legislations.

In addition, the correlation between age groups and the ranges of monthly food expense which are the students’ other demographic chracteristics, have been tested. Relating to the age group, chi‐square value is 0,65. However, related to the ranges of monthly food expense, chi‐square sig. value is 0,32. Since both of values are more than 0,05, the absence hypothesis has been accepted; but H1b and H1c hypotheses have been rejected.

2.2.2. Hypotheses 2 H2: There is a significant correlation between the students’ demographic characteristics and the levels of noticing the food quality certificates in their food shopping. 

Hypotheses 2a sub‐Hypotheses

H2a: There is a significant correlation between the students’ gender and the level of noticing the food quality certificates in their food shopping.

Chi‐square analysis results related to the variables are included in Table 5. Calculated at a significance level of 0,01 and degree of freedom of 2, chi‐square value is 60.759;however, expected chi‐square value is 15.13. On the other side, Chi‐square sig. value is 0.00, that is, less than 0,05. Therefore, the absence hypothesis has been rejected; the hypothesis asserting that there is difference has been accepted. In other words, it has been determined that there is a significant correlation between the students’ gender and their

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level of noticing the food quality certificates in their food shopping, and H2a sub‐hypothesis has been accepted.

Table 5: Correlation between the Students’ Gender and the Level of Noticing Food Quality Certificates Noticing Level Total

Women

Number

Men

Number

GENDER Total Number Expected value is not less than 5 in any cell.

Low Level 11 21

Normal Level 92 38

32

130 D.F: 2

High Level 18 76

121 135

94 256 Chi Square χ2: 60,759

 Hypotheses 2b sub‐Hypotheses Belonging to the variables of the students’ age group, another demographic characteristics in the questionnaire, and level of noticing the food quality certificates, chi‐square sig. value is 0,00. As it is less than 0,05, H2b sub‐hypothesis has been accepted.

2.2.3. Hypotheses 3 H3: There is a significant correlation between the students’ levels of awareness of the food quality legislations and their level of noticing the food quality certificates in their food shopping.

Chi square analysis results related to the variables are included in T6. Calculated at a significance level of 0,01, and degree of freedom of 0,01, chi square value is 11,441. Chi square sig. value is 0,003, as well. Since chi square sig. value is less than 0,05, the absence hypothesis has been rejected; but the hypothesis asserting that there is difference has been accepted. In this way, it can be said that there is a significant correlation between the students’ level of the food quality awareness and their level of noticing the food quality certificates. So H3 hypothesis has been accepted.

Table 6: Correlation between the food quality legislations and the level of noticing the food quality certificates Noticing Level Total Low Normal Level High Level Level High Level Number 10 63 60 133 Awareness 22 67 34 123 Level Low Level Number Total Number Expected value is not less than 5 in any cell.

32

130 D.F: 2

94 256 Chi Square χ2: 11,441

2.2.4. Correlation Analysis Correlation is referred as ‘r’, and its value changes between ‐1 and +1. Here the direction of correlation is determined by the mark of ‘r’, and its degree is determined by magnitude of coefficient. Minus value shows that a variable decreases as the other increases; however, plus values shows that both variables’ value increase or decrease together [Damodar, 2001].  Correlation 1 65

In this section, the results of correlation analysis used in the research are given. Belonging to the variables between genders and opinions about the quality certificated products’ being expensive, ‘r’ value has been calculated as 0,396 at a significance level of 0,01. That is, there is a positive correlation in the mid‐degree between genders and expensiveness of the quality certificated products. On the other hand, there is not a clear cause and effect relation, but it can be commented that males, rather than females, think that the quality certificated products are expensive.  Correlation 2 The correlation between those not caring the writings on the food products and those caring quality, not price of the product is 0,646. Accordingly, there is a high corelation in a linear direction between variables.  Correlation 3 The correlation between the level of food and quality legislations awareness and the level of noticing the food quality certificates in food shopping has been calculated as ‐0,211 at a significance level of 0,01. Therefore, it can be inferred that there is a low correlation in negative direction between variables.

Conclusion To sum up the results obtained in the research:  51,9% of the students in the research have a high level of the food legislations awareness. However, %48,1 has a low level of the food legislations awareness.  The expressions that form the level of noticing the food quality certificates on participants’ purchasing attitudes have been categorised by a cluster analysis. According to that, 36,7% of the students have high level; 50,8% have mid‐level; 12,5 % have low level of noticing.  The rate of those who know HACCP‐ ISO 22000 standards is 40,7% .  59,4 % of the participants know the concept of Quality Standards.  56,2% of the participants don’t prefer the products that don’t have a quality certificate.  62,5% of the students have stated that a quality certificate is the main reason while preferring the product.  The awareness level of Halal Food Certificate is 80,5%. On the other hand, 76,6% of the participants cares this certificate on buying meat and meat products.

Variables and hypotheses determined in the research have been analysed by chi square test. According to the analysis results, significant correlations have not been found between the demographic characteristics of the students, who study in the department of Business Administration, and their awareness level of food quality legislations. H1 hypothesis has been rejected with its all sub hypotheses.

Statistically significant correlations have been determined between the students’ demographic characteristics and the level of noticing the food quality certificates on buying behaviours. Accordingly the hypothesis(H2) asserting that there is a significant correlation between the students’ demographic characteristics and the level of noticing the food quality certificates on buying behaviours has been accepted with its all sub‐hypotheses.

The relations has been tested between the students’ level of food and quality legislations awareness and the level of noticing the quality certificates on their food shopping, and

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significant correlation has been determined. According to the analysis results, significant correlations have been found between the level of food and quality legislations awareness and the level of noticing the food quality certificates in food shopping, and H3 hypothesis has been accepted.

The relation between the two variables has been examined by a correlation analysis. A correlation in a negative direction and low degree has been found between the level of food and quality legislations awareness and the level of noticing the food quality certificates on buying behaviours. In brief, individuals’ level of noticing the quality certificates on buying decreases while the level of the food and quality legislations awareness increases. In this situation, it is clear that the students, who study in the Department of Business Administration, Faculty of Economics and Administrative Sciences, Hitit University, are aware of the food quality legislations, but don’t care the food quality certification on buying. So it can be inferred that the level of noticing the food quality certificates in food shopping decreases as the food and quality legislations awareness increases.

In the future studies on the subject, it will be suitable to conduct surveys and establish models which reveal the cause and effects of the negative correlation between the food quality legislations and the level of noticing quality certificates.

References [1) Alpay, Ş. (2001). Avrupa Birliği Kalite Ve Sağlık Standartlarının Türk Gıda Sanayii Sektörü Rekabet Gücü Üzerine Etkisi, Ankara, Tarımsal Ekonomi Araştırma Enstitüsü Yayın No: 59.

[2] Aran, N. (1993), Gıda Endüstriside Kritik Kontrol Noktalarında Tehlike Analizleri Sistemi, Gıda Sanayinde Mikrobiyoloji Ve Uygulamaları, Kocaeli, Tübitak‐Marmara Araştırma Merkezi.

[3] Boyacıoğlu, D. (1993), Gıda Kalite Kontrolünde Kritik Kontrol Noktalarının Tehlike Analizi Sistemi Ve Uygulamaları, Gıda Dergisi, p. 297 [4] Damodar N. G. (2001), Basic Econometric, Çeviren: Ümit Ş. & Gülay G. Ş., İstanbul, Literatür Yayıncılık.

[5] Frost, R. (2005). Iso 22000 Standard For Safe Food Supply Chains. Iso Management Systems, Iso Insider, July‐ August 2005, p.321.

[6] Halaç, E. (2002)Türkiye Gıda Sanayinde Kalite Ve Güvenlik Standartları: Kavramlar, Mevzuat Ve Uygulamalar, Akdeniz Üniversitesi, Sosyal Bilimler Enstitüsü, İktisat Anabilim Dalı, Yayınlanmış Yüksek Lisans Tezi, Antalya.

[7] Koç, A.; Boluk, G. (2008), Gıda Güvenliği Ve Kalite, Akdeniz İibf (16) p. 83‐ 115 [8] Kurtuluş, K. (1998), Pazarlama Araştırmaları, İstanbul, Avcıol Basım Yayın, 6. baskı.

[9] Unnevehr, L.J.; Jensen, H.H. (1998), The Economics Implications Of Using Haccp As A Food Safety Regulatory Standard, Food Policy, p. 625‐635.

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The Predictable Future of Bio-Economic Society 1

Mustafa Emre ÇAĞLAR Hitit University, Business Management Department, Çorum, Turkey Tel: +905334824279, Email: emre.cag@gmail.com

Abstract: This theoric study aims to draw a picture of midterm future by terms of socio-economic environment. While doing this, we mostly assume ‘social structure’ as dependent variable and the ‘new economy’ ( green energy and new production ) as independent variable. As known, social transformations take more time due to the human generations lifespans, according to technological or economical transformations. İn fact social factors effect economic and technological factors in long term deeply. But in this study we will be generally limited by the mids of 21.

Century.

According to Jeremy Rifkin, great economic transformations in history appears when a new communication technology interact with a new energy system. New communication system make it possible to organize the more complex civilization, which the new energy system created. We are discussing the socio-economic future of human life on earth; how people will distribute on geography, how they work and how governments will change into new forms of social regulators?

IBM, Cisco Systems, Siemens and General Electric, are all trying to construct a smart power grid. This intelligent energy network will embrace virtually every facet of life.

Homes, offices and vehicles will continuously communicate wtih each other, sharing information and energy on a 24/7 basis.

How this happenings effect the social community all over the world? With other entries like the rising of transnational enterprises, the individual independence on energy acquiring, will destroy the social contracts which establishes nations. İndividuals normally gets together for creating economies of scale. Because individuals cannot build large energy plants like coal plants or nuclear plants by themselves. As a result governments become to loose their basic functional reason of existance againts citizens.

Keywords: Third Industrial Revolution; Green Energy JEL classification: O33, Q57 and R12

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1. Green Energy In 1770’s the usage of steam power ignited the first industrial revolution. About a hundered years later, electrification and electric based communication systems interact with internal combustion engine systems. This synergy ingnite the second industrial revolution. Electrification of factories causes mass production. With the technique of Henry Ford, the vehicle inventory rised dramatically and an increasing demand for oil emerged.

Today we are at the dawn of a new interaction between new communication and energy systems. The interaction of internet technology and green energy creates the third industrial revolution. In the 21 Century billions of people will produce and then use their own green energy in their homes and vehicles and will sell the surplus to the demanders by clever electrification networks. EU intends to fulfil the one third of its energy from green energy by 2020’s. (Rifkin, 2011) While conventional fuels are getting scarce and expensive the acquiring cost of green energy are falling rapidly due to new technologic breakthroughs. The cost of photovoltatic electricity declines at a rate of 8 percent a year and by 2012 have reached the cost of conventional fuels. Now solar and wind installations are doubling every two years and are poised to follow the same trajectory as personal computers and internet use over the next two decades. The first inclination for getting green energy was to go to places where the sun allways shines and create great solar parks to collect the energy. Similarly, grab the wind where it’s most abundant. But about 2006 a fundamental shift appeared on this understanding. (Rifkin, 2011) The sun was shining on the every part of the earth and the wind blows all over the world.

We all generate garbage. In other words unlike fossil fuels and uranium, which are elite energies and only found in certain regions of the world, renewable energies, are everywhere.

If so why should we try to collect the energy on specific locations? In this point scientists like Jeremy Rifkin began to give conferences especially in Europe about this new idea. In EU there are about 190 million building and all of thems surface and roofs would be cowered by photovoltatic generators and wind power generators.

Altough renewable energies are abundant they come with their own unique problems.

The sun isn’t allways shining and the wind isn’t allways blowing, or when it is blowing, it may not need.

In this case, storing the energy efficiently and cheply is the better thing to do. Hydrojen fuel cells are going to be used for this. But after the usage of the building, how this stored surplus energy is going to be distributed?

1.1 Energy Internet IBM, Cisco Systems, Siemens and General Electric, are all trying to construct a smart power grid. This intelligent energy network will embrace virtually every facet of life. Homes, offices and vehicles will continuously communicate wtih each other, sharing information and energy on a 24/7 basis. Smart utility networks will be connected to wheather changes, allowing them to continuously adjust electricity flow also allowing dynamic pricing. The smart grid will be the backbone of the new economy. This network will may be 100 times

69

greater than the internet. Some homes have internet, some’s not. But everyone has electricity.

How this happenings effect the social community all over the world?

The energy costs will decline on behalf of developing countries as the knowledge access cost decline with internet.

This progress also will change the political and economic balance of power in favour of developing countries which are dependent by terms of energy sources to other forces now.

With very other entries like the rising of transnational enterprises, the individual independence on energy acquiring, will destroy the social contracts which establishes nations. İndividuals normally gets together for creating economies of scale, because individuals cannot build large energy plants like coal plants or nuclear plants by themselves. As a result governments become to loose their basic functional reason of existance againts citizens.

Also national borders become to be meaningless in terms of energy sharing. The energy grid system will make sharing energy beyond border dwellings meaningfull.

2. Distributed Capitalism Energy regimes shape the nature of civilizations; how they are organized, how political power is applied and how social relations are conducted. In the 21 Century, the location of control over energy production and distribution is going to shift from giant fossil fuel based centralized energy companies to millions of small producers who will generate their own energy in their dwellings and trade surplus. The democratization of energy has profound implications for how we orchestrate and define human life on earth. According to Jeremy Rifkin, we may call this era (TİR) as distributed capitalism. (Rifkin, 2011) To understand how the 3 industrial revolution infrastructure is likely to change the economic, political and social power dramatically, we should glance how the fossil based first and second industrial revolutions reordered the world. Fossil fuels are elite energy resources. They are found in only select places. They require a significant military investment for secure their access and they also require centralized top-down command – control systems and massive capital to treat them. (Rifkin, 2011) Three of the four largest companies in the world today are oil companies; Royal Dutch Shell, Exxon Mobil and British Petrolium. The centralized energy infrastructure sets the conditions encourages similar business models. The business models of the second industrial revolution were giant ones. Now underneath these giant energy companies, five hundered global companies representing every sector are in-seperably connected to fossil fuels. The existance of these 500 enterprises are belongs to the existance of 3 energy company. (Rifkin, 2011) This pyramidal structure realizes an income transfer from bottom to top. And this transfer encourages the income inequality. İn contrast, the emerging TİR is organized around distributed renewable energies that are found everywhere. The distributed nature of renewable energies necessitated collaborative rather than hierarchic control mechanisms.

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3. 3D Printing The other pillar of new economy is 3D Printing as a new production paradigm. In the new era everyone can potentially be their own manufacturer in their dwellings as well as their own power company; Production in the home or distributed manufacturing.

The classical (subtractive) manufacturing paradigm shapes the materials with outside forces like cutting, molten, bending, punching and assembly. In a very close future we will begin to manufacture with nano dusts additively. We will able to provocate nano materials for being a part of the bisset good. These days 3D printing technique is the fore steps of this paradigm. 3D printiners build successive layers of the product using, powder, molten plastic or metals to create the good. These machines can produce multiple copies just like a photocopy machine.

3D printing requires 10 percent of the raw material expended in traditional manufacturing and uses less energy than conventional factory production. This reality will be the major support for green energy era. Because when we look at with classical energy consuming paradigm we see that, green energy can’t be support high industrial energy consume. New energy era is coming with its new usage paradigms.

In the same way that internet radically reduced entry cost in generating and disseminating information, additive manufaacturing has the same potential for reducing the cost of producing hard goods, trading these goods ( only knowhow of the goods will be imported not the body of them ), making entery costs low to encourage SME’s to challenge with giant companies.

Thus we can foresee that carrying complete goods will loose its weighty part in logistic sector throug 2050’s. These years logistic sector become the carrying of goods which requires economy of scale and nano molecules which 3D printing machines use.

In other words factories will be evolved in to factories which produce nano-molecules and 3D printing machines for distributed manufacturing. As a result, the number of classical factories and the energy usage of manufacturing activities will decline.

4. Dwelling In 1950 there were 80 cities on earth which every one of them includes more than 1 million people. In 2015 the number of these cities will be about 550. According to Jackues Attali urban enlargement is a fact. In 2025 there will be more than 30 cities on earth which includes more than 10 million people. According to Attali, the economic, political and cultural turbulances of future will originate not from workers or officials conversely from suburbans of great cities. (Attali, 2007) However, we think that urbanisation will disconfirm itself at some point and a converse progress will start before 2050’s. How this will be happen? The green energy, genetic technology and robotic manufacturing will transform the meaning of being unemployed.

The first and second industrial revolutions first gather people from their villages to the cities and organize them for working in factories than this era gradually loads the production to machines and human being evolved in to an operator and than to a knowledge or service personnel. This progress will turn back as geographically and functionally. As we mention, the death of factories (robots will do almost everything ) and 3D manufacturing will dramatically decline the need of human personnel in industry,

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except programmers and designers. Roughly there will be two kind of worker; white collar workers and a surplus crowd of people. For programmers working at home or working far from office will be very possible due to the sophisticated communication systems. What will happen to surplus crowd of people?

They will be the new age farmers and villager of the 21 and 22 Century. While big cities are getting bigger some other people will began to immigrate to cheap houses of rural areas.

They will produce their own energy with cheap green resources, they will manufacture enough good with their 3D printing machines and they will make agricultural activities in their green houses with genetically altered seeds.

Thus, ironically, the industrial develoPments which gather people together in cities will disconfirm itself and distribute people to rural areas as they lived pre-industrial age.

People are social animals. They will prefer to live together in towns but the needs of life will not require huge amounts of people together in one settlement.

4.1 Usage of Residence The rising income inequality chances the behaviour of prosperous communities. They began to live in enclosed locations with borders in especially big cities. These areas could fulfill almost every need of residents by mega markets, work centres and recreation areas and they began to settle down the periphery of cities as big technologic villages. The transportation between these residents and the city is provided by highways. The future cities will began to be connected residence dots which are being protected from suburbans. Thus outer areas of the city will get less attention and will get less participation from taxes of the city. The hiper-empires (transnational companies) will be strongly related with these types of knowledge production centres and the others will be the others who deny being a part of highly controlled society by transnational insurance companies. We will not explain much the hiper-empires, and the possible role of transnational insurance companies on crowd of people.

References [1] Rifkin, J. (2011) The Third Industrial Revolution, New York, Palgrave Macmillan, USA [2] Attali, J, (2007) A Brief History of the Future, New York, Arcade Publishing, USA

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Postmodernist Identity Construction and Consumption İrfan ÇAĞLAR1, Reyhan KARABABA2, William J. HAGOOD, M.A., 3 1 Hitit University, Iktisadi Idari Bilimler Fakultesi Akkent 3. Cad. No 3, Corum, 19040, Turkey+ Tel: +903642257700, Fax: +903642257710, Email: irfancaglar@hitit.edu.tr Abstract: With the transition from modernism to postmodernism, identity as a concept has started to become redefined in sociology literature. The aim of this study is to show that postmodernism and symbolic interactionism are fused together to determine both the scene as well as an actor’s identity. In that way, the interaction of a social structure with a culture won’t be completely ignored, and, with the opinion that the categorized roles can skillfully be shaped and diversified by actors, they are then able to move away from a pure determinism. However, individuals pay more attention to their appearance more than who they are in order to be accepted by each group. In this manner, a metaphysical shell game begins. In the following study, the “Social Appearance Anxiety” is used as an indicator of this game.

This study was based on the analysis of the data collected through a questionnaire given to 181 students studying at Hitit University. The INDCOL [Singelis et al., 1995] was used to determine the cultural values of students in four dimensions; namely, vertical individualism-collectivism, and, horizontal individualism-collectivism. To measure the “Social Appearance Anxiety”, the validity of the Turkish version of the scale developed by Hart et al. in 2008 [Doğan, 2010] was used. The findings show that individuals having greater vertical individualistic value are more malleable to have social appearance anxiety. The findings also indicate that individuals having more collectivist value are not affected by this kind of anxiety. Also, the new generation of advertisements especially emphasizes the importance of appearance. Due to this trend, a person’s Social Appearance Anxiety can result in excessive consumption for the more individualistic individual.

Keywords: Post Modernism, Identity, Cultural Values, Social Appearance Anxiety, Consumption.

2

Hitit University, Iktisadi Idari Bilimler Fakultesi Akkent 3. Cad. No 3, Corum, 19040, Turkey Tel: +903642257700, Fax: +903642257710, Email: reyhankarababa@gmail.com 3 Hitit University, Bahçelievler. Mah. 3. Sok No:6, Corum, 19040, Turkey, Tel: +903642221000, Fax: +903642221002, Email: whagood@hitit.edu.tr

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JEL classification: M19

1. Introduction In recent years, in the social sciences, the ideas of identity and character continue to be located at the center of the debate. This emphasis on self-concept has led to the emergence of interdisciplinary science as an adopted eclectic method and postmodern trend. These new sciences have not been affected by symbolic interactionism, which is the dominant theory found in sociology dealing with identity. According to Lemert, symbolic interactionism has found an irrelevant place to postmodernism, as pragmatism. The reasons for this can be searched on the symbolic interactionism approach to pragmatism, while postmodernism stays away from pragmatism. However, due to the structural loyalty of symbolic interactionism to the real world, it seems to be a relative of postmodern theory (Callero, 2003). Symbolic interactionists maintain that social order occurs as a result of meaning being attributed to objects, events, and actions. Therefore, in the study, the symbolic interactionism approach has been used to understand individual consumption orientation. The individualistic individual of today loads a lot of meaning into the clothes they wear and the products they use and the belief that their appearance provides them with more power than who they actually are. This may lead to an excessive social appearance anxiety. To manage this process, they can tend to indulge in overconsumption. And this trend provides advertisers with new tools.

The main effort of this study makes clear the degree to which the postmodern consumer, taking an individualistic value in the center, is affected by the external reference locus and this orientation can lead any person to have a social appearance anxiety.

In the marketing field, concrete examples of this can be seen clearly in the new generation of advertisements. For example, a man using a roll-on deodorant belonging to an X mark can increase his attractiveness in the eyes of women, while a woman using toothpaste belonging to Y mark can become the focus of attention in a party. In this regard, brands present their products as a magical power making people more attractive and heroic.

2. Research Methodology This study was based on the analysis of the data collected through a questionnaire given to 181 students studying at Hitit University. The INDCOL measure of individualism and collectivism [Singelis et al., 1995] was used to measure cultural values in four dimensions; namely, vertical individualism and collectivism, and horizontal individualism and collectivism. This measure is used to define the independent variables describing cultural values as four concepts. The Social Appearance Anxiety was measured by using the Turkish version of Hart’s (et al.) scale (2008) that has been validated by [Doğan 2010]. The main hypothesis examined in the study is that there is a significant relationship between “Social Appearance Anxiety” and the dominant concern of individualism which emerged with post modernism.

3. The Analysis First, the descriptive statistics of the cultural values and the Social Appearance Anxiety were given for the sample. Then, to measure the scales’ reliability, they were evaluated using Cronbach alpha coefficients. This co-efficient is usually used in social sciences and in literature, with 0.70 and above being acceptable. For the sample which was studied, the

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value for both of the scales was about 0.90. Finally, both regression and correlation analysis were used to examine the effects of cultural values on social appearance anxiety.

4. Results The results of the analysis are supported by literature. The relationship between the collectivist dimension and the social appearance anxiety is negative. In other words, the social appearance anxiety decreases for individuals with a more collectivist value. The findings also show that individuals with a greater vertical individualistic value are more malleable to have social appearance anxiety. Also, horizontal individualism, not including status difference and competition, has a negative relation with social appearance anxiety too. However, there is a positive relation between vertical individualism emphasizing competition and social appearance anxiety.

Table 1: Correlation Results

social appearance anxiety

social appearance anxiety 1

Pearson Correlation Sig. (2-tailed) N

Horizontal Collectivism

Pearson Correlation

,027

181

181

181

**

1

**

,691

Sig. (2-tailed)

,004

N

181

181

181

*

**

,000

1

-,164

Sig. (2-tailed) N

Vertical Individualism

,004

-,213

Vertical Collectivism Pearson Correlation

Horizantal Individualism

Horizontal Collectivism Dikey Toplulukçuluk ** * -,213 -,164

Pearson Correlation

,691

,027 181

,000 181

**

**

-,280

181 **

,622

,664

Sig. (2-tailed)

,000

,000

,000

N

181

181

181

**

,097

,000

,195

,021

181

181

181

Pearson Correlation

,632

Sig. (2-tailed)

N **. Correlation is significant at the 0.01 level (2-tailed).

*

,172

*. Correlation is significant at the 0.05 level (2-tailed).

Source: Authorsâ&#x20AC;&#x2122;Research

In a nutshell, in the regression analysis, it is found that the social appearance anxiety is significantly influenced positively by vertical individualism. Therefore, individuals tend to have more anxiety when they are more vertically individualistic.

Table 2: ANOVA Model 1

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Sum of Squares

df

b

Mean Square

Regression

40,638

1

40,638

Residual

50,527

179

,282

F 143,969

Sig. a

,000

Total

91,165

180

a. Predictors: (Constant), dikeyBireycilik b. Dependent Variable: sosyalGörünüşKaygısı

Conclusion In our world, which is changing and developing faster every day, culture has a tendency to lean towards polymorphism rather than simplicity. In the process of modernization, this can be seen to have universal values with different local forces or cultural patterns coming together. This situation may cause an individual to reach a synthesis rather than choosing one for themselves. The emergence of different and hybrid cultures in the same context can be an indicator of that. On one hand, symbolic interactionism has evolved as approaching an interpretation and that enabled it to find its place in a postmodern world.

Therefore, culture can be used as a medium to reach the meaning of our world. On the other hand, symbolic interactionism is not denying the collective identity, in the microlevel, which can suppress the diversity concerns of postmodernism. In the study, the use of two approaches combined in the same body can be more descriptive to help explain identity. The purpose of this study, in the modern world, shows that common features and certain variables shared by individuals will shed light on both business and marketing policies. Indeed, the emergence of solipsism with postmodernism manifests that appearance is power. Using this motivation, we can see that individuals tend to indulge in over- consumption.

References [1] DOĞAN, Tayfun (2010) Sosyal Görünüş Kaygısı Ölçeği’ Nin (Sgkö) Türkçe Uyarlaması: Geçerlik Ve Güvenirlik Çalışması, Hacettepe Üniversitesi Eğitim Fakültesi Dergisi (H. U. Journal of Education) 39, p.

151-159.

[2] Callero, PeterL., 2003. THE SOCIOLOGY OF THE SELF. Annu. Rev. Sociol. 2003. 29, p.115–33.

[3] Hart, T. A., Flora, D. B., Palyo, S. A., Fresco, D. M., Holle, C., & Heimberg, R. C. (2008). Development and Examination of the Social Appearance Anxiety Scale. Assessment, 15, p. 48-59.

[4] Singelis, T. M, Triandis, H. C., Bhawuk, D. S., ve Gelfand, M. J. 1995. Horizontal and vertical dimensions of individualism and collectivism: A theoretical and measurement refinement. Cross-Cultural Research, 29 (3), p. 240-275.

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Agglomeration and Economic Growth. A New Economic Geography approach for Romania’s Counties Bogdan COPCEA1, Dan VÎLCEANU2, Sorin TRIFU3 1 West University of Timisoara, Faculty of Economics and Business Administration, Timisoara, 300115, Romania, Tel: +40 256 592 506, Fax: + 40 256 592 500, Email: bogdancopcea@yahoo.com Abstract: Over the last 25 years and particularly over the last 10 years, Romania has achieved an important economic growth pace. Nevertheless, the level of economic development is not the same across the country and, like many other states, Romania displays a heterogeneous territory with different economic, social and geographical characteristics and therefore with great disparities among regions and among counties. Regarding this aspect, and built on the principles of the New Economic Geography approach, this paper proposes to explain the inequalities stemming from the location, distribution and spatial organization of economic activities.

Using the endogenous growth theory as a foundation, and using panel data models in order to uncover the role of both agglomeration economies and positive externalities in regional development, our inquiry focuses on Romania’s 41 counties plus Bucharest, analysing data from 2005 to 2012.

The results show a certain positive impact of both the employment and unemployment rates, research and development and education. Nevertheless, all these components are statistically significant only in the long run, given the fact that in the short run it is very difficult to uncover and evaluate their impact on economic development. By the same vein, even if a different result was expected, in some models, public infrastructure and market potential seem to have a negative impact on Romania‘s regional development.

Keywords: agglomeration economies; positive externalities; regional disparities, regional development; economic growth.

2

West University of Timisoara, Faculty of Economics and Business Administration, Timisoara, 300115, Romania, Tel: +40 256 592 506, Fax: + 40 256 592 500, Email: dan79vilceanu@yahoo.com 3 West University of Timisoara, Faculty of Economics and Business Administration, Timisoara, 300115, Romania, Tel: +40 256 592 506, Fax: + 40 256 592 500, Email: trifu_s@yahoo.com

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JEL classification: O41, R11, R12, R15

1. Introduction Systematic economic research on the relationship between agglomeration economies and economic development in some regions circumscribed to a wider geographical area have led to the creation of an extensive collection of economic literature. This is creating an analytical method of thinking that integrates economic concentration activities with endogenous growth theory and New Economic Geography. Theoretical literature on agglomeration economies highlights the subject of positive externalities that are simply contributing to economic growth, as evidenced in empirical studies, even if the types of agglomeration economies with substantial influence or magnitude of their effects may lead to different and sometimes even contradictory results. Depending on the phase of aggregation and spatial extent which formed the foundation for analysis, econometric techniques used, and especially the agreed measures of agglomeration externalities that were regarded as potential determinants in regional development, consequences and their implications vary widely among researchers.

By introducing a spatial dimension to the analysis of economic growth, we look at the principles of agglomeration externalities and the way in which they emerge and break into a specific geographical region. These principles address the implications of both the static and dynamic effects of this type of externalities. On the one hand, taking into account the static effects, one can rely on the positive relations existing between incremental productivity growth in one of economic units, and the repercussions that this phenomenon has on other entities in a region. On the other hand, dynamic effects involve, for instance, the dissemination of knowledge within a region, an economic phenomenon that contributes to the economic growth of the concerned region (Doring & Schnellenbach, 2006). Therefore, a large part of the variation in GDP per capita can be explained by the availability of raw materials and intermediate inputs (Redding & Venables, 2001) and thus the quality and quantity of infrastructure networks.

Beginning with the uneven distribution of economic activities, the cores (or poles) of growth have developed over time, around some cities or even covering larger geographical areas. During this time, other regions have confirmed their status as "periphery", having an increasingly reduced population density and a low standard of living in comparison with the regions that have gained the status of â&#x20AC;&#x153;coreâ&#x20AC;?. The coreperiphery model is a characteristic of the New Economic Geography, being developed by Paul Krugman. In his work, developed in the early 1990s, the spatial structure of an economy, transport costs, the various economies of scale and economic development are closely linked (Krugman, 1991). Considering the spatial distribution of the economy, which in some regions allows the outlining of a core-periphery model, there is a close correlation between the regions or counties within the periphery and their level of development (Bruna et al, 2014), a phenomenon that can be observed at the European Union level as well.

The process described above has led to the formation of a geographic concentration of interconnected economic activities (industrial agglomerations or clusters). They are specialized in a particular field, and their appearance is due to the increase in the productivity of enterprises within the cluster because of the interrelationships between those components of the system (Porter, 1998). The development and upgrading of

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clusters has become strategically important both for national and regional authorities.

The process involves a particularly important contribution from the private sector as well.

Initiatives present in these programs outline a new direction in economic development, however, relying on the efforts of previous macroeconomic stabilization, stimulation of the process of learning and, particularly, research and market liberalization.

Brakman et al (2009) highlight the importance of neighboring regions for the development of a particular region, whereas the examples established at this level do not allow for the existence of developed enclaves surrounded by poor areas. However, the empirical data from Romania suggests that this phenomenon is possible in the richest counties, attracting investments and developing at a pace much faster than the less developed counties. This could be explained by the fact that the interlocking is more pronounced where there are a high degree of integration at all levels. In this case, the political-administrative component of the counties of Romania can be a factor which promotes polarization.

There are, however, costs associated with the concentration of economic activities.

Hanson (2004) states that the phenomenon of congestion limited the creation of industrial conglomerations and Combes et al. (2012) note that there is a possibility that the land price will rise unduly high in large industrial centers. In addition, labor costs are higher in the more developed, and thus more crowded regions, this being an advantage for employees and, at the same time, a drawback for employers.

Estimates based on econometric analysis can identify key factors in the economic growth of regions, among the most important finds in the literature being human capital, the initial level of GDP/capita, public infrastructure (measured, for example by means of density highways) innovation activity (rate of patent application) and agglomeration economies (such as industrial specialization and diversity) as well as the market potential.

To these are added variables to the functionality and development of markets and the total economic activity indicators (trade opening rate, foreign direct investment, demographic and socioeconomic dimensions etc.).

The models, borrowed both from the New Economic Geography and endogenous growth theories, come to establish real-world observations and to explicate the mechanisms and channels of influence of urbanization and localization externalities. Valuation of the impingement of these externalities on GDP growth requires empirical studies and this is why we aimed to spotlight the use of different types of agglomerations on growth in the counties (or areas) of Romania. Even if the analysis of a not so large number of years makes it more difficult to highlight the long-term characteristics and to better distinguish the contradictory influences of economic crisis, we consider the results as relevant and having the ability to encourage further research.

2.

Regressions

In our analysis, we used panel data and semi and double-log models, in order to observe the effects of various explanatory variables.

The panel data model measures the impact of independent variables on growth, comprising both the country effects (cross-section) and time-specific effects. The specification of the panel data is widely practiced due to the benefits and facilities related to the technical possibilities of estimating diversity and to the opportunities to appraise

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the effects on national economic growth in the sub-space components that construct the national soil. Perhaps the most important positive aspect is that, noting regional data every year, allow recording results over time, i.e. after some investments and / or expenses may prove their usefulness and purpose within the productive activities. Use of estimates on the data panel allows the identification of the specific effects of the regionsâ&#x20AC;&#x2122; controlling missing or unnoticed variables (Judson & Owen, 1999).

The estimated specification on data panel, measuring the forces affecting regional growth, takes place at three levels: once regional effects are taken into consideration by the coefficients of the independent variables, the effects of regional (cross sectional) ones capture the indicators that do not vary in space, and time effects that measures the change in volume in all regions in a given time (year), highlighting the invariant characteristics over time.

At this stage we are exploring the effects of density growth variable proxy using different econometric techniques. Models with panel data can be specified with fixed or random effects. Fixed effects panel allows the correlation of disturbances within the spatial areas (counties or regions, in our case), random effects taking into account this correlation.

Where: GDP/cap= GDP/capita, Infrast= public roads relative to population density (kilometers of road / capita), MP=market potential, Div=sectorial diversity, Empgrowth_rate= growth rate of employment, Unem_rate= unemployment rate, R&D= share of expenditure on R & D expenditure in GDP. 3.

Results and interpretations

The sample panel comprises 41 counties plus the city of Bucharest, the estimates of the seven models being comprised of the fixed and random effects, while choosing the right one was performed using the Hausman test.

Table 1 The results of GDP/capita growth models at county level, using fixed and random effects, 2005-2012 -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 b/se b/se b/se b/se b/se b/se b/se ------------------------------------------------------------------------------------------------------log_GDP_cap 2.598* 1.688 -0.222 5.877* 6.536* 7.847** 59.139*** (1.17) (1.06) (2.27) (2.72) (3.28) (2.91) (5.98) log_Infrast 0.257 -0.182 4.226 11.716 23.278* 23.989* -23.687 (0.58) (0.52) (9.82) (21.19) (11.51) (10.20) (20.57) Empgrowth_rate 1.013*** 1.658*** 1.119*** (0.12) (0.20) (0.12) log_Unemp_rate -12.449*** (1.55) log_R&D -2.255* (1.10) log_MP -12.792 -11.163 2.975 (9.94) (8.80) (9.00) log_Div -31.106 (45.75) Constant -21.393* -11.328 1.775 -117.758 -144.484* -164.398** -369.673** (8.86) (8.08) (65.41) (128.79) (71.05) (62.96) (122.86) -------------------------------------------------------------------------------------------------------R-squared 0.321 0.228 0.192 0.323 0.018 0.233 0.468 F/Wald 7.57 86.38 23.100 18.344 1.782 21.976 26.855 N observations 336.000 336.000 336.000 200.000 336.000 336.000 168.000 -------------------------------------------------------------------------------------------------------

* p<0.05, ** p<0.01, *** p<0.001

GLS Regression, OLS Regression, Note: Standard errors are presented in brackets

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Source: Own preparation using Stata 12.0

The results of the seven developed models highlight the high levels of statistical significance of the coefficients estimated by the method of least squares, on the basis of fixed and random effects.

Also, the Wald and Fisher tests validate the common influence of explanatory variables of the dependent t-test, confirming the individual influence (positive or negative) of each variable. Breusch-Pagan test in the case of models with random effects and modified Wald test for group-wise heteroskedasticity models with fixed effects, confirm the hypothesis of homoscedasticity. Therewith the Wooldridge test removes the possibility of first order serial correlation in the residual variables, so the accuracy of the estimated coefficients is high.

According to our estimated models, the coefficient of elasticity of the GDP/capita does not highlight a convergence of views between the counties, but on the contrary, the fact that in the period 2005-2012, differences in GDP between counties grew. The level of GDP/capita is important in the process of growth when it is accompanied by the effect of other factors, such as infrastructure and especially the employment rate, according to Models 4 and 6.

Replacement of the employed population by the unemployment rate as an explanatory variable in combination with infrastructure results in an appearance of a convergence in relation to the previous period, a decrease in the unemployment rate, contributing to the reduction of differences in GDP/capita. Moreover, the demonstration of a possible process of convergence is statistically significant (Model 3). A proxy measure of the changing labor market radically alters the results of the equation. However, the use of the employment rate measure does not seem to be a good estimator, even if the results are statistically relevant and explanatory power is high, whereas if any other determinants were introduced into the models, the significance of the employment variable would not change.

The same conclusion leads us and the replacement measure population employed with the unemployment rate, the explanation being that a reduction of it (unemployment rate) would mean a greater mobilization of resources from poor counties, which would contribute to their economic growth dynamics. To correct a possible problem of endogeneity and to increase the relevance of the results, we performed estimations using the method of maximum likelihood.

With regard to the level of GDP/capita in cross-country regressionsâ&#x20AC;&#x2122; elasticities variable section, GDP/cap yields understanding that a certain tendency towards convergence of GDP between counties exists, but very low values of the coefficient of determination (R2) do not allow a clear conclusion on this influence or, at least, requires additional precautions in interpretation. Instead, these results are different in predicting the panel, but more stable, highly statistically significant, and confirm the hypothesis of a divergence in GDP growth between counties. Analysis of the panel suggests a divergence in relation to the previous period in the models 1-2 and 4-7. This trend is clear in Model 7, where the GDP/capita variable coefficients are statistically significant at the 1 per cent (but subject to a number of factors).

The first measure externally introduced into the models is the infrastructure. Alongside the level of GDP/capita it can affect regional growth to a certain extent, with statistical

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relevance, and later, through the gradual introduction of other variables of agglomeration and control, the estimated coefficient of the infrastructure becomes negative in all models, contrary to expectations, but statistically insignificant (models 2-7). We interpret these results as being due to improper measurements of the variable included as a proxy for physical capital, due to several reasons. Firstly, public roads are only part of the infrastructure (public funds) and other investment having a direct impact on productive activities either by allowing their development or by reducing costs (such as energy, telecommunications, railways, airports), are not taken into account. Furthermore, public investment does not take into account private equity stocks and data unavailability in this respect at the regional level. In addition, we must not forget that the indicator comprises public roads in general, without distinguishing between European, national, regional or municipal roads, with features and capabilities that are fundamentally different. Thus, it is not surprising the results are not significant in themselves.

In general, the empirical literature identifies a positive relationship between regional growth and infrastructure. The Study How Regions Grow. Trends and Analysis (OECD, 2009) conducted at the level of large regions of 335 territorial level 2 of the OECD area, regarding the effects of infrastructure growth in dynamic models with offsets, concludes on the role required, but not enough of it, pointing out that it takes three years for it to have an impact on infrastructure growth and five years, in the presence of human capital measured by the number of pupils in primary, secondary and tertiary education. In addition, the indicator is calculated based on the length of a certain type of public roads, highways, which might not be relevant in our research.

As a result of the OECD study estimates, the authors concluded that infrastructure is significant only in the presence of human capital and innovation, which in terms of political action would suggest corroborating certain types of measures in order to have the desired effect. Highways can increase access to other markets, but also can increase competition to lead to local firm's exit from the market, possibly through the migration of production to other regions (OECD, 2009). You can thus apply the theories and models of the new economy, which describe geographically how goods can be sent to the Center in order to obtain savings, increasing earnings of foreign company scale. However, it may be attractive to keep capital in regions where employment and innovative activity are present, in order to benefit from a high labor supply market.

In the developed models, infrastructure is a positive factor influencing the growth dynamic of the richest counties (i.e. a process of divergence), but only with human capital, measured by employment, whose coefficient is statistically significant and very robust (Model 2, 4 and 6). This would also suggest that education and innovation could corroborate a positive growth process, but the measures available for education or school population as measured by the number of students by level of education, have led to significant results in this respect.

Regarding specific and labor market performance in all three models in which we introduced the influence of employed population, retention of estimated coefficientsâ&#x20AC;&#x2122; elasticity regardless of variable influence indicates the need for cautious interpretation of the results. When we introduced the unemployment rate as an independent variable (Model 4), to observe the impact of employment on GDP growth, the negative sign and high statistical significance support the role of labor in production (a decrease in the unemployment rate results in an increase in GDP / capita level), a reduction in the

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unemployment rate could induce a faster growth in counties with a lower GDP / capita, as a reflection of an increased capacity of counties to raise their labor resources. This measure, associated with the infrastructure in areas with lower labor resources that are not used enough, cannot promote sustained growth of these regions. On this line, as otherwise stated in the literature (OECD, 2009), a reorganization of the regional economy could foster more profitable use of the potential of untapped labor.

Endogenous growth emphasizes the importance of innovation in the economic growth process. In the model developed, this is expressed by R & D spending, and not patents, due to not having observations available in the counties in complete annual series, which makes it difficult to estimate a positive relationship with an endogenous growth model estimation. Expenditure on research and development still seem to exert a significant influence on growth, as the elasticity of estimated coefficients is lower (higher for public sector spending), with the business sector not being very involved in this activity (low value volume of private investment in research at the territorial level).

This could be due to the fact that they represent only one of the entries which are necessary in an effective R&D process and therefore should be connected directly to innovation, but they do not fully explain the developments in this area. These elements can lead to better coordination of infrastructure development policies, with the formation of human capital and promotion of innovation to support economic growth in each and every region.

Conclusions One of the essential results of our models represents the important role of economies of agglomeration in locating and developing economic activities. In the New Economic Geography models, agglomeration economies are seen as an important element of concentration. Our panel estimates suggest that the agglomeration economies are partly responsible for the overall more growth of rich areas, suggesting a conditional divergence process, unlike the cross-sectional analysis.

Positive externalities have influenced a faster growth of GDP / capita in the richest counties, mainly due to the increased market accessibility of these areas. In this case, the GDP/capita variation in relation to the potential market accessibility is enlightening.

Although this is not statistically significant, some models suggest that a region with good accessibility has an added advantage for its growth prospects, along with human capital, innovation, infrastructure and economies of agglomeration.

The lack of convergence between the counties of Romania is conditioned by other factors related to agglomeration economies. Thus, the trend of a process of divergence is supported by specialization. A concentration of labor in agriculture, construction and public services do not encourage growth and regional convergence. The elasticity with statistically significant values and influence of these variables confirms this result, which, looked at in the mirror, is in line with the theory of Jacobs (1969) regarding the explosive growth of cities and concentrated areas (especially given the negative sign of the sectorial diversity of these models).

These estimates suggest that, in general, a high degree of accessibility confers an advantage to a region in its growth prospects, especially with the better use of skilled labor force resources, but also in conjunction with other externalities. We emphasize the importance and statistical significance of sectorial diversity together with good market

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access for richer regions at the expense of the poorest (we must keep in mind that the positive sign of the GDP / capita variable does not imply a faster growth in poorer regions and regional income convergence but, on the contrary, a widening income gap).

Similarly, market access and the degree of industrial specialization are combinations of externalities that promote growth of regions with higher GDP / capita. It should be pointed out that with the inclusion of other variables, the number of available observations decreases because data on all variables are not available for all regions and over the entire period analyzed (some are limited to 2008-2011).

In general, the fact that these regional determinants are highlighted so strongly underlines their importance in regional growth, requiring policies not only nationally, but also regionally, to mobilize labor resources, develop local facilities, and exploit comparative advantages.

Acknowledgements This work was supported from the European Social Fund through Sectorial Operational Programme Human Resources Development 2007 – 2013, project number POSDRU/159/1.5/S/142115, project title “Performance and Excellence in Postdoctoral Research in Romanian Economics Science Domain”.

References [1] Brakman, S., Garretsen, H., & van Marrevijk, C. (2009). Economic Geography within and between European Nations: The Role of Market Potential and Density across Space and Time. CESifo Working Paper No. 2658, 1-28.

[2] Bruna, F., Faíña, A., & Lopez-Rodriguez, J. (2012). Market Potential and the curse of distance in European regions. International Conference on Regional Science the Challenge of Regional Development in a world of changing hegemonies: Knowledge, competitiveness and austerity. XXXVIII Meeting of Regional Studies - AECR, (pp. 1-30). Bilbao.

[3] Combes, P.-P., Duranton, G., & Gobillon, L. (2012). The Cost of Agglomerations: Land Prices in French Cities. Marseille: Aix Marseille School of Economics .

[4] Doring, T., & Schnellenbach, J. (2006). What Do We Know About Geographical Knowledge Spillovers and Regional Growth? A survey of the Literature. Regional Studies, 375-395.

[5] Hanson, G. H. (2005). Market Potential, Increasing Returns, and Geographic Concentration. Journal of International Economics, 1-24.

[6] Jacobs, J. (1969). The Economy of Cities. New York: Random House.

[7] Judson, R. A., & Owen, A. L. (1999). Estimating Dynamic Panel Data Models: a Guide for Macroeconomists. Economic Letters, 9-15.

[8] Krugman, P. (1991). Geography and trade. Leuven, London: Leuven University Press & The MIT Press.

[9] Porter, M. E. (1998). Clusters and the New Economics of Competition. Harward Business Review, 77-90.

[10] Redding, S., & Venables, A. J. (2001). Economic geography and international inequality. CEP Discussion Papers, 1-48.

[11] *** Organisation for Economic Co-operation and Development . (2009). How Regions Grow. Trends and Analysis. Paris: OECD Publishing.

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The Necessity of Statistics as a Part of Globalization Process. International Comparability in Statistical Analysis Diana-Virginia CRĂCIUNAŞ, “SpiruHaret” University, Faculty of Finance and Banking, 46 G Fabricii Str., District 6 Bucharest, Romania Tel: +40213169793, Fax: +40213169793, Email: craciunasdiana@yahoo.com Abstract: The world wide integration of goods, services and capitals markets due the main part of world economies aspect in this millennium. Globalization is a notion which occurs often in the economic current debates defined through economic interdependence between states, due to increasing the dependence to the world economy.

The international economies integration idea appears as a complex process of uses the interdependences among the international economies. The aim of this process is the achievement of a number of objectives by common interest. For a scientific knowledge of national economies as the basic cells of various international integrationist forms classifies these economies depending of some criteria as the economic potential and the capitalization degree.

One of the key features of modern information infrastructures is their international dimension. Setting up such structures runs parallel to the internationalization of economic activity and the globalisation of business strategies. We have to keep this in mind for our statistical activities.

The world have more than one reality as the economic, social, educational or health systems and structures and we all know that such systems are highly different all over the world.

As a precondition for joint international work in statistics, it is necessary to use generally accepted international standards. However, that alone will be not enough.

The above mentioned economic and social changes reflect bilaterally on the statistical organization. On one hand, the contents of its work are constantly changing. As the society is changing, the statistics describing its progress must change as well. The provision of relevance of statistical data requires constant revision of its production.

On the other hand, as the environment is changing, the conditions under which the statistical organization is working are also changing. Adjusting to the constantly changing conditions of the environment is a challenge in itself for the statistical organization and its management approach. The application of modern management tools of quality can contribute towards the indispensable adjusting of the statistical organization to the changes.

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Within this framework, the provision of complete respect of principles of quality is of crucial importance during the production of official statistics. The quality in compliance with the European Union recommendations is expressed through six general components of quality.

Keywords: international comparability, harmonisation, reliability, relevance, coherence JEL classification: F02, F60

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Factors Affecting Mobile Taggıng Awareness; A Research on Social Media Consumers Kübra Müge DALDAL1, Sabiha KILIÇ2 1 Hitit University Faculty of Economics and Administrative Sciences, Corum,TurkeyTel: +90 0364 225 77 00, Fax: +90 0364 225 77 00, e-mail: kmugedaldal@hitit.edu.tr Abstract: The purpose of the study is to identify the factors affecting awareness of mobile tagging on social media. The study assumes that the mobile tagging awareness levels of social media consumers are high. As a result of the literature review made in the scope of the purpose and assumption of the study, it was identified that the variables used in the measurement of brand awareness levels are recognition, remembering, being first in remembering, brand dominance, brand knowledge and brand opinion. A conceptual model showing the relation between these variables and mobile tagging awareness levels of social media consumers and hypotheses connected to this model were developed and a survey form, loyal to the relevant literature, was prepared in order to obtain the data necessary for the analyses. The universe of the study covers the consumers who are members of social media sites Facebook, Twitter and Linked In. For the analysis of the data obtained as a result of the survey conducted, descriptive statistics containing percentages and frequencies, factor analysis and Pearson’s Correlation Coefficient was used in the analysis of the hypotheses.

Keywords: Mobile marketing, mobile tagging, social media, brand awareness.

JEL Classification: M31

1. Introduction Together with the technological developments taking place in our day, many competitive applications are seen which create opportunities in the field of marketing. Thanks to the innovative developments in mobile telephone technology, marketers are able to reach prospective customers through new communication channels (Muk, 2007). Television is the first screen through which consumers could get information from the marketers. The internet is the second screen through which the consumers can get necessary information about the products and services. The emergence of e-commerce introduced a new 2

Hitit University Faculty of Economics and Administrative Sciences, Corum,TurkeyTel: +90 0364 225 77 00, Fax: +90 0364 225 77 00, e-mail: sabihakilic@hitit.edu.tr

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marketing channel known as mobile marketing or the third screen of communication.

According to Leppaniemi, Sinisalo and Karjaluoto(2006),mobile marketing is the use of mobile environment as a marketing communication tool. The keywords in this definition can be expressed as mobile tool (such as mobile phone) and marketing communication (information, promotions, competitions, etc). Enterprises are constantly in search of new ways and methods to retain and expand their market shares. According to Pousttchi (2006), marketing experts see mobile devices as an extremely promising marketing tool to overcome an important challenge as attracting times and attentions of the consumers. The mobile device at the same time provides the opportunity to transmit target messages to consumers with more effective methods than mass media (Barwiseand Strong, 2002). The marketers have absolutely recognised the importance of the mobile phones of the end users. Such that, mobile phones are a communication channel with great potential (Kavassaliset. al., 2003; Norris, 2007, Nysveenet. al., 2005).The purpose of the study is to identify the characteristics and the areas of use of mobile tagging, a mobile marketing application as a new generation marketing tool and to assess mobile tagging awareness of social media consumers. It is assumed that the mobile tagging awareness levels of social media consumers are high. In the following sections, social media, brand awareness and mobile tagging concepts are studied in detail in accordance with the purpose of the study and the model established.

2. Social Media In the process that started with the telegram and continued with the inclusion of film, telephone, radio and television in the world of communication, communication gained a new dimension and a simultaneous character. The developments that came along with the joining of the internet in the communication process removed the borders and made knowledge, reason and technology indispensable elements of life. In the light of all these developments experienced, the concept of media that oriented the lives of the people underwent change and the conventional media was replaced by a new communication environment, the social media, to a great extent (Ă&#x2013;zgenand Kara, 2012: 4).

The social media is expressed as â&#x20AC;&#x153;a group of internet-based applications enabling creation and circulation of user-created content, established on the foundations of web 2.0 n design and technologyâ&#x20AC;? (Kaplan andHaenlein, 2010: 61). Social media can be defined as the internet sites established for the purposes of meeting of internet users, sharing of content, making contacts, creating an environment for discussion, establishing groups according to common areas of interest (Kurumsalhaberler, n.d.). Setting off from the definitions for the concept of social media, it is possible to state that the social media is linked with the content created by the user. According to OECD (Organisation for Economic Co-operation and Development), for the contents in the virtual world to be considered as user resources, they have to have three characteristics. These characteristics are listed as: The content must be on the internet and accessible by everyone, Users must be content creators, To have content created out of professional routines and applications (OECD, 2007).

Social media, compared to conventional media, is in an advantageous position thanks to its many characteristics. The leading characteristics that makethe social media strong are being fast and having low costs. It is possible to list the strong points of the social media

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that ensure that it is preferred by the enterprises and individuals as being fast and up-todate, cost, sincerity, knowing the target group, measurability, closeness and reliability (Kaya,2011:33; Zafarmand,2010:20, Bostancı:2010,45).

Considering the social media environments based on their functions; we can divide them into three main groups as communication focused social media environments (blogs, microblogging, social network services), social media environments ensuring cooperation and sharing of information (Wiki sites,social bookmarking sites) andsocial media environments where content is shared (photograph and arts works sharing sites, video musicaudio files sharing sites, presentation sharing sites, virtual reality sites) (Erdem,2011: 110). In this study, Facebook, Twitter and LinkedIn social media sites were preferred on the grounds that they are intensively used, they have great numbers of users and they work with membership systems. As identifying the mobile tagging awareness levels of social media consumers is the main purpose of the study, the concept of brand awareness is addressed in detail in the next section.

3. Brand Awareness The word “awareness” derived from being aware expresses being aware of the existence of a situation, fact or object through the information acquired in the brain and the mind.

Awareness is a situation that can be told within mental processes where virtual or abstract thinking is necessary (Yıldırım, 2010: 98). There are a great variety of definitions in the literature of brand awareness. Brand awareness is defined as the prospective customers knowing and remembering a brand in a certain product category (İslamoğluandFırat, 2011:58). According to another definition, it is the power of the existence of a brand in the minds of the consumers (Erdiland Uzun, 2010: 221). According to another definition, brand awareness is expressed as “being aware of the brand, the place of the brand in the memory of the consumer comparative to the competitors” (Uztuğ, 2003: 8).

Creating brand awareness is one of the most important stages of the activities undertaken for the brand. The main purpose in brand awareness is, as mentioned before, to reach the highest level of perception at the highest step of the awareness pyramid. By identifying at what level an existing brand is in the awareness pyramid, it is aimed to reach the highest level of the pyramid. If the product is new, the first thing to do is to create awareness.

There are four main elements of creating awareness. These elements can be listed as link with other corporate facts, familiarity-affection, and reflection of the essence-commitment and thinking of the brand. (Elitok, 2003: 105).

The concept of brand awareness is concerned with whether there is information about the brand in the consumer's memory or how strong this information is and basically includes brand recognition and brand remembrance. Besides, for the consumers to have an opinion about the brand, awareness has to be created. In studies made on awareness, various awareness levels have been put forward and awareness was tried to be measured. These awareness levels used in the measurement of awareness levels are listed as recognition; remembering, being first in remembering, brand dominance, brand knowledge and brand opinion (Uztuğ, 2003: 29-30). In the next section of the study, mobile tagging concept, one of the mobile marketing practices, the awareness level of which is desired to the identified, is described in detail.

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4. Mobile Marketing and Mobile Tagging Mobile marketing, a new concept in marketing, is used to describe all marketing activities associated with a mobile device. The fact that mobile phones have become a tool which people cannot be without in their daily lives has made mobile phones an opportunity to be used by marketers. Mobile Marketing is generally known as the use of written messages through the mobile phones in marketing communication (Mozat,n.d.). According to another definition, Mobile Marketing can be expressed as the performance of various communication and promotion activities through mobile phones (Pazarlamadunyasi, n.d.).

According to another definition, Mobile Marketing is the process of performing all marketing campaigns through mobile devices (İşgüder, 2007:57). In this sense, we can define Mobile Marketing as a marketing practice in which the promotion process of ideas, goods and services is performed through wireless interactive tools to benefit all interest groups of the enterprise via mobile telephones (Karaca andGülmez, 2010: 71). With the advance of mobile technologies, enterprises have started including mobile devices in marketing practices. Among new marketing practices where mobile technologies are used, we can count mobile coupons, SMS polls, quiz-contests, MMSapplications mobile tags, Bluetooth-RFID applications and mobile games (Alkaya, 2007: 70-76; Karaca and Gülmez, 2010: 75-77; ArslanandArslan, 2012:109-113; Şenyuva, 2009: 2-7). Mobile tags, which are among mobile marketing practices, are read by users through smart phones and serve as a bridge between printed environments and digital media.

Mobile tags are a new and powerful barcoding technology that helps utilisation of mobile devices at the highest level to create a bridge between conventional environments and the digital world. As mobile tags can be loaded information both horizontally and vertically, they are also named as two dimensional (2D) barcodes. Furthermore, they are also called as new generation barcodes as they replaced line barcodes and have more data storage capacity. They are also known as square codes as the tags are generally in square form. At the same time, they are also referred to as QR code, which is the most commonly use mobile tag type (Mobilkod, 2010).

Mobile tags are a way to increase the value of printed environments by providing more interactive and interesting information to the user. These new generation tags are a call for action that can be printed anywhere and gives the print an interactive quality. Many reasons affect the use of mobile tags by the users such as to have more information about a product or service, to watch a video, to earn coupons or discounts (Okarimobile, n.d.).

There are more than 100 types of barcodes, however approximately 10 of these are used for mobile tagging (Schmimayer, 2008). Data matrix, QR code, Aztec code, beetagandmicrosoft-tag can be given as examples of two dimensional barcodes used for mobile tagging (Kato and Tan, 2005). With the increase of the use of smart phones, there is now more usage space for mobile tags. With the increasing popularity of mobile internet,mobile tags are seen in many places in daily life (Qrcode, n.d.). For reading of a mobile tag, mobile devices have to have camera, mobile tag reader software and internet access (J-Quin, n.d.).

Mobile tags have unlimited digital application areas with different methods in different sectors. Retail, publishing, transport and health sectors are examples of application areas of mobile tags (Mobilkod, 2012). It is recognised that mobile tags are an innovative way for

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consumers and companies. There are numerous benefits of mobile tagging, which is qualified as a new generation marketing tool, provided to consumers and companies. It is possible to list the advantages of mobile tagging as being free, providing the opportunity for instant communication, providing more information and benefits that printed environments, being able to update information, giving correct information about customers and positive contribution to the images of the enterprises, etc. (Neomedia, 2011; Pindarcreative, n.d; Dijital Printing Reports, n.d.).

In the next section of the study, the analysis results of the data obtained through the survey conducted to social media consumers to identify mobile tagging practices awareness of consumers can be found.

5. Methodology The purpose of the study is to identify mobile tagging awareness in social media. Also in the study, it is studied whether there are significant differences between mobile tagging awareness’s of social media consumers based on consumers' demographic and personal characteristics and social media usage levels. In the study, it is assumed that mobile tagging awareness levels of social media consumers are high. The universe of the study covers consumers who are members of Facebook, Twitter and Linked In social media sites.

Facebook has 30 million, Twitter has 6 million and Linked In has 750.000 active members.

The universe of the study is the 36.750.000 active social media members of the survey.

Universe variance cannot be estimated. The study's sample size was calculated with the n= π (1-π) / (e/Z) 2formula with 0.05 error level and 95% confidence interval. As the variance of the universe cannot be estimated in the formula, maximum variance π has been accepted as 0.5. According to this data, the sample size of the study has been calculated as n=0.5x0.5/(0.05/1.96)2 = 369. As the condition n/N = 1.004 <0.05 is not met N-n/N-1 correction factor was multiplied with the sample size giving the corrected sample size; 36.750.000 – 369 / 36.750.000 – 1= 0.995 x 369 = 367. Considering that there may be erroneous surveys, 444 valid surveys out of 500 conducted were assessed. Surveys were conducted to individuals 18 years old or older.

The data used in the study was obtained using online survey technique. Surveys were published as a link on Facebook, Twitter and Linked In social media sites. Information about the concept of mobile tagging was given in the survey. In the survey preparation process, brand awareness, recognition, remembering, being first in remembering, dominance, knowledge and opinion criteria were taken into account. Mobile tagging, consumers' personal and demographic characteristics are the other concepts included in the survey.

The survey form used to reach primary data in this study made to identify mobile tagging awareness in social media and the factors that affect mobile tagging awareness consists of 4 parts. The first part consists of 18 statements prepared to identify the mobile tagging awareness level of the participant listed according to 5-pointLikert scale varying between “Totally disagree” and “Totally agree”. Studies made by Uztuğ (2003), Tosun (2010), Franzen (1999) and Aaker (2007) were utilised in the identification of these statements. The second part consists of 6 multiple choice questions about interaction levels with mobile tags. The third part consists of 10 statements listed according to 5-pointLikert scale varying between "Totally disagree" and "Totally agree" to identify personal characteristics of the participants. Studies made by Kim (2010), Bostancı (2010) and Erdem (2011) were utilised

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in the identification of these statements. The fourth part consists of 6 multiple choice questions to identify demographic characteristics of the participants.

Alpha coefficient (Cronbach's Alpha) was used to identify whether there is a correlation between the elements of the survey form assessed with the Likertscale consisting of 4 parts and 40 subheadings in total, which information is given about the outlines of. At the end of the analysis, the value of the alpha coefficient must be more than 60% to be able to tell that the scale is reliable (Nakip, 2006). In line with this, the reliability analysis of the scale used in the research was made and the relevant coefficient was calculated as 92.3%. According to this result, it can be said that the survey form is reliable.

5.1. The Model of the Study The purpose of the study is to identify mobile tagging awareness in social media. The main assumption of the study is that the mobile tagging awareness level of social media consumers is high. The study model developed at the end of the literature review made in the scope of the purpose and the main assumption of the study is as follows:

Figure 1: Conceptual Model on Mobile Tagging Awareness of Social Media Consumers

The model examined, it is seen that three variables affect the Mobile Tagging Awareness of Social Media Consumers. These can be listed as the Consumers' Social Media Usage Levels; Mobile Tagging Awareness Level in Social Media; Consumers' Interaction Levels with Mobile Tagging Practices. According to the model, the Consumers' Social Media Usage Levels and Consumers' Interaction Levels with Mobile Tagging Practices affects Mobile Tagging Awareness Level in Social Media and therefore Social Media Consumers' Mobile Tagging Awareness. Mobile Tagging Awareness Level in Social Media, on the other hand, is determined by Social Media Consumers' Personal and Demographic Characteristics and mobile tagging awareness levels. Therefore, social media consumers' mobile tagging

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awareness are directly affected by mobile tagging awareness level in social media and indirectly by the consumers' social media usage levels and consumers' interaction levels with mobile practices. According to the model, the research hypotheses can be developed as follows: H1: Consumers' Social Media Usage Levels affect Mobile Tagging Awareness of Social Media Consumers.

H2: Consumers' Interaction Levels with Mobile Tagging Practices affect Social Media Consumers' Mobile Tagging Awareness.

H3: Mobile Tagging Awareness Levels in Social Media affect Social Media Consumers' Mobile Tagging Awareness.

H3a: Social Media Consumers' Personal Characteristics affect Social Media Consumers' Mobile Tagging Awareness.

H3b: Social Media Consumers' Demographic Characteristics affect Social Media Consumers' Mobile Tagging Awareness.

H3b1: Gender as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

H3b2: Age as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

H3b3: Geographical Region as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

H3b4: Income as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

H3b5: Level of Education as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

H3c: Social Media Consumers' Mobile Tagging Awareness Levels affect Social Media Consumers' Mobile Tagging Awareness.

5.2. Scope and Limitations of the Study The study covers social media users. The sampling frame consists of consumers who are members of commonly used Facebook, Twitter and Linked In social media sites. These sites have a total of 36.750.000 active users. The findings obtained in the study are limited to the perceptions of the individuals who participated to the survey of the survey questions. The survey was conducted to individuals 18 years old or older.

6. Analysis of Data and Findings Raw data obtained as a result of the survey technique was assessed with SPSS 16.0 package programme. Descriptive statistics showing percentages and frequencies were used in the analysis of data. Hypotheses developed in accordance with the model of the study were tested with Pearson Correlation Analysis. In order to identify mobile tagging awareness in social media, the factors affecting mobile tagging awareness of participants were identified using Factor Analysis. The analysis results are given in detail below.

6.1. Descriptive Statistics concerning the Model of the Study When we study the percentage and frequency distributions of the descriptive statistical measures of the variables concerning demographic characteristics of the survey respondents, it is seen that 55.2% of the respondents are women,â&#x20AC;&#x2122;44.8% are men, 78.8% 93

are between the ages 18and 35 and 70.5% have an income of 1.000 TL or above. 90% of the participants have minimum bachelor’s degree. 22.3% live in Marmara Region, 10.6% in Aegean Region, 7.4% in Mediterranean Region, 23.4% in Black Sea Region, 2.4% in Eastern Anatolia Region and 2% in Southeast Anatolia Region.

When we study the percentage and frequency values of the variables concerning personal characteristics of the survey respondents, the most frequent statements about the personal characteristics of the social media consumers taking the survey are ‘I am open to innovation’ (87.3%), ‘When I come across different and new things, I want to know what it is and apply it’ (83.9%) and ‘I have an inquisitive personality’ (79.5%), respectively. Out of 444 social media consumers who participated in the study, 344 responded as ‘Agree’ and ‘Totally agree’ to the first statement, 373 responded as ‘Agree’ and ‘Totally agree’ to the second statement and 359 responded as ‘Agree’ and ‘Totally agree’ to the third statement.

Therefore, it can be said that a great part of the social media consumers taking the survey have innovative personal characteristics. Innovative consumers are individuals who notice new developments first. This finding supports the assumption of the study that “Social media users’ mobile tagging awareness levels are high”.

The social media sites most commonly used by the social media consumers taking the survey are Facebook (71.8%), Twitter(14.9%) and MSN(4.1%), respectively. Out of 444 social media consumers who participated to the study, 319 stated that they use Facebook most, 66 stated that they use Twitter most, and 18 stated that they use MSN most.

When we study the percentage and frequency values of the variables concerning mobile tagging interaction levels of the social media consumers taking the survey; it is seen that 31.5% of the social media consumers who took the survey have not seen mobile tags before, and 69.5% saw at least once. The social media consumers who took the survey indicated that they saw mobile tags on medication boxes, magazines and newspapers most.

32.9% of the participants describe mobile tags as technological, and 20.2% as informative.

55.4% of the participants have smart phone technology, 65.1% use mobile internet, but 71.2% do not use mobile tag scanner application.

When we study the percentage and frequency values of the variables concerning mobile tagging awareness levels of the participants who took the survey, it is seen that 51.6% of the participants responded ‘Agree’ and ‘Totally agree’ to mobile tagging recognition statements (I have heard mobile tags before, I know what mobile tags look like). 52.8% of the social media consumers who took the survey responded ‘Agree’ and ‘Totally agree’ to mobile tagging remembering statements (I have seen mobile tags before. I know mobile tags when I see them). 66.7% of the participants responded ‘Agree’ and ‘Totally agree’ to Mobile Tagging dominance statements (I prefer mobile tags to other practices to get detailed information about products and services. Now, when someone says tag, mobile tags come first to my mind).48.6% of the participants responded ‘Disagree’ and ‘Totally disagree’ to mobile tagging opinion statements (I am thinking to scan mobile tag in the future. I am aware of the advantages offered by mobile tags. I think reading mobile tags is easy. I share what I know about mobile tag with my immediate environment.). Therefore, it is seen that a great majority of the participants do not have a mobile tagging opinion. 50% of the participants responded ‘Disagree’ and ‘Totally disagree’ to statements about the knowledge of the social media consumers about mobile tagging (I have knowledge of mobile tags. I know what mobile tags are for. I know how mobile tags are used. I scanned mobile tag with my smart phone before. I use mobile tags to get information. When I see a

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mobile tag, I am curious about the data inside.). In the scope these findings obtained, it can be said that, from among mobile tagging awareness levels, recognition and remembering levels are high and dominance, knowledge and opinion levels are high, of the social media consumers who took the survey. Therefore, 52.5% of the social media consumers who took the survey recognise and remember mobile tags, but do not use the mobile tagging application actively. It can be said that although social media consumers’ mobile tagging awareness is high, their usage levels are low.

6.2.Findings about the Factors Affecting Social Media Consumers’ Mobile Tagging Awareness Levels In this section, there are assessments about the reliability and factor analyses made to identify factors affecting mobile tagging awareness of the social media consumers who took the survey. Reliability is a concept showing all variables’ inter-consistency and internal harmony in a scale. Cronbach alpha coefficient is found by proportioning of the variances of all variables in the scale to the general scale total variance. Cronbach alpha coefficient varies between 0 and 1 values. Variables that decrease scale reliability can be taken out of the scale if necessary. Cronbach alpha value is desired to be 70% (Kurtuluş, 2010:184). In this framework, first the reliability of the variables was checked on factor basis, and then, the reliability of the whole scale was tested.

Factors affecting mobile tagging awareness of social media consumers are the factors in the study model. These factors were identified as the personal characteristics of the consumers and mobile tagging awareness levels. Of these factors, the scale average of 26 questions identified to share the common value out of 28 questions constituting the subscale was calculated as 83.57 and the standard deviation as 23.368.The general average of the questions is 3.21 and the average variance is 1.871. The range of the averages of the 26 questions is 2.270 and the range of the variances is 2.240. The general average of the correlations between the questions (inter-item correlations) is 0.391, whereas the minimum correlation between the questions was calculated as 0.019 and the maximum correlation as 0.931.

In the study, the Item-Total correlations were obtained as high values varying between 0.344 and 0.859. For the sake of the additive of the scale, the correlation coefficients between the Item and the Total are expected to be non-negative and bigger than 0.25 value. Before deciding on taking out of a question from the scale, the importance of the relevant question in the scale must be assessed checking the reliability coefficient Alpha calculated after the relevant question is taken out and change of average and variance calculated after the relevant question is taken out. With the reliability analysis made in the scale with 28 questions, the general reliability coefficient Alpha was calculated as 0.923.

With the reliability analysis made with remaining 26 questions after taking out 2 questions which do not share the common value, the general reliability coefficient Alpha was calculated as 0.947. The internal reliabilities of the personal characteristics and mobile tagging awareness levels identified taking the model of the study as basis were calculated as 88.0% for personal characteristics, 89.2% for recognition, 95.2% for remembering, 93.4% for knowledge, 64.9% for dominance and 70.3% for opinion, respectively.

After making of the reliability analysis, the factor analysis was utilised to quantitatively verify the factor structure affecting mobile tagging awareness of social media consumers.

Factor analysis is a multi-variable statistical analysis type ensuring presentation of data more meaningfully and in summary based on the relations between the data (Kurtuluş,

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2010:189). To assess whether the data set is suitable for factor analysis, first the suitability of the variables in the data set to normal distribution must be checked. Central tendency criteria for the variables concerning the data set are given in Table 1.

Table 1: Values of Central Tendency for the Factor Analysis Variables Mean Median I have heard mobile tags before 3.15 4.0 I know what mobile tags look like 3.20 4.0 I have seen mobile tags before 3.21 4.0 I know mobile tags when I see them.

3.06 3.0 I have knowledge of mobile tags 2.78 3.0 I know what mobile tags are for.

2.92 3.0 I know how mobile tags are used 2.81 3.0 I scanned mobile tag with my smart phone before.

2.23 3.0 I am thinking to scan mobile tag in the future 2.81 3.0 I am aware of the advantages offered by mobile tags 2.70 3.0 I use mobile tags to get information 2.62 2.5 When I see a mobile tag, I am curious about the data inside 3.0 3.0 I think scaning mobile tags is easy 3.02 3.0 I prefer mobile tags to other practices to get detailed information 2.23 2.0 about products and services I share what I know about mobile tag with my immediate environment 2.62 3.0 Now, when someone says tag, mobile tags come first to my mind 2.02 2.0 I have an inquisitive personalityâ&#x20AC;&#x2122; 4.08 4.0 I am open to innovation 4.28 4.0 When I come across different and new things, I want to know what it 4.23 4.0 is and apply it I follow technology closely.

3.85 4.0 I read technology news in the newspapers and magazines.

3.66 4.0 I follow social media closely.

3.97 4.0 I share something about technological innovations on social media.

3.13 3.0 I search product packace when shopping.

3.86 4.0 The logos on product package is draw my attention.

3.75 4.0 I follow mobile phone applications.

3.26 3.0

Mod 5.0 5.0 5.0 5.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 2.0 3.0 2.0 5.0 5.0 5.0 4.0 4.0 4.0 3.0 4.0 4.0 5.0

When we study Table 1, it is seen that the data set has a normal distribution and is suitable for factor analysis.

Along with identifying suitability of the data set to normal distribution, the correlation matrix has to be created and Barlett test and Kaiser-Meyer-Olkin (KMO) sampling sufficiency tests must be made to check suitability of the data set to factor analysis. Barlett test tests the probability of high rate correlations between at least a part of the variables in the correlation matrix. This test shows that the data set is suitable for factor analysis. KMO test, on the other hand, is an index comparing the size of the observed correlation coefficients and the size of the partial correlation coefficients. The KMO rate must be above 0.5. The higher the rate, it can be said that, the better the data set is to make a factor analysis. The data of the Barlett test and KMO test values are given in the below table.

Table 2: Barlettand KMO Test Results KMO Value 0.941 Barlett Test Value chi-square 9.888E3 Df. df.

325 Sig. .000

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KMO value was calculated as 94.1%. The fact that the KMO sampling sufficiency measure is above 60% shows that the variables in the scale are suitable for factor analysis. The Barlett Test was found to be Sig. 0.000<0.05significant with 9.888E3 chi-square and 325 degrees of freedom. Therefore, there is correlation between the variables and the data set is suitable for factor analysis according to the result of the Barlett Test. Factor analysis results are shown in Table 3.

S5 S4 S8 S7 S6 S9 S12 S13 S3 S2 S26 S27 S32 S25 S33 S28 S29 S30 S31 S34 S18 S16 S17 S11 S14 S10

Table 3: Factors Affecting Social Media Consumers’ Mobile Tagging Awareness Factor 1 Factor 2 Factor 3 Factor 4 Personal Factor 5 Factor Remembering Knowledge Recognition Characteristics α= Dominance Opinion α=95.2 α= 93.4 α= 89.2 88.0 α=64.9 α=70.3 0.916 0.910 0.901 0.900 0.886 0.666 0.652 0.575 0.896 0.838 0.886 0.866 0.818 0.797 0.776 0.643 0.606 0.469 0.451 0.449 0.778 0.673 0.772 0.741 0.662 0.547

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Factors affecting mobile tagging awareness of social media consumers were identified as the consumers’ personal characteristics and mobile tagging awareness levels (recognition, remembering, knowledge, opinion, dominance). Factor 1, which is remembering, explains 32.97% of the total variance; Factor 2, which is Knowledge, 14.55%; Factor 3, which is Recognition, 11.64%; Factor 4, which is Personal Characteristics, 9.32%;Factor 5, which is Dominance, 3.02%;Factor 6, which is Opinion, 2.42%. These six factors listed explain 73.94% of the total variance. Therefore, it can be said that these six factors listed affect social media consumers’ mobile tagging awareness. The most effective among the factors is remembering which explains 32.97% of the total variance. Therefore, it can be stated that the most important factor determining awareness of mobile tags is the remembering of the mobile tags. This finding is supported by the previous findings of the study (that the participants responded ‘Agree’ and ‘Totally agree’ to the statements on recognition and remembering levels of the mobile tagging awareness levels). In the following section, analyses on the hypotheses developed in accordance with the study model are given.

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6.6.1. Hypothesis Tests of the Study The purpose of the study is to identify mobile tagging awareness of social media consumers.

According to the model developed in the scope of the purpose of the study, social media consumers’ mobile tagging awareness is affected by the consumers’ social media usage levels, interaction levels of the consumers with the mobile tagging practices and mobile tagging awareness level in social media. 3 main hypotheses developed based on the study model developed in the scope of the purpose and the main assumption of the study were analysed with Chi-Square and Pearson Correlation coefficient. Chi-Square is a nonparametric test (Kalaycı, 2010:85). The data to be used in the testing of the first and second hypotheses developed in the scope of the study model contains nominal scaled data.

Therefore, the analysis of this data was made according to the Chi-Square test. Interval scale was used in the measurement of data to be used in the testing of the third hypothesis developed according to the study model. Therefore, the data is suitable for analysis with Pearson Correlation coefficient. Pearson Correlation Coefficient is used in the measurement of the degree of the linear relationship of two continuous variables. It is an analysis defining whether there is a significant relationship between two variables (Kalaycı, 2010:116). The analysis results are given in the below tables: Table 4: Hypothesis Test Results, Chi-Square Tests H1: Consumers' Social Media Usage Levels affect Mobile Tagging Awareness of Social Media Consumers.

Value

Asymp. Sig. (2-sided)

Df a

32.020

Likelihood Ratio

55.324

32.006

N of Valid Cases

444

Pearson Chi-Square

a.

50.559

32 cells (71,1%) have expected count less than 5. The minimum expected count is ,08.

When we study Table 4, it is determined that there is a significant relationship between the consumers’ social media usage levels and mobile tagging awareness of social media consumers with 0.020<0.05 significance level and (50.559) chi-square value. According to chi-squared correlation coefficient value (55,324), there is a medium level relationship between them. H1 hypothesis is accepted according to this data.

Table 5: Hypothesis Test Results, Chi-Square Tests H2: Consumers' Interaction Levels with Mobile Tagging Practices affectSocial Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2-sided)

a

48.000

Likelihood Ratio

303.790

48.000

N of Valid Cases

444

Pearson Chi-Square

2.743E2

a. 39 cells (60,0%) have expected count less than 5. The minimum expected count is ,08.

According to Table 5,there is a relationship between the consumers’ interaction levels with mobile tagging practices and mobile tagging awareness of social media consumers with 48 degrees of freedom, 2.743E2 chi-square value and 0,000<0,05 significance level. H2 hypothesis was accepted.

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Table 6: Hypothesis Test Results H3: Mobile Tagging Awareness Levels in Social Media affectSocial Media Consumers' Mobile Tagging Awareness.

S4 S5 S6 Pearson Correlation .883 .888 .809 Sig. (2-tailed) .000 .000 .000 S11 S12 S13 Pearson Correlation .659 .576 .562 Sig. (2-tailed) .000 .000 .000

S7 .825 .000 S14 .617 .000

S8 .821 .000 S16 .429 .000

S9 .559 .000 S17 .312 .000

S10 .492 .000 S18 .220 .000

Question 4 and Question 18 are statements about mobile tagging awareness level.

When we study Table 6, it is seen that there is a relationship between social media consumers’ mobile tagging awareness levels and social media consumers’ mobile tagging awareness with sig. 0.000<0.05 significance level. H3a hypothesis was accepted. According to this data, it can be said that social media consumers’ mobile tagging awareness will increase as their mobile tagging awareness levels increase.

Table 7: Hypothesis Test Results H3a: Social Media Consumers' Personal Characteristics affect Social Media Consumers' Mobile Tagging Awareness.

S25 Pearson Correlation .263 Sig. (2-tailed) .000 S30 Pearson Correlation .157 Sig. (2-tailed) .000

S26 .225 .000 S31 .165 .000

S27 .237 .000 S31 .211 .000

S28 .328 .000 S33 .291 .000

S29 .347 .000 S34 .342 .000

Question 25 and Question 34 are statements about personal characteristics of consumers.

When we study Table 7,it is seen that there is a relationship between social media consumers’ personal characteristics and social media consumers’ mobile tagging awareness with sig. 0.000<0.05 significance level. H3b hypothesis was accepted. In this sense, it can be said that there is a significant relationship between social media consumers’ personal characteristics and social media consumers’ mobile tagging awareness.

Table 8: Hypothesis Test Results: Chi-Square Tests H3b1: Gender as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2-sided)

Pearson Chi-Square

8.815

a

4

.066

Likelihood Ratio

8.850

4

.065

N of Valid Cases

444

a. 0 cells (,0%) have expected count less than 5. The minimum expected count is 13,45.

Table 9: Hypothesis Test Results: Chi-Square Tests H3b2: Age as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2sided)

Pearson Chi-Square

50.331

a

28

.006

Likelihood Ratio

50.155

28

.006

99

Table 8: Hypothesis Test Results: Chi-Square Tests H3b1: Gender as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2-sided)

Pearson Chi-Square

8.815

a

4

.066

Likelihood Ratio

8.850

4

.065

N of Valid Cases

444

a. 23 cells (57,5%) have expected count less than 5. The minimum expected count is ,07.

Table 10: Hypothesis Test Results: Chi-Square Tests H3b3: : Geographical Region as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2sided)

Pearson Chi-Square

29.578

a

24

.199

Likelihood Ratio

31.998

24

.127

N of Valid Cases

444

a. 13 cells (37,1%) have expected count less than 5. The minimum expected count is ,61.

Table 11: Hypothesis Test Results: Chi-Square Tests H3b4: Income as one of the Social Media Consumers' Demographic Characteristics affectsSocial Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2-sided)

Pearson Chi-Square

48.684

a

24

.002

Likelihood Ratio

55.176

24

.000

N of Valid Cases

444

a. 11 cells (31,4%) have expected count less than 5. The minimum expected count is ,57.

Table 12: Hypothesis Test Results: Chi-Square Tests H3b5: Level of Education as one of the Social Media Consumers' Demographic Characteristics affects Social Media Consumers' Mobile Tagging Awareness.

Value

Df

Asymp. Sig. (2-sided)

Pearson Chi-Square

31.966

a

16

.010

Lindiğinde kelihood Ratio

34.047

16

.005

N of Valid Cases

444

a. 9 cells (36,0%) have expected count less than 5. The minimum expected count is ,14.

When we study Tables 8, 9 and 10,we see that there is a relationship between social media consumers’ demographic characteristics age, income and education level and social media consumers’ mobile tagging awareness with p<0.05 significance level. Along with this, according to Table 11 and 12,there is not a significant relationship between social media consumers’ demographic characteristics gender and geographical region and social media consumers’ mobile tagging awareness with p<0.05 significance level. According to the findings obtained, it can be said that age, income and education level play a determining role on social media consumers’ mobile tagging awareness. When we study the previous findings of the study, it can be said that approximately 79% of the social media consumers who took the survey are younger than 35, 71% have an income of 1.000 TL and above and

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90% are minimum high school graduates. It is seen that the findings of the study support each other.

Conclusion Growth and expansion are observed in the promotion mix elements of marketing in parallel with the technological developments. Particularly, given the presence of a generation growing and developing with technology, effective and proper use of promotion tools, transmission of the messages to the right persons become more important in a market structure with abundant alternatives. Mobile communication tools have become one of the important promotion tools of our day with their content, dynamic and social structure and that they provide a communication environment which is not boring instead of a formal message structure. With the advance of technology and starting of the common use of smart phones by the consumers, mobile tags have become one of the fields of application of mobile marketing.

The purpose of the study is to identify mobile tagging awareness of social media consumers.

According to the conceptual model developed in the scope of the purpose and the assumption of the study, the consumers’ social media usage levels and the consumers’ interaction levels with mobile tagging practices affect mobile tagging awareness level in social media and therefore the social media consumers’ mobile tagging awareness. Mobile tagging awareness level in social media, on the other hand, is determined by social media consumers’ personal and demographic characteristics and mobile tagging awareness levels.

The factors affecting social media consumers’ mobile tagging awareness were determined as the consumers’ personal characteristics and mobile tagging awareness levels (recognition, remembering, knowledge, opinion, dominance). Factor analysis was made to identify to what degree the independent variables affect the dependent variable. The six factors identified explain 73.94% of the total variance. Therefore, it can be said that these six factors listed affect social media consumers’ mobile tagging awareness. The most effective factor among those is remembering, which explains 32.97% of the total variance.

In the study, the hypotheses developed based on the conceptual model were analysed with Pearson’s Correlation Coefficient. At the end of the analysis, hypotheses H1, H2, H3b2, H3b4 and H3b5were accepted and hypotheses H3b1 and H3b3 were rejected. Therefore, according to the results of the hypothesis test, it can be said that there is a linear relationship between the consumers’ social media usage levels, consumers’ interaction levels with mobile tagging practices, social media consumers’ personal characteristics and social media consumers’ demographic characteristics age, income level and level of education and social media consumers’ mobile tagging awareness while there is not a linear relationship between social media consumers’ demographic characteristics gender and geographical region and social media consumers’ mobile tagging awareness.

The study covers the consumers in the social media. Therefore, the findings obtained include the personal and demographic characteristics of the social media consumers. The study has an original value in that it studies social media consumers’ social media usage levels, consumers’ interaction levels with mobile tagging practices and mobile tagging awareness level in social media in identifying social media consumers’ mobile tagging awareness.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Ethical Unconcern Scale: Construction and Validation Antonia DELISTAVROU1, Irene TILIKIDOU2

1

Alexander Technological Educational Institute of Thessaloniki, P.O. Box 141, 57400, Greece Tel: +30 2310 013242, Email: adelis@mkt.teithe.gr, delistavrou@yahoo.com Abstract: Presents the development procedure of an Ethical Unconcern (EthU) scale. The procedure included literature search, brainstorming and discussion groups to generate the pool of the initial 99 items. A student survey was conducted to refine the measure. Item analysis and reliability assessment resulted in an initial scale of 25 items. A consumer survey was conducted in the urban area of Thessaloniki, Greece, in order to test the initial EthU scale. Item-to-total correlation and alpha-if-item deleted were applied in the consumer sample and the results indicated that all items obtained coefficients greater than 0.30. Exploratory Factor Analysis (EFA) followed by the employment of PCA. Five factors with eigenvalues greater than 1 were found to explain 61.34% of the variance. Four items (two with a factor loading <0.50 and two cross-loaded) were eliminated; the remaining 21 itemsindicated a= 0.923 for EthU. The five factors were named Boycott/ Discursive, Fair-Trade, Scepticism, Powerlessness and Ineffectiveness. The AMOS SPSS was then used to conduct confirmatory factor analysis. Goodness-of-fit results indicated 2 that the measurement model fit the data well (χ =594.226, p<0.000, CFI=0.926, NFI=0.899, TLI=0.910, RMSEA=0.066).

Keywords: Ethical Consumption; Ethical Unconcern; Measure Development JEL classification: M310 Marketing

1. Introduction Ethical consumption is a relatively new topic within the marketing academic community.

Ethical consumption does not concern merely individual satisfaction of needs and wants, as it simultaneously aims at the overall social welfare (Crane, 2001). Ethical consumption may be positive (choose eco-friendly and fair products, prefer firms responsible and fair enough to the workers etc.) or negative (boycotting unethical products or firms) as suggested by Tallontire et al. (2001) and discursive (digital communication about consumption issues) as suggested by Michelletti et al. (2005). Focusing on the first type, it has to be mentioned that positive ethical consumption has not yet gained its place in the mainstream of the marketing research. There must be no doubt the economic crisis would not and does not assist any shift towards ethical consumption patterns in the European market. However, there is already a small academic stream addressing the challenge to understand this type of consumption by revealing any potential antecedents.

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There have been some studies (e.g. Creyer & Ross,1997; Mohr et al., 2001; FernandezKranz & Merino-Castello, 2005; Delistavrou & Tilikidou, 2012; Tilikidou, 2013), which indicated a number of consumers ready to prefer firms that are socially responsible towards the natural and the human environment. On the other hand, the actual market share for these products is much more limited than what the studies suggested (Boulstridge & Carrigan, 2000; Cowe & Williams, 2000; Carrigan & Attalla, 2001; Tilikidou, 2013). Cowe & Williams (2000) more than a decade ago underlined that although most surveys reveal that around 30% of the population is particularly motivated to buy ethical products, these products make up only fewer than 3% of their individual markets. This phenomenon has been named the “30:3 syndrome” in ethical consumption.

In the consumer research context there has always been a debate as to whether attitudes can be considered a valid predictor of an individual’s behaviour, as attitudes are often not translated into action (Carrigan & Attalla, 2001; Sheeran, 2002; Papaoikonomou et al., 2011; Delistavrou & Tilikidou, 2014). This phenomenon is even more obvious when the behaviours under examination are socially desirable (Peattie, 1995, p. 154; Shrum et al., 1995; Thørgensen & Ölander, 2003; Tilikidou, 2013). Therefore, the emergence of the attitude - behaviour gap was expected in the ethical consumer research (Boulstridge & Carrigan, 2000; Carrigan & Attalla, 2001; Auger et al., 2004; Chatzidakiset al., 2007; Papaoikonomou et al., 2011).

On the other hand, the assumption that attitudes are able, at least to an extent, to describe and/or predict behaviour cannot be taken for granted, as the attitude - behaviour link might provide important implications for the marketers of ethical products (Papaoikonomou et al., 2011). In fact, explaining and/or eliminating the attitudesbehaviour gap might be considered as one of the most important challenges ethical consumption should face in the future. In the context of the ecologically related behaviour, in an effort to understand better the insights of this phenomenon, Tilikidou & Delistavrou (2005a) examined which negative attitudes might inhibit pro-environmental behaviours, instead of examining those attitudes that might influence behaviours positively.

Following this latter direction of research, this study aimed to construct a reliable and valid measure of ethical unconcern and examine, at least preliminarily, its inhibiting role on positive ethical consumption.

2. Review of the Literature The positive ethical consumption has been suggested as a rather broad concept, including buying, eco-friendly and fair products (Tallontire et al., 2001), recycling, repair, reuse as well as donate, volunteer etc. (Tilikidou & Delistavrou, 2012). Of course the ecologically related consumer research has been gained most of the academic attention, so far.

With relevance to attitudes, much research has been directed on examining ethical consumer behaviour based on existing attitude-behaviour models (Shaw & Shiu, 2003; Chatzidakis et al., 2007). In this sense, the Theory of Planned Behaviour (TPB) (Ajzen, 1991) is one of the more testable frameworks that have been applied in ethical consumer behaviour (Chatzidakis et al.,2007). According to TPB, attitudes is one of the three (attitudes, subjective norms and perceived behavioural control) antecedents of consumers’ behavioural intentions.

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TPB has been applied in fair trade products buying; the constructs of ethical obligation and self identity were added to the original conceptual model as potentially measures of further explanation (Shaw & Shiu, 2003; Chatzidakis et al., 2007). Papaoikonomou et al.

(2011) commented that to an extent, these studies explain the existence of word/deed inconsistencies, i.e., the difference between what one says and what one actually does.

For instance, consumers claim that price, availability and convenience are significant barriers to their intention to behave ethically (Shaw & Clarke, 1999; Carrigan & Attalla, 2001).

Tilikidou et al. (2013) employed a semantic differential scale to examine attitudes towards green hotels, namely choices between two opposite perceptions, such as favourableunfavourable, positive-negative etc. This approach was discussed as rather unsatisfactory, so the authors suggested that there is a need to develop more reliable and valid instruments to investigate ethical attitudes, measured on the typical Likert scale.

With reference to the ecologically related research, Tilikidou & Delistavrou (2005a) pointed out that most of the scales, which have been used to measure attitudes, had been designed to estimate positive “pro-environmental concern” scores (e.g. among others Bohlen et al., 1993; Tilikidou, 2001, p. 64; Fotopoulos & Krystallis, 2002; Carrus et al., 2008). It has been observed (Tilikidou & Delistavrou, 2005a) that the attitudinal scores have been always significantly higher than the behavioural scores and claimed that the social desirability effect must have been extremely remarkable in the attitudes measurement. Therefore, it might be argued that the examination of negative attitudes might hopefully be found more efficient in capturing more sincere beliefs; those beliefs that in overall express indifference, disinterest, recklessness about environmental issues.

So far, the above mentioned authors developed the Environmental Unconcern scale (see: Tilikidou & Delistavrou, 2005a). The literature search indicated that there has not been a effort so far to construct and test an ethical unconcern scale.

3. Research Objectives 

to develop a reliable and valid measure of Ethical Unconcern



to examine its impact on Positive Ethical Consumption

4. Methodology The methodology of this study consisted of two stages: a) a measure development procedure to construct a scale of Ethical Unconcern (EthU) and b) an exploratory field research to test the impact of EthU on Positive Ethical Consumption (PEC).

4.1. The measure development Following the suggestions of Churchill (1979), Spector (1992) and Robinson et al. (1991) the measure development procedure incorporated the following steps: domain definition, literature search, focus group, brain storming, items generation, a preliminary survey to students, item analysis, reliability estimation and factor analysis (PCA).

Domain definition: Fishbehn and Adjen (1975, p. 6) wrote that attitudes are “ a learned predisposition to respond in a consistently favourable or unfavourable manner with respect to a given object”. Hawkins et al. (1998, p. 396) suggested that “attitude is an enduring organization of motivational, emotional, perceptual and cognitive process with respect to some aspect of our environment”. For the requirements of this study we defined Ethical

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Unconcern as “negative feelings, thoughts, ideas and beliefs with respect to Ethical Consumption”. An effort was made to ensure that the under construction measure would have incorporated attitudes towards all three types of Ethical Consumption, as well as items capturing all components of the domain definition.

Literature search: Previous research papers (qualitative and quantitative) on the topic of ethical attitudes were collected and the relevant scales and qualitative findings were reviewed. (John & Klein, 2001; Klein et al., 2004; Uusitalo & Oksanen, 2004; Shaw et al., 2005; Fraj & Martinez, 2006; Freestone & McGoldrick, 2007; Tilikidou, 2007; Delistavrou & Tilikidou, 2009; among others) Brainstorming: 9 students and 5 academics of the Marketing Department of the Thessaloniki TEI were gathered in two different discussion groups to suggest items that the under construction scale should contain.

Discussion group: A discussion group of 7 consumers was organised. The consumers were asked to discuss and express their thoughts, feelings, ideas about the three types of ethical consumption namely Positive, Negative and Discursive Ethical Consumption, through a semi-structured procedure. The procedure was videotaped. A thorough study of the records provided fruitful information as to each one of the above types of ethical consumption. Based on the information provided, the components of the under construction scale were decided to be the following 5: ethical concerns, ecological concerns, fair-trade concerns, attitudes towards boycotting and discursive actions.

Item generation pool and pre-testing: Editing and re-editing followed to gain the initial items generation pool. In an effort to cover all the components 99 items in total were generated and measured on a 7-point Likert scale. A students’ survey was then conducted in order to pre-test the initial measure of Ethical Unconcern. A cluster sample of 290 students of the TEI of Thessaloniki was used and the data were input in the analysis.

Refinement of the scale: Item analysis was conducted by the employment of the item-tototal correlation and alpha-if-item-deleted techniques. Item analysis indicated that 25 items obtained coefficients greater than 0.45 and the initial scale indicated Cronbach’ alpha of 0.903.

4.2. The consumers’ survey The Ethical Unconcern (EthU) scale was included in a structured questionnaire together with the scale of Positive Ethical Consumption (PEC) adopted from Delistavrou&Tilikidou (2012). The PEC consists of 19 items, measured on a 7- point frequency scale from 1= Never to 7=Always and in this study provided a Cronbach’s alpha of 0.905.

The sample size was set at 600 households of the urban area of Thessaloniki. The sampling method was a combination of the two stage area sampling and the systematic method (Tull& Hawkins 1993; p. 544; Zikmund 1991, p. 471) and resulted in565useable questionnaires.

5. RESULTS 5.1. Item analysis Item-to-total correlation and alpha-if-item deleted were applied in the consumer sample and the results indicated that all items obtained coefficients greater than 0.30.

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Exploratory factor analysis (EFA) was conducted with the employment of PCA to explore if there are any possible factors in the measure of EthU. Five factors with Eigenvalues greater than 1 were found to explain 61.34% of the variance. The factor loadings indicated 4 items (EthU05, EthU13, EthU14 and EthU25) that should be eliminated. Two of them (EthU05 and EthU25) did not indicate factor loadings above 0.50, while the other two (EthU13 and EthU14) were double loaded. The remaining 21 items in EThU provided Cronbach’s alpha of 0.923.

Table 1: Item analysis results Alpha if ItemStd. Item Total Mean Dev. Deleted Cor.

Factor loadings 1

2

3

4

5

EthU1

The relevant to ethical consumption information require time and effort, which is difficult for me

4.02 1.664

0.936 0.357 0.045 0.086 0.035 0.750

0.083

EthU2

I do not believe that consumers are able to get united and fight against “unethical” business practices

3.45 1.748

0.934 0.527 0.214 0.066 0.014 0.616

0.439

EthU3

It is rather impossible for us to find products and services provided by firms that are responsible towards the natural and the human environment

3.78 1.778

0.935 0.470 0.152 0.183 0.136 0.698

0.052

EthU4

I do not think that we could stop buy products from business that have been accused about unethical practices

3.40 1.664

0.933 0.604 0.336 0.282 0.175 0.540

0.121

EthU5

I would never be able to judge if the products I buy cause trouble to somebody else

2.53 1.583

0.933 0.616 0.425 0.087 0.134 0.384

0.422

EthU6

I think that ethical consumption is just temporarily on fashion

3.35 1.807

0.932 0.635 0.308 0.068 0.607 0.335

0.237

EthU7

I am more concerned with my own financial problems than with the elimination of poverty in the underdeveloped countries of the so-called Third World

3.84 1.729

0.933 0.589 0.163 0.631 0.160 0.233

0.298

EthU8

It is useless to buy Fair Trade products if there are not many consumers doing the same

2.94 1.559

0.933 0.588 0.281 0.246 0.121 0.294

0.511

EthU9

I am exclusively interested in the economic problems of my own country; problems in the economically weaker countries are not my concern

3.73 1.787

0.933 0.600 0.173 0.761 0.121 0.179

0.263

EthU10 There are other problems that bother me more than environmental destruction

3.63 1.790

0.933 0.599 0.223 0.760 0.043 0.128

0.315

EthU11 I don’t believe that the environment would be protected if we used less water, electricity and oil

2.93 1.722

0.934 0.539 0.176 0.156 0.177 0.178

0.699

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EthU12 I do not think we should sacrifice economic development just to protect the environment

3.23 1.635

0.933 0.580 0.201 0.276 0.234 0.074

0.670

EthU13 More money to the natural environment means less money to jobs

3.23 1.579

0.934 0.553 0.294 0.226 0.485 -0.104

0.429

EthU14 I am not willing to pay more in order to buy ecological products

3.78 1.694

0.934 0.531 0.243 0.653 0.426 0.109 -0.153

EthU15 Most ethical products are of lower quality

3.27 1.572

0.934 0.517 0.167 0.160 0.721 0.061

0.205

EthU16 I think that the so called ecological products is another advertisement trick

3.33 1.700

0.933 0.619 0.309 0.158 0.768 0.132

0.133

EthU17 If a boycotting is successful my participation is not necessary

3.04 1.620

0.932 0.652 0.574 0.173 0.222 0.116

0.356

EthU18 It is impossible for me to participate in a boycotting against my favorite brands

3.30 1.700

0.932 0.660 0.522 0.311 0.186 0.249

0.213

EthU19 Boycotting of products or firms is always useless

3.13 1.636

0.931 0.705 0.604 0.246 0.283 0.194

0.223

EthU20 I think that marches, demonstrations and other events against the so – called “unethical” business practices are all meaningless

3.20 1.698

0.933 0.616 0.743 0.092 0.196 0.029

0.196

EthU21 I would never be interested to get to know and evaluate activities of a firm in order to make a judgment about its ethics or to judge if it is :unethical” or not

2.89 1.611

0.932 0.696 0.730 0.228 0.123 0.232

0.140

EthU22 There is no personal responsibility of mine, as a consumer, about profiteering or labour rights removal

3.12 1.636

0.932 0.646 0.741 0.260 0.019 0.167

0.137

EthU23 Petition gathering have never been effective to any issue

3.34 1.686

0.933 0.599 0.726 -0.012 0.218 0.073

0.224

EthU24 Fair Trade claims are nothing more that advertisement tricks

3.38 1.638

0.932 0.655 0.660 0.128 0.417 0.131

0.055

EthU25 It is hard to search and find ecological products

3.27 1.764

0.934 0.522 0.486 0.280 0.268 0.323 -0.209

Taking a close look at the items entered in each factor, it was observed that the first factor includes eight items expressing consumers’ refusal to care about boycotting and discursive actions and it was named Boycott/Discursive. The second factor contains three items expressing consumers’ objections to fair-trade and it was named Fair-trade. The third factor included three items expressing the consumers’ reservations towards ethical products with regard to their quality, price and ethical claims and it was named Scepticism. The fourth factor includes four items expressing the consumers’ lack of empowerment with regards to their impact on business’ unethical practices and it was named Powerlessness. The fifth factor contains three items expressing the consumers’ sense of ineffectiveness regarding economic conservation and adoption of ethical choices and it was named Ineffectiveness.

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The AMOS SPSS (Table 2) was then used to conduct confirmatory factor analysis (CFA).

Goodness-of-fit results indicated that the measurement model fit the data well (χ2=594.226, p<0.000, CFI=0.926, NFI=0.899, TLI=0.910, RMSEA=0.066).

Table 2: Confirmatory Factor Results

EthU17

1 Boycotting/ Discursive 0.722

EthU18

0.699

EthU19

0.775

EthU20

0.697

EthU21

0.760

EthU22

0.726

EthU23

0.665

EthU24

0.696

2 Fair Trade

EthU07

0.734

EthU09

0.820

EthU10

0.789

3 Scepticism

EthU06

0.736

EthU15

0.807

EthU16

0.626

4 5 Powerlessness Ineffectiveness

EthU01

0.518

EthU02

0.685

EthU03

0.628

EthU04

0.689

EthU11

0.712

EthU12

0.715

EthU8

0.681

Construct Reliability

0.895

0.825

0.769

0.726

0.745

It is observed that the construct reliability of each factor is satisfactory enough (above 0.70).

5.2. Descriptives The Ethical Unconcern (EthU) scale (range 21-147, Mean 70.30) indicated that consumers “Somewhat Disagree” to ethical unconcern, or in other words that they are at least somewhat concerned about ethical issues.

The Positive Ethical Consumption (PEC) scale (range 19-133, Mean 66.15), indicated “Rare” to “Occasional” engagement of consumers in PEC. 5.3. ANOVA One-way The ANOVA One-way was applied to explore the mean differences in EthU across demographical categories. Statistically significant differences (p<0.05) were found of Ethical Unconcern with gender (women less unconcerned that men), education (graduates less unconcerned than their counterparts).

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5.4. Pearson’s Correlation The Pearson’s parametric correlation indicated statistically significant (p<0.01) negative and weak relationships between EthU and PEC (r= -0.169). With regards to each one of EthU factors, the results indicated the following: Scepticism and PEC (r= -0.179), Fair-Trade and PEC (r= -0.162), Ineffectiveness and PEC (r= -0.158), Boycotting/Discursive and PEC (r= -0.125) and (p<0.05) between Powerlessness and PEC (r= -0.083).

Conclusions The exploratory effort to construct a scale of Ethical Unconcern indicated (see Table 1) that consumers are inhibited to adopt ethical choices mostly by their perceptions that they need time and effort in order to obtain relevant information (EthU1). Finding and evaluating which firms are ethical seems to be equally difficult for the consumers (EthU3).

Moreover, as the fourth factor indicates, consumers feel rather powerless towards unethical business practices (EthU2, EthU4). As expected, consumers where found highly concerned with the problems that economic crisis caused to their lives and thus less interested in to what happens into the Third World, FairTrade movement etc. (EthU7, EthU9). In addition, as the second factor indicates, their own problems diminish their concerns about global environmental destruction (EthU10).

The fact that they seem less unconcerned -more concerned- about water, energy and oil conservation would not be safely interpreted as ethical attitudes; these attitudes may very well be driven by financial motives (EthU11). Also, as factor five indicated this issue is associated with consumers’ perceptions regarding how ineffective fair-trade and economic growth reductions are (EthU8, EthU12).

However, Greeks should not be characterized as highly unconcerned about ethical issues as in overall all items provided Means, which can be interpreted as “somewhat disagree” to ethical unconcern. This means that Greeks in overall hold rather positive ethical attitudes, which however were not found at a very high level. These findings verify, to an extent, our initial assumption that social desirability effect is less evident when measuring negative than positive attitudes.

In conclusion in this study, an Ethical Unconcern scale was developed, including 21 items with an exemplary lever of internal consistency. It provided five factors that reflected all aspects of negative perceptions, feelings and attitudes towards ethical issues in the consumption field. It has been previously claimed that ethical consumer behaviour is more complex and heterogeneous than may at first be apparent (Shaw & Clarke 1999; Cherrier 2007; Newholm & Shaw 2007). This preliminary study indicated that the same argument may be claimed about ethical attitudes as well.

Of course, there is much more to be further pursued in order to increase validation of this new scale and/or examine its impact on all types of ethical consumption namely positive (ethical preferences), negative and discursive (boycotting and digital action).

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

The Portrait of Child Labour in Turkey 1

Burcu DOGAN1 Hitit University, Department of Economics, Center, Çorum, 19000, Turkey, Tel: 90 0541 523 63 56, E-mail: burcu_dogan90@hotmail.com Abstract: For the fact that children represent a country’s future, studying on the issue of child labor in Turkey is necessary. In the study the portrait of child poverty in Turkey is drawn, the legislation on child labor in Turkey is explained and the statistics on child labor in Turkey is evaluated. The fact that Turkey accepting international standards on child labor does not have a favorable rate in child labor, seems very interesting. For this reason this study has a great significance.

Keywords: Child poverty, child labor, distribution of income, Turkey, combat with poverty.

JEL classification:

1. Introduction Today there are about 250 million working children in the world. Although the problem does not bear the characteristics of developing countries as a whole, the fact that it exists largely in these countries shows that it stems from structural problems associated with the deficiency in development such as increasing young population, poverty, unemployment, low education level and distorted urbanisation. In countries with less developed industrial structures, high young population, families generally approach education under the pressure of poverty. The problem also stems from the lack of confidence in the quality of education. The fact that the system of education in developing countries is not well adjusted to the system of production, one tends to think that it will eventually create large numbers of unemployed people in the near future and in an unfavourable economic and social structure children are driven into labor life. Turkey’s Gross Domestic Product was $820,827 billion (nominal) in the year 2013 and Turkish economy has been the 17th biggest economy (according to nominal value) among 30 OECD countries in the same year.

However there have been problems in the distribution of income equitably and the portrait of child labor in Turkey have been unlikable considering that Turkey has been the candidate member of European Union since December 1999.

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For the fact that children represent a country’s future, studying on the issue of child labor in Turkey seems necessary. In this study, the portrait of child poverty in Turkey will be drawn, the legislation on child labor in Turkey will be explained and the statistics on child labor in Turkey will be evaluated. In this study, document scanning is used for data collection and discourse analysis is used for the elaborations. The fact that Turkey accepting international standards on child labor does not have a favorable rate in child labor, seems very interesting. For this reason, this study has a great significance. It is thought that the study will be a serious contribution to the literature on child labor in Turkey.

2. Child Poverty in Turkey Child represents a country’s future and this is an obvious reason for societal concern with child well-being. Children are unable to take full responsibility for their circumstances and are dependent on others to look after and raise them. Their vulnerability provides a powerful moral imperative in favour of collective action in general to help them and a welfare state in particular. To implement this requires prior knowledge about the nature of child poverty and knowledge of what the causes are (Bradbury and Jenkins and Micklewright 2001).

The definition of child poverty is based on four interrelated aspects of poverty experienced by a child (Marshall 2003).The first aspect of the definition of child poverty is “growing up without an adequate livelihood” which means child is grown up without access to the financial and nutritional resources needed for survival and development. The second aspect of the definition is “growing up without opportunities for human development” which means child is grown up without opportunities such as an access to qualified education and life skills, water and sanitation to develop as a healthy person who will fulfill his/her potential in life. The third aspect is “growing up without family and community structures that nurture and protect himself/herself” which means child is grown up without having parents or guardians with time, ability and desire to care for himself/herself; without an extended family or community that can cope if parents and guardians are not able or not there; without a family that cares for and protects child and meets the emotional, personal and spiritual needs of child. The fourth aspect is “growing up without opportunities for voice” which means child is grown up with powerlessness including the lack of political resources underpinning the lack of economic, physical, environmental, social and cultural resources.

The definition of childhood is multi-dimensional and cannot be reduced to definition such as “child poverty is the income poverty experienced during childhood by children” merely.

Child’s well-being cannot be separated from his/her family’s opportunities to attain economic, physical, environmental, social, cultural, political resources which are essential for all the members of a family to fulfil their potential. However the assumption that the policies good for household will be good for the children is objectionable. Children may need more targeted policies (Gürses 2010). Moreover the assumption that the policies toward families will be beneficial for children in the long term is inconvenient. Children are growing up during the short term and they will lose opportunities that they may not be able to regain in later life, for this reason policies addressing the short term situation should be implemented with the policies bringing long term positive changes simultaneously.

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Everyone in the world is a child or has been through childhood and poverty experienced in childhood is poverty suffered during a stage of life which is crucial development of child.

While child poverty shares causes and manifestations with poverty experienced by adults, there are important causes and effects peculiar to child poverty. Crucially, child poverty may have lifelong consequences. There are a number of factors that cause child poverty.

The fundamental causes of child poverty are economic trends and policies, social institutions, political system, diseases such as HIV/AIDs or malaria, environmental stresses such as drought, floating or earthquakes. These factors can be both causes and outcomes at the same time (Gürses 2009).

In Turkey, the most important causes of child poverty are economic trends and policies.

Since 1980s, economic policies in Turkey have been based on neoliberal implementations including measures of reform such as privatisation, opening up of markets to foreign investors, liberalising financial systems, promotion of foreign direct and indirect investments, currency arrangements, restrictions on public expenditure especially in education and health due to debt management, stabilisation packages, and immediate action steps for economic growth. These liberalisation policies in Turkey have resulted in great poverty among low-income groups and fostered child poverty and the measures to combat with the negative effects of the implementation of liberalisation policies such as the application of poverty reduction strategy have not given desired outcomes. According to child development index (CDI) in the years 1995-1999, Turkey -with the score 15.25- is the 73rd in the country ranking in the world. In the same period, according to CDI, Syria is the 52nd and Egypt is the 65th although both Syria and Egypt are lower middle income countries. In the same period, China -with the score of 8.23-which is the most populous country in the world, is the 42nd in the country ranking in the world. In the years 20002004, CDI score of Turkey decreases to 8.86 and Turkey becomes 56th among all countries in the world. Though this improvement is favorable for Turkey, it should be reminded that in the same period, China -with its score 6.39- is the 39th among all countries in the world.

In the years 2005-2010, CDI score of Turkey decreases to 5.70 and Turkey becomes 47th among all countries in the world. The efforts of governmental instructions, UNICEF (United Nations International Children’s Emerceny Fund) and civil society initiatives in the first half of 2000s to eliminate the child poverty under the programs or/and projects namely “The Girls’ Education Company, Regional Primary Boarding Schools, Conditional Cash Transfer and Green Card, Early Childhood Development Project” (Hablemitoğlu, and Özkan, and Purutçuoğlu 2010, 234) resulted in the fall of child poverty rate in Turkey. However all these programs or/and projects have not been sustainable.

When the scores of all countries in the period 2005-2010 are elaborated, it is seen that the portrait of child poverty in Turkey is worse than the portraits of other Middle Eastern countries such as Kuwait and Jordan. And Malaysia -whose economic performance has been compared with Turkey’s economic performance in the last decade has a better portrait of child poverty. Moreover, Latin American countries such as Peru, Brazil and Argentina and Eastern European countries such as Romania, Czech Republic and Croatia have all better portraits in comparison with Turkey. Considering that Turkey’s CDI score has changed from 15.25 to 5.70 for fifteen years, the rate of decline as 1/3 in fifteen years is promising. However there are still many disadvantageous children in poor households whose asset bases are limited with their labor in Turkey. The uneven distribution of resources has not been solved yet. Today, inequality in Turkish society, the gap between the richest and the poorest is still vast and deep and Turkey’s CDI score of 5.70 seems not

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be decreased via simply awareness raising measures. In more clear terms, in Turkey, the indicators of child poverty such as poor health, low educational attainment, lack of life skills, homelessness, social pressure into early marriages, victims of violence and abuse, crimes, legal or illegal forms of child labor are all at serious point that simply awareness raising measures are insufficient to combat with child poverty.

In all countries, the well-being of children is determined by three broad sets of factors: demographics, labor markets, and government policy. By demographic or family factors, there are four effects: the average age of parents, the education of parents, the number of children per household, family structure as indicated by whether the child is living with a single parent or not. The impact of the labor market in child poverty rates is measured by two variables, binary variables indicating whether the parents are working, and the annual earnings they each obtain. These are influenced by broader forces determining employment growth and the distribution of income. The impact of government policy (or state) is measured by changes in the amount of transfer income received by the household (Chen and Corak 2008, 539). It should be noted that the measurement of child poverty rates inherently involves value judgements; however the findings are important to put the focus of attention of the governments toward the issue of child poverty.

In Turkey, children under 19 years of age make up %38 of Turkeyâ&#x20AC;&#x2122;s population (70 million in 2003) and children under 15 years of age represent 29%. Depending on the assumption that households in income share held by lowest 20% are the poor and the individual below 15 is child, 40 children of every 100 children live in poor households. In other words, the households in income share held by lowest 20% own the 40% of the children in Turkey.

The average number of children in households in high-income share is behind the average number of children in households in low-income share (Durgun 2011,149).The reason of the fact that the poor households are inclined to have many children in Turkey arises from the fact that poor families see the children as the contributors to income of the household. In this case, child labor as one of the causes of child poverty seems to be also the outcome of child poverty. The gap between the opportunities presented for children by the households in income share held by the lowest 20% and the opportunities presented for children by the households in income share held by the highest 20% is remarkable. The calculations made by TEPAV (Economic Policy Research Foundation of Turkey) are stated in Table 1: Table 1: Living Conditions of Children in Turkey Questions Asked to Households (Children) Answers The Lowest 20% Income Wearing new clothes No 70.3 Having two pairs of new shoes No 74.7 Eating fresh fruits and vegetables at least No 69.3 once a day Eating three meals a day No 28.5 Eating meat, chicken or fish at least once a day No 88.9 Presence of age-appropriate books at home No 65.6 Having tools (bike,skate..) to spend spare time No 77.6 Having educational toys (lego,checkers..)

No 78.8 Special day celebrations (birthday,feast..)

No 65.2 Visiting medical doctor if necessary No 66.3 Suitable environment for studying courses at No 66.3 home for the children going to school

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The Highest Income 14.0 13.4 13.1 03.4 33.1 09.1 17.4 16.9 15.5 08.2 15.0

20%

(silence,sufficient light...)

Presence of safe area for playing games No 52.7 41.8 outdoors Regular activities in spare time (summer No 72.1 26.6 school,…)

Possibility of invitation of friends for eating No 61.8 12.8 meal Participation in school trips requiring Money No 69.6 19.8 Source: Calculations made by TEPAV based on the data of Turkish Statistical Institute (TurkStat)

In Turkey, child poverty rates change region to region. The highest rate is seen in the south east region of the country where great majority of population is Kurdish. The calculationsi made by TEPAV (Economic Policy Research Foundation of Turkey) are stated in Table 2: Table 2: Regional Differences in Child Poverty in Turkey Regions in Turkey Child Poverty Rate(%) Number of Poor Children South East Anatolia Region (Gaziantep-Şanlıurfa- 53.0 1,403,089 Mardin) Middle East Anatolia Region (Malatya-Van) 45.7 569,838 North East Anatolia Region (Erzurum-Ağrı) 42.3 290,879 Mediterranean Region (Antalya-Adana-Hatay) 23.6 549,669 Middle Anatolia Region (Kırıkkale-Kayseri) 21.5 208,651 West Black Sea Region (Zonguldak-Kastamonu- 21.5 220,513 Samsun) West Marmara Region (Tekirdağ-Balıkesir) 15.7 95,439 Aegean Region (İzmir-Aydın-Manisa) 11.7 221,608 East Black Sea Region (Trabzon) 13.7 77,465 West Anatolia Region (Ankara-Konya) 09.1 143,108 East Marmara Region (Tekirdağ-Bursa) 06.4 92,819 İstanbul (as a province) 04.1 116,410 Source: Calculations made by TEPAV based on the data of Turkish Statistical Institute (TurkStat)

It should be noted that economic growth does not necessarily reduce child povertyii.

According to data of Turkish Statistical Institute(TurkStat),in the year 2011, Turkey’s GDP(Gross Domestic Product) is $ 772,298 which suggests that Turkish economy is the 16th biggest economy among 30 OECD countries. Turkey’s GDP grows by 8,5% in 2011.

GDP per capita in 2011 is $ 10,444 at current prices. Among 193 countries which are the members of United Nations (UN), Turkey -with its GDP (per capita income) in 2011- is the 62nd biggest economy in the ranking of International Monetary Fund (IMF), the 64th biggest economy in the ranking of World Bank (WB) and the 66th biggest economy in the ranking of World Factbook of CIA (Central Intelligence Agency of USA) and these scores prove that Turkey is a upper-middle income country. However there have been problems in the distribution of income equitably and child poverty can not be reduced without equitable distribution between different classes as well as between disadvantaged groups and geographical regions (Kidd, 2012).

The UN Convention on the Rights of the Child contains 54 articles covering almost every aspect of the rights and well-being of children. It is a comprehensive legal text negotiated and agreed by all member states of UN. Two articles of the Convention - article 27 and article 4- are directly related to the well-being of children. Arccording to article 27 governments recognize the right of every child to a standard of living adequate for the child’s physical, mental, spiritual, moral and social development. It states that parents or

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others responsible for the child, but the governments should assist parents, support programs particularly with regard to nutrition, clothing and housing. Article 4 of the Convention notes that these rights shall be fulfilled by each country to the maximum extent of their available resources. In this context, it is seen that the elimination of child poverty is not only as a policy objective, but the elimination of child poverty takes top priority (Corak 2005).

To sum up, the portrait of child poverty in Turkey is unlikable especially considering that Turkey is candidate member of European Union whose members have better portrait of child poverty than Turkey. Accordingly, Turkey should eliminate the child poverty immediately.

3. Legislation on Child Labor in Turkey Child labor is work that harms children or keeps them from attending school either by violating the minimum age laws or by threatening the childrenâ&#x20AC;&#x2122;s physical, mental and emotional well-being. Underage children working under conditions that are considered illegal or extremely exploitative usually because they and their families are extremely poor.

In Turkey, child labor occurs in sectors such as agriculture, domestic works, services and industry. There are also children who work in illicit activities like the drug trade in Turkey.

Children in agriculture face long hours in extreme temperatures, health risks from pesticides, little or no pay, inadequate food, water, and sanitation. Children working in agriculture are used in particular in farming and dairy. In Turkey, especially girls work in domestic services and can be the victims of sexual abuseiii. Work of children in hotels or cafes or restaurants is accepted legitimate in Turkey, but there are indications of considerable abuse. Child laborers in the sector of services are prompted to do the jobs such retail, hawking goods, load and transfer of goods, storage, picking and recycling trash. In informal urban industry, children are labored in operating machinery in small businesses and in large cities there are children working at polishing shoes in the streets.

Low pay is the norm for children working at these sorts of jobs. Children involved in serfdom, forced labor and illicit activities such as producing and trafficking drugs are also extremely exploited.

Most of the child laborers are employed by their parents in Turkey, because income from a childâ&#x20AC;&#x2122;s work is usually crucial for the survival of household. Some parents wonder if going to school is really worth, in the case of the quality of education is poor or the school is far away from the house and it is difficult to reach school for a child. Some parents although they are not in poverty think that work is good for the character building and skill development of children. In Turkish culture, child labor is thought as a means for male children to learn and practice the work life from a very early age by some parents.

Similarly, in Turkish culture, girls are pushed into child labor such as providing domestic services to follow her mothersâ&#x20AC;&#x2122; footsteps in the way of being a matured woman. The most big problem within the female children in the rural areas of Turkey is the fact that the education of girls is less valued and girls are not expected to need schooling. For this reason the rate of child brides -which is one of the reasons of child poverty in Turkey- is high.

Poverty, unavailability of schools or lack of qualifed schools (especially in south east region) explains the child labor in Turkey, but there is one additional reason which causes

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child poverty more than the others: growth of low paying informal economy in the last decade. Because of the fact that the great majority of enterprises in manufacturing industry consists of small and medium businesses and these businesses are lack in high techologies and have labor-intensive production, the demand of child labor occurs in Turkey. If the informal economy is not eliminated or at least the size of it is not minimized and the small and medium sized businesses are not scaled up to big businesses and transform their production from labor-intensive to capital-intensive production, it is almost impossible to eliminate child labor under free market conditions where demand and supply of the products are flexible. Turkey -which is an upper-middle income country and has to surpass the income trap under the sharp competition of world market- has not been able to generalized the higher paying formal economy not to reduce the level of exports. In this context, Turkey seems unable to eliminate child labor, even has to bend the minimum age laws to increase the acceptability of child labor undermining the labor standards in the country.

In Turkish constitution according to article 50, no one shall be required to perform work unsuited to his/her age and capacity. In this article it is also stated that minors with physical or mental disabilities shall enjoy special protection with regard to working conditions. In Turkey, legislation on child labor is included in “Labor Act of Turkey” numbered 4857 which was published in Turkish Official Gazette on 10 June 2003 and some of whose articles were changed by the Law numbered 6270 on 17 January 2012. According to Law numbered 4857, employees under the age of 18 are divided into two categories as child employees and young employees. An employee at the age of 14 and 15 is accepted as child and an employee who does not complete the age of 18 is accepted as young in the law. The work is divided into two categories as light work and heavy and dangerous work according to the nature of the work in the law. Jobs which will probably not have a harmful effect on children’s development or health and safety and jobs that do not prevent children continuing at school, participating in vocational training and training programs ratified by the local official and their benefiting from these types of activities are accepted as light work. However works in underground exploration and drilling, industry of metallurgy, stone industry, industries of metal made and wooden made products, chemical industry, textile industry, paper and cellulose industry, alcohol drinks and cigarette industry, production of explosives, noisy workplaces, jobs done in very cold and very hot conditions, workplaces including radiocative substances, power generation industry, jobs related with transportation, jobs related with agricultural and animal husbandry, warehousing are accepted as heavy and dangerous works.

Provisions of the articles of Law numbered 4857 which are on the protection of child and young employees are in accordance with European Community Council Directive indicated as 94/33/EC on the protection of young people at work. For the proof of this claim, two examples can be given. For instance in article 3 of the Directive, it is said that “young person shall mean any person under 18 years of age” and “child shall mean any young person of less than 15 years of age or who is still subject to compulsory full time schooling under national law” and “adolescent shall mean any young person of at least 15 years of age but less than 18 years of age who is no longer subject to compulsory full time schooling under national law”. And in article 7 of the Directive, the works that are prohibited for young people are stated as “work which is objectively beyond their physical or psychological capacity; work involving harmful exposure to agents which are toxic, carcinogenic, cause heritable damage, or harm to the unborn child or which in any other

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way chronically affect human health; work involving harmful exposure to radiation; work involving the risks of accidents which it may be assumed can not be recognized or avoided by young persons owing to their insufficient attention to safety or lack of experience or training; work in which there is a risk to health from extreme cold or heat or from noise or vibration” and these prohibited works are also prohibited for the young employees in Turkey by considering that these works are heavy and dangerous works.

The provisions related with child labor are in the articles 71,72,73,85,87,104,105 of Law numbered 4857. In article 71 entitled “Working age and restrictions on the employment of children”, it is stated that employment of children who have not completed the age of 15 is prohibited. However, it is also said that children who have completed the full age of 14 and their primary education may be employed on light works that will not hinder their physical, mental and moral development, and for those who continue their education, in job that will not prevent their school attendance. According to this article, in the placement of children and young employees in jobs and in the types of work where they are employable, their security and health, physical, mental, psychological development as well as their personal suitability and capability shall be taken into consideration. In the article it is stated that the job the child performs must not bar him/her for attending school and from continuing his/her vocational training, nor impair his/her pursuence of class work on a regular basis. It is also stated in the article that the working time of children who have completed their basic education and yet who are no longer attending school shall not be more than 7 hours daily and more than 35 hours weekly. However, in the article it is said that working time may be increased up to 40 hours weekly. According to article 71, the working time of school attending children during the education period must fall outside their training hours and shall not be more than two hours daily and ten hours weekly. According to article 53 of Law numbered 4857, both child and young employees shall be allowed to take annual leave with pay and the length of annual leave with pay must not be less than 20 days and annual leave with pay must not be divided into more than two parts.

In article 72 entitled “Restrictions on underground and underwater work”, it is stated that boys under the age of 18 and women irrespective to their age must not be employed on underground or underwater work like mines, cable-laying and the construction of sewers and tunnels. In article 72 entitled “Restrictions on night work”, it is stated that children and young employees under the age of 18 must not be employed on industrial work during the night. In article 85 entitled “Arduous and dangerous work”, it is stated that young employees who have not completed the age of 16 years and children must not be employed on arduous or dangerous work. According to Regulation on Heavy and Dangerous Works dated 2004, employees completed the age of 16 but under the age of 18 are not allowed to works in sectors “underground exploration and drilling, industry of metallurgy, stone industry, industries of metal made and wooden made products, chemical industry, textile industry, paper and cellulose industry, alcohol drinks and cigarette industry, production of explosives, noisy workplaces, jobs done in very cold and very hot conditions, workplaces including radiocative substances, power generation industry, jobs related with transportation,jobs related with agricultural and animal husbandry, warehousing”. However, young employees completed the age of 16 and graduated from vocational schools and acquire profession on heavy and dangerous works are allowed to work on heavy and dangerous works related with their profession provided that their health, security and morality are under protection in full.

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It is required to underline that there are works and working relationships in which Law numbered 4857 is not applied. In the article 4 of this law, these works are stated as “sea and air transportation jobs, agricultural and forestry businesses where the number of employees is below 50, construction works related with agriculture in family economy, handicrafts made at homes under the supervision of relatives, houseworks, works of apprentices, workplaces with maximum three employees that are subject to the Law of Craftsmen and Artisans.” Child and young employees working in shipping, pofessional sports, cultural, artistic and advertising jobs are subject to Public Sanitation Law dated 1930 and law of obligations (Bakırcı 2007). Exclusion of some works from the application of Law numbered 4857 because of either the nature of work or the necessity of work, can be evaluated as the deficiency of legislation on child labor in Turkey. Here, it is required to remind that Ministry of Labor and Social Security, labor and employers’ unions and the public have identified three worst forms of child labor in Turkey, namely, children in seasonal and/or mobile agricultural work, in small and medium sized manufactories, and in the street (Gülçubuk 2010, 1389).

Ministry of Labor and Social Security(MOLSS) declared that for the year 2012 net minimum wage for the children who have not completed the age of 16 is 643,14 Turkish liras ($ 358) and net minimum wage for the children who have completed the age of 16 is 739,79 Turkish liras ($ 412). However according to researches made by trade unions in Turkey, it is seen that child laborers below 16 have been paid 1/3 of the net minimum wage and young laborers have been paid 1/2 of the net minimum wage and they work informally, out of record.

In article 87 entitled “Medical certificate for employees aged under 18 years”, it is stated that before being admitted to any employment, children and young employees aged between 14 and 18 (including those in their 18th year) shall be examined by the medical practitioner attached to the establishment or by an employees’ health service, or in the absence of either, by the mdeical services of the nearest Social Insurance Organisation, health center, government or municipal medical parctitioners, in that order, and shall be certified as being fit physically fit for the job to be performed, taking into consideration the nature and conditions of the work. It is also said that until employees have reached the age of 18, they shall be subject to medical examinations at least every six months to determine whether or not there is any drawback in their continuing their employment; all certificates shall be filed in the establishment and produced by the employer on request by any competent official and Social Insurance Organisation may not refrain from conducting the first examination before the employee’s admission to employment.

In article 104 entitled “Violation of provisions on organisation of work”, it is stated that an employer or his/her representative shall be liable to a fine of 1,200,00 Turkish liras ($ 669) if he/she fails to comply with the provisions of the articles 71,72,73. In the article 105 entitled “Violations of the provisions as to health and safety”, it is stated that an employer or his/her representative shall be liable to a fine of 1,200,00 Turkish liras ($ 669) if he/she employs in contravention of article 85, children under the age of 16 in arduous and dangerous work or if he/she violates the age limits prescribed in article 85. In article 105 it is also said that an employer or his/her representative shall be liable to a fine of 220,00 Turkish liras ($ 122) for each child involved if he/she does not procure medical certificates for the children in accordance with article 87.

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Turkey which signed Constitution of International Labor Organisation (ILO) in the year 1932, accepted international standards on child labor by ratifying Underground Work (Women) Convention no.45 in 1937, Minimum Age (Sea) Convention no.58 in 1959, Minimum Age (Trimmers and Stokers) Convention no.15 in 1959, Radiation Protection Convention no.158 in 1968, Maximum Weight Convention no.127 in 1972, Medical Examination of Young Persons (Industry) Convention no.77 in 1983, European Social Charter of the European Council in 1989, Minimum Age (Underground Work) Convention no.123 in 1991, Minimum Age (Industry) Convention no.59 in 1992, United Nations Childrenâ&#x20AC;&#x2122;s Rights Convention in 1995, Minimum Age Convention no.138 in 1998, Worst Forms of Child Labor Convention no.182 in 2001, Optional Protocol to the Convention on the Rights on the Sale of Children, Child Prostitution and Child Pornography in 2002, European Social Charter(Revised) of the European Council in 2007.

Turkey, in which compulsory basic education has been 8 years since February 1997 and school beginning age has been the age of 5,5 (66 months) since September 2012, seems to accept the age of 13,5 (8+5,5=13,5) as the age of starting work actually. However, before September 2012, school beginning age was the age of 7 (84 months) and from 1997 to September 2012, Turkey accepted the age of 15 (8+7=15) as the age of starting work actually. In this connection, it is possible to claim that Turkey has provided the opportunity for the violation of the limits of age of employment since the last change in school beginning age. The governing party (AK Party) which has been in power since 2002 objects this fact and argues that in recent years industrialised countries tend to use the issue of child labor as a barrier in international trade against developing countries, in particular against Turkey. According to governing party, rich countries with more industrialised economic structures have taken further action to establish a link between child labor and international trade in the form of social standards and this approach disregards the existing socio-economic structure of Turkey and will harm Turkeyâ&#x20AC;&#x2122;s economy.

4. Evaluation of Statistics on Child Labor in Turkey Turkey, which has accepted international standards on child labor, does not have a favorable rate in child labor. This is not because of lack in laws and regulations, but because of lack in enforcement or lack in coordination between instutional mechanisms.

The Disadvantaged Groups Department (DGD) of the Ministry of Labor and Social Security(MOLSS) is the primary agency coordinating the child labor efforts of the Ministry of Education, the Social Services and Child Protection Instution, the Ministry of the Interior, the Ministry of Justice and non-governmental organizations. The DGD acts as the secretariat of the National Guidance Committee which monitors child labor and the activities of the government to combat with the problem of child labor. MOLSS conducts labor enforcement in workplaces that are covered by the labor law including medium and large scale industrial and service sector enterprises. MOLLS inspectors are responsible for enforcing the child labor legislation and are instructed to prioritize complaints alleging child labor. There are nearly 850 labor inspectors, all of whom are authorized to conduct inspections on child labor.

According to governmental official reports, in 2010 Labor Inspection Board conducted 46,969 labor inspections which revealed 22,271 employed youngs and no child younger than age of 15 were found in heavy and dangerous work. According to official reports,it is said that in 2010 MOLSS implemented a special child labor inspection project in the

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province Ankara in Ivedik Organized Industrial Zones and 230 workplaces were inspected and only three underage workers were detected. This seems not true considering the findings of non-governmental organizations in Turkey. For instance, on the day of combat with child labor on 12 June 2012, a labor union in Turkey, DİSK declared that an extensive research has been made. With the assumption of people at the age between 5 and 17 are children, it has been found that there are 1 billion 586 million children in the world and 306 million of this population is child labor. According to DİSK, there are 958 thousand child laborers in Turkey. DİSK emphasized that the strking finding of the research is the increase in the number of child laborers in industrial works in Turkeyiv. While the percentage of child laborers in industry in 1994 is 16, this increases up to 28% in 2006. And the number of children working in trade has been increasing according to research of DİSK. The increase of the percentage of child laborers in trade (from 8% in 1994 up to 22% in 2006) seems unfavorable, because the economic relationships in trade are very flexible and irregular and the irregularities in workplaces pave way to the exploitation of children.

Complaints about child labor can be made by phone to a hotline operated by the Social Services Instution or to the web site of Prime Minister’s Office Communications Center in Turkey. However, as the child labor is a kind of strategy for households to combat with poverty, it seems useless. The Turkish National Police (TNP) employs nearly four thousand officers tasked with addressing children’s issues and TNP also investigates cases of human trafficking but there is no any information on the number of criminal investigations, victims, court cases or convictions for violations of the regulations. The Rural Development Plan (2010-2013) prepared by the Ministry of Agriculture and Rural Affairs, addresses child labor in agriculture and focuses specifically on seasonal migrant labor. But all these polices held by different branch of government seems not to address the problem of child labor.

The reason seems to be the lack in coordination of the governmental departments and unsuccess to give a start to implement a comprehensive program to combat with the problem.

According to data of Turkish Statistical Institute (TurkStat) for the year 2006, the number of children aged 6-17 in Turkey is 16,264 and 60,9% of this population is in urban areas and 39,1% of it is in rural areas. And 84,7% of 16,264 children attend school and 15,3% of 16,264 children does not attend school. Girls constitute 58,8% of the children population in Turkey for the year 2006. The most striking data is that 68,5% of female children does not attend school. According to TurkStat data, most of the child laborers (40,9%) work in agriculture. According to UNICEF for the year of 2003, children under 19 years age make up 38% of Turkey’s population (70 million in 2003) and children under 15 years of age represent 29% and Turkey’s population growth rate is falling but the size of the population of children is expected to be unchanged by 2015v. According to UNICEF in the same year, 37% of children under 15 years of age are living with food and non-food poverty and this means that their parents and care givers have insufficient means to feed, clothe, shelter, educate and protect them properly. Children most at risk of poverty in Turkey include those who are born into large families with only one breadwinner; who grow up in dry, mountainous rural areas where outmoded farming techniques and limited access to major markets threaten livelihoods; who are from single-parent families; whose families have recently migrated to urban areas; whose parents work in informal and causal employment and have no regular income as a result; whose parents have little or no formal education are often unskilled and have a lower than average earning capacity; whose parents are

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underemployed and unable to earn enough; whose parents are long term unemployed living with a disability or caring for a disabled person.

According to ILO statistics of September 2012, labor force participation rate in Turkey for the year 2011 is 49,8%. However 71,6% of this annual average is men and 28,8% of it is women. Labor force participation rate for the year 2011 by youth is 39,2%. Estimates of child labor made by national or international instutions or/and governmantal or nongovernmental organizations vary because different working ages are counted. It ranges between 250 to 300 million, if children aged 5-17 invloved in any economic activity are counted. If light occasional work is exluded, ILO estimates there are 153 million child laborers aged 5-14 worlwide in the year 2008. According to ILO statistics, nearly 60% of the child labor is involved in agricultural activities such as farming, dairy and forestry and nearly 25% of chil labor is in service activities such as retail, hawking goods, restaurants, load and transfer of goods, storage, picking trash, polishing shoes, dometstic help. The remaining 15% of child labor is in informal economy, small business, operating machinery in medium businesses and such kind of operations. Child labor accounts for 22% of the workforce in Asia, 32% in Africa, 17% in Latin America and 1% in USA, Canada and wealthy European countries. Because of the fact that the accurate child labor information is difficult to obtain and there are disagreements between data sources as to what constitutes child labor, all the statistics about child labor should be evaluated with doubt.

According to report entitled “2010 Findings on the Worst Forms of Child Labor in Turkey” which was prepared by USA Department of Labor’s Bureau of International Labor Affairs and dated 3 October 2011, working children between the ages 5-14 constitutes 2,6% and children attending school between the ages 5-14 constitutes 92,4% and the children combing work and school between the ages 5-14 constitutes 1,6% of total population of children in Turkey. In 2010, Turkey’s population is 73,722,988 and 22,5 million of this population is below the age of 18 constituting 30,7% of it. However the children between the ages 0-14 constitute 26% of the population. In this report, it is stated that children who are engaged in the worst forms of child labor, particularly work in agriculture and urban informal sector. It is said that children are involved in the agricultural production of cotton, tobacco, hazelnuts and sugar beets and children in agriculture often work long hours and are invloved in activities such as using potentially dangerous machinery and tools, carrying heavy loads and applying harmful pesticides. In the year 2009, according to Turkish government, the number of children working in the streets is 8,298. In the report it is emphasized that parents force the children to shine shoes, sell tissues and food and children working in the streets may be exposed to many dangers including severe weather, vehicle accidents and criminal elements. According to report, 57,1% of child laborers works in agriculture, 14,3% works in manufacturing and 27,1% works in services, however 1,5% is indicated as other works.

In Turkey, necessary laws and regulations exist related with the issue of child labor.

However there is lack in coordination among relavant instutions to combat with the problem and there is lack in enforcement of the present laws and regulations on child labor. Although legislation on child labor in Turkey complies with the international standard in the legislation on child labor, Turkey does not have a favorable rate in child labor. It is thought that creating sensitivity toward the issue of child labor or increasing interest of public view toward the issue or consciousness raising activities seem not to be solution. However, the only solution to decrease the rate of child labor in Turkey under 1% as in the case of wealthy countries, seems to extend the time period of compulsory

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education from 8 years up to 12 years and at the same time increasing the school begining age from 66 months up to 96 months.

Conclusion Turkey which is a developing country, has ratified most of the necessary international regulations on child labor and the protective legal regulations to prevent the exploitation of children are sufficiently strong. However, child labor is existent at high level in Turkey considering the levels of child labor of member states of European Union. It is thought that creating sensitivity toward the issue of child labor or increasing interest of public view toward the issue or consciousness raising activities seem not to be solution. However, the only solution to decrease the rate of child labor in Turkey under 1% as in the case of wealthy countries, seems to extend the time period of compulsory education from 8 years up to 12 years and at the same time increasing the school begining age from 66 months up to 96 months.

References [1] Acar,Ozan.2012. “Geleceğin Güçlü Türkiye’si ve Yoksul Çocuklarımız”. TEPAV (Türkiye Ekonomi Politikaları Araştırma Vakfı) http://www.tepav.org.tr/tr/kose-yazisi-tepav/s/3287 Accessed February 8, 2013.

[2] Bakırcı, Kadriye. 2007. “Türk İş Hukukunda Çocuk ve Genç İşçilere Yönelik Ayrımcılık,” in Politika Tartışmaları (Cahit Talas Anısına),ed. B.C.Ataman, 101-134. Ankara Üniversitesi SBF Yayınları:Ankara.

[3] Bradbury, Bruce, and Stephen P. Jenkins, and John Micklewright. 2001. “Beyond the Snapshot: A Dynamic View of Child Poverty,” in The Dynamics of Child Poverty in Industrialised Countries, ed.B.Bradbury, and S.P.Jenkins, and J.Micklewright, 1-20. Cambridge University Press: Cambridge.

[4] Browning, Martin. 1992. Children and Household Economic Behavior. Journal of Economic Literature.

30(3):1434-1475.

[5] Chen,Wen-Hao, and Miles Corak. 2008. Child Poverty and Changes in Child Poverty. Demography.

45(3):537-553.

[6] Corak, Miles,and Michael Fertig, and Marcus Tamm. 2005. “Portrait of Child Poverty in Germany”.

UNICEF Innocenti Research Center, discussion paper no:1528. http://ftp.iza.org/dp1528.pdf Accessed February 8, 2013.

[7] Corak, Miles. 2005. “Principles and Practicalities for Measuring Child Poverty in the Rich Countries”.

[8] UNICEF Innocenti Research Center,discussion paper no: 1579. http://ftp.iza.org/dp1579.pdf Accessed February 8, 2013.

[9] Çakmak, Diren. 2009. “Türkiye’de Çocuk Gelinler (Child Brides in Turkey)”. Birinci Hukukun Gençleri Sempozyumu-Hukuk Devletinde Kişisel Güvenlik Sempozyumu,20-21 Mart 2009, Ankara Üniversitesi, Ankara. http://www.umut.org.tr/hukukungencleri/tammetinlersunular/direncakmak.pdf Accessed February 8, 2013.

[10] Çakmak, Diren. 2009. “The Instrument for the Legitimacy of the New-Right Movement: Poverty Reduction Strategy of World Bank”. Eurasia Business and Economics Society (EBES) 2009 Conference, 1-2 June 2009, Kadir Has University, Istanbul.http://web.hitit.edu.tr/direncakmak/ Accessed February 8,2013.

[11] Durgun,Özlem.2011.Türkiye’de Yoksulluk ve Çocuk Yoksulluğu Üzerine Bir İnceleme. Bilgi Ekonomisi ve Yönetimi Dergisi. 6(1):143-154.

[12] Gülçubuk, Bülent. 2010. Child Labor under the Worst Conditions: Child Laborers in Cotton Production in Turkey. African Journal of Agricultural Research. 5(12):1388-1393.

[13] Gürses, Didem. 2009. An Analysis of Child Poverty and Social Policies in Turkey. The Journal of Developing Societies. 25(2):209-227.

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[14] Gürses, Didem. 2010. “Children and Child Poverty in Turkey,” in Kindheit und Jugend in Muslimischen Lebenswelten, ed. C.H. Kreisel, and S. Andresen, 257-269. VS Verlag für Sozialwissenschaften: Wiesbaden.

[15] Hablemitoğlu, Şengül, and Yasemin Özkan, and Eda Purutçuoğlu. 2010. The Millennium Child Poverty in Developing Turkey. The Journal of International Social Research. 3(12):230-237.

[16] Kıdd, Stephen.2012. “Child Poverty in OECD Countries: Lessons For Developing Countries”. Pathways’ Perspectives.http://www.developmentpathways.co.uk/wp-content/uploads/2012/06/PathwaysPerspectives-2-Child-Poverty1.pdf Accessed February 8, 2013.

[17] Marshall, Jenni. 2003. “Children and Poverty-Some Questions Answered”. CHIP Policy Briefings 1. http://www.childhoodpoverty.org/index.php/action=documentfeed/doctype=pdf/id=46/ Accessed February 8, 2013. i

The calculations are made by researcher of TEPAV,Ozan Acar. According to Ozan Acar, there are two main reasons of the high rate of child poverty in the south east region of Turkey. First one is low level income in the region and the second one is high rate of the average number of children in the region. He emphasizes that the great gap between the eastern and western regions of Turkey in the context of child poverty is one of the most serious problems of Turkey. Please look at his article entitled “Geleceğin Güçlü Türkiye’si ve Yoksul Çocuklarımız”http://www.tepav.org.tr/tr/kose-yazisi-tepav/s/3287 Accessed February 8, 2013. ii Miles Corak,Michael Fertig and Marcus Tamm prepared a discussion paper (no.1528) entitled “A Portrait of Child Poverty in Germany” for UNICEF Innocenti Research Center in February 2005 and in this study it is said that “Despite half a century of considerable economic growth and large increases in per capita income, child poverty is still prevalent in the world’s most advanced countries. According to Corak (2005) the proportion of children living in households with less than one-half of median income in the OECD countries ranges from less than 3 per cent to more than 25 per cent and in the majority of countries is above one in ten. At the same time many observers fear that growing up in poverty undermines the well-being and opportunities of children, possibly leading to learning difficulties, lower levels of schooling, higer probabilities of delinquent behavior and unemployment, and ultimately to a self-enforcing spiral of poverty across generations.” Please look at “Portrait of Child Poverty in Germany”, http://ftp.iza.org/dp1528.pdf Please also look at for the report entitled “Child Poverty in Perspective: An Overview of Child Well-Being in Rich Countries” UNICEF Innocenti Research Center, report card no:7, http://www.unicef.org/media/files/ChildPovertyReport.pdf Accessed February 8, 2013. iii According to article 227 of Turkish Penal Code, prostitution for persons younger than age 21 and the sexual exploitation of children in the production of pornography is prohibited. Article 80 of Turkish Penal Code outlaws trafficking for the purposes of sexual exploitation and forced labor. Please look at http://www.tbmm.gov.tr/kanunlar/k5237.html for Turkish text of the code. Accessed February 8, 2013. iv DİSK argues that with the decrease in school beginning age from 84 months to 66 months, the rate of child labor will increase as the graduate age from compulsory basic education is thought to be the the age of starting work. DİSK offers to be extended the time period of compulsory education from 8 years up to 12 years. Look at the offers of DİSK from its own website. http://www.disk.org.tr/default.asp?Page=Content&ContentId=1317 Accessed February 8, 2013. v Fertility rate in Turkey vary from region to region. The highest rate is in the eastern region. It is 3,26. In other regions the rate ranges between 1,73 to 2,20. The data has been taken from newsletter (no:10923) of Ministry of the Interior of Turkey, Gneral Directorate of Civil Registration and Nationality, http://www.tuik.gov.tr/PreHaberBultenleri.do?id=10923 Accessed February 8, 2013.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Socio-Economic Characteristics of the Elderly Population in Romania Manuela EPURE1, Liliana GURAN-NICA2 1,2 “SpiruHaret” University, Ion Ghica, no. 13, Bucharest, 030045, Romania Tel: +40214551000, Fax: +40213143900, Email: info@spiruharet.ro Abstract: Europe is currently facing the highest ageing rate worldwide. Romania, a EU-member country since 2007 has to cope with its own demographic difficulties, e.g. an overall population decline, an increased proportion of elderly and a longer average life-span, a majority of female elderly, etc. The ageing process had a th progressive course, which began in the latter half of the 20 century, particularly in the countryside, where certain settlements appeared to be at greater demographic risk. The situation had also significant socio-economic implications. In 2012, people aged 60 and over represented 22% of Romania’s population, with 25.5% living in the village and 19% in town. According to forecasts, the nest few decades will witness a rapid and massive growth of elderly people, from 4.5 million in 2012 to 6.5 million in 2050. As the elderly category, mostly retired and inactive, puts greater pressure on the active adults, social and economic problems become ever more acute, given that the existing pensions system cannot adequately sustain the older population; besides, neither is the health-care system ready to meet the increasing demands of this ever larger category. It follows that Romania should take the necessary steps now and start adjusting to these issues in order to avoid the risk of endemic poverty among elderly people. In view of it, a coherent medium-and-longterm development programme should be elaborated, capable to rebalance the demographic structure and solve many of the problems associated to ageing.The present study takes an in-depth look at all these issues and highlights regional disparities.

Keywords: elderly population; Romania.

JEL classification: J11; J14

1. Population Ageing – a Worldwide Problem “Population ageing is one of the most significant trends of the 21st century. It has important and far-reaching implications for all aspects of society. Around the world, two persons celebrate their sixtieth birthday every second – an annual total of almost 58 million sixtieth birthdays. With one in nine persons in the world aged 60 years or over,

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projected to increase to one in five by 2050, population ageing is a phenomenon that can no longer be ignored” [***, 2012, p. 3].

Human society has had a windy pattern of evolution characterized by permanently alternating ups and downs. As the most dynamic of all the 20th century was marked by several processes, some of them allegedly considered to have negatively impacted upon society; based on this, scientists concluded that our present-day society is a globalized “risk society” [Beck, 1992, ***, 2002].

Some of these risks were generated by the demographic evolution. Two hundred years ago the issue of the planet becoming overpopulated was a common topic brought up by many scientists, such as Malthus. He is the one who mentioned this risk in his “Essay on Principle of Population”, where he dwells upon one of the most discussed topics in the past 50 years, namely the ageing of population (Nancu, Guran-Nica, Persu, 2010). Thus, based on the findings of various studies warning about the above-mentioned phenomenon, the Second World Assembly on Ageing held by the UN in Madrid in 2002, an International Plan of Action on Ageing was drawn which ”emphasizes the crucial role of governments in ‘promoting, providing and ensuring access to basic social services, bearing in mind specific needs of older persons’2; fully recognises the rights and contributions of older persons themselves; and draws attention to the urgent need for action on ageing worldwide, in line with the central concept of ‘A Society for All Ages’3. Its main areas of action are: 1. Older persons and development; 2. Advancing health and well-being into old age; and 3. Ensuring enabling and supportive environments”. [***, 2011, p. iv].

There are lots of geographical studies which analyse this phenomenon that ”consists in the growing ratio of the elderly population (from 60 or 65 upwards) in the population total numbers”[Rotariu, 2006, p. 78; ***, 2013]. Scientists unanimously agree that the process started when the demographic transition took off about 100 years ago [***, 2005]. The first countries which felt the strongest impact of this process were the developed ones, with a prediction that the effect of the population ageing will be felt in the developing as well as in slightly developed countries [Epure, 2012]. There is also a possibility that a second demographic transition (featuring a strong decline in fertility) will spread from the developed countries towards the other states, especially the ones in Asia, and also a third demographic transition triggered by the international migration [Harper, Leeson, 2008].

The analysis of this phenomenon takes into account the two main causes, namely the decrease in fertility and the decrease of the mortality ratio[Rotariu, 2006; Weil, 2006; ***, 2005; ***, 2013], in which the latter causes an increase in life expectancy. The effects of the two demographic indicators combine with the ones caused by the indirect impact of some social and economic elements, as the level of people’s education, their mentalities and traditions, the development of the health system, of the corresponding infrastructure, the living standard, and overall the general level of development, not to mention the economic behaviour of the state [Nancu, Guran-Nica, Persu, 2010].

The impact of the ageing process is also to be felt by all the components of the socialeconomic system. Thus the first areas to be impacted are the demographic components (the increase of the elderly population ratio, the decrease of the dependency factor and 2

* * * (2002), article 13 Concept adopted for the International Year of Older Persons in 1999, developed from a concept that has been formulated at the World Summit of Social Development in Copenhagen in 1995 – the concept of A Society for All (Sidorenko, Walker, 2004) 3

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last but not least, the increase of the raw mortality rate)[Rotariu, 2006]. The next ones to be affected are the remaining socio-economic components especially the pension system and the health insurance one, representing in fact the impact upon the state´s financial resources.

Nowadays, the ageing process affects all countries, but its impact is considerably stronger in the highly developed countries where the average age of the population is far above the world one, namely 40 years as compared to 29 [***, 2013]. The analysis of the ageing index4 conveys the same results, namely 44.6% worldwide, as compared to 147.4% in Europe (the fastest ageing continent) and 103.2% in North America [***, 2013]. The general overview focuses on the discrepancies between geographical areas regarding the ratio of the elderly population within the total population of the globe (figure 1). One can notice clear differences between the higher developed regions on one hand and the developing or less developed regions on the other hand. “Most western style countries have aged continuously over the past century […]. Europe reached maturity at the turn of the millennium, with older people than younger” [Harper, Leeson, 2008, p. 1]. This phenomenon is already noticeable in less developed countries. „Already two thirds of the world’s older population live in less developed regions with the absolute numbers of older people in these regions doubling to reach some 900 million within 25 years” [Harper, Leeson, 2008, p. 1].

Figure 1: Proportion of old (60 years and over) in total population at continental level

Figure 2: Population ageing in Europe (2013)

4

Figure 3: Dependency ratio in Europe (2013)

ageing index=no. of persons aged 60 and over per hundred persons under 15

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From this point of view Romania is a good example. As a developing country belonging to the European continent, it perfectly fits the category of the states where the population is ageing. A percentage of 21.2 of elderly population and a value of 141.5 of the ageing index place Romania among the ageing countries of Eastern Europe, but nevertheless on the higher end as compared to the other Eastern European states (figure 2). A similar situation can be identified in Romania regarding the dependency ratio with a particular mention that in this country the ratio is extremely high, placing Romania in a negative place as compared to the rest of the European states (figure 3).

2. Characteristics of the Ageing Process in Romania The ageing process in Romania started in the 20th century. Towards the beginning of the century the younger population (<15 years old) represented over 30%, while the elderly population percentage was 6% of the total population numbers. Nowadays the situation is completely reverse as shown in figure 4. Therefore one can say that a shift in the age groups occurred, which has worsened the demographic situation. This negative change refers to a total shift of the ageing index from 22% to 140% (actually a change of 100% when considering population aged 65 and over). Thus, the current position that Romania holds is one of a European country with clear ageing tendency.

Figure 4: Age structure - evolution Data source: INS

Figure 5: Age structure - 2012 Data source: INS

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When examining the group ages as their data appear during the last census (figure 5) the situation is worrying, in the sense that one of the most numerous age groups (55-59) will soon reach pensionable age, which will dramatically increase the numbers of the dependent population and will result in higher pressure on the active population. The situation is even more difficult when the number of younger contingents become increasingly reduced, so the future generations of actives will have to support quite a high number of non-actives.

The demographic ageing is even more visible in the rural areas of the country. It began in the second half of the 20th century, gradually becoming more acute after 1992. In fact, this process marks the transition from the traditional trend of reproduction of population, characterized by high rate of natality and mortality, towards a more modern trend featuring low birth rates and low mortality rates, specific to present days [Nancu, GuranNica, Persu, 2010].

Lately, a decline in fertility can be considered quite worrying; the process started in 1990 and became quite strong after 2000. In Romania, the countryside has traditionally been viewed as the Romanian people´s main source of vitality, since families in the countryside were larger than the city ones. Today, this demographic feature is no longer visible.

Statistics reveal that for each child-bearing woman in the country there is a corresponding number of 1.3 children, less than the required number of 2.1 in order for the population to be replaced [Nancu, 2006]. Thus, the increasingly low values of the fertility index determine a slow rhythm of replacing the generations, and subsequently a decline in population numbers, as well as ageing (figure 6).

Figure 6: Population pyramid - 2012 Data source: INS

From a spatial point of view one can notice that the ageing process has spread in all developing regions of Romania, hence the corresponding graphic representation in the shape of a pyramid has a narrow base in all cases. The only revitalising tendency is represented by a wider base of the pyramid in the region BucureĹ&#x;ti-Ilfov, corresponding to a higher natality rate.

The ageing process has manifested itself at different times in various areas (figure 7).

Some counties in the West of the Romania (such as TimiĹ&#x;, Arad) and also in the centre (Sibiu, Harghita, Covasna), have kept the tradition of small families, with few children, which meant a low natality rate, namely a constant ageing of the population, or lower ageing rhythm. The opposite is represented by the majority of the counties in Moldova and the Romanian Plane, where higher ageing rhythms can be witnessed due to the fact 132

that the fertility rate and implicitly the natality rate have dramatically decreased lately.

Moreover, these areas which were former high-natality areas in the past, have a big number of elderly population, although one must take into account the process of migration for work purposes which happened in these regions over the years.

Figure 7: Old population (%) and the rate of ageing (1966-2010) Source:Nancu, Guran-Nica, Persu, 2010

3. Socio-Economic Impact One of the most reliable indicators for the impact of the ageing process of the population is the degree of demographic dependency. When it comes to the ratio between the inactive population groups (both young and elderly) and the active population (15 to 59), this indicator provides valuable information regarding the economic burden placed on the productive population. This is based on the concept of ´´dependent´´ being understood as active, while the able population can also be viewed as maintained (namely economically dependant).

From this point of view, the place that Romania holds within the EU is not a priviledged one. With a degree of dependency of 56.2% (the average being 50.2 within the EU) our country is placed at the bottom of the list, while only a few countries such as Czech Republic, Poland, Slovakia, Slovenia are ahead of it. Importantly, the values of the degree of dependency have generally gone down during 1930-2012, but this feature can also be explained by referring to a decline in the numbers of the young population. The evolution itself was a windy one, whith natality reaching a peak in 1977, after a sharp increase following the law regarding births. The decrease of natality up to 2002 was due to the fact that the youths of the 70´s joined the active able population, thus contributing to an increased ratio of the active population within the total numbers. During the past ten years the tendency of the degree of dependency to go up is undoubtedly determined by the ageing of the population: this is clearly shown in the age pyramid as well as by the indicators mentioned above.

The geographical differences are significant (figure 8). As expected, the dependency factor in the urban area is much lower than in the rural area, since towns are centres that 133

concentrate the majority of the work force. The increased values in the rural areas are strictly determined by the process of demographic ageing. The most affected are the counties in the North-East, South-East, South and South-West (over 60%). The region Bucharest-Ilfov is the most priviledged one, since the dependency factor doesn´t exceed 50%. In this area, the index corresponding to the rural region is slightly higher, but never exceeding 60%; the higher numbers of the younger population are also a strong influence.

Figure 8: Dependency ration by development regions - 2012 Data source: INS

4. Basic Approaches of Population Ageing Facing a problem means always to have a problem solving approach, looking at the best ways to get the problem solved is not simple, several alternatives can be explored and the scholars (***, 2012b) that have been studying population ageing suggest the following four approaches:  Workers save more and consume less in order to prepare better for their retirement.  Workers pay higher taxes (and consume less) in order to finance benefits for older people.  Benefits (and thus consumption) for older people are reduced so as to bring them in line with current tax and saving rates.  People work longer and retire later, raising their earnings and national outputs.

Policy-makers should address all four options depending on the country level of population ageing. It is time to act; any delay can generate difficulties in the future decision- making process (Epure, 2012).

There are various assumptions about retirement age, healthcare costs increase, public support for older persons, the effects of increased national savings on investment returns.

No matter what paths will be chosen a coherent and global approach should be set up in the near future.

Acknowledgement This paper uses information from Romania's Spatial Development Strategy(RTDS), Study 1 – The analysis of the demographic structure and evolution, developed under the contract no. 122/02.07.2012, for Ministry of Regional Development and Public Administration.

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References The references to literature should be noted in the main text in the following form: [Barr, 2012]; [Blake, 2006; Barr, 2008]; [Barr & Diamond, 2008]; [Caseyet al., 2003]; [IMF, 2014]. Footnotes should be avoided.

List these in alphabetical order at the end of the paper in the reference section as in the examples: [1]Beck, U. (1992)Risk Society. Towards a New Modernity, Sage Publications, London.

[2]Epure, M. (2012)Population ageing – a demographic trend with various consequences, Review of Applied Socio-Economic Research, Volume 4, Issue 2, p. 97-107.

[3]Harper, S., Leeson, G. (2008) Introducing the Journal of Population Agein, Journal of Population Ageing, vol. 1, no. 1, Springer Netherlands, p. 1-5.

[4]Malthus, T. (1798)An Essay on the Principle of Population, Electronic Scholarly Publishing Project, 1998.

Available athttp://www.esp.org [5]Nancu, Daniela (2006)Rural space, in Romania, space, society, environment, The Publishing House of the Romanian Academy, Bucharest, p. 212-227.

[6]Nancu, Daniela, Guran-Nica, Liliana, Persu, Mihaela (2010)Demographic ageing in Romania’s rural area, Human Geographies – Journal of Studies and Research in Human Geography, vol. 4, nr. 1, p. 33-42, www.human geographies.org.ro [7]Rotariu, T. (2006)Îmbătrânirea demografică şi unele efecte sociale ale ei, Sociologia Românească, IV, 4, Bucureşti.

[8]Sidorenko, A., Walker, A. (2004)The Madrid International Plan of Action on Ageing: from conception to implementation, Ageing and Society, 24, pp. 147-165.

[9]Weil, N. D. (2006)Population Aging, NBER Working Paper Series, Working Paper 12147. Available athttp://www.nber.org/papers/w12147.

[10]* * * (2002)Political Declaration and Madrid International Plan of Action on Ageing, Second World Assembly on Ageing, Madrid, Spain, 8-12 Aprilie 2002, United Nations, New York.Available at http://undesadspd. org/Portals/0/ageing/documents/Fulltext-E.pdf [11]* * * (2005)Global Population Aging in the 21st Century and Its Economic Implications, A Series on Immigration, a CBO Paper, Congress of the United States.

[12]* * * (2006)Scurt istoric al sistemului de asigurari de sanatate din Romania. Available athttp://www.cnas.ro/?id=2 [13]* * * (2011) Policy, Research and Institutional Arrangements Relating to Older Persons. Overview of Progress since Madrid, UNFPA, HelpAge International, New York. Available athttp://www.unfpa.org/ webdav/site/global/shared/documents/publications/2011/Older_Persons_Report.pdf [14]* * * (2012a) Ageing in the Twenty-First Century: A Celebration and A Challenge, United Nations Population Fund (UNFPA), New York, and HelpAge International, London. Available athttp:// www.unfpa.org/webdav/site/global/shared/documents/publications/2012/UNFPA-Exec-Summary. pdf [15]* * * (2012b)Ageing and the macroeconomy- Long-term implications of an older Population, Committee on the Long-Run Macro-Economic Effects of the Aging U.S. Population; Board on Mathematical Sciences and Their Applications; Division on Engineering and Physical Science; Committee on Population; Division of Behavioral and Social Sciences and Education; National Research Council, The National Academies Press, Washington DC, USA. [16]* * * (2013) World Population Ageing 2013, Economic and Social Affairs, Population Division, United Nations, New York. Available at http://www.un.org/en/development/desa/population/publications/ pdf/ageing/WorldPopulationAgeing2013.pdf

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Youth and Social Cohesion 1

Manuela EPURE1, Lorena MIHӐEȘ1 Spiru Haret University, Ion Ghica Street, Bucharest, Romania Email: prorector_cercetare@spiruharet.ro

Abstract: The present study aims to present and interpret the findings of a survey carried out for the YEU-International, a nonprofit organization based in Brussels. The survey was meant to assess different aspects related to social cohesion, and was conducted on groups of young people from 16 countries. Among the major findings, we can enumerate the fact that the majority of youngsters have strong ties with their families; they are willing to get involved in civic activities; they have no gender prejudices; they do not trust public institutions; school plays an important role in their learning about human rights; economic prosperity creates a better framework for social cohesion; the most stringent social problems are poverty and access to jobs; the majority of respondents have participated at least once in a non-formal education programme, which mainly improved their communication skills, their interest in social issues and concerns of their community, their team – working skills, their intercultural communication, their organization/planning skills, their decisionmaking abilities and their confidence/autonomy.

Keywords: youth; social cohesion; survey; human rights; non-formal education.

JEL classification: Z13.

1. Introduction The present study is based on a survey commissioned by the YEU-International, a nonprofit organization based in Brussels (http://www.yeu-international.org/). Youth for Exchange and Understanding (YEU) works to promote peace, understanding and cooperation between the young people of the world, in a spirit of respect for human rights.

The survey was conducted by Prof. PhD. Manuela Epure.

The thematic area of the survey refers to social cohesion and the way young people position themselves in relation to it. The Organisation for Economic Cooperation (OECD) defines social cohesion as a cohesive society works towards the well-being of all its 1

Spiru Haret University, 13 Ion Ghica Street, Bucharest, Romania, Email: lorenamihaes@gmail.com

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members, fights exclusion and marginalisation, creates a sense of belonging, promotes trust, and offers its members the opportunity of upward mobility [OECD, 2011]. Social cohesion includes the Social Cohesion Triangle: Social Capital, Social Inclusion and Social Mobility. Social capital also has an important "downside" [Portes and Landholt, 1996]: communities, groups or networks which are isolated, parochial, or working at crosspurposes to society's collective interests (e.g. drug cartels, corruption rackets) can actually hinder economic and social development.

The survey is founded on the premises that the three aspects of social cohesion can be measured and quantified. The main objectives of the survey have been: To develop new tools/activities by using non-formal education as methodology in order to support young people’s understanding of social cohesion processes, in the creation of a society of equal opportunities, better understanding of different generations of human rights and struggle against discrimination based on personal characteristics; To motivate youth activists to develop and implement local actions, which would serve as examples of good practices; To ensure the transfer of innovations from European to national/local level and vice-versa by assuring the quality of the non-formal education provided.

In order to understand a community’s needs, a needs assessment survey was conducted in 16 countries (EU and non-EU): Albania, Armenia, Bulgaria, Bosnia and Herzegovina, Croatia, Cyprus, FYROM/Macedonia, Latvia, Lithuania, Norway, Moldova, Montenegro, Morocco, Poland, Portugal and Serbia. Because the survey encompassed various geographical areas, the link which connected the subjects was represented by their age: they were all in the prime of their life.

The questionnaire was distributed online with the help and dedication of organisations from the YEU-International’s network. The distribution was in line with the study objectives: 16 countries were targeted, the average response rate was above 50% for all questions, and that illustrates a successful data collection. The countries were not equally represented as number of responses, but the responses per country allows us to make assumptions to verify and to draw conclusions.

The online questionnaire was available from April, 15-May, 21, 2014, and 1497 responses were collected, which ensures the survey’s representativeness. The responses were exported and analysed by specialised software. They were assessed and then each variable was graphically represented.

2. The Survey Findings The survey questionnaire was designed to reveal the specific community needs, related to social cohesion, in order to provide the basis for discussing the situation in targeted countries and understanding the processes and/or problems of the vulnerable groups and/or the community in general. Questions are grouped in four thematic domains: 1. The Social Cohesion concept (social capital, social inclusion and social mobility) perceptions and values; 2. Human rights (with special emphasis on social rights, intercultural dialogue) – awareness; 3. Non-formal education (experiences, benefits, new skills); 137

4. The country’s youth profile.

The set of questions regarding social cohesion explores the respondents' awareness of its components: social inclusion, social mobility and social capital. The perceptions of social and moral values are seen through the eyes of young people and the survey aims to identify the level of awareness regarding the concepts, the degree of importance they hold in young people’s everyday life, and how that might affect them in their adult life.

The questions on human rights are intended to identify the subjects’ level of awareness and how and where they have learned about human rights. A special attention was paid to respondents’ perception about the human rights problem at community/country level, the youth’s willingness to promote human rights in their community on voluntarily basis, the responsibility of respecting human rights, the improvements needed so that their community may function better in the future. The variables mentioned were designed to be understandable and easy to assess by young people.

Non-formal education (NFE) can be seen as any educational activity outside the established formal system – whether operating separately or as an important feature of some broader activity- that is intended to serve identifiable learning clienteles and learning objectives [Combs, et al. 1973].

The questions regarding NFE were designed to illustrate: the past experience of respondents regarding NFE; description of the NFE programmes and their learning experience; their attitude towards non-formal education benefits; building trust among NFE attendees and how these programs can be improved. Moreover, respondents were asked to identify the key competencies and skills that have improved through NFE programmes and how beneficial they were, generally speaking.

Special attention was paid to the soft skills developed through NFE programmes, and how these skills are contributing to the enhancement of their chances on the job market.

A set of questions were introduced in order to develop a country’s youth profile, starting with a series of general profile questions such as: gender, age, education, employment status, country of residence, etc.

Some of the profiling questions were constructed around psychological profile: creativity, social status and money related issues, personal security, dedication to social well-being, willingness to contribute to building a better world, adventure and risk taking profile, respecting social behavioural norms etc.

Profiling also consists in how young respondents see themselves, and how they relate to the world. The intention was to identify different categories of youth, and how they act and think about the community needs and specificity.

After the online data collection, the responses were analysed and the most relevant conclusions are: 1. The results confirm the assumption that youth under 25 have strong ties with their family and friends, and leisure time plays an important role in everyday activities.

They have no serious commitments to work or religion, are not interested at all in politics and community.

2. The respondents are not happy to live next to drug addicts, heavy drinkers and around 10-17% of them are reluctant to gypsies, homosexuals, and AIDS carriers.

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3. Women’s independency is related directly to having a job which allows them to earn money and to act according to their own will. Looking at the percentage of female respondents, one can easily identify the fact that female respondents influenced the trend of responses.

4. There are no differences between genders when we discuss better political leadership performances. It means that the young generation has no gender prejudices when discussing about leadership in politics. Leadership is perceived as being equally represented, men and women make good political leaders according to their abilities and profile background, and not because of their gender characteristics. Gender issues in politics are clearly spotted by the young respondents. They strongly believe that men and women have similar performances in politics.

5. Both males and females are entitled to higher education – the majority of young people that took the survey agree on that.

6. The figures show without any doubt that, generally speaking, people can be trusted. 62.9% of respondents are optimistic and they appreciate the positive behaviour of people in their community. A lot of good things for the community can be built based on trust and individual commitment.

7. When respondents were asked further details about trust, a higher percentage (70.5 %) of respondents say that people in their own community can be trusted most of the time under certain circumstances. Social cohesion is better developed when the level of trust between individuals is significantly higher.

8. The majority of respondents, 53.7 % (34.2% + 19.5%), are keen to get involved in civic activities, which creates the assumption that civic activism is easily accepted by young people, and also supports the need of a more intensive non-formal education, addressing the civic engagement.

9. The level of trust in public institutions is low. 36.8% of respondents deny that they trust them, and 50.7% contend that “public institutions are trustworthy but only sometimes, and under some circumstances”. A clear YES was indicated by 4.0 % of respondents, which generally means a very low level of trust.

10. “Economic prosperity creates a better framework for Social Cohesion,” appreciate 55.3% of respondents, which is a significant percentage, compared to only 9.5%. of negative answers.

11. The most visible opportunities for better social integration are: language classes (65.3%), cultural events (73.6%), volunteering, (72%), free access to education, religion-charity (41.9%), and intercultural dialogue (45.4%). The distribution of responses per country is an analysis highly desirable in order to suggest new formal education programs tailored for each country’s needs, in order to stimulate social integration.

12. The most stringent social problems that young respondents identified were: poverty and access to jobs, which are actually very strong related. Young people are aware of the fact that “ethnicity-based conflicts” ranked 3, and “poor communication” ranked 4 reflects the need for a better communication. The communication skills should be better developed and an improvement in nonformal education programmes in this area is welcome.

13. Young people‘s perception of the human rights situation in their own country is based on their own life experience. 32.9 % of respondents appreciate that human rights are a major problem in their country, but a similar percentage, 26.0% of

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them, say that it is a minor problem. The level of knowledge of human rights thematic area, and their limited life experience influence the young people’s perception, and the survey results reflect it. A more accurate perception depends on the level of awareness of human rights.

14. The most attractive NFE programmes are those about learning and observing society and human rights. The programmes are also beneficial for developing youth’s opinion and their objective perceptions. For young people, being actively engaged in civic activities means a lot, and their enthusiasm and willingness should be supported by an appropriate level of awareness.

15. The vast majority of respondents agree (34%) and fully agree ( 44.9%) that school plays an important role in learning about human rights. 43.7% of the respondents believe that volunteering is the best way to learn about the reality of human rights.

The responses show that young people (74.3%) would like to have more opportunities to talk about human rights, and they would prefer to do that in school.

16. The main reason for learning about Human rights is “to be able to take advantage of them”. A large number of young respondents (40% agree and 34.2% fully agree) contend that this motivation keeps their interest alive. Young people directly associate the learning process with the most tangible outputs, so it is very important for many of them to see the immediate advantages of learning.

17. Analyzing the positive responses distribution, we conclude the following: there is a real need for more opportunities to talk about human rights in schools/communities. People should learn more about human rights and there is a need for non-formal education programmes on this topic. Young respondents agreed upon the fact that they should get more involved in respecting human rights in their community/country.

18. 61.5% of respondents have participated in a NFE programme at least once. The percentage is relevant in order to get into further details and ask more precise opinions about their NFE experience.

19. The respondents’ opinion about NFE programmes is formed based on their own experiences, which can be described as follows: - NFE programme “was organized on voluntarily bases” 30.6% - which is good; - NFE programme “ was meeting their interests” for 27.1% of respondents – but there is a lot room for improvements in this direction; - NFE programme “was about sharing experiences” for 27.8% of respondents.

20. The young people appreciate that NFE programmes they attended were not so much learner-centered, and did not involve building trust/ friendship among participants in different vulnerable groups. Therefore, one can say that the survey results suggest that there is need for some major improvements in designing nonformal education, especially in the abovementioned areas.

21. The majority of respondents declare that a NFE programme have improved their “communication skills” (48.1% of answers) and their “interest in social issues and concerns of their community” (35.9%). More than 30.5 % of respondents agree upon the fact that NFE programmes “have increased their ability to take advantage of what they have learned”.

22. The survey results show that the most cited soft skills are:

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60.9% of respondents agree that NFE programmes have improved their “team – working” skills to a great extent; 46.3% of respondents indicate that NFE programmes have improved their “intercultural communication”; 43.7% of respondents have improved their “organization/planning” skills, and 38.2 % of them have noticed improvements of their”decision-making” abilities, and 35.0% of them, improvements of their “confidence/authonomy” level.

3. Conclusion One can conclude that young generation understands the role of social cohesion, which is a good start for planning activities that sustain this trend on long run. Generally speaking, young people are keen to take action, but adequate training programmes, be they formal or non-formal (although the present article mainly highlights the advantages carried by non-formal education with regard to social cohesion) are highly desirable in order to increase the effectiveness of such human potential.

References [1] Combs, P.H. et al. (1973) New Paths to Learning. New York, UNICEF. [2] OECD (2011), Perspectives on Global Development 2012: Social Cohesion in a Shifting World, OECD Publishing. Available at http://dx.doi.org/10.1787/persp_glob_dev-2012-en.

[3] Portes, A.; Landolt, P. (1996) The Downside of Social Capital. The American Prospect, May 1, 1996.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 â&#x20AC;&#x201C; 8174, ISSN-L: 2392 â&#x20AC;&#x201C; 8166

The State of Knowing in the Field of Enterprise Treasury- Notional Cash, Content, Scope Floarea GEORGESCU Romanian Academy, 125 Victoria Street, District 1, Bucharest, Romania Tel: 0752230209, Email: georgescuflori@yahoo.com Abstract: The main objective of this paper is to perform a theoretical analysis of the main issues related to the concept of flow, starting from the stage of knowing in the company's treasury and continuing treasury structures and components classified and recognized in the accounts.

We begin this research with a conceptual analysis of enterprise treasury domain definitions, interpretations, approaches, nuances, linguistic indices are sometimes useful, but can be misleading since scientists borrow words from the pool of words.

There is the danger of getting contaminated by common understandings and meanings related to everyday, common sense.

Analyzing the view of some reputable researchers, and academic elite Romanian definitions over time, we see that the treasury was distinctly defined.

All these contradictions are based on our approach to the problem of how to combine the creative rational thinking. It is often said that a problem well put is half solved. Lucian Blaga "a problem not only never made ... objective data can be called only objective data to which we refer, in that they are outside the problem started, and in that matter absorbs as a receptacle theirs. All of these objective data we call the problem area. "(Black, 1974).

Keywords: treasury, treasury, investment securities, amounts receivable, cash on hand, letter of credit .

JEL classification: Please use the classification available at the following address and choose at least one code: M41

1. Introduction In medieval Romanian countries, treasurer was the title given the great governor who was responsible for the financial administration of the country and the state treasury and the treasury was the institutions that manage public money, the state treasury. More specifically it was the place or room where keeping the public treasury.

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The word derives from the French Treasury "treasury" and expressed in literary form, office of a state which maintains and administers the public treasury.

From the etymological meaning Treasury is managing the public treasury.

Expression is correct but the treasury coffers; expression Romanian language was replaced with a one word statement.

At the microeconomic level, the activity of the companies, the Treasury is "finance department, which deals with the receipt, management and placement of funds.

If we call the Romanian academic elite definitions over time, we see that the treasury was distinctly defined.

In the view of Professor Ristea Michael, "Treasury's work in which transactions and events are included which manages short-term financial instruments (marketable securities or short-term financial investments), amounts receivable, cash available in bank accounts banking companies, cash available on hand companies, short-term bank loans, cash and cash equivalents in the form of letters of credit separate from banks and other treasury securities.”

From the point of view of teachers Feleagă Niculae and Ion Ionaşcu treasury is defined from two perspectives: • From the perspective of businessman "Treasury represents all funds available to meet enterprise payments: Available in bank accounts, cash on hand, checks cashed receivable commercial paper held till maturity, investment securities, etc. and the failure of these funds is possible to get a loan "; • The financial analyst's perspective "Treasury is the difference between availability (liquidity) and chargeability (liabilities) immediately."

Bernard Colasse Treasury notes that an economic unit should not be confused with the availability of which it has a point, but what remains of the resources are stable, having been financed property and the need to finance current business. The author believes that the ability of the Treasury to finance the company's stable resources.

From our point of view, the treasury is the component of the aspiring, on one hand, sizing based on current needs cash you need to cover, and on the other hand, excess investment in short-term placements.

Although the concept of cash is considered a crucial element in the management of the company, considering the views of the authors quoted we see that there is no consensus on the definition and components of trezorerieii.

Denis Dubois in his "gestion Encyclopedia" states that "brings together all treasury management decisions, rules and procedures to ensure the lowest cost, maintain financial equilibrium snapshot of the company".

2. Approaches to the company treasury. Overview treasury functions Activity in an enterprise generates input and output streams of cash. These flows are generated by a variety of activities related to training, or pay capital increase, sale and purchase of goods, making investment and financing expenses, etc., provided that the Treasury's task to organize and to link of all these activities.

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The main function of the treasury is the so organizing and managing incoming and outgoing flows of money, management of cash and short-term loans (cash).

If the company is large, then the Treasury can be organized into a distinct financial direction. This section will be one that will link the monetary and financial market organization, which takes care of ensuring the liquidity of the enterprise, effectively placing liquidity for evaluating sources of financing, developing and tracking budgets and making cash forecasts.

The company, being placed in a complex economic and financial relations must meet all financial obligations such other treasury function is to ensure liquidity.

In the cash market economy is one of the most important forms of capital. To pay suppliers, taxes, employees, shareholders are required cash dividends to ensure continuity of the business. Their absence, even if the firm has other material values can cause financial setbacks and even failures.

As stated in the first part of this paper, the existence of profit does not mean that the company has cash as income or expense when the engagement does not coincide with that of the receipt or payment. So cash benefits should not be confused with the company, even if an activity is likely to cost the company is unable to pay its debts at some point, if it has no liquidity.

Increasing profitability of a business is generating cash, but a profitable firm that makes investments in fixed assets unjustified, do not receive timely claims that maintains surplus stocks that make unjustified loans can easily turn into a victim of creditors and banks.

It is necessary to implement certain measures treasurer as effective cash management, to plan, synchronize incoming and outgoing cash liquidity required to ensure business continuity.

Increase the company's profitability and hence the liquidity necessary to establish the amounts and purpose of cash, knowledge development and deficit cash surplus, timely delivery of cash reserves for contingencies, analysis and control of cash to establish timely and effective action by state treasury.

Cash control concerns the collection, management and settlement of cash in order to prevent loss, avoiding fraud and waste.

From the perspective of internal financial control is considered one of the most important forms of control designed to prevent financial losses.

3. Structures and components Treasury classified and recognized accounting The accounting regulations compliant with European directives' accounts provide evidence of the existence and movement of treasury shares in affiliated entities, other short-term investments, cash at bank and in hand, short-term bank loans and other Treasury securities. " Based on the above definition that treasury structure is as follows: • Short-term investments and investment securities • Amounts receivable • Availability of money in bank accounts or in cash • Letter of credit • Other cash values 144

The settlement between enterprises can be achieved both in cash and through bank as treasury structure settlement includes all tools used (money order, check etc.).

3.1. Short-term financial investments Short-term investments and investment securities designated or investment securities "are securities purchased for sale and in this way achieve a short-term gain.

Purposes of these investments are a speculative or obtaining a short-term gain. Gain value is determined as the difference between the selling price (higher) and cost of acquisition of securities (lower).

Unlike term investments purchased with the intent to be sustainably preserved, investment securities are purchased short-term part of the structure of current assets.

The composition of short-term financial investments included: shares (listed and unlisted), bonds, treasury shares repurchased bonds issued and redeemed by the company, other investment securities and similar debt (short-term treasury bills, certificates of deposit, etc).

Given the purpose of acquiring and destination, shares and bonds are divided into two categories: • Stocks and bonds purchased for resale and in this way obtain a gain; • Own shares and bonds, a category which includes securities sold and redeemed for resale at a reasonable price or grant their employees, and their bonds for cancellation.

The accounting distinction is made between actions, which are investments involving a right of ownership and bonds are those that gives their owner a claim during ownership.

By purchasing securities as an enterprise intends either to temporarily use a portion of its availability to conserve cash value or profitability of its investments through increased income from interest and dividends or obtaining more value at resale.

Regarding the evaluation of investment securities, as with other active elements, they are evaluated in four points: a) When entering management investment securities acquired for valuable consideration are accounted at cost; b) On the inventory investment securities are measured at fair value, which may be: • Listed securities using the quotation of the day 31 December; • Unlisted securities probable sale value (negotiable) Titles rated securities are listed on the official stock exchange, increase or decrease in the exchange taking effect on inventory value.

At closure, temporary losses of value are recorded as adjustments for impairment of treasury accounts: c) On the closing balance of accounts is determined by comparing the inventory with the entry in the application of the precautionary principle; d) On leaving the management, investment securities are valued differently: • The sale itself using the transfer price (sale); • Titles of management is carried out at book value (input value).

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The difference between the issue price and the carrying amount is the result of the transfer and takes the form of a plus or minus.

To establish the favorable or unfavorable from the sale of marketable securities are not taken into account any adjustments for impairment of securities established before divestiture.

In the assessment of short-term investments in international accounting doctrine faces two diametrically opposed viewpoints.

In the opinion of experts on short-term investments should be measured at the lower of acquisition cost and market value.

Others consider that it is appropriate to evaluate those elements at market value, given the particular nature of short-term investments.

IAS 39 "Financial Instruments - Recognition and Measurement", specifies that when a financial asset or financial liability is recognized initially, an enterprise should evaluate their cost, ie the fair value of the consideration offered by these transaction costs being included in the initial measurement of all financial assets and liabilities.

After initial recognition, an enterprise should measure financial assets at their fair value, including derivatives that are assets, without any deduction for transaction costs that may arise from the sale, except for financial assets that do not have quoted market price in an active market and whose fair value cannot be measured reliably, receivables and loans created by the company that are not held for trading and investments held to maturity.

The fair value of a financial instrument can be measured reliably only if: â&#x20AC;˘ Variability in the range of reasonable estimates of fair value is not significant for that instrument; â&#x20AC;˘ If the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value. Often variability within the range of reasonable fair value estimates is so large, and the probabilities of different incomes are so difficult to assess that the utility of a single assessment of fair value is rejected.

3.2. Values receivable Amounts receivable as cash items comprise in their structure checks cashed effects receivable and notes submitted for discounting.

Law. 59 / 05.01.1934 of the check, bill of exchange and promissory notes, one of the oldest laws in Romania, has recently undergone significant changes in introducing online operations. Until recently only the physical form of payment instruments has legal value, electronic equivalents were not recognized.

Globally, information technology has produced important changes in the presentation of payment instruments and recent attempts to align Romanian legislation in this trend.

The emergence of new modern payment instruments (cards) no unnecessary delay circuit operations will cause the gradual disappearance of old forms.

3.2.1. Electronic check The check is a payment instrument by which a person named drawer (issuer of the check), go order a shot (the bank) to pay for a third person (beneficiary) a sum of money.

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This payment instrument can be used both by individuals and by legal entities for various payments.

Additions to the law do not replace the old payment systems only provide an alternative processing electronically.

Important issues that are reflected check amending Law no. 59 / 05.01.1934 are: • Regulation of so-called truncation (submission in electronic payment) • Clearer definition of the content of signatures on checks • Other regulations to facilitate electronic submission of payment of the check.

Presentation of a check payment can be original or cropping.

3.2.2. Bills of exchange and promissory notes New regulations on the bill and promissory notes aimed legal recognition of the value of these instruments in electronic form and covers changes similar to those of the check law.

Cambia is one of the oldest instruments of payment and dates back over 1,000 years, is known as treaty or policy.

Cambia is a document by which a person gives to another person ordered to pay a third person or to his order, a sum of money at a certain Scandentia and in a certain place.

The promissory note is a debt in which the issuer undertakes to pay the beneficiary a sum of money at a certain time in a certain place.

Unlike the bill of exchange, promissory notes occurs between two people and does not contain a payment order addressed to another person, but only assuming their payment obligations.

3.3. Cash at bank and in hand To treat this chapter it is necessary to make a distinction between the availability of money in the bank, in which case the receipts and payments transactions are done without cash, payment instruments and cash in the house, where returns between parties is done cash.

3.3.1. Cash at bank As stated in the previous paragraph operations without cash receipts and payments are those operations that termination of rights and obligations between the parties is done through the banks on the basis of documents submitted by them. Lenders collect from debtor’s amounts they are entitled to through banks where they hold accounts in retaining funds. Operations without cash receipts and payments are made by banks by transferring the amount from customer accounts (debtors) in accounts suppliers (creditors). Such customer steering operation amount represents a payment and the same operation is a collection providers.

Therefore, in order to perform operations without cash receipts and payments, companies need to keep cash in the bank accounts they serve. All operations performed by a company through the bank accounts will be recorded by the bank in a statement.

Account Statement is a document in which the proceeds fall day, the final balance of payments and current account balance.

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Accounting records of receipts and payments are based on bank account statements received from the bank along with supporting documents.

To avoid situations where differences occur between current account balance and the balance of the bank account statement is prudent that these balance to compare daily or at the end. This comparison is called “bank points” and allows the identification of differences arising between the Bank and the record company.

The field values include checks receivable effects and notes submitted for input, and their accounting is performed using 511 account "Values receivable” accounts which develops synthetic accounts of second degree on course receivable value.

In terms of payments, the document on which the bank will make a payment from your current account is the order of payment. The payment order is unconditional, given by its issuer receiving a banking company to make available to a beneficiary a sum of money at a fixed date.

If the current account balance is insufficient to cover payments employed at one time under the bank credit agreement, the bank will provide a loan up to the full cover payments employed. This difference will be just loan by the bank current accounts, also called cash loan (short-term).

3.3.2. Cash at home Currency in lei and foreign currency available to society, society is kept in hand, and his management accounting is distinct through the account 531 "House".

Thus all transactions in cash receipts and payments is done by cashiers companies up to a certain ceiling.

For companies there are certain limitations in terms of certain operations or ceilings ceiling amounts can be kept in the house. While certain thresholds have changed and some have even disappeared.

For all other operations that exceed the limits set, whether aimed receipts or payments will be used by the bank operations.

3.4.

Short-term bank loans

As stated above, if the current account balance is insufficient to cover payments employed under contracts of bank loan, the bank will give a loan to the extent that payments will be covered fully engaged. This difference will be very short-term bank credit extended by banks to companies on the basis of contracts concluded in advance and provide coverage for temporary needs.

Short-term loans, the bank may be achieved in the following ways: • Loans within lending ceilings, in which case the bank will pay all obligations of the enterprise, even when there is sufficient available funds in the current account at the time of payment; • Loans by the bank transfer of the money available in the account of the company, in which case the loan will supply the cash account.

For the availability of the companies receiving interest bank accounts; such interest is financial income for the companies concerned and will be reflected in the accounts as "interest receivable".

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If the companies receive bank loans or contracts current short-term bank loans, they will owe the bank interest.

Current borrowing is reflected in the accounts as "Interest payable" and the short-term bank loans are recorded as "Interest on short-term bank loans," both representing financial costs to society.

3.5.

Transferable letter of credit and treasury

Transactions in goods and services trade involve risks both internally and internationally, although the interests of the parties are the same, the buyer wants the benefits to be offered and the seller that payment will be made.

These risks can be reduced by using techniques settlement transactions, regulated and accepted internationally.

In this respect one of the most used techniques payment in trade relations is the letter of credit. Operations performed through the letter of credit shall be governed by the rules and practices Uniforms (RUU), developed by the International Chamber of Commerce in Paris. These rules were first published in 1951 and subsequently revised Lisbon.

The letter of credit is a form of settlement requested by the provider to be sure that their client receives the value of the goods delivered, work done and services rendered on his behalf.

The letter of credit is made to the bank and is the transfer of money from the current account of the purchaser in a separate account opened to the supplier of goods and services and that is to pay the following supplies of goods and services. As the bank proves that the supplier has fulfilled contractual duties, the bank will make the payment by transferring amounts of L current account provider.

Letter of credit can be opened both in lei and foreign currency and Recognition is done using the account 541 "Letters" account into two accounts detailing synthetic degree, 5411 "Letters in lei" and 5412 "accredited currency ".

Companies can keep the cash and other valuables from the treasury: and rest treatment vouchers, coupons and tickets, stamps and postage stamps, etc.

Accounting for other Treasury securities is reflected using the account 532 "Other values" which develops synthetic accounts of second degree.

Conclusions The main objective of treasury management is to avoid a negative treasury, ensuring a balance between liquidity and close out. This balance depends on the amount of cash at the beginning of the period, the flow of receipts and payments for the period, as well as other variables such as: capital structure, size of business enterprise, corporate culture, customs and traditions etc.

Indicator obtained from the comparison of income and expenditure incurred by a company during a financial year is the result that, when positive, reflecting an increase of wealth, specifically an increase in assets. The existence of profits does not mean that the company has liquidity as expense or income when employment does not coincide with that of their payment or receipt. Management enterprise performance management

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requires both job flows (income / expenses) and cash management (collection and payment flows).

Through careful management of cash, and payment instruments and funding is achieved another objective of the Treasury, namely to ensure the company's profitability, which ensures on the one hand minimizing costs and secondly optimizes the placement of surplus short-term cash.

The current economic crisis, marked by a lack of liquidity causes another dimension of treasury management, financial risk management represented, which involves the use of insurance instruments and speculation when financial markets are very volatile (exchange rates and interest rates fluctuate very small time intervals).

From these considerations it follows that the least expensive treasury management policy is "zero treasury," which is to maintain as close to zero balance availability. The management practice of "Treasury zero" is difficult to assess, because in most cases, financial flows are regulated by financial instruments whose date of presentation to the bank not known precisely.

An efficient management of cash so that the company requires to have at some point sufficient available funds to meet immediate chargeability. For this, you need an enterprise treasury looking management that can be provided on the size and chargeability and availability instantly.

The current economic crisis demonstrates the importance of extensive global policy administration numeral healthy. Countless companies, although profitable, are on the verge of bankruptcy due to excessive leverage and lack of liquidity.

Cash has important functions in the distribution of dividends, financing future investments, payment of debts to suppliers and state taxes and the absence inevitably lead to cessation.

Given the importance of cash in the activity of an enterprise Board Financial Reporting Standards Board (IASB) issued a separate standard IAS 7 "Statement of Cash Flows", whose goal is to impose information on the history of cash movements and cash equivalents of an enterprise by means of the cash flow statement.

Under IAS 7 cash is defined as "cash and cash equivalents comprise cash and deposits." In other words, cash is cash and cash equivalents of a company in cash or bank accounts, and other similar elements such as values receivable, cash advances and other assets.

IAS 7 defines cash equivalents "are short-term financial investments, highly liquid, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value."

Cash equivalents arise as a consequence of excess cash and cash management includes the investment of excess cash in cash equivalents.

In other words, the excess cash resulting from carrying out an activity must be placed as effectively as cash equivalents.

The purpose of investing cash in securities is speculative one that is getting an income as dividends or interest, obtaining a gain from the resale of securities purchased or providing short-term highly liquid assets to enable support commitments with a similar maturity.

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Acknowledgements This work was supported by the project “Excellence academic routes in the doctoral and postdoctoral research – READ” co-funded from the European Social Fund through the Development of Human Resources Operational Programme 2007-2013, contract no.

POSDRU/159/1.5/S/137926.

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129-230, pp. 285-306, vol. II pp. 209-254; [10] Emanuel A., Zur Klein., Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors, Journal of Finance, vol.64/febr.2009, pp. 187-229; [11] Eisdorfer A., Empirical Evidence of Risk Shifting in Financially Distressed Firms, Journal of Finance, vol.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

The Partnership between the Public Authorities and NGOs: An Effective Way of Covering the Need for Social Services in Romania Mihaela GHENŢA1, Luise MLADEN2 1 National Scientific Research Institute for Labour and Social Protection, 6-8 Povernei Street, Bucharest, 010403, Romania Tel: +40 21 312 40 69, Fax: + 40 21 311 75 95, Email: ghenta@incsmps.ro.

Abstract: The paper aims to present a number of specific issues regarding the provision of social services by non-governmental organizations (NGOs) from Romania. In the current context of the budget cuts, these organizations play an important role in enhancing the quality of life for disadvantaged groups, such as elderly, disabled, families in need etc. The paper presents the characteristics of NGOs as they emerge in the national legislation and the practical ways in which the collaboration between these organizations and institutions occurs. The partnership between the public authorities and NGOs represents an effective way of covering the need for social services at the national level. The last part of the paper presents statistical data regarding the NGOs’ activity in recent years.

Keywords: NGOs, social services, globalization, public-private partnership JEL classification: I30, P36, A13

1. Introduction Non-governmental organizations (NGOs) are important players in social services, together with the public providers and economic agents. The importance of the social services provided by these organizations in increasing the quality of life of disadvantaged people is acknowledged both in the scientific literature and at the level of some international organizations [Anheiher, 2002].

2

Spiru Haret University, 13 Ion Ghica Street, Bucharest, Romania, Email: lmladen.fb@spiruharet.ro , 3 National Scientific Research Institute for Labour and Social Protection, 6-8 Povernei Street, Bucharest, Romania, Tel: +40 21 312 40 69, Email: lmladen@incsmps.ro

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The social services are defined in scientific literature as structural components of the social assistance system, contributing together with the social benefits to social inclusion of the disadvantaged, vulnerable groups, to the increase of the quality of life, to poverty alleviation, and not least to the social and economic development [Buzducea, 2009].

The social services are tools by means of which the state provides a level of basic, minimal welfare for its own citizens, together with services such as the health and the education, the adequate housing, the minimum subsistence income.

The global changes affect the current way of organizing and delivering the social services, since there is an interdependence of the economic, social, cultural and political systems that cannot be denied [Ghenţa, 2014].

The globalization of the economic activities has generated a diversification of risks that may affect, at a given time, an individual's life, creating the need for an intervention in the form of social services. The effects of globalization on the social assistance, and thus on the social services, aim at:  

 

the diversification of the social services, the emergence of new types of social services; the proliferation of the digital technologies that had changed the practices in social assistance, resulting in an increase of the complexity of ethical and risk management issues [Reamer, 2013]; the labor migration, a phenomenon that manifested itself differently from one country to another; the development of the capacity of understanding and the ability to respond to various social problems.

Based on these effects, we consider the implications of globalization on social services are both positive and negative (Table 1).

Table 1: The effects of the globalization on social services The characteristics of the globalization The diversification of the social services, the emergence of new types of social services The global communication

The labour migration

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The implications on social services Positive Negative - the achievement of social inclusion for certain disadvantaged groups; - the increase of the quality of life for the beneficiaries of the social services; - the high protection of the fundamental rights and freedoms.

- the difficulties in ensuring financial sustainability; - the increase of the dependence on international non-governmental organizations and the programs implemented by them.

- enhances the communication between professionals in social assistance work; - fosters the exchange of know-how; - a high degree of recognition of the global nature of the work undertaken by social workers; - facilitates the international partnerships; - changes the working practices.

- the increase of the employment.

- a high risk of labor migration; - a lack of relevance of some of the international practices, relative to the local character; - a preference for certain "best practices" (with proven efficiency) can discourage local initiatives.

- global imbalances in terms of satisfying the labour demand in

The characteristics of the globalization The development of the capacity of understanding and the ability to respond to various social problems

The implications on social services Positive Negative

- the development of the training programs held by the social assistance educational institutions; - the development of knowledge based on practical experience; - the transfer of knowledge between professionals in social assistance in an international context.

social services.

- the increased pressure felt by professionals in adapting to rapid change; - the need to implement measures leading to increased professional recognition.

Source: developed by the authors

The NGO activity, even if itâ&#x20AC;&#x2122;s limited in quantity due to the financial and human resources that are available, exerts a positive impact on the life of the communities and people that need, at a given time, interventions in the form of social service.

The non-profit legal persons are subject to registration in the National Registry of NGOs and include: NGOs, unions, non-profit foreign legal persons.

The Romanian law includes in non-governmental organizations: the associations, the foundations and the federations (groups of associations and foundations).

What distinguishes these organizations from public organizations or other private profit or non-profit organizations are the purpose and the categories of the persons for which they activate. From this point of view, the associations and the foundations develop non-profit activities, in the general interest of a community or of a non-profit individual interest.

In most cases the collaboration between the public and non-governmental sector takes the form of a public-private partnership. In the scientific literature, they are appreciated the positive effects of the cooperation between the public and private organisations within the social services in an increasingly complex economic and social environment [Jalonen, H., Juntunen, 2011].

2. The partnership between public and non-governmental organizations in providing social services The diversification of the social needs, together with the multiplication of the potential beneficiaries of social services, made impossible satisfying them by the effort of one single actor: the state [Dima, 2013].

It is considered that the relationship between the government and the NGOs can develop through a constant consultation with the NGOs on the issues of the local communities, on the development of joint projects and action plans designed to meet various social needs, on a clear division of responsibilities of satisfying the social needs of the community, on granting financial support within the available public resources [Cace, Sali, 2002].

Having small size, high mobility, high adaptive capacity according to the changes occurred in the social and economic environment where they operate, the NGOs are able to identify and respond to social needs much faster than the public institutions.

The public-private partnership is favouring the generation of positive effects on economic and social field, such as: the increase of the involvement of citizens in voluntary social

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activities, the improvement of the quality and efficiency of social services, the strengthening of the communities, the ensuring of a high level of social integration.

The assignation of public financial resources (central and local) for developing and providing social services is regulated, in Romania, in the form of service contracts (like the type of contract by which the public-private partnerships can take place), subsidies, grants, public procurement contracts, concession contracts.

In the case of the public procurement or concession contracts which have as their object the social services, the NGOs are considered and treated as any economic agent that is closing a public procurement or concession contract with the state or one of his entities.

All of these represent the public funding mechanisms that are able to support the activity of the NGOs. Where the provision of social services is done by NGOs and other types of private providers based on a public-private partnership, any of these suppliers may request a social audit for the provided social services [Mihăilescu, 2007].

Both from the perspective of the legislator, as well as of some authors, the social audit offer a way of developing the privately provided social services. The social audit promotes the verification of the efficiency and effectiveness of the public resource assignation and the improvements in the activity of the social services providers as a result of given recommendations. The social audit enables the social organizations to measure the viability of the social actions undertaken from the point of view of the things that the organization and its stakeholders consider to be important [Freer, 2008].

As the share of the allocated costs to the social assistance (social services and benefits) decreased in 2009-2012, the ability to finance public social services has decreased, while the social needs have increased as a result of the economic and financial crisis. In the current context, the partnership between public authorities and NGOs represents an effective way of satisfying the need for social services.

The real form that can take this collaboration is the contracting of public social services.

The contracting in social services provides the social service provision by the local public authorities through the development of a specific procedure for the purchase or concession of this type of services.

Contracting in this field is carried out only for the types of social services organized and defined as in the Nomenclature of social services. It is estimated that, in terms of NGOs, the contracting foster:   

the public costs reduction related to social services; the sharing of the risks associated to the provision of social services; the increase of the activity and revenue efficiency.

For the public organizations the contracting helps ensure the stability in the provision of social services, the development and diversification of the social services, the increase in number of the beneficiaries, the improvement of the service quality, the fostering of the development of the NGO sector.

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3. Specific issues regarding the provision of the social services by nongovernmental organizations The involvement of the non-governmental organizations in providing social services was done gradually since 1990. The non-governmental sector in Romania has gained importance in the social field as different types of social services have been developed.

The National Registry of NGOs kept by the Ministry of Justice were registered 66.804 organizations in 2010 and 88 337 organizations (66 369 associations and 17 968 foundations) in April 2014. Only a small fraction of these have submitted the balance sheet by the end of the fiscal year, thus demonstrating that they had economic activity in the previous financial year (Figure 1).

Figure 1: Associations and foundations: number and activity rates Source: developed by authors after Institutul de Economie Socială, (2012) Atlasul Economiei Sociale 2012, pp. 15, http://www.fdsc.ro/library/files/atlasul_economiei_sociale_2012_ro.pdf, accesed in September 2014; Registru Naţional ONG, Ministry of Justice, http://www.just.ro/MinisterulJustiției/ RegistrulNaţionalONG/tabid/91/Default.aspx, accesed in april 2014 Note: activity rates for 2011-2014 weren’t calculated because of data unavailability.

In the period 2000-2010 the most active NGOs (with demonstrated economic activity in the previous fiscal year based on the balance sheet) have worked in the social field: 41.9% in 2000, 30.3% in 2005 and 22.6% in 2010 (a short distance from NGOs working in the field of sport - 19.2%).

This fact is reflected in the income derived from the carried out activities, too. In 2010 from the total income obtained by the NGOs, 21% belonged to NGOs from the social sector, followed at a distance of more than 5 percentage points by the NGOs from sports, education field and the ones belonging to the religious denominations [The Institute of Social Economy, 2012].

Considering the development regions, it is noticed that in 2010, most of the associations and foundations (regardless the field of activity) were established in the North-East and Central regions, that had high poverty rates and associated social problems, followed at a distance by the Bucharest-Ilfov region. The Central and the North-East regions also had the highest rates of NGOs with economic activity (Figure 2).

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Figure 2: Associations and foundations at regional level: number and activity rates (2010) Source: developed by authors after Institutul de Economie Socială, (2012) Atlasul Economiei Sociale 2012, pp. 29, http://www.fdsc.ro/library/files/atlasul_economiei_sociale_2012_ro.pdf, accesed in September 2014.

However, in 2010 only a small part of the NGOs working in the social field were accredited providers of social services, respectively only 990 associations and foundations (16.6%) met the conditions required for accreditation – they could provide organizational and financial conditions appropriate to the minimum quality criteria.

Figure 3: Associations and foundations in the field of social services Source: developed by authors after Dima G. (coordonator), (2013) Serviciile sociale în România. Rolul actorilor economiei sociale, pp. 43, http://www.ies.org.ro/library/files/ raport_serviciile_sociale_in_romania._rolul_actorilor_economiei_sociale.pdf, accesed in april 2014.

In the period 2000-2010, the NGOs that managed to meet the conditions for accreditation increased, the only period of decline had been recorded in 2010 compared to 2009: decreased by 0.6% (Figure 3).

Conclusions The social services and the social benefits, components of the social assistance system in Romania, help improve the quality of life for all people that experience at some point in life a state of need that they cannot overcome by themselves [Matei et al., 2012].

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Social services are contributing to limiting the negative effects of situations that may affect the quality of life of different groups of people. In Romania there were changes that had the consequence of aligning the national legislation with the European trends towards the inclusion of the social services in the category of social services of general interest [Ghenţa, 2014b, 2012, 2011].

The changes that took place in the legislation in the last decades have shaped the current level of development and the involvement of NGOs in community life. Regardless of the geographic area in which these organizations operate, the contributions to the economy are significant (Ghenţa, 2014a).

As the economic situation stabilizes, the statutory funding mechanisms will become more efficient, in terms of opportunity and rationality of the budget allocations, with positive effects on increasing the quality of life of disadvantaged groups.

References [1] Anheier, H. (2002) The third sector in Europe: Five theses. Civil Society Working Paper 12. Available at http://eprints.lse.ac.uk/29051/1/CSWP12.pdf.

[2] Buzducea, D. (2009) Sisteme moderne de asistenţă socială. Tendinţe globale şi practici locale, Iaşi: Editura Polirom.

[3] Cace, S., Sali, N. (2002) Relaţia ONG-urilor cu administraţia centrală şi administraţia locală, Jurnalul practicilor pozitive comunitare, no. 1-2, pp. 41-44.

[4] Dima G. (coordonator) (2013) Serviciile sociale în România. Rolul actorilor economiei sociale. Available at http://www.ies.org.ro/library/files/raport_serviciile_sociale_in_romania._rolul_actorilor_economiei_soci ale.pdf.

[5] Esping-Andersen, G. (1990) The three worlds of welfare capitalism, New Jersey: Princeton University Press.

[6] Freer, S. (2008) Social Audit Toolkit. Fourth Edition. Available at http://www.socialauditnetwork.org.uk/files/9013/2325/3606/Social_Audit_Toolkit.pdf.

[7] Ghenţa, M. (2014a) Rolul sectorului non-profit în furnizarea serviciilor sociale, Puterea de a fi altfel, Runcan, P., Runcan, R. (eds.), Bucureşti: Editura Didactică şi Pedagogică R.A, pp. 267-275.

[8] Ghenţa, M. (2014b) Factori determinanţi ai serviciilor publice sociale în context internaţional/Main factors driving social public services in international context, Strategii Manageriale, year VII, no. 1(23), pp. 21-27.

[10] Ghența, M., Matei, A., Sănduleasa, B. (2012) Asistența socială a persoanelor vârstnice în România/Social assistance of elderly in Romania, București: Editura Agir.

[11] Ghenţa, M., Rizea, C., Flood, I. (2011) Change management in social assistance system: case study Romania, Proceedings of the 7th International Conference Management of Technological Changes, Book II, pp. 645-648.

[12] Jalonen, H., Juntunen, P. (2011) Enabling Innovation in Complex Welfare Service Systems, Journal of Service Science and Management, vol. 4, no. 4, pp. 401-418.

[13]Institutul de Economie Socială, (2012) Atlasul Economiei Sociale http://www.fdsc.ro/library/files/atlasul_economiei_sociale_2012_ro.pdf.

2012.

Available

at

[14] Matei, A., Sănduleasa, B., Ghenţa M. (2012) Reconciliation of Work and Family Life in Romania: Facts and Challenges, Curent issues in sociology: Work and Minorities, Katsas, G., A. (editor), Athens: Athens Institute for Education and Research Publishing House, pp. 115-125.

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[15] Mihăilescu, A. (2007) Auditul social – o cale spre dezvoltarea unui mediu de afaceri implicat social, Calitatea Vieţii, vol. XVIII, no. 1–2, pp. 75–89.

[16] Ministerul de Justiţie, (2014) Registrul Naţional ONG. Available at http://www.just.ro/ MinisterulJustiției/RegistrulNaţionalONG/tabid/91/Default.aspx.

[17] Ordonanţa cu privire la asociaţii şi fundaţii (2000) no. 26, Monitorul Oficial, Parte I, no. 39 from 30/01/2000.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Sustainable Growth with the Help of Quality Scheduling Index George Cristian GRUIA1, George GRUIA2 1 Czech Technical University in Prague, Karlovo namesti 13, Prague, 121 35, Czech Republic Tel: +420776211483, Email: cristian.gruia@email.cz Abstract: The paper presents a new way for small and middle size companies to sustain their growth using the Quality Scheduling Index. The aim of the paper is to provide the managers from not only the private sector, i.e. manufacturing companies, a tool which can help them improve Just-In-Time delivery of the products to the market, reduce manufacturing costs related with time usage for manufacturing the products on parallel production lines and also increase the quality according to the ISO norms as well as according to each and every customer requirements. In this way the Pull principle is applied and the company will produce and deliver the right products, at the right time and according to the customer’s specifications. The Quality Scheduling Index is presented and partial results of its implementation are shown from a managerial as well as juridical point of view. The goal is to extend Total Quality Management in areas little explored, working in JustIn-Time mode, by eliminating the temporal variations from the contractual delivery terms regarding time. Among other things, the new management tool, Quality Scheduling Index, is able to capture the desired degree of temporal variations and the associated costs. Its implementation methodology goes to business practice, eliminating the company’s risk of failure from the enterprise supply chain.

Keywords: Quality Scheduling Index, sustainable, growth, management, improve.

JEL classification: L23, O21, M11, L15, K20

1. Introduction In today’s market when the customer enters the shop and places an order, he expects to receive the ordered goods at the right price, within the specified time and quality features’ requirements.

2

“Spiru Haret” University, Șoseaua Berceni nr. 24, sector 4, Bucharest, 041905, Romania, Tel: +40732242917, Email: g.gruia@yahoo.com

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The Just-In-Time (JIT) manufacturing and delivering of the ordered goods to the final user should also involve the Quality requirements of each and every customer, Quality which in our conception should be part of the manufacturing schedule and not its adversary. If we have to sacrifice quality to meet schedule requirements, is because we are doing the job wrong from the very beginning and here is where our paper finds its place and can stop this situation to occur. The goal of the paper is to maintain the quality requirements and meet the schedule in the same time through a new way of managing the time consumption, quality features and manufacturing costs in close relation with the macroeconomic environment in which all the Small and Middle size Enterprises (SMEs) compete and interact with the global final customer.

The business practice shows that in the Just-In-Time (JIT) environment is expensive to delay the production lines of the finalists, because it must be paid and for this pays everyone in the manufacturing supply chain. Therefore, today's quality should also include a module of the time accuracy of the supplies.

Our article, through the newly developed Quality Scheduling Index (QSI), integrates indicators of quality of the supplies to the final assembly of the producer of engineering products. Thus we introduce a new approach to modern requirements for understanding the quality of time structure of production processes. Basically, it is the elimination of time deviations (quality) from the contractual delivery time. This corresponds to the following secondary goals (targets): A. Creating a new management tool that is capable of containing a degree of temporal variations from the standard (quality) process with delivery costs sooner or later; B. Determination of the appropriate methodology for the implementation of the new management tools (Quality Scheduling Index - QSI) into practice; C. Construction of a unique evaluation scale for assessing the quality achieved through index QSI in small and medium-sized engineering companies.

In other words we focus on achieving a higher level of supplies reliability (in contractual terms - quality) in terms of compliance with manipulation between production processes at the workshop level of production and operations management.

2. Sustainable growth from an EU perspective The online encyclopaedia Wikipedia states that: “Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy [...]”. [Higgins, 1977] According to the 11th President of the European Commission, José Manuel Barroso said in the “COMMUNICATION FROM THE COMMISSION, EUROPE 2020, A strategy for smart, sustainable and inclusive growth” that: “Europe has many strengths. We have a talented workforce; we have a powerful technological and industrial base. We have an internal market and a single currency that have successfully helped us resist the worst...The Commission is proposing five measurable EU targets for 2020 that will steer the process and be translated into national targets: for employment; for research and innovation; for climate change and energy; for education; and for combating poverty. They represent the direction we should take and will mean we can measure our success.” [European Commission, 2010]

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With our paper we aim at achieving the EU targets: for employment and education (by training the right people for the specific jobs which have to be fulfilled as part of the supply chain, according to the material and informational flow), for research and innovation (with QSI the managers will be able to produce only the products which will be bought by the targeted market segment) and for climate change and energy, because by optimizing the production process within public and private sector, productivity will increase and thus more qualitative products will be made with the same or less resources than before in a unit time.

2.1 Quality Scheduling Index From a juridical point of view, when signing a contract, the parties bound themselves to fulfil the contractual terms and deliver the products or services within the required schedule at the required quality standard, which must comply with ISO standards, but might not necessary, comply with customer requirements. Time can be considered as a negative factor, namely delaying the decision of the public institution as a negative influence on the market and the business environment. Thus an important business decision may create a state of uncertainty affecting business productivity and therefore profitability [Gruia & Gruia, 2013]. In this manner the managerial tool Quality Scheduling Index can be implemented in private as well as into public sector, which is of a great importance and affects through its political decisions [Gruia, 2014] the good development of the private sector. In the same time, by implementing the Quality Scheduling Index (QSI) in public or private sector the productivity of the company increases and at a macroeconomic level we can achieve the state of sustainable growth in terms of target debt to equity ratio, target dividend by payout ratio, target profit margin or target ratio of total assets to net sales. The QSI concept provides a starting point for the development of a comprehensive financial framework and formula for any SME specific to sustainable growth rate calculations.

To achieve the previous defined secondary goals (targets) we had to mathematically formulate the necessary input and output variables. The model was developed and considered only from a private sector perspective [Gruia & Kavan, 2014], however the range can be broaden with application in the public sector (state own companies as well as public administration institutions), and from a macroeconomic point of view, applied even at the level of European Union. Rationalized organization of work achieved with the help of Quality Scheduling Index can be explained in a simplified manner according to the following figure.

Figure 1: Mind map in the form of cause and effect diagram

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Source: Own contribution

Based on the requirements of the market and of the shareholders, on optimization model is born with a new and unique Quality Scheduling Index (QSI) as the degree of elimination of schedule deviations from the production plans:

In this way the secondary goal A was fulfilled.

2.2. Implementation methodology and QSIâ&#x20AC;&#x2122;s evaluation scale We had to theoretically test the proposed Quality Scheduling Index (QSI) and tune it experimentally and then test its functionality in business practice. Thus was developed and tested implementation methodology of the Quality Scheduling Index (QSI) and thus was fulfilled the second target B. The first part of the methodology consists of collecting and sorting the necessary information - what is specified in the formula for the calculation of the Quality Scheduling Index to be applied in the production plans as well as public enterprises (while in the private sector there are production processes, in the public sector we will have public administration processes): 1. Creation of main management strategic directions: pessimistic, most likely, optimistic.

2. Division of processes depending on the business model and jobs (with one and with more than one operation).

3. Arrangement of jobs / processes in parallel: 3.1 Schedule jobs according to our own priority rule FFBR (jobs with one operation), or 3.2 According to other newly established priority rules NoBtl and MaxQminT, with partial use of SPT rule (for more than one operation) and 3.3 Based on Greedy algorithm so that each process has added maximum value before passing to the next job.

4. Determination of optimistic, pessimistic and most probable procedure of the production / public administration process, the determination of the production batch/batch of documents to be sent.

5. According to the CRM / CI find utility value of products / services.

6. Identification of primary and secondary processes that affect the utility value directly or indirectly.

7. Identification of processes that should be carried out in exactly the given time interval, or those who may be delayed, or those that can be done in advance

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(according to the optimistic and pessimistic strategic directions of work planning the production / public administration line).

8. Identification of the priorities of processes, the most important process will denote with a value of 1 and the least important gets the value of the total number of operations of the manufacturing / administrative process.

9. Sorting the processes into 3 groups (by the previous paragraph 8) with the appropriate priority.

10. Calculating the total cost of the product or batch of products / services (according to data availability).

11. Calculation of the total cost of one product (the product / services batch), in compliance with the processes and time requirements.

12. Calculation function of the quality of where is the utility value of the product / service, number of employees is i â&#x2C6;&#x2C6; {1,2, ..., h}, with a direct impact on customer satisfaction.

The second part of the implementation methodology is devoted to of calculating of QSI corresponding to the maximum level of quality and minimum value in losses of time and money.

13. Run the developed software at least 10 thousand cycles of repetition, with previously obtained and the relevant inputs.

14. Repeat the previous point at least five times consecutively, in order to reduce the likelihood of errors.

15. Compare calculated values with those in the rating scale and select the essential values of the interval defined rating scale.

The third part of the methodology concerns the elimination of cyclic error (which can occur) and the determination of the definitive measures for improving the quality of processes based on the values of the Quality Scheduling Index (QSI).

16. In the graph of the calculated QSI values - eliminate values that are outside the specification limits â&#x20AC;&#x201C; which are set by the customer base.

17. Adjust the final values of quality (time completion, the total cost) according to your business model (note that the production period, calculated by the program is in minutes; the program is set up to work for 12 hours per shift (for reasons of practical applications performed in a specific company and the specific conditions), so if you have an 8-hour shift, just multiply the value of the time rate of 8/12).

18. Return to the quality equation and find the corresponding values of the coefficient and accordingly set the workplacesâ&#x20AC;&#x2122; adding value.

19. Do the same for the total cost and completion time of the work, when including the most likely strategic directions and implement measures arising from the calculated values.

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20. If the calculated value of QSI is not in the "good" rating scale - take steps to reduce costs and improve the time usage and then repeat the calculation of the Quality Scheduling Index (QSI).

Thus was fulfilled the secondary target B. 2.3 Sustainable growth using QSI The Quality Scheduling Index (QSI) can be used as a useful tool by SMEsâ&#x20AC;&#x2122; managers, which with the help of the newly developed Quality Scheduling Index evaluation scale can find out exactly in what state they are in the business production processes before (and after) the implementation of the QSI in the company. It is listed in the following table, thereby meeting the secondary target C. Table 1: Evaluation scale of the Quality Scheduling Index Parallel identical machines -workers 1-100 -jobs 1-100

- workers 101-250 -jobs 101-250

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 1-100

Parallel uniform machines

Parallel unrelated machines

- workers 101-250 -jobs 101-250

-workers 1-100 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 1-100

-workers 101-250 -jobs 101-250

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

-workers 1-100 -jobs 101-250

-workers 101-250 -jobs 1-100

Good

- workers 1-100 -jobs 1-100

Average Bad

Source: Own contribution

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We have divided the scale (one for each of the cases of parallel identical, uniform and unrelated machines or working tables) in three main categories: 1. Good – which can act for the company as a stimulus that the process is in good limits and the company is manufacturing products according to the utility value requested by the customers and within the quality, time and costs specifications of the business model. If a company has the Quality Scheduling Index in this evaluation scale, it means that it can invest in the R&D of a new product and can invest in the innovation of the business model with any concerns regarding the actual business model, because the actual one is at the highest levels (every process runs smooth within specifications and according to the customers’ requested utility value).

2. Average – this level states that the company should give more attention to the processes which don’t add value in direct way, but in indirect one, because there are some discrepancies which can be easily adjusted. Also the values of QSI from this range indicate that the company has losses on the production line, which affect the delivery time and the quality of the requested products by the market.

3. Poor – the level indicates that there are major problems on the production lines and the processes should be evaluated in detail, from the quality, time and costs point of view. These values can act as an alarm signal for the management that something is wrong in the company which affects the image and reputation of the company. Additional managerial tools are needed to further evaluate the situation like: FMEA, evaluation of processes, Value Chain Analysis, Supply Chain Analysis, etc., according to the specific business model, the industry in which develops its business and experience of the management.

For better results each of the levels above are valid for four different situations: a) For a number of workers between 1 and 100 and a number of jobs between 1 and 100; b) For a number of workers between 101 and 250 and a number of jobs between 101 and 250; c) For a number of workers between 1 and 100 and a number of jobs between 101 and 250; d) For a number of workers between 101-250 and a number of jobs between 1 and 100; The first two cases are valid for designing of experiment (and simulating different schedules according to the strategic directions in SMEs) on parallel machines for jobs with one operation, whereas the last two cases are valid for scheduling jobs with more than one operation (in our specific case the index works best for only up to three consecutive operations per each job which had to be done on different types of parallel machines, but we should know in advance the processing times of each operation in part).

The Quality Scheduling Index was also partially implemented in selective manufacturing companies from two European countries (Romania and Czech Republic) and it was shown that by implementing the QSI, it was obtained an increase in average of 27% in time consumption of the available time, and an increase in the production of qualitative products too, from 51 to 54, i.e. approximate 6% increase in the quality of the products with zero defects. In the same manner the costs of quality were considerably diminished, with up to 17% [Gruia & Kavan, 2014]. From a juridical point of view we consider that this

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small managerial tool which combines time consumption, quality requirements as well as costs related to time usage, should be implemented through a directive from the European Council in every European country so that all Small and Middle size Enterprises to have the possibility and opportunity to consistently increase their sales and profits annually through a predefined financial European approved policy. The QSI can also be easily modified to answer SMEs from different industries and countries within European Union.

Conclusion In this paper we have presented a new way of achieving sustainable growth using the Quality Scheduling Index, if applied at the European level in small and middle size enterprises, as well as into state institutions, according to our implementation methodology and based on the evaluation scale developed. The possibility of practical application of the index QSI is made through newly developed software that calculates it and can be used in practice for small and / or medium-sized enterprises to increase business productivity. For better understanding of the concept of our index QSI, we recommend the reader to get acquainted with the authors other works.

New information was brought to the scientific community in the field of management and economics, with some juridical recommendations and can act as a new way of attaining sustainable growth in a faster and free of charge way, in the development of Applied Operations Research and Production and Operations Management. It improves understanding of quality scheduling on parallel machines and combines distributed workflow maximizing the utilization of productive resources.

The paper presented not only the index QSI, but our research deals with a wide range of related optimization problems, including contribution to the fact that management can be more precise and faster in taking some strategic decisions when dealing with a global customer with easy access to information and to different companies from the competition. The actual need of Quality Scheduling Index (QSI) was commissioned by the philosophy Just-In-Time and can play a strategic role in the enterprise of the 21st century.

References [1] European Commission (2010) EUROPE 2020 A European strategy for smart, sustainable and inclusive growth, European Commission COMMUNICATION FROM THE COMMISSION. Available at http://ec.europa.eu/eu2020/pdf/COMPLET%20EN%20BARROSO%20%20%20007%20-%20Europe%20202 0%20-%20EN%20version.pdf.

[2] Gruia, G.; Gruia, G.C. (2013) Scenarios regarding the role of the Competition Council and its influence to the economic environment, Juridical Tribune (Tribuna Juridica), Bucharest Academy of Economic Studies, Law Department, vol. 3(2), p. 259-267, December.

[3] Gruia, G. (2014) Politici publice, Sitech Press, Craiova.

[4] Gruia, G.C.; Kavan, M. (2014) An innovative way of improving just in time delivery by using the Quality Scheduling Index. Review of Applied Socio-Economic Research, Vol. 7, Issue 1/2014, pp. 73, Available at http://ideas.repec.org/a/rse/wpaper/v7y2014i1p73-83.html.

[5] Higgins, R. (1977) How much growth can a firm afford, Financial Management vol.6, issue 3, p. 7-16.

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The Impact of Forest Degradation on Rural Communities in Romania Liliana GURAN-NICA1, Cornelia MARIN2 1,2 “Spiru Haret” University, Ion Ghica, no. 13, Bucharest, 030045, Romania Tel: +4021 4551000, Fax: +4021 3143900, Email: info@spiruharet.ro Abstract: Evolutia societatii umane s-a facut, de multe ori, pe seama utilizarii resurselor naturale. Comuniunea padure-om a reprezentat pentru Romania mai mult decat acoperirea unor nevoi materiale imediate. Romanul „frate cu codrul” a stiut sa aprecieze, timp de secole, valentele multiple pe care le presupune padurea.

Pădurile, ca element distinct al fondului forestier, cunosc, în România ultimelor decenii, o afectare a starii lor. In paralel cu exploatarea destinata intretinerii si regenerarii padurilor a aparut o exploatare in scop economic care depaseste pragul de responsabilitate si normele de taieri suportate de mediu. Degradarea fondului forestier are un impact major ce include cresterea riscurilor la inundatii, alunecari de teren, distrugerea ecosistemelor, degradarea peisajelor, disparitia sursei de subzistenta pentru localnici. Dintre hazadrele posibile s-a acordat o atentie deosebita inundatiilor deoarece cand acestea depasesc codul galben, marchează profund comunitatea afectata. Inundatiile reprezinta un fenomene greu de evitat din cauza frecventei lor cauzata direct si indirect de defrisari excesive.

Managementul riscului la inundatii ar trebui sa inceapa cu gestionare responsabila a padurilor care porneste de la pastrarea unui nivel de despaduriri comparabil cu acea capacitate de regenerare a padurii. O analiza a perceptiei membrilor comunitatilor locale completeaza lucrarea cu date concrete. Interpretarea tuturor datelor duce la concluzii interesante unele mergand pana la aprecierea modului in care legislatia ajuta la mentinerea padurilor sau permite distrugerea acestui mediu forestier.

Keywords: forest, rural community, deforestation, floods, Romania JEL classification: Q01; Q51; Q56

1. Functional Polyvalence of the Forest According to article 1 of the Romanian forest Code, law 46/2008, national forest fund is defined as: all forests, fields for afforestation, those that serve the needs of culture, production or forest administration, of ponds, stream channels, other land with forestry

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and non-productive destination, included in forest planning on January 1 st 1990, or included therein subsequently, in accordance with the provisions of the law, irrespective of the nature of the property right.

The study of relationship that is now taking shape between forest, as distinct component of natural environment, and human communities, particularly rural areas, as well as elements of anthropic environment should be based on a comprehensive complexity subject, the Multifunction of the two types of items.

Forest meets within territorial system which it belongs, multiple functions, whose analysis must be carried out in relation to the major elements of the latter, through the prism of relations of interdependence and conditioning.

Ecological function is essential as a result of the fact that the forest is a component of natural environment, essential for proper functioning of the latter. Through their relationship develop with all other elements of natural system, has a decisive role in helping to maintain balance. In the specialized literature [Muja Sever, 1994] it talks about the multifunctionality of the forest in the sphere of the environmental protection (of water, land and soil, against climatic factors and harmful industrial, scientific function healthcare of ecofund preservation and forest genofund, the aesthetic-landscape. This function has an indirect impact on the entire geographical system, fact strongly demonstrated in human community behavior.

Economic function is derived from the direct relationship that has been established between forest and human-factor, within the framework of which the second being an active element with high impact on the forest environment.

Forest, by its ability to produce plant biomass and animal, represented in the course of time an important source of raw materials for human. It is one of the determinants environmental factors of rural settlements, offering those communities the necessary resources for survival (equipment required for houses construction and household annexes, domestic heating fuel and for food preparation, the environment conducive livestock farming - in contact between forest and pasture, source of supply with various food products, which complements the food resources or can increase by selling household revenue namely fruit, mushrooms, game, etc. Also, wood exploitation within the framework of certain specialized undertakings, wood processing and achievement of various wooden objects, searched on the domestic market but also external or recouping tourist attraction of the forest, increase considerably its economic value.

The socio-cultural function was born from the join of the two functions and results from the impact on the forest on human behavior. Ecological and economic offers have been completed in the course of the history through the protecting role that the forest had during the periods in which the population of this space was threatened by various dangers, while protecting it from the incursions of various migratory people. Along with the necessary lives resources, the forest also gave people optimal conditions for maintaining physical health. So, we may speak about a cult of "forest", of its relationship with the man, and which can be found in the entire Romanian culture (material and spiritual).

Although it is theoretically, functional versatility of the forest is indestructible, some of the internal relationships to the territorial system, of which it is a part, can be adversely affected causing disturbance for long periods of time, in accordance with the conditions in

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which the necessary measures are not taken. Unfortunately, in the past few years, on the Romanian geographical territory, such disorders resulted from changes occuring in a given period from a political point of view, which have deeply affected the relationship manenvironment as a result of changes in the field of property in general, the largest forest in particular.

2. Development of Forestry Property Fund in Romania and the Management Mode Areas occupied by forest, in the past history of the country, amounted to 70-75 %. The forest, Romanian’s brother, defended him, inspired him, fed him, sheltered him.

The forest set up, from the most ancient times, a basic element of Romanian geographical territory, the population of this territory feeling in a permanent relationship with the forest both from an economic point of view as well as socio-cultural. This interdependence prevailed by the appearance and strengthens over time of a man’s feeling of dependence towards this element of the natural environment, which materialized through the various forms of ownership of forest land. In the specialized literature there are many details of the manner in which it has evolved historically the forest property [Giurgiu, V., 2000].

The process of forest exploitation in an organized manner yet started since the ancient times. It is to be noticed particularly the Romanian period, in which the forests were considered to be „ager publicus“(public goods) and their exploitation shall be carried out by the "forestry colleges" and by the so-called "procuratores saltamos". At that time, a very small part of forest areas could be found in private property.

Later, starting with the principality and voivodeship period and continuing in the feudal, has appeared the form of ownership property (in which several individuals shared the same forest area - ownership property), which has withstood centuries of. On the other hand, it also took shape the royal property, often used by the rulers in the case of donations, in favor of the troop leaders, churches, protégés but also the freeholders in Muntenia and peasants in Moldavia. Thus, large forest holdings have been formed, which belonged to monasteries, nobles but also to rural communities.

First attempt to regulate the way in which forests are operated is represented by the Wood law entered in Radu Negru Monument from 1612. Several princely acts in Moldavia and Wallachia imposed "prohibitions of nature damage". Forest that was subject to this law was protected being prohibited hunting, fishing but also breaking down trees. The Wood law also existed in Transylvania. The need for forestry space management has imposed the formation in Banat (the year 1769) and in Transylvania (1781), of the regular forest service (in the reign of Emperor Iosif II). "Forest organization", printed in 1786 in Romanian and German, can be considered as the first forestry code. This Forest organization of the forest has been enforced in Bucovina, and was mentioned that the state is the one that manages the forests. In the Moldova year of 1792, voivode Alexandru Moruzzi gave a willing subordination (anaphora) to forests and water sides followed, two years later, by another imposed by the chaotic conditions in which were chopping forests in their place appearing areas denuded of vegetation. Wallachia shall not delay with regulations on forest protection (1793).

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In the second half of the 19th century there is a new form of property, that of the state, which strengthens and broadens in 1863, when applying the provisions of the law for monastic wealth impropriation, the government thus becoming a big owner of forest land [Turnock, Lawrence, 2007]. Also, a year later, during reign of Alexandru Ioan Cuza, through its agrarian reform, there was little farmer's forest property.

The forest code of 1881 included rules of the operation and maintenance of forests, it referred to the management and forest property observance. Next Forest code (1910) will be in force over 50 years. By this code shall be under an obligation of submission of a guarantee of 100 lei per hectare, with a view to reforestation. Forest exploitation, regardless of the type of property, it could not be achieved without a planning or regulation of exploitation.

Transylvania, region for centuries under the Austro-Hungarian Empire domination, had a different scheme of forests. Ownership property of Romanian population has been also transferred to the other ethnic groups that are coming in this space over time (Hungarian, Saxons of Transylvania and Szeckler) but also to the church. Subsequently, the form of ownership has diversified a fact that has caused the appearance of conflicts. After the revolution of 1848 it was recognized the serf right to forest property, ordering the breakdown of forest landowners.

Under a law of the year 1871 it was decided the formation by such land the formation of "composesorate urbariale", administered under the guidance of state. Because of the irrational exploitation of the forest by Law 19/1898 have passed in the management of state all forests belonging to those communities that could not only employ a technical staff for the proper management of their own.

After the First World War together with the development of the Romanian unitary state the situation was uniform throughout the country. Has been recognized property rights on forests, as a result of historic development up to 1918. In the inter-war period, the forest fund has been reduced by about 1.3 million ha, one of the reasons being also the Agrarian law in July 1921, by which Romanian peasants have been reinstated (producing, thus, a structural change in the forest property), which has caused intensification of wood exploitation for marketing, major source of income and employment in rural area [Turnock, Lawrence, 2007]. Thus, in 1929 the state had about 30% of Great Romania's forests.

After the Second World War the fund forestry has been subject to significant changes. By the Agrarian reform in 1945 have been carried out allotments with small consignements of forest. In addition, large areas of land (the "war criminals") were transferred into the ownership of the state. Some of the owners who owned large consignments of forest, seizing nationalization approach, have totally or partially alienated the forest properties, selling them to peasants. Thus an excessive crumbling has been caused.

In 1948, as a result of the new measures taken by the communist state, forests of all natural and legal persons were nationalized, becoming "property of the whole people".

The state got to manage about 6.5 million ha belonging to forest fund. Cutting down the forests took a controlled course and, even if it has been broken the right to property, the chopping were doubled by afforestations. The 1962 forest code mentions the forest role (they were considered to be among the main natural riches of the country and with a particular economic role). Forest defense was considered a patriotic duty of all citizens.

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After the year 1989, there have been many laws, which have marked the period of transition Romania went through. First of them is the Law No 18/1991 which decided the restitution of a hectare of forest for former natural person owner, the sequel to consisting of tens of thousands of hectares felled, abandoned and unregenerated. The 1996 forest code was trying to make an adaptation of the legislation to the new reality and it was only in 2008 a Forest code shall be drawn up and shall enter into force that fits also the concept of sustainable development of forests.

Analyzing the evolution of the surface occupied by forests from 1990 to 2012 (fig 1) you can see a reduction of the area occupied by forests, maximum reduction being registered by the year 2004. This reduction is explained by the rise in areas subject to clearings, phenomenon that got out of control in particular as a result of illegal retrocession, abusive. On the graph you can see an increase in wooded area in a manner that has exceeded the level of 1990 to wooded land. Apparently things seem to be back to normal again - National Forest Administration ROMSILVA has purchased land intended for afforestation. At a closer analysis it seems that a series of surfaces have been transferred, declared until recently pastures, in category of forests (as a result of running or planning to run, afforestation works). This increase, on the background of massive slaughter of trees, most of the times beyond the legal limit, it is difficult to explain: either the survey that was made revealed areas larger than each other knew, or have not been correctly declared the areas covered by woods so as to be able to exploit on wooded "non-existent" land. A correlation with the information supplied by the graph in figure 2 can be considered that there was a moment in which it may be possible to be recognized the decrease of wooded area (year 2000) after which they have been seeking solutions so that in the statistics to hide the reality from the land. ha

Figure 1: Developments in occupied area forests (source INS)

Figure: 2 Developments in occupied areas of forest by by of forest and other forest vegetation (source INS)

Figure: 3 The evolution of afforestation and deforestation activities

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The phenomenon which has determined that fall in the forest areas, in 2000 can be explained by the graph in figure 3. It can be seen, in parallel, the manner in which the afforestations and slaughtering of trees have evolved by the year 2005. Wooded areas represent less than 50 % of the surface area of forests affected by cuts. Notice also the fact that the time period 2001-2005 was marked by an increase, an increase of wood chopping from forests.

The 1996 forest Code set up punishments for cutting of trees that did not observe the forest planning, including those carried out on the private property (on forest). In summary Audit report on the "Patrimonial situation of forestry fund in Romania between 1990-2013' it highlights local authoritiesâ&#x20AC;&#x2122; complicity of the authorities who have allowed reconstitution of the ownership of forest areas without a judicious analysis of the content file. For example: for persons without vocation succession or open files on the basis of mandates made abroad and whose authenticity could not be checked), with the granting, sometimes, of areas larger than those held by former owners.

All of these actions have been endorsed by some courts who have allowed ownership restoration on areas larger than those held in reality by the applicant, or have refused Stateâ&#x20AC;&#x2122;s right to defend the ownership by the appointed administrator. They have also accepted requests by asking for ownership recognition of forest land expropriated engraved by tasks in favor of state or have admitted applications on the basis of which it is had been returned in full areas requested from the land fund even though the request was not made and signed by all members of the heirs associative forms.

3. Malfunctions of Environmental Forest Exploitation - Risks and Catastrophes Forest space exploitation is marked by a few coordinates. On the one hand, one can talk about the required operation for maintenance of forest environment, operation involving work of regeneration (in their frame entering also slaughterings of regeneration and for the removal of brushwood), works to protect, collection of specific products (mushrooms, fruit, hay, medicinal plants).

On the other hand, commercial size that fits both primary cutting and trimming of the trees, transport and marketing average wood - both as firewood and as a raw material for the manufacture of wooden various objects.

(From Summary Audit Report)

Forests know in Romania last decades, a dangerous degradation. At the level of 2012, Romania had an area of about 26.8 % occupied by forests, under the circumstances in 173

which areas declared to be occupied by forests have increased almost constantly since 2004. This increase, on the background of massive tree cutting, most of the times beyond the legal limit, it may have a more detailed explanation (defective cadastre, the inclusion of new woodland areas, etc. ). Illegally felled areas are to be found, statistically, in the areas covered by forests. We are below the European average (32.4 %) and very far away from Slovakia who holds 57% of the country's surface, woods [Grigorean Maria Loredana, 2009]. The specialist in forestry, Victor Giurgiu, made an important remark concerning the quality of woodland areas which Romania holds at this point namely that, unfortunately, many forests are degraded, ill, non-working [Viorel Giurgiu, 1998]. The distribution of forests, on landforms, is not uniform (fig.4). In areas with slopes the percentage of forests is greater. Destruction of forests (by untidiness, illegal cutting) can have serious consequences in the medium and long term. The denuded slopes trees lose their ability to secure water from precipitation favoring sand drifted those processes, torentialitate.

Water originating from precipitation is no longer fixed on slopes and will give rise to an erosion of the soil and a transport toward the base of the slope. If precipitation occurs are abundant drives solid material found on slopes (woody fragments, fragments minerals) and the re-allocation settlements at a lower rate.

To assess the risks that arise as a result of cutting forests it must be identified the risks.

Multi-criteria analysis which takes into account frequency risks’ occurrence, their duration, damage to which they give rise in extreme weather phenomena allows the assessment of increased risk in the case of heavy rainfall. Floods are events with a predictable character to the extent that it can be done a meteorological assessment in the short and medium term (under normal conditions, without aggravation of local factors - see land clearing).

The year 2005 represented the development of flood climax on the territory of Romania, being considered to be the most severe in the past 35 years. So, out of the 160 meteorological stations existing in service at Romanian level, to 76 have exceeded multiannual environments, in the warm semester, with more than 50% [Dragotă, 2006].

Average quantity of precipitation throughout the territory was 866.5 mm with a surplus of 33.9 percent as compared to the 647 mm as well as represented climatological normal from the period of observations. In the warm semester monthly quantities and those that have fallen in 24 hours have been exceptional, exceeding in many cases historical records in the whole period of observations. With the exception of June and October months, all the other was in surplus from the pluviometric point of view with monthly higher average than the annual average value [Bogdan, Marinică, 2007].

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As a result of this situation, there have been major floods in almost all regions of the country on stretched out (fig. 5): in Bega river basins, Timiş, Bârzava, Moraviţa, Caraş, Nera and Cerna (in April), and in the middle basin of Olt and in those of Jiu, Ialomiţa, Mureş and Târnavelor (in the coming months of May, June and July), on Criş, Mureş, Olt, Vedea, Argeş, Ialomiţa, Buzău, Bistriţa, Bicaz, Tarcău, Trotuş, Tazlău, Putna, Şuşiţa, Râmnicu Sărat and Siretul inferior (in July-August).

Floods resulting from spills of water courses from discharges and damage to the dams and small build-ups, the leakage on slopes, as a result of severe weather phenomena, have affected 1734 localities in all counties in the country, the total amount of damage being estimated at 5 975 201.5 thousand RON. Infrastructure has suffered major damage, being recorded damage to 9,861 km county and municipial roads, 560 km national roads, 2,466 km streets in localities, 2,645 km forest roads, 9113 bridges and footbridges, 24 km railway, networks of water supply, electrical and telephone networks. There have also been seriously damaged 630 hydrotechnical buildings acting as defense against flood, mainly dikes, enforcement and defense of banks, adjustments of watercourses, which have necessitated urgent work of restoration. Along with all these losses have been also recorded human beings, 76 people being declared dead [***, 2006].

Conclusions All the studies carried out over the last few years, have underlined the role that the forest represents in the economy and the normal existence of this people. Economic reasons have exceeded, in many cases, legal behavior in relation to forest management and forest fund, as a whole.

Nature seeks to find its balance which man, in his recklessness, hurts it. Where it can no longer regenerate, produces disasters as warnings for thoughtless human actions.What is there to be done? New laws? Existing laws, whether it would have been complied with, maybe it would have led to a different situation, a normal one in which the forests would have plenty of time to recover and afforestations to perfectly double or even to exceed cuts of wood mass.

We believe it was a mistake the uncontrolled restitution of forests (especially in the areas where there were no real acts), a mistake for which no one will pay. What else can be done at this point? Restricting the right of cutting for all forest owners, the state remaining the only entitled to decide, by its authorized bodies, the management of wood mass.

References [1] Giurgiu, V. (2000) Evoluţia structurii pădurilor României după natura proprietăţii, Revista Pădurilor, 115 (1), pp. 1-12.

[2] Muja, S. (1994) Dezvoltarea spaţiilor verzi în sprijinul conservării mediului înconjurător, Ceres, Bucureşti.

[3] Turnock, D., Lawrence, Anna (2007), Romanian’s forests under transition: changing priorities in management, conservation and ownership, Geographica Timisiensis, 16, no. 1-2, p. 5-28.

[4] *** 2006, Raport privind efectele inundaţiilor şi fenomenelor meteorologice periculoase produse în anul 2005, Ministerul Mediului şi Gospodăririi Apelor, Comitetul Ministerial Pentru Situaţii de Urgenţă.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Eco-Bio-Management of Global Risks - A Necessity in a World of Vulnerabilities Where Eco-Bio-Economy Is Required to Accomplish Eco-Sano-Genesis Elena GURGU1,2, Cosmina Silviana SAVU1,3 1 “SpiruHaret” University, Ion Ghica, no. 13, Bucharest, 030045, Romania Tel: +40214551000, Fax: +40213143900 Email: elenagurgu@yahoo.com, cosmina.savu@yahoo.com

Abstract: The Vision of the Eco-Bio-Economy is to sustain development of the humankind welfare in all forms, through an economy of future dedicated to human life through the rational use of the environmental resources. This paper tries to convey the issues facing humanity that is at the beginning of a new global economic paradigm. Meet the minimum point of the financial crisis started in 2008, the final years of declining phase of the long-term global economic cycle. Feeling played through work is the lack of vision from governments, improvisation, passive reaction, type seeing and doing. However, in the economic sense the global economy is tired, with a sick system operated by trouble recovering. Perception, not far from the harsh reality is that national competition is focused to minimize losses caused by the financial crisis and use that type beggar thy neighbor policies similar to the exit from the crisis on the backs of others.

Key words: eco-bio-economy, global economic and financial crisis, global risks, unemployment, inequality, globalization, conflicts, chronic underemployment JEL Classification: A11, D81, E24, E27, F01, F02, F62, G01, H12, J50

1. Introduction UNEP-United Nations Environment Program (environment for development) has developed a working definition of the Green Economy as an economy that may have 2 3

Romanian Academy - National Institute of Economic Research,, Costin C. Kiritescu " Free International University of Moldova (FIUM)

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results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. Ecological policies became throughout times, a constant attitude of the world governments, as much as the ecological and the biodiversity interferences of the regional, national, transnational and global interdependencies, affect all nations. Eco-Bio-Economy is a scientific, economic and philosophic endeavor dedicated to the development of the integrated environment health, of the mankind welfare, through an integrated multi-polar eco-bio-economic concept, which promotes the Agrifood Green Power and the Smart Sustainable Integrated Development of the future. “Eco-Bio-Economy is an economy of the future, in the service of human life by rational use of environmental resources“, prof. Dr. dr.h.c. Alexandru T. Bogdan, member of the Romanian Academy, claims to several national and international conferences and publish in international specialty literature, an attempt to unite the two concepts: Eco-Economy, by Lester Brown and Bio-Economy, by Nicholas Georgescu Roegen, a new paradigm Eco-Bio-Economy. Eco-Bio-Economic-Safety directed to the economic, biodiversity, food security and food safety aspects, introduces – the new syntagm of the Eco-Bio-Economic Food Safety, to define also to a new syntagm – the EcoBio-Economic Social Safety, focusing the Customer Satisfaction and equally the Customer Protection, considering that food safety and social security have among other important objectives, a common target – customer satisfaction and its protection- and in extension, all interested parties.

Figure 1: Subsequent relations between concepts, syntagms and paradigms, which forms the content of the Eco-Bio-Economy, Eco-Bio-Safety (Food & Social), Eco-Bio-Management, Green Business, Customer-ClientSatisfaction-Protection

Source: A.T. Bogdan, Dana Comşa orig. May 2011

The Eco-Bio-Management is a Smart Sustainable Management (SSM) defined as an ecobio-management of future, eco-bio-sustainable, smart, harmonious, integrated and innovative, dedicated to the smart sustainable development and to the eco-biocontinuous improvement, welfare and the quality of life improvement, through innovative and rational use of the environmental resources. The syntagm Smart Sustainable Development is addressing to the holistic development through the concepts linked with the eco-bio-economy, innovation and quality. The syntagm Integrated Smart Sustainable Development is launched in order to stimulate the interrelation between concepts as ecoeconomy, bio-economy, economy, biology, biodiversity, ecology, green quality, together

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with new approaches as eco-bio-economy, agrifood green power, international diplomacy, global economy, sustainable development.

Figure 2: Smart Integrated Sustainable Green Power in the Eco-Bio-Economy context

Source: A.T. Bogdan, Dana Comşa orig. May 2011

In the context of the eco-bio-economic thinking, univ. prof. PhD Dr. h.c. Alexandru T. Bogdan, correspondent member of the Romanian Academy, initiator of the Eco-BioEconomy, introduced the new concept of the Integrated Environment Health in a globalized world, as an Olympic health, a multidimensional, global, integrative health, a healthiness of people, plants, animals, water, soil, air, for a healthy environment: “a healthy mind, in a healthy body, in a healthy world, with a healthy environment”, (orig.

A.T. Bogdan, May 2011).

Figure 3: Integrated environment health in a globalized world

Source: A.T. Bogdan, Dana Comşa orig. May 2011

Eco-Bio-Economy may be considered an attempt for a new eco-economic and bioeconomic vision, which reunites in an integrated pattern: the economy, the ecology, the biodiversity, the eco-economy and the bio-economy focusing the integrated smart sustainable development of the world. To this valuable areas, the Eco-Bio-Economy may address possible Eco-Bio-Policies and Eco-Bio-Strategies and allows the contribution of the

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social economy, of excellence and of the â&#x20AC;&#x153;all in one qualityâ&#x20AC;?, of the welfare economy, of solidarity, social corporate responsibility, as elements which may be utilized in an integrated practical future platform in a multipolar world for a healthy and ecological environment, to ensure and to promote a smart, creative, innovative, economic sustainable development. The use of the decision-making process at the highest level and the modern diplomatic tools are the expected and needed catalytic agent for a global ecobio-policy and eco-bio-economic successful equation.

Figure 4: Social Eco-Bio-Economy pyramid

Source: orig. A.T.Bogdan, Dana ComĹ&#x;a, May 2011

Global financial and economic crisis of 2008-2009, whose effects are still felt today, which were intensified by "currency wars", spy scandals, escalating armed conflict and terrorist acts, all contributed to increased global risks, uncertainties and vulnerability of world economies. 2013 was a modest year in global economy. Growth estimated at only 2.1% means little and confirm claims of "secular stagnation" or the existence of phase "winter" on the long-term cycles, Kondratieff type. EU stagnated in 2013 (estimate of + 0.1%), China has increased by 8%, and the United States increased by 1.9%. Japan had a heartening of + 1% in 2013. Forecasts for 2014 are more optimistic, showing a gradual recovery with 1.6% in the EU 28, + 1.6% in Japan, and + 8.1% in China.

Rapid transformation in the 21st century level of infrastructure, more efficient systems of faster communication (Internet) have generated the development of closer relations between countries, economies and companies, as well as trade and closer investment relations. Developments in the economic, geopolitical, social and technological have triggered unprecedented economic opportunities, but the interconnections between them also involved large systemic risks.

2. Globalization: Risks, Uncertainties and Vulnerabilities Emerging global risks are affecting governments and stakeholders from all sectors of business. To effectively manage and develop a resistance capable of withstanding their impact, we must understand, measure and predict global interdependence of these emerging risks by completing and diversifying traditional risk management tools. 2014 Report on global risks, presented at the World Economic Forum in Davos presents an analysis of global risks. It seems that the most important categories of socio-economic

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global risks identified by the level of concern arising likelihood, impact and relationship between them are: 1.Fiscal Crisis of major countries (expressed in highly leveraged debt to GDP in the USA, Japan, the Euro area countries). Economies are still in danger, while many emerging markets have experienced an increase in lending in recent years, which could fuel the financial crisis. A fiscal crisis in any of the major economies could easily have a global impact cascade.

2. The rate of high unemployment (especially among youth) and chronic underemployment in the labor market, both in developed and emerging economies. Unemployment is a global risk given by many people both in advanced economies and the emerging economies that fail to engage. Unemployment among young people, the most vulnerable category, is reaching 50% in some countries, and underemployment prevailing labor market is especially in emerging and developing countries. Structurally high unemployment and low employment rate of labor from countries in difficulty (eg. Spain) are considered the most serious by the social, economic and political point of view of the financial crisis.

3. Crisis of drinking water resources is realized to an extent increasing amid mismanagement and growing competition for already scarce resources. In my opinion, any decision on the exploitation of other natural resources, including shale gas, should take into account this major challenge, because sustainable development means meeting the needs of the present without compromising the ability of future generations to meet their own needs.

4. Severe disparities of income. There are also concerns about the negative effects that the financial crisis has on the middle classes of the developed economies, while globalization has led to polarization of incomes in emerging and developing countries.

5. Failure to mitigate and adapt to climate change. Even if governments and corporations are required to take action to reduce the greenhouse effect, the stake is not just in climate change mitigation, but also adaptation. Failure adaptation mainly affects the least developed countries.

6. Increasing frequency and intensity of extreme weather events (eg floods, storms, hurricanes, typhoons, fires). Climate change generates instability, resulting in a higher frequency of extreme events such as floods and droughts. The implications of these phenomena in terms of food security and social and political stability are strong enough.

7. Global governance failures. The risk of failure of global governance is considered to be connected to the greatest extent with other global risks. Institutions is weak or inadequate, in correlation with national interests and competing political hinders cooperation in order to combat threats.

8. Food shortages. Food crisis occurs when access to a certain amount and quality of food is inadequate or unsafe. Food crises are closely related to the risks of climate change and associated factors.

9. Failure mechanisms and major financial institutions. Five years after the collapse of Lehman Brothers, the collapse of such institutions is also a concern, given the persisting uncertainties about the quality of many banks' assets.

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10. Deep political and social instability. There is a risk that one or more countries systemically critical to experience a significant erosion of trust and mutual obligations between states and citizens, which could lead to the collapse of state domestic violence, regional or global instability and possibly in a military conflict.

Figure 5: Global risks in 2014

Source: World Bank, Global Risks Raport 2014 (2014), Ninth Edition, World Economic Forum, Davos

Of all these risks, three risks fall into the category of economic risks (1, 2, 9), three are environmental risks (3, 5, 6), three social risks (4, 8, 10) and a geopolitical one (7). Such risks are often interrelated with each other, generating instability and, moreover, comes in confluence with other challenges that accompany the â&#x20AC;&#x2122;'reset world order." Restricting the analysis, a survey conducted by Earnst & Young among companies from 21 countries, both developed markets and in emerging markets gives us a clearer picture of the risks and opportunities. The study examines in detail how companies address current and future challenges and opportunities, and identify the top 10 risks and opportunities for 20132015 in different sectors. Risk ranking given by the respondents, although stable in the first part, the second part fluctuates while ranking opportunities is more balanced. In the first part of the ranking, the top five risks ranked for 2013 and 2015 are similar: (1) pressure on prices; (2) reducing costs and pressure on profit; (3) market risks; (4) macroeconomic risk - outlook weak or volatile economic growth and (5) management talent and skills shortages. In the second part of the table, you can see some changes:

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expanding the role of governments in the economy - the 6th in 2013, will go down in 7th place in 2015; regulation and compliance - 7th 2013, climbed to no. 6 in 2015; sovereign debt and the impact of fiscal austerity and sovereign debt crisis falls on the 8th in 2013, 10th place in 2015; importance of emerging technologies ranked 9th in 2013, is ranked 8 in 2015 and shocks caused by political change up from position 10 in 2013 to 9 in 2015.

Somewhat similar to the risk ladder, in the ladder of opportunities, this time, the first six classes remain the same, both for 2013 and for 2015. Thus, innovation in products (1), increased demand in emerging markets (2), investments in processes business in the tools and training to achieve greater productivity (3), new marketing channels (4), improve strategy execution in all business functions (5), investment in iT (6).

Chronic gap between the incomes of the richest and the poorest citizens of the world is viewed in Davos Report as risk likely to cause serious damage worldwide. Analyzing the likely evolution of mankind in the next 10 years, the report classifies five categorieseconomic, environmental, geopolitical, social and technology-potential risks that they assess in terms of likelihood and potential impact.

Table 1: Evolution of the 5 most important global risk factors in terms of probability in the period 2007-2014

Source: World Bank, Global Risks Raport 2014 (2014), Ninth Edition, World Economic Forum, Davos

The most likely global threats after income gap. Experts believe at the World Economic Forum that severe weather events likely to cause "global systemic shock." These are followed by unemployment and underemployment, climate change and cyber attacks.

Table 2: Evolution of the 5 most important global risk factors in terms of impact in the period 2007-2014

Source: World Bank, Global Risks Raport 2014 (2014), Ninth Edition, World Economic Forum, Davos

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Threats considered with the worst impact that affect systems and states are destructive financial crises. Economic risk is followed by two of the kind of environment - climate change and the water crisis, one social category (unemployment and underemployment) and other technology (collapse of critical infrastructure communications).

Table 3: Key global risks in terms the likelihood and potential impact

Source: World Bank, Global Risks Raport 2014 (2014), Ninth Edition, World Economic Forum, Davos

Each report has analyzed potential risks worldwide, but their inter-conectability can trigger simultaneous or cascading effect, which can lead to a multiplier effect. It is vital so that the rich and responsible people to look with responsibility these risks.

3. Major Threats of Economic, Geopolitical, Social and Environmental Nature In this part of the work I intend to bring to the fore some of the major threats to economic, geopolitical, social and environmental hanging over the global environment by presenting some views expressed by senior officials of some countries: Japanese Prime Minister, Chinese Foreign Secretary of State, the British Prime Minister, President of Brazil and the Iranian president.

Japan. Japanese Prime Minister, Shinzo Abe, has "a new vision of a new Japan that highlighting two main aspects: economic strategy "of the three arrows" (or Abenomie = Abe + economy) and peace in the Asian seas. In Japan, deflation in the last 15 years have led to the stagnation of the national economy amid discouraging investment and new projects and also to increase the public debt. In December 2013, the government approved a record budget for the fiscal year began on April 1, 2014, amounting to 96,000 billion yen (921 billion US dollars). Economic Strategy "of the three arrows" is based on an aggressive monetary policy, fiscal policy and structural reform of the flexible economy.

The three arrows refer to the legend of Motonari Mori, the Japanese feudal lord of the

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sixteenth century, who gave his sons a lesson showing that while one arrow is easily broken, the same can said of a bundle of three arrows. The moral is this: those who are united and invincible.

The challenge of an aging population in an unprecedented rate, resulting direct labor reduction. It takes into account the electricity market reform (the first such reform in the last 60 years) in three stages, which will be completed by the opening of the Olympic Games in Tokyo in 2020 (see also the report on the first year of the Abe administration, January 2014). However, the Japanese government aims to eliminate restrictions on rice production (in force for over 40 years), health care reform, labor market reform (including increasing the role of women and the acceptance of foreign workers), building cities with zero greenhouse gas emissions. Externally, it is considered Japan's deepening integration into the global flows of knowledge, trade and investment by finalizing the Transpacific Partnership and conclusion of the EU-Japan Economic Partnership. Japanese Prime Minister states that "Asia has become a center of growth for the world. Japan is surrounded by neighbors with endless possibilities such as China, South Korea, ASEAN, India and Russia, and the Pacific, Transpacific Partnership partner countries ". He highlighted the need to restrict military expansion in Asia and transparency of military budgets. Reference to peace in Asian seas is an indirect message to China, given its increasing military force and intensifying territorial disputes in the East China Sea. China. Chinese Minister of Foreign Affairs Wang Yi, focuses on the current reform, "the benefit of the whole world" and the strengths of the Chinese economy, such as millenary culture and traditions and the strength of the Communist Party with 86 million members, "united as one ", which, incidentally, printed Chinese characteristics capitalist development model of PR China. As the Chinese system weaknesses are disparities between urban and rural areas and between regions. In geopolitical, Wang Yi accentuate China's contribution to global peace, the way to "peaceful" development of the country's deeper involvement in international conflicts and disputes and firm opposition to any form of aggression. Renewal of China and "Chinese dream come true" (which reminds us of the American dream) are "good for China and the world."

USA. Secretary of State, John F. Kerry firmly rejects the accusation that "the United States would withdraw from global affairs," citing his country's active involvement in three of the most acute problems in the Middle East: Iran's nuclear war in Syria and the IsraeliPalestinian conflict. He says that no state in the world has invested so much effort in this region. He also outlines the progress of the US-EU economic integration path (an allusion to transatlantic trade and investment partnership under negotiation) and other similar initiatives, such as Transpacific Partnership.

UK. British Prime Minister, David Cameron, refers to the opposite of outsourcing, which begins to grow, "bringing" jobs in East back to the West, so that the benefits of globalization to return "home". According to surveys conducted among British small businesses, one in ten has started producing again in the UK. In the USA, a similar survey shows that over a third of entrepreneurs plan to relocate their production facilities in China in the USA. In this context, British Prime says that one of the important factors of "internalisation" and also economic growth, is the exploitation of shale gas. Perhaps the British prime minister considers the elections in 2015 most important but the fate of the environment and the planet. Referring to the relationship with the EU, Cameron shows that we need "to reform EU to reform the UK relationship with the EU".

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Brazil. Dilma Rousseff, president of Brazil, is focussing on attracting investment, and say that they are welcome in the context of poverty eradication and strengthening the middle class (which increased in number to 42 million in 2003). Referring to the short-term volatility caused by restrictive monetary policies in developed countries, it said that Brazil is ready, with foreign exchange reserves amounting to 370 billion, and more than that, the country benefit from the economic recovery in advanced economies. Rousseff is in favor of liberalization, claiming both the Doha Round and the negotiations for an FTA EUMercosur.

Iran. Iranian President, Hassan Rouhani (based on August 2013), emphasizes growth and target his country to become one of the top ten economies of the world in the coming years. He stressed a desire to have peaceful relations with both its neighbors and the world. Referring to the preliminary agreement on Tehran's nuclear program in Geneva of the P5 + 1 (USA, UK, France, Russia, China and Germany), Rouhani said that he does not see obstacles or impediments in the way of an agreement insurmountable in the comprehensive future.

4. Perspectives of Global Economy This section is based on data from "World Economic Outlook", published by the IMF in January 21, 2014. For a complete analysis of the global economic situation, I consulted also the World Bank Report "Global Economic Prospects" and the UN Report, "The situation and prospects of the global economy," January 2014.

Founder and president of the World Economic Forum in Davos, Klaus Schwab, believes that the current global context is characterized by "low expectations" and "many unknowns". It held that in the next 5-10 years, the world economy will grow slowly and growth will not return to pre-crisis levels anytime soon. At Davos mentioned the risk of European bleak scenario in the long term, slow growth (about 1% per year), with high structural unemployment (between 9 and 11% of the population) and public debt about 100% of GDP. IMF Managing Director, Christine Lagarde, said at Davos that there are "old threats" (failure of reforms in the banking system and reduced economic imbalances) and "new dangers" hanging over the global economy and the crisis has not ended. Indeed, this is confirmed by the recent turmoil in emerging markets, especially Argentina and Turkey, where the peso and the pound have been massive devaluations, and in countries like Brazil, India, Indonesia, Republic of South Africa (the four , along with Turkey, is known since May 2013 as "the five fragile economy" - name given by experts from Morgan Stanley - to fund current account deficits recorded by them, which makes them vulnerable to outflows of "hot capital" ).

IMF Managing Director urged caution about bubbles and warned that economic recovery is accompanied by imbalances, high unemployment and the risk of deflation. Lagarde warned that low inflation in the advanced countries, especially the euro area (with an inflation rate of 0.8%, below the ECB target of 2%), could have unpleasant consequences in terms of financing costs and indebtedness, both for governments and companies.

However, it stressed that social inequalities are less sustainable higher growth.

European Commissioner for Economic and Monetary Affairs, Commissioner Olli Rehn, said he is aware of the risks, but began to see good developments in Europe.

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The IMF Report on Global Economic Forecast, published before the meeting in Davos, is expected to rebound in economic activity in 2014-2015 (increases of 3.7% and 3.9%) amid the recovery in developed economies. In all developed economies, GDP growth is forecast at 2.2% in 2014 and 2.3% in 2015 (compared to 1.3% in 2013), an above average recovery is expected in countries like USA, UK and Canada, and below average in the euro area and Japan. IMF analysis shows that, in developed countries the output gap remains high and, given the risks involved (ie, deflation), we recommend a flexible monetary policy, while fiscal consolidation should continue. The slowdown in the Chinese economy - the engine of global economic growth - is a concern for experts. However, the growth rate of China's GDP is still robust, levels indicating IMF forecasts of 7.5% in 2014 and 7.3% in 2015. For 2014 to 2015, IMF staff forecast that economic growth of India will exceed the average rate of the group of emerging economies and developing countries, in contrast to the Republic of South Africa, Brazil and Russia, with rates below average group.

IEM Experts considers that the BRICS countries, with engines of economic growth and exports and FDI attracted in recent years more strongly complementary engines, such as domestic demand (fueled by the high level of remittances from nationals abroad in countries such as China and India), investment abroad, stimulating innovation and infrastructure development.

5. Climate Change In the World Economic Forum in Davos this year , the date of January 24 become "Climate Day" being reserved for the topic of climate change, to encourage world leaders to engage firmly in the fight against this global threat.

Ban Ki-moon, Secretary General of the United Nations (UN) has drawn attention to climate change and the need to shift from "brown economy" to the "green". In his view, this transformation requires: (1) support from the financial sector (investors, banks and other financial institutions), (2) reducing financial resources of older technology, (3) increasing transparency on greenhouse gas emissions, (4) cooperation between banks, investors, and those in the field of regulation, so that they ensure that the rules governing financial markets support sustainable development. In this context, Ban Ki-moon emphasized that climate summit, which will take place in New York in September 2014 under the auspices of the UN, is a significant step on the path of the signing in 2015 of a legally binding treaty - Global Agreement for changes climate.

World Bank President, Jim Yong Kim, said, in turn, that despite the measures taken in terms of "green economy", emissions of greenhouse gases continue to increase, and the poor suffer further. In his opinion, there is no need for leaders who think in terms of shortterm benefits or election cycles, but the leaders that take the most vulnerable of present and future generations. However, it takes a plan to address the whole issue of climate change and possible solutions.

Jim Yong Kim appreciated the need for a levy on pollution and also the performance standards for buildings, vehicles, transportation systems, technologies so as to encourage growth "cleaner and greener". The IMF study "Reforming energy subsidies: lessons and implications" of March 27, 2013, subsidies for fossil fuels amounted to 1900 billion worldwide. However, this amount may be redirected to investments in green energy.

World Bank President believes that the first short-term goal may be to boost the green

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certificates market, which could reach $ 20 billion to the summit in September in New York and $ 50 billion to the United Nations Conference on Climate Change Paris next year.

6. Gradual Withdrawal of Monetary Stimulus by the FED USA, with Effects on Emerging Economies Worldwide, central banks' assets increased from 5000-6000 billion before the global financial and economic crisis to nearly 20,000 billion today, financial markets became so dependent on "cheap money". This led to "chase" after raising revenue (or yield) and the correction of significant capital to emerging economies.

According to international experts, reducing the easing of the USA will be accompanied by withdrawal of dollar liquidity in global markets, which will bring even more out structural problems and imbalances in the global economy. Reforms to increase competitiveness in developed economies are far from being completed and also debt (public and private) in these countries (as a share of GDP) has reached unprecedented levels.

In the current phase of quantitative easing, the Fed purchased each month government bonds and mortgage bonds in order to maintain a low cost lending and spur economic recovery and create new jobs. As the unemployment rate put on a downward slope in the latter part of last year (7% in November and 6.7% in December 2013 - levels still high compared with an unemployment rate of 4.4% in May 2007), was reduced and the amount of securities purchased. Thus, in December 2013, it was decided to decrease the amount of purchases of $ 85 billion per month to $ 75 billion per month, and in January 2014 a further drop to $ 65 billion per month ($ 30 billion plus $ 35 billion mortgage securities state).

International experts expect that the next meeting of the Federal Open Market Committee (FOMC) of the EDF, the degree of relaxation of monetary policy to be further reduced, and some analysts warn that this year even monetary incentives could be withdrawn fully.

Emerging economies have been "flooded" in recent years a considerable amount of "cheap dollars" generated by the FED monetary policy and are in search of high returns.

According to the Institute for International Finance, the amounts of these economies attracted foreign direct investment especially investment in bonds and shares amounted to 7000 billion in the period 2005-2013. Exchange-traded funds (ETFs) amounted to $ 300 billion in 2013, triple the amount recorded in 2008, compared to a value close to zero in 2004 to facilitate inflows instruments "hot capital" in emerging economies during the boom were a quick exit channel of these capital during periods of slow economic growth rates visible.

A few years ago, Brazilian Finance Minister, Guido Mantega, accused developed countries of the initiation of a "currency war" quantitative easing is equivalent to the weak dollar and simultaneously discouraging exports to emerging markets in developed countries. In turn, braking quantitative easing is a threat, which is equivalent to the cheapening of American bonds and lower demand for assets in emerging markets.

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7. Reducing Disparities, an Elusive The Report of Oxfam Development organization released on January 20, 2014 and entitled "Working for the few" shows that almost half of global wealth is in the possession of 1% of world population. Their wealth is estimated at 110,000 billion. Moreover, 85 people have half the world's population. According to a Bloomberg index that accounts for the wealth of the richest 300 people in the world, on the whole, their fortunes have reached 3700 billion in 2013, which means an increase of 524 billion in just one year. Of those 300, only 70 were losses.

According to the United States Census Bureau, income inequality in this country is growing for decades. The poverty rate was 15% in 2012, while the number of poor people reached 46.5 million. A quarter of young people under 18 are below the poverty line.

Oxfam Report mentioned above shows that even before the financial crisis and economic crisis in several EU countries recorded increases in income inequality. Portugal and the UK are among the most "unequal" countries among the member countries of the Organization for Economic Cooperation and Development (OECD). Austerity programs implemented in most EU countries have not led to the expected results in terms of economic recovery and reduction of social disparities, as evidenced and statistics: the richest 10% increased their share of total income. Aggregate wealth of the richest ten Europeans is higher than cash provided by economic stimulus measures adopted in the EU between 2008 and 2010 (217 billion Euros compared to 200 million).

Cardinal Peter Turkson, president of the Pontifical Council for Peace and Justice, read the Pope's message to world leaders at the opening ceremony of the World Economic Forum, the basic idea being that wealth should serve humanity, not to lead, requiring mechanisms aimed at helping the poor so that they can get out of the situation of social assistance.

Ban Ki-moon, UN Secretary-General noted that 2015 is the deadline for achieving the Millennium Development Goals (MDGs) and is necessary to define a post-2015 development agenda. In turn, World Bank President Jim Yong Kim, drew attention to social inequalities.

8. Unemployment The ILO report, "Trends in employment globally," published on January 21, 2014, shows that the global unemployment rate was 6% last year, while about 202 million people were unemployed (5,000,000 increase compared to 2012). Of these, 74.5 million were younger than 24 years (increasing by 1 million compared to 2012), which has high youth unemployment rate to 13.1%. There is a category of youth who neither work nor receive education and training (Neither in employment, education or training cloud - NEET), in some countries a quarter of young people aged 15 to 29 years being part of this category.

In the year 2013 of 375 million people (nearly 12%) lived on less than $ 1.25 a day and 839 million employees (26.7% of total) with less than $ 2 a day. 2018 is expected about 215 million unemployed worldwide. Every year it is necessary to generate about 42 million jobs for new entrants into the labor market. Currently, the largest share of the new unemployed are concentrated in East and South Asia (45% of total), followed by subSaharan Africa and Europe.

Guy Ryder, general director of the ILO drew attention to the fact that, after leaving the Swiss mountain resort of the leaders who attended the summit should focus on those who

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were in Davos, among them are: unemployed who are looking for a job, employees who need a decent salary, businessmen who need access to credit. The issue of jobs is "gorilla in the room in Davos" and it cannot be ignored, but must be addressed.

Conclusions Currently there is a lack of consistent European model, easily seen by re-division of the EU, this time in creditor countries and debtor countries, countries with stable economic growth and low cost financing and countries with serious problems such as Portugal, Spain, Gracia , Italy etc. How to think of entering a virtuous circle in Europe given that you have 27 million unemployed, have an average unemployment rate in the Eurozone by 12% when there are countries like Greece and Spain that have 25% unemployment and almost 60% unemployment rate among young people? Recoil feeling is strong and can be seen from the fact that Italy came back with per capita income at 1998 and the eurozone average back 6 years ago.

European decisions which seem of an elitist club "governing from a distance" suffer from asymmetric information and with serious shortcomings in reducing time lags recognition problems substantiation and implementation of the decision on the solutions. During the slow progress is being made towards the creation of the Union Banking and Tax, as we can decipher and German dual behavior - is often stronger integration pro or refusing to take measures to increase domestic aggregate demand to save around stagnation zone.

Is clear. The next crisis will be a European-wide policy, rapid trigger a strong social crisis.

Maintaining the status quo's not worth being a scenario to consider. Year 2014 will be the year of decision. If the European project will go ahead in its present form is a good question. I think not structural reform measures to be implemented quickly. Regulatory Act is ineffective - regulations, directives and decisions in a number of 1800 per year seems much, an average cost of starting a business of 2300 Euro is almost 4 times more than in the USA and 15 times lower than in Canada and it looks huge and not realize, for example, the refining, petrochemicals and distribution contribute to national budgets with over 250 billion and is left to die seems exaggerated. And ironically, to spend 180 billion on climate policy and both hesitated to give 8 billion to reduce unemployment among young people it's not very logical.

However, a coherent action in 2014 can restore hope among European countries. In parallel with fiscal consolidation (defined as predominantly qualitative adjustment based on better management of public funds, increasing the multiplier effects of public investment by prioritizing them and transfer to EU funding, restructuring of state companies, increasing transparency in public spending, tradable sector growth even through a deep transformation of its rural) action is necessary rethinking of Germany, the main engine of European integration. Condition of continued fiscal consolidation and troubled countries' commitment to the rules imposed by the Fiscal Compact, European Semester to Chancellor Merkel will probably accept wage increases of 1.5-2 percentage points higher than the growth rate of labor productivity growth in demand internal default anchor for tradable goods produced in countries of the southern flank. Germany will win anyway net risk that economic growth model of this country to reach its limits (especially

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considering capping exports and low domestic demand) is clearly higher than the general inflation plus the rate of increase in wage growth over the labor productivity.

ECB will restructure the policy of injecting money into the economy at risk thinking that reducing interest rates to generate a much lower cost of capital relative to labor, and thus a high structural unemployment. Forcing European construction with a Union Banking (prudential system common deposit guarantee system and unified mechanism for resolving potential banking crisis) as an antidote to run the bank, completed the issuance of Eurobonds, relaxation mechanisms to stimulate industrial policy and Growth pact EU could take vicious circles where they are now.

A budget and a common mechanism cushioning asymmetric Eurozone countries (widow of macroeconomic adjustment tools) seem inescapable.

Last but not least, the EU should create a Fund for Economic Growth and Infrastructure.

Development countries cohesion fund will consist of outstanding commitments at December 31, 2013, related to the total allocation 2007-2013 for certain types of projects (eg, those related to infrastructure and the environment and for human resource development). This fund will be financed, in national allocations initial connection to the trans-European infrastructure networks, education, research, etc.

The European model must return to the targets set initially - growth, solidarity and improve well-being. Economic stagnation for an area that represents a quarter of global GDP can only be worrying news. Otherwise, the gap to the American model, with growth fuelled strong shale gas revolution, will grow stronger.

References: [1]. Alexandru T. Bogdan and co-authors (2010), Prospects of Agrifood Green Power in 2050 and Forecasting for 2100 with Sustenable Solutions Based on Ecobioeconomics new Paradigm, Bulletin UASVM Animal Science and Biotechnologies, 67 (1-2)/2010; [2].Cohen, D. şi Soto, M. (2011), Growth and Human Capital: Good Data, Good Results, Development Centre Technical Papers No.179, OECD; [3].De la Fuente, A. şi Doménech, R. (2006), „Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?”. Journal of the European Economic Association. Vol.4, No.1, pp.1-36; [4].Dictionary, The New Palgrave Dictionary of Economics(2008), 2nd edition, Palgrave Macmillan, Basingstoke, Hampshire.

[5].Dipl. Eng. Dana Comşa, Prof. Univ. Ph.D. Dr. H. C. Alexandru T. Bogdan, Correspondent Member To The Romanian Academy, Eco-Bio-Diplomacy A New Concept For A Smart Sustainable Development In A Globalized World In The Context Of The Eco-Bio-Economy (2013), Bulletin UASVM Animal Science and Biotechnologies, 78 (1-2)/2013; [6].DPAD, United Nationas Report - World Economic Situation and Prospects mid -2014 (2014), United Nations; [7].IIF, Institute of International Finance (2014), The Global Association of Financial Industry, Global Economic Monitor; [8].ILO, Global Employment Trends 2013- Recovering from a second jobs dip (2013), International Labour Organisation, Geneva; [9].IMF, Energy Subsidy Reform. Lessons and Implications, (2013), Philippe Karam, International Monetary Found;

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[10].IMF, World Economic Qutlook (WEO) – Recovery Strenghtens, Remains Uneven, (2014), International Monetary Found; [11].OECD (2013), The Well-being of Nations. The Role of Human and Social Capital, Centre for Educational Research and Innovation, OECD Publications, Paris.

[12].OECD (2013), The Well-being of Nations. The Role of Human and Social Capital, Centre for Educational Research and Innovation, OECD Publications, Paris.

[13].Oxfam Briefing Paper (2014), Working for the few - Political Capture and Economic Inequality, 20 January; [14].UNDP, Human Development Report 2014 (2014), Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience, New York, USA ; [15].United States Census Bureau, USA, 2014; [16].World Bank, WB Annual Report 2014 – The Perspectives of Global Economy, Poverty vs. Prosperity, The World Bank, 2014 [17].World Bank, Global Risks Raport 2014 (2014), Ninth Edition, World Economic Forum, Davos; [18].World Economic Forum (2013), The Global Information Technology Report 2013, Geneva – World Economic Forum.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Impact of R&D Expenses on Firm Performance: Empirical Evidence from the BIST Information Technology Index Fatih KONAK1, Selçuk KENDİRLİ2 1 Hitit University, Hitit Üniversitesi İİBF, Akkent / Çorum, Turkey Abstract: The relationship between R&D expenses and firm performance has been discussed and carefully studied for many years. Vast amount of research have been carried to figure out whether this relationship exist or not. Some researchers suggest that there is no relationship between R&D expenses and firm performance, others put forward the existence of negative or positive relationship. It can be asserted that possible existence as an useful information can be consumed by managers to increase the market value of firms. In that respect, the main aim of this research is to reveal the relationship between R&D and firm performance by taking into account 10 companies that are listed on the BIST Information Index for 5 years periods (between 2009 and 2013). In order to accomplish this purpose, we employed pooled regression model and cross sectional time series analysis technique. In general, although negative and positive coefficients are found, almost, all of them is not statistically significant. In other words, according to outcomes, it can be claimed that there is no relationship between R&D and firm performance which is line with previous studies.

Keywords: R&D Expenses, Firm Performance, BIST Inf. Tech. Index JEL classification: G30, G32

1. Introduction The growth of technological firms is based on innovative products and services, led them to invest in research and development (R&D) [Lantza & Sahutb, 2005]. It is significant to note that the relationship between R&D expenditures and firm’s performance is vital for firm’s managers whose aim is to maximise the present values of stockholders’ value [Tubbs, 2007].

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Hitit University, Hitit Üniversitesi İİBF, Akkent / Çorum, Turkey, Tel: +90364 2191919, Email: selcukkendirli@hitit.edu.tr 192

In that context, The relationship between R&D expenditures and firm performance has been discussed and carefully studied for many years. Vast amount of research have been carried to figure out whether this relationship exist or not. Some researchers advocate that there is no relationship between R&D expenditures and firm performance, others suggest the existence of negative or positive relationship. It can be claimed that possible existence as an information can be employed by managers to increase the market value of firms. In that respect, the main aim of this research is to reveal the relationship between R&D expenditures and firm performance of 10 companies that are listed on the BIST Information Index for 5 years periods (between 2009 and 2013). In order to accomplish this purpose, pooled OLS test and cross sectional time series analysis technique were employed.

2. Literature Review Many empirical researches have been carried to provide evidence that shows the correlation between R&D expenditures and firm performance. Many researchers have been interested in the correlation between R&D expenditures and the firm performance that is the indicator of firms’ market value, and positive and significant relationship has been shown. Some of them are; Liang and Zhang (2005) figured out the relationship with 72 hi-tech companies as the sample. Connolly & Hirschey (1984) focused on 390 firms Fortune 500, and found the existence of a positive and significant relationship between the R&D expenditures and the firm’s value. Similiarly, Hongwei & Cheng (2006) analysed the sample to 96 companies and figured out the positive impact of R&D investments on firms’ market value.

Additionally, Bae & Kim (2003) examined this relationship for three leading economiesthe USA, Germany, and Japan- , and found that R&D investment consistently has a significant positive effect on firms’ value. Zhong & Zhou (2012) do the same work with a stochastic frontier model, and obtained the same conclusion with data of China market.

According to market performance indicator perspective, Tobin’s q, Hall et al. (2007) found positive and significant association as well. Also, Koellinger (2008), evaluated e-commerce companies in Europe. In his research, he found that companies engaged in internet-based innovations illustrate gerater performance than firms which do not invest in R&D. Vaccaro et al (2010) detemined the effective use of information management tools to develop new products and services, positeve affect on companies’ performance.

3. Data, Variables and Methodology 3.1. Data The book and market information of the 10 companies that are listed on the BIST Information Index for 5 years periods (between 2009 and 2013) is used for analysis. In order to obtain the data set, (http://www.imkb.gov.tr) and (http://www.kap.gov.tr), and websites of firms were examined in detail.

3.2. Dependent, Independent and Control Variables Table 1 demonstrates the dependent, independent and control variables taken into account for our research. Notably, dependent variabes shown below were selected as performance indicators.

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Table 1 : Dependent, Independent and Control Variables Bağımlı Değişkenler (Tobins's q, ROA, ROE) Tabins'q Return on Assests Return on Equity

(Total Liabilities - Equity + Market Value) / Total Assets

Tobins'q

Net Profit/ Total Assets

ROA

Net Profit/ Equity

ROE

Bağımsız Değişkenler (OY1, OY2, OY3, H0) Change in R&D Expenditures Square of Change in R&D Expenditure BIST 100 Index Return

The Change in Annual Marketing Expenses ⁡ The Square of The Change in Annual Marketing Expenses

RD^2

RD

Rt = log (Pt/(Pt-1))

R(BIST)

Kontrol Değişkenleri (Ln(S), K) Size of Sales Leverage Ratio

Natural Logarithm of Net Sales

Ln(s)

Total Debt / Total Assets

LE

3.3. Model Pooled OLS Test and cross sectional time series analysis technique were employed in order to figure out the realtionship between R&D expenses and firm performace. In this context, the regression models used for our investigation can be seen below; ROAit= αit+ β1RDit+ β2 RD2it+ β3R(BIST)it+ β4Ln(s)it+ β5LEit+εit 2

ROEit= αit+ β1RDit+ β2 RD it+ β3R(BIST)it+ β4Ln(s)it+ β5LEit+εi Tobins’qit= αit+ β1RDit+ β2 RD2it+ β3R(BIST)it+ β4Ln(s)it+ β5LEit+εit

(1) (2) (3)

Shown in Equation Tobin's'q, ROA and ROE performance criterias, and dependent variables; RD, RD2 and R(BIST). Also, Ln (S) and LE demonstrates control variables. In addition, 'i' refers business 't' periods and 'N' represents the total number of enterprises.

4. Analysis First of all, the effect of R&D expenditures on firm performance is detected by pooled OLS test. Afterwards, regarding Hausman test results, the fixed or random effects models are used. Under the fundamental assumption of OLS Test that is all companies used in research are same, the outcomes of thest are shown in Table 2. According to Table 2, regression results in three panels which are regression results generated by taking into account only one dependent variable ROA, ROE and Tobins’ q in Model 1, Model 2 and Model 3 respectively. there are some positive and negative figures were found, even though none of them is statistically significant at any level of confidence selected.

Furthermore, as Coşkun et al. (2010) suggested that any increase in marketing and R&D expenditures can affect company’s performance in some positive way, although an expenditure level that above a certain level, this positive effect may change in a direction of opposite way. Parallel with the idea of them, the R&D expenditures squared analysis represents that even though it has possitive and negative impact on ROE and Tobins’q performance measurements, these effects been changed in opposite direction. It can be,thus, advocated that there is convcave relationship between firm performance and R&D expenditures. However, it should not be overlooked that this results are not significant.

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Table 2: Pooled Regression Models’ Outcomes Model -1Model -2Model -3Dependent Variable: Dependent Variable: Dependent Variable: ROA ROE Tobin's q Coeff.

T-stat Sig. Coeff T-stat Sig. Coeff T-stat Sig. C -0,175 -0,781 0,439 -0,793 -2,121 0,040 -618,534 -2,756 0,009 RD 0,000 0,015 0,988 -0,030 -0,590 0,558 2,242 0,075 0,941 2 RD 0,001 0,168 0,868 0,006 1,044 0,302 -0,044 -0,012 0,991 R(BİST) -0,014 -0,534 0,596 0,013 0,299 0,766 -31,990 -1,222 0,228 Ln(s) -0,135 -1,607 0,115 -0,359 -2,569 0.013** -44,429 -0,530 0,599 LE 0,015 1,070 0,291 0,055 2,389 0.021** 34,220 2,489 0.016** R^2 0,427 0,190 0,227 Adj. R^2 0,392 0,098 0,139 Observ.

50 50 50 Note: , *** , ** and * demonstrate statistically significance at level 1%, 5% and %10 respectively.

According to pooled OLS test, all companies are the same as used in the analysis is fundamentally assumed, it is not possible to accept that this assumption is exist in market conditions. Hence, Hausman Test is used in order to determine fixed or random effects model for analysis of relationship of R&D expenditure and firm performance which shown in Table 3. According to the Hausman test outcomes, it is found that fixed effect model is more active than random effect model for all model applied. Therefore, fixed effect model is used for evaluation for all models based on the Hausman test outcomes.

Table 3: Statistical Testing of Regression Models Model-1 Model-2 Hausman Test 0,756 0,571 P-Value 0,980 0,989

Model-3 2,403 0,791

Note: , *** , ** and * demonstrate statistically significance at level 1%, 5% and %10 respectively.

Table 4 illustrates fixed effects’ and random effects’ model estimation results depending on Hausman Test. As mentioned above, examination of the fixed effects methods, which taken into account for all, demonstrates smiliar figures which were obtained fromd running Pooled OLS Test. Therefore it can be said that there is no proof which shows statistically significant realtionship between R&D expenditures and firm performance in the context of Turkish firms that are listed on the BIST Information Index.

Table 5 indicates the R&D Expenditures, GDP and Scientists and Engineers per Million People indicators for selected countries throughout the world. The the far right refers a country which devotes largest share of GDP for R & D expenditure. Also, the top of the chart represents a country that has relatively the highest number of scientists and engineers in its population. Eventually, the size of circle reflects the relative amount of annual R&D spending by indicated country. Having done the interpretation of the chart above, it can be seen that Turkey is on the left bottom side of the chart that means it has informationally lagged behind many countries. This stiation can negatively effect the main idea of our research which advocate the positive significant correlation. As shown in the analysis part of the research, the correlation between R&D expenditures and firms performance has not been revealed. The reason of this circumstance can be altered by employing diferent market data. In other words, whole direction of the country towards the R&D investments has a vital role that influce all sectors in country’ economic system.

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Table 4: Fixed Effects’ and Random Effects’ Model Estimation Results Model -1Model -2Model -3Dependent Variable: Dependent Variable: Dependent Variable: ROA ROE Tobin's q Coeff.

T-stat Sig. Coeff T-stat Sig. Coeff T-stat Sig. C -0,927 -1,029 0,311 -1,438 -1,039 0,306 -689,277 -0,793 0,433 RD 0,003 0,097 0,923 -0,026 -0,494 0,624 -4,075 -0,122 0,904 RD2 0,000 0,064 0,949 0,006 0,874 0,388 0,402 0,097 R(BİST) -0,016 -0,567 0,574 0,012 0,277 0,783 -31,053 -1,129 Ln(s) -0,233 -0,839 0,407 -0,634 -1,491 0,145 -208,503 -0,780 LE 0,058 1,108 0,275 0,097 1,206 0,236 42,407 0,840 R^2 0,632 0,357 0,328 Adj. R^2 0,511 0,100 0,059 Observ.

50 50 50 Note: , *** , ** and * demonstrate statistically significance at level 1%, 5% and %10 respectively.

0,924 0,267 0,440 0,406

Table 5: R&D Expenditures, GDP and Scientists and Engineers per Million People

Source: Battelle, R&D Magazine, International Monetary Fund, Worlbank, CIA Fact Book, OECD

Conclusion This research investigated the relationship between the relationship between R&D expenditures and firm performance of 10 companies that are listed on the BIST Information Index for 5 years periods from 2009 to 2013. In order to this aim, pooled OLS test and cross sectional time series analysis technique and pooled OLS method were employed. According to pooled OLS results for Model 1, Model 2 and Model 3, there are some positive and negative figures were figured out, although none of them is statistically significant at any level of confidence selected for both RD and RD2. Notably, It can be, advocated that there is concave relationship between firm performance and R&D expenditures. Yet, these results are not significant. Analysis of relationship by using cross sectional time series indicates that examination of the Fixed effects methods, which taken into account for all model employed, demonstrates similar figures which were obtained from running Pooled OLS Test. Hence, it can be said that significant relationship between 196

R&D expenditures and firm performance is not proved for firms that are listed on the BIST Information Index. Moreover, we realized that the Turkey’s place in the rankings of the R&D Expenditures, GDP and Scientists and Engineers per Million People indicators is behind many countries which might be the reason why R&D expenditure level is not a variable that affect company’s market value or performance.

Taking all into the consideration, it can be claimed that in line with the literature the relationship between marketing expenditure and firm performance exists. It should also be, however, highlighted that possible data or market change may reduce or strengthen the reliability of the findings obtained.

References [1] Bae, S. C. & Kim, D. (2003) The Effect of R&D Investment on Market Value of Firms: Evidence from the US, Germany and Japan, Multinational Business Review, Vol. 11, No. 3, pp. 51-75. doi:10.1108/1525383X200300016 [2] Connollly, R. A. and Hirschey, M. (1984) R&D, Market Struc-ture and Profits: A Value-Based Approach, Review of Economics and Statistics, Vol. 66, No. 4, pp. 682- 686. doi:10.2307/1935995 [3] Coşkun,

E., Kök, D. and Yücel, A. (2010) Pazarlama Faaliyetlerinin Firma Değerine Kısa ve Uzun Dönem Etkilerinin İncelenmesi, Finans Politik ve Ekonomik Yorumlar, Cilt:47, Sayı:540, ss. 67-76.

[4] Hall, B. Hç, Thoma, G. and Torrisi, S. (2007) The Market Value of Patents and R&D: Evidence from European Firms, NBER Working Paper, Cambridge, 2007.

[5] Hongwei, C. & Changi, Y. (2006) An Empirical Study on the Relationship Between R&D Inputs and Performance, Scientific management research, 110-113.

[6] Koellinger, P. (2008) The Relationship between technology, innovation and firm performance-Empirical evidence from e-business in Europe. Research Policy, 37, 1317-1328.

[7] Lantza, J. & Sahutb, J. (2005) R&D Investment and the Finan-cial Performance of Technological Firms, International Journal of Business, Vol. 10, No. 3, pp. 251-269.

[8] Liang, L.& Zhang, H. (2005) An Empirical Study on The R&D İnputs Performance of High-Tech Enterprises, J.Cent.South Unıversıty, 232-236.

[9] Tubbs, M. (2007) The Relationship between R&D and Company Performance, Research-Technology Management, Vol. 50, No. 6, pp. 23-30.

[10] Vaccaro, A., Parente, R. and Veloso, F.M. (2010) Knowledge Management Tools, Inter-Organizational Relationships, Innovation and Firm Performance. Technological Forecasting and Social Change, 77, 10761089.

[11] Zhong L. & Zhou, Q. (2012) R&D Investment, R&D Efficiency and Enterprise Performance under the Restriction of Endogenous The Sample of High-tech Segment Industries of China, Soft science, 11-14.

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Expansion for Who, Markets or the Poor?

Sedat KUSGOZOGLU1, M. Sakir BASARAN2, Selcuk KENDIRLI31 1,2 Turkish Court of Account, Turkey Abstract: In this study we examine the impacts of expansionary monetary policies executed by the Federal Reserve on poverty in the United States of America. It has been discussed in various studies that the Fed’s expansionary monetary policies create a less positive impact on economy as a whole than financial sector. In this study, the expansionary effects of expansionary policies on the poor living in America will be discussed. The main thesis of the study is that the poor living in the United States benefited less from expansionary monetary policies than either financial sector or the US economy as a whole. When discussing the thesis of the study both employed and unemployed poor will be discussed. Therefore, it will be questioned that the decrease in the unemployment rate is the indicator of the fight against poverty. Indicators such as indices and interest rates in the financial markets, and indicators such as growth rates and unemployment rates in the overall economy are regarded as essential indicators but as for poverty it’s hard to find such regarded indicators. Unfortunately, there are not too many statistics about the poor living in the United States in the reports of the international organizations. Thus the main trouble of the study is that international comparisons are almost impossible. Therefore, various indicators produced by the U.S. government agencies of various indicators will be used in this study.

Keywords: Quantitative Easing, Federal Reserve, Poverty, The Poor.

JEL classification: E58, I32

1. Quantitative Easing Policy Many measures were taken after the subprime mortgage crisis which starts in late 2007 in United States of America (USA) and still has effects present day. These measures can be roughly classified as follows:  Tax incentives,  Bailouts,  Bond purchases,  Interest rate cuts, 3

Hitit University FEAS Banking and Finance, E-mail: selcukkendirli@hitit.edu.tr 198

 Other measures.

The scope of study is limited with quantitative easing (QE) which is classified under bond purchases.

Quantitative easing is a non-traditional policy which include large-scale asset purchases of, for example, mortgage-backed securities and Treasury securities [1].

The main objective in implementing the policy of quantitative easing is raising the prices of assets through purchasing assets from banks. Bond purchases which operated under QE lead to increase the price of bonds and decrease interest rates. Lower interest rates makes investors direct their funds from low yielding bonds to stock markets in expectation of higher returns. As a result, thanks to rising asset prices, asset owners will have a portfolio which is more valuable and more liquid. If they feel wealthier and have more money immediately available, then they are likely to increase their spending which boosts the economy directly, or else to take on more risk by increasing their lending to consumers and businesses [2]. Fed explains the effecting process of QE on economy as “when the Fed makes such purchases, the demand for those assets and their prices increase, driving down interest rates. As interest rates fall, the cost to businesses for financing capital investments, such as new equipment, decreases. Over time, new business investment should bolster economic activity, create new jobs, and reduce the unemployment rate [3]”.

The first round of QE began in March 2009 and concluded in March 2010. Fed purchased $1.25 trillion in mortgage-backed securities and $200 billion in federal agency debt (i.e., debt issued by Fannie Mae, Freddie Mac, and Ginnie Mae to fund the purchase of mortgage loans). To help lower interest rates in general (and thaw the frozen private credit market), the Fed also purchased $300 billion in long-term Treasury securities [4].

The second round of QE, widely called QE2, began in November 2010 and is scheduled to conclude by the end of the second quarter of 2011. QE2 works toward both of these objectives by fostering economic growth through lower interest rates intended to spur consumer spending and business investment. During QE2, the Fed will purchase up to $600 billion in long-term Treasury securities [5].

The third round of QE, widely called QE3, began in September 2012. Federal Open Market Committee (FOMC) will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month [6]. At the following meeting amount of the bond purchases increased to $85 billion per month. FOMC announced that decision as “The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month [7]”.This decision applied to a period longer than one year and then at the FOMC meeting in December 2013 it was decided two separate kind of bond purchases to reduce both $5 billion per month [8]. Amount of purchased bond has reduced at following meetings.

2. Effects of the QE on the Overall Economy The expected impact of raising effect on asset prices of the QE on the overall economy is, as mentioned earlier; achieve economic growth by the increase in investments. While there are several methods of measuring this effect, we will use unemployment and GDP as indicator as they are also accepted by Fed. Along with these two indicators, gross domestic investment statistics are taken into account in order to test the step of 199

transforming raising asset prices to investment which is the most important step in achieving the objectives of QE.

Figure 1: Gross Domestic Product

As can be seen from the GDP figures, QE policy has reached its objective of overall economic growth.

Figure 2: Civilian Unemployment Rate

Unemployment figures have improved later then GDP figures. The unemployment rate peaked in January of 2010, in the later period of steadily falling QE policy has reached its objective.

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Figure 3: Gross Domestic Investment

The theoretical background of the EQ, increase in asset prices to encourage investment proposition in terms of gross domestic investment, also has been shown to reach the goal.

Bottomed in the third quarter of 2009, gross domestic investment has increased steadily since then.

3. Effects of the QE on Financial Markets As mentioned earlier, central banks aim at boosting investments in the economy through raising the price of assets. It is clear that QE passes through various channels to reach this goal. The initial effect of the Fedâ&#x20AC;&#x2122;s bond purchasing is falling interest rates through raising price of bonds. To measure the fall of the interest rates 10-year U.S. Treasury bond prices will be accepted as indicator. As mentioned earlier, the rise in price of bonds means a fall in interest rates. As can be seen in the graph below, although, it is not possible to mention about the 10- year U.S. Treasury bond rate has steady movement, from 2009 when QE started to be implemented to the beginning of 2014 it seems to fall.

Figure 4: 10 Year Treasury Constant Maturity Rate

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The impact of the decline in interest rates naturally causes increase prices of assets other than bonds too. In the scope of study we will accept S&P 500 index as a sample of financial markets because of its inclusiveness on global economy and its role as a international indicator of economic activity.

As can be seen from the chart given below, after each QE policy application a remarkable rise in the S & P 500 index was observed. If observed at the long term, thanks to QE policy, S&P 500 successively rises to historic levels.

Figure 5: S & P 500 index

Experiencing the lowest point of GDP in the second quarter of 2009 when it was $14,342 billion rose to $17,016 billion in the first quarter of 2014, an increase of 18% has been realized. From the perspective of the S & P 500 index value of 915.5 in the same period to 1864, an increase of 103% points, performing much higher than the overall economy.

4. Effects of the QE on the Poor From the perspective of financial markets and the general economy, it can be seen that QE reached its goal. However, the main question of the study is that how much of the effect of QE really was reflected to the poor. In this final section of the study will seek to answer this question.

The impact of the QE on poverty is not possible to measure with a single indicator.

Therefore, these impacts will be discussed by using different indicators.

One of the main indicators related to poverty, Gini coefficient is an important indicator to measure the fair distribution of income. As seen from the chart given below, Gini coefficient for households was 0,466 in 2008, and rose to 0,468 in the first year QE policy began, and in 2012 it raised to 0,477. Thus, from the beginning of the crisis the income distribution from 2008 to 2012 has deteriorated against the poor.

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Figure 6: Income Ginu Ratio for Households by Race of Householder, All Races

Another indicator relevant to poverty is food insecurity rate. In the figure below, food insecurity, very low food insecurity rates and also unemployment rate has shown. As a natural consequence of downturn, increase in the food insecurity and very low food insecurity rates was expected. Despite QE and other measures taken in the years following the crisis, in food insecurity rate and particularly in the very low rate of food insecurity, a significant decrease was not observed. Another important aspect shown on the chart, fall in the unemployment rate fail to have a significant effect on food insecurity and very low food insecurity rate.

Figure 7: Food insecurity worsened in the recession then changed little through 2012

Another important indicator on poverty is the number of participants in Supplemental Nutrition Assistance Program. As seen in the chart below, in the years following the beginning of the crisis, the number of people benefiting from the program bounces

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dramatically. It is noteworthy that in the years following the crisis the number of participants in program did not decline; in fact it has continued to increase in 2013.

Figure 8: Snap Average Participation Source: http://www.fns.usda.gov/sites/default/files/pd/SNAPsummary.pdf

Percentage of people below the poverty rate is the most important indicator for the study.

As can be seen in the chart below, the rate bounced in 2008 and never has a significant decline after that year.

Figure 9: Percentage of People in Poverty Source: Denavas - Walt, Proctor, Smith; Income, Poverty, and Health Insurance Coverage in the United States: 2012, p 52

As can be understood from those described heretofore, QE policy has a significant impact on stock markets and a less significant impact on the overall economy. From the point of the poor, one cannot say QE has favour consequences. As there is not seen any improvement in poverty indicators from the year the QE policy started in 2009 until 2013, in contrast there is an undeniable deterioration in poverty indicators since 2009.

Although all these positive improvements experienced in the overall economy and stock markets, the poor could not benefit from these improvements. Reasons can be described as followings.

It is clear that the most benefited sector from QE policy is that the stock markets. And stock owners are the ones that have the higher savings rate, the rich. So 覺f stock prices increase, it simply causes the rich get richer. The poor who has low rate of savings are unable to benefit from the stock market rally. The increase in the Gini coefficient confirms that suggestion.

As noted in the charts mentioned above, the decline in the unemployment rate did not cause a significant decrease in the poverty rate. This can be explained with between the third quarter of 2009 and first quarter of 2014 employment cost index increased %7,8 [9], 204

but in the same period consumer price index increased %9,3 [10]. While asset prices increases, price of labour increase less than other assets. And that causes increase in the number of the poor in the working class.

It is actually requirement of the definition of the QE policy not to benefit the poor. As mentioned before, QE has effects first on the banks, then on companies and finally on working class. It is an expected result that the banks will use this low cost resource to make their balance sheets less risky. In various statements made by Fed, this result is counted as one of the purposes of the QE policy. The next stage after banks is companies where QE funds should have converted into investments. However, in real life companies transferred the funds that came from banks to developing country bonds and stock markets which provide higher return with less risk. This suggestion confirmed with developing country stock and foreign exchange markets collapses after the Fedâ&#x20AC;&#x2122;s decision to end both former QE policies and the decision to reduce current QE3 policyâ&#x20AC;&#x2122;s monthly bond purchase amount.

Conclusions Therefore, it can be said that only a limited part of the resources created by the Federal Reserve turn into investment. However, as mentioned earlier, new investments and the decrease in the unemployment rate could not be effective in reducing poverty.

As a result, QE policy has tremendous effects on stock markets. However, it can be observed that QE policy has less positive effects on the overall economy and almost no positive effect on poverty. The point to note is that these results did not occur in practice, they are designed in this way from the beginning.

References [1] Quantitative Easing Explained, Available at http://research.stlouisfed.org/pageone-economics/uploads/ newsletter/ 2011/201104.pdf [2] Bank of England, Target 2.0, Available at http://www.bankofengland.co.uk/education/Documents/ targettwopointzero/t2p0_qe_supplement.pdf, page 1.

[3] Quantitative Easing Explained, April 2011, Available at http://research.stlouisfed.org/pageoneeconomics/uploads/newsletter/2011/201104_ClassroomEdition.pdf, page 1.

[4] Quantitative Easing Explained, April 2011, Available at http://research.stlouisfed.org/pageoneeconomics/uploads/newsletter/2011/201104_ClassroomEdition.pdf, page 2.

[5] Quantitative Easing Explained, April 2011, Available at http://research.stlouisfed.org/pageoneeconomics/uploads/newsletter/2011/201104_ClassroomEdition.pdf, page 2.

[6] http://www.federalreserve.gov/newsevents/press/monetary/20121024a.htm [7] http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm [8] http://www.federalreserve.gov/newsevents/press/monetary/20131218a.htm [9] http://research.stlouisfed.org/fred2/series/ECIWAG [10] http://research.stlouisfed.org/fred2/series/CPIAUCSL

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The Process of Globalization of Businesses and Opportunities Offered by the New Technology on Ethics and Responsibility in Business Marius Daniel MAREŞ1, Valerica MAREŞ2, Lucian Dorel ILINCUȚĂ3 SPIRU HARET University, Faculty of Financial –Accounting, Management, Bucharest1,3 E-mail1: mdmares.mfc@spiruharet.ro2 Abstract: In this paper the authors aim to create a presentation of the triangle morals-ethics-responsibility with an accent on the current globalized society.

Business ethics has to disseminate in all the corners of a company, and first of all it has to be understood. Understanding the moral criteria of behaviour in business is important because the new Organizational structures create new complications, related to information flow and information administration inside various workgroups and in the entire organization, for which there are no traditional precedents.

The increase in the importance given to business ethics can be explained through the changes suffered by the strategies and the structures of the corporations.

Recent currents in the managerial theory and practice, as total quality management, as well as restructuring and redimensioning processes for top companies left to abandoning many traditional practices for managing economic processes. Intricate and rigid managerial hierarchies have been considerably flattened. As a consequence, the authority and the decisional responsibility have been dispersed more and more inside the company: important decisions are taken at lower hierarchical levels and by more employees. That’s why it is required that each employee, not just the management, should understand as well as possible the complexity of the problems and how they should be reflected in the practical behaviour of the company in the economic environment.

Keywords: smart business, corporatist social responsibility, ethical investments, green energies business ethics.

JEL classification: M15, O17

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1. Introduction The term ethics has at least three different meanings. First of all ethics refers to the so called manners, customs and traditions specific to different cultures. Business ethics implies introducing in daily decisions and in management strategies more norms than the law requires. P. V. Lewis defines business ethics as „that set of principles or arguments that should govern the business behaviour, individually or collectively”. A company that is socially responsible, that is it takes into account not only the interests of the shareholders but also the interests of all the groups affected by its activity, so business ethics is a cost and implies delegating resources from the trajectory imposed by a strict computation of economic efficiency.

Eudaimonia means happiness, and the first to talk on this theme was the philosopher Aristotel in Nichomahic Ethics where he talks about virtue that is needed by people to lead the best possible life. The main idea of Aristotel is that there are different opinions about what is best for people and these differences have to be resolved. The question is: What is good? Aristotel doesn’t look for a list of things that’d be easy to make, Aristotel looks for the highest of the goods and considers that this, no matter what it’d be, has three characteristics: it is desirable in itself, it is not desirable for another thing, and all the other things are desirable for it. Nobody lives for a certain goal except the one of goodness. And all the subordinated aims, as health and wealth are wished for the reason that they promote good and because they are good in themselves.

The problems and the opportunities created by the new technology, by the globalization process, by the privatization of the media raises new ethic and spiritual challenges for those who work in social communications. These challenges can be effectively met by those who accept the fact that, in order to serve a human being, building a community based on solidarity, justice and love, and presenting the truth about the human life are and will remain aspects central to ethics.

The increase in the importance given to business ethics can be explained through the changes suffered by the strategies and the structures of the corporations. Recent currents in the managerial theory and practice, as total quality management, as well as restructuring and redimensioning processes for top companies left to abandoning many traditional practices for managing economic processes. Intricate and rigid managerial hierarchies have been considerably flattened. As a consequence, the authority and the decisional responsibility have been dispersed more and more inside the company: important decisions are taken at lower hierarchical levels and by more employees. That’s why it is required that each employee, not just the management, should understand as well as possible the complexity of the problems and how they should be reflected in the practical behaviour of the company in the economic environment.

Business ethics costs: money, human resources and time, expertise, opportunities, as investments or development. Moreover, business ethics and its most visible form, the social involvement of the companies, are options that are not required by low. In the classical form of the corporatist philanthropy, in the regulated form of donation and sponsorship or in the modern form of corporatist social responsibility integrated in the management strategy, the social involvement of the companies has been perceived for a long time as a less and less necessary cost, a luxury of large corporations.

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Business ethics consider businesses from a larger perspective that is all the members of the society have different material needs that they have to satisfy in the economic system, through production activities, services, distribution, repairs etc. Businesses are not the only possible way to satisfy these material needs. They appeared, during the rise of the capitalism, as the most efficient solution to sustain a rapid and constant economic growth (although not lacking in crises and difficult periods), an increase in the economic efficiency, of quality and the variety of products and services, a relative or absolute decrease of prices etc. It is essential that the society doesnâ&#x20AC;&#x2122;t exist for the business people to profit from it, but on the contrary, it exists to support social needs.

2. Social Responsibility and the New Dimensions of Globalization The social responsibility of an entity means what the society expects from an organization from an economic, legal, ethic and philanthropic point of view at a certain moment.

Social responsibility is a concept regarding the contribution that companies have to have at the development of the modern society, and it is also called corporate citizenship, corporate philanthropy, corporate societal marketing, community affairs, and community development.

International states and institutions realized that the assimilation of the principles of social responsibility by the companies serves the objectives of durable development and led to the appearance of international standards for defining what meansâ&#x20AC;&#x17E;desirable corporatist behaviourâ&#x20AC;?. United Nations, European Union and the Organization of Economic Cooperation and Development are the most important institutions that committed themselves in creating a framework for defining social responsibility and for establishing indicators through which they can be evaluated in a transparent way. This framework has been accompanied by recommendations and principles to guide the states and the local authorities in formulating public policies that could promote and ensure transparency and support social responsibility initiatives.

Figure 1: Level of ethic

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Without being perceived as a sign of economic power, social responsibility takes now a form of corporatist civics – a way of keeping the business relationships stable and profitable for all the parts involved, a non-aggressive way, a least detrimental functioning way next to a community, a friendly way to communicate with the society. In this form, social responsibility is nothing less than a modern, open and flexible way of management.

Social responsibility is often seen wrongly as the exclusive responsibility of the brand manager, rather than a common responsibility of all the top managers in a company.

This happens because, indeed, many companies started doing social responsibility after being surprised by the answer of the public to some of the aspects of their activities that they didn’t see as part of their business responsibilities. For example NIKE had to stand a mass boycott after the media denounced the abusive work practices of some of their suppliers in Indonesia.

In the business practices from small enterprises, the differentiation between management and shareholders is vague and employees have multiple roles and the main activities aim at solving the daily problems, which is done mainly through informal relationships and communication. Also the interpersonal relationships play a very important role.

The uncertainty generated by the pressures of the large companies, the unstable position on the former traditional markets force the small enterprises to create strong partnerships, personal relationships that can offer trust. It will be noticed a tendency of the small enterprises to compensate the instability on the market with an increase of stability of the inter-human relationships, with the employees, the business partners and the clients. The social involvement of the small enterprises leads to an increase of the reputation in the community, to improving the personal image of the owner and of the administrator, and to increasing the trust in the enterprise, to increasing the loyalty towards the company. All these guarantee the stability of the relationships with the business partners, with the employees and the community.

In order to support companies the General Secretariat of the UN has created a program Global Compact which is a partnership between United Nations and companies for attaining a durable development at global level. Global Compact is a network that comprises agencies of the United Nations, companies, union organizations, business organizations, academic organizations, civil society organizations, governmental/administrative institutions and is oriented towards social responsibility on the basis of universal principles, divided in domains of interest and on dimensions: internal and external.

3. The Ethic Investments in IT As soon as the interest of the public towards corporate responsibility increases, there appears and grows considerably a new category of shareholders, who are interested not only in the profitability of their investment, but also in the moral correctness and the social responsibility of the companies in which they have shares. Unlike militant shareholders, the adepts of ethical investments don’t use directly their investments for forcing companies to listen to their opinions and take them into consideration. They look for those investments which are in the same time profitable and compatible with certain ethical standards. In Cowton’s definition, ethical investments are those that „use ethical, social and ecological criteria for selecting and administrating investment portfolios when it comes to shares of certain companies”.

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The criteria for evaluation and selection of the companies can be negative or positive.

Those removed from the list of ethical companies are often the companies that produce or trade alcohol, tobacco, military equipment and any products that are detrimental to the environment or whose production is pollutant and consumes non-regenerable resources.

Companies that support oppressive political regimes exploit cheap work labour from poor countries and employ minors; and finally the companies that violate the rights of animals, that endanger biodiversity and those that promote genetic engineering etc The companies that meet the positive criteria are those that are involved in conserving and protecting the environment, in improving public transportation and living conditions, repairing and conserving buildings and architectural monuments, those that promote „green” energies and those that ensure the equality of chances when promoting employees, work safety conditions etc.

Besides the normative ethic motivation, the ethic investments can be desirable also from a strictly economic point of view. The risks of having the public boycott some products that are not accepted or the risk of ecologic disasters can influence the dynamics of shares and the ethic companies are less exposed to such risks.

On the other side, the success on the market of ethic products can make the investments they finance very attractive. The majority of ethic investment funds make the selection of companies in whose shares are interested starting from the data offered by the market.

For example, many corporations from the electronic industry produce household and medical equipment as well as military equipment. In the same time, the investment in bank shares is not safe enough, because banks can finance companies that don’t meet the criteria of ethic investors.

In Romania, far from being an ethic undertaking, social responsibility is a possibility of the companies to move the attention of population to legal obligations they should meet in welfare actions. For example a company that is a big polluter advertises for its action of planting trees that it does with volunteers, calling these actions „corporatist social responsibility” and ethic investment.

The ethic investment movement spread considerably, with effects that are not negligible.

By aiming at investments towards corporations that meet certain moral standards, investors don’t exert an influence just on the policies of a certain company, but also stimulates the other corporations to reconsider their ethic behaviour in order to avoid a possible and predictible decrease of their attractiveness on the capital markets in a short tem perspective.

4. The Ethics of the IT Workforce The sensitive personnel problems confronting the multinational IT corporations are the following: 1) The payment of the employees, who work for multinational companies in countries with a development level sensibly lower than in their home countries. It is imputed to foreign investors that they exploit the labour from underdeveloped countries, paying a couple of times less expensive the same labour done by employees in their home countries with similar qualifications. On the other side the former are disadvantaged by the fact that, by moving the investment and the production units to the third world, there will be an increase in unemployment in the developed countries. Transnational

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corporations are fiercely criticized for adopting selfish policies, in the pursuit of maximizing profit, and they break that hypothetic social contract with different categories of shareholders, causing prejudices to employees from their home countries – who lose their work and who’s union pressure decreases in intensity when the owner can menace with relocation of investments in other countries – and to employees from the third world – who are exposed to an equivalent work load to those in developed countries but are paid worse. The counter arguments are numerous and powerful. First of all the alternative for the employs in the underdeveloped countries is to have a low pay (compared to the employees from the developed world) or to not be paid at all, as long as the main point of interest for the foreign investors is the low cost of the work force. It can be stated, many times rightly, that the salaries offered by multinational corporations are sensibly higher than the average from the poor countries in which these companies operate.

Besides the work environment offered by these multinationals is more correct, more civilized and some principles when recruiting ad promoting labour are being implanted in the countries from the Third World, thus creating more evolved models for the leadership for treating the workforce.

2) The management of branches from other countries of multinational corporations raises a lot of ethic problems. Many companies prefer to offer low credit to local managers, and implant managers from their home countries to the management of local branches. These managers sometimes don’t know well enough the traditions of the local problems and are not flexible enough towards the wishes and the difficulties of the partners and the employees from the countries where they are implanted. This is the main reason why, in these last years, multinational corporations adopted a policy of managerial adaption, and promoted more and more actively local leaders, trained professionally in the west, where they can learn the methods and techniques of modern management.

3) Women discrimination is a delicate problem; the investor companies are not necessarily culpable of it, because it is not its managers are those who impose it, but the local traditions and religious beliefs. Multinational corporations are criticized by the public opinion from the origin countries that they are not more determined in having an active policy, even aggressive, for eliminating women discrimination from the Third World, where it represents a hard to combat practice. Other, more reasonable critics, refer to the fact that, in some countries where religion doesn’t prevent women from playing a role in economic life, the sexual discrimination takes other forms, as employing mainly women because their salaries are lower than those demanded by men.

4) Employing minors is, obviously, the most often incriminated aspect and obviously the most criticable, in terms of personnel problems of the multinational corporations. Thus it is deemed that without the material support of the children employed, their families would lack subsistence means, and those kids would have to choose between dying of hunger and begging, stealing and roving. It is certain that education, health and psychosomatic development of the children that work while still young, are affected, and their future is sombre.

5) The measures taken to protect the employees constitute a problem for international companies in terms of their public image in the origin countries and less in the weakly developed countries in which they operate, although it is the employees in poor countries that suffer. In the third world the labour legislation is weakly developed or practically inexistent, thus the standards for protecting the personnel at the work place are very low

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compared to the developed countries. That’s why multinational corporations take much fewer measures for protecting the labour in the branches from the third world as they do, forced by the legislation and by the public opinion. In their origin countries, as a consequence there are many accidents, with victims and grave mutilations of the employees at the work place. They don’t reject the idea and take some measures, but not much, invoking profitability and competitively. If they spent as much as necessary for the safety of the employees, the costs would increase significantly and if some competitive companies don’t’ take these measures, they risk to be pushed out of the market, which should bring back again the old dramatic dilemma of the workers from the poor countries: risks and low salaries, versus no salaries. All that can be achieved through good intentions is a compromise of the two requirements – the economic and the moral ones.

5. Ethic Controversies over Environment Protection This is the battlefield of the most disputes concerning global warming and multinational corporations are the first to be incriminated, because environment destruction, which often claims life’s, produce grave, often irreversible effects not only in the countries where they take place, but they also affect the global climate, the quality of water and air on a global scale. The causes of ecologic destructions are the same as in the case of insufficient employee protection at the work place: the legislation is very permissive, the local population has a low degree of technological competence and doesn’t understand the dangers to which it is exposed, the high costs of non-polluting technologies etc.

In fact, the case that brought a focus on international business ethics was the disaster from Bhopal, in India, but the earthquake and the tsunami from Japan, from March 2011 and the explosions at the nuclear power plant from Fukushima is enhancing this discussion. Faced to these phenomena, the reaction and the pressure of the international public opinion have been strong enough to force transnational corporations to accept that they have an obligation to take radical measures for ecologic protection in the countries where the local legislation doesn’t impose very high standards, by covering the higher costs that are required by non-polluting technologies as well as by advertising and training the personnel and the population.

Due to the variety of cultural values and moral principles around the planet and because the accommodative policies had inacceptable effects, there appeared more and more strongly the idea of elaborating international ethic codes, with the explicit agreement of government or non-government associations, in which the main role goes to the large transnational corporations.

The International Institute for Business Ethics proposes the following three basic principles for companies: 

INTEGRATION: Business ethics has to be implemented in all the aspects of the organizational culture and it has to be reflected in managerial systems. Companies have to start by integrating the ethics in fixing the objectives and the practices for recruiting, employing and promoting the personnel.



IMPLEMENTATION: The ethic behaviour is not just an idea; it is also an effort for implementing a plan for changing the attitude in different activity branches of a corporation. Examples: changing the reward and stimulation systems, promoting better practices for protecting the environment, consulting experts whenever it is required.

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

INTERNATIONALIZATION: The ever more extended opening towards a global market is necessary for any successful business in the 21st century. It can be achieved through international partnerships, commercial blocks and by implementing GATT agreements or other similar agreements. The clarification of a company’s definition of the moral integrity, so that it can transcend national borders, is necessary for any corporation that operates on the global market, and has as result an action plan and an ethic code without a specific cultural colour, which doesn’t require essential changes when applied in a global context.

Conclusion: 1. The last decade saw an explosion of ethic behaviour codes of multinational corporations in international business. The majority of these codes are created according to the principles established by OECD (Organization of Economic Cooperation and Development) and ICGN (International Corporate Governance Network). Unfortunately, many of these behaviour codes state vague truisms, and top managers and analysts recognize that there is a lot to be done in implementing the principles declared in these codes in the daily activity of companies that operate on a global level.

2. Many problems are still waiting for a solution that is strongly proofed theoretically and verified in practice. It is important that the most pressing problems have already been formulated and accepted by the community of transnational corporations, which is a lot.

Once started, the process of evolution of ethics in international business will continue for sure, in an accelerated rhythm, hopefully with positive results, for more and larger categories of interactive groups in the global economy.

References [1] Cowton, Ch.;Crisp, R., (1998), Business Ethics. Perspectives on the Practice of Theory, Oxford University Press [2] Crane, A.; Matten, D., (2004), Business Ethics. A European Perspective, Oxford University Press [3] Lewis, P. V.; (1987), Defining ‘Business Ethics’ Like Nailing Jello to the Wall Journal of Business Ethics 14 / 1985, p. 839-853 [4] Mareş, M. D.; Mareş, V., (2013), Audit şi control într-o entitate performantă, Editura Tribuna Economică, ISBN: 978-973-688-242-5-0 [5] Mareş, M. D.; Mareş, V., (2012), The managerial process of deleveraging IT&C, 7th International Conference Accounting and Management Information Systems AMIS 2012 „Knowledge, information and communication”, submitted for review to Thompson Reuters Conference Proceedings Citation Index (CPCI) [6] Mareş, M. D.; Mareş, V., (2010), Fluxul informaţiilor financiar-contabile, Editura Tribuna Economică, ISBN: 978-973-688-177-0 [7] Nicolescu, O., (2011), Metodologii manageriale. Editie nouă, Editura Universitară [8] Petecel, S., (1998) Aristotel Etica nicomahică, Bucureşti, Editura Ştiinţifică şi Enciclopedică

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Development Agencies on the Way to Regional Development: Romania-Turkey Comparison Nadir EROGLU1, Ilhan EROGLU2, Mustafa OZTURK3, Halil Ibrahim AYDIN4 1 Prof., Marmara University, Faculty of Economics, Department of Economics, Tel: +90 216 541 40 21, Fax: +90 216 346 43 56, Email: neroglu@marmara.edu.tr Abstract: The levels of development disparities vary from region to region so many countries suffer from this problem established regional development agencies for minimizing these differences. Regional development agencies are established with the aim of invigorating regional economies and they aim to unearth regional internal dynamics and convert these dynamics into economic and socio-cultural values in both national and international arena. Thus, agencies can attract investments and contribute to the minimization of unemployment. Furthermore, they can invigorate regional economies and contribute correspondingly to the country’s economic growth.

The purpose of this study is to examine the potential roles of regional development agencies in minimizing regional development disparities and their contributions on regional economies. Comparison of Turkish and Romanian development agencies is the sample case for this study.

Jel Classification: O100, O430 Key Words: Economic Development; Development Agencies; Development Disparities

1. Introduction Regional development agencies [RDA] are established for detecting sectoral and general development problems and determining strategies for the solution of these problems.

Assoc. Prof., Gaziosmanpasa University, Faculty of Economics and Administrative Sciences, Department of Economics, Tel: +90 356 252 16 71, Fax: +90 356 252 16 73, Email: ilhan.eroglu@gop.edu.tr 3 Assoc. Prof., Fatih University, Faculty of Economics and Administrative Sciences, Department of International Trade, Tel: +90 212 866 33 00, Fax: +90 212 866 3342, Email: mozturk@fatih.edu.tr 4 Sirnak University, Faculty of Economics and Administrative Sciences, Department of Economics, Tel: +90 486 216 40 08 , Fax: +90 486 216 82 47, Email: hiaydin12@gmail.com 2

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RDAs provide fund to local investors and coordinate development activities in the short term. Furthermore, RDAs function as key institutions in making development policies and play a supporting role in preparing annual development plans. They are also in charge of local distribution of the EU fund in the medium term. RDAs are highly important in the path to democratization since they incorporate people into the decision-making process.

Indisputably, the road to national development is through regional development. Local problems are solved generally by regional agencies. Thus, the establishment of regional development is a crucial step to national development. Development agencies are brandnew agents that play important roles in the establishment of regional development. In this paper, we will compare Romania to Turkey and analyze the primary objectives, activities, sources of income and legal status of these agencies.

2. Concept of Regional Development The concept of regional development dates back to the emergence of development economics in the 1940s. Regional development is defined as the reduction of national development efforts to regional level [Bildirir, 2005]. Furthermore, it points to alterations in socioeconomic structure that is affected by revenue growth in a region. The concept of regional development today includes a more various and complicated network of relations than national development. The applications including stimulation of enterprise, infrastructure improvement, education and/or environmental protection are assumed to be associated with development. The assumptions focus on the activities that will improve a region’s economic and social welfare. Thus, regional development can be defined as stimulation of indigenous sources and enterprise for increasing the region’s level of revenue and employment [Uzay, 2005].

The objective of regional development is to remove the development differences among the cities in a region and follow a balanced development policy over the removal of interregional economic, social and cultural differences among regions. Thus, governments attach special importance to regional development plans for encouraging underdeveloped regions [Gündüz, 2006].

3. Regional Development Agency RDAs are independent of central governments and they aim to help a certain region develop by activating the region’s primary development dynamics. These agencies are among the most important actors of regional development and can be defined in different ways according to their objectives and functions [Bandirma Institute of Economic Researches, 2007].

Based on a legal provision, development agencies aim at the economic development of a certain region by providing the cooperation between all private and public companies, local authorities and nongovernmental organizations [Kocberber, 2006]. Recent regional development paradigm defines development agencies as the instruments designed for the establishment of regional development. In other words, development agencies are regional strategy formulation organizations where the decisions and policies on regional development are determined by local inhabitants, particularly key actors and stakeholders, of the relevant region [DPT, 2008]. According to another definition, these agencies are development units with a public or semi-public mission that aims to provide

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cooperation between all regional companies, nongovernmental organizations and local authorities [Yazkan, 2008].

3.1. Regional Development Agencies: Romania-Turkey Comparison Many countries today use RDAs as instruments for the establishment of regional development. RDAs are considered important to sustainable development. RDA was first implemented with the establishment of Tennessee Valley Authority [TVA] in USA, 1993.

Many countries have established RDAs for regional development since the 1950s. Most of the RDAs are today established in the EU because they are included in the scope of the EU’s regional policies. The application of the EU fund launched for regional development is performed via the programs that describe the strategies and priorities determined by RDAs [Ozmen, 2008].

Romania separated regional development policies from general socioeconomic policies in 1996. European Commission and Romania prepared “The Green Book for Romania’s Regional Development” in May 1997 for determining the framework of regional development and necessary administrative qualifications, precautions, instruments and organizations. The Green Book suggested organizing 8 development regions and establishing RDAs at NUTS 2 level. Romania organized 8 development regions in between September 1998 and May 1999 and established RDAs that would be in service in the 8 regions. The Regional Development Code no. 315/2004 decrees that RDAs be the parts of national system that has been organized for regional development [Cilavdaroglu, 2008].

Table 1 shows the RDAs in Romania that are classified according to level 1, 2 and 3.

Table 1: Classification of RDAs in Romania Administrative divisions of Romania NUTS-1

Macroregiunea 1

Macroregiunea 2

Macroregiunea 3

Macroregiunea 4

NUTS-II (Regions) NUTS-III (Counties)

NorthWest Bihor BistrițaNăsăud Cluj Maramureș Satu Mare Sălaj

NorthEast Bacău Botoșani Iași Neamț Suceava Vaslui

South

SouthWest Dolj Gorj Mehedinți Olt Vâlcea

Center Alba Brașov Covasna Harghita Mureș Sibiu

SouthEast Brăila Buzău Constanța Galați Tulcea Vrancea

Argeș Călărași Dâmbovița Giurgiu Ialomița Prahova Teleorman

Bucharest– Ilfov Bucharest (municipality and capital) Ilfov

West Arad CarașSeverin Hunedoara Timiș

Source: http://en.wikipedia.org/wiki/Nord-Est_(development_region)

As is seen in Table 1, there are 8 development regions at level 2 and 42 cities at level 3.

The EU and Romania established 8 development regions in anticipation of economic and social collaboration in regional development. The relevant code states that the regions are non-areal administrative units with no legal status [Izmir Development Agency, 2008].

Figure 1 shows the 8 development regions of Romania.

In Turkey, regional development policies first appeared in development planning in the 1960s and were later incorporated in ten development plans. The policies on the actualization of development targets have failed to minimize the interregional differences and even deepened them. [Mac, 2006].

Turkey added the concept of RD to the agenda shortly after the registration of candidacy for the EU membership in the 1999 Helsinki Summit. The EU emphasizes that regional 216

planning be reconsidered from a fresh perspective via RDAs. Accession Partnership Document has dealt with the same point in the medium-term tasks in the EU full membership process. Thus, the EU membership process is the utmost driving force behind the establishment of RDAs in Turkey. Another underlying reason for the establishment of RDAs is to increase competitiveness and accelerate the overall development of the country through the potential of underdeveloped regions [Ağcakaya & Aydın, 2011].

Figure 1: Development Agencies in Romania Source: http://www.tepav.org.tr Table 2: Classification of Development Agencies in Turkey Development Agencies İstanbul Development Agency Trakya Development Agency Ankara Development Agency Southern Marmara Development Agency Bursa, Eskişehir, Bilecik Development Agency Eastern Marmara Development Agency Western Black Sea Development Agency Northern Anatolia Development Agency Central Black Sea Development Agency Eastern Black Sea Development Agency Northeastern Anatolia Development Agency Serhat Development Agency Ahiler Development Agency Central Anatolia Development Agency Fırat Development Agency Eastern Anatolia Development Agency İzmir Development Agency Zafer Development Agency Southern Aegean Development Agency Western Mediterranean Development Agency Mevla Development Agency Çukurova Development Agency Eastern Mediterranean Development Agency İpek Yolu Development Agency Karacadağ Development Agency Dicle Development Agency Source: [Prepared by the authors].

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Sub-regions İstanbul Edirne, Kırklareli, Tekirdağ Ankara Balıkesir, Çanakkale Bursa, Eskişehir, Bilecik Bolu, Düzce, Kocaeli, Sakarya, Yalova Bartın, Karabük, Zonguldak Çankırı, Kastamonu, Sinop Amasya, Çorum, Samsun, Tokat Artvin, Gümüşhane, Giresun, Ordu, Rize, Trabzon Bayburt, Erzincan, Erzurum Ağrı, Ardahan, Iğdır Kars Aksaray, Kırıkkale, Kırşehir, Niğde, Nevşehir Kayseri, Sivas, Yozgat Elazığ, Malatya, Bingöl, Tunceli Bitlis, Hakkari, Muş, Van İzmir Afyon, Kütahya, Manisa, Uşak Aydın, Denizli, Muğla Antalya, Isparta, Burdur Konya, Karaman Adana, Mersin Hatay, Kahramanmaraş, Osmaniye Adıyaman, Gaziantep, Kilis Diyarbakır, Şanlıurfa Şırnak, Batman, Siirt, Mardin

Turkey has established 12 1-level, 26 2-level and 81 3-level territorial units in 2012 with the aim of attaining development goals, taking advantage of the funds for candidate countries and adjusting regional policies to the EU standards and implemented the law no.

5449 regarding the establishment, coordination and duties of development agencies [Karaarslan, 2008].

Figure 2: Development Agencies in Territorial Units for Statistics Source: [Karakoyun, 2011:7].

3.2. Objectives and Activities of Regional Development Agencies The main objective of Turkish development agencies is to enliven the economy by adding new values to the relevant region. Furthermore, the agencies aim to increase employment and competitiveness, contribute to sustainable development, attract investments to the region, support enterprises, encourage vocational education and improve social and physical conditions [Cilavdaroglu, 2008]. We can categorize Turkish agencies’ activities under 6 titles as follow [Yuceyilmaz, 2007]:      

Providing endogenous development, Attracting foreign investors, Servicing entrepreneurs, Servicing local and regional authorities, Educational services and International activities.

The objective and activities of Romanian development agencies are as follow [Izmir Development Agency, 2008]:   

Preparing regional development strategies, plans, programs and fund management plans and submitting them for the approval of Regional Development Committee, Planning fund management in accordance with the relevant legislation and decisions made by Regional Development Committee and assuring the execution of regional development plans and Finding fund for the execution of duties.

There are some differences between the objectives and activities of the Romanian and Turkish RDAs. Table 3 shows the comparison of these differences.

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Table 3: General Purpose of Establishment and Activities

Country Turkey

Romania

Purpose of Establishment and Activities Supporting the determination and preparation of regional strategies, encouraging entrepreneurship, attracting investments to the region, providing cooperation between public and private organizations and CSOs and increasing project production capacity.

Minimizing interregional development differences, adjusting governmentâ&#x20AC;&#x2122;s sectoral policies to the region and providing intraregional, interregional, international and cross-border cooperation.

Source: [Izmir Development Agency, 2008:18-21].

Romanian RDAs focus basically on two issues. First, they pave the way for regional development plans that support National Development Plans of Romania. Second, they adjust national regional development investments that are financed annually by the Phare Program to the relevant regions [http://www.tepav.org.tr].

3.3. Sources of Income of Regional Development Agencies Government provides RDAs with capital in the forms of cash and real estate. Agencies make use of various state funds for industrialization by producing projects on the application of the funds. Furthermore, the EU and World Bank provide loans for RDAs [Arslan, 2010:31].

States consult various sources for financing RDAs. For instance, France finances RDAs with incomes from local governments, private sector and agencies; Germany with national and local governments; Austria and Italy with national governments; Ireland and Singapore with national governments and agencies; Portugal with local governments; England with national and local governments and agencies; and Spain with national and local governments and the World Bank [http://kamumakale.googlepages.com]. Table 4 shows the sources of income of Romanian and Turkish RDAs. Table 4: Sources of Income

Country Turkey

Romania

Source of Income Public finance [general budget and contributions of municipality, chambers of commerce and industry and special provincial administration], incomes from activities, EU funds Share in national fund for regional development, contributions of provincial budgets, resources from private sector, banks, foreign investors, EU and other organizations.

Source [Izmir Development Agency, 2008: 16-17].

3.4. Legal Status of Regional Development Agencies Legal status of RDAs is different almost all European countries. RDAs are semiautonomous public corporations in Germany; inter-municipality agencies in Spain; publicprivate sector corporations in Czech Republic, Estonia, Slovakia and Poland; private-law public organizations in France; public limited companies in Nederland, Italy, Ireland and Portugal; non-departmental public organizations in England; limited companies in Sweden; non-profit making organizations in Latvia; and municipal enterprises in Greece [Karaarslan, 2008]. Table 5 shows the legal status of the RDAs in Romania and Turkey.

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Table 5: Legal Status of Regional Development Agencies

Country Legal Status of Regional Development Agencies Turkey Private-law legal entity with enacted duties and authorities.

Romania Non-profit making legal entity Source: [Izmir Development Agency, 2008: 14]

RDAs are classified according to their bureaucratic structure, autonomy, purpose of establishment and activities. However, the basic difference is whether government is included in core administrative structure. Many European RDAs are independent bodies that will exist necessarily with economic and political support. Thus, RDA activities undergo political interventions [Picak, 2008]. Furthermore, we can classify agencies by their founders and activities. By founders, we can categorize RDAs as a] RDAs founded by central government, b] RDAs answerable to local/regional government, c] RDAs founded by local/regional government and d] RDAs founded by public/private trusts. On the other hand, agencies by their activities are strategic agencies, global operational agencies, sectoral operational agencies and internal agencies [http://www.sayistay.gov.tr].

4. Conclusion Economic and social interregional differences today increase rapidly and cause many troubles. RDAs are important units that aim to minimize the differences. Turkey has prepared regional plans for minimizing regional differences. However, Turkey’s policies on national development objectives have failed to reduce the differences and even expanded the interregional gap. Thus, RDAs have been established for reinvigorating the economy.

There are some differences between the objectives, activities, duties, responsibilities, sources of income and legal status of Romanian and Turkish agencies. However, the common objective of the agencies in the two countries is to provide regional development.

RDAs have been established for regional economic recovery and will unearth regional internal dynamics and convert these dynamics into economic and sociocultural values in both national and international arena. Furthermore, agencies will attract investors and contribute to the minimization of unemployment and correspondingly to the country’s economic growth. Regional development is an integral part of national development and RDAs are highly important units to regional economies.

References [1] Arslan, E. (2010) Kalkınma Ajansları ve Kalkınma Ajanslarının Türkiye Ekonomisine Beklenen Katkıları, Selçuk Üniversitesi, Sosyal Bilimler Enstitüsü, İktisat anabilim Dalı, İktisat Bilim Dalı: Yayınlanmamış Doktora Tezi.

[2] Ağcakaya, Serpil; Aydın H. İbrahim (2011) Bölgesel Kalkınma Ajanslarına İktisadi ve Mali Perspektiften Bir Bakış, 9th International Conference on Konowledge, Economy &Management Proceedings, SarajevoBosnia &Herzegovina.

[3] Bandırma İktisadi Araştırmalar Enstitüsü (2007) Bölgesel Kalkınma Ajansları, Bilgilendirme Kitapçığı Dizisi Yayın No: BK – 2 / 2007.

[4] Bildirir, H. N. (2005) Avrupa Birliği ve Türkiye Bölgesel Kalkınma Politikaları: Uygulamalar ve Alınan Sonuçlar, Gaziantep Üniversitesi Sosyal Bilimler Enstitüsü: Yayınlanmamış Yüksek Lisans Tezi.

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[5] Cilavdaroğlu, A. A. (2008) Bölgesel Kalkınma Ajansları, Türkiye'de Kuruluş ve İşleyiş Sorunları, Gazi Üniversitesi, Sosyal Bilimler Enstitüsü, Kamu Yönetimi Anabilim Dalı, Kentleşme ve Çevre Sorunları Bilim Dalı: Yayınlanmamış Yüksek Lisans Tezi.

[6] DPT (2008), Dokuzuncu Kalkınma Planı [2007-2013], Devlet Planlama Teşkilatı Bölgesel Gelişme Özel İhtisas Komisyon Raporu.

[7] Gündüz, Ali Yılmaz (2006) Bölgesel Kalkınma Politikası, Ankara: Ekin Kitapevi.

[8] İzmir Kalkınma Ajansı, (2008) Avrupa’da Kalkınma Ajansları, Yayın No: İZKA-A/2008-01, Temmuz.

[9] Harding, R. (2006) İngiltere ve Romanya'da Bölgesel Kalkınma Ajansı Deneyimleri, Available at http://www.tepav.org.tr/sempozyum/2006/bildiri/bolum2/2_3_hardingTR.pdf.

[10] Hasanoğlu, M.; Aliyev Z. Avrupa Birliği ile Bütünleşme Sürecinde Türkiye'de Bölgesel Kalkınma Ajansları, Available at http://www.sayıştay.gov.tr/yayin/dergi/icerik/der60m5.pdf .

[11] Karaarslan, G. (2008) Avrupa Birliği ve Türkiye'de Bölgesel Politikalar ve Kalkınma Ajansları, Ankara Üniversitesi, Sosyal Bilimler Enstitüsü, Avrupa Birliği ve Uluslararası Ekonomik İlişkiler, Ekonomi - Maliye Anabilim Dalı: Yayınlanmamış Yüksek Lisans Tezi.

[12] Karakoyun, İ. (2011) Yeni Bölgesel Kalkınma Yaklaşımı ve Kalkınma Ajansları: Karacadağ Kalkınma Ajansı Örneği, 26. Türkiye Maliye Sempozyumu “Bölgesel Kalkınma ve Kamu Politikaları”.

[13] Koçberber, S. (2006) Kalkınma Ajansları ve Sayıştay Denetimi: Sayıştay Dergisi, Nisan-Haziran, Sayı 61.

[14] Maç, N. (2006) Bölgesel Kalkınma Ajansları ve Türkiye: Konya Ticaret Odası, Etüd-Araştırma Servisi, Sayı: 2006-117/76.

[15] Özmen, F. (2008) AB Sürecinde Türkiye’de Bölgesel Kalkınma Ajanslarının Karşılaşabilecekleri Temel Sorun Alanları: Süleyman Demirel Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, C.13 S.3.

[16] Piçak, M.; Yilmaz, S. (2008) Güneydoğu Anadolu Bölgesinde Kurulacak Bölgesel Kalkınma Ajansları Üzerine Bir Değerlendirme, Ocak, Yıl: 10, Sayı: 121, Available at http://www.mevzuatdergisi.com/2008/01a/02.htm.

[17] Uzay, N. (2005) Bölgesel Gelişmişlik Farklarının Giderilmesi ve Bölgesel Kalkınma Ajansları: Seçkin Yayınları.

[18] Yazkan, E. (2008) Bölgesel Gelişme Politikalarının Başarısında Kalkınma Ajanslarının Rolü, Kocaeli Üniversitesi, Sosyal Bilimler Enstitüsü, Siyaset Bilimi ve Kamu Yönetimi Anabilim Dalı: Yayınlanmamış Yüksek Lisans Tezi.

[19] Yüceyılmaz, H. (2007) Avrupa Birliği Sürecinde Bölgesel Gelişmeler ve Kalkınma Ajansları, Selçuk Üniversitesi, Sosyal Bilimler Enstitüsü, Kamu Yönetimi Anabilim Dalı: Yayınlanmamış Yüksek Lisans Tezi.

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Cluster Analysis of the EU Countries in Terms of Labor Market Indicators Daniela PAȘNICU1, Speranța PÎRCIOG2, Cătălin GHINĂRARU3, Gabriela TUDOSE4 1 2,3,4 INCSMPS, USH, Bucharest, Romania Email: danielapasnicu@yahoo.com Abstract: Dynamics of main indicators in the EU labor market context reflects that the EU labor market as whole remains tense, and that differs substantially from one country to another. This paper includes an analysis of recent developments in labor market participation, employment, unemployment, education level with special concerning on data disaggregated by age and sex. Paper aims to group the EU countries according to key indicators of the labor market for gaps and similarities identification in order to achieve the objectives of cohesion policies at EU level. To achieve this propose it was used hierarchical cluster analysis method.

Keywords: labor market, cluster analysis method, employment, unemployment, cohesion policies, vulnerable groups.

JEL classification: E24, E19

1. Introduction A priority of the Europe 2020 strategy is the promotion of an economy with a high rate of employment, ensuring social and territorial cohesion. In this context, the Commission proposed as main objective that 75% of the population aged 20 to 64 should have a job till 2020 year. However, recent dynamics (2010-2013) of the main indicators of the labour market in the European Union reflects the situation across the EU and that remains tense and differs substantially from one country to another.

Following the period of economic crisis which has wiped out years of economic and social progress, changes in the unemployment rate was scored on an upward trend, both in EU and Romania, in 2008-2013 the unemployment rate increased by 3,9p.p. in E.U. and by 1,5p.p in Romania. Although for some indicators have seen some positive signs, such as 2,3,4

INCSMPS, Bucharest, gabriela_tudose@yahoo.com

Romania,

pirciog@incsmps.ro,

ghinararu@incsmps.ro,

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activity rate, which was due mainly to those policies increasing the period of education and less as a result of economic developments. Deterrent effect size for those seeking employment such as young long-term unemployed, people aged but still active on labour market, persons with low education etc. indicates that more acutely manifest structural weaknesses in Europe's economy and Romania.

Once the awareness of active aging EU population and reforming the pension system in crisis and post-crisis remains a question for the public policy reform as a whole in order to stimulate employment of all "ages" and, in particular, young people and seniors.

Labour market activation policies have been developed in recent years in the EU labour markets with common characteristics, taking into account the recommendations made by the European Commission for each country. However taking into account the heterogeneity of national situations, models of integration of young people, women and older workers, considered as vulnerable groups also different, labour market outcomes, employment rates, in part, explain the different dynamics. To understand these differences, the analysis must consider the question of reform policies, the role of institutions and agreements negotiated in the labour market, taking into account the specificities of individual choices and the need to integrate the issue of employment of vulnerable groups in a lifelong learning approach.

European employment strategy makes an effort to stimulate the a converging development around a common way of activation and stimulation of employment, but national employment models differ in their history, their stage of development they are in, the resources they use to implement different measures. They belong to various groups and the transition to a new performance is a process that should be focused by catalytic elements related to political and national institutional construction. The labour market has a national component that can explain the nature of institutional differences between countries.

Regardless of country, there is a specific position of these vulnerable groups in the labour market in most EU countries. Whether it is young workers under 25 years old in most countries they have very high unemployment rates much higher than the other age groups. If older workers employment rates are generally lower than the other groups, their unemployment is lower than that of young people. Women, however, are more inactive due to repeated career breaks and lower employment rates than men.

2. Recent Developments in the Labour Market in Romania Compared to the EU Countries In this first section we present the synthesis aspects from further analysis of recent developments (2010-2013) of the labour market in Romania, compared to the EU28 countries, making use of existing statistics. The main indicators that formed the basis of this analysis include: activity rate, employment rate, unemployment, long term unemployment. Mentioned indicators were analysed both overall and disaggregated by gender, age, level of education, sector of activity and employment status.

In the period 2010-2013 the activity rate in the European Union has had an upward trend in most member countries. The most significant increases in activity rates were recorded in Malta (7.6% in 2013 compared to 2010), Hungary (4.3%), Czech Republic (3.8%) and Croatia (3.7%). Countries activity rate decreased in this period were Denmark (-1.6%), 223

Slovenia (-1.3%), Portugal (-0.5%), Belgium (-0.2%) and Greece (-0.2%). Decreases in the activity rate may be due both to the fact that the number of pensioners in the EU ("babyboom") increased and promoting policies to increase the period of education. In the year 2013, the highest activity rate values are found in central and northern European countries (Sweden 81.1%, Netherlands 79.7%, Denmark 78.1%, and Germany 77.5%).

Romania registered in 2013 a fairly low activity rate (64.6%) compared with the average EU28 (72%), although in 2010-2013 has had an increase of 1.5%. This highlights the fact that in Romania the number of inactive people (pupils, students, retirees, home workers, etc.) remains quite high. Romania fits into the trend of Central and Eastern European (except the Czech Republic), who have activity rates below average EU28.

The employment rate is an important indicator for the EU, especially since it was a major objective in the Lisbon Agenda (2000-2010) and stored also in the current Europe 2020 and Agenda 2010-2013. The Member EU employment rate experienced significant decreases especially in southern countries (Mediterranean), which have been most affected by the economic crisis. Thus, in 2013, the employment rate in Greece was 49.3%, falling down to 17.2% from same indicator in 2010, Cyprus was 61.1%, with 4,5pp lower than in 2010 and in Spain and Portugal fell by 6.8% reaching 54.8% and 61.1%. Decreases by more than two percent of registered employment rate, have been recorded in Slovenia and Italy. Given that the target set by the Agenda 2020, the employment rate of 75% (EU28 average) in the year 2013 we see that no country has achieved this goal. States with the highest employment rate in 2013 are those of the northern and central Europe Sweden (74.4%), the Netherlands (74.3%), Germany (73.3%) and Denmark (72.3%). The EU -28 averages is almost 10 percentage points lower than the target set for the year 2020.

Romania has not a very high employment rate (59.7%), where the target assumed for 2020 is 70%, but in the next period we can notice a slight increase of 0, 9 percentage points.

Concerning the age cohort 15-24, the employment rate of most EU Member States declines, indicating that young people were the most affected by the economic crisis and they are a vulnerable group in the labour market. At the level of the U.E.-28, the employment rate for age group 15-24 years decreased from 33.9% in 2010 to 32.3% in 2013. In the analysed period, the southern countries had significant reductions in employment rate among young people - Greece (-41.6%) reaching only 11.9% in 2013; Croatia (-36.9%), falling from 23% to 14.5%, Spain (-32.8%) reaching 16.8% in 2013, Cyprus (-30.4%), Portugal (-21 7%) and Italy (-20.4). Central and Eastern European countries have declined the employment rates - Slovenia (-22.2%), Poland (-8.3%), Bulgaria (-4.5%). The highest rate of youth employment (over 50%) is observed in the Netherlands, Austria and Denmark. In Romania, the employment rate among young people is only 23.5%.

In the EU 28 self-employment rate (self-employed) had a slight decrease in 2010-2013, reaching the 15.4% of total employment. In the year 2013, Romania had the second highest rate of self-employment (31.8%), following Greece (34.9%), indicating that there are a lot of people who feel self-employed, especially in agriculture and services (especially tourism). The Mediterranean and Central and Eastern Europe are those that have the highest rates of self-employment, while continental and Nordic countries have the lowest rates (in 2013 Sweden recorded a rate of self-employment of 5.1%, 5.9% in Denmark and 6% in Luxembourg). We can see that the Baltic countries have among the highest increases in this rate - Estonia has had an increase of 8.4%, Lithuania an increase of 8.2% and Latvia of 0.8%.

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Percentage of persons employed on a temporary contract (fixed-term employment contract) of the E.U.-28 had a slight decrease from 13.9% in 2010 to 13.8% in 2013. In Poland and Spain, at least one of four employees had a temporary contract in 2013 and in Portugal there was a similar percentage (21.5%). Among other Member States, the percentage of employees who have worked on the basis of fixed-term contracts ranged from 20.6% in the Netherlands and only 1.5% in Romania. Important variations from one Member State to another regarding the tendency to use fixed-term contracts may reflect, at least to some extent, national practices, supply and demand labour characteristics, employers' assessments concerning economic growth/reduction and the employerâ&#x20AC;&#x2122;s facility to hire or fire.

In the period 2010-2013 the unemployment rate in the EU Member States remained at relatively high levels, continuing to remain a priority in the policies pursued by governments. Average E.U.-28 increased by 1,2percentage points, reaching 10.8%. The most significant reductions in unemployment took place in the Baltic countries - Estonia arrived to reduce the unemployment to half from 16.7% to 8.6%; Latvia decreased by 11.9% reaching 7,6 p.p. and Lithuania decreased of 6 p.p., in 2013, recorded an unemployment rate close to the EU average. In the period 2010 - 2013, countries affected by the economic crisis continued to deepen the unemployment. Greece is the country where the unemployment rate increased by 116%, reaching a high record of 27.5%.

Cyprus unemployment has also increased a lot in recent years from 6.3% in 2010 to 15.9% in 2013; other states knew unemployment rate as Spain (26.1% in 2013), Croatia (17.3%), and Portugal (16.4%). Regarding Romania, the unemployment rate of 7.3% (below the EU average) has remained constant.

Analysing long-term unemployment is observed that it has a significant proportion among the unemployed. In the year 2013 the highest rates were recorded in Slovakia (70.2%), Greece (67.5%) and Croatia (63.7%). Romania is found in the top of three countries with the most significant increases in long-term unemployment rate in the period 2010-2013 with an increase of 32.9%, following Poland (36.6%) and Spain (35.7%). At EU level 28 long-term unemployment is rising from 40.1% in 2010 to 47.5% in 2013 This indicates that in EU many people still face serious difficulties in finding work, especially for those who are in long term unemployment. Thus, Member States must do more to stimulate creating jobs and combat social exclusion, particularly through active labour market measures and social investments.

3. Hierarchical Clustering EU28 Countries by Main Labor Market Variables Based on deeply analysis of recent developments (2010-2013) of the labor market from Romania compared to the EU countries was made clusters of countries from the European Union 28 according to key indicators of the labor market and the share of county in EU28 GDP using the "hierarchical cluster analysis" (HCA), Agglomerative clustering type. This method is a 'bottom-up' in the sense that each observation starts in its own group, and pairs of groups are joined into one, thus moving up in the hierarchy. The Labor market variables selected for development dendogram were: activity rate, employment rate and unemployment rate, the total dissociated by gender, age and education level. The metrics used for hierarchical clustering was Squared Euclidean distance. The mathematical formula for calculus is:

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Where: d(C1,C2) = the distance between Country1 and Country2 Ra1, Ra2 = the activity rate in Country1 and Country2 Ro1, Ro2 = the employment rate in Country1 and Country2 Rs1, Rs2 = the unemployment rate in Country1 and Country2

Figure 1: Dendrogram - Clusters Source: processing authors based on Eurostat, LFS database

Dendogram analysis for the total population aged 15-64 years, for 2013, showed the following (fig. 1). EU countries have been clustered according to the three selected variables (activity rate, employment rate and unemployment rate) in four clusters as follows: cluster 1 (includes Belgium, Bulgaria, Czech Republic, Estonia, Ireland, France, Italy , Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Poland, Portugal, Romania, Slovenia, Slovakia and Finland), cluster 2 (including Denmark, Germany, Netherlands,

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Austria, Sweden and the UK), cluster 3 (including Greece and Spain ) and cluster 4 includes Croatia. In bottom cluster Romania is together with Belgium, Malta, Poland and Hungary, forming the upper cluster together with Italy. For other dendogram drawn for vulnerable group, Romania is in the bottom cluster, as follows: for women, with Poland and Hungary; for men with Belgium, Poland, Slovenia and France; for young people with Belgium, Lithuania, Czech Republic, Slovenia and Poland; for elderly with Luxembourg, Belgium, Italy, Hungary, Poland and Austria; and for those with ISCED 0-2 education level with Luxembourg and up cluster with Austria and Malta.

If we compare the groupings obtained on the basis of the three labor market variables with groups obtained by the Commission in the analysis of flexicurity models on a total of 22 states (listed in Employment in Europe 2007), we see that the cluster are maintained, with little differences (Greece is not in the same cluster with the countries of East European model, Finland is no longer in the same cluster with countries from Nordic Model, Ireland is not in the same cluster as the United Kingdom, Belgium and France are not the same the cluster of countries from Continental Model and the countries from Mediterranean Model there are in different clusters.

4. The Dynamics of the Labor Market Status of Vulnerable Groups A separate section is devoted to analyzing the dynamics of the labor market variables dissociated by gender, age and education level. The main issues raised are summarized below.

Age 15-64 year Figure 2: Gender gap concerning activity rate, employment rate and unemployment rate Source: processing authors based on Eurostat, LFS database

Regarding the employment rate (Chart 1) gender gap curve has an upward trend of 2.8 pp in the period under review, and in 2011-2013 it was 1.2 pp. Both, gender gap curve concerning activity rate and the employment rate registered an upward trend, with a higher growth after 2008, due to lower growth of the indicators of women compared to men. The gap between men and women concerning the employment rate achieve in 2013 of 14.2p.p.and 16.2 p.p. for the activity rate, representing the maximum values in the analyzed period. Gender gap curve concerning unemployment rate is trending downward after 2008, explained by the sharp increase in the unemployment rate for women in this

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period. This can be explained by higher employment of women in jobs with higher volatility, which due to the outbreak of the economic crisis led to a further deterioration of the employment of women compared to men. We conclude that despite the measures taken in the period under review to reduce gender gaps concerning employment, continue recorded a deterioration of labor market conditions for women.

The overall activity rate in the analyzed period 2002-2013 had a small increase of 0.4pp in Romania, compared to growth in the EU, the 3,4p.p. Female activity rate decreased from 1,1p.p. between 2002-2013 in Romania, while the EU28 grew by 5,6p.p. If in 2002 the difference of female activity rates in the EU and Romania was 2,8p.p, in the year 2013 reached at 9,5p.p value. For the other periods analyzed, namely 2008-2013 and 2010-2013 increases in Romania for female activity rates were lower than those recorded in the EU, ie 1,3p.p. and 0,7p.p. in Romania and EU 2,3p.p and 1,6p.p. On the other hand, the values recorded for the male activity rate increases in the intervals analyzed. 2013/2008, 2013/2010 and 2013/2002 being superior in Romania, reaching values 2,1p.p.; 1,2p.p. and 1,7p.p., versus to the EU, where the values recorded are 0,2p.p .; 0,5p.p. and 1,5p.p.

The overall employment rate has increased slightly in Romania for all periods analyzed (2013/2008, 2013/2010 and 2013/2002), respectively 0,7p.p., 0,9p.p and 1,1p.p., while in the EU28 is a decrease with 1,6p.p. for the first interval, due to the negative effects of the economic crisis on employment, a sign that the economic crisis has not been yet fully improved, and for the next two intervals increases were 0,1p.p. and 1,8p.p. Although in the case of Romania, during 2002-2013 there is a decrease in the rate of female employment with 0,2 p.p., between 2010-2013 it increased slightly from 0,6p.p., as compared to the growth registered for the EU28 from the same period. Variation in male employment rate has been positive for all intervals analyzed in Romania, while those registered in the EU are negative, reflecting the EU's recent economic crisis affected mainly the male population.

Unemployment rate continued to rise in the EU 28 in all analyzed intervals, both overall and on female and male. The highest increases were registered for male unemployment rate, taking values 4,3p.p., 1,2p.p. and 2,6p.p. In Romania there were only increases in the period 2013/2008 range, values recorded were lower than those recorded in the EU28 both overall and for male and female.

Despite efforts, young people face severe difficulties in finding jobs in several EU Member States, the evolution of the employment rate indicating a decrease for all time intervals, including Romania. This is due to low or no experience; employment, especially with unstable employment contracts, such as fixed-term or part-time, which involves limited access to unemployment benefits; transition from school to work is often very difficult and that youth entering on the labor market tend to leave education early. Lack of employment opportunities is an additional burden for those who have not managed to find a job. The older workers employment rates are generally lower than in the other groups, but often higher than the young case.

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Employment rate change by 5-year age group, EU28 4,0

2,0

65 - 69

60 - 64

55 - 59

50 - 54

45 - 49

40-44

35 - 39

30 - 34

25 - 29

20 - 24

-2,0

15 - 19

0,0

-4,0 -6,0 -8,0

2008-2010

2008-2013

2010-2013

Figure 3: Employment rate change by 5 years age group, EU28 Source:processing authors based on Eurostat, LFS database

Conclusion Cluster analysis based on the three variables of the labor market indicates three clusters and one singleton. The country outlier in our analysis is Croatia which has the lowest employment rate of EU28 countries, is the second country with the lowest activity rate and the third country with the highest unemployment rate. Best placed on the labor market are countries in cluster 2, respectively Sweden, Nederland, Austria, Germany, Denmark and United Kingdom. The cluster 3 includes Greece and Spain, countries which have negative values of the analyzed indicators, respectively, highest unemployment rates, employment rates among the lowest EU28 values and average values for activity rates.

In recent decades, efforts have been made in all EU Member States so as to combine the entry on the labor market of the youth with retention in the activity of the older persons, reconciliation of private and professional life and equal opportunities on the labor market for women. There is a specific position of vulnerable groups in the labor market in most EU countries.

References [1] Barnichon, R.; A. Figura (2013), Labor Market Heterogeneities and the Aggregate, [2] Boeri, T; van Ours, J, The economics of Imperfect labor Markets, Princeton University Press, 2008; [3] Dimian, G,C (2011), Dezechilibre pe piața muncii în țări din Uniunea Europeană și OCDE, Revista Română de Statistică, nr1/2011 [4] European Commission (2013), Labour Market Developments in Europe 2013, ISBN 978-92-79-28538-7 [5] European Commission (2012a). “Labour Market Developments in Europe, 2012”, European Economy No.5, Directorate General for Economic and Financial Affairs.

[6] Hastie, T; Tibshirani, R; Friedman J, The elements of statistical learning, Hierarhical clustering (p.p. 520528), New York:Springer, second edition, 2009 [7] IMF (2013), “World Economic Outlook”, April 2013.

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Model of Innovation through Information Network Sharing Luminița PISTOL1, Rocsana ȚONIȘ (BUCEA-MANEA)2 1, 2 Spiru Haret University, Faculty of Marketing and International Business, 46 G Fabricii Str., District 6, Bucharest, Romania Tel: +40 21 4551405, Email: luminita.pistol@spiruharet.ro Abstract: Nowadays the extinction of financial, economic and scientific globalization urges the companies to come up with new methods of accessing information in order to have adequate management which properly meets the market request. This article aims to discuss how innovation influences the firms’ profitability while protecting the environment. It also analyses how widely innovation and eco-innovation will contribute to the improvement of the global economy as well as to the environment protection. This should be an aim for every person who wants to breathe clean air, to drink clean water, to spend leisure time in an unpolluted environment, to preserve the nature for future generations. The authors propose a model of innovation through information network sharing.

Keywords: open innovation, environmental innovation, model of innovation, network business ecosystem JEL classification: O3

1. Introduction The firms have to take into account a sustainable development plan. The profit on short term at any price, affecting the environment is considered a trap because it implies investments, technologies and methodologies that do not support a safe economic development, turning against the company as a boomerang. When the boomerang returns the company will either fail or will have the option to invest in safe technologies 2

Spiru Haret University, Faculty of Marketing and International Business, 46 G Fabricii Str., District 6, Bucharest, Romania Tel: +40 21 4551405, Email: rocsanamanea.mk@spiruharet.ro

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and methodologies, providing eco-friendly products and services. On long term, the firms will be the beneficiary of a positive impact and of reducing productivity costs, fulfilling the requirements of global legislation in the field.

In this article we discuss the opportunity for firms to adopt open innovation, ecoinnovation in their development process. Firstly, we initiate a literature review and then we propose a model of innovation.

The companies tend to involve both customers and employees in the supply chain and product/service management. The companies open their gates to the environment through blogs, focus groups and markets surveys. Even large companies have understood that innovation does not mean only investing in technology or in very complex laboratory or hiring the best specialists in the field and then waiting for the innovation to emerge.

Nowadays innovation should be open and assume inter-firm cooperation in R&D.

2. Methodology The research in this paper is founded on a literature review and journal articles regarding open innovation, eco-innovation and social-innovation. The authors choose to find out information in a Science Direct database (http://www.sciencedirect.com) that contains a large number of studies on innovation. Our empirical research is improved with an innovation model.

2.1. Open Innovation â&#x20AC;&#x153;Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technologyâ&#x20AC;?[ Chesbrough, 2003] The software interface for open innovation is very similar with a social network (like Facebook) or with a hub, where the users talk about professional themes. The users can ask for information regarding their objective of interest, can comment on a post or find an expert in the field. This interface allows users to form clusters depending on interest and to vote interesting ideas that might be classified by an algorithm (that most voted an idea the most useful or interesting).

In this respect a very good example of network is related to the applied research in the German Fraunhofer model (www.fraunhofer.de), that shortens the ties between academic institutions, research institutions and industry, facilitating the materialization through innovation of the inventions - as finished product of the research and materialization of entrepreneurs innovative ideas, giving them the chance to become more competitive in the global market. Fraunhofer is the largest European organization for applied research, for transfer of technology and information in natural sciences and engineering. Fraunhofer contributes substantially to the transfer of academic depth research results to the industries, thus contributing to the implementation of innovations from industry and technology. Fraunhofer is accepted in the international labor market as a high performer in terms of practical use of research due to the large number of patent applications (such as mp3 format, the air bag, etc.). Fraunhoferâ&#x20AC;&#x2122;s work extends internationally through representative offices and affiliated research centres, and through the collaborative activities of its specialists who provide access to current information, with reference to the stage of technical innovations which contribute to the development of scientific and technical progress. Most staff consists of specialists and scientists, especially engineers,

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highly qualified. Two-thirds of organization revenues come from contract research paid by industry and publicly funded projects, and a third of organization revenues comes from government funds or in the form of institutional funding.

The innovative ideas of the entrepreneurs can become reality with the know-how accumulated in these non-profit entities, such as the Fraunhofer.

2.1.1. How does open innovation work?

Here we go back to the nature, to the logarithmic spiral, described by Jacob Bernoulli, in which the distances between the arms of a logarithmic spiral increase in geometric progression in open innovation. These distances are factors of External Technology Insourcing, Intellectual property Acquisition, Licensing, Internal and External Technology.

As the ancient Greeks found the nature lesson is the best, using the Ď&#x20AC; and Ď&#x2020; numbers in architecture, so the open innovation process is following the same spiral.

Figure 1: Open Innovation Spiral (Source: www1)

Open Innovation has a lot of advantages such as reducing costs in R&D. As the specialty literature reveals, the advantages of open innovation are [www2]: reduced costs of conducting research and development, potential for improvement in development productivity, incorporation of customers early in the development process, increase in accuracy for market research and customer targeting, potential for synergism between internal and external innovations, potential for viral marketing [Schutte, 2010] The disadvantages are: possibility of revealing information not intended for sharing, potential for the hosting organization to lose their competitive advantage as a consequence of revealing intellectual property, increased complexity of controlling innovation and regulating how contributors affect a project, devising a means to properly identify and incorporate external innovation, realigning innovation strategies to extend beyond the firm in order to maximize the return from external innovation. [West, 2006] [Schutte, 2010] The pillars of the open innovations are: 1. Launching a product in an open platform in order to become a tool-kit for everyone that accesses the platform and to be developed further more with new functionality, such as software development kit (SDK), or application programming interface (API) are common examples of product platforms. [Schutte, 2010]

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2. The most competitive ideas are rewarded during strong competitions.

3. Involving customers in the product development cycle, in the design process, in the product management cycle, through interaction with the firmsâ&#x20AC;&#x2122; employees 4. Very similar with the first pillar is the model of developing and designing the product in a collaborative way. The difference is made by the control that is still maintained by the hosting organization. Thus the product is developed faster, more correct and with reduced costs. Dr. Henry Chesbrough based his research in the optics and photonics industry on this model for open innovation. [Chesbrough, 2013] 5. In the innovation networks, the competitive ideas are rewarded in the form of an incentive.

Open source appropriate technologies are coming to sustain open innovation assisting poverty reduction or sustainable development. [Pearce, 2012] Big companies can put in a common pool their patents, or grant unlimited license use to anybody. Such an example is IBM with its Eclipse platform, where companies are invited to cooperate inside an openinnovation network. [IBM, 2007]. Both the experts meant to design and develop software and the open-source adepts need one-another.

2.2. Eco-Innovation Eco-innovation is a class of manufacturing practices that include source reduction, pollution prevention, and the adoption of an environmental management system [Eiadat, 2008]. Some benefits of eco-innovation are presented in the figure below.

Figure 2: Eco-Innovation benefits

Through eco-innovation firms can improve their profitability reducing waste disposal and raw materials cost and increase product value due to enhanced reputation of the company. Customers demand for environmentalâ&#x20AC;?friendly products or services is increasing and answers to regulations that help protect the environment. [Yang, 2011] Ecoinnovation improves competitiveness and overall business success and brings the sense of feeling good when protecting the environment. (Day 2011; Gibbs, 2009; Millard, 2011; von Weltzien Høivik, 2010).

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Eco-innovation is easier to be implemented in the network than open innovation is. One example of platform designed for facilitating innovation in SMEs activity is Ecosmes.net.

This platform can facilitate the start-up of the product eco-innovation process, but with the time revels that not all the potentialities have been fully exploited. Ecosmes.net is an example of how ICT tools and online services can support SMEs by disseminating a structured approach for the implementation of all phases of the process and by supplying services that can facilitate eco-innovation. [Buttol, 2012] This process should be continuously upgraded by involving new sectors and exploiting the positive results of the numerous projects and studies promoted through network, funded by the Horizon 2020 Programme. In the network, case studies and a guide of good practices should be shared.

The companies may take into account the European Ecolabel criteria, Energy Using and Related Products implementing measures and environmental policies. The platform may be a beneficiary of semantic web services and tools that support users with machine readable information. [Khilwani 2009].

For SMEs development, open innovation is vital. Because they don’t have the resources, the expertise and the management experience like old and large companies they have to get together, to develop a business environment network in order to access the latest key information and ideas, to share and test new ideas. In his article [Petra 2013] it is shown that the effect of eco-innovation on firm performance will decrease with firm size. His statements are based on annual account data and survey data applied on 1712 Flemish firms. Although SMEs’ managers consider that it is very important to innovate in network and protect the environment at the same time, they are often overwhelmed by current activities and financial problems. But some of SMEs created a competitive advantage providing consumers with eco-friendly products, and improving their image/brand.

In the 90’s, the SMEs were considered much less likely than large firms to engage in environmental actions [Merrit, 1998], but recent studies have shown the opposite.

[Darnell, 2010]. SMEs are said to be the beneficiary of the solar energy, reducing the cost of the power energy, are said to be implied in producing bio-aliments (like honey, cheese, jam, fruit compote, bio- fruits and vegetable, etc) or developing open source products using open source technology. However, SMEs reap fewer benefits of innovation than the large enterprises.

Because 99% of firms in the European Union are SMEs and provide two-thirds of all private sector jobs [Buttol, 2012], it is very important for the entire economy to help SMEs to respect the eco policy and to become environmentally friendly. [Robinson, 2013] The environmental regulations that have a positive impact on the performance of large firms may be detrimental for small firms. Therefore policy makers should consider adapting the stringency of regulations to firm size.

In Romania open SMEs to eco-innovation face the challenges of time and costs needed for an innovation to penetrate the market, the lack of skills and labor market rigidities, training and entrepreneurial spirit. Eco-innovation returns may be observed after long term investment. [Robescu, 2010]. The SMEs can overcome the high cost of developing an eco-innovation accessing open technology, approaches and information from a business network eco-system funded by European finance, through Horizon 2020 Program.

A research over 581 SMEs and large companies operating on the Romanian market, active in the following sectors: banking, construction, services – tourism, advertising, management, consulting, automobiles, IT, retail, energy, utilities and transportation, oil & gas and telecommunications- confirmed the importance of leadership and visionary

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management, as well as the role of organizational culture and change management in integrating corporate sustainability. They are motivated by the moral duty and responsibility of businesses for a clean environment, the economic and financial advantages gained on the market, and sustainability as a key element of organizational culture.

The most common eco-innovation activities among responding organizations refer to reducing energy consumption, followed by selective waste collection, the use of clean technologies and the reduction of raw materials usage. On the second place, ecoinnovation activities were the reduction of waste resulted in the production process, recycling of materials, optimization of production processes from a technological and organizational point of view, reducing pollutant emissions and the collection and recycling of end-of-life products.

The research highlighted that the engaged firms in eco-innovation activities, do not have a clear evidence of the costs involved, and no precise monitoring of the results. Reporting the results of the efforts to implement the sustainability principles (through ecoinnovation or otherwise) is essential for investors, partners, employees and other stakeholders. [Paraschiv 2012]

3.

Results and discussions

Companies, especially SMEs, should innovate in network of a business eco-system. They should have an open and fare communication that can be facilitated by a governmental institution and very clear policy regarding intellectual property. We imagine a model that follows the entire life cycle of a product/service (awareness and training; analysis; product (re)design; communication/certification) and supply chain. In our model, big companies and state institutions may invest in a performing open innovation platform and in licenses.

We have the example of Fraunhofer and IBM, in our paper. All companies that have a new idea of product/service can become a member of eco-system. Within the network, the company will have to obtain the acceptance of an ecological agency. This agency tests how sustainable the idea is. If the idea is eco-friendly, market research is needed. This should be done by a marketing agency within the eco-system. Having in mind the market feedback, the company tests the feasibility of the idea with a consultant agency. If the result is positive, the inventors in the network and academic researchers may come up with possible solutions of implementations. The best solution will be chosen and the company will collaborate with the inventor to implement the idea. Then the marketing agency has to commercialize the product/service. A supervisor, the governmental partner, takes care that the profit is shared and the patent is protected.

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Intermediary Government Agency

Intermediary Government Agency Figure 3: Innovation Model in a Network Business Ecosystem

Conclusions The article emphasizes the importance of innovation within a Network Business Ecosystem in order to get sustainable development. The eco-system offers an ICT platform and online services that are the support of business for the entire product/service life cycle.

The members of the ecosystem come from different fields: research, marketing, ecology, consultancy, government, inventors and different size companies. Keeping all this in mind the authors have proposed a model of innovation.

Acknowledgement This work is supported by the Romania’s Operational Program for Human Resource Development (POSDRU), financed from the European Social Fund and the Romanian Government under the contract number POSDRU ID 134393 (cempdi.pub.ro/knowledge).

References [1] Buttol Patrizia, Roberto Buonamici, Luciano Naldesi, Caterina Rinaldi, Alessandra Zamagni, Paolo Masoni, Integrating services and tools in an ICT platform to support eco-innovation in SMEs, Clean Technologies and Environmental Policy, April 2012, Volume 14, Issue 2, pp 211-221 , DOI 10.1007/s10098-011-0388-7 [1] Chesbrough, Henry William (1 March 2003). Open Innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business School Press. ISBN 978-1578518371.

[1] Chesbrough, Henry; Eichenholz, Jason (January 2013). Open Innovation in Photonics". SPIE Professional 8: 24–25. doi:10.1117/2.4201301.15. Retrieved 21 February 2013.

[1] Darnall, N., Henriques, I., and Sadorsky, P. (2010) Adopting Proactive Environmental Strategy: The Influence of Stakeholders and Firm Size. Journal of Management Studies, Vol 47(6), pp 1072–1094.

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The Performance Comparison of the Participation Banks Acting In Turkey Grey Relations Analysis Method Ilker SAKINC1, Merve GULEN2 1,2 Hitit University, Corum, 19030, Turkey Tel:+903642257700, +903642257710, Email: ilkersakinc@hitit.edu.tr ABSTRACT:”Participation Banks” are the final review of banking sector that have become indispensable for economy of countries. Although participation banks do not have a long history, they were included to the Bank Law in 2005 and these banks are getting more attention day by day. Since participation Banks are showed as alternative for traditional banks, the performance comparisons of participation banks is important for managers and investors. The purpose of this study is to compare the performances of the participation banks operating in Turkey via Grey Relational Analysis Method. In order to do this, 15 ratios which show the capital adequacy, liquidity, asset quality and profitability criteria years have been determined by using 4 year-data of the participation banks during the years between 2010 – 2013. Participation banks’ performances have been compared with the result of the analysis with the help of determined ratios. The rank obtained from the result of the analysis is; Kuveyt Türk Participation Bank, Türkiye Finans Participation Bank, Albaraka Türk Participation Bank and Asya Participation Bank. At the end of the study, capital adequacy has been determined as the dominant ratio among all the ratios which affect the performances of participation banks.

Key Words: Participation Banks, Grey Relation Analysis, Performance Analysis, Capital Proficiency Ratios, Financial Performance.

JEL classification: G14, C67

1. Introduction There is scarcely any market affected by the terms, such as "globalizing world" and "global economy". In the changing and developing world, banking system has grown into a market

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where competition has reached peak and customer satisfaction is prioritized. Intermediary, which is the first definition coming to mind about banks and where fund-demanding and fund-offering meet, remains quite simple. These intermediaries have included many alternative transactions as well as providing loan facilities and adding values to money in the account day by day. Banks are grouped as public banks, private banks, foreign banks, development banks, participation banks etc. Participation bank is the last one that has been added to this group.

Participation banks are the banks which collect funds on the basis of participation in the profits and losses as deemed appropriate basically by Islamic rules and distributing these funds on the basis of commercial relationship and partnership instead of providing them as credit, and where other Islamic-approved banking transactions are made [Turkmenoglu 2007]. These banks, which are known as interest free banks in the international literature, are referred as participation banks in our country which means that it is based on the participation in both the profit and loss.

Participation banks, which have a different working system than traditional banks, are seen as an alternative to traditional banks. Participation banks that are based on Islamic rules allow the entrance of certain idle funds into the system. Considering that these banks pay taxes according to the legal liabilities on this idle fund, they also contribute to the public revenues.

When examining the studies on the participation banks, performance and financial ratios comparisons with the traditional banks stand out and it is seen that the studies, in which participation banks are compared among themselves and effectiveness thereof is evaluated, are not sufficient. Responding the questions about the market share percentage and effectiveness of the participation banks in the same market with the other banks will be effective in the bank preferences of the individuals. Therefore, in this study it is aimed to rank 4 participation banks operating in our country according to their performances by 15 financial ratios and to determine the most effective bank. This study, which will show the ranking among participation banks, is a recent study as it has been conducted according to the data of last 4 years.

2. Literature In their study, Yayar and Baykara [2012] focused on the effectiveness and efficiency of the Participation Banks in Turkey. Criteria for the effectiveness and efficiency were determined according to the data between 2005-2011 and effectiveness and efficiency among the banks were measured by TOPSIS Method. According to the results, it was determined that Albaraka TĂźrk was the most effective Participation Bank and Bank Asya was the most efficient bank.

DoÄ&#x;an [2013] compared the financial performances of the Participation Banks and Conventional Banks that operate in Turkey between 2005-2011. DoÄ&#x;an [2013] used profitability, liquidity, risk, solvency and capital adequacy rates in the study. According to the analysis results, 4 different rates were determined between both banking types. Liquidity, solvency and capital adequacy rates of these were high and risk rate was lower.

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Parlakkaya and Akten [2011] conducted a study to determine whether this difference is observed in the financial ratios of the structurally different Conventional and Participation Banks. 23 financial ratios were determined according to the data obtained between the years of 2005-2008, and regression analysis was applied. At the end of the study, differences in profitability and liquidity ratios were observed.

Ecer [2013] ranked the Private Banks in Turkey by comparing these banks' financial performances. To achieve this ranking, Grey Relational Analysis Method was used. In the study conducted, Garanti Bankası was placed on the top of the performance ranking.

3. Participation Banking Participation banks, which first entered Turkey in 1983 as private financial institutions, took the title of Participation Bank as of 01.01.2006 with the amendment made in Banking Law No. 5411 in 2005.

Participation banks operate according to Islamic rules and there are 4 participation banks in our country, where 95% of the population is Muslim. These banks are Türkiye Finans Katılım Bankası, Albaraka Türk Katılım Bankası, Kuveyt Türk Katılım Bankası and Asya Katılım Bankası.

Basic characteristics of these development banks, which are extending their shares continuously, could be listed as follows [Sayım & Alakel 2012]: ü Participation in profit or loss: Saver-bank relationship in participation banking is completely different from the depositor-bank relationship in conventional banking and basic characteristic of the saver is his/her participation. ü Support for the real sector: Due to working principles, participation banks cannot add value to their funds in the fixed income assets as other banks. Therefore, they have to regain the collected funds to the economy on the basis of participation. ü Risk Sharing Basis: Participation Banks enter into the relation of profit and loss partnership with the saver through participation account. ü Working Principle Based on Economic and Social Development: According to Islamic rules, participation banks do not provide every financing facility as they do not directly give money to the fund-using party. These banks provide finances after evaluating the value of a good or service morally and considering the national economy and nation's interests.

4. Data and Methods 4.1. Financial Ratios used in this study In this study, 15 ratios which show the capital adequacy, liquidity, asset quality and profitability criteria years have been determined by using 4 year-data of the participation banks during the years between 2010 – 2013. In order to to obtain these data, it was benefitted from the internet site of Participation Banks Association in Turkey. In the analysis of the data, Grey Relational Analysis was carried out on the ratios which were calculated by taking the average of 4 years.

The ratios which were used to determine the financial performance are given as follows:

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Table2: Financial Ratios CODE

FINANCIAL RATIOS

s1

Equity Capital/ (Credit + Quotation + Operational Risk Amount)

s2

Equity Capital / Total Assets

s3

(Equity Capital - Fixed Assets) / Total Assets

s4

Net Balance Sheet Position / Equity Capital

a1

Financial Assets / Total Assets

a2

Total Loans And Receivables / Total Assets

a3

Total Loans And Receivables / Total Funds Raised

a4

Non-Performing Loans / Total Loans And Receivables

l1

Liquid Assets / Total Assets

l2

Liquid Assets / Short-term Liabilities

l3

Liquid Assets / Total Assets

k1

Net Profit / Loss / Total Assets

k2

Net Profit / Loss / Equity Capital

k3

Continuing Operations Before Tax Profit (Loss)/ Total Assets

The ratios shown as s1, s2, s3 and s4 codes in the table were the ones used to measure the capital adequacy of the bank. It refers to the ability of capital adequacy to deal with risky situations in terms of the bank. The risk here involves credit risk, market risk, operational risk etc. In the present study, four ratios acquired from Participation Banks Association were chosen to measure the capital adequacy of the banks.

The a1, a2, a3 and a4 coded ratios are related to active quality of the banks. The active quality is a crucial ratio for the banks. The most salient item in the bank actives is the credits.

In the current study, the active quality was deemed significant with regards to performance evaluation of a bank, four ratios determined by the Participation Banks Association were preferred. l1, l2, l3, l4 ratios demonstrate the liquidity adequacy of the banks. The banks are required to possess liquidity at a certain level in order to realize necessary cash outflow. As the banks which have a sufficient liquidity level portray a controlled approach in the market, they will be affected from abrupt changes at a minimum level. Four ratios considered appropriate on the internet site of Participation Banks Association were chosen for liquidity adequacy, which is quite important for the banks.

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The last three ratios coded as k1, k2 and k3 are the ones which show the profitability of the banks. It would be unnecessary to remind that not only banks but also all other establishments aim to maximize their profitability. Three profitability ratios, which could also be defined as the result of a performance which lasts for a whole term, were reported in the present study.

While applying the method, the data are placed in a way to form a decision matrix first.

Later, normalization table is formed by normalizing the values in this matrix. What should be taken into consideration at this point is that three different approaches are followed to certain situations, such as the dataâ&#x20AC;&#x2122;s being high, low or at a fixed value. Difference matrixes are formed by finding absolute maximum of normalized values. After then, a final evaluation is carried out so as to reach Grey Relational values. According to the obtained values, the degree of relationship is calculated.

4.2. Method In this study Grey Relational Analysis is used.

4.3. Application As stated in the beginning of the study, there are four participation banks in Turkey. The ratios determined in accordance with the data acquired from the internet site of Participation Banks Association between the years of 2010-2013. Their reference values were identified and normalization values were prepared by means of determining the distance of other ratios to these reference values. After then, difference matrix was formed by applying absolute value procedure. As a last phase of the analysis Grey Relational Coefficients Table was acquired by using the values in this matrix. Grey Relational Coefficients Table is the table which we could comment on the performances of the banks.

OVERVIEW BANK NAME

PERCENTAGE

RANK

ALBARAKA

0,65

3

ASYA

0,42

4

KUVEYT TĂ&#x153;RK

0,75

1

TFKB

0,70

2

Comparisons were carried out according to these values.

Table 1: Participation Banks overall ranking table

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In the current study, the performances of four participation banks in Turkey with regards to their financial ratios were determined. According to the analyses, Kuveyt Türk Participation Bank is the most prominent bank in terms of performance. This result is followed by Türkiye Finans Participation Bank, Albaraka Türk Participation Bank and Asya Participation Bank respectively.

When the items taken into account to determine performance are investigated one by one, while Kuveyt Türk Participation Bank takes the first place with regards to capital adequacy and liquidity, Türkiye Finans Participation Bank for active adequacy, and Albaraka Türk Participation Bank shows the best performance concerning profitability.

To comment on general performance evaluation from back to front, we need to start with Asya Participation Bank first. Asya Participation Bank brings up the rear concerning capital adequacy, liquidity and profitability ratios, but takes the third place in terms of active quality. In other words, there is not a big difference either between the sums of money reserved for the situations like operational risk, credits etc. and the equity capital or it could be claimed that this bank incurs debt by keeping equity capital low.

Therefore, ratios related to capital remain low. It could also be claimed that this bank is not successful with regards to reward-risk planning and due to this fact the bank’s active quality and liquidty ratios are low and this condition causes their inability to increase liquidity potential in possession. This performance would manifest itself in the net profit obtained at the end of the term. Consequently, this bank remains in the last place for profitability performance.

Although Albaraka Türk Participation Bank takes the first place in the liquidity ratios rank, it could not sustain this success in general performance evaluation. The fact that bank is short of capital adequacy shows that this bank is not assertive in terms of financial position.

Naturally, liquidity ratios have its share of this situation. Although its financial position is not very assertive, this bank managed the current situation very well and closed the end of period successfully and took the lead in the profitability ratios. However, as stated in the beginning of the paragraph, its failure in capital adequacy downscaled the general performance and led to third place in the rank.

Türkiye Finans Participation Bank takes the first place with regards to active quality while it takes the second place in the rank when it comes to general performance evaluation. The fact that its active quality is strong led to the formation of portfolio by planning the rewardrisk relationship in a successful manner. Türkiye Finans Participation Bank, which has a higher value in terms of capital adequacy, showed a more successful performance in comparison with the other two banks.

Kuveyt Türk Participation Bank is the most accomplished participation bank with regards to general performance in our performance analysis which was carried out via four-year data.

However, it could not show big success in active quality as it did in capital adequacy and liquidity. Although this bank’s financial structure is strong, its failure to opt for right portfolio choices leads to active quality downfall. The bank’s outstanding success in the evaluation of

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capital and liquidity provided it with the opportunity to take the first place in general performance by balancing the downfall in active quality.

Conclusions Grey Relational Analysis was used in order to compare the performances of participation banks in Turkey. The significance level of 15 ratios used in the application was accepted as equal in terms of banks. As in previous studies, sample’s being small and improper distribution (in the case of showing normal distribution or not) have an impact on the choice of Grey Relational Analysis method. Besides all these, the fact that this method has not been used in the studies carried out on participation banking is one of the other reasons to choose it for this study. It was aimed to present an updated study by using the last four-year data in the calculations.

According to the analyses results, the rank among participation banks is as follows: Kuveyt Türk, Türkiye Finans, Albaraka and Asya Participation Bank. Capital adequacy and liquidity ratios were found to be the most influential in Kuveyt Türk’s taking the first place. Active quality and profitability follow capital adequacy and liquidity.

Steady capital adequacy of participation banks, which develop and grow day by day, would keep their financial structures strong. Consequently, they could leap forward to high income investments by not behaving timidly. Also, it could be claimed that the efficiency of the banks is related to profitability, but in parallel with liquidity and capital in possession, and the profitability is the result of these performances. As a final word, when the analysis results are concerned Kuveyt Türk Participation Bank is of a strong defence mechanism against the risks which may occur in the future. This strong mechanism is the biggest factor which makes it prominent among the other participation banks.

In the present study, it was aimed to fill the gap in the field by means of comparing the performances of the participation banks via Grey Relational Analysis. In the following studies, the performances of each year could be investigated individually, and the number of studies in the field could be increased by comparing the results which appear on a general basis.

References [1] Doğan, M., 2013. Katılım ve Geleneksel Bankaların Finansal Performanslarının Karşılaştırılması: Türkiye Örneği. Journal of Accounting & Finance, (58).

[2] Ecer, F., 2013. Türkiye’deki Özel Bankaların Finansal Performanslarının Karşılaştırılması: 2008-2011 Dönemi.

Abant İzzet Baysal Üniversitesi Sosyal Bilimler Enstitüsü Dergisi.

[3] Parlakkaya, R.-Ç. & Akten, S., 2011. Finansal rasyoların katılım bankaları ve geleneksel bankalar arasında bir tasnif aracı olarak kullanımı: Türkiye örneği. Ege Akademik Bakış, 11(3), pp.397–405.

[4] Sayım, F. & Alakel, M., 2012. The Participation Banking And Its Comparison With Deposit Banking In The Turkish Finance Market. European Integration Studies, (5), pp.152–164.

[5] Turkmenoglu, R.E., 2007. KATILIM BANKACILIĞI VE TÜRKİYE’DEKİ FİNANSAL YAPI. University, Kırıkkale.

[6] Yayar, R. & Baykara, H.V., 2012. TOPSIS Yöntemi ile Katılım Bankalarının Etkinliği ve Verimliliği Üzerine Bir Uygulama. Business and Economics Research Journal, 3(4), pp.21–42.

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Regional Economic Growth; Socio-Economic Disparities among Counties Salih Özgür SARICA Hitit University, Akkent 3rd st. n.3, Çorum, Turkey Tel: +90 (364) 225 7700, Fax: +90 (364) 225 7710, Email: sozgursarica@hitit.edu.tr 1

Abstract: State level economy has always been relying on its major metropolitan area’s economic success. So, such metropolitan agglomerations have been considered the only agents that can foster the state’s economic standing as if other economic places do (or may) not have significant contribution to the regional economy. In contrast, as some major cities enhance their economic well-being and agglomerate in specialized sector, the rest of the region lose their economic grounds or stay constant by widening the economic gap among cities. Therefore, an institutional approach can help to establish new regional arrangements to substitute all economic places to coordinate each other and succeed the economic growth as part of state government by reducing the disparities. In this sense, this study builds upon the inquiry that seeks the impacts of some economic disparities among economic places (counties) on the performances of state level regional economy.

Keywords: regional economic development, economic disparities, institutional approach JEL classification: H10, H11

1. Introduction It is crucial to recognize how economic well-being of a state is identical to sharp disparities among cities within particular socio-economic indicators. The focus has always been that cities can enhance their economic standing by different set of arrangements. Public choice theorists consider that the autonomy of a jurisdiction within the present of coercive force of competition among different locality give rise to the economic prosperity of the jurisdictions. On the other hand, regionalist scholars conceive more of a comprehensive 2

Hitit University, Akkent 3rd st. n.3, Turkey, Tel: +90 (364) 225 7700, Fax: + 90 (364) 225 7710, Email: sozgursarica@hitit.edu.tr

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entity which coordinates the regional economy and, by doing so, prospers the economy of particular region- mostly metropolitan area [Hooghe and Marks, 2003], because the spillover effect, coordination dilemma and spatial mismatches hidden the opportunity costs that the economic region has to bear [Barnes and Ledebur, 1992]. This empirical study intends to go through one step further of regionalist approach by posing the possible necessity of state level reforms that could foster the regional economic growth within political and structural coordination among different levels of economic regions.

The hypothesis of this study is that economic disparity among cities leads to a relatively less economic well-being of state level arrangements. Barnes and Ledebur [1992], in their analysis, point out that city and suburb together share the destiny of metropolitan areaâ&#x20AC;&#x2122;s economic standing in comparison to other metropolitan regions. In this manner, regionalist approach offers to deal with free-rider issues and to take advantage of economies of scale through relatively empowered comprehensive institutions [Savitch and Vogel, 2000]. Like other regionalists conceive that regional arrangements are not alternatives to the poly-centric set of jurisdictions but complements to existing institutions in which they have a chief role in prospering the sustainable economic growth of metropolitan areas [Hooghe and Marks, 2003]. This study has the same approach that state level regional reforms can enhance the economic standing within equal share among each jurisdiction by implementing critical programs for the same purpose. The space of agglomeration economies has always been thought as metropolitan area and this misleads to see the potential economic growth within the state level cooperation.

2. Literature Review There are two main approaches about how government should be arranged in terms of contributing the economic growth of spatial arrangements by allocating the resources and designing the institutional structures. One approach is in favor of fiscal autonomy where the locality can compete with one another. It is also known as public choice perspective in which Tiebout [1956] offers multiple jurisdictions that their quasi-costumer residents can find their preferences of public goods. The basic assumption of this approach is that economic well-being can be obtained through the coercive force of competition among localities without overwhelming government interventions. On the other hand, the spillover effects, negative externalities, coordination dilemma and the lack of scale economy advantages lead some scholars to be skeptical about multiple jurisdiction based spatial arrangements. It is the regionalist approach that sets forth the set of public interventions designed to fulfill such tasks to relieve collective action problem by designating a comprehensive governmental entity [Savitch and Vogel, 2000]. These perspectives are directed to the failures of current situations which are called - market failure or institutional failure [Keating, 2004]. The efficiency and equity of resource allocation are the most socially desirable, and expected to be implemented otherwise the deviance from both purpose is mainly deemed as the market failure in the liberal politic economy.

Regional studies have usually been focusing on the metropolitan areas as constitutes of central city and its surrounding suburbs. The place of analysis, therefore, was to solve the collective action problem in fragmented metropolitan regions by offering a regional government entity. This unilateral regional perspective is important to inquiry the metropolitan areasâ&#x20AC;&#x2122; social problems. However, the regional approach should also see the state government as a political device, fiscal entity and coordinating structure in terms of

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whether it can foster the regional economic growth within the similar theoretical perspective directed to the metropolitan studies.

Michael Keating in his article “The Political Economy of Regionalism” clarifies how we should see the regionalist approach’s theoretical base; “The term region takes different forms in different places and refers to a variety of spatial levels. Spatially, it exist somewhere between the national and the local and is the scene of intervention by actors from all levels, national, local, regional and now supranational…even though, the theme of regionalism is increasing in importance, it is often weakly institutionalized itself ”.

As such, the regionalist approach attracts many scholars in the need of economic wellbeing of different level of spatial organizations. There are many arguments why interventionist arrangements are necessary and how it should form; Olberding [2002] states that proponents of regionalism have asserted a more optimal outcome is achieved when local governments recognize their interdependencies and act in a coordinated way…Some scholars have found that large economic differences among cities in a region demonstrate a need for a regional approach; however, others have concluded that large differences in local economies make it more difficult to pursue a regional strategy.

David Rusk in his article “Growth Management: The Core Regional Issue” points out that growth management is rapidly emerging as the top regional issue of the next decade.

There are two key targets: state legislatures, which control land-use rules, and federally required metropolitan planning, which shape the allocation of federal transportation grants… There are only twelve states that have enacted statewide growth management laws. They vary in effectiveness from strong (Oregon) to almost purely exhortatory (Georgia)…Maryland governor Parris Glendening’s Smart Growth Act strengthens a weak state planning law adopted in 1993…In some states existing regional planning organizations are likely to have their planning authority extended into housing policy, regional revenue sharing, and economic development policy. Some may also become vehicles for management of region-wide infrastructure programs formerly carried out by independent authorities.

Miller et al. [2000] pose the importance of regional consensus; “The hyper-complex nature of US federalism requires multilevel intervention, using state and federal powers to reinforce local moves in the direction of regional co-operation and consolidation…Luther Halsey Gulick [1962], The Metropolitan Problem and American Ideas, reflected the spirit of John Kennedy’s ‘New Frontier’. Gulick’s one of the main points was that: all levels of US government—especially the states—must be brought to bear on emerging urban problems… Top-down directives, though out of favor, are necessary for managing metropolitan development and ensuring fiscal equalization. These are increasingly unlikely in Canada and a long shot in the US. Nonpublic groups, a potential regional force, lack unity and coherence. Voluntary consensus building is nice but not enough to shape regional patterns”.

Keating [2004] criticizes that there could be an increase in inequality between regions and within those regions without a regional set of arrangements; “Regional anti-disparity policies emerged in the postwar era as an extension of Keynesian macro-management within the aim of rectifying what were seen as market failures in the 247

allocation of resources… The main instruments of diversionary policies were grants and incentives to private investors to locate in development regions; restrictions on investment in booming locations; the diversion of public sector investments into development regions; public infrastructure investment in advance of need, to create favorable conditions for growth…In many cases, regional policy was given inadequate administrative means, consisting of grants and incentives without the necessary coordination, monitoring and follow-up”.

Olberding [2002] indicates the weakness of multiple jurisdictions by quoting that “public administration traditionalists assert that fewer local governments result in economy-of scale benefits, greater political accountability, more equitable treatment of citizens, and greater opportunity to address significant problems”.

Hooghe and Marks [2003] points out that collective action problem arises among multiple jurisdictions since the free riding issue dominates the current view of governance structure. They offer how to deal with the coordination dilemma; “one strategy is to limit the number of autonomous actors who have to be coordinated by limiting the number of autonomous jurisdictions. The second is to limit interaction among actors by splicing competencies into functionally distinct units”. Likewise, Olberding [2002] states that “Scholars have long recognized the difficulty of achieving and sustaining voluntary cooperation among a large number of individuals with no central authority- the so-called “dilemma of collective action”.

Other scholars have concluded that cooperative norms-or something conceptually similarare critical for shifting from competitive to cooperative behavior. For example, in her comprehensive review of the cooperation literature, Ostrom [1998] concludes that the key determinant of cooperation is "norms of reciprocity"-or the tendency of individuals "to react to the positive actions of others with positive responses and the negative actions of others with negative responses [Olberding, 2002].

3. Method and Data In order to evaluate the economic disparity among counties of the states (not including Alaska and Hawai), the units of analysis will be counties in each given state to find out the differences in terms of economic well-being. To deal with different factors that might affect the comparison analysis, it is crucial to classify them whether they are counted as MSA, micro statistical area or not in a metropolitan area by Census Bureau to control for urbanization and agglomeration effect. At the second step, the regional classification of the states will be important to rule out regional features such as historical or natural advantages. Furthermore, the number of counties can influence the diversity measurements since the large number of counties might result with a relatively big disparity and thus should be controlled. Another issue might be that some counties of a state can be located in a metropolitan area where its most part located in another state.

Since the analysis compares the disparities among counties with state level economic performance, dropping such counties can result some important mismatches in the model equations where the values of state level economic indicators will overweight the variables of lacking counties in aggregate. Therefore, counties will be listed based on their state location.

To answer the hypothesis, economic performance of state governments will be modeled as a function of the disparity of income level, education and employment rates among

248

their counties within other controlling factors. The model design will be used to compare relative importance of the state governments’ economy with the variation among their counties. For 48 states, the disparity value of each independent variable for given set of counties are expected to be predictors of the economic standing of state governments.

Independent variables are the differences of median household income, education level (percentage of population with associate, bachelor’s, master’s, professional, doctorate degree), employment rates (percentage of population in labor force -16 years and over) for each state’s counties. Dependent variables are the rates of per capita income and the percentage of individuals above poverty level of state governments.

To find out the disparity among counties, generalized inequality index will be used for our inquiry. Each value will be divided by the mean value then the average deviation will be inequality level for the use of determinant independent variables. For example, there is perfect income equality when everyone’s income equals the mean income but as the value deviates, the average of total deviation will be the inequality value for our set of independent variables.

A multicollinearity problem might appear since the inequality levels are based on the variables that might be highly correlated each other. We can expect the income, education and employment to show the similar tendency then it might affect the diversity value for each state. The expected result may not be statistically significant in that the sample size for each model will be 48 and 41 respectively. However, we can obtain some identical partial coefficients when other factors are controlled.

Model I: per capita income (state) = β (disparities of median household income, education level, employment rates in counties) + Controlling factors Model II: the percentage of individuals above poverty level (state) = β (disparities of median household income, education level, employment rates in counties) + Controlling factors The data set is obtained from the US Census Bureau’s 2000 Summary Files of The Decennial Census

4. Results The descriptive statistics show the range of disparities for each independent variable.

From the general inequality index, each value indicates how it is deviating from the perfect equality which is 1. The widest disparity seems to be of education level for each model. The counties of Georgia, New Mexico, Tennessee and Virginia, which are located in MSA and MicroSA have the most inequality level of education among those of all states.

On the other hand, the mean value of labor force disparity is relatively lower for both two models than other independent variables regardless of whether the counties are in MSA or not. Another noticeable finding is that the counties in Non-MSA and Non-MicroSA have lower range of disparity than the ones in MSA and MicroSA for independent variables except the labor force disparity. Finally, the states’ economic indicators- per capita income and percentage of individuals above poverty level- have the highest value in Connecticut and New Hampshire respectively, the lowest in Mississippi.

In Table 2-4 (Appendix), the correlation values show that independent variables are positively related each other at 0.01 level. In other words, the inequality level of median income, education and labor force among counties have consistent tendency as it might be theorized. Besides, the dependent variables of the models- per capita income and percentage of individuals above poverty level- are also positively correlated (.704) at .01 249

significant levels. At the same time, it is important to look at the correlation values of the number of counties within the independent variables. In fact, the reason why the number of counties is included in each model as controlling factor is that it might affect the disparity level since the inequality level is measured by the average deviation from perfect equality 1. In the tables, it is shown that the number of counties is positively correlated with income disparity (.34), education disparity (.51) and labor force disparity (.33) level in MSA, MicroSA counties at .05, .01 and .05 level respectively. For the disparity levels of counties in nonMSA and MicroSA, the number of counties is significantly correlated just with the labor force disparity (.33) at .05 level.

In Table 5, the states’ per capita income and percentage of individuals above poverty level are regressed on the median income disparity, education disparity, labor force disparity and number of counties in MSA and MicroSA. Two models explain .26 and .22 (respectively) of the variation in the dependent variables at .001 and .01 levels. For all models, we expect the coefficients to be negative according to our hypothesis.

Interestingly, the median income disparity among counties in MSA and MicroSA has a positive predictor on state’s per capita income. In other words, the state whose counties have more inequality in income level is better off in terms of per capita income. This might be because the median income can be skewed since multi-national, high wage offering firms agglomerate at specific advantageous locations which foster the state’s economic performance within a few economic places. On the other hand, education disparity has a deleterious impact on per capita income of a state at .05 level as the hypothesis expected.

Finally, only significant partial coefficient is that of labor force disparity on state’s percentage of individuals above poverty level. As labor force disparity increase one unit, the model predicts the percentage of individuals above poverty to decrease .38 at 0.1 significant levels.

When we look at the disparities among counties in Non-MSA and Non MicroSa (Table 6), median income disparity loses its significance on per capita income which indicates that the disparity is much more identical in agglomeration (or urbanization) effect. Surprisingly, the education disparity has positive predictors in each model at .01 level. The state’s per capita income and percentage of individuals above poverty is expected to be better off where its nonMSA and nonMicroSA counties have more education inequality. One skeptical approach can be raised that the better off states can help their some Non-MSA counties’ educational attainment to a particular level while others stay constant. Finally, in Table 6, the labor force disparity seems to have negative impact on the percentage of individuals above poverty at .05 level.

In last two tables, the range of predictors’ effect is seen based on the regions. The weight of income and education disparity among MSA, MicroSA counties is greater in the West and Midwest than South and Northeast. It is similar in the second model for education disparities’ positive impact of Non-MSA and Non MicroSA counties. On the other hand, in the Northeast and West, labor force disparity among Non-MSA and NonMicroSA counties has more deleterious effect on percentage of individuals above poverty level of the states.

5. Policy Implications Case studies of regional partnerships for economic development have found that economic need is a key factor in the formation of regional partnership [Olberding, 2002].

In this manner, this empirical study seeks to answer how government organizations can

250

stimulate sustainable economic development in efficient way by also reducing the economic disparity. Specifically, it offers to establish state level regional arrangements to implement such tasks through its institutionalizing opportunities.

As Hooghe and Marks [2003] implies, the regional approach may not necessarily mean that institutional arrangements are to be at the tradeoffs between public choice and regionalist perspectives. Some misspecifications might lead us to see narrowly the regionalist arguments as if they don’t provide us a ground to account for Tiebout’s model.

Therefore, this study goes beyond the extreme theoretical arguments within the view of institutional necessity for the economic growth and equal distribution of the outcomes, even though the study seems to be built on regionalist perspective. In order to provide a better environment for economic growth, all possibilities should be taken into account through the mix of counter considerations The empirical results explicitly show us that economic disparities especially in labor force and education level in metropolitan areas are identical to the state’s economic performance in negative way. However, what makes difficult to accept the hypothesis is that education level and median income disparities surprisingly have positive coefficients in the models. Thus, a further inquiry is necessary to see what the fact behind it actually is.

Nevertheless, it partly supports the argument that the concentration of economic wellbeing at particular counties results with less successful economy at state level.

Under the state governments, an economic development commission, in which the representatives of counties can cooperate for stimulating economic growth within the state by accounting not only specific successful places but within all counties, should be established and empowered through federal funds. The policy outcomes of such regional commission must not only focus on the current agenda but it is crucial to discuss other substantial improvements such as education, employment and infrastructure.

6. Appendix Table 1. Descriptive Statistics

251

Min

Max

Mean

Std Dev.

Per Capita Income

15853

28766

20712

2892.9

Percentage of Individuals Above Poverty Level

.801

.935

.879

.031

Income Disparity Among Counties (MSA,MicroSA)

.095

.350

.180

.056

Education Disparity Among Counties (MSA, MicroSA)

.166

.445

.302

.069

Labor Force Disparity Among Counties (MSA, MicroSA)

.030

.140

.075

.024

Income Disparity Among Counties (Non-MSA, Non-MIcroSA)

.063

.236

.128

.037

Education Disparity Among Counties (Non-MSA, Non-MIcroSA)

.114

.393

.205

.063

Labor Force Disparity Among Counties (Non-MSA, Non-MIcroSA) Number of Counties

.040

.161

3

254

.084 64.7

.029 46.4

Table 2. Economic Disparities among Counties in MSAs and MicroSAs Dependent Variable Per Capita Income Percentage of Ind ividuals Above Poverty Level Median Income Disparity Education Disparity Labor Force Disparity Number of Counties Constant F Adjusted N

29307.4** (.573) -21021.8* (-.504) -6848.5 (.057) -8.9 (-.143) 22883.4*** 3.877 *** .265 .197 48

.068 (.122) -.129 (-.283) -.387‡ (-.296) .000 (-.035) .937*** 3.093** .223 .151 48

Notes: Unstandardized coefficients (standardized); significant predictors in bold. ‡ p<0.1 *p<0.05 **p<0.01 ***p<0.001 Table 3. Economic Disparities among Counties in Non-MSAs and Non-MicroSAs Dependent Variable Per Capita Income Percentage of Individuals Above Poverty Level Median Income Disparity Education Disparity Labor Force Disparity Number of Counties Constant F Adjusted N

-12448.5 (-.194) 20213.1** (.542) -13034.5 (-.162) 3.992 (.074) 18332.4*** 2.225‡ .198 .109 41

-.054 (-.065) .249** (.513) -.545* (-.520) .000 (.029) .876*** 3.045* .253 .170 41

Notes: Unstandardized coefficients (standardized); significant predictors in bold. ‡ p<0.1 *p<0.05 **p<0.01 ***p<0.001

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Table 4. Economic Disparities among Counties in MSAs and MicroSAs Dependent Variable Per Capita Income Northeast Midwest South Median Income Disparity Education Disparity Labor Force Disparity Number of Counties Northeast

24487.2* (.479) -18183.7* (-.436) 6909.3 (.058) -4.5 (-.073) 1920.9 (.273)

29388.6** (.574) -20916.2* (-501) -6286.1 (-.052) -9.4 (-.151)

Midwest

28988.4** (.567) -20642.0* (-.495) -5806.2 (-.048) -8.6 (-.139)

-150.5 (-.024)

West

Adjusted N

29810.2** (.583) -21096.6* (-.506) 627.0 (.005) -14.3 (-.231)

106.6 (.016)

South

Constant F

West

21168.0*** 3.793** .311 .229 48

22800.1*** 3.033* . .265 . .178 48

22778.8*** 3.035* .265 .178 48

-1356.2 (-.199) 22911.2*** 3.543** .297 .213 48

Notes: Unstandardized coefficients (standardized); significant predictors in bold. ‡ p<0.1 *p<0.05 **p<0.01 ***p<0.001

Table 5. Economic Disparities among Counties in Non-MSAs and Non-MicroSAs Dependent Variable Percentage of Individuals Above Poverty Level Northeast Midwest South West Median Income Disparity Education Disparity Labor Force Disparity Number of Counties Northeast

-.055 (-.067) .247** (.509) -.562* (-.537) .000 (.016) -.007 (.-077)

-.078 (-.094) .325*** (.671) -.423* (-.404) .000 (-.145)

Midwest

-.040 (-.048) .229** (.473) -.428‡ (-.409) .000 (.158)

.040*** (.593)

South

-.028** (-.440)

West Constant F Adjusted N

.879*** 2.433‡ .258 .152 41

. .

.850*** 8.304*** .543 .477 41

.871*** 4.842** .409 .324 41

Notes: Unstandardized coefficients (standardized); significant predictors in bold. ‡ p<0.1 *p<0.05 **p<0.01 ***p<0.001

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- .062 (-.075) .274** (.565) -.532* (-.509) .000 (-.034)

-.009 (-.122) .876*** 2.485‡ .262 .157 41

References [1] Barnes, William R. and Larry C. Ledebur (1992); City Distress, Metropolitan Disparities and Economic Growth, A Research Report of the National League of Cities, Washington D.C. [2] Rusk D. (2000); Growth Management: The Core Regional Issue, Reflections on Regionalism, Brookings Institute.

[3] Gulick, L. H. (1962); The Metropolitan Problem and American Ideas. New York: Alfred Knopf [4] Hooghe, L. and Gary Marks (2003); Unraveling the Central State, but How? Types of Multi-level Governance, American Political Science Review, Vol. 97, No. 2 [5] Keating, M (2004); The Political Economy of Regionalism, Frank Cass & Co Ltd, Oxon.

[6] Miller D, Clyde Mitchell-Weaver and Ronald Deal (2000); Multilevel Governance and Metropolitan Regionalism in the USA, Urban Studies Journal, 37: 851 [7] Olberding, Julie Cencula (2002); Does Regionalism Beget Regionalism? The Relationship between Norms and Regional Partnerships for Economic Development, Public Administration Review, Vol. 62, No.4 [8] Ostrom, Elinor. (1998); A Behavioral Approach to the Rational Choice Theory of Collective Action, American Political Science Review 92(1): 1-22.

[9] Savitch, H. V., and Ronald K. Vogel (2000). Metropolitan consolidation versus metropolitan governance in Louisville, State and Local Government Review 32 (3): 198-212.

[10] Tiebout , Charles M (1956); A Pure Theory of Local Expenditures, Journal of Political Economy 64 ( 5 ): 416 â&#x20AC;&#x201C; 24 .

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

From Performance Measurement to Strategic Management Model: Balanced Scorecard Cihat SAVSAR1 1 Hitit University Vocational Higher School, Corum, TURKEY, 19030 TEL: + 90 364 2230800/3341, FAX: +90 364 2230801, Email: cihatsavsar@hitit.edu.tr Abstract: In Today’s competitive markets, one of the main conditions of the surviving of enterprises is the necessity to have effective performance management systems. Decisions must be taken by the management according to the performance of assets. In the transition from industrial society to information society, the presence of business structures have changed and the values of nonfinancial assets have increased in this period. So some systems have emerged based on intangible assets and to measure them instead of tangible assets and their measurements. With economic and technological development multi-dimensional evaluation in the business couldn’t be sufficient. Performance evaluation methods can be applied in business with an integrated approach by its accordance with business strategy, linking to reward system and cause effects link established between performance measures. Balanced scorecard is one of the commonly used in measurement methods. While it was used for the first time in 1992 as a performance measurement tool today it has been used as a strategic management model besides its conventional uses. BSC contains customer perspective, internal perspective and learning and growth perspective besides financial perspective.

Learning and growth perspective is determinant of other perspectives. In order to achieve the objectives set out in the financial perspective in other dimensions that need to be accomplished, is emphasized. Establishing a causal link between performance measures and targets how to achieve specified goals with strategy maps are described..

Keywords: Performance Measurement, Strategic Management, Balanced Scorecard, Performance Management Systems, Performance Of Assets, Intangible Assets JEL classification: M19, M40

2

Organisation, Address, City, Postcode, Country, Tel: +country code local code number, Fax: + country code local code number, Email:

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1. Conceptual framework: Concepts relating to performance There isn’t a definition which agreed by academics as well as practitioners regard to the concept of performance and performance evaluation. According to Neely and others, although performance is rarely defined, it is a topic discussed very intensively (Neely et al., 2005).

1.1 Performance Performance is a concept which determines obtained things quantitatively and qualitatively as result of intentional and planned event (Akal, 2005). On the other hand, performance can be described as ability of producing results aimed at certain objectives and priorities within a certain time (Akman et al., 2008). In the literature of business, performance of a business system can be described as result of specific working.

1.2. Organizational Performance Evaluation Organizational performance evaluation; defines as an analytical process that of an organization evaluates along with generated products, services, and results according to predetermined goals and objectives (Güner & Memiş, 2007). In terms of different business functions, concept of organizational performance evaluation is able to express different meanings. For example, performance evaluation from the point of production function is set of criteria using both in order to measure activity of events and actions and to provide feedback to employees (Santos et al., 2007).

1.3.

Performance Management

Performance management process basically describes that different system in management of performance how to be used by organization. These systems consist of not only developing strategy and observing but also consist of accounting management, target management and non-financial performance measurement; in addition it isn’t limited with them (Bititci et al., 1997).

2.

Importance of Evaluation of Organizational Performance for Business

‘’When you can measure what are you speaking about, and express it in numbers, you know something about it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind’’ William Thompson (Lord Kelvin), 1824–1907.

2.1. Factors Effecting Organizational Performance Evaluation Today’s economic conditions and information age has revealed truth that business multi dimensionally have to manage their performance. We can summarize developments and changes demonstrating this result under seven headings (Neely, 1999).

Changing Work Life: In production systems along with information age, share of items which forming production cost occurred changes. Production transformed from labourintensive to capital-intensive and technology-intensive (Şimşek & Nursoy, 2002).

Increasing Competition: Today’s businesses which are operating in global markets are under a constant pressure about decreasing their cost and increasing their quality of goods and services (Şimşek & Nursoy, 2002).

Specific Development Initiatives: Many organizations in response to increasing competition have turned to development themes such as total quality management, lean

256

production and worldwide production. An organization which adopts this new emerging vision has led to value-oriented production rather than cost-oriented production (Neely, 1999).

National and International Quality Awards: National and international institutions organizes various organizations which include awards in order to increase quality.

However, in order to get determined award you must perform criteria which based on performance (Şimşek & Nursoy, 2002).

Changing Roles of Organizations: Accounting and finance departments in information age's businesses produces not only information required for external reporting but also produces other information required by management in order to perform activities (Akal, 2005).

Changing External Demand: Today's business faces with very different external demand now. The main demandant parties consist of laws, regulations, customer organizations, shareholders, public opinion, the media and civil society organizations (Şimşek & Nursoy, 2002).

Power of Information Technology: Technological advancements only did not provide easier way to obtain and analyse data, in addition it made possible to new opportunities with regard to data. For example, electronic sales systems produced opportunities for monitoring buying habits of individuals and also it offered to chance for monitoring result of discounting. At the same time, software packages allowed to use systems of balanced performance measurement (Akal, 2005).

2.2. Development of Organizational Performance Evaluation Development of performance evaluation process can be handled in three periods as follows (Wilcox and Bourne, 2003); 1850-1925; The Development Process of Cost and Management Accounting: Although technology was important during this period, it generally were used to provide an effective method for the purpose of producing large quantities (Kaplan &Norton, 1999).

Significant accounting techniques were developed and used as performance evaluation tool in this period. Basic cost and management accounting methods such as standard costing and budgeting techniques used today were developed and were used in this period (Wilcox & Bourne, 2003).

1974-1992; Developments in Multi-Dimensional Performance Evaluation Methods: Whereas products lifecycle was diminishing in this term, new products and services designed and works which improve benefits of theirs became important. While number of workers was decreasing in labour force, along with the effect of the competitive environment increased number of personnel who have analytical skills such as engineering, marketing, managerial and administrative (Güner & Memiş, 2007). Nonfinancial performance criteria as customer satisfaction, employee satisfaction, quality, market share, brand value in addition to financial criterions started to be used.

1992-2000; Strategy Maps, Business Models and Developments in Cause and Effect Diagram: Since the 1980s, in order to eliminate inadequacies of performance evaluation methods which based on financial criteria became evident multidimensional performance evaluation methods but these methods did not fulfil requirements of the information age.

As a result, we needed to methods of covering the whole of the business and comply with business strategy and as a result of these seeking an appeared development which is the third stage of performance evaluation such as strategy maps, business models, and cause 257

and effect diagrams (Wilcox & Bourne, 2003). In the last point where we stand now in historical process of performance evaluation methods; to remedy the deficiency of traditional performance evaluation methods emerged multidimensional and strategyoriented performance evaluation methods. Figure 1 shows changes in the performance evaluation process by years.

Figure 1: Performance Measurement Systems Typology.

Source: (Garengo, 2009)

3. Balanced Scorecard 3.1. Definition of Balanced Scorecard Balanced Scorecard is comprehensive a strategic management model which foreseen to determine organization's vision and strategy (Kaplan & Norton, 1999; Virtanen, 2009; Niven, 2002). Initially Balanced Scorecard only were used as performance measurement method but if we are look at its wider meaning, it is management concept that organization's vision and strategy allow to spreading to base (Virtanen, 2009; Crabtree & De Busk, 2008).

3.2. Development of Balanced Scorecard Phases of Balanced Scorecardâ&#x20AC;&#x2122;s can be evaluated in three periods (Speckbacher et al., 20003; Lawrie & Cobbold, 2004).

3.2.1. First Generation Balanced Scorecard In this period Balanced Scorecard has been developed to respond performance measurement methods which only concentrate on financial criteria, in addition it is performance of measurement methods which use non-financial criteria (Kaplan & Norton, 2008; Kaplan & Norton, 2001).

3.2.2. Second Generation Balanced Scorecard The most important difference of second generation Balanced Scorecard in addition to in the first generation it used as lean performance measurement tool is that it defines connection between perfectives using cause-effect relations (Lawrie & Cobbold, 2004).

258

Second generation Balanced Scorecard has two different feature more than the first one.

These are (Lawrie & Cobbold, 2004);  

Criteria which appear in perspectives are determined according to strategic objectives which predetermined.

There are relation which connected with cause and effect relations between criteria and strategic objectives

According to Speckbacher and others (2003), the most important feature of this period is that tangible and intangible assets which owned by businesses using cause and effect relationship are connected to business strategy (Speckbacher et al., 2003).

3.2.3. Third Generation Balanced Scorecard In this period, Balanced Scorecard is a strategic management system which by means of communication and action plans and reward systems finds application area. Balanced Scorecard is not only tool which defines business strategy but also it tells how to apply this strategy (Speckbacher et al., 2003). Kaplan and Norton who wrote book which name is "Strategy-Focused Organization" in 2001. They especially focused on this issue in their book. They added four management processes in second generation also they added five principles in third generation (Achterbergh et al., 2003).     

Strategy should be converted to operational expressions Organization should be regulated in accordance with its strategy Strategy should be brought everyone's daily work Strategy is seen as a continued period With the top management support changing should be keep alive

What should be the plan of action and how should be a reward system should be? These questions gained importance in this period. For each criterion were formed an expression which means target groups, to choose strategic objectives and target criteria. Thanks to target expressions, strategic links which be defined with cause and effect relationship can be seen and also we can test to have been achieved how much of objectives. Shortly, we can say that third-generation performance scorecards designed for putting into practice more functional and more strategic issues (Lawrie & Cobbold, 2004).

3.3. Perspectives of Performance Scorecard Using targets and measurements which appears Balanced Scorecard, business performance can be handling from four different angles. These are; financial perspective, customer perspective, internal process perspective and learning and development perspective    

Financial Perspective: Our achievements to be accepted by our shareholders, what objectives are achieved by ours?

Customer Perspective: To achieve our vision, how we should be perceived by customers?

Internal Process Perspective: To satisfy our shareholders and customers, which in process we aim at excellence?

Learning and Development Perspective: To arrive our vision, how a learning and development model we choose?

As seen, Balanced Scorecard not a model but it is a tool which aimed to give answer to above questions, also it should be unique for each business. At same time Balanced

259

Scorecard allows to be reflected strategy which is the most important determinant of organizational performance to business processes. The most important difference of Balanced Scorecard is that each activities of business must be compatible with business strategy. Therefore, business strategy is located centre of model. At first, for each perspective are determined objectives. Then, we decides what measures will be used, to achieve these objectives. Afterwards, in order to achieve the objectives, business find out what activities have to make. Perspectives which proposed by Kaplan and Norton are described below.

3.3.1. Financial Perspective Balanced Scorecard maintains criteria which are traditional measures that used for decades; in addition it is a fact that financial criteria contain information about past criteria. Therefore traditional methods which based on financial measures used by industrial age businesses because achieve capacity utilization and customer relationships of these businesses to be successful; they had to have long-term investment. However traditional measures aren't enough to today's businesses which have aim of creating value which aimed at investing to customers, suppliers, employees, internal operational processes, technology and innovation (Kaplan & Norton, 1999). In financial perspective, we search for answer to question. This question is that how should be our image which seen by our shareholders? And generally, business objectives are determined on the axis with profitability, growth and shareholder value (Kaplan & Norton, 1992). Balanced Scorecard sees financial perspective as purpose of business (Kaplan & Norton, 2006).

Financial objectives of different departments which located in business create Balanced Scorecard and Balanced Scorecard associate to business strategy. Financial objectives which located on Balanced Scorecard with this aspect focus on objectives and criteria of other perspectives. Every measure located in financial performance should be a part of cause and effect relation which play role in financial performance. Balanced Scorecard starts from a long-term financial objective to achieve these objectives needed financial transactions, customers, internal processes, people and systems (Kaplan & Norton, 1999).

3.3.2. Customer Perspective Second perspective of Balanced Scorecard is customer perspective which search for answer to achieve our vision, how we are perceived by customers? Shareholder pressure on businesses to achieve better financial results in traditional methods of performance evaluation restrict to spending which made to improve new business products, processes, human resources, information technology, database and systems, customer and market.

Cost accounting, these type reductions which happen in a short time perceives as an increase in income of business. In fact, these loss are stolen from own business resources and future resources. While these application which seen in short time are perceived as an improvement in the financial statements, in fact they can damage to business because of decreasing in customer loyalty and satisfaction in future (Kaplan & Norton, 1999). In this context, the Balanced Scorecard is perceived activities which not reflected on the balance sheet of business such as customer orientation, intellectual capital, new product, brand value, organizational learning capabilities, process improvement skills, improving internal control activities, etc. as factors that increase value of business. Therefore, with these features which happen in customer perspective increases in organizational performance and market value of business (Pirtini, 2010). Customer perspective in Balanced Scorecard

260

allow to convert business's vision, mission and strategies to special purposes regarding customers and thus ensuring business is shared between all parties.

3.3.3. Internal Process Perspective In the Äąnternal process perspective, for a business is determined what should be internal business processes which a business should be superior. The main success criteria of this perspective focus on internal processes which is the most important in achieving financial goals and customer satisfaction. Moreover improving an organization which learning internal processes and growth perspective is allowed to turn to essential functions and processes which can be obtained competitive advantages (Ensari, 2005). As a matter of fact, process which determined purpose and measurements of internal processes perspective reveals one of the most important difference between traditional performance evaluation systems and Balanced Scorecard. While traditional performance measurement systems focus on available responsibility centres and measurement system, performance scorecard brings performance evaluation system which include in purchasing, production, planning and control (Kaplan & Norton, 1999).

3.3.4. Learning and Development Perspective Criteria and objectives of learning and development perspective is provider of other perspectives. In other words, the success of Balanced Scorecard depends on how accurately reflected objectives and criteria which located on financial perspective, customer perspective and internal processes perspective, to perspective of learning and development. Learning and development determines what level should be organizational climate to achieve the objectives which determined in other perspectives (Niven, 2002).

Owing to the fact that businesses often focus on short-term financial results, they have hard time to maintain spending on employees, systems and institutional development.

While Balanced Scorecard emphasizes importance of investments, also it emphasizes that it is not only limited to physical investments such as machinery and equipment but also investing on human, systems and methods too (Kaplan & Norton, 1999). Learning and development perspective determines organization's non-financial assets and their roles in strategy.

Conclusion Performance Measurement Systems which handling results of business activity only from a financial point didnâ&#x20AC;&#x2122;t survive in today's economic environment. Additionally, performance measurement systems only which using non-financial measures apart from financial perspective didnâ&#x20AC;&#x2122;t full fill the needs of business either. Economic and technological developments revealed that performance in businesses should be measured as versatile. At the same time, it revealed that system in accordance with business strategy should become functional. Balanced Scorecard that has experienced all processes which occurred in performance measurement and evaluation system is a model, at same time it used as a management tool. Learning and development perspective is a determinant of other perspectives. Performance is evaluated with financial, customer, internal processes and learning and growth dimensions by basing on company's vision and strategy. In addition, objectives and criteria between dimensions are connected each other with cause and effect relationship. Financial dimension is the dimension of final performance which shown the result of all dimension. Balanced Scorecard play an

261

important role in determining how a strategy will be implemented in business, who will implement this strategy and how this strategy will be implemented.

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12. Kaplan, R.S.; Norton D.P.(2006) Strateji Haritaları: Gayri Maddi Varlıkları Maddi Sonuçlara Dönüştürmek, (Trans. Şeyda Öztürk), (1th edition), İstanbul: Alfa Yayınları.

13. Lawrie, G. ; Cobbold, I. (2004) Third-Generation Balanced Scorecard: Evolution Of An Effective Strategic Control Tool, International Journal Of Productivity and Performance Management, 53(7), p.611-623.

14. Neely, A. (1999) The Performance Measurement Revolution: Why Now And What Next?, International Journal of Operations & Production Management, Vol. 19, No. 2, p.205-228.

15. Neely, A. et al. (2005) Performance Measurement System Design: A Literature Review and Research Agenda, International Journal of Operations & Production Management,25, 12, p. 1228-1263.

16. Pirtini, S. (2010) Pazarlamada Müşteri Odaklılık ve Balanced Scorecard, (1th edition), İstanbul: Beta Yayınları.

17. Santos, M. F. et al. (2007) Towards A Definition Of A Business Performance Measurement System International Journal of Operations & Production Management, Vol. 27, No. 8, p. 784-80.

18. Şimşek, M.; Nursoy M. (2002) Toplam Kalite Yönetiminde Performans Ölçme, İstanbul: Hayat Yayıncılık.

19. Speckbacher, G. et al. (2003) A Descriptive Analysis On The Implementation Of Balanced Scorecards in German-Speaking Countries, Management Accounting Research, No:14, p. 361-387.

20. Virtanen, T. (2009) Guidelines for Implementing Balanced Scorecard, QPR Software Plc. 21. Crabtree, A.D.; De Busk G. K. (2008) The Effects Of Adopting The Balanced Scorecard On Shareholder Return, Advances in Accounting, incorporating Advances in International Accounting, No:24, p. 8-15.

22. Niven, P.R. (2002) Balanced Scorecard Step-By-Step - Maximizing Performance and Maintaining Results.

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Perceptions of Disabled Rights in Global Governance Models Menekşe ŞAHİN1, Doğan DEMİRCİ2 Hittites University, Çorum, Turkey Tel: +90 364 223 08 00, Fax: + 90 364 223 08 04, Email: meneksesahin@hitit.edu.tr, dogandemirci@hitit.edu.tr Abstract: 2011 World Report on Disability shows that disabled people are more exposed to poverty and poor socio-economic consequences. The unemployment rate is higher among people with disabilities and many countries; women are more disadvantaged than men. With "For people with people and equitable, inclusive and development on the basis of human rights" concept forming the basis of the work of the United Nations Conference on Sustainable Development held in June 2012 in Rio de Janeiro underlined that more attention should be given social inclusion, social protection and equity items assuming that economic development often brings environmental degradation and increasing inequality. For sustainable human development, to create employment for individuals with disabilities is not sufficient and productive employment opportunities should be provided, supplying an adequate income and social protection maintaining the basic labor rights.

This study focused on international legal instruments and policies related with the work and employment rights for people with disabilities as a human right and aimed to reveal in which level these policies can realize decent work approach.

Keywords: disability rights, sustainable human development, decent work JEL classification:

1. Introduction According to the report which was published in the 1995 by the UN Commission on Global Governance with the name of “Our Global Neighborhood” global governance is defined as ‘the sum of the many ways individuals and institutions, public and private, manage their common affairs’. The report also suggests that ‘at the global level, governance has been viewed primarily as intergovernmental relationships, but it must now be understood as also involving nongovernmental organizations (NGOs), citizens’ movements, multinational corporations, and the global capital market [CGG, 1995] That means, global governance

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refers to more than the formal institutions and organizations through which the management of international affairs is or is not sustained. In this context, global governance is conceived to include systems of rule at all levels of human activity – from the family to the international organizations, in which the pursuit of goals through the exercise of control has transnational repercussions [Rosenau, 1995] . It could be defined, at the same time, as ‘governing, without sovereign authority, relationships that transcend national frontiers. Global governance is doing internationally what governments do at home [Finkelstein, 1995]. The fact of the behind of these definitions is the idea of global governance has been developed as an answer for the changing nature of world politics.

During the 1980s and 1990s theorists recognized a deeper change within the world politics. This change, spurred by technological revolution and the globalization of economic life, made our world no longer organized in a set of discrete sovereign states.

2. Global Initiatives on Disabled People Working Conditions ILO is one of the most important organizations that made the earliest international acknowledgements of the right of people with disabilities to work opportunities. ILO stated in its Recommendation with the number of 71 in 1944 that disabled workers, “whatever the origin of their disability, should be provided with full opportunities for rehabilitation, specialized vocational guidance, training and retraining, and employment on useful work” . It means that persons with disabilities should, wherever possible, be trained with other workers, under the same conditions and the same pay, and called for equality of employment opportunity for disabled workers and for affirmative action to promote the employment of workers with serious disabilities [Arthur, 2007].

Four years later, UN declared the right to work of everyone, including persons with disabilities, with Article 23 of the Universal Declaration of Human Rights adopted by the General Assembly on 10 December 1948. It was so explicit: “Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment. Everyone, without discrimination, has the right to equal pay for equal work. Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection. Everyone has the right to form and to join trade unions for the protection of his interests” [Arthur, 2007].

UN Committee on Economic, Social and Cultural Rights (UN CESCR) pointed out at the end of 1994, that the effects of disability based discrimination had been particularly severe in the fields of education, employment, housing, transport, cultural life and access to public places and services in General Comment with the number of 5. The consideration of the Committee on the field of employment as one in which discrimination had been both prominent and persistent [UN, 1994]. The unemployment rate among persons with disabilities was two to three times higher than that for others in most countries. Disabled persons were mostly engaged in low-paid jobs with little social and legal security and often segregated from the mainstream labor market. As the ILO had frequently noted, physical barriers such as inaccessible public transport, housing and workplaces were often the main reasons why persons with disabilities were not employed. The Committee drew attention to the valuable and comprehensive instruments developed by the ILO, including in particular Convention No. 159, and urged States Parties to the International Covenant to consider ratifying that Convention [Arthur, 2007].

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The United Nations Convention on the Rights of Persons with Disabilities (the CRPD or the Convention), adopted on December 13, 2006, and entered into force on May 3, 2008, constitutes a key landmark in the emerging field of global health law and a critical milestone in the development of international law on the rights of persons with disabilities. At the time of its adoption, the U.N. High Commissioner for Human Rights heralded the CRPD as a rejection of the understanding of persons with disabilities "as objects of charity, medical treatment and social protection" and an embrace of disabled people as "subjects of rights."

Attaining an accurate measure of the global prevalence of disability is difficult because of the lack of reliable, internationally comparable data on disability. Despite the limitations on data, the World Bank estimates that around 10% of the world's population, or roughly 650 million people, live with a disability, and that persons with disabilities constitute the world's largest minority group [WHO, 2011]. Furthermore, the number of disabled people is expected to increase as a consequence of growing and aging populations and medical advances. Within countries, there is significant variance in disability rates based on factors such as poverty, gender, and education. In all countries disability rates are significantly higher among groups with lower economic status, underscoring the link between poverty and disability; indeed, one of every five of the world's poorest persons is disabled.

Persons with disabilities face isolation and exclusion in their communities and are routinely denied access to education, employment, health care services, and basic needs Convention on the Rights of Persons with Disabilities (CRPD), unanimously adopted by the UN General Assembly in December 2006, adds new impetus to this package of measures, marking a ground-breaking change in the way disability issues are regarded in international law, and strengthening the pathway to independence and the dignity of decent work and to full inclusion in all aspects of society [UN, Convention On The Rights Of Persons With Disabilities]. Convention on the Rights of Persons with Disabilities (CRPD) affirms the fundamental rights of people with disabilities who now represent the world’s largest minority, totaling more than one billion people. It creates space in the field of international development to examine disability beyond the traditional domestic spheres of health and welfare to the systematic oppression and exclusion experienced by this community globally. Because it expands upon the significant elements of other key human rights treaties In November 2010, the Commission adopted the European Disability Strategy 2010–2020, which aims to ensure that people with disabilities can access their rights and to help implement the CRPD. The strategy focuses on eliminating barriers in eight main areas: accessibility, participation, equality, employment, education and training, social protection, health, and external action [EU, 2010].

Specific initiatives in the context of global context can be said as the considerable attempts such as Universal Declaration of Human Rights, Council of Europe: European Convention on Human Rights, International Covenants, UN Declaration on the Rights of Disabled Persons, Current employment of persons with disabilities in social enterprises.

3. Disabled People Rights in the Context of Decent Work In 1999, the Director-General of the ILO, Juan Somavia, defined the mission of the ILO in today’s world in the following terms: “The ILO's mission is to improve the situation of human beings in the world of work. Today, that mission finds resonance in the widespread 265

preoccupation of people at times of great change: to find sustainable opportunities for decent work. The primary goal of the ILO today is to promote opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and human dignity” [ILO, 1999].

According to the ILO, what is required today is the design of social and financial systems that can offer employment and security without losing the ability to adapt to the rapidly changing conditions in the competitive arena of today’s global world [ILO, 2003]. Thus, while talking about the priorities of the ILO, Somavia, the General Director of the ILO, put the emphasis on the expansion of the chances that men and women can find decent and effective jobs which can offer freedom, equality, security and prestige [Ghai,2003]. This point of Somavi’s brought about the following 4 strategies in the agenda of ILO. First, Respect the basic principles and, rights in labour life, second, Employment, third, Social security, and fourth, Social Dialogue. These strategies can be explained as follows [ILO,1999]:  To generate standards, principles and rights in business life,  To create more alternatives so that women and men can work under humanistic conditions,  To increase the efficiency and scope of the social security and social protection programs,  To strengthen the social dialogue among the government, employers and employee.

The basic purpose of the decent work approach is to boost the options for employment around the world. Nonetheless, decent work not only aims “to create job opportunities” but also “to ensure the acceptability of these jobs”. Therefore, decent work should intend to practice employment which can be accepted by many people [Rodgers, 2007]. In this regard, decent work is a composite of a number of aspects related to employment such as income, working conditions, social security, workplace safety, basic labour rights and social dialogue. In this process, this phenomenon analyzes the interrelation among these aspects from a holistic approach [Ghai, 2002 ].

The concept of a decent work introduced as a “Universal goal” by the International Labour Organization [ILO] in 1999 bears the objective and attempts to include almost all sections in a society [the children, the adults, the unemployed, the elderly, the young unemployed, disabled people, and the women workforce]. A decent work for disabled people, one of the sections of people in question in the society is, on the other hand, is possible to define in terms of providing decent employment opportunities to help them to be integrated into the social life. Decent work for disabled people makes a reference to the aim of a sustainable human development. In this connection, when this issue is considered from the perspective of disabled people, a decent work is known to encompass participation, improving the human capital and a vision based on justice and equal rights. Therefore, it is possible to say that the concept of a decent work for disabled people has a special meaning and significance for the risk groups in general and the disabled in specific.

4. Decent Work Deficits for Disabled People Today laws, policies, programs and services concerning people with disabilities are undergoing a fundamental change. Increasingly, there is an emphasis on the need to promote their access to education, training, the labour market and all other spheres of 266

society on an equal basis with others. At the policy level, the goal of inclusion and full participation is being widely adopted. These changes will make a tremendous difference in the lives of disabled people around the globe [ILO, 2009]. The 2011 World Report on Disability provides a body of evidence that people with disabilities experience worse socioeconomic outcomes and poverty than those without disabilities. The onset of disability may lower a person’s social and economic status and lead to poverty in a variety of ways, for example by reducing access to education, employment, and earnings or increasing expenses [WHO, 2011].

The cost of the social and workplace exclusion disabled persons face goes beyond the personal, social and economic hardship that individuals and families endure. In many countries, the financial costs of excluding disabled persons from the active labor market are staggering and can be linked to the lack of effective policies on disability matters. The costs are related to maintaining workers’ compensation systems that lack effective vocational rehabilitation and return to work services, separate training facilities and workplaces for disabled persons and losses in taxes and other revenues from disabled persons who might otherwise work, if opportunities were open to them. This combination of elements reflects a welfare approach to disability. According to a paper commissioned by the World Bank, the cost of exclusion based on disability is between US$1.37 trillion to $1.94 trillion of the global GDP. These economic costs to society are shared by all, including business. [ILO, Employment and Disabled Persons] People with disabilities represent an estimated 10 per cent of the world’s population or some 650 million people worldwide (ILO, 2009):  Approximately 470 million are of working age.  The UN estimates that 80 per cent of disabled persons in developing countries live in poverty.  Around 20 per cent of the world’s poor have a disability, according to the World Bank.  Many disabled persons in developing countries live in rural areas where access to training, work opportunities and services are limited.  Ninety-eight per cent of children with disabilities in developing countries do not attend school, according to UNESCO.  People with disabilities are less likely to be in employment than non-disabled persons. They are also more likely to earn lower wages than non-disabled persons.  Among persons with disabilities, men are almost twice as likely to have jobs as women.

People with disabilities cannot attain decent work if they do not have access to education, training and employment services and other social and development experiences that enable them to acquire employability skills. Other decent work barriers that disabled persons face include [ILO, Employment and Disabled Persons]:  Fears, stereotypes and discrimination about disability at all levels of society, including among employers  Lack of effective legislation or policy support to address their rights to full participation in society and the workplace  Lack of information about people with disabilities, which can render them “invisible” and forgotten

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 Lack of access to assistive devices, technology, accommodations, support services and information  Inaccessible buildings and communication and transportation systems  Psychosocial issues that can arise from years of social exclusion.

Conclusion There are approximately 470 million disabled persons of working age around the world.

While information on their employment status is incomplete and international comparisons are difficult to make, it is clear that the deficit of decent work hits disabled people far harder than others. Many women and men with disabilities are unable to find decent jobs even when they have completed training, and frustration and a decline in aspirations can set in. Discouraged by discriminatory barriers and mistaken assumptions about their capacity to work, many withdraw from an active search for jobs, and rely either on disability benefits where these exist, or eke out a livelihood in low value-added work in the informal economy, with support provided by their families and community.

Decent work, in its most general sense, is used to explicate the general conceptual framework referring to individuals’ rights of employment, the conditions of health and safety at work, the opportunities of social security and their “rights of expressing themselves” through the trade unions or the representation and participation of other mechanisms. decent work for disabled people is signifies both the employment opportunities that will provide disabled people with a sufficient income and social security and their integration into the societal whole/social inclusion. It is clear that a decent work for disabled people makes a reference to the aim of a sustainable human development.

Today, there are considerable progressions on disabled people rights at global governance level. But there are, yet, some people living without employment and under the poverty limits. So, it is necessary to supply to disabled people productive work opportunities that provide social protection and adequate protecting of basic labour rights.

References [1] Arthur O’R.; (2007), The right to decent work of persons with disabilities International Labour Office, Geneva.

[2] CGG, (1995), Commission on Global Governance, ‘Our Global Neighbourhood: The report of the Commission on Global Governance’, Oxford: Oxford University Press, 1995, XIV. [3] EU, (2010). http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0636:FIN:EN:PDF.] [4] EU, http://capacity4dev.ec.europa.eu/disability-and-development-network/ [5] Finkelstein, L. S.; (1995), What is Global Governance, in: Global Governance, Vol. 1, No. 3, 1995, pp. 367372 [6] Ghai, D., (2002), “Decent Work: Concept, Models And Indicators", International Institute for Labour Studies, Discussion Paper, DP/139/2002, Geneva.

[7] Ghai, D., (2003), "Decent Work: Concept And Indicators", International Labour Review, vol 142, no 2.

[8] ILO, (1999). “Decent Work”, International Labour Conferance 87th Session 1999, Report Of The Director General, Geneva.

[9] ILO, (2003), “Working Out Of Poverty”, International Labour Conference 91st Session 2003, International Labour Office, Geneva.

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[10] ILO, (2009), Promoting Decent Work for People with Disabilities, http://www.ilo.org/wcmsp5/groups/public/ed_emp/ifp_skills/documents/publication/wcms_111460.pdf [11] ILO, Employment and Disabled Persons, http://www.hpod.org/pdf/employment-disabled.pdf [12] ILO, Facts On Disability and Decent Work, http://www.ilo.org/wcmsp5/groups/public/---ed_emp/--ifp_skills/documents/publication/wcms_117143.pdf [13] Rodgers, G., (2007), “Decent Work, Social Inclusion, And Development”, Indian Journal Of Human Development, vol 1, no 1.

[14] Rosenau, J. N.; (1995), ‘Governance in the Twenty-first Century’, in: Global Governance, Vol. 1, No. 1, 1995, pp. 13- 43.

[15 ] UN, 1948, The Universal Declaration of Human Rights http://www.un.org/en/documents/udhr/ [16] UN, (1994). The Standard Rules on the Equalization of Opportunities for Persons with Disabilities New York [17]UN, Convention On The Rights Of Persons With Disabilities http://www.un.org/disabilities/documents/ convention/convoptprot-e.pdf [18] WHO, (2011) , World Report on Disability, http://www.who.int/disabilities/world_report/2011/en/index.html

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Publicity, Advertising and Spirituality 1

Ștefănescu-Mihăilă RAMONA OLIVIA1, Spiru Haret University, 13 Ion Ghica Str., District 3, Bucharest, 030045, Romania Tel: +40214551410, Fax: +40213112947, Email: stefanescu_r@yahoo.com Abstract: Advertising industry is more and more often associated to brilliant minds in areas such as: psychology, sociology, anthropology, who turned a job into a full time task of “penetrating the collective public mind, (...) its manipulation, exploitation and control”. That is why, ever since its beginnings, the advertising industry was admonished by social critics for taking materialism to the highest levels; to replace inner happiness and intrinsic motivation with the wish to be productive in society only to the extent of consuming and buying happiness.

Therefore, over time, advertising and publicity have raised pros and cons; while some voices describe advertising as a motor of society, driving economic development, there are others that strongly criticise advertising creations, blaming it of manipulation. Conversely, reality proves that a number of other factors exercise a major influence on the customers: experience, price, traditions, age, fashion, religion, etc thus, the fight between advertising pros and cons has led to the emergence of theories regarding its efficiency. Controversy related to the relationship between the rational and the emotional is still ongoing, the more so as the conventional alternative states that we should not let ourselves be affected by emotion when we make decisions, also, religious doctrines state that the mind and the body are two separate entities.

Keywords: advertising industry; advertising effect; consumer psychology; emotional advertising; faith and spirituality.

JEL classification: A13, M37, D87, Z12

1. Introduction Consciousness gives people the right to pursue happiness. You have to catch it yourself. B. Franklin

Often, “advertising calls on what is missing in society” [Mooij, 2010] as that “distorting mirror” [Pollay, 1986] that only reflects certain values and lifestyles. Professor Guy Cook [1992], in The Discourse of Advertising goes along similar lines: “advertising radically

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reflects the changes in technology and the media, in the economic and social relationships, reflects our inner ego and our group identity”.

In other words, a first rule for successful advertising is nothing but a requirement for the copywriters to have a grasp of basic psychology and psycho-sociology (see Table 1, A psychological approach versus a psycho-sociological approach to advertising), and to turn the “advertiser - artistic director” dyad into a triad:”psycho-sociologist-advertiser-artistic director” [Chelcea, 2012].

Table 1: A psychological approach versus a psycho-sociological approach to advertising A psychological approach to advertising  before 1925, advertising was first informative, focusing on the description of product characteristics and use;  then, up until the end of World War II, a period referred to by William Leiss [Leiss et al., 2006] as the iconographic age, advertising revealed the symbolic value of the products, with the core of advertising shifting from the objet to the person, picturing the elites and their success due to the use of the advertised products;  the third stage, from 1945 to 1965, was referred to as narcissist, with the consumers being encouraged to consider the products as part of their own personality, and the advertising discourse predominantly emotional, charged with sensuality and metaphor;  advertising is not omnipotent, it does not change human nature, but contributes to the development of higher level needs and proposes new ways of satisfying biological requirements; “ads cannot create new needs, they may especially revive them, awaken them, discover them, and to a lesser extent fabricate them” [Drăgan, 2007]; Primum vivere, deinde philosophari (O. Klineberg);  to claim that advertising manipulates, using subliminal stimuli, is to raise questions, as subliminal advertising relies on a kernel of truth: we can be influenced without being aware of it, when people have less involvement in their behavioural decision, in their consumer behaviour; subliminal perception relies on the existence of a sensitivity threshold in every one of us, a threshold that varies not only from one person to another, but also based on the concrete state of the respective person; as William James said: we are aware of what draws our attention and are not aware of what does not;  subliminal advertising, combined with eroticism and pornography, still fascinates certain categories of the public; ads that contain sexual information manage to draw attention and retain it for longer, in the

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A psycho-sociological approach to advertising • it shows how belonging to a group leads to a certain buying behaviour, to a specific way of perceiving and evaluating ads, advertising messages becoming a force in their own right, and providing social cohesion; • Harry Hollingworth, the creator of a theory according to which human figures used in advertising increase the effectiveness of the advertising message, concluded, in his experiments, that the images of a female faces (especially of actresses) or of children are more strongly committed to the memory than male faces; • the Dutch psycho-sociologists Bob M. Fennis and Wolfgang Stroebe consider, as a response model to the issue of information acquisition and processing, as provided by advertising, the four stages: subconscious analysis, which assumes a generic supervision of the environment, without a specific aim; focused attention, a conscientious focusing on the stimulus and its classification; understanding, consisting of the shaping of semantic interferences; reasoning, a process where semantic representation of the stimuli is related to previously stored buyer’s knowledge; • subconscious information processing results in its storage into the implicit memory, only retaining the perceivable characteristics of the advertising message, and not its meaning; • Robert G. Heath proposed a model of processing advertising messages at the low level of attention, based on the following assumptions: at the low level of attention we process the advertising messages almost continuously; this processing is performed at a subconscious level; it results in sensory associations that define the brands in our minds and are transferred to the long-term memory; the sets of sensory associations strongly influence the buying decision, without us being aware of it [Pringle & Field, ]. Effortless processing of information is experienced by the consumers as a positive emotion, leading to a positive evaluation of the stimulus; • in the process of focusing attention, short-term memory plays a very important role, thus helping identify two categories of factors that determine attention focusing: stimuli-related factors (characteristics of the products and of their image)

consumer’s memory, than those that do not contain such information. However, there are not sufficient data on record to support the idea that exposure to sexual information leads to an increase in sales. Cultural and religious constraints come into play here; a veritable commandment might be: Never produce an ad you would not wish your family to see [Ogilvy, 2009];  advertising exploits the human tendency to draw quick conclusions in the absence of a strong enough factual support: a quick generalisation, encouraged by the credo consolans philosophy: people believe because they enjoy it, Gardner says;  advertising asks us to choose between two complete opposites, a reasoning considered fallacious in the very presentation of one facet of the issue only - the red herring reasoning consists of an attempt on the part of ad creators to divert attention from the arguments in favour of the product or brand.

and factors related to the personality features and the concrete situation in which the consumer is placed; • specialist literature refers to three characteristics of the stimuli that attract our attention involuntarily: prominence, absolute prominence, and novelty; • unlike prominent stimuli, drawing attention by contrast with the context, absolute prominent stimuli, are remarkable in themselves, being: strongly emotional, concrete and generating living images, close in time and space to the field of perception.

Equally suggestive to ad creators are the results of research of advertising tricks, with novelty features: the travelling speed of a light spot vertically and horizontally. The light spot, moving at the same speed, seems to descend or ascend faster if it is actually perceived as moving horizontally. The “Ebbinghaus illusion”, a visual illusion, like the “human face – vase” illusion or the “Rubin faces”, taking their name from the Dutch psychologist Edgar Rubin, are tricks frequently used in advertising [Ebbinghaus, 2012].

Source: own elaboration

Advertising, the most expressive form of mass culture, that “cultural industry”, that “spearhead of mass culture models” becomes, according to Brune [1996], the promoter of middle class-specific consumerism. The effects of advertising are not limited to people themselves, as a complex phenomenon, they are reflected in culture, in the volume of knowledge, values and rules of a given society. In order to seduce the consumers, advertising resorts to sensorial images and show material and erotic stimuli, while the characters and communication situations are sketchy ad stereotypical. Thus, advertising provides stereotypes of thinking and behaviour, sets of images, ideas and evaluations, that the receiver uses in defining his own behaviour.

In Pollay’s opinion, in juggling with emotions, stereotypes and manipulation of ideas taken from real-life situations, advertising has reduced us to a state of “irrational consumer”.

The value, the benefits of a product, in Scott’s understanding [Scott, 1904], may be suggested by the creator of the advertising message, by associating information strictly related to the human personality and the typology of the target audience behaviour, with product-specific objective elements, in a pictorial representation. In explaining human behaviour, Lewin [1951] used the concept of a psycho-social field. In his approach, the behavioural response is based on the mental processes of the individual and on its physical and social environment.

2. Description of the study area With the most spectacular role among the classic product promotion types and means, advertising is the message paid for by the sponsor, the owner of the products/ services, through a brokerage relationship between its company and the potential consumer, in most cases through the mass media channels.

The basic function of advertising is to convince a certain segment of the public and ranges from the shaping or change of attitude in the target audience toward a product/ service or 272

idea, to creating the desire to take action. Ad creators focus on the consumer psychology, while the marketing personnel emphasize the economic coordinate of the market on which the offer is being launched.

2.1. Opinions pros and cons publicity In our times, people begin to take an interest in a multitude of diverse information, a natural phenomenon, generated by the range of accumulated knowledge and experience over time. In the case of accumulated experience, success begins to wane. Pro and con theories of advertising efficiency (see Table 2, Opinions pros and cons publicity) triggered the need for methods to measure their effects; the effects are influenced by many factors including: the kind of message, the age of the market, any rival advertising, the degree of investment.

Table 2: Opinions pros and cons publicity     





  

Opinions cons publicity a manipulative force, that determines customers to perform illogical, senseless acts (Vance Packard); consumers pay to be persuaded of the need for the product being advertised. “a formidable form of brutalisation, treating man as the most obtuse of all animals” (Georges Duhamel); “an insult to our sensed, falsifies epithets, it corrupts all qualities and criticisms” (Paul Valery); advertising tries to adapt its language to the majority, in order to be better perceived, understood, which makes it, according to some critics, become vulgar; advertising speeds up product obsolescence, artificially enhances certain production behaviours and provides false economic dimensions; advertising creates frustration and resentment to the targets who cannot afford to procure the advertised product, thus fuelling social conflicts; advertising creates fake needs and causes confusion in taking on roles in society; advertising cultivates euphoria, hedonism. narcissism and individualism; advertising disturbs the individuals’ relating to their environment, offering an illusive world.

Opinions pros publicity  the purpose of advertising is to create and fuel the wish to be embraced by the community and be as sexually attractive as possible (John K. Galbraith);  the vulgarisation of advertising is described as natural and even rewarded (John Fiske);  “the flower of contemporary life is an assertion of optimism” (Blaise Cendrars);  advertising is an economic process that supports the “flow” of product/service production to the consumers and draws attention to service quality;  advertising presents new ways of life, enabling the diversity of life in the community, thus increasing the integrity of the consumers;  advertising may generate optimism and self trust in the consumers, thus reinforcing the sense of being.

Source: own elaboration

Although there is no perfect method of measuring the effects of advertising, and the lack of standardisation makes it difficult to apply and interpret the results, the specialists refer to at least five evaluation methods, as follows: evaluation of notoriety, campaign balance, the impact of calculated variables, exposure calculation and the barometer.

The advertisement components, such as the title, the text, the slogan, the logo and the illustration determine its classification into one of three types of ads: transformational, purely informative and frequently repeated; these types of ads require a correct adjustment of the promotion strategies, based on the objective of the advertising message corroborated with the product lifecycle, the advertising budget, customers’ preferences, so that some specialist authors refer to the early “Pavlov advertising” age, the “standards” age or the “fiction-based advertising” age.

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However, in the field of marketing and advertising, he is still a prisoner of preconceived ideas and stereotypes and perceptibly limits human discretion and capacity to correctly assess other human beings, which may deprive the marketers of the possibility of objectively assessing individuals as consumers, thus leading to erroneous conclusions, at the expense of perception of the specific target groups and of the business as a whole, Marder says [2002].

2.2. Effective Advertising In an objective note, it is obvious that in this whole context, traditional research methods, may not fulfil their mission to really find out what consumers think. All the more so as our irrational mind – assaulted by cultural, educational prejudice, deeply rooted in the tradition we subscribe to by our spatial belonging, the community, the society, the group we belong to, in tandem with a number of other subconscious factors - exercises a strong, but imperceptible influence on our decisions related to acquisition and consumption.

Moreover, marketing and advertising researchers have observed, for decades, the restrictions imposed by the old market research methods, with analysis focusing on finding answers in the post-rational stage. It was only in recent years that science facilitated an efficient device that can help “decode” the customers’ thoughts considering that human thoughts and emotions are the result of this subconscious human activity and the actions it triggers cannot be explained in a conscientious context, which is why most of the market research cannot reveal the true preferences of the targeted subjects.

A new area of study suggests that the consumer’s response to advertising is based on his cognitive efficiency rather than on marketing manipulation. Results show why direct exposure to repeated ads increases consumer preference for the advertised products and, more importantly, for the advertising messages where the consumers are the least aware of repetitiveness (of having seen it before). Watch out for your brain, watch out for your wallet!, said Ian Cook, a psychiatry professor with Semel Institute for Neuroscience and Human Behavior at UCLA, following the discovery of areas of the brain involved in the emotional and decision making process; including Cingular orbital-frontal areas and, previously, the amygdalis and the hippocampus – the area in charge of memory he noticed significant levels of intense activity, whenever the participants in the experiment were watching logical persuasion ads.

Joseph LeDoux, one of the well-known neurologists world-wide, conducted extensive research on how emotions affect our brain, memory and decision making. He noticed an emotional and physical response, before engendering a first thought/ rational action, such as the situation where we avoid collision with a bus by taking a step backward, and only seconds later realise why. Furthermore, LeDoux discovered that emotions, especially fear, release chemicals that help induce the building of synapses; the amygdalis – the emotional core of the brain, is responsible for the release of such substances that cause the building of new synaptic links.

In this context, emotions, an important part of the decision-making process in the customer, accounting for about 50% of the decision, determines the emotional experience that may generate a total positive experience in the customer. This explains why anthropomorphism, the endowing of human features to inanimate objects, is a procedure used in advertising, and branding experts know how important it is, this being one of the

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secrets of presenting anthropomorphism in children products, where â&#x20AC;&#x153;cutenessâ&#x20AC;? induces a feeling of pleasure and the desire to acquire various items such as cereals, juices, toys, etc.

2.3. Ethics and spirituality in publicity The Christian doctrine about body, mind and human in general is different from metaphysical theories. Since the beginning of times, the Christian thinking, supported by the revelation, has recognized a certain spirituality of the soul, whilst carrefully avoiding to be confused with the heavenly spirituality. Nevertheless, sometimes the Church fathers have had difficulties to clearly and distinctly express the difference between the soul and the divine, difficulties due to philosophical principles which influenced the Christian thinking, and also to the errors of the biblical Exegesis. The Bible explicitly makes the distinction between the soul and the body, whilst arguing just as explicitly their inseparable unity. Feed your body, without killing it through greed! (Saint John Goldmouth) Making its presence more and more felt in the modern organization of life, the advertising, by means of the media, proves to be in the contemporary world a significant force of persuading vigor, which has influence on mentality and behavior. The Church was often in charge of mass-media, their role and responsibilities, considering these tools as gifts of God which can unify the people; the reason why the consumer behavior within the advertising messages is studied also through the prism of spirituality is a simple one: within the current society the advertising deeply influences the way people see life, the world and themselves, in particular as regards the values and criteria of judgment and behavior. These are concepts that should raise an honest and profound interest from the part the Church.

The supporters of spirituality do not share the opinion of those who said that the advertising simply reflects the attitudes and cultural values of the world in which we live.

No doubt the advertising, as well as the social communication tools in general, acts as a mirror. Nevertheless, similar to the general media, it also contributes to shaping a reality which sometimes reflects and distorts the real image. At the opposite pole, the specialists in advertising choose between the values and attitudes which should be promoted and encouraged, by promoting some of them and ignoring the others. Such a selection shows how false is the idea that the advertising reflects the culture of the world in which we live.

The publicity may contribute, in fact, to the increase of the quality of society through a meaningful and inspiring action, that stimulates people to act in such a way that their actions are for their benefit and that of the others. Advertising may cheer through simple humor, good taste and the type of entertainment which is its main trait. Some of the publicity works represent masterpieces of popular art, having a life force and an enthusiasm which are only their own.

In many cases, social welfare institutions, including those of a religious nature, use advertising to communicate their messages: those of faith, patriotism, tolerance, compassion and altruism, charity towards the needy; messages that relate to health and education, constructive and useful ads, which in various ways, educate and motivate people. Advertising can be of good taste and compliant to the highest moral principles; sometimes even morally uplifting; but they can also be vulgar and morally degrading. They often deliberately appeal to motivations such as envy, status seeking and lust. Moreover, nowadays, some advertisers consciously seek to shock and titillate people by exploiting such morbid, perverse or pornographic issues. Creators of commercial advertising sometimes include religious themes or use religious images or personages to sell their

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products. This is something that can be done in a respectful and acceptable way, but the practice is offensive when turning religion into a tool. However, as the rule, the issue of truth in advertising is a little more subtle: it is not that what advertising says is obviously a falsehood, only that it can distort the truth by implying or withholding relevant facts.

As Pope John Paul II noted, truth and freedom, both at the individual and social levels, are inseparable; without truth as the foundation, as the starting point and criteria of acumen, judgment, choice and action, there can be no authentic exercise of freedom. But there is a fundamental principle that the advertising may not deliberately seek to deceive, whether it does so explicitly or implicitly, whether it is done by omission. The proper exercise of the right to information demands that the statement is true and complete, taking into account the rightfulness and charity. This includes the obligation to prevent, in any circumstance, any manipulation of the truth. [Pope John Paul II , 1987]

3. Recommendations and conclusions A first a fortiori conclusion of the study is that the effective advertising is emotional, then it is absolutely imperative to respect the human person, its right and obligation to make the responsible choice, its inner freedom. [Paul VI , 1977] The essential guarantees of ethically correct behavior in the advertising industry are primarily well-formed and responsible consciousness of professional advertisers who know that they should not put themselves exclusively in the service of those who order and finance their work and that they should respect and uphold the rights and interests of their audience and contribute to the common good.

Voluntary codes of ethics, among the external sources of support, however, prove to be effective only where by the willingness of the advertisers offers the possibility to comply strictly with them. It is for the underlying advertisers, advertising operators, and directors and managers to promote, pursue, implement the already properly set ethics codes, so that they can get public involvement.

Representatives of the population should participate in stating, implementing and periodic reviewing of professional ethics codes in the advertising field. These representatives should include people who are concerned with the study of ethics and also preachers, as well as representatives of consumersâ&#x20AC;&#x2122; organizations. Individuals should organize themselves into groups of such associations, in order to guarantee their interests against the commercial interests.

The regulation of the advertising content and practice, already existing in many countries, can and must be extended beyond the mere prohibition of false advertising, in the strictest of sense the social means of communication used shall not cause material injury to public morality, or to the progress of human society.

Media should be involved in informing the public on the world of advertising. Given the great social impact of the publicity, it is appropriate for the mass-media to regularly monitor and analyze the activities of advertising specialists.

Whilst attempting to reveal the deepest secrets of the human consumption behavior, I have considered the advertising creation in a strategic manner, slightly unusual, by setting a "dialogue" between an imaginary consumer, as an active participant, through his own mind, with the advertising, whose advertising messages can sometimes convince us to let them "seduced" and even "manipulate" us. If this is only a false impression of the

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consumer, as a result of the behavior of the human's persuasion skills of marketing, a simple myth, it means that the reality lies in our mind power, those somatic markers, those " human brain bookmarks", which may influence the reasons for which we acquire and consume a product to the disadvantage another. [Lindstrom, 2011]

References [1] Brune, F. (1996), Fericirea ca obligaţie: psihologia şi sociologia publicităţii, p.26. Bucureşti: Editura Trei.

[2] Chelcea, S. (2012), Psihosociologia publicităţii, p.13, p37, Bucureşti: Collegium Polirom.

[3] Cook, G. (1992), The Discourse of Advertising. Londra: Routledge.

[4] Drăgan, I. (2007), Comunicarea. Paradigme şi teorii, p.364. Bucureşti: RAO

International.

[5] Ebbinghaus, H. apud Chelcea, S. (2012), Psihosociologia publicităţii, p.13, p37, Bucureşti: Collegium Polirom [6] Ioan Paul al II-lea (1987), Discurs adresat specialiştilor în comunicaţii, Los Angeles, în L'Osservatore romano, pag. 5.

[7] Leiss, W., Kline, S., Jhally, S., & Botterill, J. (2006), Social Communication in Advertising: Consumption in the Mediated Marketplace, 3rd edition. Routledge.

[8] Lewin, K. (1951), Field Theory in Social Science. New York: Harper.

[9] Marder, E. (2002), Comportamentul consumatorilor. Bucureşti: Editura Teora.

[10] Mooij, de Marieke, (2010), Global Marketing and Advertising. Understanding third edition, p.11, USA: SAGE Publications, Inc.

cultural paradoxes,

[11] Ogilvy, D. (2009), Confesiunile unui om de publicitate, p.13, p. 162, p204. Bucureşti: Humanitas.

[12] PAUL AL VI-LEA (1977), Mesaj pentru Ziua Mondială a Comunicaţiilor Sociale 1977, în L'Osservatore romano, pag. 1-2.

[13] Pollay, W., Richard. (1986), The distorted mirror: Reflections on the unintended consequences of advertising, Journal of Marketing.

[14] Scott. W., D. [1904] (2006), Psychology of advertising, Seria de articole din Atlantic Monthly, 93, p.29-36.

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Private Management in Romanian State Owned Companies from Transportation Field Mihaela ŞTEŢ1 1 Technical University of Cluj Napoca, North Centre of Baia Mare, Romania Email: miha9s@yahoo.com Abstract: The purpose of this paper is to reveal the results of the attempt to recruit and to set up private managers in Romanian state owned companies. The study aims to highlight the problems that arose soon after the implementation of this project. Far from being a panacea solution for all these companies, from the very beginning this initiative faced a number of difficulties. The research is realized on the Romanian transport sector revealing the major strengths and weaknesses, but also the opportunities and threats that should be considered in the attempt to solve the financial problems of state owned companies.

Keywords: transport, private, management, state.

JEL classification: L91, M10

1. Introduction The purpose of this paper is to reveal the results of the attempt to recruit and to set up private managers in Romanian state owned companies. The research is based on literature review, covering a series of publications, magazines, journals, books in the field, academic publications.

There are only few studies about the private management in state owned companies and its effects, most of them being focused on those of privatization of this type of companies.

Starting with ’80, the economists found that privatization of state enterprises can improve their performance, an idea materialized in a series of studies [Megginson and Netter, 2001].

2

Organisation, Address, City, Postcode, Country, Tel: +country code local code number, Fax: + country code local code number, Email:

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The liberalization of rail transport in the United Kingdom was achieved by auctions in order to enter into franchise agreements with rail operators. The infrastructure manager charges the tax of access to infrastructure that is the subject for periodic review [Shaw, 2000].

Some analyzes over time reveals that such a system allows faster productivity growth and significant benefits for consumers [Pollitt and Smith, 2002].

As indicators of the performance of the transport company usually it is used the delivery on time rate, and in the case of those delayed, the average value of the delays.

2. Private management for state owned companies: strengths and weaknesses In 2012 started the process of selecting private management of state companies in the portfolio of the Ministry of Economy, Trade and Business Environment, given the commitment of the Romanian authorities to the International Monetary Fund. At the level of this ministry they were identified 48 companies with bad financial situation. At the same time, it began the recruitment of top managers for the Ministry of Transport.

Even though, from some points of view, the offer of the Romanian policymakers to hire private managers in state companies, that have been proven unprofitable in the past 20 years, seemed interesting, but at a closer analysis, it is far to be an attractive offer.

Launching this offer by the Romanian government has attracted a relatively large number of applicants for each state companies involved in the project which aimed to recruit top managers for these companies.

The attempt to recruit private managers of state companies it can say that it was a failure.

Recruitment was conducted for state companies with a turnover of more than EUR 7.3 million project and it was funded by the European Social Fund Operational Programme "Administrative Capacity Development 2007-2013" (PODCA) and co-financed by the state.

Although it was taken into consideration the essential aspects, such as salaries, trying to bring them at a level comparable to that of private companies, they were also impediments that, unfortunately, the officials have not wanted to remove them.

In an interview to a TV channel, the Transport Minister of that period recognized that private management was necessary "because the state was not able to stop theft and political clientelism".

Interesting is the fact that at another state owned company, National Company for Highways and National Roads in Romania has not been appointed private management.

The management plan of those who formed the first private railway management was rejected and the company's management was dismissed (table 1). The same minister motivate this by the relatively small number of concrete objectives, the absence of deadlines, of a plan to absorb EU funds, as well as some details about the restructuring of the company.

Also, the private manager from Tarom was forced by the Chairman of Board to outgoing after the first year, due to the recovery plan of the company, unaccepted by the board, although the losses of the company have been reduced in the first quarter of 2013 by 24%, compared to the same period of previous year.

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Obviously, for connoisseurs, this result was expected. Even if it is said that at the top level there are not so important the domain knowledge and the specialty skills, managerial skills excelling, in transportation field and, in particular rail transport, it is necessary for those who think reorganization strategy, a minimal knowledge of how the system works, the major shortcomings of its functionality, the problems faced by such a company and, why not, and the history, the evolution of its operation and organization.

It is not a sine qua non condition that people that reached the top of the hierarchy to be persons previous employed by the company, but to have specialized knowledge and to possess an overview and knowledge of its functionality is more than necessary.

By customizing in the case of the railway companies, it can highlight some interesting aspects related to the process of replacing the management realised with persons from their systems by people from the private sector.

At CFR SA, the General Assembly of the Shareholders selects the board of directors, and the board is appointed through a decree of the Ministry of Transport. In the statute of the company there are presented the attributions of the board and of its chairman, who is also the manager of the company.

Because shareholders of these companies consist of representatives of the state, being appointed persons on political criteria, who decide the guidelines of the company's activities, the manager has no real leverage to increase the efficiency of the company.

Even if the board members were also recruited from the private sector, the invalidation of the projects and activity plans of them by AGA cancel almost all of the beneficial actions for company. Discrediting policy of the executive managers and recruited members of boards is part of the strategy of those who were used to promote other criteria than competence.

The management of railway companies was conducted from the operational level to the strategic level by people employed by these companies and promoted from the inside of them on the higher hierarchical levels. Theoretically, specialized knowledge has not missed those who were promoted through the system and, probably, nor the managerial skills to a certain level.

Even though rail transport imply entry barriers, in recent years Romanian state owned rail companies have known a competition to be considered from the private operators, relatively recently entered on the market.

One of the most tumultuous attempts of establishing private management was at CFR SA. Over time the company had to face a number of important issues: • Difficulties in collection of the tax for the use of infrastructure from two state owned companies, the railway operators CFR Marfa and CFR Calatori, they being also in financial difficulty; • Arrears to the state budget and energy suppliers; • High costs of infrastructure maintenance; • High costs with staff salaries; • Investment needs for infrastructure modernization; • Theft of components of the traffic safety systems and construction.

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Rail operators direct their acquisition costs for railway rolling stock, railway traction vehicles. Annual expenditure includes a significant proportion of fees for access to the rail infrastructure that they pay to the railway infrastructure company. The need for rail modernization requires investments in information and communication technologies.

Punctually, the offered solutions by the general manager of CFR SA were appropriate.

Obviously, it was strictly necessary the reassessment of the entire staff of the company, quite large at the time, about 28,000 employees. But he overlooked a crucial aspect, namely, how it was designed this assessment. For a long time, these assessments were not strictly objective, and that was known by everybody from the system, sometimes even those outside of the company. Organization in terms of objectivity of these assessments would represent, first of all, high costs for the company. The reassessment with foreign personnel it is possible for certain types of positions within the entity, but for positions located at tactical and operational levels, where prevails the importance of specialty skills and expertise, it was necessary to find solutions to eliminate the subjectivity or, even the corruption of the examiners, in most of the cases.

A second proposed solution was that of the staff restructuring. The fact that the new management team who is recruited to ensure the private management was unable to produce more than a decrease in absolute number of staff, without detailing the territorial distribution of staff reductions, it is also due to lack of knowledge of hotspots that require really to be restructured. From this derives a number of risks, including reducing staff, as in the previous restructuring processes, right there where it is not necessary, which is the most prominent risk. It is well known that the restructuring of the 90’s created serious disruptions in the organization and operation of the company.

Among the most important proposed measures and the results there are also: 

Reduction the fuel consumption;



Decreasing the cost of services from subsidiaries;



Increased revenue from rents for land and commercial premises;



Negotiations on the reduction of the purchase price of electricity.

The biggest drawback of private management in railway companies was, on the background of ignorance of the technical specificity of the transport companies, the lack of attention given to rail safety.

The first action should have been taken in this direction, where, due to the lack of maintenance funding, there are some delays in compliance with schedule of the works, with impact on railway safety.

An important part of the costs of railway infrastructure companies need to be allocated to the maintenance of buildings and railway installations. In a short period after the nomination of private management in several public companies, they have enjoyed an unexpected prize: rescheduling the tax liabilities of companies that had debts exceeding 300 million lei to the state budget for a period of seven years. The beneficiaries of this measure have been CFR Marfa, CFR SA and the Romanian Television.

The Ministry of Transport has increased by 400 million the share capital of CFR Calatori, money being destined to the payment of the fee for infrastructure use to CFR SA.

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With the collected money, CFR SA has paid part of the tax liabilities and a debt to E.ON Gas Distribution, as a result of taking over an amount receivable through the contract of assignment of receivables of the E.ON Energie.

As a result, the payment of fiscal obligations could be achieved through the contribution of the state. Even the payment of the debt to the energy supplier has taken the way to the state treasury, being provided in the form of dividends to the Ministry of Economy.

So, eliminating or reducing the company debt is due only partly to private management, which is possible because the measure imposed by the Ministry of Transport.

In 2013 started a recruitment procedure for seven executives addressing the professionals from railway system and outside this, and carried out by an internal committee of the company. For the recruitment of five Chief Officers the procedure was developed in collaboration with independent firms specialized in HR recruitment.

At the beginning of 2014, the Board was replaced because of the failure of supervision and control of the executive of the company, leading to the perpetuation of the executive acts harmful to the company, and violation of legal provisions. There were identified, from economic, administrative and organizational deficiencies to infractions, such as disappearance of over 1000 wagons from the patrimony of the economic entity.

Tabel 1: Key moments in the implementation of private management in state owned companies

State owned Company Tarom

CFR Marfa CFR SA

Key moments in the implementation of private management  Refusal of the first private manager in November 2012 immediately after the nomination;  Revocation of the CA by the AGA due to conflict between members of board and CEO,  Completion of the mandate at the end of the first year of office for the second recruited private manager;  Resignation of Chairman of the Board of Directors;  Failure of the privatization  December 2012 - Refusal of the Presidency of CA by the first nominated candidate;  April 2013 - Rejection by the Ministry of Transport of the management plan proposed by President of the Board  the change of CA and the resignation of the manager;  September 2013 - Resignation of the next President of the Board who invoked personal reasons;  January 2014 - The entire Board has been revoked due to poor performance of the management, which affected the financial situation of the company;  Resignation by two members of the new Board.

Less than two years after the appointment of the first private managers at the state owned companies subordinated to the Ministry of Transport, the Minister asked the Internationally Monetary Fund to give permission to give up this kind of management, due to failure to comply to certain decisions of the AGA. However, nor the shareholders

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structure is one that indicate that in its decisions would prevail the professionalism in the field, as long as there are people with no specialized knowledge in transport.

Conclusions After a much publicized recruiting of private managers of state companies, costly and long lasting, the results were far from the target. Furthermore, the existence of interest groups in the ownership of these companies acted as a lever to sabotage the actions of these managers, practically chasing private managers of state owned companies.

On the other hand, private managers felt they were pressured, AGA asking them to pass over irregularities: rigging auctions and unfavourable contracts for the company, requests for awarding major contracts to companies that did not meet legal conditions.

References [1] Megginson, W. L.,. Netter, J. M., (2001), From State to Market: A Survey of Empirical Studies on Privatization, Journal of Economic Literature 39: 321-389.

[2] Pollitt, M. G. and Smith, A. S. J.(2002), The Restructuring and Privatisation of British Rail: Was It Really That Bad ?, Fiscal Studies, 23, 463-502 [3] Shaw, J. (2000), Competition, Regulation and the Privatisation of British Rail. Aldershot: Ashgate.

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Conflict Management Methods of Managers: An Empirical Study of the Turkish Tourism Industry Muharrem TUNA1, Fatih TÜRKMEN2 Gazi University Tourism Faculty Gölbaşı Yerleskesi 06830 Gölbaşı / Ankara, TURKEY, Tel: +903124851460, e-mail: muharrem@gazi.edu.tr

Abstract: Although considered unwanted by the tourism industry, it has been acknowledged that conflict can foster new ideas which contribute in a positive way by providing an opportunity for self-critique and maintaining internal dynamism through change and innovations. For these reasons how to manage conflict is a crucial skill for managers. This research paper aims to determine the extent to which conflict management methods change according to demographic characteristics or the characteristics of the enterprises. It examines the preferences of managers on integrating, obliging, compromising, dominating and avoiding methods. Survey research has been conducted on 1098 managers, who work at touristic enterprises located in the seven regions of Turkey. The first part of the survey includes questions on the personal characteristics of managers and the general characteristics of their enterprises. The second part includes 28 statements to explore the conflict management strategies of the managers. Percentage, frequency, t-test for independent samples, one-factor variance analysis (Anova) and Bonferroni test have been used on statistical analysis. The survey analysis establishes a significant relationship between conflict management methods of managers, their demographic characteristics and the characteristics of the enterprises they work at.

Keywords: Conflict; Conflict Management; Conflict Management Methods; Tourism Enterprises Managers JEL classification: M12

1

2

Karabük University Safranbolu Faculty of Tourism 78600 Safranbolu/Karabük, TURKEY, Tel: +905322748257, e-mail: fatihturkmen@karabuk.edu.tr

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1. Introduction Humans, have to be in interaction with the individuals surrounding their social environment, especially with the family members and friends. However, during the process of communication and interaction, they may face with problems, and be unable to communicate their messages and express themselves sufficiently. These and the related problems might be defined as conflict in general terms [Cornille et al., 1999: 69; Çelik, 2011: 2]. In this sense, the conflict, which is a part of the human nature, is highly important for the organizations [Dijkstra et al., 2005: 87-88].

The studies on conflict management methods, which are conducted in order to manage these conflicts, aim to analyze the individual experiences of conflicts and the intentions of the individuals regarding the conflicts [De Dreu et al., 2001: 646]. The ability to manage the conflicts is considered as one of the fundamental factors for managerial success [Everard et al. 2004: 99] and the conflict management is considered as within the domain of the leader’s responsibility [Kim et al, 1999: 130].

Conflict is a part of not only the social life, but also the organizational life. Since conflicts are inevitable, the managers are required to benefit from the conflicts in order to realize organizational aims [Mirzeoğlu, 2005: 51]. Hence, although the individuals, who are parts of the conflicts, may find it hard to cooperate, the conflict might contribute to the individuals’ personalities and might create the opportunities to increase job satisfaction, if it is at tolerable levels [Schrumpf et al., 2007: 39].

Conflict is not only a subject of management and organizational psychology, but studies from the disciplines of sociology, psychology, anthropology, and economy also deal with conflicts [Asunakutlu and Safran, 2004: 27; Üngüren, 2008: 882; Rhenman et al., 1970: 57].

There are various definitions of the term ‘conflict’ in the literature. These differences are related with the evaluation of the conflict as a process, a type of communication, or an outcome [Alexander, 1995: 33]. In fact, what is meant in the previous sentence is about the disagreements between the conflicting sides regarding the resource usage, expectations, aims, and the conflicting ideas [Wilmot and Hocker, 2001: 41].

Rahim [2002: 206] defines conflict as an interaction, which is revealed in the form of disconformities or disagreement, whereas Sirivun [2001: 7] defines the term as a process, which is a result of the disagreement and disconformities between the social entities and which occurs as a result of the interaction between these entities. On the other hand, Ting-Toomey [1994: 360] defines the conflict as the discord of the values, expectations, perceived processes and the outcomes, which are the results of the material and relational problems between two or more parties.

Conflicts mostly damage the relationship between two parties. Especially the dysfunctional conflicts may have negative consequences for the attitudes and the behaviors related to the organizational aims and may lead to loss of energy related to the focal point [Lydiah, 2009]. However, it has been asserted that the organizations without conflicts are doomed to failure due to the absence of dynamism [Regnet, 1999: 12]. In addition to this, organizational conflicts may not always have devastating results, but may be results of the different individual perceptions [Rees et al., 2012: 20]. Moreover, it should be recalled that the conflicts are the starting points of change, evolution and development [Günbayı and Karahan, 2006: 210], and are inevitable elements of the organizations [Everard et al., 2004: 99; Asunakutlu et al., 2004: 170; Gibson et al., 2000:

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225; Hodge and Anthony, 1991: 528; Rahim, 2001: 1]. Since the conflicts may be used for organizational continuity, efficiency, and development and since they may lead to organizational failure, the management of the conflicts is highly important [Özmen, 1997: 12-13; Tjosvold, 1991: 53; Aydın, 1984: 9]. Within this context, Rahim [1992: 6] claims that the conflicts show the extent to which the organizations are healthy, and adds that the organizational theory will have an important deficit without any works to gain insight into organizational conflicts.

Rothwell and Kazanas [2003: 490] argue that disagreements of aims and values among the individuals or the groups, competition over the resources, and the communication problems lie at the sources of organizational conflicts. If the conflicts can be controlled, they may have positive consequences for the modern organizations, such as the increasing cooperation between the members of the organization, and the development of the capacity and the innovative structure of the organization. With the help of the feedback provided by the conflicts, the organization may adopt a critical perspective, intraorganizational relations may deepen, and the organizational problems may be solved. At this point, the conflict management strategies of the managers are crucial for organizational continuity [Chaudhry et al., 2008: 345] and for efficiency of the employees [Brewer et al., 2002: 78]. In fact, Peterson and Behfar [2003: 103] revealed, in their study, that the relationship between the conflict and the organizational performance is highly important for innovation, organizational dynamism, determination of possible conflict levels, coordination and avoidance of previous problems. On the other hand, the study of Kitchin [2010: 107] found that the organizational conflicts may be hidden or salient, and that the determination of organizational conflicts may be a hard task due to the organizational culture. Due to this, since unrevealed conflicts may constitute a potential source of problem for the organizations, the managers have to develop alternative methods to deal with the conflicts [Badaracco, 1997: 169].

In conclusion, conflicts are evident in all organizations and they might have both positive and negative consequences [Gibson et al., 2000: 225]. What is important is the management of the conflicts in order to obtain positive consequences for the organization. As such, the managers may benefit from the conflicts to provide innovation and development to the organizations. In case of the organizations, in which the conflicts are not managed, the conflicts may result with destructive effects such as inefficiency, stress, or job loss. In this context, the management of the conflict may be defined as the management of the disagreement and the discontent into the favor of the organization by controlling the levels of the conflict between the parties [Akkirman, 1998: 3].

2. Conflict Management Methods The avoidance of conflicts and the maintenance of the organizational success are among the main issues to be dealt with the managers. This is because of the fact that the managers have to define the conflict management strategies for various conflicts. It is claimed that some of the methods provide temporary solutions, whereas the others solve the problems permanently. At this point, the managers have to decide on the proper methods for either temporary or permanent solutions [Şahin et al., 2006: 556].

Consequently, it is not appropriate to remain the organizational problems unresolved.

Conflict management methods, which have been defined by Rahim [2004: 9] as integrating, obliging, compromising, dominating, and avoiding, have been considered as appropriate method of scaling [Şirin and Yetim, 2009: 187]. These five methods, which

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may be used to classify the methods of conflict management, are appropriate for the analysis of individual and organizational conflicts [Rahim, 2004: 10].

However, the analysis of three standards is crucial for the determination of the appropriate methods in order to achieve organizational profit. These include, the contributions of the methods to the organizational efficiency, the degree to which the methods can respond to the stakeholders’ demands and expectations, and the extent to which the methods can satisfy the participants’ ethical demands [Rahim, 2002: 208-209] The methods used to manage conflicts also reveal the managers’ leadership skills. In order to maintain the minimum influence of the conflicts over the organizations, the managers have to determine one or more than one of the conflict management methods and try to decrease the influence of the conflicts over the organizations. During the process of conflict management, the managers have to determine the sources of conflict, decrease the uncertainties related with the conflict, and adopt a cooperative management style based on confidence [Wall and Callister, 1995: 540-541].

3. Method 3.1. Universe and the Sample The universe of this research comprises of the A group travel agencies and the three, four and five stars hotels, operating in Turkey. Within the scope of this research, A-group travel agencies [6496], three stars hotels [641], four stars hotels [543], and five stars hotels [319] includes the universe for the case for Turkey. The universe of this study has been stratified according to the seven geographic regions of Turkey and the cases have been selected based on the cluster sampling method in order to maintain representativeness. Since the universe includes more than 10.000 enterprises, we used the unlimited universe [N>10.000] and the universe volume calculation formula [ H] developed by Özdamar [2001: 257]. The sample volume of this research has been calculated for each four different types of enterprises. In other words, we intended to sample 245 managers from every different enterprise. Based on these, we reached to 350 managers of A-group travel agencies, 247 three stars hotel managers, 252 four stars hotel managers, and 249 five stars hotel managers, which amount to a number of 1098 participants.

3.2. Scales used in Data Collection In this study, survey method was used for data collection. The survey comprises two parts.

The first part includes data on the demographic characteristics of the participant managers and the enterprises that they work at. In the second part, the scale for conflict management method, which includes 28 items and 5 sub-dimensions, has been used. This scale has been developed by Rahim (1983) and has been labeled as the Rahim Organizational Conflict Inventory II. Five-point Likert scale has been used for the evaluation of each statement in both scales and has been scored as the following: “Strongly Disagree=1”, “Disagree=2”, “Neither agree nor disagree=3”, “Agree=4” and “Strongly Agree=5”.

3.3. Aim of the Research and the Hypotheses This research aims to determine the relationship between the conflict management methods of the managers who work at travel agencies and hotels, their demographic characteristics and the characteristics of the enterprises. With this aim, the following hypotheses have been developed.

287

H1: There are significant differences between conflict management methods and his/her gender.

H2: There are significant differences between conflict management methods and his/her age.

H3: There are significant differences between conflict management methods and his/her education level.

H4: There are significant differences between conflict management methods and his/her experience.

H5: There are significant differences between conflict management methods and his/her administrative status.

of managers of managers of managers of managers of managers

3.4. Analysis of the Data The data obtained from the survey has been analyzed by using SPSS statistical software.

Confirmatory factor analysis of the scale has been conducted and the Kaiser-Meyer-Olkin measure of sampling adequacy test has shown the adequacy of the sample [KMO=0,913], whereas the Bartlett test has shown the applicability of the factor analysis [χ2 =17984, 693; p<0,001]. Five factors [Integrating, obliging, compromising, dominating and avoiding] have been determined. Besides, the alpha reliability co-efficient of the scale has been measured as α=0,922, and the Cronbach’s alpha reliability co-efficient of the five factors and their sub-dimensions have been calculated as over α=0, 70. Hence, the scale for the conflict management methods seems reliable. The research has provided the demographic characteristics of the managers, and the characteristics of the enterprises in the form of frequency and percentage distribution. Bonferroni test has been used to compare the participant managers’ demographic traits in terms of the dimensions. Besides, t-test for independent samples for the groups with two variables has been used to compare individual or organizational characteristics. Additionally, one-factor variance analysis has been used for groups with more than two variables.

3.5. Findings and Discussion 42.3% of the participant managers are female [f=465], whereas 57.7% are male [f=633].

Regarding the participants’ ages, 16.2% are below the age of 25 [f=178], 48.1% are between 26 and 35 [f=528], 29.6% are between 36 and 45 [f=325], and 6.1% are over the age of 46 [f=67]. Besides, the 96% of the participants have the degrees of high school, associate or undergraduate, whereas 2% are primary school graduates and 2% have graduate degrees. Finally, 22% of the participants hold top executive roles [director general or deputy director general], 28.1% hold mid-level positions [department manager or deputy department manager], and 49.9% of the participants hold junior positions [chief and deputy chief].

The analysis of the frequency and the percentage distribution of the enterprises’ characteristics [type of enterprise, the geographical location of the enterprise, the status of the enterprise, and the operating period of the enterprise] shows that the A group travel agencies constitute 31.8% of the participants. The remaining managers, who participated in this research, work for five stars [22.7%], four stars [23%], or three stars hotels [22.5%]. 30% of the managers work in hotels located in the Aegean region, whereas 18.9% are located in Mediterranean region, 17.9% in Central Anatolian region, 16.2% in Marmara region, and 11% in Black Sea region. The number of the managers, who work at the Eastern and the Southeastern Anatolia regions amount, is to 5.9%. On the other hand, 58.3% of the managers work at domestic independent firms. Finally, 61.3% of the

288

participants have been working at touristic enterprises with an operating period of less than ten years.

Table 1: Statistical Analysis on the Comparison of Conflict Management Methods 

Conflict Management Methods

d.f.

F

P

Integrating 4,20 a 0,71 Obliging 3,64 b 0,77 * Dominating 3,63 b 0,83 237,086 0,000 Avoiding 3,53 c 1,02 Compromising 4,05 d 0,75 * a, b, c, d p<0,001 The difference between the groups with different letters under the same column are significant.

Table 1, which provides the results of the “Bonferroni” test reveals a significant difference between the averages for each conflict management methods [p<0,001]. Mean values show that the participant managers mostly used integrating methods [  =4, 20] and lastly used the avoidance method [  =3, 53]. The participants are inclined to use the obliging [  =3, 64] and the dominating methods [  =3, 63] at equal levels. Finally, the second mostly used conflict management method is found as the compromising method [  =4, 05].

Table 2: Comparison of the Conflict Management Methods according to Gender Conflict Management Methods Gender Integrating Obliging Dominating Avoiding Compromising ***

Male Female Male Female Male Female Male Female Male Female



d.f.

4,21 4,18 3,56 3,76 3,56 3,74 3,38 3,72 4,02 4,08

0,66 0,77 0,76 0,77 0,82 0,86 1,02 1,00 0,75 0,76

t

p

0,698

0,485 ***

4,251

0,000

3,543

0,000

5,474

0,000

1,198

***

***

0,231

p<0,001

The results of the t-test for independent samples, which have been revealed in Table 2, show a significant difference between the conflict management methods and the genders of the participants, with the exception of the integrating and the compromising methods.

The mean values show that the females are more likely to use the obliging, dominating, and the avoiding methods than the males. These findings might be interpreted, as the females are more likely to use their authority, ignore the problems, and adopt the obliging methods compared to the male managers.

Table 3: Comparison of the Conflict Management Methods according to Age Conflict Management Methods Integrating

289

Age 25 and below 26-35 36-45



s.d.

4,04 a

0,70

4,20 b 4,26 b

0,76 0,66

F

3,977

P

**

0,008

Obliging

Dominating

Avoiding

Compromising

***

**

p<0,001 p<0, 01 method is significant.

46 and 4,28 b 0,51 above 25 and 3,49 a 0,79 below 26-35 3,69 b 0,76 *** 7,090 0,000 36-45 3,78 b 0,75 46 and 3,45 a 0,81 above 25 and 3,53 a 0,85 below 26-35 3,64 a 0,82 2,545 0,055 36-45 3,71 a 0,86 46 and 3,49 a 0,82 above 25 and 3,55 a 0,88 below 26-35 3,54 a 1,01 1,898 0,128 36-45 3,55 a 1,05 46 and 3,24 a 1,26 above 25 and 3,92 a 0,73 below 26-35 4,04 a 0,76 2,526 0,056 36-45 4,11 a 0,77 46 and 4,09 a 0,69 above a, b The difference between the groups that involve different letters for each

The results of the one-factor variance analysis (ANOVA) in Table 3 shows a significant difference between the integrating [p=0,008; p<0, 05] and the obliging methods [p=0,000; p<0, 05] and the ages of the participants, but also shows no significant difference between the managersâ&#x20AC;&#x2122; age and the other conflict management methods [p>0, 05].

Table 4: Comparison of the Conflict Management Methods according to the Education Conflict Management Methods

Integrating

Obliging

Dominating

Avoiding

Education Level

ď &#x192;

d.f.

Primary School High School Associate Undergraduate Graduate Primary School High School Associate Undergraduate Graduate Primary School High School Associate Undergraduate Graduate Primary School High School Associate Undergraduate

3,99 a 4,09 a 4,27 b 4,23 b 3,97 a 3,23 a 3,57 b 3,79 c 3,57 b 3,52 b 3,35 a 3,63 b c 3,75 c 3,55 b 3,52 b 3,04 a 3,55 b c 3,67 b 3,41 c

0,71 0,69 0,74 0,70 0,60 0,69 0,79 0,78 0,75 0,54 0,73 0,83 0,84 0,84 0,85 1,10 1,00 0,99 1,05

F

Levels p

**

3,746

0,005

6,650

0,000

3,704

0,005

4,914

0,000

***

**

***

290

Compromising ***

**

p<0,001 p<0, 01 method is significant

Graduate Primary School High School Associate Undergraduate Graduate a, b, c, d

3,27 d 3,87 a 4,03 a 4,05 a 4,08 a 3,98 a

0,86 0,91 0,75 0,77 0,73 0,74

1,598

0,173

The difference between the groups that involve different letters for each

The results of one-factor variance analysis (ANOVA) in Table 4 show a significant difference between the conflict management methods and the education level [p<0, 05] with the exception of the compromising method [p=0,173; p>0, 05].

Table 5: Comparison of the Conflict Management Methods according to Administrative Experience Conflict Management Methods Integrating

Obliging

Dominating

Avoiding

Compromising ***

**

p<0,001 p<0, 01 method is significant

Administrative experience Less than 5 years 5-9 Years 10-14 Years 15 Years and above Less than 5 years 5-9 Years 10-14 Years 15 Years and above Less than 5 years 5-9 Years 10-14 Years 15 Years and above Less than 5 years 5-9 Years 10-14 Years 15 Years and above Less than 5 years 5-9 Years 10-14 Years 15 Years and above a, b, c, d

ď &#x192;

d.f.

4,24 a 4,10 b 4,07 b 4,25 a 3,74 a 3,45 b 3,41 b 3,39 b 3,73 a 3,49 b 3,40 b 3,22 c 3,68 a 3,31 b 3,18 c 2,64 d 4,09 a 3,96 b 3,87 c 4,09 a

0,70 0,76 0,67 0,49 0,77 0,76 0,62 0,73 0,84 0,85 0,76 0,61 0,97 1,03 1,09 1,09 0,76 0,75 0,77 0,58

F

p

**

3,170

0,024

12,958

0,000

11,098

0,000

23,141

0,000

3,022

0,029

***

***

***

**

The difference between the groups that involve different letters for each

The results of the one-factor variance analysis (ANOVA) in Table 5 demonstrate a significant difference between the conflict management methods and the administrative experience [p<0, 05].

Table 6: Comparison of the Conflict Management Methods according to Administrative Status Conflict Management Methods

Integrating

Obliging

291

Administrative Status Director general or deputy director general Department manager or deputy department manager Chief or deputy chief Director general or deputy director general Department manager or deputy department manager

ď &#x192;

d.f.

4,20 a

0,69

4,31 b

0,69

4,14 a

0,73

3,44 a

0,74

3,81 b

0,75

F

p

**

5,473

0,004

16,348

0,000

***

Chief or deputy chief Director general or deputy director general Department manager or deputy department manager Chief or deputy chief Director general or deputy director general Department manager or deputy department manager Chief or deputy chief Director general or deputy director general Department manager or deputy department manager Chief or deputy chief

Dominating

Avoiding

Compromising

***

**

*

p<0,001 p<0, 01 p<0, 05 each method is significant

a, b, c

3,64 c

0,78

3,56 a

0,82

3,73 b

0,85

3,62 a

0,84

3,34 a

1,11

3,59 b

1,03

3,57 b

0,98

4,09 a

0,74

4,05 a

0,80

4,02 a

0,73

*

3,095

0,046

5,053

0,007

0,609

**

0,544

The difference between the groups that involve different letters for

The results of the one-factor variance analysis (ANOVA) in Table 6 show a significant difference between the conflict management methods and the administrative status [p<0, 05], with the exception of the compromising method [p=0,544; p>0, 05].

Conclusion This research, which evaluates the conflict management methods of the managers employed by the touristic enterprises, has found that the managers likely to opt for the integrating, compromising, obliging, dominating and avoiding methods, respectively. The usage of the integrating method, which is the most effective method of conflict management [Rahim, 2004], indicates the adaptation of a positive approach by the managers during times of conflict. The reluctance of the managers to adopt the avoiding method, which comprises negative behaviors such as retreat, non-involvement, indifference, and which leads to lose the conflicting sides, reflects the consistency and the knowledgeableness of the managers during the management of the conflicts.

This research has also analyzed the influence of the personal characteristics of the managers, and the characteristics of the enterprises over the selection of conflict management methods. The results of the difference analysis, which was conducted to find the relationship between the personal characteristics of the managers [age, gender, and education levels] and the conflict management methods employed by the managers showed significant difference for the obliging, dominating and avoiding methods. The opinions of the female managers regarding the obliging, dominating and the avoiding methods are more positive than the male managers. This finding reveals that the female managers are more likely to use their authorities, to be indifferent to the conflicts, or to becalm or not to upset the conflicting parties. Besides, this research has also found that both the female and the male managers are likely to use the methods of integrating and compromising. This finding is parallel to the studies of Özmen [1997], Sirivun [2001], Niederauer [2006], Şirin [2008], and Kırçan [2009].

The analysis of the difference between the ages of the managers and the conflict management methods shows significant differences for the integrating and the obliging methods. The participants have positive responses for the integrating method as they get

292

older. This finding shows that the experienced managers are likely to solve the interpersonal problems in a more rational way. Regarding the obliging method, the managers above 46 and below 25 do not make concessions. This finding reveals that the managers at these age groups are more likely to prioritize their interests and to use their administrative authorities over the subordinates.

Significant differences between the managers’ education levels and the conflict management methods have been found for the integrating, obliging, dominating and the avoiding methods. These methods have been frequently used by the managers with associate degree, and least used by the primary school graduates. This finding reflects that the primary school graduates do not have sufficient knowledge on the conflict management methods and do not use these methods deliberately. On the other hand, managers with associate degrees use the integrating method in a rational way. However, since these managers have positive evaluations about the obliging, dominating and the avoiding methods, we may argue that they have some improper tendencies for the management of the conflicts.

This research has also dealt with the results of the difference analysis related with the positions of the touristic enterprise managers [experience and administrative status] in the tourism sector. The comparison of the conflict management method according to the managers’ experiences show that the integrating and compromising methods are mostly used by the managers with less than five years or more than 15 years of experience. These results indicate that these managers are likely to pay attention to the conflicting sides’ opinions and to search for a middle way. Additionally, the managers with more than 15 years of professional experience are reluctant to use avoiding, dominating and obliging methods. This shows that experienced managers are more likely to manage the conflicts in a professional way and are more likely to recognize and solve the problems rather than ignoring them. The employment of the obliging, dominating and the avoiding methods by the managers with less than 5 years of experience may be related with the lack of professional experience, absence of prior experiences with the conflicts, or with these managers’ tendencies to rely on temporary solutions such as ignoring, making concessions or suppression. The findings are parallel to the findings of the Niederauer’s [2006] study.

This study also dealt with the differences between the administrative positions of the managers and their preferences for the conflict management methods. The analysis shows that the department managers and the deputy department managers opt for the integrating, obliging and the avoiding methods. On the other hand, since the managers holding these positions also prefer the dominating method, it may be concluded that they adopt both the benign and the dominating administrative styles. The reluctance of director generals and the deputy director generals to employ the avoiding and the obliging methods indicates that the top managers deal with the conflicts in a proper way. Finally, the hesitancy of the chiefs and deputy chiefs to use the integrating method shows the professional inexperience and lack of knowledge of the junior managers.

In fact, the finding is verified by the fact that managers have positive evaluations for the compromising method. However, we should recall that the practice of the compromising method may end up with complex problems and may be inadequate to manage the conflicts [Rahim, 2002].

293

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

A ‘modern’ approach to the macroeconomic accounting: Potential advantages of including the monetary part in macro accounting Onur TUTULMAZa, b a Hitit University, Department of Economics b York University, Faculty of Environmental Studies Abstract: Economic output is placed at the heart of the macroeconomics. To calculate the output one needs to achieve simplifying a high level complexity of economic relationships to form a system. On the flip side, the model should be enough elaborated to be able to reflect the important relationships. In this manner, the classical macroeconomic identity as Keynes suggested is simple enough to understand the main elements but it does not show the financial parts of transactions. Not having the monetary part of the economy it lacks the coherence.

With the financial and economic crises getting more frequent, more endeavour to build a more inclusive and coherent macroeconomic system has been observed.

However, there are large variety in different options of simplifying and simulating complex relationships among the real and monetary part of the modern economies.

Our paper tries to set an analysis comparing some of the recent prominent ideas in building balance sheet and transaction flow matrix in regard to macroeconomic accounting system. We can conclude the new achievement of including the monetary transactions in the frame causes a compromise from the simplicity for a coherent and more complete picture of macro economy.

Keywords: Macroeconomic accounting; Transaction flow matrix; Output; Monetary economy; Macroeconomics.

JEL classification: E10, E42

1. Introduction The speed of development of the human economy has been fascinating in the last two centuries. Many times, the establishing the necessary institutions to evaluate and manage it follow behind of the developing economy and its changing structures1.

Money and the monetary institutions are one of the important parts of a modern economy. However, it has been long discussed that the monetary model we are applying to represent our economies and therefore its monetary theory is insufficient having

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important shortcomings in simulating the modern economies. Wray (2012)`s suggestion, one of its several recent similar ones, of a â&#x20AC;&#x153;modern monetary theoryâ&#x20AC;? which combines the stock-flow consistent 3-sector balance approach of Godley (1996) and the modern money approach of Minsky (1986) and use it as a base for his monetary theory or, in better terms, modern interpretation of the macroeconomic modelling. Jackson and Dyson`s (2013) and Ryan-Collins et al. (2011) discuss also the issue within the same perspective. Godley and Lavoie`s (2007) discussion on the issue that a better and more thorough method of macroeconomic accounting is possible and even necessary can be seen within the parallel direction.

National or macro level accounting of the economies are actually critically important to understand the structure of the economies and to better manage them. Godley and Lavoie introduce a more complete way of macro accounting and discuss how it better represents the economy.

In this paper we aim to elaborate this discussion analysing the mentioned approach of Godley and Lavoie. Comparing the recent developed methods with conventional macroeconomic methods and trying to underline important points that differ itself, the paper set a first look on the possible promises of such a more elaborate macro accounting system. Second chapter focuses on the macro accounting subject closer. Third chapter conducts a comparison between the approaches. Fourth chapter concludes the study.

2.

Conventional Macro Accounts

The history of macro accounting is much younger than the development of the economy itself. In many aspects, however, it can be said that macro accounting of national income helped to improve economic modelling and to understand how it works.

Keynes defined the economic activity with the expenditure spent on the final activity.

Equation 1 gives therefore the volume of an economy, in terms gross domestic products (GDP).

C+I+G+ NEx=Y

(1)

Equation 1 has led to form a basic logic for a macro accounting system. Starting from 1930s the NIPA accounts2 are started to be measured according to the basic logic of overall expenditure.

Expenditures made on the total national product constitute, at the other end, the factor incomes, i.e. the disposable income plus net tax and transfers. Equation 2 gives this relationship as Wf represents wages and factor incomes and F represents the profits.

Taking account the disposable income definition, Yd=Y-T, Equation 2 gives us the expenditure-income identity in a simplest manner (Equation 2 constitutes a base for transformation from expenditure matrix in Table 1 to income-expenditure matrix in Table 2): C+I+G+ NEx=Y(=Yd+T)=Wf+F+T

(2)

Keynesian textbook expenditure identity given in Equation 1 and the first part of Equation 2 can be given in a matrix notation as in Table 1 below. In Table 1 we embark the double entry system which is used extensively by Godley and Lavoie (2007) for their balance sheet and transaction flow matrix analyses. The double entry system shows the direction of the transaction flows so that we can show transactions of the elements of basic

297

macroeconomic identity. Here, the consumption expenditures made by the households are received by the firms for end products and services produced by the business.

Government makes also spending the business production and services. The investment that the business achieves is financed by the private sector itself. The private sector here represents the financial private sector such as banks and other financial institutions.

Table 1. Matrix form of macroeconomic accounting on expenditures (closed economy from Eq. 1) Households -C

Consumption Investment Government

Private sector +C +I +G [Y]

Private sector

Government

If -G

Setting double entry system we can see the flow directions in macroeconomic expenditure identity. However, the matrix form of the macroeconomic identity in Table 1 is not coherent. At this point we can try to introduce the income part of the identity in Equation 2. The wages and factor incomes are introduced a simplistic method in Table 2. Profits are classified as distributed (FD) and undistributed (FU). Distributed profits are channeled to the households and undistributed profits are capitalized by the firms. Factor incomes other than the profits are included in W and it is assumed that all the factor incomes are from the business to households. Tax (T) is an income-decreasing factor for both business and households, forming the source of government expenditures. Tax is assumed here as net tax after substituting government transfers.

Table 2. Conventional income and expenditure matrix (closed economy from Eq. 2) Consumption Investment Government Wages-factor inc.

Net Profits Tax and transfers

Households -C

+W +FD -Th

Firms-Current +C +I +G [Y] -W -F -Tf

Firms-Capital

Government

-If -G +FU +T

The expenditure matrix of Table 2 seems more inclusive in terms of the inclusion of factor income side of the income-expenditure identity. Therefore, we can see the identity coherence throughout the firms-current transactions: The summations of the expenditure elements determining the output is fully distributed to income items. Consequently, total expenditure is equaled to the total income throughout the business sector where the production of the end products and services take place. However, it lacks still the transaction coherence for all sectors. For example, the net savings of the sectors can be calculated here but where they are hold and by which financial tools are not known in Table 2. For that purpose, though, we need to build more inclusive system. We will see an attempt in this direction by Godley and Lavoie in the next section.

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3.

Income-Expenditure Matrix vs. Transaction Flow Matrix

3.1.

Transaction flow matrix

Table 1.2 in the previous section, despite being useful to reflect the basic logic of measuring gross product of Equation 1 and Equation 2, cannot prevent some important questions to be raised. For example, we don`t know about personal savings holdings; neither much about savings or deficits about business and government. In other words, which forms the savings falls in or deficits are financed from? A more complete accounting system takes the counterpart of the expenditures or the savings and configures the financial tools utilized. For example, the accounting system of the balance of budget does take in account the capital and the financial counterpart of the exchange of goods and services through the border. We know that the fund of transaction In this manner, Table 3 gives more complete picture giving the flows of funds under the already known transactions from the NIPA system. According to different level of simplifying assumptions it is possible to build various different transaction flow matrixes.

Following Godley and Lavoie (2007) we are giving detailed 5 sector transaction matrix. In Table 3, banks are placed separately to better cover especially financial and monetary transactions. Central bank is placed separately from government in a similar manner.

Table 3. Transactions flow matrix Households

Production firms Current

Consumption

-C

+C

Investment

-Ih

+I

Government

Capital

Banks Current

Capital

+WB

-WB

Profits, firms

+FDf

-Ft

Profits, banks

+FDb

Current

Capital

-If

Σ 0

0 -G

0 0

+FUf

0 -Fb

+FUb

Profits, Cent. B

0 +Fcb

0 0

Deposit interest +rm(-1)∙Mh(-1)

-rm(-1)∙M(-1)

0

+rb(-1)∙Bh(-1)

+rb(-1)∙Bb(-1)

-rb(-1)∙B(-1)

-Tb

+T

Bill interest

Taxes-Transfers -Th sub -Σ

SAVh

-rl(-1)∙Lf(-1)

-Fcb

+rl(-1)∙L(-1)

Loan interest

-rl(-1)∙Lh(-1)

Central Bank

0

+G

Wages

Government

-Tf 0

Change in loans + Lh Change in cash

SAVb=FUb SAVg=-DEF 0

+ Lf

- L

+ Mb

Change in bills

- Bb

- Bh + ef ∙ pef 0

0

0 0

- Hb

Change, deposits - Mh

0 0

SAVb=FU-I 0

- Hh

Change, equities -( ef∙pef + eb∙peb) Σ 0

+rb(-1)∙Bcb(-1)

+ H

0 + B

- Bcb

+ eb ∙ peb 0

0

0

0 0

0

0

0

0

(Source: Godley and Lavoie, 2007, p.39; minor changes belong author)

The first part of the transaction flow matrix in Table 3, we can see the conventional NIPA accounts with the expenditures and the factor incomes of the sectors. Here the financial sectors are added to make it clear that where the funds are coming and where they are going. The central bank is also set separately. In Table 3 we can see the interest flows are 299

given in detailed so we don`t have to put the asset and liability interests together. Profits are divided into 2 groups; therefore, they are not just distributed to the households, some part of them stays undistributed and adds to the capital stock. We can see here investment expenditures take place in a more elaborate manner.

3.2.

System Evaluation: NIPA vs. Transactional flow matrix

The macro accounting system tries to measure economic activity. An economic activity in a modern economy contains, at one side, the production of goods and services and exchange of them, often called real economy; it also contains, at the other side, also the monetary economy which does not just include the financial reflection of the real activity but also capsulate the pure monetary transactions consisting from the transactions among the financial tools. Therefore, a macro accounting system aiming to measure the economic activity should first be able to reflect the economy into a macro accounting model. As we know, a major modelling goal is to find the simplest model to represent the behaviour of the part of the universe that we interested, which is the economic activity here, In this manner, both conventional income-expenditure matrixes and the transaction flow matrixes have advantages and disadvantages.

First of all, a conventional income-expenditure matrix such as NIPA matrix helps to track the logic of GDP calculation. Expressing clearly the macroeconomic duality of the expenditure-income, it is also very helpful for pedagogical purposes. In other words, it is simple enough to represent the “real” part of the economy; so defined, it is useful to understand the real economy. However, it is uncertain that which financial tools are being used to finance these transactions, neither is the relationship between the financial tools and the real economy.

As for the transaction flow matrix, it can put the whole picture thoroughly. The first part of the transactional flow matrix given in Table 3 is same old income-expenditure matrix and reflects the ‘real’ part of the economy. The financial relations are given in detail in the below part of the matrix. Therefore we can see the all transactions including real and financial ones in the matrix and we can test their coherence. This constitutes a very important advantage because the causality in an economy is deemed to be bidirectional.

Hence, the pure financial transactions to balance inter financial tools describing the interest rates have their effects into the real economy. That affecting mechanism generally deemed as via the interest rates. Interest rates are deemed to affect investment, consumption or foreign trade affecting the exchange rates.

Conclusion The conventional macro accounting of an economy tries to capture the economic activity takes places in the ‘real economy’. GDP numbers are produced through this macro accounting system, such as NIPA, and they are prevalently regarded as a measure of the economy. Even more importantly, accounting the macroeconomic activity in an economy we can show the way the economy runs and the roles of the different sectors in it. For example, it gives an opportunity to see and to check how the dual equality of macro incomes and expenditures works on a single table.

We evaluate in this study, on the other hand, today`s macro accounting system NIPA matrix is not coherent. If the balance of payments account, as a different macro accounting perspective of an economy, can supply this coherence in its calculations, it

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should be maintained for the macroeconomic accounts which are deemed to take a picture of the whole economy. For that purpose, it should include the financial and monetary dimensions of the running economy.

The most important point to be underlined is that the transaction flow matrix has such coherence for the whole of the economy. It has the financial transaction part as well as the conventional real economy part. The financial interdependencies can be followed as being in a sectorial balance sheet; while the coherence rule puts a reality check on them on sectorial base. Taking the bidirectional influences between the real and monetary part of the economy, the transactional matrix seems the sole system that can simulate the behaviour of the economy.

So far in the history the main focus was on the real part of the economy in terms of macro accounting systems, but in the modern world economy the monetary activity of an economy is much bigger than the real part. In addition to the monetary counterpart of the real exchanges, there are saving funds and also the pure monetary transactions following financial causes. The equilibrium reached through these financial transactions has its effects on real economy mainly via the interrelationship of interest rates with investment, consumption and exchange rates. Transaction flow matrix is the unique tool that one can see the all dimensions and their effects in a single accounting body. The literature shows that not only the practical application of such attempt but also the theoretical formation of one intact coherent macro accounting body is not easy at all. Therefore, we can conclude that further studies on the subject will be utmost useful both in economics theory and economic management on the field.

References [1] BEA (2006). A Guide to the National Income and Product Accounts of the United States. Available at: http://www.bea.gov/national/pdf/nipaguid.pdf.

[2] Godley, W. and Lavoie, M. (2007). Monetary Economics: An integrated approach to credit, money, income, production. Palgrave Macmillan, New York.

[3] Jackson, A. and Dyson, B. (2012). Modernising Money: Why our monetary system is broken and how it can be fixed, Positive Money, London, UK. [4] Moss, D. (2002). A Concise Guide to Macroeconomics, Harvard Business School Press, Boston.

[5] Moss, D. and Brennan, S. (2002). National Economic Accounting: Past, Present and Future, Case 703-026, Harvard Business School Press, Boston.

[6] Ryan-Collins, J., L.R. (2012). Where Does Money Come From? Nef, London, UK. [7] Wray, L.R. (2012). Modern Money Theory. Palgrave Macmillan, New York.

1

For example, the Fed (Federal Reserves) in US was not established until 1913. Its independence has not been completed until 1951 (Moss, 2007, p.70; Moss and Brennan, 2002) 2 Simon Kuznets from NBER (National Bureau of Economic Research) was appointed to build macro accounting system and the first estimates on national income was conducted in 1934 (BEA, 2006).

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Forecasting Volatility: Evidence from the Bucharest Stock Exchange Assoc. Prof. Erginbay UĞURLU1 1 Hitit Üniversitesi, FEAS, Department of Economics, Çorum, 19030, Turkey Tel: +903642257700, Fax: +903642257710, e-mail: erginbayugurlu@hitit.edu.tr Abstract: Financial series tend to be characterized by volatility and this characteristic affects both financial series of developed markets and emerging markets. Because of the emerging markets have provided major investment opportunities in last decades their volatility has been widely investigated in the literature. The most popular volatility models are the Autoregressive Conditional Heteroscedastic (ARCH) or Generalized Autoregressive Conditional Heteroscedastic (GARCH) models. This paper aims to investigate the volatility of Bucharest Stock Exchange, BET index as an emerging capital market and compare forecasting power for volatility of this index during 2000-2014. To do this, this paper use GARCH, TARCH, EGARCH and PARCH models against Generalized Error distribution. We estimate these models then we compare the forecasting power of these GARCH type models in sample period. The results show that the EGARCH is the best model by means of forecasting performance.

Keywords: stock returns; volatility; GARCH models; emerging markets.

JEL classification: C13, C32 C51, C52, G17

1. Introduction The conditional variance of financial time series is important for measuring risk and volatility of these series. Conditional distributions of high-frequency returns of financial data have excess of kurtosis, negative skewness, and volatility pooling and leverage effects. Volatility of stock exchange indices and forecasting of their volatility have enormously increasing literature for both investors and academicians. The prices of financial securities have constant inconsistency and their returns over the various periods Hitit University,FEAS, Department of Economics, Çorum, 19030, Turkey, Tel: +903642257700, Tel: +903642257710, Fax: +902123351000, e-mail: erginbayugurlu@hitit.edu.tr 1

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of time are notably volatile and complicated to forecast. The modelling volatility started with the Autoregressive Conditional Heteroskedasticity (ARCH) model, introduced by Engle (1982) and generalized by Bollerslev (1986) in GARCH model. Although ARCH and GARCH models capture volatility clustering and leptokurtosis, they fail to model the leverage effect. After these two papers, various types of GARCH models were proposed to solve this problem such as the Exponential GARCH (EGARCH) model , the Threshold GARCH (TARCH) model and the Power ARCH (PARCH) model.

Aim of this paper is to investigate the volatility and of Bucharest Stock Exchange, namely Bucharest Exchange Trading Index (BET) as an emerging capital market for the last decade.

Also we aim to compare forecasting power of GARCH-type models to find the relevant GARCH-type model for BET. We investigate the forecasting performance of GARCH, EGARCH, TARCH and PARCH models together with the Generalized Error Distribution (GED).

Bucharest Exchange Trading Index (BET) is a capitalization weighted index which was developed with a base value of 1000 as of September 22, 1997. BET is the first index developed by the BSE and comprised of the most liquid 10 stocks listed on the Bucharest Stock Exchange BSE tier 1. Currently, the Bucharest Stock Exchange calculates and publishes a few indices: BET, BET-C, BET-FI, ROTX, BEX-XT, BET-NG, RASDAQ-C, RAQ-I, RAQ-II. BET. (Pele et al.,2013; Bloomberg,2013) Investigating volatility of returns of stock markets and comparing forecasting accuracy of returns of stock markets have achieved attractiveness all over the world. Because of aim of the paper we focused on paper about European and emerging stock markets.

[Emerson et al.,1997], [Shields ,1997], and [Scheicher,1999] investigates Polish stock returns. [Scheicher,2001], [Syriopoulos,2007] and [Haroutounian and Price, 2010] analyze the emerging markets in Central and Eastern Europe. [Vošvrda and Žıkeš, 2004] is another research about the Czech, Hungarian and Polish stock markets. [Rockinger and Urga, 2012] make a model for transition economies and established economies. [Ugurlu et al., 2012] and [Thalassinos et al. 2013] investigate the forecasting performance of GARCH-type model to European Emerging Economies and Turkey and Czech Republic stock exchange respectively.

This paper is organized as follows. Section 2 describes the volatility models which are used in this paper. Section 3 shows empirical application results. Section 4 contains summary of the paper and some concluding remarks.

2. Method In this section we review the GARCH-type models which are used in the empirical application section of this paper.

Engle (1982) developed Autoregressive Conditional Heteroscedastic (ARCH) model. ARCH models based on the variance of the error term at time t depends on the realized values of the squared error terms in previous time periods. The model is specified as: yt  u t (1)



u t ~ N 0,  2t

(2)

303



q

 2t   0    ju 2t i

(3)

t 1

This model is referred to as ARCH(q), where q refers to the order of the lagged squared returns included in the model. [Bollerslev, 1986] and [Taylor, 1986] proposed the GARCH(p,q) random process. The process allows the conditional variance of variable to be dependent upon previous lags; first lag of the squared residual from the mean equation and present news about the volatility from the previous period which is as follows: p

q

   0    u    i t2i 2 t

i 1

2 i t i

(4)

j 1

All parameters in variance equation must be positive and is expected to be less than one but it is close to 1. If the sum of the coefficients equals to 1 it is called an Integrated GARCH (IGARCH) process.

[Nelson, 1991] proposed the Exponential GARCH (EGARCH) model as follows: (5) In the equation represent leverage effects which accounts for the asymmetry of the model. While the basic GARCH model requires the restrictions the EGARCH model allows unrestricted estimation of the variance. If it indicates presence of leverage effect which means that leverage effect bad news increases volatility.

Threshold GARCH (TARCH) model was developed by [Zakoian ,1994]. In TARCH model the leverage effect is expressed in a quadratic form as follows:

(6) where The effect of the represents the good news and represents the bad news have different outcomes on the conditional variance. The impact of the news is asymmetric and the leverage effects exist when

.

The power-ARCH (PARCH) specification proposed by [Ding et al. ,1993] generalises the transformation of the error term in the models as follows:

(7) where

is power parameter,

is an optional threshold parameter

3. Empirical Application We use daily data in stock exchanges of BET Index for the period 1/5/2004-6/10/2014 thus we have 2607 observations. Data collected from Reuters. We use return series as follows:

304

 BETt   return  log   BETt 1 

(8) BET

RETURN

12,000

.15

10,000

.10

8,000

.05

6,000

.00

4,000

-.05

2,000

-.10

0 04

05

06

07

08

09

10

11

12

13

14

-.15 04

05

06

07

08

09

10

11

12

Figure 1: Graph of BET and Return Series of BET Source: Authors

Table 1: Descriptive Statistics Return Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis Jarque-Bera Probability Observations

0.000416 0.000647 0.105645 -0.131168 0.017425 -0.544454 10.69096 6551.549 0.000000

2606

Source: Authors

Table 1 summarizes descriptive statistics of return series. Because the skewness of the variable is negative and kurtosis is higher than 3, the descriptive statistics indicate that the return of BET has negative skewness and high positive kurtosis. These values signify that the distributions of the series have a long left tail and leptokurtic. Jarque-Bera (JB) statistics reject the null hypothesis of normal distribution at the 1% level of significance for the variable.

Before the variance of the series is to estimate the mean model of the mean equation should be estimated. To estimate the mean equation we find the exact ARIMA(p,d,q) model. In the model; p is the number of autoregressive terms, d is the number of differencing operators, and q is the number of lagged forecast errors in the prediction equation.

Before the model is chosen unit root test must be used to see d part of the model. Table 2 shows unit root tests results of the variable. ADF and DF-GLS tests results conclude that return is stationary then d part of the model is “0” then ARMA(p,q) model must be used instead of ARIMA(p,d,q).

305

13

14

Table 2: Unit Root Test Results of Return Intercept -47.0073(0)*** -46.66605(0)*** -47.08005 (12) ***

ADF DF-GLS PP

Trend and Intercept -47.0239(0)*** -46.84999(0)*** -47.08553(12) ***

Notes: The figures in square brackets show the lag length by SIC for ADF and Bartlett Kernel for PP test. *, ** and *** indicate statistical significance at the 10, 5 and 1% levels, respectively

Source: Authors calculation

The correlogram of the return series shows no systematic pattern according to autocorrelation function (ACF), and partial autocorrelation function (PACF) (See:Appendix). We set the maximum lag ARMA(2,2) in order to estimate mean equation and consider (1,1), (1,2), (2,1) and (2,2) as specifications for choosing the best model.

Existence of ARCH effect in these mean models is tested by ARCH-LM test. If the value of the ARCH LM test statistic is greater than the critical value from the distribution, the null hypothesis of there is no ARCH effect is rejected. After the ARMA(p,q) model is defined as a mean part of the series we will estimate the GARCH-type models. We set the maximum lag order in the GARCH-type part to 2 and consider (1,1), (1,2), (2,1) and (2,2) too as used in ARMA part. To compare ARMA(p,p) models and GARCH-type models, we use the Akaike Information Criterion (AIC) [Akaike, 1973], Schwarz Information Criterion (SIC) [Schwarz, 1978], Hannan-Quinn Criterion (HQC) [Hannan and Quinn, 1979], loglikelihood and R squared. The model which has smaller AIC, BIC and HQC value and the greater R squared and loglikelihood value is the better the model.

Table 3: Estimation results of the ARMA Models Coefficient intercept AR(1) AR(2) MA(1) MA (2) 2

R AIC SIC HQC Loglikelihood ARCH (1) ARCH(5)

ARMA (1,1) 0.000417 0.014048 0.06824

ARMA (1,2) 0.000417 -0.40397 0.486967 0.04123

ARMA (2,1) 0.000412 0.500484 -0.05005 -

ARMA (2,2) 0.000414 -0.36794*** -0.68256*** 0.43619*** 0.716625***

0.00673 -5.2663 -5.25954 -5.26385 6862.349 302.4293*** 361.9099***

0.006829 -5.26563 -5.25662 -5.26236 6862.478 304.0687*** 363.0508***

0.006969 -5.26547 -5.25646 -5.26221 6859.645 300.4242*** 359.8138***

0.009398 -5.26715 -5.25589 -5.26307 6862.833 297.6099*** 357.2484***

Notes: The bold fonts show the selected criteria. *, ** and *** indicate statistical significance at the 10, 5 and 1% levels, respectively

Source: Authors calculation

Table 3 shows the results of ARMA(p,q) models. All criteria indicate that the ARMA(2,2) is the best model, also only this model has significant coefficients. In the second step, we estimate a set of GARCH-type processes with a generalized error distribution using GARCH, EGARCH, TARCH and PARCH models with ARMA(2,2) process in mean equation.

Table 4: Estimation results of the GARCH Type Models Coefficient Îą1 Îą2

GARCH (1,1) 5.74E-06*** 0.180984***

GARCH (1,2) 7.15E-06*** 0.2352***

GARCH (2,1) 2.83E-06*** 0.3075*** -0.2130***

GARCH (2,2) 1.27E-06*** 0.3024*** -0.2577***

EGARCH (1,1) -0.6169*** 0.3491***

EGARCH (1,2) -0.6795*** 0.4249***

EGARCH (2,1) -0.4672*** 0.4788*** -0.2091***

306

EGARCH (2,2) -0.3190*** 0.4883*** -0.2816***

1 2 β1 β2 V R2 AIC SIC HQC Logl.

ARCH(5)

0.813674*** 1.2520*** 0.0077 -5.7705 -5.7503 -5.7632 7522.264 6.5621

0.2668*** 0.4889*** 1.2610*** 0.0076 -5.7750 -5.7525 -5.7669 7529.0810 3.1579

0.9002***

TARCH (1,1) 6.73E-06*** 0.1601***

TARCH (1,2) 7.95E-06*** 0.2102***

1.2703*** 0.0076 -5.7800 -5.7575 -5.7719 7535.5840 2.3140

1.2654*** -0.3125**** 1.2776*** 0.0076 -5.7826 -5.7578 -5.7736 7539.9270 1.7614

TARCH (2,1) 2.99E-06*** 0.3008*** -0.2092*** 0.0098***

TARCH (2,2) 1.15E-06** 0.2877*** -0.2460 -0.0012***

-0.0365**

-0.0500**

0.9583*** 1.2679*** 0.0079 -5.7716 -5.7491 -5.7635 7524.6460 7.2362

0.4127*** 0.5451*** 1.2854*** 0.0076 -5.7809 -5.7561 -5.7719 7537.7430 3.3227

PARCH (1,1) 8.93E-05*** 0.1944***

PARCH (1,2) 0.0001 0.2476***

-0.0439 0.0176 0.9693*** 1.3118*** 0.0076 -5.7783 -5.7513 -5.7685 7535.3800 2.4836 PARCH (2,1) 2.84E-05 0.2996*** 0.1010 -0.1974*** 0.1264 0.9030***

α1 α2 1 0.0576* 0.0592 0.0921** 0.0899* 2 β1 0.8005*** 0.2665** 0.8976*** 1.2956*** 0.8162*** 0.2827** β2 0.4809*** -0.3392*** 0.4843*** δ 1.4121*** 1.3828*** 1.4957*** V 1.2731*** 1.27E-06*** 1.2704*** 1.2867*** 1.2589*** 1.2680*** 1.2753 R2 0.0078 0.0078 0.0077 0.0078 0.0079 0.0078 0.0077 AIC -5.7697 -5.7751 -5.7794 -5.7840 -5.7719 -5.7767 -5.7799 SIC -5.7471 -5.7503 -5.7546 -5.7569 -5.7471 -5.7497 -5.7506 HQC -5.7615 -5.7661 -5.7704 -5.7742 -5.7629 -5.7669 -5.7693 Logl.

7522.0990 7530.1880 7535.7360 7542.7370 7526.0450 7533.2400 7538.4340 ARCH(5) 4.6202 2.5684 2.0927 1.4294 7.2958 3.5841 2.8717 Notes: The bold fonts show the selected criteria. *, ** and *** indicate statistical significance at the 10, 5 and 1% levels, respectively. v shows GED parameter. If GED parameter equals two it means normal distribution if it is less than two it means leptokurtic

distribution. δ is the power of the conditional standard deviation process.

Source: Authors calculation

Table 4 shows the results of the GARCH-type models. Before interpretation of the models significance conditions for estimated parameters must be held. In this step we aim to choose best model, for this reasons we are not going to examine these conditions and only the results of criteria is going to compare. The best model for AIC and HQC is TARCH(2,2). SIC concluded that the ARCH(2,2) model is the best. PARCH (1,1) and PARCH(2,2) was selected from R squared and Loglikelihood criterion respectively.

Although TARCH(2,2) model was selected by two criteria, according to the five criteria none of model has strong dominance to other.

The GARCH-type models can be compared by their forecasting performance by using forecasting error criteria. In this paper we compare estimated variance for all models for 1/03/2014-6/10/2014 in sample period using static forecast. We select the period to show 2014 year’s data. Four criteria are used to evaluate the forecast accuracy for the sample namely, Mean Square Error (MSE) and Mean Absolute Error (MAE): n









MSE1  n 1   t2  ˆ t2

2

t 1

(10) n

MSE2  n 1   t  ˆ t t 1

(11) n

MAE1  n 1   t2  ˆ t2 t 1

(12)

307

2

-0.0488 0.0304 1.0315 -0.0506*** 1.2789*** 0.0075 -5.7792 -5.7500 -5.7686 7537.5710 3.5863 PARCH (2,2) 3.61E-06 0.2856*** 0.1485** -0.2476*** 0.1734*** 1.3499*** -0.3862*** 1.7051*** 1.2872*** 0.0078 -5.7836 -5.7521 -5.7722 7544.2610 2.3598

n

MAE 2  n 1   t  ˆ t t 1

(13) where, n is the number of forecasts, forecast at day t.

is the actual volatility and

is the volatility

Table 5: Comparison Forecasting Performance of GARCH-type Models Coefficient MSE1 MSE2 MAE1 MAE2

GARCH (1,1) 2.75348E-08 4.70024E-05 8.84287E-05 0.005685322

GARCH (1,2) 2.64013E-08 4.51454E-05 8.67443E-05 0.00561891

TARCH (1,1) TARCH (1,2) MSE1 2.81852E-08 2.66746E-08 MSE2 4.84847E-05 4.51144E-05 MAE1 9.09225E-05 8.60816E-05 MAE2 0.005777002 0.005585907 Notes: The bold fonts show the selected criteria.

GARCH (2,1) 2.65268E-08 4.46425E-05 8.53613E-05 0.005553817

GARCH (2,2) 2.68233E-08 4.44975E-05 8.50496E-05 0.005518952

EGARCH (1,1) 2.73202E-08 4.62145E-05 8.63471E-05 0.005564041

EGARCH (1,2) 2.51014E-08 4.17345E-05 8.0017E-05 0.00532046

EGARCH (2,1) 2.61637E-08 4.34523E-05 8.33985E-05 0.005431897

EGARCH (2,2) 2.60132E-08 4.18254E-05 8.10262E-05 0.005312196

TARCH (2,1) 4.81601E-08 4.51144E-05 8.60816E-05 0.005585907

TARCH (2,2) 2.66245E-08 4.43071E-05 8.47503E-05 0.005518374

PARCH (1,1) 2.70041E-08 4.62548E-05 5.75549E-07 0.00560942

PARCH (1,2) 2.5839E-08 4.42667E-05 8.43061E-05 0.005523667

PARCH (2,1) 2.60592E-08 4.35832E-05 8.31733E-05 0.005457809

PARCH (2,2) 2.66318E-08 4.30049E-05 8.24342E-05 0.00537086

Source: Authors calculation

Table 5 reports the forecasting performance of the GARCH, EGARCH, TARCH and PARCH models. The BET volatility forecasts obtained from EGARCH(1,2) model have the greatest forecasting accuracy under MSE1 and MSE2. EGARCH(2,2) and PARCH(1,1) have greatest forecast models for BET under MAE2 and MAE1 respectively. That is, EGARCH model is a better choice than the other models in terms of BET volatility forecasting.

As it stated above significance conditions for estimated parameters must be examined.

The results of the selected model which is EGARCH(1,2) is below:

Except the coefficient of leverage effect is significant in 5% level rest of the coefficients are statistically significant in 1% level (Table 4). The leverage effect is negative and significant means that leverage effect bad news increase volatility in Bucharest Stock Exchange Trading Index (BET).

1.

Conclusion

The first aim of the paper is to estimate the volatility model of Bucharest Exchange Trading Index (BET) by using GARCH, EGARCH, TARCH and PARCH models. The second aim is to compare forecasting performance of the used GARCH-type models to find best model for the return of the BET. The empirical application was started with investigating excess of kurtosis, negative skewness and normality of distribution of the return series. Before the GARCH-type models were selected the ARMA models estimated to modelling the mean side of the series using several criteria. We compared the forecasting performance of several GARCHtype models using GED distribution for BET. We found that the EGARCH(1,2) model is the most promising for characterizing the behaviour of the return of BET. In other words EGARCH model might be more useful than the other models which are used in this paper for Bucharest Exchange Trading Index returns.

308

References [1] Bloomberg.com(2013) www.bloomberg.com/quote/BET:IND [2] Bollerslev, T., (1986) “Generalized Autoregressive Conditional Heteroskedasticity”. Journal of Econometrics, Vol. 31, issue 3, pages 307-327 .

[3] Ding, Z., Granger, C.W.J., and Engle, R.F., 1993, “A Long Memory Property Of Stock Market Returns And A New Model.” Journal of Empirical Finance, vol. 1, no. 1, pp. 83-106.

[4] E. Thalassinos, Y. Muratoğlu, E. Ugurlu “Comparison of Forecasting Volatility in the Czech Republic Stock Market” International Journal of Economics & Business Administration, “I-4”, 2013, (forthcoming) [5] E. Uğurlu,E. Thalassinos, Y. Muratoğlu, “Modeling Volatility in the Stock Markets using GARCH Models: European Emerging Economies and Turkey” International Conference On Applied Business And Economics, University of Cyprus, 11- 13 October 2012, Nicosia, Cyprus [6] Emerson, R., Hall, S. and Zelweska-Mitura, A. (1997) “Evolving Market Efficiency with an Application to Some Bulgarian Shares” , Economics of Planning, Volume 30, 75-90 [7] Engle, R.F., (1982) “Autoregressive Conditional Heteroskedasticity With Estimates of The Variance Of UK İnflation”, Econometrica 50, 987–1008.

[8] Haroutounıan M. K. and Price S. (2001) “Volatility İn The Transition Markets of Central Europe”, Applied Financial Economics, 11, 93-105 [9] Nelson, D. B. (1991). Conditional Heteroscedasticity İn Asset Returns: A New Approach.

Econometrica, 59(2), [10] Pelea D. T., Mazurencu-Marinescua M., Nijkampb P. (2013) “Herding Behaviour, Bubbles and Log Periodic Power Laws in Illiquid Stock Markets A Case Study on the Bucharest Stock Exchange “ TI 2013-109/VIII Tinbergen Institute Discussion Paper [11] Rockinger, M., Urga, G., (1999) Time Varying Parameters Model To Test For Predictability And İntegration İn Stock Markets Of Transition Economies”. Cahier De Recherche Du Groupe Hec 635/1998.

[12] Scheicher , M., (2001). “The Comovements Of Stock Markets In Hungary, Poland And The Czech Republıc” Internatıonal Journal Of Fınance And Economıcs Int. J. Fin. Econ. 6: 27–39 [13] Scheicher, M. (1999). ”Modeling Polish Stock Returns.” in Helmenstein, C., ed., Capital Markets in Transition Economies. Cheltenham, UK : Edward Edgar, pp. 417–437.

[14] Shields K., ( 1997) “Stock Return Volatility On Emerging Eastern European Markets”, The Manchester School Supplement: 118–138.

[15] Syriopoulos, T., (2007) Dynamic Linkages Between Emerging European And Developed Stock Markets: Has The EMU Any İmpact? “, International Review Of Financial Analysis 16, 41-60.

[16] Taylor, S. J. (1986), Modelling Financial Time Series, John Wiley & Sons, Chichester.

[17] Vošvrda M. and Žıkeš F. (2004). “An Applıcatıon Of The Garch-t Model On Central European Stock Returns” Prague Economıc Papers, 1, 26-39 [18] Zakoian J. M., 1994, “Threshold Heteroskedastic Models”, Journal of Economic Dynamics and Control, vol. 18, no. 5, pp. 931–952.

309

Appendix

310

Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

Working Capital Management in Czech SMEs: An Econometric Approach Erginbay UGURLU1, Irena JINDRICHOVSKA2, Dana KUBICKOVA3 1

Hitit University, FEAS, Department of Economics, Çorum, 19030, Turkey Tel: +903642257700, Fax: +903642257710, e-mail: erginbayugurlu@hitit.edu.tr Abstract In this paper we investigate the relationship of working capital management and corporate profitability on a sample of Czech small and medium firms. Capital structure and working capital management are two areas widely investigated by economic researchers in order to investigate forces determining profitability of firms. We use an initial sample of 3053 Czech SMEs for the period of 2009-2012 and we employ the panel data methodology to find whether there is the statically significant relationship between profitability and components of working capital – mainly inventories, receivables and payables and other variables based on the previous literature.

Key words: cash conversion cycle, profitability, SMEs, working capital management, panel data JEL classification: C53

1. Introduction In this paper we investigate the relationship of working capital management and firms´ profitability on a sample of Czech SMEs (Small and Medium Sized companies). Relationship of assets management to company profitability will be relevant because majority of Czech SME companies uses short term debt for their overall funding. It is therefore interesting to investigate the details of the cash conversion cycle. We expect to find out what is the statistical significance between profitability, measured through ROA and the cash conversion cycle. We expect that the results of our research on working capital 1

2

University of Economics and Management, Prague, 15800, Czech Republic, Tel:+420224095111,Fax: +42022409 687, e-mail: irena.jindrichovska@seznam.cz 3 University of Finance and Administration, Prague, 10100, Czech Republic Tel: +420271741597,Fax: +420271740871, e-mail: dana.kubickova@centrum.cz

311

management will elucidate the major characteristics of working capital management in Czech SMEs. In the previous studies on this problem it has been found that managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each different component to an optimum level [e.g. Solano and Teruel, 2006; Lazaridis, Tryfonidis, 2006). In this paper we would like to verify whether such relation exists on the Czech market as well.

2. Literature Review In general and in accordance with liberal theory the main goal of each enterprise in its profit maximization and strive to increase the volume of sales to generate earnings.

Working capital management is a part of the financial management of an enterprise having an impact upon its liquidity and profitability [Shin, Soenen, 1998; Deloof, 2003; Dong and Su, 2010]. The liquidity and profitability of the enterprise are competing goals.

Smith (1980) pointed out that it was important to satisfy both goals and a compromise.

To attain this goal, working capital management has been a focus on of many studies especially in the segment of SMEs, because these companies typically do not use the long term capital resources. Therefore the small and medium sized companies use predominantly short term capital resources. Thus the suppliers´ credit typically plays the dominant role, because it is believed to be cheaper and more accessible source of financing than bank loans.

In previous studies on the Czech market this tendency was verified by e. g. [Polak, Kotora, 2000; Polak and Kocurek, 2007; Jindrichovska and Körner, 2008; Jindrichovska, 2013; and lately Jindrichovska, Ugurlu and Kubickova, 2013].

Another relevant source of SMEs funding can be retained capital, however this is subject to the fact that companies manage to create capital surplus in previous years. In this study we expect that the results of our research will elucidate the major characteristics of working capital management in the Czech Republic. The findings will be relevant because majority of Czech SME companies uses short term debt for their overall funding. We expect to find out what is the statistical significance between profitability, measured through gross operating profit, and the cash conversion cycle. In previous studies on this problem which we analyse here Previously it has been found hat managers can create profits for their companies by handling correctly the cash conversion cycle and keeping each different component (accounts receivables, accounts payables, inventory) to on optimum level.

These decisions and relevant management actions taken by an enterprise management represent efficient handling of current assets. Positive working capital mostly characterizes efficient Working Capital Management. The purpose of working capital is to balance costs and maintain the optimum level of cash, raw materials and finished goods in order for the company to remain liquid at any moment. However, for some companies it is rational to maintain negative net working capital. This is typically the case when a company can use its dominant position on the market and “work” with the money of its suppliers. In this case the company uses financing provided by its supplies to finance its own long term needs.

312

3. Empirical Application 3.1 Data We collect data for the 2008-2009 period. The collected data represent accounts payable2 (AP), accounts receivable3 (AR), cash conversion cycle4 (CCC), debt5 (DEBT), inventory6 (INV), return on asset (ROA), assets and sales. We use the return on assets (ROA) as the dependent variable and the logarithm of assets (SIZE), the sales growth (SGR), natural logarithm of debt (LDEBT) , INV, CCC, and GDP growth (GDPGR) as independent variables.

The variables INV and CCC is the variables to measure the working capital management.

In the consequence of calculating SGR as (salest-salest-1)/sales we have lost one year and the data period is therefore 2009-2012.

3.2 Characteristic of firms in the sample The age of firms in years was determined according to date of establishment. The oldest firm was established in 1951 and the youngest is 2008.

Table 1: Years of Establishment Year

Freq.

Percent

Year

Freq.

Percent

1951

1

0.03

1989

2

0.07

1972

1

0.03

1990

43

1974

1

0.03

1991

335

1981

1

0.03

1992

1984

2

0.07

1985

1

1988

2

Year

Freq.

Percent

Year

Freq.

Percent

1996

183

6.01

2003

113

3.71

1.41

1997

178

5.85

2004

105

3.45

11

1998

162

5.32

2005

83

2.73

379

12.45

1999

138

4.53

2006

78

2.56

1993

265

8.7

2000

158

5.19

2007

89

2.92

0.03

1994

256

8.41

2001

115

3.78

2008

37

1.22

0.07

1995

213

7

2002

104

3.42

Total

3,045

100

Source: Authors Calculation

In total, we have 3045 firms from 99 different regions. Table 2 shows number of regions investigated in the empirical application. The largest region is region no 6220 with 146 firms which represents approximately 5 per cent of the total.

Table 2: Regions Region

Freq.

Percent

Region

Freq.

Percent

Region

Freq.

Percent

Region

Freq.

Percent

11I0

6

0.2

1190

21

0.69

4120

23

0.76

6140

39

1.28

11J0

13

0.43

2110

18

0.59

4130

19

0.62

6150

39

1.28

11K0

8

0.26

2120

16

0.53

4210

44

1.44

6210

45

1.48

11L0

3

0.1

2130

28

0.92

4220

26

0.85

6220

146

4.79

11M0

6

0.2

2140

22

0.72

4230

20

0.66

6230

69

2.27

21A0

30

0.99

2150

15

0.49

4240

14

0.46

6240

46

1.51

21B0

27

0.89

2160

23

0.76

4250

23

0.76

6250

53

1.74

21C0

5

0.16

2170

21

0.69

4260

27

0.89

6260

19

0.62

11A0

42

1.38

2180

24

0.79

4270

27

0.89

6270

33

1.08

11B0

4

0.13

2190

29

0.95

5110

14

0.46

7110

10

0.33

2

(Short term payables total /Sales) *365 (Accounts receivable/sales)*365 4 Days Receivable +Days in Inventory-Days Payable 5 Short term payables total 6 (Inventories/purchases)*365 3

313

11G0

10

0.33

3110

58

1.9

5120

23

0.76

7120

63

2.07

11F0

3

0.1

3120

26

0.85

5130

48

1.58

7130

26

0.85

11E0

1

0.03

3130

20

0.66

5140

39

1.28

7140

38

1.25

11H0

5

0.16

3140

11

0.36

5210

68

2.23

7150

32

1.05

11C0

13

0.43

3150

16

0.53

5220

25

0.82

7210

38

1.25

11D0

9

0.3

3160

21

0.69

5230

59

1.94

7220

57

1.87

110E

1

0.03

3170

42

1.38

5240

33

1.08

7230

68

2.23

1110

38

1.25

3210

24

0.79

5250

46

1.51

7240

101

3.32

1120

16

0.53

3220

26

0.85

5310

38

1.25

8110

24

0.79

1130

19

0.62

3230

59

1.94

5320

49

1.61

8120

58

1.9

1140

47

1.54

3240

16

0.53

5330

37

1.22

8130

38

1.25

1150

23

0.76

3250

18

0.59

5340

72

2.36

8140

38

1.25

1160

20

0.66

3260

12

0.39

6110

40

1.31

8150

45

1.48

1170

8

0.26

3270

17

0.56

6120

38

1.25

8160

62

2.04

1180

22

0.72

4110

19

0.62

6130

25

0.82

Total

3,045

100

Source: Authors Calculation

Table 3 shows the descriptive statistics of the variables. It is worthwhile to point out a high variability of INV (inventories) and CCC (cash-conversion cycle) variable. Standard deviation and difference between minimum and maximum values of these variables are very high relatively to other variables.

Table 3: Descriptive Statistics of Variables Variable Obs

Mean

Std. Dev.

Min

Max

ROA

12180

0.054586

0.143489

-3.52106

1.729839

INV

12180

104.5021

425.3807

-25.0064

43617.5

CCC

12180

49.85429

6397.297

-665862

48029.55

SIZE

12180

10.7561

1.380063

5.846439

14.22098

SGR

12157

0.241159

8.834666

-17.9809

574.375

LDEBT

12158

9.624735

1.473706

4.094345

13.91082

GDPGR

12180

-0.35

2.719027

-4.5

2.5

Source: Authors Calculation

Correlation between variables is shown in table 4 Table 4: Correlation Matrix of used Variables ROA

INV

CCC

SIZE

SGR

LDEBT

ROA

1

INV

-0.0270***

1

CCC

0.0362***

0.0600****

1

SIZE

0.0682***

0.0208**

-0.0118

1

SGR

0.0078

0.0059

0.0008

0.002

1

LDEBT

-0.0334***

-0.0051

-0.0256***

0.8531***

0.0111

1

GDPGR

0.0308***

0.0059

-0.0109

0.0195

0.0023

0.0271***

GDPGR

1

Notes:** and *** indicate significance at the 5% and 1% level Source: Authors Calculation

314

Table 4 shows the correlation matrix for the variables. We find a significant negative correlation between the INV and the ROA and positive correlation between the CCC and the ROA. Although these two variables have significant relationship between ROA the relationship is not strong. The relationships between the variables are generally low. The highest correlation coefficient is between LDEBT and SIZE variable thus these two variables related strongly for the investigated sample of Czech SMEs. 3.3 Model Subsequently two models capturing the relation between profitability and elements of net working capital including the cash conversion cycle were formulated:

[1]

[2] In these two models INV and CCC are the working capital management variables.

Estimating models from panel data requires us first to determine whether there is a correlation between the unobservable heterogeneity ηi of each firm and the explanatory variables of the model. If there is a correlation we would obtain the consistent estimation by using fixed effect model (FEM) otherwise we should use random effect model (REM).

To decide to use FEM or REM the [Hausman,1978] test is used under the null hypothesis E(ηi/xit) = 0. If the null hypothesis is rejected, the effects are considered to be fixed.

Table 5: Estimation Results of the Model (Dependent Variable : ROA) Variable C INV

Model 1 Coefficient -1.00882*** (.0614608) -3.81x10-6 (3.06e-06)

Model 2 Coefficient -1.004542*** (0.0614073) -

Model3 Coefficient -1.008815*** (.164512) -3.81x10-6 (4.17 x10-6) -

Model 4 Coefficient -1.004542*** (0.164606) -

R squared

0.150336 (0.0071) 0.000141*** (0.0001) -0.05745*** (0.0038) 0.000978** (0.0004) 0.0498

8.79 x10-6*** (1.98e-07) 0.149502*** (0.0071) 1.41E-05 (0.0001) -0.05701*** (0.0038) 0.001** (0.0004) 0.0517

.1503361*** (0.0202) 0.000141 (.0002) -.0574535*** (0.0079) .0009781*** (.0004) 0.0498

8.79 x10-6*** (8.43e-08) 0.149502*** (0.0202) 1.41E-05 (0.0002) -0.05701*** (0.0079) 0.001** (0.0004) 0.0517

F stat Hausman 2 Wald Test ( ) Wooldridge (F)

95.29*** 268.95*** 8 2.1x 10 *** 36.920***

99.13*** 268.48*** 8 1.8x10 *** 36.191***

13.71 -

187.70*** -

CCC SIZE SGR LDEBT GDPGR

-

Notes: The values in parenthesis shows standart errors. *,** and *** indicate significance at the 10%,5% and 1% level for the coefficents and rejection of null hypothesis for the test statistics.

Source: Authors Calculation

315

Modified Wald test for groupwise heteroskedasticity is used to test for the existence of heteroskedasticity in the models. The null hypothesis of the Wald test is those residual variances are homoscedastic [Baum, 2001]. [Wooldridge, 2002] test is used to test for autocorrelation under null hypothesis no first-order autocorrelation.

Before interpreting models the Wald and Wooldridge tests are examined. In the first model we reject the null hypothesis for both tests. Thus we conclude that the first model has heteroskedasticity and the first order autocorrelation. To solve these problems we use “cluster” option of Stata to have standard errors are completely robust to any kind of serial correlation and/or heteroskedasticity. Model 3 is the model with robust standard errors. Although the explanatory ratio (R squared) is very low, coefficients and model are statistically significant and model does not include autocorrelation and heteroskedasticity.

The results of Model 3 show that the model is statistically significant at 1% level and that the variables SIZE, LDEBT and GDPGR are statistically significant at 1% level. Size of the SME and GDP growth of the country has positive effect on ROA of the SME and debt has a negative effect on ROA. But the INV variable has no effect on ROA for Czech firms for the period investigated. This finding is in contrast to previous research by Solano and Teruel, 2006, where the authors found significant negative relation.

According to Wald and Wooldridge test our Model 2 has heteroskedasticity and autocorrelation, too. We thus use the “cluster” option for Model 2 once again to have model with robust standard errors without autocorrelation and heteroskedasticity. In this model CCC has positive and significant effect in 1% level on profitability measured by ROA. As it was expected the other variables’ effects have the same direction as in Model 1.

Conclusions, Limitations and Future Research In this empirical paper we have found that the profitability of Czech SMEs is influenced by short term capital management, especially by the length of the Cash-Conversion-Cycle.

This finding is in line with the previous literature in other countries. Surprisingly though, the profitability measured by ROA is not influenced by inventories in the Czech Sample.

This is in contrast to previous research and calls for further investigation.

It must be highlighted that our sample is very heterogenous, which was established by measuring descriptive statistics of used data namely standard deviation and min-max range of used dependent variables (especially Inventories and Cash-Conversion-Cycle).

For further and more detailed investigation it would be worthwhile to split the sample according to industries (NACE codes) and search more homogeneity of results. Another suggestion would be to compare our findings with the sample of large forms for the same economy and for the same period. As another topic for future research is that it may be worthwhile to look more closely into the sub-sample of companies with negative net working capital and investigate the reasons, why companies use it and whether this style of aggressive short-term financing really leads to desired higher profitability in their segment.

316

Acknowledgement: The authors acknowledge the support of the Research project IGA VŠFS No 7753 “National and cultural specifics and implementation of IFRS (with special accent on CEE countries)” which provided data for this research.

References [1] Baum C. F. (2001) Residual Diagnostics For Cross-Section Time Series Regression Models, The Stata Journal, 1, Number 1, pp. 101–104 [2] Deloof, M. (2003) Does Working Capital Management Affect Profitability of Belgian Firms?. Journal of Business, Finance and Accounting 30, pp. 573-587.

[3] Dong, H.P., Su, J. (2010) The Relationship between Working Capital Management and Profitability: A Vietnam Case. International Research Journal of Finance and Economics, Vol. 49, pp. 59-67.

[4] Jindrichovska, I., Körner, P. (2008) Determinants of corporate financing decisions: a survey evidence from Czech firms. Working Papers IES, 2008(1). Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies.

[5] Jindrichovska, I. (2013) Financial Management in SMEs. European Research Studies Journal, 16 (Special Issue on SMEs), 79-96.

[6] Jindrichovska, I., Ugurlu, E., Kubickova, D. (2013) Changes in Capital Structure of Czech SMEs: A Dynamic Panel Data Approach. Ekonomika a management, (3).

[7] Lazaridis, I., Tryfonidis, D. (2006) Relationship between Working Capital Management and Profitability of Listed Companies in the Athens Stock Exchange. Journal Financial Management and Analysis, Vol. 19, No. 1. Available at SSRN: http://ssrn.com/abstract=931591 [8] Martínez-Solano, P., García-Teruel, P. J. (2006) Effects of Working Capital Management on SME profitability. International Journal of Managerial Finance. Vol. 3 (2), pp. 16–177. Available at SSRN: http://ssrn.com/abstract=894865 [9] Polak, P., Kotora, F. (2000) Funding Working Capital in the Czech Republic. Treasury Management International, pp. 23-25.

[10] Polak, P., Kocurek, K. (2007) Cash and Working Capital Management in the Czech Republic, Investment Management and Financial Innovations, Volume 4, Issue 1, 2007.

[11] Smith K. (1980) Profitability versus Liquidity Tradeoffs in Working Capital Management. Readings on the Management of Working Capital. Ed. K. V. Smith, St. Paul, West Publishing Company, pp. 549562.

[12] Wooldridge, J. M. (2002) Econometric Analysis of Cross Section and Panel Data. Cambridge,MA: MIT Press.

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Sustainable Environment and in the Context of Environment Economy Necessary and an Analyze Gunes UNAL1, M. Sakir Başaran2, Selcuk KENDIRLI3 1,2 32

Turkish Court of Accounts, Ankara, 06520, Turkey

Hitit University FEAS Banking and Finance, Akkent 3. Cadde No:3, Corum,19100 , Turkey Tel: +905423239238, Fax: + 903642257710, Email: selcukkendirli@hititiedu.tr Abstract: In global world, the environment has become a scarce resource. Since economics is about how to deal with scarce resources, environment and economics are interrelated with each other. On the other hand it is also clear that economics which creates both positive and negative externalities, affects the environment. For this reason, it is not possible to except environmental problems from the economics. Today some socio-economic activities like increasing consumption based on shopping malls, urban regeneration, fast population growth and etc. have being created environmental cost.

One way of using economics is to ensure that the costs and the benefits of environmental measures are well balanced. Although it is difficult to estimate costs and benefits, there is an increasing demand that this is should be done before the economical activity.

Economic and environmental objectives are often perceived as being contradictory.

It is believed that a choice must be made between one and the other and that cannot be achieved concurrently. To change this perception, some measures should be taken on both national and international level. At this point, an efficient environmental auditing is being important day by day to ensure environmental economics.

1

Turkish Court of Account, İnönü Bulvari (Eskisehir Yolu) No:45 Balgat/Çankaya/Ankara, 06520, Turkey, Tel: +90 (312) 295 30 00, Fax: + 90 (312) 295 40 94, Email: selcukkendirli@hitit.edu.tr 3

Hitit University FEAS Banking and Finance, Akkent 3. Cadde No:3, Corum,19100 , Turkey

Tel: +905423239238, Fax: + 903642257710, Email: selcukkendirli@hititiedu.tr

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In this study we will research what was done in the world in terms of environmental economics. In this context, we will examine what will have to do in Turkey in terms of legislation?

Key Words: Environment, Sustainable Environment, Environmental Economy JEL Codes: Q00, Q50

1. The Relationship between Economics and the Environment 1.1. Concepts of Economy and the Environment Economy is a complete activity which satisfies human needs. While economy maintains these activities, it has to ensure the usage of resources in the direction of unlimited needs.

Because the man’s needs are unlimited but goods and services which satisfy these needs are always scarce and limited. Since the disparity between “needs” and “goods services” which satisfies these needs exist in developed or underdeveloped, capitalist or socialist, all communities, this is called “Law of Scarcity”. [http:// bbs. bartin. edu. tr/ dosyalar/ Ders Materyal/44866u2ve3k%C4%B1tl%C4%B1kkanunualternmalyt.pdf, 25.06.2014] And while economy fulfills its main function which is to meet needs of human, it creates positive and negative externalities.

While, environment is a component which creates inputs of economy with its resources, it is also integrity of systems affected by negative externalities of the economy. Therefore, the close relationship between economy and the environment makes economy manage the environment which has a limited source.

In a general meaning, environment is a place, which human communities and the other lives continue their lives and make use of natural resources. A different identification for environment is as flows; environment is the sum of physical, chemical and social factors which has an immediate or direct or indirect effect on human activities and live assets in a particular time. [Kaya, 2006] No matter in which context environment is used, the concept of environment usually emphasizes, “to be at the center and to be out of the center”. Therefore, environment is defined at the opposite of a center and in this sense; it is an “external” phenomenon. [Özdek, 1993] INPUT (Production Factor)

Losses of natural resources as a result of scarce resource usage.

PRODUCTION

OUTPUT (Goods and Services)

Damage of solid, liquid and gas waste which occurs during production process.

Environmental contamination as result of goods and services usage.

Figure 1: Business – Natural Environment Relationship Source: KAYA Uğur, (2006), İşletme-Doğal Çevre İlişkilerinin Mali Tablolar Aracılığıyla Raporlanması ve Denetimi, SPK Yayınları,p.31

While the environment is seen an external phenomenon affected by the output of the production process - goods and services -, it is also a large concept includes production factors –inputs- . In this sense, environment provides inputs to economy, as well as it is affected by the externalities created by economy. Today, both businesses and countries are in the discussion of unlimited natural resources which the environment provides as an

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input to economy. Therefore, environmental costs are currently being processed to minimize by both volunteer applications and legal regulations.

In this respect Environmental Economics can be defined as; “A specific sub-field of Economics, in which environmental issues is taken from an economic perspective, a contribution to economy with the protection of environment and natural resources , and also the way of the minimizing environmental pollution. [http://www.nedirnedemek. com/%C3%A7evre-ekonomisi-nedir-%C3%A7evre-ekonomisi-ne-demek ,26.06.2014] Today environmental economics has become more and more important comparing to the past in order to ensure the continuous activity of economy which is done through with scarce resources, and also as a result of the broad concept of environment including both affects economy with its factors of production and affected by the externalities of economy. So; as Al Gore, the vice-president of USA and also specialist on environmental problems says that “Holding on to the old argument that the environment and the economy are in conflict is really outdated”. [Press Release; “Sierra Club Endorses Gore”, 2000] 1.2. The History of Environmental Economics There are differences between the conventional economics and neo-classic economics approaches on environmental issues. While quantity was considered in classic economics, quality was also taken into account in neo-classic economics. According to classical economists such as J.B. Say and Adam Smith, natural resources were characterized as free goods and excluded from the economic analysis. A. Pigou, a neo-classic economist, put environmental concept into the economic analysis, and so laid the foundations of environmental economics.

A.Marshall is the first name contributing economic analysis of environmental problems.

According to Marshall, market economy’s inefficiency lies in back of the basic reason of environmental pollution. He spoke first time about the externalities in his work published in 1890. And Keynes who is one of the important economists in the last term, has created a discussion platform up to this day about the externalities of environmental pollution will be resolved/or not resolved by market mechanism. [Yıldırım & Marin, 2004 ]

2. Environmental Issues Environmental cost of economy creates environmental problems. Too tight and bilateral relations are available between economic development and environmental issues.

Economic development is a cause, and environmental issues are foregone conclusion of it.

Environmental problem usually includes all cons which occur on environmental values (water, air, soil, etc.) as a result of human activities. In that context the first issue coming to mind is “pollution” problem. [Kaya, 2006] Environmental pollution is the deterioration which damages natural stability of environment and makes up catastrophic exposures on living beings as a result of dirty air, dirty water, and dirty wastes which are caused by the production process to satisfy human needs. [Özdek, 1993] It has occurred major changes on natural balance of earth climate and evolution due to the usage of fossil fuels which is emitted into the atmosphere from gases that cause the greenhouse effect used from Industrial Revolution. So; “Global Warming” is a significant other environmental problem which is the natural result of economic activities,

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finding a place as an international concept and is defined as “in the increase of average temperatures of the world’s lands, seas and air seen throughout the year.” [http://tr.wikipedia.org/wiki/K%C3%BCresel_%C4%B1s%C4%B1nma, 26.06.2014] 2.1. Main Causes of Environmental Pollution Environmental pollution is the specific term of the environmental issue. Although it is put forwarded so many factors causes of the environmental pollution, three basic titles are; population growth, urbanization and industrialization [Kaya, 2006]. In fact these three basic titles have a relationship with each other on a cause-effect base. For example, increasing population pressure creates illegal immigration and in that context creates urban growth, so with it industrialization occurs to ensure economic dynamic.

Today, rapid population growth and as a result of it urbanization and related to it urban transformation and constructions have been increasing environmental costs of economy.

In particular, with the reasons of like urban transformation projects and change in consumer oriented approaches such as shopping malls, it has been in progress no returnconstruction buildings, so does the damage to the environment is increasing in the same or a higher rate. It is also questionable that the contribution of these constructions to the economy besides from their damage to the environment. Perhaps, one of the best examples of it is; the big stadiums which have been built for the World Football Cup 2014 in Brazil. It has been criticized because of their management on a “use and throw” base. In accordance with, the construction industry in 2014 Athens Olympic Games has become an economic downturn for Greece as well as its damage to the environment.

2.1. Approaches to Solve Environmental Problems 2.2.1. National Approaches Developed countries are accepted which have already completed industrialization process, while developing countries have selected the industrialization path before performing transition process of farming to industry. So, this rapid and uncontrolled industrialization creates serious adverse effects on the environment. [http://journal.dogus.edu.tr/ojs/ index.php/duj/article/view/175/191, 03.07.2014] Both in developed and in developing countries there is a pressure on environment created by economy, so in recent years environmental concept given priority among the topics.

The most effective approach for solving environmental problems is to get rid of those elements that cause the problem. This solution is far from being “rational”; it is just “radical”. Rational solution approaches can be put in ordered as; Sustainable Development, Cost-Benefit Analysis, Environmental Impact Assessment and other approaches. [Kaya, 2006]  Sustainable Development -Sustainability Economy is required into the basis of “Sustainable Development” to get rid of the negative effect creates on the environment. It is possible to make the description of “Sustainable Development” as follows; The plan of today’s life and the future’s development with establishing a balance between man and nature by without the risk of damaging natural resources and ensuring the usage of resources consciously. [http://www.bilgiustam.com/surdurulebilir-kalkinma-nedir, 25.06.2014] In addition a broad consensus exists that it means that economic activities should be consistent with: sustainable use of renewable natural resources, protection of ecosystem features and functions,

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preservation of biological diversity, a level of harmful emissions remaining below critical (assimilative) thresholds, and avoidance of irreversible damage to the environment and nature. [Mulder & Jeroen & Bergh, 2001] Sustainability works both for minimizing the loss of environmental damage created by economy and also recycling this loss into economy again. In this sense, production technologies will be required compatible with nature, as well as having efficient and productive technologies. Therefore implementation of renewable energy sources has become essential in the natural part of production process to contribute to “environmental sustainability”.

One of the best examples has been Sweden, in the sense that environment has been returned to the economy on the subject of sustainable development. Sweden head of all countries about recycling, solar energy and many more sustainable practices and a country maintains large part of its heating-up needs from garbage, has started to import waste from its the nearest neighbor Norway. Even, it is about 80.000 tons of waste imported from Norway. [http://www.ntvmsnbc.com/id/25436041; İsveç’in çöpü bitti, 25.06.2014] In this sense, sustainability is the concept which has to be implemented essentially day by day to create a coil in the economy and to hold a dynamic standing of environment. We also provide a sustainable development, while our environment can be converted back.

Environmental economy more in case of ecological sense, the aim becomes; “…,to protect, to continue and to use again and again." [Areuea Journal, 1978. Available at http://web.a.ebscohost.com/ehost/pdfviewer]  Cost & Benefit Analysis Cost – Benefit Analysis is quite a well-developed method for determining the net returns to a Project over a period of time; the only necessary correction is the inclusion of environmental costs or benefits. [Dutta, 2003] To use Cost and Benefit Analysis as a solution on the environmental issues, environmental impacts on investments should be used as a data. In other words, it should be calculated as a quota by summing up cash returning and positive impact of the investment, and as a denominator again by summing up the cash outflows of the investment and negative impact on environment by investment made and then agree that the ratio of quota to denominator will be the “cost - benefit ratio”. By using this ratio, both environmentally sound investments can be selected and also problems can be prevented at the planning stage.

However, although cash outflows (costs) regarding negations on the environment can be calculated to a degree, cash inflows regarding the positive effects on environment cannot be calculated. This makes the approach’s applicability quite difficult. [Kaya, 2006] Despite its well-known limitations, benefit-cost analysis can be a key method for consistently assimilating the disparate information that is pertinent to sound decision making. If properly done, it can be of great help to public officials as they seek to identify environmental targets and goals.  Environmental Impact Assessment

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Environment has to be placed on a legal ground to lighten the pressure on it created by industrialization. So in order to increase both economic developments of countries and environmental quality, “Environmental Impact Assessment” is an international concept found a place.

Environmental Impact Assessment, is an approach which analyses the effects of an activity in which sense it affects the environment (directly or indirectly, positively or negatively) in the decision making phase of it. It is also an approach to identify the alternative solutions to minimize that may be made by the adverse effect of the activity. Known as Environmental Impact Assessment (EIA) approach, the report must be drawn up before the investment decisions for the prevention and seeing of possible effects on environment created by the investment. This is called; "Environmental Impact Assessment Report" or simply called EIA report. [Kaya, 2006] While Environmental Impact Assessment approach resembles the other environmental problem solution approach – Cost Benefit Analysis- in the way of positive and negative aspects of the investments on the environment, it is a more comprehensive approach. In addition, in this approach as it is not compulsory to use numbers for all the data, it is also easier to use. [Kaya, 2006]  Environmental Law With all of above, Environmental Law’s popularity has also continued to increase in accordance with today’s conditions. To protect and improve the environment, to establish rules for both preventing environmental pollution and compensating for damages, to create resources for all of these regulations and to recommend sanction are all in the field of Environmental Law. [http://www.sayistay.gov.tr/yayin/yayinicerik/145.k1Cevsemtr.pdf, 06.07.2014]  Government Policy

Environmental pollution created by the negative externalities of an economy can be resolved in a well-functioning price system. If price system is installed, both less polluting technologies are encouraged and a fair distribution for the environmental pollution costs will be made.

However even a well-functioning market system may be remained as inactive for diminishing the environmental pollution. For some reason, task begins to fall to the public economy as a solution for the prevention of environmental pollution which has a right to use fiscal policy tools and policies such as taxes and/or subsidies.

2.2.2. International Regulations It is inevitable in terms of the work for countries resolving environmental problems.

However, the work made globally, enforces countries a tighter co-operation and in the natural sense it would be more incentive. This co-operation around the world for the environmental protection has been doing by dual or multi-sided agreements on international environmental law.

In this respect the first global environmental policies created as UNEP (United Nations Environment Program) followed by a meeting in Stockholm in 1972 by the United Nations.

In addition Kyoto Protocol in 1997, a single-frame to ensure the fight both for global warming and climate change which are one of the main problems of today is also an important international regulation on environment.

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Some major policy options were set in the process of which starts with UNEP and continues along Kyoto Protocol, including reduction of fossil fuel usage, development of renewable energy sources to ensure the energy needed and also efficient use of energy.

The use of new technologies and particularly technology has been another policy options to help the countries which have not yet been completed development processes.

[Yıldırım &Marin, 2004]

3. Contribution of Environmental Auditing on Environmental Economics Environmental controls which will make a contribution on environmental economics must also be taken into consideration. The basic distinctive feature of environmental controls of course focuses on environmental issues and aims at improving the environment which is both today’s and the future’s basic public supply for all of humanity and ensuring sustainable use of it. [http://www.sayistay.gov.tr/yayin/yayinicerik/145.k1Cevsemtr.pdf, 06.07.2014] From this point of view, countries’ external audit component that is Court of Accounts’ have to perform important tasks to assess the use of public source.

3.1. Types of Environmental Auditing As it is known that the management of resolving environmental issues has been regularized which both in national and international laws and agreements , Court of Accounts can be given as part of the service of “Legality Audit” for the protection and development of the environment. In this sense, Court of Accounts’ can follow the conformity in accordance with laws and international environment contracts as a public source.

If the use of environmental resources (air, water, soil, etc.) and its usage effects are recorded correctly, a “Financial Audit” may also be possible for environmental affairs. [http://www.sayistay.gov.tr/yayin/yayinicerik/145.k1Cevsemtr.pdf, 06.07.2014]

With the path of “Performance Audit”, it is carried out by monitoring in environmental programs, the environmental impact of other programs, environmental management systems, and/or environmental agreements. [http://www.sayistay.gov.tr/yayin/ yayinicerik/145.k1Cevsemtr.pdf, 06.07.2014] So a new concept has occurred called “4 E” which includes economy, efficiency, effectiveness and environment also the base of “Performance Audit” .

Conclusion Economy and the environment have been seen as two dynamic concepts which replaces on the same plane within difficulty. It is believed that a choice must be made between one and the other and that cannot be achieved concurrently. But the importance of the both national and international works to change this approach is increasing.

In this regard, it should be created protection – based environmental economies both nationally and internationally. In addition, it should be generated economic policies that doesn’t see the environmental problems as a natural result of the economic activities and takes into account the environment and its value.

A positive bilateral relationship between economy and the environment can be ensured by sustainable development. Therefore it should be aimed an environmentally sustainable economies - Eco-Economies. The cost of protecting the environment without polluting it is

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cheaper than bringing a contaminated environment back to its old one. As a result clean and nature-friendly technologies are preferred, and yet again, if there still any pollutants they have to be recycled. [http://www.sayistay.gov.tr/yayin/yayinicerik/145.k1Cevsemtr. pdf,06.07.2014] Another point to make popular environmentally sustainable economies (eco-economy) is that; it is necessary to work with economists and ecologists. Only economists and ecologists who work together might build on its future continues today. [Uğur &, Marin, 2004] Besides “Sustainable Development”, Cost - Benefit Analysis approach should be used to help for creating effective policies to protect environment from the negative externalities of economic activities.

However while population growth affects urbanization and industrialization and so both economic development and environmental problems in terms of countries, also causes an increase in global environmental issues. It is therefore; perhaps population control policies have to grow up globally as an example of today’s China. According to Gore; the world is expected to have more than 9 billion people by 2075, with much of that growth coming from developing countries in Africa. So; Gore argues an alarming point that “Fertility Management” is needed to address a whole slew of global development issues, including mitigating global warming. [http://nation.foxnews.com/2014/01/28/al-gore-suggestsfertility-management-fight-global-warming , 03.07.2014] In addition an environmental damage occurs with urbanization and constructions caused by the natural result of population growth and internal migration. So, to reduce the effects of environmental damage, it has to be built up a healthy and a balanced urbanization policy and this policy should be performed by providing sustainability. All next-generation, neighbors, living creatures and the environment must be taken into account. [Akyel, 2013] One of the important reasons which create environmental issues is that “Efficiency” isn’t given the importance in production and consumption activities as well as in resource allocation and technology usage. So technology help to developing countries to be focused on a solution proposition.

In resolving environmental problems, environmental monitoring, should also be seen as an effective instrument, so it requires co-operating of more than one country’s Court of Accounts.[http://www.sayistay.gov.tr/yayin/yayinicerik/145.k1Cevsemtr.pdf ,06.07.2014] In addition, the importance of implementation of informative and conservative environmental policies is undeniable. While it is thought that “Standards of Protection of the Environment” make a positive contribution to economy by creating new business courses, it also may be incentive for the countries to ensure the interaction between economy and the environment. And again, Al-Gore says; “We can improve our economy and create millions of good new jobs if we go about building the new technologies that can help us clean up the environment.” [Press Release; “Sierra Club Endorses Gore”, 2000]

References [1] Areuea Journal .(1978), Areuea Journal,Journal of the American Real Estate &Urban Economics. Available at http://web.a.ebscohost.com/ehost/pdfviewer [2] AKYEL R. (2013); The President of Turkish Court of Accounts ,p.41.

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[3] Dutta M . (2003) New Economic Dimensions in Economic Thought: The Case of Environmental Economics, Journal of the Alumni Association of the Economics Department Calcutta University, pp.95–109.

[4] http://bbs.bartin.edu.tr/dosyalar/DersMateryal/44866u2ve3k%C4%B1tl%C4%B1kka nunualternmalyt.pdf [5] http://journal.dogus.edu.tr/ojs/index.php/duj/article/view/175/191 [ 6 ]http://nation.foxnews.com/2014/01/28/al-gore-suggests-fertility-management-fight-global-warming [7] http://tr.wikipedia.org/wiki/K%C3%BCresel_%C4%B1s%C4%B1nma [8] http://www.bilgiustam.com/surdurulebilir-kalkinma-nedir [9] http://www.nedirnedemek.com/%C3%A7evre-ekonomisi-nedir-%C3%A7evre-ekonomisi-ne-demek [10] http://www.ntvmsnbc.com/id/25436041; İsveç’in çöpü bitti [11] http://www.sayistay.gov.tr/yayin/yayinicerik/145.k1Cevsemtr.pdf [12] Mulder P.; Jeroen C.J.M.; Bergh V. D. (2001), Evolutionary Economic Theories of Sustainable Development, Blackwell Publishers.

[13] ÖZDEK, Y. E. (1993) İnsan Hakkı Olarak Çevre Hakkı, TODAIE Yayınları.

[14] Press Release. (2000) “Sierra Club Endorses Gore”.

[15] Stavins; R. N. (2000) A Draft- A Two-Way Street between Environmental Economics and Public Policy, Edward Elgar Publishing Inc. [16] Yıldırım U.; Marin M. C. (2004) Çevre Sorunlarına Çağdaş Yaklaşımlar, Beta Yayınları.

[17] Yrd. Doç. Dr. KAYA, U. (2006) İşletme-Doğal Çevre İlişkilerinin Mali Tablolar Aracılığıyla Raporlanması ve Denetimi, SPK Yayınları.

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The Budget of the European Union - Opportunity or Burden for Romania?

Dragoș Mihai UNGUREANU1 1 Spiru Haret University, Faculty of Finance and Banking, 46 G Fabricii Str., District 6 Bucharest, Romania, Tel: 021 3169785, Email: dragos.ungureanu@yahoo.com Abstract: This paper aims to structure a synoptic image of the expenditure at European Union level from the EU Budget by correlating with the financial flows between EU and Romania, in order to prove a false widespread public idea that Romania contributes to EU accounts with more money than it receives back. Hence, it concludes that Romania is a net beneficiary in relation to EU budget with a positive balance of approx. 15 billion euro by mid-2014.

Keywords: multiannual financial framework, financial perspective, net financial flows, net beneficiary.

JEL classification: E60, E61, H60, H61

1. The structure of the European budgetary expenditure 2007-2013 The structure of the Community budget’s expenditure includes many chapters and budgetary lines. All of them are classified in six budgetary headings composing the financial perspective (Multiannual Financial Framework – MFF) for 2007-2013 . The main headings of the MFF are the following: • Sustainable growth - this part of the budget is subdivided into a) Competitiveness for growth and employment and b) Cohesion for growth and employment. Funds under this heading cover research, trans-European energy and transport networks, support for the development of a knowledge-based society for the countries and regions with a GDP below the EU average, for the continuation of the peace process in Northern Ireland and the regions at the EU's borders.

• Preservation and management of natural resources - this includes PAC, fisheries policy and other specific areas. In addition to the subsidies allocated to farmers, this chapter includes funds for sustainability, biodiversity and rural development measures.

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• Citizenship, freedom, security and justice - this heading consists of a variety of expenses. We underline here the resources assigned for expenses related to asylum and migration, the Schengen system, counter-terrorism measures, enforcement of Community legislation, cultural exchange programs, the European Media program, etc.; • EU global partner - here are found all external instruments, including development assistance (other than the one financed by the European Development Fund, which is not part of the EU budget), prevention of external conflicts, expenses for EU enlargement and neighborhood policy, humanitarian aid and support to developing countries for human rights and democracy; •

Administration - includes administrative costs (budgets of Union institutions);

• Compensation - is a minor element that was created for the period 2007-2009 and destined to Romania and Bulgaria in the form of cash-flows from the lack of experience of the two Member States in managing EU funds after accession.

Table 1: Multiannual Financial Framework 2014-2020, commitment appropriations (mil euro)

Source: European Commission

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Figure 1: Multiannual Financial Framework 2007-2013 (%) Source: European Commission

Analyzing the figures agreed in terms of the financial perspective, we can easily notice the budgetary priorities of the Union.

"Preservation and management of natural resources" (mainly CAP and rural development funds) started in 2007 as major priority, but gradually decreased by 2010 in favor of "Growth and Employment", which, at the beginning of programming, had started the second. In gross numbers, from 2007 to 2013, the Heading Preservation and management of natural resources (agriculture) received approx. Euro 417 billion and the sub-heading Cohesion for growth and employment (cohesion policy) received approx. Euro 348 billion.

"EU global partner" remains at a constant level of about 6%. "Administration" also receives around 6%. "Citizenship, freedom, security and justice” has marginal position in the amount of EU spending. The Heading "Compensation" was temporary and received budgetary resources only in 2007-2009. It is obvious that the EU policies with the highest budget allocations are PAC, the cohesion policy, competitiveness (research, transEuropean networks) and external actions.

2. Multiannual financial framework 2014-2020 On November 19, 2013, after two and half years after intense negotiations since the Commission presented its proposals on June 29, 2011, the European Parliament voted positively as regards the multiannual financial framework (MFF) of EU for 2014-2020.

The EU will invest nearly one trillion Euros for economic growth and employment between 2014 and 2020. The EU budget is modest in terms of its size, compared to national wealth.

However, the budget for one year means more money - at current prices - than the entire Marshall Plan at the time! The European budget oriented towards the future can make a real difference in people's lives. It will help strengthen and support the economic recovery ongoing in the entire European Union. Funds are allocated to exit the crisis, to financially support those living in poverty or who are looking for a job, to provide investment opportunities for small businesses and support for local communities, farmers, researchers and students.

The EU multiannual financial framework for 2014-2020 allows EU to invest up to 960 billion Euros in commitment appropriations (1.00% of the EU’s GNI) and 908.4 billion Euros in payment appropriations (0.95% of the EU’s GNI). The tools for contingencies (such as the Emergency Aid Reserve, the European Globalization Adjustment Fund, the Solidarity Fund and the Flexibility Tool) and the European Development Fund are outside the MFF ceilings. If fully activated, they are still 36.8 billion Euros (or 0.04% of the EU’s GNI). The EU budget for 2014-2020 defines spending priorities, which are oriented towards sustainable economic growth, employment and competitiveness in line with the EU's growth strategy "Europe 2020". For example, compared to the previous multiannual financial framework (2007-2013), the amount of the sub-heading 1a (Competitiveness for growth and employment) is increased from 91.5 billion Euros (9.2% of the budget) to 125.6 billion Euros (13.1% of the budget).

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Table 2: Multiannual Financial Framework 2014-2020, commitment appropriations (mil euro)

Source: European Commission

Figure 2: Commitment appropriations mil euro (prices, 2011) MFF 2007-2013 vs. MFF 2014-2020 Source: European Commission

Following the comparative analysis, we notice that there are no major changes in terms of chapters/budgetary headings. There are still six in number, but as regards the distribution of allocations of the two policies with major impact on the Union budget, as total share and the European funds allocated to Romania, PAC (chapter 2 - sustainable growth: natural resources), the budget is reduced to 373 billion Euros from 420.6 billion Euros and the cohesion policy (subchapter 1b - economic, social and territorial cohesion) also recorded a reduction to 325 billion Euros from 355 billion. There is a considerable increase of sub-heading 1a, Competitiveness for growth and employment, from 91.5 billion Euros to 125.6 billion.

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3. Evolution of cash-flows between Romania and the EU in 2007-2014 Once Romania joined the European Union on January 1, 2007, our country has significantly increased the potential for accessing non-reimbursable EU funds by significantly increasing the financial allocations of the EU for Romania. Along with these huge financial opportunities to inject money into the local economy, Romania has a number of obligations to contribute to the EU budget and other Community programs. The document that summarizes the relation between capital inflows and outflows is called net financial flows (NFF). NFF is the tool to determine the national net financial position in relation to the EU budget - comparing financial flows to and from the Community budget.

To obtain the net financial position, there are compared to actual amounts received from the European Union to the amounts actually paid to the EU during the period under analysis.

The amounts received from the EU are divided into the following chapters: pre-accession funds (PHARE, ISPA, SAPARD) and post-accession funds (Structural Funds and Cohesion Funds, Funds for Rural Development and Fisheries, the European Agricultural Guarantee Fund, the European Neighborhood and Partnership Instrument, the Instrument for preAccession Assistance - Romania-Serbia Program, the Transition Facility, the Schengen Facility and for cash flows, the General Program "Solidarity and Management of Migration Flows", funds for moving national experts in the works of Community institutions, funds received from FRONTEX for operational cooperation at the external borders, funds received from EASO agency, other funds received by Romania in the form of nonrepayable financial assistance â&#x20AC;&#x201C; the Solidarity Fund, the European Globalization Adjustment Fund, the EEA Financial Mechanism, the Norwegian Cooperation Program.

We also point out a number of Community programs according to which Romania benefits from non-reimbursable EU funds of smaller scale, such as: the agricultural census program in Romania, the program for data collection and management necessary to conduct the common fisheries policy, the program of control, inspection and surveillance in fisheries area, the RICA program (Farm Accountancy Data Network), the "Civil Justice" program, the Community Statistical Program 2008-2012, the Hercules Program, the "Prevention and fight against Crime" program, the Seventh framework program for research and technological development program, the "Clean Sky", the "Lifelong learning" program and "Youth in Action".

The allocations for Romania from the EU during the multiannual financial framework for 2007-2013 were about 35 billion Euros for post-accession funds and 2.85 billion Euros for pre-accession funds. Romanian authorities estimate that for 2014, it amounts to approx.

7.87 billion Euros, which is largely allocations of the same financial programming 20072013, community programs being carried out according to the n + 1, n + 2, n + 3.

Conclusions Out of a total of 38.20 billion Euros allocated to Romania (including pre-accession funds totalling 2.85 billion) for the previous financial framework 2007-2013, Romania achieved a gross absorption of 25.1 billion Euros from 2007 to August 2014, which represents only about 65% of the total allocated. The end of 2013 did not mean the interruption of payments to Romania, however, it was very important the commitment by Romania of more funds by the end of 2013 from the initial allocation to improve the absorption rate.

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It must be said that, of the total pre-accession funds allocated to Romania, there were made 93.5% and only 62.75% of the post-accession funds allocated to Romania.

Achieving a high level of absorption of EU funds should be one of the strategic objectives of Romania and at the same time, a major benefit of joining the European Union. This goal requires substantial efforts to ensure a flexible system of accessing and implementing the funds and eliminating/limiting any barriers that may affect the absorption process.

Regarding the contributions paid to the EU, they consist of the contribution to the Union budget - own resources and other contributions - contributions to extra-budgetary funds and other European institutions, additional and unexpected contributions, refunds of unimplemented programs, etc.

All these additional contributions, others than the contribution to the EU budget amount to a value of 301.95 million Euros for the 2007 - August 2014, insignificant compared to the contribution to the EU budget, which is 10.07 billion Euros. Therefore, the total amount of payments that Romania made to the European Union amounted to 10.37 billion Euros.

Analyzing the amounts received from the EU budget between 2007 and August 2014, totalizing 25.1 billion Euros and those transferred to the accounts of the Union in the same period amounting to 10.37 billion Euros, we find a positive balance for Romania between 2007 to August 2014 of 14.72 billion Euros. It can be said with certainty that Romania was, at this time subject to review, a net beneficiary related to the EU budget, dismantling the so widespread public opinion that Romania transfers more money to the EU than it receives.

Reference: [1] Begg, I. (2005). "The European Union Funding. The Federal Trust Report on the European Union's Budget." Federal Trust, London [2] Commission of Brussels. the European Communities (CEC, 2005). Financing the European Union.

Commission Report on the operation of the own resources system.

[3] Commission of Brussels. the European Communities (CEC 2009). EU budget 2008. Financial report. Office for official publications of the European Communities. Luxembourg.

[4] Council of the European Union (CEU 2005). Financial Perspectives 2007-2013 Brussels.

[5] De la Fuente, a., v. and r. Rant Doménech (2008). "The redistributive effects of the EU budget and projections: an update for 2007-2013 [6] Miron, Dumitru, “Economy of the European Union“ Publishing House, Bucharest, 2004 Luceafarul.

[7] Wallace, Helen; Wallace, William, and Mark a. Pollack, Policy-making in the European Union, the European Institute of Romania, 2005, Fifth Edition, p. 205.

Websites: http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/misc/87677.pdf http://ec.europa.eu/budget/mff/figures/index_en.cfm http://ec.europa.eu/budget/index_en.htmhttp://ec.europa.eu/dgs/economy_finance/index_en.htm.

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Nowcasting Credit Demand in Turkey with Google Trends Data Ömer ZEYBEK1, Erginbay UĞURLU2 1 ING Bank Turkey Analytic CRM Dept., Maslak, İstanbul, 34357, Turkey Tel: +902123351340, Fax: +902123351000, Email:omer.zeybek@ingbank.com.tr 2

Abstract: Age of Big Data and internet has brought variety of opportunities for social researchers on identifying on-going social trends instantly. As internet user base grew exponentially, major internet content search companies have begun to offer data mining products which could extract attitude of on-going trends and identify new trends on web as well. Since 2009, as a pioneer on these web analytics solutions Google has launched Google Trends service, which enables to researchers to examine change of trend on specific keywords. We use weekly Google Trends Index of “General Purpose Loan” (GT) and total out-standing volume of Turkish banking system from the data period of first week of March 2011 to second week of September 2014. In this paper we test whether the Google Analytics search index series can be used as a consistent forecaster of national general purpose loan (GPL] demand in Turkey. We show how to use search engine data to forecast Turkish GPL demand. The results show that Google search query data is successful at nowcasting GPL demand.

Keywords: Nowcasting web analytics, forecasting, general purpose loan.

JEL classification: C53

1. Introduction Public and private data providers periodically release indicators on level of economic and financial activities for various sectors. However, due to difficulties in data collection and statistical calculation procedures, announcement of figures could be lagged for a period of ING Bank Turkey Analytic CRM Dept., Maslak, İstanbul, 34357, Turkey, Tel: +902123351340, Fax: +902123351000, Email:omer.zeybek@ingbank.com.tr 2 Assoc Prof. Hitit University,FEAS, Department of Economics, Çorum, 19030, Turkey, Tel: +903642257700, Tel: +903642257710, Fax: +902123351000, e-mail: erginbayugurlu@hitit.edu.tr 1

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time. In addition to this, data such as GDP or IP are subsequently revised due to post publication collection of updated observations. Unless short-dated delays up to three months are tolerable for economic policy and trend analysis, on marketing strategy decisions and monetary interventions of central banks side, these delays could cause very serious short-comings in decision making processes. So, it became a common practice for researchers to forecast current conditions when the real data is delayed. This process, the forecasting of present time could be referred as now casting which is a contraction of now and forecasting.

[Hendry et al.,2013] defines now-casting as “any procedure that uses additional information when producing contemptuous aggregate data, beyond just cumulating observed disaggregates as now-casting”. Beside that definition, [Banbura et al.,2010] generalizes time interval of forecasts and defines “now” as near future, now and near past. Originally as a procedure generally used by meteorologist, ‘the now casting’ could be defined as predicting today’s or near future’s weather conditions, based on extensive past meteorology data. But considering economics side, it’s a fact that quality of recent data is more suspicious compared to definite meteorology data. For example GDP or IP indices employed as consistent estimators, could be updated after initial publication of data.

However, the idea made now-casting important was spill over of monetary economics and government’s tendency to react spontaneous actions on any disequilibrium occurred in market environment. As stated in [Evans,2005] although, individual customers or firms are aware of their contemptuous activities, information about current state of economic activity is widely dispersed among economic agents. So this phenomenon causes disintegration between economic reality and already published data, thus markets and trading environment falls short on information on current state of economics. For example, as a major indicator of progress in economic activity the GDP indices are the most vulnerable data releases to this adverse effect.

Accordingly, when we examine recent works on now-casting dominance of analysis on GDP growth draws attention. While now-casting, current-quarter GDP a typical method would be using small bridge equations containing monthly data to forecast current quarterly GDP via these small models. Consequently, [Baffigi et al.,2004] and [Runstler and Sedillot,2003] could be counted as an example bridge equation method.

Until recently predicting the present has been considered as a challenge for academic researchers working on specific issues like listed above or central bankers and other government agencies as a extension of their duty of managing level of economic activity.

But in this paper we claim that contemporaneous forecasting of credit demand in high frequency could have crucial importance on operations of banking industry. We assume that by estimating weekly credit demand of retail side, banks could regulate their loanable funds stock more efficiently and place their campaigns as soon as it’s necessary. However it should be noted that a high frequency forecasting on weekly basis could require more specific econometric methods such as mixed model estimations or appliance of high level time series methods. On the other hand, because our goal in this paper is to familiarize readers on now-casting weekly outstanding credit figures using web searching trends we didn’t prefer complicated methods in this paper. However, we believe that using such valuable data in high frequency future researcher could create more advanced models.

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The remainder of this article is organized as follows. Section 2 explains the outstanding credit conditions in Turkey. Section 3 investigates the previous literature and section 4 presents results of empirical application. Section 5 summarizes the paper.

2.

Outstanding Credit Conditions in Turkey

As briefly introduced above, in this paper we investigate a rather different side of economic activity, personal finance demand of individuals in Turkey. As an emerging country, majority of the population compromises of youths with increasing disposable income, consumer spending in Turkey increases steadily for almost a decade3.

Consequently, private income’s contribution to 4.0% YoY increase in Turkish GDP came at 3.1% level (translating about 80% of all increase in GDP is explained by domestic demand) by the end of 2013. Moreover, total amount of personal finance in Turkey has reached approx. US$250bn by the end of same year. The banking regulator Banking Regulatory and Supervision Agency of Turkey (BDDK)’s figures presents that nearly half of this figure (US$141bn) is concentrated in general purpose loans4 segment, while rest of the personal debt is listed under mortgages, vehicle and overdraft/credit card loans. However because Turkish private consumption is largely consists of imported consumer products and local savings standing at very low-levels, the funds needed to stimulate this growing consumer economy needs to be financed from aboard. Consequently financing huge volume of funds from aboard creates extensive imbalances in Turkey. In order to regulate this unbalanced growth, from 2011 to 2013 government utilised different kinds of macro-prudential measures to drown-down loan growth which reached to 40% YoY by 2010 to more moderate %15 levels in 2013.

As [Basci,2006] stated, the rapid growth in emerging countries bring problem of responding credit booms on policymakers table. On the other hand, one should not be miss out that any measure against credit boom could only be effective when the intervention comes at the right time, after annual credit growth reaching high levels and household debts hitting the top it would be extremely challenging to rebalance economic activity. On the contrary, when we leave macro ground and focus on micro company view; if you are a bank with a large stockpile of loanable funds it’s very important to plan supply of this capital. Offering funds when the credit conditions are dull would face bank with unfavourable lending conditions. That’s why monitoring real time credit demand has crucial importance for the banks either.

BDDK is responsible from publication of banking sector statistics. Each week the agency publishes weekly banking statistics with a one week of lag (as of 12nd Sept. We are able to reach 5th Sept’s data). Regarding economic indicators, one week lag could be counted as an acceptable delay but if you are central banker commissioned with daily monitoring of credit conditions or a sales manager of a retail bank responsible from weekly planning of consumer loan campaigns, a 7 day of delay could cause some important problems.

Respectively, in following sections we will try to build a reliable model to foresee level of outstanding credit volume both for central bankers and also both for commercial bankers.

While seeking a reasonable proxy for estimating current outstanding GPL volume, as keeping in mind that this volume translates to current outstanding GPL credit demand, we preferred using web searches as a proxy of credit demand.

3 4

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TURKSTAT http://www.turkstat.gov.tr/HbGetirHTML.do?id=16193 http://ebulten.bddk.org.tr/haftalikbulten/index.aspx

3.

Literature Review

After emerge of internet as main source of information in late 1990s, first studies on the relation between web searches and macro-economic variables have started by early 2000s. [Kuhn and Mikal, 2002] argue that does web search has an positive impact on unemployment period of U.S. job seekers, and they were unable to find any significant statistical relation between being a job seeker using web search could shorten period of being unemployed. On the other hand, [Ettredge et al.,2005] was the first study which aims to now-cast unemployment rate in US, especially a reasonable time before the BLS report of unemployment subsequent year. However due to lack of data availability they prefer to make an indirect forecast of unemployment rate via using number of jobseekers on internet. Consequently, Google’s launch of Google Insights in 2007 (Google Trends after 2012) enables researchers to employ strong proxy variable for forecasting any trend.

[Choi and Varian,2009a,b] described how can Google Trends helps to predict several economic indicators. However widespread recognition of web search data as an indicator of present came up with 2009’s H1N1 Flu Pandemic. Flu Trends a service by Google has already been launched in 2009 and a model behind the system was continuously scoring a flu activity probability of a specific region by using 50 million queries entered search engine every day. [Polgreen et al.,2008], [Ray and Brownstein, 2013] and [Cook et al. , 2011] has confirmed Google’s claim that search data is capable for estimating H1N1 pandemic activity which out broke in 2009. When we checked economics area, [Guzman, 2011] examined Google data as an estimator of Israeli inflation. As we stated earlier because now casting current economic activity is central banker’s main challenge, we could also see several works by central bankers aiming to estimate current activity, such as [Swallow and Labbe, 2011] studied on now-casting car purchases in Chile.

Although studies on prediction power of “Google Trends” have become popular around the world, studies on Turkish case remained limited until now. As far as we know the only study [Chadwick and Sengul, 2012] examined forecasting unemployment rate in Turkey which is announced with a 3 months of lag.

4.

Empirical Application

Google Trends is a service which provides time series index of volume of searches for a specific keyword at predefined time interval. Introduced in 2007, Google Trends is able to draw, web search data since 1 Jan 2004 to present. Data are delivered in weekly frequency and users served with an index normalized by highest value, fluctuating between 0-100.

Due to normalization procedure the date with highest score represents with 100 value, while 0 means there are not enough searches during that particular week. It should be noted that these values are calculating based on a specific keyword provided by the user.

Although it’s possible to receive index values on country level, user could also reach regional volume indexes. Finally, as a last remark, due to performance issues Google Trends data compute by using a sampling method and that’s why results could vary day to day. It’s clear that important characteristic of the data could cause measurement error in the model, but [Swallow and Labbe, 2011] test the variation of the indices by downloading index data on a keyword 50 times in 50 day and they stated that measurement error is as source of concern because it weakens information contents of Google data thus it makes more difficult to reject the null hypothesis tested. Flowingly, because researchers have no access to raw data, they suggest Google to provide cleaner data available in the future.

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We collected data form both Google Trends Index and BDDK’s Weekly Outstanding General Purpose Loan figures. Google Trends Index is calculated based on key word “İhtiyaç Kredisi” which means “General Purpose Loan (GPL)” in Turkish that is downloaded from Google Trends web page at 20 September 2014. Because of sampling procedure on data which is argued above, the exact timing of data collection is crucial in analysis.

Regarding credit demand indicator, the total out-standing GPL volume of Turkish Banking System is downloaded from BDDK’s statistics web page in weekly frequency. It should be noted that a flow data for credit stock is only available for quarterly frequency, so for a high frequency analysis such like this one, researchers have to use outstanding figures.

Each rows constitute volume of GPLs in TRY by the end of week while Google Trends data prints weekly search performance for specific keyword.

We use weekly data start from first week of March 2011 to second week of September 2014 thus we have 185 observations. Figure 1 shows the time series graphs of Google Trends Index of “General Purpose Loan” (GT) and total out-standing volume of Turkish Banking System (BK).

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Figure 1:Graph of GT and BK Series Source: Authors

[Choi and Varian,2009] used a simple AR process to forecast time series. So they defined yt the log transformation of the observation at time t. Because they used monthly data, AR1 model is defined as follows: (1)

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We use weekly data hence we take a first and fourth lag of the log of the BK (LBK) to show effect of first week and first month. To estimate the model we use in sample period, 3 May 2011- 08 August 2014 period. The estimated model is below: (2) Table 1 shows the result of the estimated model of equation 2. Except intercept all coefficients are statistically significant in 1% level and the model is statistically significant according to F statistics in 1% level.

Table 1: Estimation Results of Baseline Model Dependent Variable: LBK Variable Coefficient C 0.025893 LBK(-1) 1.217201*** LBK(-4) -0.219420***

Std. Error 0.018953 0.026902 0.026459

R-squared: 0.999527 Adjusted R-squared: 0.999521 F-statistic: 182597.6*** *** indicates significance at the 1% level

Source: Authors Calculation

To see whether google trend (GT) variable has impact or not on BT, it is added to model.

Table 2 shows the model with GT variable. However, after GT variable added to model significance of the intercept and value of R-squared increased, the significance of the GT variable is low (10%). Regarding to this model we can say that the google trend data can be used as a forecaster of BK series with positive effect on it.

Table 2: Estimation Results of Model with Google Trend Data Dependent Variable: LBK Variable Coefficient C 0.055034** LBK(-1) 1.212179*** LBK(-4) -0.217158*** -5 4.44X10 * GT

Std. Error 0.025749 0.026707 0.026391 -5 2. 67X10 *

R-squared: 0.999534 Adjusted R-squared: 0.999526 F-statistic: 122972.9*** *,** and *** indicate significance at the 10%,5% and 1% level.

Source: Authors Calculation

After the forecaster variable is defined other important question would be whether the GT variable improves forecasting performance or not. To check this, we use forecasting evaluation criteria to compare the forecasting5 performance of these two models. The used criteria are Mean Absolute Error (MAE), Mean Absolute Percent Error (MAPE), Root Mean Squared error (RMSE) and Theil Inequality Coefficient. The model which has smaller MAE, MAPE and RMSE has a better forecasting performance comparing to other one. On the other hand the model whose, Theil inequality coefficient is close to zero would has better forecasting performance than the other one.

5

We use static forecast.

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Table 3: Forecasting Performance of Two Models MAE MAPE RMSE Theil Inequality Coefficient

Baseline Model 0.002823 0.025294 0.003487 0.000155

Model with GT 0.002776 0.024872 0.003459 0.000155

Source: Authors Calculation

Table 3 shows that all criteria of model with google trend data have smaller values than baseline model. Thus we can say that google trends variable has a positive impact on forecasting performance of total out-standing volume of Turkish banking system.

The final step of the empirical application is calculating out of sample forecast performance for the 8/15/2014- 9/12/2014 period. We employ the following equation for the calculations.

(3) Forecasted values were calculated using actual data of the variables. To see the performance of the model we calculate proportion of absolute deviation from the actual values of forecasts.

Table 4: Forecasting Performance of Out of Sample Forecast Term 8/15/2014 11.43098 8/22/2014 11.43431 8/29/2014 11.43592 9/05/2014 11.43681 9/12/2014 11.44074 Source: Authors Calculation

11.43245 11.43243 11.43383 11.4384 11.44503

92132.22 92439.53 92588.48 92670.92 93035.83

92268 92266 92395 92818 93436

0.001472 0.001881 0.002094 0.001585 0.004283

Table 4 shows the absolute deviation. Maximum value of the deviation is 0.004283 and the mean of the deviation is 0.002263. We have also had success with out of sample period.

Conclusion This paper provides empirical evidence for using Google Insights Search data to now cast total out-standing volume of personal finance among banking system in Turkey. We use weekly Outstanding General Purpose Loan and Google Trends Index data for the is calculated based on key word “İhtiyaç Kredisi” which means “General Purpose Loan (GPL)” for the 3 May 2011- 08 August 2014 period.

Our findings show that Google Trends data has significant explanatory power on forecasting of credit demand variable. So it could be employed to monitor nearly - real time developments in personal credit demand. However it is obvious that using lagged variable of first week and first month are very naïve forecasting method and indigenous lagged variables could absorb much of exogenous variables forecasting performance.

However because our goal in this paper was introducing google trends as a capable forecasting instrument in high frequency economic activity data we didn’t employed more complex forecasting methods and also we didn’t test whether GT is the perfect forecasting instrument among other exogenous variables. As we proved that the series has a significant explanatory power these question would be subject of following studies.

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References [1] Baffigi, A., R. Golinelli and G. Parigi (2004], “Bridge Models to Forecast the Euro AreaGDP” International Journal of Forecasting, forthcoming [2] Banbura, Marta & Giannone, Domenico & Reichlin, Lucrezia, 2010. "Nowcasting," CEPR Discussion Papers 7883, C.E.P.R. Discussion Papers [3] Başçı, E 2006,. "Credit growth in Turkey: drivers and challenges." BIS Papers, 28 The banking system in emerging economies: how much progress has been made (2006): 363-375.

[4] Brownstein, John S., Clark C. and Lawrence C, 2009 "Digital disease detection—harnessing the Web for public health surveillance." New England Journal of Medicine 360.21 (2009): 2153-2157.

[5] Carrière‐Swallow, Yan, and Felipe Labbé., 2011 "Nowcasting with Google Trends in an emerging market." Journal of Forecasting 32.4: 289-298.

[6] Chadwick, M. G., & Sengul, G. 2012. Nowcasting unemployment rate in Turkey: Let’s ask Google. Central Bank of the Republic of Turkey, Ankara.

[7] Choi H. Varian H. 2009b Predicting initial Claims for unemployment benefits, Economics Research Group,Google [8] Cook S, Conrad C, Fowlkes AL, Mohebbi MH (2011] Assessing Google Flu Trends Performance in the United States during the 2009 Influenza Virus A (H1N1] Pandemic. PLoS ONE 6(8]: e23610. doi:10.1371/journal.pone.0023610 [9] Etterdge, M., Gerdes, J. and Karuga, G. (2005] “Using web bazed search data to predict macro economic statistics’ Communications of the ACM, 48(11], 87 -92.

[10] Euro Surveillance : Bulletin Europeen sur les Maladies Transmissibles = European Communicable Disease Bulletin [2009, 14(44]:429-433] [11] Evans, Martin D.D., and Richard K. Lyons. 2004a. “A New Micro Model of Exchange Rate Dynamics.”

NBER Working Paper No.10379 (March].

[12] Evans, Martin D.D.,2005 “Where Are We Now? Real-Time Estimates of the Macroeconomy”, International Journal of Central Banking, Vol.1, No.2, September.

[13] Guzman, G., 2011 Internet search behavior as an economic forecasting tool: The case of inflation expectations. Journal of economic and social measurement, 36(3), 119-167.

[14] Hendry F, Castle L, Kitov I. Forecasting and Nowcasting Macroeconomic Variables : A Methodological Overview, Oxford University Department of Economics Series Working Papers, No.674 [15] Kuhn, Peter; Skuterud, Mikal (2002] : Internet Job Search and Unemployment Durations, IZA Discussion paper series, No. 613 Choi H. Varian H. 2009a Predicting the present with Google Trends, Economic Research Group, Google [16] Polgreen, P. M., Chen, Y., Pennock, D. M. & Forrest, N. D, 2008 Using internet searches for influenza surveillance. Clinical Infectious Diseases 47, 1443–1448).

[17] Rünstler, Gerhard & Sédillot, Franck, 2003. "Short-term estimates of euro area real GDP by means of monthly data," Working Paper Series 0276, European Central Bank.

[18] Wilson N, Mason K, Tobias M, Peacey M, Huang QS, Baker MDepartment of Public Health, University of Otago, Wellington, New Zealand. nick.wilson@otago.ac.nz

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Available online at www.icesba.eu Procedia of Economics and Business Administration ISSN: 2392 – 8174, ISSN-L: 2392 – 8166

From the Eco-Bio-Economy to the Health of the Whole Living Entity 1

Raluca ZORZOLIU1,2, Vasile Miltiade STANCIU3,4 “SpiruHaret” University, Faculty of Marketing and International Economic Affairs, 46 G Fabricii Str., District 6 Bucharest, Romania Tel: +4021316979, Fax: +4021316979, Email: zorzoliu.raluca.mk@spiruharet.ro Abstract: The current global crisis has affected the natural environment and manmade environment. It was caused by humans in their race for competition with no limits and responsibility towards the future, both for them and Earth. Economic life in the virtue of the dominant paradigm that exist in economics so far has been under the influence of some mechanisms influenced by individualism and selfish self-centred, markets without morality, greed, freedom without responsibility so, like these were not the result of human behaviour, but something beyond. The continuation and perpetuation of these behaviours will mark irremediably and irreparably our future, as well as the one of the next generations. We think it is time for humanity to move on, to a different model of understanding and interpretation of socio-economic reality at a planetary scale. In this sense, our paper proposes two models, one is "the eco-bio-economy" and another one is "the health of the whole living entity". These are, in our opinion, the twin models that can provide questions, answers and solutions for our common future, in witch we must coexist in harmony both with ourselves and others and with the environment.

Keywords: sustainable development, human development, the health of the whole living entity, harmony, respiritualization JEL classification: A13, O13, O15, R11

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Romanian Academy, post-doctoral student Post doctoral student at The Institute of World Economy, Romanian Academy 4 “SpiruHaret” University, Faculty of Marketing and International Economic Affairs, 46 G Fabricii Str., District 6 Bucharest, Romania Tel: +40213169793, Fax: +4021316979, Email: stanciu.miltiade.mk@spiruharet.ro 3

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1. Introduction During the last centuries, technology, conceived mainly to improved life and activity, brought together with partial development, different social phenomena as individual dissatisfaction and economic under development, both of them with terrible secondary effects [Ray,1996] The businesses of the last century, strictly lead by the maximization of financial profit had destroyed the three fundamental values, life lived in society as individual, work based on social division and love, as a great feeling generating hopes. Our system from the last century, lead by materialistic character of development ended by dividing people, communities, institutions and organizations in two cultures in opposite positions, one producing prosperity and health and another that brought poverty and bad life, work and love. Both development that brings wealthy and increasing that brings poverty leaded to terrible effects over the environment, and today we talk about â&#x20AC;&#x17E;Sickness of the Earthâ&#x20AC;?.

Beyond of what this century has to be for the evolution of the whole living common and of what the inheritance of the last century is, a transition is necessary. During this transition, the roots of countersense must be annihilated, prior to pattern and formalize a new vision based on value and durability of sense for changes inside people, environment, community, organizations and institutions. The world must be aware that during this period of transition, it has to be a mutation of consciousness on global level to prepare the dawn of new civilization.

2. The Eco-Bio-Economy, a Paradigm for omorrow In this sense, American scientist Lester Brown, one of the pioneers of the concept of environmentally sustainable development, launched in 2001, Eco-Economic theory, which emphasizes the importance of ecology and environmental protection, sustainable development of mankind, a warning of limited natural resources the Earth.

Another American scholar of Romanian origin, Nicholas Georgescu Roegen launched the concept of Bio-Economy [1979] , by which it brings into question the human role in anthropogenic ecosystems, the need demonstrated statistically the negative energy balance where excessive consumption of raw materials and lack of prospects for future generations. Based on the idea of scientific contradiction between the second principle of thermodynamics and the law of entropy - unlimited economic growth and material, versus the use of excessive and ultimately loss of natural resources of the Earth, an advocate of economic decrease in accord with natural law of entropy, scientist is sounding the alarm on the possibility of depletion of energy resources in the world, the need for re-balancing economic development, global political economy that respects the principles of biology.

Academician Alexandru T. Bogdan argues in his works presented in literature specialist's international attempt to unite the two concepts: Eco-Economy and Bio-economy in a new paradigm - Eco-Bio-Economy - defined as: Eco-Bio -Economy is an economy of the future in the service of human life through wise use of environmental resources.

This is a new vision of developing sustainable human welfare in all its forms, through economy of the future, in the service of human life through wise use of environmental resources. Eco-Bio-Economy is a scientific test, economic and philosophical environment dedicated to the development of integrated health, well-being of humanity, through an

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integrated concept multipolar eco-bio-economy, promoting Agrifood Green Power and Smart Sustainable Integrated Development of the future by saving the future.

Eco-Bio-Social Economy is identified as having a direct convergence areas of economic, environmental, biodiversity, eco-economic and bio-economic, socio-economic side of life, human resources and communities. The social economy includes organizations such as cooperatives, self-help organizations, associations and foundations, including employees of various religious faiths, the most active being the Christian - Orthodox and Catholic; prestigious providers of services and social activities, spiritual, philanthropic - in Europe and in the world.

In the same eco-bio-economic context - Integrated Environmental Health and Food Safety and Security, Integrated Biodiversity, Integrated Bioethics are considered to be key elements of Intelligent Integrate Sustainable Development. Environmental Health is an integrated health to all those that make life (bios): people, plants, animals, water, air, forests, soil, see fig no 1.

Figure 1: Eco-Bio-Economy Paradigm Source: A. T. Bogdan, Eco-Bio-DiplomaĹŁia, 2011, pg. 93.

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Eco-Bio-diplomacy is smart diplomacy future dedicated Intelligent Integrated sustainable development of the planet Earth and humanity through international cooperation among nations, by promoting Eco-Bio-Economy, global welfare, quality of life by using innovative and rational environmental resources. [Bogdan, 2011] If Sustainable Development contains four growth pillars: economic, socio-political sustainability, environmental sustainability, sustainable cultural, diplomatic vision anchored it should become an Intelligent Sustainable Diplomacy, to orchestrate an ecobio-economic attitude of "Smart Power "consistently applied to all sources" hard "and" soft "sciences and resources available life.

Environmental social and economic conditions imposed in the second half of this century, giving the model development and adoption of a monetary return profit under new development model that combines economic growth, improve environmental quality, social justice and democratic ambience in life insurance social, with the purpose of intergenerational equity, defined as sustainable development (S.D./D.D)

3. Contrasting realities in terms of the health of whole living entity Although concerns experts regarding sustainable development, concerns on more than 25 years, global realities are far from encouraging.

One billion people, or 14.5 percent of the world’s population (17.0 percent of the developing world’s population) are living in poverty or even below poverty ceiling – according to the statistics of the World Bank [2014]. One in nine people suffer from chronic hunger, more than 1 billion people are undernourished, and 3,1 milion children die every year to hunger and malnutrition [World Bank, 2014].

Approximately 2 billion people have difficulty to receive drinking water, due to insufficient investment, high pollution or other similar causes. About 80% of the population lives in developing countries characterized by: low income, high levels of poverty, increased rates of unemployment and poor education [Stiglitz, 2008]. A significant part of agriculture in the so called “poor world" has been diverted from feeding the local population to the rich countries [Monobiot, 2005] .

At the same time, we are talking today about a consumption civilization, consisting in a certain excess of goods necessary for man, for entire societies, as stated by Pope John Paul II (2008), as we are talking about rich and very developed societies on the one hand and on the other hand the remaining societies that are starving. A consuming civilization, dividing the world into rich, developed and very developed societies and the remaining societies facing a complex of problems, from poverty to the burden of external debt [Stanciu, 2014].

It is obviously a development which made man not take account of environment and his fellows. We believe that development is development for the sake of nonsense. The development must be examined by its ability to come in the service of people's lives, family life, community life, environment etc. In this respect, we believe that the health of „whole living entity" may contribute to passing to a new stage, that of the vertical transition to the human individual level and the global societal and institutional level when development must consider both the overall health of human society as a whole, as well as components [Stanciu, 2011].

The health of „whole living entity" surprises through a unitary approach of the relationships of causality among the living whole: the humans, the communities, the environment, the organizations and the institutions [Popescu, 2006]. All these life forms 344

with human and nonhuman character are in a relationship of organic interdependence of functionality, of their normal and meaningful evolution depending the future of our existence as a human species as well as an ecosystem, see fig. no.2

People

Families

Organizations

Institutions Communities

Environmental

Figure 2: Interdependencies between components of whole living entity

The health of „whole living entity" is defined by an assembly of natural-social parameters whose constants make in the time and space of our common micro cosmos the sensemaking evolutions, for the phenomena and processes which form life in the framework of the paradigm described so far [Costea et al, 2007].

The model contouring the “health of whole living entity” and of its components must include the following defining elements: the meaning (purpose) of life; the mechanisms of life; balances and imbalances of life; the regulation and control systems for risks related to evolution, as resulted from fig. no.3.

Risk control and regulation systems of evolution

Balance and unbalance of life

The model of the healthy living whole includes:

Purpose of life

Mechanisms of life

Figure. 3: The model of the health of the whole living entity

Source: Stanciu, V.M., 2010, Integrare economică prin competitivitate. Paradigma sănătăţii întregului viu, Universitară Publishing House, Bucharest, p.176.

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The extent of the vision regarding human health over the other components which define non-human life have the purpose to make essential the functionality, no matter the forms under which it manifests itself as its purpose. This means, according to our opinion, that when we speak about the health of the individual as a state of harmony and normality of the functions of his/her life [Costea et al, idem], we may speak also of the health of the family, of the organization, of the communities, the health of the water, air, institutions etc., as states of integral functionality of life in these forms, from the perspective of its purpose, as organic parts of the common living entity.

Therefore, it is necessary to build a healthy economy to have a healthy environment, where people’s health, ecological equilibrium, organizations, communities and institutions have as a common denominator a durable responsibility versus the functioning of the whole living.

The implementation of the new paradigm, which we suggest, supposes the acceptance of the "living" for all the components of the entity. As they include human beings, the organizations behave as living entities. They have stages of evolution according to which they deal with adjusted models at different levels or degrees of complexity". The organizations belong to the living entity no matter if they are “healthy or suffering” (Smith, 2006). They are exactly like humans: they are born, they grow and they can also die. We can speak even about the death of the spirit of an organization.

The Nobel prize laureate in Economics, Amartya Sen, said about two components of the living whole, that `` the humans live and act in a world dominated by institutions. Our opportunities and perspectives depend in a crucial manner on the existence of the institutions and on the way they function” [Sen, 2004].

Hubert Reeves, a well known physicist, winner of the Albert Einstein prize , wrote in 2005, about the connections between other two components of the living whole: the human and the environment: ``The temperature of the planet is rising, the natural resources are depleting, the soil and the water are polluted, species of animals and plants are disappearing in a rapid manner – these are the signs of the evil provoked by our civilization gripped in a development that ignores exactly the fundamental conditions of our own existence”.

4. Instead of conclusions Therefore, today we cannot ignore `` the traffic rules” that the man itself, a component of the living whole, created, but he himself ignores constantly and repeatedly. Or, we can continue to ignore these rules, but we will get to a point where we will have to face the consequences, which are in general irreversible. The unbalances provoked by the human beings in their run after wealth without paying attention to the risks or the price needed to be paid can be catastrophic for all the living whole components, in a smaller or bigger degree.

In the end, fully believing that the spirit of hope and faith that the respiritualization of the global mind is the key of positive changes from the both twin paradigm perspective, we hope that our common efforts will not be wasted on the learning filed.

Acknowledgements "This work has received support through the Post-Doctoral school for zootechnical biodiversity and food biotechnology based on the eco-economy and the bio-economy required cross-sanogenesis, financing contract no. POSDRU/89/1.5/S/63258, financed by

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the European Social Fund through The Operational Human Resources Development Programme 2007-2013” This paper has been financially supported within the project entitled “Horizon 2020 Doctoral and Postdoctoral Studies: Promoting the National Interest through Excellence, Competitiveness and Responsibility in the Field of Romanian Fundamental and Applied Scientific Research”, contract number POSDRU/159/1.5/S/140106. This project is cofinanced by European Social Fund through Sectoral Operational Programme for Human Resources Development 2007-2013. Investing in people!

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