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THE IMPACT OF DEBT-SERVICING BURDEN ON HOUSEHOLD EXPENDITURE IN NIGERIA: A CASE OF EKITI STATE SENATORIAL DISTRICTS

Author(s): Amassoma Ditimi,Ogbuagu Matthew Ikechukwu,Damilola Fasina / Language(s): English / Issue: 33/2020

Keywords: household; debt; expenditure pattern; logistic regression; SPSS;

This study employs binary logistic regression technique to explore the impact of household debt-servicing burden on expenditure patterns in South-West geo-political region of Nigeria, using Ekiti State as a case study. Questionnaires were randomly distributed to 2500 households, and the results unveil that households with high income, large family-size and heads within the age group (40 and above) were more susceptible to debt burden. In addition, the paper highlighted that indebtedness compromises the quality of nutrition and health status of household members. Based on the above findings, we conclude that high indebtedness and debt burden trajectories cause deleterious effects on household consumption patterns and overall economic well-being. Thus, household heads should inculcate fiscal discipline which promotes saving culture and averts future shocks that could emanate from precautionary demands. Second, debt providers should regulate loans in cognizance to household repayment capacity and other stipulated policies which break the vicious cycle arising from over-indebtedness, install stability and spur economic development.

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GLOBAL MATRIX OF REGIONAL GROWTH IN THE FUNCTION OF THE ANALYSIS OF REGIONAL DEVELOPMENT AND INTERREGIONAL RELATIONS

Author(s): Stanko Stanić,Željko Račić / Language(s): English / Issue: 31/2019

Keywords: direct growth rate; indirect growth rate; growth matrix; regional growth matrix; global regional growth matrix; dynamic analysis;

The subject of research in this paper is the expansion of the growth matrix, which is reflected in the definition of a new matrix - a global regional growth matrix. The assumption for the formation of this matrix is that the synthetic measures of the development of individual regions included in the analysis are first calculated. This matrix provides an opportunity to analyze interregional relations and the dynamics of structural change in the respective regions.

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THE IMPACT OF FOREIGN DIRECT INVESTMENT ON EMPLOYMENT IN TOURISM IN BOSNIA AND HERZEGOVINA

Author(s): Andrijana Mrkaić Ateljević,Ivo Armenko / Language(s): English / Issue: 31/2019

Keywords: foreign direct investment; tourism; Bosnia and Herzegovina;

The global tourism market is accompanied by the constant changes in the market share of individual countries, the preferences of tourists and ways to satisfy their needs. In 2017, Europe, for example, dominated the tourism market with 51% of market share. However, the increase in Asia-Pacific participation compared to 2016 is as high as 24%, which indicates that the share of transnational companies in the region is increasing, not only in revenues, but also in tourism investments. Part of the investment is also directed to Bosnia and Herzegovina, which emphasizes inflows from Arab countries. Regardless of the type, investments in tourism are of particular importance to developing countries, because in addition to economic effects, they contribute to technology transfer, management experience and they also strengthen the cooperation between the state and the investor. The subject of this paper is foreign direct investment (FDI) in tourism in Bosnia and Herzegovina. The aim of this paper is to examine the impact of foreign direct investment on employment in the tourism sector. Using the correlation regression analysis, the impact of foreign direct investments on the number of jobs in the accommodation and food and beverage industries was examined. The paper shows that there is a weak positive impact of FDI on the increase in the number of employees in the accommodation and food and beverage industries.

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STOCHASTIC ASPECTS OF CONTINUOUS IMPROVEMENT OF THE BUSINESS RESULTS PERFORMANCE OF THE PUBLIC ADMINISTRATION

Author(s): Mirjana Landika,Sanel Jakupović,Radmila Bojanić,Velibor Peulić,Vedran Šupuković,Wolfgang Berger / Language(s): English / Issue: 31/2019

Keywords: business excellence; effective operation; unwanted result; stochastic manifestation; probability distribution; performance improvement;

Effective operation of a system is expressed as an aspiration to achieve excellence in business results, recognized as total elimination of prevented difference between desired values and actual values of the realized system performance, requiring identification of both environmental and internal factors, as well as an explicit expression of the form and the extent of their impact on business processes. It is heavily laden by stochastic manifestation of their values and complexity of the influence. Optimal business management is determined by the structure and the concept of the system operation, and it is expressed and measured by the extent to which a business result meets user requirements. Realization of business objectives is contained in the performance of an output vector, being a resultant of actions of the business system, in terms of separate task stages in public administration management, and also in the operation of the system as a whole. Elimination of unwanted results involves interdependence, conditioning, frequency and probability distribution of their occurrence, and also coordination of, and cooperation between, numerous resources required to achieve the desired level of operational efficiency. Testing the reagibility of realized level of customer (dis)satisfaction with the performance of administrative services, as a dependent variable, in terms of level and intensity, manifested forms of used protocols and adequacy of service provider engagement, as an input of the variable, and their expression by means of an appropriate statistical function represents the aim of research, i.e. improvement of business efficiency by means of exact results. The aforementioned procedures facilitate anticipation and correction of business results, and despite the stochastic process performance variations which are analyzed and monitored, their behavior is predicted, controlled and rationally directed towards a desired business result. The design of experiment is based on time disproportion in discovering the causes of realized level of subjective perception of satisfaction when satisfying the demand in terms of administrative services, and in the context of frequency of demandand the form of service requested. By overcoming and eliminating dissatisfaction with the performance of services, business efficiency of administrative process results is being significantly and permanently improved and the degree of employees’ satisfaction is intensified; the same is with the service users, whose final result minimizes differentiality of realized and targeted performances, and simultaneously the global optimum of the social-economic system. The conclusion in terms of the existence of intensive connections between the observed phenomena reveals the causes of the achieved level of output performance and facilitates its indirect correction by dosing the structure and intensity of the input vector.

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IMPACT OF MATERNAL MORTALITY ON SUSTAINABLE DEVELOPMENT IN THE SELECTED WEST AFRICAN COUNTRIES

Author(s): Joseph Afolabi Ibikunle / Language(s): English / Issue: 31/2019

Keywords: maternal mortality; sustainable development; cross sectional dependence; West Africa; female;

Over half a million females die every year as a result of pregnancy and birth complications. The vast majority of these fatalities can be avoided. SDG 3.1’s objective is to reduce the global maternal mortality ratio by 2030 to below 70 per 100,000 live births. Despite a number of policies put in place maternal mortality in Africa remains unacceptably high. This study investigates the impact of maternal mortality on sustainable development in 9 selected West African countries for the period from 1990 to 2015. Data used were adjusted net savings, maternal mortality, consumer price index, per-capita income and financial development. The second-generation econometric methods were employed: cross sectional dependence, slope homogeneity, Westerlund cointegration, Eberhadt and Teal AMG regression, and the Emirmahmutoglu and Kose bootstrap Granger causality test. Findings confirm the following: First, cross-sectional dependence and slope heterogeneity exist among the West African countries. Second, there is a long run relationship between maternal mortality and sustainable development. Third, maternal mortality impacted negatively and significantly on sustainable development. Fourth, the direction of causality varies across countries between maternal mortality and sustainable development. Lastly, causality runs from maternal mortality to sustainable development when analyzing the causal relationship among all countries. The findings suggest that the West African government needs to commit more funding to the health care sector and ensure access to free healthcare service to pregnant women or at low cost with quality and effective health care services if the countries must attain sustainable development by 2030.

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POSSIBLE DIRECTIONS OF CHANGE OF KEY SEGMENTS OF THE ECONOMIC REGULATORY FRAMEWORK IN SERBIA

Author(s): Gojko Rikalović,Dejan S. Molnar / Language(s): English / Issue: 31/2019

Keywords: constitution; regulatory framework; economy; public finances; Serbia; EU;

The paper first analyzes the institutional framework of the economy and public finances in Serbia, with particular reference to the treatment of the SME sector and entrepreneurs, foreign investors and the digital (IT) infrastructure. A special part of the paper deals with the dynamics of accession to the European Union of some countries that are now members of this integration, as well as with the process of Serbia’s membership, since it is considered that this process is the key determinant of the institutional conditions for our country. The third part deals with the treatment of public finances in the Constitutions of the selected EU Member States.

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THE IMPACT OF MICROFINANCE INSTITUTIONS ON ECONOMIC GROWTH IN NIGERIA

Author(s): Orok Bassey Ekpenyong,Patrick Nwaeze Nnamocha / Language(s): English / Issue: 31/2019

Keywords: microfinance institutions; economic growth; loans;

The study adopted a descriptive analysis and graphical approach in expressing the readily available data between 1992 and 2017 on how the microfinance institutions affected the following economic indexes used in the study: agriculture and forestry, mining and quarrying, manufacturing and food processing, real estate and construction, transport/commerce and other subsectors of the economy. The purpose of the study was to investigate the unimpressive performance of microfinance institutions in Nigeria over the past two decades. The result indicated that the loans from microfinance institutions had a positive impact on the selected macroeconomic sector and enhanced sector al productivity of the country as illustrated graphically in the study, and had a positive effect on the gross domestic product of Nigeria. Though, with a significant improvement in the operational modalities of the microfinance institutions, there will be an improved output, which will have a multiplier effect on the agriculture and forestry, mining and quarrying, manufacturing and food processing, real estate and construction, transport/commerce and other subsectors of economy as alighted in the study. The study, therefore, recommends that interest rates should be reduced on the loans given to the alighted subsectors to enhance economic growth.

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THE APPLICATION OF FAIR VALUE ACCOUNTING IN BOSNIA AND HERZEGOVINA

Author(s): Amira R. Pobrić / Language(s): English / Issue: 31/2019

Keywords: fair value accounting; Bosnia and Herzegovina; non financial assets; financial companies; non-financial companies; company size;

This study investigates the application of fair value accounting in companies in Bosnia and Herzegovina. The study was conducted on a sample of 190 companies. The application of fair value accounting causes a lot of controversy related to the relevance and reliability of fair value information. It is believed that the extent to which fair value measurement is used reflects attitudes of financial statement preparers about the usefulness of this model at its best. The findings of this study suggest that most companies in Bosnia and Herzegovina do not have tendency to apply fair value accounting. It is found that half of the companies in the sample do not use fair value accounting at all. Almost half of the companies that use fair value accounting use it just because they own assets that require fair value measurement. Fair value accounting is much more used in financial and larger companies than in non-financial and smaller companies. Companies mostly use fair value accounting for the measurement of investment property. However, they use it for the measurement of intangible assets at a minimum. The findings also suggest that the application of fair value accounting increases the uncertainty in financial statements. The quality of fair value disclosures is very low. Numerous companies do not disclose information on fair value hierarchy and valuation techniques that were used for fair value measurement. Companies that disclose this information mostly use indirectly observable inputs (Level 2) for fair value measurement and these create a lot of room for earnings management.

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MULTI-ATTRIBUTE DECISION-MAKING METHODS–INDIFFERENCE ASSESSMENTS

Author(s): Željko V. Račić,Saša Damjanac,Katarina Račić,Dunja Milić / Language(s): English / Issue: 31/2019

Keywords: multi-attribute decision-making methods; indifference methods; additive model; multiplicative model; multiple linear model; weighting;

Real situations are based on multiple attributes or criteria. If the assessment problem has multiple dimensions of value, then intuitive judgments can be very difficult. In many situations, the ultimate assessment seems very difficult, especially when the decision maker chooses one of a set of possible options in an unfamiliar environment. This paper analyzes indifference value measurement methods. Indifference value measurement methods rely on studies of indifference (indifference assessments) or comparison of strength of preferences. The values that the decision maker gives to the attributes reflect his preferences, ie. utilities. Utility is only a way to describe preferences. The process of determining (functions) values is only one form of sequential determination of utility.

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ECONOMIC INEQUALITY AND POVERTY IN EUROPEAN UNION

Author(s): Božana Škorić,Jelena Bjelić,Marijana Nikolić,Luis Chirosa / Language(s): English / Issue: 31/2019

Keywords: income inequality; poverty; Gini coefficient; risk of poverty; European Union;

Excessive accumulation and raising income inequality reflected on the high rates of poverty in the European Union countries. Economic literature has wide research on the link between income inequality and economic growth. However, knowledge about correlation between income inequality and poverty is scare. In this paper, we have proved that poverty is not synonymous for income inequality, but that is a product of income inequality. Income inequality, measured by the Gini coefficient, reflected the movement of the percentage of the population who are at risk of poverty. The coefficient of simple on correlation showed that income inequality affects the growth risk of poverty in the countries of the European Union. Besides poverty, as a consequence of income inequality, other socio-economic problems also appeared: the suppression of economic growth, the rise in crime rate, the decline in the quality of education and health, the political inequality growth. All these problems should warn governments to take economic policy for reducing economic inequality. The European Union, as an area of 28 member states, needs to carefully select economic policy instruments to reduce income inequality and ensure stable ground for economic growth. The differences between the level of development, the index of democracy, income and living standards in observed countries have influenced the difficulty in observing the problem and computing mathematical and statistical connection. Through equalization of incomes, the European Union could solve problems of poverty, social exclusion and democracy (measured by index of democracy).

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ENERGY ACCESS AND HOUSEHOLD INCOME IN SUBSAHARAN AFRICAN COUNTRIES

Author(s): Musibau Ojo Adejumo,Ajide Bello Kazeem / Language(s): English / Issue: 30/2019

Keywords: energy access; per capita income; energy price; FDI and trade openness;

This study empirically examined the energy access and household income in Sub-Saharan African countries between 1990 and 2015. The study employed five variables: energy access, per capita income, energy price, FDI and trade openness, as well as panel unit root test using two criteria to test stationarity. Panel cointegration test was also conducted to test long-run cointegration between the variables employed. Panel granger causality test was employed to check the degree of causality between the dependent and explanatory variables and Auto Regressive Distributive Lag method of estimation was employed to check the long-run and short-run relationships between the variables. The results of the panel unit root test from the LLC and IPS methods show that the order of integrations is mixed with some of the variables being stationary at levels (household income, Foreign Direct Investment and Trade Openness) and first difference (Energy Access and Fuel Price) at the same time. The result of Pedroni cointegration test indicated the bivariate long-run cointegration equation between the variables employed except for EA and GDPPC. The panel granger causality test revealed that there is causality between these three variables (EA, GDPPC and FUELP) and the direction of causality only flows from these variables to energy access. The ARDL result revealed that all explanatory variables accounted for 60% variation of energy access in SSA. However, the study made the following policy implications: energy policy needs to be orientated in favor of expanding the supply of energy to reach an enhanced degree of sustainable economic growth and development, and governments in this region can subsidize energy products to increase its consumption and promote the welfare of their citizens.

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STOCHASTIC MULTI-ATTRIBUTE UTILITY MODEL

Author(s): Katarina Račić,Željko V. Račić,Saša Damjanac,Dunja Milić / Language(s): English / Issue: 30/2019

Keywords: Stochastic Multi-Attribute Utility Model; value; utility; probability; weights;

In real situations, the attribute value (mostly variable) can be best represented by introducing the finite number of attribute values level, to which the corresponding probabilities should also be attached. Stochastic MultiAttribute Utility Model has the ability to analyze such stochastic multi-attribute problems. The choice of one, from the set of available options, is made by choosing the best option based on the maximum expected utility structure. In this paper, we will mention some arguments for the development of the Stochastic Multi-Attribute Utility Model, its advantages (they are closer to reality), disadvantages (analytically difficult technique, subjective assessments of the values of variable attributes), as well as the process of solving the problem.

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ANALYSIS OF THE BRAND VALUATION BASED ON THE ASSESSMENT BY INTERBRAND, BRAND FINANCE AND MILWARD BROWN OPTIMOR

Author(s): Svetlana Terzić,Irena Đalić / Language(s): English / Issue: 30/2019

Keywords: brand; brand value; methodology of evaluation; Interbrand; Brand Finance; Millward Brown Optimor;

Brands are significant category in the department of marketing and finance of the company. They also play the key role in the segment of consumer behavior when it comes to decision making during the purchase. Marketing managers in domestic companies still do not have enough experience in using the modern methods for estimation of the brand value. From this, the conclusion can be drawn that the operational structure do not receive an adequate support from marketing department in decision making. Analysis in this work will be based on the research of the concept of the brand value and the methodology of evaluation. The goal is to analyze advantages and disadvantages of different methodologies of well-known consultant agencies for estimation of the brand value. The work consists of a few parts. Attention is first directed towards the concept of the brand value and the classification of the evaluation methods. It is followed by the analysis of necessary measuring of the brand value in domestic practice and the current state in international practice. Then a more detailed analysis of the mode of operations for global agencies follows: Interbrand, Brand Finance and Millward Brown Optimor. Results of the empirical research will be shown through the comparative analysis of the values for the world’s famous brands, which are obtained by using the mentioned methodologies in the same time period.

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VALUE ADDED AS A MEASURE OF ECONOMIC PROFIT

Author(s): Silvije Orsag,Ante Džidić / Language(s): English / Issue: 29/2018

Keywords: accounting profit; normal profit; economic profit; the cost of capital; value added;

Economic profit is the concept immanent for the value added. It is an attempt to analyze properly the business success in terms of contribution of profit to the increase in the company value and the stockholders’ wealth. Fundamentally, value added is a measure of the business success where all standard costs and the costs of invested capital are excluded from the realized revenues. Profit as a traditional measure of business success ignores the cost of equity, although equity is the most expensive form of capital. To illustrate better this concept, we made an analysis of the most profitable corporations in Bosnia and Herzegovina listed on Banja Luka and Sarajevo stock exchanges. The analysis showed that the majority of these corporations operate poorly because they do not meet the implicit cost of capital, essentially losing the value of capital entrusted to them by their stockholders. Also, this analysis questioned the importance of the industries which are usually considered to be the most important in BiH economy.

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HUMAN CAPITAL, ENTREPRENEURSHIP AND RURAL GROWTH OF THE SERBIAN ECONOMY

Author(s): Sonja Josipović,Dejan Molnar / Language(s): English / Issue: 29/2018

Keywords: rural areas; outdoor amenities; human capital; entrepreneurship; rural growth; Serbia;

In the new economy, based on knowledge and innovation, the concept of human capital is becoming an increasingly important factor of growth (and development) not only for urban, but also for rural areas. The studies dealing with the analysis of the available human capital at the local level have highlighted its significant presence in rural areas characterised by a “specific environmental quality”, defined in the literature as rural outdoor amenities. Highly educated individuals who live and work with their families in these areas are responsible for the successful transformation of the local economy, employment growth, the improvement of living standard, development of entrepreneurship, and achievement of high rates of economic growth. This paper is aimed at analysing the relevance of the concept of human capital for rural development, with special emphasis on the rural development of Serbia. The paper presents the results of an empirical study of the model of economic growth of rural areas in Serbia, based on the panel data analysis, during a five-year period. According to the results, human capital and entrepreneurship have a significant impact on economic growth. Additionally, there are significant differences in the rate of economic growth between the rural areas with high and low outdoor amenities in Serbia. Human capital and entrepreneurship are represented in the models of rural economy growth as determinants of the development mechanism through which rural economies grow.

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(IN)CONSISTENCY OF THE SELECTION OF THE METHOD OF MULTIPLICATIVE DECISION-MAKING

Author(s): Katarina Račić,Željko V. Račić / Language(s): English / Issue: 29/2018

Keywords: Multi-attributive decision-making; data normalization; weight coefficients; Likert scale;

The paper analyzes the main causes of the (in)consistency of the selected method of multiplicative decision-making: data normalization, weight coefficients and the application of the Likert scale for the purpose of measuring quantitative attributes. Normalized data in the methods of multitributive decision making represents the substitute for a subjective attribute ratings by decision makers. Since they are calculated on the basis of mathematical transformations of empirical data, one gains the impression that the choices basen on normalized values are „objective”. Therefore, the sensitivity analysis of the results has dealt exclusively with effects of weight coefficients on the final choices so far, while the potential impact of normalization is complitely ignored; meanwhile, the deformations caused by the normalization of data have been attributed to the effects of weight coefficients and their inevitable subjectivism. We intent to point out at the deformations of empirical values that are the result of normalization and which call into question the application of normalized values as a decision base. It can be proven that the normalized values are an unrealiable information base for decision-making. In addition, the (in)consistency of selection methods of multi-attributive decision-making is also influenced by changes in the method of measuring and formulating attributes.

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STUDENTS’ CAREER ASPIRATIONS TOWARDS ENTREPRENEURIAL AND MANAGERIAL JOBS: A COMPARATIVE STUDY IN BOSNIA AND HERZEGOVINA, CROATIA AND SERBIA

Author(s): Saša Petković,Mira Krneta,Ana-Marija Alfirević,Maja Ivanović Đukić / Language(s): English / Issue: 28/2018

Keywords: entrepreneurial intentions; managerial career; entrepreneurial education; student entrepreneurship; Bosnia and Herzegovina; Croatia; Serbia;

In conditions of significant high youth unemployment rates in the transition countries of Southeast Europe, the subject of special interest of public administration and the academic community is researching the connection between stimulating entrepreneurial activity and launching independent entrepreneurial ventures and self-employment. Also, the subject of research interest is factors influencing the entrepreneurial affinities and intentions of youth, who are finishing the process of formal education and trying to get involved in the world of work, either as employees or employers. The subject research was conducted on a purposive (deliberate) sample of 448 respondents in Croatia, Bosnia and Herzegovina (BiH) and Serbia, collected through online questionnaire, with the aim of comparing career aspirations of youth towards entrepreneurial and managerial jobs. The research is an extension of the interest of the academic community, complements the previous intense research from the region of Southeast Europe and gives a scientific contribution by modifying and testing previously conducted empirical research in BiH and Croatia (Umihanić, Đonlagić Alibegović & Alfirević, 2018), extending the sample to Serbia, where significant research of this kind has not been conducted. The results, obtained by using descriptive statistics, analysis of variance (F-Test) and Post Hoc Fisher’s LSD test for testing research hypothesis, indicate that there are significant differences in the career orientation of the surveyed students between three observed countries. In Croatia and Serbia, the impact of society and national culture is neither favourable for entering entrepreneurship, nor for a managerial career. Attitudes are somewhat more favourable in BiH, but not significantly more favourable in comparison to Serbia and Croatia.

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GOVERNMENT FINANCE STATISTICS IN BOSNIA AND HERZEGOVINA: HOW FAR WE HAVE COME

Author(s): Mira Vujeva / Language(s): English / Issue: 28/2018

Keywords: fiscal reporting; official statistics; government finance statistics;

Fiscal reporting is the first principle of fiscal transparency. Its main purpose is to present accurate picture of government finance and to provide markets, legislatures and citizens with the necessary information to hold the government accountable. Fiscal reporting is expected to give a comprehensive overview of fiscal activities of the public sector, provide frequent and regular information on relevant, internationally comparable and historically consistent basis, compiled and disseminated in accordance with the international standards. In the last two decades significant changes in this area have begun with the adoption of accrual-based reporting and the extension of the coverage of reports. This paper presents recently developed norms for reporting fiscal statistics and analyses their appliance. In the Analyses it is shown that there has been considerable progress in the development of official public statistics in Bosnia and Herzegovina. Yet, its National Statistical System is confronted with an increasing number of new requirements to align with international recommendations, standards and best practices. The purpose of this paper is to describe the international standards of government finance statistics, analyse the existing system of compilation and dissemination of the official public finance statistics in Bosnia and Herzegovina, compare the state of its compatibility with international standards and highlight challenges and future direction in this statistical area.

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SPECIFICITY OF FISCAL POLICY IN THE MONETARY UNION

Author(s): Branka Topić Pavković / Language(s): English / Issue: 28/2018

Keywords: monetary integration; fiscal policy; convergence criteria; budget; public debt; fiscal discipline; European Monetary Union; asymmetric shocks;

The condition of the optimal currency area as a theoretical basis of the monetary integration considers the harmonization of the fiscal and monetary policy crucial in achieving the efficient functioning of the monetary union. The issue of sustainability of the monetary union without fiscal union reaches real intensity in times of crisis and market instability. In that context, this paper focuses on the relation of uncoordinated fiscal policies and non-fulfillment of the fiscal criteria of convergence with the functioning and sustainability of the monetary union. The aim of this research is to establish whether, based on the analysed theoretical assumptions and empirical case, the fiscal criteria are respected in practice in the member countries, and how specificity of the fiscal policy influences the monetary integration especially in the years of crisis. We started research with the cost-benefit analysis of the monetary union pointing out to the specific costs and benefits occurring when a country joins the monetary union. We examined the fiscal parameters of the convergence criteria of the member states pointing to the problem of heterogeneity of members and deviations from the reference values of the Union. The results show that the metodology used to establish the set norms of the fiscal convergence cannot correspond symetrically to all member countries. The results also point to the fact that, unlike symmetrical, in the emergence of asymmetric shocks, i.e. disorders that affect various countries differently, membership in the monetary union becomes more expensive because of the inability to conduct monetary policy

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THE SHARING ECONOMY: UBER AND ITS EFFECT ON TAXI COMPANIES

Author(s): Lana Pepić / Language(s): English / Issue: 28/2018

Keywords: Uber; the sharing economy; transportation; competition; taxi; ride-sharing services;

The popular ride sharing service Uber has undoubtedly affected the taxi industry by offering lower prices, faster and more quality service, as well as a higher degree of transparency in terms of choosing drivers and determining fares. A question arises inevitably: does Uber present loyal or unloyal price competition to taxi companies by offering significantly lower prices, cutting fixed costs and bypassing middlemen? Is there a tax loophole at play? The hypothesis this paper aims to examine is whether Uber is a new way of providing transportation services, thus bringing more transparency and fair competition to the industry, or it is a disruptor on a previously fair market. If the second case is correct, not all hope should be lost - perhaps with the right amount of regulation, Uber could become a new standard in service transportation. This paper is divided into three parts. The first part briefly explores the concept of the sharing economy; a relatively new term and even newer foundation for business models of contemporary startups. Special significance is given to the reduced costs in companies which operate based on the sharing economy versus the so-called traditional companies. The second part of the paper examines Uber’s business model through costs, the pricing system, driver earnings and working conditions. Finally, the third part of the paper estimates the present and future impact of Uber on traditional taxi companies, taking into account its legal status, competition and the changing labor market.

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