TUTECON: Research Brief No. RB-2017/16


Who has a better chance of getting higher salaries among creative R&D employees?
Heili Hein, Aaro Hazak, Kadri Männasoo

It is a known fact from previous studies that on average, women earn less than men. Although the size of the gender pay gap differs from country to country, this statement is true almost everywhere. This brief study aims to contribute to the discussion on the gender pay gap by examining the earnings of a specific demographic – Estonian creative R&D employees. Not surprisingly, we discovered that gender is an important and statistically significant driver of salary levels with women being less likely than men to receive higher levels of salaries. In addition, we find that age is a further statistically significant determinant of salary levels. The effect of age on earnings forms an inverse-U-shape with younger and older employees having a lower likelihood of earning higher salaries compared to their middle-aged colleagues.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/15


Long working days and falling asleep at work – issues in R&D work efficiency
Erve Sõõru, Aaro Hazak, Marit Rebane

Excessive daytime sleepiness is a major problem in the modern 24/7 society. In our study among Estonian creative R&D employees, we sought to investigate the links between work arrangements, duration of the working day and daytime sleepiness. The average duration of the working day among our sample of 153 creative R&D employees is as long as 10 hours – considerably more than the statutory eight hours. As might be expected, the more working hours and the less sleeping hours, the more serious the daytime sleepiness problem is. Moreover, we find that employees that have the flexibility to choose when they work (and where they work) experience less daytime sleepiness, and also feel that their sleep is significantly less disturbed compared to peers with more rigid work arrangements. Flexitime and distance work may therefore help considerably in reducing work-related daytime sleepiness.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/14


Learning from abroad: Export versus foreign ownership
Kadri Männasoo, Heili Hein

Companies engaged in innovation and research and development (R&D) are often engaged in business on an international scale and their success is critically dependent on international R&D networking and the ability to absorb new knowledge. Foreign ownership, joint ventures and trade are among the channels that enable companies to learn from abroad. This brief analysis aims to describe these learning patterns and look for associations between R&D engagement and foreign interactions. Using data from eleven Central and Eastern European countries for the years 2007-2009 and 2012-2014 reveals that exporting is the only foreign channel that has a clear positive relationship with R&D engagement.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/13


Fixed-term contracts – a turnoff for R&D employees
Aaro Hazak

Fixed-term employment contracts are very common in the current project-based era. Our research group has been seeking to find out how fixed versus permanent contracts link to how Estonian R&D employee perceive their wellbeing, tiredness and sleepiness. We found that the happiness of those working with fixed-term contracts is significantly lower – both in terms of current happiness and potential happiness looking forward. Moreover, employees with fixed-term contracts appeared to be considerably more tired and experience greater levels of daytime sleepiness. We did not find, however, any significant differences in the perceived work results of R&D employees with fixed-term contracts compared to those with permanent contracts. Employers as well as R&D governance bodies should keep in mind the adverse effects that fixed-term contracts may have on individual wellbeing.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/12


Sitting at a desk at work makes creative employees tired
Viive Pille, Viiu Tuulik, Aaro Hazak

We seek to identify how working hours spent at the workplace relate to work outcomes and the tiredness of the employee. Our study covers Estonian creative R&D employees – product developers, IT developers as well as academic and applied researchers. It appears that the greater the share of working time spent at the workplace, the more tired employees feel. Furthermore, the more time the employee does his or her work at the office, the more they perceive the results of the work as lower. Tiredness may be related to the obligation to do the work in a place and at a time that does not coincide with the employee’s creative mood. In view of these results, employers may wish to consider whether sitting at a desk at work for a fixed number of hours is the best way to organise the work of creative employees.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/11


Are business obstacles different for R&D companies?
Heili Hein, Kadri Männasoo

Investment in research and development (R&D) is often long-term, making R&D companies extremely sensitive to their environment. Using data from the Business Environment and Enterprise Performance Survey rounds IV (2007-2009) and V (2012-2014), we examine the differences in how severe R&D and non-R&D manufacturing companies in Central and Eastern Europe perceive business obstacles to be. Overall, R&D companies were relatively more troubled by various institutional and regulatory obstacles in their business environment than were non-R&D companies, whose main business concern was the tax rate. Over both rounds of the survey, R&D companies perceived labour and trade regulations as more severe obstacles than non-R&D companies did. During the post-crisis period, R&D companies were also relatively more concerned about political instability, courts and corruption.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/10


Better not to ask your employees to come to work? Issues in R&D work efficiency
Aaro Hazak

The understanding that work is done at a workplace is a deeply-rooted social norm, including in the case of creative R&D work. We have studied Estonian creative R&D employees to find out the links between distance work and work outcomes, individual wellbeing, sleep and tiredness. It appears that those who have a distance work option perceive their work results significantly higher than those without that option. Moreover, employees that can work outside the office are happier and less tired, and they feel the constraints that work sets on their sleep habits much less than those who have to do their work at the workplace only. Although some creative R&D jobs may require the use of specific laboratories, equipment, data or teamwork, providing the distance work option appears to be beneficial overall for both the employer and the employee.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/9


Does anyone want to work 5 days per week and 8 hours per day? Issues in R&D work efficiency
Raul Ruubel, Aaro Hazak

Social norms in regard to weekly and daily working times emerged more than a century ago. The nature of work and the means of doing work have, however, changed a lot over that time. Based on a survey among Estonian creative R&D employees, we sought to understand what types of employees prefer what types of work schedules. It appears that compared to men, women prefer a week where work is concentrated into 3–4 days, while men have a higher preference for a working week spread over 6–7 days. Those who sleep less than the usual 7–8 hours tend to prefer the latter working week arrangement as well. Moreover, general health, morning-types versus evening-types as well as educational level appear to have a significant impact on preferences about weekly and daily work schedules. The standard five-day working weeks and eight-hour working days may not be optimal for everyone. This is an important aspect that R&D employers and regulators should keep in mind when aiming to benefit from the full creative potential of their employees and maximising their individual wellbeing.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/8


Women need flexible work, but men get it – issues in R&D work efficiency
Marit Rebane, Aaro Hazak, Kadri Männasoo

Flexible working time is often advocated as a means of providing better employment opportunities for women by considering the time constraints related to their family obligations. Based on our survey among Estonian creative R&D employees in 2015 and 2016, we find that there is a selection mechanism in filling positions that provide a flexible working time option. In other words, there is a higher probability that certain types of employees get jobs with flexitime than others. It appears that men have much better chances of getting flexible working time despite the understanding that it is women who need flexitime more.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/7


Are R&D companies credit-constrained? Credit frictions during and post-crisis
Kadri Männasoo, Heili Hein

Private research and development (R&D) and innovation activity is believed to fall below the socially optimal level. The credit constraints that R&D companies face due to asymmetric information and credit market imperfections may hinder innovation. This descriptive analysis aims to provide a comparative insight into the credit demand and supply patterns of R&D and non-R&D companies in Central and Eastern European countries during and after the Global Financial Crisis. The study uses company-level data from rounds IV and V of the Business Environment and Enterprise Performance Survey, covering the years 2007-2009 and 2012-2014. It reveals that the dependence of R&D companies on bank credit dropped significantly over the two survey rounds, mirroring substantial self-selection into R&D, with a smaller number of able and well-capitalised companies continuing R&D activity after the crisis. We do not subsequently find convincing evidence that R&D firms that remained in business after the crisis are notably credit-constrained.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/6


Non-creative tasks: a turn off for creative R&D employees
Aaro Hazak

Reports, applications, formalities and administrative tasks – these are common elements in the work of R&D employees. We performed a study among Estonian creative R&D employees to identify what the link is between the share of creative work in total working time, and the results of the work, as well as the sleepiness, tiredness and wellbeing of the employee. We find that the more creative the R&D employee’s work, the more satisfied the person is with his/her work results, while more routine tasks also decrease creative content in work outcomes. Furthermore, the more creative the work, the happier the employee appears to be. We also find that non-creative tasks increase the daytime sleepiness and tiredness of creative R&D employees. It is important that employers as well as R&D governance bodies consider carefully the adverse effects that extensive non-creative work tasks may have on both the R&D work results as well as individual wellbeing.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/5


Using flexitime – for better work or a better life? Issues in R&D work efficiency
Marko Virkebau, Aaro Hazak, Kadri Männasoo

Providing flexible working time has become increasingly popular among employers with the purpose of improving efficiency or making jobs more attractive for employees. It is still quite unclear, however, what the motivating factors are in different types of employees in terms of using flexitime. Based on our survey among 153 Estonian creative R&D employees, we find two distinct groups of reasons for the use of flexible work – some aim to improve the work results while some wish to achieve a better work-life balance. Younger and better educated employees, as well as those who sleep less hours at night appeared to be more aimed at better work outcomes through the use of flexitime. Those with larger families, however, appear to value options for improving the work-life balance more when using flexitime. It is important that employers understand that flexible working time is attractive for different types of employees, and for different purposes. This, in turn, may have an impact on what kinds of employees the employer is able to recruit or maintain.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/4


Capital investments and financing structure: Are R&D companies different?
Kadri Männasoo, Heili Hein

Research and development (R&D) activities place elevated demands on high-technology equipment and infrastructure, and this requires sizable investments. However, returns on R&D investments are time-lagged, highly uncertain and subject to appropriability problems, causing private R&D investment to fall below the socially desirable level. Market imperfections such as financing constraints are also reasons why R&D may be insufficient. This short, descriptive analysis compares the funding structure of the capital investments of R&D and non-R&D companies over rounds IV (2007-2009) and V (2012-2014) of the Business Environment and Enterprise Performance Survey. We find that R&D companies invest more relative to sales, and that they are more reliant on credit from banks and other financial intermediaries. Although the share of internal funding increased for all companies after the crisis, the strong selection of companies into R&D and innovation activities has made R&D companies less vulnerable to credit contraction with fewer marked changes in their financing structure than has been seen by non-R&D companies.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/3


Why force owls to start work early? The work schedules of R&D employees and sleep
Erve Sõõru, Heili Hein, Aaro Hazak

Are you a lark, an owl, or a hummingbird? Getting to work on time might be a breeze for early birds but a challenge for owls, who would prefer to stay in bed, since they went to sleep late. The conventional “nine-to-five” work schedule does not accommodate the natural sleeping habits of all employees. Using data from a survey conducted among Estonian creative R&D employees, we aimed to uncover what the links are between work arrangements, sleep habits and work related sleep disturbances that employees are feeling. We find the sleep schedule of evening-oriented employees or “owls” to be considerably more affected by work-driven constraints than that of other types of employees. Moreover, we find the “owls” to have a much higher level of daytime sleepiness. As there is to some extent a genetic background to the idea of the morning types and evening types of people, it is important that employees as well as regulators acknowledge these important individual differences. Moreover, as impaired sleep could lead to decreased productivity among employees and the underutilisation of their creative abilities, employers and regulators should consider implementing more flexible working arrangements. This could have a major positive impact both on employee work results as well as their overall quality of life. 

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/2


More flexibility, better results? Issues in R&D work efficiency
Marko Virkebau, Aaro Hazak, Kadri Männasoo

Flexible working time and teleworking have provided grounds for debate among employers, employees, researchers and HR experts. With our study among 153 Estonian creative R&D employees we seek to better understand what the links are between flexible work arrangements and creative work results. We find that flexibility in choosing to work fully or at least partially from home or elsewhere outside the office has a positive effect on the employee’s satisfaction with his/her work results. In regard to working time arrangements, we find that men as well as those with a better education have much better chances of getting jobs that offer flexitime. This in turn has implications for the work outcome, as positions that include flexible working time options are filled by a certain type of employee. Another result from our research is that clearly evening and clearly morning types of people – “owls” and “larks” – are in general more satisfied with their creative work results. This may be due to part of their creative work being done outside normal office hours, providing a potentially less stressful work environment. Overall, employers should consider providing employees more flexibility in the timing and place of work in order to facilitate improved work results – at least in creative R&D jobs.

Issued: 2017-09-04

TUTECON: Research Brief No. RB-2017/1


Does flexible work make R&D employees happier?
Marit Rebane, Heili Hein, Aaro Hazak

Striving for happiness is a universal human goal, and increased happiness is regarded as a key objective in modern scientific literature on socio-economic development. Yet, the connection between happiness and the organisation of work has not received much scrutiny. In our study on Estonian creative R&D employees, we explore the effects of flexible work schedules, the option of teleworking, and other aspects of work arrangements on employee happiness. We uncover that the option to work out of the office substantially increases happiness, and this effect is further augmented by flexible working time arrangements. We also consider the inner circadian cycles of employees and find that evening type individuals (“owls”) feel significantly less joy from their daily lives than their morning type colleagues (“larks”). This is potentially due to genetic factors, but could also be partially caused by a mismatch between the innate time preferences among owls and social as well as employer expectations. Overall, the results of our study suggest that flexible working arrangements could significantly increase the happiness and well-being of creative R&D employees.
Issued: 2017-09-04

TUTECON: Working Paper No. WP-2015/2


EU Cohesion Policy Funding in Estonia: Background, Developments and Challenges. Karin Kondor-Tabun, Karsten Staehr

The EU cohesion policy funding aims to enhance economic, social and territorial cohesion across regions and countries in the European Union. This paper discusses the implementation of the policy in Estonia since 2004 using as background information surveys of the theoretical and empirical literature and a thorough description of the institutional framework. Estonia received cohesion policy funding amounting to approximately 2.2 percent of GDP in 2004–2006 and 3.0 percent of GDP in 2007–2013. The funding went mainly to infrastructure projects, enterprise support and human resource development. A key challenge is to ensure that the EU cohesion policy funds are used effectively and in ways that are beneficial in the long term.

Issued: 2015-03-20

TUTECON: Working Paper No. WP-2015/1


Primary School Choice in Tallinn: Data and Simulations. Andre Veski, Kaire Põder

Within the first 20 years of the market economy in Estonia, the public school market has been decentralized in Tallinn. Firstly, we describe how students are allocated to primary schools in a narrative, and secondly, in a formal mechanism design language. We indicate the closest equivalent algorithms from the matching markets design theory and conclude that the current system in Tallinn is a hybrid. The decentralized part of the market namely inter-district exam schools apply autonomous school proposing deferred acceptance; and the centralized part of the market intra-district regular schools apply school random serial dictatorship. Finally using data from Tallinn primary school matching, we show by an empirical evaluation of matching mechanisms. Since the currently the collected data does not reveal the students preference ordering we simulate some potential orderings for comparison.

Issued: 2015-02-10

TUTECON: Research Brief No. RB-2014/3


Education and stock market performance. Kristjan Liivamägi

In our recent work (Liivamägi, Vaarmets, & Talpsepp, 2014), we study how education and mental abilities affect investors’ risk adjusted performance on the stock market. We use a dataset from Tallinn stock exchange, covering stock market transactions from a full business cycle along with educational background details for all individual investors. Data are anonymous and provided by official national registries. Controlling for a variety of tradingrelated and socio-economic factors, we show that better mathematical skills and overall high mental abilities are associated with better risk adjusted performance. In addition, holding a higher degree or a university degree in economics or information technology helps to outperform other investors.

Issued: 2014-10-01 View abstract in Estonian

TUTECON: Research Brief No. RB-2014/2

Education, mental abilities and stock market participation. Tarvo Vaarmets

In our recent work (Vaarmets, Liivamägi and Talpsepp (2014)), we offer strong evidences that people with higher mental abilities are more likely to participate in the stock market. We dig deeper into the behaviour of individual investors and can give a more precise picture how education and mental abilities are connected with stock market participation. The results show that being good at math and physics raises the market participation probability the most, and investors achieve significantly higher results in their national final high school exams than non-investors. Thus, we conclude that investors with higher intellect are more likely to participate in the stock market and investors are not only more educated as found in previous studies, but also outsmart other people in every field, including both so called soft and hard sciences.

Issued: 2014-09-30 View abstract in Estonian

TUTECON: Working Paper No. WP-2014/8


Corporate Tax Convergence in Asian and Pacific Economies. Yang Chen, Juan Carlos Cuestas, Paulo José Regis

Countries in the Asia and Pacific region have shown many macroeconomic similarities such as current account surpluses, exchange rate appreciation, export-oriented economies, growth success, etc. This paper argues that there may be one more macroeconomic feature to add to the list: strong tax convergence. Using data on the statutory corporate tax rate in 15 countries from 1980 to 2014, we identify (i) a significant dynamic tax convergence pattern, and (ii) three tax convergence clubs. The latter consist of the small tax haven economies of Hong Kong and Singapore, the East Asian countries (plus one), and the South and Southeast Asian and Oceania countries. These economies, within groups, have been reducing the tax gaps with their neighbours over time.

Issued: 2014-09-16

TUTECON: Working Paper No. WP-2014/7


Masters of the Stock Market. Kristjan Liivamägi, Tarvo Vaarmets, Tõnn Talpsepp

We analyze how intellectual abilities and education affect investors’ risk-adjusted returns in the stock market. To investigate such effects, we use educational performance measured by standardized exams and the type and specialty of a university degree obtained.  The data used covers one complete business cycle and includes detailed transactions and performance on the national stock exchange for all Estonian individual investors along with their past educational records from a national registry. Controlling for trading style, wealth, experience and variety of educational characteristics, we provide empirical evidence that investors with higher mathematical skills combined with overall high intellectual ability, have higher probability to outperform market. We also show that investors holding higher university degrees or specialize in certain fields achieve higher risk-adjusted return in the stock market.

Issued: 2014-09-12

TUTECON: Working Paper No. WP-2014/6


The brilliant mind of investors. Tarvo Vaarmets, Kristjan Liivamägi, Tõnn Talpsepp

Combining two exhaustive datasets from NASDAQ OMX Tallinn and Estonian national educational registry we dig deeper into the behaviour of the individual investor and paint a picture about how mental abilities in very different areas influence stock market participation. We use different tools of statistical analysis including probit regression models to determine what distinguishes investors from other people. The main contribution of the paper is a substantial step forward in determining how education and mental abilities influence stock market participation. We prove that investors achieve significantly higher results in their national final high school exams than non-investors. This is consistent with our main contribution – we offer strong evidences that people with higher mental abilities in very different areas are more likely to participate in the stock market. The most important factors for stock market participation are mathematics and physics. Finally we conclude that investors are not only more educated as found in previous studies, but investors also outsmart other people in every field, including both so called soft and hard sciences.

Issued: 2014-09-10

TUTECON: Working Paper No. WP-2014/5


How Did Household Indebtedness Hamper Consumption during the Recession? Evidence from Micro Data. Merike Kukk

The paper investigates the extent to which household indebtedness suppressed consumption during the economic downturn in 2008-2009. The paper uses a unique quarterly panel dataset containing financial information on over 100,000 individuals. The dataset covers the period 2005-2011, when there were large changes in credit volumes, income and consumption in Estonia, a new EU member country. The estimations show that indebtedness measured by the debt-to-income ratio and the debt service ratio hampers consumption over the whole business cycle. The negative impact of the debt service ratio is, however, substantially stronger during the recession than in the pre-crisis and post-crisis periods, while the negative effect of the debt-to-income ratio shows a weakening trend over the sample period. The findings suggest that household indebtedness is amplifying the recession and the debt repayment burden indicates the mechanism which is at work.

Issued: 2014-09-03

TUTECON: Working Paper No. WP-2014/4


Lending Growth and Cyclicality in Central and Eastern European Banks. Laivi Laidroo

This paper investigates determinants of lending growth and cyclicality in banks of 15 Central and Eastern European countries during the period of 2004-2010. The results support, as expected, cyclicality in lending growth, but contrary to expectations, the association between GDP growth and lending growth is weaker when economy is below trend than when it is above trend. This result suggests the existence of strong supply-side pressures on lending growth initiated or amplified by large foreign-owned banks prior to the 2008 financial crisis. The same developments may explain lending growth’s unexpected negative association with bank size and positive association with banking market concentration. Coefficients of other macroeconomic and bank-specific variables exhibit the expected signs. However, bank’s equity level, credit risk and size have stronger association with lending growth when the economy is below trend than when it is above, and foreign-ownership matters only when economy is above trend.

Issued: 2014-02-17
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