Issue 7, 2007

In 2002 Bulgaria performed some operations with its government external debt. These operations were unique in its history in terms of their size. In spring, two types of global bonds were issued - for EUR 535.5 million and for USD 513 million. During the fall of the same year there followed another issue of global bonds for USD 759 million. Those global bonds were used to buy back and exchange the Brady bonds already in circulation. The managerial team acted trying to get a financial advantage of the operations carried out. Five years later one can draw up a complete balance of the outcomes. They are disastrous for Bulgaria. Not a single hypothesis of the managerial team has been confirmed. The projections were carried out unprofessionally and incompetently. On the other hand, however, the counterparts (investors) could not have lost. In the end, the country has paid about one billion EUR more to service its external debt.

JEL: H63; F34

The flexibility is defined as labour market ability to respond to external influence and changes. Concerning the first aspect, the labour market reaction is studied in the case of influence of more important macro-economic factors (GDP, inflation and labour productivity). In order to estimate the labour market ability for changing, key indicators in the field are used: labour force mobility (labour market flows - internal and external), working time duration and labour contracts character. Based on the results of the study, a conclusion can be made that the Bulgarian labour market should be recognised as moderately flexible. It reacts differently to external influence, shows high cross-sectional mobility and limited application of employment flexibility.

JEL: J00, J21, J62

The main objective of the study is to explore the interrelations between the most important demographic and macroeconomic indicators related to the health care expenditure in Bulgaria in a long-term perspective up to 2050 by using a model of the International Labor Organization (ILO). The study presents the basic features of the ILO model, specificity of the data used, assumptions made about the future behavior of different variables and outlines the major results.

JEL: J00, H5, I18, C32, C53

The study draws on the theory of optimal taxation and the practice in a number of federal and unitary countries to outline the conceptual framework of the allocation of revenue responsibilities among levels of government. А distinction has been made between decentralized tax policy (the power to set tax bases and rates) and tax administration (collection of taxes). Possible solutions for Bulgaria are drawn and formed on this base. It has been justified that, the strengthening of the tax autonomy of local government is the main objective of the reform in local finances but appropriate taxes are few in number and are with а limited revenue potential. Optimization of the real estate tax has been proposed, including taxation on local incomes from rent as well as local patent tax. The revenue potential of these autonomous local taxes especially in small municipalities is not large, which leads to the necessity of a semi-autonomous parallel local tax on personal incomes, as well as substantial central subsidies i.e. re-allocation of tax revenues across municipalities.

JEL: H71, H77, H21

The situation, trends and financing of municipal budget capital investment have been analyzed in the context of municipal finance development in the period 1994-2005. Major conclusions and challenges for the municipal capital investment have been formulated in the light of Bulgaria's membership in the European Union and the need for a new system of municipal capital investment revenues. Recommendations have been formulated based on the analysis of the international experience regarding potential municipal capital investment revenues that could be realized in Bulgarian conditions.

JEL: Н72; Н77

The paper focuses on the "stay or leave again" dilemma of Bulgarian return migrants. Data from a unique representative survey among households and their members who had been abroad during the period 2001-2005 is utilized. Special attention is paid on the satisfaction from the stay abroad and on the inclination of return migrants to leave again. Two binary regression models are estimated for this purpose. The independent variables reflect the socio-demographic profile and foreign experience of return migrants. Satisfaction is related to age, duration of the stay abroad, qualified job under official contract, and employment in services. Clear differences in satisfaction levels are found with respect to the region of stay: almost each fourth respondent returned from Southern Europe was not satisfied. Nevertheless, the majority of return migrants express a high likelihood to go abroad again. The availability of acquaintances residing abroad is found to be a strong determinant of the re-migration likelihood. The leave again question has a clear positive answer for return migrants satisfied with their foreign experience. However, Bulgarian labor market faces a serious deficit in a range of professions which is supported by the finding that educational level acts as a hold-up factor regarding return migrants' likelihood to leave again.

JEL: F22, J61

In this study typology of rural areas is examined, on the base of the official definition applied in Bulgaria and the definition most often used in EU countries - the OECD definition. The latter definition delimits two levels - local and regional. The local includes LAU 1/2, which for Bulgaria is municipality or settlement (in this research municipality is used), and the regional level is NUTS 3 and corresponds to a district. Recommendations are made on the base of the established conclusions about the use of the concept "rural areas" and the necessity of change of the concept "municipality" is justified.

JEL: N50; R11; R14

Criticism of the fundamental classical postulates is the main focus of attention of the institutional theory. In their works, a number of representatives of the institutionalism have expresses their strong disagreement with the hedonistic principles of profit and loss as being the primary motivating factors guiding human behavior. The main classical concepts have developed from relatively old tendencies, which have been dominating the way of thinking in XVII - XVIII century period. Due to its strong connection with the spiritual order the classical economic, theory places the main focus on the individual rather than the group. Leading institutionalists question this view and embrace the idea, that individual's behavior can only be manifested in a social environment. This and other characteristics, present the classical theory in a static format, unable to react adequately to the dynamics of the social and economic development. Among the fiercest critics of classicism are Clarence E. Ayres and Thorstein Veblen. In this respect, the following article gives an unconventional view on some of the renowned representatives of the institutionalism with their well-grounded criticism of the classical orthodoxy.

JEL; B20; B25; B31