ISET Economist Blog

A blog about economics in the South Caucasus.

Georgian Nepotism

In Georgia, employment is often found not through prevailing in fair, orderly selection processes, but through personal connections. This is a well-known fact almost nobody denies. It is evident in almost every Georgian firm and institution. In a hospital you encounter a “nurse” not capable of the most basic medical accomplishments, in one of Tbilisi’s universities you meet a “cleaning woman” who is mentally ill, known for scaring everybody through aggressive and inappropriate behavior, and in the railway station you buy a ticket from a clerk who knows n...
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On Women and Money

One of the few economists who won the Nobel Peace Prize is Muhammad Yunus, a Bangladeshi who invented the concept of microcredits. What is it about? Usually, it is very difficult for poor people to receive credits from banks. Their creditworthiness is considered low, as they have no collateral and little resources to make up for possible losses. Yunus believed, however, that poor people have good business ideas, and he did not doubt their seriousness to pay back the money. In the late 1970’s, he visited the poorest families in a Bangladeshi village calle...
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Are Georgians Too Impatient?

Assume you have lent your brother 1000 laris, and because he is a close family member, you do not charge interest from him. One day you get a phone call from your brother, and he offers you to pay back the debt either today or in one year from now. What would you choose? If you act in line with standard economic theory, you would choose to get the money back today. You are driven by what economists call time preference, a kind of “psychological interest rate” with which you discount future payoffs. There are a couple of reasons why it makes sense for hum...
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No Smart Farmers in Georgia

When I think about the lack of human capital in Georgian agriculture, I am reminded of the 1997 Georgian movie “The Turtle Doves of Paradise”, directed by Goderdzi Chokheli. In a Soviet village, an ex-priest decides to teach basic knowledge to old peasants. He wants them to learn to read, write, and elementary calculations skills. The movie addresses a problem that, fortunately, has been completely eradicated in the last decades. Nowadays, virtually all people living in Georgian villages are able to read and write (and probably also to multiply, subtract...
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