Ýêîíîìè÷åñêèå íàóêè. Ýêîíîìèêà ïðîìûøëåííîñòè

 

O. Strokachenko

Taras Shevchenko Kyiv National University, Ukraine

DEFINITION OF “RENTAL INCOME” ANALYSIS.

IDENTIFICATION OF THE INDUSTRIAL SECTORS IN THE UKRAINE GENERATING RENTAL INCOME AND COMPARISON WITH THE RESULTS FOR RUSSIA

 

National measure sometimes don’t correspond to real growth of region’s industry. From many researches, we have such result: value added in highly developed regions forms for account of natural resources’ consumption. [1]

Put forward a hypothesis: industries that consume natural resources and industries that don’t consume natural resources have different level return of activity.

Therefore such tasks are important: concept analysis of “rental income” and identification of the industrial sectors in the Ukraine generating rental income.

A. Smith, D. Ricardo, K. Marx lay down the foundations of concept of “rent”. Contemporary Russian economists are V. Volkonskii, A. Kuzovkin, A. Mudretsov; they develop methodology of identification of the industrial sectors in the Ukraine generating rental income. [6]

Integrated studies of legal category of “rental relations” are absent for now.

The goal of the research is the comparison of “rental income” definition in economics and Ukrainian legislation, identification of the industrial sectors in Ukraine generating rental income.

Definition of “rental income” defined in Ukrainian normative legal document “Scheme of normative money valuation of agricultural land and settlement land”:

1. Rental income in the agriculture is evaluating on basis of economic land estimation in 1988 year. This income are to bring about production of cereal crops. [5]

2. Rental income in the settlement is income which depends on situation of the settlement (land improvement, climatic conditions, engineering-geological conditions, architectural and landscape mode, environmental situation, historical and cultural values, functional land utilization). [2]

National standard “Immovable property valuation” includes such definition: rental income made by the land as means of production and depends on seat of the ground area, quality of the land. Rental income is calculated as the difference between the expected gross income from sales derived on land and production costs and producer’s profit. [2]

Thus, rental income is income of the company / entrepreneur. The State as owner of the natural resource receives only taxes and doesn’t receive additional income.

Several school in economic theory studied “rental income” definition:

1. The classic definition: rents as a result of the use of a limited competitive resource, and the rent is a legal income of owner of this limited resource. [6]

2. Upgraded classical definition: a business owner faces a set of constraints and each constraints can be a source of rental income (legally or illegally), which reduces the profit of the entrepreneur [6]

It is clear that all kinds of restrictions is impossible to consideration. Entrepreneur’ task is to find a decision that brings the most return in a restriction. Therefore rental income is a part of the profits of the entrepreneurs who use legacy restrictions and opportunities in time. [6].

Therefore definition of “rental income” is necessary to add to tax legislation and statistics: rental income is State’ income from its property (mineral lands).

The rent theory is important as a tool for profitability leveling between profitable fuel and raw materials industries and low-profit manufacturing industries.

Profitability is calculated by the formula:

(1)

Introduction variables designation (tabl 1):

Table 1

Variables designation

Variable

Designation

Return (Sales)

Field cost, shipping cost, processing cost

Tax

Profit

Long term assets

Income before taxes

Normative income (income of enterprises which don’t make rental income)

Rental income

 

Rental income of nature management industry calculated by the formula: [2]

(2)

 

Primary performances for profitability identification (extractive industry and manufacturing industry) represent in tabl. 2.

Table 2

Profitability estimation of the extractive industry and manufacturing industry of Ukraine in 2011

Industries group

Production,
thousand UAH

Operating charges, thousand UAH

Profitability, %

Extractive industry

116 750

88 730

31,5788

Manufacturing industry

788 017

708 585

11,2098

 

Extractive industry includes:

1) fuel and energy resources extraction,

2) mineral resources extraction (except the fuel and energy resources).

Thus, the profitability of the extractive industry is 2.8 times higher than in manufacturing.

Another important criterion for identification of industrial sectors in the Ukraine generating rental income is volume of exports.

Industrial sectors in the Russian Federation generating rental income are petroleum industry, natural gas industry, ferrous metal industry, nonferrous-metals industry. These industries provide 75 % of exports. [6]

The share of rental income in the total Russian production is:

‑ 58,4 % in petroleum industry,

‑ 61,9 % in natural gas industry,

‑ 3,9 % in ferrous metal industry;

‑ 31,3 % nonferrous-metals industry.

Industrial sectors in the Ukraine which have share in total export of more than 4 %:

‑ export of the non-precious metals and products from them – 29,6% (28,6 % - ferrous metals, 0,9 % - non-ferrous metals),

‑ mineral products - 11,9 %,

‑ ores, slages and ashes, mineral fuels, petroleum and its products have total percentage of 10.9 %.

According to two methods of identification industrial sectors generating rental income Ukraine have following industrial sectors generating rental income: ferrous metal industry, petroleum industry, coal industry.

The results can be used to form additional exogenous variables in the construction of various regressions that characterize the economic and environmental status of the region.

 

References:

1. Economic portal (2013), Ekologicheski skorrektirovannaya otsenka ekonomicheskogo razvitiya regionov [Ecological adjusted estimate the economic development of the regions], available at: http://institutiones.com/general/1391-ekologicheski-skorrektirovannaya-ocenka-ekonomicheskogo-razvitiya.html.

2. Professional legal system MEGA-NAU (2013), “Otsinka nerukhomoho maina [postanova Kabinetu ministriv Ukraini vid 28.10.2004” [“Immovable property valuation [accepted by Cabinet of Ministers of Ukraine 24/10/2004]”], available at: http://zakon.nau.ua/doc/?code=1442-2004-%EF.

3. The official site of Ministry of economic development and commerce (2013), available at: http://ukrexport.gov.ua/rus/economy/trade//6622.html.

4. The official site of State Statistics Service of Ukraine (2012), available at: http://www.ukrstat.gov.ua/.

5. The official site of Verkhovna Rada (2013), “Poriadok normatyvnoi hroshovoi otsinki zemel silskohospodarskoho pryznachennia ta naselenykh punktiv [nakaz vid 27.01.2006]” [“Scheme of normative money valuation of agricultural land and settlement land [accepted 27/01/2006]”], available at: http://zakon1.rada.gov.ua/laws/show/z0388-06.

6. Volkonskiy, V. Kuzovkin, A and Mudretsov, A (2004), Prirodnaya renta I metodi ee otsenki [Rental income and methods its estimation], available at: http://www.ecfor.ru/pdf.php?id=2005/1/03.