The transition from the technology-centric paradigm of Industry 4.0 to the human-centric, sustainable, and resilient vision of Industry 5.0 represents a critical juncture for global economies. This shift presents both systemic challenges and significant opportunities for national development strategies. This study aims to analyze the alignment of the Republic of Azerbaijan's national digital development strategy with the core principles of Industry 5.0, and to identify the key challenges and opportunities this transition presents for the country's economic future. Employing a qualitative research design, this study integrates a systematic literature review with a content and institutional analysis. The theoretical framework is built upon the concepts of industrial revolutions, and key documents from the European Commission, the World Economic Forum (WEF), the OECD, and the official strategy of the Government of Azerbaijan are critically examined. The findings reveal that while Industry 4.0 focused primarily on technological efficiency, the shift to Industry 5.0 represents a fundamental socio-technical transformation. Globally, this is characterized by the displacement of 92 million jobs by 2030, a significant "compute divide," and pressing ethical concerns. The study finds that the "Strategy for the Development of the Digital Economy of the Republic of Azerbaijan for 2026-2029" demonstrates a strong, though not yet complete, alignment with Industry 5.0 principles, particularly in its focus on human capital development and infrastructural resilience. This research provides a novel, evidence-based assessment of Azerbaijan's readiness for the human-centric industrial era. It offers practical policy recommendations for enhancing the inclusivity and sustainability of the national digital strategy, thereby contributing to the broader discourse on economic development in the context of global technological transformation.
In "An Essay on the Nature and Significance of Economic Science," Robbins challenged the classical conception of economics, which he called "materialist." He replaced this classical idea with the "scarcity" concept: "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." The definitions of economics we find in modern textbooks are variants of Robbins' statement, and the catchphrase that has finally emerged from this controversially acclaimed definition is: "Economics is a science of choice." This paper represents a critique that systematically examines Robbins' century-old adage to argue that Robbins' thesis is logically indefensible for many reasons, including the fact that the definition of science cannot be derived from its subject-matter, which expands as time passes; the subject matter of a science is supposed to be implied by the definition. However, the most damaging influence of Robbins' conception on modern economics is his submission that the discipline is free from all moral obligations because it is a science. Following this submission, some prominent economists have devoted their personal and private time and society's resources to research
In this paper, we examine the impact of partial vertical cross-ownership on the optimal licensing strategy for cost-reducing technology among downstream firms. We compare three types of licensing strategies - fixed fee, royalty, and two-part tariff - under two partial vertical cross-ownership structures: forward cross-ownership and backward cross-ownership. Results show that under forward cross-ownership, the licensor prefers two-part tariff licensing, whereas under backward cross-ownership, fixed-fee licensing may also be optimal, alongside two-part tariff licensing. Compared to the benchmark without cross-ownership, both ownership structures increase consumer surplus and social welfare. We further find that the licensor always prefers backward to forward cross-ownership with the upstream firm. However, this privately optimal ownership choice does not necessarily coincide with the socially optimal vertical market structure.
We study second opinions in fixed-price credence goods markets, in which strategic experts have strong incentives to overtreat consumers, a phenomenon often observed in healthcare. This setting has been largely overlooked in the literature, likely because second opinions are ineffective: strategic experts always overtreat, and consumers never seek a second opinion. We depart from the benchmark by introducing a share of honest experts – who never overtreat – and a degree of transparency, defined as the probability that an expert providing a second opinion knows that the consumer has already received a prior recommendation. We show that if transparency exceeds a critical threshold, second opinions discipline strategic experts, provided the share of honest experts is neither too low nor too high. We identify the level of transparency that maximizes legitimate welfare – defined as the sum of the consumer’s expected utility and the expected utility experts derive from behaving honestly. Unlike in low-stakes environments, full transparency – though it never maximizes legitimate welfare – still performs better than no transparency.
We study a model of price competition in a homogeneous good market where consumers may be fully rational or inattentive to small price differences. At the beginning, firms are pricing at marginal cost, and receive a stochastic signal concerning consumers’ rationality. They then compete for two periods, observing the market outcome at the end of the first. We characterize an equilibrium in which, when consumers are effectively inattentive (and at least one firm receives the correct signal), the market price converges to the monopoly level by the second period. This is achieved after a first period where the informed firms raise their prices just a little: through this mild price increase, these firms forward their signal to the uninformed firms, and they do so in a credible way, as this makes the actual consumers’ status common knowledge. Instead, a sudden price jump already in the first period is not sustainable as an equilibrium. We also show how our results extend to a duopoly market with differentiated products.
This study sets up an imperfect competition endogenous growth model with productive government spending and endogenous firm entry to analyze the relationship between competition and economic growth from the perspective of industrial organization. Based on this framework, the study finds that the presence of production specialization and industry clusters leads to an ambiguous relationship between competition and economic growth. In addition, this study also shows that the optimal income tax rate is positively related to the degree of production specialization and the spillover effect, but is negatively related to the extent of the congestion effect.
This paper examines how product heterogeneity influences the government’s choice and design of emission tax versus standard regimes within a welfare-maximization framework. We find that under an emission tax, lower abatement efficiency prompts a higher optimal tax rate, whereas greater product homogeneity leads to a lower tax. In contrast, under an emission standard, the effects reverse: reduced abatement efficiency induces a laxer standard, while increased homogeneity results in a stricter one. Under the maintained assumptions of the model, the welfare-maximizing emission tax yields higher social welfare than the welfare-maximizing uniform absolute emission standard under both Cournot and Bertrand competition.
Tax policy plays a crucial role in shaping the economic development of a country by influencing investment decisions, business activity, and overall fiscal stability. In the case of Azerbaijan, tax reforms implemented over the past decades have significantly contributed to the diversification of the economy, reduction of the shadow economy, and improvement of the business environment. This study examines the relationship between tax policy and economic development in Azerbaijan, focusing on key reforms, tax incentives, and their impact on entrepreneurship and economic growth. The research highlights how a balanced and transparent tax system enhances state revenues while simultaneously encouraging private sector development. Furthermore, it analyzes current challenges such as tax compliance, administrative efficiency, and the need for continuous modernization in line with global standards. The findings suggest that effective tax policy not only supports macroeconomic stability but also fosters sustainable and inclusive economic growth in Azerbaijan.
This study examines the impact of green financial instruments on sustainable economic development. As global environmental challenges intensify, financial systems are increasingly required to support low-carbon and resource-efficient growth models. Green financial instruments, including green bonds, green loans, sustainability-linked bonds, and carbon markets, have emerged as effective mechanisms for mobilizing capital toward environmentally responsible projects. The paper analyzes the environmental, economic, and social contributions of these instruments, highlighting their role in reducing carbon emissions, promoting renewable energy investment, fostering technological innovation, and enhancing long-term financial stability. Furthermore, it evaluates empirical evidence demonstrating the positive relationship between green finance development and sustainable growth indicators. Despite their potential, green financial instruments face challenges such as greenwashing, regulatory fragmentation, and lack of standardized reporting frameworks. The study concludes that strengthening regulatory systems, improving transparency, and encouraging international cooperation are essential to maximize the effectiveness of green finance in achieving sustainable economic development objectives.
The Economic Cooperation Organization (ECO) summit held in Khankendi is an important event in terms of strengthening regional cooperation and economic integration. The summit was organized at the initiative of the Republic of Azerbaijan and aimed to present the process of restoration and development of Karabakh on an international platform and ensure stability in the region. The speeches of the heads of state participating in the event reflected a common will on regional stability, energy security, development of transport corridors, expansion of trade relations, digital economy and environmental problems. At the end of the summit, decisions were made to increase trade turnover, develop strategic transport routes, promote energy and green technology projects, as well as increase support for the restoration of Karabakh. This event marked the beginning of a new stage in the activities of the ECO and created conditions for strengthening cooperation between member countries, ensuring regional stability and promoting sustainable development.
The article provides information about the geographical features of the economic and geographical region of the economic and geographical region of the economic and geographical region of Azerbaijan, the characteristics of the existing environmental situation. Zagatala State Nature Reserve, located in the north-western region of our country, was noted about the types of flora and fauna protected in the reserve. In addition, the highlights in the economic and geographical region are recorded and reported on the existing rocks here. These monitoring works serve to analyze the environmental situation in the Sheki-Zagatala economic and geographical region, to reveal a broken balance.Agriculture, especially tobacco growing, nut growing, vegetable growing, grain growing, and cattle breeding are the main directions in the formation of the region’s economy. In recent years, reforms in the agricultural sector, increased subsidies and new technological approaches have created conditions for increasing productivity. In the field of industry, Balakan is more specialized in food and processing industry. Hazelnut processing enterprises, flour and bread production, fruit and vegetable canning production are the main components of the added value chain created in the region. The presence of favorable conditions for the development of small and medium enterprises in the region also encourages the expansion of the sector. The share of tourism in the economic development of Balakan region is increasing. Natural-climatic resources, opportunities for ecotourism and rural tourism, as well as the border-geographical position determine the increase in the flow of tourists. Infrastructure projects – renewal of highways, construction of social facilities, expansion of service areas – serve to increase the overall economic potential of the region. In general, the economic indicators of Balakan region show that the region has formed an agrarian-oriented, sustainable, economic structure based on natural resources. The current investment programs and modernization of agricultural production lay the groundwork for the further acceleration of socio-economic development in the region.
This study examines the possibilities of applying artificial intelligence technologies in the production of agricultural products in Azerbaijan and their impact on productivity. Climate variability, suboptimal use of land and water resources, and high risk factors in agricultural production reduce the effectiveness of management mechanisms. Therefore, the potential for applying artificial intelligence-based models in the production of agricultural products should be assessed. A mixed methodological approach was applied in the study. An empirical method was applied based on official statistical data, meteorological indicators, and farm figures in the agricultural sector. Productivity was predicted using regression and classification algorithms and the results obtained were analyzed in a comparative manner with traditional statistical methods. The main highlight of the model is the assessment of accuracy, relative error, and justified criteria. The scientific novelty of the study is the adaptation of artificial intelligence-based forecasting models to the agro-ecological environment in Azerbaijan and the quantitative substantiation of their impact on productivity. The results show that the use of artificial intelligence-based algorithms significantly increases the accuracy of productivity forecast indicators, creates conditions for optimizing the use of fertilizer and water resources, and minimizes risks in crop production. The article creates a methodological basis for shaping digital decision-making capabilities in the agricultural sector. It can also be considered an important academic contribution to further improving agricultural activities, both theoretically and practically.
The drilling of highly deviated and horizontal wells has become a key technological advancement in the oil and gas industry, enabling access to complex reservoirs and improving hydrocarbon recovery rates. However, these operations are often associated with increased technical challenges, higher operational risks, and elevated costs. This study focuses on the evaluation of the economic efficiency of drilling highly deviated wells by analyzing both technical and financial indicators. Key factors such as drilling time, equipment utilization, well trajectory design, and operational risks are examined to determine their impact on overall project costs and productivity. Furthermore, the research highlights the importance of optimization strategies, including advanced drilling technologies, real-time monitoring systems, and efficient resource management, in reducing expenditures and improving performance. Comparative analysis between conventional and highly deviated wells is also conducted to assess cost-benefit ratios and long-term economic outcomes. The findings suggest that despite higher initial investments, highly deviated wells can provide significant economic advantages through increased production rates and improved reservoir contact when properly planned and managed. This study contributes to the development of more effective decision-making frameworks for drilling operations, emphasizing the integration of technical innovation and economic evaluation to achieve sustainable and cost-efficient outcomes in the oil and gas sector.
We study strategic corporate social responsibility (CSR) in an asymmetric-cost Cournot duopoly producing a homogeneous network good under passive consumer expectations. Firms first choose CSR weights (modeled as nonnegative weights on consumer surplus) and then compete in quantities; the game is solved by backward induction. Network effects change the commitment value of CSR: relative to a benchmark without CSR, strategic CSR lowers the survival threshold of the less efficient firm, so consolidation pressures strengthen as network intensity rises. In the interior region with two active firms, the equilibrium is unique: the more efficient firm endogenously selects a higher CSR weight, supplies more, and earns more, while the rival’s CSR and output decline as the cost gap widens. Regarding welfare, CSR unambiguously raises consumer surplus and lowers prices by credibly expanding output; total surplus exceeds the benchmark whenever the less efficient firm’s output does not increase under CSR, a condition that naturally occurs near the survival margin. The results clarify when CSR in network markets expands coverage and lowers prices, and when it tilts the industry toward concentration, with implications for competition policy in digital and communications sectors.
This paper examines the competitive and welfare effects of a wave of vertical mergers in a supply chain model where two upstream suppliers, with different marginal costs of production, provide a homogeneous input to three horizontally differentiated retailers. We identify conditions under which a wave of vertical mergers unambiguously improves consumer welfare. Specifically, when the most efficient supplier is the first to integrate and the market is fully covered, the subsequent integration by the less efficient supplier unambiguously benefit consumers irrespective of whether the independent retailer is foreclosed or not. The intuition is that the second merger helps the less efficient supplier establish a protected position in the downstream market, preventing the more efficient competitor from leveraging its cost advantage to create contractual barriers to entry in the upstream market and monopolize the downstream market. If the order of mergers changes, a merger wave may or may not benefit consumers depending on the degree of cost heterogeneity and the degree of product differentiation. Interestingly, when comparing consumer welfare across different market structures — namely, no integration at all, single integration, and a wave of vertical mergers — we show that when a merger wave maximizes consumer welfare, it requires the independent retailer to be foreclosed.
I incorporate time-inconsistent preferences under hyperbolic discounting into the monetary search model following Lagos and Wright (2005) and use it to analyze two types of economies. One economy consists of sophisticated agents who understand their time inconsistency, whereas the other consists of naïve agents who do not understand their time inconsistency. I extend previous analyses of this topic by considering two monetary policy rules: inflation targeting under which the target variable is the inflation rate and nominal growth rate targeting under which the target variable is the growth rate of gross domestic product. Through this analysis, I show that inflation targeting can be a time-inconsistent monetary policy rule in the economy consisting of naïve agents even if there is no uncertainty.
This paper develops a two-stage game to analyse firms’ incentives to adopt mutual passive interlocking cross-ownership in a duopolistic network industry. In the first, decision-making stage, shareholders choose whether to engage in reciprocal cross-ownership; in the second, market stage, firms compete simultaneously in quantities (Cournot) or prices (Bertrand). Under full compatibility, we show that network effects can, under specific conditions, overturn the conventional belief that cross-ownership is invariably profit-enhancing, giving rise, for example, to: (1) a prisoner’s dilemma in which self-interest and the mutual benefits of cross-ownership conflict (under both quantity and price competition), and (2) an anti-coordination game in which only one firm strategically adopts cross-ownership (under price competition). Moreover, the degree of product compatibility generates a rich set of subgame-perfect Nash equilibria of the cross-ownership decision game. To the extent that the anti-competitive practice of mutual interlocking cross-ownership may arise, our findings provide a new, endogenous explanation for the empirical observation of markets with reciprocal, unilateral, or no cross-ownership, and they offer novel insights and antitrust policy implications that emerge uniquely from the interplay between endogenous ownership choice and network effects, as well as for achieving Pareto-superior outcomes.
We formulate a reciprocal dumping model of Cournot competition, with international location choice in the presence of global common ownership. We theoretically examine how payoff interdependence caused by overlapping ownership such as common and cross ownership affects location and production choices, and resulting welfare. We find that positive payoff interdependence incentivizes firms to shift their location choices from cost- oriented to market-oriented location. This type of location shift enhances international location diversification and, as a result, promotes welfare-improving production substitution, which may ultimately enhance global welfare. The presence of market integration further reinforces the robustness of this main finding. Oligopolistic firms’ competition in an international market is investigated. Overlapping ownership induces positive payoff interdependence among firms. Payoff interdependence affects firms’ production and location choice. Payoff interdependence enhances international location diversification. Welfare may increase with payoff interdependence.
The purpose of the study is to assess how government support measures affect the productivity level of the grain sector in Azerbaijan. In recent years, the country's agricultural policy has provided significant subsidies, benefits and incentive mechanisms to increase yields and production sustainability. However, the practical effectiveness of these measures has not been fully studied. The paper uses methods of comparative and statistical analysis based on official data on yields and production volumes of grain crops in recent years. Additionally, a review of regulatory documents and support programs was conducted, as well as a comparison with the experience of other countries where similar tools are used. The results of the study show that government assistance in the form of subsidies for seeds, fertilizers and fuels and lubricants generally has a positive effect on productivity, but the effect strongly depends on the level of technology adaptation, soil conditions and climatic conditions in specific regions. At the same time, there are risks of reduced efficiency due to the uneven distribution of resources and limited access of small farms to support. The practical significance of the work lies in the fact that the findings can be used to adjust agricultural policy, in particular, to develop more targeted incentive tools and introduce innovative methods of production management in the grain sector.
In the last decade, cryptocurrencies and blockchain technologies have caused radical changes in the financial system and affected the structure of global economic relations. This area is of great relevance not only from technological, but also from economic and legal aspects. Especially for developing countries like Azerbaijan, cryptocurrencies have great potential in terms of the formation of a digital economy, increasing financial inclusion, and liberalizing capital flows. The main goal of the study is to study the mechanisms of influence of cryptocurrencies on the world and Azerbaijani economies, to determine their impact on financial stability, state regulation, and fiscal policy. At the same time, it is aimed to propose an optimal regulatory model that can be applied at the national level on a scientific basis. The study used analysis-synthesis, systematic approach, and comparative methods, and analyzed global cryptocurrency indicators based on databases of international organizations.The regulatory models of countries such as the United States, the European Union, and China were examined in a comparative manner, and the possibility of adaptation for Azerbaijan was assessed. The analyses conducted prove that cryptocurrencies carry both risk and development potential. Under the conditions of their proper regulation, the expansion of the digital economy, the strengthening of financial innovations, and the fintech sector are possible. The originality of the work lies in the fact that for the first time the concept of a "balanced regulatory model" is proposed for the Azerbaijani economy.
