nep-cis New Economics Papers
on Confederation of Independent States
Issue of 2006‒10‒07
nineteen papers chosen by
Anna Y. Borodina
Perm State University

  1. Non-wage benefits, costs of turnover, and labor attachment: Evidence from Russian firms By Juurikkala, Tuuli; Lazareva, Olga
  2. Markets and democracy in Russia By Ivanenko, Vlad
  3. Lobbying at the local level: Social assets in Russian firms By Juurikkala, Tuuli; Lazareva, Olga
  4. Russia’s common market takes shape: Price convergence and market integration among Russian regions By Gluschenko, Konstantin
  5. Coping with missing public infrastructure: An analysis of Russian industrial enterprises By Solanko, Laura
  6. A ten-year retrospection of the behavior of Russian stock returns By Anatolyev, Stanislav
  7. Equilibrium exchange rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) diseased? By Égert, Balázs
  8. Biases in cross-space comparisons through cross-time price indexes: The case of Russia By Gluschenko, Konstantin
  9. Choice of the substitution currency in Russia: How to explain the dollar's dominance? By Dorbec, Anna
  10. Liquidity provision in transition economy: the lessons from Russia By Dorbec , Anna
  11. Air Pollution Costs in Ukraine By Elena Strukova; Alexander; Anil Markandya
  12. Regional impacts of Russia ' s accession to the World Trade Organization By Rutherford, Thomas; Tarr, David
  13. Trade specialisation patterns: The case of Russia By Algieri , Bernadina
  14. Collective action and post-communist enterprise: The economic logic of Russia’s business associations By Pyle, William
  15. Probability of default models of Russian banks By Peresetsky, Anatoly A.; Karminsky , Alexandr A.; Golovan , Sergei V.
  16. Ex-ante dynamics of real effects of monetary policy: Theory and evidence for Poland and Russia, 2001-2003 By Charemza , Wojciech W.; Makarov, Svetlana
  17. The inflationary consequences of real exchange rate targeting via accumulation of reserves By Sosunov, Kirill; Zamulin, Oleg
  18. Russian equity market linkages before and after the 1998 crisis: Evidence from time-varying and stochastic cointegration tests By M. Lucey , Brian; Voronkova, Svitlana
  19. Assessing a feasible degree of product market integration. (A pilot analysis) By Gluschenko , Konstantin; Kulighina, Darya

  1. By: Juurikkala, Tuuli (BOFIT); Lazareva, Olga (Centre for Economic and Financial Research, Moscow)
    Abstract: Just as in established market economies, many Russian firms provide non-wage benefits such as housing, medical care or day care to their employees. Interpreting this as a strategic choice of firms in an imperfect labor market, this paper examines unique survey data for 404 large and medium-size industrial establishments from 40 Russian regions. We find strong evidence that Russian industrial firms use social services to reduce the costs of labor turnover in the face of tight labor markets. The strongest effect is observed for blue-collar workers. We also find that the share of non-monetary compensation decreases with improved access to local social services.
    Keywords: non-wage benefits; labor turnover; labor attachment; Russia
    JEL: J32 J33 J42 J63 M52 P31
    Date: 2006–04–13
  2. By: Ivanenko, Vlad (University of Western Ontario, London, Canada)
    Abstract: The paper looks into convergence of Russian institutions with those of other democratic, free-market-oriented states, and considers definitions of "normalcy" that incorporate the concepts of free market, democracy, and government efficiency. The author provides an estimate of Russia’s institutional convergence to the standards of the G7 and the “Big Five” group of large, middle-income countries that includes Brazil, China, and India. In some areas Russia outperforms "Big Five" countries, in others it trails behind. Finally, public mistrust, corruption, and inefficient governance in Russia are discussed in light of the Putin administration’s current reform policies.
    Keywords: free market; democracy; institutions; Russia
    JEL: O57 P30 P52
    Date: 2005–12–30
  3. By: Juurikkala, Tuuli (BOFIT); Lazareva, Olga (Centre for Economic and Financial Research, Moscow)
    Abstract: IIn the planned economy firms were made responsible for providing their workers with so-cial services, such as housing, day care and medical care. In the transforming Russia of the 1990s, social assets were to be transferred from industrial enterprises to the public sector. The law on divestment provided little more than general principles. Thus, for a period of several years, property rights concerning a major part of social assets, most notably hous-ing, were not properly defined, as transfer decisions were largely left to the local level players. Strikingly, the time when assets were divested varied considerably across firms. In this paper we utilize recent survey data from 404 medium and large industrial enterprises in 40 Russian regions and apply survival data analysis to explore the determinants of dives-titure timing. Our results show that in municipalities with higher shares of own revenues in their budget and thus weaker fiscal incentives, firms used their social assets as leverage to extract budget assistance and other forms of preferential treatment from local authorities. We also find evidence that less competitive firms were using social assets to cushion them-selves from product market competition. At the same time, we do not find any role for lo-cal labor market conditions in the divestment process.
    Keywords: housing divestment; lobbying; firms; muncipalities; Russia
    Date: 2006–04–13
  4. By: Gluschenko, Konstantin (Institute of Economics and Industrial Engineering, Siberian Branch of the Russian)
    Abstract: This paper analyzes the spatial structure of goods market integration in Russia, characterizing regions into three states: (a) integrated, (b) not integrated but trending toward integration, and (c) not integrated and not trending toward integration. Using time series of the cost of a staples basket across 75 regions of Russia for 1994-2000, I exploit a nonlinear cointegration relationship with an asymptotically subsiding trend to capture movement toward integration. The analysis suggests that 36% of Russian regions were integrated with the national market over 1994-2000, 44% were in the process of integrating with the national market, and 20% of regions were not integrated and not trending toward integration.
    Keywords: market integration; law of one price; price dispersion; convergence; Russian regions
    JEL: C32 P22 R10 R15
    Date: 2006–06–22
  5. By: Solanko, Laura (BOFIT)
    Abstract: During the Soviet period industrial firms not only formed the backbone of the economy but also directly provided a wide range of benefits to their municipalities. Firms were in charge of supplying a great variety of social services, such as housing, medical care and day care. The need to divest at least some of these functions was generally accepted already in the early 1990s. Industrial firms' engagement in the provision of infrastructure services, such as heating, electricity and road upkeep has to date received much less attention. Using a unique dataset of 404 large and medium-sized industrial enterprises in 40 regions of Russia, this paper examines public infrastructure provision by Russian industrial enterprises. We find that, first, to a large degree engagement in infrastructure provision – as proxied by district heating production – is a Soviet legacy. Second, firms providing district heating to users outside their plant area are more likely to have close relations with the local public sector along many other dimensions.
    Keywords: Russia; infrastructure; firm performance
    JEL: H54 P31 P35
    Date: 2006–04–20
  6. By: Anatolyev, Stanislav (New Economic School)
    Abstract: We study three aspects of the Russian stock market – factors influencing stock returns, integration of the stock market with world .financial markets, and market efficiency – from 1995 to present, putting emphasis on how these evolved over time. We .find many highly unstable relationships, and indeed, greater instability than that generated by financial crises alone. While most computed statistics exhibit constant ups and downs, there are recently clear tendencies in the development of the Russian stock market: a sharp rise in explainability of returns, an increased role of international financial markets, and a decrease in the profitability of trading.
    Keywords: Russia; transition; stock returns; integration; efficiency
    JEL: C22 F36 G14 G15
    Date: 2005–07–15
  7. By: Égert, Balázs (Oesterreichische Nationalbank)
    Abstract: This paper investigates the equilibrium exchange rates of three Southeastern European countries (Bulgaria, Croatia and Romania), of two CIS economies (Russia and Ukraine) and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with a careful analysis of country-specific factors. For Russia, a first look is taken at the Dutch Disease phenomenon as a possible driving force behind equilibrium exchange rates. A unified framework including productivity and net foreign assets completed with a set control variables such as openness, public debt and public expenditures is used to compute total real misalignment bands.
    Keywords: Balassa-Samuelson; Dutch Disease; Bulgaria; Croatia; Romania; Russia; Ukraine; Turkey
    JEL: E31 O11 P17
    Date: 2005–06–27
  8. By: Gluschenko, Konstantin (Institute of Economics and Industrial Engineering, Siberian Branch of the Russian)
    Abstract: Lacking data on price levels across locations (countries, national regions, etc.) for cross-space comparisons, researchers resort to local consumer price indexes (CPIs) over time to evaluate these levels. This approach unfortunately fails to specify, even generally, the exactness of such proxies. Worse, the method is silent on whether the results are consistent, at least qualitatively, with those obtained using actual price levels. This paper aims to find an answer empirically, using data across Russian regions. Through comparison of CPI-proxied price levels with direct evaluations of regional price levels (i.e. Surinov spatial price indexes and the costs of a purchasing power basket), biases that distort the qualitative pattern of inter-regional differences are identified. Cross-region distributions for real income (calculated with CPI-proxied and directly evaluated price levels) for several points in time are estimated and compared. The CPI-induced biases are found to generally overstate inter-regional disparities.
    Keywords: consumer price index; spatial price index; real income; nonhomothetic prefer-ences; Russia; Russian regions
    JEL: C43 E31 P22 R19
    Date: 2006–08–18
  9. By: Dorbec, Anna (University of Paris X Nanterre)
    Abstract: The analysis of external economic relations of Russia reveals a paradox: while Europe is the main trade and direct investment partner of Russia, this is far from being the case concerning its currency’s role in Russia's financial activities. The dollar is much preferred by economic agents for financial operations. This paper proposes a disaggregated approach to this issue by separating the ‘means of exchange’ and ‘store of value’ components of the use of substitution currencies. The influence of three main factors (inertial component, real trade relations and exchange rate fluctuations) on the relative demand for the euro by Russian economic agents is tested for the period 1999-2004. Finally we suggest a theoretical interpretation of the results based on the conventions theory approach.
    Keywords: dollarisation; euroisation; transition; Russia; currency substitution; asset substitution; network externalities; hysteresis; conventions
    JEL: E41 E52 F31 F41 G20
    Date: 2005–12–01
  10. By: Dorbec , Anna (Université Paris X Nanterre)
    Abstract: This paper provides micro and macroeconomic analysis of the economic role of banks in the Russian economy. Using a large panel containing Russian enterprises’ balance sheet and income statement data, we evaluate the determinants of bank financing. Econometric model put out the existence of liquidity providing activity of Russian banks. Even though the overall liquidity provision system suffers from certain deficiencies, we demonstrate its importance in the macroeconomic context, using time series econometric analysis. Bank credit appears to be a significant factor in explaining the non-payment dynamics and use of informal financing. Finally, the uncertainty concept helps us to understand the reasons for a limitation of Russian banks in their liquidity providing role.
    Keywords: liquidity; finance; transition; Russia; uncertainty; banks; inter-enterprise credit
    JEL: D80 G21
    Date: 2004–11–01
  11. By: Elena Strukova (World Bank); Alexander (Environmental Defense); Anil Markandya (Fondazione Eni Enrico Mattei)
    Abstract: The paper presents estimation of the health losses from urban air pollution in Ukraine. The methodology developed by US EPA and adjusted in Russia for Eastern European transition countries was applied for health risk assessment. PM2.5 was identified as the major source of human health risk, based on experience from the Russian studies. In the absence of reliable computed concentrations of PM2.5, the study was based on monitoring data of total suspended particle (TSP) emissions in Ukraine. Additional cases of mortality and morbidity were calculated based on reporting data on TSP concentration that was recalculated into PM2.5. Then the concentration–response function was applied to estimate individual risk. Next, individual risk was applied to the population exposed to the concentration reported for each city included in the analysis (we selected most polluted cities). For each city we considered individual data on baseline mortality and morbidity and population structure. In total, air pollution related mortality represents about 6 percent of total mortality in Ukraine. In Russia the corresponding indicator totals about 4 percent. The relative mortality risk attributed to air pollution calculated per 100 000 population in both countries is about 55-59 cases. Since applied method is sensitive to the primary data uncertainties we conducted sensitivity analysis applying Monte-Carlo method. Economic damage related to mortality risk was estimated at about 4 percent of GDP. There was no relevant WTP study in Ukraine therefore we applied the benefit-transfer method in order to estimate VSL, since mortality attributed to air pollution is major component of health losses (about 94 percent). In order to compare and aggregate mortality and morbidity risks we recalculated them in DALY. Then morbidity represents about 30 percent of total air pollution health load. Data on baseline morbidity is less reliable than data on baseline mortality; therefore the morbidity risk estimates are more uncertain than mortality estimates. It is likely that morbidity risk is underestimated. Regardless of uncertainties mentioned above and some problems with reported data we can conclude that the mortality risk attributed to air pollution is significant. Therefore, costs of air pollution in Ukraine are sizable and in the nearest future may offset the economic growth. Recovery of the Ukrainian economy based on restoration of polluting industries may lead to stagnation since mortality and morbidity risks not only puts burden on the economy, but also reduce labor force.
    Keywords: Air Pollution, Ukraine, Environmental Damages
    JEL: Q53 I10 I18
    Date: 2006–09
  12. By: Rutherford, Thomas; Tarr, David
    Abstract: In this paper we develop a computable general equilibrium model of the regions of Russia to assess the impact of accession to the World Trade Organization (WTO) on the regions of Russia. We estimate that the average gain in welfare as a percentage of consumption for the whole country is 7.8 percent (or 4.3 percent of consumption); we estimate that three regions will gain considerably more: Northwest (11.2 percent), St. Petersburg (10.6 percent) and Far East (9.7 percent). We estimate that the Urals will gain only 6.2 percent of consumption, considerably less than the national average. The principal explanation in our central analysis for the differences across regions is the ability of the different regions to benefit from a reduction in barriers against foreign direct investment. The three regions with the largest welfare gains are clearly the regions with the estimated largest shares of multinational investment. But the Urals has attracted relatively little FDI in the service sectors. An additional reason for differences across regions is quantified in our sensitivity analysis: regions may gain more from WTO accession if they can succeed in creating a good investment climate.
    Keywords: Economic Theory & Research,ICT Policy and Strategies,Free Trade,Markets and Market Access,Investment and Investment Climate
    Date: 2006–09–01
  13. By: Algieri , Bernadina (University of Naples)
    Abstract: This paper considers trade specialisation in Russia, examining changes in trade patterns at the sectoral level over the transition period. Trade based on inter-industry specialisation and intra-industry trade (IIT) are empirically distinguished using the Aquino and Grubel-Lloyd indices. The Aquino index is applied to measure the degree of inter-industry specialisation by sector, while the Grubel-Lloyd index is used to establish the level of IIT between industries. The empirical results support recent trade theory, which predicts an increasing level of intra-industry trade with liberalisation processes. They also suggest how inter- and intra-industry trade coexist. The final econometric estimation of the factor content of Russia’s exports (specialisation in resource-intensive products) supports the index analysis.
    Date: 2004–12–31
  14. By: Pyle, William (Middlebury College)
    Abstract: Drawing on a unique set of surveys, this article explores the question of whether Russia’s post-communist business associations are generally antithetical to or supportive of the broad objectives of economic restructuring. Contrary to the most widely cited analysis as to the purposes of collective action in the business community, the survey evidence demonstrates that association members have embraced market-adapting behaviors at greater rates than non-members. The responses of both firms and associations, moreover, suggest that the associations themselves are, at least in part, directly responsible. These findings point to the conclusion that in contemporary Russia the net returns to collective action in support of market development are high relative to those for purposes that are less benign.
    Date: 2005–12–30
  15. By: Peresetsky, Anatoly A. (New Economic School); Karminsky , Alexandr A. (Gazprombank, Moscow, Russia); Golovan , Sergei V. (New Economic School)
    Abstract: This paper presents results from an econometric analysis of Russian bank defaults during the period 1997–2003, focusing on the extent to which publicly available information from quarterly bank balance sheets is useful in predicting future defaults. Binary choice models are estimated to construct the probability of default model. We find that preliminary expert clustering or automatic clustering improves the predictive power of the models and incor-poration of macrovariables into the models is useful. Heuristic criteria are suggested to help compare model performance from the perspectives of investors or banks supervision authorities. Russian banking system trends after the crisis 1998 are analyzed with rolling regressions.
    Keywords: banks; Russia; probability of default model; early warning systems
    Date: 2004–12–30
  16. By: Charemza , Wojciech W. (National Bank of Poland and University of Leicester, UK); Makarov, Svetlana (European University at St. Petersburg, Russia and National Bank of Poland)
    Abstract: The paper proposes a new indicator of expected real effects of a policy aimed at controlling inflation. The indicator, called real effect of inflation targeting (REIT), involves the comparison of expected and output-neutral inflation. It is shown that it can be derived from a simple two-dimensional vector autoregressive model of inflation and output gap. The microdynamics of such model are explained in terms of the foundations of Taylor-type staggered wage contracts. It is assumed that the monetary authority has some discretion regarding the timing of monetary actions. Here REIT can be used to set the optimal times for such actions, if the control of output is regarded as a secondary policy target. A simulation experiment illustrates the rationale of such a device for timing monetary measures. The REIT has been used by the Polish Monetary Policy Council since 2001 in it's inflation targeting and is thought to have contributed to a substantial decline in Polish inflation in 2003 and to an increase in output growth in 2004. A similar indicator computed for Russia as a means of monitoring monetary policy rather than as an active tool confirms that active expansionary policy in 2002 and 2003 might have contributed to Russian economic growth in 2004 and 2005, whereas similar policy measures for 2004 are likely to prove ineffective.
    Date: 2005–12–30
  17. By: Sosunov, Kirill (Higher School of Economics, Moscow); Zamulin, Oleg (New Economic School)
    Abstract: The paper investigates the ability of monetary authorities to keep the real exchange rate undervalued over the long run by implementing a policy of accumulating foreign exchange reserves. We consider a model of a three-sector, small, open economy, where the central bank continuously purchases foreign currency reserves and compare them to Russian and Chinese economies in recent years. Both countries appear to pursue reserve accumulation policies. We find a clear trade-off between the steady state levels of the real exchange rate and inflation. After calibration, the model predicts an 8.5% real undervaluation of the Russian currency and a 13.7% undervaluation of the Chinese currency. Predicted inflation is found to match observed levels.
    Keywords: real exchange rate targeting; foreign exchange reserves; Dutch disease
    JEL: E52 F41
    Date: 2006–08–24
  18. By: M. Lucey , Brian (BOFIT); Voronkova, Svitlana (BOFIT)
    Abstract: This paper examines the relationships between the Russian and other Central European (CE) and developed countries’ equity markets over the 1995-2004 period. Along with the traditional Johansen and Juselius (1990) multivariate cointegration tests, we apply novel cointegration approaches, including Gregory-Hansen (1996) test, which allows for a structural break in the relationships, as well as the newly developed stochastic cointegration test by Harris, McCabe and Leybourne (2002) and the non-parametric cointegration method of Breitung (2002). The latter tests point to a significant agreement that in the aftermath of the Russian crisis of 1998 there was an increasing degree of comovements of the Russian market with other developed markets, but not with CE developing markets. This result is further confirmed by dynamic conditional correlation modeling, which allows us to investigate graphically the evolution of comovements in the system. The results of detailed cointegration analysis suggest a. that the time-varying nature of equity markets comovements should be explicitly accounted for while modeling long run relationships b. that there is a decline in diversification benefits for foreign investors seeking to invest in Russian equities over the long horizon.
    Keywords: Stock Market Integration; CEE Stock markets; Russian Stock Market; Cointegration
    JEL: G10 G15
    Date: 2005–10–20
  19. By: Gluschenko , Konstantin (Institute of Economics and Industrial Engineering of SB RAS, Novosibirsk,); Kulighina, Darya (Novosibirsk State University)
    Abstract: Perfect integration eludes the real world, so we suggest a realistic benchmark standard for judging the extent of market integration in various economies. We estimate the degree of integration in the US product market, widely acknowledged to be the most integrated among geographically large economies, so as to provide a reference for measuring Russian market integration. Prices for 27 grocery items across 29 cities of the United States in the first quarter of 2000 are used as empirical data. The estimated degree of integration turns out to be very close to values obtained for Russia for 2000. Apparently, market integration in Russia has in recent years moved toward conditions found in advanced market economies. The roles of other factors that could potentially cause segmentation of the US market are also analyzed.
    Keywords: market integration; price dispersion; law of one price; United States; Russia
    JEL: F14 F15 L81 R11
    Date: 2006–04–19

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