nep-tra New Economics Papers
on Transition Economics
Issue of 2005‒02‒27
four papers chosen by
Toño Sanchez
Universidad de Valencia

  1. The Law of one Price in the Russian Economy By Konstantin Gluschenko
  2. On the Evolution of Size and Productivity in Transition: Evidence from Slovenian Manufacturing Firms By Saso Polanec
  3. Trade Protection and Industry Wage Structure in Poland By Chor-ching Goh; Beata Smarzynska Javorcik
  4. High Corruption Income in Ming and Qing China By Shawn Ni; Pham Hoang Van

  1. By: Konstantin Gluschenko
    Abstract: Taking the law of one price as a test for market integration, the spatial set-up of Russia’s market integration over 1994-2000 is analyzed with the use of time series of the cost of a staples basket across Russian regions. The law is found to hold for about 50% to 60% of Russian regions, estimates of a threshold model suggesting rather high barriers to inter-regional trade. To reveal whether there is a movement towards market integration among non-integrated regions, dynamics of cross-sectional distribution of prices receives study. The results indicate that such a tendency does take place. An effort is made to identify forces responsible for Enter-regional price disparities.
    Keywords: market integration, price dispersion, price convergence, Russia, Russian regions
    JEL: P22 P25 R15 R19
  2. By: Saso Polanec
    Abstract: This paper compiles a set of stylized facts on the evolution of Firm size and labor and total factor productivity distributions during the process of transition. These facts are based on the data for all Slovenian manufacturing firms active between 1994 and 2003. Stylized picture of transition can be summarized as follows. Initially, we can distinguish between two types of firms: small and on average more productive and large and on average less productive firms. Removal of institutional restrictions has spurred growth of small firms and entry of new firms on one hand and decline and exit of large firms on the other. These simultaneous shifts have transformed the shape of firm size distribution from bimodal into unimodal. While labor and total factor productivity distributions exhibit large right-hand shifts and lower heterogeneity over time, firm productivity rankings changed substantially. Smaller firms, which were initially more productive, exhibited lower productivity growth rates and thus gradually lost their advantage. Commonly held view of transition as a process of reallocation of resources from inefficient state to efficient private firms is at odds with our results of aggregate labor and total factor productivity decompositions. Almost half of aggregate labor productivity growth can be explained by within firm growth and the rest by reallocation. Our evidence suggests that within firm growth seems to be related to the process of technological catching up of less productivelarge firms. These stylized facts may give a wrong impression of transition being a deterministic process, while it is not. The process is stochastic and thus similar to those found for established market economies. Hence theoretical models of transition should reflect deterministic features that we outlined and preserve stochastic elements introduced in now standard models of industrial dynamics.
    Keywords: manufacturing, size, labor productivity, total factor productivity, catching up, distributions, transition
    JEL: L11 L16 L60
  3. By: Chor-ching Goh; Beata Smarzynska Javorcik
    Abstract: This study examines the impact of Poland%u2019s trade liberalization 1994-2001 on the industry wage structure. The liberalization was undertaken in preparation for Poland%u2019s accession to the European Union and was more pronounced in industries with larger shares of unskilled labor. Our analysis indicates that a decrease in an industry tariff was associated with higher wages being earned by workers employed in the industry, controlling for worker characteristics and geographic variables. The result is robust to including year and industry fixed effects, controlling for industry-level exports, imports, concentration, stock of foreign direct investment and capital accumulation. The finding is consistent with liberalization increasing competitive pressures, forcing firms to restructure and improve their productivity, which in turn translates into higher profits being shared with workers. It could also be potentially attributed to trade liberalization lowering the costs of imported inputs which enhances firm profitability. The result holds when skilled workers are excluded from the sample, thus suggesting that reductions in trade barriers benefited the unskilled in terms of an increase in wages.
    JEL: F16
    Date: 2005–02
  4. By: Shawn Ni (Department of Economics, University of Missouri-Columbia); Pham Hoang Van (Department of Economics, University of Missouri-Columbia)
    Abstract: We develop an economic model that explains historical data on government corruption in Ming and Qing China. In our model, officials’ extensive powers result in corrupt income matching land’s share in output. We estimate corrupt income to be between 14 to 22 times official income resulting in about 22% of agricultural output accruing to 0.4% of the population. The results suggest that eliminating corruption through salary reform was possible in early Ming but impossible by mid-Qing rule. Land reform may also be ineffective because officials could extract the same rents regardless of ownership. High officials’ incomes and the resulting inequality may have also created distortions and barriers to change that could have contributed to China’s stagnation over the five centuries 1400-1900s.
    Keywords: Corruption, China
    JEL: O10 O53
    Date: 2005–02–18

This nep-tra issue is ©2005 by Toño Sanchez. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.