nep-tra New Economics Papers
on Transition Economics
Issue of 2005‒05‒07
fourteen papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Making Fiscal Decentralization Work in Vietnam By Jorge Martinez-Vazquez
  2. Ukraine: Assessment of the Implementation of the New Formula Based Inter-Governmental Transfer System By Jorge Martinez-Vazquez; Signe Zeikate
  3. A model for Public Infrastructure Equalization in Transitional Economies By Sophia Levtchenkova; Jeff Petchey
  4. From a Currency Board to the Euro: Public Attitudes toward Unilateral Euroization in Bulgaria By Neven T. Valev
  5. Beliefs about Exchange-Rate Stability: Survey Evidence from the Currency Board in Bulgaria By Neven T. Valev; John A. Carlson
  6. Getting it Right: Financing Urban Development in China By Richard M. Bird
  7. Value-Added Taxes in Developing and Transitional Countries: Lessons and Questions By Richard M. Bird
  8. Tax Compliance of Small Business in Transition Economies: Lessons from Bulgaria By Konstantine Pashev
  9. "NO, NO, NO, NO!": Three Sons of Connecticut Who Opposed the Chinese Exclusion Acts By Henry Cohn; Harvey Gee
  10. Loan Extension in China: a Rational Affair By Piet van Gennip
  11. Adjustment to the Asymmetric Shocks and Currency Unions: the Case of Belarus and Russia By Charnavoki Valery
  12. Loyalty and Power in Union–Party Alliances: Labor Politics in Postcommunism By Sabina Avdagic
  13. Fiscal Consolidations in the Central and Eastern European Countries By António Afonso; Christiane Nickel; Philipp Rother
  14. A Dynamic Shift-Share Analysis of the Electronics Export Market 1988-2001: Can the NIEs Compete with China? By Peter Wilson; Ting Su Chern; Tu Su Ping; Edward Robinson

  1. By: Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Vietnam is a poor country with large and increasing needs in infrastructure, education, health, and other areas of the public sector. The current policy of the Government of Vietnam (GOV) is not to increase tax effort, but actually to reduce it. Recently, the GOV has cut the rates of several taxes with the goal of making Vietnam’s exports more competitive internationally and to attract more foreign direct investment. Tax revenues will be further cut in the near future as the GOV prepares for accession to the WTO by reducing the level and dispersion of customs tariff rates.
    Keywords: Fiscal Decentralization,Vietnam, tax effort
    Date: 2004–08–01
  2. By: Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Signe Zeikate
    Abstract: Since independence, Ukraine has tried to function with the system of public finance it inherited from Soviet times. Experience has demonstrated that this system, based on an outdated budget law of 1996, has not served Ukraine well and that it has become increasingly inappropriate for an economy struggling to make a successful transition to a modern market economy. Among this system's more notable failures were its high degree of nontransparent and discretionary decision-making, its marked instability of both expenditure and revenue assignments for local governments, the lack of predictability for good budgeting practices, and the faulty incentives it provided for local governments to raise additional revenue and spend more effectively.
    Keywords: Ukraine, Inter-Governmental Transfer System
    Date: 2004–09–01
  3. By: Sophia Levtchenkova; Jeff Petchey
    Abstract: In this paper, a simulation model is constructed that would enable policy-makers in transitional economies to estimate regionally disparate capital needs and direct capital expenditures to improve standards of public capital or services such as education and health. The model allows policy makers to achieve some degree of ‘equalisation in the regional distribution of publicly supplied capital to allow citizens greater equality of access to services, regardless of location. After developing an appropriate input database, the model is applied to South Africa. The results show that South Africa would need to commit about 2 percent of GDP to supplementary public capital expenditures if it is to make substantial inroads into attaining some form of public infrastructure equalisation over time.
    Keywords: transitional economies, capital expenditure, PIM, equalisation, infrastructure backlogs, public expenditure
    Date: 2004–11–01
  4. By: Neven T. Valev (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Bulgaria has operated a currency board since 1997. It is expected to join the EU in 2007 and the EMU thereafter. This paper uses survey data to analyze public attitudes toward adoption of the euro in advance of EMU membership. Bulgarians are equally split in support for and opposition to euroization. The reasons to support euroization include the eliminated risk of currency devaluation and the perception that the euro is already widely used in the economy. The opposition derives from people’s attachment to the national currency and from concerns about the conversion costs involved in a switch to the euro.
    Keywords: Euroization; Dollarization; Euro; Survey Data; Bulgaria; Currency Boards
    Date: 2004–11–01
  5. By: Neven T. Valev (Andrew Young School of Policy Studies, Georgia State University); John A. Carlson
    Abstract: We use unique survey data from Bulgaria’s currency board to examine the reasons for persistent incomplete credibility of a financial stabilization regime. Although it produced remarkably positive effects in terms of sustained low inflation since 1997, the currency board has not achieved full credibility. This is not uncommon in other less-developed countries with fixed exchange rate regimes. Our results reveal that incomplete credibility is explained primarily by concerns about external economic shocks and the persistent high unemployment in the country. Past experiences with high inflation do not rank among the top reasons to expect financial instability in the future.
    Keywords: Credibility; Currency Boards; Financial Stabilization Programs
    Date: 2004–11–01
  6. By: Richard M. Bird
    Abstract: China is the world’s most populous country. For some years, China has sustained a remarkably fast rate of economic growth. Despite the forests of construction cranes so often noted by visiting foreigners, however, China remains to a surprising extent a rural country, with only about one-third of its population living in urban areas. But China’s cities are growing rapidly, and within a decade half or more of its population will be urban. In addition to urbanizing less rapidly than would normally be expected for its growth rate, the pattern of urban growth in China during its recent rapid economic expansion has also not followed that found in other countries. In particular, contrary to experience in most of the world, its largest urban centers have on the whole grown less rapidly than the urban sector as a whole. Moreover, in some critical respects the internal pattern of growth within Chinese cities has also deviated from what economic logic would suggest is sensible – although in this respect at least its experience is not too different to what has been seen elsewhere.
    Keywords: Urban Development, China, Economic Growth
    Date: 2004–12–01
  7. By: Richard M. Bird
    Abstract: The value-added tax has, in recent decades, become the most important single tax in most developing and transitional economies. This paper reviews some problems that have emerged as important as more experience has been gained with how VATs really work in many such countries and suggests some lines of research that need to be explored further to overcome those problems.
    Keywords: Value-Added Taxes in Developing and Transitional Countries
    Date: 2005–03–01
  8. By: Konstantine Pashev (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper studies the challenges of raising tax compliance in the small business sector in transition economies, drawing from the experience of Bulgaria. It identifies the elements of tax design and enforcement that discriminate against the small business and drive non-compliance. It argues that these drivers are related mainly to the disproportionate tax burden of compulsory social insurance contributions and income taxation of sole proprietors, as well as to the higher compliance costs faced by the small business in Bulgaria. In this framework it studies Bulgarian experience with two presumptive taxes - the patent tax and the minimum insurance income thresholds - and discusses the opportunities and costs of their optimization.
    Keywords: tax compliance, transition economies, Bulgaria
    Date: 2004–03–01
  9. By: Henry Cohn (None); Harvey Gee (None)
    Abstract: In 1882, with the passage of the initial Chinese Exclusion Act, the United States committed an overt act of discrimination against its resident Chinese population. The Act, signed by then President Chester A. Arthur on May 6, 1882, had an undistinguished and mild official title, promising merely to implement treaty restrictions. However, its practical effect was devastating.
  10. By: Piet van Gennip
    Abstract: Against the background of the problem of Non Performing Loans, the lack of data causes bankingbehaviour in China being wrapped in mystery. By making use of data reported by Shenzhenlisted firms, this paper reveals some stylized facts on loan extension in China. For that purpose both static and dynamic panel data estimation techniques are applied to investigate the relationship between a firm's debt position and some potential explanatory variables. In its approach, the paper differs from the corporate leverage literature in the sense that it focuses on bank behaviour. The results, as they come forward in the paper, provide mixed evidence regarding the soundness of loan extension policy of Chinese banks. On the one hand, banks seem to pursue a restrictive policy towards firms that face poor profit performance. On the other hand, factors that are generally considered as being important conditions on loan extension by banks do not have the effect ascribed to them by both intuition and the literature.
    Keywords: Loan extension by banks; Corporate finance; Panel data estimation
    JEL: C33 D21 G21 G32
    Date: 2005–05
  11. By: Charnavoki Valery
    Abstract: The paper analyzes mechanism of adjustment to the asymmetric shocks in terms of trade in possible currency union of Belarus and Russia. It is emphasized the role of real exchange rate in this process. An empirical analysis based on panel data confirms the asymmetric effect of fuel price changes on the equilibrium real exchange rate in two countries. At the same time, according to our estimates, real exchange rate changes affect significantly real output and its structure in Belarus. On the base of analysis provided, conclusion is made about necessity to create a fiscal stabilization mechanism which would allow to smooth negative effect of asymmetric shocks on Belarusian economy under currency union.
    Keywords: Belarus, Russia, currency union, asymmetric shocks, terms of trade, real exchange rate.
    JEL: C23 E42 F31 F33
    Date: 2005–05–04
  12. By: Sabina Avdagic
    Abstract: Abstract Europe's 'political space,' its dimensionality and its impact on European policies have received increased academic attention lately. Yet, one very basic element of this political space, the party composition of EU member states' governments, has never been studied in a systematic way in the rich literature on European integration. In this paper we explain why the EU literature would benefit from a closer analysis of Europe's party-political 'center of gravity.' We give a systematic overview of the party composition of member governments from 1957 to 2003. This includes analyses of how the support for integration, the left/right political conviction, and the ideological homogeneity or heterogeneity of the member states affected strictly intergovernmentalist EU institutions like the Council over the course of time. We draw on expert surveys, the data of the Comparative Manifesto Project, and data about government composition. Our case study about the fate of European social policy from the Treaty of Rome to the present day highlights the argument that analyses of European integration require an understanding of the party-political dimension of this process.
    Keywords: corporatism; institutions; leadership; political parties; political opportunity structure; post-Communism; power analysis; social democracy; trade unions; transition processes; transition processes
    Date: 2004–11–04
  13. By: António Afonso; Christiane Nickel; Philipp Rother
    Abstract: We study fiscal consolidations in the Central and Eastern European countries and what determines the probability of their success. We define consolidation events as substantive improvements in fiscal balances adjusting for the impact of cyclical effects. We use Logit models for the period 1991–2003 to assess the determinants of the success of a fiscal adjustment. The results seem to suggest that for these countries expenditure based consolidations have tended to be more successful. By contrast, revenue based consolidations have a tendency to be less successful.
    Keywords: fiscal policy; fiscal episodes; Central and Eastern Europe; Logit models.
    JEL: C25 E62 H62
  14. By: Peter Wilson (Department of Economics, National University of Singapore); Ting Su Chern; Tu Su Ping; Edward Robinson
    Abstract: This paper uses dynamic shift-share analysis to examine the export performance of China in electronics compared to the east Asian NIEs exporting to the USA, European Union and Japan between 1988 and 2001. Our findings suggest that China has now emerged as a serious contender in the export market for electronics goods, but this position has not been a dominant one. Her main gains have been in consumer electronics and telecommunications equipment and to a lesser extent in disk-drives, printers and PCs; but in the higher-end exports of printed circuit boards and semiconductors, China has not yet gained a significant stronghold in developed country markets, at least to the extent that the growth in her overall exports and increase in market shares might suggest. Moreover, China’s success since the early 1990s has been largely underpinned by strong export growth rather than a favourable industry mix. Nonetheless, If China can sustain rapid growth in exports and is able consolidate its industrial base, China’s overall competitiveness can be expected to improve substantially in the future. Its low cost structure, an increasingly skilled workforce and an influx of technology and management skills associated with large foreign direct investment inflows, together with its recent entry into the WTO, places China in a very favourable position.
    Keywords: Trade, Competitiveness, Exports, East Asia, Shift-Share
    JEL: F10 F14

This nep-tra issue is ©2005 by Tono 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.
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