nep-tra New Economics Papers
on Transition Economics
Issue of 2005‒09‒17
eight papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Just how Undervalued is the Chinese Renminbi By Michael Funke; Jörg Rahn
  2. Correlating Growth with Well-Being during Economic Reforms Evidence from India and China By Sudip Ranjan Basu
  3. Trade, Product Variety and Welfare: A Quantitative Assessment for the Transition Economies in Central and Eastern Europe By Ralf Ruhwedel; Michael Funke
  4. Institutions, Markets and Men’s and Women’s Wage Inequality: Evidence from Ukraine By Ina Ganguli; Katherine Terrell
  5. Diversity of capitalism and Central and Eastern European Countries. A statistical analysis. (In French) By Jean-Philippe BERROU (CED, IFReDE-GRES); Christophe CARRINCAZEAUX (E3i, IFReDE-GRES)
  6. Export Variety and Economic Growth in East European Transition Economies By Ralf Ruhwedel; Michael Funke
  7. Bringing Home the Money - What Determines Worker's Remittances to Transition Countries? By Mechthild Schrooten
  8. Eat, Drink, Firms and Government: An Investigation of Corruption from Entertainment and Travel Costs of Chinese Firms By Hongbin Cai; Hanming Fang; Lixin Colin Xu

  1. By: Michael Funke; Jörg Rahn
    Abstract: Given that the value of China´s currency has been hot topic recently, this paper explores the equilibrium levels of China´s real and nominal exchange rates. Employing a Johansen cointegration framework, we focus on the behavioral equilibrium exchange rate (BEER) and permanent equilibrium exchange rate (PEER) models. Our results suggest that, while the renminbi is somewhat undervalued against the dollar, the misalignment is not nearly as exaggerated as many popular claims.
    Date: 2005–04
  2. By: Sudip Ranjan Basu (Graduate Institute of International Studies HEI , Geneva)
    Abstract: This paper investigates the hypothesis that economic growth is critical in inducing well-being during economic reforms. The regional (16 Indian states and 28 Chinese provinces) level study of India and China show that the quality of growth has been essential for well-being. We estimate level of economic well-being by aggregating different socio- economic indicators through multivariate statistical method of factor analysis. We estimate economic growth (per capita income, real) along with their well-being level for four different sub-periods since 1978/80-2001 for all regions. Our empirical results confirm that differential level of well-being across regions is correlated with the quality of growth.
    Keywords: Growth, Well-being, Economic Reforms, Multivariate statistical method, India, China
    JEL: O C R11
    Date: 2005–09–08
  3. By: Ralf Ruhwedel; Michael Funke
    Abstract: We calculate welfare gains of trade liberalization in the Central and East European transitioneconomies, following the approach of Romer (1994), who emphasized that proper modeling ofthe impact of trade restrictions on the number of available product varieties is crucial toquantifying the welfare impact of trade liberalization. The empirical work relies on directmeasures of product variety calculated from 5-digit trade data. Although the issue is far fromsettled, the emerging conclusion is that freer trade has boosted welfare.
    Keywords: Trade Liberalization, Product Variety, Welfare, Transition Economies
    JEL: D60 F14 F15
    Date: 2004–01
  4. By: Ina Ganguli (Harvard University); Katherine Terrell (University of Michigan, Ann Arbor and IZA Bonn)
    Abstract: Ukraine, the second largest country in the former Soviet bloc, is facing the challenge of rallying popular support for major structural reforms. As in most developing economies, the "Orange Revolution" government’s success will depend on its ability to keep income distribution within an acceptable range. This paper is the first to make use of recent methodological developments in Lemieux’s (2002) decomposition method to advance our understanding of the determinants of wage inequality in developing and transition economies. With an eye toward future policy, we apply this approach to the first large longitudinal micro data set for Ukraine - the Ukrainian Longitudinal Monitoring Survey (ULMS) - to determine the extent to which the introduction of markets and new institutions affected men’s and women’s wage inequality between 1986 and 2003. We find that wage inequality rises substantially for both men and women. Applying the Lemieux method, we show that market forces drive the increase in inequality through changes in wage premiums, but the changes in the composition of the labor force (selection) generally contribute to a reduction in wage inequality; the exception is that changes in women’s labor composition contribute to an increase in inequality in the top half of their wage distribution. Finally, changes in unobservable characteristics work toward increasing inequality for both men and women. The institution of the minimum wage plays an important role in lowering the growth in inequality, more for women than for men. Going forward, if the government wants to ameliorate the effects of market forces on wage inequality, it should recognize the importance of maintaining the value of, and compliance with, the minimum wage.
    Keywords: gender, inequality, semi-parametric estimation, transition, wages, Ukraine
    JEL: C14 I2 J16
    Date: 2005–07
  5. By: Jean-Philippe BERROU (CED, IFReDE-GRES); Christophe CARRINCAZEAUX (E3i, IFReDE-GRES)
    Abstract: Realised within the framework of the ESEMK project supported by the EU (FP6, Priority 7, Contract CIT-CT-2004-506077), the present study proposes a statistical analysis of the variety of the European socio-economic models integrating Central and Eastern European Countries (CEEC) using Bruno Amable’s approach of the diversity of capitalism. The analysis relies on the theoretical design of institutional complementarities whose coherence defines the character of model of capitalism. The aim of this methodological study is to test the stability of Amable’s results when new countries are introduced (Hungary, Poland, Czech Republic, Turkey and one emerging country, Mexico, in order to diversify our sample), and to position the CEEC with respect to the European models already identified. Although the typology of the five capitalisms seems finally well resist to the introduction of new countries, it is however necessary to note some more dubious configurations on the side of European continental and Mediterranean models. Concerning the new introduced countries, the three Central European countries differs from the whole of the other models whereas Turkey is close to the Mediterranean model.
    Keywords: variety of capitalism, institutional complementarities, Central and Eastern European Countries (CEEC)
    JEL: B52 P50
    Date: 2005
  6. By: Ralf Ruhwedel; Michael Funke
    Abstract: Utilising panel data for 14 East European transition economies we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels.The empirical work relies upon some direct measures of product variety calculated from 5-digit OECD trade data.Although the issue is still far from being settled, the merging conclusion is that the index of relative export varietyacross countries is significantly correlated with relative per capity income levels.
    Keywords: Product Variety, Transition Economies, Eastern Europe, Economic Growth, Panel Data
    JEL: C33 F43 O31 O52
    Date: 2005–01
  7. By: Mechthild Schrooten
    Abstract: Workers' remittances are a major source of external finance in many former socialist countries. While previous studies showed that remittances have a positive impact on economic development, this study focuses on the determinants of remittances. Therefore, dynamic panel-data estimation techniques are applied. Major findings are: Remittances per capita and remittances in percent of GDP are driven by similar factors. In general, remittances are highly persistent and increase with the domestic unemployment rate. A higher GDP per capita as well as a higher degree of international integration of the sending countries' real sector leads to a decrease of remittances. In addition, there seems to evidence that remittances operate as a substitute for a well performing domestic banking sector. Institutional development seems to have no significant influence on the size of remittances. However, remittances per capita increase in times of war.
    Keywords: remittances, migration, dynamic panel data models
    JEL: F22 F36 C23
    Date: 2005–09
  8. By: Hongbin Cai; Hanming Fang; Lixin Colin Xu
    Abstract: Entertainment and Travel Costs (ETC) is a standard expenditure item for Chinese firms with an annual amount equal to about 20 percent of total wage bills. We use this objective accounting measure as a basis to analyze the composition of ETC and the effect of ETC on firm performance. We rely on the predictions from a simple but plausible model of managerial decision-making to identify components of ETC by examining how the total ETC responds to different environmental variables. In our empirical analysis we find strong evidence that firms. ETC consists of a mix that includes bribery to government officials both as “grease money” and “protection money,” expenditures to build relational capital with suppliers and clients, and managerial excesses. ETC overall has a significantly negative effect on firm performance, but its negative effect is much less pronounced for those firms located in cities with low quality government service, those who are subject to severe government expropriation, and those who do not have strong relationship with suppliers and clients. Our findings have important implications on how to effectively curb corruption.
    JEL: L2 O1 H2
    Date: 2005–09

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