nep-tra New Economics Papers
on Transition Economics
Issue of 2005‒10‒29
seventeen papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Are Eastern European Countries Catching Up? Time Series Evidence for Czech Republic, Hungary, and Poland By Ralf Brüggemann; Carsten Trenkler
  2. Ukrainian international trade: How far from the potential? By Maryanchyk Ivan
  3. Foreign Direct Investment, Regional Geographical and Market Conditions, and Regional Development: A Panel Study on China By Mei Wen
  4. Estimation of own- and cross-price elasticities of disaggregated imported and domestic goods in Russia. By Ivanova Nadezhda
  5. Gender Differences in Occupational Mobility and Segregation at the Labor Market: The Case of Russian Economy By Mal'tseva Inna
  6. Diffusion of Mobile Phones in China By Sangwan, S.; Pau, L-F.
  7. Organization and Strategy of Farmer Specialized Cooperatives in China By Hu, Y.; Huang, Z.; Hendrikse, G.W.J.; Xu, X.
  8. Rural Non-Farm Economic Development and Poverty Alleviation in Romania By Junior Davis; Dirk Bezemer
  9. The rural non-agricultural economy in transition countries: Enterprise level findings from Armenia By Dirk Bezemer; Junior Davis
  10. Theory and Measurement of Modern Transition By Hyeok Jeong; Yong Kim
  11. Prospects for Regional Free Trade in Asia By Gary Clyde Hufbauer; Yee Wong
  12. The Feasibility of a Fixed Exchange Rate Regime for New EU-members: Evidence from Real Exchange Rates By Bertrand Candelon; Clemens Kool; Katharina Raabe; Tom van Veen
  13. "China's Energy Dilemma" By Haider A Khan
  14. Trade Liberalisation and Employment Effects in Ukraine By Atanas Christev; Olga Kupets; Hartmut Lehmann
  15. The rural non-farm economy and poverty alleviation in Armenia, Georgia and Romania: A synthesis of findings. By Junior Davis; Dirk Bezemer; Monica Janowski; Tiago Wandschneider
  16. The Emerging Market Crisis and Stock Market Linkages: Further Evidence By Jian Yang; Cheng Hsiao; Qi Li; Zijun Wang
  17. Non-farm employment in small-scale enterprises in Romania: policy and development issues By Junior Davis; Angela Gaburici

  1. By: Ralf Brüggemann; Carsten Trenkler
    Abstract: The catching up process in Czech Republic, Hungary, and Poland is analyzed by investigating the integration properties of log-differences in per-capita GDP versus the EU15 and a Mediterranean country group. We account for structural changes by using unit root tests that allow for two endogenous breaks in the level and the trend. We find that Czech Republic and Hungary are stochastically converging towards the Mediterranean group, while only Czech Republic is stochastically converging towards EU15. Remaining per capita GDP differences are only reduced by deterministic trends. Extrapolating these trends we find that catching up will take about 20 years.
    Keywords: Stochastic convergence, Catching up, Unit root tests, EU accession
    JEL: C32 E24
    Date: 2005–03
  2. By: Maryanchyk Ivan
    Abstract: This paper applies the gravity theory to model Ukrainian trade patterns. I estimate two specifications — Global and Ukrainian. The former is used to forecast the optimal trade volumes and compare with the actual. The latter helps analyzing factors affecting Ukrainian trade. Ukraine explored its trade potential with the EU. On the other hand, having the low potential in 1995, the country achieved even better results in this direction in 2002. Trade with CIS deteriorated despite vast possibilities predicted by the model. Another unexplored opportunity is large economies of G7, Asia, and Americas. Ukraine could benefit liberalizing trade relations with Russia (to gain in trade and reach the potential) and with EU (to safeguard achieved results). Accession to the WTO might help in exploring the potential with G7 and other big economies.
    Keywords: Ukraine, international trade, gravity.
    JEL: F12 F13 F14
    Date: 2005–10–18
  3. By: Mei Wen
    Abstract: This paper uses regional panel data to investigate the mechanism of how FDI has contributed to China’s regional development through quantifying regional marketization level. It is found that FDI inflow generates a demonstration effect in identifying regional market conditions for investment in fixed assets and hence affects industrial location. In addition, its effects on regional export and regional income growth varied across east, central and west China since the second half of the 1990s, depending on FDI-orientation in different regions. In east China, geographical advantage in export attracts FDI inflow and FDI promotes export. In addition, rise of FDI-GDP ratio increases regional share in industrial value added in east China. These effects contribute positively to regional income growth in east China although there is a direct crowding out effect between FDI and domestic investment (as input) in growth. In contrast, the negative impact of FDI inflow in central China on regional export orientation weakens its contribution to regional income growth. Furthermore, contribution of improvement of market mechanism to regional development is evidenced in attracting FDI, in promoting export and directly contributing to regional income growth.
    Keywords: Export-oriented FDI and import substitute FDI, marketization, industrial location, and regional growth
    JEL: F23 O53 P52 R11
    Date: 2005
  4. By: Ivanova Nadezhda
    Abstract: The paper employs panel data analysis to estimate price and income elasticities for disaggregated domestic and imported goods using the Budget Survey of Russian households and prices of imported and domestic goods in Russia. The project is implemented using two types of data: the national level data for average households and households differentiated by income, and the data for the average regional households. Three different specifications of the demand equations: the double-logarithmic, the Linear Approximation to the AIDS, and the specification derived from the maximization of the CES utility function, are estimated for eight categories of traded non-food goods. The application of the instrumental-variable estimators to the regional data enables the endogeneity biases of the elasticity coefficients to be substantially corrected. The results of estimations of elasticities of demand for domestic and imported goods obtained for households differentiated by income indicate certain differences between estimated elasticities. This fact may be important for evaluating the impact of implementation of price and tariff policies on consumers with different levels of income.
    Keywords: Russia, imported and import-competing domestic goods, price and income elasticities of demand, Armington elasticities, household expenditures, Russian regions, income deciles.
    JEL: C23 D12 F14 I32 R15
    Date: 2005–10–18
  5. By: Mal'tseva Inna
    Abstract: This research analyses the influence of the differences in occupational mobility of men and women on gender segregation at the Russian labor market during 1985–2002. At the basis of the occupational mobility model which takes into account the gender differences in social roles, we estimate the input that individual characteristics and parameters of current occupation, characteristics of the local labor market make into probability of occupational mobility of employees of the different genders and probability of choice between different "gender-dominated" occupations, as well. The results prove that segregation decrease through occupational mobility is possible depending on increasing competitiveness of women at the labor market and eliminating factors preventing their access to employment in the private sector. Positive returns to occupational mobility in terms of wage growth were discovered for both gender groups.
    Keywords: Russia, occupational mobility, gender segregation, occupational choice, return to mobility
    JEL: J16 J62 J71 P23
    Date: 2005–10–18
  6. By: Sangwan, S.; Pau, L-F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Diffusion of mobile communication has induced great societal changes in China. Factors at global market, communications industry and end-user market levels are driving the adoption at a high rate. Firstly, China?s economic emergence together with e.g. accession to WTO has led to foreign investment increase in telecom and communications industry. Secondly, a parallel deregulation and reengineering of the telecom industry ensured an introduction of competition in the domestic terminals market and facilitated manufacturing in China. Finally, overall growth in China has increased purchasing power enabling consumers to adopt new technologies. At the market level, challenges and future growth depends on a favorable business environment both for local and multinationals organizations, operators and service providers, and most importantly to the distribution channels (retailers and resellers). Market mechanisms such as improvement in payment methods, regulations for content providers, branded and low-end mobile phones marketing, applications and support in Chinese language are required for a systematic and not just sporadic adoption of mobile devices. Product development and innovation, improvement in distribution infrastructure, mobile services operators skill enhancement are some measures that can growth of mobile communication and increase in average consumer spending.
    Keywords: China;Mobile phones diffusion;Market developments;China?s industrial policy;
    Date: 2005–10–14
  7. By: Hu, Y.; Huang, Z.; Hendrikse, G.W.J.; Xu, X. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: A description and analysis of China?s Farmer Specialized Cooperatives is presented. Data is presented regarding the historical development of farmer cooperatives in China, the membership composition of a sample of 66 farmer cooperatives in the Zhejiang province, and the various attributes (governance, quality control system, and strategy) of a watermelon cooperative in this province. Many cooperatives are being transformed in organizations with a market orientation. These cooperatives exhibit substantial heterogeneity, in terms of farmers being member and skewness in the distribution of control rights. Human asset specificity in terms of establishing and maintaining relations and access to markets seems to be more important than physical asset specificity in accounting for governance structure choice in the current institutional setting.
    Keywords: Farmer Cooperative;China;Governance;
    Date: 2005–10–18
  8. By: Junior Davis (Natural Resources Institute); Dirk Bezemer (University of Groenigen)
    Abstract: Since the collapse of the Soviet Union, the Romanian rural economy has undergone massive changes. Increased urban unemployment has stimulated migration from towns to rural areas. Meanwhile, rural industries that were subsidised under communism have collapsed, causing rural unemployment. Subsistence agriculture is now vitally important to rural livelihoods. It is a low-risk option for poor people, but it does little to stimulate economic growth. There is a growing focus on the rural non- farm economy (RNFE) as a way of stimulating economic growth that will make use of the high labour supply and improve livelihoods. It is also important for Romania’s EU accession, as the development of remunerative and sustainable non-farm employment opportunities will have important effects in terms of the use of future structural funds. This paper tests the hypothesis that two processes are apparent: demand-pull, where rural people respond to new opportunities; and distress-push, where the poorest are driven to seek non-farm employment as a survival strategy. In addition, it also considers how the RNFE contributes to poverty alleviation. The empirical work presented in this paper is primarily based on a large (nationwide) rural household survey and other field- related research representing a broad range of methodologies.
    Keywords: Rural non-farm economy, non-agricultural employment, livelihood diversity, transition economies
    JEL: O P
    Date: 2005–10–27
  9. By: Dirk Bezemer (University of Groningen); Junior Davis (Natural Resources Institute)
    Abstract: In this paper the findings of a survey conducted in June 2001 in Armenia are summarised. The aim was to gain insight into the nature of the rural non-farm economy (RNFE) in the country. For that purpose, 21 rural communities in 3 regions (called marzes in Armenian) were non-randomly selected. These regions were Ararat, Gegharkunik and Syunik . Since a prime motivation of the research is to study the potential of the NFRE to alleviate rural poverty, selection criteria included poverty levels and the level of development of the RNFE.
    Keywords: Enterprise development, rural-non-farm economy, poverty, transition economies
    JEL: O P
    Date: 2005–10–27
  10. By: Hyeok Jeong; Yong Kim
    Abstract: The process of modernization is neither instantaneous nor homogeneous across countries. Given the large productivity growth gap between traditional and modern sectors, the gradual and varying degree of transition between these technologies seems puzzling. We develop a theory of transition that resolves this puzzle. The key forces are sector-specific complementarity between work-experience and labor, and exogenous technical progress present only in the modern sector. Using nationally representative micro data from the Socio-Economic Survey of Thailand (1976-1996), we measure the theory by estimating cross-sectional earnings functions, and assess if the model captures the observed dynamics of transition. The model jointly explains the gradual and S-shaped transition, stagnant growth of aggregate earnings, and the rise and fall of experience-earnings profiles in Thailand.
    Keywords: Modern Transition, Sector-Specific Complementarity, TFP and Inequality
    JEL: O11 O47 J31 O15
    Date: 2005–08
  11. By: Gary Clyde Hufbauer (Institute for International Economics); Yee Wong (Massachusetts Institute of Technology)
    Abstract: Frustrated with lackluster momentum in the WTO Doha Round and the Asia Pacific Economic Cooperation (APEC) forum, and mindful of free trade agreement (FTA) networks centered on the United States and Europe, Asian countries have joined the FTA game. By 2005, Asian countries (excluding China) had ratified 14 bilateral and regional FTAs and had negotiated but not implemented another seven. Asian nations are also actively negotiating some 23 bilateral and regional FTAs, many with non-Asian partners, including Australia, Canada, Chile, the European Union, India, and Qatar. China has been particularly active since 2000. It has completed three bilateral FTAs—Thailand in 2003 and Hong Kong and Macao in 2004—and is initiating another 17 bilateral and regional FTAs. However, a regional Asian economic bloc led by China seems distant, even though China accounts for about 30 percent of regional GDP. As in Europe and the Western Hemisphere, many Asian countries are pursuing FTAs with countries outside the region. On present evidence, the FTA process embraced with some enthusiasm in Asia, Europe, and the Western Hemisphere more closely resembles fingers reaching idiosyncratically around the globe rather than politico-economic blocs centered respectively on Beijing, Brussels, and Washington.
    Keywords: Regional free trade agreements, China, trade liberalization, Asia, FTA strategy
    JEL: F13 F14 N75
    Date: 2005–10
  12. By: Bertrand Candelon; Clemens Kool; Katharina Raabe; Tom van Veen
    Abstract: In this paper, we estimate fundamental bilateral real exchange rates for a group of eight accession countries using a panel-cointegration approach for the period 19932003. We document a significant positive link between productivity levels and the corresponding real exchange rate levels. Future rises in productivity cannot be excluded on the basis of either our own analysis or the literature as a whole. Consequently, inflation pressure and real exchange rate appreciation in the accession countries probably remain a fact of life in the near future. The extent to which this is a problem for a fixed nominal exchange rate regime is hard to determine. Price dynamics in the accession countries are still quite flexible to accommodate substantial real exchange rate movements even when the nominal exchange rate is rather fixed; moreover, that price adjustment is mostly an internal process for the accession countries. Overall we conclude that a fixed exchange rate regime for each of the accession countries would be feasible in itself, despite possible future real exchange rate appreciations due to either the BalassaSamuelson effect or demand shifts. We find current misalignments to be small, robust and generally in line with the literature. This implies current exchange rate levels provide a reasonable indication of the level at which a parity exchange rate could be set.
    Keywords: real exchange rate, misalignments, Balassa-Samuelson, panel cointegration
    Date: 2005–03
  13. By: Haider A Khan (Department of Economics, University of Denver)
    Abstract: PRC's energy dependence is growing and has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies(NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future . Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate regional cooperation institutions can lead to the way out of the current dilemma for China.
    Date: 2005–10
  14. By: Atanas Christev; Olga Kupets; Hartmut Lehmann
    Abstract: This paper addresses a controversial issue in the current literature, namely the effects of trade liberalisation on labour market job flows. It studies the case of Ukraine where we view the sudden openness of the economy to trade as a quasi-natural experiment. We use disaggregated data on manufacturing industries and customs data on trade flows according to the shifting trade patterns after the disintegration of CMEA trade regime. We provide some first evidence that 3-digit NACE sector job flows are driven by idiosyncratic factors within industries. Other things equal, there is increased labour shedding as larger non-state share in industry relates to less job creation and more job destruction. Trade openness does affect job flows in Ukrainian manufacturing disproportionately according to trade orientation. We find that while trade with CIS decreases job destruction, trade with the EU increases excess reallocation mainly through job creation.
    Keywords: Job creation, job destruction, Ukraine, trade flows
    JEL: E24 F14 J63 P23
    Date: 2005
  15. By: Junior Davis (Natural Resources Institute); Dirk Bezemer (University of Groningen); Monica Janowski (Natural Resources Institute); Tiago Wandschneider (Natural Resources Institute)
    Abstract: The aims of this study are to improve understanding of the dynamics of the rural non-farm economy in providing employment and income diversification opportunities in Armenia, Georgia and Romania. The study aims to focus on improving the well-being and livelihoods of the rural population, through developing their capacity to access resources and actively participate in non-farm rural enterprise and employment opportunities. We place emphasis on the diversity and diversification of income sources in the face of vulnerability to shocks and stresses - particularly on the part of the poorest members of society; and provide an in-depth analysis of the context (socio-cultural, economic, agronomic) in which non-farm rural livelihood options are currently pursued and in which new options can be developed.
    Keywords: rural non-farm economy, poverty, diversity, non-agricultural growth, transition economies, Central Asia, Balkans
    JEL: O P
    Date: 2005–10–27
  16. By: Jian Yang; Cheng Hsiao; Qi Li; Zijun Wang
    Abstract: This study examines the long-run price relationship and the dynamic price transmission among the U.S., Germany, and four major Eastern European emerging stock markets, with particular attention to the impact of the 1998 Russian financial crisis. The results show that both the long-run price relationship and the dynamic price transmission were strengthened among these markets after the crisis. The influence of Germany became noticeable on all the Eastern European markets only after the crisis but not before the crisis. We also conduct a rolling generalized VAR analysis to confirm the robustness of the main findings.
    Keywords: market linkages, emerging stock markets, generalized impulse response analysis, generalized forecast error variance decomposition, rolling VAR analysis
    JEL: G15 C32
    Date: 2005–07
  17. By: Junior Davis (Natural Resources Institute); Angela Gaburici (Romanian Academy of Economic Sciences)
    Abstract: The aim of this paper is to summarise the results of a non-farm micro- enterprise survey in rural and peri-urban Romania and to examine their impact on the development of sustainable rural livelihoods. As these firms operate in fixed locations and are therefore more easily located and observed, most of the data presented s based on our survey of firms in Brasov and Dolj counties of Romania. This data is complemented with information about unregistered gathering, hawking, and handicraft activities collected through our qualitative social development studies in the same counties. Both categories of information document the situation at a particular point in time and can provide insights into the functioning of enterprises, but not on the dynamics of change. There are however, some initial complications in understanding the operation of small non-farm firms. On the one hand, for many of those involved in rural non-farm enterprise activities, there is no difference between activities to meet their subsistence needs and producing for the market. Thus, they sell what is surplus to their needs or in response to the opportunity selling provides to generate additional cash income. On the other hand, many of the registered rural non-farm firms are commercially oriented and operate in a competitive market. We consider the nature and extent of rural non-farm enterprises and outline their main characteristics.
    Keywords: Rural Non-Farm, Economic Development, poverty, enterprise development
    JEL: O P
    Date: 2005–10–27

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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