nep-tra New Economics Papers
on Transition Economics
Issue of 2005‒11‒12
twenty-two papers chosen by
Tono Sanchez
Universitat de Valencia

  1. "State and Ownership Reforms in Transition Economics: China vs. the Orthodoxy" By Jeffrey B. Miller; Stoyan Tenev
  2. Income Disparity and Economic Growth: Evidence from China By Duo Qin; Marie Anne Cagas; Geoffrey Ducanes; Xinhua He; Rui Liu; Shiguo Liu
  3. Fiscal Federalism : Normative Criteria for Evaluations, Developments in Selected OECD Countries, and Empirical Evidence for Russia By Ulrich Thießen
  4. Firm Turnover, Restructuring and Labour Productivity in Transition: The Case of Poland By Barbara M. Roberts; Steve Thompson
  5. Transitions from employment in Poland: a multinomial logit analysis By Maciej Bukowski; Piotr Lewandowski
  6. ECONOMIC SYSTEMS By Oldrich Kyn
  7. "Contract Enforcement in the Early Transition to a Market Economy." By Jeffrey B. Miller; Kenneth Koford
  8. An Investigation of the Role of Cross-Border Spillover of Returns and Volatility in the Estonian Stock Market By Alar Kein
  9. Modelling the Structural Change of Transition Countries By Ulrich Thießen; Paul R. Gregory
  12. Social Capital in Central and Eastern Europe. A Critical Assessment and Literature Review By Dimitrina Mihaylova
  13. Production Functions Estimates for Soviet Industry and Some Implications By Oldrich Kyn; Hans-Juergen Wagener; Joerg Hocke
  14. The Effect of Foreign Direct Investment on Labour Productivity: An Overview of an Empirical Study of Estonia and Slovenia By Priit Vahter
  16. Illegal Market of Cigarettes in Estonia By Evelin Ahermaa
  17. The Three Knots on Voucher Privatization By Oldrich Kyn; Michal Mejstrik; Zdenek Blaha; Jan Mladek
  18. Strategic Management in Estonian SMEs By Juhan Teder; Urve Venesaar
  20. Americanisation behind the Curtain: the History of Management Consulting in Estonia By Jaak Leimann; Antti Ainamo; Janne Tienari
  21. Delayed Privatization in Kosovo: Causes, Consequences, and Implications in the Ongoing Process By Isa Mulaj
  22. Réflexions sur l'économie cubaine. By Rémy Herrera

  1. By: Jeffrey B. Miller (Department of Economics,University of Delaware); Stoyan Tenev
    JEL: P20
    Date: 2005
  2. By: Duo Qin (Queen Mary, University of London); Marie Anne Cagas (Asian Development Bank); Geoffrey Ducanes (Asian Development Bank); Xinhua He (Chinese Academy of Social Sciences); Rui Liu (Chinese Academy of Social Sciences); Shiguo Liu (Chinese Academy of Social Sciences)
    Abstract: This paper carries out a pilot empirical study on how income inequality affects growth and the macro economy by means of incorporating panel data information into a macro-econometric model. China is used as the pilot field. Provincial urban and rural household data are used to construct inequality measures, which are then used to augment household consumption equations in the ADB China model. Model simulations are performed to study the effect of inequality on GDP growth and its sectoral components. Results show that inequality is a robust explanatory variable of consumption and that the way inequality develops over time carries certain negative consequences on GDP and sectoral growth.
    Keywords: Income inequality, Growth, Econometric model, China
    JEL: R11 E21 D3 C5 C2
    Date: 2005–11
  3. By: Ulrich Thießen
  4. By: Barbara M. Roberts; Steve Thompson
    Abstract: This paper explores the impact of turnover and restructuring on labour productivity in the Polish economy over the period 1988-1993. Changes in aggregate productivity are decomposed into elements corresponding to productivity growth among survivors, market share growth by survivors and the contributions of entering and exiting firms. The traditional entry and exit effects begin to work as transition to a market economy progresses. However, initial productivity improvements are due to changes to market shares of the existing firms following the break-up of large enterprises. Regression analysis shows that changes in the firm-level productivity are affected by restructuring and a more competitive economic environment.
    Date: 2005–10
  5. By: Maciej Bukowski (Warsaw School of Economics, Institute for Structural Research); Piotr Lewandowski (Warsaw School of Economics, Institute for Structural Research)
    Abstract: This paper investigates the determinants of the flows out of employment in Poland using multinomial logit model based on the individual LFS panel data covering the 1997-2004 period. It focuses on the influence of the personal characteristics, macroeconomic environment, industry restructuring and labor market institutions on the individual's labor market prospects. Special attention is devoted to social security benefits and pensions as co-determinants of labor market behavior of older workers.
    Keywords: Labor dynamics, transition economies, job destruction, multinomial logit
    JEL: J2 H31
    Date: 2005–11–09
  6. By: Oldrich Kyn (Boston University)
    Abstract: This short paper was presented in the discussion at the CESES conference about 'the Prices in Eastern Europe' in Florence, Italy, 1966. Its purpose was to formulate briefly but as precisely as possible the differences between Pure Market Economy, Command Economy, Lange-Lerner model of Market Socialism, and the plausible system combining the market with central planning. The different systems were evaluated from the point of view of the information flows necessary for coordination of economic decisions.
    Keywords: Market Economy, Command Economy, Market Socialism, Plan and Market, Lange - Lerner,
    JEL: O P
    Date: 2005–11–03
  7. By: Jeffrey B. Miller (Department of Economics,University of Delaware); Kenneth Koford
    Abstract: How were contracts among firms enforced in the early phase of a transition economy when firms lacked experience with commercial contracts or legal procedures? What were their views of their new business environment? We interviewed a sample of Bulgarian firms, including private, state-owned and cooperative firms in 1994. Consistent with Williamson’s (1994) theories, complex contracts were quite limited, sometimes implying the breakdown of important markets, but we also found that even spot-market contracts had severe problems of bilateral dependency. Having been "burned" in previous transactions, firms were very cautious in dealing with new potential trading partners and tried to work closely with trustworthy counterparts. These results are consistent with Klein, Crawford and Alchian’s (1978) theory.
    Keywords: Bulgaria, contract enforcement, contract institutions, contract law,legal institutions
    JEL: P5 I22 K12
    Date: 2005
  8. By: Alar Kein (Faculty of Economics and Business Administration, Tallinn University of Technology)
    Abstract: The paper examines the role of foreign stock markets’ price and volatility movements in the price and volatility movements in the Estonian stock market. Using daily log returns from July 8th, 1996 through December 31st, 2003 and applying a VAR-EGARCH framework, the author finds that there is a spillover of returns and volatility from foreign stock markets into the Estonian stock market. It is found that the stock prices in Estonia are influenced by the movement of prices on the markets of Denmark, Russia, Finland, the Czech Republic, Poland and the U.S.A. In general, the response to exogenous price movements is found to be contemporaneous, same-directional and symmetric, while the revealed impact of exogenous volatility-changes is rather market-specific and often asymmetric. The author also finds that the influence of the Finnish market on the Estonian market has significantly increased after the HEX-Group acquired the majority share in the Tallinn Stock Exchange and the integration of the Estonian stock market with the Finnish stock market began in April 2001.
    Keywords: stock returns, cross-border spillover of returns, cross-border spillover of volatility
    JEL: G12 G14 G15 G19
  9. By: Ulrich Thießen; Paul R. Gregory
  10. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: Attempt has been made to identify dominant forms and factors for finance supply in Bulgarian farms. New Institutional and Transaction Costs Economics framework is used to estimate comparative efficiency of various modes for financing of short-term and long-term activities of farms of different type and size. Study is based on a large-scale microeconomic data collected through interviews with managers of 0.5% of commercial farms in the country. Big transitional institutional, economic and behavioral uncertainty combined with high asset specificity and low recurrence of transactions, have blocked use of market debt financing of farms. Great variety of specific private modes have emerged to overcome funding difficulties and to govern dependant transactions (internal investment, personal contacts, share investment, interlinked organization). However, vast development and maintenance costs (“free riding”) have prevented formation of effective collective credit supply forms. Large third-party (Government, international assistance, NGO) intervention has also taken place to finance (directly or indirectly) farms or to assist market and private modes of funding of farm activities. Nevertheless, for majority of Bulgarian farms external funding is still either too expensive (high interest rate, unaffordable collateral requirements, immense paper work and bureaucratic procedures, big “side payments”) or not accessible at all. High transaction costs for “credit supply”, and “marketing”, and “contract enforcement” are the major factors limiting farm enlargement at present stage of transition. Along with further credit support, public involvement should be directed to enhancement of efficiency of State lending programs and improvement of general institutional environment (legislative framework, contract enforcement system, market infrastructure etc.).
    Keywords: governing of finance in farms; transaction cost economics; transitional farm organization
    JEL: G
    Date: 2005–11–06
  11. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: In this paper an attempt has been made to identify dominant forms and factors for land supply in Bulgarian farms. The New Institutional and Transaction Costs Economics framework is adapted to transitional agrarian economy. Institutional, behavioral, and transaction costs factors for evolution and sustainability of different forms of subsistent, cooperative, and commercial land supply in Bulgaria have been analyzed. Comparative efficiency of various forms for land supply in market-oriented farms of different type (unregistered, cooperatives, agro-firms) and sizes (small, middle, large) has been estimated. The study is based on original microeconomics data collected through interviews with managers of 0.5% of commercial farms in the country. First of all, a general characteristics and development of different kind of farms in Bulgaria has been presented. That analysis comprises: the kind of new commercial farms; the type of transactions under their management; the pace of evolution of market oriented farms; and factors for emergence of large-scale subsistent farming. Institutional and transaction costs origin of existing forms of farming has been underlined. Secondly, an analysis is made on major modes for land supply in commercial farms. It includes: the type of land supply (e.g. own land, leased land, cultivation in groups); modes of acquisition of land ownership (restitution, privatization, purchase); extend of lease-in contracts; forms for reduction of land “supply” (sell off and lease-out land). Dominating modes of land supply are found to relate to critical dimensions and costs of transacting. Thirdly, an analysis of the transaction costs in land supply has been made. In encompasses: the specific features of land supply contracts; the type of rent; extend of a third-party involvement in land transactions; and problems in land supply deals. Preferred contract forms depend on attributes of transactions and aim at protecting and minimizing costs of land deals. Finally, factors for enlargement of Bulgarian farms have been specified. It is proved that the reduction of land supply and the expansion of size of commercial farms, both have been determined by the transaction costs reasons. Presently, the high marketing, credit supply, and contract enforcement costs are the major factors restricting farms enlargement. A good part of cooperatives and middle-size farms also spend significant “time and efforts for finding partners selling or leasing-out land” On the other hand, the most important factors for farm development in the future relates to improvement of the institutional environment, and managerial experience of farm entrepreneurs. According to the farm managers there are no specific factors related to land supply which could impede farm development in the country.
    Keywords: governing of land supply, New Institutional and Transaction Costs Economics, transitional farm organization
    JEL: O P
    Date: 2005–11–06
  12. By: Dimitrina Mihaylova (Center for Policy Studies, Central European University)
    Abstract: Ever since the 1990s, social capital has attracted attention from social science researchers. With its focus on the importance of intangible resources such as trust, social capital appeared to supplement existing theories of social and economic change. For its early proponents such as Bourdieu, Coleman and more famously, Putnam, social capital could be understood as a critical component in social reproduction, educational achievement and administrative efficiency. Social capital seems especially relevant in Central and Eastern Europe and the countries of the former Soviet Union. Not only does it direct attention to informal networks as ways of getting things done, it also explores how strong ties of personal trust co-exist with low levels of general trust and how this can affect economic and political reform. In terms of its actual policy implications, the conclusions of social capital research have not always been clear and it may be fair to say that expectations have been scaled down since the World Bank declared that social capital to be the missing link. This study offers a critical review of over seventy studies that have applied social capital to developments in Central and Eastern Europe and the former Soviet Union. The author draws from a variety of social science disciplines as well as including several reports from international organisations. The review investigates five principal fields in which social capital has been used to date and to provides a series of suggestions as to how such research can help encourage institutional and policy innovation.
    JEL: O P
    Date: 2005–11–02
  13. By: Oldrich Kyn (Boston University); Hans-Juergen Wagener (Europa Universitat Viadrina, Frankfurt Oder); Joerg Hocke (----)
    Abstract: This study presents estimation of production functions for the Soviet industry from the 1951—1970 data. Different specifications and estimation procedures were tried. The results diverged on a wide range and this may have serious implications. The paper shows possible effects of different parameter estimates on the growth potential of the Soviet industry as represented by a steady state growth rate according to a very simple neo-classical model. This does not necessarily imply that such a model is truly representative of the Soviet-type economy, however, the growth potential can very well serve to demonstrate the difficulties stemming from the errors in estimated parameters.
    Keywords: Production Function, Cobb-Douglas, CES, Growth Model,
    JEL: C1 C2 C3 C4 C5 C8
    Date: 2005–11–03
  14. By: Priit Vahter (Eesti Pank (Bank of Estonia) Research Department, University of Tartu)
    Abstract: This paper studies the effects of foreign direct investment on labour productivity in manufacturing industries of two transition countries, Estonia and Slovenia. The emphasis is on the dimension of export/local market orientation. The study is based on firm-level panel data. It is shown that in Estonia the export oriented foreign investment enterprises have on average much lower labour productivity than the domestic market oriented foreign affiliates. In Slovenia, on the contrary, the export orientation of foreign affiliates is not correlated with lower labour productivity. No horizontal spillover of foreign direct investment to domestic firms is detected in Estonia. In Slovenia, however, positive spillovers to domestic firms are found. The findings show also that different types of foreign direct investment can have different effects on the host country and that the existence of positive spillover may depend on the level of economic development of the host country.
    Keywords: foreign direct investment, productivity, spillovers, export oriented foreign direct investments
    JEL: F10 F21 F23
  15. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: This paper presents the dominating farming structure in Bulgaria on the eve of EU accession, and evaluates recent policies for farm and agricultural income support, and assesses likely consequences of CAP implementation on farming structures and sustainability. We demonstrate that a specific farming structure dominates in the country consisting of numerous subsistence and small farms; and few large farms, cooperatives, and agro-firms; and widely used informal, vertically integrated, and mix forms. Public support to farming has been in an increase in recent years but is still far bellow the European level. Besides, only a fraction of farms benefit from some form of public support most of them being large farms, cooperatives, and tobacco producers. Farming is still an important income source for a good part of population. However, there is a significant gap in the monetary income in the large and some smaller- scale (intensive) enterprises, and the great majority of farms. Besides, development programs contribute less to agrarian and rural sustainability, and to decreasing divergence between richer and poor regions of the country. Assessment of likely short-term impact of the CAP implementation in Bulgaria shows that it will increase sustainability of farms bringing net financial benefits, enhancing competitiveness, and improving environmental performance. However, the chief beneficiary from the direct payments and other support measures will be the biggest farms in the most developed regions of the country. CAP programs will also give new possibility for extending activities of existing forms and bring to a life new organizational arrangements. All that will create more employment and income opportunities, and revitalize agrarian and rural economy. On the other hand, some effective smaller-size and family structure and livestock farms will have no or limited access to EU funding. Consequently, income and performance gap between farms of different types, sub-sectors and regions will widened unless special supplementary measures (“coupled” with production and regions) are taken. Besides, CAP will likely support “ineffective” and non-market modes (such as part-time and subsistence farming, production cooperatives), and therefore raise their sustainability and delay further restructuring. Last but not least important, there will be significant difficulties for introducing CAP and EU standards which will require more costs than in other countries, and will be associated with some time lag until “full” implementation, and would not involve less commercialized and subsistent farming.
    Keywords: farms structures, support to farms, impact on CAP implementation on farm sustainability
    JEL: O P
    Date: 2005–11–06
  16. By: Evelin Ahermaa (Estonian Institute of Economic Research)
    Abstract: Tobacco products belong to a group of excise goods and an excise duty is levied on them. The latter increases the price, but there are no changes in the quality of the goods and it leads to tax frauds. There has been regular increase in the excise duties on tobacco products in Estonia; changes in tax rates have influenced legal sales, mostly of cigarettes. Consumption of cigarettes is the largest in the group of tobacco products in Estonia; therefore, the paper is especially focused on cigarettes. The purpose of the paper is to evaluate illegal market of cigarettes in Estonia, using comparison of the net of estimations. The paper introduces the method of analysis where the essential role is given to inhabitants (concerning their expert and individual opinions). Empirical evidence concerning illegal market of cigarettes in Estonia is presented by size on the example of fieldwork carried out in 2003.
    Keywords: cigarettes, excise duty, illegal market, taxation
    JEL: E62 K42
  17. By: Oldrich Kyn (Boston University); Michal Mejstrik (Charles University, Prague); Zdenek Blaha (---); Jan Mladek (---)
    Abstract: This paper is discussing problems that emerged in the first wave of the voucher privatization in Czechoslovakia (January 1992). The first problem relates to the procedures for evaluation and approval of enterprises’ privatization projects. The original design of the privatization assumed a very quick mass distribution of state property through the voucher method. It was expected that the privatization projects would be simple, with virtualy all the property going to vouchers, and that it would be easy to evaluate them quickly. Only after the first round of voucher privatization started the rules for submitting privatitzation projects were changed and as a result thousands of competing projects began to emerge. The thorough evaluation of them would require an immeasurable amount of work. The following lesson follows from this experience for the second wave of privatization: hold to an originally agreed upon strategy and do not change the rules during the game. A second important set of problems is caused by unclear rules for the attainment of equilibrium between supply and demand during the first wave of voucher privatization. A full knowledge of this algorithm is very important for investors' choice of a successful strategy. The final set of problems is the absence of the law on investment companies and on securities trading. That creates at least two serious problems. The first is the protection of the small investor against the abuse of power by the strong investment funds' administrators. The second important problem is that the fund administrators and advisers will not be able to choose an optimal investment strategy as long as they do not know what rules will be set during the course of the privatization process or after its termination. Perhaps the most important lesson comes from the acknowledged fact that the best protection of the small investor is the increasing competition between funds.
    Keywords: Voucher Privatization, Czechoslovakia,
    JEL: O P
    Date: 2005–11–03
  18. By: Juhan Teder (School of Economics and Business Administration, Tallinn University of Technology); Urve Venesaar (School of Economics and Business Administration, Tallinn University of Technology)
    Abstract: The research is based on the empirical survey conducted among the members of Estonian Association of SMEs. The study involved goal setting, development and implementation of strategies, competitive advantages striven for, orientation toward growth, and factors hindering enterprises’ development. As a result, characteristics of strategic management in enterprises with different levels of growth orientation (expanding, stable and declining enterprises) as well as those depending on other enterprise’s characteristics (e.g., coincidence of managers and owners; age and size of enterprises, etc) were proposed. The analysis showed the existence of clear relationship between the coincidence of owners and managers and existence of formalised plans, whereby company growth leads to the increasing difference of coincidence of owners and managers and therefore increases the role of strategic plans in the enterprises. Measures taken for strategy formation (e.g. managers’ role, cooperation) are supporting factors for positive implementation performance of the intended strategy in expanding firms. The analysis of the factors hindering company growth indicates an increasing need for managers’ training in the area of strategic management. National entrepreneurship policy should, in addition to supporting start-up enterprises, pay more attention to supporting the implementation of company growth potential by help of relevant measures.
    Keywords: SME, strategic management; strategy implementation, coincidence of managers and owners, growth orientation, growth barriers, entrepreneurship policy.
    JEL: L25 M21 O21 O38
  19. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: The New Institutional and Transaction Costs Economics framework is incorporated to transitional Bulgarian agriculture, and level of sustainability of dominating subsistent farming, production cooperatives, small-scare commercial farms, and large agro-firms assessed. New framework for assessing sustainability of farms and for governing of sustainable development is suggested taking into account: role of specific institutional environment, comparative efficiency of various market, private, public and hybrid governing modes, transaction costs and critical factors (frequency, uncertainty, asset specificity, and appropriability) of farm transactions. Analysis of sustainability of different types of Bulgarian farms is made, and further domination of subsistence farming, cooperatives, large agro-firms, and some part of small commercial farms projected.
    Keywords: assessment of sustainability of farms, governing of agrarian sustainability, sustainability of Bulgarian farms
    JEL: O P
    Date: 2005–11–06
  20. By: Jaak Leimann (School of Economics and Business Administration at Tallinn University of Technology); Antti Ainamo (Jaakko Pöyry Consulting); Janne Tienari (Lappeenranta University of Technology)
    Abstract: Management consulting started to evolve in Estonia around 40 years ago. The development was affected by the consulting practice and literature mostly from the United States and neighbouring Finland. The most important factors in the development of the consulting sector in Estonia were direct contacts and cooperation of Estonian and Finnish management experts. As a result, the Estonian management theorists and practicioners were of the top level in the whole Soviet Union and affected the management-related thinking and practice in many other management knowledge centres in the Soviet Union. The development of management consulting between 1970 and 1990 formed a good basis for contemporary management consulting and development after Estonia regained its independence from the Soviet rule in 1991.
    Keywords: historical research, management consulting, iron wall, American model, consulting practice, consulting project, conference, theory-building, internationalisation
    JEL: L84 N01 P20
  21. By: Isa Mulaj (Integra Consulting, Prishtina)
    Abstract: In this paper we look at the specific features of the delayed privatization in Kosovo, emphasising in particular two stages: i) the events during 1990s, including the consequences of emergency measures, ii) the impact of an autonomous privatization in the early 1990s in a limited number of SOEs in the Gjakova region based on a survey of these enterprises, and iii) the critical assessment of the privatization proposals and the challenges in continuing the ongoing privatization process after the war.
    Keywords: SOEs, emergency measures, UNMIK, Kosovo Trust Agency, privatization
    JEL: K
    Date: 2005–11–07
  22. By: Rémy Herrera (MATISSE)
    Abstract: This Working Paper deals with the progresses, but also with the deficiencies, of the Cuban revolution in the economic field, until the recent de-dollarization. It underlines its economic challenges at the beginning of the XXIst century, as well as its internal forces and external opportunities facing these challenges.
    Keywords: Development, socialism, revolution, growth, de-dollarization.
    JEL: J43 J71 N36 N40 O10 O13 O54 P16 P51
    Date: 2005–10

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