nep-tra New Economics Papers
on Transition Economics
Issue of 2005‒12‒20
twenty papers chosen by
Tono Sanchez
Universitat de Valencia

  1. The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine By J. David Brown; John Earle; Almos Telegdy
  3. Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine By J. David Brown; John Earle; Almos Telegdy
  4. Law in Transition and Development: The Case of Russia By Dalia Marin
  5. Women's Employment, Children and Transition An Empirical Analysis on Poland By Elena Bardasi; Chiara Monfardini
  6. Financial Crisis, Economic Recovery, and Banking Development in Russia, and other FSU Countries By Haizhou Huang; Dalia Marin; Chenggang Xu
  7. China and the Relationship Between the Oil Price and the Dollar By Agnes Benassy-Quere; Valerie Mignon; Alexis Penot
  8. Believe but Verify? Russian Views and the Market By Andrew Austin; Tatyana Kosyaeva; Nathaniel Wilcox
  9. A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe By Dalia Marin
  10. The dynamics of managerial ideology: analyzing the cuban case By Cunha, Miguel Pina e; Cunha, Rita Campos e
  11. ‘A Nation of Poets and Thinkers’ - Less So with Eastern Enlargement? Austria and Germany By Dalia Marin
  12. Can Educational Attainment Explain Total Factor Productivity? Growth Accounting Evidence from Seven Transition Countries for the Period 1991-2000 By Kaloyan Ganev
  13. Trade Integration and Production Networks in Asia: The Role of China By Sven W. Arndt
  14. Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland By Andzelika Lorentowicz; Dalia Marin; Alexander Raubold
  15. Univariate Potential Output Estimations for Hungary By Gabor Vadas; Zsolt Darvas
  16. Analysis of Health and Longevity in Oldest-Old Population: A Health Capital Approach By Zhong Zhao
  17. Are Oligarchs Productive? Theory and Evidence By Yuriy Gorodnichenko; Yegor Grygorenko
  19. How are Oil Revenues redistributed in an Oil Economy? The case of Kazakhstan By Boris Najman; Richard Pomfret; Gael Raballand; Patricia Sourdin
  20. Population Geography Perspectives on the Central Asian Republics By Gentile, Michael

  1. By: J. David Brown; John Earle; Almos Telegdy
    Abstract: This paper estimates the effect of privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in four economies. We exploit the key longitudinal feature of our data to measure and control for pre-privatization selection bias and to estimate long-run impacts. We find that the magnitudes of our estimates are robust to alternative functional forms, but sensitive to how we control for selection. Our preferred random growth models imply that majority privatization raises MFP about 15% in Romania, 8% in Hungary, and 2% in Ukraine, while in Russia it lowers it 3%. Privatization to foreign rather than domestic investors has a larger impact, 18-35%, in all countries. Positive domestic effects appear within a year in Hungary, Romania, and Ukraine and continue growing thereafter, but take 5 years after privatization to emerge in Russia.
    Keywords: privatization, productivity, foreign ownership, random growth model, transition, Hungary, Romania, Russia, Ukraine
    JEL: D24 G34 L33 P31
    Date: 2005
  2. By: Warwick J. McKibbin
    Date: 2005–12
  3. By: J. David Brown; John Earle; Almos Telegdy
    Abstract: We analyze the effects of privatization on firm-level wages and employment in four transition economies. Contrary to workers' fears, our fixed effect and random trend estimates imply little effect of domestic privatization, except for a slight negative effect in Russia, and they provide some evidence of positive foreign effects on both wages and employment in all four countries. The negligible employment impact of domestic privatization results from effects on efficiency and scale that are large, positive, but offsetting in Hungary and Romania, and from small effects of both types in Russia and Ukraine. The positive employment and wage bill consequences of foreign ownership result from a substantial scale-expansion effect that dominates the efficiency effect.
    Keywords: privatization, employment, wages, foreign ownership, Hungary, Romania, Russia, Ukraine
    JEL: D21 G34 J23 J31 L33 P3
    Date: 2005
  4. By: Dalia Marin (University of Munich and CEPR)
    Abstract: The rise of barter and non-cash payments has become a dominant feature of the Russian transition to a market economy. This paper confronts with empirical evidence two approaches to explain barter in Russia: the ’illusion view’ and the ’trust view’ of barter. The ’illusion view’ suggests that barter allows the parties to pretend that the manufacturing sector in Russia is producing value added by enabling this sector to sell its output at a higher price than its market value. The ’trust view’ sees barter as an institution to deal with the absence of trust and liquidity in the Russian economy. We confront the prediction of both explanations with actual data on barter in Ukraine in 1997. The data reject the ’illusion view‘ in favor of the ‘trust view‘ of barter.
    Keywords: imperfect input and capital markets, the virtual economy, trade credit, trust, contract enforcement
    JEL: D20 G30 O10 P30
    Date: 2004–04
  5. By: Elena Bardasi; Chiara Monfardini
    Abstract: The effect of transition from centrally planned to market economies on female employment is unclear a-priori. Many studies have pointed out that the emergence of labour markets created obstacles to but also new opportunities for women’s employment. A frequently mentioned explanation of the lower female participation during the transition period is the reduction of childcare facilities, which created a major constraint on the participation of women with dependent children. However, the effect of forces of opposite sign should not be overlooked, first of all the household necessity of having two earners during the turbulent transition period. The aim of this paper is to give an empirical assessment on how the transition to a market economy affected the relationship between motherhood and labour force outcomes in Poland. We estimate random effects probit models on two PACO panel datasets covering a four year period before the reform (1987-1990) and a three year period afterwards (1994- 1996). Our findings indicate that during transition young children were much less of a deterrent to the employment probability of their mother than it was before transition.
    Keywords: female employment, fertility, transitional economies, Poland, panel data, PACO database
    JEL: J13 J22 P23 C23
    Date: 2005–05
  6. By: Haizhou Huang; Dalia Marin (University of Munich and CEPR); Chenggang Xu
    Abstract: This paper provides a unified analysis for the onset of the 1998 financial crisis and the strong economic recovery afterward in Russia and other former Soviet Union countries. Before the crisis a banking failure arose owing to the coexistence of a lemons credit market and high government borrowing. In a lemons credit market low credit risk firms switched from bank to nonbank finance, including trade credits and barter trade, generating an externality on banks’ interest rates. The collapse of the treasury bills market in the financial crisis triggered a change in banks’ lending behavior, providing initial conditions for banking development.
    Keywords: banking development, institutional trap, financial crisis
    JEL: G3 G21 P34 O16 D82
    Date: 2004–06
  7. By: Agnes Benassy-Quere; Valerie Mignon; Alexis Penot
    Abstract: We study cointegration and causality between the real price of oil and the real price of the dollar over the 1974-2004 period. Our results suggest that a 10% rise in the oil price coincides with a 4.3% appreciation of the dollar in the long run, and that the causality runs from oil to the dollar. Through the development of a theoretical model, we then investigate possible reasons why this relationship could be reversed in the future due to the emergence of China as a major player on both the oil and the foreign exchange markets.
    Keywords: Oil price; real exchange rate; dollar; euro; China; cointegration; causality; error correction model; dollar; energy cost; models; foreign exchange markets
    JEL: C22 F31 Q43
    Date: 2005–10
  8. By: Andrew Austin; Tatyana Kosyaeva; Nathaniel Wilcox
    Abstract: Prominent analysts argue that the Russian reform process has gone badly because Russian attitudes towards the market mechanism fundamentally differ from those in the West. Others strenuously dispute this. We combine surveys and a double auction experiment to investigate Russian beliefs about how markets work. Beliefs about the likelihood that economic theory would predict outcomes were elicited before (‘ex ante’) and after (‘ex post’) the double auction. Women, graduates of general secondary schools, children of Orthodox parents and children of entrepreneurs are more skeptical ex ante. Having observed the trading results women, children of Orthodox parents and children of entrepreneurs become less skeptical. Graduates of general secondary schools remain relatively skeptical ex post. Measures of political orientation are weakly associated with beliefs, and sociodemographic characteristics, such as occupation, income and parents’ education, have no detectable effect on beliefs about the predictive value of economic theory.
    Date: 2005–11
  9. By: Dalia Marin (Department of Economics, Ludwigstrasse 28, D-80539 Munich, phone: ++4989/2180-2446, fax: ++4989/2180-6227.
    Abstract: Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intrafirm trade between Austria or Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and reduced levels of corruption as well as improvements in the contracting environment in Eastern Europe are affecting the level of intrafirm imports from that region. These factors also favor outsourcing over offshoring. In contrast, low organizational costs of hierarchies and large costs of holdup (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) favor offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.
    Keywords: the empirics of global sourcing, intrafirm trade, contract enforcement, comparative advantage in Eastern Europe, empirical test of the theory of the firm
    JEL: D23 D51 F11 L14 O11
    Date: 2005–09
  10. By: Cunha, Miguel Pina e; Cunha, Rita Campos e
    Abstract: After the collapse of state socialism in Eastern Europe, management researchers devoted considerable energy to investigate ways to smooth transition to market economies. But one country of the former Soviet bloc, Cuba resisted transition and reaffirmed loyalty to communism. Little is known about management in Cuba on the managerial impacts of the combination of two major environmental forces: the American embargo and the Soviet Union collapse, both of which have challenged the sustainability of the communist regime. This study intends to approach one particular aspect of management in Cuba: the relationship between national ideology and management practice. To analyze these topics, direct qualitative data from focus groups with Cuban managers and management professors was obtained and complemented with documentary analysis. Results suggest that the dynamics of managerial ideology can be understood as the interplay of several processes operating at distinct levels: institutional, professional, organizational and individual. The study provides a nested, multi-level understanding of management and organization as parts of a wider institutional context, which is both a source of constraint and a non-tangible resource to be used by ideological bricoleurs. The interplay between the acceptance of ideology and its use as a practical resource is a potential source of change. As such, the same professional class (managers) may be both a source of continuity and a trigger of change - a finding that is line with institutional theorys claim that it is necessary to understand both institutionalization and de-institutionalization for understanding organizational change and continuity.
    Keywords: Cuba, managerial ideology, institutional change, ideological bricolage
    Date: 2004
  11. By: Dalia Marin (University of Munich)
    Abstract: Many people in the European Union fear that Eastern Enlargement will lead to major job losses. More recently, these fears about job losses have extended to high skill labor and IT jobs. The paper examines with new firm level data whether these fears are justified for the two neighboring countries of Eastern Enlargement Austria and Germany. I find that Eastern Enlargement leads to surprising small job losses, because jobs in Eastern Europe do not compete with jobs in Austria and Germany. Low cost jobs of affiliates in Eastern Europe help Austrian and German firms to stay competitive in an increasingly competitive environment. However, I also find that multinational firms in Austria and Germany are outsourcing the most skill intensive activities to Eastern Europe taking advantage of cheap abundant skilled labor in Eastern Europe. I find that the firms’ outsourcing activities to Eastern Europe are a response to a human capital scarcity in Austria and Germany which has become particularly severe in the 1990s. Corporations’ outsourcing of skill intensive firm activity to Eastern Europe has helped to ease the human capital crisis in both countries. I find that high skilled jobs transferred to Eastern Europe account for 10 percent of Germany’s and 48 percent of Austria’s supply of university graduates in the 1990s. I then discuss what can be done to address the skill exodus to Eastern Europe. I show that R&D subsidies do not work in economies with a skill crisis and I suggest to liberalize the movement of high skill labor with Eastern Enlargement.
    Keywords: human capital, intra-firm trade, multinationals and jobs, out-sourcing to Eastern Europe, R&D policy
    JEL: F21 F23 J24 J31 L24 O3 P33
    Date: 2004–03
  12. By: Kaloyan Ganev (Agency for Economic Analysis & Forecasting)
    Abstract: In this paper we use growth accounting methodology to study whether human capital explains a part of total factor productivity in transition. The results that are obtained are not in support of the theoretical findings of growth theory that human capital is a major determinant of growth and productivity. However, eventually we continue to believe that the reasons for this misfit to theory lie in the very nature of data and not in the specifics of the methodology used.
    Keywords: educational attainment, productivity, growth, transition, human capital
    JEL: C6 D5 D9
    Date: 2005–12–13
  13. By: Sven W. Arndt (Lowe Institute of Political Economy, Claremont McKenna College)
    Abstract: This paper examines the implications of cross-border component sourcing and production networks for trade competitiveness and welfare. Offshore sourcing of components in which it has comparative disadvantage, enables a country to enhance its comparative advantage in the final product. This option provides emerging countries with an important alternative to capital accumulation and technical change as paths to economic development. In addition, production sharing changes the nature of trade-balance accounting and tends to reduce the sensitivity of trade flows to movements in exchange rates. This has important implications for trade policy and for the choice of exchange-rate regime. In the context of regional trade areas, for example, deeper integration allowing for production sharing has welfare effects superior to those of standard preferential trade liberalization.
    Keywords: cross-border sourcing, trade integration, production sharing, exchange rate elasticities
    JEL: F11 F15 F32
    Date: 2004
  14. By: Andzelika Lorentowicz; Dalia Marin; Alexander Raubold
    Abstract: Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division of labour emerging in Europe Austria, the high income country, is specializing in the low skill intensive part of the value chain and Poland, the low income country, is specializing in the high skill part. As a result, skilled workers in Austria are losing from outsourcing, while gaining in Poland. In Austria, relative wages for human capital declined by 2 percent during 1995-2002 and increased by 41 percent during 1994-2002 in Poland. In both countries outsourcing contributes roughly 35 percent to these changes in the relative wages for skilled workers. Furthermore, we show that Austria's R&D policy has contributed to an increase in the skill premium there.
    JEL: F21 F23 J31 P45
    Date: 2005
  15. By: Gabor Vadas (Magyar Nemzeti Bank); Zsolt Darvas (Magyar Nemzeti Bank)
    Abstract: Potential output figures are important ingredients of many macroeconomic modelsand are routinely applied by policy makers and global agencies. Despite itswidespread use, estimation of potential output is at best uncertain and dependsheavily on the model. The task of estimating potential output is an even moredubious exercise for countries experiencing huge structural changes, such astransition countries. In this paper we apply univariate methods to estimate andevaluate Hungarian potential output, paying special attention to structural breaks.In addition to statistical evaluation, we also assess the appropriateness of variousmethods by expertise judgement of the results, since we argue that mechanicaladoption of univariate techniques might led to erroneous interpretation of thebusiness cycle. As all methods have strengths and weaknesses, we derive a singlemeasure of potential output by weighting those methods that pass both thestatistical and expertise criteria. As standard errors, which might be used forderiving weights, are not available for some of the methods, we base our weightson similar but computable statistics, namely on revisions of the output gap for alldates by recursively estimating the models. Finally, we compare our estimated gapswith the result of the only published Hungarian output gap measure of Darvas-Simon (2000b), which is based on an economic model.
    Keywords: ombination, detrending, new EU members, OCA, output gap, revision
    JEL: E32 C22
    Date: 2005–12–15
  16. By: Zhong Zhao (IZA Bonn and CCER, Peking University)
    Abstract: Using 2002 cross-sectional data and 1998, 2000, 2002 three waves of panel data from the Chinese Longitudinal Healthy Longevity Survey, we study health in oldest old population. We measure health using the Katz Index of Activities of Daily Living (ADL) and in term of mortality. Our results suggest that besides aging, there are other important factors contributing to bad health both in term of the Index of ADL and mortality. Effects of gender on the Index of ADL and on mortality are different. Female tends to be more dependent in daily living, but has higher probability to survive. Oldest-olds living in urban area are also more dependent, but are less likely to die. Socioeconomic status such as financial resources, education level of the oldest-old and of his/her spouse and etc. plays insignificant role in the health of oldest-old. Oldest-olds still in marriage are more independent in daily living and are more likely to survive. There exists reverse causality between health and risky behaviors. After controlled for simultaneity bias by instrumental variable method, the coefficients of risk behaviors are consistent with theory and common wisdom.
    Keywords: oldest-old, mortality, Katz index of ADL, Grossman model
    JEL: I12 J14 I18
    Date: 2005–12
  17. By: Yuriy Gorodnichenko (University of Michigan); Yegor Grygorenko (Citigroup Russia)
    Abstract: This paper develops a partial equilibrium model to account for stylized facts about the behavior of oligarchs, politically and economically strong conglomerates in transition and developing countries. The model predicts that oligarchs are more likely than other owners to invest in productivity enhancing projects and to vertically integrate firms to capture the gains from possible synergies and, thus, oligarchs can be socially beneficial. Using a unique dataset comprising almost 2,000 Ukrainian open joint stock companies, the paper tests empirical implications of the model. In contrast to commonly held views, econometric results suggest that, after controlling for endogeneity of ownership, oligarchs tend to improve the performance of the firms they own relative to other firms.
    Keywords: Oligarch, transition, firm performance, property rights, treatment effect
    JEL: C21 C25 D24 O17 P26 P31
    Date: 2005–12–15
  18. By: Zavkidjon Zavkiev
    Abstract: This paper attempts to estimate a model of inflation in Tajikistan using the Johanson cointegration approach and single equation error correction model. It also develops a methodology for creating monthly real output series. The paper investigates both the short run dynamic behaviour of inflation and the long run relationship of prices with their determinants. There is evidence that in the long run prices are determined by exchange rate, money, real output and interest rates, and in the short run by values of money growth and inflation, and current and past values of output growth and interest rate changes. The speed of adjustment of prices to their long run equilibria is determined. The results suggest controlling excessive money growth and stabilizing excessive exchange rate fluctuations should be the key ingredients of monetary policy in controlling inflation of the country.
    JEL: E31 C32 O53
    Date: 2005–12
  19. By: Boris Najman (ROSES-CNRS, University of Paris 1, France); Richard Pomfret (University of Adelaide, Australia); Gael Raballand (World Bank, Washington DC, USA); Patricia Sourdin (University of Adelaide, Australia)
    Abstract: Kazakhstan’s economy has been driven by an oilboom since the discovery of large new oilfields coincided with the upturn of world oil prices after 1998. This paper uses national household expenditure survey data to examine whether Kazakhstan’s experience supports a curse or a blessing outcome. We assess the extent to which the benefits from the oilboom are retained in the oil-producing regions, or spread evenly across the national economy, or are concentrated in the cities where the country’s elite lives. We then analyze the data to determine the transmission mechanisms (higher wages, social transfers or informal income) from the oilboom to household expenditure.
    Keywords: resource boom; redistribution
    JEL: D30 Q32 O13
    Date: 2005–12–13
  20. By: Gentile, Michael (Institute for Futures Studies)
    Abstract: Since the fall of the iron curtain, research on population issues in Central Asia, with the exception of migration, has lost ground in the academia, and little is known about the geographical dimensions of population issues in this region beyond the findings of the handful of studies carried out under the auspices of international organisations. Therefore, the purpose of this paper is to outline the main traits of the population geography of the Central Asian Republics of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The report investigates the geographical characteristics of the countries’ vital statistics, as well as of other significant demographic indicators, such as the age structure, dependency ratio and infant mortality. Additionally, the report attempts to establish whether particular regional and local demographies show inter-linkages with the specific socio-economic and/or cultural settings that they are embedded in. The report uses the systematic collection and analysis of data from statistical sources as its main method. Most of the statistical materials derive from the national statistical authorities of the USSR and its successor states, although additional and complementary data was collected from the US Bureau of Census’ international database web resource. The use of such data involves substantial methodological and interpretative difficulties, which this report discusses in detail. <p> Applying a three-scale geographical approach on the study of the Central Asian Republics’ population development, this report demonstrates that there are significant variations in the territoriality of these countries’ demographies. The variations are indeed striking, and suggest that the five states will face distinctly spatially differentiated challenges with regard to the volume and type of healthcare that will be required, the nature of the demand for housing, social and cultural services, and the structure of the labour market, just to name a few examples. These challenges should be taken into greater consideration by policy-makers and other stakeholders, along with matters of more immediate concern, such as the poor health infrastructure and sanitary situation, the high rate of poverty, environmental degradation, and the economic and political instability in the southern regions, most recently epitomized by the Ferghana valley-based “tulip” revolution in Kyrgyzstan and the violent riots in the Uzbek city of Andijan.
    Keywords: Population Geography Perspectives; Central Asian Republics
    JEL: J10
    Date: 2005–12–12

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