nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒02‒26
eighteen papers chosen by
Tono Sanchez
Universitat de Valencia

  1. China's Fiscal System: A Work in Progress By Richard Bird; Christine C.P.Wong
  2. Russian Attitudes Toward Paying Taxes – Before, During, and After the Transition By Benno Torgler; James Alm; Jorge Martinez-Vazquez
  3. Urban Social Exclusion in Transitional China By Bingqin Li
  4. The Role of Law in China's Economic Development By Donald Clarke; Peter Murrell; Susan Whiting
  5. Poverty and Inequality and Social Policy in China By Bingqin Li; David Piachaud
  6. Fiscal Decentralization and Economic Growth: A Comparative Study of China and India By Jorge Martinez-Vazquez; Mark Rider
  7. Globalization and SMEs: A Comment on Three Asian Experiences By Sumner La Croix
  8. The Effect of the One-Child Policy on Fertility in China: Identification Based on the Differences-in-Differences By Hongbin Li; Junsen Zhang; Yi Zhu
  9. How to Sustain Growth in a Resource Based Economy?: The Main Concepts and their Application to the Russian Case By Rudiger Ahrend
  10. Economic Transformation, Population Growth and the Long-Run World Income Distribution By Marcos Chamon; Michael Kremer
  11. Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later By Sergio Godoy; Joseph Stiglitz
  12. Efficiency Analysis of East European Electricity Distribution in Transition : Legacy of the Past ? By Astrid Cullmann; Jürgen Apfelbeck; Christian von Hirschhausen
  13. Employment Fluctuations and Dynamics of the Aggregate Average Wage in Poland 1996 - 2003 By Michal Myck; Leszek Morawski; Jerzy Mycielski
  14. Mother's Education and Child Health: Is There a Nurturing Effect? By Yuyu Chen; Hongbin Li
  15. On the Periphery of the Russo-Japanese War Part II By Ian Nish; David Steeds
  16. Family-Type Subsistence Incomes By Christos Koulovatianos; Carsten Schröder; Ulrich Schmidt
  17. Exchange rate regimes and exchange market pressure in the new EU member countries By Van Poeck A.; Vanneste J.; Veiner M.
  18. Quels sont les enjeux après la conférence ministérielle de l'OMC à Hong Kong ? By Ken Heydon

  1. By: Richard Bird (Andrew Young School of Policy Studies); Christine C.P.Wong (University of Washington)
    Abstract: We argue in this paper that unless China begins to tackle more systematically the serious problems that have emerged in the finances of its various levels of sub-national government the problems to which the present unsatisfactory system give rise will over time increasingly distort resource allocation, increase distributional tensions, and slow down the impressive recent growth of the Chinese economy. Despite the lack of solid and reliable information on the size and nature of China’s real fiscal system, we show that the evidence available is generally consistent with this pessimistic reading. China’s fiscal and – in time – economic future thus rests to some extent on reforms to key aspects of its fiscal system, especially its intergovernmental finances. Moreover, a more consistent and purposive framework to this complex of problems seems needed. Given the scale and scope of China’s underlying public finance problems, the ‘reactive gradualism’ evidenced in recent ad hoc reforms to this or that piece of the fiscal system has, we suggest, run its course.
    Keywords: Chima. Sun-national government, Fiscal system, China's fiscal system
    Date: 2005–11–01
  2. By: Benno Torgler (World Bank); James Alm (Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies)
    Abstract: This paper examines citizens’ attitudes toward paying taxes – what is sometimes termed their “tax morale”, or the intrinsic motivation to pay taxes – focusing on the experience of individuals in the Russian Federation. A unique aspect of our analysis is our ability to study tax morale before (1991), during (1995), and shortly after (1999) the transition of the Russian economy from a centrally planned economy to one based on market reliance. Our empirical analysis uses data from the World Values Survey and the European Values Survey. The results show decay in tax morale in the first four years of the transition from 1991 to 1995, and a small recovery in 1999. These results are consistent with the relevance of social norms in tax compliance, where the widespread perception of tax evasion and of a corrupt and inefficient state led initially to a decline of tax morale. However, the results also suggest that the restoration of a higher level of trust in the state, after some progress in the transition to a market economy, positively influenced tax morale. Using disaggregated data for Russian regions, we also find significant regional differences in tax morale, reflecting the degree of trust different regions have toward Moscow’s institutions and policies.
    Keywords: Russia, Taxes, Transition, Tax Morale
    Date: 2005–09–05
  3. By: Bingqin Li
    Abstract: This paper demonstrates that urban social exclusion in China does not only include restricted participation by the ¿underclass¿ in urban life, but also the deprivation of certain political, social and economic rights. In addition, the paper describes how the character of urban social exclusion has changed over time. The author also examines the social exclusion of rural workers living and working in urban areas. The paper concludes by arguing that urban social exclusion in China needs coordinated reforms that target the whole set of problems in the urban ¿underclass¿ lacking political rights, social protection and economic opportunities.
    Keywords: social exclusion, urban China, rural to urban migrants
    JEL: J43 R23 I30
    Date: 2004–03
  4. By: Donald Clarke; Peter Murrell (Department of Economics, University of Maryland); Susan Whiting
    Abstract: This paper surveys China's legal system in the economic reform era. We analyze the role of law in the economy, assessing whether China's formal legal system contributed to those expectations of stable and predictable rights of property and contract that are prerequisites for growth. The paper begins by detailing legal developments. The relationship between legal and economic development was bidirectional - a coevolutionary process. We then examine three spheres of activity - property rights, agreements to trade, and corporate governance - asking whether law plays an important role, how that role has changed, and what the current problems are. Common themes arise. First, there have been profound changes, with law playing an increasingly important role. Second, formal legal institutions have not made a critical contribution to China's remarkable economic success. This latter conclusion leaves open the question of which mechanisms generated the necessary expectations of reasonable returns from decentralized economic activity. We briefly reflect on mechanisms other than law that might have produced such expectations, for example, the role of local Communist Party officials. However, lack of empirical information suggests this is a topic for future research.
    Keywords: China, institutions, law, property rights, contracts, corporate governance
    JEL: P20 P26 P30 P37 N45 K00 K20 K40
    Date: 2006–02
  5. By: Bingqin Li; David Piachaud
    Abstract: Despite prolonged economic growth, poverty has become a more notable and noted feature of Chinese society. The paper examines three phases of development since the foundation of the People's Republic: the central planning era (1949 -1978); the pro-urban growth model (1978 - 1999); and more recent changes (1999 - 2004). For each phase the nature of the economic and social policies are described and the effects on poverty and inequality are examined. The limitations of a social policy that is subservient to the economic strategy are considered. The alternative of a model of social development based on the livelihood approach is analysed and its potential to reduce poverty and inequality are considered.
    Keywords: poverty, inequality, social policy, China, livelihoods, social development
    JEL: I3
    Date: 2004–11
  6. By: Jorge Martinez-Vazquez (Andrew Young School of Policy Studies); Mark Rider (Andrew Young School of Policy Studies)
    Abstract: Although there are obvious differences in the political systems of China and India, there are surprising similarities in their respective approaches to decentralization. Both countries face similar design issues with their intergovernmental systems, such as the lack of clear expenditure assignments, high transfer dependency, low revenue autonomy, and soft budget constraints. As a result, in both countries there is a lack of aggregate fiscal discipline among sub-national governments, and the quality of sub-national government service delivery is poor. Poor service delivery and the lack of fiscal discipline threaten the ability of both countries to sustain high rates of economic growth.
    Keywords: China, India, Fiscal Decentralization, Economic Growth, Intergovernmental fiscal
    Date: 2005–10–01
  7. By: Sumner La Croix (Department of Economics, University of Hawaii at Manoa)
    Abstract: This paper briefly discusses three case studies (Choi and Tcha 2005; Lin 2005; Motohashi 2005) of responses by small and medium-size manufacturing enterprises (SMEs) in Korea, Taiwan, and Japan to the rising tide of imports from China in their product markets. They find vastly different responses in each country, with some firms relocating plants to mainland China; others exiting affected product markets; and some maintaining home country production by moving up the product ladder and using new production technologies. This paper conjectures that outmoded production technologies may underpin the exit of Japanese SMEs from these product markets; considers the impact that potential impact of Chinese imports on Korea’s attachment to a market economy; and finds that Taiwan’s SME investments in mainland China have substantial political as well as economic roots. The long-run response by Northeast Asian SMEs to Chinese competition will, in all three countries, be closely tied to SME development (via in-house or cooperative R&D) or acquisition of rights to new products and technologies. I conclude that a better understanding of the public and private institutions structuring SME contracting vis-a-vis R&D projects and technology acquisition is vital to each country’s development of effective policy responses to the meteoric rise of China.
    Keywords: Globalization, SMEs, creative destruction, exports, imports, entry, exit
    Date: 2006
  8. By: Hongbin Li; Junsen Zhang; Yi Zhu
    Abstract: This paper measures the effect of China's one-child policy on fertility by exploring the natural experiment that has been created by China's unique affirmative birth control policy, which is possibly the largest social experiment in human history. Because the one-child policy only applied to Han Chinese, but not to ethnic minorities, we construct a differences-in-differences estimator to identify the effect of the policy on fertility. Such a natural experiment is a rare opportunity, whether for the analysis of the effect on fertility or for the analysis of economics in general. Using two rounds of the Chinese Population Census, we find that the one-child policy has had a large effect on fertility. The average effect on the post-treatment cohorts on the probability of having a second child is as large as -11 percentage points. We also find that the magnitude is larger in urban areas and for more educated women. Our robustness tests suggest that our differences-in-differences estimates of the effect of the one-child policy are not very likely to be driven by other policy or socio-economic changes that have affected the Han and the minorities differently.
    JEL: J13 J15 J18 O10
    Date: 2005–08
  9. By: Rudiger Ahrend
    Abstract: In recent years economists have come to see rich natural resource endowments as a ?curse? or ?precious bane? that inevitably undermines development and slows economic growth. Resource-based development undeniably involves important risks. Nonetheless, the resource curse - if it exists - is at least no fatalité, as the examples of Australia, Canada and the Scandinavian countries demonstrate. This paper argues that the serious challenges posed by resource-dependence, which include an increased vulnerability to external shocks, the risk of ?Dutch disease?, and the risk of developing specific institutional pathologies, can be overcome, or at least very substantially mitigated, if accompanied by the right economic policies. It then analyses in detail what these ?right? economic policies are, and how to set up economic and political framework conditions to facilitate their successful implementation. The paper thereafter looks specifically at Russia as a prominent example of a resource-based economy. It investigates briefly the main drivers of Russian growth in recent years, and makes specific recommendations that would help the Russian economy to sustain high growth. <P>Comment soutenir la croissance dans une économie fondée sur l'exploitation des ressources naturelles ? Ces dernières années les économistes ont commencé à envisager la dotation en ressources naturelles comme une "malédiction" qui inévitablement mine le développement économique et freine la croissance. Le développement économique fondé sur l'exploitation des ressources naturelles comporte sans aucun doute des risques importants. Cependant, la malédiction des ressources -- si elle existe -- n'est pas toujours une fatalité, comme le montre les exemples de l'Australie, du Canada et des pays scandinaves. Cet article soutient que les défis sérieux posés par une forte dépendance envers les ressources naturelles - comme une vulnérabilité accrue aux chocs externes, le risque d'un "syndrome néerlandais" et le risque de développer des pathologies institutionnelles spécifiques - peuvent être maîtrisés, ou au moins très sensiblement amoindris, s'ils s'accompagnent de politiques économiques adéquates. L'article analyse en détail ces politiques économiques "adéquates", et comment mettre en place un cadre politique et économique qui facilite l'implémentation réussie de ces politiques. Le cas de la Russie est ensuite étudié comme un important exemple d'une économie fondée sur l'exploitation des ressources naturelles. L'article examine brièvement les principaux moteurs de la croissance de ces dernières années, et formule des propositions qui pourraient aider la Russie à maintenir une croissance forte.
    Keywords: economic growth, croissance économique, transition, transition, fiscal policy, politique budgétaire, monetary policy, politique monétaire, Russia, Russie, capital flight, natural resources, dutch disease, resource curse, oil, diversification, ressources naturelles, syndrome néerlandais, malédiction des ressources, pétrole, diversification
    JEL: E6 O1 O52 P2 Q43
    Date: 2006–02–09
  10. By: Marcos Chamon; Michael Kremer
    Abstract: This paper considers the long-run evolution of the world economy in a model in which countries' opportunities to develop depend on their trade with advanced economies. Trade opportunities in turn depend on the relative population of the advanced and developing world. As developing countries become advanced, they further improve the trade prospects for the remaining developing countries. As long as the population growth differential between developing and advanced countries is not too large, the rate at which countries transition to prosperity accelerates over time. However, if population growth differentials are large relative to the transition rate, the world economy converges to widespread prosperity if and only if the proportion of the world population in advanced countries is above a critical level. In our baseline calibration the world economy is below that critical level, but further declines in population growth in the developing world or rapid growth in China would bring it above that threshold. Even then, the share of the world population living in developing countries would decrease very slowly. Substantial narrowing of population growth differentials, increases in the transition rate or the rapid development of India could bring the world economy to a trajectory of accelerating development.
    JEL: J11 F43 O41
    Date: 2006–02
  11. By: Sergio Godoy; Joseph Stiglitz
    Abstract: This paper examines alternative hypotheses concerning the determinants of success in the transition from Communism to the market. In particular, we look at whether speed of privatization, legal institutions or initial conditions are more important in explaining the growth of the transition countries in the years since the end of the Cold War. In the mid 90s a large empirical literature attempted to relate growth to policy measures. A standard conclusion of this literature was the faster countries privatized and liberalized, the better. We now have more data, so we can check whether these conclusions are still valid six years later. Furthermore, much of the earlier work was flawed since it did not adequately treat problems of endogeneity, confused issues of speed and level of privatization, and did not face up to the problems of multicollinearity. Our results suggest that, contrary to the earlier literature, the speed of privatization is negatively associated with growth, but is confirms the result of the few earlier studies that have found that legal institutions are very important. Other variables, which seemed to play a large role in the earlier literature, appear to have at most a marginal positive effect.
    JEL: P2
    Date: 2006–01
  12. By: Astrid Cullmann; Jürgen Apfelbeck; Christian von Hirschhausen
  13. By: Michal Myck; Leszek Morawski; Jerzy Mycielski
  14. By: Yuyu Chen; Hongbin Li
    Abstract: In this paper, we examine the effect of maternal education on the health of young children by using a large sample of adopted children from China. As adopted children are genetically unrelated to the nurturing parents, the educational effect on them is most likely to be the nurturing effect. We find that the mother's education is an important determinant of the health of adopted children even after we control for income, the number of siblings, health environments, and other socioeconomic variables. Moreover, the effect of the mother's education on the adoptee sample is similar to that on the own birth sample, which suggests that the main effect of the mother's education on child health is in post-natal nurturing. Our work provides new evidence to the general literature that examines the determinants of health and that examines the intergenerational immobility of socioeconomic status.
    JEL: I12 I21 O15
    Date: 2006–02
  15. By: Ian Nish; David Steeds
    Abstract: Steeds: David Davies, a young member of a prominent Welsh commercial/industrial family, spent the period between October 1904 and January 1905 in Japan, Korea and North China. His diary of the journey presents interesting background on conditions in Japan during what were crucial months in the Russo-Japanese war. Nish: SUEMATSU Kencho, a senior Japanese politician, was sent to Europe at the start of the Russo-Japanese war in order to improve the image of Japan in European countries and dispel the idea of the Yellow Peril. He became the main publicist for the Japanese war effort, lecturing, writing articles and publishing books. He stayed on after the Portsmouth Peace Treaty, returning to Japan in February 1906.
    Keywords: Davies, Russo-Japanese war, Korea, North China, Ainu, Dr Batchelor, Red Cross, Rendel, KOMURA Jutaro, Chefoo, Suematsu, Colonel Akashi, Yellow Peril, Kaneko, HAYASHI Tadasu, Japan Society of London, Takakusa, Tomoeda, TAKAHASHI Korekiyo, Prince Arisugawa, Stead.
    Date: 2005–05
  16. By: Christos Koulovatianos; Carsten Schröder; Ulrich Schmidt
    Abstract: Different family types may have a fixed flow of consumption costs, related to subsistence needs. We use a survey method in order to identify and estimate such a fixed component of spending for different families. Our method involves making direct questions about the linkup between aggregate disposable family income and well-being for different family types. Conducting our survey in six countries, Germany, France, Cyprus, China, India and Botswana, we provide evidence that fixed costs of consumption are embedded in welfare evaluations of respondents. More precisely, we find that the formalized relationship between welfare-retaining aggregate family incomes across different family types, suggested by Donaldson and Pendakur (2005) and termed “Generalized Absolute Equivalence Scale Exactness,” is prevalent and robust in our data. We use this relationship to identify subsistence needs of different family types and to calculate income inequality.
    JEL: I31 I32 C42 D31 D12 D63
    Date: 2006–02
  17. By: Van Poeck A.; Vanneste J.; Veiner M.
    Date: 2005–06
  18. By: Ken Heydon
    Abstract: La conférence ministérielle de l’OMC qui s’est tenue en décembre 2005 à Hong Kong a permis quelques avancées du Programme de Doha pour le développement, mais il reste beaucoup à faire, en particulier pour fixer les modalités des négociations sur l’agriculture et sur l’accès aux marchés pour les produits non agricoles, et pour donner plus d’épaisseur à l’AGCS. En outre, les progrès réalisés sont à nuancer, qu’il s’agisse de la réponse apportée aux préoccupations des producteurs africains de coton ou de l’amélioration de l’accès aux marchés pour les produits des pays les moins avancés. Compte tenu de ce qu’il reste à accomplir, il n’est pas certain que les nouvelles échéances fixées seront respectées ni que le Programme de Doha pour le développement sera achevé en temps voulu. Un ralentissement de la dynamique de libéralisation multilatérale peut avoir de nombreuses conséquences ; les analyses réalisées par l’OCDE montrent que l’ampleur des opportunités perdues pourra être considérable et que le système commercial multilatéral risque d’être soumis à des tensions systémiques. Les pays en développement seraient alors parmi les principaux perdants. Pour aller de l’avant, il faudra envisager les politiques commerciales dans un contexte plus large au niveau intérieur, en reconnaissant que l’ouverture du marché est plus efficace lorsqu’elle est appuyée par des politiques macroéconomiques solides, des marchés de l’emploi souples, une culture de la concurrence et des institutions fortes. En se plaçant dans cette perspective, il est possible de promouvoir la réforme des échanges en l’envisageant comme un outil indispensable de la croissance et du développement plutôt que comme une concession.
    Keywords: croissance, marché du travail, développement, libéralisation, services, agriculture, ajustement structurel, facilitation des échanges, régionalisme, coton, marchandises, négociation des modalités, macroéconomique, obstacles aux échanges
    Date: 2006–01–18

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