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on Transition Economics |
| By: | Joachim Ahrens; Philipp Mengeringhaus |
| Abstract: | This study introduces a coherent comparative concept of governance, applies it to China, and elaborates to what extent the Chinese institutional matrix exhibits characteristics of a market-enhancing governance structure (MEGS). It is argued that a subtle interplay of political and economic institutions created a stable and viable politico-institutional foundation which made China's unorthodox transition strategy politically feasible and economically effective. The paper concludes with an assessment of the quality of the overall Chinese governance structure and its expected implications for the future transition process. |
| JEL: | H70 H83 P26 P35 |
| Date: | 2006–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:28&r=tra |
| By: | Dwayne Benjamin; Loren Brandt; John Giles; Sangui Wang |
| Abstract: | This paper provides an overview of the evolution of income inequality in China from 1987 to 2002, employing three series of data sets. Our focus is on both urban and rural inequality, as well as the urban-rural gap, with the objective of summarizing several “first-order” empirical patterns concerning the trajectory of inequality through the reform period. We document significant increases of inequality within China’s urban and rural populations. In rural areas, increased inequality is primarily related to the dis-equalizing role of non-agricultural self-employment income and slow growth in agricultural income from the mid-1990s onward. Poverty persists, and tied in part to slow growth in agricultural commodity prices. In urban areas, the declining role of subsidies and entitlements, the increase in wage inequality and the layoffs during restructuring, have fueled the growth in inequality within urban areas. Poverty levels, however, are very low. We find that spatial (regional) dimensions of inequality are significant, but are much less important than commonly believed for both the urban and rural populations, and for differences between urban and rural areas. Accounting for urban-rural reclassification, which otherwise exaggerates the rising urban-rural gap, we find a relatively stable ratio of urban to rural incomes. This hides some geographical variation, however: The urban-rural gap is increasing more rapidly in interior provinces, where SOE’s had a more dominant role in economic activity in urban areas, than in coastal provinces where the non-state sector was more important earlier in the reform period. |
| Keywords: | China, Income Distribution; Poverty; Inequality; welfare; transition; development |
| JEL: | I3 P2 O1 D3 |
| Date: | 2005–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-238&r=tra |
| By: | Steven Rosefielde |
| Abstract: | Andrei Shleifer and Daniel Treisman recently rendered a summary verdict on the post Soviet Russian transition experience finding that the Federation had become a normal country with the west's assistance, and predicting that it would liberalize and develop further like other successful nations of its type. This essay demonstrates that they are mistaken on the first count, and are likely to be wrong on the second too. It shows factually, and on the norms elaborated by Pareto, Arrow and Bergson that Russia is an abnormal political economy unlikely to democratize, westernize or embrace free enterprise any time soon |
| JEL: | P40 P51 P52 P30 |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:12&r=tra |
| By: | Patricia McGrath; ; |
| Abstract: | Advocates of financial regulation, Arestis and Demetriades, argue that financial liberalisation does not impact on financial market efficiency and the allocation of investment. Results in this study find that Czech, Hungarian and Polish firms are subject to scrutiny when applying for credit. The firm’s ability to provide collateral, the potential of the proposed investment project and individual financial backgrounds are all factors that are used before loans are offered, and it likely that allocational efficiency is strengthened in these circumstances, and not weakened. Stiglitz has the view that financial repression improves the quality of the pool of loans. Results here indicate that companies in these countries previously had very limited access to credit while government owned companies and government projects received the bulk of credit. After deregulation it became apparent that the quality of the pool of loans was very poor. This study supports Shaw’s assertion that financial deregulation improves financial deepening. |
| Keywords: | Transition Economies, Industrial Development, Financial Deregulation, Economic Growth, Eastern Europe |
| JEL: | G G2 G21 |
| Date: | 2005–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-804&r=tra |
| By: | Alexander Pivovarsky |
| Abstract: | This paper investigates the relationship between ownership concentration and enterprise performance in Ukraine. Using data on 376 medium and large enterprises, it finds that ownership concentration is positively associated with enterprise performance in Ukraine. The paper also finds that concentration of ownership by foreign companies and banks is associated with better performance than ownership concentrated by the domestic owners. Ownership by Ukrainian investment funds and holding companies does not have a positive effect on performance. In contrast to predictions by many observers of early transition, privatization methods had a lasting effect on ownership structure in Ukraine. |
| Keywords: | Privatization , Ukraine , Governance , Transition economies , |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:01/42&r=tra |
| By: | Bulent Unel; Harm Zebregs |
| Abstract: | China's growth record since the start of its economic reforms in 1978 has been extraordinary. Yet, this impressive performance has been associated with an increasing regional income disparity. We use a recently developed nonparametric approach to analyze the variation in labor productivity growth across China's provinces. This approach imposes less structure on the data than the standard growth accounting framework and allows for a breakdown of labor productivity into capital deepening, efficiency gains, and technological progress. Like other studies before us, we do not find strong evidence of convergence in labor productivity across China's provinces during 1978-98. However, our results show that provinces converged in efficiency levels, while they diverged in capital deepening and technological progress. |
| Keywords: | Economic growth , China , Labor productivity , Data analysis , |
| Date: | 2006–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/55&r=tra |
| By: | John E. Anderson; ; |
| Abstract: | This paper reports the first empirical evidence that fiscal reform efforts in transition countries have positive effects. Using the EBRD BEEPS I and II data, reported in 1999 and 2002, rigorous econometric models are estimated showing that the share of bribes paid to tax collectors is reduced in countries with more extensive fiscal reforms. This effect controls for selection bias in the likelihood that firms are required to make unofficial payments to tax authorities. On the basis of this evidence, we now have some confidence in the success of fiscal reform efforts. In addition, we have insight regarding what forms of fiscal reform may be more successful as the share of revenues generated from direct taxes (both personal and corporate) has an impact on tax bribes. |
| Keywords: | Fiscal reform, Bribery, Transition economies, Eastern Europe, Central Asia |
| JEL: | C21 H25 O23 O52 |
| Date: | 2005–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-800&r=tra |
| By: | Jeffrey Miller; ; |
| Abstract: | The mass privatization program in Bulgaria was implemented in 1996-97. Following programs in countries like the Czech Republic, more sophisticated regulatory bodies were put into place to prevent the kind of abuses observed elsewhere. This study finds that Bulgaria avoided some of the extreme problems that manifested themselves in these other countries, but there were still serious problems of dilution. Dilution is similar in both mass privatization firms and nonmass privatization firms. Dilution is associated with positive performance, suggesting that more concentrated ownership has had some benefits. Even after a number of years have passed, mass privatization firms have performed less well than firms privatized by other means. |
| Keywords: | Bulgaria, mass privatization, dilution |
| JEL: | P5 P3 G3 |
| Date: | 2006–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2006-814&r=tra |
| By: | Alessia Amighini |
| Abstract: | This paper investigates the position of China in the international fragmentation of production in the ICT industry, the most dynamic and globally dispersed sector in the world economy. The evidence shows that during the 1990s China dramatically increased its market shares in ICT products and now ranks among the top three world exporters. Moreover, China has upgraded from mere assembly of imported inputs to the manufacturing of high-tech intermediate goods. As a result, import dependence has declined and the domestic value added of exports has increased. This supports the hypothesis that industrial upgrading occurred in some tradable sectors through technological learning associated with processing trade. Therefore, a pattern of specialization initially dominated by processing trade could be favourable to a country's long-term development, to the extent that entering at the lower end of high-tech sectors is promotive of catching up in more sophisticated technology-intensive production |
| JEL: | F02 F14 L63 N60 |
| Date: | 2005–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:20&r=tra |
| By: | Stefan Hedlund |
| Abstract: | Ongoing discussions between Russia and the EU on the formation of a Common European Economic Space bring back to mind Alexander Gerschenkron's classic essay on economic backwardness in historical perspective. This paper argues that the institutions that once produced a specific kind of catch-up economics in Czarist Russia still remain largely the same. Unless negotiations between Moscow and Brussels take into consideration such fundamental institutional incompatibility, attempts at harmonization, expressed by Brussels as an attempt tp spread Western values, will be doomed to fail. A cynical conlusion views potential convergence as adaptation by Brussels to traditional Russian institutional patterns of rule evasion, rather than a Westernization of Russia |
| JEL: | P26 N23 P52 P48 |
| Date: | 2006–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:27&r=tra |
| By: | Balázs Égert |
| Abstract: | This paper investigates the importance of the Balassa-Samuelson effect for two acceding countries (Bulgaria and Romania), two accession countries (Croatia and Turkey) and two CIS countries (Russia and Ukraine). The paper first studies the basic assumptions of the Balassa-Samuelson effect using yearly data, and then undertakes an econometric analysis of the assumptions on the basis of monthly data. The results suggest that for most of the countries, there is either amplification or attenuation, implying that any increase in the open sector's productivity feeds onto changes in the relative price of non-tradables either imperfectly or in an over-proportionate manner. With these results as a background, the size of the Balassa-Samuelson effect is derived. For this purpose, a number of different sectoral classification schemes are used to group sectors into open and closed sectors, which makes a difference for some of the countries. The Balassa-Samuelson effect is found to play only a limited role for inflation and real exchange rate determination, and it seems to be roughly in line with earlier findings for the eight new EU member states of Central and Eastern Europe |
| JEL: | O11 P17 E31 |
| Date: | 2005–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:21&r=tra |
| By: | Olaf Unteroberdoerster |
| Abstract: | This paper reviews recent banking reform efforts in the lower Mekong countries (LMCs), comprising Cambodia, the Lao People's Democratic Republic, and Vietnam. Linked by close economic and cultural ties, the three LMCs face the dual challenge of economic development and transition to market-based economies. Two-tier banking systems were formally introduced in the late 1980s. However, state-owned banks with weak balance sheets continue to dominate the banking systems of Vietnam and Lao P.D.R. Cambodia's main challenge is to reconstruct a banking system after decades of civil strife. Based on progress made and brief cross-country comparisons, the paper identifies key challenges and options for further reform. |
| Keywords: | Bank reforms , Vietnam , Cambodia , Lao People's Democratic Republic , Transition economies , |
| Date: | 2004–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfpdp:04/5&r=tra |
| By: | Jean-Marc Figuet; Nikolay Nenovsky; |
| Abstract: | Despite their progress Bulgaria and Romania significantly differ from the EU economies. In this article, on the basis of the theoretical and empirical achievements of the theory of optimal and (endogenous) currency areas we study to what extent the two South European economies are able to adopt the common economic (and above all monetary) policy of the EU, and to what extent the convergence to the EU stimulates the economic development of these countries. Despite the similarities, the two countries now differ fundamentally in their choice of a monetary regime – while Romania uses inflation targeting and a flexible exchange rate, Bulgaria has adopted a currency board regime. For this purpose we analyze: (i) the degree of nominal, real and financial convergence and synchronization of the economic cycle with that of the European Union (using unconditional ß convergence approach). Income and price levels, inflation rate, interest rate, monetary aggregates, credit, productivity etc. are among the studied variables; (ii) the resistance to different external and internal shocks (using VAR model) as well as (iii) the mechanisms for balancing and absorption of these shocks. To give a better comparative picture we compose the panel including Hungary and Czech Republic. |
| Keywords: | convergence, shocks, EU enlargement, Bulgaria and Romania |
| JEL: | E3 F4 P2 |
| Date: | 2006–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2006-810&r=tra |
| By: | Elizabeth Brainerd; ; |
| Abstract: | Both Western and Soviet estimates of GNP growth in the USSR indicate that GNP per capita grew in every decade – sometimes rapidly – from 1928 to 1985. While this measure suggests that the standard of living improved in the USSR throughout this period, it is unclear whether this economic growth translated into improved well-being for the population as a whole. This paper uses previously unpublished archival data on infant mortality and anthropometric studies of children conducted across the Soviet Union to reassess the standard of living in the USSR using these alternative measures of well-being. In the prewar period these data indicate a population extremely small in stature and sensitive to the political and economic upheavals visited upon the country by Soviet leaders and outside forces. Remarkably large and rapid improvements in infant mortality, birth weight, child height and adult stature were recorded from approximately 1940 to the late 1960s. While this period of physical growth was followed by stagnation in heights and an increase in adult male mortality, it appears that the Soviet Union avoided the sustained declines in stature that occurred in the United States and United Kingdom during industrialization in those countries. |
| Keywords: | Soviet Union; Russia; height; health; standard of living |
| JEL: | P23 P36 N34 |
| Date: | 2006–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2006-812&r=tra |
| By: | Stabley W. Black |
| Abstract: | The obstacles to economic growth in Mongolia are modeled with a supply-side growth model calibrated to represent inefficient use of resources and intermediation. Progressive removal of inefficiencies over time by means of privatization of banks and industrial enterprises potentially leads to increased productivity and increased capital accumulation, raising economic growth and per capita output. |
| Keywords: | Transition economies , Economic growth , Mongolia , Capital , Labor , Privatization , Economic models , |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:01/37&r=tra |
| By: | Bernardina Algieri |
| Abstract: | This paper considers the dynamics of human capital in Russia, examining its changes over the transition period. A theoretical model has been developed to explain why a significant endowment of human capital creates the possibility but not the certainty of sustainable economic growth. An overview of the main high tech districts concludes the analysis |
| JEL: | J24 O30 O15 |
| Date: | 2006–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:29&r=tra |
| By: | Timothy Frye; ; |
| Abstract: | Are property rights obtained through legally dubious means forever tainted with original sin or can rightholders make their ill-gotten gains legitimate by doing good works?2 This is a critical question for developing countries (and Russia in particular) where privatization is often opaque and businesspeople may receive property, but remain unwilling to use it productively due to concerns about the vulnerability of their rights to political challenge. Using a survey of 660 businesspeople conducted in Russia in February 2005, I find that the original sin of an illegal privatization is difficult to expunge. Businesspeople, however, can improve the perceived legitimacy of property rights by doing good works, such as investing in the firm and by providing public goods for the region. Finally, managers that provide public goods for their region are more likely to invest in their firms than those who did not. The finding that public goods providers invest at higher rates is at odds with standard economic logic, but fits well with the more political view of property rights developed here. These findings have implications for political economy and contemporary Russia. |
| Keywords: | Property Rights, Transition, Rule of Law, Privatization |
| JEL: | K11 P14 P16 |
| Date: | 2005–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-801&r=tra |
| By: | Karsten Staehr |
| Abstract: | This paper considers the effects of sequencing and reform speed on output performance in transition countries. These largely unsettled issues are addressed using principal component techniques to construct reform clusters and by explicit tests of speed effects. The results indicate that broad-based reforms are good for output growth, but so is a policy of liberalisation and small-scale privatisation without structural reforms. Conversely, large-scale privatisation without adjoining reforms, market opening without supporting reforms and bank liberalisation without enterprise restructuring affect growth negatively. Swift reform policies allow transition countries to benefit from higher growth for longer time. The speed of reforms appears otherwise to have little effect on growth in the short and medium term. |
| JEL: | P21 P30 H11 C33 |
| Date: | 2005–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:19&r=tra |
| By: | Bernardina Algieri |
| Abstract: | The paper gauges export demand elasticities for Russia using an Error Correction technique within a cointegration framework. An extended version of the Imperfect Substitutes Model has been implemented to estimate the sensitivity of Russian exports without oil components to price and to Russian and world income. Our results suggest a robust and negative long run cointegration relationship between the real effective exchange rate, defined as the weighted average of the rouble's exchange rates versus a basket of the three currencies with the largest share in the trade turnover adjusted to incorporate inflation rate differences (the ratio of the domestic price indices to the foreign price indices), and Russian exports. An increase in exports by 24 % is caused by a real depreciation by 10 %. Furthermore, a 10 % growth in world income leads to a 33 % rise in exports. Finally, exports drop by 14 % whenever a 10 % increase in domestic income occurs. |
| JEL: | F19 P27 C22 |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:8&r=tra |
| By: | Dwayne Benjamin; Loren Brandt; John Giles |
| Abstract: | We explore the relationship between the level of village inequality in 1986, and the subsequent growth of household incomes from 1986 to 1999. Using a detailed household-level data set from rural China, we find robust evidence that initial inequality is negatively related to subsequent household income growth. We are able to address a number of econometric issues that affect the use of aggregate data for this exercise, especially measurement error and aggregation: Our results strongly suggest that village inequality has an external adverse impact on household-level income trajectories. However, once we account for possibly fixed village-level unobserved heterogeneity, we find no evidence that changes in inequality are correlated with household income growth: Whatever factor drives the inequality-growth relationship only operates in the “long run.” We explore several possible avenues by which initial inequality – or an unobserved variable correlated with it – affects household income growth. While we do not find the precise mechanism, our findings point toward a class of explanations based on collective choice (like the provision of public goods or determination of local taxes), and away from credit-market based explanations. |
| Keywords: | Inequality; Growth; Rural China; Panel Data |
| JEL: | O12 O15 P20 |
| Date: | 2006–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-237&r=tra |
| By: | Lawrence King; Patrick Hamm; |
| Abstract: | Economists have used cross-national regression analysis to argue that postcommunist economic failure is the result of inadequate adherence liberal economic policies. Sociologists have relied on case study data to show that postcommunist economic failure is the outcome of too close adherence to liberal policy recommendations, which has led to an erosion of state effectiveness, and thus produced poor economic performance. The present paper advances a version of this statist theory based on a quantitative analysis of mass privatization programs in the postcommunist world. We argue that rapid large-scale privatization creates severe supply and demand shocks for enterprises, thereby inducing firm failure. The resulting erosion of tax revenues leads to a fiscal crisis for the state, and severely weakens its capacity and bureaucratic character. This, in turn, reacts back on the enterprise sector, as the state can no longer support the institutions necessary for the effective functioning of a modern economy, thus resulting in deindustrialization. Using cross-national regression techniques we find that the implementation of mass privatization programs negatively impacts measures of economic growth, state capacity and the security of property rights. |
| Keywords: | privatization, transition economies, state capacity, property rights, institutions, growth |
| JEL: | B52 C31 H11 D02 D23 F02 P26 P51 |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-806&r=tra |
| By: | Jean-Francois Nivet |
| Abstract: | Post-socialist transition raises crucial issues about the institutional setting of a market economy. The priority has been given to property rights, and privatization has been advocated as a means to depoliticize economic activities. The dismissal of external interventions, allied with the attraction to the American model and Hayekian ideas, often led to the introduction of minimal laws and wait for their evolutionary development. The failure of corporate and public governance, notably in Russia, helps to show why, on the contrary, democratically established legal rules are essential. Legislation should not only protect corporate shareholders and stakeholders, but more fundamentally all citizens against predatory collusive behavior of political, economic and criminal elites |
| JEL: | D23 K2 P3 |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:7&r=tra |
| By: | Sumon Kumar Bhaumik; Ira N. Gang; Myeong-Su Yun |
| Abstract: | Kosovo is a war-torn corner of the former Yugoslavia, where a civil war between ethnic Albanians and ethnic Serbs raged during most of the 1990s. We examine the incidence and depth of poverty and some of its correlates in post-conflict Kosovo using the Living Standards Measurement Survey. |
| Keywords: | poverty, ethnicity, transition |
| JEL: | I32 O12 J15 |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-807&r=tra |
| By: | Piritta Sorsa |
| Abstract: | The paper reviews key macroeconomic challenges with EU accession in Southeastern Europe (SEE). Most of the countries in the region are years away from EU accession and need substantial progress to meet the key macroeconomic criteria-the establishment of a functioning market economy and macroeconomic stability. The former calls for further structural reforms. While macroeconomic stability is essential throughout the EU accession process, the importance of specific outcomes increases in the last stage of accession, when countries face decisions to apply for entry into the ERM2 and the Maastricht criteria (Bulgaria and Romania). The main challenges with establishing macroeconomic stability in other countries are related to sustainability of their monetary frameworks, risks from rapid financial deepening, and further fiscal consolidation to support growth and stabilization. Most of the SEE countries have room to lower public spending and increase the share of pro-growth spending. |
| Keywords: | Markets , Europe , European Union , Fiscal policy , Economic stabilization , |
| Date: | 2006–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/40&r=tra |
| By: | Aghassi Mkrtchyan |
| Abstract: | This paper examines the impact of monetary policy and administrative price adjustments on price variability in a low inflation economy characterized by relatively frequent administrative price adjustments. Fluctuations of market determined prices, prices of agricultural goods in particular, are linked to poor synchronization between administrative price changes and monetary policy. If monetary policy does not account for expected changes in administrative prices, demand for free goods shifts, causing fluctuation of prices for agricultural goods, because the supply of these goods is highly inelastic in Armenia. The findings contribute to a better understanding of agricultural price variability during 1998-2002. The impact of macroeconomic policy and structural adjustments on income distribution and rural poverty incidence are also examined. This research has immediate policy implications, since Armenia will continue to undergo major upward price adjustments of regulated prices, which may have a negative impact on income distribution unless aggregate demand management is changed. |
| JEL: | E31 E65 E61 |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:13&r=tra |
| By: | Joy ten Berge; Tapio Saavalainen |
| Abstract: | Quasi-fiscal deficits of public utility companies are common in all member countries of the Commonwealth of Independent States (CIS). They constitute a significant impediment to efficient resource allocation and endanger macroeconomic stability. This paper presents a simple framework for measuring and monitoring such deficits and highlights their macroeconomic relevance. It reviews the progress under IMF conditionality aimed at correcting these imbalances during 1993-2003. The paper suggests that the extensive conditionality under the IMF-supported programs has yielded only limited progress in reducing the energy sector's financial imbalances. In conclusion, different policy options are discussed in light of the lessons learned. |
| Keywords: | Energy , Armenia , Azerbaijan , Georgia , Kyrgyz Republic , Moldova , Tajikistan , Uzbekistan , Budget deficits , Energy sector , Transition economies , Conditionality , Governance , |
| Date: | 2006–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/43&r=tra |
| By: | Cristiano Perugini; Marcello Signorelli |
| Abstract: | This paper analyzes the national and regional (NUTS-2) employment performance and convergence for various aggregations of 27 European countries (EU-25, plus Romania and Bulgaria), mainly using the three employment rates (total, female, older worker) adopted by the European Employment Strategy (EES). At the national level, this analysis confirmed the existence of considerable differences in employment performance between and within the various country aggregations. Empirical analysis highlighted the remarkable net job creations in the EU-15 (and EMU-12) for the period 1997-2003, accompanied by a (national) convergence for all three employment indicators. As regards total employment rates, significant converging trends also emerge at the regional level for both EU-15 and EMU-12 aggregations. In the eight Central European Countries, new EU members (8 CEC-NM), a diverging trend in the total employment rate began in 1999, whereas converging dynamics were limited to the employment rate of older workers in the period 1998-2001. Regional analyses showed significant diverging dynamics in the total employment rates (1999-2003) for the eight CEC-NM regions. At the national level of analyses, the relationship between "progress in transition" and employment performance was also briefly examined. Results show that a simple, stable correlation does not exist. However, a weak U-shaped relationship existing in 1998 shifted downward and evolved toward a positive link in 2003. The main results of cluster analysis of the 53 regions of the ten CECs confirmed a high level of regional labour market diversification, and the fact that sector structure affects employment performance significantly |
| JEL: | R23 J21 O52 P27 |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:11&r=tra |
| By: | Shamit Chakravarti; Sanjeev Gupta; Luc Leruth; Luiz de Mello |
| Abstract: | This paper assesses changes in the size and scope of government in 24 transition economies. Whereas these governments have retrenched in terms of public expenditures in relation to GDP, as well as public employment as a share of population, some indicators suggest that size remains high (e.g., rising indebtedness, a heavy regulatory burden, and prevalence of noncash transactions). At the same time, the scope of government activities-although evolving-has not necessarily become appropriate. This paper provides some recommendations for aligning the scope of government with the increasing market orientation of these economies. |
| Keywords: | Transition economies , Government expenditures , Public debt , |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:01/55&r=tra |
| By: | Rossitza Rousseva (SPRU, University of Sussex) |
| Keywords: | software, Bulgaria, CEE, industrial development, accumulation of capabilities, industrial policy |
| JEL: | O33 L86 P23 |
| Date: | 2006–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:151&r=tra |
| By: | Volker Treichel |
| Abstract: | This paper studies the financial sustainability of the Albanian pension fund and assesses possible options for its reform. The paper concludes that the pension fund is not sustainable in its current form and proposes for the urban scheme a combination of parametric changes to the existing pay-as-you-go system that would be conducive to broadening the contribution base and strengthening the financial performance of the pension fund. In addition, it proposes the establishment of a voluntary funded pillar in the urban scheme. For the rural scheme, the paper concludes that it should either be merged with the scheme for the urban self-employed or be replaced by a mandatory and funded second pillar. The paper also proposes administrative reforms to strengthen revenue collections. |
| Keywords: | Pensions , Albania , Transition economies , |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:01/47&r=tra |
| By: | Tigran Poghosyan; Evzen Kocenda; |
| Abstract: | This paper studies foreign exchange risk premium using the uncovered interest rate parity framework in a single country context. The analysis is performed using weekly data on foreign and domestic currency deposits in Armenian banking system. The paper provides the results of the simple tests of uncovered interest parity condition, which indicate that contrary to established view dominating in empirical literature there is a positive correspondence between exchange rate depreciation and interest rate differentials in Armenian deposit market. Furthermore, the paper presents and discusses a systematic positive risk premium required by the economic agents for foreign exchange transactions, which increases over the investment horizon. The two currency affine term structure framework is applied to identify the factors driving the systematic exchange rate risk premium in Armenia. At the end, possible directions for further research are outlined. |
| Keywords: | “forward discount” puzzle, exchange rate risk, affine term structure models, foreign and domestic deposits, transition and emerging markets, Armenia |
| JEL: | E43 E58 F31 G15 O16 P20 |
| Date: | 2006–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2006-811&r=tra |
| By: | Gagik G. Aghajanyan |
| Abstract: | Several non-monetary (mainly supply) factors affect prices in the short-run. It is widely acknowledged that in countries (especially countries in transition), where the price level is highly volatile and seasonal, it is not expedient for central banks to use official inflation index while formulating monetary policy. For this reason, it is crucial for central banks to work out, study and follow the behavior of core inflation that enables to reflect long-run price movements. This paper presents the application of various methods of calculating core inflation to Armenian data (for 1996:1-2002:12). Each measure is calculated at monthly frequencies and evaluated by different criteria. The analysis shows that core inflation indices, calculated by trimming the distribution of prices at 10 or 15%, are the best and most effective indicators for monetary policy-makers in Armenia, since they capture inflation trends and are closely tied to monetary aggregates. However, the median seems to be the best predictor for forecasting inflation of all core inflation measures discussed in this paper |
| JEL: | P2 R5 E31 P3 |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:16&r=tra |
| By: | Vitaliy Zheka |
| Abstract: | This study investigates the impact of overall level as well as of separate elements of corporate governance on enterprise performance for public companies in Ukraine. We use unique data on corporate governance choices for above 5 thousand firms (around a half of all public companies in Ukraine) for three years from 2000 to 2002. We construct index/sub-indices of corporate governance describing such aspects of corporate governance as shareholder rights, transparency/information disclosure, board independence, chairman independence and ownership arrangements. The novelty of our approach is that we use social trust factors as instruments for corporate governance choices. We use a set of instrumental variables coming mainly from "trust" literature, in particular political diversity, religion and ethnic diversity, and methods of privatisation, to tackle possible endogeneity. We employ ordinary least squares (OLS), two-stage least squares (2SLS), two-stage generalized method of moments (2SGMM), fixed effects (FE), random effects (RE), fixed effects instrumental variables analysis (FE IV) and random effects instrumental variable analysis (RE IV) to analyse the governance effects in the framework of standard production function approach. We find strong evidence that corporate governance predicts firm performance in the transition context. We do not find significant evidence of reverse causation or other endogenous effects. OLS results predict that one-point-increase in our overall corporate governance index would result in around a half-percent increase in performance; and worst to best change in our overall corporate governance index predicts about 40% increase in company's performance. We document statistically and economically strong effects of such governance elements as shareholder rights, transparency and board independence on performance. We also find a negative effect of the independence of the board chairman on performance. |
| Keywords: | Ukraine, corporate governance, firms |
| JEL: | G34 P2 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:hwe:certdp:0605&r=tra |
| By: | Armenuhi Mkrtchyan |
| Abstract: | The structure of the banking industry typically undergoes fundamental changes during the transition to a market economy. This research employs the method suggested by Panzar and Rosse (1987) to evaluate the empirical evidence on the evolution of competitive structure in the Armenian banking industry during its recent transition and on the possible forces-market power or efficiency/contestability-that underlie that evolution. The results point to monopolistic competition.The reduction of bank numbers and the simultaneous increase in concentration is accompanied by a decline in competition intensity, which supports the market-power hypothesis |
| JEL: | L1 L8 |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:15&r=tra |
| By: | Anders Åslund (Institute for International Economics); Nazgul Jenish (University of Maryland) |
| Abstract: | In the first decade of postcommunist transition, multiple growth regressions showed that the more radical and comprehensive market economic reform was, the earlier a country returned to economic growth and the more vigorous its growth, and that Central Europe took the lead. Since 2000, however, the Commonweath of Independent States (CIS) countries have had more than 4 percentage points higher annual growth than the Central European countries. A regression analysis for 20 postcommunist countries shows, with strong significance, that reducing public expenditures has most effectively stimulated economic growth. As expected, oil exports are also positive and significant. The distance from the European Union is also positive and significant: that is, the further from the European Union, the higher the economic growth. The effect of corruption is negative for growth but only marginally significant. Neither the laggard effect nor investment reveals any significant effect. The conclusion is that at least among postcommunist countries more emphasis should be given to reducing public expenditures to boost economic growth. |
| Keywords: | economic systems, transition, economic growth, public sector economy, oil |
| JEL: | E62 H30 O23 P27 P35 Q43 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp06-5&r=tra |
| By: | Hakob Zoryan |
| Abstract: | This paper attempts to estimate the actual (de facto) level of dollarization in Armenia. "Co-circulation" involves the regular use of two or more currencies within an economy. The existence of an unknown amount of foreign currency in circulation makes the outcome of domestic monetary policy uncertain. The volume of foreign currency deposits is easily obtained from the official statistics. However, it is very hard to determine the stock of foreign currency in circulation. The effective money supply may be much larger than the domestic money supply and is subject to behavioral responses which are very different than the movements of the presently measured money supply. The purpose of this paper is to assess the level of dollarization, that is, to evaluate the size and/or proportion of foreign currency in the total money stock of Armenia as a highly dollarized country. |
| JEL: | E5 E4 G21 P3 F3 P2 |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:14&r=tra |
| By: | Anna Iara (The Vienna Institute of International Economic Studies and Center for European Integration Studies, University of Bonn) |
| Abstract: | Temporary migration is of growing significance in Europe. Upon migration to a country with higher technological development that typically coincides with positive wage differentials, temporary migrants may upgrade their skills by learning on the job and subsequently import the newly acquired human capital to their source country, thus adding to international know-how diffusion and the catching up of the respective economy. This paper is the first to provide supportive evidence of this hypothesis in a cross-country East to West European perspective, using the 2003 Youth Eurobarometer dataset. |
| Keywords: | Central and Eastern Europe, return migration, wage premium, skill diffusion |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:210&r=tra |
| By: | Maksimovic, Vojislav; Demirguc-Kunt, Asli; Ayyagari, Meghana |
| Abstract: | Using cross-country data, the authors evaluate historical determinants of protection of property rights. They examine four historical theories that focus on conceptually distinct causal variables believed to shape institutions: legal origin, endowments, ethnic diversity, and religion. There is only one realization of the data with relatively few observations, which have by now been well explored in the literature. Given the correlations between the explanatory variables, it is difficult to fashion empirical tests which are consistent in their treatment of the competing theories and to know which regressions to take seriously, giving rise to competing interpretations in the literature. The authors use Directed Acyclic Graph (DAG) methodology to identify which historical factors are direct determinants of property rights protection and which are not, and subject the outcomes to a battery of robustness tests. The empirical results support ethnic fractionalization as a robust determinant of property rights protection. Despite the attention it has received in the literature, the impact of legal origin on protection of property rights appears fragile and dependent on the inclusion of transition economies in the sample. |
| Keywords: | Legal Institutions of the Market Economy,Judicial System Reform,Anthropology,Gender and Law,Legal Products |
| Date: | 2006–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3940&r=tra |
| By: | Lucjan Orlowski; Kryzstof Rybinski; |
| Abstract: | This study proposes an extension to the inflation targeting framework for Poland that takes into consideration the exchange rate stability constraints imposed by the obligatory participation in the ERM2 on the path to the euro. The modified policy framework is based on targeting the differential between the domestic and the implicit euro area inflation forecasts. The exchange rate stability objective enters the central bank reaction function and is treated as an indicator variable. Adjustments of interest rates respond to changes in the relative inflation forecast, while foreign exchange market intervention is applied for the purpose of stabilizing the exchange rate. The dynamic market equilibrium exchange rate is ascertained by employing the Johanssen cointegration tests and the threshold generalized autoregressive heteroscedasticity model with the in-mean extension and generalized error distribution (TGARCH-M-GED). |
| Keywords: | inflation targeting, monetary convergence, ERM2, euro, Poland, cointegration, GARCH |
| JEL: | E58 E61 F33 P24 |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-802&r=tra |
| By: | Katalin Balla (Hungarian Academy of Sciences); János Köllo (Hungarian Academy of Sciences and IZA Bonn); András Simonovits (Hungarian Academy of Sciences, Budapest University of Technology and CEU) |
| Abstract: | We extend the benchmark model of Aghion and Blanchard (1994), assuming two segments of the emerging private sector that differ in workers’ productivity. We look at the paths of employment, wages, taxes, labor costs and profits during and after the transition, up until the shock is fully absorbed. Viability is a function of the speed of job destruction and the strength of the initial shock to employment. In the long run, the system asymptotically converges to full employment. If the rate of job destruction is sufficiently low, the unemployment rates can get close to steady-state values during the transition. Within the realm of feasible scenarios, unemployment differentials are simultaneously determined by the speed of destruction, the level of benefits and the cross-subsidization of low-productivity groups. Lower benefits induce higher aggregate employment and inequalities throughout the redeployment process, while higher subsidies are conducive to lower inequalities and higher aggregate employment. The choice between low versus high benefits is a matter of preferences but the systems with subsidies dominate the systems with no subsidies. The subsidy has strongest marginal effect on employment and income when job destruction is fast and benefits are high. |
| Keywords: | transition, heterogeneous labor, job creation, unemployment benefit, wage subsidy |
| JEL: | J64 P31 H53 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2179&r=tra |
| By: | Luca De Benedictis; Roberta De Santis; Claudio Vicarelli |
| Abstract: | The object of this paper is to estimate if and how the Central European Free Trade Agreement (CEFTA) and the Baltic Free Trade Agreement (BFTA) exerted a significant impact on intra-European trade, effectively reducing the influence of the European Association Agreements (EAs) in shaping the European trade structure as a hub-and-spoke system - with the EU15 being the hub and the CEECs the spoke. This paper analyses bilateral trade flows between eight CEECs and EU-23. We estimate a gravity equation using a system GMM dynamic panel data approach. Results support the assumptions that gravity forces and "persistence effects" matter. With respect to the effect of free trade agreements, evidence is found that Free trade agreements between CEECs matter: There is evidence that the presence of intra-periphery agreements helped expand intra-periphery trade and limited the emergence of a "hub-and-spoke" relationship between CEECs and EU. This results have important policy implications for the trade strategy of "future" EU members of the Southeastern European Countries as well as of the Southern Mediterranean Countries. According to the empirical results, these countries should move towards a regional free-trade area as exemplified by the CEFTA and the BFTA to avoid "hub-and-spoke" effects. |
| JEL: | C23 C13 F15 F13 |
| Date: | 2005–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:22&r=tra |
| By: | Paolo Verme |
| Abstract: | The paper uses a range of methods to assess changes in income, poverty and income distribution between 2001 and 2002 in Kazakhstan. It is found that outstanding GDP growth has been translated into very modest growth in mean household income. However, both income poverty and inequality have decreased significantly and growth has been 'pro-poor', which is explained by changes in inequality accounting for almost all the changes in poverty. The elasticity of poverty with respect to both growth and inequality is also found to be high. These findings suggest that GDP changes can be, at times, disjoint from household income performance and that, when this happens, income redistribution can still play a key role for poverty reduction. Yet a much greater reduction in poverty would have occurred if mean income would also have risen. Hence, the distribution of GDP growth among factors of production and the distribution of income among households are the cornerstones of poverty reduction rather than GDP growth alone. |
| JEL: | D31 D63 I32 O1 P36 |
| Date: | 2006–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:24&r=tra |
| By: | Sumon Bhaumik; Ira Gang; Myeong-Su Yun |
| Abstract: | We use the Living Standards Measurement Study (LSMS) household survey from post-conflict Kosovo to examine economic deprivation among Serbs and Albanians. Economic deprivation is measured by per capita household expenditure and by the incidence of poverty as captured by the headcount ratio. We examine the roles played by the stock of attributes and by the impact of these attributes on deprivation using Oaxaca-type decomposition methods. Empirical results for both decomposition analyses show differences in characteristics as well as returns to measured characteristics favor Serbs, even though Serbs have lower expenditures and higher poverty incidence than Albanians. |
| Keywords: | poverty, ethnicity, decomposition |
| JEL: | I32 O12 J15 |
| Date: | 2005–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-808&r=tra |
| By: | Valentina Hartarska; Steven B. Caudill; Daniel M. Gropper |
| Abstract: | Microfinance institutions are important, particularly in developing countries, because they expand the frontier of financial intermediation by providing loans to those traditionally excluded from formal financial markets. This paper presents the first systematic statistical examination of the performance of MFIs operating in Eastern Europe and Central Asia. A cost function is estimated for MFIs in the region from 1999-2004. First, the presence of subsidies is found to be associated with higher MFI costs. When output is measured as the number of loans made, we find that MFIs become more efficient over time and that MFIs involved in the provision of group loans and loans to women have lower costs. However, when output is measured as volume of loans rather than their number, this last finding is reversed. This may be due to the fact that such loans are smaller in size; thus for a given volume more loans must be made. |
| Keywords: | Eastern Europe, banking, microfinance, efficiency |
| JEL: | G20 G21 O16 |
| Date: | 2006–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2006-809&r=tra |
| By: | Tran Ngoc Ca |
| Abstract: | This study looks at the contribution of the university system in Vietnam to the socioeconomic development in general, and their relationship with firms, dynamic actors of the economy in particular. The study uses different methods of research, from reliance on secondary data to interviews with universities and survey of firms. Several case studies of the key universities in four regions have been undertaken: Hanoi in the north, Danang in the center, and Ho Chi Minh City and Cantho in the south of Vietnam. The findings show that the role of Vietnamese universities in research is much weaker than teaching, and that their contribution to the socioeconomic development of the country is limited to the production of an educated labor force rather than innovation. However, in selected universities, innovation did take place to a certain extent and brought benefits for both the universities and firms they served. This situation is explained by both the inherited university system in Vietnam and its shift in behavior in the context of economic renovation and globalization. |
| Keywords: | Tertiary Education,ICT Policy and Strategies,Agricultural Knowledge & Information Systems,Rural Development Knowledge & Information Systems,Access & Equity in Basic Education |
| Date: | 2006–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3949&r=tra |
| By: | Marko Simoneti; Aleksandra Gregoric |
| Abstract: | The Slovenian post-privatisation period has been characterised by a decline in the ownership by non-managerial owners (employees) and state-controlled funds. On the other hand, domestic and foreign non-financial firms, Privatisation Investment Funds and managers have been increasing their holdings. The latter, namely the growing managerial ownership, is likely to feature in future ownership dynamics in Slovenia. In fact, in 2002 the desired (optimal) ownership stakes estimated by Slovenian managers were 10.8 percentage points higher than their actual stakes. The aim of our paper is to describe the main trends in the ownership of Slovenian corporations in the post-privatisation period and to provide an answer to the basic economic question: what is the influence of the ongoing consolidation of managerial ownership on the performance of Slovenian firms. The empirical analysis testing this relationship is based on a panel of 182 Slovenian firms in the 1995-99 period and does not provide relevant evidence of any positive effects of the increasing managerial control on Slovenian firms' performance. If any, a positive incentive effect is only observed in those firms whose managers' holdings exceed 10-percent, only with regards to firms' financial performance (but not total factor productivity) and only in firms that are not listed on the capital market. Further, the negative effect of the current gap between the desired and actual managerial ownership seems to exceed any positive incentive effect arising out of managerial ownership. |
| JEL: | G30 |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:liu:liucej:10&r=tra |