nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒08‒12
fifteen papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Trade Liberalisation Scenarios for Wool Under an Australia-China Free Trade Agreement By Yinhua Mai; Philip Adams
  2. Monetary Transmission Mechanism in Transition Economies: Surveying the Surveyable By Balázs Égert; Ronald MacDonald
  3. Unraveling the Chinese Oil Puzzle By R.S. Eckaus
  4. The Chinese GDP Growth Rate Puzzle: How Fast Has the Chinese Economy Grown? By Harry X. Wu
  5. Energy Prices and Energy Intensity in China A Structural Decomposition Analysis and Econometrics Study By Xiaoyu Shi; Karen R. Polenske
  6. When I'm 104: The Determinants Of Healthy Longevity among the Oldest-Old in China By Dennis Ahlburg; Eric R. Jensen; Ruyan Liao
  7. The MONASH-Multi-Country (MMC) Model and the Investment Liberalisation in China's Oil Industry By Yinhua Mai
  8. Complementarity and Custom in Contract Violation By John S. Earle; Klara Sabirinova Peter
  9. Modelling the Potential Benefits of an Australia-China free Trade Agreement By Yinhua Mai; Philip Adams; Mingtai Fan; Ronglin Li; Zhaoyang Zheng
  10. Price Adjustment under the Table By Daniel Levy
  11. Social Assistance Policy Development and the Provision of a Decent Level of Income in Selected OECD Countries By Willem Adema
  12. The Limits of Self-Governance in the Presence of Spite: Experimental Evidence from Urban and Rural Russia By Simon Gächter; Benedikt Herrmann
  13. "The Local Geographic Origins of Russian-Jewish Immigrants, Circa 1900" By Joel Perlmann
  14. How does monetary policy affect aggregate demand? A multimodel approach for Hungary By Zoltán M. Jakab; Viktor Várpalotai; Balázs Vonnák
  15. Coordinating Aid for Regional Cooperation Projects: The Experience of Central Asia By Richard Pomfret

  1. By: Yinhua Mai; Philip Adams
    Abstract: This study analyses the effects of removing Tariff Rate Quota (TRQ) and other barriers on wool imports into China using the Monash Multi-Country (MMC) model, a dynamic Computable General Equilibrium Model of Australia, China and the Rest of the World. The study suggests that TRQ on greasy wool represents the most restrictive barriers to wool imports into China, if the current level of quota holds. The elimination of TRQ on greasy wool is found to boost Chinese imports of wool from Australia and Chinese exports of textiles and clothing products to the Rest of the World significantly. The Australian wool and Chinese textiles and clothing industries stand to gain from the elimination of TRQ on greasy wool. Both countries also gain in terms of a slightly higher growth in real GDP and real GNP due to the elimination of TRQ on wool imports into China.
    Keywords: Wool, China, FTA
    JEL: D58 F15 Q17
    Date: 2005–10
  2. By: Balázs Égert (Oesterreichische Nationalbank; EconomiX at the University of Paris X-Nanterre and William Davidson Institute.); Ronald MacDonald (University of Glasgow and CESIfo.)
    Abstract: This paper surveys recent advances in the monetary transmission mechanism (MTM). In particular, while laying out the functioning of the separate channels in the MTM, special attention is paid to exploring possible interrelations between different channels through which they may amplify or attenuate each others’ impact on prices and the real economy. We take stock of the empirical findings especially as they relate to countries in Central and Eastern Europe, and compare them to results reported for industrialised countries, especially for the euro area. We highlight potential pitfalls in the literature and assess the relative importance and potential development of the different channels.
    Keywords: Monetary transmission, transition, Central and Eastern Europe, credit channel, interest rate channel, interest rate pass-through, exchange rate channel, exchange rate pass-through, asset price channel.
    JEL: E31 E51 E58 F31 O11 P20
    Date: 2006
  3. By: R.S. Eckaus
    Abstract: As oil prices rose in 2004, a large part of the blame was laid at the feet of the emerging colossus of the East. Newspaper stories wrote of the, “surging,” and, “insatiable demand,” coming from China, describing it as the, “engine of oil demand growth,”1 and explaining the change, "More than a billion Chinese are joining the oil market…. How can prices go down?”2 There were moderately dissenting voices, e.g., from a professional at the International Energy Agency, "It is neither fair nor accurate to blame China for most of the rise in oil prices.3 The measured increases in China’s international oil imports are based on international data and are quite real and not related to the probable overestimates of China’s overall rate of economic expansion. The very high growth rates of Chinese oil imports in 2004 and previous years are shown in Table 1. The implied growth rates are so high as to be almost unbelievable. From the fourth quarter of 2003 to the third quarter of 2004, there was a 30 per cent increase in crude oil imports. Such a high growth rate is not the way economies, in general, actually behave or, in particular, the manner in which the Chinese economy has functioned in the past, even in the course of its remarkable expansion. Yet the growth is real, so how can it be explained? That is the puzzle!
    Date: 2004–12
  4. By: Harry X. Wu
    Abstract: The Chinese statistical authorities have recently adjusted the Chinese GDP level and growth rate for the period 1993-2004 following China's first national economic census. However, their methodology used in the adjustment is opaque. Using a trend-deviation interpolation approach, this study has managed to replicate the basic procedures of the adjustment and reproduced the official estimates. Through this exercise, it has found that the estimates that could be obtained by the normal interpolation procedures were significantly and arbitrarily modified to satisfy certain needs. Based on some political economy argument, we attempt to explain why the adjustment had to leave the growth rate of 1998 intact and why it had to bypass the price issue and directly work on the real growth rate adjustment. Based on previous studies and other observations, we also challenge the census results on non-service industries.
    Date: 2006–07
  5. By: Xiaoyu Shi; Karen R. Polenske
    Abstract: Since the start of its economic reforms in 1978, China's energy prices relative to other prices have increased. At the same time, its energy intensity, i.e., energy consumption per unit of Gross Domestic Product (GDP), has declined dramatically, by about 70%, in spite of increases in energy consumption. Is this just a coincidence? Or does a systematic relationship exist between energy prices and energy intensity? In this study, we examine whether and how China’s energy price changes affect its energy intensity trend during 1980-2002 at a macro level. We conduct the research by using two complementary economic models: the input-output-based structural decomposition analysis (SDA) and econometric regression models and by using a decomposition method of own-price elasticity of energy intensity. Findings include a negative own-price elasticity of energy intensity, a price-inducement effect on energyefficiency improvement, and a greater sensitivity (in terms of the reaction of energy intensity towards changes in energy prices) of the industry sector, compared to the overall economy. Analysts can use these results as a starting point for China's energy and carbon emission forecasts, which they traditionally conduct in China without accounting for energy-intensity changes. In addition, policy implications may initiate new thinking about energy policies that are needed to conserve China's energy resources and reduce carbon emissions.
    Date: 2006–05
  6. By: Dennis Ahlburg (Leeds School of Business, University of Colorado-Boulder); Eric R. Jensen (Department of Economics, College of William and Mary); Ruyan Liao (Carlson School of Management, University of Minnesota)
    Abstract: This study uses the China Healthy Longevity Survey of Oldest-Old to investigate the health status of the oldest-old in China. We found that the different measures of health collected in the survey were only moderately related. That is, there is not a single construct called "health". We found that work history was modestly related to some measures of health. We also found that childhood health and socioeconomic status were correlated with health even at advanced ages. To the best of our knowledge, this is the first study to examine this connection in developing countries and at such advanced ages.
    Keywords: Aging, oldest-old, longevity
    JEL: J14 I10
    Date: 2006–07–15
  7. By: Yinhua Mai
    Abstract: Computable general equilibrium models have been widely applied in analysing the effects of removing tariffs. However, not nearly as much effort has been devoted to their application on investment liberalisation that is increasingly an integral part of trade liberalisation agreements. The Monash-Multi-Country (MMC) model is developed to meet such policy needs. The MMC model is an advanced dynamic CGE model with bilateral investment flows between countries/regions modelled explicitly at an industry level. This paper describes the model structure and data of the MMC model. Its application is illustrated by a simulation of a potential investment liberalisation in China's oil industry.
    Keywords: China, oil industry, investment liberalisation, CGE modelling
    JEL: D58 F15 F21
    Date: 2005–10
  8. By: John S. Earle (W.E. Upjohn Institute for Employment Research and Central European University); Klara Sabirinova Peter (Georgia State University, CEPR, and IZA)
    Abstract: We analyze a model of wage delay in which strategic complementarity arises because each employer's costs of violating its contracts decrease with the arrears in its labor market. The model is estimated on panel data for workers and firms in Russia, facilitating identification through fixed effects for employees, employers, and local labor markets, and instrumental variables based on policy interventions. The estimated reaction function displays strongly positive neighborhood effects, and the estimated feedback loops – worker quits, effort, strikes, and legal penalties – imply that costs of wage delays are attenuated by neighborhood arrears. We also study a nonlinear case with two stable equilibria: a punctual payment and a late payment equilibrium. The estimates imply that the theoretical conditions for multiple equilibria under symmetric labor market competition are satisfied in our data.
    Keywords: Earle, Sabirinova, contract violation, wage arrears, social custom, strategic complementarity, neighborhood effect, social interactions, multiple equilibria, network externality, transition, Russia"
    JEL: D21 G34 J23 J31 L33 P23 B52 J30 K42 L14 O17 P31 P37
  9. By: Yinhua Mai; Philip Adams; Mingtai Fan; Ronglin Li; Zhaoyang Zheng
    Abstract: In this study, we simulated three potential scenarios of an Australia-China Free Trade Agreement (FTA): removal of border protection on merchandise trade, investment facilitation, and removal of barriers to services trade. The analytical framework is a multi-country, multi-sector computable general equilibrium model, the Monash-Multi-Country (MMC) model. The FTA is found to deepen the two-country's economic partnership developed in the past fifteen or so years. On one hand, it sharpens the competitiveness of the Chinese manufacturing sector by reducing its costs of intermediate inputs. On the other hand, it raises the welfare of Australian consumers through improved terms of trade. In achieving a better utilisation of resources, adjustment of labour between sectors does occur. However, such adjustment is small in scale compared with what is occurring in the two countries amid globalisation without an FTA.
    Keywords: China, Australia, FTA, investment liberalisation
    JEL: D58 F15 F21 O53
    Date: 2005–10
  10. By: Daniel Levy
    Abstract: Direct data on corruption and its prevalence is scarce because of the illegal nature of corruption. Based on first-hand account, this paper offers evidence on corrupt price setting and price adjustment mechanisms that were illegally employed under the Soviet regime. The evidence is anecdotal, and it is based on personal experience during the years 1960–1971 in the Republic of Georgia, while it was still a part of the former Soviet Union. The description of the social organization of the black markets and other illegal economic activities in Georgia that I offer, depicts the creative and sophisticated ways the people in the former Soviet Union were routinely using in order to overcome the problems of constant shortages created by the country’s inefficient centrally-planned command economic price system with its distorted relative prices. The description of the specific cases and events and the details of illegal arrangements that were employed in Georgia’s black markets, offers a glimpse of quite explicit micro-level evidence on various types of corruption that were common in Georgia, where rent-seeking behavior led to emergence of remarkably well-functioning black markets. The evidence I describe, underscores again the power of incentives in a rent-seeking society.
    Date: 2006–07
  11. By: Willem Adema
    Abstract: The paper starts with a brief look at social expenditure patterns and the importance of different social policy areas, in particular the role of social assistance policy within social protection systems. It then looks at the objectives of social assistance policy and considers payment-rates in terms of adequacy, financial incentives to work, addressing issues as budget standards, indexation methods and the policy approach towards specific client groups. Also, the study briefly highlights Chinese public expenditure issues more generally and presents some key indicators on the dynamics of ageing populations which will have consequences for future social expenditure trends in China.
    JEL: H53 I31 I38
    Date: 2006–08–01
  12. By: Simon Gächter (University of Nottingham, CESifo and IZA Bonn); Benedikt Herrmann (University of Nottingham)
    Abstract: We report evidence from public goods experiments with and without punishment which we conducted in Russia with 566 urban and rural participants of young and mature age cohorts. Russia is interesting for studying voluntary cooperation because of its long history of collectivism, and a huge urban-rural gap. In contrast to previous experiments we find no cooperation-enhancing effect of punishment. An important reason is that there is substantial spiteful punishment of high contributors in all four subject pools. Thus, spite undermines the scope for self-governance in the sense of high levels of voluntary cooperation that are sustained by sanctioning free riders only.
    Keywords: social norms, free riding, punishment, spite, experiments
    JEL: H41 C91 D23 C72
    Date: 2006–07
  13. By: Joel Perlmann
    Abstract: This working paper concerns the local origins of Russian-Jewish immigrants to the United States, circa 1900. New evidence is drawn from a large random sample of Russian-Jewish immigrant arrivals in the United States. It provides information on origins not merely by large regions, or even by the provinces of the Pale of Settlement (where nearly all Russian Jews lived), some 25 in number; rather, most analysis is conducted in terms of some 230 districts that made up the administrative subdivisions of provinces. The sample evidence is coordinated with district-level data from the detailed publications of the 1897 Census of the Russian Empire. Finally, all of this evidence has been entered into digitized maps.
    Date: 2006–08
  14. By: Zoltán M. Jakab (Magyar Nemzeti Bank); Viktor Várpalotai (Magyar Nemzeti Bank); Balázs Vonnák (Magyar Nemzeti Bank)
    Abstract: This paper assesses the effect of monetary policy on major components of aggregate demand. We use three different macromodels, all estimated on Hungarian data of the past 10 years. All three models indicated that after an unexpected monetary policy tightening investments decrease quickly. The response of consumption is more ambiguous, but it is most likely to increase for several years, which may be explained by the slow adjustment of nominal wages. On the other hand, we could not detect any significant change in net exports during the first couple of years after the shock. The weak response of net exports can be due to the fact that the drop in exports is coupled with a fall in imports of almost the same magnitude, highlighting the relative importance of the income-absorption effect, as opposed to the expenditure-switching effect.
    Keywords: monetary transmission mechanism, macromodels, VAR, impulse responses.
    JEL: E20 E27 E52
    Date: 2006
  15. By: Richard Pomfret
    Abstract: For the Central Asian countries the dissolution of the Soviet Union led to economic disintegration as old coordination mechanisms disappeared and new national borders appeared. This paper analyses why it has been difficult to coordinate aid for regional cooperation projects (eg. on the Aral Sea or trade facilitation) whose economic benefits appear positive. Bilateral aid flows to Central Asia have been dominated by geopolitical rather than economic considerations, and have been at best narrowly national in focus and at worst regionally divisive. Regional organizations composed of Central Asian countries and various neighbours have also competed rather than cooperated, so that the most plausible source of coordinated aid for regional cooperation projects is the multilateral agencies. A key role for aid donors is to provide technical assistance in analysing and explaining benefits, and how these affect various interests. Initial advantages which multilateral agencies had as impartial providers of technical advice were undermined in 1992-3 when the IMF’s strong position in favour of retaining the ruble turned out to be mistaken advice. In the 1990s aid directed to the Aral Sea problem produced few benefits because, despite the magnitude of the gross benefits from reversing the desiccation, littoral countries see differential benefits and costs; pure win-win situations are more likely from regional cooperation in trade facilitation. Subsequently the multilateral agencies have had a better focus, sharing priorities in the destination of aid and agreeing on a functional division of labour, but this has not yet translated into effective assistance for regional cooperation.
    Date: 2006–08–02

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