nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒09‒23
fifteen papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Increasing inequality in transition economies : is there more to come? By Mitra, Pradeep; Yemtsiv, Ruslan
  2. Angel or Devil? China's Trade Impact on Latin American Emerging Markets By Jorge Blázquez-Lidoy; Javier Rodríguez
  3. Patent Laws and Innovation in China By Linda Y. Yueh
  4. Village inequality in Western China: Implications for Development Strategy in Lagging Regions By Xing, Li; Fan, Shenggen; Luo, Xiaopeng; Zhang, Xiaobo
  5. Asymmetric property rights in China's economic growth By Zhang, Xiaobo
  6. Tendencies and problems of economical insolvency (bankruptcy) institution development in Belarus: 1991 - 2005 By Aliaksei P. Smolski
  7. Assessing Russia’s Non-fuel Trade Elasticities: Does the Russian Economy React "Normally" to Exchange Rate Movements? By Christian Gianella; Corinne Chanteloup
  8. Female Managers and their Wages in Central Europe By Stepán Jurajda; Teodora Paligorova
  9. Economic growth and its price: some tendencies of Belarus economy transformation, 1990-2005 By Aliaksei P. Smolski
  10. Economic development and restructuring: Look after Russian context By Irina Peaucelle
  11. Macroeconomic Effects of Fiscal Policies: Empirical Evidence from Bangladesh, China, Indonesia and the Philippines By Geoffrey Ducanes; Marie Anne Cagas; Duo Qin; Pilipinas Quising; Mohammad Abdur Razzaque
  12. Pay Inequality in Cuba: the Special Period and After By James K. Galbraith; Laura Spagnolo; Daniel Munevar
  13. Rural vulnerability in Serbia By Ersado, Lire
  14. Azerbaijan ' s household survey data : explaining why inequality is so low By Ersado, Lire
  15. Customer order flow, information and liquidity on the Hungarian foreign exchange market By Áron Gereben; György Gyomai; Norbert Kiss M.

  1. By: Mitra, Pradeep; Yemtsiv, Ruslan
    Abstract: This paper decomposes changes in inequality, which has in general been increasing in the transition economies of Eastern Europe and the former Soviet Union, both by income source and socio-economic group, with a view to understanding the determinants of inequality and assessing how it might evolve in the future. The empirical analysis relies on a set of inequality statistics that, unlike " official data " , are consistent and comparable across countries and are based on primary records from household surveys recently put together for the World Bank study " Growth, Poverty and Inequality in Eastern Europe and the Former Soviet Union: 1998-2003 " [World Bank (2005b)]. The increase in inequality in transition, as predicted by a number of theoretical models, in practice differed substantially across countries, with the size and speed of its evolution depending on the relative importance of its key determinants, viz., changes in the wage distribution, employment, entrepreneurial incomes and social safety nets. Its evolution was also influenced by policy. This diversity of outcomes is exemplified on the one hand for Central Europe by Poland, where the increase in inequality has been steady but gradual and reflects, inter alia, larger changes in employment and compensating adjustments in social safety nets and, on the other for the Commonwealth of Independent States by Russia, where an explosive overshooting of inequality peaked in the mid-1990s before being moderated through the extinguishing of wage arrears during its post-1998 recovery. The paper argues that the process of transition to a market economy is not complete and that further evolution of inequality will depend both on (i) transition-related factors, such as the evolution of the education premium, a bias in the investment climate against new private sector firms which are important vehicles of job creation and regional impediments to mobility of goods and labor, as well as increasingly (ii) other factors, such as technological change and globalization. The paper also contrasts key features of inequality in Russia in the context of other transition economies with trends in inequality observed in China where rapid economic growth has been accompanied by a steep increase in inequality. It argues that the latter ' s experience is, to a large extent, a developmental, rather than a transition-related phenomenon deriving from the rural-urban divide and is, therefore, of limited relevance for predicting changes in inequality in Russia.
    Keywords: Poverty Impact Evaluation,Inequality,Services & Transfers to Poor,Economic Theory & Research,Equity and Development
    Date: 2006–09–01
  2. By: Jorge Blázquez-Lidoy; Javier Rodríguez
    Abstract: China’s economy has expanded by leaps and bounds, with dazzling progress since it first opened to foreign investment and reform in 1978. Over the last 25 years and after a long period of economic autarky, the country has emerged as a major player in world trade. Its accession to the World Trade Organisation (WTO) in 2001 was a milestone. China presents both a threat and an opportunity for Latin American emerging markets. On average and despite some exceptions, Latin America is a clear trade winner from Chinese global integration. This contribution studies China’s exporting and importing structure, using a database of 620 different goods. It builds two indices of trade competition to compare Chinese impacts over 1998-2004 on 34 economies, of which 15 are Latin American. The results generally confirm that there is no relevant trade competition between China and Latin America. Not surprisingly, countries that export mainly commodities face lower competition, because China is a net importer of raw materials. But the emergence of China is also a wake-up call for Latin American countries. More reforms are needed, especially in infrastructures if the region wishes to maintain its comparative advantages. Latin America will have also to deal with the Chinese bonanza. The dark side of this windfall is the risk of being stuck out of the global value chain in a raw material corner. <BR>L’économie de la Chine s’est développée à pas de géants, en progressant de manière spectaculaire depuis qu’elle a commencé à s’ouvrir aux investissements étrangers et s’est réformée en 1978. Tout au long des 25 dernières années et suite à une longue période d’autarcie économique, le pays s’est imposé en tant qu’acteur majeur du commerce mondial. Son adhésion à l’Organisation Mondiale du Commerce (OMC) en 2001 a été un événement de taille. Ainsi, la Chine représente à la fois une menace et une opportunité pour les marchés émergents d’Amérique latine. En moyenne et en dépit de certaines exceptions, l’Amérique latine fait partie des gagnants de l’intégration globale de la Chine. Ce document étudie les structures d’importation et d’exportation de la Chine, en s’appuyant sur une base de données composée de 620 biens. Deux indices de compétitivité commerciale ont été élaborés afin de comparer les impacts de la Chine sur 34 économies tout au long de la période 1998-2004, 15 d’entre elles étant des économies latino-américaines. De manière générale, les résultats confirment qu’il n’y a pas de concurrence importante entre la Chine et l’Amérique latine. Mais l’émergence de la Chine appelle aussi les pays latino-américains à se réveiller. Si la région souhaite maintenir ses avantages comparatifs, d’autres réformes sont nécessaires, en particulier au niveau des infrastructures.
    Date: 2006–06–29
  3. By: Linda Y. Yueh
    Abstract: This paper explores whether the patent law and intellectual property rights (IPR) system have resulted in innovation in China during the reform period. It appears that the patent laws have produced a stock of patents, where the success rates of patent applications are fairly uniform across the country. As the IPR framework does not vary across provinces, we asked which factors would explain innovation in China. We find the main determinants of patents to be R&D expenditure and foreign direct investment, but not the number of researchers, though the level of human capital matters. We conclude that the patent laws in China have been associated with innovation that has accompanied economic growth despite imperfections in the legal system.
    Keywords: Intellectual Property Rights, Patent Laws, Law and Economics, Innovation, Economic Growth, China
    JEL: O34 K29 O4 O53 K19
    Date: 2006
  4. By: Xing, Li; Fan, Shenggen; Luo, Xiaopeng; Zhang, Xiaobo
    Abstract: "Increased regional inequality has been a major concern in many emerging economies like China, India, Vietnam and Thailand. However, even a large inequality is observed within the lagging regions. The objective of this paper is to look into what are the sources of within region inequality using the community surveys and a census type of households in Western China. This snapshot view of inequality within and between rural villages in western China is based on a census-type household survey in three administrative villages and a sampling survey of 286 natural villages in the poor province of Guizhou in 2004. In contrast to coastal regions, nonfarm income is distributed unevenly in this inland western region. This accounts for the largest share of overall income inequality. But agriculture is still the rural people's major source of livelihood in this particular location. On the expenditure side, health care is one of the most important sources of inequality. Because rural income is strongly related to human capital, the uneven access to health care will translate into a larger income gap in the long run. The analysis based on the natural village survey indicates that income varies widely across villages. Access to infrastructure and markets, education, and political participation explain most of this variation. These findings have important implications on the future development strategy in promoting lagging regions development and poverty reduction. While the overall economic development will be the main instrument to bring the majority poor out of poverty, a targeted approach has become increasingly crucial in helping the poor villages and households. It is critical to understand why these villages and households can not participate in the growth process and how development programs and various transfer programs help them to overcome the constraints they face." Authors' Abstract
    Keywords: Rural development, Poverty reduction, Inequality, Public investment, China, Asia, Household surveys, Agriculture, Income Rural areas,
    Date: 2006
  5. By: Zhang, Xiaobo
    Abstract: "This paper highlights the difference between secure investor property rights and loosely defined individual property rights. Globalization and fiscal decentralization have intensified this difference. On the one hand, in the presence of mobile foreign direct investments and under the arrangement of fiscal decentralization, local governments compete vigorously to offer various protections on the property rights of investors; on the other hand, local governments and developers attempt to acquire land at as low price as possible by taking advantage of the loopholes inherent in the Chinese law. Secure investor property rights together with weak protections on individuals' land property rights is argued to be one of the major drivers of China's rapid economic growth. But the same factor can veer those individuals being deprived of land into violence and social unrest, which may undermine China's social stability and long-term sustainable growth." from Authors' Abstract
    Keywords: Property rights, Investments, economic growth, China, individual land property, Fiscal policies, Decentralization,
    Date: 2006
  6. By: Aliaksei P. Smolski (Belarus State Economic University)
    Abstract: The paper investigates becoming and development of bankruptcy institution in Republic of Belarus after USSR disintegration. It shows the approaches of government to regulation of bankruptcy at different stages of transitional economy development and its current state. The economical, legal and political problems of bankruptcy institution application in Belarus are reviewed.
    Keywords: bankruptcy, Belarus, insolvency, transition economy
    JEL: E61 G33 K12 P21
  7. By: Christian Gianella; Corinne Chanteloup
    Abstract: This paper attempts to assess the impact of exchange rate movements on Russian import and nonfuel export performance, using an error correction model. The estimation of trade equations shows that long-run price elasticities for imports and non-fuel exports are close to 0.6 and 0.7 respectively, hence relatively similar to those obtained for OECD countries. The Marshall-Lerner condition clearly holds. More precisely, we find that a 10% real appreciation (depreciation) of the currency leads on average to a non-fuel current account deterioration (improvement) of around 1% of GDP. Moreover, the short-term dynamics of the error correction model indicate that the response of the trade balance to exchange rate shocks is rapid, the adjustment being almost complete after one quarter. Finally, the evolution of import prices and non-fuel export prices of Russia, relatively to its competitors on domestic and third markets, suggests that the Russian economy lost already in 2004 the price-competitiveness advantage it had gained after the 1998 crisis. <P>Évaluation des élasticités-prix du commerce extérieur hors hydrocarbures en Russie : L'économie russe réagit-elle "normalement" aux mouvements de taux de change ? <BR>Cette étude vise à évaluer l'impact des mouvements du taux de change sur les importations et les exportations hors hydrocarbures de la Russie, à partir d'un modèle à correction d'erreur. Les estimations d'équation de commerce extérieur montrent que les élasticités-prix de long terme pour les importations et les exportations hors hydrocarbures se situent respectivement autour de 0.6 et 0.7, soit des valeurs similaires à celles obtenues pour les pays membres de l'OCDE. La condition de Marshall-Lerner est clairement vérifiée. Plus précisément, une appréciation (dépréciation) réelle de 10% du taux de change conduit à une dégradation (amélioration) de la balance courante hors produits pétroliers d'environ 1%. Par ailleurs, la dynamique de court terme du modèle à correction d'erreur indique que la réponse de la balance commerciale aux chocs sur le taux de change est rapide, l'ajustement étant quasiment achevé après un trimestre. Enfin, l'évolution des prix à l'import et à l'export -- hors hydrocarbures -- de la Russie, relativement à de ses concurrents sur les marchés domestiques et tiers, suggère que l'économie russe a épuisé dès 2004 l'avantage de compétitivité-prix qu'elle avait gagné après la crise de 1998.
    Keywords: exchange rates, taux de change, Russia, Russie, foreign trade, non-fuel trade balance, price elasticities, price-competitiveness, commerce extérieur, balance commerciale hors hydrocarbures, élasticité-prix, compétitivité-prix
    JEL: C22 F19 O11 P27
    Date: 2006–09–04
  8. By: Stepán Jurajda (CERGE-EI, CEPR and IZA Bonn); Teodora Paligorova (CERGE-EI)
    Abstract: This paper examines the gender gaps in employment and wages among top- and lower-level managerial employees in a recent sample of Czech firms. Unlike the existing analyses of managerial gender pay gaps, we acknowledge the adverse consequences of the low and uneven representation of women for the Oaxaca-Blinder decomposition and offer an alternative set of results based on a matching procedure. Only 7% of top-level Czech managers are women and their wages are about 20 percent lower even when compared only to their comparable male colleagues.
    Keywords: managers, gender pay gap
    JEL: J31 J71 P31
    Date: 2006–09
  9. By: Aliaksei P. Smolski (Belarus State Economic University)
    Abstract: In article some tendencies and features of Belarus economy transformation are analyzed. Macroeconomic processes and conditions are esteemed as external environment elements, in which one the enterprises of country operates. The financial state and a number of other enterprises activity performances as objective reasons of their economic insolvency are investigated. The features of Belarus economy are disclosed, which remind of socialist system. The question about the price of reached rates of economic growth for enterprises and society is examined.
    Keywords: Belarus, economic growth, investments, output, transition economy, unemployment
    JEL: E60 H30 J60 L16 O11 P30
  10. By: Irina Peaucelle
    Abstract: The main approaches to the determination of growth and development in the contemporary global economy are examined. Special attention is given to the measures of services, mainly in the spheres of health and finance, and of those services increasing knowledge. The paper discusses the short run advantages of the Russian economy, connected to natural resources, on the one hand, and to the scientific and technological culture of the workforce, on the other hand. It analyses the utilization of the accumulated financial resources, provided by the sale of natural resources, for investment in mega-projects in the sphere of science-intensive production and financial control. A schema of the flexible reconstruction of the existing system of production with the aid of the credit policy by the Central Bank is proposed.
    Date: 2006
  11. By: Geoffrey Ducanes (University of the Philippines); Marie Anne Cagas (Asian Development Bank and University of the Philippines); Duo Qin (Queen Mary, University of London and Asian Development Bank); Pilipinas Quising (Asian Development Bank); Mohammad Abdur Razzaque (University of Dhaka, Bangladesh)
    Abstract: This paper studies macroeconomic effects of fiscal policies in four Asian countries – Bangladesh, China, Indonesia, and the Philippines – by means of structural macroeconometric model simulations. It is found that short-term fiscal multipliers from an untargeted increase in government expenditure are positive but much less than those from an increased expenditure targeted to capital spending. The multiplier effects from fiscal expansion via a tax rate reduction are found to be typically much less than through higher spending. The effectiveness of automatic stabilizers in general, and more specifically whether expenditure or tax-side stabilizer is more effective, differs across countries.
    Keywords: Fiscal policy, Growth, Public finance, Deficit
    JEL: E62 E17 C53 P52
    Date: 2006–09
  12. By: James K. Galbraith (The University of Texas Inequality Project, The University of Texas at Austin); Laura Spagnolo (The University of Texas Inequality Project, The University of Texas at Austin); Daniel Munevar (The University of Texas Inequality Project, The University of Texas at Austin)
    Abstract: This paper analyzes the evolution of pay inequality in Cuba from the early 1990s through 2004, during what was known as the “Special Period in Times of Peace” and after. We measure pay inequality across sectors and regions, using the between-groups component of Theil’s T statistic, and we map the changing components of that statistic in order to provide a compact summary of structural change in Cuba. This method helps us to observe the transition of the Cuban economy from one based fundamentally on sugar to one based largely on services, especially tourism, but also others with greater growth potential, such as information technology, pharmaceuticals, and biotechnology. Regionally, we observe that a main dividing line between winners and losers is the presence of tourist attractions: the recent increase of regional pay inequality is associated primarily with changing incomes in the city of Havana and the province of Matanzas.
    Date: 2006
  13. By: Ersado, Lire
    Abstract: In the presence of risk and uncertainty, measures such as poverty rates are inadequate to analyze the well-being of poor households. The poor are not only concerned about the current low levels of their income or consumption, but also the likelihood of experiencing stressful declines in these levels in the future. Risks to livelihood are particularly important in rural areas where there is generally high dependence on agriculture and the environment. In this study, the author analyzes the nature, extent, and causes of rural vulnerability in Serbia using panel national household data from the 2002 and 2003 Serbia Living Standard Surveys. He measures rural vulnerability as a function of nonstochastic determinants of poverty as well as exposure to risk. While low levels of consumption (poverty) explain about 70 percent of vulnerability, the author identifies risk and uncertainty as crucial dimensions of rural life in accounting for the remaining 30 percent of household vulnerability. Households and regions with a greater share of their livelihood depending on agricultural activities are more at risk of vulnerability than those with a significantly higher share of their income coming from nonagricultural sources. Dependence on agricultural income is directly associated with higher aggregate risk, underscoring the agricultural sector’s lopsided exposure to covariate shocks in general, and the negative impact of the 2003 drought in particular. Rural vulnerability to poverty and risk is also strongly associated with asset ownership and access to markets to mobilize them in time of need.
    Keywords: Rural Poverty Reduction,Population Policies,Pro-Poor Growth and Inequality,Services & Transfers to Poor
    Date: 2006–09–01
  14. By: Ersado, Lire
    Abstract: While the Azerbaijan household income and expenditure survey (HIES) data satisfy most empirical regularities expected in a typical household survey data, the unequality measures based on the data are unusually low. For example, for the latest three years for which we have data (2002 - 2004), the consumption Gini coefficient (the commonly used summary measure of inequality) is in the range of 16 - 18 percent. This is among the lowest Gini coefficients ever observed in any country, and is extremely low even with the standard of countries generally considered as most equal in the world. Azerbaijan, a transitional economy with a significant natural resource base, is unlikely to be the most equal country in the world. The objective of this paper is to investigate why inequality measures are unusually low in the Azerbaijan household survey data. The author presents a methodology for diagnosing and identifying the potential sources of low inequality in the data, including cluster analysis at the primary sampling unit level. The main inference from the findings of the cluster analysis is that the observed low inequality indices are not due to poor supervision of the interviewers and the data collection process. The author finds that the main culprits for the observed low inequality in the HIES data are (1) the low participation rates of wealthy households in the household surveys, and (2) the widespread availability of well-targeted public and private transfers.
    Keywords: Rural Poverty Reduction,Poverty Impact Evaluation,Services & Transfers to Poor,Inequality,Consumption
    Date: 2006–09–18
  15. By: Áron Gereben (Magyar Nemzeti Bank); György Gyomai (Magyar Nemzeti Bank (at the time of writing)); Norbert Kiss M. (Magyar Nemzeti Bank)
    Abstract: Customer order flow – signed transaction volume between market makers and their customers – is a key concept in the microstructure approach to exchange rates. We attempt to explore what the data tells us about the role of customer order flow in the market for Hungarian forint, using the standard analytical framework of the FX microstructure literature. Our results confirm that customer order flow helps to explain exchange rate fluctuations, which suggests that customer order flow is a key source of information for the market makers. We also find that domestic and foreign customers play significantly different roles on the euro/Hungarian forint market: foreign players' order flow seems to provide the information that drives exchange rate fluctuations, whereas domestic customers are the source of market liquidity. We present evidence suggesting that current order flow from customers is able to provide a significantly better ‘forecast’ for the the exchange rate than the random walk benchmark in a simple Meese-Rogoff-type framework. However, we were unable to improve upon the random walk in a more realistic forecasting exercise. Finally, we highlight some features of our data that suggest that beyond microstructure, the traditional portfolio-balance channel of exchange rate determination is also in place.
    Keywords: customer order flow, microstructure, exchange rate.
    JEL: F31 G15
    Date: 2006

This nep-tra issue is ©2006 by Tono Sanchez. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.