nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒12‒09
nineteen papers chosen by

  1. Estimating Russia's Impact on the Economic Performance of the Commonwealth of Independent States since 1991: The Cases of the Kyrgyz Republic, Tajikistan, Armenia, Georgia and Ukraine By Melinda Robson
  2. Employment Effects of Privatisation and Foreign Acquisition of Chinese State-Owned Enterprises By Yundan Gong; Holger Görg; Sara Maioli
  3. Post-conflict Privatisation: A Review of Developments in Serbia and Bosnia Herzegovina By Kate Bayliss
  4. Command Economy after the Shocks of Opening up: The Factors of Adjustment and Specialisation in the Czech Trade By Vladimír Benáček; Jiří Podpiera; Ladislav Prokop
  5. ADR/GDR Potential in Central Europe By Kateřina Tsolov
  6. Sources of Capital Structure: Evidence from Transition Countries By Karin Joeveer
  7. Corporate Philanthropy in the Czech and Slovak Republics By Katarina Svitkova
  8. Ready to Go? EU Enlargement and Migration Potential: Lessons from the Czech Republic in the Context of the Irish Migration Experience By Wadim Strielkowski; Cathal O'Donoghue
  9. Entry rates and the risks of misalignment in the EU8 By Tatiana Fic; Ray Barrell; Dawn Holland
  10. The Legitimacy of Redistribution: the Czech Republic in International Comparison By Sirovatka, Tomas; Valentova, Marie
  11. Employment Fluctuations and Dynamics of the Aggregate Average Wage in Poland 1996-2003 By Michal Myck; Leszek Morawski; Jerzy Mycielski
  12. Political Pressure on Central Banks: The Case of the Czech National Bank By Adam Geršl
  13. Czech Bankruptcy Procedures: Ex-post Efficiency View By Ondřej Knot; Ondřej Vychodil
  14. Informal Employment in Russia: Combining Disadvantages and Opportunities By Irina Merkuryeva
  15. Evaluating Active Labor Market Programs in Romania By Nuria Rodriguez-Planas; Jacob Benus
  16. Convergence of Consumption Structure By Tomáš Cahlík; Tomáš Honzák; Jana Honzáková; Marcel Jiřina; Natálie Reichlová
  17. Returns to Schooling in Kazakhstan: OLS and Instrumental Variables Approach By G. Reza Arabsheibani; Altay Mussurov
  18. Fiscal Policy in New EU Member States: Go East, Prudent Man! By Ondřej Schneider; Jan Zápal
  19. What Are Their Words Worth? Political Plans And Economic Pains Of Fiscal Consolidations In New EU Member States By Ondřej Schneider; Jan Zápal

  1. By: Melinda Robson
    Abstract: This paper finds that Russia’s traditional forms of influence on growth in the case-study countries have generally declined during transition (with the notable exception of Tajikistan). Countries that have integrated into the global economy and undertaken robust domestic policy and structural reforms have overcome inherited economic distortions and reduced their ties with the CIS and Russia to a greater degree. However, new forms of economic linkage with Russia are emerging, most of which could have a significant impact on the key determinants of growth.
    Keywords: Russia, Commonwealth of Independent States, CIS, transition, economic growth, Kyrgyz Republic, Tajikistan, Armenia, Georgia, Ukraine
    Date: 2006–05
  2. By: Yundan Gong (University of Nottingham); Holger Görg (GEP, University of Nottingham and IZA Bonn); Sara Maioli (University of Newcastle)
    Abstract: This paper investigates the effects of domestic privatisation or foreign acquisition of Chinese State Owned Enterprises (SOEs) on employment growth, using firm level data for China and a combination of propensity score matching and difference-in-differences in order to identify the causal effect. Our results suggest that, controlling for output growth there is some evidence that domestic privatisation leads to contemporaneous reductions in employment growth compared to firms that did not undergo an ownership change. By contrast, there is some evidence that foreign acquisitions show higher employment growth in the post acquisition period than non-acquired SOEs.
    Keywords: privatisation, foreign acquisition, employment growth, difference-in-differences
    JEL: P2 F2
    Date: 2006–11
  3. By: Kate Bayliss
    Abstract: This paper is concerned with the micro-level effects of privatisation in South-East Europe, focusing on the experiences of Bosnia Herzegovina and the Republic of Serbia. The republics of the former Yugoslavia were among the first transition economies in Eastern Europe to implement privatisation as far back as 1989, based on the sale of shares to ‘insiders’. However, little was achieved until after the devastating war of the early 1990s, which resulted in both Bosnia Herzegovina and the Republic of Serbia approaching the introduction of revised privatisation programmes in the latter part of the decade from a much weaker economic base. The paper explores the relationship between different privatisation methods and policy outcomes based on a sample of medium-scale industrial enterprises in the two countries for alternative categories of investor. It also considers the effect on the enterprises surveyed of the years of conflict and the break-up of the former Yugoslavia. While there is much shared history, Bosnia Herzegovina and Serbia have had different experiences with privatisation, and the analysis presented in this paper indicates that it is not possible to point to a post-conflict privatisation effect. Rather, outcomes depend on a number of factors including the nature of the programme adopted, the post-war political and institutional framework, the capacity and credibility of the privatisation programme and the wider economic climate.
    Keywords: Privatisation, Serbia, Bosnia Herzegovina, transition economies
    Date: 2005–08
  4. By: Vladimír Benáček (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jiří Podpiera (Czech National Bank, Prague, Czech Republic); Ladislav Prokop (Czech National Bank, Prague, Czech Republic)
    Abstract: This analysis focuses on factors determining the transition of international trade in the Czech economy. Even though the Czech economy was exposed to several structural shocks during 1993–2002 and grew at a very low rate, its external trade flows sustained an annual growth at around 10%. The restructuring in the pattern of specialisation with the EU-15 was exceptionally intensive and our results confirm that its progress can be explained by the variables used in the theories of open economies. The undergoing changes were profound and painful, but their positive final outcome is undisputable. In the econometric part of this study we quantify the determining factors of Czech exports and imports during 1993–2002 when the trade flows have undergone intensive structural and qualitative changes facilitating the trade creation. Our findings lend significance to the variables of aggregate demand and the real exchange rate, in addition to liberalisation of tariffs, evolution of unit prices of exports and imports, changes in quality, diversion in factor usage and economies of scale. Unimpeded opening-up can be a crucial driver of an in-depth restructuring, which brings positive results from the very start, even though its spillovers into an overall fast growth can be delayed.
    Keywords: industrial specialisation; export and import dynamics; dynamic estimation; trade determinants
    JEL: F14 F43 O24 P30
    Date: 2006–04
  5. By: Kateřina Tsolov (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Depositary receipts gained much popularity in the 1990s. After a slowdown in 2001/2002, years 2003 and 2004 brought a renewed progress of the DR markets. Also Central European companies are gradually becoming aware of the advantages of DR offering. In line with the market segmentation hypothesis, we found, that the prices of depositary receipts by Central European companies and their respective actual shares are very closely correlated and the opportunity of arbitrage is therefore very limited. To quantify the effects of a DR issue on the respective actual shares in the local market, we considered 19 shares of companies from the Czech Republic, Hungary and Poland, which issued depositary receipts. The results show that creation of a DR program may have a positive impact on the respective actual shares’ value. The simple average of value added to the share price one year after establishment of the DR program reached very high, positive value; the price increase (from the level of the day 20 prior to the issue) equaled 33.33%. On the other hand, with 7 out of 19 shares no positive effect of DR offering on price could be observed. On the same sample, the hypothesis, that a DR listing enhances liquidity of the respective actual shares in the local market, was confirmed. The daily trading volumes improved on average by 21% in the year subsequent to the listing.
    Keywords: Depositary Receipts; cross-listing; Central European stocks; market integration; stock performance; liquidity effects
    JEL: G14 G15 G29 G34
    Date: 2005
  6. By: Karin Joeveer
    Abstract: This study explores the significance of firm-specific, institutional, and macroeconomic factors in explaining variation in leverage using a sample of firms from nine Eastern European countries. Country-specific factors are the main determinants of variation in leverage for small unlisted companies, while firm-specific factors explain most of the variation in leverage for listed and large unlisted companies. Around half of the variation in leverage related to country factors is explained by known macroeconomic and institutional factors, while the remainder is explained by unmeasurable institutional differences (e.g. law and enforcement). These findings are in line with the results forWestern European countries in Joeveer (2005) and show that country characteristics are not more significant determinants of leverage in these transition economies.
    Keywords: Capital structure, Eastern Europe.
    JEL: G32
    Date: 2006–09
  7. By: Katarina Svitkova
    Abstract: This study explores the characteristics of corporate charitable behavior in the Czech Republic and Slovakia. It is the first quantitative study for transition economies, analyzing data from two surveys for 577 and 162 firms over three (2001-2003) and five (2001-2005) years in the Czech Republic, and for 152 firms over four years (2001-2004) in Slovakia, and the first study that distinguishes different channels of support, namely, sponsoring and giving. The results show that tax legislation, specifically, the changes in the tax rates do not have any significant effect on corporate charity in neither country. The study fails to find a difference in the role of the tax rate for sponsoring and giving but documents differences in their use. It fails to support the usual claim that foreign firms give more than domestic ones but it suggests that foreign firms are better able to use the tax advantages of the various giving channels. We identify a significant difference between the two countries: Slovakia lags behind the Czech Republic in giving, the importance of large and international firms is higher, and more small companies behave in an adhoc manner. Importantly, the study fails to identify any significant decline in giving in Slovakia in 2004, contrary to expectations resulting from the radical changes in its tax legislation that made giving more expensive. It suggests, though, that foreign-owned firms shifted their support from giving to sponsoring.
    Keywords: Corporate charity, sponsoring, giving, tax legislation, transition
    JEL: D21 L25
    Date: 2006–10
  8. By: Wadim Strielkowski (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Cathal O'Donoghue (National University of Ireland, Galway, Ireland; IZA - Institute for the Study of Labor, Bonn, Germany)
    Abstract: EU enlargement is hardly can be seen as the major push factor for migration. There are mainly economic factors that influence the migration decisions. Besides it seems that there is a migration potential, unique for every country, that pre-determines the migration or labor mobility. In our paper we (i) analyze the impact of internal economic factors, such as GDP growth, unemployment and wages on the emigration rate and (ii) compare the migration potential for the country distinguished by the high ratio of outward migrations (represented by Ireland) with those of the post-communist economy as well as the “new” EU Member (represented by the Czech Republic). We come to conclusions that economic factors have the decisive role on pre-determining the migrations and that migration potential and the propensity to migrate as a reaction to worsening of the economic conditions at home are highly correlated. These can explain why there was no mass emigration from the EU “new” Member States to the “old” Member States after the recent Enlargement, as far as it comes to migration potential needed for inducing such labour moves. The potential emigrants from new EU Members States are simply not ready to go to wealthier Member States in search of better wage and employment opportunities.
    Keywords: migration; labour mobility; EU enlargement; Czech Republic; Ireland
    JEL: F02 F22 J61
    Date: 2005
  9. By: Tatiana Fic; Ray Barrell; Dawn Holland
    Abstract: New member states will join the EMU in the coming years. Setting the central parity has been and will be a challenging task, as there is a considerable amount of uncertainty, both from a theoretical and an empirical perspective, surrounding the determination of the optimal exchange rate. In effect, the probability of misalignment of the entry rate can be a non-zero one. Given the possible - if not inevitable - misspecification of the equilibrium rate it is thus advisable to focus on the effects of a misalignment of the entry rate for the economy, as it has implications for countries’ both real and nominal convergence. An overvalued exchange rate would have an adverse impact on a country’s competitiveness and its growth, while an undervalued currency would contribute to an overheating of the economy and an excessive inflation. The objective of this paper is to better understand the role of the entry rates for short run inflation and GDP developments and their implications for the inflation criterion and the real convergence process. Having estimated equilibrium exchange rates for eight out of ten countries that entered the EU in May 2004 - Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovenia and Slovakia - we conduct simulations showing what their adjustments to equilibrium would be if their entry rates deviated from the optimal ones.
    Date: 2006–09
  10. By: Sirovatka, Tomas (Faculty of Social Sciences, Masaryk Univesity Brno); Valentova, Marie (CEPS/INSTEAD, Luxembourg)
    Abstract: In this paper we pay attention to the legitimacy of the principles, scope and purpose of redistribution in Czech society. We use data from international surveys from the second half of the nineties, including European Values Study 1999 and ISSP 1996 – module Role of the Government and some national Czech surveys. We claim that Czech society does not favour extensive redistribution at the level of principles. Nevertheless, demand for redistribution is stronger compared to the other European countries and preferences for state responsibility and redistribution increased during nineties. Furthermore, the purpose of redistribution seems to play a central role. While benefits for marginalised groups are not supported, mainstream benefits should be increased according to the public, and the strategies to improve human capital and capabilities to adapt in the labour market gain support as well. The Czech public also prefers to combine collective (social) protection with private supplementary insurance schemes against risks of the contemporary society. There are remarkable differences in most of the above described attitudes among social classes. The above described findings may be explained by the social consequences of market transition: specifically by impacts of new social risks differentiated according to class position combined with restrictive social policies implemented during the nineties.
    Keywords: Lagitimacy; Redistribution ; Social Protection
    Date: 2006–11
  11. By: Michal Myck (DIW Berlin and IZA Bonn); Leszek Morawski (Warsaw University); Jerzy Mycielski (Warsaw University)
    Abstract: The aggregate average wage is often used as an indicator of economic performance and welfare, and as such often serves as a benchmark for changes in the generosity of public transfers and for wage negotiations. Yet if economies experience a high degree of (nonrandom) fluctuation in employment the composition of the employed population will have a considerable effect on the computed average. In this paper we demonstrate the extent of this problem using data for Poland for the period 1996-2003. During these years employment in Poland fell from 51.2% to 44.2% and most of it occurred between the end of 1998 and the end of 2002. We show that about a quarter of the growth in the average wage during this period could be attributed purely to changes in employment.
    Keywords: wage distribution, aggregation, employment dynamics, transition economies
    JEL: E24 J21 J31
    Date: 2006–11
  12. By: Adam Geršl (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Czech National Bank, Prague, Czech Republic)
    Abstract: As the independence of national central banks in the European Union is one of the main institutional features of the monetary constitution of the EU, the paper tries to find out whether central banks are factually independent in their decisions about interest rates if they face political pressure. The Havrilesky (1993) methodology of the political pressure on central banks is applied to the Czech National Bank, a central bank of one of the new EU Member States, in order to test whether the conducted monetary policy has been influenced by political pressure from various interest groups.
    Keywords: political economy; monetary policy; pressure groups
    JEL: E52 D78
    Date: 2006–04
  13. By: Ondřej Knot (Center for Economic Research and Graduate Education-Economics Institute, Prague, Czech Republic); Ondřej Vychodil (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; CERGE-EI, Prague, Czech Republic)
    Abstract: The paper presents facts on the ex-post efficiency of the Czech bankruptcy procedures. First, it briefly summarizes in what aspects bankruptcy systems differ across countries and introduces the main observations made about the Czech case so far. Second, international data are presented to assess the Czech standings in four aspects of bankruptcies' ex-post efficiency – duration, recovery rate, administrative costs, and continuation/liquidation decision. Third, the paper provides a summary of statistical observations on ex-post efficiency based on data on 903 Czech companies whose bankruptcies were completed during 2004 by the distribution of returns to the claim-holders. In the paper, understanding the ex-post efficiency is meant as an important prerequisite for an analysis from the ex-ante efficiency prospective.
    Keywords: bankruptcy; liquidation; ex-post efficiency
    JEL: G33 K39
    Date: 2006–01
  14. By: Irina Merkuryeva
    Abstract: The paper discusses the problem of informal employment in Russia, its structure and the factors contributing to the individual decisions making when choosing specific employment type. Informal employment is a highly diverse area comprising individuals with different profiles and motivations to prefer specific informal options over formal employment. Empirical findings using the 2003 NOBUS dataset confirm that defined groups of informally employed individuals are consistently different according to their main characteristics. This finding allows us to regard informal employment as a superior entrepreneurial sector or an inferior disadvantaged sector of the labour market depending on the specific segment.
    Keywords: Informal employment, Russia, labour markets
    JEL: J21 J24 O17 P2
    Date: 2006
  15. By: Nuria Rodriguez-Planas (Universitat Autònoma de Barcelona and IZA Bonn); Jacob Benus (Impaq International)
    Abstract: We evaluate the presence of effects from joining one of four active labour market programs in Romania in the late 1990s compared to the no-program state. Using rich survey data and propensity score matching, we find that three programs (training and retraining, small business assistance, and employment and relocation services) had success in improving participants' economic outcomes and were cost-beneficial from society’s perspective. In contrast, public employment was found detrimental for the employment prospects of its participants. We also find that there is considerable heterogeneity, which suggests that targeting may improve the effectiveness of these programs.
    Keywords: active labour market programs, propensity score matching, transition economies, net social benefits
    JEL: J68
    Date: 2006–11
  16. By: Tomáš Cahlík (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Tomáš Honzák (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jana Honzáková (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Marcel Jiřina (Czech Technical University in Prague, Faculty of Electrical Engineering, Center of Applied Cybernetics, Prague, Czech Republic); Natálie Reichlová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Purpose of this paper is to analyze the convergence of the consumption structure, both at the empirical and the theoretical levels. The basic empirical result is that the consumption structure converges quite quickly. We feel that the income effect is not sufficient to explain this high speed. That is why we introduce some post-Keynesian motives of consumer behaviour. We present a model of the dynamics of consumption structure and describe different simulation experiments with this model. These experiments are based on the actual data about consumers in the Czech Republic and in Germany (in fact, we approximate by German consumers the old EU members’ consumers). The results of simulations show that the behavior of the model really leads to the convergence of the consumption structure in the Czech Republic and the old EU members, so the post-Keynesian motives of consumer behavior are among possible explanations of the empirical fact of convergence.
    Keywords: fiscal convergence; consumption; post-Keynesian theory; model; simulation
    JEL: C6 D1
    Date: 2005
  17. By: G. Reza Arabsheibani (University of Wales Swansea, WELMERC and IZA Bonn); Altay Mussurov (KIMEP)
    Abstract: This paper examines rates of return to schooling in Kazakhstan using OLS and instrumental variable (IV) methodologies. We use spouse’s education and smoking as instruments. We find that spouse’s education is a valid instrument and that conventional OLS estimates that assume the exogenous nature of schooling, and hence do not control for endogeneity bias, may underestimate the true rates of return. The results indicate that the returns to schooling in Kazakhstan have increased with transition. This may reflect the relative scarcities of highly educated people in Kazakhstan with human capital that employers require and, following the market reforms, reward accordingly.
    Keywords: human capital, instrumental variables, rate of return to education
    JEL: C13 I21 J24
    Date: 2006–11
  18. By: Ondřej Schneider (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jan Zápal (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The European Union (EU) accepted ten new member states (NMS) in 2004. These countries, mostly former socialist countries, have had to adjust their economic policies to the EU’s standards. Perhaps most difficult has proven to be fiscal policy whereby NMS must comply with the Stability and Growth Pact (SGP) rules. Indeed, six out of the ten NMS have breached the SGP limits and were put in Excessive Deficit Procedure (EDP). While the SGP is being modified, fiscal policy is set to remain on the agenda for all NMS in years to come. In this paper, we analyse fiscal policy in the NMS, focusing primarily on time period that immediately preceded their EU accession. We analyse the structure and scale of these countries’ fiscal policy and identify main trends in revenues and expenditures of their public budgets. We then explore dynamics of fiscal policy in the new member states and isolate main factors of the dynamics. Namely, we show how much of the consolidations was due to the fiscal authorities’ effort and how much was caused by external factors. We also show that most NMS’ governments have run rather inconsistent fiscal policy and have not consolidated their budgets appropriately by postponing politically difficult consolidation measures. However, we also identify a group of countries characterised by strong reform efforts and responsible fiscal policy making, supported usually by strong economic growth. In this context, room is given to economic, as well as political economy factors.
    Keywords: Fiscal Policy; New Member States; Consolidations; Stability and Growth Pact; Excessive Deficit Procedure; Growth Accounting; Probit Analysis.
    JEL: E6 E62 H6 H87
    Date: 2005
  19. By: Ondřej Schneider (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jan Zápal (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; London School of Economics and Political Science)
    Abstract: In this paper, we track behaviour of fiscal authorities of the ten new EU member states (NSM) in the period which immediately preceded their EU accession. We first present basic stylized facts about public budgets of those countries. The paper then analyses reasons which led to periods of fiscal consolidations in NMS. Secondly, we also present evidence from Pre-Accession Economic and Convergence programmes of NMSs concerning planed steps of fiscal authorities and try to contrast them with reality. Throughout the paper, we identify two different groups of countries which significantly differ in their fiscal behaviour. On the one side is group of Baltic countries displaying strong reform effort and responsible fiscal policy usually supported by strong economic growth. On the second extreme, we identify fiscally irresponsible central European countries and two Mediterranean islands displaying lax fiscal policies and little political will to implement costly reforms. Somewhere between stand Slovenia and Slovakia, first without strong reform performance yet with budget deficit in compliance with Stability and Growth Pact and later for its recent reform efforts. Our key finding concerning behaviour of fiscally irresponsible group of countries is that their current problems with high budget deficits originate in their lax approach and inability to implement politically costly expenditure cuts which is apparent from their revision of budget plans and endeavour to shift envisioned deficit reduction into the future. Yet, this strategy has led those countries to uncomfortable position vis-a-vis European fiscal rules.
    Keywords: fiscal policy; new member states; consolidations; Stability and Growth Pact; Excessive Deficit Procedure; Convergence Programmes banking
    Date: 2006–06

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