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on Transition Economics |
| By: | Lambert-Mogiliansky, Ariane; Sonin, Konstantin; Zhuravskaya, Ekaterina |
| Abstract: | We study the nature of judicial bias in bankruptcy proceedings following the enactment of bankruptcy law in Russia in 1998. We find that regional political characteristics affected judicial decisions about the numbers and types of bankruptcy procedures initiated after the law took effect. In particular, controlling for indicators of firms’ insolvency and the quality of the regional judiciary, reorganization procedures were significantly more frequent in regions with politically popular governors and governors who had hostile relations with the federal government. Poor judicial quality was also associated with higher incidence of reorganizations. In addition, the quality of the regional judiciary affected performance of firms in reorganization procedure: in regions with poor judicial quality firms in reorganization significantly underperformed firms not in bankruptcy; while the opposite was true in regions with high-quality judges. The effect of judicial quality on restructuring is particularly strong in regions with politically popular governors because the judicial bias in governor’s favor is the highest in poor-quality courts when governors are popular. This evidence is consistent with previously reported anecdotes, which suggested that politically strong regional governors used bankruptcy proceedings to protect firms from paying federal taxes. |
| Keywords: | bankruptcy; capture; incentives; regional governments; Russia; transition |
| JEL: | D23 G33 H11 H77 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5998&r=tra |
| By: | John Beirne (Brunel University); Nauro F. Campos (Brunel University, CEPR and IZA Bonn) |
| Abstract: | Conventional wisdom suggests that the stocks of human capital were one of the few positive legacies from communism. However, if factories under communism were so inefficient, why would the education system not have been? Using the education production function approach and new data on educational inputs and outcomes from 1960 to 1989, we find evidence suggesting that the official human capital stocks figures were "over-estimated" during the communist period. In other words, we find that the official human capital stock numbers are significantly higher than those predicted not only in relation to countries at similar levels of development, but also on the basis of educational systems with comparable features and efficiency levels. |
| Keywords: | human capital, education, transition economies |
| JEL: | O11 J24 P27 P39 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2502&r=tra |
| By: | Ralitza Dimova (Brunel University and IZA Bonn); Ira N. Gang (Rutgers University and IZA Bonn); John Landon-Lane (Rutgers University) |
| Abstract: | With the use of panel data constructed from the 1995 and 1997 Bulgarian Integrated Household Surveys, this paper explores the sectoral reallocation of labour by gender. In Bulgaria, men and women started the transition on an almost equal standing, allowing us to concentrate our attention on the impact of individual and household characteristics in explaining gender differences in the labour market. We find that household characteristics, rather than alternative explanations such as differences in individual characteristics or pure gender discrimination, better explain the observed gender differences in labour market outcomes. |
| Keywords: | employment, mobility, gender, household |
| JEL: | J21 J23 J31 J62 P2 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2476&r=tra |
| By: | Zakolyukina Anastasia |
| Abstract: | The project examines the performance of the external management procedure on the data set from the arbitration court of the Udmurt Republic and the unique data set of politically connected firms that went bankrupt 1995–2004 in Russia. We use a narrow definition of political connections: a CEO or a member of an executive board being a member of par-liament or a top executive at the federal, regional, or municipal level. We show that political connections matter for the timing of bankruptcy procedures. Also, political connections do not result in efficiency-enhancing bankruptcies; in line with a politicians-and-firms story, politically connected firms preserve employment rather than increase productivity. Based on the court level data, we find that debt concentration increases likelihood of external management initiation, whereas external management itself decreases the share of total debt repaid. However, there is no evidence of adminis-trative expenses inflation in favor of a particular unsecured creditor under the assumption of a tradeoff between inflation of administrative expenses and main debt repayment. |
| Keywords: | Russia, bankruptcy, external management, liquidation, political connections |
| JEL: | G33 G38 P16 |
| Date: | 2006–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:eer:wpalle:06-09e&r=tra |
| By: | John Whalley; Ximing Yue |
| Abstract: | Available data indicates a growing urban-rural income gap (the ratio of mean urban to rural incomes) with a significant increase from around 1.8 in the late 1980's to over 3 today. These estimates do not take into account the higher volatility of rural incomes in China. Current literature based on analyses of rural income volatility in China decomposes poverty into chronic and transient components using longitudinal survey data and assesses the fraction of the Foster, Greer and Thorbecke poverty gap attributable to mean income over time being below the poverty line. Resulting estimates of 40-50 % transient poverty point to the policy conclusion that poverty may be a less serious social problem than it appears in annual data due to rural income volatility. Here we use a direct method instead to adjust rural income for volatility using a certainty equivalent income measure and recompute summary statistics for the distribution of volatility corrected incomes, including the urban-rural income gap on which much of current poverty debate in China focuses. Since an uncertain income stream is worth less in utility terms than a certain income stream we argue that heightened rural volatility increases the effective urban-rural income gap and intensifies not weakens poverty concerns. Using Chinese longitudinal rural survey data for which current decompositions can be replicated, we make adjustments for certainty equivalence of rural household income streams which not only widen the urban-rural income gap in China but also increases other distributional summary statistics. Depending upon values used for the coefficient of relative risk aversion, the measured urban-rural income gap increases by 20-30% using a certainty equivalent measure to adjust rural incomes for volatility. We also conduct similar analyses using consumption data, for which slightly larger increases occur. |
| JEL: | O15 O20 O53 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12779&r=tra |
| By: | Arvind Virmani (Indian Council for Research on International Economic Relations) |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:ind:icrier:178&r=tra |
| By: | Alessandra Guariglia; Sandra Poncet |
| Abstract: | Using data for 30 Chinese provinces over the period 1989-2003, this study examines the relationship between the level of financial intermediary development, and real GDP growth, physical capital accumulation, and total factor productivity (TFP) growth. We find that traditionally used indicators of financial development and China-specific indicators measuring the level of state interventionism in finance are generally negatively associated with growth and its sources, while indicators measuring the degree of market driven financing in the economy are positively associated with GDP and TFP growth, and capital accumulation. These effects have gradually declined over time and are weaker for high FDI recipients. |
| Keywords: | Financial intermediation; economic growth; capital accumulation; productivity growth; China |
| JEL: | E44 G21 N15 O16 O40 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2006-21&r=tra |
| By: | Balázs Égert |
| Abstract: | This paper analyses the effectiveness of foreign exchange interventions in Croatia, the Czech Republic, Hungary, Romania, Slovakia and Turkey using the event study approach. Interventions are found to be effective only in the short run when they ease appreciation pressures. Central bank communication and interest rate steps considerably enhance their effectiveness. The observed effect of interventions on the exchange rate corresponds to the declared objectives of the central banks of Croatia, the Czech Republic, Hungary and perhaps also Romania, whereas this is only partially true for Slovakia and Turkey. Finally, interventions are mostly sterilized in all countries except Croatia. Interventions are not much more effective in Croatia than in the other countries studied. This suggests that unsterilized interventions do not automatically influence the exchange rate. |
| Keywords: | central bank intervention, foreign exchange intervention, verbal intervention, central bank communication, Central and Eastern Europe, Turkey |
| JEL: | F31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1869&r=tra |
| By: | Nicole Madariaga; Sandra Poncet |
| Abstract: | We study the impact of FDI on growth performance. We rely on a data set of Chinese cities between 1990 and 2002 to investigate the effects of FDI in the traditional growth regression framework using the GMM estimator for dynamic panels. Our growth model incorporates an explicit consideration of spatial dependence effects in the form of spatially lagged income and FDI. Our results reveal that Chinese cities take advantage not only of FDI flows received locally but also of FDI flows received by their neighbors. |
| Keywords: | Growth; regional convergence; economic geography; foreign direct investment China |
| JEL: | E1 O1 O5 R1 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2006-22&r=tra |
| By: | Laura Hering; Sandra Poncet |
| Abstract: | We study the effect of geography and in particular of market access on wages by working with individual data from 56 Chinese cities in 11 different provinces. By applying the theory of the New Economic Geography on individual survey data, we contribute to the explanation of growing disparities within the country, and even within provinces. We examine to what extent proximity to markets can explain inter-individual wage heterogeneity and growing wage disparities within Chinese provinces. Using a New Economic Geography style model, we derive an econometric specification relating wages to market access. The latter is calculated as a transport cost weighted sum of the surrounding locations’ market capacities. Based on data from 1995 on around 10,000 Chinese workers, and after controlling for individual skills and factor endowments, we find that a significant fraction of inter-individual differences in terms of return to labor can be explained by the geography of access to markets. Moreover, our study investigates whether the relationship between market access and wages holds for all types of workers equally and shows that the magnitude of the impact depends on the firm type and the level of qualification. |
| Keywords: | Economic geography; international trade; regional integration; wage China; inequality |
| JEL: | F12 F15 R11 R12 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2006-23&r=tra |
| By: | John Whalley; Shunming Zhang |
| Abstract: | We note the absence of prior literature on analytical structures to be used for China and other economies with extensive SOEs when evaluating behavioural responses of SOEs to trade policy and other changes. This is despite both the large empirical literature discussing the productivity effects of Chinese SOE enterprise reform, and wider policy discussion of the potential impacts of various reform initiatives. We present two simple analytical formulations of SOE behaviour in response to trade policy change with the aim of investigating how traditional competitive models of enterprise behaviour can mislead when used in policy debate. One formulation centres on SOE managerial control. In this enterprise managers are politically appointed, expect any non performing loans to be recapitalized by state banks andhence capital is centrally allocated by credit rationing. The managers are assured to maximize the size of the enterprise rather than profits since this yields maximal networking benefits to managers. This implies labour is priced at its average rather than its marginal product, and with a competitive non-manufacturing (agricultural) industry free trade is not optimal policy. The other assumes worker control of SOEs and that workers satisfice in their supply of effort to the enterprise given both fixed wage rates and enterprise employment and otherwise shirk or pursue second jobs. In this formulation the enterprise meets their budget constraint and covers costs. With leisure in the preferences of enterprise members, their leisure consumption will be implied by the satisfying behaviour of the enterprise and will be non optimal. In both model variants, implications for trade policy are different from those of a standard competitive model, and computations using models calibrated to 2003 Chinese data suggest the differences can be large. |
| JEL: | F00 F13 P2 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12780&r=tra |
| By: | Agnieszka Stazka |
| Abstract: | This paper investigates, using the SVAR model of Clarida and Gali (1994), the sources of real exchange rate fluctuations in eight Central and East European new EU member states. Theoretically, one should expect the real exchange rates of Exchange Rate Mechanism II participants to be primarily driven by temporary shocks and those of ERM II “outs” by permanent shocks. Our results reveal an opposite pattern. We conclude that the sources of real exchange rate movements – and the usefulness of nominal exchange rates as shock absorbing instruments – were not the decisive factor behind these countries’ decisions concerning the ERM II participation. |
| Keywords: | exchange rate fluctuations, Central and Eastern Europe, ERM II, SVAR |
| JEL: | C32 F31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1876&r=tra |
| By: | Koziarivska Larysa; Oliinyk Andrii |
| Abstract: | The paper researches into the consequences of the pit reform of 2004 introduced on tax revenues, shadow activities, and income streams. The research approach adopted involves constructing theoretical general equilibrium model adapted to Ukrainian practices and further empirical testing of the hypotheses on the firm-level data. The study leads to inferring that the reform did not stimulate any tangible structural changes in the economy; with no effect on the shadow sector size. As a result of the reform, the government's income in the form of PIT revenues was redistributed to firms. The research shows that under the present conditions no other rate is expected to perform better the existing rate. Within the framework of existing structural ties in the economy it would be beneficial to increase compliance by introducing a more severe punishment for evasion. |
| Keywords: | Ukraine, tax reform, tax policy, tax evasion, shadow economy, behavioural response |
| JEL: | D21 E64 H21 H25 H26 H32 |
| Date: | 2006–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:eer:wpalle:06-08e&r=tra |
| By: | Benoit Dostie (HEC Montréal, CIRANO, CIRPÉE and IZA Bonn); David E. Sahn (Cornell University) |
| Abstract: | In this paper, we estimate a model of labor market dynamics among individuals in Romania using panel data for three years, 1994 to 1996. Our motivation is to gain insight into the functioning of the labor market and how workers are coping during this period of economic liberalization and transformation that began in 1990. Our models of labor market transitions for men and women examine changing movements in and out of employment, unemployment, and self-employment, and incorporate specific features of the Romanian labor market, such as the social safety net. We take into account demographic characteristics, state dependence, and individual unobserved heterogeneity by modeling the employment transitions with a dynamic mixed multinomial logit. |
| Keywords: | employment dynamics, Romania, multinomial logit, initial conditions, random effects |
| JEL: | P2 P3 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2511&r=tra |