nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒01‒06
six papers chosen by

  1. The Russian-Ukrainian Political Divide By Amelie Constant; Martin Kahanec; Klaus F. Zimmermann
  2. What's Driving Investment in China? By Ray Brooks; Steven Barnett
  3. Can Good Events Lead to Bad Outcomes? Endogenous Banking Crises and Fiscal Policy Responses By Celine Rochon; Andrew Feltenstein
  4. Export Performance and External Competitiveness in the Former Yugoslav Republic of Macedonia By Eva Gutierrez
  5. Reconciling the Estimates of Potential Migration into the Enlarged European Union By Anzelika Zaiceva
  6. Self-Selection and the Returns to Geographic Mobility: What Can Be Learned from the German Reunification "Experiment" By Anzelika Zaiceva

  1. By: Amelie Constant (IZA, Georgetown University and DIW DC); Martin Kahanec (IZA); Klaus F. Zimmermann (IZA, Bonn University, DIW Berlin, Free University Berlin and CEPR)
    Abstract: The Orange Revolution unveiled significant political and economic tensions between ethnic Russians and Ukrainians in Ukraine. Whether this divide was caused by purely ethnic differences or by ethnically segregated reform preferences is unknown. Analysis using unique micro data collected prior to the revolution finds that voting preferences for the forces of the forthcoming Orange Revolution were strongly driven by preferences for political and economic reforms, but were also independently significantly affected by ethnicity; namely language and nationality. Russian speakers, as opposed to Ukrainian speakers, were significantly less likely to vote for the Orange Revolution, and nationality had similar effects.
    Keywords: transformation, voting preferences, Ukraine, ethnicity, Orange Revolution
    JEL: D72 J15
    Date: 2006–12
  2. By: Ray Brooks; Steven Barnett
    Abstract: Investment has grown rapidly in China in recent years, reaching more than 40 percent of GDP. Despite good progress on bank and enterprise reforms, weaknesses remain that could contribute to inefficient investment decisions. Manufacturing, infrastructure, and real estate have been the drivers of fixed asset investment. Econometric analysis presented in the paper suggests that manufacturing investment is strongly correlated with firms' liquidity, largely retained earnings. Analysis of residential real estate investment shows that it is weakly correlated with real household income growth and real mortgage interest rates. A policy implication of these findings is that reducing liquidity in firms, for example by requiring state-owned enterprises to pay dividends to the government, and using monetary policy to reduce liquidity increase real interest rates, would slow investment in manufacturing and real estate.
    Keywords: China , investment , capacity , Investment , China , Absorptive capacity , Resource allocation ,
    Date: 2006–11–30
  3. By: Celine Rochon; Andrew Feltenstein
    Abstract: In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector. Numerical simulations are performed using stylized Chinese data, and banks failures are generated through increases in the growth rate of the labor force, a revaluation of the exchange rate or an increase in debt issue to finance the government deficit, as compared to a benchmark scenario in which banks remain solvent. Thus bank failures can result from what might seem to be either beneficial economic trends, or correct monetary and fiscal policies. We introduce fiscal policies that modify relative factor prices by lowering the capital tax rate and increasing the tax rate on labor. Such policies can prevent banking failures by raising the return to capital. It is shown that such fiscal policies are, in the short run, welfare reducing.
    Keywords: Banking failures , fiscal policies , Banking , China , Fiscal policy , Tax rates , Labor markets , Foreign investment , Economic models ,
    Date: 2006–11–29
  4. By: Eva Gutierrez
    Abstract: This paper reviews a broad set of indicators of competitiveness in the Macedonian economy and estimates the equilibrium real effective exchange rate (REER) using different methodologies. Although the REER is broadly in equilibrium at present, structural factors are found to hamper competitiveness. While a more competitive exchange rate might improve short-term export performance, sustained improvements require enhanced productivity and resource reallocation to more dynamic sectors, which depends on reforms to improve the business environment.
    Keywords: Competitiveness , equilibrium exchange rate , Export performance , Macedonia, FYR , Competition , Exchange rates ,
    Date: 2006–11–28
  5. By: Anzelika Zaiceva (IZA Bonn)
    Abstract: This paper briefly reviews the existing literature on potential migration into the enlarged European Union, reconciles the results with recent evidence and presents an additional migration scenario. The estimation procedure accounts for both sending and receiving countries' unobserved heterogeneity, and in the simulations a counterfactual scenario is calculated, in which all EU member states introduce free movement of workers simultaneously in 2011. The results suggest that the overall level of migration from the East will amount to around 1 per cent of the EU15 population within a decade after enlargement, and that the legal introduction of free movement of workers will not increase immigration significantly. These findings are compared both with the previous literature and emerging evidence.
    Keywords: migration extrapolations, EU enlargement, panel data
    JEL: F22 J11 J61
    Date: 2006–12
  6. By: Anzelika Zaiceva (IZA Bonn)
    Abstract: This paper investigates the causal effect of geographic mobility on income. The returns to German East-West migration and commuting are estimated, exploiting the structure of centrally planned economies and a "natural experiment" of German reunification for identification. I find that the migration premium is insignificantly different from zero, the returns for commuters equal to 40 per cent, and the local average treatment effects for compliers are insignificant. In addition, estimation results suggest no positive self-selection on unobservables for migrants, and some evidence of positive self-selection on unobservables for commuters.
    Keywords: returns to migration, causality, treatment effects
    JEL: F22 J61 R23
    Date: 2006–12

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