nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒02‒03
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Russian manufacturing and the threat of ‘Dutch disease’ - A comparison of competitiveness developments in Russian and Ukrainian industry By Rudiger Ahrend; Donato de Rosa; William Tompson
  2. Patterns of Land Market Developments in Transition By Jo F.M. Swinnen; Liesbet Vranken
  3. Economic Reforms and Income Inequality in Urban China By Okushima, Shinichiro; Uchimura, Hiroko
  4. Sources of Investment Inefficiency: The Case of Fixed-Asset Investment in China By Duo Qin; Haiyan Song
  5. Distribution System of China's Industrial Clusters: Case Study of Yiwu China Commodity City By DING, Ke
  6. Transport Sector and Regional Price Differentials: A SCGE Model for Chinese Provinces By Ando, Asao; Meng, Bo
  7. Healthcare Reform in Russia: Problems and Prospects By William Tompson
  8. Influence of Social Institutions on Inequality in China By Uchimura, Hiroko
  9. Stimulating Innovation in Russia: The Role of Institutions and Policies By Christian Gianella; William Tompson
  10. A golden rule for Russia? How a rule-based fiscal policy can allow a smooth adjustment to the new terms of trade By Christian Gianella

  1. By: Rudiger Ahrend; Donato de Rosa; William Tompson
    Abstract: This paper examines the development of Russian industry in comparison with that of Ukrainian industry during 1995–2004 in an effort to ascertain to what extent, if any, Russian manufacturing showed signs of succumbing to ‘Dutch disease’. Ukraine and Russia began the market transition with broadly similar institutions, industrial structures and levels of technology, and the economic reforms implemented in the two countries were also similar, although Ukraine was reckoned to lag behind Russia in many areas. The main difference between them is Russia’s far greater resource wealth. It follows that differences in industrial development since 1991 may to some degree be attributable to differences in initial natural resource endowments. In short, Ukraine could provide a rough approximation of how a resource-poor Russia might have developed over the transition. <P>Le secteur manufacturier russe et la menace du « syndrome néerlandais » Comparaison du développement de la compétitivité des industries russe et ukrainienne <BR>Cette étude analyse le développement de l’industrie russe en le comparant avec celui de l’industrie ukrainienne sur la période 1995-2004, afin d’établir - si tel était le cas - dans quelle mesure l’industrie manufacturière en Russie serait affectée par le ‘syndrome néerlandais’. L’Ukraine et la Russie ont commencé leur transition vers l’économie de marché avec des institutions, des structures industrielles et des niveaux de technologie globalement similaires et les réformes mises en œuvre dans les deux pays ont également suivi une voie similaire, même si l’Ukraine est considérée comme étant en retard par rapport à la Russie dans beaucoup de domaines. La différence principale entre les deux pays est la richesse en ressources naturelles, bien plus importante en Russie. Il en résulte que les différences dans le développement industriel depuis 1991 peuvent, dans une certaine mesure, être attribuées aux différences de dotations intiales en ressources naturelles. En résumé, l’Ukraine peut fournir une approximation fruste de la manière dont une Russie pauvre en ressources naturelles aurait pu se développer sur la période de transition.
    Keywords: productivity, productivité, transition, transition, restructuring, restructuration, gas, gaz, Russia, Russie, natural resources, dutch disease, oil, ressources naturelles, syndrome néerlandais, pétrole, industry, competitiveness, revealed comparative advantage, unit labour costs, industrie, compétitivité, avantage comparatif révélé, coût unitaire de main-d'œuvre, salaires, wages, Ukraine, Ukraine
    JEL: J24 L60 O57 P23 P27 Q33
    Date: 2007–01–25
  2. By: Jo F.M. Swinnen; Liesbet Vranken
    Abstract: Transition countries provide a natural experiment to study the development of land markets. This paper provides survey-evidence of the variation in the development of land markets, identifies a series of patterns, and provides a set of hypotheses to explain these variations in land market development.
    Date: 2007
  3. By: Okushima, Shinichiro; Uchimura, Hiroko
    Abstract: This paper reports the results of an analysis of changes in income inequality, and in its determinants, in urban China since the economic reforms that began in 1978. The intention is to identify new characteristics of economic inequality. It first shows that income differentials acrossand in provinces widened and that their economic rankings were becoming fixed during the period from 1988 to 1995. Second, age was the major factor in inequality in 1988, while education became the important factor in 1995. Third, education significantly contributed to increasing inequality during the period. Fourth, the higher education-level groups had less within-group inequality. These changes reflect the penetration of the market mechanism into China after the reforms. However, this will be problematic without equality of opportunity.
    Keywords: Asia, China, Income inequality, Economic reform, Education, Urban, Income distribution, Economic policy
    JEL: D31 J31 P20
    Date: 2006–10
  4. By: Duo Qin (Queen Mary, University of London); Haiyan Song (Hong Kong Polytechnic University)
    Abstract: This study attempts to measure the inefficiency associated with aggregate investment in a transitional economy. The inefficiency is decomposed into allocative and production inefficiency based on standard production theory. Allocative inefficiency is measured by disequilibrium investment demand. Institutional factors are then taken into consideration as possible explanatory variables of the disequilibrium. The resulting model is applied to Chinese provincial panel data. The main findings are: Chinese investment demand is strongly receptive to expansionary fiscal policies and inter-provincial network effects; and although there are signs of increasing allocative efficiency, the tendency of over-investment remains, even with improvements in production efficiency.
    Keywords: Over-investment, Efficiency, Disequilibrium, Soft-budget constraint
    JEL: E22 E62 H74 P3 C23
    Date: 2007–01
  5. By: DING, Ke
    Abstract: This paper discusses the issue of upgrading industrial clusters from the perspective of external linkages. It is taken for granted that in most developing countries, due to the limited domestic market and poor traditional commercial networks, industrial clusters are able to upgrade only when they are involved in global value chains. However, the rise of China’s industrial clusters challenges this view. Historically, China has had a lot of industrial clusters with their own traditional commercial networks. This fact combined with its huge population resulted in the formation of a unique external linage to China’s industrial clusters after the socialist planning period ended. In concrete terms, since the 1980s, a traditional commercial institution . the transaction market . began to appear in most clusters. These markets within the clusters get connected to those in the cities due to interaction between traditional merchants and local governments. This has resulted in the formation of a powerful market network-based distribution system which has played a crucial role for China’s industrial clusters in responding to exploding domestic demand. This paper explains these features in detail, using Yiwu China Commodity City as a case study.
    Keywords: Industrial cluster, Transaction market, Merchants, Network, Yiwu, Distribution, Industrial structure, Commerce, Market, China
    JEL: L67 L81 O14 O53
    Date: 2006–10
  6. By: Ando, Asao; Meng, Bo
    Abstract: With regression formulas replaced by equilibrium conditions, a spatial CGE model can substantially reduce data requirements. Detailed regional analyses are thus possible in countries where only limited regional statistics are available. While regional price differentials play important roles in multi-regional settings, transport does not receive much attention in existing models. This paper formulates a spatial CGE model that explicitly considers the transport sector and FOB/CIF prices. After describing the model, performance of our model is evaluated by comparing the benchmark equilibrium for China with survey-based regional I-O and interregional I-O tables for 1987. The structure of Chinese economies is summarized using information obtained from the benchmark equilibrium computation. This includes regional and sectoral production distributions and price differentials. The equilibrium for 1997 facilitates discussion of changes in regional economic structures that China has experienced in the decade.
    Keywords: SCGE model, FOB/CIF prices, Transport sector, Chinese regional economy, Transportation, Econometric model, Local economy, Prices, International trade, China
    JEL: C68 O5 R13 R15
    Date: 2007–01
  7. By: William Tompson
    Abstract: This paper examines the prospects for reform of Russia’s healthcare system. It begins by exploring a number of fundamental imbalances that characterise the current half-reformed system of healthcare provision before going on to assess the government’s plans for going ahead with healthcare reform over the medium term. The challenges it faces include strengthening primary care provision and reducing the current over-reliance on tertiary care; restructuring the incentives facing healthcare providers; and completing the reform of the system of mandatory medical insurance. <P>La réforme du système de santé en Russie: problèmes et perspectives <BR>La présente étude analyse les perspectives de réforme du système de santé en Russie. Il commence par explorer un certain nombre de déséquilibres fondamentaux qui caractérisent le système actuel, en état de semi-réforme, avant de passer en revue les projets du gouvernement à moyen terme. Les principaux enjeux sont de renforcer les soins primaires et réduire le recours excessif aux soins tertiaires, de réexaminer les incitations auxquelles font face les prestataires de soins et de mener à son terme la réforme de l'assurancemaladie obligatoire.
    Keywords: competition, health care, système de santé, Russia, Russie, compétition, assurance maladie, primary care, pharmaceuticals, hospitalisation, hospitalisation, health insurance, single payer, payeur unique, soins primaires, produits pharmaceutiques
    JEL: I11 I12 I18
    Date: 2007–01–15
  8. By: Uchimura, Hiroko
    Abstract: This study analyses the impact of changes in social institutions, i.e. in the informal and formal social security system, on income inequality in China. This study uses an inequality decomposition analysis approach comparing household survey data for 1988 with 1995.Three main results emerge from the analysis: first, it findsthat the family based social security is losing its importance mainly through the changes in employment pattern in a household. This change contributes to rising income inequality. Second, thestudy shows that the introduction of new formal social security system helped to equalise the distribution of retired household members' income in urban areas in 1995. Third, however, these changes have only benefited a restricted number of persons. Benefits for rural migrants are low and most of the rural population has still no access to the new system.
    Keywords: Income Inequality, Social Institutions, Family, Social Security, Household, Income distribution, China
    JEL: D31 O15 P20
    Date: 2006–10
  9. By: Christian Gianella; William Tompson
    Abstract: This paper examines the potential role of innovation policy in enhancing long-term productivity growth in Russia. It begins by exploring the role of framework conditions for business in encouraging innovative activities, particularly with respect to intellectual property rights and competition. Realising Russia’s innovation potential will also require reform of the large public science sector. This raises issues pertaining to the organisation and financing of public research bodies and, in particular, to the incentives and opportunities they face in commercialising the results of their research. Finally, the paper looks at the potential role of direct interventions, such as special economic zones and technoparks, as well as the scope for improving the tax regime for private-sector R&D. <P>Augmenter l’efficacité de la politique de l’innovation <BR>Cette étude examine le rôle potentiellement joué par la politique de l’innovation pour stimuler la croissance de la productivité en Russie à long terme. Il souligne tout d’abord l’importance des conditionscadres pour les entreprises, et notamment la protection de la propriété intellectuelle et la promotion de la concurrence, comme facteur favorable aux activités innovantes. La réalisation du potentiel de la Russie en matière d’innovation nécessitera aussi une réforme du large secteur scientifique publique. Les enjeux concernent aussi bien l’organisation que le financement des organismes publics de recherche, ainsi que les incitations et les débouchés qui s’offrent à eux pour commercialiser le résultat de leur recherche. Enfin, l’étude examine le rôle potentiel des interventions directes – zones économiques spéciales, technopôles – et les possibilités d’amélioration du régime fiscal applicable à la recherche-développement dans le secteur privé.
    Keywords: productivity, productivité, venture capital, capital-risque, competition, impôt, innovation, innovation, concurrence, ICT, TIC, Russia, Russie, research and development, recherche-développement, patents, brevets, technology transfer, technology, technologies, intellectual property, propriété intellectuelle, tax, science, science, computers, ordinateurs, transfert de technologie
    JEL: L11 L52 O31 O34 O38
    Date: 2007–01–15
  10. By: Christian Gianella
    Abstract: The Russian economy continues to grow strongly, buoyed by rising terms of trade, which, in turn, are supporting a boom in domestic consumption. This paper addresses the challenge that the adjustment to sustained high oil prices poses for macroeconomic management. It first examines the impact of rising terms of trade on the domestic economy, particularly with respect to exchange-rate appreciation, competitiveness and inflation. It then considers the role of monetary and fiscal policies in ensuring a smooth adjustment to the higher terms of trade. The paper argues that fiscal policy should be the primary instrument for tackling this challenge. It therefore focuses on the potential role of a fiscal rule in insulating the economy and the budget from commodity-price fluctuations, and on the management of windfall oil and gas revenues accumulated in the fiscal Stabilisation Fund. <P>Une règle d’or pour la Russie? Comment une politique budgétaire fondée sur des règles peut permettre un ajustement en douceur aux nouveaux termes de l’échange. <BR>L’économie russe continue de croître à un rythme élevé, bénéficiant d’une amélioration prolongée des termes de l’échange qui alimente la forte hausse de la consommation intérieure. Cette étude analyse le défi que l’adaptation à des prix du pétrole durablement élevés suscite en termes de gestion macroéconomique. Il examine d’abord les conséquences de l’augmentation des termes de l’échange sur l’économie nationale, en particulier son impact sur l’appréciation du taux de change, la compétitivité et l’inflation. Il analyse ensuite le rôle que les politiques monétaire et budgétaire peuvent jouer pour garantir un ajustement en douceur à cette augmentation des termes de l’échange. Le chapitre conclut que la politique budgétaire devrait être l’instrument à privilégier pour réaliser cet ajustement. Enfin, l’étude considère le rôle que peuvent potentiellement jouer des règles budgétaires pour mettre l’économie et le budget à l’abri des fluctuations des prix des matières premières, et se concentre sur la gestion des recettes pétrolières et gazières exceptionnelles transférées dans le Fonds de stabilisation.
    Keywords: fiscal policy, politique budgétaire, monetary policy, politique monétaire, Russia, Russie, dutch disease, syndrome néerlandais, macroeconomic management, gestion macroéconomique
    JEL: E52 E63 O23
    Date: 2007–01–15
  11. By: Kristina Toming
    Abstract: This paper seeks to answer the question about whether the investments made by Estonian food processing companies to meet the EU’s strict hygiene and structural requirements have enhanced their competitiveness and opened up better export opportunities to the EU-15 market. Enhanced competitiveness means not only larger export volumes, but also redirection of exports towards higher value-added products. The current study focuses on the milk, meat and fish industries, concluding that in general, foodstuffs exports to the EU-15 have increased, but only the milk processing industry has experienced a shift towards value-added consumer products. This shows that the Estonian food industry has not (yet) been able to reap the benefits of the EU market, and further investments in product development and quality, as well as in larger production volumes are necessary.
    Keywords: ___
    Date: 2006

This nep-tra issue is ©2007 by J. David Brown. 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.