nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒04‒09
eight papers chosen by
J. David Brown
Heriot-Watt University

  1. Insider Privatization and Careers - A Study of a Russian Firm in Transition By Guido Friebel; Elena Panova
  2. Determinants of Finnish-Russian Economic Relations By Markku Kotilainen
  3. Inequality and Poverty in China during Reform By Sangui Wang; Dwayne Benjamin; Loren Brandt; John Giles; Yingxing Li; Yun Li
  4. Jobless growth in the Central and Eastern European Countries: A country specific panel data analysis for the manufacturing industry By Özlem Onaran
  5. The financial integration of China: New evidence on temporally aggregated data for the A-share market By Eric Girardin; Zhenya Liu
  6. Transition economy convergence in a two-country model - implications for monetary integration By Jan Bruha; Jirí Podpiera
  7. The Costs of EMU for Transition Countries By Alexandra Ferreira Lopes
  8. Contested Capitalism: Financial Politics and Implications for China By Richard, Carney

  1. By: Guido Friebel; Elena Panova
    Abstract: We study how transition has affected human resource policies of a Russian heavy industry firm. Our data set contains personnel files of 1538 white-collar workers over 17 years: from 1984 to 2000. We find career paths before the first year of Gaidar's reforms, 1992, when Russian transition to a market economy began. After 1992, promotions are blocked, because both (i) more managers are hired from the outside, and (ii) fewer managers leave the firm. A possible reason is an extremely weak outsider property rights enforcement in Russia. Keywords: institutional environment and internal labor market, transition to a market economy.
    JEL: M5 P3
    Date: 2007–03
  2. By: Markku Kotilainen
    Abstract: The broad context of the study is the main determinants of Finnish-Russian economic relations during the post-Soviet era and the prospects for the future. The study explores the determination of trade as well as foreign direct investment (FDI). The main emphasis is on the structure and development of foreign trade. When measured by the Grubel-Lloyd index of intra-industry trade (SITC3, 4-digit), it is seen that less than 3 per cent of Finnish-Russian trade occurred inside the same industry in 2004. This percentage has even declined slightly during the period studied. In Finland’s trade with Germany, the corresponding figure was 31 per cent and in trade with Sweden 47 per cent in 2004. When assessing the development of Finnish imports from Russia, we notice that the dominance of changes in oil prices and of imports of big companies does not allow sensible econometric explanations. In the case of Finnish exports to Russia we find econometric evidence on volumes and values, on aggregate and sectoral, and on annual and quarterly exports. We present several kinds of classifications of FDI, and ask which factors favour exports and which FDI. We also classify the investments of Finnish firms in Russia according to these criteria – in a very illustrative and preliminary way. Exports as well as FDI have profited from the high market growth and rapid structural change of the Russian economy.
    Keywords: Finland, Russia, economic relations, foreign trade, foreign direct investment (FDI)
    JEL: F14 F21 F23
    Date: 2007–03–26
  3. By: Sangui Wang; Dwayne Benjamin; Loren Brandt; John Giles; Yingxing Li; Yun Li
    Abstract: This paper provides an overview of the evolution of income inequality and poverty in China from 1987 to 2002, documenting significant increases of inequality within China's urban and rural populations. In rural areas, increased inequality is primarily related to the disequalizing role of non-agricultural self-employment income and the slow growth in agricultural income from the mid-1990s onward. Poverty persists, and tied in part to slow growth in agricultural commodity prices. In urban areas, the declining role of subsidies and entitlements, the increase in wage inequality, and the layoffs during restructuring have fueled the growth in inequality within urban areas. Poverty levels, however, are very low. China should give more emphasis on education, training, and other human development efforts in its poverty reduction strategy since return to education increased rapidly and became a major source of inequality. A nationwide "social safety net" and an effective redistributive taxation system should be adopted and implemented to ensure that the poor can benefit from the fruits of rapid economic growth.
    Keywords: Income inequality, poverty, welfare, growth, reform, transition, policy, China
    JEL: D31 D63 I32 O18 O53
    Date: 2007
  4. By: Özlem Onaran (Department of Economics, Vienna University of Economics & B.A.)
    Abstract: This paper estimates a labor demand equation based on the panel data of manufacturing industry in the Central and Eastern European Countries (the Czech Republic, Hungary, Poland, Slovakia, Slovenia, Lithuania, Bulgaria, and Romania) in order to test the effect of domestic factors (wages and output) and international factors (exports, imports, and FDI) on employment during the era of post -transition recovery. The findings indicate that employment does not respond to wages in more than half of the cases. The output elasticity of labor demand is mostly positive, but low, with a number of cases where employment is completely de-linked from output. An impressive speed of integration to the European economic sphere through FDI and international trade has not prevented job losses in the manufacturing industry. While there are very few cases of positive effects, insignificant effects of trade and FDI dominate the findings with some evidence of negative effects as well
    JEL: F16 F21 J23
    Date: 2007–03
  5. By: Eric Girardin (Chateau Lafarge GREQAM); Zhenya Liu (People's University of China)
    Abstract: In spite of high trade openness, existing empirical work, using daily data, has not found any evidence of international financial integration of China. In this paper we examine to what extent the Chinese A-share market, de jure protected from foreign influences by capital controls, is actually integrated with global or regional markets. We study a long sample (October 1992 through March 2005) of active trading, within the framework of a regime-switching error correction model. We confirm the role of temporal aggregation in cointegration tests. With daily or mid-week closing prices, we do not find any long run relationship with either the New York or the Hong Kong market, thus replicating previous findings. However, the use of weekly averaged prices implies that, up to late 1996, the Shanghai A-share market index was cointegrated with the S&P500. Subsequently, this relationship broke down and a long run relationship with the Hang Seng index gradually arose. Information flows, as well as the prospects of de jure financial opening, and the growing awareness of valuation concepts among Chinese domestic investors, in the presence of multiple listing of Mainland firms, help explain the evidence of financial integration in spite of capital controls
    Keywords: China's A-share market, Markov-switching ECM, temporal aggregation, international financial integration
    JEL: F36 G15
    Date: 2007–02–02
  6. By: Jan Bruha (External Economic Relations Division, Czech National Bank, Na P??kop? 28, 115 03 Praha 1, Czech Republic.); Jirí Podpiera (External Economic Relations Division, Czech National Bank, Na P??kop? 28, 115 03 Praha 1, Czech Republic.)
    Abstract: In this paper we present a two-country dynamic general equilibrium model of ex ante unequally developed countries. The model explains a key feature recently observed in transition economies – the long-run trend real exchange rate appreciation – through investments into quality. Our exchange-rate projections bear important policy implications, which we illustrate on the collision between the price and nominal exchange rate criterion for the European Monetary Union in a set of selected transition economies in Central and Eastern Europe. JEL Classification: E58, F15, F43.
    Keywords: Two-country modeling, Convergence, Monetary Policy, Currency area.
    Date: 2007–03
  7. By: Alexandra Ferreira Lopes (ISEG, ISCTE and DINÂ MIA)
    Abstract: Czech Republic, Hungary and Poland will have to join the European and Monetary Union. Surprisingly, there is very little work on the welfare consequences of the loss of monetary policy flexibility for these countries. This paper fills this void by providing a framework to evaluate quantitatively the economic costs of joining the EMU. Using a two country dynamic general equilibrium model with sticky prices we investigate the economic implications of the loss of monetary policy flexibility associated with EMU for each country. The main contribution of our general equilibrium approach is that we can evaluate the effects of monetary policy in terms of welfare. Our findings suggest that these economies may experience sizable welfare losses as a result of joining the EMU. Results show that the cost associated with the loss of the monetary policy flexibility is bigger in the presence of persistence technological shocks, weak correlation of monetary shocks, strong risk aversion and a small trade share with the EMU
    Keywords: Monetary Policy, Eastern and Central Europe Countries, Euro, Open Economy Macroeconomics, General Equilibrium
    JEL: C68 E52 F41
    Date: 2007–02–02
  8. By: Richard, Carney
    Abstract: As China's economy grows and matures, is it developing institutional patterns that resemble those of other wealthy countries? I offer an innovative theory that deduces the structure of nations' capitalist institutions based on distributive welfare gains to those actors representing an economy's main factors of production (land, labor, and capital), using the structure of a nation’s financial institutions as a proxy for its capitalist institutions. Based on statistical and qualitative evidence across countries and time, I then draw implications for China. I find that China resembles continental European capitalism far more than Anglo-American capitalism, and that it is likely to remain this way for the foreseeable future.
    Keywords: comparative finance; financial institutions; political economy; capitalism; China
    JEL: P00 N00 O10
    Date: 2007–03–14

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