nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒05‒12
fourteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Inter-Regional Trade and Lobbying By Sergei Guriev; Evgeny Yakovlev; Ekaterina Zhuravskaya
  2. Returns to education in the economic transition : a systematic assessment using comparable data By Tiongson, Erwin R.; Paternostro , Stefano; Flabbi, Luca
  3. The Chinese government's new approach to ownership and financial control of strategic state-owned enterprises By Mattlin, Mikael
  4. Skills Shortages and Training in Russian Enterprises By Hong Tan; Yevgeniya Savchenko; Vladimir Gimpelson; Rostislav Kapelyushnikov; Anna Lukyanova
  5. Social Assistance Receipt and its Importance for Combating Poverty in Urban China By Bjorn Gustafsson; Deng Quheng
  6. Information Sharing and Credit: Firm-Level Evidence from Transition Countries By Martin Brown; Tullio Jappelli; Marco Pagano
  7. Chinese postsocialist transformation: economic opening and external constraint By El Karouni, Ilyess; Charles, Sébastien
  8. China and the knowledge economy : challenges and opportunities By Wang, Shuilin; Zeng, Douglas Zhihua
  9. China's Entrepreneurs By Linda Yueh
  10. The attractiveness of central eastern European countries for venture capital and private equity investors By Groh, Alexander P.; Liechtenstein, Heinrich; Lieser, Karsten
  11. Estimating hedonic price indexes for personal computers in russia: Case of Yekaterinburg By Parkhomenko, Alexander; Redkina, Anastasia; Maslivets, Olga
  12. Regional cooperation in Central and Southeastern Europe: the Romanian experience in fighting corruption By Botezatu, Elena
  13. The Role of Association Agreements within European Union Enlargement to Central and Eastern European Countries By Christophe Rault; Robert Sova; Ana Maria Sova
  14. The flat tax in Romania. A good economic strategy? By Socol, Cristian; Marinas, Marius; Socol, Aura Gabriela

  1. By: Sergei Guriev (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR)); Evgeny Yakovlev (University of California, Berkeley); Ekaterina Zhuravskaya (New Economic School (NES), Center for Economic and Financial Research (CEFIR), Center for Economic Policy Research (CEPR))
    Abstract: In a federation, local policies with inter-regional spillovers depend on the extent and the nature of local capture. Local lobbyists who have multi-regional scope internalize inter-jurisdictional externalities to a larger extent than the lobbyists with interests in a single region. In particular, multi-regional industrial groups lobby for lower interregional trade barriers than local industrial lobbies. The results are based on a simple model, case-study evidence, and econometric analysis of micro-level panel data from Russia. Controlling for firm-level fixed effects, the performance of firms increases with an increase in the number of neighboring regions captured by multiregional groups. The paper has implications for international trade: lobbying by multinationals should lead to lower protectionism compared to lobbying by national corporations.
    JEL: P26 D78 F15 F23
    Date: 2007–04
  2. By: Tiongson, Erwin R.; Paternostro , Stefano; Flabbi, Luca
    Abstract: This paper examines the assertion that returns to schooling increase as an economy transitions to a market environment. This claim has been difficult to assess as existing empirical evidence covers only a few countries over short time periods. A number of studies find that returns to education increased from the " pre-transition " period to the " early transition " period. It is not clear what has happened to the skills premium through the late 1990s, or the period thereafter. The authors use data that are comparable across countries and over time to estimate returns to schooling in eight transition economies (Bulgaria, Czech Republic, Hungary, Latvia, Poland, Russia, Slovak Republic, and Slovenia) from the early transition period up to 2002. In the case of Hungary, they capture the transition process more fully, beginning in the late 1980s. Compared to the existing literature, they implement a more systematic analysis and perform more comprehensive robustness checks on the estimated returns, although at best they offer only an incomplete solution to the problem of endogeneity. The authors find that the evidence of a rising trend in returns to schooling over the transition period is generally weak, except in Hungary and Russia where there have been sustained and substantial increases in returns to schooling. On average, the estimated returns in the sample are comparable to advanced economy averages. There are, however, significant differences in returns across countries and these differentials have remained roughly constant over the past 15 years. They speculate on the likely institutional and structural factors underpinning these results, including incomplete transition and significant heterogeneity and offsetting developments in returns to schoolin g within countries.
    Keywords: Education For All,Primary Education,Teaching and Learning,Education Reform and Management,Access & Equity in Basic Education
    Date: 2007–05–01
  3. By: Mattlin, Mikael (BOFIT)
    Abstract: This paper reviews recent regulatory and policy changes that affect the Chinese central government's ownership and authority over the capital allocations of strategic state-owned enterprises (SOE). The paper examines the reform of the central government's relationship with key SOEs as a consequence of the establishment of the State Assets Supervision and Administration Commission of the State Council (SASAC) in 2003, the coming introduction of a centralised operating and budgeting system for SOEs, and the government's ongoing re-evaluation of its ownership policy. SASAC appears to have the potential to develop into a major actor in China's domestic capital allocation, with an active role in strategic financing and restructuring of key sectors of the Chinese economy. The data reviewed for this paper strongly suggests that the Chinese central government aims to retain significant ownership control over key SOEs and, by extension, over a major part of the domestic economy. The new operating and budgeting system is set to significantly enhance central government control over SOEs' capital allocation.
    Keywords: state-owned enterprises; privatisation; corporate governance; China
    JEL: G32 G38 P26 P31
    Date: 2007–05–04
  4. By: Hong Tan (World Bank); Yevgeniya Savchenko (World Bank); Vladimir Gimpelson (Higher School of Economics, Moscow and IZA); Rostislav Kapelyushnikov (Higher School of Economics, Moscow); Anna Lukyanova (Higher School of Economics, Moscow)
    Abstract: In the transition to a market economy, the Russian workforce underwent a wrenching period of change, with excess supply of some industrial skills coexisting with reports of skill shortages by many enterprises. This paper uses data from the Russia Competitiveness and Investment Climate Survey and related local research to gain insights into the changing supply and demand for skills over time, and the potential reasons for reported staffing problems and skill shortages, including labor turnover, compensation policies and the inhibiting effects of labor regulations. It discusses in-service training as an enterprise strategy for meeting staffing and skill needs, and presents evidence on the distribution, intensity and determinants of in-service training in Russia. It investigates the productivity and wages outcomes of in-service training, and the supportive role of training in firms’ research and development (R&D) and innovative activities. A final section concludes with some policy implications of the findings.
    Keywords: human capital, skills, training, employment protection legislation, transition, Russia
    JEL: J23 J24
    Date: 2007–04
  5. By: Bjorn Gustafsson (University of Göteborg and IZA); Deng Quheng (Chinese Academy of Social Sciences)
    Abstract: Since the second half of the 1990s economic restructuring in urban China has led to widespread joblessness and income insecurity. The rapid expansion of the system of social assistance, Di Bao, can be understood from this perspective. Using a survey covering large parts of urban China in 2002, we investigate factors affecting receipt and how receipt affects urban poverty. Results from estimating probability models indicate that social assistance receipt is strongly linked to joblessness among household members, the household’s expenditure burden, as well as the lack of financial assets. Further, a long education of the household head and membership in the Communist Party reduces the probability of receiving social assistance while having been sent to rural China during the Cultural Revolution increases it. For some types of households, receipt of Di Bao differs greatly across cities in China. The social assistance payments appear strongly targeted to the poor. However, as the Di Bao payments typically are small and many of the urban poor are not receivers, much urban poverty remains.
    Keywords: social assistance, poverty, China, cultural revolution
    JEL: I32 I38 P36
    Date: 2007–04
  6. By: Martin Brown (Swiss National Bank); Tullio Jappelli (Università di Napoli "Federico II", CSEF and CEPR); Marco Pagano (Università di Napoli "Federico II", CSEF and CEPR)
    Abstract: We investigate whether information sharing among banks has affected credit market performance in the transition countries of Eastern Europe and the former Soviet Union, using a large sample of firm-level data. Our estimates show that information sharing is associated with improved availability and lower cost of credit to firms, and that this correlation is stronger for opaque firms than transparent firms. In cross-sectional estimates, we control for variation in country-level aggregate variables that may affect credit, by examining the differential impact of information sharing across firm types. In panel estimates, we also control for the presence of unobserved heterogeneity at the firm level and for changes in selected macroeconomic variables.
    Keywords: information sharing, credit access, transition countries
    JEL: D82 G21 G28 O16 P34
    Date: 2007–05–01
  7. By: El Karouni, Ilyess; Charles, Sébastien
    Abstract: This article is an attempt to show that China's post-socialist transformation involved a change in its growth regime. Indeed, during the Maoist era, it took the form of a "forced growth" as theorized by Kornai (1972). In addition, "export aversion" was one of the main characteristics of Chinese external economic relations. Today, it is not the case anymore since China follows an export-led growth strategy. Nevertheless, this situation could be particularly difficult to manage with respect to its dependence on external demand in a context of low domestic-demand.
    Keywords: Changement institutionnel; transformation postsocialiste; Chine; export-led growth
    JEL: F19 B52 P33
    Date: 2007
  8. By: Wang, Shuilin; Zeng, Douglas Zhihua
    Abstract: The rapid pace of economic growth in China has been unprecedented since the start of economic reforms in late 1970s. It has delivered higher incomes and made the largest single contribution to global pove rty reduction. Measured by international poverty lines, from 1978-2004, the absolute poor population in rural areas has dropped from 250 million to 26.1 million. Such gains are impressive and have been driven largely by a set of market-oriented institutional reforms, strong investment, and effective adoption and application of various knowledge and technologies, especially foreign ones through trade and foreign direct investment. While enjoying tremendous success, China also faces many challenges that need to be addressed to sustain its long-term development. These include weak institutions, low overall educational attainment, weak indigenous innovation capacity, poor links between research and development and industries, and so on. This paper provides an analysis of some strengths, weaknesses, opportunities, and challenges to China ' s knowledge economy in the areas of economic incentives and institutional regime, human capital, innovation system, and information infrastructure.
    Keywords: Tertiary Education,Agricultural Knowledge & Information Systems,ICT Policy and Strategies,Population Policies,Technology Industry
    Date: 2007–05–01
  9. By: Linda Yueh
    Abstract: This paper investigates the traits of the self-employed entrepreneurs in urban China, an economy rife with informational and institutional imperfections, under-developed financial markets, but a growing and important non-state sector. The self-employed make on average 20% more than non-entrepreneurs, but are similar in their age, marital status, educational attainment, and socio-economic background. Fewer are Communist Party members and more have experienced unemployment. Social networks are significant in entrepreneurship, while women and older workers are less likely to become self-employed unless they have experienced unemployment. Motivation and drive, as do attitudes toward risk, are also determinative factors.
    Keywords: Asia, China, Self-employment, Entrepreneurship, Social networks
    JEL: J44 O53 O12
    Date: 2007
  10. By: Groh, Alexander P. (IESE Business School); Liechtenstein, Heinrich (IESE Business School); Lieser, Karsten (Strategic Capital Management)
    Abstract: We address the attractiveness of Central Eastern European countries for VC/PE investors by the construction of a composite index. For the index composition we refer to the results of numerous prior research papers that investigate relevant parameters determining entrepreneurial activity and/or the engagements of institutional investors. We aggregate the index via five different methods and receive country rankings that vary only slightly, signaling a robust index calculation. We clearly identify six tier groups of attractiveness for all of our sample countries. We compare our index with the actual fundraising activities in the particular countries and reveal a reasonable correlation of both figures. The results highlight the strengths and weaknesses of the particular economies and provide guidelines for political improvements and institutional investors' country allocations.
    Keywords: Venture capital; Private equity; Central Eastern Europe; Economic transition;
    JEL: G23 G24 M13 O16 P34 P52
    Date: 2007–02–19
  11. By: Parkhomenko, Alexander; Redkina, Anastasia; Maslivets, Olga
    Abstract: Economists have been noting for decades that Consumer Price Index (CPI) in the developed countries is overstating inflation by 0,5−2,0% per year. A significant part of the bias is due to the presence of technology products and differentiated products in the CPI basket. An increase share of these products in the Russian CPI may also lead to a substantial upward bias. Nowadays hedonic indices are believed to be the most efficient way to reduce this bias. They can be used in two ways: to estimate the bias in CPI and to elaborate alternative official price indices for information and communication technology (ICT) products. We estimate a 25% fall in the price of personal computers for 20 months (03.04-11.05) using this method. A 25−44% upward bias in price index for PC in Russia was also calculated. We have found that the Russian CPI could be upward biased by 0,18-0,32% per year due to new goods and quality change effects for PC (given 1% expenditure share).
    Keywords: CPI; price index; hedonic price index; CPI bias
    JEL: E31 C43
    Date: 2007–01–05
  12. By: Botezatu, Elena
    Abstract: Regional cooperation is of outmost importance, both for the southeastern European countries that want to set themselves on the European mainstream, and for the EU. In the last few years, the fight against corruption has been high on the agenda of all the governments in the CEE countries. The regional initiatives have provided the opportunity to exchange not only best, but also “worst practices” in this field, contributing to the development of anticorruption programs and to the improvement of the situation in these countries. The paper seeks to present the Romanian experience in regional initiatives, particularly in the Stability pact Anticorruption – Initiative.
    Keywords: regional cooperation; corruption; Southeast Europe; Romania
    JEL: F53
    Date: 2006–10
  13. By: Christophe Rault (LEO, University of Orleans and IZA); Robert Sova (CES, Sorbonne University and A.S.E); Ana Maria Sova (CES, Sorbonne University and A.S.E)
    Abstract: The main goal of regionalization is the creation of free trade areas and the guarantee for countries to accede to a widened market. Many studies dealing with the effects of regional free trade agreements on trade flows already exist in the economic literature and the explosion in the number of regional agreements among countries has recently stressed the key role of regionalization. However, the effects of agreements on trade were sometimes contradictory in those studies. These diverging results can be explained by the potential endogeneity bias of the agreement variable. Our research in this paper aims at reassessing the genuine role of associations. For this matter, we particularly study the association of Central and Eastern European countries (CEEC) with European Union countries. Our econometric analysis based on qualitative choice models highlights in particular why European countries chose to conclude an association agreement with CEEC, and stresses the fact that European Union countries select endogenously the conclusion of association agreements. We are also particularly interested in modeling the effect of the association agreement on export performances between countries, and to quantify its impact. When considering annual data for 4 CEEC and 19 OECD countries (1990-2004), we find a 0.17 positive impact of the association agreement on bilateral exports.
    Keywords: regionalization, European integration, qualitative choice models, gravity model
    JEL: E61 F13 F15 C25
    Date: 2007–04
  14. By: Socol, Cristian; Marinas, Marius; Socol, Aura Gabriela
    Abstract: This paper evaluates the main effects of the implementation of tax flat system in Romanian economy. If accompanying measures are not going to be enforced, the introduction of the flat rate of 16% in Romania will lead to unsustainable budgetary deficits and inflationist pressures. The flat tax favors the workers with big salaries and also big and financially solid companies (which, mainly “export” the profit). It will attack the fragile macroeconomic stability. It is uncertain if it will lead to the increase of the degree of employment, having in view the fact that the contributions to the social insurances have a very high level. The alternative scenario is simple. Romania should have chosen to continue what it was confirmed to be a valid element of the economic evolution towards a European standard (progressive fiscal system).
    Keywords: flat tax; fiscal policy; inflation; AD-AS model
    JEL: E62 E31 H21
    Date: 2007–04–05

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