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on Transition Economics |
| By: | Jan Svejnar (University of Michigan, CERGE-EI, CEPR and IZA) |
| Abstract: | While China shared many systemic, initial conditions with the transition economies of Central-East Europe (CEE) and the Commonwealth of Independent States (CIS), it had a more agricultural economy and a more stable political-economic system than many CEE and CIS countries. Unlike most of the CEE and CIS economies, China adopted a strategy of gradual economic transformation that maintained the existing system and created new economic activities on top of it. This enabled China to avoid the transformation depression observed in CEE and CIS, and allowed it to generate high rates of economic growth that have now lasted for almost three decades. At the time of this study, the CEE and CIS economies have also completed a decade or more of respectable economic growth, demonstrating that numerous forms of the transition process can generate long term economic growth. In retrospect, the tradeoff for avoiding an initial depression appears to be the willingness to maintain most of the existing economic and political system rather than embarking on a rapid but incomplete economic and political transformation. With a rising economic instability and political pressure, countries such as Poland and the Soviet Union (CIS) had little choice but to proceed relatively fast. Others, such as East Germany and Czechoslovakia, could have retained the centrally planned system, but they abandoned it and communism rapidly for political reasons. Looking forward, the current situation is an optimistic one, with China, CIS and CEE belonging to the fastest growing regions of the world. It will be interesting to see whether all or only some of these models will turn out to be successful in the long run. |
| Keywords: | China, transition economies, economic performance |
| JEL: | O1 P2 N1 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2791&r=tra |
| By: | Serban Scrieciu (Department of Land Economy, University of Cambridge, UK); Lindsay C Stringer (School of Environment and Development, University of Manchester, UK) |
| Abstract: | Since Communism collapsed at the end of the 1980s, the transition towards a market-based economy has been considerably influenced by the neoclassical economic approach to the reform process. This has often ignored the establishment of adequate institutional frameworks, resulting in high transition costs and the side-lining of environmental concerns. This paper takes a holistic approach to the transformation of post-Communist economies that emphasises, in addition to socio-economic and political dimensions, the importance of appropriate institutional developments in the area of environmental sustainability. Core development values and objectives need to be significantly re-evaluated, if long-term sustainability prospects are to be effectively pursued. |
| Keywords: | Post-Communist societies, transition, environment, sustainability, neoclassical economics, post Keynesianism |
| JEL: | Q2 Q4 R4 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:lnd:wpaper:200725&r=tra |
| By: | B. MERLEVEDE; K. SCHOORS; B. VAN AARLE |
| Abstract: | This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyze the impact of the oil price, the exchange rate, private sector confidence and fiscal policy on economic performance. The model does very well in explaining Russia’s recent economic history in the period 1995-2004. Simulations suggest that the Russian economy is vulnerable to downward oil price shocks. We substantiate two mechanisms that mitigate the economic effects of oil price shocks, namely the stabilisation brought by the Oil Stabilisation Fund and the Dutch disease effect. The negative effect of a shock in private sector confidence on real GDP is comparable to the effect of an oil price shock, although the transmission of both shocks runs along different channels. The fiscal policies of the Putin administration temper economic fluctuations caused by oil price shocks, but it remains to be seen whether these policies will be continued. |
| Keywords: | Russia, Macroeconomic Modeling, Macroeconomic stabilization |
| JEL: | C70 E17 E58 E63 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:07/461&r=tra |
| By: | Daniel Münich (CERGE-EI, Prague); Jan Svejnar (University of Michigan, CEPR, CERGE-EI and IZA) |
| Abstract: | In this paper, we use 1991-2005 panel data on the unemployed, vacancies, inflow into unemployment, and outflow from unemployment in five former communist economies and in the western part of Germany (a benchmark western economy) to examine the evolution of unemployment together with that of inflows into unemployment and vacancies. The comparison of the transition economies with an otherwise similar and spatially close market economy is useful because it enables us to identify the main differences and similarities in the evolution of the key variables, and thus draw conclusions as to whether different or similar factors cause high unemployment. |
| Keywords: | unemployment, communism, transition, labor |
| JEL: | P2 J4 J6 C33 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2798&r=tra |
| By: | David Dollar; Shang-Jin Wei |
| Abstract: | Based on a survey that we designed and that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, this paper examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to capital across firm ownership, regions, and sectors. It provides a systematic comparison of investment efficiency among wholly and partially state-owned, wholly and partially foreign-owned, and domestic privately owned firms, conditioning on their sector, location, and size characteristics. It finds that even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms. Similarly, certain regions and sectors have consistently lower returns to capital than other regions and sectors. By our calculation, if China succeeds in allocating its capital more efficiently, it could reduce its capital stock by 8 percent without sacrificing its economic growth (and hence could raise its household consumption and deliver a faster improvement to its citizens' living standard). |
| JEL: | E22 F21 O1 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13103&r=tra |
| By: | Francesco Pastore (Seconda Università di Napoli and IZA); Alina Verashchagina (Università di Siena) |
| Abstract: | This paper suggests an analytical framework to analyse the joint evolution of female participation and wages across countries in Central and Eastern Europe (CEE) and the Former Soviet Union (FSU), of which Belarus is a particular case. In CEE, female participation has reduced relatively more than wages, due to greater wage rigidity; in the FSU, wages have reduced more than participation, due to labour hoarding practices. In Belarus, only wages adjust, since (mainly state owned) firms tend to largely maintain their entire workforce. Underneath slow transition and remarkably stable female participation rates (at over 80%), the unconditional gender gap in log hourly wages has increased by a half, while that in log of net and total monthly wages has more than doubled over almost a decade (1996-2004). The Juhn, Murphy and Pierce (1991) decomposition suggests that the deterioration of women wages is caused by negative changes in observed characteristics (due to horizontal segregation) and in the remuneration for those characteristics. Instead, very bland changes in the residual wage distribution tended to reduce (not to increase) the gender wage gap: in fact, women have benefited both of changes in the degree of wage inequality and of gains in the mean female rank in the male residual distribution. |
| Keywords: | evolution of the gender wage gap, decomposition analysis, wage inequality, economic transition, Belarus |
| JEL: | J16 J22 J31 P20 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2796&r=tra |
| By: | Bobirca, Ana; Miclaus, Paul-Gabriel |
| Abstract: | The purpose of the article is to illustrate the main characteristics of the corporate governance challenge facing the countries of South-Eastern Europe (SEE) and to subsequently determine and assess the extensiveness and effectiveness of corporate governance regulation in these countries. Therefore, we start with an overview on the subject of the key problems of corporate governance in transition. We then address the issue of corporate governance measurement for SEE countries. To this end, we include a review of the methodological framework for determining both the extensiveness and the effectiveness of corporate governance legislation, as defined by the EBRD and a discussion on aspects related to corporate governance development, the quality of corporate governance codes and of the “law on the books”. We then focus on the actual analysis of legal institutions effectiveness and provide a measure of corporate governance in Romania and other SEE emerging markets. The paper concludes by emphasizing the relationship between legal change and the development of financial markets in the SEE region. |
| Keywords: | corporate governance; South-Eastern Europe; transition; extensiveness; effectiveness |
| JEL: | G38 P31 K22 G34 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3272&r=tra |
| By: | Nienke Oomes; Katerina Kalcheva |
| Abstract: | In this paper, we assess whether recent economic developments in Russia are symptomatic of Dutch Disease. We first provide a brief review of the literature on Dutch Disease and the natural resource curse. We then discuss the symptoms of Dutch Disease, which include (1) real exchange rate appreciation; (2) slower manufacturing growth; (3) faster service sector growth; and (4) higher overall wages. We test these predictions for Russia while carefully controlling for other factors that could have led to similar symptoms. We conclude that, while Russia has all of the symptoms, the diagnosis of Dutch Disease remains to be confirmed. |
| Date: | 2007–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/102&r=tra |
| By: | Andreas Kontoleon (Department of Land Economy, University of Cambridge, UK); Pauline Grosjean (LERNA, University of Toulouse and European Bank for Reconstruction and Development, France) |
| Abstract: | This paper undertakes a direct comprehensive assessment of the long-run sustainability of one the world’s largest sustainable development programs, the Slopping Land Conversion Program (SLCP) in China under different plausible post-SLCP scenarios. The analysis is based on farmer contingent behavior post-program land and labor decisions as well as choice experiment data. Our econometric results highlight the main obstacles to the program’s sustainability, which include specific shortfalls in program implementation as well as certain institutional constraints such as tenure insecurity, poor land renting rights, limited access to credit and limited land management rights. |
| Keywords: | sustainable development programs, sustainability, recursive probit, choice modeling, Asia, China |
| JEL: | Q2 Q4 R4 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:lnd:wpaper:200726&r=tra |
| By: | Ashoka Mody; Deniz Igan; Stefania Fabrizio |
| Abstract: | Despite the appreciation of the exchange rate, the eight Central and Eastern European countries (the CEE-8) that entered the European Union in May 2004 have achieved a decade of impressive export growth, expanding significantly their shares of world markets. Does this mean that the real exchange rate is irrelevant? If not, what other factors compensated for the appreciation to explain the apparently strong competitiveness of these economies? And will these favorable factors continue to power export growth? This paper places in international context the achievements of the CEE-8 and helps more broadly to identify the determinants of international competitiveness. Building from data at the six-digit level of disaggregation, it shows that the CEE-8 made an impressive shift in product quality and in the technological intensity of exports, and that these shifts associated with the structural transformation were also associated with increased market share. The analysis strongly suggests that, when trading in international markets, countries benefit from higher product quality. However, while the structural transformation achieved was valuable in raising market shares, the easy gains from this process may be over. |
| Date: | 2007–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/97&r=tra |
| By: | Pham, T.H. (Poverty Research Unit at Sussex, Department of Economics, University of Sussex) |
| Abstract: | Vietnam?s rural economy has substantially diversified over the past two decades. The rural nonfarm sector has grown rapidly and became an important source of employment and income for rural households. This growing nonfarm employment was associated with radical changes in the trade policy reform that has put the country to the top two or three performers in the developing world. This paper examines the potential effect of the trade policy reform on nonfarm employment in rural Vietnam during the period 1993-2002. It proposes two trade openness indices that allow changes in the trade policy at the macro level to be transmitted to rural households. The results reveal that the trade policy reform does have a material impact on rural nonfarm employment. While a more liberalized agricultural sector encourages nonfarm diversification, a lower protection level in the nonfarm sector discourages individual participation in nonfarm income-generating activities. |
| Keywords: | Trade liberalization, trade policy reform, rural nonfarm employment, Vietnam |
| JEL: | F13 F16 J21 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:pru:wpaper:35&r=tra |
| By: | David A. Grigorian; Hamid Reza Davoodi |
| Abstract: | Despite recording double digit growth since 2000, Armenia's tax-to-GDP ratio has been fairly stable at about 14½ percent. This paper catalogues a range of factors that may account for Armenia's stubbornly for tax collection by benchmarking Armenia's tax-to-GDP against some comparator countries and conducting an extensive econometric study of the main determinants of tax collection. We find empirical support for the hypothesis that the persistence of Armenia's low tax-GDP ratio can be traced to persistence of weak institutions and a large shadow economy. The gap between the potential and actual tax collection in Armenia could be as high as 6½ percent of GDP. We conclude with some policy recommendations that, if adopted, can boost revenue buoyancy. |
| Date: | 2007–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/106&r=tra |
| By: | Mohnen, Pierre (UNU-MERIT and University of Maastricht); Tiwari, Amaresh (University of Maastricht); Palm, Franz (University of Maastricht); Schim van der Loeff, Sybrand (University of Maastricht) |
| Abstract: | Using direct information on financial constraints from questionnaires, rather than the commonly used balance sheet information, this paper presents evidence that, controlling for traditional factors as size, market share, cooperative arrangement, and expected profitability, financial constraints affect a firm's decision of how much to invest in R&D activities. Apart from these constraints, other hampering factors as market uncertainty and institutional bottlenecks, regulations and organizational rigidities also affect R&D investment. A semiparametric estimator of sample selection is employed to control for potential endogeneity of the regressors. The paper also shows that old firms and firms that belong to a group are less financially constrained when it comes to undertaking R&D activities. For the estimation a semiparametric binary choice model is used. |
| Keywords: | Research and Development, Investment, Financial Risk |
| JEL: | O32 G11 G32 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2007011&r=tra |