nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒07‒13
six papers chosen by
J. David Brown
Heriot-Watt University

  1. Mind the Break! Accounting for Changing Patterns of Growth during Transition By Fidrmuc, Jan; Tichit, Ariane
  3. The relation between private transfers and household income on looking at altruism, exchange and risk-sharing hypotheses. An empirical analysis applied to Russia (In French) By Matthieu CLEMENT (GREThA)
  4. Comparative analysis of the exchange market pressure in Central European countries with the Eurozone membership perspective By Stavarek, Daniel
  5. Corporate Governance and Dividend Policy in Poland By Oskar Kowalewski; Ivan Stetsyuk; Oleksandr Talavera
  6. Is there a Displacement Deadweight Loss from Tax Evasion? Estimates Using Firm Surveys from the Czech Republic By Hanousek, Jan; Palda, Filip

  1. By: Fidrmuc, Jan; Tichit, Ariane
    Abstract: We argue that econometric analyses based on transition countries’ data can be vulnerable to structural breaks across time and/or countries. We demonstrate this argument by identifying structural breaks in growth regressions estimated with data for 25 countries and 16 years. Our method allows identification of structural breaks at a-priori unknown points in space or time. The only prior assumption is that breaks occur in relation to progress in implementing market-oriented reforms. We find robust evidence that the pattern of growth in transition has changed at least two times, yielding thus three different models of growth associated with different stages of reform. The speed with which individual countries progress through these stages differs considerably.
    Keywords: Growth; reform; structural breaks; transition
    JEL: O47 P26 P27
    Date: 2007–07
  2. By: Jaan Masso; Urmas Varblane; Priit Vahter
    Abstract: The current extensive literature on the home-country employment effect of FDI focuses almost exclusively on the case of investments from high-income and high labour cost home countries. In our paper we analyse the home-country employment effect in Estonia as a low- cost medium-income transition economy. The data from the population of Estonian firms between 1995 and 2002 was studied with regression analysis and propensity score matching in order to construct an appropriate counterfactual for the firms that have invested abroad. The results indicate that in general, outward FDI had a positive impact on the home-country employment growth. Concerning direct investors (domestic firms investing abroad) and indirect investors (foreign-owned firms investing abroad), the former group had a stronger home- country employment effect due to their smaller pre-investment size and because the subsidiaries of indirect investors are served from other locations rather than from Estonia. The positive employment effect was much stronger in the case of investments made after 1999 due to the better macro-economic performance of Estonia from the year 2000 onwards. Services firms demonstrated a stronger home-country employment effect than manufacturing firms. Our results imply that the logic of the outward investments from low-cost transition and developing economies differs from that of high-income countries.
    Keywords: outward foreign direct investments, employment effects of FDI, Central- and Eastern Europe, transition
    JEL: D21 F23 J23
    Date: 2007
  3. By: Matthieu CLEMENT (GREThA)
    Abstract: The aim of this paper is to analyze the impact of household income on private transfers in Russia on the basis of altruism, exchange and risk sharing hypotheses. Econometrical investigations, with Russia Longitudinal Monitoring Survey data for 2002, show that private transfers can’t be explained by altruism but rather by reciprocity. More precisely, in poor households, the idea of risk sharing is central, whereas in richer households, individual interest (exchange hypothesis) is more appropriate to understand private transfers.
    Keywords: Private transfers; well-being ; altruism; exchange; risk-sharing; bivariate Tobit; spline regression; Russia
    JEL: C24 C34 D64 I30 P20
    Date: 2007
  4. By: Stavarek, Daniel
    Abstract: This paper estimates the exchange market pressure (EMP) in four Central European countries (Czech Republic, Hungary, Poland, Slovakia) during the period 1993-2006. Therefore, it is one of very few studies focused on this region and the very first paper applying concurrently model-dependent as well as model-independent approach to the EMP estimation on these countries. The results obtained suggest that the approaches are not compatible and lead to absolutely inconsistent findings. They often differ in both identification of principal development trends and estimated magnitude and direction of the pressure. Therefore, any general conclusion on those issues is hard to draw. The paper provides evidence that a shift in the exchange rate regime towards the quasi-fixed ERM II should not lead to increasing EMP. However, it is highly probable that some episodes of the excessive EMP will make the fulfillment of the exchange rate stability criterion more difficult in all countries analyzed unless the criterion will have eased.
    Keywords: exchange market pressure; model-dependent approach; model-independent approach; EU New Member States; exchange rate stability criterion
    JEL: F36 E42 F31 C32
    Date: 2007–06–28
  5. By: Oskar Kowalewski; Ivan Stetsyuk; Oleksandr Talavera
    Abstract: This study examines the relation between corporate governance practices measured by Transparency Disclosure Index (TDI) and dividend policy in Poland. Our empirical approach, constructs measures of the quality of the corporate governance for 110 non-financial companies listed on Warsaw Stock Exchange between 1998 and 2004. We find evidence that an increase in the TDI or its subindices leads to an increase in the dividend-to-cash-flow ratio. These results support the hypothesis that companies with weak shareholder rights pay dividends less generously than do firms with high corporate governance standards. Therefore, minority shareholders often use power to extract dividends. We also find that large and more profitable companies have a higher dividend payout ratio, while riskier and more indebted firms prefer to pay lower dividends.
    Keywords: Corporate governance, dividend policy, agency theory
    JEL: G30 G32 G35
    Date: 2007
  6. By: Hanousek, Jan; Palda, Filip
    Abstract: In the presence of the underground economy taxes give rise to a deadweight loss from displacement of efficient producers by inefficient producers. We consider an economy in which a producer faces two types of costs: the cost of production, and taxes. If the ability to evade taxes is inversely proportional to the ability to keep production costs down, high tax rates may cause inefficient producers to crowd out efficient producers. We estimate this deadweight loss from surveys of 426 Czech firms taken in 2004 and 2005. We find that the deadweight loss due to this crowding out can be several times as large as the triangle deadweight losses from discouraged consumption. Our paper provides the first estimates ever of the displacement loss from tax evasion.
    Keywords: Underground economy; social cost of public funds; taxation.
    JEL: H26 H21
    Date: 2007–06

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