nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒08‒18
six papers chosen by
J. David Brown
Heriot-Watt University

  1. FDI and Technology Spillovers in China By Sea Jin Chang; Jaiho Chung; Dean Xu
  2. What Explains Persistent Inflation Differentials Across Transition Economies? By Felix Hammermann; Mark Flanagan
  3. Measuring Rural Poverty in China: a Case Study Approach By Xiuqing Wang; Shujie Yao; Juan Liu; Xian Xin; Xiumei Liu; Wenjuan Ren
  4. Collective Pension Funds: International Evidence and Implications for China's Enterprise Annuities Reform By Yu-Wei Hu; Colin Pugh; Fiona Stewart; Juan Yermo
  5. Globalization of R&D and China – Empirical Observations and Policy Implications By Lundin, Nannan; Schwaag Serger, Sylvia
  6. Enlarging the EMU to the east: What effects on trade? By Ansgar Belke; Julia Spies

  1. By: Sea Jin Chang; Jaiho Chung; Dean Xu
    Abstract: Using a database of Chinese firms, we examine the effects of technology spillovers not only between foreign entrants and local firms but also between “modernized” local firms to other local firms. Our results show that the increased presence of foreign multinationals within industries and in their upstream sectors positively affected the productivity of local firms. The positive intra-industry spillover effect from wholly owned subsidiaries becomes evident when the Chinese government’s restriction on foreign ownership was lifted. We also find strong spillover effects among local firms.
    Keywords: foreign direct investment, spillover effects, China
    JEL: F2 O2
    Date: 2007–07
  2. By: Felix Hammermann; Mark Flanagan
    Abstract: Panel estimates based on 19 transition economies suggests that some central banks may aim at comparatively high inflation rates mainly to make up for, and to perhaps exploit, lagging internal and external liberalization in their economies. Out-of-sample forecasts, based on expected developments in the underlying structure of these economies, and assuming no changes in institutions, suggest that incentives may be diminishing, but not to the point where inflation levels below 5 percent could credibly be announced as targets. Greater economic liberalization would help reduce incentives for higher inflation, and enhancements to central bank independence could help shield these central banks from pressures.
    Keywords: inflation, transition economies, panel data
    JEL: E58 P24
    Date: 2007–08
  3. By: Xiuqing Wang; Shujie Yao; Juan Liu; Xian Xin; Xiumei Liu; Wenjuan Ren
    Abstract: This paper measures rural poverty in Hubei Province and Inner Mongolia in China. The poverty lines we derived by Ravallion's method differ from the official Chinese poverty lines. The official pan-country poverty line underestimates rural poverty in Hubei Province and overestimates rural poverty in Inner Mongolia. Poverty determinants are estimated by Logit as well as Probit models. The study notes that factors such as living in a mountainous area, lack of better irrigation conditions, a large family size, few fixed assets, few land owned and sole dependence on agriculture as a livelihood source would make a rural household more vulnerable to poverty. On the other hand, a rural household whose members are either better educated or trained laborers would statistically be less poor. The growth-redistribution decomposition reveals that for all the three FGT indexes in Hubei province, income growth contributed much to the alleviation of poverty, while the redistribution or inequality effects counteracted the growth effects and worsened poverty. The poverty incidence decomposition results reveal that about one third of the growth effects had been counteracted by the redistribution effects. This implies that future anti-poverty programs should pay more attention to solving the inequality problem in China. Poverty dominance analysis also helps us better understand the poverty situation. It reveals that rural poverty in Inner Mongolia is more severe than that in Hubei, and that poverty incidence in Hubei has lessened from 1997 to 2003, which are the same findings as those drawn from deriving poverty lines.
    Keywords: Rural Poverty Line, Poverty Determinants, Growth Redistribution Decomposition, Poverty Dominance, China
    JEL: I32 D33 C43
    Date: 2007
  4. By: Yu-Wei Hu; Colin Pugh; Fiona Stewart; Juan Yermo
    Abstract: Collective pension funds (CPFs) - occupational pension funds that cover the employees of more than one employer (enterprise) - have been operating in OECD countries for decades. Generally speaking, there are two models, i.e. closed pension funds, with membership restricted to a particular industry or group of industries, and open pension funds open to all types of company. The governance structure of such funds also operates in two ways – via an internal model (with trustees appointed by employers and employees) and external model (with professional, commercial trustees). In this report, we first describe and analyse how CPFs are operated in selected OECD countries and non-OECD economies. Then, we review occupational pensions (or Enterprise Annuities -EA- in Chinese terminology) in general and CPFs in particular. Given the problems holding back the development of EA plans among small and medium size enterprises (SMEs) in China, and bearing in mind both China‘s specific situations and international best practices, we propose a number of policy recommendations to promote the development of CPFs covering the SME sector. Our practical policy recommendations include 1) industry funds with more open membership; 2) establishment of new purpose-built industry funds; 3) establishment of new regional EA administration centres acting as independent pension councils (trustees) for open pension funds; 4) in parallel to these policy initiatives in China, commercial trustees should be encouraged to establish CPFs targeting the SME sector. <P>Fonds de pension collectifs : Observations internationales et conséquences pour la réforme des rentes d'entreprise en Chine <BR>Les fonds de pension collectifs (FPC) – fonds de pension professionnels qui couvrent des salariés relevant de plusieurs employeurs (entreprises) – existent dans les pays de l‘OCDE depuis plusieurs décennies. De manière générale, il existe deux modèles : des fonds de pension fermés auxquels seuls peuvent adhérer les travailleurs d‘une certaine industrie ou d‘un groupe d‘industries, et des fonds de pension ouverts auxquels peuvent adhérer les travailleurs de toutes entreprises. De même, il y a deux modèles de structure de gouvernance : un modèle interne (où les fiduciaires sont désignés par les employeurs et les travailleurs) et un modèle externe (où les fiduciaires sont des professionnels qui agissent à titre commercial). Dans ce rapport, nous commençons par décrire et analyser la façon dont les FPC sont gérés, dans certains pays de l‘OCDE et dans certaines économies extérieures à la zone de l‘OCDE. Puis nous examinons la question des pensions professionnelles (en Chine, on parle de rentes d‘entreprise), de façon générale, et des FPC en particulier. Étant donné les problèmes qui freinent le développement des systèmes de rentes d‘entreprise dans les petites et moyennes entreprises (PME) en Chine, et compte tenu, par ailleurs, des spécificités de la situation chinoise et des pratiques optimales définies au niveau international, nous formulons un certain nombre de recommandations pour promouvoir le développement des FPC dans le secteur des PME. Nos recommandations, concrètement, sont les suivantes: 1) ouvrir plus largement l‘adhésion aux fonds par industrie; 2) créer de nouveaux fonds par industrie spécialisés; 3) mettre en place de nouveaux centres régionaux de gestion des rentes d‘entreprise qui joueraient le rôle de conseils indépendants (fiduciaires) pour les fonds de pension ouverts; 4) parallèlement à ces initiatives d‘ordre public, en Chine, des fiduciaires agissant à titre commercial devraient être encouragées à créer des FPC ciblés sur le secteur des PME.
    Keywords: China, pension fund, fond de pension, Small and Medium-sized Enterprises
    JEL: G23 P52
    Date: 2007–08
  5. By: Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Schwaag Serger, Sylvia (ITPS)
    Abstract: As one of the world’s largest recipients of Foreign Direct Investment (FDI), China is emerging as a key global player in Research and Development (R&D). This rapid increase in R&D investment is mainly attributed to the effort of strengthening the indigenous innovation capacity of domestic actors and, to an increasing extent, to the process of globalization of R&D with multinational enterprises as key driving force. This paper provides a detailed overview of the relative importance of foreign R&D in China based on quantitative mapping in terms of R&D inputs, outputs and local linkages in R&D-related activities, combined with an in-depth description of the nature of foreign R&D activities. Our empirical observation suggests that the growing importance of China in the globalization of R&D is more than a ‘flash-in-the-pan’. On one hand, China is facing new challenges, but at the same time is attempting to seize the “window of opportunity” to compete for knowledge and human resources through structural adjustments and new policy initiatives. On the other hand, multinational enterprises from OECD countries are not only intensifying, but also diversifying their activities in a larger number of R&D intensive sectors in China. In such a rapid and dynamic development, China seems to emerge not only as an important source of R&D but also a key magnet of global R&D operations.
    Keywords: China; R&D; Globalization; Multinationals
    JEL: F23 O31 O32
    Date: 2007–08–09
  6. By: Ansgar Belke; Julia Spies
    Abstract: The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results indicate that the common currency has boosted intra-EMU imports by 7%. Under the assumption that the same relationship between the explanatory variables and imports will hold for EMU-CEEC trade, we are able to predict the future impact of the euro. Our findings suggest that except for the least integrated countries, Poland, Latvia and Lithuania, all CEECs can expect increases in the EMU-12 import share.
    Keywords: Central and Eastern European countries, Euro area enlargement, gravity model, panel estimation
    JEL: F15 F41
    Date: 2007–07

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