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

  1. Wage determination and wage inequality inside a Russian firm in late transition: Evidence from personnel data - 1997 to 2002 By Thomas Dohmen; Hartmut Lehmann; Mark E. Schaffer
  2. How Efficient Has Been China's Investment? Empirical Evidence from National and Provincial Data By Dong He; Wenlang Zhang; Jimmy Shek
  3. Please Pass the Catch-up The Relative Performance of Chinese and Foreign Firms in Chinese Exports By Bruce Blonigen; Alyson Ma
  4. Occupational gender composition and wages in Romania: from planned equality to market inequality? By Andrén, Daniela; Andrén, Thomas
  5. Managing risks: what Russian households do to smooth consumption? By Notten, Geranda; de Neubourg, Chris
  6. Share Price Disparity in Chinese Stock Markets By Tom Fong; Alfred Wong; Ivy Yong
  7. Explaining Gift Behavior: Altruism or Social Norms? Theory and Evidence from Romania By Mitrut, Andreea; Nordblom, Katarina
  8. Fertility postponement and age norms in Poland: is there a deadline for parenthood? By Monika A. Mynarska
  9. The Case for Financial Sector Liberalization in Ethiopia By Kozo Kiyota; Barbara Peitsch; Robert M. Stern

  1. By: Thomas Dohmen; Hartmut Lehmann; Mark E. Schaffer
    Abstract: We use personnel data from a Russian firm for the years 1997 to 2002 to study the determinants of wages during transition. Our findings indicate that remuneration is not predetermined by formal rules and a stable institutionalized structure of wages, but rather that local labor market conditions have a strong impact on wage setting at the firm level. In particular, we document that real wages fall substantially during a period of high inflation and worsening local labor market conditions. Relative wage decreases are most pronounced for employees who initially earned the highest rents. The process of rent extraction leads to a strong compression of real wages and real compensation at the firm.
    Keywords: personnel economics, wage determination, Russia, transition
    JEL: J31 P31
    Date: 2007
  2. By: Dong He (Research Department, Hong Kong Monetary Authority); Wenlang Zhang (Research Department, Hong Kong Monetary Authority); Jimmy Shek (Research Department, Hong Kong Monetary Authority)
    Abstract: China's investment has been growing very strongly. The share of gross capital formation in GDP in China has also been higher than in other East Asian economies during their high growth period in the 1970s-80s. Many commentators have argued that such high rates of investment growth have been driven by irrational incentives and have been largely inefficient, will cause a build up of non-performing loans in the banking system, and will also lead to over-capacity and deflation. Others, however, have argued that China is still capital scarce, returns to capital are high, and therefore high rates of investment are both desirable and sustainable. This paper attempts to shed new light on the debate. We analyse both the allocative efficiency and the dynamic efficiency of China's spending on capital. The allocative efficiency measures the extent to which resources have been invested in places where potential rates of return on capital are high. The potential rates of return can be calculated as the marginal products of capital derived from an aggregate production function. The dynamic efficiency measures the extent to which the capital-output ratio exceeds the optimal level. The optimal level of the capital stock is determined by a rate of investment, at which level the Chinese residents at the present enjoy the highest level of consumption without sacrificing the level of consumption in the future. We first construct China's total capital stock at national and provincial levels, estimate the Cobb-Douglas and CES production functions, and compute the marginal products of capital. Assuming that the Chinese economy was operating on the production frontier, the marginal products of capital at the aggregate level have been relatively high in the past two decades, and have not shown clear signs of decline in recent years. We find that China's marginal product of capital compares favourably with those observed in the major industrialised economies and in the Asia region. We also find that the marginal products of capital have been higher in the coastal areas than in the less developed areas of western and central China, but the marginal products of infrastructure capital have been higher in the inland areas than in the coastal areas. These results are robust to different assumptions made in constructing the data of capital stock.
    Date: 2006–11
  3. By: Bruce Blonigen; Alyson Ma
    Abstract: Foreign-invested enterprises (FIEs) account for well over half of all Chinese exports and this share continues to grow. While the substantial presence of FIEs has contributed greatly to the recent export-led growth of China, an important objective of the Chinese government is to ultimately obtain foreign technologies and develop their own technological capabilities domestically. This paper uses detailed data on Chinese exports by sector and type of enterprise to examine the extent to which domestic enterprises are "keeping up" or even "catching up" to FIEs in the volume, composition and quality of their exports. We also use a newly-created dataset on Chinese policies encouraging or restricting FIEs across sectors to examine the extent to which such policies can affect the evolving composition of Chinese exports.
    JEL: F14 L11 L15
    Date: 2007–09
  4. By: Andrén, Daniela (Department of Economics, School of Business, Economics and Law, Göteborg University); Andrén, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In Romania, the communist regime promoted an official policy of gender equality for more than 40 years, providing equal access to education and employment, and restricting pay differentiation based on gender. After its fall in December 1989, the promotion of equal opportunities and treatment for women and men did not constitute a priority for any of the governments of the 1990s. Given that both the economic mechanisms and the institutional settings changed radically, the question is if this affected gender equality. This paper analyzes both gender and occupational wage gaps in Romania before and during the first years of transition from a planned to a market economy. The results suggest that the communist institutions did succeed in eliminating the gender wage differences in female- and male-dominated occupations, but not in gender-integrated occupations, for which the gender wage gap was about 31.6%. During the transitions years, this gap decreased to 20-24%, while the gender wag gap in maleand female-dominated occupations increased to 10-14.5%.<p>
    Keywords: Occupational segregation; gender wage gap; occupational wage gap; transition
    JEL: J24 J31 J71 J78 P26 P27
    Date: 2007–08–31
  5. By: Notten, Geranda; de Neubourg, Chris
    Abstract: The increasing availability of rich (panel) data provides many opportunities to test theories on consumption smoothing behaviour. At the same time, the informational requirements in terms of data and modelling are high and very context specific, thus requiring a filtering of essential explanatory ingredients. In this paper we show how conceptual and exploratory empirical analysis can contribute to this filtering process. We develop a conceptual framework to analyze possible smoothing arrangements of households distinguishing between various smoothing mechanisms, institutional smoothing partners and required assets. Subsequently, we apply this framework to Russian survey data to explore how Russian households may smooth consumption. We select and analyze a broad set of indicators from household survey data to study what actions Russian households take and how these actions reflect the existence and prevalence of particular smoothing channels. The results can be used to formulate hypotheses on household smoothing behaviour and to delineate the features of a more rigorous analysis. The picture that emerges is one in which financial markets play a limited role as a smoothing channel in Russia, regardless of the smoothing mechanism used (saving, lending, insurance). Instead, households seem to use internal strategies, their family, social networks and the state to smooth consumption through capital accumulation, gift giving, the provision of loans and (pension) benefits. Furthermore, we find some evidence that old age pensions may be used for intergenerational risk-sharing within families while other findings point towards the use of household food production as an income smoothing strategy as opposed to a shock-response strategy.
    Keywords: Keywords: consumption smoothing; poverty; social risk management; Russia
    JEL: H55 D31 D12 D13 H53
    Date: 2007–08
  6. By: Tom Fong (Research Department, Hong Kong Monetary Authority); Alfred Wong (Research Department, Hong Kong Monetary Authority); Ivy Yong (External Department, Hong Kong Monetary Authority)
    Abstract: The presence of price disparity between A- and H- shares suggests that the two markets are segmented and thus allocation of capital is inefficient. In this paper, we attempt to identify the factors contributing to the price disparity, with a view to helping policymakers find solutions to the problem. Our results suggest that the disparity is caused by a combination of micro and macro factors. The fact that some of these factors are found to have played a crucial role in determining the disparity implies that reforms that can remove or reduce the segmentation can potentially bring considerable benefits by improving price discovery and market efficiency.
    Keywords: Price disparity, Chinese stock markets, Panel data analysis, Synchronisation, Dynamic correlation
    JEL: C23 F36 G10 G12
    Date: 2007–07
  7. By: Mitrut, Andreea (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper examines the motives behind inter-household gift transfers. A theoretical model is developed where, besides altruistic income redistribution, social norms (related to e.g. customs and traditions) motivate gift giving. We apply the model to Romania, a country where private gifts are very important, and find evidence for social norms being the main motive for gift giving. However, different norms determine gift transfers to poor and non-poor households. Moreover, we find no crowding-out effects from public pensions on private gifts.<p>
    Keywords: Transfers; altruism; reciprocity; Romania; social norms
    JEL: D10 H55 I30 J14 R20 Z13
    Date: 2007–09–04
  8. By: Monika A. Mynarska (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The postponement of childbearing is occurring across Europe, but the paths of this trend differ profoundly from country to country. In Poland, as in other Central and Eastern European countries, most women have their first child at a relatively young age. This paper asks about the role of age norms in sustaining the pattern of early motherhood. We investigate young adults’ perceptions of age in relation to their fertility choices. We find that age is indeed a salient dimension that structures and regulates individual childbearing plans. The qualitative approach of our study allows for gaining insights into how age norms are explained, argued about and sanctioned. Finally, we reconstruct the mechanisms of the normative influence of age limits (deadlines) on fertility behavior, improving our understanding of the timing of childbearing.
    JEL: J1 Z0
    Date: 2007–08
  9. By: Kozo Kiyota (Yokohama National University and University of Michigan, Ann Arbor); Barbara Peitsch (University of Michigan, Dearborn); Robert M. Stern (University of Michigan, Ann Arbor)
    Abstract: This paper focuses on issues of financial sector liberalization in Ethiopia, with reference in particular to the Ethiopian banking sector. We identify two factors that may constrain Ethiopia’s financial development. One is the closed nature of the Ethiopian financial sector in which there are no foreign banks, a non-competitive market structure, and strong capital controls in place. The other is the dominant role of state-owned banks. Our observations suggest that the Ethiopian economy would benefit from financial sector liberalization, especially from the entry of foreign banks and the associated privatization of state-owned banks.
    Keywords: foreign banks, state-owned banks, financial sector liberalization, Africa, Ethiopia
    JEL: G21 G32 L33 O55
    Date: 2007

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