nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒11‒03
six papers chosen by
J. David Brown
Heriot-Watt University

  1. FDI and Job Creation in China By Karlsson, Sune; Lundin, Nannan; Sjöholm, Fredrik; He, Ping
  2. Demographic challenges and the implications for children in CEE/CIS By Sheila Marnie; Leonardo Menchini
  3. China's Exports and Employment By Robert C. Feenstra; Chang Hong
  4. When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies By Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
  5. Agricultural producer support estimates for developing countries: measurement issues and evidence from India, Indonesia, China, and Vietnam By Orden, David; Cheng, Fuzhi; Nguyen, Hoa; Grote, Ulrike; Thomas, Marcelle; Mullen, Kathleen; Sun, Dongsheng
  6. A Proposed Strategy for Growth, Employment and Poverty Reduction in Uzbekistan By Terry McKinley; John Weeks

  1. By: Karlsson, Sune (Örebro University); Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN)); He, Ping (National Bureau of Statistics of China)
    Abstract: This paper examines the effect of FDI on job creation in the Chinese manufacturing sector. As one of the world’s largest recipients of FDI, China has arguably benefited from foreign multinational enterprises in various respects. However, one of the main challenges for China, and other developing countries, is job-creation, and the effect of FDI on job creation is uncertain. The effect depends on the amount of jobs created within foreign firms as well as the effect of FDI on job creation in domestic firms. We analyze FDI and job creation in China using a large sample of manufacturing firms for the period 1998-2004. Our results show that FDI has positive effects on employment growth. The positive effect of job creation in foreign firms is associated with their firm characteristics and, in particular, their access to export markets. There also seems to be a positive indirect effect on job creation in domestically owned firms, presumably caused by spillovers.
    Keywords: China; Employment; Foreign Direct Investment; Job Creation
    JEL: F23 J21 J23
    Date: 2007–10–24
  2. By: Sheila Marnie; Leonardo Menchini
    Abstract: The paper discusses some of the implications of recent demographic changes in the CEE/CIS on children of the region. The first part of the paper documents the striking changes in population size and structures which have occurred since the beginning of transition, and which have led to a substantial reduction in the child population. It is argued that they have been mainly driven by the drop in birth rates which has characterised the whole region, but which has been most dramatic in the CEE and Western CIS. Some countries in these subregions now rank among those with the lowest levels of fertility in the world, and the shrinking cohorts of children in these countries face the prospect of a growing old-age dependency burden. The second part of the paper discusses recent data on infant and under-five mortality, which are direct measures of child wellbeing and of the success of policy measures aimed at improving child survival and development. The paper highlights the marked differences not only in levels, but also in progress in reducing mortality rates across the CEE/CIS. Whereas some countries of Central Europe have made impressive progress during the past decade and now rank among those with the lowest levels of infant mortality in the world, the high levels and slow rates of reduction in the Caucasus and Central Asian countries are a matter for concern. The paper also draws attention to the substantial monitoring challenges which still exist in estimating and tracking infant and child mortality, particularly in these latter two subregions, despite the recent official adoption of the internationally recommended definition of ‘live births’. Official estimates based on civil registry records lead to an underestimation of the scale of the child survival problem and detract policy attention from the urgent need to improve the quality of pre and post natal care, mainly through incentives and training for medical staff. Without improvements in monitoring, it will be difficult for these countries to devise appropriate policy responses to correct the problems and remove existing barriers to improving child survival.
    Keywords: birth rate; child mortality; child survival; demographic change; right to survival and development; under five mortality rate;; Central Europe; Eastern Europe; Russia;
    JEL: P36
    Date: 2007
  3. By: Robert C. Feenstra; Chang Hong
    Abstract: Dooley et al (2003, 2004a,b,c) argue that China seeks to raise urban employment by 10-12 million persons per year, with about 30% of that coming from export growth. In fact, total employment increased by 7.5-8 million per year over 1997-2005. We estimate that export growth over 1997-2002 contributed at most 2.5 million jobs per year, with most of the employment gains coming from non-traded goods like construction. Exports grew much faster over the 2000-2005 period, which could in principal explain the entire increase in employment. However, the growth in domestic demand led to three-times more employment gains than did exports over 2000-2005, while productivity growth subtracted the same amount again from employment. We conclude that exports have become increasingly important in stimulating employment in China, but that the same gains could be obtained from growth in domestic demand, especially for tradable goods, which has been stagnant until at least 2002.
    JEL: F1 O1 R15
    Date: 2007–10
  4. By: Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
    Abstract: We use firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). Providing evidence from a larger sample of countries and greater variety of firms than existing studies, with separate estimates by firm size, age, and sector, we show: a) backward spillovers (stemming from supplying a foreign firm in the host country or exporting to a foreign firm) are consistently positive; b) horizontal spillovers are mostly insignificant but positive for older firms and firms in the service sector; d) forward spillovers (from purchasing from foreign firms or importing) are also positive only for old and service sector firms. We find no support for the hypothesis that spillovers are greater for FDI with more advanced technology. While efficiency of domestic firms’ is affected by the business environment, the strength of FDI spillovers is not, either when measured by the degree of corruption, bureaucratic red tape or by differences across regions that vary in terms of development. Testing whether spillovers vary with the firm’s “absorptive capacity” we find: i) distance from the efficiency frontier tends to dampen horizontal spillovers in manufacturing and backward spillovers among old firms; ii) whereas firms with a larger share of university educated workforce are more productive, they do not enjoy greater FDI spillovers than firms with less educated workers. FDI spillovers hence vary by sectors and types of firms.
    Keywords: efficiency; FDI; spillovers; transition economies
    JEL: F23 O16 P23
    Date: 2007–10
  5. By: Orden, David; Cheng, Fuzhi; Nguyen, Hoa; Grote, Ulrike; Thomas, Marcelle; Mullen, Kathleen; Sun, Dongsheng
    Abstract: "This study analyzes the evolution of agricultural policies from 1985 to 2002 in India, Indonesia, China, and Vietnam and provides empirical estimates of the degree of protection or disprotection to agriculture in these four countries, both by key commodities and in aggregate... Taken together the reported measures of support and disprotection of specific crops and agriculture in total provide a reasonable basis for assessing the stance of agricultural policies of India, Indonesia, China, and Vietnam. Attention to measurement issues provides a sensitivity analysis. The results reported are indicative of the range of outcomes likely to be found more broadly among developing countries. From regimes of heavy intervention in agricultural markets, each of the four countries in the study has undergone a substantial reform process." from text
    Keywords: Agricultural support, Agricultural policies, Reform,
    Date: 2007
  6. By: Terry McKinley (International Poverty Centre); John Weeks (Professor Emeritus, School of Oriental and African Studies, University of London)
    Abstract: This Country Study provides an outline of a Strategy for Growth, Employment and Poverty Reduction in Uzbekistan. It recommends that the country seek to achieve a six per cent trend rate of economic growth based on increases in domestic public and private investment, instead of relying, as it currently does, on external demand for primary commodities. It also recommends measures to increase the employment intensity of growth and reduce inequality so that the country?s pattern of growth could become broad-based and inclusive. In order to achieve these goals, the study calls for more expansionary fiscal policies, focused on increasing public investment; moderately more accommodating monetary policies, designed to maintain positive but low real rates of return to stimulate private investment; and a managed exchange rate, targeted to boost the country?s international competitiveness and diversify its economy. The study notes that Uzbekistan does not lack savings; what it lacks are the means to mobilize its ample but underutilized private domestic savings. For mobilizing such savings and directing it to productive private investment, the study recommends an industrial policy, which could deploy various measures, such as tax and subsidy instruments, directed commercial credit and public-sector matching funds for private investment. The study recommends that an investment bank, based on joint public-private ownership, should spearhead industrial policy. Directing resources from capital-intensive sectors, formerly favoured by the government?s import-substitution policies, to internationally competitive employment-intensive sectors would be part of such an industrial policy, especially in order to enhance productive employment. The study favours supplementing such measures, which promote growth and employment, with more poverty-focused policies and programmes, such as an enlarged, rural-focused public works scheme, doubling public investment in agriculture and providing small farmers with greater access to land, other productive resources and credit. The study also calls for strengthening the country?s social policies, education and health in particular, and its system of social protection. For health, it emphasizes strengthening primary health care and, for education, it stresses ensuring a full 12-year cycle of secondary education, including professional and vocational education. It also calls for improving the efficiency and equity of the country?s community-based mahalla system of social protection, which it believes has functioned fairly well during the transition period.
    Keywords: Strategy; Growth; Employment; Poverty Reduction; Uzbekistan
    Date: 2007–10

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