nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒12‒08
ten papers chosen by
J. David Brown
Heriot-Watt University

  1. Modelling inflation in China - a regional perspective By Aaron Mehrotra; Tuomas Peltonen; Alvaro Santos Rivera
  2. Structured Microfinance in China By Byström, Hans
  3. Total Factor Productivity Growth in Chinese Industry: 1952-2005 By Selin Ozyurt
  4. Economic Crisis and Political Participation in a Transitional Economy: Evidence from Russia By Altay Mussurov; Paul Mosley
  5. Self-Assessed Health Status and Satisfaction with Health Care Services in the Context of the Enlarged European Union By Popescu, Livia; Rat, Cristina; Rebeleanu-Bereczki, Adina
  6. Industrial Policy in Asia By Kuchiki, Akifumi
  7. Costs and Benefits of Kosovo's Future Status By Vladimir Gligorov
  8. How is real convergence driving nominal convergence in the new EU Member States?. By Sarah M. Lein-Rupprecht; Miguel A. León-Ledesma; Carolin Nerlich
  9. Determinants and Impacts of Migration in Vietnam By Nguyen Thi Thu Phuong; Tran Ngo Minh Tam; Remco Oostendorp; Nguyen Thi Nguyet
  10. Economic and Financial Integration between Hong Kong and Mainland China before the Open Door Policy 1965-75 By Catherine R Schenk

  1. By: Aaron Mehrotra (Corresponding author: Bank of Finland, BOFIT, PO Box 160, 00101 Helsinki, Finland.); Tuomas Peltonen (European Central Bank, Directorate General International and European Relations, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alvaro Santos Rivera (European Central Bank, Directorate General International and European Relations, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: We model provincial inflation in China during the reform period. In particular, we are interested in the ability of the hybrid New Keynesian Phillips Curve (NKPC) to capture the inflation process at the provincial level. The study highlights differences in inflation formation and shows that the NKPC provides a reasonable description of the inflation process only for the coastal provinces. A probit analysis suggests that the forwardlooking inflation component and the output gap are important inflation drivers in provinces that have advanced most in marketisation of the economy and have most likely experienced excess demand pressures. These results have implications for the relative effectiveness of monetary policy across the Chinese provinces. JEL Classification: E31, C22.
    Keywords: China, Inflation, Regional, New Keynesian Phillips Curve, GMM.
    Date: 2007–11
  2. By: Byström, Hans (Department of Economics, Lund University)
    Abstract: In this paper we discuss the potential for commercial microfinance in China. Particular emphasis is put on securitization of microloans and on structured microfinance in a China context. Three particular factors that we believe could support a strong growth in Chinese structured microfinance are (i) the lack of currency risk, (ii) the scale advantages and (iii) the massive potential interest from traditional, domestic as well as international, financial firms. On the policy side, structured microfinance could be an important tool for fighting unemployment in China. It could also be used to circumvent corruption or government bureaucracy in the microlending process.
    Keywords: commercial microfinance; structured finance; securitization; China
    JEL: G10 G21 O16 R51
    Date: 2007–11–20
  3. By: Selin Ozyurt
    Abstract: This paper presents a timely assessment of Chinese industrial productivity performances over the period 1952-2005. The total factor productivity (TFP) growth analysis is based on a Cobb-Douglas specification with aggregated annual data set. This study tackles some theoretical and methodological issues raised by critics of previous studies. First of all, the use of economic tools allows us to relax some restrictive hypothesis of the neoclassical growth framework such as competitive market behaviour, constant returns to scale production technology and Hicks neutral technological change. In addition, our TFP growth estimates are adjusted for business fluctuations. The paper also deals with the autocorrelation issue prevailing in most previous studies. Our major findings are: (i) In Chinese industry, between 1952 and 2005 capital accumulation has been the main engine of economic takeoff. (ii) During the post-reform period, TFP growth contributed significantly to economic growth. (iii) TFP gains have exhibited a sharply increasing pattern since the late 1980’s, along with the accelerated integration of China into the world economy.
    Date: 2007–11
  4. By: Altay Mussurov (University of Sheffield); Paul Mosley (University of Sheffield)
    Abstract: The experience of countries adjusting in the wake of the global crisis of 1997-2000 has awakened many debates related to the political economy and social costs of adjustment. Amongst these, the experience of Russia is particularly controversial, both because of the great severity of the shock experienced by a large number of Russians during the process of perestroika, and because of the political consequences, which in many provinces have involved street protests and demonstrations and in some, also violence and demands for secession (Giuliano 2006). These political consequences are relevant to the general question of the political feasibility of adjustment in the circumstances of the present decade, which is examined in several papers within our research project (e.g. Mosley 2007a, 2007b). In this paper, we examine within this context political participation and wage inequality during the 1998 financial crisis in Russia. We use two household survey data sets. The VTsIOM household survey dataset, conducted in 1998 and 1999, was used to analyze individuals’ response patters to escalating economic hardship. Data from the Russian Longitudinal Monitoring Survey (RLMS) was employed in our analysis of the welfare impacts of the crisis. We address two key questions. Firstly, we attempt to identify major factors behind individuals’ propensity to take part in a political protest. In particular, we look at what determines individual support for reform and whether individual propensities change with the targeted audience. Secondly, we attempt to determine who are the winners and losers from the crisis, in the spirit of the earlier analysis of Brainerd(1998).In particular, we analyse whether wage inequality widened during the crisis and whether wage discrimination worsened. These questions are of interest for several reasons. Firstly, the pace and extent of the crisis had a dramatic impact on Russia’s economy which, in turn, may have influenced political mobilization motivated by claims for policy reversals. Secondly, if financial crisis generated wage inequality, it is important to identify the extent, pattern, and nature of the wage inequality for effective policy formulation.
    Date: 2007–02
  5. By: Popescu, Livia (Faculty of Sociology and Social Work, Babes-Bolyai University Cluj-Napoca); Rat, Cristina (Faculty of Sociology and Social work, Babes-Bolyai University Cluj-Napoca); Rebeleanu-Bereczki, Adina (Faculty of Sociology and Social work, Babes-Bolyai University Cluj-Napoca)
    Abstract: The paper aims at analysing the relationship between self-rated health-status, satisfaction with health care services and socio-economic factors, in the context of different national health care systems in the enlarged European Union. The effects of socio-economic deprivation and the functioning of national health care systems on self-rated health status and satisfaction with health care services are investigated using the European Social Survey 2006 dataset (ESS3), and macro data provided by Eurostat (2007) and the World Health Organization (2007). Socio-economic deprivation is measured both at the micro-level (using indicators of economic strain, household income, education, employment status and belonging to discriminated groups), and the macro-level (national poverty rates, the values of poverty thresholds, quintile ratios and GDP per capita). The performance of national health care systems is quantified with the help of two indexes, designed for the purpose of the present study: an index of total health care provisions and an index of governmental commitment to health care. The following countries are included in the analysis: Belgium, Bulgaria, Denmark, Finland, France, Germany, Hungary, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Sweden, and the United Kingdom.
    Keywords: self-assessed health ; health care systems ; health inequalities ; governmental policies
    JEL: I18 H51
    Date: 2007–11
  6. By: Kuchiki, Akifumi
    Abstract: This paper examines three types of industrialization that have occurred in East Asia: the Japanese, Chinese and generic Asian models. Industrial policies in Japan and the Republic of Korea (ROK) initially protected local companies from foreign investors by imposing high tariffs on foreign investors. But Japan began introducing liberalization policies to attract foreign direct investment (FDI) in the 1960s, and the ROK began to welcome foreign technology in the 1970s. Meanwhile, the governments of the ASEAN countries and Taiwan established export-processing zones (EPZ) to invite FDI by offering preferential treatment, such as tax deductions and exemptions. China adopted similar industrial policies and also established EPZs, attracting the capital and know-how of multinationals and thereby strengthening the international competitiveness of local enterprises. This paper reaches the following three conclusions. First, it would have been difficult for East Asian countries to grow without FDI. Second, central governments were a crucial factor in these countries' growth strategies. Third, EPZs offering preferential treatment can effectively enhance aggregate growth in developing countries, and the Asian experience shows that this strategy can be applied to other countries that satisfy certain preconditions.
    Keywords: Industrial policy, Export-processing zones, Foreign direct investment, Government intervention, Market competition, Priority production method, Production rationalization method, Import-substituting industrialization, Export-oriented policy, East Asia, Southeast Asia, Japan, South Korea, China, Foreign investments, Exports
    JEL: G18 O14 R11
    Date: 2007–10
  7. By: Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Stability and normalization should be the crucial ingredients of Kosovo's future status. If achieved, it would lead to strong economic recovery in Kosovo and to more sustainable economic growth in Serbia. Chances for positive economic development, strong recovery and sustained long-term growth are significant if normalization is achieved. Kosovo's potential growth rate could be close to 7% to 8% per year in the medium run while Serbia could sustain a convergence growth rate above 5% per year. Both would also benefit from a 'peace dividend', i.e., lower security costs. Of the scenarios considered: (i) full Serbian sovereignty, (ii) substantial autonomy for Kosovo, (iii) supervised independence in accordance with Ahtisaari's Plan, and (iv) Serbian and Kosovo partnership of some sort, only the last one would provide for a significant decline of risks, for increased investment and trade, for improved prospects of EU integration and for strong recovery in Kosovo and sustained growth in Serbia, whereas any solution that would be rejected by any of the parties would trigger increased fiscal and security costs and impair investment and GDP.
    Keywords: Serbia, Kosovo, post-conflict settlement, fiscal costs and benefits, Economic Integration, Regional Development
    JEL: O52 H73 K33
    Date: 2007–11
  8. By: Sarah M. Lein-Rupprecht (KOF Swiss Economic Institute ETH Zurich, Weinbergstrasse 35, CH-8092 Zürich, Switzerland.); Miguel A. León-Ledesma (Department of Economics, University of Kent, Canterbury, Kent, CT27NP, United Kingdom.); Carolin Nerlich (European Central Bank, DG-Economics, Kaiserstraße 29, 60311 Frankfurt, Germany.)
    Abstract: The purpose of this paper is to evaluate the empirical relevance of real convergence on the process of nominal convergence for the new EU Member States. We discuss two of the main channels through which real convergence could affect relative prices with respect to the euro area - productivity growth and increased trade openness. Productivity growth can have a positive effect on price levels via the Balassa Samuelson effect, whereas increased openness leads to reductions in mark ups and costs and therefore can have a negative impact on prices. In order to assess their empirical relevance, we used a Structural VAR model to which we applied a model reduction algorithm. This method accounts for endogeneity and simultaneity and circumvents the problem of limited data availability. Our findings show that, in general, openness has had a negative impact and productivity growth a positive one on price level convergence with respect to the euro area. JEL Classification: O52, E31.
    Keywords: Real convergence, nominal convergence, inflation, new EU Member States.
    Date: 2007–11
  9. By: Nguyen Thi Thu Phuong (Centre for Analysis and Forecasting, Vietnam Academy of Social Sciences); Tran Ngo Minh Tam (Centre for Analysis and Forecasting, Vietnam Academy of Social Sciences); Remco Oostendorp (Free University, Amsterdam); Nguyen Thi Nguyet (Central Institute for Economic Management (CIEM), Vietnam)
    Abstract: <p>This chapter * uses the recent Vietnam Household Living Standard Survey 2004 to analyze the determinants and impacts of migration in Vietnam. Most of the previous studies on the determinants and impacts of migration have focused on destination rather than origin areas of migration. This limits our understanding of the determinants of migration and also does not provide evidence on important impacts of migration such as on household inequality in origin areas.</p><p>In terms of determinants of migration, the study shows that migration is a highly selective process and strongly affected by household and commune characteristics, although differently across type of migration and across urban and rural areas. We do find evidence for the existence of a 'migration hump' for economic long-term migration, with an inverted Ushape in the probability of migration with respect to per capita expenditures. The presence of non-farm employment opportunities does reduce short-term migration but not long-term out-migration for economic reasons.</p> <p>In terms of impacts the study analyzes the impact of migration on household expenditures and household inequality. Migration is found to have a strong positive impact on household expenditures but increases the Gini coefficient of per capita household expenditures from 0.38 to 0.42 in origin areas compared to the no-migration case.</p>
    Keywords: Migration; Vietnam; Household
    Date: 2007
  10. By: Catherine R Schenk (University of Glasgow)
    Abstract: The ‘one country, two systems’ structure established to govern the relationship between Hong Kong SAR and Mainland China was an innovative and comprehensive solution to particular economic and political challenges posed by the return of Hong Kong to the PRC in 1997. At the time of the drafting of the Basic Law, the integration of the colony into the regional economy of Southeast China through outward FDI had already begun, and from the mid-1980s this process facilitated the transformation of the Hong Kong economy from a manufacturing base to one dominated by financial and commercial services. It was recognised on both sides of the negotiations that the territory’s viability and future prosperity relied on retaining independence over a range of key fundamentals, including a separate and independent currency and monetary system that was at the foundation of Hong Kong’s attraction as an international financial centre for the PRC and also for the rest of the Asian region. An important credibility mechanism for the HK$ (as for the inconvertible RMB at this time) was the exchange rate link to the US$. Since this was also the anchor for the RMB after 1997, the linked rate system kept the relationship between the RMB and the HK$ stable.
    Date: 2007–04

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