nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒12‒19
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Benchmarking North Korean Economic Policies; The Lessons from Russia and China By Judith Thornton
  2. Who Wants to Revise Privatization and Why? Evidence from 28 Post-Communist Countries By Denisova, Irina; Eller, Markus; Frye, Timothy; Zhuravskaya, Ekaterina
  3. The Convergence of a Transition Economy: The Case of the Czech Republic By Jan Bruha; Jiri Podpiera; Stanislav Polak
  4. Remittances in the CIS: Their Economic Implications and a New Estimation Procedure By Robert Shelburne; Jose Palacin
  5. Environmental Policy and Competitiveness in a Globalizing World: Challenges for Low-Income Countries in the UNECE Region By Dieter Hesse
  6. What determines banks’ customer choice? Evidence from transition countries By De Haas, Ralph; Ferreira, Daniel; Taci, Anita
  7. Deregulation of Business By Yakovlev, Evgeny; Zhuravskaya, Ekaterina
  8. Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle By Ian Babetskii; Nauro F. Campos
  9. Measuring and Explaining Inflation Persistence: Disaggregate Evidence on the Czech Republic By Ian Babetskii; Fabrizio Coricelli; Roman Horvath
  10. Foreign banks in transition countries. To whom do they lend and how are they financed? By De Haas, Ralph; Naaborg, Ilko
  11. The impoverishing effect of adverse health events : evidence from the western Balkans By Gragnolati, Michele; Bredenkamp, Caryn; Mendola, Mariapia

  1. By: Judith Thornton (Department of Economics University of Washington)
    Date: 2007–02
  2. By: Denisova, Irina; Eller, Markus; Frye, Timothy; Zhuravskaya, Ekaterina
    Abstract: A 2006 survey of 28,000 individuals in 28 post-communist countries reveals overwhelming support for revising privatization, but most respondents prefer to leave firms in private hands. We examine who wants to revise privatization and why. Respondents with poor human capital and few assets support revising privatization due to a preference for state over private property. Economic hardships during transition increase support for revising privatization due to the perceived unfairness of privatization. The institutional environment has no impact on how human capital and asset ownership influence attitudes toward privatization, but does affect how economic hardships during transition shape these attitudes.
    Keywords: demand for property rights; legitimacy of property rights; nationalization; privatization; property rights; revision; transition
    JEL: L33 P20 P26 P50
    Date: 2007–12
  3. By: Jan Bruha; Jiri Podpiera; Stanislav Polak
    Abstract: In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run paths of a converging emerging market economy. The model’s novel feature is the inclusion of quality investment to the standard framework of applied general equilibrium two-country models. This extension proves crucial ingredient for explanation of the trend in real exchange rate. Using a case study calibration of productivity and deep parameters for the Czech economy we demonstrate the ability of the model to consistently explain dynamics in key macroeconomic variables that are essential inputs for commonly used ‘gap models’ in monetary policy practice.
    Keywords: Convergence, monetary policy, two-country modeling.
    JEL: F12 F41
    Date: 2007–09
  4. By: Robert Shelburne (United Nations Economic Commission for Europe); Jose Palacin (United Nations Economic Commission for Europe)
    Abstract: Migrant remittances are an increasingly important type of international financial flow for providing both additional resources for development as well as consumption expenditures for poverty alleviation. One geographical area where these flows are quite significant is in the CIS economies both in terms of their sheer size as well as their economic importance in providing a source of external finance for the recipient countries. Data on remittances generally, but especially in this region, are often of poor reliability due to the fact that these flows often move through unofficial and unmonitored channels. Data for the CIS are limited in that several countries do not provide this information in their balance of payment statistics and in those that do, it is often only partially reported and poorly collected or estimated. In this paper the characteristics, trends, and importance of remittances in the CIS are discussed and a new approach for estimating remittance flows in the CIS is developed based upon a new set of financial data recently released by the Central Bank of Russia and unpublished data obtained from the central banks of Kazakhstan, Moldova and Ukraine.
    Keywords: remittances, migration, CIS, Russia, external finance, financial flows
    JEL: P25 G21 R31
    Date: 2007–10
  5. By: Dieter Hesse (United Nations Economic Commission for Europe)
    Abstract: A major policy goal of low-income countries is to promote the creation of competitive economic capacities in order to achieve sustained growth and raise the material well being of the population. Economic growth is, however, associated with increasing environmental pressures, and the question is to what extent the costs of more stringent environmental policies will affect the competitiveness of domestic firms. This paper examines the empirical evidence on the impact of environmental protection costs on international trade and FDI location decisions and explores the opportunities that the process of technological upgrading, which is a major driving force of economic development, provides for reducing environmental pressures. Also considered are the policies and supportive institutional arrangements that can help to effectively integrate environmental protection into national economic development strategies and thereby promote sustainable production and consumption patterns.
    Keywords: Environmental policy, competitiveness, Eastern Europe, transition economies
    JEL: O33 O52 Q55 Q56 Q58
    Date: 2007–10
  6. By: De Haas, Ralph; Ferreira, Daniel; Taci, Anita
    Abstract: This paper explores how bank characteristics and the institutional environment influence the composition of banks’ loan portfolios. Using a new data set based on the recent EBRD Banking Environment and Performance Survey (BEPS), which was conducted in 2005 for 220 banks in 20 transition countries, we show that bank characteristics such as ownership and size are important determinants of bank customer focus. In particular, we find that foreign banks are relatively strongly involved in mortgage lending and lending to subsidiaries of foreign companies, while lending relatively less to large domestic firms. We also find that small banks lend relatively more to SMEs than large banks do, while large banks appear to have a comparative advantage in lending to large customers. We do not find much evidence for the hypothesis that better legal credit protection changes bank portfolio composition. An exception is that banks that perceive pledge and mortgage laws to be of high quality focus more on mortgage lending.
    Keywords: banking; portfolio composition
    JEL: K22 F3 P27 G21
    Date: 2007
  7. By: Yakovlev, Evgeny; Zhuravskaya, Ekaterina
    Abstract: What determines the enforcement of deregulation reform of business activities? What are the outcomes of deregulation? We address these questions using an episode of a drastic reform in Russia between 2001 and 2004 which liberalized registration, licensing, and inspections. Based on the analysis of micro-level panel data on regulatory burden, we find that: 1) On average, the reform reduced the administrative costs of firms; but, the progress of reform had a substantial geographical variation. 2) The enforcement of deregulation reform was better in regions with a transparent government, low corruption, better access of the public to independent media sources, a powerful industrial lobby, and stronger fiscal autonomy. 3) Using the exogenous variation in regulation generated by the interaction of reform and its institutional determinants, we find a substantial positive effect of deregulation on net entry and small business employment and no effect on pollution and public health. The results support public choice theory of the nature of regulation and are inconsistent with the predictions of public interest theory.
    Keywords: Deregulation; Enforcement; Entry; Public choice; Reform; Regulation; Transparency
    JEL: H10 K2 K20 L50
    Date: 2007–12
  8. By: Ian Babetskii; Nauro F. Campos
    Abstract: Despite the many benefits associated with structural reforms, the literature has thus far failed to establish a positive significant effect of reforms on growth. Using data from 43 econometric studies, we show that one third of the coefficients (of reform on growth) are positive and significant, another third are negative and significant, and the final third are not statistically significant. In trying to understand this remarkable variation, we find that the measurement of reform and controlling for institutions and initial conditions are the main factors in decreasing the probability of reporting a significant and positive effect of reform on growth.
    Keywords: Growth, liberalisation, structural reforms, transition.
    JEL: O11 P21 C49
    Date: 2007–11
  9. By: Ian Babetskii; Fabrizio Coricelli; Roman Horvath
    Abstract: The paper provides an empirical analysis of inflation persistence in the Czech Republic using 412 detailed product-level consumer price indexes underlying the consumer basket over the period from 1994:M1 to 2005:M12. Subject to various sensitivity tests, our results suggest that raw goods and non-durables, followed by services, display smaller inflation persistence than durables and processed goods. Inflation seems to be somewhat less persistent after the adoption of inflation targeting in 1998. There is also evidence for aggregation bias, that is, aggregate inflation is found to be more persistent than the underlying detailed components. Price dispersion, as a proxy for the degree of competition, is found to be negatively related to inflation persistence, suggesting that competition is not conducive to reducing persistence.
    Keywords: Inflation dynamics, inflation targeting, persistence.
    JEL: D40 E31
    Date: 2007–11
  10. By: De Haas, Ralph; Naaborg, Ilko
    Abstract: We use focused interviews with managers of foreign parent banks and their affiliates in Central Europe and the Baltic States to analyse the small-business lending and internal capital markets of multinational financial institutions. Our approach allows us to complement the standard empirical literature, which has difficulty in analysing important issues such as lending technologies and capital allocation. We find that the acquisition of local banks by foreign banks has not led to a persistent bias in these banks’ credit supply towards large multinational corporations. Instead, increased competition and the improvement of subsidiaries’ lending technologies have led foreign banks to gradually expand into the SME and retail markets. Second, it is demonstrated that local bank affiliates are strongly influenced by the capital allocation and credit steering mechanisms of the parent bank.
    Keywords: foreign banks; transition economies; small-business lending; internal capital markets
    JEL: F23 G32 G21 F36
    Date: 2006
  11. By: Gragnolati, Michele; Bredenkamp, Caryn; Mendola, Mariapia
    Abstract: This paper investigates the extent to which the health systems of the Western Balkans (Albania, Bosnia and Herzegovina, Montenegro, Serbia, and Kosovo) have succeeded in providing financial protection against adverse health events. The authors examine disparities in health status, healthcare utilization, and out-of-pocket payments for healthcare (including informal payments), and explore the impact of healthcare expenditures on household economic status and poverty. Methodologies include (i) generating a descriptive assessment of health and healthcare disparities across socioeconomic groups, (ii) measuring the incidence and intensity of catastrophic healthcare payments, (iii) examining the effect of out-of-pocket payments on poverty headcount and poverty gap measures, and (iv) running sets of country-specific probit regressions to model the relationship between health status, healthcare utilization, and poverty. On balance, the findings show that the impact of health expenditures on household economic wellbeing and poverty is most severe in Albania and Kosovo, while Montenegro is striking for the financial protection that the health system seems to provide. Data are drawn from Living Standards and Measurement Surveys.
    Keywords: Health Monitoring & Evaluation,Health Systems Development & Reform,Health Economics & Finance,Population Policies,Rural Poverty Reduction
    Date: 2007–12–01

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