nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒01‒26
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Incremental Reform and Distortions in China’s Product and Factor Markets By Zhang, Xiaobo; Tan, Kong-Yam
  2. Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter? By Brzoza-Brzezina, Michał; Chmielewski, Tomasz; Niedźwiedzińska, Joanna
  3. Exit Polls: Refugee Assessments of North Korea's Transition By Yoonok Chang; Stephan Haggard; Marcus Noland
  4. The Chinese Health Care System: Structure, Problems and Challenges By Jens Leth Hougaard; Lars Peter Østerdal; Yi Yu
  5. Bosnia and Herzegovina 2001-2004 : enterprise restructuring, labor market transitions and poverty By Yemtsov, Ruslan; Tiongson, Erwin R.
  6. Institutions matter: the case of Vietnam By Thi Bich Tran, Tom Kompas and R. Quentin Grafton
  7. Does Interbank Borrowing Reduce Bank Risk? By Valeriya Dinger; Jürgen von Hagen
  8. The Location of Foreign Direct Investment in the Central and Eastern European Countries: A Nested Logit and Multilevel Data Approach By Simona Rasciute; Eric J. Pentecost
  9. Tax Rate Cuts and Tax Compliance--The Laffer Curve Revisited By Elöd Takáts; Tamas K. Papp
  10. Empirical evidences on risk aversion for individual Romanian Capital Market investors By Paun, Cristian; Musetescu, Radu; Brasoveanu, Iulian; Draghici, Alina
  11. A forewarning indicator system for financial crises: the case of six central and eastern european countries By Irène Andreou; Gilles Dufrénot; Alain Sand-Zantman; Aleksandra Zdzienicka-Durand

  1. By: Zhang, Xiaobo; Tan, Kong-Yam
    Abstract: The purpose of economic reform is to reduce distortions and enhance efficiency. However, when reforms are partial and incremental, individuals and local governments are often able to capture the rent inherent in the gradual transition process. Young (2000) warned that such rent-seeking behavior might lead to increasing market fragmentation. Empirical studies have shown the opposite in the product market. This article argues that as the rent from China’s product market has been squeezed out due to deepening reforms, rent-seeking behavior may have shifted to the capital market. Further reforms are needed in the capital market to squeeze out these rent-seeking opportunities, just as those from the product and labor markets were squeezed out earlier.
    Keywords: Market integration; China; rent seeking
    JEL: O1 O53 D33 P23
    Date: 2007
  2. By: Brzoza-Brzezina, Michał; Chmielewski, Tomasz; Niedźwiedzińska, Joanna
    Abstract: In this paper we ask a question about the impact of monetary policy on total bank lending in the presence of a developed market for foreign currency denominated loans and potential substitutability between domestic and foreign currency loans. Our results, based on a panel of three biggest Central European countries (the Czech Republic, Hungary and Poland) confirm the existence of the substitution effect between these loans. Restrictive monetary policy leads to a decrease in domestic currency lending but simultaneously accelerates foreign currency denominated loans. This makes the central bank's job harder with respect to providing both, monetary and financial stability.
    Keywords: domestic and foreign currency loans; substitution; monetary policy; financial stability; Central Europe
    JEL: E58 E52 E44
    Date: 2007
  3. By: Yoonok Chang (Hansei University, Foreign Language Education Center, Department of Graduate Education); Stephan Haggard (University of California, San Diego Graduate School of International Relations and Pacific Studies); Marcus Noland (Peterson Institute for International Economics)
    Abstract: Results from a survey of more than 1,300 North Korean refugees in China provide insight into changing economic conditions in North Korea. There is modest evidence of slightly more positive assessments among those who exited the country following the initiation of reforms in 2002. Education breeds skepticism; higher levels of education were associated with more negative perceptions of economic conditions and reform efforts. Other demographic markers such as gender or provincial origin are not robustly correlated with attitudes. Instead, personal experiences appear to be central: A significant number of the respondents were unaware of the humanitarian aid program and the ones who knew of it almost universally did not believe that they were beneficiaries. This group's evaluation of the regime, its intentions, and accomplishments is overwhelmingly negative--even more so than those of respondents who report having had experienced incarceration in political detention facilities--and attests to the powerful role that the famine experience continues to play in the political economy of the country.
    Keywords: North Korea, transition, reform, refugees, famine, aid
    JEL: P2 P3 F22
    Date: 2008–01
  4. By: Jens Leth Hougaard (Department of Economics, University of Copenhagen); Lars Peter Østerdal (Department of Economics, University of Copenhagen); Yi Yu (Department of Economics, University of Copenhagen)
    Abstract: In the present paper we describe the structure of the Chinese health care system and sketch its future development. We analyse issues of provider incentives and the actual burden sharing between government, enterprises and people. We further aim to identify a number of current problems and link these to a discussion of future challenges in the form of an aging population, increased privatization and increased inequity.
    Keywords: Chinese health care system; provider incentives; burden sharing; aging population; inequity
    JEL: H51 H75 I11 I18
    Date: 2008–01
  5. By: Yemtsov, Ruslan; Tiongson, Erwin R.
    Abstract: This paper takes stock of labor market developments in Bosnia and Herzegovina over the period 2001-2004, using the panel Living Standards Measurement Study/Living in Bosnia and Herzegovina survey. The analysis estimates a multinomial logit model of labor market transitions by state of origin (employment, unemployment, and inactivity) following the specification of widely used models of transition probabilities, and analyzes the impact of standard covariates. The results provide strong evidence that there are indeed significant differences in labor market transitions by gender, age, education, and geographic location. Using the panel structure of the multi-topic survey data, the authors find that these transitions are related to welfare dynamics, with welfare levels evolving differently for various groups depending on their labor market trajectories. The findings show that current labor market trends reflecting women ' s movement out of labor markets and laid-off male workers accepting informal sector jobs characterized by low productivity will lead to adverse social outcomes. These outcomes could be averted if the planned enterprise reform program creates a more favorable business environment and leads to faster restructuring and growth of firms.
    Keywords: Labor Markets,Labor Policies,Population Policies,,Banks & Banking Reform
    Date: 2008–01–01
  6. By: Thi Bich Tran, Tom Kompas and R. Quentin Grafton
    Abstract: The paper investigates institutional reforms in Vietnam and their impact on the economic performance of firms. Using the provincial competitiveness index 2006 (PCI06) and firm-level data in Vietnam in 2005, the results show that provincial competitiveness is economically and statistically significant in explaining cross-province differences in firm performance. We find that a one percentage point improvement in government practice could increase the daily value-added of an average firm by an amount equivalent to nearly three times per capita GDP per day. The results show that an improvement in providing market information, more secure land tenure and labor training assistance has a positive effect on firm performance. By contrast, weaknesses in the judiciary system and administrative reforms impede growth of non-state firms. The findings indicate that governance is an important obstacle to the development of the non-state sector in Vietnam.
    Date: 2008
  7. By: Valeriya Dinger (University of Bonn; Jürgen von Hagen (Zentrum für Europäische Integrationsforschung Rheinische Friedrich-Wilhelms-Universität Bonn Walter Flex Strasse 3 53113 Bonn Tel. (0228) 73-9199 Fax (0228) 73-1809 Email
    Abstract: In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks.
    Keywords: interbank market, bank risk, market discipline, transition countries
    JEL: G21 E53
    Date: 2007–11
  8. By: Simona Rasciute (Dept of Economics, Loughborough University); Eric J. Pentecost (Dept of Economics, Loughborough University)
    Abstract: This paper generalizes the existing empirical literature on the determinants of the location of FDI, using a nested logit (NL) model and a novel three-level dataset to examine the factors explaining 1,108 foreign investment location decisions into 13 Central and Eastern European countries (CEECs) between 1997 and 2007. The NL model relaxes the multinomial logit model assumption of independence of identically distributed error terms and allows for testing if national boundaries affect the investment location choices of MNEs in the CEECs. In contrast to the existing empirical literature on the investment location choices, the Heteroskedastic Extreme Value model is used as a tool to reveal an appropriate nesting structure. The highly significant empirical results, based on a general underlying economic model of imperfect competition, show that the responsiveness of FDI in the CEECs to country-level variables differs both across sectors and across firms of different sizes and profitability. Hence the results of previous studies that used only country-level data or only industry- and firm-level data may be misleading.
    Keywords: Nested logit model, foreign direct investment, multi-level data, heteroskedastic extreme value model
    JEL: F23 P33
    Date: 2007–12
  9. By: Elöd Takáts; Tamas K. Papp
    Abstract: The paper shows how tax rate cuts can increase revenues by improving tax compliance. The intuition is that tax evasion has externalities: tax evaders protect each other, because they tie down limited enforcement capacity. Thus, relatively small tax rate cuts, which decrease incentives to evade taxes, can lead to increased revenues through spillovers - creating Laffer effects. Interestingly, tax rate cuts here imply increasing effective taxes. The model is consistent with what happened in Russia, and may provide basis for further thinking about tax rate cuts in other countries.
    Keywords: Tax evasion , Russian Federation , Tax revenues , Taxes ,
    Date: 2008–01–11
  10. By: Paun, Cristian; Musetescu, Radu; Brasoveanu, Iulian; Draghici, Alina
    Abstract: Risk aversion is reflected on a risk premium, which consists of an expected extra return that investors require to be compensated for the risk of holding stocks. We intend to evaluate the situation of Romania in terms of risk aversion. This study is very useful for understanding the differences between the individual investment behaviours in EU and to understand the further European market evolution taking into consideration this important variable – risk aversion.
    Keywords: risk aversion; individual investor; Romanian capital market
    JEL: G2 G11
    Date: 2007–10–15
  11. By: Irène Andreou; Gilles Dufrénot; Alain Sand-Zantman; Aleksandra Zdzienicka-Durand
    Date: 2007

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