nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒03‒08
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. What Russians Think about Transition: Evidence from RLMS Survey By Irina Denisova; Markus Eller; Ekaterina Zhuravskaya
  2. Russian- Chinese relations : towards an energy partnership By Olga Garanina
  3. Weathering the Global Storm, yet Rising Costs and Labour Shortages May Dampen Domestic Growth By Mario Holzner; Josef Pöschl; Peter Havlik; Peter Lukas; Leon Podkaminer; Sebastian Leitner; Waltraut Urban; Vasily Astrov; Olga Pindyuk; A. Mihailov; Sándor Richter; Hermine Vidovic; Gábor Hunya; Vladimir Gligorov
  4. Public Finance in China since the Late Qing Dynasty By Krug, B.
  5. Lessons from China for Africa By Dollar, David
  6. Reform and inequality during the transition: An analysis using panel household survey data, 1990-2005 By Milanovic, Branko; Ersado, Lire
  7. Information and communication technologies and geographic concentration of manufacturing industries: evidence from China By Fu, Shihe; Hong, Junjie
  8. Governance arrangements for state owned enterprises By Vagliasindi, Maria
  9. Attitudes to equality : the " socialist legacy " revisited By Tiongson, Erwin R.; Murthi, Mamta
  10. Fiscal policy for growth and development in Tajikistan By Canagarajah, Sudharshan; Brownbridge, Martin
  11. Spatial Spillovers in the Development of Institutions By Harry Kelejian; Peter Murrell; Oleksandr Shepotylo

  1. By: Irina Denisova (CEFIR); Markus Eller (CEFIR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR)
    Abstract: We use data from the 2006 round of the Russian Longitudinal Monitoring Survey (RLMS) to describe perceptions of Russian people about the transition process and the role of the state. We also study which groups of the population hold more positive and more negative views of transition. Overall, we find that the Russian population is divided in their assessment of transition. About one half is deeply disappointed with transition results and has serious nostalgia about the life under the communist regime. There is a lot more unanimity about the role of the state in the economy. A vast majority of Russians opts for a very high state intervention into all spheres of economic life. However, an average Russian faces a cognitive dissonance: a perception that the state should be more involved in the economy is combined with a deep mistrust of specific state institutions. The variation in these perceptions is systematically related to age, education, employment histories and transition experiences.
    Date: 2007–12
  2. By: Olga Garanina (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: This paper aims to investigate the Russian-Chinese energy relations in the context of evolution of bilateral strategic relations since 1991.The research is focused on Russia and encompasses three main aspects: strategic approach of Russian-Chinese relations, Russian hydrocarbons production and export potential and prospects for the Eastern Russia. The paper is based on qualitative analysis. It shows that the framework of bilateral relations is globally favourable for creation of costly energy transport infrastructures. The quest for diversification of Chinese energy supplies contributes to the promotion of Russian hydrocarbons exports towards Asia, the latter contributing to diversify Russian energy exports traditionally sent to Europe. However, the modalities of these projects are submitted to the Russian state interests. Moreover, while natural gas reserves are sufficient to meet the Chinese demand, oil production prospects in the East of Russia are uncertain at a long-term perspective.
    Keywords: trade relationships ; energy policy ; energy resources ; hydrocarbon ; energy ; energy supply ; Russia ; China
    Date: 2007–11
  3. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Peter Lukas (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Waltraut Urban (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); A. Mihailov; Sándor Richter (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Gábor Hunya (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The Vienna Institute for International Economic Studies (wiiw) has just released an analysis of current economic developments in Central, East and Southeast Europe, Kazakhstan, Russia, Ukraine and China (including brief country reports), as well as a medium-term forecast for these countries in the period 2008 2010. A special section investigates labour market developments and the vulnerability of financial markets in individual countries. The majority of the new EU member states (NMS) have been enjoying a period of robust economic growth. The current turbulence on global financial markets is not going to hurt directly or seriously. Even the possible indirect effects should not be too severe. GDP growth is projected to slow down from about 6% in 2007 to some 5% per year over the period 2008 2010. Inflation will gradually decline, yet in most NMS it will stay above that of the eurozone. Economic growth will be mainly driven by rising consumption (supported by rising labour incomes) and by investments. The latter will be bolstered by much higher transfers from the EU budget. Except for Bulgaria, Romania and the Baltic States, all of which remain vulnerable to external shocks, current account deficits will not be excessively high. In sum, the NMS are expected to remain a region displaying dynamic growth in the years to come, maintaining their competitive advantages as attractive locations for both trading and investment purposes. The situation on the labour market has improved dramatically, unemployment has declined rapidly. The economic growth is no longer 'jobless'. On the contrary, most countries in the region are now reporting labour shortages - especially of skilled workers - which could well become a serious constraint on economic growth. After a slight dip in growth in 2008, wiiw expects the Southeast European region to enjoy faster GDP growth in 2009 and 2010 of up to 6%. Remittances and a credit boom will continue to fuel the core growth driver: domestic demand. Strong investment growth and incipient re industrialization go hand in hand with an increase in employment. Stable competitive performance (except for Serbia and Turkey) will also provide a better environment for stronger export growth. Nevertheless, the net export position is still unfavourable for want of FDI and technology transfer. The slowdown in global growth, the hikes in oil, metal and food prices on world markets, as well as the subprime crisis are expected to have only a minor impact on the region. However, Serbia's unbalanced growth path in the wake of the Kosovo crisis poses a regional risk. Prospects of EU accession have improved for all countries, except Turkey. Kazakhstan, Russia and Ukraine are all expected to grow by more than 6% per year in the period 2008 2010 - also slightly slower than in the previous two years. A modest cooling down of growth is projected for China as well. This forecast starts a new series with the title 'Current Analyses and Forecasts'. It contains an appendix with selected indicators of competitiveness.
    Keywords: Central and East European new EU member states, Southeast Europe, Balkans, former Soviet Union, China, Turkey, GDP, industry, productivity, labour market, foreign trade, exchange rates, inflation, fiscal deficits, EU integration
    JEL: O52 O57 P24 P27 P33 P52
    Date: 2008–02
  4. By: Krug, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: How is “public finance†organized in China? Is China’s public finance system different from that of other countries? Can we detect features which link today’s system to the past? Public finance refers to more than annual state budgets and constitutional procedures. It includes foreign debt, state monopolies or monetary policies, all of which played a crucial role in China’s public finance during the last hundred years. A purely legislative definition obscures the fact that changes in public finance have contributed to the collapse of political regimes such as Imperial China (1911), Republican China (1927), and KMT-China (1945), as well engendered regime changes in 1949, 1961 and 1978. From a more comprehensive economic perspective public finance in China encompasses institutions, organizations and policies.
    Keywords: public finance;China;imperial China;republican China;KMT-China
    Date: 2008–02–05
  5. By: Dollar, David
    Abstract: China has been the most successful developing country in this modern era of globalization. Since initiating economic reform after 1978, its economy has expanded at a steady rate over 8 percent per capita, fueling historically unprecedented poverty reduction (the poverty rate declined from over 60 percent to 7 percent in 2007). Other developing countries struggling to grow and reduce poverty are naturally interested in what has been the source of this impressive growth and what, if any, lessons they can take from China. This paper focuses on four features of modern China that have changed significantly between the pre-reform period and today. The Chinese themselves call their reform program Gai Ge Kai Feng, " change the system, open the door. " " Change the system " means altering incentives and ownership, that is, shifting the economy from near total state ownership to one in which private enterprise is dominant. " Open the door " means exactly what it says, liberalizing trade and direct investment. A third lesson is the development of high-quality infrastructure: China ' s good roads, reliable power, world-class ports, and excellent cell phone coverage throughout the country are apparent to any visitor. Wha t is less well known is that most of this infrastructure has been developed through a policy of " cost recovery " that prices infrastructure services at levels sufficient to finance the capital cost as well as operations and maintenance. A fourth important lesson is China ' s careful attention to agriculture and rural development, complemented by rural-urban migration.
    Keywords: Transport Economics Policy & Planning,Environmental Economics & Policies,Emerging Markets,Population Policies,Debt Markets
    Date: 2008–02–01
  6. By: Milanovic, Branko; Ersado, Lire
    Abstract: Using for the first time survey data from 26 post-Communist countries, covering the period 1990-2005, the paper examines correlates of unprecedented increases in inequality registered by most of these economies. We find that, after controlling for country-fixed effects and type of survey used, economic reform (measured by the EBRD index) is strongly negatively associated with bottom deciles’ income shares and positively with income shares of the top two deciles. However, once economic reform is broken into its different component parts, the picture is more nuanced: large-scale privatization and infrastructure reform (mostly consisting of privatization and higher fees) are responsible for this pro-inequality effect while small-scale privatization tends to raise income shares of the bottom deciles. Acceleration in growth is also pro-rich. On the other hand, democratization (measured by the Polity measure) is strongly pro-poor, as is lower inflation. Somewhat surprisingly, we find no evidence that higher government spending as share of GDI reduces inequality.
    Keywords: Inequality; transition; economic policy
    JEL: D31 P2 P20
    Date: 2008–03–05
  7. By: Fu, Shihe; Hong, Junjie
    Abstract: Using the 2004 China economic census database, this paper examines the impact of information and communication technologies (ICT) on the geographic concentration of manufacturing industries, controlling for other determinants of industrial agglomeration. Higher geographic concentration is found consistently in industries where ICT are more widely adopted, and the association is stronger at higher geographic levels. Furthermore, young firms that have adopted ICT, although they are more footloose, contribute to industrial agglomeration. High-tech industries with advanced ICT also tend to agglomerate. Contrary to the prevalent argument that ICT lead to more dispersion, our study suggests that ICT promote industrial agglomeration.
    Keywords: Information and communication technologies; Geographic concentration; Agglomeration; China
    JEL: R32 R12
    Date: 2008–03–01
  8. By: Vagliasindi, Maria
    Abstract: The aim of this paper is to shed new light on key challenges in governance arrangements for state owned enterprises in infrastructure sectors. The paper provides guidelines on how to classify the fuzzy and sometimes conflicting development goals of infrastructure and the governance arrangements needed to reach such goals. Three policy recommendations emerge. First, some of the structures implied by internationally adopted principles of corporate governance for state owned enterprises favoring a centralized ownership function versus a decentralized or dual structure have not yet been sufficiently " tested " in practice and may not suit all developi ng countries. Second, general corporate governance guidelines (and policy recommendations) need to be carefully adapted to infrastructure sectors, particularly in the natural monopoly segments. Because the market structure and regulatory arrangements in which state owned enterprises operate matters, governments may want to distinguish the state owned enterprises operating in potentially competitive sectors from the ones under a natural monopoly structure. Competition provides not only formidable benefits, but also unique opportunities for benchmarking, increasing transparency and accountability. Third, governments may want to avoid partial fixes, by tackling both the internal and external governance factors. Focusing only on one of the governance dimensions is unlikely to improve SOE performance in a sustainable way.
    Keywords: National Governance,Banks & Banking Reform,Public Sector Economics & Finance,Debt Markets,Public Sector Expenditure Analysis & Management
    Date: 2008–03–01
  9. By: Tiongson, Erwin R.; Murthi, Mamta
    Abstract: It is routinely assumed that residents of post-socialist countries have a preference for greater income equality, other things being equal, owing to the legacy of socialism. This proposition is examined in the context of Eastern Europe and the former Soviet Union using data from three waves of the World Values Survey. Contrary to expectations, the authors find little evidence of a ' socialist legacy ' en bloc. Considering the former Soviet Union separately from other post-socialist countries, the analysis finds that as a group these countries display significantly lower preference for moving toward greater income equality than both Eastern Europe and other comparator groups (developed and developing countries). These findings hold up even when controlling for the conventional determinants of attitudes such as income level and employment status of the individual respondent, as well as national factors such as per-capita income and its distribution. Moreover, the preference for greater income inequality appears to have persisted at least since the mid-1990s and possibly since the early 1990s (data difficulties preclude a robust examination of this latter question). The results are consistent with the fairly low levels of public spending on redistribution commonly found in the former Soviet Union.
    Keywords: Access to Finance,Inequality,,Poverty Impact Evaluation,Corporate Law
    Date: 2008–02–01
  10. By: Canagarajah, Sudharshan; Brownbridge, Martin
    Abstract: Tajikistan ' s economy has recovered strongly after the collapse of the 1990s, but sustaining rapid economic growth over the long term and reducing poverty present major challenges for policymakers. This paper contributes to the debate over the strategic role for fiscal policy to play in meeting these challenges, utilizing the " fiscal space " approach to assess the long-term potential for expanding public provision of growth-promoting goods and services and evaluating the priorities for public spending. It also analyzes the long-term risks to fiscal sustainability, from external public debt and the quasi fiscal deficit of the electricity sector. The paper contends that institutional reforms in key areas, notably public financial management, tax administration, and the energy sector, are crucial for generating fiscal space and for ensuring that higher levels of public spending are translated into stronger economic growth and poverty reduction. The priorities for government spending should be education, health, and the maintenance of the core networks of the existing infrastructure for energy and transport, rather than new public investment projects.
    Keywords: Public Sector Expenditure Analysis & Management,Debt Markets,,Banks & Banking Reform,Access to Finance
    Date: 2008–02–01
  11. By: Harry Kelejian; Peter Murrell (Department of Economics, University of Maryland); Oleksandr Shepotylo
    Abstract: We examine spatial spillovers between countries in the development of institutions. Our dependent variables are three measures of institutions that relate to politics, law, and governmental administration. The major explanatory variable on which we focus is a spatial lag of the dependent variable, that is, the level of similar institutions in bordering countries. We also consider long-term determinants of institutions that have been previously examined in the literature, such as legal origin, religious groupings, ethnolinguistic fractionalization, resource base, and initial level of GDP per capita. Our framework of analysis is a spatial panel data model. Because of missing observations, our panel data set is not balanced, which causes special problems in estimating spatial models. These problems are explicitly recognized in our estimation procedure, which implements new results in spatial econometrics. Spatial spill-over effects between countries are statistically significant and economically important. We provide evidence of the size of the general equilibrium effects of spatial spillovers by examining a counter-factual the non-existence of the Soviet Union. Our central conclusions are bolstered by robustness tests that involve alternative treatments of GDP per capita and the inclusion of fixed effects.
    Keywords: institutions, spatial econometrics, governance, neighborhood effects, spatial spillovers
    JEL: C5 O1 O5 P5
    Date: 2007–11

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