nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒04‒21
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Catching up, forging ahead or falling behind? Central & Eastern European development in 1990-2005 By Marek Tiits; Rainer Kattel; Tarmo Kalvet; Dorel Tamm
  2. Regional Capital Inputs in Chinese Industry and Manufacturing, 1978-2003 By Wang, Lili; Szirmai, Adam
  3. International R&D Spillovers in Transition Countries: The Impact of Trade and Foreign Direct Investment By Marius Sorin Krammer
  4. Will the Renminbi Become a World Currency? By Wendy Dobson; Paul R. Masson
  5. Varieties of trajectories in the European Union and in the peripheral countries of the EU (In French) By Sophie BRANA (LARE-efi); Dalila NICET-CHENAF (GREThA UMR CNRS 5113)
  6. China’s Energy Economy: Technical Change, Factor Demand and Interfactor/Interfuel Substitution By John Gibson; Bongguen Kim; Hengyun Ma; Les Oxley
  8. O Crescimento Econômico e a Competitividade Chinesa By Marcelo Braga Nonnenberg; Paulo Mansur Levy; Fernanda De Negri; Katarina Pereira da Costa
  9. Rationality as a barrier to peace: Micro-evidence from Kosovo By Sumon K. Bhaumik; Ira N. Gang; Myeong-Su Yun
  10. New Europe's Promise for Life Sciences By Filippov, Sergey; Kalotay, Kalman
  11. Occupational Structures across 25 EU Countries: The Importance of Industry Structure and Technology in Old and New EU Countries By Cörvers Frank; Meriküll Jaanika

  1. By: Marek Tiits (Institute of Baltic Studies); Rainer Kattel; Tarmo Kalvet; Dorel Tamm
    Abstract: This paper aims to assess the economic development and development policies in the Central and Eastern European (CEE) countries in 1990-2005, from the collapse of the USSR to the enlargement of the European Union. A great number of authors have generally seen the transition as a very positive process. They have concluded that the reform policies focusing on macroeconomic and price stability have been the key to success for CEE economies. A reliable economic environment is, of course, instrumental for longer-term economic success, as exemplified by the prolonged crisis in most of the former Soviet Union. Our analysis of the economic development and competitive advantages in the region, however, leads to the conclusion that the specific approach to transition that the Central and Eastern European countries followed came at a rather high cost. Comparative neglect and weakness of a set of policies crucial for longer-term development, such as science, technology and innovation policies, has led to deterioration in the last decade rather than the strengthening of the competitive advantages of Central and Eastern European economies. Furthermore, we argue that, in most cases, CEE countries have unfortunately overlooked or misjudged a number of development challenges, and have thus implemented policies that have generated growth at the cost of rapidly increasing risks. This is how the financial fragility of several Central and Eastern European countries has recently increased drastically, and the region seems to have virtually arrived at the brink of economic collapse. Since the CEE countries joined the European Union, the CEE governments have gradually moved towards acquiring a more active role in economic development. These policies need, however, to be strengthened considerably and reinforced by macroeconomic policies that curb current excessive dependence on foreign-financed growth
    Keywords: Central and Eastern Europe; industrial dynamics; innovation policy; financial fragility
    JEL: F15 F36 F4 O32 O52
    Date: 2008–01–06
  2. By: Wang, Lili (UNU-MERIT); Szirmai, Adam (UNU-MERIT)
    Abstract: This paper provides new estimates of capital inputs in the Chinese economy. Estimates are made for the total economy (1953-2003), for the industrial sector (1978-2003) and for the manufacturing sector (1985-2003). The estimates for industry and manufacturing are broken down by thirty regions. The main contribution of this paperlies in constructing hitherto unvailable estimates of capital inputs at the level of Chinese regions. The paper makes a systematic attempt to apply SNA concepts to the estimation of Chinese capital inputs, according to the Perpetual Inventory Method. It makes a clear distinction between capital services and wealth capital stocks. After a general discussion of theoretical issues in capital measurement, the paper provides a detailed analysis of the relevant Chinese statistical concepts and data. It goes on to discuss previous capital estimates in the light of the modern conceptual and theoretical discussions. It ends with an explanation of the procedures followed in constructing the national and regional capital input series.
    Keywords: Capital Inputs, Capital Services, Regions, China, Industry, Manufacturing
    JEL: O47 R11
    Date: 2008
  3. By: Marius Sorin Krammer
    Abstract: While the economic theory predicts that developing countries will gain the most from technology spillovers, there have been only a few analyses looking at this question empirically. The present study focuses on a panel of 27 transition and 20 Western European countries between 1990 and 2006 and uses the latest developments in panel unit root and cointegration testing to disentangle the effects of international spillovers via trade and FDI. My findings show that imports remain the main channel of diffusion for both sets of countries, while FDI, although significant econometrically, has less quantitative impact on domestic productivity. The domestic R&D capital stock plays an active role in Western Europe while in the Eastern part is much less important. Human capital has an overall robust positive influence on TFP. The results confirm that transition countries seem to gain more in terms of productivity from the international diffusion process than their Western counterparts.
    Keywords: technology spillovers; trade; investment; panel cointegration
    JEL: O30 O47 O57 C23 D24
    Date: 2008–03
  4. By: Wendy Dobson (Rotman School of Management); Paul R. Masson (Rotman School of Management)
    Abstract: China has emerged as a major power in the world economy, so it seems natural to consider whether its currency will also have a major role. However, at present it is not used internationally. We look at the factors that contribute to the international use of currencies, and focus on the aspects of China’s financial system that would have to change before the renminbi emerged as an important regional or world currency. Even with important reforms, two important questions would remain: whether the authorities would want to encourage its international use, and whether an economy with substantial party control could gain international acceptance for its currency.
    Date: 2007–12
  5. By: Sophie BRANA (LARE-efi); Dalila NICET-CHENAF (GREThA UMR CNRS 5113)
    Abstract: This article analysis diversity of growth path for the UE-27 countries, the other Eastern European countries which developed a partnership with UE like Ukraine or Russia, and for the Mediterranean countries (Morocco, Algeria, Tunisia, Turkey) which signed the 1995 Barcelona agreements. The first part of this article categorizes dynamic growth path for each periphery of the UE. These peripheries are identified by principal component analyses and fixed effects models. In a second part, we try to explain the diversity of these trajectories. Analysis concluded on the fact that the degree of international insertion appears as fundamental variable.
    Keywords: Convergence, Economic Growth, International insertion, Comparative studies of countries, Model with panel data.
    JEL: F43 O47 O57 C33
    Date: 2008
  6. By: John Gibson; Bongguen Kim; Hengyun Ma; Les Oxley (University of Canterbury)
    Abstract: With its rapid economic growth, China’s primary energy consumption has exceeded domestic energy production since 1994, leading to a substantial expansion in energy imports, particularly of oil. China’s energy demand has an increasingly significant impact on global energy markets. In this paper Allen partial elasticities of factor and energy substitution, and price elasticities of energy demand, are calculated for China using a two-stage translog cost function approach. The results suggest that energy is substitutable with both capital and labour. Coal is significantly substitutable with electricity and complementary with diesel while gasoline and electricity are substitutable with diesel. China’s energy intensity is increasing during the study period (1995-2004) and the major driver appears to be due to the increased use of energy intensive technology.
    Keywords: China; Interfactor/interfuel substitution; Technology; Energy intensity decomposition
    JEL: D24 O33 Q41
    Date: 2008–03–01
  7. By: Rod Tyers; Iain Bain
    Abstract: With exports almost half of its GDP and most of these directed to Europe and North America, negative financial shocks in those regions might be expected to retard China’s growth. Yet mitigating factors include the temporary flight of North American and European savings into Chinese investment and some associated real exchange rate realignments. These issues are explored using a dynamic model of the global economy. A rise in American and European financial intermediation costs is shown to retard neither China’s GDP nor its import growth in the short run. Should the Chinese government act to prevent the effects of the investment surge, through tighter inward capital controls or increased reserve accumulation, the associated losses would be compensated by a trade advantage since its real exchange rate would appreciate less against North America than those of other trading partners. The results therefore suggest that, so long as the financial shocks are restricted to North America and Western Europe, China’s growth and the imports on which its trading partners rely are unlikely to be significantly hindered.
    JEL: C68 E17 F21 F17 F43 F47 O5
    Date: 2008–04
  8. By: Marcelo Braga Nonnenberg; Paulo Mansur Levy; Fernanda De Negri; Katarina Pereira da Costa
    Abstract: O artigo discute as principais causas do forte crescimento da economia chinesa nos últimos 27 anos. Apesar de este ser um fato amplamente conhecido, menos compreendidas, no entanto, são as causas desse processo, ou, pelo menos, suas características e elementos definidores mais importantes. Dentre as causas apontadas em diversos estudos, destacam-se os investimentos diretos externos (IDEs) e as medidas de política industrial, como, por exemplo, os incentivos fiscais concedidos a setores determinados localizados em zonas econômicas especiais. Esses fatores, certamente, contribuíram para o espetacular crescimento econômico chinês, mas estão longe de explicar adequadamente esse processo. Afinal, algumas dessas características estiveram presentes em diversos outros países e regiões, sem que o efeito fosse nem ao menos parecido. Assim, um dos principais objetivos deste trabalho é lançar novas hipóteses quanto às fontes do desempenho econômico chinês e suas características, propondo uma visão sobre o desenvolvimento recente daquele país, a qual procure ir além das explicações mais conhecidas e que busque, na história recente e na geografia, algumas pistas para esse processo. A adequada compreensão dessas características e o seu ordenamento ao longo da história por ordem de importância são úteis para determinar quão específicas são as condições do crescimento chinês e que políticas poderiam ser replicadas no Brasil. Em segundo lugar, examinar as perspectivas de crescimento da China. As principais questões que se colocam são: primeiro, até quando conseguirá a China manter o atual padrão de crescimento e, segundo, como manter os atuais níveis de superávit em balanço de pagamentos e de acumulação de reservas? The article discusses the main reasons behind the strong growth process of the Chinese economy in the last 27 years. Although this is a widely known fact, less well understood are the causes of this process, or at least its features and more important elements. Among the reasons noted by many authors, are foreign direct investment (IDEs) and industrial policy measures, such as tax incentives granted to certain industries located in special economic zones. These factors undoubtedly contributed to the Chinese spectacular economic growth, but are far from adequately explaining this process. After all, some of these features were present in several other countries and regions, but the effect was not the same. Therefore, one of the main purposes of this paper is to present some assumptions concerning the sources of Chinese economic performance and its characteristics, providing a vision about the recent development of this country that seeks to go beyond the explanations most known and to look in recent history and geography, some clues to this process. A proper understanding of these characteristics is useful to determine how specific are the conditions of growth in Chinese policies that could be replicated in Brazil. In second place, to analyze the growth prospects for China. The main questions are, first, to which extent will China continue to grow at the present pace. Second, how to keep the present levels of balance of payment surplus and foreign exchange accumulation?
    Date: 2008–04
  9. By: Sumon K. Bhaumik (Brunel University); Ira N. Gang (Rutgers University); Myeong-Su Yun (Tulane University)
    Abstract: Despite a significant expansion of the literature on conflicts and fragility of states, only a few systematic attempts have been made to link the theoretical literature on social conflicts to the available micro-level information about the people who are involved in these conflicts. We address this lacuna in the literature using a household-level data set from Kosovo. Our analysis suggests that it is individually rational for competing ethnic communities, Kosovo Albanians and Kosovo Serbs, to resist a quick agreement on a social contract to share the region’s resources.
    Keywords: conflict, individual rationality, economic deprivation, Balkans, Kosovo
    JEL: J15 O12 I32
    Date: 2008–01–11
  10. By: Filippov, Sergey (UNU-MERIT); Kalotay, Kalman (UNCTAD)
    Abstract: The life sciences sector (and biotechnology in particular) has emerged as a prospective area, and attracted a lot of attention recently. Multinational companies in the life sciences seek to explore new markets, and, on the other side, governments strive to develop the life sciences sector perceiving it as a basis for long-term development. Whilst the R&D activities of global multinationals in life sciences still remain concentrated in the Triadic economies, these companies increasingly seek for new location to tap the knowledge. New EU member states emerge as such prospective locations. Notwithstanding the interest towards this sector, the body of literature on the development of life sciences in new EU member states, and particularly, the role of multinational companies, remains scant. In this explorative study we attempt to fill this gap and focus on the role of multinational companies in the Czech life sciences sector.
    Keywords: Life Sciences, Biotechnology, Pharmaceuticals, Multinational Companies, European Union
    JEL: F21 F23 L65 O32
    Date: 2008
  11. By: Cörvers Frank; Meriküll Jaanika (ROA rm)
    Abstract: This paper analyzes the occupational structures of 25 European Union countries during the period 2000-2004. Shift-share analyses have been used to decompose cross-country differences in occupational structure into within industry and between industry effects. The static analysis for 2004 shows that the new Member States employ a lower share of skilled workers because their industry structure is biased towards less skill-intensive industries and because they use fewer skills within industries. The differences in the shares of (high-skilled) non-production workers are dominated by the between (industrial) effect. In contrast, the dynamic analysis of 2000-2004 shows that changes in the share of high-skilled non-production workers are mostly driven by within industry changes, which are probably related to skill-biased technological change. The results indicate the weakening of this process, at least for non-production workers. The diffusion of the increased demand for skills within sectors is witnessed for the higher income EU12 country group, but less strongly for the EU25 country group.
    Keywords: education, training and the labour market;
    Date: 2008

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