nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒05‒17
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. "Unemployment And Unemployment Protection In Transition Economie" By Vera Brusentsev; Wayne Vroman
  2. Which Membership Matters? External vs. Internal Determinants of Institutional Change in Transition Countries By Thorsten Drautzburg; Inna Melnykovska; Rainer Schweickert
  3. ORIGINS and Strengthening of Institutional Change: the Chinese Case By EL KAROUNI, Ilyess
  4. Banking Reform in China: An Assessment in Macroeconomic Perspective By Beoy Kui Ng
  5. Labour mobility during transition: evidence from Georgia By Sabine Bernabè; Marco Stampini
  6. Internationalization and economic performance of enterprises: evidence from firm-level data By Hagemejer, Jan; Kolasa, Marcin
  7. How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition By Kolasa, Marcin
  8. Structural heterogeneity or asymmetric shocks? Poland and the euro area through the lens of a two-country DSGE model By Kolasa, Marcin
  9. Euroization: What Factors drive its Persistence? Household Data Evidence for Croatia, Slovenia and Slovakia By Helmut Stix
  10. The Determinants of Exchange Rate Regimes in Emerging Market Economies By Mehmet Guclu
  11. The Effect of Corruption on Investment Growth: Evidence from Firms in Latin America, Sub-Saharan Africa and Transition Countries. By Elizabeth Asiedu; James Freeman

  1. By: Vera Brusentsev (Department of Economics,University of Delaware); Wayne Vroman (The Urban Institute, Washington, DC)
    Abstract: Nearly twenty years have passed since the transition from a centrally-planned towards a market-oriented economy in the countries of Central and Eastern Europe and the Former Soviet Union (CEE-FSU). This paper documents the differing patterns of unemployment during the period 1990 to 2006 in the 28 countries that constitute the CEE-FSU group and outlines how unemployment protection programs developed in response. We also suggest some tentative explanations for the observed trends in unemployment and unemployment compensation. Our approach is novel in that we compare the performance of the CEE-FSU group to the worldwide average and to other major economies. In addition, we demonstrate important contrasts across the CEE-FSU sub-regions. Similar to other research in the area, this paper demonstrates significantly below-average income growth between 1990 and 1995 but then significantly above-average growth in the years since 1995 when compared with the worldwide average. We also show a significant link between output growth and employment growth for many individual countries from the region. The transition economies developed new institutions to measure and offset the effects of the new phenomenon of open unemployment. The majority instituted labor force surveys to measure unemployment and all but one (Tajikistan) established unemployment compensation (UC) programs. Our analysis of unemployment rates finds that they have been high in many of these countries but, when placed within a global context, the CEE-FSU averages during 1994-1996 and again during 2004-2006 were only somewhat higher than the average unemployment rates in other major countries with labor surveys.
    Keywords: transition economics, economic growth, unemployment, unemployment compensation
    JEL: C33 J4 J6 P2
  2. By: Thorsten Drautzburg; Inna Melnykovska; Rainer Schweickert
    Abstract: This paper analyses potential internal and external determinants of institutional change as measured by the World Bank Governance Indicators (WBGI) based on a panel of 25 transition countries for the period from 1996 to 2005. We show that natural resources and capital inflows exert an insignificant or negative influence and that economic policy allows to break path-dependency. Most importantly, however, we are able to show that incentives provided by NATO membership are important for institutional development and even more robust than variables measuring the integration into the EU. This allows for some optimism about the effectiveness of ENP policies and supports the argument that NATO, offering regional security, may provide significant additional incentives for good governance
    Keywords: EU, NATO, Transition Economies, Institutional Change, Governance
    JEL: F15 F20 F50 P20 P30 O19
    Date: 2008–05
  3. By: EL KAROUNI, Ilyess
    Abstract: Without necessarily reduce it to a single cause, this article lays stress on the cultural foundations of the Chinese postsocialist transformation. The process began with what we call a «cultural shock» brought about the opening of the country and took the form of an ideological aggiornamento. Henceforth Chinese authorities attach more importance to the economy than the ideology. Deep changes occurred at all levels of Chinese economic system. Besides it is this process which allows the institutional consolidation.
    Keywords: Chine; Changement institutionnel; Culture
    JEL: P30 B52 P51
    Date: 2008–05–12
  4. By: Beoy Kui Ng (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore)
    Abstract: China has been delaying its adoption of a flexible exchange rate system with free capital flows. The main excuse is that its financial sector is still in its fragile stage and is not able to withstand any external shocks. A big bang approach towards such liberalization will only lead to financial crisis as observed by experiences of many Asia-Pacific countries during the Asian Financial Crisis. With this in mind, this paper attempts to uncover the approach and strategies adopted by China in its banking reform since 1978 and then assess these reform measures in macroeconomic perspective. The paper argues that since China is still lingering on export-oriented strategy in promoting economic growth and monetary independence for demand management is still a long way to go, it is still in China’s best interest not to adopt a flexible exchange rate system at this point of time. As to capital account liberalization, the main focus is to engineer a controlled and systematic capital outflows through outward investment in particular portfolio investment. At the micro level, China should continue its banking reforms until the financial sector is strong enough to withstand the severe pressure of globalization. By then, will China, with its matured financial system be ready to consider the adoption of a flexible exchange system with free capital flows.
    Keywords: China, banking reform, non-performing loans, state-owned enterprises, corporate governance, regulation and supervision, financial liberalization
    JEL: E44 E5 G2 O16 O5
    Date: 2007–07
  5. By: Sabine Bernabè; Marco Stampini
    Abstract: This paper deals with labour mobility in Georgia during economic transition. We use quarterly 1998-99 panel data to examine mobility across six labour market statuses (inactivity, unemployment, formal wage employment, informal wage employment, selfemployment and farming). Our findings are consistent with the hypothesis of labour market segmentation. Formal employment is preferred to informal employment. Unemployment is largely a queuing device for individuals with higher education waiting for formal jobs. Some self-employment is subsistence activities and consistent with a segmented labour market, while other is high risk and potentially high return activities. Age, gender and education are significant determinants of labour mobility. Finally, informal employment serves as a buffer in times of recession –with farming and informal wage employment absorbing labour shed by other statuses during the Russian financial crisis.
    Keywords: labour mobility, informal labour, transition, Georgia
    JEL: J21 P23
    Date: 2008
  6. By: Hagemejer, Jan; Kolasa, Marcin
    Abstract: This paper provides evidence on the relative performance of internationalized firms using Polish firm-level data spanning over the period of 1996-2005. We distinguish between three modes of internationalization: exporting, importing of capital goods and foreign direct investment. Our results point strongly at superior performance of exporters vs. non-exporters importers vs. non-importers and foreign affiliates vs. domestic firms. We also find evidence for significant horizontal and backward productivity spillovers from all three types of international activity.
    Keywords: internationalization; productivity; panel firm-level data
    JEL: F15 L25 F23 O12
    Date: 2008–05
  7. By: Kolasa, Marcin
    Abstract: This paper examines the existence of externalities associated with FDI in a host country by exploiting firm-level panel data covering the Polish corporate sector. The main findings are as follows. Local firms benefit from foreign presence in the same industry and in downstream industries. Absorptive capacity of domestic firms is highly relevant to the size of spillovers. Competitive pressure facilitates backward spillovers, while market power increases the extent of forward spillovers. Host country equity participation in foreign firms is consistent with higher unconditional productivity spillovers to domestic firms.
    Keywords: foreign investment; spillovers; productivity; firm-level data
    JEL: F23 O33
    Date: 2007–03
  8. By: Kolasa, Marcin
    Abstract: This paper presents a two-country model linking Poland and the euro area and applies it for assessment of heterogeneity across these two regions. Overall, our results can be seen as rather inconclusive about the differences in parameters describing agents' decision-making in Poland and in the euro area. On the contrary, we find strong evidence for heterogeneity in terms of volatility and synchronization of shocks hitting both economies. Our results may be viewed as a step towards estimating the costs of Poland's entry to the European Monetary Union, associated with giving up the monetary autonomy and losing benefits from stabilizing movements of the exchange rate.
    JEL: E32 D58 F41 C11
    Date: 2008–05
  9. By: Helmut Stix (Oesterreichische Nationalbank, Economic Studies Division)
    Abstract: The question asked in this paper is why people continue to use foreign currencies even after their economies have stabilized. Survey data for Croatia, Slovenia and Slovakia are employed to provide an answer. The results confirm the role of network effects and of remittances. Furthermore, the extent of currency substitution is found to be positively associated with the level of income and education. An important aspect of euroization seems to be age (the older are more likely to hold foreign currencies). In contrast, neither expectations about inflation rates, nor about exchange rates, do seem to affect the degree of euroization in a systematic and predictable way. Trust in the banking system is found to affect the choice between foreign currency cash and foreign currency deposits. Overall, the results support the view that the persistence in the use of foreign currencies is driven to a large extent by factors that are related to the past.
    Keywords: Dollarization, euroization, currency substitution, survey data.
    JEL: E41 E50 D14
    Date: 2008–04–16
  10. By: Mehmet Guclu (Department of Economics, Ege University)
    Abstract: The choice of exchange rate regime has become one of the most important issues one more time in many economies after the financial crises in recent years. In the wake of the financial crises, many countries, especially emerging market economies, opted for floating exchange rate regimes by forsaking the pegged regimes. Consequently, an old debate on the choice and determinants of exchange rate regimes has been triggered. Economists have started to debate what appropriate exchange rate regime for an economy is. When the tendency in recent years is taken into consideration, the choice of exchange rate regime of countries, especially emerging economies, needs to be analyzed. To do this, in this paper, we attempt to uncover how emerging market economies choose their exchange rate regimes. In other words, we try to find the economic and political factors underlying the choice of exchange rate regimes. The study includes 25 emerging market economies over the period 1970-2006. We use random effect ordered probit model in order to find the long run economic and political determinants of exchange rate regimes for emerging economies. The determinants of both the de jure and de facto exchange regimes are empirically analyzed in the paper.
    Keywords: Exchange Rate Regime, Emerging Market
    JEL: E42 F31 F33 F41
    Date: 2008–05
  11. By: Elizabeth Asiedu (Department of Economics, The University of Kansas); James Freeman (Department of Economics, Wheaton College)
    Abstract: Many of the empirical studies that analyze the impact of corruption on investment have three common features: they employ aggregate (country-level) data on investment, corruption is measured at the country-level, and data for countries from several regions are pooled together. This paper uses firm-level data on investment and measures corruption at the firm and country-level, and allows the effect of corruption to vary by region. Our dependent variable is firms’ investment growth and we employ six measures of corruption from four different sources: two firm-level measures and four country-level measures. We find that the effect of corruption on investments varies significantly across regions: corruption has a negative and significant effect on investment growth for firms in Transition countries but has no significant impact for firms in Latin America and Sub-Saharan Africa. Furthermore, among the variables included in the regressions (firm size, firm ownership, trade orientation, industry, GDP growth, inflation and openness to trade) corruption is the most important determinant of investment growth for Transition countries.
    Keywords: Bribery, Corruption, Firm, Investment, Latin America and Caribbean, Sub-Saharan Africa, Transition Countries.
    JEL: G31 O16
    Date: 2008–05

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