nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒06‒21
nineteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Competition and the Gender Wage Gap: New Evidence from Linked Employer-Employee Data in Hungary 1986-2003 By Anna Lovasz
  2. Does the Chinese Banking System Promote the Growth of Firms? By Panicaos Demetriades; Jun Du; Sourafel Girma; Chenggang Xu
  3. The Gender Earnings Gap inside a Russian Firm : First Evidence from Personnel Data - 1997 to 2002 ; Updated Version By Thomas Dohmen; Hartmut Lehmann; Anzelika Zaiceva
  4. Optimal Portfolio Analysis for the Czech Republic, Hungary and Poland During 2001– 2006 Period By George Xanthos; Dikaios Tserkezos
  5. Informal Employment Relationships and Labor Market Segmentation in Transition Economies : Evidence from Ukraine By Hartmut Lehmann; Norberto Pignatti
  6. "Household specialisation and gender equality in transition. Paid and unpaid work of women and men in Soviet and post-Soviet Taganrog" By Katz, Katarina; Sand, Lena
  7. Real convergence and the determinants of growth in EU candidate and potential candidate countries - a panel data approach By Magdalena Morgese Borys; Éva Katalin Polgár; Andrei Zlate
  8. Building institutions for growth and human development: an economic perspective applied to the transitional countries of Europe and CIS By Zeghni, Sylvain; Fabry, Nathalie
  9. A Real Model of Transitional Growth and Competitiveness in China By Céline Rochon; Geneviève Verdier; Leslie Lipschitz
  10. Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria By Jesmin Rahman
  11. Will an asymmetrical system of fiscal decentralisation resolve the conflicts in the republic of Georgia? By Kirn, Tanja; Khokrishvili, Elguja
  12. Das georgische Steuersystem im Transformationsprozess By Khokrishvili, Elguja
  13. Firm Characteristics and Country Institutional Development: Business Relationships with Foreign Firms in Transition Economies By Manuel Portugal Ferreira; Dan Li; Fernando A. Ribeiro Serra
  14. Composition of small and large firms? business networks in transition economies By Manuel Portugal Ferreira; Dan Li; Fernando A. Ribeiro Serra
  15. Informality and Bank Credit: Evidence from Firm-Level Data By Junko Koeda; Era Dabla-Norris
  16. The Capital Markets of Emerging Europe: Institutions, Instruments and Investors By Li L. Ong; Silvia Iorgova
  17. Relative Income Positions and Labor Migration: A Panel Study Based on a Rural Household Survey in China By Zheren WU
  18. Rights of local jurisdictions and tax revenue distribution in Georgia By Narmania, David
  19. Estimating Equilibrium Exchange Rates for Armenia and Georgia By Omar AlShehabi; Shuang Ding

  1. By: Anna Lovasz (Labor Project, Central European University)
    Abstract: The overall gender wage gap fell from .31 to .15 between 1986 and 2003 following the transition to a free market in Hungary. During the same time period, firms faced increased competition from both new domestic and foreign firms due to the rapid liberalization measures implemented by the government. Becker's (1957) model of employer taste discrimination implies that employers that discriminate against women may be forced out of the market by competition in the long run, leading to a fall in the gender wage gap. I test this implication using data from the Hungarian Wage and Earnings Survey covering 1986-2003. I estimate the effect of variation in various measures of product market competition, including trade variables, on the within-firm endowment-adjusted gender wage gap, making use of the fact that I am able to follow firms over time. The estimates show a significant negative relationship between product market competition and the within-firm gender wage gap.
    Keywords: Transitional labor market, wage differentials, gender discrimination
    JEL: J31 J71 P20
    Date: 2008–06
  2. By: Panicaos Demetriades (University of Leicester); Jun Du (Aston University); Sourafel Girma (University of Nottingham); Chenggang Xu (London School of Economics)
    Abstract: Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.
    Keywords: Chinese banking system development, value added and TFP growth, panel dataset
    JEL: E44 O53
    Date: 2008–02
  3. By: Thomas Dohmen; Hartmut Lehmann; Anzelika Zaiceva
    Abstract: Using unique personnel data from one Russian firm for the years 1997 to 2002 we study the size, development and determinants of the gender earnings gap in an internal labor market during late transition. The gap is sizable but declines strongly over the entire period. Gender earnings differentials are largest for production workers who constitute the largest employee group in the firm. Various decompositions show that these differentials and their dynamics remain largely unexplained by observable characteristics at the mean and across the wage distribution. Our analysis also reveals that the earnings differentials for production workers largely stem from job assignment, as women are predominately assigned to lower paid jobs. Earnings gaps within job levels are small and almost fully explained by observed characteristics.
    Keywords: Gender earnings gap, personnel data, internal labor market, Russia
    JEL: J16 M52 P23
    Date: 2008
  4. By: George Xanthos (Technical Institute of Crete); Dikaios Tserkezos (Department of Economics, University of Crete, Greece)
    Abstract: This paper examines the strategy of investing in selected East European stock markets: The Czech Republic, Hungary, and Poland. These stocks markets are representative of the emerging stock markets of Eastern Europe and examined from the perspective of an investor who invests solely in the Eastern European markets. International Portfolio investment gradually increased during the late 2000’s in this region. Four portfolio construction techniques were used including the Markowitz mean-variance analysis. The optimal portfolios are evaluated using standard selection criteria and it is shown that possessing a diversified international portfolio which includes some of the aforementioned stock markets is beneficial.
    Keywords: Portfolio diversification; Markowitz Mean Variance Frontier; Eastern European Countries.
    Date: 2007
  5. By: Hartmut Lehmann; Norberto Pignatti
    Abstract: Research on informal employment in transition countries has been very limited because of alack of appropriate data. A new rich panel data set from Ukraine, the Ukrainian LongitudinalMonitoring Survey (ULMS), enables us to provide some empirical evidence on informalemployment in Ukraine and the validity of the three schools of thought in the literature onthe role of informality in the development process. Apart from providing additional evidencewith richer data than usually available in developing countries, the paper investigates to whatextent the informal sector plays a role in labor market adjustment in a transition economy.The evidence points to some labor market segmentation since the majority of informalsalaried employees are involuntarily employed and workers seem to queue for formalsalaried jobs. We also show that the dependent informal sector is segmented into a voluntary"upper tier" and an involuntary lower part where the majority of informal jobs are located.Our contention that informal self-employment is voluntary is confirmed by the substantialearnings premia associated with movements into this state.
    Keywords: Labor market segmentation, transition economies, Ukraine
    JEL: J31 J40 P23
    Date: 2008
  6. By: Katz, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Sand, Lena (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Using unique survey data from the Russian industrial city Taganrog in 1989 and 1998, we analyse changes in the gender division of labour among gainfully employed women and men, pre- and post-transition. In Soviet Taganrog, dual earner families predominated, but nevertheless men were usually primary earners, while women did the bulk of housework. After transition, contrary to early predictions, aggregate female and male employment rates have declined to a similar extent but the time-use data indicate increased gender specialisation among the employed .Thus, the dual earner norm mainly remains but the pre-existing gender difference within it has increased considerably, particularly among couples with pre-school children.<p>
    Keywords: Non-market work; gender division of labour; Russia
    JEL: D13 J16 J22 P39
    Date: 2008–06–09
  7. By: Magdalena Morgese Borys (The Center for Economic Research and Graduate Education of Charles University (CERGE-EI), P.O. Box 882, Politickych veznu 7, 111 21 Prague, Czech Republic.); Éva Katalin Polgár (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Andrei Zlate (Department of Economics, Boston College, Chestnut Hill, MA 02134, USA.)
    Abstract: The EU candidate and potential candidate countries have made considerable progress in economic transition and integration into the world economy within less than two decades. Nevertheless, gaps in terms of income per capita relative to the euro area remain large. This suggests that the challenges of real convergence will remain relevant for the region even in the medium and long term. This paper therefore focuses on real convergence and its determinants in the candidate and potential candidate countries. The analysis reveals that total factor productivity growth has been the main driver of convergence, followed by capital deepening, whereas labour has contributed only marginally to economic growth. There is evidence of conditional convergence in the transition countries of central, eastern and south-eastern Europe. More specifi cally, controlling for the quality of institutions, the extent of market reforms and macroeconomic policies, there is a significant and negative link between the initial level of GDP and subsequent growth. Labour productivity has improved in most countries, while employment and participation rates have been falling. Structural changes have resulted in, at least temporarily, increasing labour market mismatches. Investment rates have been rising rapidly in recent years, and foreign direct investment has been found to have a positive impact on total investment. Investment in human capital is still at a relatively low level compared with the euro area average. Thus, in order to sustain the positive developments observed in the past, further improvements are needed in terms of labour productivity and utilisation, as well as in terms of physical and human capital accumulation. JEL Classification: F15, F43, O16, O43, O47, O52.
    Keywords: Real convergence, conditional convergence, determinants of growth, total factor productivity, labour markets, capital accumulation, EU candidate and potential candidate countries.
    Date: 2008–06
  8. By: Zeghni, Sylvain; Fabry, Nathalie
    Abstract: The aim of this paper is to analyse in a more qualitative way the role of institutions in transitional countries in the CEECs and CIS. The main question we address is: what kind of institutional arrangement leads to Human development? We propose an analytical pattern where global performance (i.e. Human development) is the final outcome of a new institutional arrangement.
    Keywords: Institution; Transition; Human Development; Growth
    JEL: P30 O17 P27
    Date: 2008–05
  9. By: Céline Rochon; Geneviève Verdier; Leslie Lipschitz
    Abstract: We present a stylized real model of the Chinese economy with the objective of explaining two features: (1) domestic production is highly competitive in the sense that an accumulation of capital that raises the marginal product of labor elicits increases in employment and output rather than only in wages; and (2) even though the domestic saving rate is high, foreign direct investment is also substantial. We explain these features in terms of a conventional neoclassical growth model-with no monetary or nominal exchange rate policy-by including two aspects of the economy explicitly in the model: (1) low production wages are sustained by a large reserve army of rural labor which drives internal migration, and (2) domestic capital is distinct from importable capital and complementary with it in production. The results suggest that underlying real phenomena are important in explaining recent history; while nominal renmimbi appreciation may dampen price and wage increases, it would probably not change the real factors that have sustained rapid growth.
    Keywords: Working Paper , China, People's Republic of , Economic growth , Competition , Foreign investment , Investment , Savings , Labor supply , Wages , Prices , Exchange rates ,
    Date: 2008–04–25
  10. By: Jesmin Rahman
    Abstract: This paper analyzes current account (CA) developments in the following 10 new EU members states: Czech Republic, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. During the last 15 years, these countries, on average, have run CA deficits that are considerably higher than the average CA deficit of other developing countries. However, more recently, a diverging pattern has emerged among these countries with one group, consisting of the Baltic countries, Bulgaria and Romania, experiencing rapid widening, while the others seeing a stabilization in their CA balances. Using panel data for 59 countries, this paper empirically investigates the following three questions: Are higher average deficits in EU-10 explained by medium-term macroeconomic fundamentals? What explains the diverging CA behavior among EU-10? And finally, how challenging is it for the group experiencing rapidly widening CA deficits to reverse the trend?
    Date: 2008–04–17
  11. By: Kirn, Tanja; Khokrishvili, Elguja
    Abstract: This paper discusses the problems regarding the decentralisation of a formerly communist country. In Georgia, the first steps towards decentralisation failed, since the transition process led to a power vacuum that escalated in bloody conflicts and secessionist movements. The status of Abkhazia and South Ossetia is still unclear and the intra-state tensions remain unsolved. This may be one of the reasons why the most recent attempts of decentralisation are rather hesitant. It is far from clear whether decentralisation in response to regional tensions would increase instability or political stability. We identify the limited autonomy at the local and regional levels as a major obstacle and challenge for the further reform process.
    Keywords: decentralisation , institutional reform , fiscal equalization , regional autonomy
    JEL: H77 H72 H71 H50 H41 H21 H11
    Date: 2008–01
  12. By: Khokrishvili, Elguja
    Abstract: During the transformation process, the reform of public finances (in particular the tax system) is crucial for Georgia. There are a lot of proposals and suggestions in the financial literature concerning the introduction of tax systems in transition countries. Individual taxes or the entire tax system should be elaborated regarding certain criteria. This paper analyzes the tax reform procedures during the transition of Georgia to the free-market economy as well as the existing tax system. Concerning the taxes, the current tax system is more or less duplicated from the Western European countries. It becomes obvious that the chance of developing a rational, sustainable and adjusted tax system for transition countries was missed.
    Keywords: tax system , status quo and reform model , integrated personal income tax , fiscal policy
    JEL: P29 F37 H20 H21 H24 H25 H27 H29 H71
    Date: 2007–08
  13. By: Manuel Portugal Ferreira (Instituto Politécnico de Leiria); Dan Li (Indiana University); Fernando A. Ribeiro Serra (Unisul Business School)
    Abstract: The composition of firms' foreign business networks has been attended to in recent research but has seldom been subjected to empirical study in transition economies. In this study, we test hypotheses related to the composition of firms' foreign business relationships. First, we suggest that firms' characteristics matter for building a network of ties the foreign agents. Then, we consider the moderating effect of the degree of institutional development of the home country to assess to extent to which firms' foreign business relationships in transition economies are affected by the institutional development. We conduct a set of logistic regressions and one OLS regression to investigate the composition of firms' business relationships using firm-level data from 24 transition economies. The results indicate that firm size and membership in trade associations are good predictors of foreign business relationships ? specifically, relationships with foreign investors, customers, and suppliers - and also of the diversity of foreign relationships. The country's institutional development radically changes which firms' characteristics matter in forming business relationships.
    Keywords: transition economies, foreign relationships, types of ties, institutional development
    JEL: M0 M1 M2
    Date: 2008–06–09
  14. By: Manuel Portugal Ferreira (Instituto Politécnico de Leiria); Dan Li (Indiana University); Fernando A. Ribeiro Serra (UNISUL Business School)
    Abstract: Recent research has theorized on the composition of firms' business networks but has not empirically examined business networks in transition economies may vary for different firms. In this study, using firm level data from twenty six transition economies collected by the World Bank and the EBRD in 1999-2000, we conduct a set of logistic regression models to investigate the composition of small and large firms' business networks. The results show that, in contrast to smaller firms, larger firms are more likely to have formal business relationships, and relationships with national and foreign financial institutions, government, and foreign firms. In addition, in a subgroup analysis of seven transition economies we show that the composition of the firms' business networks varies substantially across countries but that the government is still a dominant client. Furthermore, we found a large variation on firms' reliance on informal ties and the extent to which firms exchange with foreign firms.
    Keywords: business relationships, multi-country, transition economies, institutional environment
    JEL: M0 M1
    Date: 2008–06–09
  15. By: Junko Koeda; Era Dabla-Norris
    Abstract: The paper relies on a firm-level data on transition economies to examine the relationship between informality and bank credit. We find evidence that informality is robustly and significantly associated with lower access to and use of bank credit. We also find that higher tax compliance costs reduce firms' reliance on bank credit, while a stronger quality of the legal environment is associated with higher access to credit even for financially opaque informal firms. An interactive term between a country-wide measure of tax compliance costs and the level of informal activity is negative and significant, suggesting that the negative association between informality and bank credit is stronger in countries with weak tax administration.
    Date: 2008–04–22
  16. By: Li L. Ong; Silvia Iorgova
    Abstract: Emerging European countries have made large strides in developing their local capital markets since the early-1990s. However, the rate of development has been widely disparate across countries and market segments, underpinned by the varying degrees of progress made in key areas such as establishing pricing benchmarks, adopting, implementing and enforcing securities laws and regulations, encouraging the growth of an institutional investor base, and providing adequate trading infrastructure. This paper provides an overview of the trends in the region's local capital markets, and examines the main factors that have contributed to their growth and effectiveness to date. It also discusses selected policy responses necessary to further improve the breadth and depth of these markets.
    Date: 2008–05–09
  17. By: Zheren WU (Osaka School of International Public Policy, Osaka University)
    Abstract: Migration may be used as a strategy to improve a householdfs comparative income position in residential areas. Previous studies have found empirical evidence that relative incomes affect emigration decisions. However, no effect is detected for internal migration. In this paper, we reexamine the effect of relative income positions on internal migration behavior. Based on data from a rural household panel survey of the Sichuan and Anhui provinces in China, we find that motives based on relative income play an important role in householdsf migration decisions. When all else is equal, a household that is poor relative to its home village reference group is more likely to increase migration than is a household in the upper end of the village income distribution. This effect is particularly apparent in households with pioneer migrants. The empirical results also indicate that pioneer migrants may confer a positive externality on potential future migrants. Workers belonging to households with pioneers might be less impeded by migration risks and costs and may be more likely to view migration (an increase in the number of migrants) as an effective strategy for improving their relative economic positions.
    Keywords: Migration, Relative income position, Pioneer migrants
    JEL: J24 O15 R23
    Date: 2008–06
  18. By: Narmania, David
    Abstract: This paper describes the administrative powers of local jurisdictions in Georgia, emphasizing on the tax competences and the abilities to mobilize other sources of income. Having listed and explained the types of revenues and incomes, the articles continues to show their distribution among administrative levels according to the current tax code. Following a brief overview of the main laws underlying tax regulation, the existing problems of the status quo before 2007 and some perspectives for the immediate future are outlined.
    Keywords: iscal policy , local jurisdictions , tax distribution , state and local budgets
    JEL: H7 H2 H1
    Date: 2007–08
  19. By: Omar AlShehabi; Shuang Ding
    Abstract: The significant real exchange rate appreciation in Armenia and Georgia since 2003, coupled with persistent current account deficits, raises the question of whether real exchange rates have become overvalued. This paper seeks to identify possible exchange rate misalignment by applying the behavioral equilibrium exchange rate approach, complemented by an analysis of the traditional competitiveness indicators. The results indicate an undervaluation of the Armenian dram and no significant misalignment of the Georgian lari in 2006.
    Keywords: Working Paper , Armenia , Georgia , Exchange rate appreciation , Current account deficits ,
    Date: 2008–05–01

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