nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒09‒20
nine papers chosen by
J. David Brown
Heriot-Watt University

  1. Do domestic firms benefit from geographic proximity with FDI? Evidence from the privatization of the Czech glass industry By Elisa Gaelotti
  2. Are private banks more efficient than public banks ? Evidence from Russia By Alexei Karas; Koen Schoors; Laurent Weill
  3. Industrial Upgrade, Employment Shock and Land Centralization in China By Shunfeng Song; Chengsi Wang; Jianghuai Zheng
  4. Mapping Poverty in Rural China: How Much Does the Environment Matter? By Susan Olivia; John Gibson; Scott Rozelle; Jikun Huang; Xiangzheng Deng
  5. The Prediction of Corporate Bankruptcy and Czech Economy’s Financial Stability through Logit Analysis By Petr Jakubík
  6. Large Shocks and Small Changes in the Marriage Market for Famine Born Cohorts in China By Loren Brandt; Aloysius Siow; Carl Vogel
  7. Financial Geographies and Emerging Markets in Europe By Karreman, B.
  8. The Effects of Reforming the Chinese Dual-Track Price System By John Bennett; Huw Dixon; Helen X.Y. Hu
  9. Value-at-Risk on Central and Eastern European Stock Markets: An Empirical Investigation Using GARCH Models By Vít Bubák

  1. By: Elisa Gaelotti (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper analyzes the effects of geographical proximity and agglomeration of FDIs (foreign direct investments) on domestic firms in the privatized glass sector in the Czech Republic. The motivation for this research is based on the scant evidence in Central and Eastern Europe of the effects of geographical proximity and agglomeration on the productivity of domestic firms. This study aims to explain how spillovers are transferred from FDIs to domestic firms. The econometrical analysis, using original panel data from 1990 to 2006, provides evidence that the agglomeration of FDIs has a negative and significant effect on the productivity of domestic firms in the glass sector at a 5% level. The effect of geographical proximity to FDIs is significant at a 10% level but not in all models. The results support the importance of geographic proximity and agglomeration of FDIs and conform with the evidence that shows that FDIs have produced negative spillovers on domestic firms in transition countries.
    Keywords: Foreign direct investments, agglomeration economies, panel data, regional location, Czech Republic, glass industry
    JEL: C23 F21 F23 L61 O18 R12
    Date: 2008–09
  2. By: Alexei Karas; Koen Schoors; Laurent Weill (Laboratoire de Recherche en Gestion et Economie, Institut d'Etudes Politiques, Strasbourg)
    Abstract: We study whether bank ownership is related to bank efficiency in Russia. We find that foreign banks are more efficient than domestic private banks and – surprisingly – that domestic private banks are not more efficient than domestic public banks. These results are not driven by the choice of the production process, the bank’s environment, the management’s risk preferences, the bank’s activity mix, size or the econometric approach. The evidence in fact suggests that domestic public banks are more efficient than domestic private banks and that the efficiency gap between these two types of banks is not lower after the introduction of deposit insurance in 2004. This may be due to increased switching costs or to the moral hazard effects of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and higher access of foreign banks than from bank privatization.
    Keywords: Bank Efficiency; State Ownership; Foreign ownership; Russia.
    JEL: G21 P30 P34 P52
    Date: 2008
  3. By: Shunfeng Song (Department of Economics, University of Nevada, Reno); Chengsi Wang (Department of Economics, University of New South Wales); Jianghuai Zheng (Department of Economics, Nanjing University)
    Abstract: This paper investigates the relationships among industrial upgrading, mid-aged peasants’ non-farm employment, and land conversion systems. We prove that China’s efforts to upgrade its industries generate a negative employment shock on mid-aged peasant workers, forcing some of them to return to their home villages. The current lump-sum land acquisition system, however, will neither help peasant workers deal with the adverse employment shock nor promote land centralization for industrial and urban uses. On contrary, land cooperation, an emerging land centralization system, will help peasant workers mitigate the adverse employment shock and centralize rural land for nonagricultural purposes.
    Keywords: Peasant workers; Industrial upgrade; Employment; Land centralization
    JEL: Q15 J43
    Date: 2008–09
  4. By: Susan Olivia (University of California, Davis); John Gibson (University of Waikato); Scott Rozelle (Stanford University); Jikun Huang (Chinese Academy of Sciences); Xiangzheng Deng (Chinese Academy of Sciences)
    Abstract: In this paper, we apply a recently developed small-area estimation technique to derive geographically detailed estimates of consumption-based poverty and inequality in rural Shaanxi, China. We also investigate whether using environmental variables derived mainly from satellite remote sensing improves upon traditional approaches that only use household survey and census data. According to our results, ignoring environmental variables in statistical analyses that predict small-area poverty rates leads to targeting errors. In other words, using environmental variables both helps more accurately identify poor areas (so they should be able to receive more transfers of poor area funds) and identify non-poor areas (which would allow policy makers to reduce poverty funds in these better off areas and redirect them to poor areas). Using area-based targeting may be an efficient way to reach the poor since many counties and townships in rural Shaanxi have low levels of inequality, even though, on average, there is more within-group than between-group inequality. Using information on locations that are, in fact, receiving poverty assistance, our analysis also produces evidence that official poverty policy in Shaanxi targets particular areas which in reality are no poorer than other areas that do not get targeted.
    Keywords: China; environment; poverty; small area estimation
    JEL: O15 O53 P36 Q56
    Date: 2008–09–12
  5. By: Petr Jakubík (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Czech National Bank; EEIP, a.s; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This article presents a financial scoring model estimated on Czech corporate accounting data. Seven financial indicators capable of explaining business failure at a 1-year prediction horizon are identified. Using the model estimated in this way, an aggregate indicator of the creditworthiness of the Czech corporate sector (named as JT index) is then constructed and its evolution over time is shown. This indicator aids the estimation of the risks of this sector going forward and broadens the existing analytical set-up used by the Czech National Bank for its financial stability analyses. The results suggest that the creditworthiness of the Czech corporate sector steadily improved between 2004 and 2006, but slightly deteriorated in 2007 what could be explained through global market turbulences.
    Keywords: bankruptcy prediction, financial stability, logit analysis, corporate sector risk, JT index
    JEL: G32 G33 G21 G28
    Date: 2008–09
  6. By: Loren Brandt; Aloysius Siow; Carl Vogel
    Abstract: Between 1958 and 1961, China experienced one of its worst famines in history. Birth rates plummeted during these years, but recovered immediately afterwards. The famine-born cohorts were relatively scarce in the marriage and labor markets. The famine also adversely affected the health of these cohorts. This paper decomposes these two effects on the marital outcomes of the famine-born and adjacent cohorts in the rural areas of two hard hit provinces, Sichuan and Anhui. Individuals born pre and post-famine, who were in surplus relative to their customary spouses, were able to marry. Using the Choo Siow model of marriage matching, the paper shows that the famine substantially reduced the marital attractiveness of the famine born cohort. The modest decline in educational attainment of the famine born cohort does not explain the change in spousal quality of that cohort. Thus, the famine-born cohort, who were relatively scarce compared with their customary spouses, did not have significant above average marriage rates.
    Keywords: famine, marriage market, Choo Siow, China
    JEL: J1 O1
    Date: 2008–09–08
  7. By: Karreman, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This study examines the contemporary financial geographies in Central and Eastern Europe and argues how these may affect the established European finacial centre network in the future. As the development of the financial sector in Europe’s emerging markets is largely dependent on foreign investments, explicit attention is directed to determine which emerging centres exhibit sufficient power to attract multinational financial service firms. In addition, it is empirically assessed form which locations these investments are controlled. The results show a distinct spatial order of financial centres organized around three main city clusters: a ‘south-east’ cluster controlled by Athens, a ‘central-east’ cluster around Vienna and a ‘Baltics’ cluster directed from Copenhagen and Stockholm. Based on the results it is argued that these centres of control, with Vienna in particular, may enhance their competitiveness as a financial centre due to their strategic position in the growing markets of Central and Eastern Europe.
    Keywords: multinational banks;parent-subsidiary links;financial centres;city clusters;Central and Eastern Europe
    Date: 2008–09–01
  8. By: John Bennett; Huw Dixon; Helen X.Y. Hu
    Abstract: We formulate a microeconomic model of the dual-track price system for Households and use it to analyze 'transitional policy' reforms, which we characterize as a rise in plan-track price and a reduction in the plan-track quantity. Each of these reforms has a negative effect on market price, but a positive effect on the weighted average price (CPI). When households are homogeneous, transitional policy reform reduces welfare (if profits are not fully distributed). Under fairly mild assumptions, if households are heterogeneous and resale of goods can occur, transitional policy reform creates losers (state employees) as well as winners (non-state employees).
    Date: 2008–07
  9. By: Vít Bubák (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; MSE, Université de Paris I. Panthéon-Sorbonne)
    Abstract: Using daily return data from the four major Central and Eastern European stock markets including fourteen highly liquid stocks and ATX (Vienna), PX (Prague), BUX (Budapest), and WIG20 (Warsaw) market indices, we model the value-at-risk using a set of univariate GARCH-type models. Our results show that, in both in-sample and out-of-sample value-at-risk estimations, the models based on asymmetric distribution of the error term tend to perform better or at least as well as the models based on symmetric distribution (i.e., Normal or Student) when the left tails of daily return distributions are concerned. Evaluation of the same models is less clear, however, when the right tails of the distribution of daily returns must be modelled. We suggest an asset-specific approach to selecting the correct parametric VaR model that depends not only on the risk level considered but also on the position in the underlying asset.
    Keywords: Value-at-Risk, Expected Shortfall, Backtesting
    JEL: C14 C32 C52 C53 G12
    Date: 2008–09

This nep-tra issue is ©2008 by J. David Brown. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.