nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒10‒21
seventeen papers chosen by
J. David Brown
Heriot-Watt University

  1. Race to the top and race to the bottom: Tax competition in rural China: By Yao, Yi; Zhang, Xiaobo
  2. Corporate governance in developing and emerging countries. The case of Romania By Giurca Vasilescu, Laura
  3. Introducing Vouchers and Standardized Tests for Higher Education in Russia: Expectations and Measurements By Osipian, Ararat
  4. China's Regional Convergence in Panels with Multiple Structural Breaks By Matsuki, Takashi; Usami, Ryoichi
  5. Fees in Individual Account Pension Systems: A Cross-Country Comparison By Waldo Tapia; Juan Yermo
  6. The Status and Development of Eco-businesses in Romania By Camelia Ioana Ucenic; Laura Bacali
  7. Collective identity formation in the process of EU enlargement; Defeating the inclusive paradigm of a European democracy? By Zdzisław Mach; Grzegorz Pożarlik
  8. Effects of Changes in Public Policy on Efficiency and Productivity of General Hospitals in Vietnam By Pinar Guven Uslu; Thuy Pham Linh
  9. Corruption in Russia’s Doctoral Education By Osipian, Ararat
  10. Inflation Persistence: Is It Similar in the New EU Member States and the Euro Area Members? By Michal Franta; Branislav Saxa; Katerina Smidkova
  11. The dragon and the elephant: Learning from agricultural and rural reforms in China and India By Gulati, Ashok; Fan, Shenggen
  12. Creative China? The University, Tolerance and Talent in Chinese Regional Development By Florida, Richard; Mellander, Charlotta; Qian, Haifeng
  13. Understanding Russian Regions' Economic Performance During Periods of Decline and Growth: An Extreme-bound Analysis Approach By Rudiger Ahrend
  14. China: Shadow WTO agricultural domestic support notifications By Cheng, Fuzhi
  15. Fiscal decentralization and economic growth in Central and Eastern Europe By Andrés Rodríguez-Pose; Anne Krøijer
  16. Policies for Industrial Learning in China and Mexico: Neo-developmental vs. Neo-liberal approaches By Shafaeddin, Mehdi; Gallaher, Kevin
  17. Transforming University Governance in Ukraine: Collegiums, Bureaucracies, and Political Institutions By Osipian, Ararat

  1. By: Yao, Yi; Zhang, Xiaobo
    Abstract: "Fiscal federalism has been argued to intensify regional competition and promote economic growth. This paper is the first, to our knowledge, to empirically assess the patterns and extent of strategic tax competition between geographically neighboring governments in China. Using a panel data set containing data at the county level, we apply Anselin's (1995) local indicator of spatial association (LISA) approach to statistically test the existence of local capital tax competition and examine its determining factors. We find heterogeneous tax competition behaviors across regions. Under decentralized fiscal structure and centralized merit-based governance structure, local governments have strong incentives to compete with each other to attract mobile capital. Counties in the coastal areas with favorable initial conditions of larger tax base tend to “race to the bottom” by lowering tax rates so as to create a pro-business environment. In contrast, the local governments in poor regions have difficulty in competing with the governments on the coast to attract investment and develop the local nonfarm economy. Their local revenues are sometimes barely sufficient to cover the salaries of civil servants on the public payroll. Consequently, they are more likely to levy heavy taxes on existing enterprises, worsening the business investment environment. This leads to a “race to the top” in raising effective tax rate in lagging regions." from authors' abstract
    Keywords: Fiscal decentralization, Regional inequality, Tax competition, economic growth, Development strategies,
    Date: 2008
  2. By: Giurca Vasilescu, Laura
    Abstract: The experiences of the developed countries reveals that a good corporate governance could reduces risk, stimulates performance, improves access to capital markets, enhances the marketability of goods and services, improves leadership, increases the value of the corporations, enables the corporation to acquire external finances more easily and at a lower cost. In the case of developing and emerging economies the need for corporate governance extends beyond resolving problems resulting from the separation of ownership and control. Developing and emerging economies are constantly confronted with issues such as the lack of property rights, the abuse of minority shareholders or contract violations. But in order that corporate governance measures have a strong impact in the economy, a set of democratic, market institutions and legal system should be settled up. The Romanian governance system follows the patterns of the Continental European model based on the internal control of the employees and the management but with some particularities in function of the specific economic, political, cultural conditions.
    Keywords: corporate governance; developing countries; principles; models; firm; performance
    JEL: P2 G34 G32
    Date: 2008–10–09
  3. By: Osipian, Ararat
    Abstract: The reform of higher education in Russia, based on standardized tests and educational vouchers, was intended to reduce inequalities in access to higher education. The initiative with the vouchers has failed and by now is already forgotten while the national test is planned to be introduced nationwide in 2009. The national test called to replace the present corrupt system of entry examinations has experienced numerous problems so far and will likely have even more problems in the future. This paper analyses the reform and suggests a methodology of measuring effects of the reform on access to higher education.
    Keywords: higher education; inequalities; reform; standardized test; voucher; Russia
    JEL: P21 I28 I22
    Date: 2008–01–01
  4. By: Matsuki, Takashi; Usami, Ryoichi
    Abstract: This study investigates the existence of regional convergence of per capita outputs in China from 1952–2004, particularly focusing on considering the presence of multiple structural breaks in the provincial-level panel data. First, the panel-based unit root test that allows for occurrence of multiple breaks at various break dates across provinces is developed; this test is based on the p-value combination approach suggested by Fisher (1932). Next, the test is applied to China’s provincial real per capita outputs to examine the regional convergence in China. To obtain the p-values of unit root tests for each province, which are combined to construct the panel unit root test, this study assumes three data generating processes: a driftless random walk process, an ARMA process, and an AR process with cross-sectionally dependent errors in Monte Carlo simulation. The results obtained from this study reveal that the convergence of the provincial per capita outputs exists in each of the three geographically classified regions—the Eastern, Central, and Western regions—of China.
    Keywords: panel unit root test;multiple breaks;combining p-values;nonstationary panels;China;convergence
    JEL: O47 C12 C33
    Date: 2007–03–17
  5. By: Waldo Tapia; Juan Yermo
    Abstract: This paper focuses on the fees that are charged to participants in mandatory, defined contribution pension systems, focusing on the experience of Latin America, Central and Eastern Europe, Australia, and Sweden. In order to compare fees across countries, this paper looks at the evolution of a simple cost measure, the ratio of annual fees to assets under management. The relatively high fee to assets ratios in some Latin American and Central and Eastern European countries can be partly explained by the recent implementation of their private systems. However, system maturity cannot explain all differences observed between countries. The paper argues that the particularly low fees observed in Bolivia and Sweden at the inception of their respective systems stem largely from a decision to force cost competition among providers via a central agency or =clearing house‘. <P>Frais facturés aux particuliers ayant souscrit à un régime de retraite individuel : Comparaison entre plusieurs pays <BR>Ce document traite principalement des frais administratifs facturés aux particuliers ayant souscrit à un régime de retraite obligatoire à cotisations définies en mettant l‘accent sur les pratiques observées en Amérique latine, en Europe centrale et orientale, en Australie et en Suède. Pour pouvoir comparer les coûts d‘un pays à l‘autre, les auteurs examinent l‘évolution d‘une mesure simple des frais, à savoir le montant des frais annuels rapporté à celui des actifs gérés. Le niveau relativement élevé des ratios des frais de gestion relevés dans certains pays d‘Amérique latine et d‘Europe centrale et orientale peut être dû au fait que la mise en place de systèmes privés y est toute récente. Cependant, la maturité des systèmes ne peut expliquer toutes les différences observées entre les pays. Les auteurs affirment que le niveau particulièrement faible des frais facturés en Bolivie et en Suède dès la création de leurs systèmes respectifs est dans une large mesure imputable à la décision prise par ces pays de mettre les prestataires en situation de concurrence par les coûts grâce à la création d‘un organisme central ou ?chambre de compensation?.
    Keywords: facilitation des échanges, pension fund, fond de pension, frais d'administration
    JEL: G23 G32 J32
    Date: 2008–09
  6. By: Camelia Ioana Ucenic (University of Crete - Technical University Cluj Napoca); Laura Bacali (Technical University Cluj Napoca)
    Abstract: The eco-businesses are poorly represented in Romania, in comparison with the average of EU. The increase of weight of eco-industries is among the development objectives in medium and long run. Romania has to implement a plan of 28 actions for promotion of eco-technologies and increase their competitiveness. Economic changes had main impact on ecological protection and on the general public as an entire. Almost all eco-food Romanian products are for export because inside the country it is only a small niche of consumers. The customers are that who used to consume this type of products on European markets, others see it as a trend and a third category is occasional consumers who introduce in their diet about 5-10 percent organic products There continue to exist obstacles in the manner of the expansion of this market such as the still low-scale production, a reduced range of products, higher prices (up to 150 % more) than for standard products, low level of consumer information and low promotion level. In spite of all these aspects it is a great potential in the medium and long term. An exploratory research was carried out in order to evaluate the state of Romanian ecological producers. The survey had 18 questions but here will be presented only some of the results. The aim of this exploratory research is to offer information for the set-up of a new eco-business. The Romanian eco-businesses understood the necessity of development and implementation of the latest patterns in order to assure a sustainable development of the business. The entrepreneurs are conscious about the poor state of it in comparison with other European companies.
    Keywords: eco-business, eco-market, eco-product, exploratory research, sustainability, survey
    Date: 2008–10–06
  7. By: Zdzisław Mach; Grzegorz Pożarlik
    Abstract: Abstract In our analysis we argue that the EU eastern enlargement did not result in significant change of predominantly ethnos based collective identity in the new EU countries. Consequently, we argue that, the EU eastern enlargement has, by and large, been understood by citizens of new EU countries as primarily a process of economic adjustment to the common market standards with limited impact on political dimension of European integration, i.e. finalite politque of the EU institutional design or, more generally, the model of future democratic order in Europe. The main conclusion that could be drawn from the analysis of dynamics of collective identity formation in the context of the EU enlargement is that the inclusive paradigm of European democracy which constituted the identitarian foundation of European integration process since the establishment of first European Communities turned out to be self-defeating in the context of the EU eastern enlargement at least in short term perspective.
    Keywords: European identity; democracy; post-Communism; enlargement
    Date: 2008–09–15
  8. By: Pinar Guven Uslu (Norwich Business School and ESRC Centre for Competition Policy, University of East Anglia); Thuy Pham Linh (Norwich Business School, University of East Anglia)
    Abstract: The health sector reform programme which began in Vietnam in 1989 in order to improve the efficiency of the health system has altered the way in which Vietnamese hospitals operate. The programme put the spotlight on input savings. This study aims to examine the relative efficiency of hospitals during the health reform process and assess - by looking at the relative efficiency of hospitals - the effects of the regulatory changes. The study employs the DEA two-stage approach referring to data from 101 general public hospitals over the period 1998-2006. The study revealed that there was evidence of improvement in the productivity of Vietnamese hospitals over the period 1998-2006, with a progress in total factor productivity of 1.4% per year. Furthermore, the differences in hospital efficiency can be attributed to both the regulatory changes and hospital-specific characteristics. The user feesand autonomy measures were found to increase technical efficiency. Provincial hospitals were revealed to be more technically efficient than their central counterparts and hospitals located in the North East, South East and Mekong River Delta regions performed better that hospitals from other regions.
    Keywords: changes in public policy, health services, data envelopment analysis, hospital, regulatory changes
    JEL: I18 I19
    Date: 2008–10
  9. By: Osipian, Ararat
    Abstract: Doctorates have long attracted attention of those aspiring to scholarship and research, but also those seeking verbal distinctions and a documented knowledge. Doctoral degrees are considered as signs of a high level expertise and authority in a given filed. The growing number of dissertation defenses does not necessarily translate into a higher quality of dissertations or qualifications of newly produced doctorates. Such a trend may in part be a result of the growing corruption in higher education, including doctoral education. This paper addresses the issue of “dissertations for sale” in the Russian Federation. It describes corruption in conferring doctoral degrees in its most explicit forms and focuses on possible solutions for this problem. It searches to answer the questions: Why people buy doctorates? Whether this practice is harmful? Is corruption in doctoral education really a bad thing? Is it possible to stop such a practice and how? Answering these questions helps develop a conceptual approach to the problem of doctorates for sale, on the basis of which it will be possible to build future theoretical and empirical work.
    Keywords: corruption; dissertation; doctoral degrees; higher education; Russia
    JEL: P36 P37 I23 I28
    Date: 2008–10–01
  10. By: Michal Franta (Czech National Bank; CERGE-EI); Branislav Saxa (Czech National Bank; CERGE-EI); Katerina Smidkova (Czech National Bank; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Inflation persistence has been put forward as one of the potential reasons of divergence among euro area members. It has also been proposed that the new EU Member States (NMS) may struggle with even higher persistence due to convergence factors. We argue that persistence may not be as different between the two country groups as one might expect. However, this empirical result can only be obtained if the adequate estimation methods, reflecting the scope of the convergence process the NMS went through, are applied. We emphasize that a time-varying mean models suggest similar or lower inflation persistence for the NMS compared to euro area countries while more traditional parametric statistical measures assuming a constant mean deliver substantially higher persistence estimates for the NMS than for the euro area countries. This difference is due to frequent breaks in inflation time series in the NMS. Structural persistence measures show that backward-looking behavior may be a more important component in explaining inflation dynamics in the NMS than in the euro area countries.
    Keywords: inflation persistence, new hybrid Phillips curve, new member states, time-varying mean
    JEL: E31 C22 C11 C32
    Date: 2008–10
  11. By: Gulati, Ashok; Fan, Shenggen
    Abstract: "During the past two-and-a-half decades, China and India have implemented a series of economic reforms that have led to recent growth rates of 9-11 percent per year in China and 8-9 percent per year in India. The rapid economic growth of the two countries has not only captured the attention of the world but has also set into motion a rethinking of the very paradigm of economic development because, despite similar trends in growth rates, the two countries have taken different reform paths, which have led to different rates of poverty reduction. Thus far, agriculture-led growth in China has reduced poverty much faster than has India's experience of liberalizing and reforming the manufacturing sector. With public investments in rural roads and agricultural research and development (R&D) playing critical roles, China has been able to not only feed its population but also raise rural incomes despite having much smaller average landholding size than in India. Nonetheless, there are also lessons to be learned from India's experience. This brief is based on a book, The Dragon and the Elephant: Agricultural and Rural Reforms in China and India (published for IFPRI by Johns Hopkins University Press and, in South Asia, by Oxford University Press-India), which compares the rural development and agricultural reform experiences of China and India and examines the lessons that can be learned from both." from Text
    Date: 2008
  12. By: Florida, Richard (Martin Prosperity Institute); Mellander, Charlotta (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Qian, Haifeng (School of Public Policy, George Mason University)
    Abstract: The relationships between talent, technology and regional development have been widely examined in the advanced economies. While there is a general consensus as to the important role talent plays in regional development, debate has emerged on two key issues. The first involves the efficacy of educational (i.e. human capital) versus occupational (i.e. the creative class) measures of talent; the second involves the factors affecting the distribution of talent. In this study, we have used structural equation models and path analysis. We employed both educational and occupational measures of talent to examine the relationships between talent, technology and regional economic performance in China, and to isolate the effects of tolerance, differing levels of consumer service amenities, and the location of universities on the distribution of talent. Contrary to the findings of empirical studies on the developed economies, we found the relationships between the distribution of talent and technology and between the distribution of talent and regional economic performance in China to be weak. We found the presence of universities – a factor highly influenced by government policy – and the actual stock of talent to be strongly related. We also found that tolerance, as measured by the “Hukou index,” plays an important role in the distribution of talent and technology in China.
    Keywords: China; Talent; Human Capital; Creative Class; Tolerance; Technology; Regional Development
    JEL: O30 P30 R12
    Date: 2008–10–13
  13. By: Rudiger Ahrend
    Abstract: This article uses “extreme-bound”-type analysis to revisit the determinants behind widely differing economic growth in Russian regions. Using data of 77 regions for 1993-2004, it separately examines the growth drivers for the phase of economic decline up to 1998, and for the period of strong growth afterwards. Looking at forty variables considered to be potentially related to growth, it determines, for each of the two periods, the ones robustly associated with Russian economic performance. Among the variables considered are proxies of politico-institutional features, indicators of economic reform, and measurements of both economic and non-economic initial conditions. The main findings, based on close to one million regressions, are as follows: during the period of economic decline up to 1998, differences in Russian regional growth were almost entirely driven by initial conditions, with resource and human capital endowments, industrial structure, and geographical location playing the dominant roles. However, since the 1998 crisis, the importance of initial conditions has declined significantly, and is now basically reduced to hydrocarbon wealth and advantageous geographical location. More reform-oriented policies, as well as better regional leadership are found to have come to make a significant difference. These results point to determinants of economic performance in periods of actual economic decline being quite different from those in “normal” times of economic growth. <P>Comprendre la performance économique des régions russes pendant les périodes de déclin et de croissance : Une approche par analyse de bornes extrêmes <BR>Cet article adopte une approche par « analyse de bornes extrêmes » pour explorer les déterminants d’une croissance économique très inégale entre les régions russes. En utilisant des données couvrant 77 régions de 1993 à 2004, les déterminants de la croissance sont examinés pour la période de depression économique allant jusqu’à 1998, ainsi que pour la période d’expansion forte qui l’a suivie. Parmi 40 variables potentiellement importantes pour la croissance, sont déterminées, pour chacune des deux périodes, les variables associées de façon robuste à la performance économique russe. Les variables examinées incluent des aspects politico-institutionnels, des indicateurs des reformes économiques, ainsi que les conditions initiales économiques et non-économiques de ces régions. Les résultats principaux, dérivant d’un nombre de régressions atteignant presque un million, sont les suivants: pendant la période de stagnation se déroulant jusqu’en 1998, les différences de croissance entre régions sont expliquées presque entièrement par les conditions initiales, en termes de ressources naturelles, de capital humain, de structure industrielle, et de situation géographique. Toutefois, depuis la crise de 1998, l’influence de ces dernières a considérablement diminué, et seules la richesse pétrolière et une situation géographique avantageuse sont demeurées importantes. Une politique de réformes économiques, ainsi que la plus grande qualité des dirigeants régionaux, ont commencé à avoir un impact important. Ces résultats suggèrent que les facteurs de la croissance économique en période de déclin sont différents de ceux prévalant pendant les périodes “normales” de croissance positive.
    Keywords: economic growth, transition, Russia, Russie, natural resources, ressources naturelles, political economy, économie politique, economic reform
    JEL: O4 O52 P2 R11
    Date: 2008–10–10
  14. By: Cheng, Fuzhi
    Abstract: "This paper reviews recent agricultural policy changes in China and presents estimates of domestic support for the period 1996-2005. A set of relevant alternative subsidy-definition scenarios and their effects on the calculated levels of support are analyzed, and a projection of domestic support through 2013 is presented. The paper concludes with a discussion of new WTO rules that may be negotiated in the Doha Round and their implications for China. Based on standard WTO subsidy calculation methods, our results indicated that China's domestic support for the period 1996-2005 has been well below the limits agreed at its WTO accession. The market price support (MPS) component of the aggregate measure of support (AMS) in China has been below zero, and this has dwarfed the relatively small but positive non-product specific AMS and led to a zero current total AMS after de minimis. China has no AMS commitments but can provide trade-distorting domestic support to agricultural producers up to 8.5 percent of the value of production (or RMB561 billion). Thus there appears to be substantial room for China to extend its amber box subsidy measures through heavy use of the de minimis provision. We project domestic support notifications through 2013 based on specified assumptions about domestic policies, including changes in administered prices and commodity program coverage. New rules potentially negotiated in the Doha Round are expected to provide more constraints on subsidies. Due to China's developing country status, with no AMS commitments under the Uruguay Round Agreement on Agriculture the impacts of these new constraints are shown to be limited, although our projections indicate that China may exceed its WTO commitment levels under certain price and commodity coverage scenarios." from authors' abstract
    Keywords: Agricultural policies, WTO Doha round, WTO compliance, Notification of domestic support, China agricultural support policies, Globalization, Markets,
    Date: 2008
  15. By: Andrés Rodríguez-Pose (London School of Economics); Anne Krøijer (London School of Economics)
    Abstract: The majority of the literature on fiscal decentralization has tended to stress that the greater capacity of decentralized governments to tailor policies to local preferences and to be innovative in the provision of policies and public services, the greater the potential for economic efficiency and growth. There is, however, little empirical evidence to substantiate this claim. In this paper we examine, using a panel data approach with dynamic effects, the relationship between the level of fiscal decentralization and economic growth rates across 16 Central and Eastern European countries over the 1990-2004 period. Our findings suggest that, contrary to the majority view, there is a significant negative relationship between two out of three fiscal decentralization indicators included in the analysis and economic growth. However, the use of different time lags allows us to nuance this negative view and show that long term effects vary depending on the type of decentralization undertaken in each of the countries considered. While expenditure at and transfers to subnational tiers of government are negatively correlated with economic growth, taxes assigned at the subnational level evolve from having significantly negative to significantly positive correlation with the national growth rate. This supports the view that subnational governments with their own revenue source respond better to local demands and promote greater economic efficiency
    Keywords: fiscal decentralization; economic growth; efficiency; devolution; Central and Eastern Europe
    Date: 2008–10–10
  16. By: Shafaeddin, Mehdi; Gallaher, Kevin
    Abstract: Abstract Previous work has shown that the results of both China and Mexico’s export-led market reforms over the past quarter century have been strikingly different. In contrast to China, Mexico has not managed to increase the value added of its exports of manufactured goods and has subsequently had a difficult time competing with China in world markets. Building on this previous work, in this paper we conduct a comparative analysis of the role of government policies in industrial learning and the development of capabilities of indigenous firms in Mexico and China in order to shed light on why China is so outperforming Mexico. We find that Mexico and China have had starkly different approaches to economic reform in this area. Mexico’s approach to reform has been a “neo-liberal” one, whereas China’s could be described as “neo-developmental.” Mexico’s hands-off approach to learning has resulted in a lack of development of endogenous capacity of domestic firms, little transfer of technology, negligible progress in the upgrading of industrial production, and little increase in value added of exports. By contrast, China has deployed a hands-on approach of targeting and nurturing domestic firms through a gradual and trial and error led set of government policies.
    Keywords: International trade; development; competitiveness; value added; government policy; assembly operations
    JEL: O38 O25 O34 I0 O32 L60 O14 L63 N65 O30 F10 L52 I00 O20 O31 P52
    Date: 2008–09
  17. By: Osipian, Ararat
    Abstract: The massification of higher education in Ukraine is a fact while financing the system is still an issue. External pressures from the Central government and the market require changes in university governance. Europeanization of educational system and adherence to the principles laid down by the Bologna declaration add to already existing challenges faced by universities. This paper states that there is no one right prescription for changing governance in Ukraine’s universities, because they differ in their history, location, culture, organizational structure, student body, faculty, and educational process and content. It proposes different approaches to the different types of the universities, considering universities as collegiums and bureaucracies, and suggests the political system as a viable form of organizational structure for the task of reforming universities.
    Keywords: governance; higher education; reform; university; Ukraine
    JEL: P36 I20 I23
    Date: 2008–01–01

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