nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒11‒04
thirteen papers chosen by
J. David Brown
Heriot-Watt University

  1. The transition from school to work in Russia during and after socialism: change or continuity? By Christoph Bühler; Dirk Konietzka
  2. Land Tenure Arrangements and Rural-Urban Migration in China By Katrina Mullan; Pauline Grosjean; Andreas Kontoleon
  3. Patterns of partnership formation among lone mothers in Russia By Cordula Zabel
  4. Alternative Tax-Benefit Strategies to Support Children in Poland By Levy H; Morawski L; Myck M
  5. Declining Secondary Enrollment in Albania: What Drives Household Decisions? By Mieke Meurs; Juna Miluka; Thomas Hertz
  6. Corruption of the Politicized University: Lessons from the Orange Revolution in Ukraine By Osipian, Ararat
  7. The Governance Grenade: Mass Privatization, State Capacity and Economic Development in Postcommunist and Reforming Communist Societies. By Lawrence King; Patrick Hamm
  8. Domestic Debt Structures in Emerging Markets : New Empirical Evidence By Arnaud Mehl; Julien Reynaud
  9. The Elasticity of Taxable Income: Estimates and Flat Tax Predictions Using the Hungarian Tax Changes in 2005 By Péter Bakos; Péter Benczúr; Dóra Benedek
  10. Implied Market Loss Given Default: structural-model approach By Jakub Seidler
  11. Voluntary Private Health Care Insurance Among the Over Fifties in Europe: A Comparative Analysis of SHARE Data By Omar Paccagnella; Vincenzo Rebba; Guglielmo Weber
  12. Bank Account and Savings - The Impact of Remittances and Migration: A Case Study of Moldova By Fernando Rios Avila; Eva Schlarb
  13. What hides behind extended periods of youth unemployment in Bosnia and Herzegovina? Evidence from individual level data By Leman Yonca Gurbuzer; Ozge Nihan Koseleci

  1. By: Christoph Bühler (Max Planck Institute for Demographic Research, Rostock, Germany); Dirk Konietzka (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Russia. It compares the process of entering working life during socialism (1966-1990) and the transition period (1991-2005) by utilizing information from 6,455 males and females of the "Education and Employment Survey for Russia". The results document influences both of change and of continuity. The introduction of labor markets and a mismatch between qualifications acquired at school and demanded by employers led to increasing risks of unemployment after education and first jobs at the lower levels of the occupational hierarchy. However, as the general character of the educational system and the internal structures of many firms did not change, traditional paths of mobility from educational degrees to particular occupational positions continued to exist. Thus, the transition from school-to-work in Russia did not experience an abrupt change but a gradual adjustment to the new economic order.
    Keywords: Russia, early aduldhood, educational systems, employment, occupational qualifications, transitional society, unemployment
    JEL: J1 Z0
    Date: 2008–04
  2. By: Katrina Mullan (University of Cambridge, Department of Land Economy); Pauline Grosjean (Department of Agricultural and Resource Economics, University of California); Andreas Kontoleon (University of Cambridge, Department of Land Economy)
    Abstract: This paper examines the impacts of the Chinese Household Responsibility System, which governs rural land tenure, on rural-urban migration. Migration in China has traditionally been limited by the hukou system of household registration, under which individuals who wish to change their place of residence must gain approval from government authorities. This system is currently being relaxed in an attempt to reduce inequalities between rural and urban areas. However, migration will not increase if additional constraints remain for potential migrants. Using a model of the relationship between land tenure arrangements and migration of household members, we examine whether those with greater tenure security and formal rental rights for agricultural or forest land are more likely to participate in labour markets outside the village. The finding that greater tenure security increases migration suggests that the current system of property rights, in which land is periodically reallocated, acts as a constraint on migration. This strengthens the case for further tenure reform for agricultural and forest land.
    Keywords: Land tenure security; land rental rights, rural-urban migration, China
    JEL: J61 O15 P32
    Date: 2008
  3. By: Cordula Zabel (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: This study examines the determinants of partnership formation among lone mothers in Russia, using data from the Russian Generations and Gender Survey (GGS) and the Education and Employment Survey (EES). The central research question is whether difficult economic circumstances pressure lone mothers to enter new partnerships sooner than they would under other circumstances, limiting their freedom of choice of type of living arrangement. The empirical results show that while occupation influences lone mothers’ rates of partnership formation both before and after 1991, a significant effect of employment status does not appear until after 1991. Apart from economic factors, demographic factors such as the age and number of children are also shown to have an important impact on lone mothers’ rates of partnership formation. Comparisons to patterns of partnership formation among childless women are also presented.
    Keywords: Russia
    JEL: J1 Z0
    Date: 2008–06
  4. By: Levy H (Institute for Social & Economic Research); Morawski L; Myck M
    Abstract: Eurostat data shows that children and elderly are especially at risk of being in poverty. In 2004 the average rates of poverty risk in the European Union for these groups were about 19%. In Poland, the rate was 29% for children and only 7% for the elderly. We examine the role of the tax-benefit system in explaining this situation and analyse how much child poverty figures could change under several reform scenarios. In 2005, families with children were mainly supported by a means-tested family allowance and some supplements. This was extended in 2007 with the introduction of a non-refundable child tax credit. Making use of the European tax-benefit microsimulation model EUROMOD, this paper assesses the consequences of the recent reform in Poland. We examine the outcome in comparison to child policies in three other European systems and show that poverty reduction would have been more pronounced, if child policies were changed along the lines of the system in France or the United Kingdom. The Austrian system - relying primarily on universal benefits - would bring about a similar reduction in the poverty rate but with much greater reduction in the poverty gap. The paper presents detailed distributional analysis under the different systems assuming the cost of 'importing' each of them to be the same as that of introducing the 2007 reform.
    Keywords: child poverty, tax and benefit reforms, transition
    JEL: D31 I38
    Date: 2008–06
  5. By: Mieke Meurs; Juna Miluka; Thomas Hertz
    Abstract: In some post-socialist countries, the post-socialist economic downturn had a negative impact on human development indicators. Education is one area of concern. In this paper, we examine secondary schooling dynamics in Albania, where enrollment declines have occurred. Drawing on the existing literature on household investment in schooling, we examine factors underlying the recent changes. We find that, as in other counties, parental education has a significant impact on the choice to attend secondary school. But we also find that factors specifically related to transition, including household economic resources, local employment prospects, opportunity costs of children’s time, and access to school are significant predictors of schooling decisions in Albania. These findings suggest a number of areas where policy interventions may positively affect long-term outcomes.
    JEL: P36 I28 O15
    Date: 2008–08
  6. By: Osipian, Ararat
    Abstract: This paper argues that corruption is used on a systematic basis as a mechanism of direct and indirect administrative control from the state level down to local authorities and administrations of public and private institutions. Informal approval of corrupt activities in exchange for loyalty and compliance with the regime is commonplace in many countries. This paper explains how corrupt regimes maximize their position in terms of loyalty and compliance by using the example of the 2004 presidential elections in Ukraine. It presents mechanisms by which political bureaucracies politicize universities in order to influence students and channel their electoral power during the Orange Revolution in Ukraine.
    Keywords: corruption; elections; politicization; students; university; Ukraine
    JEL: P36 P37 I23 I28
    Date: 2008–10–30
  7. By: Lawrence King; Patrick Hamm
    Abstract: This article critiques neoliberal transition theory from a state-centered perspective. Neoliberal scholars have used cross-national regression analysis to argue that postcommunist economic failure is the result of inadequate adherence to neoliberal precepts. Sociologists, in turn, have relied on case study data to show that postcommunist economic failure is the outcome of too close adherence to neoliberal policy recommendations, which has led to an erosion of state effectiveness, and thus produced underdevelopment. The present paper advances a version of this statist theory based on a quantitative analysis of mass privatization programs in the postcommunist world. We argue that the neoliberal policy of rapid large-scale privatization creates severe supply and demand shocks for enterprises, thereby inducing firm failure. The resulting erosion of tax revenues leads to a fiscal crisis for the state, and severely weakens its capacity and bureaucratic character. This, in turn, reacts back on the enterprise sector, as the state can no longer support the institutions necessary for the effective functioning of a capitalist economy, thus resulting in de-modernization. In this paper, we test the predictions of neoliberal transition theory against those of our statist theory, using cross-national regression techniques. We find that the implementation of mass privatization programs negatively impacts measures of economic growth, state capacity and the security of property rights.
    Date: 2008–10
  8. By: Arnaud Mehl (European Central Bank - ECB); Julien Reynaud (European Central Bank - ECB, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper explains why public domestic debt composition in emerging economies can be risky, namely in foreign currency, with a short maturity or indexed. It analyses empirically the determinants of these risk sources separately, developing a new large dataset compiled from national sources for 33 emerging economies over 1994-2006. The paper finds that economic size, the breadth of the domestic investor base, inflation and fiscal soundness are all associated with risky public domestic debt compositions, yet to an extent that varies considerably in terms of magnitude and significance across sources of risk. Only inflation impacts all types of risky debt, underscoring the overarching importance of monetary credibility to make domestic debt compositions in emerging economies safer. Given local bond markets' rapid development, monitoring risky public domestic debt compositions in emerging economies becomes increasingly relevant to global financial stability.
    Keywords: Public domestic debt, composition, risk, emerging economies.
    Date: 2008–10
  9. By: Péter Bakos (Royal Bank of Scotland); Péter Benczúr (Magyar Nemzeti Bank, Central European University.); Dóra Benedek (Central European University, Ministry of Finance.)
    Abstract: Many Central and Eastern European countries are adopting flat tax schemes in order to boost their economies and tax revenues. Though there are signs that some countries do manage to improve on both fronts, it is in general hard to distinguish the behavioral response to tax changes from the effect of increased tax enforcement. This paper addresses this gap by estimating the elasticity of taxable income in Hungary, one of the outliers in terms of not having a flat tax scheme. We analyze taxpayer behavior using a medium-scale tax reform episode in 2005, which changed marginal and average tax rates but kept enforcement constant. We employ a Tax and Financial Control Administration (APEH) panel dataset between 2004 and 2005 with roughly 215,000 taxpayers. Our results suggest a relatively small but highly significant tax price elasticity of about 0.06 for the population earning above the minimum wage (around 70% of all taxpayers). This number increases to around 0.3 when we focus on the upper 20% of the income distribution, with some income groups exhibiting even higher elasticities (0.45). We first demonstrate that such an elasticity substantially modifies the response of government revenues to the 2004-2005 tax changes, and then quantify the impact of a hypothetical flat income tax scheme. Our calculations indicate that though there is room for a parallel improvement of budget revenues and after-tax income, those gains are modest (2% and 1.4%, respectively). Moreover, such a reform involves important adverse changes in income inequality, and its burden falls mostly on lower-middle income taxpayers.
    Keywords: elasticity of taxable income, tax reform, behavioral response, revenue estimation, flat tax.
    JEL: H24 H31
    Date: 2008
  10. By: Jakub Seidler (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper focuses on the key credit risk parameter–Loss Given Default (LGD). We describe its general properties and determinants with respect to seniority of debt, characteristics of debtors or macroeconomic conditions. Further, we illustrate how the LGD can be extracted from market observable information with help of the adjusted Mertonian structural approach. We present a derivation of the formula for expected LGD and show its sensitivity analysis with respect to other structural parameters of the company. Finally, we estimate the 5-year expected LGDs for companies listed on Prague Stock Exchange and find out, that the average LGD for this analyzed sample is around 20%. To the author’s best knowledge, those are the first implied market estimates of LGD in the Czech Republic.
    Keywords: loss given default, credit risk, structural models
    JEL: C02 G13 G33
    Date: 2008–10
  11. By: Omar Paccagnella (University of Padua); Vincenzo Rebba (University of Padua); Guglielmo Weber (University of Padua)
    Abstract: Using data from SHARE (Survey of Health, Ageing and Retirement in Europe), we analyze the effect of having a voluntary health insurance policy (VPHI) on out-of-pocket (OOP) health spending for individuals aged 50 or more in a host of European countries. We control for self selection into VPHI policy holding, and find that VPHI policy holders do not have lower OOP's than the rest of the population. In Southern European countries and Austria they even spend more. We also find that the main determinants of VPHI are different in each country and this reflects the differences in the underlying health care systems.
    Date: 2008–10
  12. By: Fernando Rios Avila; Eva Schlarb
    Abstract: In many developing countries, the formal financial sector is underdeveloped and majority of the population does not have access to it. This paper analyzes the empirical link between remittances and financial sector development on a microeconomic level. Using a unique household dataset for Moldova, we find that receiving monetary remittances has a positive and significant effect on the probability of having a bank account, thereby promoting financial sector development. Furthermore, we show that remittances tend to have an even higher positive effect on household savings, which is a sign for a hidden potential for financial sector development.
    Date: 2008–05
  13. By: Leman Yonca Gurbuzer (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Ozge Nihan Koseleci (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper provides the first empirical analysis on youth unemployment duration in Bosnia-Herzegovina. The study is based on micro data from the Household Survey Panel Series (2001-04). We formulate the problem within a duration model framework. Semi-parametric methods are used and compared to alternative approaches. The analyses are carried out separately for young men and women to take into account the traditional pattern of the domestic division of labour between genders. Our results indicate that the speed with which an unemployed young person finds employment is partly a function of his/her particular characteristics. We also find significant gender differences in factors affecting the prospects of access to employment. We further observe that for young men as well as young women there is strong evidence for non-monotonic duration dependence. These results turn out to remain robust to different specifications and to the introduction of unobserved heterogeneity.
    Date: 2008–06–30

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