nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒12‒21
fourteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Future Economic Strategy of the Czech Republic as an EU Member State By Tošenovský, Filip
  2. Convergence in Institutions and Market Outcomes: Cross-Country and Time-Series Evidence from the BEEPS Surveys in Transition Economies By Mitra, Pradeep; Muravyev, Alexander; Schaffer, Mark
  3. Fiscal reform and corporate governance in the Czech Republic By Szarowska, Irena
  4. Exchange Market Pressure in Central European Countries from the Eurozone Membership Perspective By Stavarek, Daniel
  5. Bank Efficiency and Share Prices in China: Empirical Evidence from a Three-Stage Banking Model By Abdul Majid, Muhamed Zulkhibri; Sufian, Fadzlan
  6. The East German Wage Structure after Transition By Orlowski, Robert; Riphahn, Regina T.
  7. Monetary Transmission Mechanism in Central and Eastern Europe: Surveying the Surveyable By Balázs Égert; Ronald MacDonald
  8. Emerging Economies’ Multinationals: General Features and Specificities of the Brazilian and Chinese Cases By Andrea Goldstein; Fazia Pusterla
  9. Dollarization in Transition Economies: New Evidence from Georgia By Olga Aslanidi
  10. Econometric Evidence on the Impacts of Privatization, New Entry, and Independent Industry Regulator on Mobile Network Penetration and Expansion By Yan Li
  11. Tax quota development in the Czech Republic and in the European Union By Szarowska, Irena
  12. The Vote, The Politics and the interjurisdictional Transfers: The Romanian Case By Mutascu, Mutascu
  13. Effects of Trade Liberalization on Non-farm Household Enterprises in Vietnam By Tran Quoc Trung; Nguyen Thanh Tung
  14. Trade liberalization and development in ICT sector and its impact on household welfare in Vietnam By Tran Quoc Trung; Nguyen Tung; Le Thuc Duc; Nguyen Cao Duc; Tran Hao Hung

  1. By: Tošenovský, Filip
    Abstract: The article discusses the economic and political position of the Czech republic as an EU member state and comments on its potential future problems related to a greater expansion of the EU.
    Keywords: migration; education; bank credits; state deficit; labor market
    JEL: A10
    Date: 2008–12–15
  2. By: Mitra, Pradeep (World Bank); Muravyev, Alexander (IZA); Schaffer, Mark (Heriot-Watt University, Edinburgh)
    Abstract: This paper uses the BEEPS firm-level data to study the process of convergence of transition countries with developed market economies. The primary focus of the study is on competition and market structure, finance and the structure of lending to firms, and how firms respond to the economic environment by restructuring; we are able to do this because the BEEPS cover thousands of firms from virtually all transition countries over a long time period (1996-99 through 2002-05), as well firms from developed market economies, thus providing a set of natural benchmarks. We find substantial evidence of convergence of transition countries with developed market economies in a number of dimensions. The pattern of growth at the country, sectoral and firm level shows rapid growth of the new private sector and of the micro- and small-firm sectors, with the size distribution of firms moving towards the pattern observed in the BEEPS surveys of developed market economies. Our interpretation of the evidence on competition is that there is an initial move by firms into niches to exploit local market power, and later in transition entry and domestic competitive pressure increases. In finance, the increasing reliance on retained earnings in transition countries reflects a maturation of the sector as new firms come to rely less on informal and family sources of finance. The scale of restructuring and innovation activity is as high or higher in transition economies as in developed market economies. Interestingly, we find evidence of an inverse-U shape pattern, with the peak of restructuring activity taking place in 2002, the middle of the period analyzed. Throughout, the regional patterns suggest greater convergence in the transition countries that joined the European Union in 2004 than in the other, lower-income transition economies.
    Keywords: transition, convergence, market structure, competition, enterprise finance, enterprise restructuring
    JEL: G32 L11 O12 P31
    Date: 2008–12
  3. By: Szarowska, Irena
    Abstract: The Czech Republic became a Member State of the European Union in May 2004. Under the EU legislation, prior to adopting the euro the Czech Republic must therefore be an EU Member State and must have fulfilled the Maastricht convergence criteria. The Czech Republic is currently reporting an excessive deficit, which poses an obstacle on the way towards compliance with Maastrich convergence criteria. Therefore Czech government has decided to solve primarily public finance problems. Early April 2007, the Czech government introduced a planned legislative reform affecting taxes, social security, health insurance etc. The bill introduced by the Czech government contains many significant changes which came into effect from 2008. Moreover the president of the Czech Republic signed the amendment on the stabilization of public finances which brings alterations to the most of the currently valid tax law. The main object of approved changes is to stabilize Czech public finance, but tax and fiscal reform will have a fundamental impact on corporate governance in the Czech Republic. The aim of a paper is not to summarize all approved modifications but paper analyzes and points out significant changes which came into effect in year 2008 and focuses on estimated impact and consequences for corporate governance in the Czech Republic in a future period.
    Keywords: tax reform; corporate governance; corporate income tax; value added tax
    JEL: E62 G3 H2
    Date: 2008
  4. By: Stavarek, Daniel
    Abstract: This paper estimates the exchange market pressure (EMP) in four Central European countries (Czech Republic, Hungary, Poland, Slovakia) over the period 1993-2006. Therefore, it is one of very few studies focused on this region and the very first paper applying concurrently model-dependent as well as model-independent approach to the EMP estimation on these countries. The results obtained suggest that the approaches lead to inconsistent findings. They often differ in identification of the principal development trends as well as magnitude and direction of the pressure. The paper provides evidence that a shift in the exchange rate regime towards the quasi-fixed ERM II should not stimulate EMP to grow. However, it is highly probable that some episodes of the excessive EMP will make the fulfillment of the exchange rate stability criterion more difficult in all countries analyzed.
    Keywords: Exchange Market Pressure; Model-dependent Approach; Model-independent Approach; European Union; Euro-candidate Countries
    JEL: C32 E42 F31 F36
    Date: 2008–11–10
  5. By: Abdul Majid, Muhamed Zulkhibri; Sufian, Fadzlan
    Abstract: This paper examines for the first time the relationship between China banks’ efficiency and its share price performance. Our analysis consists of three parts. First, we calculate the annual share price returns of the banks for each year between 1997 and 2006. Then we employ Data Envelopment Analysis (DEA) Window Analysis method, first proposed by Charnes et al. (1985) to estimate the efficiency of the banks. Finally, we estimate the annual share price returns over the change in efficiency, while controlling for other bank specific traits. The empirical findings suggest that large China banks have exhibited higher technical and pure technical efficiency levels compared to their small and medium sized bank counterparts, while the medium sized banks have exhibited higher scale efficiency. The relationship between China banks’ efficiency and share price performance suggest that bank efficiency estimates derived from the DEA Window Analysis method contributes significant information towards share price returns beyond that provided by financial information.
    Keywords: Bank Efficiency; Share Prices; DEA Window Analysis; China
    JEL: G1 G2
    Date: 2008–03–01
  6. By: Orlowski, Robert (University of Erlangen-Nuremberg); Riphahn, Regina T. (University of Erlangen-Nuremberg)
    Abstract: We extend the literature on transition economies' wage structures by investigating the returns to tenure and experience. This study applies recent panel data and estimation approaches that control for hitherto neglected biases. We compare the life cycle structure in East and West German wages for fulltime employed men in the private sector. The patterns in the returns to seniority are similar for the two regional labor markets. The returns to experience lag behind in the East German labor market, even almost 20 years after unification. The results are robust when only individuals are considered who started their labor market career in the market economy and they hold across skill groups.
    Keywords: wage structure, life cycle earnings, returns to tenure, returns to experience
    JEL: J31 J24
    Date: 2008–12
  7. By: Balázs Égert; Ronald MacDonald
    Abstract: This paper surveys recent advances in empirical studies of the monetary transmission mechanism (MTM), with special attention to Central and Eastern Europe (CEE). Our results indicate that the strength of the exchange rate pass-through substantially declined over time mainly due to a fall in inflation rates and to some extent due to the so-called composition effect. The asset price channel is weak and is likely to remain weak because of shallow stock and private bond markets and because of low stock and bond holdings of domestic household. House prices may become an exception with higher levels mortgage lending and with high owner occupancy ratios. While the credit channel could be a powerful channel of monetary transmission - as new funds raised on capital markets are close to zero in CEE - it is actually not, as both commercial banks and non-financial corporations can escape domestic monetary conditions by borrowing from their foreign mother companies. The moderately good news is, however, that those banks and firms are influenced by monetary policy in the euro area because their parent institutions are themselves subjected to the credit channel in the euro area. <P>Canaux de transmission de la politique monétaire dans les PECO: une revue de la littérature <BR>Ce papier vise à synthétiser la littérature empirique portant sur le mécanisme de transmission monétaire, et tout particulièrement dans les pays d’Europe centrale et orientale (PECO). Cette étude montre que l’effet du taux de change sur l’inflation a diminué au cours du temps principalement en raison de la baisse des taux d’inflation, mais aussi dans une certaine mesure suite à un effet dit de composition. Le canal des prix d’actifs est faible et le restera probablement en raison des marchés d’actions et de titres obligataires privés peu développés, mais aussi à cause d’un faible taux de détention d’actifs financiers par les ménages. En revanche, avec l’accroissement du nombre de prêts immobiliers et de ménages propriétaires de leur appartements, les prix immobiliers peuvent jouer un rôle plus important à l’avenir. Même si le canal du crédit devrait être un des canaux de transmission les plus puissants, sachant que le financement externe sur les marchés est quasiment nul dans les PECO, tel n’est pas le cas pour autant. La raison en est que les banques commerciales mais aussi les entreprises peuvent échapper aux conditions monétaires nationales par le biais de financements obtenus auprès de leurs maisons mères implantées à l’étranger. La nouvelle quelque peu encourageante est que les entreprises mères sont elles-mêmes contraintes par la politique monétaire de la zone euro, exportant ainsi les effets du canal du crédit dans les PECO.
    Keywords: monetary transmission mechanism, asset prices, Central Europe, interest rate, credit channel, canal du crédit
    JEL: E31 E51 E58 F31 O11 P20
    Date: 2008–12–01
  8. By: Andrea Goldstein (OECD, Paris - France); Fazia Pusterla (IADB, Washington - USA)
    Abstract: The expansion of South-North and South-South FDI reflects the rise of cross-border capital flows, a distinguishing feature of the contemporary global economy, together with the increasing size and complexity of emerging market multinational corporations (EMNCs). Against this background, in emerging economies governments have become increasingly aware of the role outward FDI (OFDI) can play as an instrument to deepen the integration into the world economy. This paper analyzes recent trends in OFDI from Brazil and China. Using annual data for the period 1980 to 2006 for both countries, we test the well-known investment development path (IDP) theory, according to which the net outward investment position of a country depends on its level of development. Results show that both China and Brazil are moving towards the third stage of the path, where domestic firms have acquired ownership and other advantages to go abroad and become leading outward investors. The role of governments, institutions and the characteristics of domestic firms in both countries are considered to be crucial factors in determining the movement along the path.
    Keywords: foreign direct investment, emerging economies, investment development path.
    JEL: F23 O57
    Date: 2008–10
  9. By: Olga Aslanidi
    Abstract: This paper provides new evidence for dollarization in Georgia during the period from 1996 to 2007 using implications of dynamic money-in-utility-function models. Partial effects of foreign and domestic inflation, exchange rate, and foreign and domestic currency deposits’ interest rates on dollarization are considered. The US dollar is a strong substitute for domestic currency and has a significant share in producing domestic liquidity services. The actual dollarization in Georgia is persistent and larger than partial effects models predict.
    Keywords: Dollarization, Georgia, Money-in-utility-function
    JEL: C51 E41 F31
    Date: 2008–09
  10. By: Yan Li (Centre for Competition Policy, University of East Anglia)
    Abstract: This study examines the impacts of reforms – privatization, new entry and independent regulatory authority – on mobile network penetration and expansion using a new and hitherto unused panel dataset for 30 national mobile markets (i.e. 29 OECD countries and China) over the time period 1991-2006 under a 3-equation econometric framework. The estimation results confirm that introducing new entry is, in general, positively correlated with mobile network penetration and expansion; and in particular, the third entry brings many more benefits than the second one. The results also highlight the crucial role of an independent regulator in privatized mobile markets. Especially, the dynamic estimation results suggest that without an independent regulator, privatization is, on average, negatively correlated with mobile network expansion, even in certain competitive market environments.
    Keywords: New entry, privatization, independent regulator, mobile network, econometric analysis
    JEL: L10 L51 L96 K23
    Date: 2008–12
  11. By: Szarowska, Irena
    Abstract: Eurostat and OECD regularly publish data concerning a tax burden in particular countries. Tax quota (compound tax quota) is used as a basic international comparative indicator, which determines a ratio of taxes in the gross domestic product. This indicator is a subject of interest even in discussions concerning the tax harmonization of the European Union, which objective is to make taxes not to be a barrier of free movement of people, capital, goods and services among states and also to prevent tax evasions. This paper describes a basic conception of the indicator, points out methodical differences in the calculation of the tax quota and analyses the development of the tax quota in the Czech Republic and in the European Union. The objective is as well to verify a hypothesis that a value of the tax quota is decreasing in time and indirect taxes currently outweigh direct ones.
    Keywords: tax; tax quota; direct taxes; indirect taxes; tax harmonization
    JEL: E62 H20 F2
    Date: 2008
  12. By: Mutascu, Mutascu
    Abstract: This paper represents a continuation of a previous paper, Mutaşcu & Dima (2005), where we demonstrated the “abnormal” behavior that local authority from Romania is manifesting regarding the subventions received from the central budget. In accord with public choice theory, exist an “affinity” of a social group - local communities in this case - for a certain political party or political coalition, in which case can expect that the distribution of public funds, having the nature of transfers given by the central budget to local budgets, to be impregnated with a considerable “political color”. This paper is trying to establish, in Romania, quantitative and qualitative, the modality of distributing the central public funds to local authorities under the political impact.
    Keywords: Politic; voter; local financing
    JEL: E62 D70 R11
    Date: 2008–11–13
  13. By: Tran Quoc Trung (Ministry of Planning and Investment, 2 Hoang Van Thu, Ba Dinh, Vietnam); Nguyen Thanh Tung (International College of I.T and Management, 34B Han Thuyen, Hanoi, Vietnam)
    Abstract: This paper evaluates multiple indirect effects of trade liberalization on performance and business behaviours of NFHEs during the transition period in Vietnam based on the industry and enterprise panel data. The paper shows that NFHEs in the benefited industries from trade liberalization had more opportunities to expand their operations or start up and were more likely to survive. However, this is only applicable for NFHEs in labour intensive and unskilled industries and the expansion of NFHEs in these industries did not go together with the improvement of their efficiency. On the other hand, NFHEs in the almost negatively affected manufacturing industries from trade liberalization had to face with the fiercer competition and many of them had to shutdown their operations. Nevertheless, the survived NFHEs had better and high performance and had more chance to become formal SMEs. We also find that the more openness and the lower tariff increased the NFHE income in the industry but these effects were not the same for NFHEs in different industries. There are some concerns for the future role and development of NFHEs in the face of increasing international competition in the market.
    Keywords: Trade liberalization; Non-farm household enterprise; Panel data; Vietnam.
    JEL: C23 F14 O12 O14 O24 O53
    Date: 2008
  14. By: Tran Quoc Trung (Ministry of Planning and Investment, 2 Hoang Van Thu, Ba Dinh, Vietnam); Nguyen Tung; Le Thuc Duc; Nguyen Cao Duc; Tran Hao Hung
    Abstract: This paper examines the ITC related issues in Viet Nam. The ICT sector in Viet Nam had not been developed until the 1980s. However, over the last decade of rapid growth, it has had a powerful impact on many aspects of life in this country. Although the ICT sector is still at an early stage of development and lags behind many other countries in the region, the government of Viet Nam made strong commitments to upgrade the nation's ICT capability and implemented significant reforms in terms of trade and investment liberalization in ICT sector over the last decade. This commitment has probably been the most important factor in accelerating ICT usage in society and government. It may also have partially contributed to achieve an average annual economic growth rate of 7.6 percent over the period 1991-2006 and reduce the poverty rate from 57 percent of the population in 1993 to less than 20 percent in 2004 (Duc, et al., 2006; VDR, 2005; GSO, 2004). Therefore, the relationship between ICTs development and household welfare in Viet Nam under the dynamic changes over the last decade need to be examined in more details. This is made possible by the availability of four high-quality household surveys3 spanning the period 1993-2004.
    Date: 2008

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