nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒06‒03
sixteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Endogenous Health Investment, Saving and Growth - A theoretical study with an application to Chinese data By Chen, Yan
  2. A Dynamic Approach to Interest Rate Convergence in Selected Euro-candidate Countries By Hubert Gabrisch; Lucjan T. Orlowski
  3. Nominal Convergence By Iancu, Aurel
  4. MOEL im Sog der Krise (CEECs Falling Prey to the International Crisis) By Vasily Astrov; Josef Pöschl
  5. The Evolution of an Industrial Cluster in China By Belton M. Fleisher; Dinghuan Hu; William McGuire; Xiaobo Zhang
  6. Efficiency of the Bulgarian Banking System: Traditional Approach and Data Envelopment Analysis By Nikolay Nenovsky; Petar Chobanov; Gergana Mihaylova; Darina Koleva
  7. Dynamic Analysis of the Behavioural Patterns of the Largest Commercial Banks in the Russian Federation Abstract: This paper presents a pattern behavio ral analysis of 100 largest Russian commercial banks by total assets during an eight- year period: from the first quarter of 1999 to the second quarter of 2007. Bank performance indicators are analyzed. Structural similarities in the development of the banks are examined. A cluster analysis is applied to determine banks with a similar structure of operations. This analysis allows to estimate how the structure of the Russian banking system has been changing over time. In particular, it allows to identify prevailing patterns in the behavior of Russian commercial banks and to analyze the stability of their position in a particular pattern. By Fuad Aleskerov; V. Belousova; M. Serdyuk; V. Solodkov
  8. Convergence between the Romanian and the EU RD/I Systems By Sandu, Steliana; Paun, Cristian
  9. The "Addiction" with FDI and Current Account Balance By Joze Mencinger
  10. A Distribution Dynamics Approach to Regional GDP Convergence in Unified Germany By Juessen, Falko
  11. Productivity, Net Returns and Efficiency: Land and Market Reform in Vietnamese Rice Production By Tom Kompas, Tuong Nhu Che, Ha Quang Nguyen and Hoa Thi Minh Nguyen
  12. Data Appendix to "Reforming the State-Owned Enterprises in China: Effects of WTO Accession" By Claustra Bajona; Tianshu Chu
  13. Capitalising on Innovation for Exports by the SME Sector By Anh Ngoc Nguyen; Nicola Jones; Nhat Duc Nguyen; Chuc Dinh Nguyen
  14. Superiority of Exporters and the Causality Between Exporting and Firm Characteristics in Vietnam By Nguyen Hiep; Hiroshi Ohta
  15. Why Do Firms Switch Their Main Bank? - theory and evidence from Ukraine By Stephan, Andreas; Tsapin, Andriy; Talavera, Oleksandr
  16. Cyclical dimensions of labour mobility after EU enlargement By Alan Ahearne; Herbert Brücker; Zsolt Darvas; Jakob von Weizsäcker

  1. By: Chen, Yan (Department of Economics)
    Abstract: The idea behind this thesis stems from the existing abundance of empirical studies suggesting the strong correlation between longevity and economic growth. In a simple two period overlappinggeneration framework, we establish a direct link between health investment and economic growth through endogenous survival rate. We find that health expenditure complements saving in equilibrium, thereby contributes to economic growth, which in turn leads to a further increase in health investment. The simulation with calibrated parameters also manifests the consistence between our results and the worldwide data as well as the fact of China.
    Keywords: health investment; economic growth; China
    JEL: I31
    Date: 2009–06–03
  2. By: Hubert Gabrisch; Lucjan T. Orlowski
    Abstract: We advocate a dynamic approach to monetary convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we empirically test volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001 untill January 22, 2009 sample period. Our results show a varied degree of bond yield co-movements, the most pronounced for the Czech Republic, Slovenia and Poland, and weaker for Hungary and Slovakia. However, since the EU accession, we find some divergence of relative bond yields. We argue that a ‘static’ specification of the Maastricht criterion for long-term bond yields is not fully conducive for advancing stability of financial systems in the euro-candidate countries.
    Date: 2009–05
  3. By: Iancu, Aurel
    Abstract: After presenting the institutional construction during the pre-accession and post-accession to the Economic and Monetary Union (EMU), the exchange rate mechanisms (ERM) in several countries and the convergence criteria, we go on with a brief analysis of the way the CEE countries cope with the convergence criteria in accordance with the Maastricht Treaty. Then, the study deals with a topic often discussed in the scientific literature and included on the agenda of decision-makers at various levels, in order to clarify the following major issues: a shorter transition to the euro, the exchange rate equilibrium versus the inflation rate diminution and the Balassa-Samuelson effect, the exchange rates and the exchange rate deviation index, evidences concerning the real exchange rate equilibrium and the appreciation of the exchange rate in the CEE countries.
    Keywords: Convergence criteria, exchange rate, exchange rate mechanisms, Euro Area, Balassa-Samuelson effect, tradable goods, non-tradable goods, exchange rate deviation index, purchasing power parity
    JEL: F31 F33 O43 O47
    Date: 2009–06
  4. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: GERMAN: Die mittel- und osteuropäischen Länder (MOEL) sind spätestens seit September 2008 von der Krise der Weltwirtschaft ebenfalls betroffen. Vor allem die Industrieproduktion und der Außenhandel leiden unter den Folgen des Nachfrageeinbruchs. Das reale BIP-Wachstum verlangsamte sich zunächst deutlich und dürfte mittlerweile in fast allen Ländern von einem Rückgang abgelöst worden sein. Die Verschlechterung der Wirtschaftslage bewirkte eine deutliche Erhöhung der Arbeitslosigkeit. Die öffentlichen und die privaten Haushalte sowie die Unternehmen und Banken stehen unter Druck, der zunehmen wird, sollte die Weltwirtschaftskrise von längerer Dauer sein. Die Unterschiede zwischen den einzelnen Ländern sind jedoch substantiell, da in jedem Land spezielle krisenabschwächende oder -verstärkende Faktoren eine Rolle spielen. Gravierend dürfte die Rezession in jenen Ländern ausfallen, die durch hohe makroökonomische Ungleichgewichte gekennzeichnet sind (Ungarn, baltische Länder) oder eine rückständige Exportstruktur aufweisen (Ukraine). ---- ENGLISH: The current global financial and economic crisis has been spilling over to the Central and Eastern European countries (CEECs). After several years of economic prosperity in most of these countries, activities of the real economy have slowed down. The crisis has reached the region on two tracks. More difficult and costly access to borrowing (first track) exerts a negative impact on private consumption, especially with regard to demand for durable consumer goods, such as cars, on private investment (both in construction and equipment), and, finally, on foreign trade. At the same time, CEE exports are suffering from the recession in the EU 15 (second track), above all in Germany, the main trading partner for most of the CEECs. Industrial output and export data both reflect the depth of the economic downturn. Inflation had been on the rise up to mid-2008, but decelerated afterwards, with cases of zero month-on-month inflation frequently seen in CEECs. At least, this is true for euro countries and countries with a fixed currency peg. In others, the currency depreciated after September 2008, which also led to significant real depreciation. CEECs with notoriously large current-account deficits are in a dilemma, as sources of external financing have become scarce. The same is true for countries where a wide gap between interest rates for domestic and foreign borrowing had seduced the private sector to accumulate large volumes of debt denominated in foreign currency. Governments were bound by fiscal discipline in recent years, but deficits will increase in 2009 and 2010 in an environment of low revenues, high expenditures and high unemployment. Apart from Russia, these countries have only limited means to implement economic stimulus packages. As internal sources will not be able to generate a great deal of additional demand, the CEECs will have to wait for spillovers from an improving business climate in the rest of the world.
    Keywords: transitional economies, comparative study, economic growth, fiscal and monetary policy, macroeconomic forecast, macroeconomic analysis
    JEL: P2 O57 E17 O4
    Date: 2009–05
  5. By: Belton M. Fleisher (Department of Economics, Ohio State University); Dinghuan Hu (China Academy of Agricultural Sciences); William McGuire (Department of Agricultural, Environmental, and Development Economics, Ohio State University); Xiaobo Zhang (International Food Policy Research Institute (IFPRI))
    Abstract: We use two rounds of surveys, in 2000 and 2008, in the Zhili Township children’s garment cluster in Zhejiang Province to examine in depth its evolution. Firm size has grown on average in terms of output and employment, and increasing divergence in firm sizes has been associated with a significant increase in specialization and outsourcing among firms in the cluster. Although initial investments have more than tripled, they remain low enough so that formal bank loans remain an insignificant source of finance. Accompanying lower entry barriers, there have been an increasing number of firms in the cluster, which have driven down profit and bid up wages, particularly since the year 2000. Facing severe competition, more firms have begun to upgrade their product quality. By the year 2007, nearly half of the sampled had established registered trademarks and nearly 20 percent had become ISO certified. Declining profit ratios to initial investment and stagnant TFP imply that the future of this industry is likely to rest on using more advanced technology and higher ratios of capital to labor, which imply increases in firm size and initial investment. Thus traditional sources of finance that do not require honest, efficient, and transparent courts are likely to fade as the need for improved legal and financial institutions become critical factor influencing China’s growth prospects.
    JEL: L22 O14 P23
    Date: 2009–05
  6. By: Nikolay Nenovsky; Petar Chobanov; Gergana Mihaylova; Darina Koleva
    Abstract: The present paper traces the trends in the development of the Bulgarian banking system focusing on the dynamics of bank efficiency. Although the financial crisis in 1996-1997 and the following shift in monetary regime (introduction of Currency Board Arrangement) exerted significant influence on the development of the banking sector characteristics, the study covers only the period of 1999-2006 because of the lack of consistent available data prior to 1999. During the period analysed, the impact on bank efficiency of the following factors is studied: change in property, penetration of foreign commercial banks on the local banking market, competition, structure of bank assets and liabilities, central bank policy in regard to credit activity, etc. The limits of traditional accounting approaches to bank efficiency evaluation are discussed, as well as the implementation of non-parametric methods, in particular Data Envelopment Analysis (DEA). Different specifications of DEA like the intermediation and operating approaches were applied to separate groups and sub-groups. The results show that: firstly, foreign banks perform better than domestic and state-owned banks because of the technological and managerial improvements; and secondly, large banks are more efficient than small banks due to decreasing operating costs and scale economies.
    Keywords: DEA, bank efficiency, Bulgarian banking system, foreign banks
    JEL: G21 C61
    Date: 2008–06
  7. By: Fuad Aleskerov; V. Belousova; M. Serdyuk; V. Solodkov
    Keywords: Bank, dynamic pattern analysis, cluster analysis
    JEL: C61 G21 O16
    Date: 2008–06
  8. By: Sandu, Steliana; Paun, Cristian
    Abstract: The globalisation of economy and communications, quick technological progress and its social implications led to the creation of the European Research Area, an important objective for the convergence of national RD&I systems. The monitoring of convergence process is achieved, since 2000, through a system of indicators, developed and refined every year, in order to make them consistent with new trends and requirements for relevant and systemic expression of the progress made in the RD&I field, in relation to both inputs and outputs and RD&I contribution as a determinant factor of improving national and European competitiveness. This paper analyses the progress made in the last six years in achieving the convergence of European RD&I systems, the factors that have accelerated or slowed down the process, laying the stress on Romania’s position in closing the gaps that separate it from European average and from the leaders in this area. For this purpose, we tested a model for estimating the degree of convergence of the Romanian RD&I system with the EU27 system by the clustering method.
    Keywords: European Research Area (ERA), convergence of RD&I systems, innovation gaps, clustering
    JEL: F15 O32 O47
    Date: 2009–06
  9. By: Joze Mencinger
    Abstract: The EU new member states (NMS) have been recipients of substantial net capital inflows in the form of FDI. Economic policy makers and development strategists often regard them as the pillar of the development and neglect their potential long run consequences: inevitable deficit in the investment balance. FDI however affects current account balance also indirectly by improving or deteriorating trade balance which might overweigh negative direct effects, moderate them, or add to the deterioration of the current account balance. Capital outflows through the investment account in NMS have been increasing rapidly . Namely, the rates of return on FDI are twice the rates of return on portfolio investments and three times the rates of return on loans. Indirect effects have moderated strong direct effects but could not overweigh structural current account deficit caused by transition. A major problem might arise as a consequence of the “addiction” with FDI. First, the outflows of capital speeded up by the opportunities of multinationals to reallocate production to the countries with even cheaper labor might become larger than new inflows. Second, sudden interruption of FDI inflows could result in an exchange rate crisis.
    Keywords: current account, factors services, foreign direct investments
    JEL: F32 F21
    Date: 2008–06
  10. By: Juessen, Falko (University of Dortmund)
    Abstract: This paper uses nonparametric techniques to study GDP convergence across German labor market regions and counties during the period 1992-2004. The main result is that regional convergence in unified Germany has been substantial. In the first years after German unification the distribution of GDP has been characterized by a pronounced bimodality. The dispersion of the GDP distribution has become substantially smaller over time. Although some bimodality remains in most recent years, this bimodality is weak in comparison to previous years. Nevertheless, disparities among regions located in the Eastern and Western part of the country are still apparent.
    Keywords: regional convergence, distribution dynamics, nonparametric econometrics, stochastic kernel
    JEL: O47 R11 C14
    Date: 2009–05
  11. By: Tom Kompas, Tuong Nhu Che, Ha Quang Nguyen and Hoa Thi Minh Nguyen
    Abstract: Extensive land and market reform in Vietnam has resulted in dramatic increases in rice output over the past thirty years. The land and market reforms in agriculture were pervasive, moving the system of rice production from commune-based public ownership and control to one with effective private property rights over land and Farm assets, competitive domestic markets and individual decision making over a wide range of agricultural activities. The effect of this reform period and beyond is detailed with measures of total factor productivity (TFP), terms of trade and net returns in rice production in Vietnam from 1985 to 2006. Results show that TFP rises considerably in the major rice growing areas (the Mekong and Red River Deltaareas) during the early years of reform, and beyond, but also that there is clear evidence of a productivity `slow-down' since 2000. The differences over time and by region speak directly to existing land use regulations and practices, suggesting calls for further land and market reform. To illustrate this, additional frontier and efficiency model estimates detail the effects of remaining institutional and policy constraints, including existing restrictions on land consolidation and conversion and poorly developed markets for land and capital. Estimates show that larger and less land-fragmented farms, farms in the major rice growing areas, and those farms that are better irrigated, have a greater proportion of capital per unit of cultivated land, a clear property right or land use certificate and access to agricultural extension services are more efficient.
    Date: 2009
  12. By: Claustra Bajona (Ryerson University); Tianshu Chu (South Western University of Finance and Economics)
    Abstract: Data for the article, in Excel format.
    Date: 2009
  13. By: Anh Ngoc Nguyen (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam); Nicola Jones (Oversee Development Institute, UK); Nhat Duc Nguyen (Development and Policies Research Center (DEPOCEN), 216 Tran Quang Khai Street, Hanoi, Vietnam); Chuc Dinh Nguyen (Aston Business School, Aston University, UK)
    Abstract: A key question facing Vietnamese policy makers is how to improve the competitiveness of the small and medium enterprises. Among the many initiatives being proposed to improve their competitiveness innovation policy has attracted attention not only from policy makers, but also from researchers and the business community. Innovation in SMEs has also been given special emphasis in a recent declaration in Hanoi by APEC ministers. These initiatives are based on the assumption that innovation can affect a firm's competitiveness and hence export status by increasing productivity (and reducing costs) and by developing new goods for the international market. Improving the export competitiveness of Vietnamese SMEs has become even more pressing given (i) that Vietnam's trade deficit as a percentage of GDP widened significantly to an alarming level of double digit figures in two recent years, 2007 and 2008 and (ii) that the world economic recession has made exporting more challenging due to falling demand. Based on quantitative data analysis and qualitative case-studies, the paper highlights the importance of innovation for the success of Vietnamese firms in their exporting and provides several policy recommendations.
    Keywords: Vietnam's economic growth, SME, financial incentives for R&D
    Date: 2009
  14. By: Nguyen Hiep (Research Institute for Economics and Business Administration, Kobe University); Hiroshi Ohta (Graduate School of International Cooperation Studies (GSICS), Kobe University)
    Abstract: The study in this paper is on the causal relationship between export activities of firms and their characteristics in a transition country that is pursuing export-led growth strategies and experiencing a fast track of trade liberalization. For this purpose, we examine the superiority of exporters using a panel of firm-level data of manufacturing firms in Vietnam. We observe that exceptional performance of exporters, especially in TFP, does prevail in this country. Via testing self-selection hypothesis using a random-effects dynamic probit model to examine the causality from firm characteristics to export probability, we find significantly positive impacts of factors such as firm size, age or foreign ownership but not that of TFP. However, TFP superiority of exporters is satisfactorily explained by the existence of learning-by-exporting effects that are tested in a multivariate analysis using matching technique in combination with difference-in-differences approach. Besides contributing an empirical analysis to heterogeneous-firm trade theories, this study gives us some insights into the interpretation of mixed findings in macro-analysis of the effects of exports on growth in Vietnam.
    Keywords: Exporter superiority, self-selection, learning-by-exporting, Vietnam
    JEL: F10 F14 F43 D21 D24 L20 L60
    Date: 2009–03
  15. By: Stephan, Andreas (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Tsapin, Andriy (European University Viadrina); Talavera, Oleksandr (Aberdeen Business School)
    Abstract: We examine why firms change their main bank and how this affects loans, interest payments and firm performance after switching. Using unique firm-bank matched Ukrainian data, the treatment effect estimates suggest that more transparent and riskier companies are more likely to switch their main bank. Importantly,main bank power, measured by equity holdings, appears to be one of the main drivers of firm switching behavior. Furthermore, we find that firms have lower performance after changing their main bank as they have to contend with higher interest payments.
    Keywords: financial constraints; switching; main bank power; firm performance; Ukraine
    JEL: G21 G30 G32
    Date: 2009–06–04
  16. By: Alan Ahearne (Bruegel, National University of Ireland in Galway, Trinity College Dublin); Herbert Brücker (Institute for Employment Research in Nürnberg, University of Bamberg); Zsolt Darvas (Bruegel, Hungarian Academy of Sciences, Corvinus University of Budapest); Jakob von Weizsäcker (Bruegel)
    Abstract: This paper explores the influence of the economic cycle on labour mobility within the EU, focusing on the likely impact of the present economic crisis. To do so, we use an econometrically calibrated simulation and a case study of Ireland. We find that, in the short run, the crisis is likely to lead to a somewhat lower stock of migrants from the new member states in the EU15 than would have been the case without the crisis on account of diminished job opportunities for migrants. By contrast, in the longer run the crisis might lead to a moderate increase in migration from some of the new member states compared to what would have been the case without the crisis. The latter is driven by the observation that the crisis may have undermined the economic growth model of some of the new member states, thereby slowing down their economic catching-up process.
    Keywords: labour mobility, economic cycle, crisis, European Union
    JEL: F22 C33 J61 O11 O15 O24
    Date: 2009–03–02

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