nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒06‒10
twelve papers chosen by
J. David Brown
Heriot-Watt University

  1. What explains the low profitability of Chinese banks? By Alicia García-Herrero; Sergio Gavilá; Daniel Santabárbara
  2. The Chinese Export Bundles: Patterns, Puzzles and Possible Explanations By Zhi Wang; Shang-Jin Wei
  3. Where Did All the Remittances Go? Understanding the Impact of Remittances on Consumption Patterns in Rural China By Yu Zhu; Zhongmin Wu; Liquan Peng; Laiyun Sheng
  4. Agriculture, Food Security,and Poverty in China; Past Performance, Future Prospects, and Implications for Agricultural R&D Policy By Jikun Huang
  5. Participation in Payments for Ecosystem Services programmes in developing countries: The Chinese Sloping Land Conversion Programme By Katrina Mullan; Andreas Kontoleon
  6. The Cost Competitiveness of Manufacturing in China and India: An Industry and Regional Perspective By Bart Van Ark; Abdul Azeez; Erumban Vivian Chen; Chen Utsav Kumar
  7. Cost and Effectiveness of Regulating Infectious Disease Control in Rural China By Qingyue Meng
  8. Structural Change and Economic Development in China and India By Saccone Donatella; Valli Vittorio
  9. A Survey and Analysis of Outsourcing in East China By Fan, Tijun; Sandal, Leif K.; Kong, Jiehong; Li, Dandan
  10. Capital Inflows, Household Debt and the Boom-bust Cycle in Estonia By Zuzana Brixiova; Laura Vartia; Andreas Wörgötter
  11. Transition to a Market Economy and Export Performance in Vietnam By Prema-chandra Athukorala
  12. Modeling migration dynamics in Albania : a hazard function approach By Azzarri, Carlo; Carletto, Calogero

  1. By: Alicia García-Herrero (Banco Bilbao Vizcaya Argentaria); Sergio Gavilá (Banco de España); Daniel Santabárbara (Banco de España)
    Abstract: This paper analyzes empirically what explains the low profitability of Chinese banks for the period 1997-2004. We find that better capitalized banks tend to be more profitable. The same is true for banks with a relatively larger share of deposits and for more X-efficient banks. In addition, a less concentrated banking system increases bank profitability, which basically reflects that the four state-owned commercial banks -China’s largest banks- have been the main drag for system’s profitability. We find the same negative influence for China’s development banks (so called Policy Banks), which are fully state-owned. Instead, more market oriented banks, such as joint-stock commercial banks, tend to be more profitable, which again points to the influence of government intervention in explaining bank performance in China. These findings should not come as a surprise for a banking system which has long been functioning as a mechanism for transferring huge savings to meet public policy goals.
    Keywords: China, Bank profitability, Bank reform
    JEL: G21 G28
    Date: 2009–06
  2. By: Zhi Wang (Indian Council for Research on International Economic Rela); Shang-Jin Wei (Indian Council for Research on International Economic Rela)
    Abstract: China's exports have become increasingly sophisticated. This has generated anxiety in developed countries as the competitive pressure may be increasingly felt outside labor-intensive industries. Using product-level data on exports from different cities within China, this paper investigates the contributing factors to the rising export sophistication. Somewhat surprisingly, neither processing trade nor foreign invested firms are found to play an important role in generating the increased overlap in the export structure between China and high-income countries. Instead, improvement in human capital and government policies in the form of tax-favored high-tech zones appear to be the key in the country's evolving export structure. On the other hand, processing trade, foreign invested firms, and government-sponsored high-tech zones all have contributed significantly to raising the unit values of China's exports within a given product category.
    Keywords: China, India, Export sophistication, Export structure, high-tech zones,human capital
    JEL: F1 F14
  3. By: Yu Zhu; Zhongmin Wu; Liquan Peng; Laiyun Sheng
    Abstract: We focus on the impact of migrants’ remittances on consumption patterns in rural China, allowing for endogeneity of remittances and county fixed-effects. We find that the marginal propensity to consume out of remittances is close to unity, which is far greater than that out of non-migrant earnings or farm income. These findings imply that rural households take remittances as permanent income and are consistent with the prevalence of circular and repeat migration which is largely caused by the combination of the restrictive hukou (household registration) system and the rigid land tenure system in China.
    Keywords: Rural-Urban Migration; Remittances; Consumption Patterns; Fixed-Effect Instrumental-Variables Estimation
    JEL: D12 D13 J61 R23
    Date: 2009–05
  4. By: Jikun Huang
    Abstract: China’s experience demonstrates the importance of technological development and public investment in improving agricultural productivity, farmer income, and food security in a nation with limited supplies of land and other natural resources. Technology has been the engine of China’s agricultural productivity growth in the past and will continue to play a major role in boosting China’s agricultural development and improving the nation’s food security in the 21st century.[IFPRI NO 3]
    Keywords: China; Agricultural Research and Development; Alternative R & D; Investment; Agriculture; fertilizer; pesticides
    Date: 2009
  5. By: Katrina Mullan (North Carolina State University, Dept. of Forestry and Environmental Resources); Andreas Kontoleon (Department of Land Economy, University of Cambridge)
    Abstract: This paper contributes to the limited existing empirical evidence on assessing household participation in Payments for Ecosystem Services (PES) programmes in developing countries. We examine this issue for the case of the Sloping Land Conversion Programme (SLCP) in China, one of the largest PES schemes in the world, using household and village level data. Our analysis examines the determinants of both current and future participation in the SLCP and makes three key contributions. First, we show the importance of incorporating the influence of programme administrators in the observed participation outcome. Secondly, we use a novel latent class approach to account for heterogeneity in the determinants of the household decision over whether to sign up to a PES programme. Thirdly, the empirical analysis focuses on the impact of market imperfections that are prevalent in developing countries. We find significant differences between households with good access to markets and those facing market imperfections.
    Keywords: Payments for Ecosystem Services; programme participation; latent class model; China ; Sloping Land Conversion Programme, separability.
    Date: 2009
  6. By: Bart Van Ark (Indian Council for Research on International Economic Rela); Abdul Azeez (Indian Council for Research on International Economic Rela); Erumban Vivian Chen (Indian Council for Research on International Economic Rela); Chen Utsav Kumar (Indian Council for Research on International Economic Rela)
    Abstract: This paper focuses on comparisons of productivity, (unit) labor cost and industry-level competitiveness for the manufacturing sector of China and India. We first provide a comparison between India and China using a broad international perspective. We find that China has increased its labor productivity to a level above that of India, but due to a somewhat higher compensation level, China is still somewhat at a disadvantage in terms of unit labor cost in manufacturing relative to India. In the second half of the paper, we make an analysis of industry level differences in productivity, labor compensation and unit labor costs at state and province level in the two countries from the mid 1990s to the early 2000s. We find rapid declines in unit labor cost across industries and provinces in China, but increases in many instances in India. This suggest that productivity and compensation growth have become much more aligned across regions in China whereas this is not (yet) the case in India. We relate these results to differences in the implementation of market reforms between the two countries and removal of barriers to resource mobility eradicating inefficient manufacturing activity
    Keywords: O14, J24
  7. By: Qingyue Meng
    Abstract: Infectious diseases are still recognized as severe public health problems at present in China, especially in poor rural areas. Since the late 1970s, the changing social and economic contexts have encouraged the government to adopt legislative instruments rather than sole political command system in steering and administering infectious disease control programs. However, little is known about the effectiveness and costs of implementing regulatory activities in infectious disease control. This study was undertaken to assess the effectiveness of selected infectious disease control legislation and to estimate actual and required costs for implementing the regulation.[HEFP WP NO 03/03]
    Keywords: AIDC; DALY; mortality rate; Sexually transmitted infectious; China; anti-epidemic stations; China’s National People’s Congress; Act of Food Hygiene; Ministry of Health; Shandong; Shanxi provinces; regulation; cost; epidemic
    Date: 2009
  8. By: Saccone Donatella (University of Turin); Valli Vittorio (University of Turin)
    Abstract: The comparison of the periods of rapid economic growth in China since 1978 and India since 1992 markedly show different patterns of development and structural change. However, both countries experienced some of the advantages of “relative economic backwardness” and some aspects of the “fordist model of growth”. China had an anticipated and deeper structural change, spurred mainly by economic reforms and the growth of the internal market in the 1980s and since the mid-1990s by a very rapid penetration of its industrial products in the world market. However, a substantial part of its exports in medium and high tech sectors are due to joint- ventures with foreign multinationals. India had a more balanced structural change and a slower insertion in the world market, although some sectors, such as software, steel, automotive and pharmaceuticals are recently increasing their share in the world markets.
    Date: 2009–07
  9. By: Fan, Tijun (East China University Of Science And Technology, School of Business); Sandal, Leif K. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Kong, Jiehong (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Li, Dandan (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: The aim of this study is to investigate whether outsourcing activities in east china are associated with a theoretical framework derived from the literature. By the methodology of Statistics Package for the Social Science (SPSS), the results of survey indicate that outsourcing will more extensively practiced in the future, the principal outsourcing motivation are to reduce costs and focus on core businesses. The purchasing outsourcing has the largest correlation coefficients with short-term contract, the total outsourcing has a significant correlation coefficient with long-term contract at the level of =0.05. The findings indicate that high service quality and mutual trust are the main criteria for selecting outsourcing vendors. However, it is found that outsourcing satisfaction is generally low. The main benefits of outsourcing are to reduce cost, concentrate on core businesses and improve the service quality, while the main problems with outsourcing are legal disputes, disclosure of commercial secrets and conflicts with vendors.
    Keywords: Outsourcing; strategy; contract; survey
    JEL: L20
    Date: 2009–05–25
  10. By: Zuzana Brixiova; Laura Vartia; Andreas Wörgötter
    Abstract: From 2000 to 2007, Estonia was one of the fastest growing emerging market economies. A housing boom, fuelled by capital inflows and credit, resulted in skyrocketing house prices and an over-expanded construction sector. However, the currency board limited the Bank of Estonia’s ability to curb credit growth, while the fiscal policy framework amplified the cycle through pro-cyclical spending increases and tax cuts. As credit was mostly financed by cross-border loans from foreign banks, the risks of disruptions to credit flows and financial contagion have increased. Some have already materialised through tightened lending standards and capital outflows. Estonia is now in a severe recession. To restore high and sustainable growth, the country will need to rebalance its resources from non-tradables towards exports. Regaining external competitiveness will be challenging, however, given the fixed exchange rate and recent devaluations in partner countries. Flexibility of the economy will thus be crucial. Over the medium term, policymakers could also strengthen incentives for a better functioning of the housing finance market and gradually remove the pro-cyclical bias of fiscal policy.<P>Entrée de capitaux, endettement des ménages et alternance expansion-contraction en Estonie<BR>Entre 2000 et 2007, l’Estonie a été l’une des économies de marché émergentes qui ont connu la plus forte croissance. Une rapide progression de l’investissement privé, surtout dans l’immobilier résidentiel, a été alimentée par les entrées de capitaux et par le crédit. En conséquence, les prix immobiliers se sont envolés et le secteur de la construction s’est surdéveloppé. Le système de caisse d’émission a toutefois limité les possibilités d’action qui s’offraient à la Banque d’Estonie pour freiner la croissance rapide du crédit. Parce que le crédit était essentiellement financé par les prêts transnationaux que consentaient les banques mères étrangères, les risques d’arrêt brutal et de contagion financière se sont aggravés. Certains de ces risques se sont déjà concrétisés par un durcissement des conditions de prêt et par des sorties de capitaux. L’Estonie est maintenant en proie à une sévère récession. Son PIB réel s’est contracté de 3.6 % en 2008 et de 9.7 % au quatrième trimestre par rapport à la même période de 2007. Pour en revenir à une croissance forte et durable, l’Estonie devra rééquilibrer ses ressources en favorisant l’exportation par rapport au secteur non exportateur (en particulier la construction et l’immobilier). Mais il sera difficile de rétablir la compétitivité extérieure sachant que le taux de change est fixe et que plusieurs pays partenaires ont récemment dévalué. La flexibilité de l’économie sera cruciale. A moyen terme, il faudrait aussi renforcer l’incitation à un meilleur fonctionnement du marché du financement du logement.
    Keywords: capital inflows, credit, crédit, household debt, endettement des ménages, boom-bust cycle, cycle expansion-contraction, Estonia, Estonie, entrées de capitaux
    JEL: C2 E3 E62
    Date: 2009–05–27
  11. By: Prema-chandra Athukorala
    Abstract: This paper examines Vietnam’s export performance in the process of economic transition. The key theme of analysis is the complementary role of domestic policy shifts and the ongoing changes in world trade patterns in determining trends and patterns of exports. The analysis yields clear evidence that when market forces are unleashed, albeit in a constrained fashion, specialisation patterns assert themselves as predicted by the received trade theory. On the contrary, there is no evidence to suggest that the state-mediated attempts in the early stage of reforms to mould the emerging patterns of manufacturing exports had any tangible effect. Vietnam’s export performance looks impressive, particularly when we take into account the nature of the reform process, and the constraining effects of the US trade embargo during the first decade of reforms and the historic overwhelming reliance on the Soviet-block markets.
    Keywords: Vietnam, exports, FDI, global production sharing, processed food
    JEL: F14 F15 F33 O24
    Date: 2009
  12. By: Azzarri, Carlo; Carletto, Calogero
    Abstract: Since 1990 migration flows from Albania have been massive, relative to the size of the country and its population, but they have also fluctuated over time. This paper presents and discusses various descriptive trends, mainly in graphical form. The data come from the Albanian Living Standards Measurement Survey, 2005 round, and cover the period 1990-2004. The resulting observed trends reflect changing push and pull factors in Albania and the two main host countries, Greece and Italy. The paper also presents a hazard approach to modeling Albanian emigration and return migration. This analysis highlights, among other things, the relevance of networks in Albanian migration dynamics, both to promote emigration and to delay return.
    Keywords: Population Policies,Anthropology,Human Migrations&Resettlements,Voluntary and Involuntary Resettlement,International Migration
    Date: 2009–05–01

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