nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒07‒17
eighteen papers chosen by
J. David Brown
Heriot-Watt University

  1. The role of production technology for productivity spillovers from multinationals: Firm-level evidence for Hungary By Holger Görg; Alexander Hijzen; Balázs Muraközy
  2. Do institutions matter? Estimating the effect of institutions on economic performance in China By Ying , Fang; Yang , Zhao
  3. Monetary Transmission in three Central European Economies: Evidence from Time-Varying Coefficient Vector Autoregressions By Zsolt Darvas
  4. Growth Accounting for the Chinese Provinces 1990-2000: Incorporating Human Capital Accumulation By Xiaolei Qian; Russell Smyth
  5. The role of banks in monetary policy transmission: Empirical evidence from Russia By Juurikkala, Tuuli; Solanko, Laura; Karas, Alexei
  6. The Dynamics of Structural Change - The European Union's Trade with China By Bianka Dettmer; Fredrik Erixon; Andreas Freytag; Pierre Olivier Legault Tremblay
  9. China’s evolving external wealth and rising creditor position By Guonan Ma; Zhou Haiwen
  10. ENVIRONMENTAL SURROUNDINGS AND PERSONAL WELL-BEING IN URBAN CHINA By Russell Smyth; Ingrid Nielsen; Qingguo Zhai; Tiemin Liu; Yin Liu; C.Y. Tang; Zhihong Wang; Zuxiang Wang; Juyong Zhang
  11. Strategic tax collection and fiscal decentralization: the case of Russia By Alexander Libman; Lars P. Feld
  14. The structure of herring product demand in Russia By Lien, Kristin; Tveterås, Ragnar; Tveterås, Sigbjørn
  16. International Entrepreneurship and Technology Transfer: The CDM´s Reality in China By Aleluia, João; Leitão, João
  17. Tax Assignment Revisited By Richard M. Bird
  18. Analýza efektívnosti slovenských bánk využitím Stochastic Frontier Approach By Stavarek, Daniel; Šulganová, Jana

  1. By: Holger Görg; Alexander Hijzen; Balázs Muraközy
    Abstract: This paper analyses the potential for productivity spillovers from inward foreign direct investment using administrative panel data on firms for Hungary. We hypothesise that the potential for spillovers is related to observable characteristics of the production process of foreign affiliates, and evaluate this empirically. We further explore the role of competition in explaining productivity spillovers within industries. Our empirical analysis yields a number of important findings. First, we show that the potential for spillovers is importantly related to the production technology of the sectors and foreign affiliates. Firms that relocate labour-intensive activities to Hungary to exploit differences in labour costs are unlikely to generate productivity spillovers, while spillovers increase in the capital intensity of foreign affiliates. Second, we find that spillovers differ markedly in the early and later stages of transition, and that there are differences between small and large firms. Furthermore, foreign presence tends to affect the productivity of domestic firms negatively whenever MNEs produce for the domestic market
    Date: 2009–02–01
  2. By: Ying , Fang (BOFIT); Yang , Zhao (BOFIT)
    Abstract: This paper estimates the effect of institutions on economic performance using cross-city data from China. We argue that China's ongoing reforms are part of a long and circuitous historical transition from antiquity to modernity, which started about 150 years ago. Learning from Western countries has been a central aspect of this historical process. The West had a laThis paper estimates the effect of institutions on economic performance using cross-city data from China. We argue that China's ongoing reforms are part of a long and circuitous historical transition from antiquity to modernity, which started about 150 years ago. Learning from Western countries has been a central aspect of this historical process. The West had a large influence on the early stage of this transition, which has persisted to current reforms. This study uses the enrollment in Christian missionary lower primary schools in China in 1919 as an instrument for present institutions. Employing a two-stage least squares method, we find that the effect of institutions on economic performance in China is positive and significant. The results are robust according to various tests including additional controls, such as geographic factors and government policy-related variables.
    Keywords: institutions; christian; geography; policy
    JEL: O11 O53 P16 P51
    Date: 2009–07–06
  3. By: Zsolt Darvas (Bruegel, Institute of Economics of the Hungarian Academy of Sciences and Corvinus University of Budapest)
    Abstract: This paper studies the transmission of monetary policy to macroeconomic variables in three new EU Member States in comparison with that in the euro area with structural time-varying coefficient vector autoregressions. In line with the Lucas Critique reduced-form models like standard VARs are not invariant to changes in policy regimes. The countries we study have experienced changes in monetary policy regimes and went through substantial structural changes, which call for the use of a time-varying parameter analysis. Our results indicate that in the euro area the impact on output of a monetary shock have decreased in time while in the new member states of the EU both decreases and increases can be observed. At the last observation of our sample, the second quarter of 2008, monetary policy was the most powerful in Poland and comparable in strength to that in the euro area, the least powerful responses were observed in Hungary while the Czech Republic lied in between. We explain these results by the credibility of monetary policy, openness and the share of foreign currency loans.
    Keywords: monetary transmission, time-varying coefficient vector autoregressions, Kalman-filter
    JEL: C32 E50
    Date: 2009–07–02
  4. By: Xiaolei Qian; Russell Smyth
    Abstract: This paper examines the linkage between aggregate real output, capital, labour, education, and productivity within a growth accounting framework for 27 Chinese provinces between 1990 and 2000. The results suggest that human capital has had a significant role in facilitating economic growth of all of the provinces throughout the 1990s. Regional disparities in factor accumulation are also considered. The results suggest that uneven distribution of resources between the coastal and inland provinces increased the regional gap in economic growth throughout the 1990s.
    Keywords: China, Economic growth, Human capital, Reform
    JEL: O40 O15 O53
    Date: 2009–05
  5. By: Juurikkala, Tuuli (BOFIT); Solanko, Laura (BOFIT); Karas, Alexei (BOFIT)
    Abstract: This paper focuses on the role of the banking sector in monetary policy transmission in an emerging economy with a rapidly developing financial system. Specifically, we exam whether the central bank's monetary policy stance affects banks' lending behaviour. Based on a comprehensive quarterly dataset on all Russian banks from 1Q1999 to 1Q2007, we find evidence for the existence of a bank lending channel in Russia. Contrary to several studies on developed economies, the level of a bank's capitalization matters for the transmission process. Better capitalized banks are less likely to adjust their lending practices following a change in the monetary policy stance.
    Keywords: monetary policy transmission; bank lending; Russia
    JEL: C23 E44 E52 G21
    Date: 2009–07–06
  6. By: Bianka Dettmer; Fredrik Erixon; Andreas Freytag (Friedrich-Schiller-University Jena, School of Economics and Business Administration); Pierre Olivier Legault Tremblay
    Abstract: Sino?European trade relations have been controversially discussed mainly, if not only, because of the increasing European Union's bilateral trade deficit with China. As from the European perspective trade with China becomes more important, the structural adjustment process of the Chinese economy from inter?industry to intra?industry trade is not as intensively discussed. We show how the emergence of China on the world markets has affected European comparative advantages over time. The change in bilateral trade is compared to the overall development of European comparative advantages to highlight the features of the structural change in China. We show that China is increasingly specialising in technology intensive goods. This development is absolutely in accordance with the historical perspective on country's upgrading in technology while integrating into the world economy. Technology intensive Schumpeter goods are either of a mobile or an immobile type based on the selection criterion of separating research and production process. While China predominantly focuses on the mobile type of Schumpeter goods, the European Union maintains its comparative advantages in immobile technology intensive goods, which are harder to imitate. Based on technology intensity, the second issue presented in the paper focuses on the Chinese integration into the world?wide value?added chain, which has been fragmented across borders in recent years. Not least due to increasing FDI, intra?industry trade has become more prevalent in bilateral trade relations with China.
    Keywords: Comparative advantage, Intra-industry trade, Fragmentation, EU, China
    JEL: F11 F14
    Date: 2009–07–08
  7. By: Paresh Kumar Narayan; Ingrid Nielsen; Russell Smyth
    Abstract: This paper tests Wagner’s law of increasing state activity using panels of Chinese provinces. The paper’s main methodological contribution is in that we employ for the first time in the literature on Wagner’s law a panel unit root, panel cointegration and Granger Causality testing approach. Overall, we find mixed evidence in support of Wagner’s law for China’s central and western provinces, but no support for Wagner’s law for the full panel of provinces or for the panel of China’s eastern provinces.
    Date: 2009–06
  8. By: Xun Lu; Dietrich Fausten; Russell Smyth
    Abstract: Financial sector development may contribute to economic growth by facilitating capital accumulation and by improving productivity. This paper investigates empirically the contribution that financial development may make to these two alternative drivers of economic growth in China. Specifically, we construct a set of instruments for measuring financial development by using annual data from 1952 to 1999. Using cointegration and Granger-causality testing we examine the relationship between financial development and, respectively, capital accumulation and productivity in a time-series vector autoregression (VAR) framework. The substantive findings are that in China financial development contributes to economic growth primarily through facilitating capital accumulation, while the linkage between financial development and productivity improvement is statistically weak.
    Date: 2009–06
  9. By: Guonan Ma; Zhou Haiwen
    Abstract: China’s emergence as a major player in world trade is well known, but its rising role in global finance is perhaps underappreciated. China is the second largest creditor in the world today, with a net creditor position of exceeding 30% of GDP in 2007. In this paper, we test the importance of growth differential, demographics, government debt, financial depth and the exchange rate in shaping China’s net foreign asset position. Our findings highlight the sharp fall in youth dependency as one key driver behind China’s puzzlingly large net lender position and also confirm the neoclassical prediction that faster growth attracts more capital inflows. Looking ahead, our findings also suggest that China is unlikely to turn into a meaningful net debtor nation over the next two decades. Moreover, we project that, as China engages in increased cross-border asset trade, its gross foreign assets and liabilities could triple in 10 years. While adjustments in China’s net foreign asset position are expected to be gradual and may thus facilitate its capital account opening, increasing exposure to external shocks and growing interactions with the rest of the world may present challenges both to China and to the global financial system.
    Keywords: international investment position, external balance sheet, current account balance, financial integration
    Date: 2009–07
  10. By: Russell Smyth; Ingrid Nielsen; Qingguo Zhai; Tiemin Liu; Yin Liu; C.Y. Tang; Zhihong Wang; Zuxiang Wang; Juyong Zhang
    Abstract: We examine the relationship between atmospheric pollution, water pollution, traffic congestion, access to parkland and personal well-being using a survey administered across six Chinese cities in 2007. In contrast to existing studies of the determinants of well-being by economists, which have typically employed single item indicators to measure well-being, we use the Personal Well-Being Index (PWI). We also employ the Job Satisfaction Survey (JSS) to measure job satisfaction, which is one of the variables for which we control when examining the relationship between environmental surroundings and personal well-being. Previous research by psychologists has shown the PWI and JSS to have good psychometric properties in western and Chinese samples. A robust finding is that in cities with higher levels of atmospheric pollution and traffic congestion, respondents report lower levels of personal well-being ceteris paribus. We find that a one standard deviation increase in suspended particles or sulphur dioxide emissions is roughly equivalent to a 12-13 percent reduction in average monthly income in the six cities. This result suggests that the personal well-being of China’s urban population can be enhanced if China were to pursue a more balanced growth path which curtailed atmospheric pollution.
    Keywords: China, Environment, Pollution, Personal Well-Being.
    JEL: A13 D60
    Date: 2009–06
  11. By: Alexander Libman (University of Mannheim); Lars P. Feld (University of Heidelberg)
    Abstract: In a centralized federation, where tax rates and taxation rules are set by the federal government, manipulating the thoroughness of tax auditing and the effectiveness of tax collection could be attractive for regional authorities because of a variety of reasons. These range from tax competition to principal-agent problems, state capture and benefits of fiscal equalization. In this paper we discuss strategic tax auditing and collection from the perspective of fiscal federalism and test for strategic tax collection empirically using data of the Russian Federation. Russia’s regional authorities in the 1990s have always been suspect of tax auditing manipulations in their favor. However, in the 2000s increasing bargaining po¬wer of the centre seems to induce tax collection bodies in the regions to manipulate tax auditing in favor of the federal centre. Our findings confirm the existence of strategic tax collection for the Yeltsin period after exclusion of outliers; the results for the Putin period are however rather ambiguous.
    Keywords: fiscal federalism, tax arrears, transition economies
    JEL: H26 H77
    Date: 2009
  12. By: Russell Smyth; Xiaolei Qian
    Abstract: We find that perceptions of corruption are positively correlated with left-wing beliefs across 32 Chinese cities, controlling for income, personal characteristics and ideology.
    Keywords: beliefs, corruption, fairness, political legitimacy.
    JEL: P16 K42 E62
    Date: 2009–06
  13. By: Xiujian Peng; Dietrich Fausten
    Abstract: Increasing life expectancy and rapid fertility decline in China since the 1970s have accelerated the rate of population ageing, fuelling the prospects of an ageing workforce and a significant slowdown in the growth of the working age population. The present paper examines the trend of labour supply in China over the next 45 years under alternative fertility scenarios by taking account of the demographic composition effect and potential trends of the age-and sex-specific labour force participation rates. The main finding is that the labour supply contraction will accelerate from 2020 onwards in response to population ageing and the probable attrition of the LFPR of the young population. Relaxing the current one-child policy may moderate the adverse labour market consequences by increasing the base of the working age population and decelerate the rate of population ageing.
    Keywords: population ageing, labour supply and China
    JEL: J11 J14
    Date: 2009–06
  14. By: Lien, Kristin (Norwegian Seafood Export Council); Tveterås, Ragnar (University of Stavanger); Tveterås, Sigbjørn (University of Stavanger)
    Abstract: Russia is experiencing deep structural changes in many areas. For the seafood industry important developments are large increases in household incomes, development of modern super- and hypermarket distribution channels, and product innovations. In the seafood category consumers are adopting new species and new product forms at a rapid rate. Herring is one of the species that is experiencing these changes. The dominant product form has traditionally been whole salted herring, typically sold at open markets. Herring sold in the traditional unprocessed form has been a protein source for poor people, consumed at home. But more processed and expensive product forms that are distributed through modern distribution channels have increased their market share during the data period. <p> We employ a panel data set on monthly per capita demand for different herring products in six Russian regions, from unprocessed to value added products, to test hypotheses on the structure of herring consumption. We estimate dynamic panel data demand systems, with region-specific estimates of price and income elasticities. The six regions in the data set have large differences in average per capita income. Our econometric estimates indicate significant structural regional differences in per capita consumption of different products, also after controlling for income differences. We find that whole herring is generally an inferior good, whereas fillet herring products tend to be normal goods. This suggests that if incomes continue to increase, consumption will shift further from unprocessed to value added herring products.
    Keywords: seafood; demand
    JEL: M20
    Date: 2009–04–28
  15. By: Russell Smyth; Xiaolei Qian
    Abstract: This paper examines how individual preferences for redistribution depend on beliefs about what determines one’s lot in life and self-assessed prospects for climbing the social ladder in urban China. We find that both beliefs about what determines one’s lot in life and subjective perceptions of future mobility are correlated with the formation of left-wing beliefs and, by extension, preferences for redistribution. We find that the marginal effects of the variables measuring one’s lot in life are larger than self-assessed prospects for climbing the social ladder. These findings are robust to the inclusion of control variables for the personal characteristics of the respondent, including his or her ideology, and the location in which he or she lives.
    Keywords: Equal opportunities, Redistribution, Mobility.
    JEL: D31 D63
    Date: 2009–06
  16. By: Aleluia, João; Leitão, João
    Abstract: Entrepreneurship as a determinant of economic growth and innovation intensity has been increasingly used by governments for shaping public policies with sustainable development purposes. This chapter positions the Clean Development Mechanism as an example of an international technology transfer mechanism that can stimulate knowledge spillovers in the host economies. Taking as reference the Chinese context, a benchmarking approach is proposed to assess the performance of distinct mechanisms of climate friendly technology transfers. This is particularly relevant since it is an innovative attempt for addressing the caveat found in the literature of international entrepreneurship and technology transfer, especially focused in the need for developing both qualitative and quantitative analyses about distinct experiences in adopting technology transfer mechanisms into developing countries. This is useful not only in the scope of global efforts to mitigate the emission of greenhouse gases, but also in the accomplishment of sustainable development goals of host economies. Moreover, from the current proposal an operative tool is derived for guiding the action of policy makers, managers and practitioners engaged in the field of Energy Entrepreneurship.
    Keywords: Benchmarking; Clean Development Mechanism; CDM; International Entrepreneurship; Technology Transfer.
    JEL: O34 F23 L26 L24
    Date: 2009–06–15
  17. By: Richard M. Bird (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper first restates the lessons to be learned from Richard Musgrave’s pioneering discussion of the tax assignment issue. Next, it considers subsequent developments in the theory of fiscal federalism related to the issue of tax assignment. Surprisingly little clear guidance is offered by the theoretical discussion when it comes to the practical policy issues facing any country with respect to tax assignment: what countries do seems to bear little relation to what theory suggests they should do. This point is illustrated this point by a brief review of tax assignments observed around the world in large emerging countries. The tax assignment issue in such countries as India and China is both important and unduly neglected: for the most part, these are still countries in search (whether they know it or not) for a sustainable solution to this problem. The paper concludes with some reflections about what seem to be future possible -- or, perhaps better, needed -- developments with respect to both the theory and practice of tax assignment, again with special reference to large emerging countries.
    Keywords: tax assignment; fiscal federalism; Richard Musgrave; Brazil, India, China, Nigeria, Russia
    Date: 2008–12–01
  18. By: Stavarek, Daniel; Šulganová, Jana
    Abstract: This paper aims to estimate efficiency of the Slovak commercial banks in the period 2001-2005. The paper uses data obtained from annual reports of 13 Slovak banking institutions. For the practical estimation we applied the parametric Stochastic Frontier Approach and Cobb-Douglas production function. The results suggest that the initial hypothesis was confirmed as the average efficiency increased. This is also evident in results of individual banks as 11 banks recorded increase in efficiency. The results point out a better ability of Slovak banks to use the inputs in the production process.
    Keywords: Efficiency; Stochastic Frontier Approach; banks; Slovak Republic
    JEL: C20 D24 G21
    Date: 2009–03–16

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