nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒08‒16
twenty-one papers chosen by
J. David Brown
Heriot-Watt University

  1. IS THE TRANSITION OVER? By Oleh Havrylyshyn
  2. Where Have All the Shooting Stars Gone? By Mario Holzner; Sebastian Leitner; Josef Pöschl; Anton Mihailov; Waltraut Urban; Hermine Vidovic; Leon Podkaminer; Sándor Richter; Olga Pindyuk; Vladimir Gligorov; Gábor Hunya; Vasily Astrov; Peter Havlik; Zdenek Lukas
  3. Unemployment and common smooth transition trends in Central and Eastern European Countries By Juan Carlos Cuestas; Javier Ordóñez
  4. What explains the low profitability of Chinese Banks? By Alicia García-Herrero; Sergio Gavilá; Daniel Santabárbara
  5. .Rushing in where Angels Fear to Tread?.: The Early Internationalization of Indigenous Chinese Firms By Naude, Wim
  6. Commitment devices, opportunity windows, and institution building in Central Asia By Danne, Christian
  7. (In)Efficiency of Matching - The Case of A Post-transition Economy By Jeruzalski, Tomasz; Tyrowicz, Joanna
  8. The One Child Policy and Family Formation in Urban China By Gordon Anderson; Teng Wah Leo
  10. Inequality in Croatia in Comparison By Sebastian Leitner; Mario Holzner
  12. Farm performance and support in Central and Western Europe: a comparison of Hungary and France By Fogarasi, Jozsef; Latruffe, Laure
  13. Influence Of Labour Migration On Latvia’s Labour Market By Skribans, Valerijs
  14. Forecasting credit growth rate in Romania: from credit boom to credit crunch? By Albulescu, Claudiu Tiberiu
  15. Are Patent Laws Harmful to Developing Countries? Evidence from China By Belton M. Fleisher; Mi Zhou
  16. Non Parametric Estimation of a Polarization Measure By Gordon Anderson; Oliver Linton; Yoon-Jae Wang
  17. China's Exporters and Importers: Firms, Products and Trade Partners By Kalina Manova; Zhiwei Zhang
  18. EU Funds Provided to the New Member States: Relevance for ODA and Achieving the Monterrey Consensus By Jaroslaw Pietras
  19. Milk Retail Sales Patterns in a Transition Economy. The Case of Hungary By Bakucs, Lajos Zoltan; Ferto, Imre
  20. The money-happiness relationship in transition countries: evidence from Albania By Leonardo Becchetti; Sara Savastano
  21. The Assessment of Natural Rate of Unemployment and Capacity Utilisation in Latvia By Aleksejs Melihovs; Anna Zasova

  1. By: Oleh Havrylyshyn (University of Toronto)
    Abstract: While many observers thought it was premature for Czech Prime Minister Klaus to suggest in 1995 the transition was over except for fine-tuning , as we approach the 20th year after the fall of the Berlin Wall on Nov. 9, 1989,-and the 18th after the dissolution of the Soviet Union at Byelovezha- it is surely relevant to ask the question again. The first new contribution of this paper is to show that ,for all practical purposes, the post-communist transition is over in eight or nine early reformers of Central Europe and the Baltics; but it is not over for other transition countries –though many are close, and only a few very far behind. The second and perhaps more important novelty of this paper is that it goes beyond the qualitative expert judgments in earlier studies addressing this question. With one or two exceptions, earlier studies did not start with an explicit analytical definition of transition and its end-point, and evidence provided was selective often mixing partial quantitative measures with qualitative judgments-albeit well reasoned ones. This paper proposes an analytical definition of transition and its end-point , as well as ways this can be measured quantitatively without undertaking impossibly massive econometric exercises .
    Keywords: transition, efficient allocation, share of consumption, share of industry, direction of trade, trade openness, comparative advantage
    JEL: F15 N10 N14 O11 P2
    Date: 2009–03
  2. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw); Anton Mihailov; Waltraut Urban (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sándor Richter (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Gábor Hunya (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Zdenek Lukas (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The report analyses recent economic developments and short- and medium-term prospects of the countries of Central and Eastern Europe, Southeast Europe including Turkey, as well as Kazakhstan, Russia, Ukraine and China. Separate chapters present an overview of developments in the European Union's new member states and in the future EU member states of Southeast Europe, and deal with the changing role of the IMF in the region and the latest developments in foreign trade.
    Keywords: Central and East European, new EU member states, Southeast Europe, future EU member states, Balkans, former Soviet Union, China, Turkey, economic forecasts, GDP growth, exchange rates, inflation, EU integration, foreign trade, financial markets, fiscal policy, financial crisis
    JEL: G18 O52 O57 P24 P27 P33 P52
    Date: 2009–07
  3. By: Juan Carlos Cuestas; Javier Ordóñez
    Abstract: In the present paper we analyse the existence of common nonlinear trends in several of Central and Eastern European Countries in order to gain some insight about the degree of labour market integration within the area. In order to do so, we test for the order of integration of the unemployment rates, by applying the Leybourne et al. (1998) and Kapetanios et al. (2003) nonlinear unit root tests. Our results pinpoint the fact that five up to eight unemployment rates are stationary around a nonlinear trend and, by means of Anderson and Vahid (1998) approach, we also find that there is a common trend that drives the long run behaviour of that variable in these countries.
    Keywords: Unemployment, Central and Eastern Europe, unit roots, smooth transition, nonlinearities.
    JEL: C32 E24
    Date: 2009–07
  4. By: Alicia García-Herrero; Sergio Gavilá; Daniel Santabárbara
    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 banks 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: 2009–04
  5. By: Naude, Wim
    Abstract: In this paper I empirically investigate the early international entrepreneurship of indigenous Chinese firms using data on 3,948 firms surveyed by the World Bank in 2002-03. I find important differences in the extent and motivation of early internationalization between indigenous and foreign-invested Chinese firms. Despite having started with internationalization relatively more recently than most foreign-invested firms, and despite having much less least foreign experience (only 1.3 years, on average, versus nine years) than foreign-invested firms, indigenous firms who internationalize early were found to perform better than foreign-invested firms. They may be .rushing in. to international markets, but so far this seems to be paying off quite
    Keywords: international entrepreneurship, international new ventures, exports, China
    Date: 2009
  6. By: Danne, Christian
    Abstract: This paper studies the institutional reform process in Central Asia from a choice perspective. We compare institutional reform processes of Central Asian countries from 1995 to 2006 to those conducted in their neighbouring countries in Central and (South) Eastern Europe, Russia, and the Middle East. Firstly, the paper identifies contemporaneous factors responsible for the persistence of poor institutional arrangements. Secondly, we identify factors that can act as commitment devices through which institutional change can be achieved and sustained. Based on the findings, it is argued that deficiencies in the education system and preferences of individuals and politicians are responsible for the persistence of poor institutional arrangements. External factors such as real and financial openness, fixed exchange rates and non-trade related international agreements, however, provide strong commitment devices for policy makers to improve institutional arrangements in Central Asia despite poor initial conditions. Moreover, large external shocks may help to shift preferences towards more reliable institutional settings.
    Keywords: Economic Institutions; Reforms; Central Asia
    JEL: O10 H11 P20
    Date: 2009–08
  7. By: Jeruzalski, Tomasz; Tyrowicz, Joanna
    Abstract: This paper approaches the question of efficiency in job placement using regional data for Polish regions (policy relevant NUTS 4 level) over the time span of 2000-2008. Using a unique data set we estimate the matching function using stochastic frontier as well as difference-in-difference estimators. We use also managed to combine this unique data set with another unique source of data on the ALMPs coverage, unemployment structure across time and regions as well as the individual capacity of local labour offices. We use these data to explain the exceptional variation in estimated efficiency scores. Our findings suggest that matching abilities are highly driven by demand fluctuations, while unemployment structure, ALMPs and individual labour office capacities have little explanatory power. Although without individual data it is fairly impossible to provide a reliable counterfactual, we raise some arguments to support the claim of job placement inefficiency by public employment services in Poland.
    Keywords: matching function; stochastic frontier; Poland
    JEL: P36 C78 J64 C33
    Date: 2009–08–03
  8. By: Gordon Anderson; Teng Wah Leo
    Abstract: The Chinese government implemented the One Child Policy (OCP) in an attempt to ameliorate the population explosion and its potential negative economic consequences on their infant economy in 1979. Here the consequences of this policy for marital matching and family size decisions are examined. A simple General Equilibrium model demonstrates how constraints on marital output on the quantity of children dimension raises the marginal benefit of increased positive assortative matching, and greater investment in children. These theoretical predictions are examined empirically in a variety of ways. The prediction of intensified positive assortative matching was examined using Distributional Overlap and Stochastic Dominance Tests and provided support for intensified assortative matching amongst the urban population. To support this positive finding, we next examined if the policy was indeed binding. The extent to which parental family size decisions were bound by the OCP were examined using Poisson regression techniques and the results suggest that the OCP principally affected the quantity of children decision by suppressing parental preference for male heirs and they suggest that after the OCP was implemented births beyond the first child are purely accidental among younger mothers. In addition, we also found some evidence of increased educational attainment among children reflecting increased parental investments in children post OCP further supporting the view that the One Child Policy altered significantly familial decisions in urban China.
    Keywords: Family Formation, Rationing, Matching
    JEL: J12
    Date: 2009–08–06
  9. By: Gurgu, Elena (Universitatea Spiru Haret, Facultatea de Marketing si Afaceri Economice Internationale)
    Abstract: The National Strategy for Sustainable Development at the 2030 horizon is the result of Romanian assumed obligation, as EU member, in conformity with the established objectives at the EU level. The strategy proposes a vision of Romanian development in the perspective of the following two decades. At the 2013 horizon is proposed the organic incorporation of the principles and the practices of sustainable development into the Romanian programmes and public politics. For 2020 horizon it is estimated to be tauched the actual medium level of EU countries at the basic indicators of sustenable development. For the year 2030 it is estimated a significant aproach of Romania of the medium level of EU countries.The performence of these tasks will assure on medium and long term a higher economic development and a substantial reduction of socio-economic disparty between Romania and the other EU countries.
    Keywords: sustenable development; Six Sigma methodology; Benchmarking process; total productive maintenance technicque
    JEL: O11
    Date: 2009–08–09
  10. By: Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The paper analyses economic inequality in Croatia in comparison with other transition economies of Central, East and Southeast Europe. It comprises a literature review and a descriptive analysis as well as an econometric modelling exercise. The main findings are the following: Over the entire transition period, Croatia has had a rather low and remarkably stable level of income inequality. The decomposition analysis of the period 2000-2006 shows that, although the concentration of income from paid employment was rising, overall stability of income inequality was due to a reduction of the more unequally distributed income from self-employment as well as to improved targeting of public transfers in later years. By contrast, the redistributive effect of the system of public pensions is rather low and could be improved. The outcome of the econometric analysis suggests that Croatia should further aim for a high share of government expenditures and a low level of inflation, in order to achieve a reasonable redistribution of disposable income and a stable development of real income. At the same time Croatia should increase its share of exports of goods and services in GDP to raise employment in the more productive export industries. Efforts to further decrease the relatively high unemployment rate would yield positive distributional effects as well.
    Keywords: inequality, income distribution, transition economies, Croatia
    JEL: D63 O15 P36
    Date: 2009–06
  11. By: Gurgu, Elena (Universitatea Spiru Haret, Facultatea de Marketing si Afaceri Economice InternationaleUniversitatea Spiru Haret, Facultatea de Marketing si Afaceri Economice Internationale)
    Abstract: The Lisbon Strategy, established by the European Council in March 2000 like an action plan and development for the European Union, intends to address low productivity and stagnation of economic growth in the EU, through the formulation of various policy initiatives to be adopted by all Member States EU. According to the strategy mentioned above, the European Union must become the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth, jobs with more and better and greater social cohesion.
    Keywords: Lisbon Strategy; European Union; productivity; economic growth; policy initiatives; knowledge-based economy; sustainable economic growth; social cohesion
    JEL: O11 O22 O33
    Date: 2009–08–09
  12. By: Fogarasi, Jozsef; Latruffe, Laure
    Abstract: The paper investigates the difference in technical efficiency and in productivity change, and the technology gaps, between French and Hungarian farms in the dairy and cereal, oilseeds and proteinseeds (COP) sectors during the period 2001-2004. The analyses are performed with national FADN data and the Data Envelopment Analysis (DEA) approach under each countryâs respective frontier and under a metafrontier. Results revealed that in both the dairy and the COP sectors, Hungarian farmsâ technology was the more productive, despite a technological deterioration. This suggests technological advantages for large-scale (Hungarian) over small-scale (French) farming in these two sectors. These findings may also be explained by the higher policy support in France. Subsidies received by farms have indeed a stronger negative impact on technical efficiency for French farms than for Hungarian farms, and a negative impact on the ability to lead the technology only for French farms.
    Keywords: technology gap, technical efficiency, Malmquist indices, subsidies, farms, Production Economics, P51, D24, Q12,
    Date: 2009–04–01
  13. By: Skribans, Valerijs
    Abstract: This paper shows system dynamic model of labour market and labour migration in Latvia. The hypothesis of the research is: labour migration is determined primarily by the payment level in the countries under consideration and the indicator derived from it – payment differences in the countries compared; as well as employment level, unemployment level, number of work places (market capacity) and number of vacant work places. Secondary factors influencing migration may be costs connected with labour migration, formal legal barriers to migration and personal propensity to migrate. Statistics on the labour market in Latvia are not complete; there is also no common view of experts on determinant processes. In such circumstances market forecasting with quantitative methods is problematic. One approach is to simulate indicators and to estimate their influence on national economy. The model has three parts: growth (expansion) of labour force, division and migration sub models. The sub model for growth of labour force is based on division of population in various categories during transition to a working age population. Division by level of education is further used in labour market analysis in which worker groups are formed according to the education level. The paper represents mutual interaction of groups of workers as well as labour migration. The results show sensitivity of the model factors to propensity of personnel for labour migration.
    Keywords: system dynamic; labour migration; labour market; salary level
    JEL: F15 D0 F16 O1 C0 J0
    Date: 2009
  14. By: Albulescu, Claudiu Tiberiu
    Abstract: The specialists paid a special attention to credit growth in the transitions countries due to its sharp increase during the last years. However, once the financial crisis started in 2008, the credit activity evolution reversed. Consequently, forecasting the credit trend has become a subject of interest in the context of the present financial and economic conditions, because the credit market blockage has a negative impact on economic activity revival and leads to the amplification of the uncertainty on financial markets. The main objective of this paper is to highlight the recent credit developments in Romania and to predict their future evolution. Based on the credit growth rate endogenous factors and using a stochastic simulation econometric model, we demonstrate that this economy experiences a passage from a credit boom to a severe credit crunch. The forecasting exercise results show a credit activity contraction up to the end of 2009, demolishing the expectations related to a near economic recovery in Romania.
    Keywords: credit growth rate; forecasts; stochastic simulation; credit crunch
    JEL: C53 E51 C15
    Date: 2009–07–26
  15. By: Belton M. Fleisher (Department of Economics, Ohio State University); Mi Zhou (College of Economics and Trade, Hunan University)
    Abstract: Has upgrading and enforcing its patent laws slowed China’s economic growth? The answer we draw from detailed analysis of provincial aggregate data covering roughly the period 1990 through 2007 is strongly negative, but understanding the channels through which stricter protection of intellectual property rights has contributed to more rapid productivity growth is elusive. Our best estimate of the direct impact of the 1992 and 2001 patent laws on TFP growth amounts to not quite 15 percent of the average TFP growth rate over the period, but a much larger share of TFP growth is associated with enactment of the laws in a simple interpretation of our empirical investigation. We estimate that virtually none of the laws’ impact on TFP growth can be directly associated with increased quantity of FDI or R&D, although both series are strongly positively correlated with promulgation of the patent laws. We infer that amount of technology transfer through a FDI and the focus of R&D activity, decline of state ownership and increased marketization, growth of the human capital stock, and movement of the labor force from agriculture to manufacturing and service industries are all processes that were encouraged and whose effect has been magnified by stronger IPR protection. Moreover, adopting and enforcing the patent laws probably cannot be treated as an independent event with causation running in only one direction to China’s economic development..
    Keywords: Patent law, Intellectual Property Rights, TRIPS, TFP Growth
    JEL: O31 O33 O34
    Date: 2009–09
  16. By: Gordon Anderson; Oliver Linton; Yoon-Jae Wang
    Abstract: This paper develops a methodology for nonparametric estimation of a polarization measure due to Anderson Ge and Leo (2006) based on kernel estimation techniques. We give the asymptotic theory of our estimator, which in some cases is non standard due to boundary value problems. We also propose a method for conducting inference based on estimation of unknown quantities in the limiting distribution and show that our method yields consistent inference in all cases we consider. We investigate finite sample proerties of our estimator by simulation methods. We give an application to the study of polarization in China in recent years.
    Keywords: kernel estimation, Inequality, Overlap Coefficient, Poissonization.
    JEL: C12 C13 C14
    Date: 2009–07–30
  17. By: Kalina Manova; Zhiwei Zhang
    Abstract: This paper uses newly available data on Chinese trade flows to establish novel and confirm existing stylized facts about firm heterogeneity in trade. First, the bulk of exports and imports are captured by a few multiâ€product firms that transact with a large number of countries. Second, the average importer imports more products than the average exporter exports, but exporters trade with more countries than importers do. Third, compared to private domestic firms, foreign affiliates and joint ventures trade more and import more products from more source countries, but export fewer products to fewer destinations. Fourth, the relationship between firms’ intensive and extensive margin of trade is non-monotonic, differs between exporters and importers, and depends on the ownership structure of the firm. Fifth, firms frequently exit and re-enter into trade and regularly change their product mix and trade partners, but foreign firms exhibit less churning. Finally, most of the growth in Chinese exports between 2003-2005 was driven by deepening and broadening of trade relationships by surviving firms, while reallocations across firms contributed only 30%. These stylized facts shed light on the cost structure of international trade and the importance of foreign ownership for firms’ export and import decisions.
    JEL: F10 F14 F23
    Date: 2009–08
  18. By: Jaroslaw Pietras
    Abstract: The EU transfers provided to the New Member States and candidate countries are generally viewed as having been efficiently used in promoting development in these economies. This paper examines the conditionality and institutional arrangements used to manage these transfers, and asks if there are lessons to be learned that could be applied to improve the absorptive capacity of assistance provided to developing countries.
    Keywords: New Member States, Cohesion Funds, Economic Assistance, Official development Assistance, Conditionality, Economic integration, European Union Enlargement
    JEL: F35 H54 H57 H87 O19 O52 P33
    Date: 2009–01
  19. By: Bakucs, Lajos Zoltan; Ferto, Imre
    Abstract: Modern theories of sales make conflicting predictions about the temporal pattern of sales, which we test using retail chain level data. In this paper, we focus on the retail sale patterns of two retail milk prices in a New Member State (NMS), Hungary using weekly data across eight retail chain between 2005 January and 2008 June. We employ a battery of empirical tests, to try a number of sale theory hypotheses. First, we present summary statistics, histograms, and correlations of prices and sales from which we conclude that no theory of sales fully describes sale patterns and price distributions. Second, we apply vector autoregressive analysis and Granger tests of temporal ordering (âcausality testsâ) to determine whether the sale of one retail chain is followed in a predictable way by the sale of another retail chain or its own later sales. Our results suggest a dual retail market structure. Finally, we employ panel cointegration to test confirm that durable goods should have qualitatively different pricing pattern than less-durable goods. Similarly to Berck et al. (2007) we fail to see a clear difference between storable milk and boxed milk patterns.
    Keywords: Sales, retail prices, milk, Livestock Production/Industries,
    Date: 2009–04–01
  20. By: Leonardo Becchetti (University of Rome Tor Vergata); Sara Savastano (University of Rome Tor Vergata)
    Abstract: With an empirical analysis on a panel of individuals living in a transition country (Albania) we document that the impact of money on happiness does not depend only on the pecuniary outcome but also from aspirations and conditions leading to its determination. Additional factors which matter are the self perceived economic status and the share earned from remittances (and, more weakly, from social assistance). By looking at different sides of the phenomenon we find that these factors affect levels, changes in income and the probability of “being frustrated achievers”. Finally, differently from what happens in developed countries, higher income levels are negatively and not positively correlated with the probability of frustrated achievement supporting the hypothesis that individuals in transition countries are not in the upper side of a concave happiness-income relationship.
    Keywords: life satisfaction, remittances, economic status
    Date: 2009–08
  21. By: Aleksejs Melihovs; Anna Zasova
    Abstract: Inflation and its dynamics are among the most important indicators in the focus of such economic agents as producers, consumers, investors, and monetary and fiscal policy makers. Risks of high inflation or deflation enhance the need to profoundly investigate factors and causes that could underpin materialisation of such risks in the economy and to seek for steps to avert adverse effects of unwelcome inflationary dynamics. Optimal capacity utilisation is one of the ways to escape endogenous pressures that increase inflation or cause deflation. The study pursues the aim to assess short-term relationships between the capacity utilisation rate and inflation. The authors have set a target to determine the capacity utilisation rate at which no pressure is exerted upon inflation and to show whether the capacity utilisation rate of the Latvian economy was an underlying factor that caused a rise in inflation after the EU accession.
    Keywords: NAIRU, NAIRCU, Kalman filter
    JEL: C51 E31 D24
    Date: 2009–07–28

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