nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒10‒24
sixteen papers chosen by
J. David Brown
Heriot-Watt University

  1. The Impact of Chernobyl on Health and Labour Market Performance in the Ukraine By Lehmann, Hartmut; Wadsworth, Jonathan
  2. Tough Love: Do Czech Suppliers Learn from Their Relationships with Multinationals? By Beata S. Javorcik; Mariana Spatareanu
  3. Prospective Membership and Institutional Change in Transition Countries By Ansgar Belke; Ingo Bordon; Inna Melnykovska; Rainer Schweickert
  4. Estonia and Euro Adoption: Small Country Challenges of Joining EMU By Zuzana Brixiova; Margaret Morgan; Andreas Wörgötter
  5. Subsistence and Semi-Subsistence Farming in Selected EU New Member States By Sophia Davidova; Lena Fredriksson; Alastair Bailey
  6. Spatial Effects of Open Borders on the Czech Labour Market By Michael Moritz
  7. An Analysis of the Impact of the European Convergence Process on International Investments in New EU Member Countries By Christian Friedrich; Václav Zdárek
  8. Central and eastern european social model By Rotaru, Marius-Petre
  9. Рыночная доля банков с государственным участием в России By Vernikov, Andrei
  10. Implications of the growth of China and India for the other Asian giant : Russia By Ianchovichina, Elena; Ivanic, Maros; Martin, Will
  11. Investment Options and Bargaining Power the Eurasian Supply Chain for Natural Gas By Hubert, Franz; Ikonnikova , Svetlana
  12. The pattern of growth and poverty reduction in China By Montalvo, Jose G.; Ravallion, Martin
  13. Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies By Luciano Fanti and Luca Gori
  14. A comparative perspective on poverty reduction in Brazil, China and India By Ravallion, Martin
  15. Bayesian Estimation of Spatial Externalities Using Regional Production Function: The Case of China and Japan By Hashiguchi, Yoshihiro
  16. Savings in Latvia By Agnese Bicevska; Aleksejs Melihovs; Krista Kalnberzina

  1. By: Lehmann, Hartmut (University of Bologna); Wadsworth, Jonathan (Royal Holloway, University of London)
    Abstract: Using longitudinal data from the Ukraine we examine the extent of any long-lasting effects of radiation exposure from the Chernobyl disaster on the health and labour market performance of the adult workforce. The variation in the local area level of radiation fallout from the Chernobyl accident is considered as a potential instrument to try to establish the causal impact of poor health on labour force participation, hours worked and wages. There appears to be a significant positive association between local area-level radiation dosage and health perception based on self-reported poor health status, though much weaker associations between local area-level dosage and other specific health conditions or labour market performance. Any effects on negative health perceptions appear to be stronger among women and older individuals.
    Keywords: Chernobyl, health, labour market performance
    JEL: H00 J00
    Date: 2009–10
  2. By: Beata S. Javorcik; Mariana Spatareanu
    Abstract: Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. While the empirical studies have cast doubt on the existence of horizontal spillovers from FDI in developing countries, several recent papers have confirmed the presence of vertical spillovers, which take place through contacts between foreign affiliates and their local suppliers. However, the existing studies rely on industry-level proxies for vertical spillovers rather than information on actual relationships between local companies and multinationals. This study goes one step further by employing a unique dataset from the Czech Republic, which allows us to identify local firms supplying multinationals operating in the country. The data suggest that suppliers are different from other firms. They are larger, have a higher capital-labor ratio, pay higher wages and exhibit a higher productivity level. The evidence is suggestive of both high productivity firms having a higher probability of supplying multinationals as well as suppliers learning from their relationships with multinationals.
    Keywords: foreign direct investment, technological spillovers, suppliers
    JEL: F21 F23
    Date: 2009
  3. By: Ansgar Belke; Ingo Bordon; Inna Melnykovska; Rainer Schweickert
    Abstract: This paper quantifies the impact of incentives related to potential membership on institutional change as measured by the World Bank Governance Indicators (WBGI). Based on a panel of 25 transition countries for the period from 1996 to 2008 we show that pre-accession incentives provided by EU and NATO clearly matter for institutional development. In addition, path-dependency determined by cultural norms may be overcome by economic liberalization while foreign aid seems to hamper institutional development
    Keywords: EU, NATO, Transition Economies, Institutional Change, Governance
    JEL: F15 F20 F50 P20 P30 O19
    Date: 2009–10
  4. By: Zuzana Brixiova; Margaret Morgan; Andreas Wörgötter
    Abstract: Estonia gave up the exchange rate and monetary policy tools of macroeconomic management when it introduced its currency board in 1992. While the currency board arrangement served the country well during transition in the 1990s, it offers limited flexibility to implement policies that would ease the EU convergence as well as mitigate the global financial and economic crisis. The ongoing financial crisis has made euro adoption more attractive than ever and put it on the top of the country’s policy agenda. However, shocks affecting Estonia are only weakly synchronized with those of the euro area, and the structure of its economy also notably differs from the euro zone. To benefit fully from joining the EMU, Estonia must strengthen other adjustment mechanisms to shocks, including flexibility of the labour market, further improving its environment to do business and a framework, which allows for anti-cyclical fiscal policies.<P>L’Estonie et l’adoption de l’euro : Les problèmes que pose à un petit pays l’adhésion à l’UEM<BR>En mettant en place un régime de caisse d’émission en 1992, l’Estonie a renoncé pour sa gestion macroéconomique aux instruments que constituent la politique de taux de change et la politique monétaire. Tout en ayant été très utile pour le pays durant la période de transition des années 1990, le régime de caisse d’émission n’offre qu’une souplesse limitée pour mettre en œuvre les mesures qui faciliteraient la convergence par rapport à l’UE et qui atténueraient aussi la crise financière et économique mondiale. Du fait de la crise financière actuelle, l’adoption de l’euro est plus attrayante que jamais et est une des priorités du pays. Malgré tout, les chocs que subit l’Estonie ne sont que faiblement synchronisés avec ceux que connaît la zone euro et la structure de l’économie estonienne est également assez différente de celle de l’économie de la zone euro. Pour bénéficier pleinement de la participation à l’UEM, l’Estonie devra renforcer d’autres mécanismes d’ajustement aux chocs économiques ; il lui faudra un marché du travail plus flexible, un environnement plus propice aux activités industrielles et commerciales et un cadre qui lui permette de mener des actions budgétaires anticycliques.
    Keywords: EMU, UME, Estonia, Estonie, business cycle synchronization, synchronisation du cycle conjoncturel, structural VAR, VAR structurelle
    JEL: C53 E32 E42
    Date: 2009–10–13
  5. By: Sophia Davidova; Lena Fredriksson; Alastair Bailey
    Abstract: Factor and cluster analysis are used to analyse the attitudes and perceptions of agricultural households in five EU New Member States towards farming, commercialisation, and barriers to and drivers for an increased integration in agricultural markets. The contribution of unsold output to the total household income is valued. A stepwise linear regression is employed to detect important variables explaining the degree of agricultural market integration of farm households. The analysis indicates that subsistence farming is of utmost importance for the rural poor, and particularly in Bulgaria and Romania. The proportion of consumption from own production, manual cultivation techniques and distance to an urban centre negatively affect output sales. Rural development policies targeted at rural physical and market infrastructure might relieve some of these constraints.
    Keywords: Agricultural households; subsistence; commercialisation; incomes; cluster analysis; stepwise regression
    JEL: Q12 Q13 O18
    Date: 2009–10
  6. By: Michael Moritz (Institute for Employment Research)
    Abstract: Hardly analysed in the literature the fall of the Iron Curtain had also effects on the regional structures of the labour markets in the Central and Eastern European Countries (CEECs). Focusing on the Czech Republic I analyse whether during the undoubtedly increasing integration of markets the Czech border region close to the Western European high-wage countries benefited from its geographical position. Even without transnational free labour mobility, free trade and outsourcing of production activities can lead to shifts in the labour demand and wage structure with respect to different skill groups. According to the theoretical background these integration effects should be stronger in border regions.
    Keywords: regional labour markets, border regions, international trade, employment, wage inequality
    Date: 2009–10–08
  7. By: Christian Friedrich; Václav Zdárek
    Abstract: This paper examines how international investors evaluate the change in the risk-return profile of ten Central and Eastern European countries that recently entered the European Union (EU). By supplement- ing international investment position data provided by IMF’s International Financial Statistics with data obtained from Lane and Milesi-Ferretti’s External Wealth of Nations Mark II Database, we create a unified data set of external assets and liabilities for new EU member states (NMS) ranging from 1993 to 2007. Drawing from the so called ‘push-pull’ factor approach and the achievements of Modern Portfolio Theory, we then collect an extensive set of international controls and a number of local risk-return variables that served as transmission channels for the benefits of EU integration and hence, potentially attracted foreign capital. These variables finally enter a panel data model with the Feasible Generalized Least Squares, (FGLS) and linear regression method with panel-corrected standard errors (PCSE) as proposed by Beck and Katz (1995). Our results indicate that convergence towards the EU has had a significant impact on the liability side of international investment positions in NMS. Especially for debt and portfolio equity liabilities, the region’s affiliation with the EU has mitigated the negative evaluation of local macroeconomic risk factors by international investors. Nevertheless, also global forces turned out to be important drivers of the recent build-up in external liabilities and show that the region’s capital supply still depends on actions taken in other parts of the world.
    Keywords: capital flows, push-pull factor approach, EU enlargement, new EU member states
    JEL: E31 F15 F21
    Date: 2009–10
  8. By: Rotaru, Marius-Petre
    Abstract: The 10 former communist countries from Central and Eastern Europe have inherited similar social protection systems, specific to an ethatist economy, and faced similar issues along the transition to market economy. Distinct in Europe through common traits, the new-comers in the European Union, especially the 10 from Central and Eastern Europe, encompass the fifth submodel of the European social model. Ageing of the population, conservatory management of the pensions fund (aversion for risk, regarding the public funds transfer into private pensions fund), migration of qualified work force, increasing unemployment rate represent a wide variety of threats which brought to the public attention the need to reform the social model of the post-communist countries.
    Keywords: European Social Model; European Social Policy; comparative social policy; welfare state; Central and Eastern Europe;
    JEL: M1 Z10
    Date: 2009–05–30
  9. By: Vernikov, Andrei
    Abstract: In this paper we rely on empirical data to develop a classification of state-influenced banks. An estimate of such banks’ combined market share by July 1, 2009 is suggested. We identify 53 state-controlled banks in Russia, including state-owned banks and state-governed banks. Public sector in the banking industry is not limited to the property of federal-level executive authorities or the Central Bank of Russia. It also comprises banks effectively controlled by sub-federal (regional and municipal) authorities, by state-owned enterprises and banks and by “state corporations”. Altogether these banks account for 56% to 57% of all banking assets. Banks owned by public capital indirectly are the fastest-growing group among state-influenced institutions. Concentration grows within public sector of the banking industry, with top-5 state-controlled banking groups in possession of over 49% of national bank assets. We also contemplate a crowding out and erosion of domestic private capital whose market share shrinks from year to year. Effectively a return to a state-run credit system has been accomplished. Several largest state-owned banks now constitute a de facto intermediate third tier of the banking system. Russia’s transition path goes in a quite different direction from that of CEE countries.
    Keywords: Russia; banks; state control; public sector; state-owned banks; state-controlled banks; state-influenced banks; transition
    JEL: P43 P31 G28 G21
    Date: 2009–10
  10. By: Ianchovichina, Elena; Ivanic, Maros; Martin, Will
    Abstract: Continuing rapid growth of China and India can be expected to raise incomes in Russia, but also to put adjustment pressure on Russian firms. The impacts of the rapid growth of China and India on the Russian economy are explored by examining a baseline projection using a global general equilibrium model, and then assessing the implications of higher-than-expected growth in China and India. The authors find that a major source of benefits to Russia is likely to be terms-of-trade improvements associated with higher energy prices - a quite different channel of effect from that for many developing countries that benefit primarily through expanded opportunities to trade directly with these emerging giants. Taking into account the likely improvements in the quality and variety of exports from China and India, the gains to Russia increase substantially. The expansion of the energy sector and the contraction of manufacturing and services are a sign of a Dutch disease effect that will increase the importance of policies to encourage adaptation to the changing world environment.
    Keywords: Economic Theory&Research,Emerging Markets,Markets and Market Access,Trade Policy,Free Trade
    Date: 2009–10–01
  11. By: Hubert, Franz; Ikonnikova , Svetlana
    Abstract: We use cooperative game theory to analyze how the architecture of the pipeline network determines the power structure in the supply chain for Russian gas. If the assessment is narrowly focused on the abilities to obstruct flows in the existing system, the main transit countries, Belarus and Ukraine, appear to be strong. If investment options are accounted for, however, Russia achieves clear dominance. We show that options to bypass one of the transit countries are of little strategic importance compared to Russia's direct access to its customers through the Baltic Sea. Comparing the results of our calibrated model with empirical evidence obtained from transit and import agreements we find that the Shapley value explains the power of major transit countries better than the core and the nucleolus.
    Keywords: Bargaining Power; Supply Chain; Shapley Value; Gas Transport
    JEL: F50 C71 F51 D43
    Date: 2009–09
  12. By: Montalvo, Jose G.; Ravallion, Martin
    Abstract: China has seen a huge reduction in the incidence of extreme poverty since the economic reforms that started in the late 1970s. Yet, the growth process has been highly uneven across sectors and regions. The paper tests whether the pattern of China´s growth mattered to poverty reduction using a new provincial panel data set constructed for this purpose. The econometric tests support the view that the primary sector (mainly agriculture) has been the main driving force in poverty reduction over the period since 1980. It was the sectoral unevenness in the growth process, rather than its geographic unevenness, that handicapped poverty reduction. Yes, China has had great success in reducing poverty through economic growth, but this happened despite the unevenness in its sectoral pattern of growth. The idea of a trade-off between these sectors in terms of overall progress against poverty in China turns out to be a moot point, given how little evidence there is of any poverty impact of non-primary sector growth, controlling for primary-sector growth. While the non-primary sectors were key drivers of aggregate growth, it was the primary sector that did the heavy lifting against poverty.
    Keywords: Rural Poverty Reduction,Achieving Shared Growth,Regional Economic Development,Subnational Economic Development
    Date: 2009–10–01
  13. By: Luciano Fanti and Luca Gori
    Abstract: In this paper we link endogenous fertility, endogenous longevity, economic growth and public policies – represented by public health investments and child policies – in a basic overlapping generations model. We found that there even exist four equilibria, and thus low and high development regimes, which may be, however, determined by government policies, and concluded that when fertility is endogenous, increasing public health is always beneficial allowing economies to escape from poverty and, hence, to prosper. The same conclusion holds for the child tax policy. In particular, the latter result may be in accord with, for instance, the tremendous development experienced by China where a restrictive one child per family policy forced by the government planned and restricted the size of Chinese families, probably allowing some geographic areas within China to escape from poverty.
    Keywords: Child policy; Endogenous fertility; Health; Life expectancy; OLG model.
    JEL: I1 J13 O4
    Date: 2009–10–15
  14. By: Ravallion, Martin
    Abstract: Brazil, China and India have seen falling poverty in their reform periods, but to varying degrees and for different reasons. History left China with favorable initial conditions for rapid poverty reduction through market-led economic growth; at the outset of the reform process there were ample distortions to remove and relatively low inequality in access to the opportunities so created, though inequality has risen markedly since. By concentrating such opportunities in the hands of the better off, prior inequalities in various dimensions handicapped poverty reduction in both Brazil and India. Brazil’s recent success in complementing market-oriented reforms with progressive social policies has helped it achieve more rapid poverty reduction than India, although Brazil has been less successful in terms of economic growth. In the wake of its steep rise in inequality, China might learn from Brazil’s success with such policies. India needs to do more to assure that poor people are able to participate in both the country’s growth process and its social policies; here there are lessons from both China and Brazil. All three countries have learned how important macroeconomic stability is to poverty reduction.
    Keywords: Rural Poverty Reduction,Achieving Shared Growth,Regional Economic Development,Services&Transfers to Poor
    Date: 2009–10–01
  15. By: Hashiguchi, Yoshihiro
    Abstract: This paper used regional panel data for Chinese provinces from 1979 to 2003, and for Japanese prefectures from 1955 to 1998, to estimate the spatial externalities (or spatial multiplier effects) using a production function and Bayesian methodology, and to investigate the long-run behavior of the spatial externalities of each country. According to the estimation results, China's spatial externalities increased its domestic production significantly after 1994, which tended to increase until 2003. Before 1993, however, its spatial externalities were not significant. Japan's spatial externalities showed fluctuating values throughout the sample period. Furthermore, the movement of the spatial externalities was correlated with Japan's business conditions: the externalities showed a high value in the economic boom, and a low value in the economic depression. This could mean that spatial externalities depend mainly on business conditions.
    Keywords: Spatial Externalities; Bayesian Estimation; Production Function
    JEL: E23 N95 C11
    Date: 2009–10
  16. By: Agnese Bicevska; Aleksejs Melihovs; Krista Kalnberzina
    Abstract: A high saving rate is the foundation of a sustainable national social and economic policy. Nevertheless, boosting saving is not an end in itself. The process of making savings should be analysed taking into account several related aspects. This paper aims at conducting a detailed and comprehensive analysis of saving behaviour in Latvia and its estimation in the global context. Household saving behaviour and saving habits are in a particular focus and are examined econometrically using a unique source of Latvia's micro data, i.e. household budget surveys.
    Keywords: savings, household saving habits, micro data, cross-section model
    JEL: C21 D12 D14 E21 O16
    Date: 2009–10–01

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