nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒11‒27
eight papers chosen by
J. David Brown
Heriot-Watt University

  1. Do Returns to Schooling Go Up During Transition? The Not So Contrary Case of Vietnam By Tinh T. Doan; John Gibson
  2. EU Integration and Trade: a Look from the Outside of the EU Eastern Border? By Oleksandr Shepotylo
  3. Institutional change, rural services, and agricultural performance in Kyrgyzstan: By Akramov, Kamiljon T.; Omuraliev, Nurbek
  4. Energy prices and China’s international competitiveness By Chen , Guifu; Hamori, Shigeyuki
  5. A World Factory in Global Production Chains: Estimating Imported Value Added in Chinese Exports By Koopman, Robert; Wang, Zhi; Wei, Shang-Jin
  6. Governance and Fund Management in the Chinese Pension System By Gregorio Impavido; Yu-Wei Hu; Xiaohong Li
  7. Asymmetries in the exchange rate pass-through into Romanian price indices By Cozmanca,Bogdan-Octavian; Manea, Florentina
  8. Foreign Currency Borrowing by Small Firms By Brown, Martin; Ongena, Steven; Yesin, Pinar

  1. By: Tinh T. Doan (University of Waikato); John Gibson (University of Waikato)
    Abstract: A key stylized fact about transition economies is that the returns to schooling rise as economic reform progresses. Existing research suggests that Vietnam is an exception to this pattern, with a decrease in males’ return from 1992 to 1998, and little increase in the return to females’ education (Liu, 2006). This exception may be because of the gradual economic reform applied in Vietnam, whilst in Eastern European countries the “Big Bang” transformation was conducted. Therefore to see whether Vietnam is still a counter example, we re-examine the trend in the rate of return to schooling in Vietnam over the 1998-2004 period, where the reforms have had a longer time to have an effect.
    Keywords: economic transition; returns to schooling; Vietnam
    JEL: J31 O15
    Date: 2009–10–31
  2. By: Oleksandr Shepotylo (Kyiv School of Economics and Kyiv Economics Institute)
    Abstract: This paper develops a methodology for trade policy analysis of costs and benefits of alternative regional integration scenarios, based on the disaggregated gravity equation, and applies it to calculate the impact of the EU enlargement on integration strategies of non-member countries. In particular, the paper measures the impact of the 2004 EU enlargement from the standpoint of Ukraine – a country that has been lost in transition; Ukraine moves away from CIS, but does not get closer to EU. This angle allows estimating the costs of non-integration that occurred due to trade and investment diversion, and forgone opportunity to carry our structural changes in the Ukrainian economy. According to the results, EU accession would have had a small positive effect on total export volumes but would have dramatically changed the composition of Ukrainian exports by almost doubling exports of manufactured goods by 2007. The costs of non-integration accumulate towards the end of the investigated period. Projecting the results into the future clearly indicates that the benefits of EU accession for Ukraine would have been unambiguously positive and would overweight benefits of CIS integration.
    Keywords: Gravity model, EU enlargement, Ukraine, CIS, heterogeneous firms, trade policy
    JEL: C33 F12 F17
    Date: 2009–11
  3. By: Akramov, Kamiljon T.; Omuraliev, Nurbek
    Abstract: The institutional change in rural Kyrgyzstan during the transition period included farm reorganization, land reform, building markets, and community institutions. The land reform established private property rights to land, including the rights to transfer, exchange, sell, lease, and use the land as collateral for credit. These key features of Kyrgyzstan's agrarian transition are in sharp contrast with those of other transition countries in Central Asia. This paper reviews the process of institutional change in rural Kyrgyzstan, examines its impact on agricultural performance and discusses some remaining major institutional and policy constraints on agricultural growth in this country.
    Keywords: Institutional change, Land reform, Agricultural growth, Rural services, Development strategies, Kyrgyzstan,
    Date: 2009
  4. By: Chen , Guifu; Hamori, Shigeyuki
    Abstract: This paper uses the CCF approach to analyze and determine whether there is a causal relationship between the world energy price index and China’s international competitiveness. The data on the volatility of energy prices can provide information in addition to that available in the price data alone. Our analysis suggests that the volatility of energy prices has significant implications concerning information linkages between the energy market and China’s international competitiveness.
    Keywords: energy prices; international competitiveness; CCF approach; Chinese economy
    JEL: Q43
    Date: 2009–11
  5. By: Koopman, Robert; Wang, Zhi; Wei, Shang-Jin
    Abstract: The rise of the People’s Republic of China (PRC) in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of foreign value added (FVA) in exports. We review a general formula in Koopman, Wang and Wei (2008) for computing domestic and foreign contents when processing exports are pervasive. In addition, we develop another formula for slicing up foreign content to allocate it among key individual economy’s supply chains, including sourcing from Japan and the United States. By our estimation, the share of foreign content in exports by the PRC is about 50%. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly high foreign content (about 80%). By our estimation, Japan; the United States; Hong Kong, China; and the European Union are the major sources of foreign content in the PRC’s exports of computers and consumer electronics, two of its largest and fastest growing export categories.
    Keywords: domestic content; foreign value added; processing trade
    JEL: C67 C82 F1
    Date: 2009–09
  6. By: Gregorio Impavido; Yu-Wei Hu; Xiaohong Li
    Abstract: The Chinese pension system is highly fragmented and decentralized, with governance standards, pension fund management practices, their regulation and supervision varying considerably both across the funded components of the Chinese pension system and across provinces. This paper describes the key components of the system, highlights the progress made to date and identifies remaining weaknesses, in regard to information disclosure, the governance framework and pension fund management standards.
    Keywords: Banking crisis , Capital , Cross country analysis , Demand , Economic growth , External sector , Fiscal policy , Labor , Monetary policy , Productivity ,
    Date: 2009–11–09
  7. By: Cozmanca,Bogdan-Octavian (Academy of Economic Studies Bucharest and National Bank of Romania); Manea, Florentina (RBS Romania)
    Date: 2009–11
  8. By: Brown, Martin; Ongena, Steven; Yesin, Pinar
    Abstract: We examine the firm- and country-level determinants of the currency denomination of small business loans. We first model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs, and also incorporates the impact of information asymmetry between banks and firms. When foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners with high revenues and low distress costs choose foreign currency loans. When the banks have imperfect information on the currency and level of firm revenues, even more local earners switch to foreign currency loans, as they do not bear the full cost of the corresponding credit risk. We then test the implications of our model by using a 2005 survey with responses from 9,098 firms in 26 transition countries. The survey contains details on 3,105 recent bank loans. At the firm level, our findings suggest that firms with foreign currency income and assets are more likely to borrow in a foreign currency. In contrast, firm-level distress costs and financial transparency affect the currency denomination only weakly. At the country level, the interest rate advantages of foreign currency funds and the exchange rate volatility do not explain the foreign currency borrowing in our sample. However, foreign bank presence, weak corporate governance and the absence of capital controls encourage foreign currency borrowing. All in all, we cannot confirm that "carry-trade behavior" is the key driver of foreign currency borrowing by small firms in transition economies. Our results do, however, support the conjecture that banking-sector structures and institutions that aggravate information asymmetries may facilitate foreign currency borrowing.
    Keywords: banking structure; competition; foreign currency borrowing; market structure
    JEL: F34 F37 G21 G30
    Date: 2009–11

This nep-tra issue is ©2009 by J. David Brown. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.