nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒12‒11
sixteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Political Selection of Firms into Privatization Programs. Evidence from Romanian Comprehensive Data. By Adam Szentpeteri; Almos Telegdy
  2. Dynamic Ethnic Fractionalization and Economic Growth in the Transition Economies from 1989 to 2007 By Campos, Nauro F.; Saleh, Ahmad; Kuzeyev, Vitaliy S.
  3. Corporate environmental management in transition economies: The case of Central and Eastern Europe By Garcia, Jorge; Bluffstone, Randy; Sterner, Thomas
  4. Financial constraints in China: firm-level evidence By Sandra PONCET; Walter STEINGRESS; Hylke VANDENBUSSCHE
  5. Stock Return Seasonalities and Investor Structure: Evidence from China’s B-Share Markets By Martin T. Bohl; Michael Schuppli; Pierre L. Siklos
  6. “Crossing the river while feeling the rocks”: Incremental land reform and its impact on rural welfare in China By Bruce, John W.; Li, Zongmin
  7. Do Foreign Institutional Investors Destabilize China’s A-Share Markets? By Michael Schuppli; Martin T. Bohl
  8. Rural households decisions towards income diversification : Evidence from a township in northern China By Sylvie Demurger; Martin Fournier; Weiyong Yang
  9. Employment convergence of immigrants in the European Union By Szilvia Hamori
  10. Global Integration of Central and Eastern European Financial Markets: The Role of Economic Sentiments By Ansgar Belke; Joscha Beckmann; Michael Kühl
  11. The Impact of the Crisis on Budget Policy in Central and Eastern Europe By Zsolt Darvas
  12. FDI by Early Movers, Followers and Latecomers: Timing of Entry by German Firms during Transition in the Czech Republic By Henning Mühlen; Peter Nunnenkamp
  13. Trade, Technology and Inequality in a Developing Country: Theory and Evidence from China By Li, Muqun; Coxhead, Ian
  14. Eine Panel-Analyse des chinesischen Intraindustriellen Handels im Investitionsgütersektor By Yiping Zhu
  15. Land-tenure policy reforms: Decollectivization and the Doi Moi system in Vietnam By Kirk, Michael; Tuan, Nguyen Do Anh
  16. An Empirical Analysis of the Shanghai and Shenzen Limit Order Books By Huimin Chung; Jie Lu; Bruce Mizrach

  1. By: Adam Szentpeteri (Central European University, E”tv”s Lor nd University); Almos Telegdy (Institute of Economics - Hungarian Academy of Sciences)
    Abstract: Exploiting a unique institutional feature of the early Romanian privatization setup, when a group of firms was explicitly barred from any privatization, we test how politicians select firms into privatization. Using comprehensive data that includes all firms inherited from socialism, we estimate the relation between pre-privatization firm characteristics - the information known to politicians at the time of decision making - and the effect of privatization on employment, efficiency and wages. With the estimated coefficients we simulate the effect of privatization on non-privatizable and privatizable firms separately, including in the latter group both actually privatized and not privatized enterprises. The simulations show that politicians expected privatization to increase the employment of the privatizable group by 7 - 10 percent, and to decrease it in the non-privatizable group by 10 - 30 percent, depending on the first-stage estimation method, OLS or matching combined with OLS. We do not find such discrepancies in the expected change in firm efficiency; the simulated efficiency effect of privatization is large and positive for both groups of firms, and it 52 - 65 percent for non-privatizable, and 41 - 43 percent for the privatizable firms. The analysis does not support the hypothesis that wages played an important role in privatization decisions. Our study suggests that employment concerns played the key role in selecting firms for privatization, even if efficiency gains had to be sacrificed.
    Keywords: Privatization, Government objectives, Firm Efficiency, Employment, Wages, Romania
    JEL: L33 P26
    Date: 2009–09
  2. By: Campos, Nauro F. (Brunel University); Saleh, Ahmad (Brunel University); Kuzeyev, Vitaliy S. (affiliation not available)
    Abstract: In their survey of the literature on ethnic fractionalization and economic performance, Alesina and La Ferrara (JEL 2005) identify two main directions for future research. One is to improve the measurement of diversity and the other to treat diversity as an endogenous variable. This paper tries to address these two issues: it investigates the effects of ethnic fractionalization on economic growth across countries using unique time-varying measures. We first replicate the finding of a weak effect of exogenous diversity on growth and then we show that accounting for how diversity changes over time and treating it as an endogenous variable makes a difference. Once diversity is instrumented (with lagged diversity and latitude), it shows a significant negative impact on economic growth which is robust to different specifications, polarization measures, econometric estimators, as well as to the use of an index of ethnic-religious-linguistic fractionalization.
    Keywords: ethnic diversity, fractionalization, polarization, growth
    JEL: O11 Z12 O55 H1
    Date: 2009–11
  3. By: Garcia, Jorge (Department of Economics, School of Business, Economics and Law, Göteborg University); Bluffstone, Randy (Department of Economics, Portland State University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We use firm-level data to study the adoption of Environmental Management Practices (EMPs) in the most polluting industrial sectors in Bulgaria, Hungary, Lithuania, Poland, Romania, and Slovakia during the 1990 – 1998 period when these countries were in a transition away from a centrally planned economy. Despite the stickiness of a long established managerial regime and the declines in industrial output during this period, around 42% of the firms in our sample adopted Environmental Plans (EPs) and/or established Environmental Departments (EDs). The analysis reveals that enforcement and public disclosure of the environmental performance of firms are the most important forces behind the implementation of both of these EMPs. Also, but to a lesser extent, export oriented firms and larger firms are prone to adoption. Finally, we use a methodology that clarifies some of the links between different EMPs not addressed in earlier studies. Notably, once a firm has decided to adopt (or not adopt) an ED, additional increases in enforcement do not to lead to EP implementation.<p>
    Keywords: Environmental Management; Bivariate Analysis; Central and Eastern Europe
    JEL: C25 Q53 Q58
    Date: 2009–12–04
  4. By: Sandra PONCET (Centre dÕEconomie de la Sorbonne, Universite Paris 1 and CEPII,); Walter STEINGRESS (Boston College); Hylke VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper uses a unique micro-level data-set on Chinese firms to test for the existence of a "political-pecking order" in the allocation of credit. Our findings are threefold. Firstly, private Chinese firms are credit constrained while State-owned firms and foreign-owned firms in China are not; Secondly, the geographical and sectoral presence of foreign capital alleviates credit constraints faced by private Chinese firms. Thirdly, geographical and sectoral presence of state firms aggravates financial constraints for private Chinese firms (Òcrowding outÓ). Therefore it seems that ongoing restructuring of the state-owned sector and further liberalization of foreign capital inflows in China can help to circumvent financial constraints and can boost the investment of private firms.
    Keywords: Investment-cashflow sensitivity, China, firm level data, foreign direct investment
    JEL: E22 G32
    Date: 2009–09–14
  5. By: Martin T. Bohl; Michael Schuppli; Pierre L. Siklos
    Abstract: This paper investigates whether seasonalities in daily stock returns are related to the trading behavior of individual and institutional investors. The change in the investor structure of B-share markets in Shanghai and Shenzhen after the abolition of ownership restrictions in 2001 provides a unique testing environ- ment. We show that day-of-the-week eects are attenuated after the market entrance of Chinese individual investors who had previously not been allowed to trade in B-shares. Our empirical results suggest that institutional rather than individual investors are a main driving force behind such anomalies. In addi- tion, we nd evidence of reduced index return autocorrelation and US spillover eects in the post-liberalization period.
    Keywords: Institutional Investors, Individual Investors, Stock Return Seasonalities, Chinese Stock Markets, GARCH Model
    JEL: G12 G14 G18
    Date: 2009–10
  6. By: Bruce, John W.; Li, Zongmin
    Keywords: millions fed, food security, Land reform, Land tenure, Collectivized agriculture, Household responsibility,
    Date: 2009
  7. By: Michael Schuppli; Martin T. Bohl
    Abstract: This paper investigates the eect of foreign institutional investors on the sta- bility of Chinese stock markets. Previous literature views this investor group as destabilizing feedback traders. We use the abolition of ownership restrictions on A shares as a natural experiment. There is strong evidence that foreign in- stitutions have a stabilizing eect on Chinese stock markets and contribute to market eciency. This nding is robust across exchanges, sample periods, size quintiles and alternative model specications. By contrast, domestic investors appear to engage in positive feedback trading. Our results have important implications for market regulation.
    Keywords: Foreign Institutional Investors, Feedback Trading, Chinese Stock Markets, Regulation, Ownership Restrictions
    JEL: G14 G15 G18
    Date: 2009–10
  8. By: Sylvie Demurger (HIEBS - Hong Kong Institute of Economics and Business Strategy - The Hong Kong University); Martin Fournier (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Weiyong Yang (University of International Business and Economics (Beijing) - University of International Business and Economics (Beijing))
    Abstract: Economic reforms in rural China have brought opportunities to diversify both within-farm activities and off-farm activities. Participation in these activities plays an important role in increasing rural households' income. This paper analyzes the factors that drive rural households and individuals in their income-source diversification choices for ten villages in Northern China. At the household level, we distinguish three types of diversification as opposed to grain production only : within farm (non- grain production) activities, local off-farm activities, and migration. At the individual level, we analyze the determinants of participation in three different types of jobs as compared to agricultural work : local off-farm employment, local self-employment and migration. At the household level, we find that land and labor availability stimulates on-farm diversification. Local off-farm activities are mostly driven by household wealth and credit constraints, while migration decisions strongly depend on the household age and composition. At the individual level, we find a clear gender and age bias in access to off-farm activities that are mostly undertaken by male and by young people. More surprisingly, education is found to play a role for accessing local wage employment but not in migration decision. As at the household level, the household assets position is found to strongly affect participation in any off-farm activity.
    Keywords: income-source diversification; agricultural households; off-farm employment; China
    Date: 2009
  9. By: Szilvia Hamori (Institute of Economics Hungarian Academy of Sciences)
    Abstract: In light of the importance of immigrants' labour market integration in the host countries, this study examines the employment convergence between foreign-born and native-born in the European Union (EU), by gender and broad region of origin - distinguishing between immigrants born within and outside the EU - based on data drawn from the European Labour Force Survey. The estimation results point to numerous differences across immigrant groups, genders and receiving EU regions - especially between the Southern EU member states and the rest of the EU15 and between the Eastern European countries admitted in 2004 and the 15 pre-enlargement member states.
    Keywords: Immigrants, Employment, European Union
    JEL: F22 J21 J61
    Date: 2009–10
  10. By: Ansgar Belke; Joscha Beckmann; Michael Kühl
    Abstract: This paper examines the importance of different economic sentiments, e.g. consumer moods, for the Central and Eastern European countries (CEECs) during the transition process. We first analyze the importance of economic confidence with respect to the CEEC's financial markets. Since the integration of formerly strongly regulated markets into global markets can also lead to an increase of the dependence of the CEECs' domestic market performance from global sentiments, we also investigate the relationship between global economic sentiments and domestic income and share prices. Finally, we test whether the impact of global sentiments and stock prices on domestic variables increases proportionally with the degree of integration. For these purposes, we apply a structural cointegrating VAR (CVAR) framework based upon a restricted autoregressive model which allows us to distinguish between the long-run and the short-run dynamics. For the long run we find evidence supporting relationships between sentiments, income and share prices in case of the Czech Republic. Our results for the short run suggest that economic sentiments in general are strongly influenced by share prices and income but also offer some predictive power with respect to the latter. What is more, global sentiments play an important role in particular for the CEECs' share prices and income. The significance of this link increases with economic integration.
    Keywords: Cointegration, European integration, financial markets, restricted autoregressive model, sentiments
    JEL: E44 G15 P2
    Date: 2009
  11. By: Zsolt Darvas (Institute of Economics - Hungarian Academy of Sciences, Bruegel - Brussels, Corvinus University of Budapest)
    Abstract: This paper describes the particular impacts of the financial and economic crisis on Central and Eastern European (CEE) countries, studies pro-cyclicality of fiscal policies, discusses the impact of the crisis on fiscal policy, and the policy response of various governments. After drawing some lessons for fiscal policy from previous emerging market crises, the paper concludes with some thoughts on the appropriate policy response from a more normative perspective. The key message of the paper is that the crisis should be used as an opportunity to introduce reforms to avoid future pro-cyclical fiscal policies, to increase the quality of budgeting and to increase credibility. These reforms should include fiscal responsibility laws comprising medium-term fiscal frameworks, fiscal rules, and independent fiscal councils. When fiscal consolidation is accompanied by fiscal reforms that increase credibility, non-Keynesian effects may offset to some extent the contraction caused by the consolidation.
    Keywords: budget policy, Central and Eastern European (CEE) countries, financial and economic crisis
    JEL: C32 E62 H60
    Date: 2009–11
  12. By: Henning Mühlen; Peter Nunnenkamp
    Abstract: Theoretical considerations suggest that the option of waiting under conditions of uncertainty affects the relative importance of firm-level productivity and distance-related transaction costs as driving forces of FDI. Yet the timing of FDI has received little attention in the empirical literature on FDI determinants. To help close this gap we analyze FDI decisions by German firms with and without affiliates in the Czech Republic at different stages of transition. We find that FDI entry strongly depends on firm productivity immediately after the political and economic regime change, but less so with diminishing uncertainty. Likewise, distance-related transaction costs discourage FDI by latecomers considerably less than FDI by early movers
    Keywords: multinational enterprises, firm-level productivity, distance, timing of FDI
    JEL: F23
    Date: 2009–11
  13. By: Li, Muqun (Samsung Economic Research Institute, Beijing); Coxhead, Ian (University of Wisconsin, Madison)
    Abstract: Could globalization--specifically, increased international trade and openness to foreign investment--increase inequality in developing countries? Empirical studies in many such economies show that expanding trade and FDI are associated with higher inequality in wages and regional incomes. However, there is no agreement regarding the cause of such increases. We present a theoretical model showing how interactions between factor mobility restrictions and different rates of technical progress (due to trade and FDI) in a regionally heterogeneous economy can explain the evolution of inequality. As favored regions benefit more from trade, their growing demand for skills drains skilled workers from disadvantaged areas, and average incomes in favored regions grow faster than in less favored regions. Moreover, this unbalanced regional growth may be the source of rising inequality within each region, and even of falling per capita incomes in the less favored region. We test our predictions with data from China's coastal and inland provinces. The results confirm that different regional growth rates have increased both interregional and intraregional inequality. In addition, growth of skills-based export industries in coastal regions, other things equal, is associated with lower incomes for the poor in inland provinces.
    JEL: F16 O15 R10
    Date: 2009–07
  14. By: Yiping Zhu
    Abstract: This paper adopts the Hausman-Taylor 2SLS error components approach in estimating the determinants of China's Intra-Industry Trade (IIT) in the capital goods sector with its 26 partner countries. It disaggregates IIT into horizontal IIT (HIIT) and vertical IIT (VIIT). Capital goods final products and intermediates are separately estimated in order to reveal the differentiated trade patterns. It finds that economic similarity is very significantly negatively correlated with the intermediates IIT, but to a less extent correlated with the final products IIT. Factor endowment is of no significance in determining IIT in the intermediates, although it is significantly positively correlated with the final products IIT. Economic size is significantly negatively correlated with both final products and intermediates IIT. Distance is not yet dead in impacting the level of final products IIT, but of less importance in influencing the intermediates IIT. China is exchanging intermediates in a less intraindustry manner with ASEAN nations. However, because VIIT is dominating TIIT, no significant differences exist between the estimation results of TIIT and VIIT.
    Keywords: Intra-IndustryTrade,PanelEconometrics
    JEL: F14 C33
    Date: 2009–11
  15. By: Kirk, Michael; Tuan, Nguyen Do Anh
    Keywords: millions fed, food security, rice, Land tenure, Land reform, Doi Moi, Decollectivization,
    Date: 2009
  16. By: Huimin Chung; Jie Lu; Bruce Mizrach
    Abstract: This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Ex- changes. The two major Chinese stock markets are pure order-driven trading mechanisms without market makers, and we analyze empirically both limit order books. We begin our empirical model- ing using the vector autoregressive model of Hasbrouck and extend the model to incorporate other information in the limit order book. We also study the market impact on A shares, B shares and H shares, and analyze how the market impact of stocks varies cross sectionally with market capital- ization, tick frequencies, and turnover. Furthermore, we distinguish the market impacts of small, average and block trades, and conclude that the market impacts of small trades are signi?cantly lower than those of other trades.
    Keywords: limit order book; Chinese stock market; microstructure; VAR model
    JEL: A
    Date: 2009–09

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