nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒02‒05
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Structural Change in Transition Economies: Does Foreign Aid Matter? By Mohsen Fardmanesh; Li Tan
  2. The Determinants of Economic Growth in European Regions By Jesus Crespo-Cuaresma; Gernot Doppelhofer; Martin Feldkircher
  3. Polish Households' Behavior in the Regular and Informal Economies By François Gardes; Christophe Starzec
  4. Traditional dynamics of output and factor income shares: lessons from East Germany By Simona E. Cociuba
  5. Temporary Work in Poland: Who Gets the Jobs? By Hilary Ingham; Mike Ingham
  6. Welfare Effects of Regressive Taxation and Subsidies in China By Xiaobing Wang; Jenifer Piesse
  7. Globalization, Trade & Wages: What Does History tell us about China? By Kris James Mitchener; Se Yan
  8. The IMF’s Stand-by Arrangements and the Economic Downturn in Eastern Europe: The Cases of Hungary, Latvia, and Ukraine By Jose Antonio Cordero
  9. Euroization in Central, Eastern and Southeastern Europe – New Evidence On Its Extent and Some Evidence On Its Causes. By Jesús Crespo Cuaresma; Martin Feldkircher
  10. Bosnia and Herzegovina's surprising export performance : back to the past in a new veil but will It last ? By Kaminski, Bartlomiej; Ng, Francis
  11. Market prospects of meat and meat products in Russia By Sidorchuk, Roman

  1. By: Mohsen Fardmanesh (Temple University); Li Tan (American International Group)
    Abstract: This paper addresses whether the initial declines in the manufacturing and real wages in transition economies were anything unexpected to justify policy reversal, and whether the “often-recommended” foreign aid would have helped them curb these declines in any significant way. It answers these questions with the help of a two-sector three-factor small open economy model and simulation exercises. It concludes that, given the relative price distortions and the market disequilibria that transition economies inherited from their planning era, the initial declines in their manufacturing and real wages are to be mostly expected. Foreign aid, whose impact is noticeable only when it is in excess of 5% of GDP, does not curb the decline in their real wages in any measurable way and exacerbates the decline in their manufacturing by a few percent.
    Keywords: liberalization, structural adjustment, transition economies, East European economies, Soviet Republics, foreign aid
    JEL: P2
    Date: 2009–09
  2. By: Jesus Crespo-Cuaresma; Gernot Doppelhofer; Martin Feldkircher
    Abstract: We use Bayesian Model Averaging (BMA) to evaluate the robustness of determinants of economic growth in a new dataset of 255 European regions in the period 1995-2005. We use three different specifications based on (i) the cross-section of regions, (ii) the cross-section of regions with country fixed effects, and (iii) the cross-section of regions with a spatial autoregressive (SAR) structure. Our results indicate that the income convergence process between countries is dominated by the catching-up process of regions in Central and Eastern Europe (CEE), whereas convergence within countries is mostly a characteristic of regions in old EU member states. We find robust evidence of asymmetric growth performance within countries, with a growth bonus in regions containing capital cities which is particularly sizeable in CEE countries, as well as a robust positive effect of education. The results are robust if we allow for spatial spillovers a priori. In this setting, we also find robust evidence of positive spillovers leading to growth clusters.
    Keywords: model uncertainty, Bayesian Model Averaging (BMA), spatial autoregressive model, determinants of economic growth, urban agglomerations, European regions
    JEL: C11 C15 C21 R11 O52
    Date: 2009–09
  3. By: François Gardes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Christophe Starzec (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: The paper analyzes characteristics of the informal economy in Poland in the context of transition using a specific survey carried out in the frame of the classic Labor Force Survey 1995 by the Polish National Statistical office (GUS). The participation probabilities of three types of informal activities (working, buying and hiring) are discussed. Their interdependencies are discussed the hypothesis of the network or neighborhood effects. The impact of the household's participation on informal markets on its regular consumption is estimated by imputing the informal activity probabilities to the consumption surveys and panel. Then, the specific consumption profiles of participants in the informal market can be identified. This participation does influence significantly more than half of the household's expenditure groups. Moreover, the participants of the informal economy distinguish themselves by the higher individual full prices (integrating non monetary constraints and resources).
    Keywords: Informal economy participation, Consumer behavior, Cross-section-panel estimation
    Date: 2009–09–01
  4. By: Simona E. Cociuba
    Abstract: I evaluate the quantitative implications of technology change and government policies for output and factor income shares during East Germany's transition since 1990. I model an economy that gains access to a high productivity technology embodied in new plants. As existing low productivity plants decrease production, the capital income share varies due to variation in the profit share of these plants. Two policies - transfers and government-mandated wage increases - have opposite effects on output growth, but both contribute to reducing the capital share during the transition. The model's output and capital share line up with counterparts in East German data.
    Keywords: Income distribution ; Economic development ; Technology - Economic aspects ; Productivity ; Capital investments ; Wages
    Date: 2010
  5. By: Hilary Ingham; Mike Ingham
    Abstract: In recent years, Poland witnessed a dramatic decline in its unemployment rate and, from having had one of the worst jobless records in the EU-27, the country now posts a figure below the Union average. However, this remarkable turnaround has apparently been driven by amendments to the country's Labour Code, which have generated an enormous increase in temporary working. On the basis of gross flow data from five consecutive annual panels from the Labour Force Survey, the paper identifies a strong link between this growth and the fall in unemployment. A multinomial logit model then reveals the flows were most heavily concentrated among males and the less well educated. There was also some evidence that fixed-term work lured previously discouraged, inactive individuals back into the labour market. However, the requirement that Poland aligns its temporary employment legislation with that of the EU could conceivable lead to at least a partial reversal of these developments.
    Keywords: Unemployment, Temporary Work, Labour Market Dynamics
    Date: 2010
  6. By: Xiaobing Wang; Jenifer Piesse
    Abstract: Using three comparable national representative household surveys for China in 1988, 1995 and 2002, this paper provides micro level evidence of a policy of absolute regressive taxation and an inverted welfare system. It reviews the economic effects of taxes and subsides and shows that a dual and regressive taxation system increases the urban rural income gap and enhances overall inequality. The empirical evidence indicates that the relatively poorer rural population pay net tax while those in the richer urban areas receive net subsidies. This biased system of taxes and welfare payments is one of the major causes of the persisting urban-rural income gap and is largely responsible for overall income inequality in China.
    Date: 2009
  7. By: Kris James Mitchener; Se Yan
    Abstract: Chinese imports and exports grew rapidly during the first three decades of the twentieth century as China opened up to global trade. Using a new data set on the factor-intensity of traded goods at the industry level, we show that Chinese exports became more unskilled-intensive and imports became more skill-intensive during these three decades. The exogenous shock of World War I dramatically raised the price of Chinese exports, increased the demand for Chinese goods overseas, and increased the demand for unskilled workers producing these goods. These trends continued even after the war ended. We show that the timing of the rise in export prices is consistent with the observed decline in the skill premium in China. The skill-unskilled wage ratio flattened out during the 1910s and then fell by eight percent during the 1920s. We simulate the price shock of World War I using a general equilibrium factor-endowments model of trade and find evidence consistent with the observed fall in the skill premium in China during the 1920s.
    JEL: F15 F33 N25 N75
    Date: 2010–01
  8. By: Jose Antonio Cordero
    Abstract: This paper looks at three countries that have been hard-hit by the world economic recession, and have turned to the IMF for assistance: Hungary, Latvia, and Ukraine. In all of these countries, it would appear that there were more sensible responses to the crisis that would reduce the loss of employment and output, cuts in social services, and political instability that have resulted from the downturn. Instead, the governments’ responses to the downturn as well as IMF conditions for assistance have caused additional harm.
    Keywords: IMF, Hungary, Latvia, Ukraine, fiscal policy, monetary policy
    JEL: O O5 O52 E E5 E51 E52 E6 E62 E63 F F3 F32 F33 F34 F37
    Date: 2009–09
  9. By: Jesús Crespo Cuaresma (Department of Economics, University of Innsbruck; Universitätstrasse 15, 6020 Innsbruck, Austria); Martin Feldkircher (Oesterreichische Nationalbank, Foreign Research Division, Otto-Wagner-Platz 3, POB 61, A-1011 Vienna)
    Abstract: In this paper we put forward a Bayesian Model Averaging method dealing with model uncertainty in the presence of potential spatial autocorrelation. The method uses spatial filtering in order to account for different types of spatial links. We contribute to existing methods that handle spatial dependence among observations by explicitly taking care of uncertainty stemming from the choice of a particular spatial structure. Our method is applied to estimate the conditional speed of income convergence across 255 NUTS-2 European regions for the period from 1995 to 2005. We show that the choice of a spatial weight matrix - and in particular the choice of a class thereof - can have an important effect on the estimates of the parameters attached to the model covariates. We also show that estimates of the speed of income convergence across European regions depend strongly on the form of the spatial patterns which are assumed to underlie the dataset. When we take into account this dimension of model uncertainty, the posterior distribution of the speed of convergence parameter has a large probability mass around a rate of convergence of 1%, approximately half of the value which is usually reported in the literature.
    Keywords: Dollarization, Model uncertainty, spatial filtering, determinants of economic growth, European regions
    JEL: C11 C15 C21 R11 O52
    Date: 2010–01–11
  10. By: Kaminski, Bartlomiej; Ng, Francis
    Abstract: Bosnia and Herzegovina's industrial restructuring, as seen through the lenses of foreign trade performance and its sustainability, has taken off. Bosnia and Herzegovina’s exports have displayed strong dynamics outstripping the pace of growth of exports in almost each year over 1997-2007 combined with the shift to higher value added exportables. Although its performance during the period 1996-2000 following the end of war in late 1995 was not surprising, given relatively low foreign direct investment inflows and weaknesses in the investment climate, its subsequent export performance has come as a surprise. Industrial restructuring, as revealed in the pattern of exports, consisted in rebuilding and modernizing the pre-independence industrial base built around wood products, metalworking, clothing, and automotive products. Although exports still remain relatively low in terms of both per capita and gross domestic product in comparison with other Balkan economies, there has been significant change in their composition, indicating a growing presence of more processed manufactures and the participation of local firms in global networks of production and distribution, mostly as independent suppliers. Firms with foreign participation have been one of the levers of export upgrading and expansion. The dominance of joint ventures as a mode of entry of foreign capital is worrisome for two reasons: first, domestic firms may not have access to the most recent technologies and knowhow; and second, it is always indicative of weaknesses of a domestic economic regime. This also raises concerns about the future sustainability of export performance.
    Keywords: Economic Theory&Research,Trade Policy,Free Trade,Agribusiness&Markets,Emerging Markets
    Date: 2010–01–01
  11. By: Sidorchuk, Roman (Milagro M; RSconsult; Russian Economical Plehanov's Academy)
    Abstract: This is a brief overview of the market of meat and meat products in Russia. Food products account for a significant portion of the costs residents of Russia. In 2000, these costs amount to more than 50% of all household expenditure. In this case the cost of meat and meat products 14.6% of all household expenditures. This shows how important place is the market of meat and meat products and its development prospects. Since the mid-sixties, then in the Soviet Union saw an increase in consumption of meat products. For example, the average consumption of meat increased in 1990 compared with 1960 in 1,6 times (from 41,8 to 68,3 kg. However, after the reforms, by 1997 every citizen of Russia consumes an average 46 kg of meat and meat products year, and in 1998 - 44 kg. FAO experts suggest that countries with economies in transition (including Russia) reached pre-reform level of consumption only in 2020. At the same time, some Russian experts (including the authors of the study) suggest that in Russia is the level will be reached before 2010 remains a question due to what sources of production, domestic or imported, will be covered is demand for meat and meat products.
    Keywords: agricultural economics, meat market, wholesale meat market, wholesale market of sausages, meat market of Russia, wholesale market of delicacies, market of meat products in the Moscow region, market research, expert method, «Milagro M», marketing in Russian
    JEL: M31 Q13 R3 L11 O52 M11
    Date: 2001–12

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