nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒02‒20
thirty-one papers chosen by
J. David Brown
Heriot-Watt University

  1. Economic Inequality and Environmental Quality: Evidence of Pollution Shifting in Russia By Marina Vornovytskyy; James Boyce
  2. Differentiation of Innovation Behavior of Manufacturing Firms in the New Member States. Cluster Analysis on Firm-Level Data By Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
  3. Experience in Implementing Social Benefits Monetization Reform in Russia. Literature Review. By Irina Sinitsina
  4. Effects of the EU-Enlargement on Income Convergence in the Eastern Border Regions By Fredrik Wilhelmsson
  5. The Innovation Patterns of Firms in Low and High Technology Manufacturing Sectors in the New Member States By Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
  6. The Effects of Relative Food Prices on Obesity — Evidence from China: 1991-2006 By Yang Lu; Dana Goldman
  7. EU's Eastern Neighbours: Institutional Harmonisation and Potential Growth Bonus By Artur Radziwill; Pawel Smietanka
  8. China's Financial Sector Reforms By Richard Herd; Samuel Hill; Charles Pigott
  9. The EU's Role in Supporting Crisis-Hit Countries in Central and Eastern Europe By Zsolt Darvas
  10. China's Labour Market in Transition: Job Creation, Migration and Regulation By Richard Herd; Vincent Koen; Anders Reutersward
  11. The Distribution of Income and Well-Being in Rural China: A Survey of Panel Data Sets, Studies and New Directions By Chen, Xi; Zhang, Xiaobo
  12. Risk Management and Managerial Efficiency in Chinese Banks: A Network DEA Framework By Matthews, Kent
  13. The impact of the crisis on budget policy in Central and Eastern Europe By Zsolt Darvas
  14. A Pause in the Growth of Inequality in China? By Richard Herd
  15. Institutional Harmonization and Its Costs and Benefits in the Context of EU Cooperation with Its Neighbors. An overview By Anna Kolesnichenko
  16. Agriculture Income Assessment for the Purpose of Social Assistance: the Case of Ukraine By Dmytro Boyarchuk; Liudmyla Kotusenko; Katarzyna Pietka-Kosinska; Roman Semko; Irina Sinitsina
  17. Innovation, Labour Demand and Wages in Poland. Some Introductory Results Using Micro-macro Data By Mateusz Walewski
  18. Strategic Behaviour of Chinese Political Elites By Chien Chiao
  19. The Role of Intermediaries in Facilitating Trade By JaeBin Ahn; Amit K. Khandelwal; Shang-Jin Wei
  20. Social security driven Tax wedge and its effects on Employment and Shadow Employment By Marek Gora; Oleksandr Rohozynsky; Irina Sinitsina; Mateusz Walewski
  21. Portfolio and Short-term Capital Inflows to the New and Potential EU Countries: Patterns, Determinants and Policy Responses By Pirovano M.; Vanneste J.; Van Poeck A.
  22. Trade performances and technology in the enlarged European Union By Alessandro Antimiani; Valeria Costantini
  23. The Effects of Migration and Remittances in Rural Moldova By Eugene Hristev; Georgeta Mincu; Maya Sandu; Mateusz Walewski
  24. East-West Integration and the Economic Geography of Europe By Arne Melchior
  25. Dutch Disease in Former Soviet Union: Witch-Hunting By Balázs Égert
  26. Passenger cars taxation. Romania's case By Lazar, Sebastian
  27. Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe By Danzer, Alexander M.
  28. The Baltic Challenge and Euro-Area Entry By Zsolt Darvas
  29. Local Sustainable Development and Spatial Cohesion in the Post-transition Balkans: in search of a developmental model By Vassilis Monastiriotis and George Petrakos
  30. Impact of the Financial Turmoil on the Romanian Capital Market By Susanu, Monica; Micu, Adrian; Micu , Angela Eliza
  31. Romania's public debts and their consequences upon the economy By Popa, Ionela; Codreanu, Diana; Albici, Mihaela

  1. By: Marina Vornovytskyy; James Boyce
    Abstract: This paper utilizes the Russian Statistical Agency's data on air pollution in Russia to analyze the impact of economic inequalities among Russia's regions on environmental degradation. Controlling for the absolute level of income, we find that regions with lower incomes relative to those of neighboring regions have more uncontrolled air pollution. Differences in uncontrolled pollution do not appear to be attributable to differences in spending on pollution control, suggesting that facility siting provides the dominant explanation. In addition, we find that greater within-region inequalities in income and in the provision of public goods are associated with greater uncontrolled air pollution.<p></p>
    Keywords: Air pollution; environmental inequality; pollution shifting; regional inequality; environmental Kuznets curve; Russia - environment
    JEL: P25 P28 Q53 Q56 R11
    Date: 2010
  2. By: Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
    Abstract: This paper investigates the differences in innovation behaviour, i.e. differences in innovation sources and innovation effects, among manufacturing firms in three NMS: the Czech Republic, Hungary and Poland. It is based on a survey of firms operating in four manufacturing industries: food and beverages, automotive, pharmaceuticals and electronics. The paper takes into account: innovation inputs in enterprises, cooperation among firms in R&D activities, the benefits of cooperation with business partners and innovation effects (innovation outputs and international competitiveness of firms' products and technology) in the three countries. After employing cluster analysis, five types of innovation patterns were detected. The paper characterises and compares these innovation patterns, highlighting differences and similarities. The paper shows that external knowledge plays an important role in innovation activities in NMS firms. The ability to explore cooperation with business partners and the benefits of using external knowledge are determined by in-house innovation activities, notably R&D intensity.
    Keywords: Innovation patterns of firms, strategy of innovation, innovation behaviour, innovation sources, taxonomies of innovative firms, EU new member states
    JEL: L25 O31 O32 O33
    Date: 2009
  3. By: Irina Sinitsina
    Abstract: The present paper is an integral part of the "Preparation of the strategy for social benefits monetization reform in Ukraine" project, co-financed by the 2008 Polish aid programme of the Ministry of Foreign Affairs of the Republic of Poland and carried out by CASE in 2008. The paper was prepared as background material aimed at obtaining a better understanding of the main bottlenecks in reforming a vast in-kind benefits system typical for many countries of the Former Soviet Union (FSU). The paper focuses on the following issues: aims and motives of monetization reforms in Russia; expected outcomes of the reform; description of the implementation process; changes of the roles of various actors and agencies; compensation of housing and communal services (HCS) expenses in the course of HCS and monetization reforms; and the major gains and failures of the reform. The paper concludes with lessons that can be derived from the Russian monetization experience for the planned Ukrainian monetization reform. The paper is based on extensive research on the monetization reform in Russia and literature published by leading Russian independent research centers including the Independent Institute for Social Policy (IISP), the Institute for Urban Economics, the Centre for Economic and Financial studies (CEFIR), and the Institute for the Economy in Transition (IET).
    Keywords: in-kind benefits, monetization, housing and communal services benefits,targeted social assistance, social sector reform, Russia, transition
    JEL: H53 H77 I39
    Date: 2009
  4. By: Fredrik Wilhelmsson
    Abstract: This paper analyses the effect of the EU enlargement process on income convergence among regions in the EU and in the Eastern neighbourhood of the EU. The data used is NUTS II regions in the EU and Oblasts' of Russia over the period 1996-2004. The estimation techniques used take into account both regional and spatial heterogeneity. The main findings are that the regional income differences are reduced within EU15. The income convergence within the EU is mainly driven by reductions in the differences across countries rather than by a reduction in regional differences within countries. When differences in initial conditions in the regions are controlled for by fixed regional effects there are strong evidences of convergence among regions in all studied country groups.
    Keywords: Income convergence, European integration, Border effects
    JEL: R11 O18
    Date: 2009
  5. By: Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
    Abstract: For many years, analysis on innovations focused on high technology industries which were treated as synonymous with high competitiveness and growth. New research on low and medium technology industries has revealed that their growth is also based on innovations, though their sources differ from high technology industries. As the 'catching up' economies of the EU New Member States (NMS) are based on low and medium technology industries, the differences in innovativeness between high and low technology sector firms as well as within each of the sectors can play an important role in the future development of these countries. This paper aims to show the differences in innovation patterns among manufacturing firms operating in low and high technology sectors in the Czech Republic, Hungary and Poland. It is based on a survey of firms which took into account innovation inputs, cooperation among firms in R&D activities, the benefits of cooperation with business partners, innovation outputs and international competitiveness. The sample consisted of 358 firms operating in both low and medium technology industries (food and beverages and automotive) and high technology industries (pharmaceuticals and electronics). After employing cluster analysis, five types of innovation patterns were detected, characterised and compared in firms operating in the low and medium technology (LMT) sectors, and four in the high technology (HT) sector. Differences and similarities in innovation patterns between firms operating in each of the two sectors are discussed. The paper shows that external knowledge plays a crucial role in innovation activities in NMS' firms. The ability to explore cooperation with business partners and the use of external knowledge are more important for the international competitiveness of the NMS' products than in-house innovation resources.
    Keywords: Innovation of firms, Innovation patterns, Innovation sources, Diversification of innovations, Low-tech industries, High-tech industries, EU New Member States
    JEL: L25 O31 O32 O33
    Date: 2009
  6. By: Yang Lu; Dana Goldman
    Abstract: This paper explores the effects of relative food prices on body weight and body fat over time in China. We study a cohort of 15,000 adults from over 200 communities in China, using the longitudinal China Health and Nutrition Survey (1991-2006). We find that the price of energy-dense foods has consistent and negative effects on body fat, while such price effects do not always reflect in body weight. These findings suggest that changes in food consumption patterns induced by varying food prices can increase percentage body fat to risky levels even without substantial weight gain. In addition, food prices and subsidies could be used to encourage healthier food consumption patterns and to curb obesity.
    JEL: D01 I1 J88
    Date: 2010–02
  7. By: Artur Radziwill; Pawel Smietanka
    Abstract: This paper provides the quantitative estimate of the potential growth bonus for CIS countries, and in particular EU's Easter Neighbours, that can be a result of deeper institutional harmonisation with the EU. Econometric investigation involving instrumental variable, simultaneous equation and dynamic panel techniques documents the strong positive link between growth performance and reforms, as well as between reforms and European integration. The paper derives the range of possible values of growth bonus from the deepened neighbourhood cooperation between 1 and 3.8 with the median at 1.8 percentage points. The least growth bonus is expected through basic liberalization reforms, while countries with a considerable institutional gap are likely to gain the most.
    Keywords: institutions, reform, growth, transition, integration, neighbourhood, dynamic panel
    JEL: F59 O19 O49 O57 P21 P26 P27
    Date: 2009
  8. By: Richard Herd; Samuel Hill; Charles Pigott
    Abstract: Reforms to modernise and strengthen the financial sector have continued in recent years. The cleaning-up of the stock of non-performing loans is largely completed and considerable progress has been made in improving commercial banks’ corporate governance structures and risk management systems. These reforms have given rise to stronger Chinese banks which have so far weathered the global slowdown well. Reform of capital markets has focused on phasing out trading prohibitions on non-traded shares and modernising securities market institutions. Efforts have also been made to improve credit access to underserved segments, notably small and medium-sized enterprises and rural China. Despite progress in opening up the financial sector to international investors and in allowing domestic investors to invest abroad, liberalisation has been slow and in most market segments the foreign share remains very small. Ownership of financial institutions remains dominated by the State, raising issues concerning the financial system’s ability to serve the private sector as well as the extent to which banks lending decisions are based purely on commercial considerations. Although the bond market has continued to grow, corporate bond issuance remains relatively small and this segment will need to be further developed in order to address the over-reliance on the banking system<P>Les réformes financières en Chine<BR>Les réformes visant à moderniser et à renforcer le secteur financier ont continué dans les années récentes. L’assainissement des bilans a beaucoup avancé et on a assisté à une nette amélioration des systèmes de gouvernance et de gestion des risques dans les banques commerciales. Ces changements ont abouti à une consolidation des banques chinoises, qui jusqu’ici ont bien résisté au ralentissement mondial. La réforme des marchés de capitaux a privilégié la suppression progressive des restrictions concernant les actions non négociables et la modernisation des institutions opérant sur les marchés de titres. On a aussi pris des mesures pour faciliter l’accès au crédit des secteurs mal desservis, notamment les PME et le milieu rural. Malgré l’ouverture progressive du secteur financier aux investisseurs internationaux et l’autorisation postérieure donnée aux investisseurs nationaux d’opérer à l’étranger, la libéralisation a été lente et la part étrangère reste très réduite dans la plupart des compartiments du marché. L’État demeure le principal propriétaire des institutions financières, ce qui amène à s’interroger sur leur capacité à servir le secteur privé et sur le degré auquel les décisions de prêt des banques sont guidées par des considérations commerciales. Bien que le marché obligataire continue à se développer, l’émission de titres de sociétés est encore relativement limitée et devra s’accroître pour réduire le recours excessif au système bancaire.
    Keywords: risk, financial sector, capital markets, liberalisation, China, management, SMEs, libéralisation, secteur financier, marchés de capitaux, gestion des risques, Chine, PME, banques commerciales, mouvements de capitaux internationaux, prêts non productifs, actions non-négociables
    JEL: G00 H80
    Date: 2010–02–01
  9. By: Zsolt Darvas
    Abstract: The crisis has hit central and eastern European countries harder than other regions of the world. In this policy contribution Resident Scholar Zsolt Darvas looks at the role of the EU and its institutions in supporting crisis-hit CEE countries; the stabilising effects of the EU's coordinated multilateral financial assistance; and the commitment shown by Western European banks to the region. However Darvas argues that there were certain actions, or failures to act, on the part of EU institutions and governments, that have amplified the effects on CEE countries of the crisis. The European Central Bank has given little direct support to non-euro-area countries, and the EU has done little for EU neighbourhood countries. Meanwhile, euro-area membership has shielded from the crisis some countries with worse fundamentals than certain CEE countries.
    Date: 2009–12
  10. By: Richard Herd; Vincent Koen; Anders Reutersward
    Abstract: Over the past decade, the share of jobs not controlled by the state has increased considerably, whilst employment in agriculture has declined, against the backdrop of ongoing urbanisation. Over 200 million people have been drawn into urban areas through official or unofficial migration, despite various obstacles to labour mobility, including the registration system and the associated restrictions to social service access. New labour laws were introduced in 2008 to better protect employees in a market now dominated by private-sector employers, notably via more systematic use of and adherence to written labour contracts, in particular of indefinite duration ones. To what extent the new legislation and implementing regulations will be enforced remains to be seen. For the time being, de facto employment protection is far less than de jure, with an enduring preponderance of fixed-term contracts, involving few restrictions. Minimum wages are set locally and have not kept up with average wages, nor are they effectively enforced. During the recent slowdown, average wages adjusted rapidly and employment was soon on the rise again. However, this episode also highlighted the need to integrate migrants better, not least by relaxing registration rules.<P>Le marché du travail chinois en transition : création d’emplois, migrations et régulation<BR>Au cours des dix dernières années, la proportion d’emplois non contrôlés par l’État a augmenté considérablement, tandis que les possibilités de travail dans le secteur de l’agriculture s’amenuisaient sur fond d’urbanisation ininterrompue. Plus de 200 millions de personnes ont migré – officiellement ou non – vers des zones urbaines, en dépit des nombreux obstacles qui freinent la mobilité de la main-d’oeuvre, notamment le système d’enregistrement et les contraintes qu’il impose en matière d’accès aux services sociaux. Depuis 2008, le marché du travail est soumis à de nouvelles réglementations, visant à assurer aux employés une meilleure protection sur un marché aujourd’hui dominé par les employeurs du secteur privé : on soulignera le recours plus systématique au contrat de travail écrit, et en particulier au contrat de durée indéterminée. On ignore encore dans quelle mesure seront respectées la nouvelle législation et les modalités d’application. Pour l’heure, la protection réelle des employés est très inférieure à ce que prévoit le droit, et les contrats les plus répandus restent les contrats de durée déterminée qui offrent peu de protection. Le montant du salaire minimum est fixé au niveau local, sans référence au salaire moyen, et n’est d’ailleurs pas effectivement respecté. Dans la récente période de ralentissement économique, les salaires moyens ont été ajustés rapidement et l’emploi a connu une embellie. Toutefois, cet épisode a également mis en lumière la nécessité d’une meilleure intégration des migrants, notamment par un assouplissement des modalités d’enregistrement.
    Keywords: unemployment, employment, social services, China, minimum wage, labour market, access, hukou, contracts, urbanisation, chômage, marché du travail, emploi, salaire minimum, Chine, hukou, contrats, urbanisation, accès aux services sociaux
    JEL: E24 J21 J23 J24 J31 J41 J42 J61 J63 J65 J71 J82 J83 K31 O53 P23 R23
    Date: 2010–02–01
  11. By: Chen, Xi; Zhang, Xiaobo
    Abstract: This paper reviews the recent literature on inequality and income distribution in rural China utilizing panel datasets. We begin by briefly summarizing and comparing available panel datasets for rural China that can be employed to explore issues on inequality and income distribution, and major data issues that might act as obstacles to research and policy enforcement are then analyzed. The paper then reviews the trend and spatial decompositions of rural income inequality, its major determinants, and its relationship with household welfare. Dimensions other than income inequality, such as income mobility and income polarization, are categorized and reviewed respectively. A recently developed branch of literature on inequality and health is summarized. On the basis of the review, this paper concludes by identifying new research areas with existing panel data sets and a new panel dataset that could shape future research.
    Keywords: Inequality;Income Distribution;Rural China;Panel Data
    JEL: D31 O53 O15
    Date: 2009–10–25
  12. By: Matthews, Kent (Cardiff Business School)
    Abstract: Risk Management in Chinese banks has traditionally been the Cinderella of its internal functions. Political stricture and developmental imperative have often overridden standard practice of risk management resulting in large non-performing loan (NPL) ratios. One of the stated aims of opening up the Chinese banks to foreign strategic investment is the development of risk management functions. In recent years NPL ratios have declined through a mixture of recovery, asset management operation and expanded balance sheets. However, the training and practice of risk managers remain second class compared with foreign banks operating in China. This paper evaluates bank performance using a Network DEA approach where an index of risk management practice and an index of risk management organisation are used as intermediate inputs in the production process. The two indices are constructed from a survey of risk managers in domestic banks and foreign banks operating in China. The use of network DEA aids the manager in identifying the stages of production that need attention.
    Keywords: Risk management; risk organisation; managerial efficiency; Network DEA
    JEL: D23 G21 G28
    Date: 2010–02
  13. By: Zsolt Darvas
    Abstract: After drawing some lessons for fiscal policy from previous emerging market crises, Zsolt Darvas 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.
    Date: 2009–07
  14. By: Richard Herd
    Abstract: In recent years, policymaking in China has put increasing emphasis on stemming the growth in inequality, which had been fairly steep since the 1980s. Policy action has taken the form of regional development measures and of reforms of various aspects of the social safety net broadly defined. The Western Development Plan has aimed at narrowing the income gap between the sparsely populated and under-developed West and the more prosperous and faster-growing East. The bulk of the expenditure, however, has been on large capital-intensive projects rather than on education and other social spending. More emphasis on education would help reduce the income gap, since human capital is a key determinant of income. Government policies to improve conditions in rural areas nationwide have involved a substantial reduction in the burden of regressive taxes and fees. Welfare assistance has also evolved: a minimum living allowance has been introduced in urban and more recently in rural areas, but it has not reduced poverty that much, not least because of how it is administered. Moreover, the financing of this allowance ought to rely more on national solidarity and its delivery needs to be better co-ordinated with that of other social benefits. A set of new indicators of nationwide inequality, based on household survey data, suggests that overall inequality has ceased to increase in recent years, and may even have inched down. Alternative measures of income inequality across provinces show that, if migration is taken into account, disparities are markedly less, and have tended to decline somewhat in recent years. Even so, geographical inequality remains very high by international standards. It reflects intra- more than inter-provincial differences, pointing to persistent, if diminishing, labour market segmentation.<P>Une pause dans le creusement des inégalités en Chine ?<BR>Ces dernières années, la volonté d’endiguer l’accentuation des inégalités, qui tendaient à se creuser depuis les années 1980, a pris une place grandissante dans les grandes orientations chinoises. L’action publique s’est traduite par des mesures de développement régional et des réformes de divers aspects du filet de sécurité sociale au sens large. La stratégie de mise en valeur de l’Ouest a visé à réduire l’écart de revenu entre cette partie du pays peu peuplée et insuffisamment développée et l’Est plus prospère où la croissance est plus rapide. Toutefois, les dépenses ont, pour l’essentiel, privilégié les grands projets à forte intensité de capital par rapport à l’éducation et à d’autres préoccupations sociales. Un recentrage sur l’éducation contribuerait à réduire les disparités en termes de revenu, celui-ci étant largement déterminé par le capital humain. Les politiques menées par le gouvernement pour améliorer la situation des campagnes dans tout le pays ont veillé à alléger sensiblement le poids des impôts et prélèvements régressifs. L’aide sociale a également évolué : une garantie de minimum vital a été instaurée dans les zones urbaines puis, il y a peu, dans les zones rurales, sans pour autant faire véritablement reculer la pauvreté, ne serait-ce qu’en raison de ses modalités administratives. Par ailleurs, le financement de cette garantie de minimum vital devrait reposer davantage sur la solidarité nationale, et une coordination plus étroite s’impose avec l’attribution d’autres prestations sociales. D’après un ensemble de nouveaux indicateurs nationaux, conçus à partir de données d’enquêtes sur les ménages, les inégalités globales n’augmentent plus depuis quelques années ; peut être même ont-elles diminué. Il ressort d’autres mesures des inégalités de revenu entre provinces que si les migrations entrent en ligne de compte, le fossé est nettement moins grand, et tend à se combler quelque peu. Les inégalités géographiques n’en restent pas moins très fortes par rapport aux normes internationales. Le phénomène s’explique par des différences plus intra qu’interprovinciales, et renvoie à une segmentation du marché du travail persistante, bien qu’elle aille en s’estompant.
    Keywords: human capital, education, migration, social assistance, China, poverty, income inequality, hukou, labour market segmentation, capital humain, éducation, pauvreté, inégalité des revenus, Chine, migration, assistance sociale, hukou, segmentation du marché du travail
    JEL: D31 D63 E24 E64 H52 H53 H54 H55 H75 I28 I32 I38 J42 J61 O15 O53 P25 P36 R58
    Date: 2010–02–01
  15. By: Anna Kolesnichenko
    Abstract: Institutional harmonization is an important part of European integration, and its effects are more far reaching than the effects of trade liberalization. In its policy towards neighbors (the European Neighborhood Policy, ENP), the EU puts a lot of stress on the desirability of institutional harmonization, at least in certain areas. In particular, the free trade agreements that the EU envisages concluding with its Eastern neighbors will involve substantial harmonization of product standards, competition policy and a range of other policies and processes. At the very least, the harmonization will have to focus on the areas that relate to improvement of market access, i.e. removing restrictions to trade, harmonizing product standards and the systems of quality control etc. But in order to implement the new standards and rules, the EU neighbors will have to reform many related areas, so that the harmonization will encompass the whole system of economic governance. Not only will such a revamp help attaining better access to the EU markets, but also (and probably more importantly) it will stimulate modernization of the neighbors' economies and bring much needed efficiency gains. In measurement of benefits of harmonization we refer to two methods: one based on the computable general equilibrium (CGE) modeling of welfare effects of better market access, and the other employing a growth model to estimate the wider effects of European institutions on growth. The estimation of costs of harmonization bases on extrapolation of the analogous costs in other countries, in particular CEE. These costs include expenses by a public sector on introduction of harmonization measures, as well as private sector expenses and investments related to their implementation.
    Keywords: Institutional harmonization, European integration, European Neighborhood Policy (ENP), market access, non-tariff barriers
    JEL: B41 F15 P33
    Date: 2009
  16. By: Dmytro Boyarchuk; Liudmyla Kotusenko; Katarzyna Pietka-Kosinska; Roman Semko; Irina Sinitsina
    Abstract: Ukraine belongs to the group of countries which are known for the widespread phenomenon of subsistence and semi-subsistence farming. Individual farmers are not obliged to produce financial reports and their incomes belong to the category of unobservable incomes. When checking the eligibility for social assistance the level of their incomes needs to be estimated. In a country, where poverty rate is quite high, the coverage of the poor with financial aid is relatively low and public finances under constant control, the importance of a fair and justified methodology for income imputation is particularly strong. In this situation, an outdated and unfair current system of agriculture income estimation in Ukraine calls for immediate changes. This paper presents recommendations for the Ukrainian government in the area of agriculture income imputation, where several methods of estimating farm income were proposed (including the one based on Household Budget Survey). The recommendations were preceded with the analysis of five countries' practices in this area: Kazakhstan, Kyrgyzstan, Moldova, Russia, and Poland. A review of different means testing methods, including direct means testing and proxy means testing, served as an introduction to the topic.
    Keywords: subsistence and semi-subsistence farming, hard to verify income, farm household income, income (agro-income) imputation, means testing methods
    JEL: O18 E26 C13 Q12 I38
    Date: 2009–12
  17. By: Mateusz Walewski
    Abstract: There is a large body of literature on the relationship between innovations and employment at the firm level, with most of the results indicating positive effects. Thus far, this kind of analysis has not been performed for Poland and it seems to be an important and interesting field for research. On the other hand, there is some empirical evidence that developments in the Polish labour market are at least partially driven by the Skill Biased Technical Change (SBTC) process. This paper tries to fill in this gap by looking at three dimensions of the relationship between innovations and employment in Poland: innovations and job creation, innovations and the skill structure of employment innovations, and wage formation. The results of the analysis indicate that there is a weak but positive relationship between the level of innovations and the probability of job creation. However, we have not been able to prove that innovations have any effect on the skill structure of labour demand in Poland. We have however found a positive and statistically significant relationship between the level of innovations and skill-biased wage changes. The results indicate that innovations positively influence the wages of skilled workers while they negatively influence the wages of the unskilled.
    Keywords: innovation, employment, wages, Poland
    JEL: J23 J24 J31 O33
    Date: 2009
  18. By: Chien Chiao
    Abstract: A conceptual framework is constructed to study the strategic behaviour of Chinese political elites. Various rules of political elite's behaviour are examined and suggests directions for empirical studies of the subject.
    Keywords: chinese political elites,
    Date: 2010
  19. By: JaeBin Ahn; Amit K. Khandelwal; Shang-Jin Wei
    Abstract: We provide systematic evidence that intermediaries play an important role in facilitating trade using a firm-level the census of China's exports. Intermediaries account for around 20% of China's exports in 2005. This implies that many firms engage in trade without directly exporting products. We modify a heterogeneous firm model so that firms endogenously select their mode of export - either directly or indirectly through an intermediary. The model predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate. We provide empirical confirmation for this prediction, and generate new facts regarding the activity of intermediaries.
    JEL: F1
    Date: 2010–01
  20. By: Marek Gora; Oleksandr Rohozynsky; Irina Sinitsina; Mateusz Walewski
    Abstract: The aim of this paper was to analyse possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. Previous results suggest a limited positive relationship between the size of the tax wedge and shadow employment and in recent years both analysed countries undertook serious steps in order to reform and to simplify their payroll tax system and consequently to reduce shadow employment. Our result suggest that the unskilled persons engaged in unregistered jobs in Ukraine and Russia are not "rewarded" with higher net earnings. It seems that, in their case, shadow employment is the way to escape unemployment and resulting poverty, rather than to evade taxes. Hence, it seems that, in this case, broadening of general employment opportunities for this group would result in a decrease in shadow employment. We also found that the effect of the SSN benefits on shadow employment was rather low in both countries. One of the explanations is the fact that SSN benefits remain largely universal, and are not sufficiently tied to former employment history and social security contribution paid.
    Keywords: tax wedge, employment, shadow employment, transition economies
    JEL: E24 J3 H21 O17
    Date: 2009
  21. By: Pirovano M.; Vanneste J.; Van Poeck A.
    Abstract: In this paper we estimate a dynamic panel model (Arellano-Bond GMM) explaining the volume of portfolio and short-term capital inflows (predominantly bank loans) in the new and potential EU member States as a function of a set of variables representing macroeconomic fundamentals (both domestic and foreign), macroeconomic policies and development of the financial sector. We find that while inflows of short-term bank loans are significantly explained by macroeconomic factors, exchange rate regime and liquidity of the banking sector, portfolio inflows seem to be meaningfully influenced only by the level of foreign GDP. We suggest two explanations for the latter result. First, the inability of aggregate data to capture the risk and expected profitability dimensions that typically underlie portfolio decisions. Second, portfolio capital in the form of bonds might react to interest rates other than the domestic and the European ones. During the last decade, the volume of short-term capital in the form of bank loans to the New and potential member States increased (with some heterogeneity across countries). In light of the econometric results, their vulnerability to reversals could be mitigated by adequate macroeconomic policies and further improvement of their financial sector.
    Date: 2009–12
  22. By: Alessandro Antimiani; Valeria Costantini
    Abstract: We analyse the role of the enlargement process of the European Union as a factor fostering international competitiveness of EU Member States. We argue that the economic integration process has partially reduced the technological gap between old and new EU Member States, and this pattern of technological innovation can partially explain the strong impulse on the export dynamics of European countries. We have built an augmented gravity model by including the role of technological innovation, proxied by the stock of knowledge at the sector level. By using a dynamic panel data estimator we find three main empirical evidences. First, the enlargement process has produced an overall larger positive impact on export flows for new members than for old ones, and more importantly that sectors with the higher technological content have received the strongest impulse. Second, the augmented gravity model allows shaping the crucial role of technological innovation in fostering export competitiveness. Third, this impact seems to be stronger for old EU member states than for new ones. The policy implication we derive is that the more the new EU members catch up technologically as a result of the integration process, the more they will benefit in terms of economic development.
    Keywords: EU enlargement, gravity model, international trade, economic integration, technological innovation
    JEL: F14 F15 O14 O33
    Date: 2010
  23. By: Eugene Hristev; Georgeta Mincu; Maya Sandu; Mateusz Walewski
    Abstract: Remittances in Moldova reach 36% of GDP, hence they constitute an essential part of the Moldovan economy. The most visible characteristic of remittances is their unequal distribution. The analysis applying the standard Lorenz Curve proves that 75% receiving households gets only 25% of total amount being sent to the country. The way remittances are distributed does not seem to be random. Higher amounts go in general to younger and more educated households. Remittances strongly influence the economic potential of households, especially if they are high enough. They often constitute the main source of households' income, but they not discourage the members of receiving households from economic activity. It indicates that migration and working abroad is the manifest of economic activity, on the other hand it suggest that lack of employment opportunities in the country is an important reason for migration. Those who obtain remittances tend to have higher share of investments in their total household spending. Significant share of remittances for all groups is spent on education - the basic investment increasing the future competitiveness. In rural areas remittances are much more often used to improve the quality of farms than to start running other businesses. It seems that lack of infrastructure and good governance is the main reason for which educated and young emigrants sending significant amounts of money do not decide to invest them in entrepreneurial activities. Eradicating these impediments for local development should be become a highest priority.
    Keywords: Moldova, migrations, remittances, labor market, welfare, rural areas
    JEL: F22 F24 I31 J21 J61 R23
    Date: 2009
  24. By: Arne Melchior
    Abstract: Implementation of the European internal market and East-West integration has been accompanied by dramatic change in the spatial distribution of economic activity, with higher growth west and east of a longitude degree through Germany and Italy. In the east, income growth has been accompanied by increasing regional disparities within countries. We examine theoretically and empirically whether European integration as such can explain these developments. Using a numerical simulation model with 9 countries and 90 regions, theoretical predictions are derived about how various patterns of integration may affect the income distribution. Comparing with reality, we find that a reduction in distance-related trade costs combined with east-west integration is best able to explain the actual changes in Europe's economic geography. This suggests that the implementation of the European internal market or the Euro has "made Europe smaller". In Central Europe, capital regions grow faster and there are few east-west growth differences inside countries. There is no convincing support for the hypothesis that European integration had adverse effects on non-members.
    Keywords: Income distribution, regional inequality, economic growth and convergence, European integration.
    JEL: F12 F15 R12 O18
    Date: 2009
  25. By: Balázs Égert
    Abstract: This study seeks to determine the extent to which countries of the former Soviet Union are "infected" by the Dutch Disease. We take a detailed look at the functioning of the transmission mechanism of the Dutch Disease, i.e. the chains that run from commodity prices to real output in manufacturing. We complement this with two econometric exercises. First, we estimate nominal and real exchange rate models to see whether commodity prices are correlated with the exchange rate. Second, we run growth equations to analyse the possible effects of commodity prices and the dependency of economic growth on natural resources.
    Keywords: Dutch disease, exchange rate, growth, oil, commodity prices, CIS, transition
    JEL: E31 F31 O11 P17
    Date: 2009
  26. By: Lazar, Sebastian
    Abstract: The paper presents the Romania tax framework concerning passenger cars taxation in a comparative manner in European context. This framework causes a lot of criticism from European officials and led to some reconsideration that shaped the actual form, which, in our opinion, can be further improved. The paper designs a new methodology of the assessment of the tax, which smoothed its progressivity, which can be considered as exaggerate.
    Keywords: vehicles taxation; comparative analyses; progressivity of taxation; improvement
    JEL: H21
    Date: 2009–05–29
  27. By: Danzer, Alexander M. (Royal Holloway, University of London)
    Abstract: The retirement decision is under researched in developing and emerging countries, despite the topic's close relation to many development issues such as poverty reduction and social security, and despite the fact that population ageing will increasingly challenge the developing world. This paper uses a natural experiment from Ukraine to estimate the causal effect of a threefold increase in the legal minimum pension on labor supply and retirement behaviour at older ages. Applying difference-in-difference and regression discontinuity methods on two independent nationally representative data sets, the paper estimates a pure income effect that caused additional retirement of 30 to 47 percent. Additional evidence suggests that retirement incentives are stronger at the lower tail of the educational distribution and that the strict Labor Code curbed responses at the intensive labor supply margin. Although the substantial pension increase provided strong disincentives to work and put a heavy fiscal burden on Ukraine, it significantly reduced the propensity of falling into poverty for those in retirement.
    Keywords: labor supply, retirement, minimum pension, pure income effect, poverty, difference-in-differences, regression discontinuity
    JEL: J26 I38 O15
    Date: 2010–01
  28. By: Zsolt Darvas
    Abstract: Resident Fellow Zsolt Darvas takes a look at the issue of the Baltic states - Estonia, Latvia and Lithuania - and the challenges facing those three countries in the aftermath of the financial crisis. He argues that because it is in the broader European interest to prevent a collapse in the Baltics, the best option is immediate euro entry at a suitable exchange rate supported by appropriate resolution in order to manage the resulting debt overhang. However, there seems to be no legal basis for this under the current euro accession criteria. Furthermore, the economic foundations of the criteria are fundamentally flawed, as euro-area members continue to violate the criteria while the EU's expansion to 27 members has made the criteria tougher for new member states to meet themselves. Ultimately, the European Council has the ability to reform the criteria without a formal treaty change. The Council should do so, the author argues, and allow for more meaningful benchmarks for all future euro-area applicants.
    Date: 2009–11
  29. By: Vassilis Monastiriotis and George Petrakos
    Abstract: The transition process that started in the Balkans some twenty years ago, and the European association process to which it has been inexorably connected, has led to a radical transformation of the Balkan economic space across local, regional, national and trans-national levels. Amongst the other effects that this have had, was the emergence of new and acute socio-economic dichotomies (polarisation) and problems of persistent underdevelopment, peripherality-rurality and economic dependence. In this paper we review the policies that have been applied to address these issues and examine the relevance of contemporary concepts of local economic development for the mobilisation of cohesive and sustainable development in the Balkans. We examine how the main elements of the new regionalist developmental strategy relate to the basic dimensions of socio-spatial infrastructure in the Balkans and identify the key weaknesses of the latter. We conclude by proposing a wider regional strategy that will be able to r solve the existing deficiencies by means of a regional cooperation approach that will seek to maximise intra-regional synergies and develop local and regional comparative advantages and the provision of similar public goods.
    Keywords: New regionalism, regional cooperation, spatial connectivity, Balkan Development Strategy
    Date: 2009–11
  30. By: Susanu, Monica; Micu, Adrian; Micu , Angela Eliza
    Abstract: The unprecedented financial and economic world present turmoil is dangerously covering the Europe and Japan, coming from the USA and being more painful than the economic downturn of the ‘80s. A massive decrease of trust and confidence is also perceived by consumers and business alike, and their answer and reaction is a continuous cut of the expenditures. With a view to rebuild the stability and to recover the economy, the USA government as well as certain Western European governments have nationalised substantial parts of their financial sectors, in such an extent that is simply against the modern capitalism basis. Actually, the whole world is changing its usual course, towards an age when the role of the state is becoming greater and greater, while the role and the significance of the private sector is drastically diminishing, as the most dramatic consequence of the present crisis. Annalists’ opinions consider July 2007 as the beginning of the present financial turmoil, since this was the moment when the appearance of the first mortgages troubles seriously upset the global stock exchange markets, as shown in the records of the negative major indices or in the weekly - and even daily – downturns, hardly to conceive and unseen in the last five years. One can consider that the real lesson of the actual financial turmoil consists in the necessity of an ideal meeting between the most important theoretical systems concerning the economic and social process and phenomena, in order to create a new and more desirable model of economy and society. This normative and explanatory character of the new theory and synthesis is keen connected with the necessary giving-up the old model of the economic and social optimality that should be replaced by the new model of sustainability.
    Keywords: financial global turmoil; financial-economic crisis; current financial turbulence; stock exchange; currency market; stock investors; emergent economy
    JEL: F30 F31
    Date: 2009–11–01
  31. By: Popa, Ionela; Codreanu, Diana; Albici, Mihaela
    Abstract: In June 2009, Romania’s public debts rose by 12.6% more than late last year, that is up to 123.61 billion Lei (29.4 billion Euros), meaning 23.27% of the gross domestic product originally estimated for this year. Foreign loans are not a new phenomenon. Yet, in the current economic context, it is the consequences which might occur that bother most of us as a result of the (significant) increase of public debts. Concluding a loan agreement with the International Monetary Fund is « necessary evil » because it has both advantages and disadvantages. This paper aims at analyzing aspects regarding the benefits, direct and indirect costs, and social effects of such a loan.
    Keywords: public debts; elbows; benefits; economy
    JEL: F34 G38 H63
    Date: 2010–02–09

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