nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒07‒24
fifteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Political Connection and Financial Performance: Evidence from Chinese Small-and-Medium Enterprises By Sujuan Xie; Liang Guo; Lawrence King
  2. The opening up of eastern Europe at 20-jobs, skills, and reverse maquiladoras? in Austria and Germany By Dalia Marin
  3. Pollution Abatement and Control Expenditure in Romania: A Multilevel Analysis By Caporale, Guglielmo Maria; Rault, Christophe; Sova, Robert; Sova, Ana Maria
  4. The Causes of Corruption: Evidence from China By Bin Dong; Benno Torgler
  5. Modeling Economic, Social and Environmental Implications of a Free Trade Agreement Between the European Union and The Russian Federation By Maryla Maliszewska; Elena Jarocinska; Milan Scasny
  6. Russian and caspian hydrocarbons: energy supply stakes for the European Union By Catherine Locatelli
  7. Financial Crisis in Central and Eastern Europe By Ekaterina Sprenger; Volkhart Vincentz
  8. Securities clearing and settlement in China - markets, infrastructures and policy-making By Patrick Hess
  9. Innovation and international technology transfer: The case of the Chinese photovoltaic industry By Arnaud De La Tour; Matthieu Glachant; Yann Ménière
  10. Bank Efficiency in Transitional Countries: Sensitivity to Stochastic Frontier Design By Zuzana Iršová
  11. China in the Transition to a Low-Carbon Economy By ZhongXiang Zhang
  12. Evaluating Conditions in Major Chinese Housing Markets By Jing Wu; Joseph Gyourko; Yongheng Deng
  13. Linkages between Excess Currency and Stock Market Returns:Granger Causality in Mean and Variance By Eirini Syngelaki;
  14. Some Hypotheses on Commonality in Liquidity: New Evidence from the Chinese Stock Market By Paresh Kumar Narayan; Zhichao Zhang; Xinwei Zheng
  15. Context and the VSL: Evidence from a Stated Preference Study in Italy and the Czech Republic By Anna Alberini; Milan Šcasný, Charles University Prague

  1. By: Sujuan Xie (Groupe Sup de Co La Rochelle ( La Rochelle Business School ) - Groupe Sup de Co La Rochelle ( La Rochelle Business School )); Liang Guo (Groupe Sup de Co La Rochelle ( La Rochelle Business School ) - Groupe Sup de Co La Rochelle ( La Rochelle Business School )); Lawrence King (Groupe Sup de Co La Rochelle ( La Rochelle Business School ) - Groupe Sup de Co La Rochelle ( La Rochelle Business School ))
    Abstract: Since 1978, China gradually adopted a series of reform policies aiming to transform its former central planned economy to a socialist market economy. For the past three decades, the economic reform has brought China a flourishing private sector: it has grown at an annual rate of twenty percent, far above the economy's eight percent average growth for the same period (Tsai, 2002). Moreover, the non-state sector in China has accounted for two-thirds of total productivity and GDP (Welborn, 2003). The high-speed development of the private sector has been achieved primarily by decentralization of decision making power from the government to enterprises (McMillan & Woodruff, 2002; Siu & Liu, 2005). This decentralization process led to transformation of those large state-owned enterprises and spur of private small-and-medium enterprise (SMEs), such as the flourishing of township-and-village enterprises (TVEs). While most attention has been paid on how the transformation of large SOEs accelerated the development of private sectors, the creation and development of SMEs has had a significant influence on the development of the private economy, a fact that has been noted recently by sociologists. The rise of those small businesses raises several questions about the way in which China's SMEs has developed. One of these is whether there is a Chinese style of the development of SMEs which differs from that in capitalist economies. According to 3 resource-based theory, in capitalist economies the basis for a firm's competitive advantage lies primarily in its application of the valuable resources that are at the firm's disposal (Rumelt, 1984, p557-558; Wernerfelt, 1995, p172). However, developing in a transitional economy where the market is not the dominant mechanism for the allocation of resources, China's SMEs have developed different strategies to gain better financial performance. This paper, therefore, tries to explain both theoretically and empirically what is the China's style of development of SMEs, particularly focusing on the political connectivity and the financial performance of SMEs. For the rest sections of this paper we firstly deal with the theoretical debate on the development of firms in China's traditional economy.. Secondly, the methodology of this paper will be discussed. A multi-level modelling is used to describe the political connectivity and the financial performance of China's publically listed SMEs. Finally, research results will be presented and further discussed.
    Date: 2009–11–19
  2. By: Dalia Marin
    Abstract: Many people in the European Union fear that eastern enlargement has led to major job losses in 'old' member states, particularly in Austria and Germany, as the two most important neighbours of the countries that joined the EU in 2004 and 2007. Are these fears justified'To address these questions, this paper makes use of new survey data of 660 German and Austrian firms with 2,200 investment projects in eastern Europe during the period 1990-2001. The new survey data represent 100 percent of Austrian and 80 percent of German direct investment in eastern Europe.
    Date: 2010–07
  3. By: Caporale, Guglielmo Maria (Brunel University); Rault, Christophe (University of Orléans); Sova, Robert (CREST & University of Paris 1 Panthéon-Sorbonne); Sova, Ana Maria (CREST & University of Paris 1 Panthéon-Sorbonne)
    Abstract: The transition process in Central and Eastern Europe was associated with growing environmental awareness. This paper analyses the determinants of Pollution Abatement and Control Expenditure (PACE) at plant level in the case of Romania using survey data and a Multilevel Regression Model (MRM). Our findings suggest that, although Romania has improved its environmental performance, formal and informal regulation are still only partially developed due to the difficulties of economic transition, and heterogeneity across regions remains considerable.
    Keywords: pollution abatement and control expenditure, transition economy, Multilevel Regression Model (MRM)
    JEL: Q52 C29 C40
    Date: 2010–07
  4. By: Bin Dong (The School of Economics and Finance, Queensland University of Technology); Benno Torgler (The School of Economics and Finance, Queensland University of Technology, CREMA – Center for Research in Economics, Management and the Arts and CESifo)
    Abstract: In this study we explore in detail the causes of corruption in China using two different sets of data at the regional level (provinces and cities). We observe that regions with more anti-corruption efforts, histories of British rule, higher openness, more access to media and relatively higher wages of government employees are markedly less corrupt; while social heterogeneity, regulation, abundance of resource and state-owned enterprises substantially breed regional corruption. Moreover, fiscal decentralization is discovered to depress corruption significantly, while administrative decentralization fosters local corruption. We also find that there is currently a positive relationship between corruption and economic development in China that is mainly driven by the transition to a market economy.
    Keywords: Corruption, China, Government, Decentralization, Deterrence, Social Heterogeneity
    JEL: D73 H11 K42
    Date: 2010–06
  5. By: Maryla Maliszewska; Elena Jarocinska; Milan Scasny
    Abstract: The EU-Russia Partnership and Cooperation Agreement, which entered into force in 1997 foresees the possible establishment of a free trade area (FTA) between the parties. The aim of our study is to evaluate the possible economic, social and environmental impact of such a free trade agreement between the European Union and Russia. The results of the analysis indicate that an EU-Russia FTA will be beneficial to the Russian Federation and the EU27. Some sectors are expected to contract in the medium term, but their importance in total output is small. Over the long run, the majority of sectors in Russia are expected to expand, while only a few sectors in the EU27 are expected to register negligible decreases in output. We estimate that welfare losses from the environmental damages would be very small for Russia (possibly even smaller due to the implementation of greener technologies), and negligible for the EU. Despite some significant negative medium-term social implications in selected sectors in Russia, the overall increase in economic activity and wages, coupled with likely domestic policies aiming at easing the impact of transitional unemployment, are expected to allow for the overall reduction in poverty rates. Overall, the results show that significant welfare gains (2.24% of GDP for Russia) would accrue from the deep FTA scenario involving a significant reduction of NTBs along with additional flanking measures, particularly on competition, IPR protection and corruption, which would help re-branding of Russia as a safe and attractive investment location. Also a number of countries such as Finland, Ireland, Netherlands, Denmark, Estonia, Slovakia, Slovenia and Sweden are expected to see their welfare increase by around 0.5% of GDP.
    Keywords: free trade agreement, WTO accession, European Union, Russian Federation, labor market, environment, NTBs, CGE
    JEL: F12 F15 F16 F17 F18
    Date: 2010
  6. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The issue of EU gas supply security has become more and more important in the 2000s in the context of the gas market liberalisation and the question of reliability of Russian supplier. One answer to these problems is the EU gas diversification, specifically the opening up of a fourth gas corridor to supply the EU via the “Caucasus” or “southern” route with gas from Central Asia. The feasibility of this strategy might now be called into question. The aim of this article is to examine the new strategies that could emerge in the producing countries as well as those of international oil companies, and then look at what the consequences might be as far as the EU's diversification strategy is concerned. The aim of this article is to identify some of the problems and limits for this corridor.
    Date: 2010–02
  7. By: Ekaterina Sprenger (Osteuropa-Institut, Regensburg (Institut for East European Studies)); Volkhart Vincentz
    Abstract: Central and Eastern European Countries have been severely affected by the 2008 financial crisis. Several ways of contagion of the financial turmoil worked at different strengths in the different coun-tries. Although the disparities of the effects of the financial crisis are rather large, there are a number of common explanatory features. Mechanisms of transmission of the global financial crisis to the CEECs and its effects on these countries are discussed in this paper.
    Date: 2010–06
  8. By: Patrick Hess (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main)
    Abstract: China is taking a more active role on the world stage, even more so since its rapid and strong recovery from the global recession. In the financial realm this expansion is underpinned by a strategy to build strong and competitive capital markets at home. In order to achieve this goal, well-functioning and sound securities infrastructures are an important pre-requisite, and therefore they receive a lot of attention from Chinese policy-makers, as well as from market participants both in China and abroad. This paper evaluates the current market infrastructure, including the legal and regulatory framework, for securities trading, clearing and settlement in mainland China, and analyses the policy-making in this field. The paper finds that, following huge progress in recent years, the post-trading processes are increasingly safe and efficient. It concludes that, given the effectiveness of the policy process, Chinese clearing and settlement are likely to develop into the “modern financial support systems” which the authorities envisage, and which will also be increasingly connected and integrated with other securities markets of global importance. JEL Classification: E58, G15, G18, G21, G28, P34
    Keywords: China, securities market, clearing and settlement, market infrastructure, policymaking
    Date: 2010–07
  9. By: Arnaud De La Tour (CERNA - Centre d'économie industrielle - Mines ParisTech); Matthieu Glachant (CERNA - Centre d'économie industrielle - Mines ParisTech); Yann Ménière (CERNA - Centre d'économie industrielle - Mines ParisTech)
    Abstract: China is the largest solar photovoltaic cell producer in the world, with more than one third of worldwide production in 2008, exporting more than 95 percent of what it produces. The purpose of this paper is to understand the drivers of this success and its limits, with a particular emphasis on the role of technology transfers and innovation. Our analysis combines a review of international patent data at a detailed technology level with field interviews of ten Chinese PV companies. We show that Chinese producers have acquired the technologies and skills necessary to produce PV products through two main channels: the purchasing of manufacturing equipment in a competitive international market and the recruitment of skilled executives from the Chinese diaspora who built pioneer PV firms. The success of these firms in their market is, however, not reflected in their performance in terms of innovation. Rather, patent data rather highlight a policy-driven effort to catch up in critical technological areas.
    Keywords: Solar photovoltaic energy; technology diffusion; technology transfer; China
    Date: 2010
  10. By: Zuzana Iršová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This article provides an empirical insight on the heterogeneity in the estimates of banking efficiency produced by the stochastic frontier approach. Using data from five countries of Central and Eastern Europe, we study the sensitivity of the efficiency score and the efficiency ranking to a change in the design of the frontier. We found that the average scores are significantly smaller when the transcendental logarithmic functional form is used in the profit efficiency measurement and when the scaling effect is neglected in the cost efficiency measurement. The implied bank ranking is robust to changes in the stochastic frontier definition for cost efficiency, but not for profit efficiency.
    Keywords: Banking, Efficiency, Stochastic Frontier Approach, Transitional countries
    JEL: C13 G21 L25
    Date: 2010–07
  11. By: ZhongXiang Zhang (Research Program East-West Center)
    Abstract: China, from its own perspective cannot afford to, and from an international perspective, is not allowed to continue on the conventional path of encouraging economic growth at the expense of the environment. The country needs to transform its economy to effectively address concern about a range of environmental problems from burning fossil fuels and steeply rising oil import and international pressure to exhibit greater ambition in fighting global climate change. This paper first discusses China’s own efforts towards energy saving and pollutants cutting, the widespread use of renewable energy and participation in clean development mechanism, and puts carbon reductions of China’s unilateral actions into perspective. Given that transition to a low carbon economy cannot take place overnight, the paper then discusses China’s policies on promoting the use of low-carbon energy technologies and nuclear power and efforts to secure stable oil and gas supplies during this transition period. Based on these discussions, the paper provides some recommendations on issues related to energy conservation and pollution control, wind power, nuclear power, clean coal technologies, and overseas oil and gas supplies, and articulates a roadmap for China regarding its climate commitments to 2050.
    Keywords: Energy Saving, Renewable Energy, Clean Development Mechanism, Nuclear Power, Power Generation, Oil and Gas, Post-Copenhagen Climate Negotiations, China
    JEL: Q42 Q48 Q52 Q54 Q58
    Date: 2010–06
  12. By: Jing Wu; Joseph Gyourko; Yongheng Deng
    Abstract: High and rising prices in Chinese housing markets have attracted global attention, as well as the interest of the Chinese government and its regulators. Housing markets look very risky based on the stylized facts we document. Price-to-rent ratios in Beijing and seven other large markets across the country have increased from 30% to 70% since the beginning of 2007. Current price-to-rent ratios imply very low user costs of no more than 2%-3% of house value. Very high expected capital gains appear necessary to justify such low user costs of owning. Our calculations suggest that even modest declines in expected appreciation would lead to large price declines of over 40% in markets such as Beijing, absent offsetting rent increases or other countervailing factors. Price-to-income ratios also are at their highest levels ever in Beijing and select other markets. Much of the increase in prices is occurring in land values. Using data from the local land auction market in Beijing, we are able to produce a constant quality land price index for that city. Real, constant quality land values have increased by nearly 800% since the first quarter of 2003, with half that rise occurring over the past two years. State-owned enterprises controlled by the central government have played an important role in this increase, as our analysis shows they paid 27% more than other bidders for an otherwise equivalent land parcel.
    JEL: P22 P25 R10 R21 R31
    Date: 2010–07
  13. By: Eirini Syngelaki (Economics,Finance and Accounting, National University of Ireland, Maynooth);
    Abstract: This paper investigates the causal linkages between monetary and equity market integration of the new member states (NMS) as well as of the non economic monetary union (Non- EMU) member states with the euro zone, after the official launch of the euro. Granger causality in mean and in variance tests are utilized. Our results reveal a number of interesting facts that can be summarized as follows. Firstly, there is little evidence of causality in mean effects for all countries. Secondly, there are significant spill over effects for the NMS. Thirdly, the excess currency return is the chief variable which leads the excess stock market return volatility of the NMS. Our findings have obvious implications for both investors and policy makers.
    Keywords: monetary market integration, equity market integration, Granger causality in-mean and in-variance, AR, Univariate GARCH
    JEL: F36 C22 G15
    Date: 2010
  14. By: Paresh Kumar Narayan; Zhichao Zhang; Xinwei Zheng
    Abstract: In this paper, we examine four specific hypotheses relating to commonality in liquidity on the Chinese stock markets. These hypotheses are: (a) that market-wide liquidity determines liquidity of individual stocks; (b) that liquidity varies with firm size; (c) that sectoral-based liquidity affects individual stock liquidities differently; and (d) that commonality in liquidity has an asymmetric effect. Based on a two-year dataset on the Shanghai and Shenzhen stock exchanges comprising of over 34 and 48 million transactions respectively, we find strong support for commonality in liquidity and a greater influence of industry-wide liquidity in explaining liquidity of individual stocks. Moreover, our results suggest that of the three main sectors – financial, industrial, and resources – industrial sector’s liquidity is most important in explaining individual stock liquidities. Finally, we do not find any evidence of size effects, and document an asymmetric effect of market-wide liquidity on liquidity of individual stocks.
    Keywords: Commonality in Liquidity; Asymmetric Information; Size Effects; Chinese Stock Exchange.
    JEL: G10 G15
    Date: 2010–07–16
  15. By: Anna Alberini (University of Maryland and FEEM); Milan Šcasný, Charles University Prague (Charles University Prague)
    Abstract: We report on the results of a survey based on conjoint choice experiments that was specifically designed to investigate the effect of context on the Value of a Statistical Life (VSL), an important input into the calculation of the mortality benefits of environmental policies that reduce premature mortality. We define “context” broadly to include i) the cause of death (respiratory illness, cancer, road traffic accident), ii) the beneficiary of the risk reduction (adult v. child), and iii) the mode of provision of the risk reduction (public program v. private good). The survey was conducted following similar protocols in Italy and the Czech Republic. When do not distinguish for the cause of death, child and adult VSL are not significantly different from one another in Italy, and the difference is weak in the Czech sample. When we distinguish for the cause of death, we find that child and adult VSLs are different at the 1% level for respiratory illnesses and road-traffic accidents, but do not differ for cancer risks. We find evidence of a “cancer premium” and a “public program premium.” In both countries, the marginal utility of income is about 20% lower among wealthier people, which makes the VSL about 20% higher among respondents with incomes above the sample average. The discount rate implicit in people‘s choices is effectively zero. We conclude that there is heterogeneity in the VSL, and that such heterogeneity is primarily driven by risk characteristics and mode of delivery of the risk reduction, rather than by individual characteristics of the respondent (e.g., income and education). For the most part, our results do not disagree with environmental policy analyses that use the same VSL for children and adults, and that apply a cancer premium.
    Keywords: VSL, Conjoint Choice Experiments, Mortality Risk Reductions, Cost-benefit Analysis, Forced Choice Questions
    JEL: I18 J17 K32 Q51
    Date: 2010–06

This nep-tra issue is ©2010 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.