nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒09‒18
twenty-two papers chosen by
J. David Brown
Heriot-Watt University

  1. Export Restraints on Russian Natural Gas and Raw Timber: What are the Economic Impacts? By David G. Tarr
  2. Indigenous Innovation In China: Implications For Sustainable Growth By Yanrui Wu
  3. What Keeps China’s Migrant Workers Going? Expectations and Happiness Among China’s Floating Population By Wenshu Gao; Russell Smyth
  4. Urban Bias, Rural-Urban Income Gap and Agricultural Growth: the Resource-Diverting Effect of Rural-Urban Income Gap in China By Yanyan Gao
  5. Stock market reaction to debt financing arrangements in Russia By Christophe J. Godlewski; Zuzana Fungacova; Laurent Weill
  6. Appreciating The Renminbi By Rod Tyers; Ying Zhang
  7. A Note on Happiness in Eastern Europe By Humpert, Stephan
  8. Gender Differentials in the Payoff to Schooling in China By Ren, Weiwei; Miller, Paul W.
  9. Modernizing Russia: Round III. Russia and the other BRIC countries: forging ahead, catching up or falling behind? By Rainer Kattel; Erik S. Reinert
  10. Path of Chinese institutional modernization By Sahoo, Ganeswar
  11. Yegor Gaidar: Pragmatic Economist or (and) Romantic Revolutionary By Gennadi Kazakevitch
  12. Locational Determinants of Acquisitions from China and India: The Role of Human Capital By Filip De Beule
  13. Indicator-based reporting on the Chinese innovation system 2010: The regional dimension of science and innovation in China By Kroll, Henning
  14. The determinants of cross-border bank flows to emerging markets: New empirical evidence on the spread of financial crises By Herrmann, Sabine; Mihaljek, Dubravko
  15. Child Health and the Income Gradient: Evidence from China By Chen, Yi; Lei, Xiaoyan; Zhou, Li-An
  16. Why are East Germans not More Mobile? Analyzing the Impact of Social Ties on Regional Migration By P. Bönisch; Lutz Schneider
  17. Intra-firm orientations and their influence on firm growth: The case of Russian SMEs By Shirokova, Galina V.; Kulikov, Alexander V.
  18. The Gender Pay Gap in Informal Employment in Poland By Anna Ruzik; Magdalena Rokicka
  19. Universities, Innovation and Entrepreneurship: Criteria and Examples of Good Practice By Andrea-Rosalinde Hofer; Jonathan Potter
  20. The Bulgarian Economic Thought since 1989: A Personal View By Nikolay Nenovsky
  21. Market concentration in the banking sector: Evidence from Albania By Tushaj, Arjan
  22. Macro & micro aspects of the standard of living and quality of life in a small transition economy: The case of Croatia By Dajana Cvrlje; Tomislav Ćorić

  1. By: David G. Tarr (New Economic School, Moscow)
    Abstract: The paper explains that the Russian gas giant, Gazprom, has failed to invest adequately, resulting in very little development of new gas supplies in Russia. The result has been progressively increasing use by Gazprom of central Asian gas supplies, at progressively higher prices for Russia. The increased prices of gas for Russian consumers have shown that it is crucial for Russian welfare to allow new entrants, and to introduce competition in the Russian domestic market. Competition among multiple gas suppliers from Russia, however, would erode or eliminate the monopoly profits of the Russian Federation on gas exports. Thus, with a more competitive domestic market, the Russian government would be expected to grant exclusive exporting rights to a single entity (as it presently does with Gazprom) or impose export taxes. Thus, Europe should not expect to achieve cheaper Russian gas as a result of structural reforms within the Russian gas market. More promising avenues for European energy diversification are new pipeline construction to open up new sources of supply independent of Russia (especially the Nabucco pipeline) and liquefied natural gas purchases. *
    Date: 2010–03
  2. By: Yanrui Wu (UWA Business School, The University of Western Australia)
    Abstract: This paper aims to examine indigenous innovation and draw implications for sustainable economic growth in China. It investigates China’s capacity and achievements in indigenous innovation at both the macro and micro levels. China’s indigenous innovation is also compared to that in other major economies in the world. It is found that China’s innovation development is well ahead of other economies at the similar stage of development but there is a gap between China and the world’s leading innovative economies. Both aggregate and disaggregate evidence shows that China is catching up rapidly with the world’s innovation leaders. If current growth momentum is maintained, China is well positioned to become one of the most innovative economies in the world in the coming decade. There are however some serious issues to be resolved before China’s innovation potential could be realized.
    Keywords: Indigenous innovation, R&D, Chinese economy
    Date: 2010
  3. By: Wenshu Gao; Russell Smyth
    Abstract: China‟s rural-urban migrants have been the engine room that has driven China‟s high rate of economic growth; however, their living and working conditions are poor. This paper addresses the question: What keeps China‟s migrant workers going? We seek to answer this question through examining the determinants of the happiness of China‟s rural-urban migrants, drawing on a large-scale survey administered across 12 cities in 2005. We find that expectations as to future income is an important determinant of happiness. This suggests that many migrants expect their financial position and, by extension, their lives more generally to get better in the future and that this is having a positive effect on their current levels of happiness. The effect of optimistic expectations outstrips any realistic increase in own income. We find that for those who expect a big increase in income over the next five years, this translates to an increase in average monthly income of 380 per cent and for those who expect a small increase in income over the next five years this translates to an increase in average monthly income of 200 per cent to obtain an equivalent increase in happiness compared with those who expect no change in income. This finding has important implications for economic growth and socio-economic stability in China given that maintaining socio-economic stability is important to maintain China‟s high rate of economic growth and positive expectations about future income are important for maintaining socio-economic stability during times of economic transition.
    JEL: I32 O15
    Date: 2010–05
  4. By: Yanyan Gao
    Abstract: Urban bias has long been China’s dominant economic policy. The persistent urban bias leads to a severe rural-urban income gap and diverts physical as well as an effect of diverting the rural resource out of agricultural sector, and thus is detrimental to agricultural growth. This paper uses China’s provincial panel data from 1978 to 2007 to investigate the diverting effects of the rural-urban income gap on agricultural growth. The empirical results suggest that the persistent rural-urban income gap caused by urban bias has produced strong current, but smaller lagged resource-diverting effects on agriculture. The further study shows that the diverting effect is decreasing over time and it is larger in the middle provinces than other provinces. The time and region patterns are confirmed to be a “U shape” relationship between the rural-urban income gap and agricultural growth.
    Keywords: Urban Bias, Income Gap, Agricultural Growth, China
    JEL: O13 Q18 R15
    Date: 2010–05
  5. By: Christophe J. Godlewski (LaRGE Research Center, Université de Strasbourg); Zuzana Fungacova (BOFIT, Bank of Finland); Laurent Weill (LaRGE Research Center, Université de Strasbourg)
    Abstract: This paper investigates stock market reaction to debt arrangements in Russia. The analysis of the valuation of debt arrangements by stock markets provides information about the use of debt by Russian companies. We apply the event study methodology to check whether debt announcements lead to abnormal returns using a sample of Russian listed companies that issued syndicated loans or bonds between June 2004 and December 2008. We find a negative reaction of stock markets to debt arrangements that can be explained by moral hazard behavior of shareholders at the expense of debtholders. Further, we observe no significant difference between announcements of syndicated loans and bonds. Thus, our findings support the view that Russian companies could have incentives to limit their reliance on external debt.
    Keywords: Corporate bonds, event study, Russia, stock returns, syndicated loans.
    JEL: G14 G20 P30
    Date: 2010
  6. By: Rod Tyers (UWA Business School, The University of Western Australia); Ying Zhang (SCollege of Business and Economics, Australian National University)
    Abstract: International pressure to revalue China’s currency stems in part from the expectation that rapid economic growth should be associated with an underlying real exchange rate appreciation. This hinges on the Balassa-Samuelson hypothesis, which sees growth as stemming from improvements in traded sector productivity and associated rises in wages and non-traded prices. Yet, despite extraordinary growth after the mid-1990s China’s real exchange rate showed no tendency to appreciate until after 2004. We use a dynamic general equilibrium model to simulate the economy and show that, during this period, trade reforms and a rising national saving rate were offsetting forces in the presence of elastic labour supply. We then examine the possible determinants of the striking transition to real appreciation thereafter, noting mounting evidence that an improved rural terms of trade has tightened China’s labour market. We show that, should the Chinese government bow to international pressure by appreciating the renminbi either via an extraordinary monetary contraction or via export disincentives the consequences would be harmful for both Chinese and global interests.
    Date: 2010
  7. By: Humpert, Stephan
    Abstract: Recent studies in economics of happiness focusing on the influence of different aspects of subjective well-being in transition countries. Here these countries are located in Eastern Europe. After aggregating a dataset which combines the World Values Survey and the European Values Survey, I use an OLS and ordered probit and ordered logit estimation with marginal effects to perform regressions. The main findings are that individuals in transition countries behave like individuals in western industrialisted countries. This shows the international reliability of approach the happiness research approach.
    Keywords: subjective well-being; eastern europe
    JEL: I31 D60 O52
    Date: 2010–08
  8. By: Ren, Weiwei (University of Western Australia); Miller, Paul W. (Curtin University of Technology)
    Abstract: This paper examines the gender differential in the payoff to schooling in China. The analyses are conducted separately for rural and urban areas, and are based on a framework provided by the over education/required education/under education literature, and the decomposition developed by Chiswick and Miller (2008). It shows that the payoff to correctly matched education in rural China is much higher for females than for males. Associated with this, the wage penalty where workers are under qualified in their occupation is greater for females than for males. Both of these factors are shown to be linked to the higher payoff to schooling for females than for males. Over educated females, however, are advantaged compared with their male counterparts, though this has little effect on the differential in the payoff to schooling between males and females in rural China. These findings are interpreted using the explanations offered for the gender differential in the payoff to schooling in the growing literature on earnings determination in China. The payoffs to actual years of schooling for males and females in urban China are remarkably similar in this study.
    Keywords: China, schooling, earnings, rates of return
    JEL: J31 J62 J70
    Date: 2010–09
  9. By: Rainer Kattel; Erik S. Reinert
    Abstract: The term 'BRIC countries' - Brazil, Russia, India, and China - traces its roots to investment banking, Goldman Sachs coined the term in 2001. The idea of large emerging economies catching up with, and challenging, the West has captured social scientists and policy-makers alike. However, the sheer size and different historical legacies dictate that there are enormous differences between the BRIC economies. Russiaÿs situation is in three ways unique among the BRIC countries. First, Russia was an industrialized nation long before the others, secondly, it experienced unprecedented economic decline in the 1990s and by 2008 Russia barely reached the GDP level of 1989; thirdly, unlike Brazil, China, India and in fact most of the developing world, Russia is not a member of the World Trade Organization (WTO). These unique features beg the following questions that this document seeks to (at least tentatively) answer: first, what is the structural legacy of the decline in the 1990s in terms of technological and industrial capabilities in Russia; and second, what can and should Russia learn from the WTO experience of the rest of the BRIC economies until today. We argue, in brief, that while the decline of the 1990s is relatively well-known and documented on the macro-level (GDP) and more controversially in some of its micro-level and sociological impacts, there seems to be little awareness of the magnitude of devastation that took place during this period within Russiaÿs industry. Along with a massive increase in income from natural resources, a partial disintegration of the R&D system, and a greatly diminished policy capacity, the structural changes of the 1990s continue to pose grave challenges to Russiaÿs economic policy making. In fact, in many areas Russiaÿs technological and industrial capabilities have simply been lost.
    Date: 2010–09
  10. By: Sahoo, Ganeswar
    Abstract: We see the progress today that China has developed a treasure of modernity in terms of its World figure both in economic development and its strong military power with countless path of ups and downs in the past. We are more concerned with the historical study of its institutional modernization than a mere philosophical debate over its development and can discuss its various levels of struggle for ‘Substitute Modernity’2 since mid-19th century(the two opium wars) to till date.
    Keywords: China; Institutional Modernization
    JEL: N9
    Date: 2009–11–15
  11. By: Gennadi Kazakevitch
    Abstract: The article reflects upon the legacy of Yegor Gaidar (19 March 1956 – 16 December 2009), Russian economist – academic and political leader, the key figure of the initial stage of postcommunist transformation in Russia in early 1990s.
    Date: 2010–05
  12. By: Filip De Beule
    Abstract: The article will analyze the locational determinants of Chinese and Indian mergers and acquisitions (M and As). Existing literature often indicate that Chinese and Indian multinationals are motivated by access to local markets, natural resources and intangible assets (Deng, 2004; Kaartemo, 2007; Pradhan, 2008). These determinants will be used to analyze the relevant determinants of Chinese and Indian acquisitions. On the basis of several macro-economic determinants the article will analyze the relevant host country characteristics that drive the locational choices of Chinese and Indian M and A, as well as the similarities and differences between these two so-called BRIC countries.
    Keywords: chinese, indian, acquisitions, multinationals, local markets, natural resources, assests, mergers, india, China, Chinese, BRIC countries, macro economic,
    Date: 2010
  13. By: Kroll, Henning
    Abstract: As regularly stated by both international scholars and confirmed by the Chinese government itself socio-economic development in China remains highly uneven both sociologically and regionally. Conventional wisdom holds that the prevailing economic trend remains one of divergence rather than convergence. While the world-market oriented coastal provinces develop dynamically, the inland and certainly the Western provinces keep lagging behind. Nonetheless, after a number of years with increasing government proclamations regarding the objective of a harmonious society and efforts to develop the inland provinces there is no longer a unanimous trend, particularly with regard to activities under the direct or indirect control of government. Hence, it appears reasonable to analyse to what extent these general trends with regard to the regional distribution of socio-economic development affect the different dimensions of relevance to science and innovation. Consequently, it will be a key aspect of this study to focus on the development of the regional concentration of different R&D activities, thus addressing the question whether the Chinese innovation system is becoming more heterogeneous or less so. The following sections will follow the R&D process through from R&D-related investments to its eventual possible effects on the national export performance. In detail, it will analyse the regional dimension of R&D activities... --
    Date: 2010
  14. By: Herrmann, Sabine; Mihaljek, Dubravko
    Abstract: This paper studies the nature of spillover effects in bank lending flows from advanced to the emerging market economies and identifies specific channels through which such effects occur. Based on a gravity model we examine a panel data set on cross-border bank flows from 17 advanced to 28 emerging market economies in Asia, Latin America and central and eastern Europe from 1993 to 2008. The empirical analysis suggests that global as well as country specific factors are significant determinants of cross-border bank flows. Greater global risk aversion and expected financial market volatility seem to have been the most important factors behind the decrease in cross-border bank flows during the crisis of 2007-08. The withdraw of cross-border loans from central and eastern Europe was more limited compared to Asia and Latin America, in large measure because of the higher degree of financial and monetary integration in Europe, and relatively sound banking systems in the region. These results are robust to various specification, sub-samples and econometric methodologies. --
    Keywords: Gravity model,cross-border bank flows,financial crises,emerging market economies,spillover effects,panel data
    JEL: F34 F36 O57 C23
    Date: 2010
  15. By: Chen, Yi (University of California, Los Angeles); Lei, Xiaoyan (Peking University); Zhou, Li-An (Peking University)
    Abstract: Though the positive income gradient of child health is well documented in developed countries, evidence from developing countries is rare. Few studies attempt to identify a causal link between family income and child health. Utilizing unique longitudinal data from the China Health and Nutrition Survey, we have found a positive, age-enhancing income gradient of child health, measured by height-for-age z scores. The gradient is robust to alternative specifications and a comprehensive set of controls. Using the fact that the rural tax reform implemented since 2000 created an exogenous variation in family income across regions and over time, we explore a causal explanation for the income gradient, and find that it has a very strong independent causal effect on child health.
    Keywords: child health, income gradient, rural tax reform
    JEL: I10 I12 O15
    Date: 2010–09
  16. By: P. Bönisch; Lutz Schneider
    Abstract: Individuals’ preferences in transition regions are still shaped by the former communist system. We test this ‘Communism legacy’ hypothesis by examining the impact of acculturation in a communist regime on social network participation and, as a consequence, on preferences for spatial mobility. We focus on the paradigmatic case of East Germany where mobility intentions seem to be substantially weaker than in the western part. Applying an IV ordered probit approach we firstly find that East German people acculturated in a Communist system are more invested in locally bounded informal social capital than West Germans. Secondly, we confirm that membership in such locally bounded social networks reduces the intention to move away. Thirdly, after controlling for the social network effect the mobility gap between East and West substantially reduces. Low spatial mobility of the eastern population, we conclude, is to an important part attributable to a social capital endowment characteristic to post-communist economies.
    Keywords: regional mobility, social capital, East Germany
    JEL: J61 R23 C35
    Date: 2010–09
  17. By: Shirokova, Galina V.; Kulikov, Alexander V.
    Abstract: The results of survey of specific sets of deliberate intra-firm activities called intra-firm orientations are discussed in current research paper. The authors distinguish entrepreneurial orientation, change orientation and knowledge orientation. Factor analysis and structure equation modelling methods are used to test the hypotheses of the very existence of intra-firm orientations, their positive influence on firm growth. Also the orientations that dominate in different industries (Retail/Wholesale, HoReCa, IT) are analyzed. The results of the empirical research of 500 Russian SMEs show that at least three orientations exist in each firm. Knowledge orientation and change orientation have positive effect on firm growth. In addition, different orientations are manifested in firms belonging o different industries. Executive Summary is available at page 42.
    Keywords: intra-firm orientations, firm growth, entrepreneurship, organizational changes, knowledge management, factor analysis,
    Date: 2010
  18. By: Anna Ruzik; Magdalena Rokicka
    Abstract: This paper addresses the issue of the gender pay gap in the formal and informal labour markets in Poland. The authors verify the hypothesis of the existence of a gender pay gap in informal work and compare this gap with the one observed in the formal (registered) labour market. Various analyses of available data show that size and characteristics of gender pay gap differ depending on the level of earnings. The inequality of earnings among unregistered women and men is more pronounced at the bottom tail of the earnings distribution. In the case of formal employees, inequality at the top of the distribution tends to be larger, confirming the existence of a ‘glass ceiling’. The decomposition of the gender pay gap for selected quintiles indicates that it would be even higher if women had men’s characteristics. A possible explanation of the results is the lack of minimum wage regulations in the informal market and the greater flexibility in agreement on wages in the higher quantiles.
    Keywords: gender pay gap, informal employment, quantile regression
    JEL: J31 O17 J71
    Date: 2010
  19. By: Andrea-Rosalinde Hofer; Jonathan Potter
    Abstract: Eastern Germany is well on its way to becoming a modern economy and developing its high growth potential. Start-ups and young businesses have become key contributors to the region’s growth due to their dynamism and their capacity to renew the local knowledge base. In the context of a global economic crisis, we need to reflect upon the role of start-ups and their capacity to contribute to local economic development. Over the last years, the entrepreneurship activity gap between western and eastern Germany has been significantly reduced, leading to almost equal levels in both parts of the country. The total business start-up rate in Germany, amongst the age group 18 to 64 years, was 1.7 percent in 2007. The entrepreneurial potential however, especially amongst the highly qualified, is far from being exhausted.
    Date: 2010–09
  20. By: Nikolay Nenovsky
    Abstract: The objectives of this paper could be brought to three. First, a methodological one, to explain how economic knowledge disseminates and what its channels are, as well as the basic transmission mechanisms of economic theory in Bulgaria after the disintegration of the socialist bloc. Second, a purely informational objective, to present the major topics and issues studied over the period 1989-2009, and, of course, the economists working on them. And a third and parallel task to interpret theoretically the development of the Bulgarian economic thought during that period, its character and specificities.
    Keywords: economic thought, economic knowledge, post-communist economy, Bulgaria
    JEL: B20 B41 P20 P50
    Date: 2010–09
  21. By: Tushaj, Arjan
    Abstract: The market structure can be described by concentration ratios based on the oligopoly theory or the structure - conduct - performance paradigm. Measures of concentration and also competition are essential for banks conduction in the banking industry. Several researchers have proved concentration level to be major determinants of banking system efficiency. Theoretical characteristics of market concentration measures are illustrated with empirical evidence. The market structure of the Albanian Banking Sector has changed dramatically in recent years. On 1990s, our country has experienced deregulation, foreign bank penetration, and an accelerated process of consolidation and competition in the banking sector. Particularly, the working paper examines the nature and the extent of changes in market concentration of Albanian banking sector. It focused primarily on a descriptive and dynamic analysis of change in the concentration indices in banking sector from year to year. Also it examines how the inherited structure of the banking system affects the way of the distribution of market shares amongst the different banks that comprise on the banking sector. --
    Keywords: Bank Concentration,Concentration ratios,HHI index,Market Structure
    JEL: A20
    Date: 2010
  22. By: Dajana Cvrlje (Faculty of Economics and Business, University of Zagreb); Tomislav Ćorić (Faculty of Economics and Business, University of Zagreb)
    Abstract: Increasing role of quality of life and standard of living took place in countries all over the world, especially nowadays, when numerous effects of the global crisis are felt all over the world. Emerging crisis caused many problems; thereby, in the current situation it is interesting to examine the level of the quality of life and standard of living. The purpose of this paper is to define standard of living and quality of life using objective and subjective indicators. Moreover, special emphasis is on the evaluation of quality of life and living standard in Croatia. After short overview of general development of concepts of standard of living and quality of life, situation in Croatia is analyzed in more details by using different indicators; GDP per capita, shopping basket, GFK basket, households’ expenditures, poverty rate, income inequality, HDI, life satisfaction and happiness, deprivation and optimism about the future. The measures show an increase in the standard of living and quality of life in Croatia, but more importantly, they also show the trend of constant increase in the living costs and the rate of poverty. The level of HDI suggests high level of human development and the results of the level of satisfaction imply that people in Croatia are moderately satisfied with their lives and enjoy a rather high level of happiness. Concerning optimism about the future, Croatian people are mostly optimistic.
    Keywords: standard of living, quality of life
    JEL: I31
    Date: 2010–08–26

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