nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒10‒02
thirteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Labor market institutions and labor market performance: what can we learn from transition countries? By H. Lehmann; A. Muravyev
  2. Entry, Growth, and the Business Environment: A Comparative Analysis of Enterprise Data from the U.S. and Transition Economies By J. David Brown; John S. Earle
  3. Eastern Europe and the Former Soviet Union since the Fall of the Berlin Wall: Review of the Changes in the Environment and Natural Resources By Anil Markandya; Wan-Jung Chou
  4. Poverty and Vulnerability in Rural China: Effects of Taxation By Katsushi S. Imai; Woojin Kang; Xiaobing Wang
  5. Does Urban Proximity Enhance Agricultural Productivity in China? By Chloe DUVIVIER
  6. "How to Sustain the Chinese Economic Miracle? The Risk of Unraveling the Global Rebalancing" By Jörg Bibow
  7. Markets of loans provided to household and their integration measured by price indicators By Pavla, Vodová
  8. Assessing China’s Energy Conservation and Carbon Intensity: How Will the Future Differ from the Past? By ZhongXiang Zhang
  9. Relationship Lending in the Czech Republic By Adam Gersl; Petr Jakubik
  10. Trade, FDI and income inequality. Empirical evidence from transition countries By C. Franco; E. Gerussi
  11. Statistical evaluation of spatial concentration of unemployment by gender By Jaba, Elisabeta; Balan, Christiana; Roman, Mihai; Roman, Monica
  12. The Case for Reforming Euro Area Entry Criteria By Zsolt Darvas
  13. The minimum pension as an instrument of poverty protection in the defined contribution pension system – an example of Poland By Chlon-Dominczak, Agnieszka; Strzelecki, Paweł

  1. By: H. Lehmann; A. Muravyev
    Abstract: This paper studies the relationship between labor market institutions and policies and labor market performance using a new and unique dataset that covers the countries of Eastern Europe and Central Asia, which in the last two decades experienced radical economic and institutional transformations. We document a clear trend towards liberalization of labor markets, especially in the countries of the former Soviet Union, but also substantial differences across the countries studied. Our econometric analysis implies that institutions matter for labor market outcomes, and that deregulation of labor markets improves their performance. The analysis also suggests several significant interactions between different institutions, which are in line with the idea of beneficial effects of reform complementarity and broad reform packages. Finally, we show that there are important advantages of focusing on a broader set of labor market outcomes, and not only on the unemployment rate, which until now has been the main approach in the empirical literature.
    JEL: E24 J21 P20
    Date: 2010–09
  2. By: J. David Brown; John S. Earle
    Abstract: What role does new firm entry play in economic growth? Are entrants and young firms more or less productive than incumbents, and how are their relative productivity dynamics affected by financial constraints and the business environment? This paper uses comprehensive manufacturing firm data from seven economies (United States, Georgia, Hungary, Lithuania, Romania, Russia, and Ukraine) to measure new firm entry and the productivity dynamics of entrants relative to incumbents in the same industries. We contrast hypotheses based on “leapfrogging,” in which entrants embody superior productivity, with an “experimentation” approach, in which entrants face uncertainty and incumbents can innovate. The results imply that leapfrogging is typical of early and incomplete transition, but experimentation better characterizes both the US and mature transition economies. Improvements in financial markets and the business environment tend to raise both the entry rate and productivity growth, but they are associated with negative relative productivity of entrants and smaller contributions of reallocation to growth among both entrants and incumbents.
    Date: 2010–09
  3. By: Anil Markandya (University of Bath, UK and Basque Centre for Climate Change); Wan-Jung Chou (University of Bath)
    Abstract: This paper reviews the environmental record of the transition countries of Eastern Europe and Central Asia since the fall of the Berlin Wall, with a focus on areas of key concern to public policy at the present time. With the impacts of environment on public health being given the highest priority, we examined several associated health indicators at the national level, as well as looking at important environmental issues at the local level. In this respect, we focus on environmental problems related to air and water quality, land contamination, and solid waste management. Despite showing a highly differentiated performance across the region, the results suggest that inadequate environmental management seen in several of the transition countries in the past 20 years has put people’s health and livelihood under huge threats. Moreover, this paper looks at the development of policy responses and resources, i.e. environmental expenditures, in these countries, during the process of transiting from centrally planned economies to market-based one. Similarly, we identify various degrees of progress across the region. The findings reinforce the need for better coherence between national environmental expenditure and international environmental assistance, as well as the actual enforcement of national regulations and international agreements in those non-EU transition countries.
    Keywords: Eastern Europe, Environmental Record, Public Health
    JEL: N34 N54 I18
    Date: 2010–05
  4. By: Katsushi S. Imai; Woojin Kang; Xiaobing Wang
    Abstract: This paper studies the impact of taxation on poverty and ex ante vulnerability of households in rural China based on national household survey data in 1988, 1995 and 2002. It has been confirmed that i) poverty and vulnerability have reduced significantly with a great deal of geographical disparity, ii) education, land, and access to infrastructure and irrigation facilities are among the key factors to reduce vulnerability, and iii) the highly regressive tax system increased farmer’s poverty and vulnerability. The abolishment of rural tax since 2006 would thus have a significant negative impact on both poverty and vulnerability of rural households. [Working Paper No. 156]
    Keywords: poverty, vulnerability, taxation, rural China
    Date: 2010
  5. By: Chloe DUVIVIER
    Abstract: We study whether rural areas close to urban centers enjoy a more productive agricultural sector than remote ones. We try to answer three questions: (1) Do rural areas close to urban centers and remote areas share the same agricultural technology? (2) Are rural areas close to urban center technically more efficient? (3) Do they enjoy a faster technical progress? The empirical examination is realized at the county level on a sample covering three provinces of the south-east of China from 2002 to 2007. Several interesting results are obtained. On the one hand, the type of agricultural technology adopted varies with the distance between the rural area and the urban center. On the other hand, urban proximity has a positive effect on agricultural productivity. Finally, our results confirm a previous finding: the most important component of total factor productivity growth in China is technical progress, whereas technical efficiency decreases it.
    Keywords: Agricultural productivity, urban proximity, latent class stochastic frontier model, technical change.
    JEL: R11 Q10 O18 O13
    Date: 2010
  6. By: Jörg Bibow
    Abstract: This paper investigates China’s role in creating global imbalances, and the related call for a massive renminbi revaluation as a (supposed) panacea to forestall their reemergence as the world economy recovers from severe crisis. We reject the prominence widely attributed to China as a cause of global imbalances and the exclusive focus on the renminbi-dollar exchange rate as misguided. And we emphasize that China's response to the global crisis has been exemplary. Apart from acting as a growth leader in the global recovery by boosting domestic demand to offset the slump in exports, China has in the process successfully completed the first stage in rebalancing its economy, which is in stark contrast to other leading trading nations that have simply resumed previous policy patterns. The second stage in China’s rebalancing will consist of further strengthening private consumption. We argue that this will be best supported by continued reliance on renminbi stability and capital account management, so as to assure that macroeconomic policies can be framed in line with domestic development requirements.
    Keywords: Global Imbalances; Rebalancing; Renminbi Revaluation; Stimulus Package; Export-led Growth
    JEL: E63 E65 F01 F42
    Date: 2010–09
  7. By: Pavla, Vodová
    Abstract: The aim of this paper is to assess with price indicators the extent to which markets of loans provided to households in Visegrad countries are integrated with euro zone countries. Analysis of alignment and beta and sigma convergence concept showed that mortgage loan markets were much more integrated than consumer loan markets in period from January 2005 to March 2010. Czech and Slovak consumer loans market and Polish and Hungarian mortgage loans market have statistically significant relatively higher speed of convergence. However, barriers of integration are still very important.
    Keywords: credit market integration; price indicators; beta convergence; sigma convergence
    JEL: C23 F36 G21
    Date: 2010
  8. By: ZhongXiang Zhang (Research Program East-West Center)
    Abstract: As an important step towards building a “harmonious society” through “scientific development”, China has incorporated for the first time in its five-year economic plan an energy input indicator as a constraint. While it achieved a quadrupling of its GDP while cutting its energy intensity by about three quarters between 1980 and 2000, China has had limited success in achieving its own 20% energy-saving goal set for 2010 to date. Despite this great challenge at home, just prior to the Copenhagen climate summit, China pledged to cut its carbon intensity by 40-45% by 2020 relative its 2005 levels to help to reach an international climate change agreement at Copenhagen or beyond. This raises the issue of whether such a pledge is ambitious or just represents business as usual. To put China’s climate pledge into perspective, this paper examines whether this proposed carbon intensity goal for 2020 is as challenging as the energy-saving goals set in the current 11th five-year economic blueprint, to what extent it drives China’s emissions below its projected baseline levels, and whether China will fulfill its part of a coordinated global commitment to stabilize the concentration of greenhouse gas emissions in the atmosphere at the desirable level. Given that China’s pledge is in the form of carbon intensity, the paper shows that GDP figures are even more crucial to the impacts on the energy or carbon intensity than are energy consumption and emissions data by examining the revisions of China’s GDP figures and energy consumption in recent years. Moreover, the paper emphasizes that China’s proposed carbon intensity target not only needs to be seen as ambitious, but more importantly it needs to be credible. Given that China has shifted control over resources and decision making to local governments as the result of the economic reforms during the past three decades, the paper argues the need to carefully examine those objective and subjective factors that lead to the lack of local official’s cooperation on the environment, and concludes that their cooperation, and strict implementation and coordination of the policies and measures enacted are of paramount importance to meeting China’s existing energy-saving goal in 2010, its proposed carbon intensity target in 2020 and whatever climate commitments beyond 2020 that China may take.
    Keywords: Energy Saving, Renewable Energy, Carbon Intensity, Post-Copenhagen Climate Negotiations, Climate Commitments, China
    JEL: Q42 Q43 Q48 Q52 Q53 Q54 Q58
    Date: 2010–07
  9. By: Adam Gersl; Petr Jakubik
    Abstract: This paper presents the results of an analysis of data on individual bank loans of nonfinancial corporations in the Czech Republic taken from the CNB’s Central Credit Register. It focuses on the question of how firms obtain financing from domestic banks. The results show that the vast majority of non-financial corporations use the services of just one relationship lender. Small and young firms in technology- and knowledge-intensive industries tend to concentrate their credit needs in a single bank, whereas less creditworthy firms and firms in cyclical industries tend to borrow from more than one bank. The analysis also reveals different behaviour of firms towards financing banks in the case of multiple lenders. Finally, it turns out that the level of credit risk at bank level decreases in line with the extent to which firms applying single relationship lending occur in the bank’s portfolio.
    Keywords: Credit risk, relationship banking.
    JEL: G21 G32
    Date: 2010–09
  10. By: C. Franco; E. Gerussi
    Date: 2010–09
  11. By: Jaba, Elisabeta; Balan, Christiana; Roman, Mihai; Roman, Monica
    Abstract: This paper studies the spatial distribution of unemployment by gender, in the counties of Romania, in 2008.The Lorenz curve and Gini index are used to identify a pattern of spatial concentration of unemployment, differentiated by gender. Evaluation of gender differences in unemployment spatial concentration model shows significant differences. There is a greater spatial concentration of unemployment for female population. Based on results of grouping counties by cluster analysis applied for unemployment rate, one could explain the gender differences in spatial concentration correlated with spatial distribution of the workforce and the characteristics of territorial development of counties in Romania.
    Keywords: unemployment; spatial concentration; gender discrepancies; cluster analysis; regional development; Romania
    JEL: E24 J21 R11
    Date: 2010–01
  12. By: Zsolt Darvas (Bruegel, Hungarian Academy of Sciences, Corvinus University of Budapest)
    Abstract: The global economic and financial crisis has raised further concerns about the euro-entry criteria, in addition to other factors, such as the effective tightening of the criteria due to the enlargement of the EU from 12 to 27 members, the highly unfavourable property of business cycle dependence, the internal inconsistency of the criteria due to the structural price level convergence of Central and Eastern European countries, and the continuous violation of the criteria by euro-area members. The interest rate criterion became a highly volatile measure. Many US metropolitan areas would fail to qualify to be members of the US monetary union by applying the currently used inflation criterion to the US. It is time to reform the criteria and to strengthen their economic rationale within the legal framework of the EU treaty. A good solution would be to relate all criteria to the average of the euro area and simultaneously to extend the compliance period from the currently considered one year to a longer period.
    Keywords: Euro, EU institutions, financial crisis, Maastricht-criteria
    JEL: F33 F36 F53
    Date: 2010–09–15
  13. By: Chlon-Dominczak, Agnieszka; Strzelecki, Paweł
    Abstract: Pension systems’ reforms are often related to a shift towards (fully or partially) defined contribution systems, in which the pension distribution reflects to a larger extent the wage distribution. Additionally, relatively shorter working lives of those that have lower earnings, increase the risk of receiving lower benefits. The aim of the paper is to present the changing role of minimum pension as a tool of redistribution in Poland after the pension reform. The new mandatory pension system covers workers born after 1948 and is based on two components – notional and funded defined contribution (NDC and FDC). It replaced the old defined-benefit PAYG system, which had a significant redistribution through the pension formula. The formula itself served as a tool of low income protection, that was additionally strengthened by the minimum pension guarantee. The new system aims at actuarial fairness, which means that the only mechanism of redistribution is the minimum pension, financed from general taxes. As a result of this change, grater income inequalities of pensioners following those of people in working age are expected. This means a change of the role of the minimum pension from one of the tools supporting redistributive policy to the main tool of social policy preventing poverty among elderly persons. The minimum pension is expected to fall compared to average wage. The decision on its level and evolution becomes one of the most important policy questions. It will have crucial importance in preventing poverty in the old-age. Simulations are used to present the impact of changes in the pension distribution on the number of pensioners covered by minimum pension.
    Keywords: pension system; old-age poverty; minimum pension; indexation rules; define contributions; DC sytem; pension distribution
    JEL: H55 I38 I32
    Date: 2010–09

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