nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒12‒04
thirteen papers chosen by
J. David Brown
Heriot-Watt University

  1. The relationship between inflation, output growth, and their uncertainties: Evidence from selected CEE countries By Hasanov, Mübariz; Omay, Tolga
  2. Industrialization, economic and employment structure changes in Vietnam during economic transition By Tran, Tuyen; Doan, Tinh
  3. Corruption and Social Interaction: Evidence from China By Bin Dong; Benno Torgler
  4. International outsourcing over the business cycle: some intuition for Germany, the Czech Republic and Slovakia By Sandrine Levasseur; Sandrine Levasseur
  5. Dualism and growth in transition economies: a two-sector model with efficient and subsidized enterprises By Luigi Bonatti; Kiryl Haiduk
  6. Determinants of the exchange market pressure in the euro-candidate countries By Stavarek, Daniel
  7. Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks By Anna Ilyina; Eugenio Cerutti; Yulia Makarova; Christian Schmieder
  8. A Structural Vector Autoregressive (SVAR) model for the Hungarian labour market By Zoltán M. Jakab; Éva Kaponya
  9. Enterprise performance, privatization and the role of ownership in Bulgaria By Tatahi, Motasam
  10. Economic Factors in the Choice of Profession and School in the Case of Secondary Education in Prague By Vladimír Benáček
  11. Is Nonfarm Diversification a Way Out of Poverty for Rural Households? Evidence from Vietnam in 1993-2006 By Pham Thai Hung; Bui Anh Tuan; Dao Le Thanh
  12. Governmental Learning als eine Determinante des wirtschaftlichen Wachstums By Marina Grusevaja
  13. Staatliche Beihilfen in der erweiterten Europäischen Union. Ein Überblick By J. Hölscher; Nicole Nulsch; J. Stephan

  1. By: Hasanov, Mübariz; Omay, Tolga
    Abstract: In this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty in some countries. In addition, we also examine and discuss causal relationships among remaining variables.
    Keywords: Inflation; output growth; uncertainty; Granger-Causality tests; transition countries
    JEL: C51 C32 C52 E30 E10
    Date: 2010–07–09
  2. By: Tran, Tuyen; Doan, Tinh
    Abstract: This paper presents the effects of industrialization on economic and employment structure during the economic transition in Vietnam. Although Vietnam has made a significant progress in changing economic structure in which the share of agricultural contribution in GDP has dramatically decreased over the last two decades, the employment structure changed slowly. Consequently, majority of labour force is still in the agricultural sector. The economic reform has failed to shift redundant workers away from agricultural sector since most of the country’s investment has been allocated to capital-intensive industries. Therefore, policy adjustments are needed to absorb more redundant workers from agricultural sector and improve living standards for rural households.
    Keywords: Capital-intensive industries; employment structure change; economic transition
    JEL: P36 O11 P00 O14
    Date: 2010–11–25
  3. By: Bin Dong; Benno Torgler
    Abstract: We explore theoretically and empirically whether social interaction, including local and global interaction, influences the incidence of corruption. We first present an interaction-based model on corruption that predicts that the level of corruption is positively associated with social interaction. Then we empirically verify the theoretical prediction using within-country evidence at the province-level in China during 1998 to 2007. Panel data evidence clearly indicates that social interaction has a statistically significantly positive effect on the corruption rate in China. Our findings, therefore, underscore the relevance of social interaction in understanding corruption.
    Keywords: Awards; Signals; Status; Anonymity; Globalization
    JEL: K42 D72 D64 O17 J24
    Date: 2010–11
  4. By: Sandrine Levasseur (OFCE, Research Department); Sandrine Levasseur (Observatoire Français des Conjonctures Économiques)
    Abstract: In this paper, we assess the extent to which multinational firms - in the first instance, the German ones - may adjust their international outsourcing over the business cycle in the Czech Republic and Slovakia. For that purpose, we have used monthly data of production for the manufacturing sector as a whole and some of its sub-sectors, since 2000 onwards. Our econometrical estimates suggest that there would be an asymmetry in the international outsourcing across the states of the economy, meaning that multinationals firms would be engaged differently in outsourcing activities, depending on whether bad or good economic times occur. Yet, such an asymmetry is found increasing over the time for German and French multinationals operating in the transport equipment sector of Slovakia. Another conclusion is that international outsourcing made by multinational firms in Slovakia may account for a portion of its large business cycles volatility.
    Keywords: International outsourcing, foreign direct investment, business cycles, Central and Eastern European countries, European integration.
    JEL: F21 F23 F4 L60
    Date: 2010–11
  5. By: Luigi Bonatti; Kiryl Haiduk
    Abstract: We develop a two-sector growth model distinguishing between a private sector consisting of profit-making firms and a state-controlled sector consisting of subsidized firms. Both sectors produce the same good. The private sector generates learning-by-doing and technological spillovers, while the state-controlled one is technologically obsolete and ‘stagnant’. This distinction allows tracing the dual-economy stage of development observed in transition economies. While in some of them the period in which profit-making and loss-making enterprises coexist was rather brief, some continue to display this pattern because of their industrial legacies and politicoideological preferences. The model predicts that—ceteris paribus—the larger is the initial fraction of the workforce employed in the obsolete sector and the stronger is the degree of ideological hostility towards market forces, the lower is the speed at which a transition economy will converge to the income level of the most advanced countries.
    Keywords: Dual economy, endogenous growth, transitional economies
    JEL: O1 O4 P28
    Date: 2010
  6. By: Stavarek, Daniel
    Abstract: In the paper we choose the correct model specification for eight new EU Member States (NMS) to estimate the exchange market pressure (EMP) over the period 1995-2009. The results suggest that growth of domestic credit and money multiplier had a significantly positive impact on EMP. Furthermore, EMP in many NMS was determined by foreign disturbances, namely euro area’s money supply, foreign capital inflow and interest rate differential. EMP in most of NMS with flexible exchange rate regime was primarily absorbed by changes in international reserves. This forms, along with fundamentally stable EMP development in recent years, a solid basis for potential fulfilment of the exchange rate stability convergence criterion.
    Keywords: exchange market pressure; Girton-Roper model; determinants; new EU Member States
    JEL: C32 F31 F36
    Date: 2010–11–22
  7. By: Anna Ilyina; Eugenio Cerutti; Yulia Makarova; Christian Schmieder
    Abstract: This paper presents a stylized analysis of the effects of ring-fencing (i.e., different restrictions on cross-border transfers of excess profits and/or capital between a parent bank and its subsidiaries located in different jurisdictions) on cross-border banks. Using a sample of 25 large European banking groups with subsidiaries in Central, Eastern and Southern Europe (CESE), we analyze the impact of a CESE credit shock on the capital buffers needed by the sample banking groups under different forms of ring-fencing. Our simulations show that under stricter forms of ring-fencing, sample banking groups have substantially larger needs for capital buffers at the parent and/or subsidiary level than under less strict (or in the absence of any) ring-fencing.
    Keywords: Banks , Capital , Credit risk , Cross country analysis , Eastern Europe , International banking , Regional shocks ,
    Date: 2010–11–04
  8. By: Zoltán M. Jakab (Office of Fiscal Council, Republic of Hungary); Éva Kaponya (Magyar Nemzeti Bank)
    Abstract: This paper presents a Structural Vector Autoregressive (SVAR) model with particular attention to the Hungarian labour market. The identification of structural shocks is based on sign restrictions. We identify four structural shocks: a labour supply, an aggregate supply, an aggregate demand and a monetary policy shock. It is worth emphasising that a negative labour supply shock cannot be distinguished from minimum wage hikes in this model. Impulse response analysis shows that after an aggregate supply shock, real wages react more persistently and to a greater extent than prices. In addition, aggregate supply and monetary policy shocks induce relatively strong reactions on the real side of the economy. Unlike in estimated DSGE models for Hungary, we found a positive response of employment with respect to monetary policy shock. All impulse responses are estimated to be less persistent than in the SVAR model estimated using eurozone data pointing to a more flexible Hungarian economy. Our impulse responses are closer to the DSGE model of Jakab and Világi (2008) and Baksa, Benk and Jakab (2009) than to the model of Jakab and Kónya (2009) which describes a relatively rigid labour market. Historical decomposition exercises revealed the presence of positive labour supply shocks between 2003 and 2006. The other important factor in explaining employment was aggregate supply shock. Neither monetary nor aggregate demand shocks contributed significantly to employment fluctuations.
    Keywords: Bayesian, VAR, employment, inflation, wage, labour economics
    JEL: C11 C32 E24 J01
    Date: 2010
  9. By: Tatahi, Motasam
    Abstract: Abstract In both economically developed and developing countries, privatisation, budget austerity measures and market liberalisations have become key aspects of structural reform programs in the last three decades. These three recommended policies were parts of strong revival of classical and new-classical school of thought since the middle of 70s. Such programs aim to achieve higher microeconomic efficiency and foster economic growth, whilst also aspiring to reduce public sector borrowing requirements through the elimination of unnecessary subsidies. For firms to achieve superior performance a change in ownership from public (state ownership) to private has been recommended as a vital condition. To assess the ownership role, the economic performances of private, public and mixed enterprises in Bulgaria is compared through the use of factor analysis method. The extracted factors, using data of two years, 1998 and 2000, do not pick ownership as a key performance factor.
    Keywords: Bulgaria; efficiency; performance measure; privatization; factor analysis; public and private relationship; role of ownership
    JEL: L3 L33
    Date: 2010–10–25
  10. By: Vladimír Benáček (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: n this paper we study three crucial questions of economic decision-making: a) How are the people motivated in the choice of profession (career) and schools? This is also a decision that deals with the criteria for building the human capital of various specialisations. b) Can enterprises rely on the supply of new workers that should be qualified by skills for filling the future specialised demands of enterprises? c) Do the admissions into secondary schools, as intermediaries between the previous two, adjust to labour inputs with specific skills as required by firms? We have found by analysing the data for the agglomeration of Prague that the specialisation structure the supply of new cohort of workers (i.e. the school leavers) was highly consistent with the structure of expected demand of empoyers (i.e. enterprises). Our analysis working with 28 professional types of secondary schools in Prague reveals that the choice of school and profession depends primarily on the industrial structure of both employment opportunities and unemployment threats. As a secondary observation, the structure of new admissions to schools is related to the level of wages, profits, unemployment rates and R&D expenditures in industries. At the same time we could see that the existing official statistics about educational specialisation are insufficiently structured for serving as an efficient instrument for underpinning the labour market-dependent decision making in both families and schools.
    Keywords: education; human capital; supply and demand for working skills; employment in industries
    JEL: I21 G21
    Date: 2010–11
  11. By: Pham Thai Hung; Bui Anh Tuan; Dao Le Thanh
    Abstract: school. Using the four high quality household living standards surveys available to date this paper reveals that Vietnam’s rural labour force has been markedly diversifying toward nonfarm activities in the doi moi (renovation) reform period. The employment share of the rural nonfarm sector has increased from 23 percent to 58 percent between the years 1993 and 2006. At the individual level, the results indicate that participation in the rural nonfarm sector is determined by a set of individual-, household-, and community-level characteristics. Gender, ethnicity, and education are reported as main individual-level drivers of nonfarm diversification. Lands as most important physical assets of rural households are found to be negative to nonfarm employment. It is also evident that both physical and institutional infrastructure exert important influences on individual participation in the nonfarm sector. At the household level, a combination of parametric and semi-parametric analysis is adopted to examine whether nonfarm diversification is a poverty exit path for rural households. This paper demonstrates a positive effect of nonfarm diversification on household welfare and this effect is robust to different estimation techniques, measures of nonfarm diversification, and the usage of equivalent scales. However, the poor is reported to benefit less than the non-poor from nonfarm activities. Though promoting a buoyant nonfarm sector is crucial for rural development and poverty reduction, it needs to be associated with enhancing access to nonfarm opportunities for the poor.
    Keywords: Rural nonfarm sector, nonfarm diversification, household welfare, Vietnam
    JEL: I32 J21 J49
    Date: 2010
  12. By: Marina Grusevaja
    Abstract: Systemic economic transition is a process of determined radical institutional change, a process of building new institutions required by a market economy. Nowadays, the experience of transition countries with the implementation of new institutions could be reviewed as a method of economic development that despite similar singular steps has different effects on the domestic economic performance. The process of institutional change towards a market economy is determined by political will, thus the government plays an important role in carrying out the economic reforms. Among the variety of outcomes and effects the attention is drawn especially to economic growth that diverges significantly in different post-transition countries. The paper attempts to shed light upon the problem on the basis of institutional economics, of economics of innovation and partially of political economy of growth using an evolutionary, process-oriented perspective. In this context the issue central to the promotion of economic growth is the successful implementation of new institutions through governmental activities. The paper shows that under the conditions of bounded rationality and radical uncertainty economic growth is determined, inter alia, by the capacity for governmental learning.
    Keywords: economic transition, institutional change, governmental learning, economic growth
    JEL: B52 D80 O43
    Date: 2010–11
  13. By: J. Hölscher; Nicole Nulsch; J. Stephan
    Abstract: In the early phase of transition that started with the 1990s, Central and Eastern European Countries pursued economic restructuring of the enterprise sector that involved massive injections of state support. Also foreign investment from the West and facilitation of the development of a market economy involved massive injections of state support. With their accession to the European Union (EU), levels and forms of state aid came under critical review by the European Commission. This inquiry investigates whether the integration of the new member states operates on a level playing field with respect to state aid. Quantitative and qualitative analysis is relied upon to answer this key, as well as other, related questions. Findings suggest that in recent years a level playing field across the EU has indeed emerged. State aid in the new EU member countries is rather handled more strictly than laxer compared to the ‘old’ EU countries.
    Keywords: competition policy, economic transition, EU enlargement, state aid
    JEL: H25 L50 P20
    Date: 2010–11

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