nep-tra New Economics Papers
on Transition Economics
Issue of 2010‒12‒11
sixteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Population Aging and Economic Growth in China By Judith Banister; David E. Bloom; Larry Rosenberg
  2. Gender, Wages and Social Security in China’s Industrial Sector By Rickne, Johanna
  3. Income Uncertainty and Household Savings in China By Chamon, Marcos; Liu, Kai; Prasad, Eswar
  4. Inequality and Economic Growth in China: pre and post-reform periods By W.Adrian Risso; Edgar J. Sanchez Carrera
  5. The Regional Distribution of Skill Premia in Urban China By John Whalley; Chunbing Xing
  6. Policy Complements to the Strengthening of IPRS in Developing Countries - China’s Intellectual Property Environment: A Firm-Level Perspective By Minyuan Zhao
  7. Processing Trade, Firm's Productivity, and Tariff Reductions: Evidence from Chinese Products By Miaojie Yu
  8. Regional Determinants of New Firm Formation in a Transition Economy: The Case of Uzbekistan By Kan, Viktoriya
  9. Diagnosing the “Russian Disease”:Growth and Structure of the Russian Economy Then and Now By 久保庭, 眞彰
  10. Productivity growth in the Old and New Europe: the role of agglomeration externalities By Emanuela Marrocu; Raffaele Paci; Stefano Usai
  11. ChinaÕs Low Carbon Transformation: Drivers, Challenges, and Paths By Jiahua Pan
  12. International Fragmentation of Tradable Business Services: the Case of Hungary By Magdolna Sass
  13. Is There a Bubble in the Chinese Housing Market? By Christian Dreger; Yanqun Zhang
  14. Location choice of multinational enterprises in China : comparison between Japan and Taiwan By Chang, Kuo-I; Hayakawa, Kazunobu; Matsuura, Toshiyuki
  15. Potential impact of the EU Single Area Payment on farm restructuring and efficiency in Lithuania By Elodie Douarin; Laure Latruffe
  16. Estimating Estate-Specific Price-to-Rent Ratios in Shanghai and Shenzhen: A Bayesian Approach By Shawn Ni; Jie Chen

  1. By: Judith Banister (Harvard School of Public Health); David E. Bloom (Harvard School of Public Health); Larry Rosenberg (Harvard School of Public Health)
    Keywords: Population aging, economic growth, China
    Date: 2010–03
  2. By: Rickne, Johanna (Uppsala Center for Labor Studies)
    Abstract: This study compares average earnings and productivities for men and women employed in roughly 200,000 Chinese industrial enterprises. Women’s average wages lag behind men’s wages by 11%, and this result is robust to the inclusion of non-wage income in the form of social insurance payments. The gender-wage gap is wider among workers with more than 12 years of education (28%), mainly because of the higher relative wages received by skilled men in foreign-invested firms. Women’s average productivity falls behind men’s productivity by a larger margin than the gap in earnings, and the null-hypothesis of earnings discrimination is thereby rejected. Equal average wages between men and women are found among firms located in China’s Special Economic Zones, and also among some light industrial sectors with high shares of female employees. Market reform hence appears to have improved women’s relative incomes.
    Keywords: China; gender wage gap; non-wage compensation
    JEL: I30 J16 J71 O10
    Date: 2010–05–31
  3. By: Chamon, Marcos (International Monetary Fund); Liu, Kai (Johns Hopkins University); Prasad, Eswar (Cornell University)
    Abstract: China's household saving rate has increased markedly since the mid-1990s and the age-saving profile has become U-shaped. Using a panel of urban Chinese households covering 1989-2006, we document a sharp increase in income uncertainty. While the permanent variance of household income was stable, the transitory variance rose sharply. Based on these estimates, we calibrate a buffer-stock savings model and show that rising income uncertainty and pension reforms lead younger and older households, respectively, to raise their saving rates. These two factors account for over half of the increase in China's urban household savings rate and the U-shaped age-profile of savings.
    Keywords: China, household savings, income uncertainty, pension reforms, buffer-stock savings
    JEL: D91 J3 E21
    Date: 2010–11
  4. By: W.Adrian Risso; Edgar J. Sanchez Carrera
    Abstract: This paper studies the long-run relationship between economic growth and income inequality in China during the pre- and post-reform periods: 1952-1978 and 1979-2007, respectively. Income inequality is measured by the Gini coe¢ cient and economic growth by real per capita GDP. The cointegration analysis shows that, for both periods the relationship is positive and the inequality-growth elasticity has grown in the second period. In addition, a more robust test of Granger-causality suggested by Toda and Yamamoto (1995) indicates that whereas in the .rst period there is unidirectional causality from inequality to growth, there is no directional causality in the second period.
    Keywords: Cointegration; Economic Growth; Gini Coe¢ cient.
    JEL: E62 N10 O11 O15 O40 R12
    Date: 2010–09
  5. By: John Whalley; Chunbing Xing
    Abstract: We document and discuss the implications of a sharp increase in the regional dispersion of skill premia in China in recent years. This has previously been little noted or discussed. We use three urban household surveys for 1995, 2002, and 2007 and estimate skill premia at provincial and city levels. Results show an increase in the skill premium across all regions between 1995 and 2002, but only coastal regions show significant increases in skill premia between 2002 and 2007. For 2007, coastal regions also have much higher within region wage inequality and this contributes more to overall urban wage inequality than within region inequality of non-coastal regions. Using a fixed effects model at city level, we find that ownership restructuring is a significant factor in driving up skill premia during the first period, and that the ongoing process of China’s integration into the global economy plays a significant and regionally concentrated role in the second period.
    JEL: J00 J01 J30 J31
    Date: 2010–12
  6. By: Minyuan Zhao
    Abstract: Along many dimensions, China has made progress in strengthening the protection of intellectual property (IP) and expanding its research and development (R&D) base over the past two decades. Meanwhile, people’s understanding of IP has gone beyond a mechanical interpretation of patent law or copyright law. Instead, with years of experience in innovation, imitation and knowledge management, firms have begun to realize that IP protection is part of a complex business environment including various cultural, economic and strategic factors. This study takes a firm-level perspective and addresses two related topics. First, the paper examines the IP environment faced by various firms. In particular, the importance of IP protection and the strength of protective measures vary widely depending on the firms’ ownership structures and industry characteristics. Second, the paper analyzes firms’ strategic responses to the perceived IP environment. Firms not only adjust their R&D strategies, but also product and marketing strategies based on their assessment of the IP environment, which may have significant implications for China’s economic development in general. The paper concludes that momentum for IP reform is related to the economic potential in China. Such reform is an on-going system project involving not only patent, trademark and copyright laws, but also privatization policies, trade and FDI policies, as well as the role of the government in China’s innovation strategy.
    Keywords: economic development, innovation, intellectual property rights, patents, China, policy reforms, copyrights, trademarks
    Date: 2010–09–14
  7. By: Miaojie Yu (China Center for Economic Research)
    Abstract: This paper explores how processing trade, jointly with tariff reduction, can improve a firm's productivity. Tariff reductions generate productivity gain via competition, whereas processing export does so via spillovers. Using mostly disaggregated Chinese product-level trade data and firm-level production data from 2000--2006, after constructing firm-level tariffs based on product information and controlling for possible endogeneity, I found that a 10% tariff decrease generates a 12% increase in a firm's productivity gain. In addition, processing firms enjoy significant productivity gains via spillovers, with heterogeneity across firms divided according to ownership. These findings are robust to various econometric methods, disaggregated specifications, and measures.
    Keywords: Processing Trade, Productivity, Firm's Heterogeneity, Chinese Plants
    JEL: F1 L1 O1 O2
    Date: 2010
  8. By: Kan, Viktoriya
    Date: 2010–10
  9. By: 久保庭, 眞彰
    Abstract: This paper diagnoses the present Russian situation characterized as the “Russian Disease.” First, it shows that a key symptom of the Russian Disease is a strong positive relation between the country’s real growth and terms-of-trade-effects, which is different from the symptoms of the “Dutch Disease”. This paper also presents three variants (oil prices, terms-of-trade, and trading gains) of the concept of terms-of-trade effects using the SNA framework. Second, it shows a strong positive impact of terms-of-trade effects on the Russian manufacturing, which markedly differs from one of the major symptoms of the Dutch Disease (slower growth of manufacturing through the booming mining sector and real appreciation of exchange rates). This paper also suggests the significance of the manufacturing industry for the Russian economy. Third, this paper shows that the appreciation (depreciation) of real exchange rates of Russia’s rubles induced the boost (decline) of its imports. Fourth, this paper proves that the boost of imports, in turn, induced the GDP growth of the trade sector as one of the major sources of the Russian overall growth. We also present the impact of oil prices on two kinds of real exchange rates (CPI-based and GDP-based real exchange rates).
    Keywords: Russian Disease, Dutch Disease, growth, oil price, terms-of-trade, trading gain, manufacturing, imports, real exchange rate, trade
    JEL: E31 P24 P28 P59
    Date: 2010–10
  10. By: Emanuela Marrocu; Raffaele Paci; Stefano Usai
    Abstract: The recent history of the European Union is characterized by a dual picture showing the Old and the New countries in sharp contrast with respect to several economic dimensions. In particular, regions and industries in Eastern countries have shown an excellent performance whilst Western countries have kept moving on a rather slow track. Our aim is to assess the intertwined performance of regions and industries in New and Old economies within Europe by investigating the dynamics of total factor productivity over the period 1996-2007 and the role played by local externalities in the agglomeration process of economic activities. Among the determinants of local industry growth we analyse the agglomeration externalities and, in particular, we focus on the different impact of the specialisation and diversity externalities. Moreover, we analyse the potential influence of regional intangible assets such as human and technological capital while controlling for other territorial features which may affect the efficiency of the local industry. The empirical analysis makes use of spatial econometric techniques to take into account the possibility of cross-border externalities.
    Keywords: Agglomeration externalities; Local industry growth; Total Factor Productivity; Spatial models; European regional cohesion
    JEL: C31 O47 R31
    Date: 2010
  11. By: Jiahua Pan (Institute of Urban and Environmental Studies Chinese Academy of Social Science, Beijing)
    Abstract: National climate change mitigation actions and objectives could be taken from both active and passive considerations. China has multiple objectives to develop a low carbon economy and to decrease carbon dioxide emission per unit of GDP, including mitigation of global climate change, security of energy supply, promotion of sustainable development (environmental protection, poverty alleviation, employment and natural conservation). In this regard, ChinaÕs actions are more at the active side than from a pressure outside. However, there are some suspicions in the international society about whether China has the determination and efficiency in mitigation actions. The author demonstrates that ChinaÕs low carbon transformation is largely driven from domestic considerations. For china the question is not to make the transformation into a low carbon economy, but how to accelerate the process. In the meantime, low carbon transformation in China has to face many serious challenges. A dilemma exists that a higher carbon may actually help raise necessary resources for promoting low carbon solutions. Understanding and international cooperation are essential for ChinaÕs low carbon transformation.
    Keywords: low carbon transformation, sustainable development, mitigation of climate change, carbon dilemma, China
    JEL: Q54 Q56 O53
    Date: 2010–10
  12. By: Magdolna Sass (Institute of Economics - Hungarian Academy of Sciences)
    Abstract: Hungary is increasingly appearing on the map of trade in services. This is mainly due to the appearance of foreign owned shared services centres, regional or even global headquarters of multinationals. First, data problems are listed in detail when analysing tradable services (applying, extending and analysing in-depth the problems indicated by Kirkegaard, 2005). It draws the conclusion that using available statistical data on trade and FDI is misleading in trying to assess the extent of Hungary's participation in the international division of labour in services. Moreover, lack of data hinders the analysis of other aspects. That is why the paper relies on detailed company case studies (8 companies interviewed in 2008 out of around 50 such centres in Hungary). Two aspects of export oriented services projects are analysed in detail: locational advantages of Hungary which attract such projects to the country and the impact of these projects on the host economy. Vertical FDI associated with this type of efficiency seeking and highly export oriented projects, has completely different localisation requirements and local impact than horizontal FDI, which up till around 2000 dominated services FDI inflows in Hungary. As an analytical framework, Barba Navaretti, Venables, 2004 is used. The paper identifies the various elements of locational advantages connected to different elements of investment motives, in terms of cost reduction, reducing costs of disintegration of production, reducing other costs, and motives arising from the confluence of vertical and horizontal FDI, and relates these elements to the specificities of the business services sector. It differentiates general motives, which play a role in compiling the "longer list" of possible investment locations and motives which play the most important role in deciding about the final location of the investment. Analysis of Hungary is supplemented with a comparison with the other three Visegrad countries. The paper also presents the most important channels through which FDI in business services may affect the host country. The analysis is based on theories, dealing mainly with the impact of manufacturing FDI, and especially of vertical FDI on the host economy (e.g. Dunning, 1993, Lall, 1980, Blomstr”m, Kokko, 1997, Barba Navaretti, Venables, 2003, Caves, 2007), taking 3 into account specificities of business services. The paper identifies the following areas in which business services FDI impacts upon the host economy: job creation (type of activities and categories of employees affected), backward and forward linkages with local companies and with other local actors, and other spillovers (impact on the business environment and infrastructure, spillovers through trained employees).
    Keywords: offshore outsourcing, business services, locational advantages, local impact, Hungary, East Central Europe
    JEL: F21 F23 L8
    Date: 2010–10
  13. By: Christian Dreger; Yanqun Zhang
    Abstract: For many analysts, the Chinese economy is spurred by a bubble in the housing market, probably driven by the fiscal stimulus package and massive credit expansion, with pos-sible adverse effects to the real economy. To get insights into the size of the bubble, the house price evolution is investigated by panel cointegration techniques. Evidence is based on a dataset for 35 major cities. Cointegration is detected between real house prices and a set of macroeconomic determinants, implying that a bubble exhibits mean-reverting behaviour. The results indicate that the bubble is about 25 percent of the equi-librium value implied by the fundamentals at the end of 2009. The bubble is particularly huge in the cities in the southeast coastal areas and special economic zones. While the impact of real house prices on CPI inflation appears to be rather strong, GDP growth may not be heavily affected. Thus, a decline of the bubble will likely have only modest effects on the real economy.
    Keywords: Chinese economy, panel cointegration, house price bubbles
    JEL: G12 R21 C33
    Date: 2010
  14. By: Chang, Kuo-I; Hayakawa, Kazunobu; Matsuura, Toshiyuki
    Abstract: This paper examines and compares the location choice of Japanese and Taiwanese MNEs in China. Furthermore, we investigate the relationship between location choice and firm characteristics, specifically firms' productivity. Due to Taiwan's linguistic and cultural advantages in China, it is expected that the location choice mechanics are different between Japanese and Taiwanese MNEs. As a result, our main findings are that, while the less productive Japanese firms prefer a location in an area with a larger agglomeration of Japanese affiliates or in an area closer to Japan, the more productive Taiwanese firms prefer a location in an area with a larger agglomeration of Taiwanese affiliates or in an area closer to Taiwan.
    Keywords: Multinational enterprises, China, Productivity, Taiwan, Japan, International business enterprises, Industrial management
    JEL: D24 F23 M10
    Date: 2010–08
  15. By: Elodie Douarin; Laure Latruffe
    Abstract: This paper investigates the potential impact of post EU-accession public support, namely the introduction of the decoupled Single Area Payment (SAP), in Lithuania on its farming sector’s restructuring and future efficiency. Analyses are based on efficiency calculations with 2001-2002 FADN data for fieldcrop farms, and on the same sample’s farmers’ intentions to remain in the sector and to expand their area post EU-accession under two scenarios: a hypothetical scenario of continuing pre-accession national policies, and a realistic scenario of fully decoupled SAP introduction with coupled national top-ups. Our results suggest that, before accession to the EU, the smallest inefficient farms remained in the sector thanks to the policy support. However, the SAP introduction could potentially give the right incentives to Lithuanian farmers for a quicker restructuring and an increase in farm efficiency, although such change may be impeded by the lack of available agricultural land.
    Keywords: Single Area Payment, technical efficiency, size, subsidies, Lithuania
    JEL: D24 Q12
    Date: 2010
  16. By: Shawn Ni (Department of Economics, University of Missouri-Columbia); Jie Chen
    Abstract: The price-to-rent ratio, a common yardstick for the value of housing, is difficult to estimate when rental properties are poor substitutes of owner-occupied homes. In this study we estimate price-to-rent ratios of residential properties in two major cities in China, where urban high-rises (estates) comprise both rental and owner-occupied units. We conduct Bayesian inference on estate-specific parameters, using information of rental units to elicit priors of the unobserved rents of units sold in the same estate. We find that the price-to-rent ratios tend to be higher for low-end properties. We discuss economic explanations for the phenomenon and the policy implications.
    Keywords: Housing price, rents, heterogeneity, Bayesian analysis
    JEL: C11 R21 R31 G00
    Date: 2010–11–29

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.