nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒02‒26
fifteen papers chosen by
J. David Brown
Heriot-Watt University

  1. "China's increasing policy shift towards more sustainable growth" By Prud'homme, Dan
  2. Relative Concerns of Rural-to-Urban Migrants in China By Akay, Alpaslan; Bargain, Olivier; Zimmermann, Klaus F.
  3. Unemployment hysteresis, structural changes, non-linearities and fractional integration in European transition economies By Juan Carlos Cuestas; Luis A. Gil-Alana
  4. Sex Ratios, Entrepreneurship, and Economic Growth in the People’s Republic of China By Shang-Jin Wei; Xiaobo Zhang
  5. Capital Account Liberalization and the Role of the RMB By Nicholas Lardy; Patrick Douglass
  6. Export performance of Chinese domestic firms: the role of foreign export spillovers By Florian MAYNERIS; Sandra PONCET
  7. Asian Competitive Devaluations By Li-Gang Liu; Sherman Robinson; Zhi Wang
  8. Structural Transformation in China and India: The Role of Macroeconomic Policies By Codrina Rada and Rudiger von Arnim
  9. Institutions and Entry: A Cross-Regional Analysis in Russia By Bruno, Randolph Luca; Bytchkova, Maria; Estrin, Saul
  10. The Electricity Sector in FYR Macedonia By Alexander F. Tieman
  11. Armenia: An Assessment of the Real Exchange Rate and Competitiveness By Anke Weber; Chunfang Yang
  12. School Quality and Housing Prices: Empirical Evidence Based on a Natural Experiment in Shanghai, China By Hao Feng; Ming Lu
  13. Improving International Comparisons of Real Output: The ICP 2005 Benchmark and its Implications for China By Robert J. Hill; Iqbal Syed
  14. The intergenerational transmission of educational attainment in East and West Germany By Riphahn, Regina T.; Trübswetter, Parvati
  15. Do Financial Variables Help Predict Macroeconomic Environment? The Case of the Czech Republic By Tomas Havranek; Roman Horvath; Jakub Mateju

  1. By: Prud'homme, Dan
    Abstract: Many have increasingly questioned if and how Chinese policy has evolved or will evolve to ensure that the country’s development is not only focused on immediate economic growth, but also economically, socially and environmentally sustainable. This paper addresses this question by tracing key issues in China’s past and current path to development. It finds that China is clearly increasingly shifting its policies to foster more sustainable growth, which provides a good indication that its upcoming policies will head in the same positive direction.
    Keywords: China's sustainable development; China's development policy; China's economic policy; China's social policy; China's environmental policy; China's trade policy; Dan Prud'homme; China's Five Year Plans; China's quality and balanced growth
    JEL: P11 H11 O53 P21 Q56 I38 F14
    Date: 2010–04
  2. By: Akay, Alpaslan (IZA); Bargain, Olivier (University College Dublin); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: As their environment changes, migrants constitute an interesting group to study the effect of relative income on subjective well-being. This paper focuses on the huge population of rural-to-urban migrants in China. Using a novel dataset, we find that the well-being of migrants depends on several reference groups: it is negatively affected by the income of other migrants and workers of home regions; in contrast, we identify a positive, 'signal' effect vis-à-vis urban workers: larger urban incomes indicate higher income prospects for the migrants. These effects are particularly strong for migrants who wish to settle permanently, decline with years since migrations and change with other characteristics including work conditions and community ties.
    Keywords: China, relative concerns, well-being
    JEL: C90 D63
    Date: 2011–02
  3. By: Juan Carlos Cuestas (Department of Economics, The University of Sheffield); Luis A. Gil-Alana
    Abstract: In this paper we aim to analyse the dynamics of unemployment in a group of Central and Eastern European Countries (CEECs). The CEECs are of special importance for the future of the European Union, given that most of them have recently become member states, and labour flows have been seen to rise with their accession. By means of unit root tests incorporating structural changes and nonlinearities, as well as fractional integration, we find that the unemployment rates for the CEECs are mean reverting processes, which is consistent with the NAIRU hypothesis, although shocks tend to be highly persistent.
    Keywords: Unemployment, NAIRU, hysteresis, unit roots, fractional integration
    JEL: C32 E24
    Date: 2011–02
  4. By: Shang-Jin Wei; Xiaobo Zhang
    Abstract: China experiences an increasingly severe relative surplus of men in the pre-marital age cohort. The existing literature on its consequences focuses mostly on negative aspects such as crime. In this paper, we provide evidence that the imbalance may also stimulate economic growth by inducing more entrepreneurship and hard work. First, new domestic private firms – an important engine of growth – are more likely to emerge from regions with a higher sex ratio imbalance. Second, the likelihood for parents with a son to be entrepreneurs rises with the local sex ratio. Third, households with a son in regions with a more skewed sex ratio demonstrate a greater willingness to accept relatively dangerous or unpleasant jobs and supply more work days. In contrast, the labor supply pattern by households with a daughter is unrelated to the sex ratio. Finally, regional GDP tends to grow faster in provinces with a higher sex ratio. Since the sex ratio imbalance will become worse in the near future, this growth effect is likely to persist.
    JEL: E2 F3 F43 J1 J2 O1 O4
    Date: 2011–02
  5. By: Nicholas Lardy (Peterson Institute for International Economics); Patrick Douglass (Peterson Institute for International Economics)
    Abstract: Despite an erosion of consensus on its benefits, capital account convertibility remains a long-term goal of China. This paper identifies three major preconditions for convertibility in China: a strong domestic banking system, relatively developed domestic financial markets, and an equilibrium exchange rate. The authors examine each of these in turn and find that, in significant respects, China does not yet meet any of the conditions necessary for convertibility. They then evaluate China’s progress to date on capital account liberalization, including recent efforts to promote RMB internationalization and greater use of the RMB in trade settlement. The paper concludes with an overview of remaining obstacles to convertibility and policy recommendations.
    JEL: G15 G21 O16 F31
    Date: 2011–02
  6. By: Florian MAYNERIS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)); Sandra PONCET (Paris School of Economics - Université de Paris 1 Panthéon-Sorbonne and CEPII)
    Abstract: We investigate how the proximity to multinational exporters influences the creation of new export linkages (extensive margin of trade) by domestic firms in China. Using panel data from Chinese customs for 1997-2007, we show that domestic firms’ capacity to start exporting new varieties to new markets positively responds to the export activity of neighboring foreign firms for that same product-country pair. We find that foreign export spillovers are limited to ordinary trade activities. No foreign export spillovers are found for processing trade. More, export spillovers are stronger for sophisticated products indicating that proximity to foreign exporters may help domestic exporters to upgrade their exports. However we observe that foreign export spillovers are weaker when the technology gap between foreign and domestic firms is large, suggesting that upgrading may not occur when foreign firms have already a strong edge.
    Keywords: Export performance; spillovers; FDI; Sophistication
    JEL: F1 R12 L25
    Date: 2011–02–04
  7. By: Li-Gang Liu (Peterson Institute for International Economics And Marcus Noland, Peterson Institute for International Economics); Sherman Robinson (Peterson Institute for International Economics); Zhi Wang (Peterson Institute for International Economics)
    Abstract: In this paper we examine three issues. The first is the path of China's nominal and real exchange rates since 1990. As it turns out, this is more complicated than is commonly assumed, with basic results exhibiting sensitivity to the exchange rate measure used. We conclude that while China did experience a large nominal depreciation, its much higher relative inflation eroded this devaluation, and in real terms the reminbi has actually appreciated during the 1990s. The Chinese devaluation was at best a contributing factor to the Asian financial crises, not their primary cause.
    Date: 2010–12
  8. By: Codrina Rada and Rudiger von Arnim
    Abstract: This paper explores macroeconomic policies that can sustain structural change in China and India. A two--sector open--economy model with endogenous productivity growth, demand driven output and income distribution as an important determinant of economic activity is calibrated to a 2000 SAM for China and a 1999/2000 SAM for India. Short-- run analysis concerns temporary equilibria for output, productivity and employment growth rates in the formal sector. In the long--run, the model allows for multiple equilibria which can describe cases of (a) underdevelopment and structural heterogeneity or (b) sustained growth and development. Several simulation exercises are conducted. Specifically, we consider how changes in investment, wages, labor productivity trend and a depreciation of currency affect the macroeconomy and job creation in the formal sector.
    Keywords: Structural change, endogenous productivity, dual economy, China, India JEL Classification: O11, O41, E26
    Date: 2011
  9. By: Bruno, Randolph Luca (University of Birmingham); Bytchkova, Maria (London School of Economics); Estrin, Saul (London School of Economics)
    Abstract: We analyse a micro-panel data set to investigate the effect of regional institutional environment and economic factors on Russian new firm entry rates across time, industries and regions. The paper builds on novel databases and exploits inter-regional variation in a large number of institutional variables. We find entry rates across industries in Russia are not especially low by international standards and are correlated with entry rates in developed market economies, as well as with institutional environment and firm size. Furthermore, industries that, for scale or technological reasons, are characterised by higher entry rates experience lower entry within regions affected subject to political change. A higher level of democracy enhances entry rates for small sized firms but reduces them for medium or large ones.
    Keywords: entry rate, institutions, democracy
    JEL: L26 P31
    Date: 2011–02
  10. By: Alexander F. Tieman
    Abstract: This paper describes the current state of the Macedonian electricity sector. It looks at ongoing structural changes, driven by the gradual adoption of the EU acquis on energy, and comes up with estimates for electricity subsidies. It concludes by discussing the longer term outlook and sketching policy options.
    Keywords: Demand , Electric power , Energy policy , Energy sector , European Economic and Monetary Union , Macedonia, former Yugoslav Republic of , Supply ,
    Date: 2011–02–04
  11. By: Anke Weber; Chunfang Yang
    Abstract: This paper uses a range of different methodologies to estimate the equilibrium real exchange rate in Armenia with both single-country and panel estimation techniques. We estimate a country specific autoregressive distributed lag model and then proceed with the estimation of a cointegrated panel consisting of transition economies in Europe and Central Asia. This addresses cross section dependence by using common correlated effects estimators. While our analysis focuses on Armenia, the methods are applicable to a large number of transition economies, and the paper thus provides an overview of methods that can be used to assess a country’s equilibrium exchange rate.
    Keywords: Armenia , Economic models , Exchange rate assessments , Export prices , Global competitiveness , Real effective exchange rates ,
    Date: 2011–01–27
  12. By: Hao Feng; Ming Lu
    Abstract: The extent to which the quantity and quality of education is capitalized into housing prices is a key issue in understanding the relationship between allocation of educational resources and the housing market. Using monthly panel data of 52 residential areas in Shanghai and employing a natural experiment of designating Shanghai Experimental Model Senior High Schools (EMSHS), we find that housing prices in Shanghai have capitalized the access to quality schools and other public goods. One quality school per square kilometer raises average housing prices by approximately 19%, and one best EMSHS per square kilometer increases housing prices by 21%. We also match the schools designated for EMSHS with schools of similar quality but not designated for EMSHS, and compare housing prices in the corresponding areas. We find that the designation increased the housing prices, showing that dissemination of information about school quality was significantly affected by the designation.
    Keywords: education, housing market, capitalization, public goods, natural experiment
    Date: 2010–11
  13. By: Robert J. Hill (Department of Economics, University of Graz); Iqbal Syed (School of Economics, The University of New South Wales)
    Abstract: The latest round of the International Comparisons Program (ICP 2005) compares the purchasing power of currencies and real output of 146 countries. Using price quote data from nine countries in the Asia-Pacific region, we consider ways of improving the methods used in ICP 2005 and new applications of these methods (e.g., for calculating rural-urban price differentials). The most striking result in ICP 2005 was that China came out 40 percent smaller than previously thought. We also evaluate the extent to which this finding can be attributed to excessive sampling of prices in China from urban areas or of unrepresentative products.
    Keywords: International Comparisons Program; Country-Product-Dummy Method; Price Index; Basic Heading; Urban-Rural Price Differences; Representative and Unrepresentative Products; Asia-Pacific Region
    JEL: C43 O47 O53
    Date: 2010–12
  14. By: Riphahn, Regina T.; Trübswetter, Parvati (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Socialist societies often emphasized the abolition of traditional social classes. To achieve this objective, educational opportunities were at times 'actively managed' and allocated to children of less educated parents. What happened to these patterns after the demise of socialist rule in Eastern Europe? We study the development of educational mobility after the fall of the iron curtain in East Germany and compare the relevance of parental educational background for secondary schooling outcomes in East and West Germany. Based on data from the German Mikrozensus we find that educational mobility is lower in East than in West Germany and that it has been falling in East Germany after unification. While the educational advantage of girls declined over time, having many siblings presents a more substantial disadvantage in East than in West Germany." (author's abstract, IAB-Doku) ((en))
    Keywords: Bildungsmobilität, Intergenerationsmobilität, Eltern, Kinder, Qualifikationsniveau, Schullaufbahnwahl, Gymnasium, Ostdeutschland, Westdeutschland, Bundesrepublik Deutschland
    JEL: I21 I28 J11
    Date: 2011–02–15
  15. By: Tomas Havranek; Roman Horvath; Jakub Mateju
    Abstract: In this paper, we 1) examine the interactions of financial variables and the macroeconomy within the block-restriction vector autoregression model and 2) evaluate to what extent the financial variables improve the forecasts of GDP growth and inflation. For this reason, various financial variables are examined, including those unexplored in previous literature, such as the share of liquid assets in the banking industry and the loan loss provision rate. Our results suggest that financial variables have a systematic and statistically significant effect on macroeconomic fluctuations. In terms of forecast evaluation, financial variables in general seem to improve the forecast of macroeconomic variables, but the predictive performance of individual financial variables varies over time, in particular during the 2008–2009 crisis.
    Keywords: Forecasting, macroeconomic and financial linkages, vector autoregressions.
    JEL: E44 E58 E47
    Date: 2010–12

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