nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒03‒05
nineteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Intra-Regional Equalization & Growth in Russia By Jorge Martinez-Vazquez; Andrey Timofeev
  2. Russian language in Ukraine : does it concern only Russians? By Kseniia Ursulenko
  3. The Effect of European Accession Prospects on Foreign Direct Investment Flows By Hakan Gungor; Ayla Ogus Binatli
  4. China's External Surplus: Simulations with a Global Macroeconomic Model By Lukas Vogel
  5. Location Choice of Multinational Enterprises in China: Comparison between Japan and Taiwan By Kuo-I CHANG; Kazunobu HAYAKAWA; Toshiyuki MATSUURA
  6. Economic Development, Rural Zones and Farms in China By Fanfani, Roberto
  7. Change Begets Change: Employment Effects of Technological and Non-Technological Innovations - a Comparison across Countries By Robert Stehrer; Johannes Pöschl; Sandra M. Leitner
  8. The Penn Effect and Transition : The New EU Member States in International Perspective By Richard Frensch; Achim Schmillen
  9. Direct payments and rent extraction by land owners: Evidence form New Member States By Van Herck, Kristine; Vranken, Liesbet
  10. EU Gas Supplies Security: Russian and EU Perspectives, the Role of the Caspian, the Middle East and the Maghreb Countries By Gerhard Mangott
  11. What Drives Fixed Asset Holding and Risk-Adjusted Performance of Corporate in China? An Empirical Analysis By Dong, Yan; Leung, Charles Ka Yui; Cai, Dongliang
  12. Economisirea în România – evoluţii şi factori determinanţi By Dumitru, Ionut; Mircea, Romulus; Jianu (Dumitru), Ionela
  13. Mapping changes on agricultural and rural areas: an ex-post evaluation of the EU membership for Hungary By Monasterolo, Irene; Pagliacci, Francesco
  14. Role of agriculture in the livelihoods of farm households in Tibet By Brown, Colin; Waldron, Scott
  15. A Model of Total Factor Productivity Built on Hayek’s View of Knowledge: What Really Went Wrong with Socialist Planned Economies? By Harashima, Taiji
  16. Labour market mobility during a recession : the case of Estonia By Jaanika Meriküll
  17. Inflation Convergence and the New Keynesian, Phillips Curve in the Czech Republic By Katarína Danišková; Jarko Fidrmuc
  18. Skill distribution and comparative advantage: a comparison of China and India By Asuyama, Yoko
  19. The impact of the stimulus package on the agricultural sector in Vietnam By Trang, Truong Thi Thu; Vanzetti, David

  1. By: Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Andrey Timofeev (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Until 2009, the Russian economy had been enjoying above 5% annual growth since it hit bottom along with the oil prices in 1998. However, the dynamics of the economic recovery have been very uneven across Russian regions. Thus, the determinants of regional economic growth are likely to have a strong sub-national level component. In this paper we examine the potential role played by the fiscal relations between regional governments and their constituent localities. Our empirical results strongly suggest that intra-regional fiscal inequality across local governments and inter-jurisdictional equalization policies pursued by the regional governments have a substantial impact on regional growth. Specifically, we find the following policy tradeoff: one standard deviation higher level of regional equalization translates into half a standard deviation lower rate of regional growth. One question for future research is whether decentralization designs into a hierarchical system result in more local government equalization in comparison to other inter-governmental design, such as a bifurcated system, where the central government is in charge of local equalization.
    Date: 2010–05–01
  2. By: Kseniia Ursulenko (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: This paper examines the problem of current status of the Russian language in Ukraine. Based on the data of a monitoring “Ukrainian society” conducted by the Institute of Sociology (Kyiv) on the yearly basis since 1994, I define the factors that influence people’s attitudes toward the Russian language. The focus of the analysis is on the individual- and regional-level effects. The results show that there is a significant regional effect on the degree of support of the Russian language: the more Russian-speaking people live in the oblast (administrative unit), the more likely people from this oblast are to support the official status of the Russian language. In the meantime, no nationality effect was revealed suggesting that Ukrainians and Russians do not differ in the level of support of the official status for the Russian language in Ukraine.
    Date: 2011–01
  3. By: Hakan Gungor (Department of Economics, University of Verona); Ayla Ogus Binatli (Department of Economics, Izmir University of Economics)
    Abstract: The amount of FDI is increasing than any other international transactions during the last two decades. While countries remove barriers and implement policies to attract FDI inflows, the volume of foreign trade and investment increased .The objective of this paper is to enlighten the impact of EU accession of CEEC countries and Turkey on FDI flows into these countries. We perform Arrenalo-Bond - GMM model for the period of 1990-2009 for Poland, Hungary, Czech Republic, Estonia, Slovakia, Romania, Bulgaria, Turkey Croatia, Macedonia, and Ukraine. The empirical results suggest that as agglomeration effects and trade openness are significant determinants of MNCs’ activity during the period, traditional determinants, risk factors, labor cost, and market size are insignificant. In addition, the effect of EU accession prospects is found to be positive and significant.
    Keywords: European Union, FDI, Turkey, Accession, Candidacy
    JEL: F23
    Date: 2010–10
  4. By: Lukas Vogel
    Abstract: The paper analyses China's external position in a multi-region macroeconomic model of the world economy. The model includes a portfolio structure and Forex intervention to proxy net/gross and government/non-government foreign asset positions, capital controls and exchange rate management in China. The selected set of transition and globalisation shocks replicates China's external position well, suggesting that it reflects capital exports driven by shifts in domestic saving supply, rather than shifts in foreign saving demand. The simulations also highlight the importance of effective capital controls for the viability of China's exchange rate management. Finally, the analysis suggests that enhanced flexibility of the RMB exchange rate could reduce China's net creditor position.
    JEL: F30 F40
    Date: 2010–12
  5. By: Kuo-I CHANG (Department of Applied Economics, National Chung Hsing University, Taiwan); Kazunobu HAYAKAWA (Inter-disciplinary Studies Center, Institute of Developing Economies, Japan); Toshiyuki MATSUURA (Institute of Economic and Industrial Studies, Keio University,Japan)
    Abstract: This paper explores the location choice of MNEs in China, shedding special light on the role of agglomeration of same-nationality firms. In particular, we examine how its role differs according to investors’ productivity. Furthermore, we compare the location choice of Japanese and Taiwanese MNEs in China, because Taiwanese MNEs are expected to experience less uncertainty in investing in China than Japanese MNEs, due to Taiwan’s linguistic and cultural advantages in China. We find that, less productive Japanese firms prefer to locate close to larger same-nationality agglomerations, there are no differences in location according to firms’ productivity in the case of Taiwanese firms.
    Date: 2011–02–01
  6. By: Fanfani, Roberto
    Abstract: Because of the growing influence of China, the rapid economic development and the transformation of Chinese society have attracted the attention of analysts, politicians and mass media. There are, however, many aspects of these changes that are less well known. This is not only because of the sheer size of China â with a population of more than 1.3 billion â but also because of the lack of information on the enormously large and varied rural areas, where still now more than 55% of the Chinese population lives. The great reform of the Chinese economy began 30 years ago in 1978. The basic change was liberalization of foreign trade, the soâcalled âOpen Door Policyâ. This involved a deep reform of the economy and in particular of agriculture, which entailed the dismantling of the collectives and the establishment of a familyâbased farming structure, the soâcalled âHousehold Responsibility Systemâ. The rapid development of the Chinese economy in recent decades is the result of the combined effect of these reforms. However the role that reforms in agriculture and rural areas have played in this transformation have often been overlooked, and in particular the effect of reliable food supplies on a continually growing population, such as the Chinese one. The great reduction in hunger and malnutrition, which in the past affected millions of Chinese citizens, has had a decisive impact on the reduction of poverty, thus increasing the social stability of the whole country.
    Keywords: Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Production Economics,
    Date: 2010–10
  7. By: Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Johannes Pöschl (The Vienna Institute for International Economic Studies, wiiw); Sandra M. Leitner
    Abstract: This paper attempts to shed new light on the effect innovation has on employment. Specifically, it identifies the net employment effects of technological product and process innovations as well as complementary non-technological organizational innovations which have so far mostly been bypassed in comparable analyses. The analysis applies the 4th Community Innovation Survey and determines and compares innovation-induced employment effects in both manufacturing and service sectors across three country-groups: i) a set of Central and Eastern European transition countries, ii) a group of Southern EU member states as well as iii) a pool of Core EU member countries. The results reveal interesting differences across types of innovation, sectors or country-groups analysed. Particularly, in both manufacturing and service sectors of Central and Eastern European transition countries and Southern European countries, employment expands in response to the introduction of product novelties or process innovations only. Non-technological organizational innovations, on the other hand, had a detrimental effect on employment in the manufacturing sector of Central and Eastern European countries only. In contrast, employment in both manufacturing and service sectors of Core European countries only reacts to the introduction of new products but remains unaffected by the implementation of process or organizational innovations.
    Keywords: employment, technological and non-technological innovations, manufacturing and services, CIS 4
    JEL: J2 O33
    Date: 2011–01
  8. By: Richard Frensch; Achim Schmillen (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: Recent panel studies have found relatively high point estimates for the elasticity of ag-gregate price measures with respect to productivity in (former) transition economies, while other studies report price-productivity elasticity estimates to depend positively on average productivity in the sample. We aim to reconcile both results by putting com-parative price developments of transition economies in an international perspective. We argue that estimating simple price-productivity relationships without the inclusion of other real factors connected to reform effort might severely bias estimates for CEEC economies. Our results imply that, when controlling for reform effort and therefore avoiding this endogeneity problem, the price-productivity-elasticity for CEEC econo-mies was not different from that of non-transition economies during the first 15 years of transition.
    Keywords: Balassa-Samuelson, transition
    JEL: F40 F43
    Date: 2011–01
  9. By: Van Herck, Kristine; Vranken, Liesbet
    Abstract: Since the accession of the eight Central and Eastern European countries, farmers in these countries started to receive substantial agricultural subsidies. Agricultural subsidies alter farmer production incentives and thus factor demand and factor prices. Hence, agricultural support has an impact on land rents. This paper analyses the impact of the introduction of direct payments on land rents in the new member states and correlates econometrically land rental price data with support measures while controlling for other effects. The impact of direct payments on land rents is not only found to be statistically significant, but also economically important as 15% of the direct payments are capitalized in land rents in the new member states.
    Keywords: Land rental prices, Farm subsidies, New member states, Agricultural and Food Policy, Q12, Q18,
    Date: 2011–02–10
  10. By: Gerhard Mangott
    Abstract: This report tracks the major geo-economic and geo-strategic ruptures between the EU and Russia on the future patterns of gas supplies and shipping routes to the EU and the Western Balkans. It identifies the objectives and interests of the actors involved in this struggle: Russia, the EU, various EU members, the countries of the Caspian Basin (Kazakhstan, Uzbekistan, Turkmenistan, Azerbaijan) and the Middle East (Iran, Iraq, Qatar, Egypt) as well as the Maghreb countries (Algeria, Libya). It analyses in great detail the colliding interests of all actors at the intersection of business and (geo-) politics.
    Keywords: energy security, EU, Russia, gas, Southern Gas Corridor, South Stream, Nabucco
    JEL: F14 F59 L71 L78 L95 Q41
    Date: 2010–12
  11. By: Dong, Yan; Leung, Charles Ka Yui; Cai, Dongliang
    Abstract: This paper attempts to shed light on the over-investment debate by investigating listed firms in China. Firms with higher level of fixed asset holding, higher level of overhead expenses, and being covered by the tax-favor policy in China are found to be associated with a lower risk-adjusted performance. In addition, the tax-favor policy itself encourages fixed asset investment. In contrast to some of the previous literature, state-ownership of firms, dividend policy, and ownership concentration are not robust predictors of risk-adjusted performance, and debt level, managerial shareholding, and profit per unit of asset are not robust predictors of fixed asset investment.
    Keywords: fixed asset holding; corporate real estate; over-investment theory; state-ownership; tax-favor policy
    JEL: R30 L20 G30
    Date: 2011
  12. By: Dumitru, Ionut; Mircea, Romulus; Jianu (Dumitru), Ionela
    Abstract: The paper analyses the savings developments in Romania during transition in comparison with the other CEE countries, starting from the definition of savings from the national accounts. Moreover, saving analysis is performed by institutional sectors, especially for population and nonfinancial companies sectors. Also, the paper assesses the impact of savings on the financial balance sheets of population and companies. Using panel data covering 60 countries for 1980-2009 period, the paper is estimating some quantitative models for saving and its fundamentals. The models which are based on GMM methodology are used afterwards to assess the long term outlook of savings for Romania as well for other countries.
    Keywords: private savings; panel data; Ricardian equivalence; disposable income; impact of ageing
    JEL: E62 C23 E01 F21 E21
    Date: 2011–02–20
  13. By: Monasterolo, Irene; Pagliacci, Francesco
    Abstract: Several progresses have been made in evaluating the development policies for rural areas in the last years; many indicators1 have been set for assessing the effectiveness of Common Agricultural Policy (CAP) and Rural Development Policies (RDPs) and their role on the convergence process of the EU members, but a shared definition of rurality is still missing. The results obtained at the level of growth and development by the most lagging behind areas, are far from being satisfactory (Brasili, 2005). The evaluation of the policies and programmes introduced evidenced lack of institutional planning and implementing abilities, and an insufficient targeting of policies and payments (Mantino, 2010). The experience of the 10 New Member States (NMSs)2 showed how the current CAP and Cohesion policy, designed for the EU-15 (Csaki et al. 2010), arenât enough for addressing the regional specificities, hindering a process of development which is already weakened by the effects of the unfinished transition. This paper aims at offering a methodological contribution for evaluating the EU membership, with particular attention to the CAP, in Hungary. We chose this Country among the 10 NMSs because of the relevance (96%) of the rural areas on the total land3, and given the historical socio-economic role played by agriculture. The authors believe that more targeted â and therefore efficient â policies for agricultural and rural areas require a deeper knowledge of their structural and dynamic characteristics. Therefore, in order to identify the changes occurred before (2003) and after (2007) the EU membership on agricultural and rural areas, we use the following multivariate statistics methodologies: Principal Components Analysis, applied to the set of 42 variables, and Cluster Analysis on the results obtained by the Principal Components Analysis. Then, we offer a preliminary evaluation of the distribution of Single Area Payment Scheme (SAPS)4, using the information on the applications provided at the County level by the Hungarian Paying Agency to show correlations with the leading factors.
    Keywords: Agricultural and rural development policy evaluation, rural areas, policy targeting, EU enlargement, Agricultural and Food Policy, O18, P25, R58,
    Date: 2011–02–10
  14. By: Brown, Colin; Waldron, Scott
    Abstract: In its ongoing efforts to identify more socially inclusive forms of development that target households in rural areas of Tibet, the Chinese central government has begun to focus more attention and resources on agricultural modernisation and development. Although agriculture continues to play a pivotal role in rural areas of Tibet, the nature of agriculture and rural society is changing.3 This paper first highlights some of the macroâlevel changes that are occurring and some of the underlying drivers behind these changes. It then describes a model used to understand farm household systems at a microâlevel for the main agricultural areas of the Yalong river and its tributaries . The models explore the impact of agricultural innovations and changing agricultural practices on household consumption, resources, and economic returns. Although the model and analysis are still in a preliminary stage, they reveal detailed insights about the role of agriculture in the livelihoods of Tibetan farm households.
    Keywords: Community/Rural/Urban Development, International Development,
    Date: 2011
  15. By: Harashima, Taiji
    Abstract: Because Hayek’s view goes beyond the Walrasian framework, his descriptive arguments on socialist planned economies are prone to be misunderstood. This paper clarifies Hayek’s arguments by using them as a basis to construct a model of total factor productivity. The model shows that productivity depends substantially on the intelligence of ordinary workers. The model indicates that the essential reason for the reduced productivity of a socialist economy is that, even though human beings are imperfect and do not know everything about the universe, they are able to utilize their intelligence to innovate. Decentralized market economies are far more productive than socialist economies because they intrinsically can fully utilize human beings’ intelligence, but socialist planned economies cannot, in large part because of the imagined perfect central planning bureau that does not exist.
    Keywords: Hayek; Market economy; Socialist planned economy; Total factor productivity; Innovation; Experience curve effect; China
    JEL: P20 J24 P10 D24 O31
    Date: 2011–02–26
  16. By: Jaanika Meriküll
    Abstract: The paper investigates the dynamics of worker flows and the duration of different labour market states during the recent boom and bust of 2001-2010 in Estonia. We find that labour market adjustment has mostly taken place through massive worker reallocation, resulting in a high unemployment rate. Despite high worker flows from employment to unemployment, labour market mobility has fallen in many ways during the recession: job tenure and unemployment spells have increased, while job-to-job transitions and mobility across industries and occupations have fallen. The unemployed with the lowest level of education and non-Estonians have the lowest mobility to enter employment and run the highest risk of long-term unemployment. There is evidence of softer ways of adjustments to the crisis, where more workers are engaged in remote work, part-time work or jobs that do not match their skills. Internal migration has small potential to alleviate the high unemployment. The current crisis has hit the country more evenly across its regions than the Russian crisis did. Unemployment has increased similarly in all regions and unemployment inequality has dropped. Even so, there are some signs of marginalisation. The situation is worst in the north-eastern part of the country with unemployment hitting 25%
    Keywords: worker reallocation, unemployment and employment duration, business cycle
    JEL: J60 E32 J61 J62 J64
    Date: 2011–02–22
  17. By: Katarína Danišková (Comenius University Bratislava); Jarko Fidrmuc (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: The New Keynesian Phillips Curve has become an important part of modern monetary policy models. It describes the relationship between inflation and real marginal cost, which is derived from micro-founded models with rational expectations, sticky prices, and forward and backward looking behaviour. This answers the previous critique of the Phillips Curve. We estimate several specifications of the New Keynesian Phillips Curve for the Czech Republic between 1996 and 2009. We show that the GMM suffers under the problem of weak instruments leading to biased estimates. In turn, the FIML is robust and yields significant estimates of structural parameters implying a strong forward looking behaviour.
    Keywords: inflation, New Keynesian Phillips Curve, marginal costs, output gap, real unit labour costs
    JEL: E31 E52 C32
    Date: 2011–01
  18. By: Asuyama, Yoko
    Abstract: This paper empirically examines the different comparative advantages of two emerging economic giants, China and India, in relation to the different skill distribution patterns in each country. By utilizing industry export data on China and India from 1983 to 2000, we find that a country with a greater dispersion of skills (i.e., India, especially in the earlier years) has higher exports in industries with shorter production chains, whereas a country with a more equal dispersion of skills (i.e., China, especially in the later years) is found to have higher exports in industries with longer production chains. The causal relationship is fairly robust across different specifications. This empirical evidence supports our assumption that the likely mechanism for these results is the negative impact of low-skilled workers on input quality, which accumulates and becomes larger as the length of production chains and the proportion of low-skilled workers in the economy increase.
    Keywords: China, India, Manufacturing industries, Manufactures, Labor productivity, Labor conditions, International competition, Exports, Comparative advantage, Production chains, Sequential production, Skill distribution
    JEL: F14 F16 J2
    Date: 2011–02
  19. By: Trang, Truong Thi Thu; Vanzetti, David
    Abstract: The global financial crisis in 2008-2009 has affected almost all countries. Vietnam was hit by a large fall in export demand and foreign direct investment. Many governments quickly prescribed stimulus packages and Vietnam was no exception. It reduced taxes and increased government spending, mainly by subsidizing loans to state-owned enterprises. The question is what the stimulated impact is, if any, and whether a better outcome could have been achieved by a different mix of policies. In this paper, we use a simple general equilibrium model to quantify the impact of the various components of the stimulus package on the whole economy as well as agricultural sector. The results suggest that, in the short run at least, the stimulus package marginally stabilised national production and income. The package led to a reduction in total welfare because it favoured the non-agricultural sector. The poor in the agricultural sector could be better off if the investment policy were to boost demand for agricultural products. Furthermore, the risk of inflation and real exchange rate appreciation could undermine national competitiveness.
    Keywords: Vietnam, fiscal stimulus, agriculture, International Development, Public Economics, E62, D58, Q17,
    Date: 2011

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