nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒04‒09
thirteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Which Households Use Banks? Evidence from the Transition Economies By Thorsten Beck; Martin Brown
  2. Risk, Institutions and Growth: Why England and Not China? By Greif, Avner; Iyigun, Murat; Sasson, Diego
  3. Regional Growth Dynamics in Central and Eastern Europe By Vassilis Monastiriotis
  4. Has assistance from USAID been successful in promoting and sustaining democracy? Evidence from the transition economies of Eastern Europe and Eurasia By Andreas Freytag; Jac C. Heckelman
  5. Performance assessment of Russian homeowners associations : The importance of being social By Polishchuk, Leonid; Borisova, Ekaterina
  6. Emerging Paradigm of Internationalization of China's Private-Owned Enterprises: Theoretical analysis and case study By ZHAO Wei
  7. Measurement of GDP per capita and regional disparities in China, 1979−2009 By Masashi Hoshino
  8. Implementing public-private partnerships in municipalities By Moszoro, Marian; Krzyzanowska, Magdalena
  9. ODI and Home Country's Industrial Upgrading: Mechanism and preliminary evidence By ZHAO Wei; JING Dong
  10. The Selection of Migrants and Returnees: Evidence from Romania and Implications By J. William Ambrosini; Karin Mayr; Giovanni Peri; Dragos Radu
  11. Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China By Chong, T.T.L.; Lu, L.; Ongena, S.
  12. Foreign Currency Loans - Demand or Supply Driven? By Martin Brown; Karolin Kirschenmann; Steven Ongena
  13. An Empirical Investigation of Liquidity and Stock Returns Relationship in Vietnam Stock Markets during Financial Crisis By Vo, Xuan Vinh; Batten, Jonathan

  1. By: Thorsten Beck; Martin Brown
    Abstract: This paper uses survey data for 29,000 households from 29 transition economies to explore how the use of banking services is related to household characteristics, bank ownership structure and the development of the financial infrastructure. At the household level we find that the holding of a bank account or bank card increases with income, wealth and education in most countries and also find evidence for an urban-rural gap, as well as for a role of religion and social integration. Our results show that foreign bank ownership is associated with more bank accounts among high-wealth, high-income, and educated households. State ownership, on the other hand, does not induce financial inclusion of rural and poorer households. We find that higher deposit insurance coverage, better payment systems and creditor protection encourage the holding of bank accounts in particular by highincome and high-wealth households. All in all, our findings shed doubt on the ability of policy levers to broaden the financial system to disadvantaged groups.
    Keywords: Access to finance, Bank-ownership, Deposit insurance, Payment system, Creditor protection.
    JEL: G2 G18 O16 P34
    Date: 2011
  2. By: Greif, Avner (Stanford University); Iyigun, Murat (University of Colorado, Boulder); Sasson, Diego (Goldman Sachs)
    Abstract: We analyze the role of risk-sharing institutions in transitions to modern economies. Transitions requires individual-level risk-taking in pursuing productivity-enhancing activities including using and developing new knowledge. Individual-level, idiosyncratic risk implies that distinct risk-sharing institutions – even those providing the same level of insurance – can lead to different growth trajectories if they differently motivate risk-taking. Historically, risk sharing institutions were selected based on their cultural and institutional compatibility and not their unforeseen growth implications. We simulate our growth model incorporating England’s and China’s distinct pre-modern risk-sharing institutions. The model predicts a transition in England and not China even with equal levels of risk sharing. Under the clan-based Chinese institution, the relatively risk-averse elders had more control over technological choices implying lower risk-taking. Focusing on non-market institutions expands on previous growth-theoretic models to highlight that transitions can transpire even in the absence of exogenous productivity shocks or time-dependent state variables. Recognizing the role of non-market institutions in the growth process bridges the view that transitions are due to luck and the view that transitions are inevitable. Transitions transpire when ‘luck’ creates the conditions under which economic agents find it beneficial to make the choices leading to positive rates of technological change. Luck came in the form of historical processes leading to risk-sharing institutions whose unintended consequences encouraged productivity-enhancing risk-taking.
    Keywords: institutions, risk, growth, development
    JEL: O10 O31 O43 N10
    Date: 2011–03
  3. By: Vassilis Monastiriotis
    Abstract: This paper examines the regional growth process of the countries of Central and Eastern Europe since the start of their transition to market economies. It relates this to three distinctive explanations of regional growth and examines empirically their relevance in explaining the patterns of disparity and polarisation that have emerged in these countries over the last two decades. The collapse of communism and the early transition shock that followed created in many respects an experiment-like situation with a set of ‘initial conditions’ conducive for analysing patterns of convergence and divergence in the processes of national economic development and cross-national catch-up growth. The path to EU accession intensified the speed of these processes at the national level thus making the corresponding regional evolutions more marked. Our empirical analysis unveils a complex pattern of non-linear regional growth dynamics with convergence tendencies largely swaddled by processes of cumulative causation. Despite the process of national catch-up growth, regional evolutions are on the whole divergent, with a pattern of convergence at the middle- and lower-ends of the distribution and a slower tendency for club formation at the higher end, and thus overall an increasing trend of polarisation.
    Date: 2011–04
  4. By: Andreas Freytag (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Jac C. Heckelman
    Abstract: Foreign aid, especially official development assistance (ODA), has received increasing criticism in past decades. In particular, it has been put into question if and to what extent aid can help foster the aims for which it has been paid. In most cases, it seems that there is no discernable effect or even a negative effect of ODA on economic development. One reason for aid ineffectiveness may be seen in a lack of good governance on the side of the recipients. It has been argued that aid should concentrate more on creating better institutions. In the past 20 years, democracy promotion has become a pillar of USAID's mission and the funding for democracy and governance has steadily increased. The transition economies in particular have received special attention upon the fall of the Soviet Union. We assess the success of this aid by testing whether US aid is enhancing democracy in 26 transition countries. Using Freedom House Nations in Transit data, we find that in simple linear panel regressions aid has generally not been a significant factor in a country's overall democracy score. However, aid has significantly contributed to certain components of the democracy score, namely civil society, electoral process, judicial framework, and media independence. In addition, the impact of aid is found to depend on the number of years of past central planning. Countries having a history of less than 50 years of central planning had a significantly negative association to aid, whereas countries with more than 65 years of central planning benefited from greater aid.
    Keywords: ODA, transition economies, democracy
    JEL: O2 P2
    Date: 2011–04–04
  5. By: Polishchuk, Leonid; Borisova, Ekaterina
    Abstract: Performance of Russian homeowners associations – non-profits established to manage common property in residential housing – is assessed using the stochastic frontier technique, which is a powerful tool of productivity analysis. Performance variations are explained by physical and social factors, prominent among them is the availability of social capital among tenants, required to resolve collective action problems and ensure accountability of managing bodies and outside contractors. Lack of civic capacity could be an obstacle to implementing community-governance solutions in residential housing, making homeowners associations dysfunctional or prone to capture by vested interests.
    Keywords: homeowners associations; non-profit organizations; common property; stochastic frontier; social capital
    JEL: P25 L31 C01
    Date: 2010–07
  6. By: ZHAO Wei
    Abstract: The upsurge of the outward direct investment (ODI) made by the Chinese firms in recent few years is one of main concerns among the academic researchers and policy consultants targeting emerging market economies. In this paper, the focus for analysis is the internationalization and ODI initiated by Chinese private-owned enterprises (POEs). Starting with a check of key factors that shape the general environment for Chinese enterprises' ODI and internationalization, the main theme of the paper is to assess conventional western theories on firm's internationalization compared with the reality found amongst Chinese POEs. The conclusion is that the conventional western theories do not satisfactorily explain the realities found in China. An alternative framework is suggested, the SIL model, as a more convincing explanation for the ODI and internationalization of the Chinese POEs. The SIL model is a revised version of John Dunning's eclectic paradigm taking into account the Chinese POE's experience. It accounts for the way in which the POEs focus on a market seeking orientation in the early stages of "going out".
    Date: 2011–03
  7. By: Masashi Hoshino (Slavic Research Center, Hokkaido University and RIEB, Kobe University Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper analyzes provincial GDP per capita disparities in China from 1979 to 2009. Provincial GDP per capita of official statistical materials have several problems such as data correctness and reliability, because the data are composed of the huji population and the changzhu population. The differences both population data are inter-province migration patterns. We compare result using our modified changzhu population GDP per capita data with results using official statistical materials. The empirical results as follows: (1) Previous studies since the 1990s have overestimated inter-province disparities; (2) inter-province disparities decrease from 2005; (3) Western region increase in intra-regional disparities since 2002. These results suggest that we should use provincial GDP per capita statistics more carefully.
    Keywords: Regional Disparities; GDP per capita; Statistics; China
    JEL: E01 O18 O53 R12 R23
    Date: 2011–03
  8. By: Moszoro, Marian (IESE Business School); Krzyzanowska, Magdalena (Kozminski University)
    Abstract: Public-Private Partnerships (PPPs) realize three critical strategic issues for improving the quality of urban services: the enhancement of governmental financing capabilities, the improvement of public investment efficiency, and the harnessing of consumer-orientated management expertise. Based on a sample of 20 projects embarked upon by the city of Warsaw, we examine the process of project selection, planning, and prerequisites for satisfactory completion. The paper contributes to the literature on the PPP pre-implementation process and offers a perspective on the potential of PPPs in emerging economies. Key policy recommendations: 1) central headquarters for coordination of planning process; 2) clear project selection criteria; 3) involvement of independent consulting companies to legitimate the process under subsequent administrations; 4) ex ante risk allocation and ex post performance measurement procedures; 5) pre-determined termination conditions; 6) determination to start the process and learn by doing, and 7) knowledge transfer and retention mechanisms.
    Keywords: Public Services; Public-Private Partnerships; Urban Development; Central and Eastern Europe; Emerging Markets;
    JEL: D73 H83 L32 L33 R51
    Date: 2011–02–09
  9. By: ZHAO Wei; JING Dong
    Abstract: Both the outward direct investment (ODI) from emerging market economies and industrial upgrading are new topics in economic research. Most research on these two topics has been done separately so far. China's emergence as a major ODI nation and urgent requirement for domestic industrial upgrading are increasingly bringing these together. With the hypothesis of the causal connection between the ODI and industrial upgrading, this paper tries to clarify the channel and mechanism that ODI spreads in terms of its effect on home countries' industries and to identify related evidence with a way of bringing knowledge in three research fields together: a) the historical experience of the ODI Pioneering countries; b) clues found from existing research and cases at sector level; c) evidence from China. Research shows that there are clear upgrading effects of the ODI in US and Japan's history when they emerged as ODI nations although they took different patterns. The pattern taken by the US was featured with efficiency priority, while that of Japan does so with structural adjustment priority. The mechanism and channels through which the ODI imposes effects on home industries' upgrading in China are more extensive than that of pioneer industrial countries. Besides, the empirical work done with the typical regions and typical industrial sectors gives clear support on the upgrading effects hypothesis in China.
    Date: 2011–03
  10. By: J. William Ambrosini; Karin Mayr; Giovanni Peri; Dragos Radu
    Abstract: This paper uses census and survey data to identify the wage earning ability and the selectivity of recent Romanian migrants and returnees. We construct measures of selection across skill groups and estimate the average and the skills-specific premium for migration and return for three typical destinations of Romanian migrants after 1990. We find evidence for a sorting of migrants consistent with skill compensation in destination countries. The premium to return migration increases with migrants' skills and drives the positive selection of returnees. Based on the rationality of these migration decisions, a model of education, migration and return predicts positive long-run effects of increased migration for average skills and wages in Romania.
    JEL: F22 J61 O15
    Date: 2011–03
  11. By: Chong, T.T.L.; Lu, L.; Ongena, S. (Tilburg University, Center for Economic Research)
    Abstract: Banking competition may enhance or hinder the financing of small and medium enterprises (SMEs). Using a survey on the financing of China’s SMEs combined with detailed bank branch information, we investigate how concentration in the local banking market affects the availability of credit. It is found that lower market concentration alleviates financing constraints. The un-concentrated presence of joint stock banks has a larger effect on alleviating credit constraints, while the presence of state-owned banks has a smaller effect, than the presence of city commercial banks.
    Keywords: Banking Competition;SMEs Financing;Credit Constraints.
    JEL: D41 D43 G21
    Date: 2011
  12. By: Martin Brown; Karolin Kirschenmann; Steven Ongena
    Abstract: Motivated by concerns over foreign currency exposures of banks in Emerging Europe, we examine the currency denomination of business loans made in Bulgaria during the period 2003-2007. We analyze a unique dataset including information on the requested and granted currency for more than hundred thousand loans granted by one bank to sixty thousand different firms. This data set allows us to disentangle demand-side from supply-side determinants of foreign currency loans. We find that 32% of the foreign currency loans disbursed in our sample were actually requested in local currency by the firm. Our analysis suggests that the bank lends in foreign currency, not only to less risky firms, but also when the firm requests a long-term loan and when the bank itself has more funding in euro. These results imply that foreign currency borrowing in Eastern Europe is not only driven by borrowers who try to benefit from lower interest rates but also by banks hesitant to lend longterm in local currency and eager to match the currency structure of their assets and liabilities.
    Keywords: foreign currency debt, banking
    JEL: G21 G30 F34 F37
    Date: 2011
  13. By: Vo, Xuan Vinh; Batten, Jonathan
    Abstract: This paper investigates the relationship between liquidity and stock returns in the Vietnam stock market during financial crisis using a data set ranging from 2006 to 2010. Employing a rich and detailed dataset of characteristics of firm listed in Ho Chi Minh City Stock Exchange, the results from the analysis indicate that liquidity positively affects stock returns. Our results contradict previous results that liquidity is negatively correlated with stock returns as investors required a premium to compensate for illiquid stocks in developed markets
    Keywords: Liquidity; stock returns; Vietnam
    JEL: G12 G10
    Date: 2010–01–01

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