nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒05‒14
eighteen papers chosen by
J. David Brown
Heriot-Watt University

  1. The opening up of eastern Europe at 20-jobs, skills, and Â?reverse maquiladorasÂ? in Austria and Germany By Dalia Marin
  2. Export performance of Chinese domestic firms: the role of foreign export spillovers By MAYNERIS, Florian; PONCET, Sandra
  3. Inflationary Effect of Oil-Price Shocks in an Imperfect Market: A Partial Transmission Input-output Analysis By Libo Wu; Jing Li; ZhongXiang Zhang
  4. Corporate Governance in Emerging Markets By Aguilera, Ruth V.; Kabbach de Castro, Luiz Ricardo; Lee, Jun Ho; You, Jihae
  5. Body Weight and Labour Market Outcomes in Post-Soviet Russia By Huffman, Sonya K.; Rizov, Marian
  6. Assessing the potential for knowledge-based development in transition countries By Reinhilde Veugelers
  7. Productivity Growth and Ownership Change in China: 1998-2007 By Liu, Jing; Cao, Shutao
  8. Inflation and Bank of Russia's policy: is there a link? By Yulia Vymyatnina; Anna Ignatenko
  9. Europe Agreements and Trade Balance: Evidence form Four New EU Members By Caporale, Guglielmo Maria; Rault, Christophe; Sova, Robert; Sova, Anamaria
  10. Beyond the crisis: Prospects for emerging Europe By Zsolt Darvas
  11. Capital Flows to EU New Member States: Does Sector Destination Matter? By Pritha Mitra
  12. Estimation of the competitive conditions in the Czech banking sector By Stavarek, Daniel; Repkova, Iveta
  13. Effective Environmental Protection in the Context of Government Decentralization By ZhongXiang Zhang
  14. International migration and new mobility trends By Abramuszkinova Pavlikova, Eva
  15. New Estimates and a Decomposition of Provincial Productivity Change in China By J. Laurenceson; C.J. O’Donnell
  16. Environmental Security and its Implications for China’s Foreign Relations By Junko Mochizuki; ZhongXiang Zhang
  17. Energy and Climate Change in China By Carlo Carraro; Emanuele Massetti
  18. Spread Components in the Hungarian Forint-Euro Market By M. FRÖMMEL; F. VAN GYSEGEM

  1. By: Dalia Marin
    Abstract: Many people in the European Union fear that eastern enlargement has led to major job losses in 'old' member states, particularly in Austria and Germany, as the two most important neighbours of the countries that joined the EU in 2004 and 2007. Are these fears justified'To address these questions, this paper makes use of new survey data of 660 German and Austrian firms with 2,200 investment projects in eastern Europe during the period 1990-2001. The new survey data represent 100 percent of Austrian and 80 percent of German direct investment in eastern Europe.
    Date: 2010–07
  2. By: MAYNERIS, Florian (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium); PONCET, Sandra (Paris School of Economics, Université Paris 1 Panthéon-Sorbonne and CEPII, France)
    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 L12
    Date: 2011–02–01
  3. By: Libo Wu (Center for Energy Economics and Strategy Studies, Fudan University and Institute of World Economy, Fudan University); Jing Li (Department of World Economy, School of Economics, Fudan University); ZhongXiang Zhang (East-West Center)
    Abstract: This paper aims to examine the impacts of oil-price shocks on China’s price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution - the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shocks. Using the models of both China and the U.S., we separate the impact of price control from those of other factors leading to China’s price stickiness under oil-price shocks. The results show a sharp contrast between China and the U.S., with price control in China significantly preventing oil-price shocks from spreading into its domestic inflation, especially in the short term. However, in order to strengthen the economy’s resilience to oil-price shocks, the paper suggests a gradual relaxing of price control in China.
    Keywords: Oil-price Shocks, Price Transmission, Price Control, Input-output Analysis, Inflation, Industrial Structure, China, the United States
    JEL: Q43 Q41 Q48 O13 O53 P22 E31
    Date: 2011–03
  4. By: Aguilera, Ruth V. (University of IL); Kabbach de Castro, Luiz Ricardo (Universitat de les Illes Balears); Lee, Jun Ho (University of IL); You, Jihae (University of IL)
    Abstract: The turning to the XXI century has been marked by reforms in corporate governance practices around the world. Whether due to shocks caused by the economic crisis in East Asia, Russia and Latin America, or by financial scandals in the United States and Europe, the fact is that the way of doing business has changed in terms of demands for greater corporate transparency and accountability, shifts in control of ownership, empowerment of new types of owners and so on. Consequently, countries and firms have adapted their corporate governance policies and practices to this new governance environment. In this chapter, we discuss the foundation of corporate governance, that is, corporate ownership. In particular, we explore the current patterns of the ownership structure of publicly listed firms in six emerging countries. To do so, we have collected firm ownership data for listed firms in Brazil, Chile, South Korea, Czech Republic, Hungary, and Poland during the first decade of the XXI century, and we compare our data with existing ownership research of these countries in the late 1990s. We conclude that although concentration of corporate shareholdings continues to be a common denominator among these emerging countries, the processes and structures controlling firms across countries is remarkably different. For instance, the privatization process in the 1990s, in spite of having different motivations and goals in Latin American and Eastern Europe shaped much of the corporate ownership transformations. Our chapter offers a comparative analysis of the corporate ownership changes in emerging markets.
    Date: 2011–04
  5. By: Huffman, Sonya K.; Rizov, Marian
    Abstract: This paper estimates the impacts of weight, measured by body mass index (BMI), on employment, wages, and missed work due to illness for Russian adults by gender, in order to better understand the mechanisms through which obesity affects employment, wages, and sick-leave days using recent panel data (1994-2005) from the nationally representative Russian Longitudinal Monitoring Survey (RLMS). We employ econometric techniques to control for unobserved heterogeneity and potential biases due to endogeneity in BMI. The results show an inverted U-shaped effect of BMI on probability of employment for men and women. We did not find evidence of wage penalty for higher BMI. In fact, the wages for overweighed men are higher. However, having a BMI above 28.3 increases the number of days missing work days due to health problems for men. Overall, we find negative effects of obesity (BMI above 30) on employment only for women but not on wages. During the transition in Russia, the increasingly competitive pressure in the labour market combined with economic insecurity faced by the population has lead to a muted impact of an individual’s weight on labour market outcomes.
    Keywords: Russia; BMI; Labour outcomes
    JEL: D12 J71 O51
    Date: 2011–05–05
  6. By: Reinhilde Veugelers
    Abstract: This Working Paper by Bruegel Senior Fellow Reinhilde Veugelers examines the potential for a knowledge-based growth path in transition countries of central and eastern Europe, the Caucasus and Central Asia. The paper looks closely at how total-factor productivity, a residual growth factor commonly interpreted as reflecting technological progress, drives growth rates in these economies which exhibit a much lower GDP per capita compared to the EU15 or the United States.  By analysing the prerequisites for knowledge-based growth, the author explains why transition countries are at a systemic disadvantage relative to the EU15, US and Japan and have limited potential for knowledge-based growth.
    Date: 2010–05
  7. By: Liu, Jing; Cao, Shutao
    Abstract: This paper studies the industry productivity dynamics in China’s manufacturing sector from 1998 to 2007, and in particular, explores to what extent the privatization of state-owned enter- prises (SOEs) contributes to the aggregate productivity growth. Our results show that, though non-SOEs on average are more productive than SOEs, the average productivity growth among SOEs is greater than their counterparts. Industry concentration, taxation, and credit market all account for this difference in growth between SOEs and non-SOEs. We find that industry productivity growth is mainly attributed to the growth of non-SOEs, entry of non-SOE firms, and the exit of SOEs. However, non-SOE firms that are transformed directly from SOEs make a small and negative contribution to industry productivity growth.
    Keywords: Productivity Growth; Industry Dynamics; Ownership Change; Reallocation
    JEL: E6 D24 O4
    Date: 2011–04–28
  8. By: Yulia Vymyatnina; Anna Ignatenko (St. Petersburg Institute for Economics and Mathematics, Russian Academy of Sciences (RAS))
    Abstract: One of the most important aims of monetary policy of the Bank of Russia is to reduce CPI inflation under simultaneous stabilization of ruble exchange rate to the major world currencies. While such task setting is obviously contradictory and requires usage of additional instrument, it is unclear whether Central bank can influence inflation processes at all. The work inquires into how inflation is influenced by credit aggregates, oil prices and exchange rate as the major factors limiting possibilities of Bank of Russia's influence on the price level. Conclusions include recommendations on monetary policy of the Bank of Russia. (in Russian)
    Keywords: monetary policy, inflation, Bank of Russia, oil prices, exchange rate pass through
    JEL: E41
    Date: 2011–02–28
  9. By: Caporale, Guglielmo Maria (Brunel University); Rault, Christophe (University of Orléans); Sova, Robert (CREST & University of Paris 1 Panthéon-Sorbonne); Sova, Anamaria (E.B.R.C. Bucharest)
    Abstract: This paper analyses the trade balance effects of Europe agreements (EA) between the EU-15 and four new EU members from Central and Eastern Europe (CEEC-4) using both static and dynamic panel data approaches. Specifically, the system Generalized Method of Moments (GMM, Blundell and Bond, 1998) and recently developed econometric methods such as the Correlated Common Estimation Pooled - Hausman-Taylor (CCEPHT, Serlenga and Shin, 2007) are applied to analyse the effects of the agreement variable. Our estimation results indicate a positive and significant impact of EA on trade flows. However, there is an asymmetric impact of the agreement variable on the trade balance, exports and imports being affected in different ways, which results in a trade balance deficit in the CEEC-4.
    Keywords: regionalisation, trade flows, trade balance, panel data methods
    JEL: E61 F13 F15 C25
    Date: 2011–04
  10. By: Zsolt Darvas
    Abstract: This Policy Contribution by Zsolt Darvas assesses the impact of the 2008-09 global financial and economic crisis on the medium-term growth prospects of CEES countries, the Caucasus and Central Asia, which starting their economic transition about twenty years ago. Evidence shows that the crisis has had a major impact on the within-sample fit of the models used and that the positive impact of EU enlargement on growth is smaller than previous research has shown. The crisis has also altered the future growth prospects of the countries studied, even in the optimistic but unrealistic case of a return to pre-crisis capital inflows and credit booms.
    Date: 2011–01
  11. By: Pritha Mitra
    Abstract: The recent boom-bust episode in Emerging Europe was largely the product of surges and sudden stops in capital inflows. This paper empirically argues that the sectors into which capital flows determines their impact on GDP growth. Applying data from EU New Member States, it is found that capital flows into real estate have a greater impact on swings in GDP than other sectors, irrespective of a country's exchange rate or fiscal policy. Consequently, as new waves of capital inflows spread to emerging markets, policies may usefully focus on supporting capital inflows towards economic sectors that minimize large swings in GDP.
    Keywords: Bank credit , Capital flows , Capital inflows , Eastern Europe , Economic growth , Emerging markets , European Economic and Monetary Union , Foreign direct investment , Real estate prices ,
    Date: 2011–03–28
  12. By: Stavarek, Daniel; Repkova, Iveta
    Abstract: The paper uses New Empirical Industrial Organization approach, especially Panzar Rosse model to estimates the level of competition of the banking industry in the Czech Republic during the period 2001–2009. We apply Panzar-Rosse model to estimate H statistic for a panel of 15 banks, which represent almost 90 % of the market. This paper also measures and compares the degree of banking competition in two sub-periods, 2001–2005 and 2005–2009, in order to investigate development of the competitive structure of the Czech banking industry. We found that the market was in equilibrium during most of the estimation period, which is a necessary condition for sound evaluation of the competition level. While the market can be described as perfectly competitive in 2001–2005, the intensity of competition decreased after joining the EU in 2004 and the market can be characterized as one of monopolistic competition in 2005–2009. The monopolistic competition in the Czech banking market was also revealed if the full sample 2001–2009 is considered.
    Keywords: Panzar-Rosse model; competition; banking sector; Czech Republic
    JEL: D40 C33 G21
    Date: 2011–03
  13. By: ZhongXiang Zhang (East-West Center)
    Abstract: China has shifted control over resources and decision making to local governments and enterprises as the result of the economic reforms over the past three decades. This devolution of decision-making to local levels and enterprises has placed environmental stewardship in the hands of local officials and polluting enterprises who are more concerned with economic growth and profits than the environment. Therefore, effective environmental protection needs their full cooperation. Against this background, this paper discusses a variety of tactics that China’s central government has been using to incentivize local governments, and a number of market-based instruments, supporting economic policies, environmental performance ratings and disclosure and cooperation with financial institutions to promote long-lasting, improved corporate energy-saving and environmental performance. It concludes that there is a clear need to carefully examine those objective and subjective factors that lead to the lack of local official’s cooperation on the environment, and provides some suggestions for appropriated incentives to get their cooperation.
    Keywords: Effective Environmental Protection, Incentive Structure, Economic Instruments, Industrial Policy, Financial Institutions, Government Decentralization, China
    JEL: Q53 Q56 Q58 Q43 Q48 H23 H75 R51
    Date: 2011–02
  14. By: Abramuszkinova Pavlikova, Eva
    Abstract: World migration community covers 3% of the world population, in Europe it is around 7% and 4% in the Czech Republic. Europe is an important target for migration stimulated by the work offer but also by wars and natural disasters. In Western Europe at the end of the 20th century there were 20 millions of foreign migrants and also probably 3-5 million illegal migrants. Recently, we have faced new trends in international mobility which are different from traditional migration flows. They include mobility of multinational firms employees, mobility of students, pensioners but also mobility of professionals. Specific group under study is foreign migration or mobility of scientists and researchers. There is another phenomena connected with the development of modern technologies which stimulates the mobility in virtual space. Virtual mobility is another form of mobility which is using virtual space for communication, study, work and other aspects of life. The aim of this paper is to introduce the main trends in international migration including the traditional ones but stressing the new types of international mobility. The focus will be on the current situation in the Czech Republic related to migration.
    Keywords: migration; international mobility; foreigners; high skilled professionals; brain drain; virtual mobility
    JEL: F22 Z1 O19
    Date: 2011–01
  15. By: J. Laurenceson (CEPA - School of Economics, The University of Queensland); C.J. O’Donnell (CEPA - School of Economics, The University of Queensland)
    Abstract: Productivity and efficiency change lies at the heart of some of the key challenges facing China’s economy. This paper contributes to an understanding of TFP change by computing and decomposing provincial-level Hicks-Moorsteen (H-M) total factor productivity (TFP) indexes for the period 1978 to 2008. The H-M index is appealing because, unlike the more commonly-used Malmquist TFP index, it can be decomposed into unambiguous measures of technical change and efficiency change. The efficiency change component can be further decomposed into measures of pure technical, scale and mix efficiency change. We also make use of new capital stock estimates that have been computed using province-specific investment price deflators and capital stock depreciation rates. On average across provinces, we find evidence of moderate TFP growth, as well as large changes in the components of TFP growth over the sample period. Considerable heterogeneity from province to province is also documented both with respect to the rate of TFP growth and its components.
    Date: 2011–04
  16. By: Junko Mochizuki (Department of Natural Resources and Environmental Management, University of Hawaii at Manoa); ZhongXiang Zhang (East-West Center)
    Abstract: China’s emerging standing in the world demands a major rethinking of its diplomatic strategies. Given its population size, geographical scale, economic power and military presence, China is poised to play a larger political role in the twenty-first century, and is thus perceived by the international community to have greater capacities, capabilities and responsibilities. At the same time, environmental stresses caused by China’s energy and resources demands have become increasingly evident in recent years, urging China to cultivate delicate diplomatic relations with its neighbors and strategic partners. Tensions have been seen in areas such as transboundary air pollution, cross-border water resources management and resources exploitation, and more recently in global issues such as climate change. As the Chinese leadership begins to embrace the identity of a responsible developing country, it is becoming apparent that while unabated resources demands and environmental deterioration may pose a great threat to environmental security, a shared sense of urgency could foster enhanced cooperation. For China to move beyond existing and probable diplomatic tensions, a greater attention to domestic and regional environmental security will no doubt be necessary. This article explores such interrelations among domestic, regional and global environmental securities and China’s diplomacy, and suggests possible means by which China could contribute to strengthening global environmental security.
    Keywords: Acid Rain, Climate Change, Energy, Environmental Security, Transboundary Air Pollution, Water Resource Management, Asia
    JEL: Q25 Q34 Q48 Q42 Q53 Q54 Q56 Q58 O13 P28
    Date: 2011–03
  17. By: Carlo Carraro (University of Venice and Fondazione Eni Enrico Mattei); Emanuele Massetti (Fondazione Eni Enrico Mattei and Euro-Mediterranean Centre for Climate Change)
    Abstract: The paper examines future energy and emissions scenarios in China, presenting historical data and scenarios generated using the Integrated Assessment Model WITCH. A Business-as-Usual scenario is compared with four scenarios in which Greenhouse Gases emissions are taxed, at different levels. Key insights are provided to evaluate the Chinese pledge to reduce the emissions intensity of Gross Domestic Product by 40/45 percent in 2020 contained in the Copenhagen Accord. Marginal and total abatement costs are discussed using the OECD economies as a term of comparison. Cost estimates for different emissions reduction targets are used to assess the political feasibility of the 50 percent global reduction target set by the G8 and Major Economies Forum in July 2009.
    Keywords: Climate Change, China, Energy Efficiency, Energy and Development
    JEL: Q4
    Date: 2011–02
    Abstract: We apply the spread decomposition model by Huang and Stoll (1997) to a new dataset on the Hungarian Forint/Euro interbank market. In contrast to previous results we cover a minor market over a long time span. We find a significant inventory effect, which can be explained by the low number of trades per day and thus the long time between offsetting trades. The trading volume increased gradually during our sample period and coincided with a decreasing spread. We find that spread size increases significantly with trade size, in contrast to previous research on the customer market. We show that this increase is caused by rising inventory holding and adverse selection costs. Overall this work confirms the predictions from various theoretical models on a small and less liquid market. When comparing with other results the size of the market, institutional differences between markets and specificities of a dataset seem to play an important role.
    Keywords: microstructure, foreign exchange, spread, Hungary, inventory, adverse selection
    JEL: F31 G15
    Date: 2011–02

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