nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒10‒09
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Who Shrunk China? Puzzles in the Measurement of Real GDP By Robert C. Feenstra; Hong Ma; J. Peter Neary; D.S. Prasada Rao
  2. The Role of the People’s Republic of China in International Fragmentation and Production Networks: An Empirical Investigation By Lee, Hyun-Hoon; Park, Donghyun; Wang, Jing
  3. The Determinations of the Type and the Level of Consideration: An Analysis of China's Split Share Structure Reform By Qing-yuan Sui
  4. When Europeanization Hits Limited Statehood. The Western Balkans as a Test Case for the Transformative Power of Europe By Tanja A. Börzel
  5. Abuse of collective dominance under the competition law of the Russian Federation By Avdasheva, Svetlana; Goreyko, Nadezhda; Pittman, Russell
  6. Complementarity between in-house R&D and technology purchasing: evidence from Chinese manufacturing firms By Hou, Jun; Mohnen, Pierre
  7. Macroprudential Stress Testing of Credit Risk: A Practical Approach for Policy Makers By Buncic, Daniel; Melecky, Martin
  8. Asset prices and financial imbalances in CEE countries: macroeconomic risks and monetary strategy By Zoltán Szalai
  9. A Risk-Driven Approach to Exchange-Rate Modelling By Piotr Keblowski; Aleksander Welfe
  10. Equity in an educational boom: Lessons from the expansion and marketization of tertiary schooling in Poland By Herbst, Mikolaj; Rok, Jakub
  11. International migration and local employment: analysis of self-selection and earnings in Tajikistan By Atamanov, Aziz; Berg, Marrit van den

  1. By: Robert C. Feenstra; Hong Ma; J. Peter Neary; D.S. Prasada Rao
    Abstract: The latest World Bank estimates of real GDP per capita for China are significantly lower than previous ones. We review possible sources of this puzzle and conclude that it reflects a combination of factors, including substitution bias in consumption, reliance on urban prices which we estimate are higher than rural ones, and the use of an expenditure-weighted rather than an output-weighted measure of GDP. Taking all these together, we estimate that real per-capita GDP in China was 50% higher relative to the U.S. in 2005 than the World Bank estimates.
    Keywords: EKS, Geary-Khamis and GAIA indexes, Gerschrnekron effect, International comparisons of real income and GDP, Measurement economics, Substitution bias
    JEL: F10 C43 O53
    Date: 2011
  2. By: Lee, Hyun-Hoon (Department of International Trade); Park, Donghyun (Asian Development Bank); Wang, Jing (Department of International Trade)
    Abstract: Despite the central role of the People’s Republic of China (PRC) in global parts and components trade, most previous studies on the PRC’s parts and components trade have been limited to a particular trade partner or some specific industries. The central objective of this paper is to provide a more complete description of the PRC’s parts and components trade. To do so, we systematically separate total trade flows into parts and components and final goods, and give a description of the pattern of parts and components trade for the period 1992–2009. We then estimate a gravity model to examine the determinants of the PRC’s trade in parts and components. We find that the share of parts and components trade in the PRC’s total trade has grown rapidly.
    Keywords: People’s Republic of China; PRC; parts and components trade; fragmentation; production network
    JEL: F14 F21 F23
    Date: 2011–09–01
  3. By: Qing-yuan Sui
    JEL: G21 G28 G33 G38
    Date: 2011–08
  4. By: Tanja A. Börzel
    Abstract: The EU seeks to transform the domestic structures of the Western Balkan countries in order to foster peace, stability and prosperity in the region ridden by war and ethnic conflict. Unlike in case of the Mediterranean and Newly Independent States, the EU has even offered its South Eastern European neighbors a membership perspective. Whether the golden carrot is big enough, however, to draw the Western Balkans closer to Europe, is still an open question. Croatia has made sufficient progress to successfully conclude accession negotiations in the years to come. The EU rewarded domestic reforms in Macedonia and Montenegro with granting them candidate status, which Serbia is likely to receive in the near future. Albania, by contrast, appears to be more reluctant to engage in the changes necessary to get even with Macedonia and Montenegro. Bosnia Herzegovina and Kosovo, finally, are seriously lagging behind and have not even applied for membership. Can Europeanization approaches account for the differential impact of the EU in the Western Balkans? The paper argues that problems of limited statehood have seriously curbed the transformative power of the EU in the Western Balkans - despite their membership perspective. Not only has the EU exerted less pressure for adaptation on Western Balkan governments. Weak state capacities and ethnic conflicts have reduced both their willingness and capacity to implement the acquis communautaire. Given its lack of experience in state building, the EU is ill-equipped to address these problems. This results in a serious dilemma. On the one hand, the EU has offered the Western Balkans a membership perspective to stabilize the region and overcome problems caused by weak and contested statehood. On the other hand, it is the limited statehood of Western Balkan countries, which undermines their compliance with EU norms and rules.
    Keywords: EU-South-Eastern Europe; EU-South-Eastern Europe; Europeanization; Europeanization
    Date: 2011–09–09
  5. By: Avdasheva, Svetlana; Goreyko, Nadezhda; Pittman, Russell
    Abstract: In 2006, Russia amended its competition law and added the concepts of “collective dominance” and its abuse. This was seen as an attempt to address the common problem of “conscious parallelism” among firms in concentrated industries. Critics feared that the enforcement of this provision would become tantamount to government regulation of prices. In this paper we examine the enforcement experience to date, looking especially closely at sanctions imposed on firms in the oil industry. Some difficulties and complications experienced in enforcement are analyzed, and some alternative strategies for addressing anticompetitive behavior in concentrated industries discussed.
    Keywords: competition law; collective dominance; abuse of dominance; Russian Federation
    JEL: L13 L41 K21 D43
    Date: 2011–09–22
  6. By: Hou, Jun (UNU-MERIT); Mohnen, Pierre (UNU-MERIT, Maastricht University)
    Abstract: In order to catch up with the technological frontier, firms, especially in developing countries, try to acquire technological advancement through internal R&D efforts as well as through external technology sourcing activities. This study tests the existence of a complementarity between in-house R&D and external technology acquisition in Chinese manufacturing firms. We show that the two sources of technological upgrading are complementary in stimulating product innovation across small and medium size manufacturing firms in China, but not in generating process innovation nor in achieving higher levels of labor productivity.
    Keywords: R&D, technology purchasing, complementarity, China, manufacturing
    JEL: O33
    Date: 2011
  7. By: Buncic, Daniel; Melecky, Martin
    Abstract: Drawing on the lessons from the global financial crisis and especially from its impact on the banking systems of Eastern Europe, the paper proposes a new practical approach to macroprudential stress testing. The proposed approach incorporates: (i) macroeconomic stress scenarios generated from both a country specific statistical model and historical cross-country crises experience; (ii) indirect credit risk due to foreign currency exposures of unhedged borrowers; (iii) varying underwriting practices across banks and their asset classes based on their relative aggressiveness of lending; (iv) higher correlations between the probability of default and the loss given default during stress periods; (v) a negative effect of lending concentration and residual loan maturity on unexpected losses; and (vi) the use of an economic risk weighted capital adequacy ratio as the relevant outcome indicator to measure the resilience of banks to materialising credit risk. We apply the proposed approach to a set of Eastern European banks and discuss the results.
    Keywords: Supervision, Stress Test, Individual Bank Data, Eastern Europe
    JEL: G28 E58 G21
    Date: 2011–09
  8. By: Zoltán Szalai (Magyar Nemzeti Bank (central bank of Hungary))
    Abstract: Modern central banks have adopted a ‘risk management’ approach in assessing and presenting risks to macroeconomic stability. This paper seeks to contribute to the improvement of central banks’ current strategies for Central and Eastern European countries, first by assessing the potential size of macroeconomic risks, and secondly by empirically relating these risks to certain selected financial variables. Our results suggest that risks to GDP and the Price Level are significantly higher than commonly supposed based on a normal distribution of their cyclical components. However, relating these risks to the selected financial variables generated mixed results and is rarely significant in economic terms. We conclude that central banks currently risk underestimating the probability of large deviations in GDP and Price Level from their trends. A combination of financial variables and the inclusion of international financial variables could result in more significant results than the ones used separately in this study, when looking for useful indicators of such events.
    Keywords: central bank policy, financial imbalances, GDP-at-risk, CPI-at-risk
    JEL: E44 E52 E58
    Date: 2011
  9. By: Piotr Keblowski (University of Lodz, Poland); Aleksander Welfe (University of Lodz, Poland)
    Abstract: The paper presents a new approach to exchange rate modelling that augments the CHEER model with a sovereign credit default risk as perceived by financial investors making their decisions. In the cointegrated VAR system with nine variables comprised of the short- and long-term interest rates in Poland and the euro area, inflation rates, CDS indices and the zloty/euro exchange rate, four long-run relationships were found. Two of them link term spreads with inflation rates, the third one describes the exchange rate and the fourth one explains the inflation rate in Poland. Transmission of shocks was analysed by common stochastic trends. The estimation results were used to calculate the zloty/euro equilibrium exchange rate.Length: 25 pages
    Keywords: exchange rate modelling, sovereign credit default risk, CDS spread, international parities, equilibrium exchange rate
    JEL: C32 E31 E43
    Date: 2011–09–30
  10. By: Herbst, Mikolaj; Rok, Jakub
    Abstract: The transformation of Polish economy toward a free market system and related changes on the Polish labour market released the demand for higher education, held for decades at an artificially low level. The impressive increase in enrolment was possible because the Polish government allowed the private sector to establish higher education institutions. This paper demonstrates how the probability of enrolment in tertiary schools evolves for different social groups in Poland over the period of educational boom. It also investigates how the socio-economic status influences the choices between full-time and part-time studies (the latter being of relatively low quality), and the probability of admission to subsidized, free programs versus programs requiring tuition. Between 1994 and 2008 Poland has undoubtedly improved the participation of students with low socio-economic status in the university education. However, if we look at the change in the ratios of enrolment probabilities for different layers of the social strata, we find that the improvement refers to those with low family educational background and living in small settlements, but not to individuals suffering from the low income. Further investigation shows that the policy makers should focus not only on ensuring equal access to tertiary education for the whole social strata, but on allowing the unprivileged groups access to education of acceptable quality.
    Keywords: Higher education; equity; participation; transformation; Poland
    JEL: A22 D63 A23 H52 I22
    Date: 2011–09–26
  11. By: Atamanov, Aziz (Maastricht Graduate School of Governance, Maastricht University); Berg, Marrit van den (Wageningen University, The Netherlands)
    Abstract: This paper addresses the issue of self-selection of individuals in international labour migration, non-agricultural and agricultural employment in Tajikistan and its link to earnings from these activities. Unlike most empirical studies, we could attribute selection bias on unobservable characteristics to the allocation of individuals to alternative employment sectors and analyse its impact on earnings abroad and at home. We have found positive selection in migration against local non-agricultural activities and positive selection in local non-agricultural activities against local agricultural activities. This indicates that the most capable individuals with regards to unobservable characteristics choose to migrate, while the somewhat less able choose non-agricultural activities, and individuals with the worst capabilities stay in poorly-paid agricultural activities. Controlling for self-selection, labour income returns to education of migrants and individuals in non-agricultural activities are slightly lower than those from Ordinary Least Squares (OLS).
    Keywords: international migration, self-selection, earnings, Tajikistan
    JEL: J24 J31 F22 O15
    Date: 2011

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