nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒01‒10
eleven papers chosen by
J. David Brown
Heriot-Watt University

  1. Job Separations and Informality in the Russian Labor Market By Lehmann, Hartmut; Razzolini, Tiziano; Zaiceva, Anzelika
  2. The Five-Phases of Economic Development and Institutional Evolution in China and Japan By Aoki, Masahiko
  3. Structural Convergence of the Central and Eastern European Countries: Achivements in the Last Decade By Tatomir, Cristina F.
  4. Post-communist Welfare Capitalisms: Bringing Institutions and Political Agency Back In By Alfio Cerami; Paul Stubbs
  5. Financial dollarization in Russia: causes and consequences By Ponomarenko, Alexey; Solovyeva, Alexandra; Vasilieva, Elena
  6. Migration as a Substitute for Informal Activities: Evidence from Tajikistan By Abdulloev, Ilhom; Gang, Ira N.; Landon-Lane, John
  7. The Long-term Health Effects of Mass Political Violence: Evidence From China’s Cultural Revolution By Asadul Islam; Paul A. Raschky; Russell Smyth
  8. The Wage Premium of Globalization: Evidence from European Mergers and Acquisitions By Oberhofer, Harald; Stöckl, Matthias; Winner, Hannes
  9. Income shocks reduce human capital investments : evidence from five east European countries By Dasgupta, Basab; Ajwad, Mohamed Ihsan
  10. The challenges to long run fiscal sustainability in Romania By Canagarajah, Sudharshan; Brownbridge, Martin; Paliu, Anca; Dumitru, Ionut
  11. Corruption as an Obstacle for Doing Business in the Western Balkans: A Business Sector Perspective By Jelena Budak; Edo Rajh

  1. By: Lehmann, Hartmut (University of Bologna); Razzolini, Tiziano (University of Siena); Zaiceva, Anzelika (University of Modena and Reggio Emilia)
    Abstract: In the years 2003-2008 the Russian economy experienced a period of strong and sustained growth, which was accompanied by large worker turnover and rising informality. We investigate whether the burden of informality falls disproportionately on job separators (displaced workers and quitters) in the Russian labor market in the form of informal employment and undeclared wages in formal jobs. We also pursue the issues whether displaced workers experience more involuntary informal employment than workers who quit and whether informal employment persists. We find a strong positive link between separations and informal employment as well as shares of undeclared wages in formal jobs. Our results also show that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all separators but predominantly on those with low human capital. Finally, informal employment is indeed persistent since separating from an informal job considerably raises the probability to be informal in the subsequent job.
    Keywords: job separations, informality, Russia
    JEL: J64 J65 P50
    Date: 2011–12
  2. By: Aoki, Masahiko (Asian Development Bank Institute)
    Abstract: Based on the variable rate of gross domestic product per capita growth and its sources, this paper first identifies five phases of economic development that are common to China, Japan, and Korea: M (Malthusian), G (government-led), K (à la Kuznets), H (human capital based) and PD (post demographic-transition). But there are also marked differences in the onset, duration, and institutional forms of these phases across these economies. In order to understand these differences, this paper explores the agrarian origins of institutions in Qing China and Tokugawa Japan (and briefly Chosŏn Korea) and their path-dependent transformations over those phases. In doing so, the paper employs game-theoretic reasoning and interpretations of divergent institutional evolution between China and Japan, which also clarifies the simplicity of prevailing arguments that identify East Asian developmental and institutional features with authoritarianism, collectivism, kinship-dominance, Confucianism and the like. Finally, the paper examines the relevance of the foregoing developmental discussions to the institutional agendas faced by the People’s Republic of China (PRC) and Japan in their respective emergent phase-transitions. In what way can the PRC avoid the “middle income trap”? What institutional shortcomings become evident from the Fukushima catastrophe and how can they be overcome in an aging Japan?
    Keywords: development phases; institutional evolution; agrarian origin; prc economy; middle income trap; post demographic transition; east asia; norm
    JEL: J11 N15 N35 N55 O15 O43 O53 P51
    Date: 2012–01–04
  3. By: Tatomir, Cristina F.
    Abstract: The paper studies the structural convergence of the Central and Eastern European countries (CEECs) with the Euro area, in order to determine whether the last decade led an increase or a decrease of the gaps between these two regions. The main findings of the paper indicate that only three CEECs out of ten reached a higher level of structural convergence with the Euro area in the last decade, namely Latvia, Bulgaria and Slovenia. Romania remains by far the country with the highest level of structural divergence. The analysis is based on cluster methodology and the structural divergence index developed by Krugman (2001).
    Keywords: structural convergence; Central and Eastern Europe; Euro area; clusters
    JEL: F15 F41
    Date: 2011–09–22
  4. By: Alfio Cerami (Independent Researcher); Paul Stubbs (The Institute of Economics, Zagreb)
    Abstract: This article explores the post-communist worlds of welfare capitalism in Central, Eastern and South Eastern Europe, including the successor states of the former Soviet Union. It discusses recent developments, whilst offering some additional theoretical reflections on the key factors that have shaped welfare state change over time. The text explores key institutional features characterising these worlds of welfare capitalism in transition. In order to highlight the actions of political elites in the market, we discuss the notions of “state-enabled”, “state-influenced” and “state-interfered” market economies. In this article, we introduce the term “captured welfare systems” to refer to the ways in which some states and political elites interfere in the market in order to capture resources. In the conclusion, we move beyond classical approaches to institutional change based on path-dependency and lock-in arguments, drawing attention to the importance of bringing institutions and political agency back into the analysis of welfare and its transformations.
    Keywords: political economy of welfare capitalism, captured welfare system, Central and Eastern Europe, South Eastern Europe, former Soviet Union
    JEL: D60 D72 H53 I38 P20 P30
    Date: 2011–12
  5. By: Ponomarenko, Alexey (BOFIT); Solovyeva, Alexandra (BOFIT); Vasilieva, Elena (BOFIT)
    Abstract: We review some aspects of financial dollarization in Russia, applying the main relevant theories to analyze the dynamics of several dollarization indicators. An econometric model of the short run dynamics of deposit and loan dollarization is estimated for the last decade. We find that ruble appreciation was the main driver of the de-dollarization that occurred then and of the later episode of renewed dollarization. We estimate the overall (and sectoral) currency mismatches of the Russian economy. The results show a gradual improvement of the net foreign currency position of the public sector, where we have seen significant accumulation of international reserves by the Bank of Russia and repayment of government debt. Evidence is also presented for the significant currency risk vulnerability of the nonbanking private sector. Several existing empirical studies are examined in order to assess the growth losses of the Russian economy following the crisis of 2008, which was linked with the financial dollarization.
    Keywords: financial dollarization; currency mismatch; balance sheet effects; Russia
    JEL: E44 F34 G32
    Date: 2012–01–02
  6. By: Abdulloev, Ilhom (Rutgers University); Gang, Ira N. (Rutgers University); Landon-Lane, John (Rutgers University)
    Abstract: How is migration related to informal activities? They may be complementary since new migrants may have difficulty finding employment in formal work, so many of them end up informally employed. Alternatively, migration and informality may be substitutes since migrants' incomes in their new locations and income earned in the home informal economy (without migration) are an imperfect trade-off. Tajikistan possesses both a very large informal sector and extensive international emigration. Using the gap between household expenditure and income as an indicator of informal activity, we find negative significant correlations between informal activities and migration: the gap between expenditure and income falls in the presence of migration. Furthermore, Tajikistan's professional workers ability to engage in informal activities enables them to forgo migration, while low-skilled non-professionals without post-secondary education choose to migrate instead of working in the informal sector. Our empirical evidence suggests migration and informality substitute for one another.
    Keywords: informal, migration, remittances, Tajikistan
    JEL: O17 J61 P23
    Date: 2011–12
  7. By: Asadul Islam; Paul A. Raschky; Russell Smyth
    Abstract: There is much interest in the causes of several adverse health outcomes in middle and old age. In searching for new explanations for adverse health outcomes later in life, researchers have started to look beyond behavioural risk factors to examine the effect of shocks to health in utero and in childhood on health in old age. In this paper we extend this literature to examine the long-term health effects of mass political violence experienced in utero and in childhood using China’s Cultural Revolution as a natural experiment. We find that individuals who were in utero in the Cultural Revolution have reduced lung capacity later in life, but we find no evidence that being in utero has adverse effects on other health indicators later in life. We find more evidence that being an adolescent in the Cultural Revolution has an adverse effect on health later in life. Specifically, we find that individuals who were adolescents in the Cultural Revolution have higher blood pressure and reduced ability to engage in activities of daily living later in life. We also find that males who were adolescents in the Cultural Revolution have reduced cognitive skills later in life, while females who were adolescents in the Cultural Revolution have reduced lung capacity in middle and old age. specific recommendations for the Canadian context.
    Keywords: Health, Idiosyncratic Shocks, Cultural Revolution, Long-term effects
    JEL: I15 J14 O12
    Date: 2011–12
  8. By: Oberhofer, Harald (University of Salzburg); Stöckl, Matthias (University of Salzburg); Winner, Hannes (University of Salzburg)
    Abstract: We provide evidence on the impact of globalization on labor market outcomes analyzing pay differences between foreign-acquired and domestically-owned firms. For this purpose, we use firm level data from 16 European countries over the time period 1999 to 2006. Applying propensity score matching techniques we estimate positive wage premia of cross-boarder merger and acquisitions (M&As), suggesting that foreign acquired firms exhibit higher short-run (post-acquisition) wages than their domestic counterparts. The observed wage disparities are most pronounced for low paying firms (with average wages below the median). Finally, we find systematic wage premia in Western European countries, but not so in Eastern Europe.
    Keywords: Globalization; mergers and acquisitions; wage effects; propensity score matching
    JEL: C21 F15 G34 J31
    Date: 2012–01–03
  9. By: Dasgupta, Basab; Ajwad, Mohamed Ihsan
    Abstract: This paper empirically investigates whether households affected by income shocks cope by reducing human capital investments. The analysis uses Crisis Response Surveys conducted in Armenia, Bulgaria, Montenegro, Romania, and Turkey during 2009 and 2010. A propensity score matching technique is adopted to compare health and education investment decisions among households that were affected by income shocks to the matched comparison group. The authors find that households affected by income shocks reduced some human capital investments. Interestingly, households in these five countries were more likely to adopt health-related coping strategies as opposed to education-related coping strategies. The results from Armenia, Bulgaria, Montenegro, and Turkey show that households affected by income shocks reduced their visits to doctors and reduced their spending on medicine and medical care significantly more than the matched comparison group. Households affected by income shocks reduced their education investments, but did not adopt harmful education-related coping strategies, such as withdrawing children from schools or moving children from costly private to cheaper public schools. These findings reveal that long-term and possibly intergenerational household welfare could be affected by short-run income shocks and hence underscore the need for governments to employ mitigation measures.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Labor Policies,Inequality,Debt Markets
    Date: 2011–12–01
  10. By: Canagarajah, Sudharshan; Brownbridge, Martin; Paliu, Anca; Dumitru, Ionut
    Abstract: Romania, along with many other countries in the European Union, faces daunting fiscal challenges. Fiscal balances deteriorated sharply following the global economic crisis, forcing Romania to implement a fiscal consolidation that was one of the largest in the European Union, but which may not be sustainable without a recovery of economic growth. Although the ratio of public debt to gross domestic product is still relatively modest, at around 35 percent, long-term fiscal solvency is threatened by the costs of funding the public pension system in the face of adverse demographic shifts over the next 50 years. Because of widespread tax evasion, the tax system in Romania is one of the least efficient in the European Union. Tax reforms that can reduce the amount of tax lost to evasion and fraud could make a major contribution to enhancing fiscal sustainability.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Emerging Markets,Public Sector Economics,Fiscal Adjustment
    Date: 2012–01–01
  11. By: Jelena Budak (The Institute of Economics, Zagreb); Edo Rajh (The Institute of Economics, Zagreb)
    Abstract: This paper investigates business people’s perceptions of corruption as an obstacle for doing business and their attitudes towards corruption. It is based on a survey conducted on the sample of over 1800 business owners and managers in the Western Balkans region. Using the original survey data collected in 2010 for seven countries – Albania, Bosnia and Herzegovina, Croatia, Kosovo, FYR Macedonia, Montenegro and Serbia – the paper explores business people’s views on the ways in which the business sector is dealing with corruption as well as on the perceived role of private and government agents in curbing corruption. The factor analysis produced three distinct factors: (1) Understanding corruption as “grease in the wheels”; (2) Individual action can contribute to the curbing of corruption; (3) Corruption is a government-related issue. The main research question was whether the respondents’ attitudes towards corruption are related to the following variables: country of origin, their own corruption experience, perceptions of corruption as an obstacle for doing business and the general corruption prevalence trends. The results of the analysis of variance show that the country of origin strongly determines business people’s attitudes on corruption. Respondents with corruption experience tend to justify corruption as “grease in the wheels” more than “clean” respondents. Business people who believe that corruption is on the rise or that it poses a big obstacle for their business put greater emphasis on the government dealing with the issue of corruption than on individual or private anti-corruption initiatives. The findings provide useful policy recommendations for countries in the Western Balkans region to design a more entrepreneurship-friendly environment.
    Keywords: corruption, business sector, attitudes and perceptions, corruption experience, Western Balkans
    JEL: D22 D73
    Date: 2011–12

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