nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒02‒01
nineteen papers chosen by
J. David Brown
Heriot-Watt University

  1. From Divergence to Convergence: Re-evaluating the History Behind China's Economic Boom By Loren Brandt; Debin Ma; Thomas G. Rawski
  2. Entry on difficult export markets by Chinese domestic firms: The role of foreign export spillovers By Florian Mayneris; Sandra Poncet
  3. 中监为体、西监为用 or the specifics of Chinese bank regulation By Cousin, Violaine
  4. A Core-Periphery Model of Urban Economic Growth: Empirical Evidence using Chinese City-Level Data, 1990-2006 By Zhao Chen; Ming Lu; Zheng Xu
  5. Emigration and Wages: The EU Enlargement Experiment By Benjamin Elsner
  6. Productivity and Credit Constraints: Firm-Level Evidence from Propensity Score Matching By Ciaian, Pavel; Fa?kowski, Jan; d’Artis, Kanc; Pokrivcak, Jan
  7. Developments in the Agricultural and Rural Capital Market of the Former Yugoslav Republic of Macedonia By Angelova, Biljana; Bojnec, Štefan
  8. Agricultural and Rural Labour Markets in the EU Candidate Countries of Croatia, Former Yugoslav of Macedonia and Turkey By Bojnec, Štefan
  9. Rural Labour Market Developments in the Former Yugoslav Republic of Macedonia By Bojnec, Štefan; Janeska, Verica
  10. Work Values in Western and Eastern Europe By Benno Torgler
  11. Land Markets in the EU Candidate Countries of Croatia, Former Yugoslav Republic of Macedonia and Turkey By Bojnec, Štefan
  12. The Relationship between Inflation, output growth, and their Uncertainties: Evidence from selected CEE countries By Mubariz Hasanov; Tolga Omay
  13. Una lettura delle dinamiche dell’industria automobilistica europea in termini di Flying Geese e di Sophistication Index By Francesco Silvestri
  14. The Stationarity Of Consumption-Income Ratios With Nonlinear And Asymmetric Unit Root Tests: Evidence From Fourteen Transition Economies By Sadiye Baykara; Erdinç Telatar
  15. Time Series Behaviour of the Real Interest Rates in Transition Economies By Pelin Oge Guney; Erdinc Telatar; Mubariz Hasanov
  16. Monetary Policy Implications of Financial Frictions in the Czech Republic By Jakub Rysanek; Jaromir Tonner; Osvald Vasicek
  17. Regional, Ethnic, European? Complex Identity Construction of Silesians in the Context of Cultural Borderland By Dariusz Niedźwiedzki (Jagellonian University)
  18. The Cost of Improving Gas Supply Security in the Baltic States By Noël, P.; Findlater, S.; Chyong, C. K.
  19. Impacts of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model By Qin Bao; Ling Tang; ZhongXiang Zhang; Han Qiao; Shouyang Wang

  1. By: Loren Brandt; Debin Ma; Thomas G. Rawski
    Abstract: China's long-term economic dynamics pose a formidable challenge to economic historians. The Qing Empire (1644-1911), the world's largest national economy prior to the 19th century, experienced a tripling of population during the 17th and 18th centuries with no signs of diminishing per capita income. In some regions, the standard of living may have matched levels recorded in advanced regions of Western Europe. However, with the Industrial Revolution a vast gap emerged between newly rich industrial nations and China's lagging economy. Only with an unprecedented growth spurt beginning in the late 1970s has the gap separating China from the global leaders been substantially diminished, and China regained its former standing among the world's largest economies. This essay develops an integrated framework for understanding this entire history, including both the long period of divergence and the more recent convergent trend. The analysis sets out to explain how deeply embedded political and economic institutions that had contributed to a long process of extensive growth subsequently prevented China from capturing the benefits associated with new technologies and information arising from the Industrial Revolution. During the 20th century, the gradual erosion of these historic constraints and of new obstacles created by socialist planning eventually opened the door to China's current boom. Our analysis links China's recent economic development to important elements of its past, while using the success of the last three decades to provide fresh perspectives on the critical obstacles undermining earlier modernization efforts, and their removal over the last century and a half.
    Date: 2012–01
  2. By: Florian Mayneris; Sandra Poncet
    Keywords: Export spillovers, China, agglomeration
    JEL: F1 R12 A A
    Date: 2011–12
  3. By: Cousin, Violaine
    Abstract: The present paper aims to propose an explanation for the rationale behind the current banking regulatory arrangement in China. A now stable and relatively healthy banking system emerged largely unscathed from the financial crisis without relying much on recognised international best practices in bank supervision. China combines a strong regulatory hand together with a capital adequacy requirements stick, without much intervention of foreign or private institutions in the larger sense of the term. After an in-depth review of the Chinese framework we recognise that it is exactly this lip service to private monitoring mechanisms on top of restrictive regulators that allows for stability and growth - at least for now. China uses Chinese supervision as the core and western regulatory instruments as useful add-ons - a manner similar to the catch phrase used over a century ago to rejuvenate China.
    Keywords: regulation; bank; china
    JEL: G28 G21
    Date: 2011–06
  4. By: Zhao Chen; Ming Lu; Zheng Xu
    Abstract: The core-periphery (CP) model of urban systems lacks evidence from real data for the nonlinear relationship between distance to core and market potential. China remains in the process of industrialization and globalization, thereby making it suitable for practical application of the CP model of urban systems. Using Chinese city-level data from 1990 to 2006, this paper estimates the impact of spatial interactions in China's urban system on urban economic growth, and fills the gap between CP model of urban systems and reality. Our results show that a proximity to major ports and international markets is essential for urban growth. Moreover, the geography-growth relationship follows the U-shaped nonlinear pattern implied by the CP model in a monocentric urban system. We also find "border effect" in the administrative boundaries between Chinese provinces. As a centrifugal force, this prevents the absorption of urban economic activities by large cities in other provinces.
    Keywords: Core-Periphery Model, Urban Systems, Trade Policy, China
    Date: 2011–10
  5. By: Benjamin Elsner (Trinity College Dublin, Department of Economics and IIIS)
    Abstract: This paper studies the impact of a large emigration wave on real wages in the source country. Following EU enlargement in 2004, a large share of the workforce of the Central and Eastern Europe emigrated to Western Europe. Using data from Lithuania for the calibration of a factor demand model I show that emigration had a significant short-run impact on real wages in the source country. In particular, emigration led to a change in the wage distribution between young and old workers. The wages of young workers increased by 6%, whereas the wages of old workers decreased by around 1%. On the contrary, I find no effect on the wage distribution between workers of different education levels.
    Keywords: Emigration, EU Enlargement, European Integration, Wage Distribution
    JEL: F22 J31 O15 R23
    Date: 2011–11
  6. By: Ciaian, Pavel; Fa?kowski, Jan; d’Artis, Kanc; Pokrivcak, Jan
    Abstract: Drawing on a unique, farm-level panel dataset with 37,409 observations and employing a matching estimator, this paper analyses how farm access to credit affects farm input allocation and farm efficiency in the Central and Eastern European transition countries. We find that farms are asymmetrically credit constrained with respect to inputs. Farm use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per €1,000 of additional credit. Our estimates also suggest that farm access to credit increases total factor productivity up to 1.9% per €1,000 of additional credit, indicating that an improvement in access to credit results in an adjustment in the relative input intensities on farms. This finding is further supported by a negative effect of better access to credit on labour, suggesting that these two are substitutes. Interestingly, farms are found not to be credit constrained with respect to land.
    Date: 2011–09
  7. By: Angelova, Biljana; Bojnec, Štefan
    Abstract: The undeveloped rural capital market in the Former Yugoslav Republic of Macedonia is constrained by an urban–rural development gap, with limited capacities for rural development and imperfections in the rural capital market. Among the most striking hindrances are the illegal status of a large share of agricultural buildings and other real estate in rural areas, particularly on the individual family farms that prevail in the country, and the insufficient knowledge and abilities of individual farmers in applying for credit. National, EU and other donor funds are being used to improve knowledge, skills and other human resources, and to address the illegal status of buildings and facilities. During the most recent years, government support for agricultural, rural and regional development has been introduced to promote good agricultural practices, production and economic activity in rural areas. The elimination of imperfections and improvements to the functioning of the capital market – making access to credit and funds easier, especially for small-scale family farms and for rural development – are seen as measures contributing to agriculture and more balanced rural and regional development.
    Date: 2011–10
  8. By: Bojnec, Štefan
    Abstract: This paper provides an overview and comparison of labour markets in agricultural and rural areas in the three candidate countries for the EU membership: Croatia, the Former Yugoslav Republic of Macedonia and Turkey. We analyse and compare the labour market structures and the factors driving them. The analyses are based on the available cross-section and time-series data on agricultural labour structures and living conditions in rural areas. Considerable differences are found among the candidate countries in the importance of the agricultural labour force, between rural and urban labour, and in poverty and living conditions in rural areas. Agricultural and rural labour market structures are the result of demographic and education processes, in addition to labour flows between agricultural and non-agricultural activities, from rural areas to urban ones and migration flows abroad. Declines in the agricultural labour force and rural population are foreseen for each of the candidate countries, but with significant variations between them. Showing different patterns over time, labour market developments in the sector and rural areas have been shaped by the overall labour market institutions, conditions and other factors in each country, such as the legal basis, educational attainment and migration flows, as well as the presence of non-agricultural activities in rural areas.
    Date: 2011–09
  9. By: Bojnec, Štefan; Janeska, Verica
    Abstract: The significant changes in the quantitative and qualitative characteristics of human resources in rural Macedonia can be explained by the continued trend of emigration from villages to urban areas and abroad. The intensity of emigration has altered the demographic structure and reproductive base of the rural population, along with the income of rural households. The rural and agricultural labour market faces a mismatch with respect to the unfavourable age, education and spatial distribution of the total labour force. A reduction in the participation of women in the agricultural labour force is a new feature. The overall transformation is apparent in the income structure of rural households. An increase in the share of households with mixed income sources notably stems from households that receive remittances and foreign currency funds from family members abroad. The demographic revitalisation of rural areas depends on economic revitalisation, with a more rational use of the labour force and human resources, as well as a restructuring of agricultural production and agricultural holdings. In addition, improvements are necessary in the functioning of market institutions to better meet the needs of smaller farmers and the rural economy.
    Date: 2011–09
  10. By: Benno Torgler (The School of Economics and Finance, Queensland University of Technology, research fellows of CREMA – Center for Research in Economics, Management and the Arts, Switzerland and associated with CESifo)
    Abstract: The paper reports on work values in Europe. At the country level we find that job satisfaction is related to lower working hours, higher well-being, and a higher GDP per capita. Moving to the micro level, we turn our attention from job satisfaction to analyse empirically work centrality and work value dimensions (without exploring empirically job satisfaction) related to intrinsic and extrinsic values, power and social elements. The results indicate substantial differences between Eastern and Western Europe. Socio-demographic factors, education, income, religiosity and religious denomination are significant influences. We find additional differences between Eastern and Western Europe regarding work-leisure and work-family centrality that could be driven by institutional conditions. Furthermore, hierarchical cluster analyses report further levels of dissimilarity among European countries.
    Keywords: Work Values, Job Satisfaction, Work-Leisure Relationship, Work-Family Centrality, Eastern Europe, Western Europe
    JEL: P20 D10 J28 J17 J22
    Date: 2011–12
  11. By: Bojnec, Štefan
    Abstract: The paper provides an overview and a comparison of land markets covering the three candidate countries for European Union membership: Croatia, the Former Yugoslav Republic (FYR) of Macedonia and Turkey. We analyse and compare agricultural land structures and factors driving land markets. The analyses are based on the available cross-section and time-series evidence on agricultural land structures and land productivity (yields). The land productivity measured by production per hectare of agricultural land varies between the three countries. Agricultural land structures are the result of historical evolution in land markets and land-leasing developments with additional different institutional environments and agrarian and land reforms.
    Date: 2011–09
  12. By: Mubariz Hasanov (Hacettepe University, Department of Economics); Tolga Omay (Cankaya University, Department of International Trade Management)
    Abstract: In this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty. In addition, we also examine and discuss causal relationships among remaining variables.
    Keywords: Inflation; Output growth; Uncertainty; Granger-Causality Tests; Transition Countries
    JEL: C32 C51 C52 E10 E30
    Date: 2012
  13. By: Francesco Silvestri
    Abstract: This paper deals with the evolution of automobile sector during the 1990s in Central and Eastern Europe (CEE) Countries from a double point of view. At first, we wonder about the applicability to the sector of Flying Geese (FG) model, theorised by Kaname Akmatsu in the 1930s to explain export-driven development patterns in Japan, and neglected for a long time. Through the calculation of Revealed Comparative Advantage (RCA, or Balassa) index of import and export of a group of goods directly related to the automobile chain, we try to highlight the presence of sequences in the comparative industrial specialization of CEE Countries, from lower to higher sophisticated goods, connected to the European landscape, and on the consolidation of a regional hierarchy for this industrial sector. Secondly, we reframe the whole investigation to check the robustness of this hierarchy using a sophistication index approach, both in the product (PRODY) and in the country (EXPY) version Some final remarks highlights the role of Italy with respect to the hierarchy emerging both from RCA and Sophistication index analysis
    Keywords: Export sophistication, Specialization pattern, RCA, Flying Geese
    JEL: F14 F43 L62
    Date: 2012–01
  14. By: Sadiye Baykara (Hacettepe University, Department of Economics); Erdinç Telatar (Hacettepe University, Department of Economics)
    Abstract: This paper analyses the stationarity properties of the consumption-income ratios for a sample of 14 transition economies by taking account of nonlinearities and asymmetries together using the unit root tests based on the TAR models. The results provide evidence in favour of the stationary consumption-income ratios for all countries.
    Date: 2012
  15. By: Pelin Oge Guney (Hacettepe University, Department of Economics); Erdinc Telatar (Hacettepe University, Department of Economics); Mubariz Hasanov (Hacettepe University, Department of Economics)
    Abstract: Stationarity properties of real interest rates are examined for 21 transition economies. Owing to transaction costs and other frictions, it is quite plausible that we deal with potential non-linearities in the real interest rate. Therefore we examine stationarity of real interest rate allowing for non-linearities and asymmetric adjustment with smooth structural change in the data generating process. Our findings suggest that taking account of non-linearities in the data generating process results in rejection of the unit root null hypothesis for some countries which seem to be non-stationary according to conventional unit root tests. This finding points to the importance of allowing for both structural breaks and asymmetric adjustment in real interest rate series of transition countries.
    Keywords: Real Interest Rate; Transition Economies; Structural Break; Nonlinearity; Unit Root
    JEL: C22 E43
    Date: 2012
  16. By: Jakub Rysanek; Jaromir Tonner; Osvald Vasicek
    Abstract: As the global economy seems to be recovering from the 2009 financial crisis, we find it desirable to look back and analyze the Czech economy ex post. We work with a Swedish New Keynesian model of a small open economy which embeds financial frictions in light of the financial accelerator literature. Without explicitly modeling the banking sector, this model serves as a tool for understanding how a negative financial shock may spread to the real economy and how monetary policy may react. We use Bayesian techniques to estimate the model parameters to adjust the model structure closer to the evidence stemming from Czech data. Our attention focuses on a set of experiments in which we generate ex post forecasts of the economy prior to the 2009 crisis and illustrate that the monetary policy response to an upcoming crisis implied by the model with financial frictions is stronger on account of an increasing interest rate spread.
    Keywords: Bayesian methods, financial frictions.
    JEL: C53 E32 E37
    Date: 2011–12
  17. By: Dariusz Niedźwiedzki (Jagellonian University)
    Abstract: This article shows the transformation process of regional and national identities in Silesia in the context of changes induced by the processes of European integration and globalization. The author analyses the reconstruction of the identity of Silesians – a cultural borderland group –at different levels of identification. An important aspect of this analysis is an attempt to answer the question about the attitudes of Silesians, constructing and reconstructing their territorial identity, to various forms of further European integration.
    Keywords: European identity; identity; minorities; Poland; regions
    Date: 2011–12–15
  18. By: Noël, P.; Findlater, S.; Chyong, C. K.
    Abstract: The Baltic States (Estonia, Latvia and Lithuania) are three amongst the smallest gas markets in Europe. They import all the gas they consume from Russia, with whom they have difficult political relationships. A disruption of their supply from Russia, whatever the cause, would have severe consequences as a large share of their peak winter consumption could not be replaced by alternative gas or other fuels. The three governments want to invest in improving gas supply security and the European Commission pushes in the same direction. But what should they do? We present an assessment of the cost of various national and regional options – dual-fuel for heat plants and CHPs; strategic gas storage; strategic LNG terminals – to increase gas supply security. The cost is calculated over thirty years for different scenarios of supply disruptions. Uncertainty in commodity prices and interest rates is taken into account through Monte Carlo simulations. We draw the policy conclusions, taking into account the regional political context.
    JEL: O13 P28 Q48
    Date: 2012–01–23
  19. By: Qin Bao (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences); Ling Tang (Institute of Policy and Management, Chinese Academy of Sciences, Graduate University of Chinese Academy of Sciences); ZhongXiang Zhang (Institute of Policy and Management, Chinese Academy of Sciences, Center for Energy Economics and Strategy Studies; and Research Institute for the Changing Global Environment, Fudan University, Research Program, East-West Center); Han Qiao (College of Economics, Qingdao University, Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences); Shouyang Wang (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences)
    Abstract: Carbon-based border tax adjustments (BTAs) have recently been proposed by some OECD countries to level the carbon playing field and target major emerging economies. This paper applies a multi-sector dynamic computable general equilibrium (CGE) model to estimate the impacts of the BTAs implemented by US and EU on China’s sectoral carbon emissions. The results indicate that BTAs will cut down export prices and transmit the effects to the whole economy, reducing sectoral output-demands from both supply side and demand side. On the supply side, sectors might substitute away from exporting toward domestic market, increasing sectoral supply; while on the demand side, the domestic income may be strikingly cut down due to the decrease in export price, decreasing sectoral demand. Furthermore, such shrinkage of demand may similarly reduce energy prices, which leads to energy substitution effect and somewhat stimulates carbon emissions. Depending on the relative strength of the output-demand effect and energy substitution effect, sectoral carbon emissions and energy demands will vary across sectors, with increasing, decreasing or moving in a different direction. These results suggest that an incentive mechanism to encourage the widespread use of environment-friendly fuels and technologies will be more effective.
    Keywords: Border Carbon Tax Adjustments, Computable General Equilibrium Model, Carbon Emissions
    JEL: D58 F18 Q43 Q48 Q52 Q54 Q56 Q58
    Date: 2011–12

This nep-tra issue is ©2012 by J. David Brown. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.