nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒03‒08
twenty-one papers chosen by
J. David Brown
Heriot-Watt University

  1. On the Road: Access to Transportation Infrastructure and Economic Growth in China By Abhijit Banerjee; Esther Duflo; Nancy Qian
  2. Why has China grown so fast? The role of international technology transfer By John Van Reenen; Linda Yueh
  3. Determinants of FDI into China and Vietnam: A comparative study By Thi-Hong-Hanh Pham
  4. New Development of Fiscal Decentralization in China By Wang, Zhiguo; Ma, Liang
  5. Strategic Interactions in Environmental Regulation Enforcement: Evidence from Chinese Provinces By Mary-Françoise Renard; Hang Xiong
  6. Are Remote Rural Workers Trapped in Low-Remunerated Non-Agricultural Jobs? Evidence from China By Chloe Duvivier; Shi Li; Mary-Françoise Renard
  7. Effects of One-Sided Fiscal Decentralization on Environmental Efficiency of Chinese Provinces By Hang Xiong
  8. Development of land rental market and its effect on household farming in rural China : an empirical study in Zhejiang Province By Hoken, Hisatoshi
  9. Regional Differences in China's Urbanization and its Determinants By Nong Zhu; Xubei Luo; Heng-fu Zou
  10. Hukou and Consumption Heterogeneity: Migrants' Expenditure Is Depressed by Institutional Constraints in Urban China By Binkai Chen; Ming Lu; Ninghua Zhong
  11. Local Public Goods Provision in the Post-Agricultural Tax Era in Rural China By Hiroshi Sato; Sai Ding
  12. Inflation convergence in Central and Eastern Europe with a view to adopting the euro By Juan Carlos Cuestas; Luis A. Gil-Alana; Karl Taylor
  13. China's lagging region development and targeted transportation infrastructure investments By Xubei Luo; Nong Zhu; Heng-fu Zou
  14. Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China (Replaces CentER DP 2011-006) By Chong, T.T.L.; Lu, L.; Ongena, S.
  15. Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia By Arazmuradov, Annageldy
  16. Migration in the global world: economical and demographical roles and prospects for Russia By Lifshits, Marina
  17. The Ability to Adapt and Overcome Obstacles: Machinery Exports of Poland By Mitchell H. Kellman; Yochanan Shachmurove
  18. Energy consumption and carbon dioxide environmental efficiency for former Soviet Union economies. evidence from DEA window analysis By Arazmuradov, Annageldy
  19. Determinants of bank interest spread in Estonia By Kadri Männasoo
  21. Active margin system for margin loans using cash and stock as collateral and its application in Chinese market By Guanghui Huang; Weiqing Gu; Wenting Xing; Hongyu Li

  1. By: Abhijit Banerjee; Esther Duflo; Nancy Qian
    Abstract: This paper estimates the effect of access to transportation networks on regional economic outcomes in China over a twenty-period of rapid income growth. It addresses the problem of the endogenous placement of networks by exploiting the fact that these networks tend to connect historical cities. Our results show that proximity to transportation networks have a moderate positive causal effect on per capita GDP levels across sectors, but no effect on per capita GDP growth. We provide a simple theoretical framework with empirically testable predictions to interpret our results. We argue that our results are consistent with factor mobility playing an important role in determining the economic benefits of infrastructure development.
    JEL: D2 O11 O4 R4
    Date: 2012–03
  2. By: John Van Reenen; Linda Yueh
    Abstract: Chinese economic growth has been spectacular in the last 30 years. We investigate the role of International Joint Ventures with Technology Transfer agreements, an understudied area. Technology transfer is the traditional mechanism for developing countries to “catch up” and has been a key component of Chinese economic policy. We collect original survey data on Chinese firms and their joint ventures and match this to administrative data on firm performance. To identify the causal effect of joint ventures we use time-varying and province-specific policies at the time when a firm was born. International joint ventures in general and I have large effects on productivity especially when combined with a technology transfer component. We estimate that without International joint ventures China’s growth would have been about one percentage point lower per annum over the last three decades.
    Keywords: China, Technology transfer, Joint ventures, Productivity
    JEL: O32 O33
    Date: 2012
  3. By: Thi-Hong-Hanh Pham (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: Since the inception of economic reforms, China in 1978 and Vietnam in 1986, both countries have become successful examples of transition to a market economy. Over their courses of reform, attracting substantial and rising amounts of inward FDI has been a key focus of their market-oriented policy reforms. Yet, the last two decades have experienced a widening gap in inward FDI between these two countries even though the context and characteristics of their economic reform are relatively similar. Therefore, this paper aims to address the question "What has caused the substantial gap in FDI inflows between China and Vietnam?" through a comparative study of the FDI determinants. In other words, this paper revisits the determinants of FDI into China and Vietnam by employing an augmented gravity model and using a panel dataset containing information on bilateral FDI and a large set of acroeconomic variables over the period 1994-2008. The main finding is that the widening gap in inward FDI flows between China and Vietnam can be explained by two broad sets of main factors: one related to institutions and another to domestic macroeconomic stability.
    Keywords: Foreign direct investment ; Gravity model ; China ; Vietnam
    Date: 2012–02–17
  4. By: Wang, Zhiguo; Ma, Liang
    Abstract: Understanding the logic of fiscal decentralization is pivotal for the next steps of fiscal reform, and retrospection of the literature and evidences accumulated in the field is the first step. As a typical transition economy with rapid and extensive devolution reforms, China is the ideal context to examine the causes, processes, and effects of fiscal decentralization, attracting numerous academic endeavors both domestic and abroad. However, the literature has not been fully reviewed and the evidences on fiscal decentralization are still mixed and inconclusive. This paper aims to comprehensively review the latest advancement in the area of fiscal decentralization in China over the past decades. The processes, characteristics, and measurements of fiscal decentralization are firstly reviewed, and the antecedents and consequences of fiscal decentralization are then synthesized. The knowledge gap and avenues for future research are finally discussed, aiming to make the China fiscal decentralization knowledge contributive, accumulative, and sustainable.
    Keywords: Fiscal decentralization; Federalism; New development; Corruption; China; Review
    JEL: H70 H30
    Date: 2012–02–25
  5. By: Mary-Françoise Renard (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Hang Xiong (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper studies whether Chinese provinces set strategically their environmental stringency when faced with interprovincial competition for mobile capital. Using Chinese provincial data and spatial panel econometric models, we find that Chinese provinces do engage in this kind of strategic interaction, particularly among those with similar industrial structure. Furthermore, we haven't found evidence of asymmetric responsiveness suggested by the race to the bottom theory. Finally, the one-sided fiscal decentralization is likely to strengthen the strategic behavior. These empirical results call for a skeptical attitude towards China's decentralization of environment policy implementation as well as its fiscal arrangements.
    Keywords: China;strategic interaction;pollution;spatial panel
    Date: 2012–02–21
  6. By: Chloe Duvivier (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Shi Li (School of Economics and Business Administration - School of Economics and Business Administration - Beijing Normal University); Mary-Françoise Renard (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper analyzes the effect of urban proximity on rural non-agricultural wages. Using the 2002 Chinese Household Income Project data, we study the determinants of rural non-agricultural workers' hourly wages. We find strong evidence that rural workers close to cities benefit from higher hourly wages, indicating that there is a spatial differentiation in wages across rural areas. Specifically, workers living close to cities are paid about 15% more for one hour worked. This is true even after controlling for living costs, suggesting that urban proximity leads to higher non-agricultural wages in real terms. We also find that migration enables remote workers to partially compensate for lower local wages, suggesting that restrictions on migration hurt remote workers more than other workers.
    Keywords: Wages;Remoteness;regional labor market;China Codes
    Date: 2012–02–24
  7. By: Hang Xiong (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: China's actual fiscal decentralization is one-sided: while public expenditures are largely decentralized, fiscal revenues are recentralized after 1994. One critical consequence of the actual system is the creation of significant fiscal imbalances at sub-national level. This paper investigates empirically effects of fiscal imbalances on environmental performance of Chinese provinces. First, environmental efficiency scores of Chinese provinces are calculated with SFA for the period from 2005 to 2010. Then, these scores are regressed against two fiscal imbalance indicators in a second stage model. Finally, conditional EE scores are calculated. This paper finds that effects of fiscal imbalances on EE are nonlinear and conditional on economic development level. Fiscal imbalances are more detrimental to environment in less developed provinces. These results suggest that the one-sided fiscal decentralization in China may have regressive environmental effects and contribute to regional disparity in terms of sustainable development.
    Keywords: Chinese provinces;Decentralization; Environmental efficiency; SFA
    Date: 2012–02–21
  8. By: Hoken, Hisatoshi
    Abstract: This paper investigates the impact of land rental market development on the efficiency of labor allocation and land utilization in rural China. To test the hypothesis that the shadow wage of a rent-in household with limited off-farm opportunities will increase with the development of a land rental market for households, a statistical comparison between the shadow wage and the estimated market wage was conducted. The results showed that the shadow wage for both rent-in households and non-rent-in households was significantly lower than the market wage, but that the wage for the rent-in households was statistically higher than that for non-rent-in households in Fenghua and Deqing, the two counties surveyed in this study. In addition, the estimated marginal product of farmland for rent-in households was statistically higher than the actual land rent that those households paid, while a null hypothesis that the actual rental fee accepted by rent-out households is equivalent to the marginal product of farmland for those households was not rejected in Fenghua county where land transactions by mutual agreement were more prevalent. These results indicate that the development of the land rental market facilitates the efficiency of labor allocation and farmland utilization in rural China.
    Keywords: China, Land use, Farm management, Farmers, Household, Land Rental Market, Agricultural Production Function, Household Model
    JEL: J22 O13 Q12 Q15
    Date: 2012–02
  9. By: Nong Zhu (The World Bank); Xubei Luo (The World Bank); Heng-fu Zou (The World Bank)
    Date: 2012
  10. By: Binkai Chen; Ming Lu; Ninghua Zhong
    Abstract: This paper provides a new explanation for China's extremely low consumption-to-GDP ratio, highlighting the constraints of the "household registration system" (Hukou) on China's household consumption. Our baseline results show that the consumption of migrants without an urban Hukou is 30.7% lower than that of urban residents. Moreover, consumption heterogeneity cannot be explained by migration effects, culture, social norms, habits or some other forms of household heterogeneity. Further studies on the composition of household consumption have shown that the gaps are largest in areas such as education and culture, durable goods and health. As both the number and income level of migrants are rising, the constraining effects of Hukou on household consumption will continue to increase.
    Keywords: Consumption, Heterogeneity, Hukou System, Migrants, Urban Residents
    JEL: R23 E21
    Date: 2012–02
  11. By: Hiroshi Sato; Sai Ding
    Abstract: This paper investigates regional differences in local public goods provision in rural area in the 2000s, using large village sample surveys (CHIP 2002 and 2007 surveys, a survey in Ningxia). Focuses are on changes in the coverage of public investment projects, regional differences in the determinants of public investment projects, and changes in the coverage of public services provided by village collectives. The main findings are as follows. First, we confirmed that coverage of public investment projects had increased in the 2000s. Second, in spite of concentration of fiscal administration into county level as one of the pillars of the reform of taxation and local fiscal system, administrative villages still played indispensable roles in local public goods provision. Third, we found that incentive of peasants, financial ability of villages, and incentive of local government affect location decision and budget structure of public investment projects and that direction and strength of such factors were different by regions.
    Keywords: Local Public goods, Village, Local Government, Rural China
    JEL: H2 H4 R5
    Date: 2012–02
  12. By: Juan Carlos Cuestas (University of Sheffield); Luis A. Gil-Alana (University of Navarra); Karl Taylor (University of Sheffield)
    Abstract: In this paper we consider inflation rate differentials between seven Central and Eastern Countries (CEECs) and the Eurozone. We focus explicitly upon a group of CEECs given that although they are already member states, they are currently not part of the Economic and Monetary Union (EMU) and must fulfil the Maastricht convergence criteria before being able to adopt the euro. However, this group of countries does not have an opt-out clause and so must eventually adopt the single currency. Hence, considering divergence in inflation rates between each country and the Eurozone is important in that evidence of persistent differences may increase the chance of asymmetric inflationary shocks. Furthermore, once a country joins the Eurozone the operation of a country specific monetary policy is no longer an option. We explicitly test for convergence in the inflation rate differentials, incorporating non-linearities in the autoregressive parameters, fractional integration with endogenous structural changes, and also consider club convergence analysis for the CEECs over the period 1997 to 2011 based on monthly data. Our empirical findings suggest that the majority of countries experience non-linearities in the inflation rate differential, however there is only evidence of a persistent difference in three out of the seven countries. Complementary to this analysis we apply the Phillips and Sul (2007) test for club convergence and find that there is evidence that most of the CEECs converge to a common steady state.
    Keywords: Central and Eastern Europe , euro adoption, inflation convergence, non-linearities
    JEL: E31 E32 C22
    Date: 2012–01
  13. By: Xubei Luo (The World Bank); Nong Zhu (The World Bank); Heng-fu Zou (The World Bank)
    Date: 2012
  14. By: Chong, T.T.L.; Lu, L.; Ongena, S. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Banking competition may enhance or hinder the financing of small and medium enterprises. Using a survey on the financing of such enterprises in China, combined with detailed bank branch information, we investigate how concentration in local banking market affects the availability of credit. We find that lower market concentration alleviates financing constraints. The widespread presence of joint-stock banks has a larger effect on alleviating these constraints, than the presence of city commercial banks, while the presence of state-owned banks has a smaller effect. (83 words)
    Keywords: Banking Competition;SMEs Financing;Credit Constraints.
    JEL: D41 D43 G21
    Date: 2012
  15. By: Arazmuradov, Annageldy
    Abstract: This paper investigates the relationship between foreign aid (ODA), foreign direct investment (FDI) and their effect on domestic investment in five landlocked and emerging economies of Central Asia. It is important for donor countries to understand whether their aid helps to bring in a private capital essential in transition period or not. If it does, it creates a ground for public-private partnership that could release from financial constraints and restore conditions for economic growth in transition economies. If it does not, then it calls for reassessing mechanisms of ‘aid architecture’. We test ODA-FDI link on two levels: regional and country. Our results from seemingly unrelated regression on regional level indicate that (a) aid has a positive role on FDI inflows; (b) aid and FDI are complementing flows, and (c) FDI complements domestic investment, while ODA decrease it. However, on the country level only in Kyrgyzstan and Tajikistan, foreign aid catalyzes FDI inflows. We conclude that the ODA-FDI nexus is present in countries with low per capita GDP and economic growth. There is a need for improvement of aid mechanism and a room for public-private cooperation in economies of Central Asia.
    Keywords: Central Asia; transition economies; foreign direct investment; official development assistance;gross fixed capital formation
    JEL: F30 P20
    Date: 2011–12–29
  16. By: Lifshits, Marina
    Abstract: The author of this paper has taken to the econometric analysis of the ROSSTAT and World Bank data to answer the following questions: (1) Provided that age structure of the population is influenced by migration, can migration influence upon living standards too, and to what extend? (2) What factors determine the volumes and direction of the world migration flows? (3) For what reasons net migration to Russia from various post-Soviet countries is that different? (4) What are the prospects of net migration to Russia? (5) What kind of migration policy does Russia need?
    Keywords: Migration of population; net migration; migration policy; post-Soviet space; ageing of population;
    JEL: C33 J18 J11
    Date: 2011
  17. By: Mitchell H. Kellman (Department of Economics and Business,The City College of The City University of New York); Yochanan Shachmurove (Department of Economics and Business, The City College of The City University of New York)
    Abstract: From 1980-2009 the Polish economy experienced structural dislocation. The growth and success of the Solidarity movement represented the shift in manufacturing from Soviet bloc trade to membership in the European Union. This paper examines four independent metrics that measure the changing “sophistication” of trade patterns during this modal shift. The common theme underlying the analysis of these indices is that the Polish economy is resilient and adaptable. Poland is expected to compete effectively in its new economic environment after a period of adjustment and progress.
    Keywords: Trade Patterns in a Transition Economy, Machinery and Transport Equipment, Exports, Poland, Solidarity, Structural Change, Sophistication Indices, Trade Specialization Index, Intra-Industry Trade, Shock Therapy, Revealed Comparative Advantage, Herfendahl-Hirschman Index, Standard International Trade Classification, Compositional Shifts, Data Aggregation, Dispersion; Market Power
    JEL: F0 F1 L0 L1 L6 N0 N6 O1 O52 P2 R1
    Date: 2012–02–08
  18. By: Arazmuradov, Annageldy
    Abstract: The main source of convertible energy—fossil-fuel combustion—generates desirable means for production of national output (GDP) along with an undesirable by-product—carbon dioxide (CO2) emissions. This paper investigates the effect of this supply process for environmental quality. By introducing energy and non-energy production factors, we estimate economic and CO2 efficiency. We build an alternative environmental efficiency indicator with respect to CO2 emissions by applying non-parametric data-envelopment analysis (DEA)—window analysis under variable returns to scale (VRS)—to 15 former Soviet Union (FSU) economies for the period 1992–2008. There is a clear distinction between three FSU economies—Estonia, Latvia, and Lithuania (now EU member states)—and the rest of the sample in that they display better environmental performance. In these three countries, economic efficiency directly influences the environmental performance. Results also show that over time FSU economies improve their CO2 environmental efficiency and comply with the Kyoto Protocol directives. However, this positive gain comes with costs; it seems there is a tradeoff between positive output production (GDP) and controlling for carbon emission. On average, we observe a 15.9-percent drop in producing GDP, while there is a 1.59 -percent rise in positive environmental CO2 efficiency.
    Keywords: Eurasia; carbon dioxide emissions; environmental efficiency; DEA window analysis
    JEL: Q50 P28 P52
    Date: 2011–12–22
  19. By: Kadri Männasoo
    Abstract: The recent global financial turmoil increased bank interest spreads in Estonia to the highest levels recorded since the Russian crisis in 1998- 1999. The pure spread concept and the two-step estimation approach of Ho and Saunders (1981) have been used to decompose the interest spreads in Estonia. The pure spread is mainly determined by risk aversion and the market structure of the banking sector, with money market interest volatility playing quite a modest role in the long-term equilibrium. The regulatory, efficiency and bank-portfolio effects share a roughly equal weight in the observed spread, whereas credit risk adds only a tiny portion to the mark-up. Strong liquidity and foreign capital permit lower spreads
    Keywords: bank interest spread, dealership model
    JEL: G21 E43
    Date: 2012–02–22
  20. By: Jaan Masso; Priit Vahter
    Abstract: Recent empirical studies of international trade have stressed that firm level decisions about the number of export products or markets represent an important margin of adjustment in response to globalization and changes in economic conditions. We investigate how decisions about the export product mix are associated with aggregate export dynamics and productivity of firms. For that purpose we use detailed product data and export market level data of the full population of Estonia’s firms. Decomposition analysis of trade flows shows that both the relative importance of firms starting exporting and the role of product level churning (firms adding and dropping products) in total Estonian export growth increases significantly after accession to the EU in 2004. We show that starting to export and adding and dropping export products in the same period is associated with higher firm productivity compared to exporters that keep their export mix unchanged or decrease its breadth. Dropping peripheral products is associated with higher productivity only in the case of firms with a relatively large number of export products.
    Keywords: exporting, multi-product exporters, extensive margin of trade
    JEL: F10 F14 D24
    Date: 2012
  21. By: Guanghui Huang; Weiqing Gu; Wenting Xing; Hongyu Li
    Abstract: Margin system for margin loans using cash and stock as collateral is considered in this paper, which is the line of defence for brokers against risk associated with margin trading. The conditional probability of negative return is used as risk measure, and a recursive algorithm is proposed to realize this measure under a Markov chain model. Optimal margin system is chosen from those systems which satisfy the constraint of the risk measure. The resulted margin system is able to adjust actively with respect to the changes of stock prices. The margin system required by the Shanghai Stock Exchange is compared with the proposed system, where 25,200 margin loans of 126 stocks listed on the SSE are investigated. It is found that the number of margin calls under the proposed margin system is significantly less than its counterpart under the required system for the same level of risk, and the average costs of the loans are similar under the two types of margin systems.
    Date: 2012–02

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