nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒04‒03
twenty papers chosen by
J. David Brown
Heriot-Watt University

  1. Explaining the Dynamics in Perceptions of Job Insecurity in Russia By Lokshin, Michael; Gimpelson, Vladimir; Oshchepkov, Aleksey
  2. Using export market performance to evaluate regional preferential policies in China By Annette SCHMINKE; Johannes VAN BIESEBROECK
  3. Evolving Ownership Structures in Private Enterprises in China: the Case of Ningbo By Zhong Qin; Wenli Cheng
  4. Effects of deregulation and vertical unbundling on the performance of China's electricity generation sector By Hang GAO; Jo VAN BIESEBROECK
  6. Has the Chinese growth model changed? A view from the credit market By Herrala, Risto; Jia, Yandong
  7. Increasing Returns, Land Use Controls and Housing Prices By Dingsheng Zhang; Wenli Cheng; Yew-Kwang Ng
  9. Looking Inward for Transformative Growth in China By Rod Tyers
  10. Health Outcomes and Socio-Economic Status Among the Elderly in China: Evidence from the CHARLS Pilot By James P. Smith; John Strauss; Xiaoyan Lei; Albert Park; Yan Shen; James P. Smith; Zhe Yang; Yaohui Zhao
  11. Social Identity and Inequality: The Impact of China's Hukou System By Afridi, Farzana; Li, Sherry Xin; Ren, Yufei
  12. Structural challenges for SOEs in Belarus : a case study of the machine building sector By Favaro, Edgardo; Smits, Karlis; Bakanova, Marina
  13. Work Hours in Chinese Enterprises: Evidence From Matched Employer-Employee Data By Vinod Mishra; Russell Smyth
  14. Weakened Redistributive Impacts of Personal Income Tax in Urban China: Evaluation of the Personal Income Tax Reform Implemented in September 2011 By Ximing Yue; Jing Xu; Qian Liu
  15. Effects of Privatization on Exporting Decisions: Firm-level evidence from Chinese state-owned enterprises By TODO Yasuyuki; INUI Tomohiko; YUAN Yuan
  16. Impacts of China's log Import on the Ecological Sustainability of Forests in Source Countries By Ji, Chun-Yi; Yang, Hong-Qiang; Nie, Ying
  17. Does FDI Promote Human Capital Accumulation? The Role of Gradual Financial Liberalization By Qichun He
  18. Redistributive Impacts of Personal Income Tax in Urban China By Ximing Yue; Jing Xu
  19. Active Inclusion of Immigrants in Poland By Duszczyk, Maciej; Góra, Marek
  20. Information system solutions for the management of Romanian small and medium size enterprises By Moga, Liliana Mihaela

  1. By: Lokshin, Michael (World Bank); Gimpelson, Vladimir (CLMS, Moscow Higher School of Economics); Oshchepkov, Aleksey (Higher School of Economics, Moscow)
    Abstract: Contrary to the experiences of other countries, perceptions of job insecurity in Russia were not correlated with the rates of unemployment and the business cycle over the last decade. We develop the theoretical framework that predicts that the individual perceptions of job insecurity depend on regional unemployment rates and on the within-group variance of wage distribution faced by workers. We test this hypothesis using data from ten panel rounds of Russia Longitudinal Monitoring Survey. Our results indicate that while higher rates of unemployment make workers feel less job secure, the wage compression during recessions reduces their fears of losing a job. In periods of economic expansion the effect of lower unemployment rates is offset by the higher fears of losing better paying jobs.
    Keywords: unemployment, job security, business cycle, Russia
    JEL: J28 J30 J64
    Date: 2012–03
  2. By: Annette SCHMINKE; Johannes VAN BIESEBROECK
    Abstract: We apply program evaluation methods to analyze the effectiveness of two types of preferential regional policy programs in China's manufacturing sector. Economic and Technological Development Zones (ETDZs) aim to facilitate firms' internationalization strategies. Science and Technology Industrial Parks (STIPs) aim to generate technology spillovers. We focus on various dimensions of export market performance as objective indicators for the upgrading of product quality and firm operations. We compare startups that locate into one of these zones with other startups, while controlling for self-selection. The findings suggest that firms locating in an ETDZ do much better on sheer quantity of trade, i.e. the total volume of exports and number of destinations are higher. Firms locating in a STIP perform best on `quality' dimensions, in particular they fetch higher export prices, even by destination and especially for firms producing machinery.
    Date: 2011–12
  3. By: Zhong Qin; Wenli Cheng
    Abstract: This paper develops a theoretical model to study features of the spontaneous growth of private enterprises in China’s Zhejiang province. The model predicts that in a developing economy where the market environment is immature or unstable, the ownership structure of a typical private enterprise involves a cooperative arrangement between a party with management skills and another party with Guanxi (connections). As the market environment becomes more stable, the ownership share of the party with management skills increases. This result is confirmed by empirical evidence. Observations of the pattern of private sector growth suggest that ownership structures of private enterprises were strongly influenced by the market environment. Empirical analysis based on a survey of 296 firms in Ningbo city of China shows that the perceived importance of both government and family Guanxi declined with perceived improvements in market stability.
    Keywords: Guanxi, ownership structure, quality of economic environment, private enterprises in China
    JEL: L20
    Date: 2012–03
    Abstract: We study whether the 2002 deregulation and vertical unbundling of the Chinese electricity sector has boosted productivity in the generation segment of the industry. Controlling explicitly for sources of price-heterogeneity across firms and for firm-fixed effects, we find deregulation to be associated with a reduction in labor input and material use of 6 and 4 percent, respectively. This effect only appears two years after the reforms, is robust to alternative ways of identifying restructured firms, and to the nonrandom selection of restructured firms using a matching estimator. Input use of new state-owned firms that start operations two years into the reform period does not differ significantly anymore from input use of private sector entrants.
    Date: 2011–11
  5. By: GUILLERMO CARDOZA (Instituto de Empresa)
    Abstract: The paper aims to study the influence of the institutional environment on the international expansion of SMEs from China; the study is based on 134 SMEs operating in Jiangsu Province, China. Data from these companies were analysed using multivariate regressions, and the models used the firms´ export intensity as dependent variables. Seven models were run for the following variables, limited access to financial resources, inefficiencies in logistics and distribution in the home market, transport and insurance costs and payment collection methods, assistance from the government, adverse regulatory framework, state ownership, and public procurement. The results show that access to financial res
    Keywords: Internationalization
    Date: 2012–03
  6. By: Herrala, Risto (BOFIT); Jia, Yandong (BOFIT)
    Abstract: A cornerstone of the Chinese growth model has been the opening up of its economy to private competition. Some observers claim that China has changed course since joining the WTO by increasingly promoting ‘state capitalism’, the large State Owned Enterprises, thereby compromising a growth model that has served it well. Due to the opaqueness of the Chinese system, even such a major shift in policy has been difficult to verify. We are able to look inside the covert policy process by studying the credit supply to Chinese listed companies, the drivers of the growth miracle, of the past decade. The econometric analysis corroborates the policy shift: we find a significant improvement in credit supply conditions of government firms relative to other firms during the latter part of the decade. The estimations also provide evidence of other major trends in credit supply that reflect the Chinese government’s policy objectives.
    Keywords: Chinese economy; credit constraints; corporate finance
    JEL: C58 E44 G30 O16
    Date: 2012–03–22
  7. By: Dingsheng Zhang; Wenli Cheng; Yew-Kwang Ng
    Abstract: The Chinese government has been active in trying to cool the alleged bubbles in its housing markets, especially in urban areas. This paper argues that the high housing prices are at least partly caused by some real factors, including the policy of restricting land uses, in particular the maintenance of a minimum overall agricultural acreage. A simple model of three sectors (housing, agriculture, and others) is constructed to examine the effects of the artificial constraint. The role of increasing returns in the non-agricultural sectors in exacerbating the policy biases is also examined. The model is then calibrated to estimate the effects of land use control policy on housing prices in China.
    Keywords: increasing returns; land use controls in China; housing prices in China
    JEL: R31 R38
    Date: 2012–03
  8. By: GUILLERMO CARDOZA (Instituto de Empresa)
    Abstract: The ´Chinese miracle´ has captured the attention of scholars around the world. Coinciding with the extraordinary economic growth registered in China during the last three decades a growing number of studies have been published in recent years providing a wide-ranging analysis of Chinese multinational corporations´ strategies as well as analyzing the role played by the state and the institutional determinants in the internationalization processes However, it is surprising to note that very little has been said about the internationalization strategies of SMEs from China especially considering that SMEs account for 60 percent of China´s GDP, 66 percent of the country´s patent applications, 80
    Keywords: Internationalization
    Date: 2012–03
  9. By: Rod Tyers
    Abstract: Export led growth has been very effective in modernising China’s economy and establishing a large high-saving middle class. Notwithstanding political opposition from trading partners, this growth strategy has also offered the rest of the world an improved terms of trade and cheaper finance. Yet it is believed by China’s government that this convenient strategy has run its course and the transition has begun to a model that “looks inward” for growth, to be driven by expanding consumption and home investment. This paper uses a numerical model of the Chinese economy with oligopoly behaviour to examine the available “inward” sources of transformative growth along with the policies needed to exploit them. Success will require the redistribution of the considerable rents now accruing to connections of key state owned enterprises, suggesting the potential for political resistance and the yet-avoidable possibility that China could fall into a “middle income trap”.
    JEL: D43 D58 E62 L13 L43
    Date: 2012–03
  10. By: James P. Smith; John Strauss; Xiaoyan Lei; Albert Park; Yan Shen; James P. Smith; Zhe Yang; Yaohui Zhao
    Abstract: This paper is concerned with measuring health outcomes among the elderly in Zhejiang and Gansu provinces, China, and examining the relationships between different dimensions of health status and measures of socio-economic status (SES). The authors use the China Health and Retirement Longitudinal Study (CHARLS) pilot data to document health conditions among the elderly in Gansu and Zhejiang provinces, where the survey was fielded. They use a very rich set of health indicators that include both self-reported measures and biomarkers. They also examine correlations between these health outcomes and two important indicators of socioeconomic status (SES): education and log of per capita expenditure (log pce), their preferred measure of household resources. While there exists a very large literature that examines the relationships between SES and health measures, little has been done on Chinese data to see whether correlations reported in many other countries are replicated in China, particularly so for the aged. In general education tends to be positively correlated with better health outcomes, as it is in other countries. However, unmeasured community influences turn out to be highly important, much more so than one usually finds in other countries. While it is not yet clear which aspects of communities matter and why they matter, they set up an agenda for future research on this topic. They also find a large degree of under-diagnosis of hypertension, a major health problems that afflicts the aged. This implies that the current health system is not well prepared to address the rapid aging of the Chinese population, at least not in Gansu and Zhejiang.
    Date: 2010–08
  11. By: Afridi, Farzana (Indian Statistical Institute); Li, Sherry Xin (University of Texas at Dallas); Ren, Yufei (Union College)
    Abstract: We conduct an experimental study to investigate the causal impact of social identity on individuals' response to economic incentives. We focus on China's household registration (hukou) system which favors urban residents and discriminates against rural residents in resource allocation. Our results indicate that making individuals' hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent, which leads to a significant leftward shift of their earnings distribution. The results demonstrate the impact of institutionally imposed social identity on individuals' intrinsic response to incentives, and consequently on widening income inequality.
    Keywords: social identity, inequality, field experiment, hukou, China
    JEL: C93 D03 O15 P36
    Date: 2012–03
  12. By: Favaro, Edgardo; Smits, Karlis; Bakanova, Marina
    Abstract: Are Belarus's state owned enterprises positioned to grow in 2011-2015 as successfully as in 1995-2006? State owned enterprises account for 55 percent of Belarus's output and two-thirds of overall employment; economic growth in 1995-2006 was the result of capacity expansion and productivity improvements in state owned enterprises. These sources of economic growth originated in policy decisions that preserved the functioning of the command and control economy and allowed the country to exploit preferential commercial access to the Russian market in several goods and services. Are the same reasons likely to facilitate the performance of state owned enterprises and overall economic growth in 2011-2015? This paper concludes that this is not likely to happen. Times have changed: the slowdown in production and exports in 2009-2010 was unquestionably associated with a transitory decline in demand for durable goods in Russia. But there have also been more permanent market forces at work: a steady increase in competition in Russia and other Commonwealth of Independent States markets resulting from low-price Chinese and Russian-produced capital goods; and a shift in demand from low-quality/low price to high-quality, high-price transport equipment demand in Russia and other Commonwealth of Independent States markets. And these forces are there to stay. This conclusion leads to the following questions: Would state owned enterprises be able to adapt to observed market changes? What reforms would be relevant to facilitate the necessary adaptation?
    Keywords: Markets and Market Access,Transport Economics Policy&Planning,Debt Markets,Economic Theory&Research,E-Business
    Date: 2012–03–01
  13. By: Vinod Mishra; Russell Smyth
    Abstract: The purpose of this paper is to explore the factors that are correlated with hours worked in China. A distinguishing feature of the study is that we use representative matched employer and employee data. Hence, in addition to the usual worker characteristics examined in conventional economic models of labour supply, we also take account of the influence of firm characteristics and policies in influencing the number of hours worked. The results suggest that in addition to the hourly wage rate, labour supply characteristics and human capital characteristics of the individual, firm-level differences are important in explaining variation in weekly hours worked in Chinese firms. In particular, our results suggest that there is a norm of longer working hours in firms which employ a high proportion of female workers, that hours worked are less in firms which pay overtime and that hours worked are less in firms in which labour disputes have disrupted production. The implications of the results for Chinese firms wishing to improve labour management practices are discussed.
    Keywords: China, hours worked, wages, firms
    JEL: J22 J30
    Date: 2012–03
  14. By: Ximing Yue; Jing Xu; Qian Liu
    Abstract: A new personal income tax reform implemented in China on September 1, 2011. The main content of this amendment is as follows: The first is to raise the pre-tax salary deduction standard from RMB2000/month to 3500/month; the second is to adjust the tax rate structure of salary, reducing from the former 9-grade extra progressive tax rate to 7 grades and adjusting the rate and the ranges of income; This paper researched the income redistribution effect after personal income tax reform. We first decomposed the redistribution effect index of personal income tax by the composition of income according to the current personal income tax collection mode of sub-levied in China. The main analysis results can be summarized in two points: First, the level of the average effective tax rate is the main determinant of the income redistribution effects and progressive is secondary. Due to the reduction of the effective tax rate, the tax reform has weakened the redistribution effects of personal income tax which already very weak in the former tax system. Second, the overall progressivity index of personal income tax was inverted U-shaped with the improvement of deduction in salary income. Coincidentally, the deduction determined by this reform (RMB3500/month) happens to be at the maximum of the inverted U-shaped,so the higher deduction would weaken the progressive.
    Date: 2012–03
  15. By: TODO Yasuyuki; INUI Tomohiko; YUAN Yuan
    Abstract: This paper examines whether or not privatization of Chinese state-owned enterprises (SOEs) increases the probability of exporting, and, if so, what channels generate such effect. Using firm-level data for the Chinese manufacturing sector for the period 2000-2007, we find that privatization has a positive effect on exporting decisions, productivity, and firm size and a negative effect on firms' long-term debt. We also find that Chinese firms are more likely to engage in export when the productivity level, firm size, or long-term debt is larger. These two sets of results suggest that privatization has positive effects on exporting decisions through improving productivity and firm size and a negative effect through lowering debt. However, quantitative analysis reveals that effects of privatization through these three channels are small. Therefore, we conclude that the positive effect of privatization on exporting decisions comes mostly from other unobservable factors, most probably changes in attitude toward profits and risks associated with privatization.
    Date: 2012–03
  16. By: Ji, Chun-Yi; Yang, Hong-Qiang; Nie, Ying
    Abstract: As the largest log import country in the world, China undoubtedly faces a severe challenge from the reduction in global forest resources. Based on the fact that a flow of ecological elements embodied in the process of import can cause extra ecological stress to the source regions, the authors assessed the ecological effect of China’s log imports on the source countries’ forest sustainability. The ecological footprints embodied in China’s log imports from 1995 to 2010, and then introduce the model of ecological tension index to assess the ecological security status of the forests in major source countries. Results demonstrate that, overall, China’s import of log has posed no serious threat to world forests. Most of the source countries have safe forest ecological states due to their huge forest bio-capacity, although China’s log import has increased their forest ecological stress by more than 14%. While for some developed source countries, China has increased the ecological tension less than 1%. The risk of forests reduction was probably caused by its own resource consumption.
    Keywords: Log Imports; Ecological Footprint; Ecological Stress Transfer
    JEL: F18 F02 A14
    Date: 2011–04
  17. By: Qichun He (CEMA, Central University of Finance and Economics)
    Abstract: We argue that how inward foreign direct investment (FDI) affects domestic human capital accumulation (HCA) depends on the degree of financial deregulation. Utilizing the Chinese experience and its panel data, the OLS (ordinary least squares) regressions suggest that FDI has a significant positive interaction effect with financial deregulation on HCA. Specifically, the estimated coeffcient on FDI is positive but insignificant, while that on its interaction with financial deregulation is significantly positive. It means that FDI promotes HCA in China, and higher degree of financial deregulation reinforces the promoting effect. Instrumenting FDI with two sets of instruments grounded on different rationales (which ensures valid identification), our limited-information maximum likelihood (LIML) estimation results are similar to those of OLS. The results are also robust when we control for other factors affecting HCA, and time and province effects.
    Keywords: Foreign Direction Investment, Human Capital, Gradual Financial Deregulation, Interaction, Panel Data
    JEL: C23 F21 J24
    Date: 2011–06
  18. By: Ximing Yue; Jing Xu
    Abstract: The purpose of this paper is to evaluate the redistributive effects of the personal income tax (PIT). Information on the PIT reported in the household survey substantially understates the real tax liability borne by households. The redistributive effects of the personal income tax would be undervalued if the information was used. In order to correct the underestimation of the PIT by non-reporting in our dataset, we apply the tax schedule and impute the tax liability for the individuals in our sample according to the components of their earned income. This imputed tax liability is used to calculate the MT index, the most commonly used measure of the redistributive effects of taxes and governmental subsidies, and to decompose the MT index into the effects of horizontal equity and vertical equity. The MT index and its decomposition show that the personal income tax does reduce inequality, but the effect is small and negligible. The low average personal income tax rate is the main reason why it fails to contribute more to improving inequality.
    Date: 2012–03
  19. By: Duszczyk, Maciej (Warsaw University); Góra, Marek (Warsaw School of Economics)
    Abstract: Poland has traditionally been treated as an emigration country. Since recently Poland has been changing into an emigration-immigration country. The latter, namely immigration, was boosted by the European Union membership and by stable and strong growth of the country. In the last years, immigrants have started to play an important role in the Polish labour market, which creates an additional challenge for the institutional structure. At the same time the institutional framework for receiving immigrants, especially integration policy, has not been fully developed yet. It is addressed only to refugees and is provided mostly by NGOs who run various integration programmes (most often focused on providing language courses). Public expenditure on integration policies has recently increased. However, data on immigrants, integration in immigration policy and also its analysis are still scarce. In this paper we try to present and discuss the available information on immigration to Poland and instruments of integration policy in the context of the existing institutional framework. We propose also recommendations for the pre-integration and integration policy in Poland. The goal of the paper is modest since it is hardly possible to apply more sophisticated methods given the limited availability of information.
    Keywords: immigrants, integration policy, active inclusion
    JEL: J61 J68 Y80
    Date: 2012–03
  20. By: Moga, Liliana Mihaela
    Abstract: In order to survive in a turbulent economy and to survive the economic crisis, enterprises should be able to adapt quickly to the continuous changes that occur in the increasingly dynamic business environment. This paper identifies the limits of the traditional design methods used to develop the information systems. It is intended to solve this problem by working on the main cause which generates this situation – analysis and design methods. Previous literature and empirical studies related to information systems design was reviewed. Based on these reviews was introduced the succession of a product’s stages that have to be covered in order to design the information systems by using the Value Analysis. By using the Value Analysis in Software Engineering, the unification of the recent research accomplished in this field with those carried out in software architecture is intended. Another modality for increasing the competitiveness of the Romanian economy is by developing a safe and dynamic e-Business environment, by increasing the number and exploitation degree of the e-Business opportunities by the Small and Medium Size Enterprises. By means of this paper, the author will investigate the manner in which are stimulated in Romania, through the development policies and their application instruments, the development of local economies, the creation of a new inter-relational culture between enterprises, the adoption of innovative e-business type solutions and the creation of local development plans and their integration in the regional strategy.
    Keywords: Management Information Systems; Software Engineering; policies; methodology; Value Analysis
    JEL: C88 B41 M21
    Date: 2011–09–15

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