nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒05‒29
twenty-two papers chosen by
J. David Brown
Heriot-Watt University

  1. Book Translations as Idea Flows: The Effects of the Collapse of Communism on the Diffusion of Knowledge By Abramitzky, Ran; Sin, Isabelle
  2. Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration By Marcus Noland; Stephan Haggard
  3. Commitment devices, opportunity windows, and institution building in Central Asia By Danne, Christian
  4. Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992 - 2008) By Jinzhao Chen
  5. The Enigmas of TFP in China: A Meta-Analysis By Xu Tian; Xiaohua Yu
  6. Estimating transport costs and trade barriers in China: Direct evidence from Chinese agricultural traders By Zhigang Li; Xiaohua Yu; Yinchu Zeng; Rainer Holst
  7. Crisis, Capital Controls and Covered Interest Parity: Evidence from China in Transformation By Jinzhao Chen
  8. Non-linear relationship between body mass index and labor market outcomes: new evidence from China By Luo, Mi; Zhang, Chuanchuan
  9. Pipeline Power By Franz Hubert; Onur Cobanli
  10. The effects of school quality on fertility in a transition economy By Vasilaky, Kathryn
  11. The Effects of Democratization on Public Goods and Redistribution: Evidence from China By Martinez-Bravo, Monica; Padro, Gerard; Qian, Nancy; Yao, Yang
  12. Determinants of Local Currency Bonds and Foreign Holdings: Implications for Bond Market Development in the People’s Republic of China By Bae, Kee-Hong
  13. International Migration and the European Union Relations in the Context of a Comparison of Western Balkans and North African Countries: Controlling Migration and Hybrid Model By Aliu, Armando
  14. Economic reform and institutional change in Central Asia: Towards a new model of the developmental state? By Stark, Manuel; Ahrens, Joachim
  15. European enlargement policy, technological capabilities and sectoral export dynamics By Valeria Costantini; Francesco Crespi
  16. Agglomeration and Markup By Lu, Yi; Tao, Zhigang; Yu, Linhui
  17. 结婚年龄与婚姻的稳定性:来自断点回归的证据 By Zhang, Chuanchuan
  18. China and the TPP: A Numerical Simulation Assessment of the Effects Involved By Chunding Li; John Whalley
  19. Income redistribution through taxes and social benefits: the case of Slovenia and Croatia By Cok, Mitja; Urban, Ivica; Verbič, Miroslav
  20. The distribution of wages and employee incomes in Slovenia, 1991–2009 By Stanovnik, Tine; Verbič, Miroslav
  21. Measuring and managing the impact of risk on organizations: The Case of Kosovo By Govori, Arbiana
  22. The Financial Lobby and Impact of Other Stakeholders in the EU: A good model for emancipation of the financial system in Kosovo By govori, fadil

  1. By: Abramitzky, Ran (Stanford University and NBER); Sin, Isabelle (Motu Economic and Public Policy Research)
    Abstract: We use book translations as a new measure of international idea flows and study the effects of Communism’s collapse in Eastern Europe on these flows. Using novel data on 800,000 translations and difference-in-differences approaches, we show that while translations between Communist languages decreased by two thirds with the collapse, Western-to-Communist translations increased by a factor of five and quickly converged to Western levels. Convergence was more complete in more economically-useful fields such as the sciences, and was more complete in Satellite than in Soviet countries. These findings help us understand how institutions shape the international diffusion of knowledge.
    Keywords: idea flows, book translations, institutions, institutional change, Communism's collapse
    JEL: N0 N70 N74 F02 F15 P20 P30 P51 P52
    Date: 2012–05
  2. By: Marcus Noland (Peterson Institute for International Economics); Stephan Haggard (University of California, San Diego Graduate School of International Relations and Pacific Studies)
    Abstract: A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country’s foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
    Keywords: trust, relational contracting, economic integration, institutions, China, North Korea
    JEL: P33 P25 L14 F15
    Date: 2012–05
  3. By: Danne, Christian
    Abstract: This paper studies the institutional reform process in Central Asia from 1995 to 2006. I compare the institutional reform processes of Central Asian countries to those conducted in their neighbouring countries of Central and (South) Eastern Europe, and the Middle East. The paper identifies contemporaneous factors responsible for the persistence of poor institutional arrangements. Second, the paper identifies factors that have acted as commitment devices in order to achieve and sustain institutional change over the last decade. It is argued that deficiencies in the education system, and preferences of individuals and politicians are responsible for the persistence of poor institutional arrangements. External factors such as real and financial openness, fixed exchange rates, and international agreements have provided a disciplining effect for policy makers to improve institutional arrangements in Central Asia, despite poor initial conditions. Finally, there is some evidence that large external shocks may help to shift preferences towards more reliable institutional settings. --
    Keywords: Economic institutions,reforms,Central Asia
    JEL: H11 O10 P20
    Date: 2012
  4. By: Jinzhao Chen (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper studies the convergence, and the role of internal real exchange rate on economic growth in the Chinese provincial level. Using informal growth equation à la Barro [1991] and dynamic panel data estimation, we find conditional convergence among the coastal provinces and among inland provinces. Moreover, our results show that the real exchange rate appreciation has a positive effect on the provincial economic growth.
    Keywords: Real Exchange Rate ; Economic Growth ; China ; Generalized method of moments
    Date: 2012–02
  5. By: Xu Tian (Georg-August-University Göttingen); Xiaohua Yu (Georg-August-University Göttingen)
    Abstract: This paper presents a meta-analysis of 5308 observations of total factor productivity growth (TFPG) in China from 150 primary studies to provide some insightful explanations to the controversies about productivity growth in China in the current literature. The main findings include that (1) The mean TFPG of the aggregate economy at the national level in the current literature is only about 2% after 1978, which barely contributes to 20% economic growth; (2) There are three cycles for TFPG after 1978 and each circle lasts about ten years; (3) Sector-specific TFPGs are generally larger than aggregate economic TFPGs; (4) Regional disparities of TFPG are significant and specifically the TFPG in East China is higher than that in Central and West China; (5) TFPG after 1978 is in general greater than that before 1978; and (6) Peer-review process and paper languages are significantly correlated with TFPG results.
    Keywords: Economic growth; TFP; Meta-Analysis; China
    Date: 2012–05–16
  6. By: Zhigang Li (University of Hong Kong); Xiaohua Yu (Georg-August-University Göttingen); Yinchu Zeng (Renmin University of China); Rainer Holst (Georg-August-University Göttingen)
    Abstract: Using a unique survey data on agricultural traders in China in 2004, this study provides direct evidence on the significance of inter-regional trade barriers and their key components. Our major findings are as follows. (1) The trade barriers within China are fairly small, accounting for about 20 percent of trade value. (2) Transport and non-transport costs respectively contribute 42% and 58% to the trade barriers. (3) Labor and transport-related taxes are the two largest proportions of total transport costs, and respectively accounts for 35% and 30%. (4) Artificial trade barriers created by the government are not sizable as we perceived. (5) Road quality is crucial for reducing transport costs within China: Increasing transport speed by 1 km per hour, the total transport costs for Chinese agricultural traders would decrease by 0.6 percent mainly due to improved fuel-burning efficiency and reduced labor requirement.
    Keywords: Transport Costs; China; Agricultural Traders; Infrastructure
    Date: 2012–05–16
  7. By: Jinzhao Chen (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper aims to investigate the intensity and the effectiveness of the capital controls in China from 2003 to 2010, with special attention to the period of financial turbulence that erupted in the summer of 2007. We employ a two-regime threshold autoregressive model to study the Renminbi yield differential between the onshore interest rate and its non-deliverable forward (NDF)-implied offshore interest rate. We find that the de facto intensity of capital controls measured by the threshold increases over time, even during the period of financial turbulence. Moreover, a slightly lower speed of adjustment to the threshold implies that the capital controls are effective in this context.
    Keywords: Covered Interest Parity ; Capital Control ; China ; Threshold Autoregressive model ; GARCH effect ; Financial Crisis
    Date: 2012–01–17
  8. By: Luo, Mi; Zhang, Chuanchuan
    Abstract: Using data from a most recent national household survey in China, we provide new evidence for the relationship between body mass index (BMI) and labor market attainments. In contrast to previous studies, we find a non-linear relationship between BMI and employment / wages, especially for women. There is no substantial heterogeneity across occupation in the effect of BMI on women’s wages.
    Keywords: Body mass index; Unemployment; Wage; Non-linear correlation
    JEL: J31 I12 J64
    Date: 2011–12
  9. By: Franz Hubert; Onur Cobanli
    Abstract: We use cooperative game theory to analyze the strategic impact of three controversial pipeline projects. Two of them, Nord Stream and South Stream, allow Russian gas to bypass transit countries, Ukraine and Belarus. Nord Stream’s strategic value turns out to be huge, justifying the high investment cost for Germany and Russia. The additional leverage obtained through South Stream, in contrast, appears small. The third project, Nabucco, aims at diversifying Europe’s gas imports by accessing producers in Middle East and Central Asia. The project has a large potential to curtail Russia’s power, but the benefits accrue mainly to Turkey, while the gains for the EU are negligible.
    Keywords: Bargaining Power, Transport Network, Natural Gas
    JEL: L5 L9 O22
    Date: 2012–05
  10. By: Vasilaky, Kathryn
    Abstract: This paper investigates the effects of school quality on fertility in a transition country. It aims to explain the slowing fertility and shrinking rural sector of a post Soviet country, Ukraine, through the decline in the quality of public services, in particular, school quality. It builds on earlier work of Rosenzweig (1982), which tests for the effects of a change in the price of child quality, measured here by school quality. Estimates from a generalized Poisson model of fertility show that school quality has a positive and significant effect on household fertility. Specifically, a 10 % increase in teacher quality is associated with a 3+% rise in fertility. This positive relationship between education and fertility distinguishes itself from the negative relationship that is commonly observed between these two factors. It also suggests that Ukraine should reconsider its population policies that are aimed at increasing fertility, from short term income transfers for rural families to long term investments into the quality and equality of their education system.
    Keywords: school quality; transition economy; quality quantity tradeoff
    JEL: D13 D7
    Date: 2011–06–28
  11. By: Martinez-Bravo, Monica; Padro, Gerard; Qian, Nancy; Yao, Yang
    Abstract: This study investigates the effects of introducing elections on public goods and redistribution in rural China. We collect a large and unique survey to document the history of political reforms and economic policies and exploit the staggered timing of the introduction of elections for causal identification. We find that elections significantly increase public goods expenditure, the increase corresponds to demand and is paralleled by an increase in public goods provision and local taxes. We also find that elections cause significant income redistribution within villages. The results support the basic assumptions of recent theories of democratization (Acemoglu and Robinson, 2000; Lizzeri and Persico, 2004). In addition, we show that the main mechanism underlying the effect of elections is increased leader incentives.
    Keywords: Democracy; Elections; Institutions
    JEL: P16
    Date: 2012–05
  12. By: Bae, Kee-Hong (Schulich School of Business, York University)
    Abstract: This case study explores which variables—macroeconomic, institutional, and capital controls—are most important in explaining cross-country differences in bond market development. It uses the ratio of amount of local currency bonds outstanding over GDP as a measure of bond market development from 43 countries during 1990–2009. The study examines government and corporate bond markets separately, as the characteristics of these markets are substantially different and requires separate examination. <p> Main findings are derived from the comparative analysis. Several policy implications drawn from the findings are pertinent to the People‘s Republic of China (PRC) bond market. The most important implication is that the way to develop fixed income markets is to start with the government bond market. Another important implication from the empirical findings is that mature and well-developed banking sector is critically important to the further development of bond market, particularly to the corporate bond market. While the PRC bond market has developed significantly over recent years, there is much room for improvement. This report provides policy suggestions, albeit not necessarily from empirical findings, to further develop PRC bond markets.
    Keywords: PRC bond market; debt securities; determinants; regulatory and legal infrastructure; off-shore CNY bonds
    JEL: E63 E65 G14 G18 G24 G28 N20
    Date: 2012–05–01
  13. By: Aliu, Armando
    Abstract: This study investigates migration flows from Western Balkans and North African countries to the high-income countries of the EU. Migration and asylum issues were analysed with taking into account empirical, analytical and political comparisons of Western Balkans and North African countries from the triple win solution point of view. The research attempts to emphasize Western Balkans migration experience in order to respond how to manage and/or control chaotic migration with respect to North African countries. In addition, the EU enlargement and neighbourhood policies have significant effects on EU migration dynamics of demographic change (i.e. ageing population) and convergence/divergence of EU member states’ migration priorities. In this context, the role of the triangle (hybridity) – state, private and civil society in migration research ought to be argued to verify whether a controlling migration by an ideal hybrid structure and decentralisation will be more effective and accurate or not? The research presents dialectics of triple win approach and hybrid model (i.e. home country-state, host country-private, and civil society-migrants) with using governance models. The main argument was tested methodologically through using case study research, grounded theory, constructivist and normative approaches.
    Keywords: Hybrid Model; Controlling Migration; Social Transformation; Western Balkans; North Africa; Decentralisation
    JEL: F22 O15 R5 R23 A14 F24
    Date: 2012–05–21
  14. By: Stark, Manuel; Ahrens, Joachim
    Abstract: Widely ignoring recommendations from mainstream economics, the some Central Asian countries have achieved remarkable economic growth rates since their transformational recession in the 1990s. While Kazakhstan, Uzbekistan, and Turkmenistan have greatly benefitted from increasing world market prices for natural resources, particularly Kazakhstan and Uzbekistan have pursued distinct country-specific policies and built up politico-institutional structures which may have also contributed to bring about economic and social progress. This paper investigates the politico-institutional foundation of these emerging market economies in Central Asia and addresses the question whether or not these marketdeveloping autocracies are on a way to become developmental states with a firm commitment to economic development in the future. --
    Keywords: Developmental State,Central Asia,Kazakhstan,Uzbekistan
    Date: 2012
  15. By: Valeria Costantini; Francesco Crespi
    Abstract: This paper examines how the last wave of the European Union enlargement process has influenced the export competitiveness of EU countries. A technology-augmented gravity model is applied to distinguished manufacturing sectors to test the effect of the economic integration as well as the role of technological capabilities on export dynamics in old and new EU countries. The main findings reveal that the enlargement process has produced an overall larger positive impact on export flows for new members and that this positive effect appears not to be confined to low-tech sectors. In addition, the study shows that the level of technological capabilities is a crucial driving factor for export dynamics, both for old and new EU countries, and that the interrelations between the EU enlargement process and the level of technological capabilities are relevant.
    Keywords: EU enlargement, technological capabilities, innovation, industries, international trade, gravity models
    JEL: F14 F15 O14
    Date: 2012–05
  16. By: Lu, Yi; Tao, Zhigang; Yu, Linhui
    Abstract: Agglomeration brings costs (e.g., intensified local competition) as well as benefits (e.g., knowledge spillover). It is important to examine the net impact of agglomeration to understand the geographic distribution of economic activities. In this study, we use firm markup (defined as the ratio of price over marginal cost) to capture the net impact of agglomeration. Using data from Chinese manufacturing firms in the 1998-2005 period, we first recover the markup ratio for each firm following De Locker and Warzynski (2012), and then use changes in industrial affiliation as a quasi-experiment to identify the impact of agglomeration on firm markup. Our difference-in-differences (DID) estimation shows that agglomeration has a negative impact on firm markup, suggesting that the devastating competition effect dominates the beneficial spillover effect in Chinese context. Moreover, we find that the impact of agglomeration on firm markup varies across different industries and types of firms.
    Keywords: Agglomeration; Firm Markup; Difference-in-Differences Estimation; Spillover effect; Competition effect
    JEL: L25 D21 R11
    Date: 2011–06
  17. By: Zhang, Chuanchuan
    Abstract: Exploiting the exogenous shock of change of marriage law, this paper estimates a quasi-natural experimental effect of age at marriage on marital stability for the first time. A new Marriage Law came into force in Jan. 1, 1981 in China, with new requirement on age at marriage. Using a regression discontinuity design by restricting sample to those married just before and after 1981, this paper finds that probability of divorce increases by age at marriage. One year delay of age at marriage increases the probability of divorce by 3 to 6 percentage points. On the contrary, the results from conventional OLS estimation show that delay of age at marriage either has no effects or has a small positive effect on marital stability, suggesting the OLS estimates suffer from severe omitted variable bias. This study suggests that increase in age at marriage is one important cause of the increase of divorce rates during recent year in China.
    Keywords: 结婚年龄 离婚率 断点回归
    JEL: J12 K36
    Date: 2012–04–25
  18. By: Chunding Li; John Whalley
    Abstract: The Trans-Pacific Partnership (TPP) is a new negotiation on cross border liberalization of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. Though the US, Australia and other pacific countries are included, China is notable for its exclusion from the process thus far. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on China and the other participating countries. We use a numerical five-country global general equilibrium model with trade costs and monetary structure incorporating inside money to allow for impacts on trade imbalances. Trade costs are calculated using a method based on gravity equations. Simulation results reveal that China will be hurt by TPP initiatives, but the negative effects are relatively small given the geographical and commodity composition of China’s trade. Other non-TPP countries will be hurt but member countries will all gain. Japan’s joining TPP would be beneficial to both herself and all other TPP countries, but negative effects on China and other non-TPP countries will increase further. If China takes part in TPP, it will increase China’s and other TPP countries’ gain, but non-TPP countries will be hurt more. As a regional free trade arrangement, TPP effects are different from global free trade effects which will benefit all countries (not just member countries) in the world, and the positive effects of global free trade are stronger than TPP effects.
    JEL: C68 F47 F53
    Date: 2012–05
  19. By: Cok, Mitja; Urban, Ivica; Verbič, Miroslav
    Abstract: The article analyses the redistributive effect attained by personal income tax, social security contributions and social benefits in Slovenia and Croatia. The redistributive effect is decomposed first to reveal progressivity and horizontal inequity effects, and further to show contributions of different tax and benefit instruments. Even though both countries started from the same socioeconomic background two decades ago, the current results reveal divergence that is a consequence of diverse development during this period. The results indicate that Croatia experienced significantly higher pre-fiscal income inequality and lower redistributive effect than Slovenia. Horizontal inequity effects, though, were higher in Slovenia than in Croatia. In both countries, the means-tested social benefits exerted an over-proportionate influence on vertical effects, suggesting a strong impact of the welfare state on income position of their residents, but also induced a large amount of horizontal inequity. In Slovenia, the non-means-tested benefits slightly increased income inequality.
    Keywords: redistributive effect; horizontal inequity; taxes and benefits; decomposition; Slovenia; Croatia
    JEL: D31 D33 H24 H23
    Date: 2012–02
  20. By: Stanovnik, Tine; Verbič, Miroslav
    Abstract: This paper analyses the distribution of employee income in Slovenia in the period 1991–2009. The analysis is based on two different datasets, both derived from the personal income tax files. It was shown that income inequality of employees income has somewhat increased in this period, using the Gini coefficient as the indicator of income inequality. Though increases in income inequality were moderate according to this summary measure, rather largest changes did occur at the very top of the income distribution, i.e. top 5 per cent and top one per cent of employees. Income inequality of employees’ net income (i.e. net of employee social contributions and personal income tax) remained fairly stable in this time period. In other words, the changes in personal income tax dampened to a large degree the effects of increasing inequality in the distribution of employee gross income. This was also established using the Kakwani index of progressivity. Increases in progressivity of the personal income tax came in leaps, mostly following the introduction of new income tax legislation.
    Keywords: income inequality; income distribution; wages; Slovenia
    JEL: D31 J31
    Date: 2012–01
  21. By: Govori, Arbiana
    Abstract: After the 2008 events that occurred in world financial markets, all organizations have increased interest in risk management. It is very clear that risk management brings benefits to the organization. By taking a proactive approach to risk and risk management, organizations will be able to manage to improve performance and results in the areas of the operations performance, the development of processes and projects, and the selection and implementation of alternative development strategies. Business firms in Kosovo have changed their approach to risk management in recent times. Reasons for that ‘approach evolution’ are based on recent losses in some of commercial banks, insurance companies, pension trust, and some negative trends in Kosovo real economy.
    Keywords: Risk; returns; organization; operations; processes; strategy; rsik quantification; risk management; risk insurance
    JEL: D81 M1 D8 M2 G3
    Date: 2012–05–05
  22. By: govori, fadil
    Abstract: Lobbying is a phenomenon which is already present in all political systems and it is not surprising if you consider the issue of lobbying within the formal structures of governance of financial markets and financial industry in the EU and Kosovo. However, the complex and inscrutable institutional structures in EU inevitably result in an inevitable quality of lobbying, which give more influence to the stakeholders that have the resources to organize and develop systematic lobbying activities. This paper describes how lobbying of influential institutions groups in EU, involved in decision making about financial services and markets, occurs through official channels, such as public consultations, and through informal means, such as close meetings between lobbyists and decision makers or officials within EU institutions. In this context we intend to rationalize such a behavior pattern in the regulation of the financial system in Kosovo. Kosovo has some fundamental problems in the field of regulation of the financial system and financial industry in conformity with the rules of functioning of the market economies. Instead of formal and official conversation between interest groups about the regulation of financial system, frequently are used corrupt models of influence which later are classified as criminal, and often classified as organized crime activities. From this point of view lobbying should be considered as a reasonable option within the formal structures of governance of financial markets and financial industry in Kosovo.
    Keywords: Financial lobbying; financial system; financial markets; financial industry; financial regulation; stakeholder; European Union; European Institutions
    JEL: G1 G3 E6 G2 G18 G38 E5 G28 E4
    Date: 2012–04–10

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