nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒06‒13
nineteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Intertemporal Income Shifting in Expectation of Lower Corporate Tax Rates: The Tax Reforms in Central and Eastern Europe By Boryana Madzharova
  2. Does Farm and Processing Industry Structure Matter for Price Transmission? Some Evidence From Transition Countries: A Comparison of Dairy Sectors in Hungary and Poland By Zolt n Bakucs; Jan Faˆkowski; Imre Fert‹
  3. Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades By Judit Karsai
  4. Measuring Convergence using Dynamic Equilibrium Models: Evidence from Chinese Provinces By Lei Pan; Olaf Posch; Michel van der Wel
  5. Fishing in the same pool: Export strengths and competitiveness of China and CESEE at the EU-15 Market By Christian Schitter; Maria Silgoner; Katharina Steiner; Julia Wörz
  6. Credit Support for Export: Evidence from the Czech Republic By Karel Janda; Eva Michalikova; Jiri Skuhrovec
  7. China's Energy Reform and Climate Policy: The Ideas Motivating Change By Olivia Boyd
  8. Long-Run Costs of Piecemeal Reform: Wage Inequality and Returns to Education in Vietnam By Phan, Diep; Coxhead, Ian
  9. Basel I, II, III – we want it all at once By Cousin, Violaine
  10. Patterns and correlates of intergenerational non-time transfers : evidence from CHARLS By Lei, Xiaoyan; Giles, John; Hu, Yuqing; Park, Albert; Strauss, John; Zhao, Yaohui
  11. Economic and Systemic Consequences of Adaptation to External and Internal Pressures Caused by Global Crisis in China By Maria Csanadi
  12. Investment and Financial Constraints in European Agriculture: Evidence from France, Hungary and Slovenia By Imre Fert‹; Zolt n Bakucs; ætefan Bojnec; Laure Latruffe
  13. Building China’s Regional Municipal Healthcare Performance Evaluation System: A Tuscan Perspective By Hao Li; Sara Barsanti; Anna Bonini
  14. Estimation of losses due to the existence of monopolies in urban bus transport in Poland By Wolański, Michał
  15. Education, Risk and Efficiency in Human Capital Investment By David Mayston; Juan Yang
  16. Learning from Neighbors' Export Activities: Evidence from Exporters' Survival. By Ana Fernandes; Heiwai Tang
  17. EU Enlargement and Agro-Food Export Performance on EU Market Segments By Imre Fert‹; ætefan Bojnec
  18. Mr Hoefner, Mr Elser, Please Welcome to Poland. Some Comments on the Polish Healthcare System Reform... By Grzejdziak, Łukasz
  19. The Causes of Slow Growth in Hungary during the Post-Communist Transformation Period By P‚ter Mih lyi

  1. By: Boryana Madzharova
    Abstract: This paper examines if firms shift income out of years with high corporate tax rates into years when tax cuts are anticipated. Such intertemporal shifting can be one explanation for the stability of corporate tax revenues in Central and Eastern Europe, despite the major decline in the corporate tax rates and overall narrowing of the tax base starting in the late 90s. Using firm-level panel data for Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia from 1999 to 2005, the estimates indicate that the lower corporate tax rates induced a considerable increase in taxable income. Most of this increase, however, was due to short-term shifting of income to years with lower tax rates leading to non-transitory responses ranging from zero to .151, depending on the specification employed. Splitting the sample by firm size shows that income shifting is an appealing tax saving strategy for small and to a lesser extent medium-sized enterprises, but not for big firms. A further disaggregation by country reveals that the driving country behind the results is Romania.
    Keywords: corporate tax; income shifting; tax reforms; Central and Eastern Europe;
    JEL: H25 H32
    Date: 2012–05
  2. By: Zolt n Bakucs (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences); Jan Faˆkowski (Faculty of Economic Sciences University of Warsaw, Poland); Imre Fert‹ (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences)
    Abstract: Rapid and thorough changes have recently taken place in dairy supply chain in the whole Central and Eastern Europe. Growing concerns have been expressed that these changes may negatively affect farmers' relative position towards downstream industry, due to market power exercised by the latter. In response to this, the present paper aims to investigate the price transmission mechanism in two countries from the region, namely Poland and Hungary and contrast the results with dairy market organisations specific for these countries. Using cointegrated vector autoregression and controlling for potential structural breaks, it is shown that Polish milk prices, as opposed to Hungarian ones, are characterised by short- and long-term asymmetries. We discuss a number of potential explanations supporting the empirical results. We consider, among others, differences between the dairy chain structures and the role of FDI.
    Keywords: price transmission, dairy sector, Hungary, Poland
    JEL: Q13 D12 D4
    Date: 2012–03
  3. By: Judit Karsai (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences)
    Abstract: In Hungary, the previously non-existing venture capital and private equity industry has strengthened over the past two decades, and it has become one of the leaders of the CEE region. Approximately 90% of the capital allocated to investments overall were raised from private sector investors. The volume of VC & PE fluctuated cyclically following international capital market cycles and the changes of domestic economic policy. The Hungarian market became a preferred area for foreign capital investors in the last third of the 1990s. Later on its position became even more favourable due to Hungary's accession to the EU. Between 2007 and 2008 the Hungarian market, similarly to the whole region, earned also profit from a transitory situation at the beginning of the crisis when the investment problems in Western Europe did not extend to the CEE region for some time. From 2009 on, however, the crisis in CEE also resulted in a very serious drop in investments, in spite of the significant amount of uninvested capital accumulated in recent years. In addition, the crisis affected the already weakened Hungarian economy more seriously than the other parts of the region, which was reflected by the drop in investments in 2010.
    Keywords: Hungary, Central and Eastern Europe, Economics in transition, Emerging markets, Venture Capital, Private Equity
    JEL: G23 G24 M13 O16 P34
    Date: 2012–01
  4. By: Lei Pan (Wageningen University); Olaf Posch (Aarhus University and CREATES); Michel van der Wel (Erasmus University Rotterdam and CREATES)
    Abstract: We propose a model to study economic convergence in the tradition of neoclassical growth theory. We employ a novel stochastic set-up of the Solow (1956) model with shocks to both capital and labor. Our novel approach identifies the speed of convergence directly from estimating the parameters which determine equilibrium dynamics. The inference on the structural parameters is done using a maximum-likelihood approach. We estimate our model using growth and population data for China’s provinces from 1978 to 2010. We report heterogeneity in the speed of convergence both across provinces and time. The Eastern provinces show a higher tendency of convergence, while there is no evidence of convergence for the Central and Western provinces. We find empirical evidence that the speed of convergence decreases over time for most provinces.
    Keywords: Economic convergence, Dynamic stochastic equilibrium models, Solow model, Structural estimation
    JEL: C13 E32 O40
    Date: 2012–05–30
  5. By: Christian Schitter; Maria Silgoner; Katharina Steiner; Julia Wörz
    Abstract: We investigate the impact of the emergence of China as a global competitor on the trade performance of Central, Eastern and Southeastern European (CESEE) countries at the EU-15 market. The paper takes a comprehensive approach in terms of empirical methods and data. We analyze export growth, export market shares, extensive and intensive margins and the number of trade links, applying highly disaggregated data at the 6 digit HS level over the period 1995 – 2010. We show that the most contested markets are those for capital goods and transport equipment, product categories where both regions have gained market shares and comparative advantage. We show that the number of trade links at the product level where both regions are active has increased substantially, indicating intensified competition. At the same time hardly any trade links were lost, which points against cut-throat competition between CESEE and China. The decomposition of export growth along the extensive versus the intensive margin shows that in line with the literature, the deepening of already existing trade relationships (i.e. the intensive margin) contributed most strongly export growth in both regions, whereas the contribution of new trade links (i.e. the extensive margin) had only a minor contribution, apart from the instance of EU accession which boosted the extensive margin considerably. We further decompose intensive margin growth into demand related structural effects and a supplier related competitiveness effect. Both the CESEE region and China successfully intensified their trade linkages above all as a result of their outstanding competitiveness as shown by the econometric shift-share analysis. While this suggests that both regions pursue a able export strategy, further diversification of production towards promising new industries and markets will become increasingly crucial for both, especially in face of projected slower EU-15 market growth in the longer run.
    Keywords: competitiveness, trade, sectoral market shares, shift-share analysis, Central, Eastern and Southeastern Europe, China
    JEL: F14 F15 O57
    Date: 2012–05
  6. By: Karel Janda; Eva Michalikova; Jiri Skuhrovec
    Abstract: This paper deals with export credit promotion in the Czech Republic. The development and structure of Czech trade and export support is presented first. This is followed by an econometric analysis of the gravity model of Czech trade. A panel of 160 countries in 1996–2008 is analyzed and two gravity models of exports for the Czech Republic are estimated, the static model by fixed effects (LSDV estimator) and the dynamic model by System GMM. Finally, robust LTS estimator is used. We show that guarantees are a significant factor that influences positively the volume of exports in the Czech Republic.
    Keywords: export; government promotion; gravity model; panel data;
    JEL: F14 G28 C23
    Date: 2012–05
  7. By: Olivia Boyd
    Abstract: China has embarked on an ambitious and unprecedented programme of energy reform and climate change mitigation. Yet the motivations for this important shift remain unclear. This paper surveys key central government documents and articles by China's leading energy academics to investigate the ideas influencing China's new energy and climate policies. Three key ideas in particular are supportive of greater climate mitigation than in the past. First, domestic energy security concerns have risen on the central government agenda as a result of electricity shortages and rapidly rising energy consumption. Such concerns have deeply influenced China's ambitious and largely successful energy efficiency policies. Second, growing awareness of the environmental constraints on economic growth in general, and the potential damages of dangerous climate change in particular, has prompted stronger official rhetoric in favour of green development. The appearance of targets and policies that specifically target carbon emissions reductions in the 12th FYP for the first time suggests that climate change mitigation is becoming a motivation for policy action in its own right, rather than simply a co-benefit of policies enacted for other purposes. Third, a conviction that the world is moving towards low-carbon energy forms has given rise to the belief that China must become a technological and economic leader in this transition. Large levels of public financing to support the development of China's wind power and solar PV sectors suggests that the Chinese government has strong vested interests in seeing China successfully compete and lead in global low-carbon energy markets. In order to understand the shift in China's approach to climate change since the 11th FYP, it is important to understand how new ideas such as these have reframed and reshaped the Chinese government's interests and objectives.
    Keywords: China, climate change, mitigation, energy policy, environment, renewable energy, energy efficiency, carbon market, pollution, reform
    JEL: Q54 Q48 Q58 P28
    Date: 2012–05
  8. By: Phan, Diep (Beloit College); Coxhead, Ian (University of WI)
    Abstract: "Shock therapy" transitions in Eastern Europe facilitated movement of skilled workers into privatized industries offering high wage premia relative to state industries. Other transitional economies (notably China and Vietnam) have been slower to relinquish control over key industries and factor markets. Some costs of this piecemeal approach are now becoming apparent. We examine the spillover of continuing capital market distortions into the market for a complementary factor, skilled labor. Using Vietnamese data we find that capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.
    JEL: F16 J31 P23
    Date: 2012–05
  9. By: Cousin, Violaine
    Abstract: The complexity of Basel II and III has reached China as well. In a revolutionary turn within seven years, the Chinese bank regulator has introduced capital adequacy as the tool of choice for supervision and ensured that banks in the process remain focused on implementing all the bits of the internationally developed Basel Accords. Will it make Chinese banks really more resilient?
    Keywords: bank; regulation; Basel II and III; China
    JEL: G38 G28
    Date: 2012–05–19
  10. By: Lei, Xiaoyan; Giles, John; Hu, Yuqing; Park, Albert; Strauss, John; Zhao, Yaohui
    Abstract: Using the China Health and Retirement Longitudinal Study 2008 pilot, this paper analyzes the patterns and correlates of intergenerational transfers between elderly parents and adult children in Zhejiang and Gansu Provinces. The pilot is a unique data source from China that provides information on the direction as well as amount of transfers between parents and each of their children, and clearly distinguishes transfers between parents and children from those among other relatives or friends. The paper shows that transfers flow predominantly from children to elderly parents, with transfers from children playing an important role in elderly support. Taking advantage of the rich information available in this survey, the authors find strong evidence that transfers are significantly affected by the financial capabilities of individual children. Educated and married children have a higher tendency to provide transfers to their parents; and oldest sons are less likely to provide transfers than their younger brothers. With future continued rapid economic growth in China, the income disadvantage of the elderly will persist and upward generational transfers will likely remain the most common form of private transfers. In the absence of some other source of elderly support (such as a public pension or own savings), the dwindling number of children implies that the financial burden associated with supporting the elderly is likely to increase.
    Keywords: Health Monitoring&Evaluation,Youth and Governance,Rural Poverty Reduction,Labor Policies,Population&Development
    Date: 2012–06–01
  11. By: Maria Csanadi (Institute of Economics Research Center for Economic and Regional Studies Hungarian Academy of Sciences)
    Abstract: Global downturn in 2008 exerted strong adaptation pressures on China that incited prompt state response. The one-off large state intervention had consequences in several dimensions: on the one hand, it had a positive impact on the system's short-term economic, social and political stability by dynamizing different economic sub-spheres. State intervention, at the same time, temporary slowed down the process of economic transformation and also mobilized system characteristics that lead to overheating and to renewed state intervention to cool it down. This paper sheds light on the consequences of adaptation to external and internal pressures on national, sectoral, regional, and structural dimensions from a systemic point of view.
    Keywords: party-state model, short-term shocks, adaptation, system transformation, global crisis, overheating, spatial disparities
    JEL: F5 D78 R58 J08 E24
    Date: 2012–03
  12. By: Imre Fert‹ (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences); Zolt n Bakucs (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences); ætefan Bojnec (University of Primorska, Faculty of Management, Slovenia); Laure Latruffe (L'Institut national de la recherche agronomique (Inra) France Economics Unit "SMART" Unit‚ Structures et March‚s Agricoles, Ressources et Territoires)
    Abstract: The article investigates the investment and financial constraints for French, Hungarian and Slovenian farms using FADN panel data with different econometric estimation approaches. Farm gross investment is positively associated with real sales growth and cash flow implying the absence of soft budget constraint. Gross farm investment is positively associated with investment subsidies. Specific results by country are found depending on farm indebtedness. Investment subsidies can mitigate some capital market imperfections in short-term, while on long-term what is crucial is farm sale ability to successfully compete in the output market gaining sufficient cash flow for farm competitive survival and investment.
    Keywords: farm investment, soft budget constraint, investment subsidy, panel data analysis
    JEL: D81 D92 O12 Q12 C23
    Date: 2012–03
  13. By: Hao Li (Istituto di Management - Scuola Superiore Sant’Anna, Pisa); Sara Barsanti (Istituto di Management - Scuola Superiore Sant’Anna, Pisa); Anna Bonini (Istituto di Management - Scuola Superiore Sant’Anna, Pisa)
    Abstract: Regional healthcare performance evaluation system (PES) can help optimize healthcare resources on regional basis and to improve the performance of healthcare services provided. The Tuscany region in Italy is a good example in meeting these requirements. China is yet to build such a system based on international experience. In this paper, based on comparative studies between Tuscany and China we propose that the Chinese managing institutions can select and commission a third party agency to respectively evaluate the performance of their affiliated hospitals and community health service centers. Following some features of the Tuscan experience, the Chinese municipal PES can be built by focusing on the selection of an appropriate performance evaluation agency, the design of an adequate performance evaluation mechanism, and the formulation of a complete set of laws, rules and regulations. When a PES system at city level is formed, the provincial government can extend the successful experience to other cities.
    Keywords: healthcare performance; performance evaluation system; evaluation agency; evaluation mechanism; evaluation laws, rules and regulations
    JEL: I18
    Date: 2012–04–01
  14. By: Wolański, Michał
    Abstract: The aim of this paper is to present the different approaches to demonopolisation used in Polish and European urban public transport, compare the efficiency of these models which have proven popular in Poland as well as to estimate the total losses incurred due to the high monopolisation of Polish public transport. The methodology of the research is based on econometric modelling (Stochastic Frontier Analysis) and on a survey conducted by the author among Public Transport Authorities. The author proves that the modern London model (competition for the market) is more efficient in Polish conditions than the classic German one (communal monopoly). The very popular in Poland combination of the two above formulas – the co-existence of a Public Transport Authority with a monopolistic publicly owned operator – is surprisingly the least efficient. Total losses due to the existence of monopolies in Polish urban bus transport are estimated for the year 2007 at the level of 10-14% of its total budget (ca. 117-149 m EURO/year). In some cities, the losses can be as high as 20-25% of the total remuneration to the public bus operator. In others, public monopolists can be as efficient as private operators in the competitive model.
    Keywords: public transport; demonopolisation; Stochastic Frontier Analysis
    JEL: K21
    Date: 2011
  15. By: David Mayston; Juan Yang
    Abstract: University of York Beijing Normal University The efficiency of the process of investment in human capital through education is of considerable importance both to the individuals involved and to the wider economy. The paper develops an analytical framework in which issues of the efficiency of such investment can be considered alongside its interface with the operations of the labour market, and in which the risks posed by such educational investments when the labour market is less than fully efficient can be analysed. These issues are of particular relevance in the context of the major expansions in higher education which have taken place in recent years, not least in China, which is now second in its share of all 25 – 64 year olds internationally with tertiary education. The paper therefore complements its theoretical analysis with an empirical investigation of the risk factors which impact on the efficiency of this large-scale educational investment for individual graduates and for the wider economy
    Keywords: Human capital investment, higher education, graduate overeducation, risk factors, educational expansion in China.
    JEL: I21 I25 I28 J24 J31
    Date: 2012–05
  16. By: Ana Fernandes; Heiwai Tang
    Abstract: Recent studies in international trade report that new exporters often start selling small amounts and cease exporting in the first year. These findings reflect a substantial amount of uncertainty facing new exporters. In this paper we study whether export activities in the neighborhood reveal information about export profitability and thus enhance new exporters' performance. Using transaction-level data for the universe of exporters in China over the period of 2001-2005, we find that new exporters; first-year sales and probability of survival are both higher in cities where there are more existing export activities in the same market (industry or destination country). Export activities in other markets do not generate any positive spillovers, and in some cases we find negative spillovers. Spillovers from processing exporters are weaker. Foreign exporters benefit less from neighboring export activities. The relaion between the magnitude of spillovers and the proxies for demand uncertainty is non-monotonic. We empirically verify that our findings are unlikely to be spurious or resulted from spillovers through the credit- constraint or the imported-material channels.
    Keywords: Knowledge spillovers, uncertainty, export dynamics, multi-product exporters.
    JEL: F1 F2
    Date: 2012
  17. By: Imre Fert‹ (Institute of Economics, Hungarian Academy of Sciences and Corvinus University of Budapest); ætefan Bojnec (University of Primorska, Faculty of Management, Slovenia)
    Abstract: This paper examines the impact of EU enlargement on agro-food export performance across 12 new EU member states and 5 newly independent states in the EU markets covering the period 1999-2007. The performance is examined by duration of export and hazard model. We find larger duration for the agro-food exports from the new EU member states. The results confirm gains from the eastward EU enlargement and governance on export increases and longer duration for exporting higher value-added specialized consumer-ready food and more competitive niche agro-food products.
    Keywords: EU enlargement, governance, agro-food export duration, hazard model, niche products
    JEL: F14 F15 Q17 P27
    Date: 2012–02
  18. By: Grzejdziak, Łukasz
    Abstract: The purpose of this paper is to verify the hypothesis that a debt write-off implemented recently by Polish authorities in favour of public hospitals constitutes State aid within the meaning of Article 107(1) of the Treaty of the Functioning of the European Union. The paper contains a detailed description of the nature of the measure – its historical background, regulatory context, as well as its construction. It presents an in-depth analysis of the fulfilment by the measure of the conditions stipulated in Article 107(1) TFEU. As a preliminary issue, the analysis addresses the problem whether Polish public hospitals can be considered as undertakings within the meaning of EU competition law, particularly, as to their activity financed by the sickness fund organized under the principle of social solidarity. The answer to this question seems to be affirmative and in line with the landmark Hoefner and Elser judgments where the ECJ held that the way in which an entity is financed is irrelevant for its classification as an undertaking. The paper argues in favour of the thesis that the debt write-off must be considered as affecting trade between Member States and competition. Consequently, and contrary to the official position of the Polish government, the measure in question is classified as State aid.
    Keywords: Poland; healthcare services; hospital services; state aid; notion of state aid; write-off of the debts of an ndertaking; notion of undertaking in the EU competition law; public undertakings; social solidarity; cross-subsidization; effect on trade between Member States; adverse effect on competition; notification of state aid; services of general economic interest
    JEL: K21
    Date: 2011
  19. By: P‚ter Mih lyi (Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Sciences, Head of Department of Finance at University of Pannonia Visiting Professor of Economics at Economics Department, Central European University)
    Abstract: In his 1966 Inaugural Lecture at Cambridge, entitled On the Causes of the Slow Rate of Economic Growth in the UK, the Hungarian-born British economist, Nicholas Kaldor presented a series of "laws" to account for the growth rate differences between Britain on the one hand, and the more successful economies like the US, Germany or France on the other. He called his method circular cumulative causation, a multi-causal approach where the interdependencies between the explanatory factors were strong, and where variables interlinked in the determination of the outcome. In Kaldor's interpretation, the UK's main problem was the slow growth of productivity, caused by the slow growth of the manufacturing sector. And why did that matter? Because he found that productivity of the manufacturing sector was positively related the growth of the manufacturing sector itself - i.e. the law of increasing returns to scale manifested itself in a strong way. The objective, the methodology and central analytical concepts of the present paper are similar. Now we look for the causes of the slow growth of the Hungarian economy. As it will turn out, increasing returns to scale, which Kaldor took from Young (1928) seminal study, occupies a central position in this paper, too.
    Keywords: Hungary, catching-up, productivity, small and medium size firms, Kaldor's law, increasing returns to scale
    JEL: E12 E22 E66 O47 O50 O52
    Date: 2012–03

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