nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒07‒08
eighteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Security of Property Rights and Land Use Transition in Ukraine By Nizalov, Denys; Thornsbury, Suzanne; Loveridge, Scott; Woods, Mollie; Zadorozhna, Olha
  2. The Returns to Education in China: Evidence from the 1986 Compulsory Education Law By Hai Fang; Karen N. Eggleston; John A. Rizzo; Scott Rozelle; Richard J. Zeckhauser
  3. Comparison of the Agricultural Cooperative Development in China and Vietnam Since De-Collectivization By Sultan, Tursinbek; Wolz, Axel
  4. : Estimating transport costs and trade barriers in China. Direct evidence from Chinese agricultural traders By Zhigang Li; Xiaohua Yu; Yinchu Zeng; Rainer Holst
  5. Foreign Banks and the Vienna Initiative: Turning Sinners into Saints? By Alexander Pivovarsky; Elena Loukoianova; Ralph De Haas; Yevgeniya Korniyenko
  6. How land fragmentation affects off-farm labor supply in China: Evidence from household panel data By Jia, Lili; Petrick, Martin
  7. Price Risk in the Wheat Market in Poland By Figiel, Szczepan; Hamulczuk, Mariusz
  8. Policy impacts under alternative land market regimes in rural China By Kleinwechter, Ulrich; Grethe, Harald
  10. Changes in Hungarian Agri-Food Trade Since EU accession By Jambor, Attila; Hubbard, Lionel
  11. Lessons of the Transformation of the Agricultural Administration and Associations in East Germany with the Collapse of the Socialist Regime By Wolz, Axel
  12. Local Governments’ Fiscal Balance, Privatization, and Banking Sector Reform in Transition Countries By Ernesto Crivelli
  13. Technological progress and efficiency change In Hungarian Agriculture By Fekete-Farkas, Maria; Szucs, Istvan; Varga, Tibor
  14. Managing Large-Scale Capital Inflows: The Case of the Czech Republic, Poland and Romania By Leonor Keller; Ibrahim Chowdhury
  15. Productivity Growth and Structural Reform in Bulgaria: Restarting the Convergence Engine By Pritha Mitra; Cyril Pouvelle
  16. The role of family background in the heterogeneity of self-employment in some transition countries By Castellano, R; Punzo, G
  17. Does an Elected Leader Have Incentives to Provide Public Goods with Future Returns? –Evidence from China By Shu, Youhua; Chowdhury, Shyamal K.; Harris, Michael
  18. Ensuring Debt Sustainability Amid Strong Economic Uncertainty in Hungary By Pierre Beynet; Rafał Kierzenkowski

  1. By: Nizalov, Denys; Thornsbury, Suzanne; Loveridge, Scott; Woods, Mollie; Zadorozhna, Olha
    Abstract: Risk and uncertainty over the results of agricultural production were always considered as impediments for the development of agricultural sector and rural areas. Besides traditional weather and market related sources of uncertainty, agriculture in transition economies is facing one more major factor of risk – changes in the institutional protection of property rights. This paper illustrates how such institutional uncertainty affects the land use and crop mix patterns in Ukraine. Ukraine is a country with some of the richest arable land in the world and is among the largest agricultural producers. Land reform started in Ukraine in 1990. It transfers land from state to private ownership. However, a market for land sales has not been established yet. Moreover, its establishment has been postponed several times since 2001. Thus, the design of this institution remains unknown, which brings uncertainty about the rights of owners, state, tenants and investors. To test if unsecured property rights for land lead to under-investments and impact the crop mix, this paper uses different sensitivity to institutional uncertainty of investments in annual vs. perennial crops. Data from Ukrainian State Statistic Committee for years 2004-2010 is used. This unique set contains panel data on a very large sample of farming entities. It shows that almost 95% of Ukrainian agricultural land is rented. Such structure creates incentives for investments in relatively more secure annual crops. The results of seemingly unrelated regression analysis show that a higher share of rented land is associated with a lower share of land used for perennial crops. At the same time, farms rent more land to increase share of annual crops. The difference in response to uncertainty is found significant between the two crop types. It implies that extension of moratorium on land sales in Ukraine leads to under-investments in Ukrainian agriculture in general and into more capital intensive crops in particular. The uncertain property right makes the tenant deviate from the “optimal” crop mix reducing the productivity of tenant farms. Thus, Ukraine faces significant losses in agricultural production and GDP in the short run. Moreover, the uncertainty leads to underinvestment into new technologies including adaptation to the climate change. Such underinvestment affects productivity and vulnerability of Ukrainian agriculture in the longer run
    Keywords: property rights, agricultural development, crop mix, transition economy, Ukraine, International Development, Land Economics/Use, Q15, Q12, O13, O17, O24,
    Date: 2012
  2. By: Hai Fang; Karen N. Eggleston; John A. Rizzo; Scott Rozelle; Richard J. Zeckhauser
    Abstract: As China transforms from a socialist planned economy to a market-oriented economy, its returns to education are expected to rise to meet those found in middle-income established market economies. This study employs a plausible instrument for education: the China Compulsory Education Law of 1986. We use differences among provinces in the dates of effective implementation of the compulsory education law to show that the law raised overall educational attainment in China by about 0.8 years of schooling. We then use this instrumental variable to control for the endogeneity of education and estimate the returns to an additional year of schooling in 1997-2006. Results imply that the overall returns to education are approximately 20 percent per year on average in contemporary China, fairly consistent with returns found in most industrialized economies. Returns differ among subpopulations; they increase after controlling for endogeneity of education.
    JEL: J31 O15 P52
    Date: 2012–06
  3. By: Sultan, Tursinbek; Wolz, Axel
    Keywords: collective farms, transition, agricultural service cooperatives, China, Vietnam, Food Security and Poverty, Institutional and Behavioral Economics, International Development,
    Date: 2012–08
  4. By: Zhigang Li; Xiaohua Yu; Yinchu Zeng; Rainer Holst
    Abstract: Using 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-related costs and artificial barriers contribute about equally to the trade barriers. (3) Labor and government taxes are the two largest proportions of total transport costs, and account for 35% and 30%, respectively. (4) Road quality is crucial for reducing transport costs within China. Increasing transport speed by 1 km per hour would, mainly due to improved fuel-burning efficiency and reduced labor requirements, decrease total transport costs for Chinese agricultural traders by 0.6 percent.
    Keywords: Transport Costs, China, Agricultural Traders, Infrastructure
    JEL: E58 R21 R28
    Date: 2012–05
  5. By: Alexander Pivovarsky; Elena Loukoianova; Ralph De Haas; Yevgeniya Korniyenko
    Abstract: We use data on 1,294 banks in Central and Eastern Europe to analyze how bank ownership and creditor coordination in the form of the Vienna Initiative affected credit growth during the 2008–09 crisis. As part of the Vienna Initiative western European banks signed country-specific commitment letters in which they pledged to maintain exposures and to support their subsidiaries in Central and Eastern Europe. We show that both domestic and foreign banks sharply curtailed credit during the crisis, but that foreign banks that participated in the Vienna Initiative were relatively stable lenders. We find no evidence of negative spillovers from countries where banks signed commitment letters to countries where they did not.
    Keywords: Bank supervision , Banks , Credit expansion , Eastern Europe , Global Financial Crisis 2008-2009 ,
    Date: 2012–05–09
  6. By: Jia, Lili; Petrick, Martin
    Abstract: This study provides a deeper theoretical understanding of the linkages between land fragmentation and off-farm labor supply and investigates this relationship empirically in a more direct and robust way than in the existing literature. Drawing upon a rural household panel dataset collected in Zhejiang, Hubei and Yunnan provinces from 1995-2002, we estimate the effects in two steps. First, we estimate the effect of land fragmentation on labor productivity. Second, we estimate the effect of land fragmentation on off-farm labor supply. The production function results show that land fragmentation indeed leads to lower agricultural labor productivity, implying land consolidation will make on-farm work more attractive and thus decrease off-farm labor supply. However, the effect of land consolidation on off-farm labor supply cannot be observed in the presence of imperfect labor market and this conclusion is supported by a direct estimation of the effect of land fragmentation on off-farm labor supply.
    Keywords: Land fragmentation, off-farm, labor supply, China, Labor and Human Capital, Land Economics/Use, Q15 Q24 J22 R23,
    Date: 2012
  7. By: Figiel, Szczepan; Hamulczuk, Mariusz
    Abstract: This paper addresses the issue of price risk assessment in the agricultural commodity markets. Four the most frequently used approaches and related methods of measuring price risk in commodity markets were characterized and used to assess price risk in the wheat market in Poland. Results of the analysis showed that predictable and unpredictable components of the price series should be distinguished to properly evaluate real risk exposure. Some noticeable changes in the volatility of the wheat prices over the analyzed period indicate that exposure to the price risk in Polish wheat market after accession to the EU has increased.
    Keywords: Demand and Price Analysis, International Development, Risk and Uncertainty, C22,
    Date: 2012
  8. By: Kleinwechter, Ulrich; Grethe, Harald
    Abstract: In this paper we apply a simulation model of a village economy in Guizhou province, China, to assess impacts of trade reform at the household and the village level under alternative land market regimes. Putting special emphasis on the modeling of household migration a trade reform scenario is simulated with and without the existence of a land rental market in the village. Significant impacts of the land market on the policy outcome regarding household production, income and welfare are found. The possibility to trade land within the village leads to increasing specialization into agriculture and migration among the households as a response to the policy shock. In a situation with a land market, incomes of households which expand agricultural production are less negatively affected by trade reform than incomes of households which migration more. At the village level, a land market does not influence the poverty outcome of the reform but reduces its inequality enhancing impact. Village migration and exports of agricultural outputs increase.
    Keywords: China, Regional Migration, Agricultural Household Model, Land Markets, Poverty, Inequality, Computable General Equilibrium, Agricultural and Food Policy, Community/Rural/Urban Development, Consumer/Household Economics, Food Security and Poverty, International Relations/Trade, Land Economics/Use, Q12, Q15, C68, R23,
    Date: 2012
  9. By: Alexander Knobel (Gaidar Institute for Economic Policy)
    Abstract: This paper estimates the influence of the service sector’s liberalization on service flows in transition economies and on productivity of the Russian industry that uses these services as intermediate consumption. Empirical analysis of the international statistics shows that service trade between CIS countries and OECD countries is strongly underestimated and could grow 2.5–3 times larger due to liberalization. Modeling of the international service trade shows that services imports into Russia are strongly limited by existing trade barriers. For Russia, according to the estimates, the most liberalized service sector is communication services, and the least liberalized sector is information technology. This paper demonstrates that services are actively used by Russian industry as intermediate consumption. On the basis of the inter-industry empirical analysis, one can conclude that service sector liberalization may have a positive impact on the productivity of various sectors of the Russian manufacturing industry.
    Keywords: : import volumes, services, trade liberalization, gravity model, panel data, labor productivity
    JEL: C23 F12 F14 O14
    Date: 2012
  10. By: Jambor, Attila; Hubbard, Lionel
    Abstract: In 2004, Hungary joined the European Union (EU) along with nine other countries. One of the major changes resulting from this was the transformation of these countries’ agri-food trade. The paper analyses the effects of EU accession on Hungarian primary and processed agri-food trade, using revealed symmetric comparative advantage based on the most recent available data. Results suggest that accession has enhanced the value of trade relations with the EU. Hungary’s agri-food imports have increased faster than agri-food exports, but the trade balance remains at around €1 billion, similar to its pre-accession level. Both exports and imports are highly and increasingly concentrated, by country and by product group, with exports based mainly on bulk raw materials and imports based principally on processed products. Revealed comparative advantages have weakened after accession. Indeed, the majority of products reveal a comparative disadvantage over the entire period, and this majority was larger in the post-accession period. Regarding stability, accession has radically changed the survival time of agri-food trade, in that revealed comparative advantage is shown not to be persistent. From the policy perspective, there is a clear need for radical structural changes in Hungarian agriculture and the agri-food sector. The most important long-term goal should be the production and export of higher value-added processed products based on domestic raw materials.
    Keywords: EU accession, agri-food trade, revealed comparative advantages, Agricultural and Food Policy, International Relations/Trade, Q17, Q18,
    Date: 2012
  11. By: Wolz, Axel
    Abstract: With the collapse of the socialist regime in East Germany in late 1989 and the rising political call for unification in early 1990, a radical and abrupt change of the institutional structure became necessary. The (agricultural) administration had to be totally restructured. This referred not only to substance, functions and tasks, similar to all other transition economies, but also the whole administrative set-up had to be re-established in line with the West German system (territorial re-organization). A new administrative system had to be built up from scratch, while simultaneously the socialist one had to be dismantled in a very short period. However, different to the other transition economies, there had been strong support from the West. Overall, this institutional change seems to have been accomplished successfully. In addition, the organizations representing the agricultural population had to be re-organized. The re-organization of the German Farmers’ Union is of special prominence as both German parts were representing completely different agricultural systems. This is the only important organization at national level where East Germans could stay in decision-making positions after unification which had severe repercussions when shaping transformation policies affecting the agricultural sector during the 1990s.
    Keywords: transition, agricultural administration, farmers' union, unification, Germany, Institutional and Behavioral Economics, Political Economy,
    Date: 2012–08
  12. By: Ernesto Crivelli
    Abstract: Several transition economies have undertaken fiscal decentralization reforms over the past two decades along with liberalization, privatization, and stabilization reforms. Theory predicts that decentralization may aggravate fiscal imbalances, unless the right incentives are in place to promote fiscal discipline. This paper uses a panel of 20 transition countries over 19 years to address a central question of fact: Did privatization help to promote local governments’ fiscal discipline? The answer is clearly ‘no’ for privatization considered in isolation. However, privatization and subnational fiscal autonomy along with reforms to the banking system - restraining access to soft financing - may prove effective at improving fiscal balances among local governments.
    Date: 2012–06–06
  13. By: Fekete-Farkas, Maria; Szucs, Istvan; Varga, Tibor
    Abstract: Hungary became the member of European Union in 2004. The authors want to show that, though, many sectors of Hungarian agriculture have been operating at low level of technology and efficiency; there was a big expectation about the fast catching up with accession to European Union. This paper investigates the effect of EU membership on the productivity performance of Hungarian agriculture based on the years 2005 and 2009 using Data Envelopment Analyses and Malmquist index. The analysis showed that there were considerable reserves of efficiency in the presented two main branches (wheat and pig fattening) of the Hungarian agriculture, and the reserves slightly decreased in wheat production, but they increased in the pig sector by EU accession. The implication for agricultural reform of future productivity growth has also been assessed.
    Keywords: total factor productivity, agriculture, EU membership, Agricultural and Food Policy, Crop Production/Industries, Farm Management, Production Economics, Productivity Analysis, Research Methods/ Statistical Methods, D24, Q16,
    Date: 2012–08–20
  14. By: Leonor Keller; Ibrahim Chowdhury
    Abstract: Many emerging market economies have in the recent past experienced a surge in capital inflows that may threaten their economic and financial stability. The IMF in early 2011 proposed a framework intended to guide Fund advice to policymakers on how to best respond to such inflows, including both macroeconomic instruments and so-called capital flow management measures (CFMs). The paper applies this framework to three countries that have experienced elevated capital inflows after the onset of the 2008 global financial crisis - the Czech Republic, Poland, and Romania. It finds that the evaluation of the macroeconomic criteria as prescribed by the framework does not support the use of CFMs, but instead advocates macroeconomic policies as the first line of defense against large-scale capital inflows. This finding is by and large consistent with the IMF’s policy advice given to country authorities in the context of surveillance missions.
    Keywords: Capital flows , Capital inflows , Emerging markets , Fiscal policy , Monetary policy ,
    Date: 2012–05–29
  15. By: Pritha Mitra; Cyril Pouvelle
    Abstract: Labor productivity levels in Bulgaria lag well behind that in the EU, weighing on the convergence process. Stronger productivity growth would allow Bulgaria to close the income gap with the EU average more quickly and to alleviate the structural problems in its labor market, reflected in its high long–term and youth unemployment. Our analysis of the drivers of labor productivity suggest that for Bulgaria closing the gap with EU standards in the areas of institutional and infrastructure quality, goods market efficiency, higher education, and innovation would permanently boost productivity growth by a total of 1 percentage point a year. This would be enough to close the income gap with the EU average by 2040, compared to the status quo where it would take an additional 10 years.
    Keywords: Cross country analysis , European Union , Fiscal reforms , Income , Labor markets , Labor productivity , Production growth , Unemployment ,
    Date: 2012–05–18
  16. By: Castellano, R; Punzo, G
    Abstract: The aim of this paper is to shed light on how some determinants, especially in the spheres of family background, differently affect the heterogeneous category of self-employment across a set of transition economies of Eastern Europe, where more or less restrictive policies and different liberalization processes have been adopted over time. At this end, three-stage multinomial logit models as discrete choice models are estimated on 2005 EU-SILC data. Country-specific peculiarities of self-employment profiles are drawn and, although the occupational status is often devised in a dualist perspective, significant differentiations within the ranks of self-employed also exist.
    Keywords: Self-employment; Generational mobility; Three-stage multinomial model
    JEL: P29 J62 P51
    Date: 2012
  17. By: Shu, Youhua; Chowdhury, Shyamal K.; Harris, Michael
    Abstract: This paper examines changes in the allocation of public funds between production related public goods (PRPGs) and labour augmenting public goods (LAPGs) once elected village leaders replaced an appointment system. We derive a two-period theoretical model in which the interest of appointed leaders in short economic development leads to allocate all public resources into PRPGs in the first period. In contrast, elected leaders have greater incentives to reflect the interest of electorates by allocating public resources to maximize their two-period revenues. The model predicts that elections lead to an increase in the provision level of LAPGs and a decrease in PRPGs in the first period, if the first-period allocation equilibrium of appointed leaders is away from the allocation mix in maximization of the two-period revenues. A panel dataset of 71 villages for the period of 1993-2000 is used to examine these two predictions. The results show that the elections increased the provision level of public health (LAPGs), but had no effects on irrigation facilities and paved roads (PRPGs).
    Keywords: Public economics, Development Economics, Community/Rural/Urban Development, Institutional and Behavioral Economics, Labor and Human Capital, Political Economy, Public Economics, D71, H41, P35,
    Date: 2012–06–14
  18. By: Pierre Beynet; Rafał Kierzenkowski
    Abstract: Despite a deep recession in 2009 and weak growth in subsequent years, Hungary’s fiscal position compares favourably with many other OECD countries. Nonetheless, the underlying fiscal balance started deteriorating in 2010 and 2011. Recognising this, Hungary’s government launched an ambitious set of fiscal consolidation measures in spring 2011, the Széll Kálmán plan, which is rightly focused on curbing public expenditure. This plan, together with subsequent significant revenue-increasing measures, should help restore fiscal adjustment in 2012 and 2013. However, ensuring the sustainability of Hungarian public debt remains challenging in the context of the persistence of the sovereign debt crisis in many European economies since shifts in market sentiment could lead to unsustainable debt servicing costs. In this context, increasing the credibility of fiscal consolidation requires using several policy levers. First, the cost/risk assessment of the debt management strategy should be reassessed by taking into account lessons from the current crisis: the share of government borrowing in foreign currency will likely need to be drastically reduced. Second, additional consolidation efforts should focus more strongly on the spending side and avoid raising distortive taxes. Third, the fiscal framework should be improved by making fiscal rules less pro-cyclical and by raising the profile and political acceptance of the fiscal council through better analytical support and an enlarged mandate, while removing its power to veto the budget. This Working Paper relates to the 2012 OECD Economic Survey of Hungary (<P>Assurer la viabilité de la dette publique dans un contexte de forte incertitude économique en Hongrie<BR>En dépit d’une grave récession en 2009 et d’une faible croissance au cours des années suivantes, la situation budgétaire hongroise est meilleure que celle de beaucoup de pays de l’OCDE. Néanmoins, le solde sous-jacent a commencé de se dégrader en 2010 et 2011. Conscient du problème, le gouvernement a lancé au printemps 2011 un dispositif ambitieux de redressement budgétaire, le plan « Széll Kálmán », qui est centré à bon escient sur la réduction des dépenses publiques. La conjonction de ce plan et de mesures subséquentes d’augmentation substantielle des recettes devrait permettre de revenir vers l’ajustement budgétaire en 2012 et 2013. Cependant, il reste difficile d’assurer la viabilité de la dette publique hongroise face à la persistance de la crise de la dette souveraine dans de nombreuses économies européennes, car les changements de perception des marchés pourraient porter le coût du service de la dette à un niveau insoutenable. Dans ces conditions, il est nécessaire d’employer plusieurs leviers pour renforcer la crédibilité du redressement budgétaire. Il convient d’abord de réévaluer la stratégie de gestion de la dette en tirant les leçons de la crise actuelle : la part des emprunts de l’État libellée en devises étrangères devra probablement être fortement réduite. Ensuite, il faut faire porter davantage l’effort d’assainissement sur les dépenses et s’abstenir d’augmenter les impôts qui introduisent des distorsions. Enfin, le cadre budgétaire doit être amélioré en rendant les règles budgétaires moins procycliques, mais aussi en donnant plus de poids et de soutien politique au conseil budgétaire grâce à un renforcement de ses moyens d’analyse et à l’élargissement de sa mission tout en supprimant son pouvoir de veto sur le budget. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Hongrie, 2012 (
    Keywords: taxation, public debt management, Hungary, public spending, fiscal consolidation, fiscal institutions and rules, fiscalité, gestion de la dette publique, Hongrie, dépenses publiques, assainissement budgétaire, règles et institutions budgétaires
    JEL: E02 E62 H21 H50 H55 H63
    Date: 2012–05–22

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