nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒07‒14
fourteen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Real convergence in Central and Eastern European EU member states By Kulhánek, Lumír
  2. Economic Transitions in Central and Eastern Europe: Any Lessons for the Arab Spring? By HAVLIK, Peter
  3. Do Chinese SOEs and private companies differ in their foreign location strategies? By Giorgia Giovannetti, Marco Sanfilippo and Margherita Velucchi
  4. The Rise of the East and the Far East: German Labor Markets and Trade Integration By Dauth, Wolfgang; Findeisen, Sebastian; Suedekum, Jens
  5. Vliv makroekonomických šoků na dynamiku vládního dluhu: jak robustní je fiskální pozice České republiky? By Melecky, Ales; Melecky, Martin
  6. Do Exporting Firms in the People’s Republic of China Innovate? By Wignaraja, Ganeshan
  7. Evaluating the possible impact of pension reforms on future living standards in Europe By Grech, Aaron George
  8. Property Tax Reform in Vietnam: A Work in Progress By Hong-Loan Trinh; William J. McCluskey
  9. External audit and relation between internal auditors, supervisory body and external auditors of the banking sector in the Republic of Macedonia By Josheski, Dushko; Jovanova, Blagica
  10. Revisiting the Internationalization of the Yuan By Yu, Yongding
  11. Two-way capital flows and global imbalances: a neoclassical approach By Pengfei Wang; Yi Wen; Zhiwei Xu
  12. Kapitał społeczny ludzi starych na przykładzie mieszkańców miasta Białystok By Klimczuk, Andrzej
  13. Crafting sustainability: managing water pollution in Viet Nam's craft villages By Sango Mohanty; Trung Dinh Dang; Phing Giang Hai
  14. Base Wage Rigidities: Evidence From a Survey of Slovak Firms By Marianna Cervena

  1. By: Kulhánek, Lumír
    Abstract: Central and Eastern European EU Member States have made considerable progress in the economic transition and integration into the European Union. Nevertheless, the challenges of real convergence will remain relevant for these countries in the medium and long term. This paper focuses on the process of the real economic convergence among the five Central European EU Countries: the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia. We have analysed both β and σ convergence in the period 1995-2011. The Central European EU countries are well positioned to catch up with the EU-15 average, however, the experience of the EU-15 countries shows that convergence cannot be taken for granted.
    Keywords: Central European EU Countries; European integration; real convergence; β-convergence; σ-convergence
    JEL: O11 E31 F43 O52
    Date: 2012–04–04
  2. By: HAVLIK, Peter
    Keywords: transition, integration, foreign trade, FDI, labour market, Central and Eastern Europe, Middle East and North Africa
    JEL: E24 F13 F53 O2 O43 O57 P52
    Date: 2012–06
  3. By: Giorgia Giovannetti, Marco Sanfilippo and Margherita Velucchi
    Abstract: We empirically analyze the host-country determinants of Chinese outbound foreign direct investments (ODI) in the period from 2003 to 2008, using disaggregated data by country and sector and distinguishing between State-owned enterprises (SOEs) and privately owned firms. Our results show that the pattern of Chinese ODI differs according to corporate ownership. Private firms are attracted by large markets and host-country strategic assets and are averse to economic and political risks when choosing investment locations abroad. Differently, state-owned enterprises follow the strategic needs of their home country and invest more in natural resource sectors, being largely indifferent to the political and economic conditions in the host countries.
    Keywords: China; Foreign Direct Investment; Internationalization; Corporate Ownership; F14; F21
    Date: 2012–06–18
  4. By: Dauth, Wolfgang (Institute for Employment Research (IAB), Nuremberg); Findeisen, Sebastian (University of Zurich); Suedekum, Jens (University of Duisburg-Essen)
    Abstract: We analyze the effects of the unprecedented rise in trade between Germany and "the East" – China and Eastern Europe – in the period 1988–2008 on German local labor markets. Using detailed administrative data, we exploit the cross-regional variation in initial industry structures and use trade flows of other high-income countries as instruments for regional import and export exposure. We find that the rise of "the East" in the world economy caused substantial job losses in German regions specialized in import-competing industries, both in manufacturing and beyond. Regions specialized in export-oriented industries, however, experienced even stronger employment gains and lower unemployment. In the aggregate, we estimate that this trade integration has caused some 493,000 additional jobs in the economy and contributed to retaining the manufacturing sector in Germany. We also conduct our analysis at the individual worker level, and find that trade had a stabilizing overall effect on employment relationships.
    Keywords: international trade, import competition, export opportunities, local labor markets, employment, China, Eastern Europe, Germany
    JEL: F16 J31 R11
    Date: 2012–06
  5. By: Melecky, Ales; Melecky, Martin
    Abstract: This paper analyzes the effects of macroeconomic shocks on the government debt dynamics in an open economy using the analytical framework of Favero and Giavazzi (2007) extended to an open economy. Applying this modeling approach to the data for the Czech Republic, the authors derive some implications for fiscal policy. The modeling framework includes structural vector autoregression (SVAR) model, estimated using short-term identification restrictions, and non-linear specification of the government debt dynamics. The main variables of the analyzed system are GDP, inflation, the effective interest rate on government debt, government revenues and expenditures, the exchange rate and government debt. The estimation is carried out using the Bayesian approach. The results suggest that allowing for a non-linear dynamics in the government debt to GDP ratio could imply stronger persistence and higher volatility in the responses of government indebtedness to macroeconomic shocks. The fiscal stance of the Czech Republic seems to be most vulnerable to unexpected depreciation of the local currency, discretionary pro-cyclical increases in government expenditures, and deflationary shocks.
    Keywords: Government Debt; Non-linear Dynamics; Macroeconomic Shocks; Open Economy; Structural Vector Autoregression Model; Bayesian Estimation; Czech Republic
    JEL: E62 H68 E37
    Date: 2012–06
  6. By: Wignaraja, Ganeshan (Asian Development Bank Institute)
    Abstract: This paper assesses factors driving firm-level export performance in Asia’s super exporter—The People’s Republic of China (PRC). While early studies suggested that innovation was important, there has been little research on opening up the black box of technology at firm-level in the PRC, the author undertakes econometric analysis of innovation, learning, and exporting in automobiles and electronics firms in the PRC using a large-scale dataset to identify the most appropriate innovation proxy. Drawing on recent literature on innovation and learning in developing countries, it tests two alternative proxies: (i) a technology index (TI) to capture a variety of minor activities involved in using imported technologies efficiently; and (ii) the research and development (R&D)-to-sales ratio, which represents formal technological efforts to create new products and processes, often at world frontiers.
    Keywords: prc; innovation; automobiles; electronics
    JEL: F23 L63 O31 O32 O57
    Date: 2012–07–04
  7. By: Grech, Aaron George
    Abstract: Successive reforms enacted since the 1990s have dramatically changed Europe’s pensions landscape. This paper tries to assess the impact of recent reforms on the ability of systems to alleviate poverty and maintain living standards, using estimates of pension wealth for a number of hypothetical cases. By focusing on all prospective pension transfers rather than just those at the point of retirement, this approach can provide additional insights on the efficacy of pension systems in the light of increasing longevity. Our estimates indicate that while reforms have decreased generosity significantly, in most countries poverty alleviation remains strong. However, moves to link benefits to contributions have made some systems less progressive, raising adequacy concerns for certain groups. In particular, unless the labour market outcomes of women and of lower-income individuals change substantially over the coming decades, state pension transfers will prove inadequate, particularly in Eastern European countries. Similarly while the generosity of minimum pensions appears to have either been safeguarded by pension reforms, or improved in some cases, these transfers generally remain inadequate to maintain individuals above the 60% relative poverty threshold throughout retirement. Our simulations suggest that the gradual negative impact of price indexation on the relative adequacy of state pensions is becoming even more substantial in view of the lengthening of the time spent in receipt of retirement benefits. The consumption smoothing function of state pensions has declined noticeably, strengthening the need for longer careers and additional private saving. When pressed, policymakers, particularly in Western Europe, seem to have been more willing to sacrifice the income smoothing function of pensions rather than its poverty alleviation function. Policymakers in some counties, notably Germany, France and the UK, have sought to refocus state pension systems towards generating better outcomes for people in the bottom half of the income distribution, probably with the insight that middle- to high-income individuals are possibly in a better position to accommodate the effect of state pension reforms by increasing their private saving. However in some cases, notably in Eastern Europe, results suggest that policymakers may not have fully considered the full impact of their policies on those on low incomes, on those with incomplete careers and on women.
    Keywords: Social Security; Public Pensions; Retirement; Poverty; Retirement Policies
    JEL: H55 I38 J26
    Date: 2012–05
  8. By: Hong-Loan Trinh (HEC Montreal); William J. McCluskey (University of Ulster)
    Abstract: In 2012, Vietnam will celebrate 25 years of economic reform and structural readjustment from a largely centralized, subsidized economy to one based on market principles. A major component of these reforms has involved establishing land and property rights, thereby giving individuals and organizations secure title to the property they occupy and use. The passing of various Land Laws has given legislative support to the concept of private property rights. This represents a significant ideological change, given that land in Vietnam has always been considered to belong to the State. In conjunction with these changes, focus has shifted to reforming the real property tax from a tax largely based on rice productivity to one based on ad valorem principles. This paper reviews existing property-based taxes, highlighting their weaknesses and outlining the potential for a land tax to effectively replace the current property tax.
    Keywords: Vietnam, land ownership, land tax, property taxes, property tax reform, area-based taxation
    JEL: H24 Q15
    Date: 2012–03
  9. By: Josheski, Dushko; Jovanova, Blagica
    Abstract: There are different types of audit, such as financial audit, regulatory audit, operational audit of performances, audit of information systems, environmental audit and others. But basically, we distinguish two types of audit which will be the main focus of attention in this work. External audit, an Internal audit. In most countries, the external auditor from the public sector reports to parliament and, where relevant, the private sector auditor reports to government (e.g. ministry of finance) and/or the public sector external auditor (the supreme audit institution). An efficient system of internal audit is an invaluable source of information for the management of the bank, its supervisors and the quality of the internal control system in that organization.
    Keywords: internal audit ;external audit; supervision;central bank external audit function
    JEL: E58 H83 M49
    Date: 2012–07–01
  10. By: Yu, Yongding (Asian Development Bank Institute)
    Abstract: As the world’s second largest economy, largest trading nation, and the largest foreign holder of United States (US) government bonds, the People’s Republic of China (PRC) needs a currency with international status that can match its economic status in the global economy. However, sequencing is important. Before the internationalization of the yuan can make meaningful progress, necessary conditions, such as the existence of deep and liquid financial markets, a flexible exchange rate and interest rates responsive to market conditions must be created. <p> The process of yuan internationalization essentially is a process of capital account liberalization. Due to the unprecedented and complex global financial crisis and the PRC’s huge imbalances, capital account liberalization has to be pursued in a cautious way. As a result, the internationalization of the yuan is bound to be a long-drawn process. <p> The PRC’s road map for the internationalization of the yuan is flawed with many missing links and wishful thinking. Yuan internationalization guided by the current road map may be proven counterproductive.
    Keywords: yuan internationalization; revisiting internationalization yuan; prc exports
    JEL: F31 F33
    Date: 2012–07–05
  11. By: Pengfei Wang; Yi Wen; Zhiwei Xu
    Abstract: Financial capital and fixed capital tend to flow in opposite directions between poor and rich countries. Why? What are the implications of such two-way capital flows for global trade imbalances and welfare in the long run? This paper introduces frictions into a standard two- country neoclassical growth model to explain the pattern of two-way capital flows between emerging economies (such as China) and the developed world (such as the United States). We show how underdeveloped credit markets in China can lead to abnormally high rate of returns to fixed capital but excessively low rate of returns to financial capital relative to the U.S., hence driving out household savings (financial capital) on the one hand while simultaneously attracting foreign direct investment (FDI) on the other. When calibrated to match China’s high marginal product of capital and low real interest rate, the model is able to account for the observed rising trends of China’s financial capital outflows and FDI inflows as well as its massive trade imbalances. Despite double heterogeneity in households and firms and a less than 100% capital depreciation rate, our two-country model is analytically tractable with closed form solutions at the micro level, which permits exact aggregation by the law of large numbers, so the general equilibrium of the model can be solved by standard log-linearization or higher order perturbation methods without the need of using numerical computation methods. Our model yield, among other things, three implications that stand in sharp contrast with the existing literature: (i) Global trade imbalances between emerging economies and the developed world are sustainable even in the steady state. (ii) There exists an immiserization effect of FDI --- namely, FDI is beneficial for the sourcing country but harmful to the recipient country under financial frictions. (iii) Our quantitative results cast doubts on the conventional wisdom that the "saving glut" of emerging economies is responsible for the low world interest rate.>
    Keywords: Capital movements ; International trade ; International finance
    Date: 2012
  12. By: Klimczuk, Andrzej
    Abstract: "Social Capital of Old People on the Example of Bialystok Residents" is a book based on theoretical and empirical study, which presents an issue of diagnosing and using of old people social capital in the local and regional development processes. This issue is significant because of the threats and challenges associated with process of rapid ageing of Polish society at the beginning of 21st century. Publication, in particular, is an attempt to give answers to the following questions: what is the state of old people social capital in Bialystok, what transformations it undergoes and how is it differentiated? In this study old people are viewed as a social category, which is a set of people similar to each other in terms of socially significant features (such as age, possessed social roles and awareness of received social benefits), who are aware of these similarities and differences between each other. Moreover, it is assumed, that such persons exceeded the 60 years of age. It is also assumed that human, social and cultural capital is accumulated in the human resources. Social capital is recognized here broadly as a potential for collaboration embedded in interpersonal relationships and social norms that may benefit individuals, groups and societies. The book consists of three chapters. The first, which is the theoretical part of work, includes information about: old age as a stage of individual life and explanation of the old people notion. It discusses social theories of ageing, historical factors affecting on the social position of old people category, changes in their place in Polish society during the system transformation and in the early 21st century. It describes the possible consequences of increased life expectancy for democracy and capitalism - including the concepts of society for all ages, silver economy. It also features ageing population issue, as well as social policy towards the elderly and old age in Bialystok as the borderland city. A variety of social capital concepts were presented; the spheres of its influence on socio-economic development, its status in Poland and guidelines for strategic building of its resources. Selected information on the activity of old people in public, social and economic life as key features of their social capital was brought closer. Putting various theoretical positions, results of research and statistical data in order was aimed to link many dispersed sources considering that it is relevant to identify and develop seniors' social capital resources, as well as leveling the delay of Polish sociology research on the elderly. Fundamental theoretical perspective of publication is the concept of capital according to P. Bourdieu. However, the proposals of J.S. Coleman, R.D. Putnam, F. Fukuyama, A. Giddens, P. Sztompka and A. Sadowski were also used. The second chapter contains a methodological framework for the purposes of study. Research assumptions, method and course of implementation of studies were discussed. The study is based on the qualitative method and the application of in-depth interview techniques. It was considered that the personal contact with old people will be more accurate than other research techniques to identify the context in which they social capital resources can be found. It is important because the transfer of developed abroad activating solutions and interpretations of old people actions may be ineffective or have negative external effects in the Polish context. Moreover, in the Polish science literature attention is paid to scarcity of gerontological research in accordance with the interpretive paradigm. Study involved 26 respondents aged 60 to 89 years living in Bialystok associated with one of two different institutions: nursing home for the elderly and University of the Third Age. By comparing the persons on two extremes of social activity it was possible to see similarities and differences in their capital equipment, and also in achievements of the life positions in the class structure and resources aimed at successful ageing. The third chapter presents the empirical analysis of the research results. This part outlines the way in which old people think about their ancestors and contemporary people. It also shows factors according to changes in their social position in the city, social issues which they consider most important for old people, their opinions about leisure time, opportunities and barriers of economic activity and types of old people social capital depending on the institution with which they are associated. Approach to the perception and use of internal disparities of seniors were also discussed. The analysis additionally contains the evaluation of senior citizens image in the polish mass media. This publication does not contain a strict ending. It only identifies the main conclusions of the research and potential directions of future analysis. Above all, older people could improve their position not by demanding increases in social benefits from which major parts are often taken away by their family members, but by highlighting their human, social and cultural capital. It is necessary to create favorable conditions for social and professional life of old people and their cooperation with members of local communities. Important role in this regard is played by institutions implementing three tasks: stimulating senior citizens' desire to satisfy previously unrealized needs; creating relationships between them so that they can solve their own problems and work for the others; and providing legal, social and vocational guidance. Stimulating cooperation between existing public, commercial and non-governmental sector organizations may serve to achieve these goals. The dissemination of bottom-up techniques of social capital building and checklist of essential features of Age-friendly Cities may also be important.
    Keywords: active ageing; age-friendly city; age discrimination; ageing; ageism; Bialystok (Podlasie Voivodship); border regions; borderland city; care elderly; cooperation; cultural capital; culture of poverty; development strategy; Discrimination in employment; economic activity; economic sociology; elderly; employment of persons in retirement age; employment of retirees; gerontechnology; gerontology; human capital; lifestyle; local development; lonely people; non-governmental organizations; nonprofit institutions; nursing home; old age; old age policy; old people; older people; older workers; pension age; peripheral regions; poverty; poverty enclave; professional activity; silver economy; silver market; social activity; social capital; social classes; social deviance; social diversity; social enclave; social exclusion; social inequality; social infrastructure; social marginalization; social policy; social security; social space; social welfare; sociology of ageing; sociology of borderland; sociology of the city; solidarity of generations; strategic management; strategic planning; third age; trust; university of the third age; welfare state
    JEL: R1 O2 P25 Z13 J11 J14 H75 I38 A14
    Date: 2012–06–24
  13. By: Sango Mohanty (Crawford School of Public Policy, The Australian National University); Trung Dinh Dang (Crawford School of Public Policy, The Australian National University); Phing Giang Hai (Crawford School of Public Policy, The Australian National University)
    Abstract: The spontaneous growth of Vietnam's 2,790 rural craft villages has been a mixed blessing. Specialising in 'traditional' crafts such as processed foods, textiles and furniture, as well as newer commodities, such as recycled products, craft businesses have expanded rapidly since Vietnam adopted the 'Doi Moi' (economic renovation policy) in the mid-1980s. As with small scale rural industries in other developing countries, the expansion, modernisation and diversification of craft production in Vietnam presents significant development opportunities as well as environmental and social risks. This largely unregulated increase in industrial activity has reduced rural poverty and brought prosperity to rural entrepreneurs, but it has also generated dangerously high levels of pollution with attendant risks to human health. Since the 1990s, the Vietnamese government has developed several laws and initiatives to regulate industrial activities and control craft village pollution, such as the 'polluter pays principle'. However, the small scale and dispersed nature of craft production has continued to defy effective management by the state, and pollution levels in craft villages have increased alarmingly. The Crafting Sustainability project aimed to provide a better understanding of the drivers of pollution, and policy approaches to better addressing them. Drawing on four cases study sites in the Red River Delta region of Northern Vietnam, this paper provides an overview of key findings and policy recommendations.
    JEL: Q20 Q25 R50
    Date: 2012–06
  14. By: Marianna Cervena (National Bank of Slovakia, Research Department)
    Abstract: Building on a unique survey of how Slovak firms adjust wages and prices, this paper studies the extent to which Slovak wages are rigid and the determinants for both nominal and real wage rigidity. Compared to other countries included in the survey, Slovakia has nominal base wage rigidity that is one of the highest and real base wage rigidity that is also relatively high. Apart from looking at the anecdotal evidence, I run multinomial logit regressions to capture the relationship between real wage rigidity, nominal wage rigidity, flexible wages and a number of firm-specific and institutional characteristics. Regression results suggest that the prevalent skill-level of the workforce matters: firms with mainly low-skilled blue-collar workers face lower probabilities of wage rigidities than firms with white-collar workers. Collective bargaining coverage is also a significant determinant. Firms covered by firm-level unions face higher probabilities of both types of wage rigidities compared to firms not covered by any level of collective bargaining. On the other hand, firms facing sectoral level unions have more flexible wages than those without any collective bargaining.
    Keywords: nominal and real wage rigidity, survey evidence
    JEL: J30 J50 E24 C81
    Date: 2012–06

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