nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒09‒09
fourteen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Drivers of convergence in eleven eastern European countries By Cuaresma, Jesus Crespo; Oberhofer, Harald; Smits, Karlis; Vincelette, Gallina A
  2. New aspects of intra-industry trade in EU countries By Ito, Tadashi; Okubo, Toshihiro
  3. China’s New Labour Contract Law: State Regulation and Worker Rights in Global Production Networks By Tu Lan; John Pickles
  4. Estimating the External Returns to Education: Evidence from China By Wen Fan; Yuanyuan Ma
  5. Different Types of Firms, Products, and Directions of Trade: The Case of the People’s Republic of China By Lee, Hyun-Hoon; Park, Donghyun; Wang, Jing
  6. Pipeline Power By Franz Hubert; Onur Cobanli
  7. Проектирование реформ: как искать промежуточные институты (Proektirovanie reform: kak iskat' promezhutochnye instituty) By Polterovich, Victor
  8. A Tear in the Iron Curtain: The Impact of Western Television on Consumption Behavior By Bursztyn, Leonardo; Cantoni, Davide
  9. Приватизация и рациональная структура собственности (Privatizatsiya i ratsional’naya struktura sobstvennosti) By Polterovich, Victor
  10. F.D.I. through the imitation procedure The case of China: A Note By Metaxas, Theodore; Kechagia, Polyxeni
  11. Global inequality, rising powers and labour standards By Dev Nathan; Sandip Sarkar
  12. Institutional obstacles for the implementation of a River Basin Management concept in Western Ukraine By Hagemann, Nina
  13. Identifying the Motives of Migrant Philanthropy By Matthias Lücke; Toman Omar Mahmoud; Christian Peuker
  14. Transmission of fiscal policy shocks into Romania's economy By Serbanoiu, Georgian Valentin

  1. By: Cuaresma, Jesus Crespo; Oberhofer, Harald; Smits, Karlis; Vincelette, Gallina A
    Abstract: This paper investigates the drivers of growth and prosperity in a group of eleven European countries -- Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia, and Slovakia (the EU11). Since the EU11 began the transformation process, this group of emerging countries has made impressive strides as developing market economies and is anchoring development in European Union institutions. There are reasons to believe that the convergence of EU11 income per capita to Western European levels will continue, but will proceed more slowly. The paper concludes that trade and financial integration have sped along at a spectacular pace in the EU11 in the recent past, although trade in modern services and the integration of government bond and equity markets are somewhat behind. As in the rest of Europe, demographic developments will pose huge challenges for the sustainability of public finance in the EU11 economies. In the next several decades, the EU11 labor force is expected to contract more than labor forces in the rest of the European Union, making it even more urgent that countries in the region reform pension systems, change migration policy, and find incentives to attract talent to the region. Closing the gap with the rest of the European Union in educational attainment levels and improving education quality might significantly soften the constraints imposed by the demographic threats and produce sizable returns in terms of additional income convergence.
    Keywords: Labor Policies,Banks&Banking Reform,Emerging Markets,Economic Theory&Research,Environmental Economics&Policies
    Date: 2012–08–01
  2. By: Ito, Tadashi; Okubo, Toshihiro
    Abstract: Using the HS eight-digit product level trade data of EU countries for the period 1988 – 2010, we analyse Intra-industry trade within EU countries as well as with Eastern European countries and with China. We find the Eastern European countries’ rise up the quality ladder, and by contrast the substantially lower prices of China’s exports to EU countries vis-à-vis China’s imports from them. The contrast between EU trade with the Eastern European countries and with China is present even in very recent years.
    Keywords: Europe, China, International trade, EU, Intra-industry trade, Horizontal and Vertical Product Differentiation, Quality, Unit price gap
    JEL: F13 F14
    Date: 2012–08
  3. By: Tu Lan; John Pickles
    Abstract: Abstract In 2007/2008, the new Labour Contract Law was enacted in China. This law has substantially changed the conditions under which workers and employers can enter into contracts and has had important effects on the ability of workers to shape their conditions of work. This paper outlines the conditions and terms of the 1995 Labour Law and how the new law changes these. It details the legal requirements of the new law and then assesses the consequences of these changes for global buyers sourcing from China and for workers and enterprises in China. In particular, it assesses the differential impacts of the new law on permanent and temporary workers in state-owned and private enterprises, and between private- and public-sector employees.
    Date: 2012
  4. By: Wen Fan (University College Dublin); Yuanyuan Ma (University College Dublin)
    Abstract: Good understanding on the human capital externalities is important for both policy makers and social science researchers. Economists have speculated for at least a century that the social returns to education may exceed the private returns. In this paper, using the longitudinal data from China Health and Nutrition Survey (CHNS), we examine how individual wage changes associated with the share of college graduates in the same province across years for a person who has never moved by implementing individual fixed effects estimates. The individual fixed effect model shows that the external returns to education in China appear to be negative and on the order of -2%, which might be biased by potential endogeneity. Concerned with this problem, we then implement the IV fixed effect estimates and find positive external returns to education at about 10%. We also find this returns differ across individual heterogeneity.
    Keywords: Education, Externalities, Spillover, Signalling, China
    JEL: J0 J24 O15
    Date: 2012–08–29
  5. By: Lee, Hyun-Hoon (Department of International Trade and Business); Park, Donghyun (Asian Development Bank); Wang, Jing (Department of International Trade and Business)
    Abstract: Using highly disaggregated, Harmonized System (HS) 8-digit, product-category level data collected by the People’s Republic of China’s (PRC) Customs Office for 2000 and 2008, we perform an in-depth anatomy of the PRC's trade in manufactured goods. First, we distinguish between foreign firms and domestic firms, with the latter further divided into private firms and public firms. Second, we distinguish products as either final goods or intermediate goods. Third, we look at not only the PRC's exports but also its imports, and test for the relative importance of the extensive margin—number of goods—versus the intensive margin—the amount traded per good. Fourth, we estimate gravity equations from the perspective of dynamics utilizing a dynamic adjustment model. Overall, our analysis yields a number of new stylized facts and generates some interesting puzzles about the PRC's exports and imports.
    Keywords: People’s Republic of China; intermediate goods; fragmentation; foreign enterprises; firm heterogeneity
    JEL: F14 F21 F23
    Date: 2012–08–01
  6. By: Franz Hubert (Humboldt–Universitat zu Berlin); Onur Cobanli (Humboldt–Universitat zu Berlin)
    Abstract: We use cooperative game theory to analyze the impact of three controversial pipeline projects on the power structure in the Eurasian trade of natural gas. 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. It curtails Russia’s power, but the benefits accrue mainly to Turkey, while the gains for the EU are negligible.
    Keywords: Bargaining Power, Network, Trade links, Natural Gas
    JEL: L5 L9 O22
    Date: 2012–09
  7. By: Polterovich, Victor
    Abstract: It is a typical case in the practice of reforms, when a reformer, who seeks to introduce an institution with desired properties, discovers that its immediate implementation is impossible because of resource, technological, cultural, political or institutional constraints. In this case, one has to construct a sequence of alternating interim institutions that, for each moment of time, satisfy the existing constraints, and, in the end, provide the implementation of the desired institution. The paper describes some methods and constructions that can be used to create sequences of interim institutions. Two approaches to their design are considered: the method of "mixing" and the method of institutional competition. I explore the possibilities of finding interim institutions through institutional experimentation and by means of using a theory of the evolving institutions in more developed countries. The suggested methodologies are used to analyze a number of reforms, such as privatization in China and Slovenia, the mass introduction of funded pension systems in the 1990s, changes of the voting rules in the Council of Ministers of the EU, the introduction of the unified state examination for admission to Russian universities, etc.
    Keywords: institutional reform design; interim institution; pension system; mortgage institution; building and loan association; dual price system; privatization
    JEL: E02 O1 P5 H75 D02 L85
    Date: 2012
  8. By: Bursztyn, Leonardo; Cantoni, Davide
    Abstract: This paper examines the impact of exposure to foreign media on the economic behavior of agents in a totalitarian regime. We study private consumption choices focusing on former East Germany, where differential access to Western television was determined by geographic features. Using data collected after the transition to a market economy, we find no evidence of a significant impact of previous exposure to Western television on aggregate consumption levels. However, exposure to Western broadcasts affects the composition of consumption, biasing choices in favor of categories of goods with high intensity of pre-reunification advertisement. The effects vanish by 1998.
    Keywords: Consumption; Media; Television; Advertising; East Germany; Communism
    JEL: D12 E21 Z10
    Date: 2012–08–27
  9. By: Polterovich, Victor
    Abstract: The costs and benefits of privatization are considered, focusing on the current Russian conditions. The experience of many countries, as well as econometric and theoretical studies, a review of which is given in the paper, show that relative efficiency of privatized enterprises in comparison with the state depends on the stage of economic development and quality of institutions. State-owned enterprises may have a number of special functions which are particularly important for developing or resource abundant economies. In particular, they can play the role of agents of modernization to initiate large-scale projects as public-private partnerships. It is shown that the decision on privatization should be considered in the context of a more general problem of finding a rational ownership structure in an economy. Factors affecting the comparative efficiency of public and private enterprises are analyzed. A number of hypotheses are proposed about the shape of dependence of the rational ownership structure on the level of development, the quality of government, and the quality of markets. Recommendations on improvement of the public sector management are formulated.
    Keywords: Sappington–Stiglitz theorem; transformation cost; NP- cycles; stationary ownership structure; ownership diversification; industrial policy
    JEL: E02 O1 P5 H11 D02 H82
    Date: 2012
  10. By: Metaxas, Theodore; Kechagia, Polyxeni
    Abstract: Over the past decades great changes have taken place in the economic environment worldwide regarding the foreign direct investment (F.D.I.). However, some of the developing countries have managed to gain more F.D.I. compared to other developing countries via skills acquisition, competition, exports and imitation. These spillovers channels are used to transfer technological knowledge among firms, while the imitation is used by many multinational enterprises (MNEs) and it is considered one of the most important spillovers channels. Therefore, many Chinese enterprises have imitated the developed countries firms’ managerial and production procedures so far. China is one the largest recipient of F.D.I. inflow worldwide and the country’s development affects the policies and the growth of other developing countries. Hence, under certain circumstances, developing countries have the ability to attract F.D.I. through imitating China.
    Keywords: imitation; China; developing countries
    JEL: O18 F21 R11
    Date: 2012
  11. By: Dev Nathan; Sandip Sarkar
    Abstract: Abstract The paper analyses growing inequality in the rising powers, concentrating on the situation in China and India. It describes the various processes that are currently underway to reduce inequality in these economies. These processes include a combination of tightening the labour market, as best seen in China, increasing rural productivity and government measures to boost basic rural incomes in all such countries. Reductions in inequality in the emerging economies have a global macroeconomic effect of increasing consumption and investment, counteracting the current global slowdown. They also have the benefit of creating more space at the bottom for poorer economies to take up more of the world’s low-skill production, as the emerging economies themselves move up to higher-skill production and exporting. This sequential upgrading is being driven by the growth of emerging economy markets and by wage increases in the emerging economies.
    Date: 2012
  12. By: Hagemann, Nina
    Abstract: This paper provides results from a case study in Western Ukraine where a River Basin Management (RBM) concept for the Western Bug River has been initiated. Ukraine aims at the introduction of an integrated water resources management implemented through a river basin organizational structure based on the principles of the EU Water Framework Directive (WFD). Even though the implementation process has been initiated for the Western Bug River catchment the process came to halt. The paper aims at outlining the structural deficits that hinder a successful implementation of a RBM concept in the case study area. The results show that in Ukraine - a country still in transition - the institutional structure is not well enough established to organize a process that calls for new institutions and governance structures that challenges even industrialized countries. More precisely, the challenges for Ukraine lie within the inconsistency of the institutional framework that is made explicit when looking at the decentralization process that has been initiated right after independence but is not yet concluded. --
    Keywords: Transition countries,Ukraine,River Basin Management,Decentralization
    Date: 2012
  13. By: Matthias Lücke; Toman Omar Mahmoud; Christian Peuker
    Abstract: Donations by migrants to community projects in their home countries (“collective remittances”) help to provide local public goods and may promote economic development. We draw on the literatures on migrant remittances and on philanthropy in general to identify possible motives for collective remittances. We test the empirical relevance of these motives using micro-level data from Eastern Europe. Our results suggest a mix of motives including altruism, exchange, and concern about future membership rights in the community of origin. We also find that communities with a high degree of ethnic fragmentation and a wide dispersion of migrants across destination countries are less likely to receive collective remittances
    Keywords: international migration, development, diaspora, collective remittances, philanthropy
    JEL: F22 F24 H41 O12
    Date: 2012–08
  14. By: Serbanoiu, Georgian Valentin
    Abstract: In this paper I use a medium scale open economy DSGE model developed by Baksa, Benk and Jakab (2010) for the Hungarian economy. This model provides a notable degree of disaggregation both on the government revenue and expenditure side, being able to capture the shocks that come from fiscal policy decisions. My contributions can be summed up in the following three actions. First of all, I estimated the model for the Romanian economy, using Bayesian techniques. Secondly, I determined the parameters of fiscal feedback rules in order to establish if the automatic stabilizers work properly. And thirdly, I tried to analyze the impulse response functions in order to assess the effects of different fiscal policy measures on the most important macroeconomic variables.
    Keywords: DSGE model; Bayesian estimation; Fiscal policy; Procyclicality of fiscal policy; Impulse response functions; Fiscal feedback rules; Fiscal deficit; Government debt;
    JEL: E62 C68 H50 H30 C15 G28 E61 C11
    Date: 2012–06–28

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