nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒11‒11
seventeen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Convergence between Russian regions By Sergei Guriev; Elena Vakulenko
  2. Aggregate Savings and External Imbalances in China By Yang, Dennis Tao
  3. Property tax in the Czech Republic and Slovakia since 1993 By Sedmihradská, Lucie
  4. Migration, Remittances and Rural Employment Patterns: Evidence from China By Sylvie Démurger; Li Shi
  5. Who needs credit and who gets credit in Eastern Europe? By Martin Brown; Steven Ongena; Alexander Popov; Pinar Yesin
  6. Monetary Policy in Transition – Essays on Monetary Policy Transmission Mechanism in China By Koivu, Tuuli
  7. Foreign activity of Russian banks:reconsidering multinational banking theory By Victor Gorshkov
  8. The Determinants of Rural Migrants' Employment Choice in China: Results from a Joint Estimation By Cui, Yuling; Nahm, Daehoon; Tani, Massimiliano
  9. The People’s Republic of China and Global Imbalances from a View of Sectorial Reforms By Ito, Hiro; Volz, Ulrich
  10. Desafios da Acessão da Rússia à OMC By Vera Thorstensen; Carolina Múller; Daniel Ramos
  11. Export upgrading and growth: the prerequisite of domestic embeddedness By Sandra Poncet; Felipe Starosta de Waldemar
  12. Product relatedness and firm exports in China By Sandra Poncet; Felipe Starosta de Waldemar
  13. Skilled-Unskilled Wage Gap Versus Evolving Trade And Labour Market Structures in the EU By Aleksandra Parteka
  14. Demographic Patterns and Household Saving in China By Steven Lugauer; Nelson Mark
  15. The Role of Funded Pensions in Retirement Income Systems: Issues for the Russian Federation By Juan Yermo
  16. For an Enhanced Terrttorial Dimension of the Cohesion Policy in Poland in the 2014-2020 Period By Jacek Szlachta; Jacek Zaucha
  17. Determinants of FDI inflows into the Baltic countries: Empirical evidence from a gravity model By Svetlana Raudonen; Andreas Freytag

  1. By: Sergei Guriev (New Economic School); Elena Vakulenko (National Research University Higher School of Economics)
    Abstract: In this paper we study convergence among Russian regions. We find that while there was no convergence in 1990s, the situation changed dramatically in 2000s. While interregional GDP per capita gaps still persist, the differentials in incomes and wages decreased substantially. We show that fiscal redistribution did not play a major role in convergence. We therefore try to understand the phenomenon of recent convergence using panel data on the interregional reallocation of capital and labor. We find that capital market in Russian regions is integrated in a sense that local investment does not depend on local savings. We also show that economic growth and financial development has substantially decreased the barriers to labor mobility. We find that in 1990s many poor Russian regions were in a poverty trap: potential workers wanted to leave those regions but could not afford to finance the move. In 2000s (especially in late 2000s), these barriers were no longer binding. Overall economic development allowed even poorest Russian regions to grow out of the poverty traps. This resulted in convergence in Russian labor market; the interregional gaps in incomes, wages and unemployment rates are now below those in Europe. The results imply that economic growth and development of financial and real estate markets eventually result in interregional convergence.
    Keywords: Convergence, economic growth, Russian regions, financial development, migration.
    JEL: J61 R23
    Date: 2012–10
  2. By: Yang, Dennis Tao (University of Virginia)
    Abstract: Over the last decade, the internal and external macroeconomic imbalances in China have risen to unprecedented levels. In 2008, China's national savings rate soared to over 53 percent of its GDP, whereas its current account surplus exceeded 9 percent of GDP. The current paper presents a unified framework for understanding the structural causes of these imbalances. I argue that the imbalances are attributable to a set of policies and institutions embedded in the economy. Moreover, the accession of China to the World Trade Organization has dramatically amplified the effects of these structural distortions. I document major trends in aggregate savings, investment, trade, and net foreign asset positions in China, and explore options for policy reforms aimed at rebalancing the Chinese economy.
    Keywords: aggregate savings, current account, income distribution, structural distortions, trade policies, China
    JEL: E21 O16 F32
    Date: 2012–10
  3. By: Sedmihradská, Lucie
    Abstract: In the early 1990´s it was expected that the property tax would play a significant role in the process of fiscal decentralization in the transition countries. Comparison of the development of legally granted and actually effected municipal autonomy regarding the property tax in the Czech Republic and Slovakia showed that increased autonomy led only to a limited extent to its effective exploitation and its contribution to increased accountability is questionable due to deteriorated transparency in the Czech Republic and significant tax exporting in Slovakia.
    Keywords: property tax; municipal fiscal autonomy; Czech Republic; Slovakia
    JEL: H71
    Date: 2012–04–10
  4. By: Sylvie Démurger (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Li Shi (School of Economics and Business Administration - Beijing Normal University / Beijing)
    Abstract: This paper explores the rural labor market impact of migration in China using crosssectional data on rural households for the year 2007. A switching probit model is used to estimate the impact of belonging to a migrant-sending household on the individual occupational choice categorized in four binary decisions : farm work, wage work, self-employment and housework. The paper then goes on to estimate how the impact of migration differs across different types of migrant households identified along two additional lines : remittances and migration history. Results show that individual occupational choice in rural China is responsive to migration, at both the individual and the family levels, but the impacts differ : individual migration experience favors subsequent local off-farm work, whereas at the family level, migration drives the left-behinds to farming rather than to off-farm activities. Our results also point to the interplay of various channels through which migration influences rural employment patterns.
    Keywords: labor migration; labor supply; remittances; temporary migration; left-behind; China
    Date: 2012–10–23
  5. By: Martin Brown (Swiss National Bank; Tilburg University); Steven Ongena (Tilburg University; CEPR - Centre for Economic Policy Research); Alexander Popov (European Central Bank); Pinar Yesin (Swiss National Bank)
    Abstract: Based on survey data covering 8,387 firms in 20 countries we compare credit demand and credit supply for firms in Eastern Europe to those for firms in selected Western European countries. We find that firms in Eastern Europe have a higher need for credit than firms in Western Europe, and that a higher share of firms is discouraged from applying for a loan. The higher rate of discouraged firms in Eastern Europe is driven more by the presence of foreign banks than by the macroeconomic environment or the lack of creditor protection. We find no evidence that foreign bank presence leads to stricter loan approval decisions. Finally, credit constraints do have a real cost in that firms which are denied credit or discouraged from applying are less likely to invest in R&D and introduce new products. JEL Classification: G21, G30, F34.
    Keywords: Credit constraints, banking sector, transition economies.
    Date: 2012–02
  6. By: Koivu, Tuuli (Bank of Finland Research)
    Abstract: China’s economic development has been exceptionally robust since the end of the 1970s, and the country has already emerged as the second biggest economy in the world. In this study, we seek to illuminate the role of the monetary policy in this successful economic performance and as a part of the extensive economic reforms of the last two decades. The five empirical essays seek to discover which monetary policy tools are the most used and most effective for guiding China’s economic development. In addition, we explore which monetary policy transmission channels are functioning and to what extent monetary policy impacts inflation and real economic developments in China. The results indicate that the conduct of monetary policy in China differs substantially from what is typical for an advanced market economy, where an independent central bank often aims to hit an inflation target by simply controlling the target interest rate. First, China’s monetary policy toolkit is highly diverse. Besides a collection of administrated interest rates, it contains quantitative policy tools and direct guidelines. Second, China’s central bank is not independent in its decision-making. For these reasons, it is exceptionally challenging to measure the monetary policy stance or to distinguish monetary policy from other macroeconomic policies in China’s case. This has been taken into account in this study by using a variety of monetary-policy indicators. Our results suggest that China’s monetary-policy implementation and its transmission to the real economy still rely heavily on quantitative policy tools and direct guidelines; interest rates play a much smaller role, in terms of both usage and effectiveness. Overall, our findings suggest that the direct link between monetary policy and real economic performance is weak in China. On the other hand, this study clearly shows that monetary policy has played a key role in price developments, which tells us that monetary policy has been an important factor in China’s economic success.
    Keywords: China; monetary policy; economic growth; inflation; exchange rates
    JEL: E50 P30
    Date: 2012–10–26
  7. By: Victor Gorshkov (PhD student, Graduate School of Economics, Kyoto University)
    Abstract: The present paper targets activity of Russian banks expanding their businesses abroad. Within the framework of existing multinational theory we examine motivation, entry modes and strategies of Russian foreign banks. We demonstrated on the example of Russia that distinctive features of banking sectors of host and home countries, offshore business of Russian banks, hidden forms of expansion through third countries, role of banks in other outward foreign investments, non-transparency of legal actors of foreign banks and their strong interrelation with the state and recourse-based TNCs and large financial and industrial groups, cultural and historical background among the host and home countries, all these factors in fact do matter and should be considered when investigating the foreign expansion of banks. Some suggestions were made in order to extend existing theoretical base on multinational banking theory.
    Keywords: multinational banking theory, foreign banks, motivation, entry modes, strategies, Russian banks
    JEL: F23 F30 G20 G21 P29 P33
    Date: 2012–11
  8. By: Cui, Yuling (Macquarie University, Sydney); Nahm, Daehoon (Macquarie University, Sydney); Tani, Massimiliano (Macquarie University, Sydney)
    Abstract: This paper investigates the determinants of employment choice of rural migrant workers across state-owned enterprises (SOEs) and various subtypes of non-state owned enterprises (non-SOEs) by taking into account unobservable characteristics that link the choice to migrate with the choice of employer. Using pooled cross-section data for 1995 and 2002, the results indicate that the choice of employment is positively related to unobserved determinants of migration. This result implies that estimating employment choices without controlling for migration status leads to biased estimates. Most rural migrants appear strongly pulled into non-SOEs because of the higher wages and despite longer working hours. The provision of pension benefits also positively motivates employees' choices.
    Keywords: rural migrant workers, employment choice, SOEs, non-SOEs, China
    JEL: C35 J21 J61
    Date: 2012–10
  9. By: Ito, Hiro (Asian Development Bank Institute); Volz, Ulrich (Asian Development Bank Institute)
    Abstract: This paper examines the impact of sectorial reforms on current account imbalances, with a special focus on the People’s Republic of China (PRC). In particular, we investigate to what extent reforms pertaining to the financial sector, social protection, and healthcare may contribute to a rebalancing of the PRC’s persistent current account imbalances. Our forecasting results suggest that reforming the financial sector would be a significant contributor to the country’s rebalancing with an effect much larger than that of capital account liberalization. Strengthened provisions of social protection and publicly-funded healthcare are also found to contribute to a rebalancing of the PRC economy.
    Keywords: global imbalances; prc; current account balance; budget deficit; financial liberalization; social sector reform
    JEL: F32 F41
    Date: 2012–11–05
  10. By: Vera Thorstensen; Carolina Múller; Daniel Ramos
    Abstract: O presente artigo pretende analisar os compromissos assumidos pela Rússia quando de sua acessão à Organização Mundial de Comércio (OMC), a fim de averiguar os impactos que esses podem trazer ao sistema multilateral de comércio. A Rússia era a última grande economia que estava ausente da OMC e, para que sua acessão fosse aceita pelos membros da organização, submeteu-se a uma série de obrigações que concediam aos demais membros maior acesso ao mercado russo e visavam assegurar que o país conformaria seu sistema econômico às regras do sistema multilateral. Assim, foram estabelecidas obrigações em temas relacionados ao setor de petróleo e gás, à participação do Estado na economia, aos programas de subsídio e à observância das regras de propriedade intelectual. A partir da análise de tais compromissos, em conjunto a uma comparação com a acessão da China à OMC, em 2001, serão identificadas as principais características da economia russa que poderão ensejar desafios à sua plena participação no sistema multilateral. Palavras-chave: OMC; acessão; Rússia; comércio internacional. This study aims to analyze the commitments undertaken by Russia at the moment of its accession to the World Trade Organization (WTO), in order to evaluate the impacts that these may have on the multilateral trading system. Russia was the last main economy outside the WTO. In order to allow its accession to the organization, WTO members demanded a series of commitments that would grant them a larger access to the Russian market and would assure that the country would adapt its economic system to the rules of the multilateral trading system. The country undertook obligations related to the oil and gas sector, state presence in the economy, subsidy programs and enforcement of intellectual property rules. Based on the analysis of such commitments and comparing them with China`s accession to the WTO, in 2001, the article shall identify the main features of Russian economy that may present a challenge to its full participation in the multilateral trading system. Keywords: WTO; accession; Russia; international trade.
    Date: 2012–10
  11. By: Sandra Poncet; Felipe Starosta de Waldemar
    Abstract: Our work contributes to the literature relating output structure and economic development by showing that growth gains from upgrading are not unconditional. Relying on data from a panel of Chinese cities, we show that the level of capabilities available for domestic firms operating in ordinary trade is an important driver of economic growth. However, no direct gains emanate from the complexity of goods produced by either processing-trade activities or foreign firms. This suggests that the sources of product upgrading matter, and that domestic embeddedness is the key for capacity building and technology adoption to be growth enhancing.
    Keywords: Economic complexity;export upgrading;FDI;processing trade;growth;China
    JEL: F10 O11 O14 O40 O53
    Date: 2012–10
  12. By: Sandra Poncet; Felipe Starosta de Waldemar
    Abstract: We propose the first evaluation using micro-level data of the expected growth gains from the consistency of activities with local comparative advantage. Using firm level data from Chinese customs over 2000-2006, we investigate the relationship between the export performance of firms and how their products relate to local comparative advantage. Our key indicator measures the density of the links between a product and the local product space. It hence combines information on the intrinsic relatedness of a good to that on the local pattern of specialization. Our results indicate that exports grow faster for goods that have denser links with those currently produced in the firm’s locality. The density of links between products thus seems to yield export-enhancing spillovers. We however also show that this positive effect of product relatedness on export performance is mainly limited to ordinary trade activities and domestic firms. It is also stronger for more productive firms, suggesting that spillover diffusion may be hindered by insufficient absorptive capacity.
    Keywords: Product space;density;spillovers;export performance;China
    JEL: F10 O11 O14 O40 O53
    Date: 2012–10
  13. By: Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland)
    Abstract: This paper proposes an alternative approach to the empirical study of wage gap between workers with different educational levels in the enlarged EU. The analysis is based on sectoral database, linking labor market statistics and trade data at the level of 12 manufacturing sectors in a group of 20 European countries: selected New Member States (NMS-5) and former EU-15 economies, in the period 1995-2005. The results of the empirical model suggest that wage inequality between workers with academic education and lower is associated mainly with domestic (and not foreign) labor market conditions and, to a lower extent, to trade forces. Degree of trade penetration affects skilled-unskilled wage gaps but we do not find significant wage effects of imports from less developed EU countries. The same result is confirmed when we consider trade in intermediates and outsourcing practices in Europe.
    Keywords: wage inequality, skills, integration
    JEL: C62 F16 J31
    Date: 2012–11
  14. By: Steven Lugauer (Department of Economics, University of Notre Dame); Nelson Mark (Department of Economics, University of Notre Dame)
    Abstract: This paper studies how changing demographics can explain much of the evolution of China's household saving rate from 1955 to 2009. We undertake a quantitative investigation using an overlapping generations model in which agents live for 85 years. Agents begin to exercise decision making when they are 20. From age 20 to 63, they work. From age 20 to 49, they also provide for children. Dependent children's consumption enters into the parent's utility, and parents choose the consumption level of the young until they leave the household. Working agents transfer a portion of their labor income to their retired parents and save for their own retirement. Retirees live of of their accumulated assets and support from current workers. We present agents in the parameterized model with the future time-path of the demographics, interest rates and wages as given by the data and analyze their saving decisions. The simulated model accounts for nearly all the observed increase in the household saving rate from 1955 to 2009.
    Keywords: Saving Rate, Life-Cycle, China, Demographics, Overlapping Generations
    JEL: E2 J1
    Date: 2010–12
  15. By: Juan Yermo
    Abstract: This paper reviews the recent development of the funded pension system in the Russian Federation and considers it role in the context of the overall retirement income system. By describing current OECD practices and policy recommendations and comparing them with the current Russian pension system, the report aims to facilitate ongoing discussions between the OECD and the Russian Federation regarding the latter’s pension system.<P> The report is based to a large extent on existing OECD published material, in particular the latest edition of OECD Pensions at a Glance (2011) and the OECD Pensions Outlook 2012. It also draws on the OECD review of labour and social policy published in December 2011.</P><P>Le rôle des régimes de pension privés dans les systèmes de retraite : les enjeux pour la Fédération de Russie<BR>Cette publication analyse l’évolution récente des régimes de pension privés dans la Fédération de Russie et examine leur rôle dans le contexte du système de retraite du pays. Elle met en regard le système de retraite russe et les pratiques en vigueur dans les pays de l’OCDE ainsi que les recommandations stratégiques formulées par l’Organisation. Ce rapport a pour objectif de faciliter les discussions en cours entre l’OCDE et la Fédération de Russie sur le système de retraite du pays. Ce document s’inspire largement de publications de l’OCDE, et notamment des dernières éditions du Panorama des pensions 2011 et des Perspectives de l’OCDE sur les pensions privées 2012. Il fait également fond sur l’examen de l’OCDE du marché du travail et des politiques sociales dans la Fédération de Russie, publié en décembre 2011.
    Keywords: investment, regulation, supervision, social security, public pensions, funded pensions, investissement, supervision, sécurité sociale, pensions privées, régulations, pensions publiques
    JEL: G18 G23 G28 H55
    Date: 2012–10–19
  16. By: Jacek Szlachta (Institute for Development, Sopot, Poland); Jacek Zaucha (Institute for Development, Sopot, Poland)
    Abstract: This article presents a synthesis on origin and development of the notion of territorial cohesion and its application to policy making. In particular the concept of policy teritorialisation is analyzed and discussed. Also the essence of territorial approached is examined and relevant typologies are proposed. Prospects from teritorialisation of the Cohesion Policy in the new programming period are identified and assessed in the context of spatial development of Poland. The concluding part contains the authors’ recommendations on a proper instillation of territorial cohesion issues in the reformed EU Structural Policy.
    Keywords: territorial cohesion, policy territorialisation, territorial approach, territorial dimension of policies, spatial development
    JEL: R11 R12 R58
    Date: 2012–03
  17. By: Svetlana Raudonen (Tallinn School of Economics and Business Administration of Tallinn University of Technology); Andreas Freytag (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: The article analyzes FDI inflows into Baltic countries using a gravity approach. The results of the empirical estimation allow us to explain how difference in corporate taxation between countries, geographical and cultural distance, institutions such as regulations and the size of the economy as well as its economic development affect FDI inflows into the Baltic countries. The influence of corporate taxation on FDI flows, expressed as corporate tax rate differences between investor and host countries is statistically significant. Larger geographical distance between the countries reduces FDI flows, and institutional variables such as the economic freedom index have significant impact and affect positively FDI into the Baltics. Finally, the size of economy, measured by GDP, impacts positively the FDI flows into Baltic countries.
    Keywords: gravity model, foreign direct investments, corporate tax, Baltic countries
    JEL: E2 F2 H2
    Date: 2012–11–02

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