nep-tra New Economics Papers
on Transition Economics
Issue of 2012‒12‒06
nine papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. The (Declining) Role of Households in Sustaining China's Economy: Structural Path Analysis for 1997-2007 By Yang, Ling; Thurlow, James; Lahr, Michael L.
  2. Technical Appendix to "Factor Market Distortions Across Time, Space, and Sectors in China" By Loren Brandt; Trevor Tombe; Xiadong Zhu
  3. The People’s Republic of China and Global Imbalances from a View of Sectorial Reforms By Hiro Ito; Ulrich Volz
  4. Empirical analysis of regional economic performance in Russia: Human capital perspective By Kufenko, Vadim
  5. Digital Urban Network Connectivity: Global and Chinese Internet Patterns By Emmanouil Tranos; Karima Kourtit; Peter Nijkamp
  6. Firms and Credit Constraints along the Value-Added Chain: Processing Trade in China By Kalina Manova; Zhihong Yu
  7. Social Networks and Labor Market Inequality between Ethnicities and Races By Ott Toomet; Marco van der Leij; Meredith Rolfe
  8. The Macedonian Labour Market: What makes it so different? By Mojsoska-Blazevski , Nikica; Kurtishi, Nedjati
  9. Skills Policies for Economic Diversification in the Former Yugoslav Republic of Macedonia- Enhancing local skills policies for the food and tourism sectors By Mojsoska Blazevski, Nikica; Kostadinov, Aleksandar; Gregg , Con; Uexkull, V. , Erik

  1. By: Yang, Ling; Thurlow, James; Lahr, Michael L.
    Abstract: Current explanations for private consumption.s diminished role in China focus on the expansion of exports and investments. Using structural path analysis, we find additional contributing factors. First, growth patterns during 1997-2007 favoured sectors wi
    Keywords: structural path analysis, economic growth, private consumption, China
    Date: 2012
  2. By: Loren Brandt (University of Toronto); Trevor Tombe (University of Toronto); Xiadong Zhu (University of Toronto)
    Abstract: Technical appendix for the Review of Economic Dynamics article
    Date: 2012
  3. By: Hiro Ito (Asian Development Bank Institute (ADBI)); Ulrich Volz
    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: the PRC and Global Imbalances, financial sector, current account imbalances, Capital account liberalization, social protection, rebalancing
    JEL: F32 F41
    Date: 2012–11
  4. By: Kufenko, Vadim
    Abstract: Having shown the important role of the Russian economy in the ex-USSR region by causality tests, we proceed to empirical analysis of growth and performance of the Russian regions. A dynamic panel data approach enabled us to obtain elasticity coefficients on proxies for convergence, physical capital, labour and innovation. After including human capital in the reformulated model we resolve endogeneity and reverse causality by introducing two instrumental variable approaches. Taking advantage of the Unified State Exam data we managed to successfully endogenize human capital by number (and share) of outperforming students and by the education index. The second approach helped to improve causality between instruments and human capital: the dates of first university foundation and distance to Moscow successfully explains human capital variations due to historical and spatial characteristics of a given region. --
    Keywords: growth regressions,regional analysis,human capital,system GMM,instrumental variables
    JEL: C01 E24 O40 O47
    Date: 2012
  5. By: Emmanouil Tranos (VU University Amsterdam); Karima Kourtit (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam)
    Abstract: The majority of cities in our world is not only connected through conventional physical infrastructure, but increasingly through modern digital infrastructure. This paper aims to test whether digital connectivity leads to other linkage patterns among world cities than traditional infrastructure. Using a generalized spatial interaction model, this paper shows that geography (and distance) still matters for an extensive set of world cities analysed in the present study. With a view to the rapidly rising urbanization in many regions of our world, the attention is next focused on the emerging large cities in China in order to test the relevance of distance frictions - next to a broad set of other important explanatory variables - for digital connectivity in this country. Various interesting results are found regarding digital connectivity within the Chinese urban system, while also here geography appears to play an important role.
    Keywords: Digital Networks; Internet; Connectivity; World Cities; Death of Distance; Centrality; Smallâ€World Networks; Clustering; Gravity Model
    JEL: O18 H54 P25
    Date: 2012–11–16
  6. By: Kalina Manova; Zhihong Yu
    Abstract: Global supply chains allow firms in developing countries to share in the gains from trade by conducting either ordinary or processing trade. This paper examines how financial constraints affect companies’ choice of trade regime and ultimately profitability. We exploit matched customs and balance sheet data from China, where processing trade is further divided into import-and-assembly (processing firm pays for imported inputs) and pure assembly (processing firm receives imported inputs for free). We establish two main results. First, profits, profitability and value added fall as exporters orient sales from ordinary towards processing trade, and from import-and-assembly towards pure assembly. Second, less financially constrained firms perform more ordinary trade relative to processing trade, and more import-and-assembly relative to pure assembly. We rationalize these patterns with a model that incorporates credit constraints and imperfect contractibility in companies’ choice of trade regime. Our results imply that limited access to capital restricts firms to low value-added stages of the supply chain and precludes them from pursuing more profitable opportunities. Financial frictions thus affect the organization of production across firm and country boundaries, and inform optimal trade policy in the presence of trade in intermediates.
    JEL: F10 F13 F14 F23 F34 G32 O19
    Date: 2012–11
  7. By: Ott Toomet (Tartu University); Marco van der Leij (University of Amsterdam); Meredith Rolfe (London School of Economics)
    Abstract: This paper analyzes the relationship between unexplained racial/ethnic wage differentials on the one hand and social network segregation, as measured by inbreeding homophily, on the other hand. Our analysis is based on both U.S. and Estonian surveys, supplemented with Estonian telephone communication data. In case of Estonia we consider the regional variation in economic performance of the Russian minority, and in the U.S. case we consider the regional variation in black-white differentials. Our analysis finds a strong relationship between the size of the differential and network segregation: regions with more segregated social networks exhibit larger unexplained wage gaps.
    Keywords: social networks; wage differential; homophily; segregation; race; minorities
    JEL: J71 J31 Z13
    Date: 2012–11–13
  8. By: Mojsoska-Blazevski , Nikica; Kurtishi, Nedjati
    Abstract: The aim of this paper is to investigate the performance of the Macedonian labour market in the period 2006-2011, as well as to provide a comparative analysis with the countries from the region and the EU. In particular, for over a decade, Macedonian labour market puzzles economic researchers. Despite the expected improvement in the allocative efficiency of the markets (including labour market) in the process of transition to a market economy, the performance of the Macedonian labour market has deteriorated during the transition. Unemployment rate for the population aged 15-64 reached 37.7% in 2005, though has been declining modestly since then to 31.6% in 2011. Participation and employment rates of 64.2% and 43.9%, respectively, are low compared to the peer countries form the region, and even more if compared to the EU countries. This holds even more so for Macedonian females. In this regard, the paper examines the main challenges in the labour market, in general, but also does so for specific groups of workers (differentiated by age, gender анд education). We also calculate the extent of the skill match, as well as the presence of the over/under-education phenomenon (mismatches). Moreover, it empirically tests the determinants of the employment, that is which factors might bring higher employment rates.
    Keywords: Labour market unemployment determinants of employment skill match labour force comparative analysis employment developments
    JEL: E24 J01 J64
    Date: 2012
  9. By: Mojsoska Blazevski, Nikica; Kostadinov, Aleksandar; Gregg , Con; Uexkull, V. , Erik
    Abstract: This report presents an application of the ILO’s Skills for Trade and Economic Diversification (STED) methodology to two sectors – tourism and food industries – of the economy of the former Yugoslav Republic of Macedonia. The STED methodology provides strategic guidance for the integration of skills development in sectoral policies. It is designed to support growth and decent employment creation in sectors that have the potential to increase exports and to contribute to economic diversification. It has been developed in recognition of the fact that having the right skills among workers is crucial for firms or industries to succeed in trade, and because understanding trade is important to providing workers with the right skills. Availability of skilled workers contributes to higher and more diversified exports, more FDI, higher absorption of technology, and more sustainable growth and productive employment creation. At the same time, skills are the key determinant for a worker’s success in finding a good job and making a living. Employment promotion and defining the priority sectors for future economic development in terms of skills is still a challenging task for many of the institutions and stakeholders in the former Yugoslav Republic of Macedonia. In this context, investment in human resources is central and formulating up-to-date policy advice on how to increase economic diversification through strengthening the business enabling environment with a focus on skill endowments and export orientation is key to fostering employment generation. While analysis at the national level can give useful directions for sustainable growth and employment creation, an in-depth analysis of individual sectors is useful – and indeed necessary – in order to design concrete policy proposals. It is for these reasons that two sectors - Tourism and Food Industries - were analysed in some detail. The analysis describes the obstacles to enhanced economic diversification and sustainable growth in terms of the business environment, the availability of skills, and the situation of global markets for Macedonian exports. A particular emphasis was put on identification of skill needs at regional and local level through the creation of two working groups representing trend-setting companies from each selected sector, employers’ organizations, workers’ organizations, practitioners and teachers. The results of the analysis have been incorporated in local action plans for employment, using the LED approach, for the regions of Krushevo, Prilep and Resen.
    Keywords: food industry / beverage industry / tourism / industrial production / production diversification / trade / human capital skilled worker skill requirements employment wages Macedonia;former Yugoslav Repblic
    JEL: O11 O1 E24 B22 J24
    Date: 2012

This nep-tra issue is ©2012 by J. David Brown. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.