nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒02‒08
ten papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. State-Owned Enterprises, Exporting and Productivity in China: A Stochastic Dominance Approach By Robert Elliott; Ying Zhou
  2. Are South East Europe stock markets integrated with regional and global stock markets? By Guidi, Francesco; Ugur, Mehmet
  3. Perceptions of unreported economic activities in Baltic Firms. Individualistic and non-individualistic motives By Jaanika Meriküll; Tairi Rõõm; Karsten Staehr
  4. China's Growth in Transition: Implications for the Thai Economy By Dr. Nasha Ananchotikul; Dr. Pornpinun Chantapacdepong; Chotima Sitthichaiviset
  5. China's Goal of Combining Economic Self-Reliance With Its Development: Changing Perspectives and Challenges By Tisdell, Clement A.
  6. Is There Evidence of a Real Estate Collateral Channel Effect on Listed Firm Investment in China? By Jing Wu; Joseph Gyourko; Yongheng Deng
  7. Incentives and Outcomes: China’s Environmental Policy By Jing Wu; Yongheng Deng; Jun Huang; Randall Morck; Bernard Yeung
  8. The Impact of Foreign Direct Investment to China on Foreign Direct Investment to Other Countries By Resmini, Laura; Siedschlag, Iulia
  9. Effects of Income Tax on Personal Savings: Econometric Evidence from Serbia By Randjelovic, Sasa
  10. Dealing with Structural Change: A Diagnosis of the Thai Economy By Dr. Kiatipong Ariyapruchya; Sukonpat Chantapant; Tosapol Apaitan

  1. By: Robert Elliott; Ying Zhou
    Abstract: A popular explanation for China's rapid economic growth in recent years has been the dramatic increase in the number of private domestic and foreign-owned firms and a decline in the state-owned sector. However, recent evidence suggest that China's state-owned enterprise (SOEs) are in fact stronger than ever. In this paper we examine over 78,000 manufacturing firms between 2002 and 2006 to investigate the relationship between ownership structure and the degree of firm-level exposure to export markets and firm-level productivity. Using a conditional stochastic dominance approach we reveal that although our results largely adhere to prior expectations, the performance of state-owned enterprises differs markedly between those that export and those that supply the domestic market only. It appears that China's internationally focused SOEs have become formidable global competitors.
    Keywords: Productivity, China, firm-level, State-owned enterprise, heterogeneity, stochastic dominance
    JEL: L2 L3 P3 D2
    Date: 2013–01
  2. By: Guidi, Francesco; Ugur, Mehmet
    Abstract: This paper analyses whether stock markets of South East Europe (SEE) have become more integrated with regional and global stock markets during 2000s. Using a variety of co integration methodologies we show that SEE stock markets have no long-run relationship with their mature counterparts. This means that SEE markets might be immunized to external shocks. We also model time varying correlations among these markets by using Multivariate Generalised Autoregressive Conditional Heteroschedastic (MGARCH) models as well as the Exponential Weighted Moving Average (EWMA) methodology. Results show that the correlations of UK and US equity markets with South East Europe market change over time. These changes in correlations between our benchmark markets and individual SEE market pairs are not uniform although evidence of increasing convergence among South East Europe and developed stock market is evident. Also examined in this paper whether the structure of correlations between returns of indices in different markets changed in different phases of the 2007-2009 global financial crisis. Overall our results show that diversification benefits are still possible for investors wishing to diversify their portfolio between developed and emerging SEE stock markets.
    Keywords: South East Europe; Stock markets; Cointegration; Correlation
    JEL: G15 G32
    Date: 2012–10
  3. By: Jaanika Meriküll; Tairi Rõõm; Karsten Staehr
    Abstract: This paper analyses managerial dishonesty in the form of economic activity not reported to the authorities. We employ data from a survey of Baltic firm managers, who were asked to assess the prevalence of unreported profits, employment and wages in their industry and to give their views on a range of questions related to various reasons for dishonest behaviour. Unreported economic activities are perceived to be widespread, although their extent and composition vary across the three countries. We employ a principal component analysis of the survey answers and identify three clusters capturing both individualistic and nonindividualistic motives for dishonest behaviour: 1) reciprocity towards government; 2) rational choice related motives; and 3) norms towards society as proxied by the tolerance of illegal activities. The econometric analysis indicates that all three motives are related to perceptions of unreported activities in the Baltic countries
    Keywords: unreported economic activity, tax evasion, tax morale, norms, governance, social coherence, Baltic countries
    JEL: E61 F36 F41
    Date: 2013–02–04
  4. By: Dr. Nasha Ananchotikul (Bank of Thailand); Dr. Pornpinun Chantapacdepong (Bank of Thailand); Chotima Sitthichaiviset (Bank of Thailand)
    Abstract: China has rapidly emerged as a global economic superpower and is expected to remain the main growth driver in the next phase of the global economy. Questions often raised are: How long can China’s extraordinary growth be sustained? What direction the Chinese economy is heading towards and what does it imply about opportunities and risks for other countries, including Thailand from our point of interest? From a review of China’s growth pattern and an in-depth analysis of sources of growth, we put forward that, in the short to medium term, China’s potential output growth will remain strong driven mainly by continued capital deepening. In the longer term, however, factor market distortions, misallocation of resources, and the demographic shift in China will increasingly become the key bottlenecks to China’s sustainable growth. Realizing these growth limitations, the Chinese leaders have recently shifted the growth paradigm by resorting to technology leapfrogging in lifting productivity and moving up the value chain. This will significantly change the future pattern of production and exports in China. The Thai economy has greatly benefited from the rising of the Chinese economy through various trade channels. But in order for Thailand to continue to reap these benefits, a sole reliance on the same export pattern will not be enough. Thailand should learn from China’s success in productivity and industrial upgrading and technological advancement, as serious efforts in this direction are much needed for Thailand to escape the middle income trap.
    Keywords: consumption,China's Growth in Transition
    JEL: O14 O16 O25 O38 O43
    Date: 2012–10–21
  5. By: Tisdell, Clement A.
    Abstract: The attainment of self-reliance (zi li geng sheng) is an important goal for China. However, approaches to achieving it have altered greatly since the People’s Republic was established in 1949. Following the split between China and the Soviet Union in 1960, Mao Zedong claimed that China could achieve this goal by promoting economic self-sufficiency at the national level as well as at subnational levels. This approach resulted in a considerable economic burden for China. While national economic self-sufficiency probably was forced on China by the hostility of foreign nations towards it, subnational self-sufficiency was not. Following the death of Mao Zedong in 1976 and the eventual rise to power of Deng Xiaoping, China’s market reforms began in 1978. With the introduction of the household responsibility system in agriculture, China gave up relying on communes and collectives for its agricultural production. The market reforms began in rural areas but were only slowly extended to urban areas because of some opposition to some politbureau numbers to the market reforms. The process of the market reforms since 1978 is outlined with some attention being given to the political hurdles involved in achieving these reforms. As a result of these reforms, the goal of subnational economic self-sufficiency has well and truly been abandoned and national self-sufficiency is no longer practised. These changes have brought new economic risks for China and the Chinese people. The benefit, however, has been greater economic growth and the enhanced global status of China. While economic self-sufficiency is no longer an over-riding goal for China, one part of zi li geng sheng is still very important for it nationally, namely, to control one’s destiny, that is, to be in charge of one’s own affairs, goals and decision-making.
    Keywords: China, Deng Xiaoping, economic self-reliance, economic self-sufficiency, Mao Zedong, market reforms, political economy, Richard Nixon, United States., International Development, Political Economy, O2, P21, P31, P52,
    Date: 2013–01
  6. By: Jing Wu; Joseph Gyourko; Yongheng Deng
    Abstract: Previous research on the United States and Japan finds economically large impacts of changing real estate collateral value on firm investment. Working with unique data on land values in 35 major Chinese markets and a panel of firms outside the real estate industry, we estimate investment equations that yield no evidence of a collateral channel effect. One reason for this stark difference appears to be that some of the most dominant firms in China are state-owned enterprises (SOEs) which are unconstrained in the sense that they do not need to rely on rising underlying property collateral values to obtain all the financing necessary to carry out their desired investment programs. However, we also find no collateral channel effect for non-SOEs when we perform our analysis on disaggregated sets of firms. Norms and regulation in the Chinese capital markets and banking sector can account for why there is no collateral channel effect operating among these firms. We caution that our results do not mean that there will be no negative fallout from a potential real estate bust on the Chinese economy. There are good reasons to believe there would be, just not through a standard collateral channel effect on firm investment.
    JEL: E22 G11 G31 R11 R3 R39
    Date: 2013–02
  7. By: Jing Wu; Yongheng Deng; Jun Huang; Randall Morck; Bernard Yeung
    Abstract: In generating fast economic growth, China is also generating growing concern about its environmental record. Using 2000-2009 data, we find that, while spending on environmental infrastructure has visible positive environmental impact, city spending is strongly tilted towards transportation infrastructure. Investment in transportation infrastructure correlates strongly with both real GDP growth, a measure of tangible economic growth relevant to city-level Party and government cadres’ promotion odds, and with land prices, which affect city governments’ revenues from land lease sales. In contrast, city governments’ spending on environmental improvements is at best uncorrelated with cadres’ promotion odds, and is uncorrelated with local GDP growth and land prices. These findings suggest that, were environmental quality explicitly linked to a cadre’s chance of promotion, or were environmental quality to affect land prices substantially, city-level public investment in environmental improvement would rise.
    JEL: G0 H54 P2 P26 Q56 Q58 R11
    Date: 2013–02
  8. By: Resmini, Laura; Siedschlag, Iulia
    Keywords: Foreign direct investment/investment
    Date: 2013–01
  9. By: Randjelovic, Sasa
    Abstract: Due to limited access to foreign savings after the 2008 crisis, transition economies are forced to rely more on domestic savings in financing their growth. In that respect, it is often argued that the government should use tax policy to encourage domestic savings. Since the personal income tax reform is a burning issue in Serbia, the aim of this paper is to provide empirical evidence on the expected effects of each of the three income tax reform scenarios (flat, dual and comprehensive income tax scheme) on personal savings in Serbia, by taking into account both capital income tax effects and labour income tax effects. Taylors theoretical model suggests that the personal saving is a function of personal income and the rate of return to savings. This is one of the seminal papers, in which the savings effects of tax policy reform are empirically estimated for a transition economy by taking into account both transmission channels. By combining Engle-Granger cointegration methods based on monthly macro data from 2004 to 2009, with the tax-benefit microsimulation model based on cross section micro data for 2007, it has been estimated that changes of capital income tax rate effects prevail over the effects of labour income tax changes, in terms of savings response. The results suggest that introduction of dual income tax in Serbia would boost personal savings in the long run, by 0.20%, while the flat tax and comprehensive income tax would lead to its decline by 2.15% and 3.64% respectively.
    Date: 2013–01–22
  10. By: Dr. Kiatipong Ariyapruchya (Bank of Thailand); Sukonpat Chantapant (Bank of Thailand); Tosapol Apaitan (Bank of Thailand)
    Abstract: The entry of China into the global economy and regional economic integration is ushering in a new global production structure. Thailand will have to find her place in this new global order by embracing internal structural change. The paper finds that Thailand will have to confront sizeable structural change due to global developments. And depending on how global and domestic developments play out, there are wide-ranging possibilities on how Thailand may transform structurally. Nevertheless, no matter what possibility materializes, the Thai economy’s smooth transformation rests on its adaptability and resiliency. We focus on adaptability in terms of physical mobility and resiliency in terms of firm resiliency to shocks. Thailand’s physical capital mobility is adequate by international standards, but rigidities exist in sectors that lack competition or financial access. At the firm level, the overall picture is that of resiliency to shocks, but there are firms in non-competitive sectors that appear particularly vulnerable. On overall, the Thai economy is adaptable and resilient but will be challenged by imminent and substantial structural change; the Thai economy must build adaptability and resiliency from within. For example, policymakers can facilitate resource allocation by fostering competition and sustaining financial sector liberalization. Firms should enhance productivity, seek out opportunities in new markets, prepare for regional competition and manage financial risk more carefully.
    Keywords: Dealing with Structural Change
    Date: 2012–10–21

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