nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒03‒02
eighteen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. CEO Incentive Contracts in China: Why Does City Location Matter? By Alex Bryson; John Forth; Minghai Zhou
  2. Urbanisation and Migration Externalities in China By Pierre-Philippe Combes; Sylvie Démurger; Shi Li
  3. On the relevance of exports for regional output growth in China By Dreger, Christian; Zhang, Yanqun
  4. Russian Banking System: Stability Factors In the Wake of 2008-2009 Crisis By Andrey Zubarev
  5. Improving regional performance in Russia: a capability-based approach  By Fadi Farra; Nadia Klos; Uwe Schober; Olga Sigalova; Alexander Zhukov
  6. If Foreign Investment Is not Foreign: Round-Trip Versus Genuine Foreign Investment in Russia By Svetlana Ledyaeva; Päivi Karhunen; John Whalley
  7. Energy institutional and organisational changes in EU and Russia: Revisiting gas relations By Sadek Boussena; Catherine Locatelli
  8. Communism or communists? Soviet legacies and corruption in transition economies By Libman, Alexander; Obydenkova, Anastassia
  9. R&D Co-operation in European Post-transition Economies By Andrea Gauselmann
  10. Natural-resource or Market-seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries By K. Gonchar; Philipp Marek
  11. Evolution of Russia’s Budgetary Policy in the 2000s: in Search of Financial Stability for the National Budget System By Sergey Drobyshevsky; Sergey Sinelnikov-Murylev; Ilya Sokolov
  12. Patterns of technology transfer in Chinese hotspots of innovative development: The perspective of the recipient firms By Kroll, Henning; Schricke, Esther
  13. Evaluation on the Financial Competitiveness of Chinese Listed Real Estate Companies Based on Entropy Method By Wei Lin; Linbo Shao
  14. Republic of Latvia: 2012 Article IV Consultation and Second Post-Program Monitoring Discussions By International Monetary Fund
  15. Do parents drink their children's welfare? A joint analysis of intra-household allocation of time. By Gianna Claudia Giannelli; Lucia Mangiavacchi; Luca Piccoli
  16. Quality of the Administration of Value-Added Tax in OECD countries and Russia By Alexander Knobel; Sergey Sinelnikov-Murylev; Ilya Sokolov
  17. How much do tariffs matter? Evidence from the customs union of Belarus, Kazakhstan and Russia By Asel Isakova; Zsoka Koczan; Alexander Plekhanov
  18. The Hungarian Monetary Policy Model By Katalin Szilágyi; Dániel Baksa; Jaromir Benes; Ágnes Horváth; Csaba Köber; Gábor D. Soós

  1. By: Alex Bryson; John Forth; Minghai Zhou
    Abstract: CEO incentive contracts are commonplace in China but their incidence varies significantly across Chinese cities. We show that city and provincial policy experiments help explain this variance. We examine the role of two policy experiments: the use of Special Economic Zones (SEZs) to attract foreign direct investment (FDI), and the rate at which state owned enterprises (SOEs) were privatised. CEO incentive contracts are negatively correlated with foreign ownership and with the introduction of FDI via SEZs. However, the SEZ effect disappears having accounted for the city-level composition of firms and executives. Rapid SOE privatisation is associated with higher city and firm-level adoption of CEO incentive contracts, irrespective of the firm's own current ownership status. The positive effect of privatisation is robust to various estimation techniques and model specifications.
    Keywords: Executive compensation, CEOs, privatisation, FDI, China, cities
    JEL: G34 J31 J33 M12 M52 O16 P31
    Date: 2013–02
  2. By: Pierre-Philippe Combes (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Sylvie Démurger (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Shi Li (School of Economics and Business Administration - School of Economics and Business Administration - Beijing Normal University)
    Abstract: We evaluate the role that cities play on individual productivity in China. First, we show that location explains a large share of nominal wage disparities. Second, even after controlling for individual and -firms characteristics and instrumenting city characteristics, the estimated elasticity of wage with respect to employment density is about three times larger than inWestern countries. Land area and industrial specialisation also play a significant role whereas the access to external markets does not. Therefore, large agglomeration economies prevail in China and they are more localised than in Western countries. Third, we -find evidence of a large positive impact of the local share of migrants on local workers'wages. Overall, these results strongly support the productivity gains that can be expected from further migration and urbanisation in China.
    Keywords: urban development; agglomeration economies; wage disparities; migration; China
    Date: 2013–02–07
  3. By: Dreger, Christian; Zhang, Yanqun
    Abstract: Despite high economic growth during the last decades, China is still vulnerable to shocks arising from industrial states. The advanced economies determine Chinese export performance, with subsequent effects on output growth. Using a production function approach, this paper examines to which extent regional GDP growth in China is export driven. In a panel of 28 Chinese provinces, series are splitted into common and idiosyncratic components, the latter being stationary. The results indicate cointegration between the common components of GDP, the capital stock and exports. In equilibrium, exports increase GDP by more than their impact expected from the national accounts. While exports and capital are weakly exogenous, GDP responds to deviations from the long run. An adjustment pattern can be detected for almost all regions, except of some provinces in the Western part of the country. --
    Keywords: Chinese economy,panel cointegration,export led growth
    JEL: F43 O11 C23
    Date: 2013
  4. By: Andrey Zubarev (Gaidar Institute for Economic Policy)
    Abstract: This paper discusses different approaches to theoretical and empirical models of bank defaults. Through constructed binary probabilistic models of defaults the paper reveals key factors which have an impact on the viability of Russian banks during the financial crisis of 2008 to 2009. Policy recommendations of the Central Bank of Russia and the banking supervision and regulation aimed at preventing bank defaults in the event of such crises in the future are formulated based on the model results.
    Keywords: bank default, financial crisis, binary models, policy of the Central Bank of Russia.
    JEL: E41 E51 E58 G21 G24 G28
    Date: 2013
  5. By: Fadi Farra (Whiteshield Partners); Nadia Klos (Whiteshield Partners); Uwe Schober (Whiteshield Partners); Olga Sigalova (Whiteshield Partners); Alexander Zhukov (Whiteshield Partners)
    Abstract: Over the past 15 years, while China’s economy has become more complex and export driven, Russia's economy has become less complex and less competitive. Economic policies have so far largely failed to boost two key drivers of economic development: knowledge and capability building. Building on a new Regional Capability Index as well as historical and case study analysis, we develop a set of scenarios and recommended models to address capability gaps and enhance the competitiveness of Russia.
    Keywords: regional development, competitiveness, product space, innovation, Russia
    JEL: O11 O14 O33 F43
    Date: 2013–01
  6. By: Svetlana Ledyaeva; Päivi Karhunen; John Whalley
    Abstract: In this paper we study the phenomenon of round-trip investment between Russia and key offshore financial centers (OFCs), namely, Cyprus and British Virgin Islands, which is now a significant part of foreign investment into Russia. Using firm-level data we study differences in location strategies between round-trip and genuine foreign investors into Russia and the factors which determine the fraction of round-trip investment in total foreign investment into Russian regions. In empirical analysis we also distinguish between different firm size and industries. We conclude that round-trip investors tend to invest more in corrupt and resource abundant Russian regions compared to genuine foreign investors. Furthermore, the share of round-trip investment in total foreign investment is significantly higher in corrupt Russian regions. In general, these results point to the corruption component of round-trip investment. Second, we find that genuine foreign investors tend to invest more in regions with higher level of skilled labour and use sea ports more compared to round-trip investors, indicating that genuine foreign investment is more technologically advanced and more oriented towards international markets than round trip.
    Keywords: Russia;round-trip investment;capital flight;foreign investment
    JEL: F21 F23
    Date: 2013–02
  7. By: Sadek Boussena (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques (IEP) - Grenoble - CNRS : UMR5194 - Université Pierre Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I); Catherine Locatelli (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques (IEP) - Grenoble - CNRS : UMR5194 - Université Pierre Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I)
    Abstract: This article tries to shed light on why gas relations between the EU and Russia, which were previously stable, have deteriorated since the introduction of institutional changes in the two regions. After identifying the areas of divergence in the context of European gas market liberalization, we then attempt to examine them in the context of the differing approaches to structuring this sector. The model of vertically unbundled network industries promoted by the EU is no longer the one that Russia intends to implement in its gas sector, despite the big changes taking place in its domestic market. All this is happening in a context where the economic stakes are very high. For the EU and its gas companies, access to Russia's hydrocarbon resources is a key question. For Gazprom, the question is whether or not it can define strategies that are flexible enough to adapt to the changing conditions in the European gas market.
    Keywords: Russia ; European Union ; gas industry
    Date: 2013–04
  8. By: Libman, Alexander; Obydenkova, Anastassia
    Abstract: This working paper contains supplementary material to the paper Communism or Communists? Soviet Legacies and Corruption in Transition Economies. The supplementary material covers the description of calculation and sources of key variables, as well as reports summary statistics and provides estimation tables and outcomes for robustness checks, used to validate the results described in the published paper. --
    Keywords: corruption,transition economies,path dependence,Soviet legacies
    JEL: D73 K42 P26
    Date: 2013
  9. By: Andrea Gauselmann
    Abstract: Innovation systems abroad become more and more important to multinational enterprises (MNEs) as sources of knowledge and technology. On the other hand, MNEs’ foreign subsidiaries can be considered agents of technological and economic development in their target location region. Applying a logit estimation, this discussion paper investigates which firm- and region-specific determinants influence cooperations in the area of research and development (R&D) between the foreign subsidiary and the regional innovation system. Results suggest that especially the foreign subsidiary’s mandate in terms of R&D and management, its size and the regional knowledge stock are positively associated with these co-operations. The analysis focuses on posttransition economies, using the example of five selected CEE countries and East Germany. We exploit a unique dataset – the IWH FDI Micro Database – which holds information on 1,245 foreign subsidiaries in this region.
    Keywords: foreign direct investment, Central East Europe, East Germany, R&D-cooperations
    JEL: F23 O30 P13 P20
    Date: 2013–02
  10. By: K. Gonchar; Philipp Marek
    Abstract: This paper conducts an empirical study of the factors that affect the spatial distribution of foreign direct investment (FDI) across regions in Russia; in particular, this paper is concerned with those regions that are endowed with natural resources and market-related benefits. Our analysis employs data on Russian firms with a foreign investor during the 2000-2009 period and linked regional statistics in the conditional logit model. The main findings are threefold. First, we conclude that one theory alone is not able to explain the geographical pattern of foreign investments in Russia. A combination of determinants is at work; market-related factors and the availability of natural resources are important factors in attracting FDI. The relative importance of natural resources seems to grow over time, despite shocks associated with events such as the Yukos trial. Second, existing agglomeration economies encourage foreign investors by means of forces generated simultaneously by sector-specific and inter-sectoral externalities. Third, the findings imply that service-oriented FDI co-locates with extraction industries in resource-endowed regions. The results are robust when Moscow is excluded and for subsamples including only Greenfield investments or both Greenfield investments and mergers and acquisitions (M&A).
    Keywords: multinational enterprises, regional economic activity, exhaustible resources and economic development
    JEL: F23 R11 Q34
    Date: 2013–02
  11. By: Sergey Drobyshevsky (Gaidar Institute for Economic Policy); Sergey Sinelnikov-Murylev (Gaidar Institute for Economic Policy); Ilya Sokolov (Gaidar Institute for Economic Policy)
    Abstract: This paper deals with 2008-2009 crisis which marked a new stage of Russia’s budgetary policy. Although the budget situation in Russia is presently much better than in the majority of the developed countries, reservation of high dependence on oil proceeds, observed trends in in the structure of expenditure obligations indicate the preservation of high risks of an unbalanced budget in long term perspective. Provision of budgetary and macroeconomic balance require adoption of urgent measures both in the sphere of tax policy and budget outlays.
    Keywords: budget policy, financial stability, tax policy, fiscal policy, national budget.
    JEL: E62 E52 E58 G01 H61 H68
    Date: 2013
  12. By: Kroll, Henning; Schricke, Esther
    Abstract: In summary, our study has highlighted that technology transfer systems in China may involve more channels, involve more partners, and in global terms be more dynamic than commonly assumed - at least in the case of well-developed urban innovation systems such as Beijing. With certainty, the times where spin-offs had to be set up for a lack of other options are over. Instead, our survey documents a vibrant set of interactions between not only science and industry but also up and down the value chain within industry itself. In terms of quantities, at least, this system does no longer appear inferior or very differently structured than those of technologically more advanced nations. Moreover, most of the surveyed companies could not find fault with many of the commonly assumed obstructions of knowledge exchange in China - such as lack of trust or unfavourable and poorly implemented regulations. --
    Date: 2013
  13. By: Wei Lin; Linbo Shao
    Abstract: The real estate is a pillar industry of China's national economy. Due to changes in policy and market conditions, the real estate companies are facing greater pressures to survive in a competitive environment. They must improve their financial competitiveness. Based on the conceptual framework of financial competitiveness, this paper presented a financial competitiveness evaluation index system, covering four aspects, including profitability, solvency, sustainable development and operational capacity. Entropy value method is applied to determine the index weight. 105 listed real estate company's financial competitiveness are evaluated, the results show that: high-scoring company has strong profitability, sustainable development and operational capacity; low-scoring company has weak profitability and poor ability of sustainable development; solvency doesn't affect the company's financial competitiveness obviously.
    Date: 2013–02
  14. By: International Monetary Fund
    Keywords: Article IV consultation reports;Economic recovery;Economic growth;Fiscal policy;Fiscal reforms;Fiscal sustainability;Reserves;Banking sector;Economic indicators;Post-program monitoring;Staff Reports;Public information notices;Latvia;
    Date: 2013–01–28
  15. By: Gianna Claudia Giannelli (Department of Economics-University of Florence and IZA); Lucia Mangiavacchi (Universitat de les Illes Balears); Luca Piccoli (Universitat de les Illes Balears)
    Abstract: The aim of this paper is to investigate whether excessive parental alcohol consumption leads to a reduction of child welfare. To this end, we analyse whether alcohol consumption decreases time spent by parents looking after their children and working. Using the Russia Longitudinal Monitoring Survey, the study focuses on mono-nuclear families with children under fifteen years of age, for whom we estimate a model of intra-household allocation of time. We find that husbands' alcohol consumption has a negative impact on their weekly hours spent doing child care, while no significant effect is observed for mothers' alcohol consumption. We interpret these findings as evidence of a negative impact of fathers' alcohol consumption on child welfare.
    Keywords: Child care, Time allocation, Alcohol consumption, Labor supply, Russia.
    JEL: D1 I1 J13 J22
    Date: 2013
  16. By: Alexander Knobel (Gaidar Institute for Economic Policy); Sergey Sinelnikov-Murylev (Gaidar Institute for Economic Policy); Ilya Sokolov (Gaidar Institute for Economic Policy)
    Abstract: This paper presents an analysis of the quality of VAT administration in OECD countries and Russia. Econometric analysis of the factors which influence the quality of VAT administration, demonstrate a positive effect of the level of institutional development on the efficiency of tax collection. However this tendency takes place only when there are no additional tax exemptions being implemented alongside the economic development where ex-emptions, in addition to causing a direct loss, complicate the taxation system and lower the quality of its administration
    Keywords: administration efficiency, optimal taxation, VAT.
    JEL: C23 C51 C53 H21 H23
    Date: 2013
  17. By: Asel Isakova (EBRD); Zsoka Koczan (University of Cambridge); Alexander Plekhanov (EBRD)
    Abstract: This paper looks at how the formation of a customs union between Belarus, Kazakhstan and Russia and associated changes in import schedules affected the structure of imports of the three member countries. The results suggest that the benefits of the new tariff policy to member countries are limited at best. Larger benefits could come from a gradual removal of non-tariff barriers.
    Keywords: customs union, imports, exports, tariffs, regional integration
    JEL: F14 F15
    Date: 2013–01
  18. By: Katalin Szilágyi (Magyar Nemzeti Bank (central bank of Hungary)); Dániel Baksa (Magyar Nemzeti Bank (central bank of Hungary)); Jaromir Benes (International Monetary Fund); Ágnes Horváth (Magyar Nemzeti Bank (central bank of Hungary)); Csaba Köber (Magyar Nemzeti Bank (central bank of Hungary)); Gábor D. Soós (Magyar Nemzeti Bank (central bank of Hungary))
    Abstract: March 2011 marked the introduction of the Magyar Nemzeti Bank’s Monetary Policy Model (MPM), representing a paradigm shift in both macroeconomic projection and monetary policy decision support. In contrast to previous conditional projections, the MPM provides an endogenous definition of both the projected policy rate and the projected exchange rate. Given the forward-looking nature of the model, expectations of economic agents play a key role in the monetary transmission process; therefore, the future achievement of the inflation target is guaranteed by the projected path of the interest rate over the forecast horizon. In this paper, we discuss the underlying structure and logic behind the MPM, describe the key behavioural equations and examine how the channels of monetary transmission appear in the model. In addition, we present the empirical validation process in detail from calibration, through Bayesian estimation and discussion of the economic properties of the model to the historical projection exercise. Finally, we discuss the main challenges we faced during the first year of application.
    Keywords: model projection, simulation, central banking, monetary policy
    JEL: C51 E17 E52 E58
    Date: 2013

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