nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒04‒06
fifteen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Returning Home at Times of Trouble? Return Migration of EU Enlargement Migrants during the Crisis By Anzelika Zaiceva; Klaus F. Zimmermann
  2. The structure of bank supervision and corruption in lending: a study for transition economies By Zenathan Hasannudin
  3. Household Formation Rules, Fertility and Female Labour Supply: Evidence from post-communist countries By Louise Grogan
  4. Carbon-based Border Tax Adjustments and China’s International Trade: Analysis based on a Dynamic Computable General Equilibrium Model By Ling Tang; Qin Bao; ZhongXiang Zhang; Shouyang Wang
  5. Persistence of regional inequality in China By Christopher Candelaria; Mary Daly; Galina Hale
  6. Social activity and collective action for agricultural innovation: a case study of New Rural Reconstruction in China By Mary-Françoise Renard; Huanxiu GUO
  7. Is government spending a free lunch? -- evidence from China By Xin Wang; Yi Wen
  8. Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance: Comparing Alternative Exchange Rate Regimes in Eastern Europe By Muhammad Khan; Mazen Kebewar; Nikolay Nenovsky
  9. The Condition and Problems of the Practical Use of China's Foreign-Exchange Reserves By Zhongling Qi
  10. Challenges for the future of Chinese economic growth By Jane Haltmaier
  11. Global Supply Chains at Work in Central and Eastern European Countries:Impact of FDI on export restructuring and productivity growth By Jože Damijan; Črt Kostevc; Matija Rojec
  12. Inspiration and Perspiration Factors in Economic Growth: The Former Soviet Union Area versus China (ca. 1920-2010) By Dmitry Didenko; Péter Földvári; Bas van Leeuwen
  13. Productivity As If Space Mattered: An Application to Factor Markets Across China By Cheng, Wenya; Morrow, John; Tacharoen, Kitjawat
  14. Agglomeration and firm-level productivity : a Bayesian spatial approach By Hashiguchi, Yoshihiro; Tanaka, Kiyoyasu
  15. Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters By Yue Ma; Heiwai Tang; Yifan Zhang

  1. By: Anzelika Zaiceva; Klaus F. Zimmermann
    Abstract: The eastern enlargements of the EU in 2004 and 2007 have stimulated the mobility of workers from the new EU8 and EU2 countries. A significant proportion of these migrants stayed abroad only temporarily, and the Great recession may have triggered return intentions. However, a return may be postponed if the economic situation in a sending region is persistently worse. This paper documents emerging evidence on return migration in post-enlargement Europe combining several data sources to describe the characteristics and selection of the returnees, as well as the determinants of return migration and potential re-migration decisions. The findings suggest that brain circulation rather than brain drain is relevant for several new member states and that returnees are most likely to migrate again. Moreover, the proportion of potential movers is larger in countries most affected by the crisis. Repeat and circular migration is expected to alleviate the potential negative impacts of the crisis, leading to a more efficient allocation of resources within the enlarged EU
    Keywords: return migration, EU Eastern enlargement, economic crisis;
    JEL: F22 J61
    Date: 2013–02
  2. By: Zenathan Hasannudin (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper try to examine the relation between the structure of bank supervision and corruption in lending based on the data from 21 transition economies in Eastern Europe and Central Asia. We support Beck, Kunt, and Levine (2006) that higher supervisory power will increase the degree of corruption in lending while supervisory policies which promote private monitoring by pushing banks to disclose accurate information and give incentives to private agents to monitor bank will reduce the degree of corruption in lending. As the main finding in this paper, we prove that the structure of bank supervision has significant effect to corruption in lending. More specifically, we found that the degree of corruption in lending will increase when the bank supervisor function is not in the central bank. We also have found that after we control our model with various country-level variables, the higher independency of bank supervisor will decrease the degree of corruption in lending.
    Keywords: banques, pratiques déloyales
    Date: 2012
  3. By: Louise Grogan (Department of Economics,University of Guelph)
    Abstract: This paper explains how household formation rules affect the fertility and labour supply of women in the Former Soviet Union and neighbouring countries. Women who bear a male first child in countries dominated by traditional, patrilocal households are shown to have sub- stantially lower subsequent fertility from those whose first child is female. Where households are generally nuclear, male first borns do not reduce subsequent fertility. Middle-aged women in more patrilocal contexts often work less if their first child is male, despite reduced fertility and being more likely to reside with a daughter-in-law. In more nuclear contexts, they tend to work more. These findings suggest that household formation rules are strongly related both to women’s demand for sons and to the direction of intergenerational transfers.
    Keywords: household formation rules, fertility, daughter-in-law, deferred compensation, Central Asia, Russia, Soviet Union, patrilocality, intergenerational transfers
    JEL: J10 O12 O5
  4. By: Ling Tang (School of Economics and Management, Beijing University of Chemical Technology, China); Qin Bao (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences, China); ZhongXiang Zhang (Department of Public Economics, School of Economics, Fudan University, Center for Energy Economics and Strategy Studies, Fudan University, China); Shouyang Wang (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences, China)
    Abstract: With large shares in global trade and carbon emissions, China’s international trade is supposed to be significantly affected by the proposed carbon-based border tax adjustments (BTAs). This paper examines the impacts of BTAs imposed by the USA and EU on China’s international trade, based on a multi-sector dynamic computable general equilibrium (CGE) model. The simulation results suggest that BTAs would have a negative impact on China’s international trade in terms of large losses in both exports and imports. As an additional border tariff, BTAs will directly affect China’s exports by cutting down exports price level, whereas Chinese exporting enterprises will accordingly modify their strategies, significantly shifting from exports to domestic markets and from regions with BTAs policies towards other regions without them. Moreover, BTAs will affect China’s total imports and sectoral import through influencing the whole economy in an indirect but more intricate way. Furthermore, the simulation results for coping policies indicate that enhancing China’s power in world price determination and improving energy technology efficiency will effectively help mitigate the damages caused by BTAs.
    Keywords: Border Carbon Tax Adjustments, International Trade, Dynamic Computable General Equilibrium Model, Price Determination Power, Technological Change
    JEL: D58 F18 Q43 Q48 Q52 Q54 Q56 Q58
    Date: 2013–02
  5. By: Christopher Candelaria; Mary Daly; Galina Hale
    Abstract: Regional inequality in China appears to be persistent and even growing in the last two decades. We study potential explanations for this phenomenon. After making adjustments for the difference in the cost of living across provinces, we find that some of the inequality in real wages could be attributed to differences in quality of labor, industry composition, labor supply elasticities, and geographical location of provinces. These factors, taken together, explain about half of the cross-province real wage difference. Interestingly, we find that inter-province redistribution did not help offset regional inequality during our sample period. We also demonstrate that inter-province migration, while driven in part by levels and changes in wage differences across provinces, does not offset these differences. These results imply that cross-province labor market mobility in China is still limited, which contributes to the persistence of cross-province wage differences.
    Keywords: China ; Wages ; Labor market ; Labor supply
    Date: 2013
  6. By: Mary-Françoise Renard (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Huanxiu GUO (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Since 2003, a grass-roots movement of New Rural Reconstruction (NRR) has emerged in China to experience alternative model of rural development. The movement adopts a particular approach for rural development on basis of rural social and cultural reconstruction. In order to understand this social approach, we investigate an original NRR experiment in a poor village of south China, where organic farming is promoted by means of basketball game. An in-depth household survey is conducted to qualitatively analyze this social approach and derive intuitive hypothesis of extended social network for empirical test. With a panel structure dataset collected by the survey, we quantitatively identify the causal effect of social network by exploiting the endogeneity of social network formation. Our identification result provides micro evidence for a large social multiplier effect in the diffusion of organic farming, whereas it is negative for organic experts. Also, our results highlight the role of women, education and labor force for the development of organic farming. On basis of these results, we conclude that organic farming is suitable but challenging for small villages in China, while social activity is a good lever to achieve farmers' collective action for its large diffusion.
    Keywords: New rural reconstruction; Social network; Organic farming; China. D71;O33;Q55
    Date: 2013–03–19
  7. By: Xin Wang; Yi Wen
    Abstract: Most empirical studies based on U.S. data suggest that the fiscal multiplier is less than 1 (e.g., Barro and Redlick, 2011). However, Keynes argued that the multiplier would be the largest when markets have failed to the greatest extent in coordinating economic activities (such as during the Great Depression with rampant unemployment and low capacity utilization). As a large developing country with high household saving rates, a large pool of rural labor force, and a wide range of market failures, China offers a unique opportunity to test the Keynesian notion that government expenditures (even as a pure waste of aggregate resources) can have a fiscal multiplier larger than 1 on aggregate income. Perhaps even more exceptional is China’s extensive use of government spending as a major policy tool to stimulate the economy over the past three decades. Based on both aggregate time-series data and panel data from 29 Chinese provinces, we find that the fiscal multiplier in China is larger than 2. We provide a theoretical model with market failures and Monte Carlo analysis to rationalize our empirical findings. Specifically, we build a model that can generate the same multiplier and business cycles observed in China and use the model as a data-generating process to gauge whether structural vector autoregressions can yield consistent estimates of the theoretical multiplier in short samples. Our analysis supports the large multiplier found in China but also suggests that government spending may not necessarily be a free lunch despite the large multiplier.
    Keywords: Government spending policy ; Multiplier (Economics) ; Economic conditions - China ; China
    Date: 2013
  8. By: Muhammad Khan (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans); Mazen Kebewar (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans, University of Aleppo, Faculty of Economics - Department of Statistics and Management Information Systems); Nikolay Nenovsky (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: In the late 90's, after severe financial and economic crisis, accompanied by inflation and exchange rate instability, Eastern Europe emerged into two groups of countries with radically contrasting monetary regimes (Currency Boards and Inflation targeting). The task of our study is to compare econometrically the performance of these two regimes in terms of the relationship between inflation, output growth, nominal and real uncertainties from 2000 till now. In other words, we test the hypothesis of non-neutrality of monetary and exchange rate regimes with respect to these connections. In a whole, the empirical results do not allow us to judge which monetary regime is more appropriate and reasonable to assume. EU enlargement is one of the possible explanations for the numbing of the differences and the lack of coherence between the two regimes in terms of inflation, growth and their uncertainties
    Keywords: Inflation, inflation uncertainty, real uncertainty, monetary regimes, Eastern Europe
    Date: 2013–03–25
  9. By: Zhongling Qi (Advanced Research Centers, Keio University)
    Abstract: Although it controls monetary policies, a central bank can occasionally experience a situation where its financial situation worsens and excessive liabilities occur. In such instances, the central bank may be unable to fulfill its policy objectives. This study focuses on the People's Bank of China (PBC), which is the central bank of China and possesses large foreign reserves, and investigates whether the costs it has incurred during its intervention in the foreign exchange market have contributed to its present financial situation. We then discuss future estimated PBC results. Against the background of an expanding international balance of payments surplus, the PBC continued intervention in the foreign exchange market to ensure Renminbi exchange rate stability. This intervention rapidly increased foreign reserves. This study examines the PBC balance sheet to estimate the costs of its foreign exchange market intervention after January 2002 using several assumptions. The results show that the losses experienced through its intervention policy are expansionary, and were 18.5% of its overseas assets by the end of 2011. Analyzing the factors affecting intervention costs individually, we see that exchange rate changes have a higher impact than interest rate fluctuations on intervention costs, and this effect can be identified at an earlier stage. The study concludes that the improvement of its financial situation, whilst still fulfilling its monetary policies, will be a significant challenge for the PBC.
    Date: 2013–03
  10. By: Jane Haltmaier
    Abstract: The Chinese economy has been growing at a rapid pace for over thirty years. Most of this growth has come from higher labor productivity, while growth of employment has diminished along with a slower rate of increase in the working-age population. This paper looks at the challenges that China will face over the next two decades in maintaining its rapid pace of economic growth, especially as working-age population growth slows further and then begins to decline. Key questions include whether China will be able to continue to devote nearly half of its GDP to investment, whether such investment will become less productive as the capital-labor ratio continues to rise, whether labor participation and employment rates will fall as the population becomes less rural, and whether future shifts out of rural employment will go more toward the services rather than the manufacturing sector, where productivity is higher. In the baseline scenario economic growth falls gradually from its current pace of about 10 percent to near 6½ percent by 2030. However, a combination of less optimistic, but still reasonable assumptions, results in a reduction in the growth rate to about 1½ percent by 2030.
    Date: 2013
  11. By: Jože Damijan; Črt Kostevc; Matija Rojec
    Abstract: This paper empirically accounts for the importance of the 'global supply chains' concept for export restructuring and productivity growth in Central and Eastern European Countries (CEECs) in the period 1995-2007. Using industry-level data and accounting for technology intensity, we show that FDI has significantly contributed to export restructuring in the CEECs. The effects of FDI are, however, heterogenous across countries. While more advanced core CEECs succeeded in boosting exports in higher-end technology industries, non-core CEECs stuck with export specialization in lower-end technology industries. This suggests that where FDI flows have been directed is of key importance. Our results show that export restructuring and economic specialization brought about by FDI during the last two decades in the CEECs might matter a lot for their potential for long-run productivity growth. Industries of higher-end technology intensity have experienced substantially higher productivity growth and so have countries more successful in attracting FDI to these industries.
    Date: 2013
  12. By: Dmitry Didenko; Péter Földvári; Bas van Leeuwen
    Abstract: In this paper we extend our previous studies (Didenko et al., 2012; Földvári et al., 2012; Van Leeuwen et al., 2011) on the role of conventional factors of production (fixed, or physical, and human forms of capital) and their productivity depending on their interrelations and economic development policies. Methodologically based on Solow (1956, 1957) and Mankiw, Romer, and Weil (1992) we apply our theoretical models on the factors of economic growth to compare China with the republics of the former Soviet Union and, to this end, create a new database for both regions. Following Krugman (1994), we decompose economic growth in perspiration (i.e. production factors) and inspiration (i.e. TFP, which consists in turn of technical efficiency of the production factors and a general production frontier) factors and find that in the socialist central-planning period economic growth was largely driven by physical and, to lesser extent, human capital accumulation. Moreover, at these times conventional TFP change was strongly negative (1930s for the FSU, 1950s for China). This means that focusing mainly on physical capital increases the factors of production (hence increasing growth via perspiration) but reduces the technical efficiency of the factors of production strongly (hence lowers the growth via TFP, i.e. inspiration). After the economic transitions were launched (end 1970s in China and end 1980s in the FSU) the inspiration/perspiration pattern changed. China managed to keep technical inefficiency relatively moderate, largely by massively increasing its human capital (which made it easier to make use of physical capital). At the same time, they managed to increase their productivity frontier. In the FSU, however, the change in the human to physical capital ratio was primarily caused not by an increase of human-, but rather by a decrease of physical capital. This means that, even though technical efficiency relatively increased, the general productivity frontier remained stable or declined. This changed in the late 1990s and the start of the 21th century when the FSU started to recover somewhat, only to reach the 1990 level.
    Keywords: factors of production, human capital, productivity, technology, economic development, socialism, USSR, China
    Date: 2013–03
  13. By: Cheng, Wenya; Morrow, John; Tacharoen, Kitjawat
    Abstract: Although firms are dispersed across space and may face radically different production conditions, this dimension of firm heterogeneity is often overlooked. Differences between factor markets, especially for labor, are stark. To pursue this line of inquiry, we model firm hiring across local labor markets. We then use the model to estimate and quantify the role of distinct regional labor markets in firm input use, productivity and location by combining firm and population census data. Considering modern China as a country with substantial regional variation, we find labor costs vary by 30-80%, leading to 3-17% differences in TFP once nonlabor inputs are considered. Favorably endowed regions attract more value added per capita, providing new insights into within-country comparative advantage and specialization.
    Keywords: General Equilibrium, Factor Endowments, Structural Estimation, Productivity.
    JEL: D5 F1 J3 O1
    Date: 2013–03
  14. By: Hashiguchi, Yoshihiro; Tanaka, Kiyoyasu
    Abstract: This paper estimates the impact of industrial agglomeration on firm-level productivity in Chinese manufacturing sectors. To account for spatial autocorrelation across regions, we formulate a hierarchical spatial model at the firm level and develop a Bayesian estimation algorithm. A Bayesian instrumental-variables approach is used to address endogeneity bias of agglomeration. Robust to these potential biases, we find that agglomeration of the same industry (i.e. localization) has a productivity-boosting effect, but agglomeration of urban population (i.e. urbanization) has no such effects. Additionally, the localization effects increase with educational levels of employees and the share of intermediate inputs in gross output. These results may suggest that agglomeration externalities occur through knowledge spillovers and input sharing among firms producing similar manufactures.
    Keywords: China, Industrial policy, Manufacturing industries, Productivity, Local economy, Agglomeration economies, Spatial autocorrelation, Bayes, Chinese firm-level data, GIS
    JEL: C21 C51 R10 R15
    Date: 2013–03
  15. By: Yue Ma (Lingnan University and Hong Kong Institute for Monetary Research); Heiwai Tang (Tufts University and Hong Kong Institute for Monetary Research); Yifan Zhang (Lingnan University)
    Abstract: Using Chinese manufacturing firm data over the period of 1998-2007, we find that firms become less capital-intensive after exporting, compared to similar non-exporting firms. To rationalize this finding that contrasts with existing evidence for most countries, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider products with varying capital intensity. In the model, firms in a labor-abundant country specialize in their core competency by allocating more resources to produce labor-intensive products after exporting. Consistent with the model predictions, we find evidence that the ex-ante more productive firms experience a smaller decline in capital intensity after exporting, but firms that experience a sharper decline in capital intensity after exporting have a larger increase in measured total factor productivity. Using transaction-level data, we confirm that Chinese exporters add new products that are less capital-intensive than their existing product portfolios and drop those that are more capital-intensive over time.
    Keywords: Exporters, Productivity, Factor Intensity, Multi-product Firms
    JEL: F11 L16 O53
    Date: 2012–10

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