nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒05‒19
twenty papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Learning Dynamics and the Support for Economic Reforms: Why Good News can be Bad By Sweder van Wijnbergen; Tim Willems
  2. Real Output and Prices Adjustments under Different Exchange Rate Regimes By Mirdala, Rajmund
  3. Rising Inequalities in Income and Health in China: Who is left behind? By Steef Baeten; Tom Van Ourti; Eddy Van Doorslaer
  4. Access to Social Insurance in Urban China: A Comparative Study of Rural-Urban and Urban-Urban Migrants in Beijing By Zhiming Cheng; Ingrid Nielsen; Russell Smyth
  5. Happiness and Job Satisfaction in Urban China: A Comparative Study of Two Generations of Migrants and Urban Locals By Haining Wang; Zhiming Cheng; Russell Smyth
  6. Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis By Petreski, Marjan
  7. Housework Burdens, Quality of Market Work Time, and Men’s and Women’s Earnings in China By Liangshu Qi; Xiao-Yuan Dong
  8. Compensating Wage & Income Differentials for Occupational Risk: Evidence from Migrant Workers in China's Pearl River Delta By Haining Wang; Zhiming Cheng; Russell Smyth
  9. The Analysis of Technical Efficiency and Productivity Growth In The Former Soviet Union Countries For Two Periods By Ertugrul Deliktas
  10. Digital Urban Network Connectivity: Global and Chinese Internet Patterns By Emmanouil Tranos; Karima Kourtit; Peter Nijkamp
  11. Экономика: теория и реальность By Pyastolov, S.M.
  12. Effects of NCMS Coverage on Access to Care and Financial Protection in China By Zhiyuan Hou; Ellen Van de Poel; Eddy Van Doorslaer; Baorong Yua; Qingyue Menge
  13. Social Networks and Labor Market Inequality between Ethnicities and Races By Ott Toomet; Marco van der Leij; Meredith Rolfe
  14. Less quality more costs: Does local power sector reliability matter for electricity intensity? By Bagayev, Igor; Najman, Boris
  15. Showing Off to the New Neighbors? Income, Socioeconomic Status and Consumption Patterns of Internal Migrants By Danzer, Alexander M.; Dietz, Barbara; Gatskova, Ksenia; Schmillen, Achim
  16. Do Hypothetical Experiences Affect Real Financial Decisions? Evidence from Insurance Take-up By Cai, Jing; Song, Changcheng
  17. Nonlinear Incentive Schemes and Corruption in Public Procurement: Evidence from the Czech Republic By Jan Palguta
  18. A Radical Change in Traffic Law: Effects on Fatalities in the Czech Republic By Josef Montag
  19. Who Moves and For How Long: Determinants of Different Forms of Migration By Borodak, Daniela; Piracha, Matloob
  20. Firm Size, Market Liberalization and Growth By Petar Stankov

  1. By: Sweder van Wijnbergen (University of Amsterdam); Tim Willems (University of Amsterdam)
    Abstract: Support for economic reforms has often shown puzzling dynamics: there are many examples of reforms that started off successfully but nevertheless lost public support, and vice versa. We show that learning dynamics can rationalize this apparent paradox, the reason being that the process of revealing reform outcomes is an example of sampling without replacement: every winner revealed reduces the number of unfilled winning places left, thereby making individuals who remain uncertain on their identity (reform winner or loser?) more pessimistic about their chances of benefiting from the reform. Consequently, learning considerations challenge the conventional wisdom that sequencing should be such that favorable reform outcomes are revealed first. Finally, we provide an explanation for why the gradual reform strategy worked well for China, while this is much less so for Latin American and Central and Eastern European countries.
    Keywords: learning, political economy, reform, sequencing, privatization
    JEL: D72 D83 P21
    Date: 2012–04–23
  2. By: Mirdala, Rajmund
    Abstract: Exchange rate regimes evolution in the European transition economies refers to one of the most crucial policy decision in the beginning of the 1990s employed during the initial stages of the transition process. During the period of last two decades we may identify some crucial milestones in the exchange rate regimes evolution in the European transition economies. due to existing diversity in exchange rate arrangements in the European transition economies in the pre-ERM2 period there seems to be two big groups of countries - “peggers” (Bulgaria, Estonia, Latvia, Lithuania) and “floaters” (Czech republic, Hungary, Poland, Romania, Slovak republic, Slovenia). Despite the fact, there seems to be no real prospective alternative to euro adoption for the European transition economies, we emphasize disputable effects of sacrificing monetary sovereignty in the view of positive effects of exchange rate volatility and exchange rate based adjustments in the country experiencing sudden shifts in the business cycle. In the chapter we analyze effects of the real exchange rate volatility on real output and inflation in ten European transition economies. From estimated VAR model (recursive Cholesky decomposition is employed to identify structural shocks) we compute impulse-response functions to analyze responses of real output and inflation to negative real exchange rate shocks. Results of estimated model are discussed from a prospective of the fixed versus flexible exchange rate dilemma. To provide more rigorous insight into the problem of the exchange rate regime suitability we estimate the model for each particular country employing data for two subsequent periods 2000-2007 and 2000-2011.
    Keywords: exchange rate volatility, economic growth, economic crisis, vector autoregression, variance decomposition, impulse-response function
    JEL: C32 F32 F41
    Date: 2013–01
  3. By: Steef Baeten (Institute for Health Policy and Management, Erasmus University Rotterdam); Tom Van Ourti (Erasmus School of Economics (EUR)); Eddy Van Doorslaer (Erasmus School of Economics (EUR))
    Abstract: During the last decades, China has experienced double-digit economic growth rates and rising inequality. This paper implements a new decomposition on the China Health and Nutrition panel Survey (1991-2006) to examine the extent to which changes in level and distribution of incomes and in income mobility are related to health disparities between rich and poor. We find that health disparities in China relate to rising income inequality and in particular to the adverse health and income experience of older (wo)men, but not to the growth rate of average incomes over the last decades. These findings suggest that replacement incomes and pensions at older ages may be one of the most important policy levers in combating health disparities between rich and poor Chinese.
    Keywords: China, income growth, income inequality, income mobility, health inequality
    JEL: C00 D30 D63 I14 I15
    Date: 2012–09–10
  4. By: Zhiming Cheng; Ingrid Nielsen; Russell Smyth
    Abstract: Since 1958 the hukou (household registration) system has assigned Chinese citizens either a rural or urban status. Some studies argue that the rural-to-urban migrants in China who do not have urban hukou are not entitled to urban social insurance schemes, due to institutional discrimination, which applies differing treatment to urban and rural hukou (chengxiang fenge). Although rural-urban migrants participate less in the social insurance system than their counterparts with urban hukou, a closer examination of recent policy developments shows that migrants actually do have the legal right to access the system. This implies that discrimination between rural and urban workers has been declining, and distinctions based on household registration status are less able to explain China's current urban transition. This paper provides a new way of examining Chinese migrants' social insurance participation, by adopting a framework that includes both rural-to-urban migrants and urban-to-urban migrants, which are an important, but less studied, migrant group. Among our key findings are that urban migrants are more likely to sign a labour contract than rural migrants; urban migrants have higher participation rates in social insurance than rural migrants; having a labour contract has a greater impact than hukou status in determining whether Beijing's floating population accesses social insurance; and urban migrants who have signed a labour contract have higher participation rates in social insurance than either rural migrants or urban migrants without a labour contract.
    Keywords: rural-to-urban migrants, urban-to-urban migrants, social insurance, labour contract
    Date: 2013–05
  5. By: Haining Wang; Zhiming Cheng; Russell Smyth
    Abstract: This study investigates determinants of happiness and job satisfaction of urban locals, first-generation migrants and new-generation migrants in China's urban workforce. We present evidence to suggest that new-generation migrants are less satisfied with their jobs and lives than first-generation migrants, despite having higher income. This finding is consistent with aspirations rising faster than income in China's fast growing urban economy.
    Keywords: China; Migrants; Subjective wellbeing
    JEL: J28
    Date: 2013–05
  6. By: Petreski, Marjan
    Abstract: The objective of this paper is to assess if inflation targeting post-communist economies performed better, in terms of output growth, during the crisis than their non-inflation targeting counterparts. The paper also puts the issue in the context of the preconditions of inflation targeters to adopt this regime. 26 post-communist economies of Central and Eastern Europe and the Commonwealth of Independent States are analyzed during the ongoing economic crisis. Results suggest that inflation targeters of those countries performed worse than non-inflation targeters. The growth decline in inflation targeters post-communist economies has been estimated to be deeper by about four percentage points than that in non-inflation targeters. The study finds very limited role of the preconditions for growth decline. Only the lower amount of monetary financing of the budget may have contributed in inflation-targeting countries to have gone through the crisis better.
    Keywords: inflation targeting, pre-conditions for adoption, post-communist economies
    JEL: E42 E52
    Date: 2013
  7. By: Liangshu Qi; Xiao-Yuan Dong
    Abstract: This paper provides the first estimates of the effects of housework burdens on the earnings of men and women in China, using data from the country’s time use survey in 2008. The analysis shows that working women in China not only spend many more hours on housework than their male co-workers but are also more likely to experience interference with their market work by housework activities. Three indicators are introduced to measure the degree to which market work is intertwined with housework. The estimates show that both housework time and its interference with market work have negative effects on the earnings of men and women. Quantitatively, the gender differences in housework-related indicators account for 27 to 28 percent of the gender earnings gap. This result supports the feminist contention that gender inequality at home is a major contributor to the weaker position of women in the labor market.
    Date: 2013–05
  8. By: Haining Wang; Zhiming Cheng; Russell Smyth
    Abstract: This study contributes to an important, but under-researched, topic on China by empirically examining the theory of compensating differentials in the context of China's migrant workers. Using survey data collected from the Pearl River Delta in Guangdong province in south China, this study applies the Firpo-Fortin-Lemieux quantile decomposition method to examine the compensating wage and income differentials for migrant workers undertaking risky and safe jobs. The results show that migrant workers undertaking risky jobs incur a wage penalty at medium- and low-wage levels and an income penalty at the low-income level. In contrast, migrant workers at the high wage level enjoy positive wage premiums, and those at the medium and high-income levels enjoy positive income premiums. Both the negative wage premiums and positive income premiums exhibit an inverted U-shape with the quantile increment. Overtime allowances, bonuses and other income are the major sources of compensation for job riskiness. In addition, at the medium-income level, workers in risky jobs are further compensated by employee benefits, while at the high-income level they are further compensated by medical reimbursement.
    Keywords: China; Pearl River Delta economy; migrant workers; compensating wage/income differentials
    JEL: C21 J31
    Date: 2013–05
  9. By: Ertugrul Deliktas (Department of Economics, Ege University)
    Abstract: This study measures economic performances of the 15 transition economies for two periods: The Soviet Union period and transition period. These periods include data of countries for 1970-1989 and 1991-2005. It is known that centrally planned economies are mainly criticized for widespread economic inefficiency and low total factor productivity. Thus, in order to see how the efficiency levels and productivity growth of the former Soviet union countries have changed during the transition or market-based period, we analyze two periods by using Data Envelopment Analysis. The results of analysis indicate that, on average, technical efficiency has slightly increased, however, total factor productivity decreased due to technical regress over the transition period when compared to the era of Soviet union for 15 countries.
    Keywords: technical efficiency, total factor productivity, transition countries, Soviet union countries, data envelopment analysis
    Date: 2013–05
  10. 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, Small-World Networks, Clustering, Gravity Model
    JEL: O18 H54 P25
    Date: 2012–11–16
  11. By: Pyastolov, S.M.
    Abstract: The monograph and study materials present the concepts of modern economics. The essences of micro - , macroeconomic theories, economic sociology, institutional economics, and economic psychology are revealed on examples of real situations with regard of the experience of the Russian economy transformations. The regularities of the development of the world and national economies, of international economic relations are discussed.
    Keywords: Economy, institutes, economic psychology, Russian national economy, development
    JEL: A12 A2 A20 A3
    Date: 2013
  12. By: Zhiyuan Hou (Shandong University, Jinan, China); Ellen Van de Poel (Erasmus University Rotterdam, Netherlands); Eddy Van Doorslaer (Erasmus University Rotterdam, Netherlands); Baorong Yua (Shandong University, Jinan, China); Qingyue Menge (Peking University, China)
    Abstract: The introduction of the New Cooperative Medical Scheme in rural China is one of the largest health care reforms in the developing world since the millennium. The literature to date has mainly used the uneven rollout of NCMS across counties as a way of identifying its effects on access to care and financial protection. This study exploits the cross-county variation in NCMS generosity in 2006 and 2008 in Ningxia and Shandong province and adopts an instrumenting approach to estimate the effect of a continuous measure of coverage level. Our results confirm earlier findings of NCMS being effective in increasing access to care, but not increasing financial protection. In addition, we find that NCMS enrollees are sensitive to the incentives set in the NCMS design when choosing their provider, but also that providers seem to respond by increasing prices and/or providing more expensive care.
    Keywords: Health insurance, access, financial protection, China
    JEL: D63 I14
    Date: 2012–04–16
  13. 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
  14. By: Bagayev, Igor; Najman, Boris
    Abstract: The paper describes the main determinants of electricity intensity in twenty-nine transition economies. We provide an original analysis on the way the local power sector unreliability may affect the firm-level electricity intensity. The paper explains the different firm’s behaviour, within EU and outside EU, in front of outages and/or local supply power quality. For this purpose, we use the Business Environment and Enterprise Performance Survey (BEEPS) done in 2008-2009 over 2400 enterprises. Moreover, we built an innovative measure of the electricity supply quality at the local-level inspired by the previous work of Guiso et al. (2004). Our results indicate that in non-EU (or insufficiently reformed) countries power sector unreliability increases firm’s electricity intensity. We estimated a potential reduction of one-fifth of firm’s electricity intensity associated with an improvement from the 75th percentile to the 25th percentile of the distribution of the local power sector unreliability. Our results suggest that bad quality of the local power sector seems to dampen the firms’ ability to decreases their electricity consumption, if the country’s institutional framework is poor.
    Keywords: Electricity Intensity, Local Power Sector, Electric Power Reforms, Transition Economies
    JEL: P28 Q4 R34
    Date: 2013–05–13
  15. By: Danzer, Alexander M. (University of Munich); Dietz, Barbara (Institute for East and Southeast European Studies, Regensburg); Gatskova, Ksenia (Institute for East and Southeast European Studies, Regensburg); Schmillen, Achim (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper analyses incomes and socioeconomic status of internal migrants over time and in comparison to their new neighbors and investigates whether status consumption is a way for newly arrived city dwellers to signal their social standing. Using a novel dataset from the emerging economy of Kazakhstan we find that internal migrants earn an income and status premium for their move. In a comparison to indigenous city dwellers their earnings and household incomes are not significantly different; however, mobile households report a significantly higher subjective socio-economic status. Exploiting expenditure data, we find that recent migrant households gain status from using visible consumption to impress their new neighbors. This signaling might be used as adaptation to the new economic and social environment or to gain access to social capital.
    Keywords: absolute and relative welfare, income, status consumption, signaling model, conspicuous consumption, adaptation, internal migration, emerging economy, rural-urban migration
    JEL: P36 I31 R23
    Date: 2013–04
  16. By: Cai, Jing; Song, Changcheng
    Abstract: This paper uses a novel experimental design to study the effect of hypothetical personal experience on the adoption of a new insurance product in rural China. Specifically, we conduct a set of insurance games with a random subset of farmers. Our findings show that playing insurance games improves insurance take-up in real life by 48%. Exploring the mechanism behind this effect, we show that the effect is not driven by changes in risk attitudes, changes in perceived probability of disasters, or learning of insurance benefits, but is driven mainly by the experience acquired in playing the insurance game. Moreover, we find that, compared with experience with real disasters in the previous year, the hypothetical experience gained in the insurance game has a stronger effect on insurance take-up, implying that the impact of personal experience displays a strong recency effect.
    Keywords: Insurance, Take-up, Game, Experience, Learning
    JEL: D03 D14 G22 M31 O16 O33 Q12
    Date: 2013–05–09
  17. By: Jan Palguta
    Abstract: This article uses data on Czech public procurement contracts from 2005 - 2010 in order to uncover patterns suggestive of corrupt behavior of procuring officials. Using polynomial regressions and local linear density estimators, the article provides evidence that procurement officials manipulate anticipated values of procurements so that contracts can be awarded through less transparent procedures with restricted entry. Manipulations manifest through emergence of sharp discontinuities in the anticipated value distribution. Procurements excessively bunch below statutory thresholds, which determine officials’ scope of discretion, entry-restrictiveness and transparency of the contract-awarding process. The first appearance of discontinuities coincides almost exactly with thresholds being introduced into the procurement legislation. Manipulations occur only in procedures restricted by thresholds and are prevalent only among a narrow group of procuring bodies. The last finding is consistent with manipulations being driven by corruption of procurement officials. Manipulations concern 8.6% of all below-limit procurements.
    Keywords: public procurement, corruption, manipulation, incentives, statutory thresholds
    JEL: D73 H72 K42
    Date: 2013–03
  18. By: Josef Montag
    Abstract: I evaluate the effects of a new road traffic law in the Czech Republic that became effective on July 1, 2006. The law introduced tougher punishments through the introduction of a demerit point system and a manifold increase in fines, together with an augmented authority of traffic police. I find a sharp, 33.3 percent, decrease in accident-related fatalities during the first three post-reform months. This translates into 51 to 204 saved lives with 95 percent certainty. The decline was, however, temporary; estimates of the effects going beyond the first year are around zero. Unique data on traffic police activity reveal that police resources devoted to traffic law enforcement gradually declined and were shifted towards general law enforcement.
    Keywords: traffic law; traffic fatalities; policy evaluation; deterrence, enforcement;
    JEL: I12 I18 K42 R41
    Date: 2013–02
  19. By: Borodak, Daniela (France Business School); Piracha, Matloob (University of Kent)
    Abstract: This paper analyses the determinants and correlates of different forms of migration, including circular, temporary and permanent. Using Moldovan data we show that age, education, number of children in a household and social as well as economic development in the region of origin play a crucial role in the decision to migrate permanently or on temporary/circular basis. We believe that understanding who moves and whether temporarily or circularly will help formulate more effective migration policies both in the sending and receiving countries.
    Keywords: circular migration, return migration, nested logit, Moldova
    JEL: C35 F22 J61
    Date: 2013–05
  20. By: Petar Stankov
    Abstract: Economies have markedly different firm size distributions. At the same time, firms of different size grow differently after identical financial- and product-market liberalization reforms. Thus, identical reforms can produce different growth outcomes across countries. This result is reached after exploring firm-level data on sales and sales per worker across 135 developing and post-transition economies. It helps explain the remarkable variation in the vast development literature studying the effects of various market-oriented reforms across countries and over time.
    Keywords: financial reforms; economic growth; firm size distributions; reform outcome divergence;
    JEL: D22 L11 L25 L53
    Date: 2013–04

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