nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒06‒09
sixteen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. How have Labour Market Developments Affected Labour Costs in China? By Wenlang Zhang; Gaofeng Han
  2. How Important is Exports and FDI for China's Economic Growth? By Yuqing Xing; Manisha Pradhananga
  3. Intra-National Protectionism in China: Evidence from the Public Disclosure of 'Illegal' Drug Advertising By Markus Eberhardt; Zheng Wang; Zhihong Yu
  4. Corruption Measurement: the case of Russian Federation By Tatiana Zhuravleva
  5. Civil Service Professionalisation in the Western Balkans By Jan-Hinrik Meyer-Sahling
  6. How Do You Feel? The Effect of the New Cooperative Medical Scheme in China By Carine Milcent; Binzhen Wu
  7. Culture and the Gender Gap in Competitive Inclination: Evidence from the Communist Experiment in China By Zhang, Y. Jane
  8. The agri-food sector in Russia: Current situation and market outlook until 2025 By Guna Salputra; Myrna van Leeuwen; Petra Salamon; Thomas Fellmann; Martin Banse; Oliver Ledebur
  9. Assessment of Institutional Quality in Resource-Rich Caspian Basin Countries By Ahmadov, Ingilab; Mammadov, Jeyhun; Aslanli, Kenan
  10. Shadow Deposits as a Source of Financial Instability: Lessons from the American Experience for China By Nicholas Borst
  11. China's Savings Multiplier By Halvor Mehlum; Ragnar Torvik; Simone Valente
  12. Environmental protection expenditure: Ex-post evaluation By Jana Soukopova; Jana Soukopova
  13. An empirical analysis of cross-border labour mobility in the case of Estonia By Marta Kaska; Tiiu Paas
  14. Horizontal and Vertical Technology Spillovers from FDI in Eastern Europe By Cristina Jude
  15. The Role of Intra-Industry Trade in the Industrial Upgrading of the 10 CEECs New Members of the European Union By Károly Attila SOÓS
  16. Emissions trading in China: Principles, design options and lessons from international practice By Frank Jotzo

  1. By: Wenlang Zhang (Hong Kong Monetary Authority); Gaofeng Han (Hong Kong Monetary Authority)
    Abstract: Labour markets in China have experienced remarkable changes in the past decade. In this paper we use above-scale industrial firm-level data of 2001-2008 to study how labour market developments have affected labour costs of firms across regions, and different levels of technology and ownership in China. Our estimates suggest that, labour market tightness has had some impact on the labour costs of Hong Kong-Macau-Taiwan (HMT) firms and private enterprises, particularly in coastal areas, but overall the impact is limited. Our research also shows that labour migration has had some impact on the labour costs and employment of HMT and private firms in East China. Our analysis suggests that China has not yet seen an absolute shortage of labour, but there have been structural problems in the labour market. Demand for young low-end workers and skilled workers has outpaced supply, while the opposite is true for better educated workers such as young college graduates. As the majority of the employees of HMT and private enterprises are at the low-education end, wage pressures for these firms have increased accordingly. As such, it is necessary to remove the barriers that hinder rural labour forces from working in urban areas and to develop vocational and technical education. It is also useful to upgrade production chains to reduce the relative demand for low-end workers and increase that for better-educated workers to reduce skill mismatch in labour markets.
    Keywords: Labour Market Tightness, Labour Migration, Labour Costs
    JEL: J21 J23 J31
    Date: 2013–05
  2. By: Yuqing Xing (National Graduate Institute for Policy Studies; Asian Development Bank Institute); Manisha Pradhananga (Asian Development Bank Institute; University of Massachusetts Amherst)
    Abstract: The Global Financial Crisis and the recent slowdown of China’s growth have led to questions about the sustainability of China’s growth. The argument is that, China is too dependent on external demand and that it needs to “rebalance” its economy toward domestic consumption. However, conventional measures of external: net exports-over-GDP and exports-over-GDP are biased and do not accurately measure the contribution of external demand to GDP growth. In this paper, we propose two measures that are simple modifications of the conventional measures. We argue that our proposed measures provide a more accurate estimate of the vulnerability of China’s economy to external shocks, in the form of exports and FDI. Our estimates show that in 2001, exports and FDI accounted for 18.2% of GDP growth and by 2004 the share rose to 49 percent. During 2005-2007, the contribution of exports and FDI to growth remained in the range of 38-40 percent. Our estimates also show that the impressive recovery of the Chinese economy in the post-crisis period owed at least 53% of its growth to exports and FDI. Based on these results, we conclude that the Chinese economy remains highly dependent on external demand in the form of exports and FDI, and re-balancing the economy towards domestic demand has not been achieved yet.
    Date: 2013–05
  3. By: Markus Eberhardt; Zheng Wang; Zhihong Yu
    Abstract: This paper provides micro-level evidence that drug advertising regulations and inspections in China are used by local governments to discriminate against firms from outside the province.  Furthermore, the degree of discrimination varies across firms in that drug manufacturers which have closer ties with rival provinces are more likely to be targeted.  These findings demonstrate that giving provincial governments strong incentives to compete with each other may exacerbate the market distortions inherent in a partially reformed economy such as China.
    Keywords: China, intra-national protectionism, drug advertising
    JEL: F15 P26 L25
    Date: 2013–04–17
  4. By: Tatiana Zhuravleva (Gaidar Institute for Economic Policy)
    Abstract: This study develops the approach of corruption measurement based on the income-expenditure comparison. Using micro-level data on reported household earnings, expenditures and assets provided by Russian Longitudinal Monitoring Survey for the period 2000-2009 we find that households with workers in the public sector receive lower earnings than their private sector counterparts, but enjoy the same level of consumption expenditures, in other words there exists an expenditure-income gap in favor of the public sector. Controlling for the reported level of earnings, households with workers in the private sector do not show neither a significantly higher probability of possessing country houses, cars and computers, nor living in better housing conditions, nor having higher financial wealth. The analysis of current and accumulated savings, risk aversion and volatility of wages does not show any sign of distinction between two sectors. Thus, differences in assets and precautionary motives of workers cannot reconcile the sizeable expenditure-income gap. Unexplained differences are referred to unreported income, or bribes.
    Keywords: corruption measurement, expenditure-income gap, RLMS, Russian Federation
    JEL: P16
    Date: 2013
  5. By: Jan-Hinrik Meyer-Sahling
    Abstract: This report examines the professionalisation of the civil service in seven Western Balkan states: Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia1, Kosovo, Montenegro and Serbia. In the case of Bosnia and Herzegovina, the civil service is analysed separately for the state level (henceforth BiH), the Federation level (FBiH) and the Republika Srpska (henceforth RS).<P>The report builds on SIGMA Paper No. 44 (2009), which assessed the sustainability of civil service reforms in the new EU member states of Central and Eastern Europe after their accession to the European Union (henceforth EU) in 2004. SIGMA Paper No. 44 found that Central and Eastern European states had made significant progress towards the establishment of professional and impartial civil service systems before joining the EU. Yet after accession only a minority of countries, namely the Baltic States, continued to invest in the professionalisation of the civil service.<P> Accordingly, the paper examines, first, the degree to which civil service systems ‘fit’ the European principles of administration and, second, the drivers of civil service professionalisation, in order to gain insights with regard to the sustainability of reforms in the Western Balkans.
    Date: 2012–11
  6. By: Carine Milcent (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA)); Binzhen Wu (School of Economics and Management - Tsinghua University)
    Abstract: During the 2003-2006 period, subjective health status in Chinese rural areas improved. We used a unique household longitudinal survey to analyze how the introduction of a public insurance system has contributed to the change. This program is based on a doubly voluntary process: counties decide to launch, then households decide to subscribe. We disentangle two channels of influence of the insurance: the insurance effect of the coverage and a general equilibrium effect on all residents in the insurance-adopting counties. The empirical findings include, first, a positive extensive margin: individuals feel better about their health status when covered by the NCMS. However, there is no intensive margin: an individual's self-assessed health status does not improve with the number of years enrolled in the program. Second, we find a positive general equilibrium effect of introducing the NCMS program on non-participants in NCMS counties. This effect accumulates over time.
    Keywords: Subjective health ; Rural China ; Health insurance ; New Cooperative Medical Scheme
    Date: 2013–05–28
  7. By: Zhang, Y. Jane
    Abstract: Radical communist reforms propelled traditionally secluded Han Chinese women into the labor force but exempted ethnic minorities. Using an economic experiment, this study compares the gender gap in competitive inclination across three ethnic groups in one county. The Han Chinese have no statistically significant gender gap while the patrilineal Yi women are significantly less competitively inclined than Yi men and than Han Chinese women. The matrilineal Mosuo women are as competitively inclined as the Han Chinese women. The findings affirm that culture matters for competitive inclination and suggests the hypothesis that institutional changes can narrow the gender gap in competitive inclination.
    Keywords: competition, culture, gender, communism
    JEL: C91 C93 J15 J16 O15 P3
    Date: 2013–05
  8. By: Guna Salputra (European Commission – JRC - IPTS); Myrna van Leeuwen (Agricultural Economics Research Institute (LEI)); Petra Salamon (Johann Heinrich von Thünen-Institute (vTI)); Thomas Fellmann (University Pablo de Olavide); Martin Banse (Johann Heinrich von Thünen-Institute (vTI)); Oliver Ledebur (Johann Heinrich von Thünen-Institute (vTI))
    Abstract: This report gives an overview on the Russian agri-food sector and provides an outlook for the developments in agricultural markets for Russia, focussing on the main agricultural commodities. For the purpose of the study a detailed dataset and modelling structure for the main agricultural commodities in Russia has been developed and integrated into the overall AGMEMOD modelling framework.
    Keywords: Economic analysis, impact assessment, Common Agricultural Policy, agricultural trade, agricultural markets, competitiveness, modelling tools, price volatility, database
    Date: 2013–02
  9. By: Ahmadov, Ingilab; Mammadov, Jeyhun; Aslanli, Kenan
    Abstract: Natural resource dependence is believed to have potential impact on institutional development, and there is growing consensus in the academic literature that institutional weakness is central to the explanation of the negative effects of resource booms. Generally, the quality of institutional framework and natural resource dependence interact mutually. Natural resources rents can damage institutions by removing incentives to conduct reforms and even to establish a well-functioning bureaucracy. Also, weak institutional quality is the ultimate cause for a disadvantageous management framework of natural resources and process of converting revenue flows into economic development. This paper examines the connection between institutional quality and resource dependence in resource-rich Caspian Basin countries (Azerbaijan, Kazakhstan, Russia, Turkmenistan) with transition economies. The analysis for the total natural resources rents suggests that, in aggregate, revenues on total natural resources have a negative impact on government effectiveness.
    Keywords: Resource curse, institutional quality, government effectiveness.
    JEL: O1 O13 Q32 Q33 Q43
    Date: 2013–06–05
  10. By: Nicholas Borst (Peterson Institute for International Economics)
    Abstract: In less than a decade, China has developed a shadow deposit system similar in scope and function to money market mutual funds in the United States. Wealth management products in China have emerged as an important source of short-term financing for the Chinese economy and are likely to continue to grow in coming years. These products promise savers higher interest rates than the controlled rates on traditional bank deposits but offer fewer investor protections. As such, these financing pools are vulnerable to rapid retrenchment when financial difficulty forces investors to reevaluate the risk of these investments. Consequently, a source of potential financial instability has been created in the Chinese economy. US experience in regulating shadow deposits offers useful lessons for China to guide its own financial development in a healthier direction.
    Date: 2013–05
  11. By: Halvor Mehlum (Department of Economics, University of Oslo); Ragnar Torvik (Department of Economics, Norwegian University of Science and Technology); Simone Valente (Department of Economics, Norwegian University of Science and Technology)
    Abstract: China's growth is characterized by massive capital accumulation, made possible by high and increasing domestic savings. In this paper we develop a model with the aim of explaining why savings rates have been high and increasing, and we investigate the general equilibrium effects on capital accumulation and growth. We show that increased savings and capital accumulation stimulates further savings and capital accumulation, through an intergenerational distribution effect and an old-age requirement effect. We introduce what we term the savings multiplier, and we discuss why and how the one-child policy, and the dismantling of the cradle-to-grave social benefits provided through the state owned enterprises, have stimulated savings and capital accumulation.
    Keywords: China, One-child policy, Overlapping generations, Growth, Savings
    JEL: O11 D91 E21
    Date: 2013–06–06
  12. By: Jana Soukopova; Jana Soukopova (Department of Public Economics, Masaryk University)
    Abstract: The paper presents the methodology for monitoring and evaluating the efficiency of current environmental protection expenditures of municipalities developed within the project of Ministry of Environment of the Czech Republic. The methodology has been approved as the voluntary environmental tool for municipal officials. A proposal of methodological procedure for evaluating municipal environmental protection expenditure is based on multi-criteria weighed assessment. It gives municipalities the instrument for assessment of expenditure efficiency and includes all three pillars of sustainable development – economical, ecological and environmental. In the paper are investigate outputs which results from the evaluation of environmental protection expenditures in the city of Brno that is the second largest city in the Czech Republic and represents the territory where live approximately 380 000 citizens. The results show real state of expenditure efficiency in the city Brno and point out the possibility of improving the current situation. The methodology is assessing tool based on available data usable for other states and their municipalities for evaluation of effectiveness of public spending at the local level.
    Keywords: methodology; efficiency; municipality; environmental protection expenditure.
    JEL: D61 H59 H76
    Date: 2013–04
  13. By: Marta Kaska; Tiiu Paas
    Abstract: The aim of this paper is to outline differences in the socio-demographic and employment characteristics of Estonian people who have worked in a neighbouring country – Finland, Sweden, Latvia or Russia. The empirical part of this paper relies on data from CV Keskus – an online employment portal bringing together jobseekers and vacant job posts. The results of our analysis show that different destination regions – the wealthier countries of Finland and Sweden (referred to as East-West mobility) and Latvia and Russia (referred to as East-East mobility) have attracted workers with different personal and job-related characteristics. Ethnicity and higher education are important determinants in explaining differences between East-West and East-East labour flows. Non-Estonians and people with a higher education have been less likely to work in Finland or Sweden.
    Keywords: geographic labour mobility, neighbouring countries, cross-country labour flows, Estonia
    JEL: J61 O57 R P52
    Date: 2013–05
  14. By: Cristina Jude (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans, FSEGA - Babes Bolyai University Cluj Napoca - Universitatea Babeş-Bolyai, Cluj-Napoca)
    Abstract: The aim of our paper is to empirically estimate the direction and magnitude of technological spillovers from FDI using a plant level dataset of Romanian firms for the period 1999-2007. We use the Levinsohn Petrin (2003) methodology in order to estimate total factor productivity and compute several measures of spillover effect based on time varying Input-Output tables. We find local suppliers to benefit from positive backward spillovers while local clients are negatively affected by forward spillovers. Using several measure of absorptive capacity like human capital or R&D does not change our results. On the other hand, a large technological gap favors the capture of technological spillovers. Labor mobility is the only significant horizontal spillovers. We also find that labor mobility changes direction according to different human capital levels. We finally show that local firms buying inputs from FDI suppliers are negatively affected by a second order vertical spillover.
    Keywords: FDI, spillovers, technology transfer, total factor productivity, absorptive capacity
    Date: 2012–08–31
  15. By: Károly Attila SOÓS (senior research fellow, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, Visiting Professor, Kyoto Institute of Economic Research, Kyoto University(2012.11.26-2013.3.16))
    Abstract: In this paper, we analyse the intra-industry trade (IIT) of the ten Central and Eastern European countries (CEECs), members of the EU partly from 2004, partly from 2007, with the 15 “old” member countries of the EU. We use 10 old EU countries’ analogous trade data and trends as a basis of comparison. Besides the (spectacular) growth of IIT, we also examine the trends of strong and not really favourable sectoral concentration of IIT. At the same time, the beakdown of IIT by price-quality segments (i. e., horizontal, low-quality and high-quality vertical IIT) shows a very positive picture, hinting to a very important technological and quality upgrading in the manufacturing industry of CEECs. However, such a conclusion is open to doubts because IIT does not include only the exchange of otherwise similar products of equal or different quality but also back-and-forth transactions in vertically fragmented production chains in the same commodity category. Thus, revealing the actual nature of the contribution to the production of items exported in the framework of IIT requires further research. The latter extends here to an analysis of relative wage levels of workers in industries participating in intra-industry trade, as well as to the examination of the trade of the products of research-intensive (Schumpeter”) industries.
    Date: 2013–06
  16. By: Frank Jotzo
    Abstract: China is considering a national emissions trading scheme, to follow several pilot schemes, as part of the suite of policies to reduce the growth of greenhouse gas emissions. A carbon tax or tax-like scheme could be an alternative. However there are special challenges in a fast-growing economy where the energy sector is heavily regulated. This paper analyses policy design options based on principles, China’s circumstances, and Australian and European experiences. The main findings are the following. (1) Features such as variable permit supple, price floor/ceiling or a fixed permit price are desirable to provide a stable price signal, especially in China’s case. A carbon tax can be a viable alternative or complement to emissions trading. (2) Any free permits or other assistance to industry should be carefully designed to preserve incentives to cut emissions, limited so that governments can use carbon revenue to support households or pay for other policy measures, and regularly reviewed to avoid lock-in of unnecessary payments. (3) Broad coverage of emissions pricing is necessary for effectiveness, including in electricity supply and demand. Carbon pricing can be partly effective in the electricity sector ahead of comprehensive energy sector reform, ultimately however market-based energy pricing is needed. (4) Carbon pricing should be seen in the broader context of economic policy reform. It offers opportunities to support broader goals of fiscal, energy and environmental policy.
    Keywords: Instrument China, emissions trading, carbon tax
    JEL: Q48 Q52 Q54 Q56 Q58 O12
    Date: 2013–05

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