nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒06‒16
eleven papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Export costs of visa restrictions By Natalia Kapelko; Natalya Volchkova
  2. From state to market revisited: more empirical evidence on the efficiency of public (and privately-owned) enterprises By Mühlenkamp, Holger
  3. Foreign Institutional Investors and Stock Market Liquidity in China: State Ownership, Trading Activity and Information Asymmetry By Ding, Mingfa; Nilsson, Birger; Suardi, Sandy
  4. The endless quest to strategic assets by Chinese firms through FDI:From Inward to Outward Flows By Françoise Hay; Christian Milelli
  5. Exporting and Innovation: Theory and Firm-Level Evidence from the People's Republic of China By Lin, Faqin; Tang, Hsiao Chink
  6. Capital-Labor-Energy Substitution in Nested CES Production Functions for China By Keting Shen; John Whalley
  7. Measuring the sources of economic growth in the EU with parametric and non-parametric methods By Krasnopjorovs, Olegs
  8. Relaxation of employment protection and its effects on labour reallocation By Liina Malk
  9. Ready for euro? Empirical study of the actual monetary policy independence in Poland By Łukasz Goczek; Dagmara Mycielska
  10. Self-employment and Small Workplaces in the Czech and Slovak Republics: Microeconometric Analysis of Labor Force Transitions By Pavla Nikolovova; Filip Pertold; Mario Vozar
  11. Public Procurement of Homogeneous Goods: the Czech Republic Case Study By Jiri Skuhrovec

  1. By: Natalia Kapelko (New Economic School); Natalya Volchkova (New Economic School)
    Abstract: The paper studies the role visa restrictions play in determining export flows between Russian firms and their partners and explores the mechanism of this relationship. The specification of empirical model is derived from a heterogeneous firms’ model of trade. The existing visa restrictions are used as proxies for the costs the exporters incur while dealing with customers abroad. The results indicate that visas have a negative market access effect. Controlling for the choice of destination, visas have a significant negative effect on the value of relationship-specific exports as well. These results are consistent with informational and contractual nature of visa costs.
    Keywords: Heterogeneous firms, exports, visa restrictions, market access costs, extensive and intensive margins of trade
    JEL: F14 F42 F55
    Date: 2013–06
  2. By: Mühlenkamp, Holger
    Abstract: For several decades public enterprises have been criticised for their poor economic performance. Many economists take it as “conventional wisdom” that publicly owned enterprises are inefficient by their very nature. This seemed to be proved by what is probably the most cited survey worldwide, that was written by Megginson and Netter (2001). They claim: “Research now supports the proposition that privately owned firms are more efficient and more profitable than otherwise-comparable state-owned firms” (p. 380). The objective of this paper is to question the proposition that public enterprises are necessarily less efficient as their private counterparts. In doing so, we argue that profits are not a reasonable performance measure for public enterprises. However, our main focus is to present a much more comprehensive review of the empirical evidence than was provided by Megginson and Netter. The evidence indicates that these authors’ conclusions were biased in favour of privatization despite the evidence indicating that the true picture is much more differentiated.
    Keywords: Public enterprises, publicly provided goods, efficiency, privatization, firm performance
    JEL: D24 H42 L25 L32
    Date: 2013–06–07
  3. By: Ding, Mingfa (Department of Economics, Lund University); Nilsson, Birger (Department of Economics, Lund University); Suardi, Sandy (La Trobe University)
    Abstract: The Chinese government has implemented the Qualified Foreign Institutional Investor (QFII) system in order to promote stock market liquidity by participation of foreign institutional investors. This paper is the first to explicitly identify the channels through which foreign institutional investors influence the liquidity on the Chinese stock markets. Firstly, we find that market participation by foreign institutional investors promotes liquidity both for state-owned enterprises (SOEs) and non-SOEs. Secondly, foreign institutions influence liquidity through the informational frictions channel, but not through the real frictions channel. Thirdly, as implied by these two results, foreign institutions are not informationally disadvantaged when investing in SOEs. Finally, the link between foreign institutional participation and liquidity remains strong before, during, and after the recent financial crisis.
    Keywords: liquidity; emerging markets; foreign institutional investors; real frictions; informational frictions
    JEL: C23 G12 G18 G32
    Date: 2013–04–23
  4. By: Françoise Hay; Christian Milelli
    Abstract: The paper highlights the major role played by foreign direct investment/ FDI flows in two ways – inflows or outflows – for Chinese firms by securing strategic assets to enhance their competitive advantage. The underlying rationale of the acquisition of such assets through FDI is specific to China. Therefore, we scrutinize the characteristics and determinants of FDI in its two dimensions
    Keywords: FDI, strategic assets, Chinese firms
    JEL: F23 L52 O33
    Date: 2013
  5. By: Lin, Faqin (Central University of Finance and Economics); Tang, Hsiao Chink (Asian Development Bank)
    Abstract: This paper investigates how exporting affects firm innovation. We embed innovation into a firm heterogeneity model with productivity, where in equilibrium the model shows that exporters invest more in innovation, such as research and development (R&D), than non-exporters. Using firm-level data from the People’s Republic of China (PRC), we apply the Levinsohn and Petrin (2003) method of estimating firm productivity and matching econometrics to control for endogeneity. The results show, on average, in contrast to non-exporters, exporters increase their R&D intensity by more than 5%, raise their R&D expenditure by more than 33%, and are 4% more likely to engage in R&D activity. In addition, we find exporting to have a smaller impact on innovation among firms that export processed goods, specifically, those in the electronics sectors, located in coastal provinces, and foreign-owned.
    Keywords: Exporting; innovation; firm heterogeneity; matching
    JEL: D21 F14 O31
    Date: 2013–04–01
  6. By: Keting Shen; John Whalley
    Abstract: In the CGE based policy modeling literature, especially recent literature on policy modeling for global climate change, nested CES production functions over multiple inputs have been widely used. Although lack of reliable estimates of substitution elasticities for nested structures has been acknowledged for a long time, the problem has not yet been solved satisfactorily. This is especially the situation for the Chinese case for which modeling work has global implications. This paper reports estimates of substitution elasticities for normalized nested CES aggregate production functions for China with different nested structures of input factors: capital, labor with or without human capital adjustment, and energy using data for the period 1979-2006. We adopt grid search based non-linear optimization techniques for estimation. The results show that all the substitution elasticities we estimate are positive. For the widely used (K,L)E structure, we find that the substitution elasticity between capital and labor for China is below unity. When human capital adjusted labor is used as input instead of unadjusted raw labor, estimates of substitution elasticity between capital and labor become lower. By considering the significance of estimates, our results suggest that the (E,L)K structure seems more appropriate for the Chinese economy.
    JEL: C61 C68 Q43 Q54
    Date: 2013–06
  7. By: Krasnopjorovs, Olegs
    Abstract: The standard neoclassical growth accounting (parametric) framework serves to explain only a minor part of labour productivity growth and its cross-country differences, thus implying an important role (as yet unexplained) for the Solow Residual or the Total Factor Productivity (TFP). However, the increased application of non-parametric methods in growth accounting, and in particular with Data Envelopment Analysis (DEA), has revealed that, along with the direct effect on output, a higher capital stock will have a substantial indirect effect that has been disregarded by the neoclassical framework. In line with an appropriate technology model (Basu, Weil, 1998), a higher capital stock allows a country to use a better technology. This paper extends the evidence regarding the relevance of an appropriate technology view to those Eastern European countries that were not previously included in a growth accounting investigation using non-parametric methods. It also reveals that the appropriate technology view is useful in explaining labour productivity growth and its cross-country differences within the EU. Furthermore, the results are robustly subject to assumptions on capital formation and on whether labour productivity has been adjusted with regard to the cross-country differences in employment structure by the various sectors and by natural resource endowment. Given both the direct and indirect effects of capital accumulation, it might prove to be a much more important tool for determining labour productivity growth than is usually considered within a neoclassical framework.
    Keywords: growth accounting, development accounting, Data Envelopment Analysis, efficiency, appropriate technology, total factor productivity
    JEL: C14 E22 O33 O47 Q32
    Date: 2012–12–01
  8. By: Liina Malk
    Abstract: Flexibility of employment protection is considered to be essential for rapid adjustments in the workforce to changing economic conditions and for the reallocation of labour towards more productive activities. This was one of the main arguments for the new Employment Contracts Act in Estonia, which eased employment protection by reducing the costs of terminating employment relationships. Since such substantial changes in employment protection legislation (EPL) are quite rare, this reform provides a good chance to examine the outcomes of the relaxation of employment protection. This paper evaluates the effects of this institutional change on labour reallocation. Exploiting the microdata of the Labour Force Surveys for the years 2007–2011, we analyse worker flows and employ the difference in differences approach to identify the effects of the EPL reform, using Lithuanians as a control group for Estonians. Subsequent to the reform, labour flows out of and into employment increased in Estonia relative to Lithuania. However, from the regression analysis, a statistically significant impact of the EPL reform was identified only on the former of these two types of flows. Both the assessment of aggregate flows and the estimation of difference in differences effects for transition probabilities indicate that the reform of employment protection resulted in lower job-to-job flows while the overall effect on labour reallocation was positive.
    Keywords: employment protection legislation, labour reallocation, policy evaluation, difference in differences estimation
    JEL: J60 K31
    Date: 2013–06–04
  9. By: Łukasz Goczek (Faculty of Economic Sciences); Dagmara Mycielska (Faculty of Economic Sciences)
    Abstract: The aim of the article is to examine the actual degree of Polish monetary policy independence in the context of joining the Eurozone. It is frequently argued that the main cost of the participation in the EMU, or in any other common currency area, is the loss of monetary policy independence. In contrast, the paper raises the question of the actual possibility of such a policy in a small open economy operating within highly liberalized capital flows and highly integrated financial markets like Poland. Confirmation of the hypothesis concerning incomplete actual monetary independence is essential to the analysis of costs of the Polish accession to the EMU. The main hypothesis of the article is verified using a Vector Error-Correction Mechanism model and several parametric hypotheses concerning the speed and asymmetry of adjustment.
    Keywords: empirical analysis, Eurozone, monetary policy independence, monetary union
    JEL: E43 E52 E58 F41 F42 C32
    Date: 2013
  10. By: Pavla Nikolovova; Filip Pertold; Mario Vozar
    Abstract: In this paper we investigate the role of the business cycle for the transitions of Czech and Slovak workers to informal economy using Czech and Slovak Labor Force Survey data. We use two approximations for the participation in informal economy, self-employment and employment in small workplace (10 and fewer workers or 5 and fewer workers). Both statuses are potentially associated with the participation in an informal economy. Using the similar methodology as presented in Bosh and Maloney (2007), we show that recent recession caused substantial increase in transitions of workers from formal into both self-employment and employment. As compare to pre-recession time the flow into self- increased more than 4 times. The increase in transitions to small workplaces is less pronounced.
    Keywords: informal economy, business cycle, labor force
    JEL: J21 H26
    Date: 2013–05–31
  11. By: Jiri Skuhrovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The goal of this paper is to show how institutional and procedural characteristics affect the final price of the public procurement. In order to get comparable prices, only public procurement of homogeneous goods is analyzed. Presented model attempts to explain the variation in unit price as a function of price estimated by the contracting authority, market price and characteristic of procurement procedure – type of procedure, number of bidders and use of electronic auction. We find that the final price in the electricity and natural gas public procurement is more sensitive to purchaser’s estimate than to actual market price. At the same time, we identify that the final price is reduced by using open procedure, electronic auction or attracting more competitors.
    Keywords: public procurement, homogeneous goods, energy markets
    JEL: H57 D23 D73 C21
    Date: 2013–05

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