nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒08‒05
eighteen papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Economic Miracle of Post-Soviet Space: Why Uzbekistan Managed to Achieve What No Other Post-Soviet State Achieved By Popov, Vladimir
  2. Heterogeneity of the effects of health insurance on household savings: Evidence from rural China By Diana Cheung; Ysaline Padieu
  3. Factors influencing energy intensity in four Chinese industries By Fisher-Vanden, Karen; Hu, Yong; Jefferson, Gary; Rock, Michael; Toman, Michael
  4. Time Varying NAIRU Estimates in Central Europe By Balázs Varga
  5. The EASI Demand System : Evidence from China Household By Song, Ze; Li, Lianyou; Ma, Chao
  6. The Way to CO2 Emission Reduction and the Co-benefits of Local Air Pollution Control in China's Transportation Sector: A Policy and Economic Analysis By Mao Xianqiang; Yang Shuqian; Liu Qin
  7. Housing and Subjective Wellbeing in Urban China By Zhiming Cheng; Russell Smyth; Haining Wang
  8. Insurance Approach for Financing Extreme Climate Event Losses in China: A Status Analysis By Haitao Yin
  9. Two-Period Comparison of Healthcare Demand with Income Growth and Population Aging in Rural China: Implications for Adjustment of the Healthcare Supply and Development By Martine Audibert; Yong He; Jacky Mathonnat
  10. Participation and Expenditure of Rural-Urban Migrants in the Illegal Lottery in China By Zhiming Cheng; Russell Smyth; Gong Sun
  11. Money-based inflation risk indicator for Russia: a structural dynamic factor model approach By Elena Deryugina; Alexey Ponomarenko
  12. Inflation persistence in Central and Eastern European countries By Zsolt Darvas; Balázs Varga
  13. Economic Analysis of Multi-pollutant Control in Coal-Fired Electricity Plants in China By Wu Dan; Xie Xuxuan
  14. Do Internal and International Remittances Matter to Health, Education and Labor of Children? The Case of Vietnam By Nguyen, Cuong; Nguyen, Hoa
  15. Forecasting China’s Foreign Exchange Reserves Using Dynamic Model Averaging: The Role of Macroeconomic Fundamentals, Financial Stress and Economic Uncertainty By Rangan Gupta; Shawkat Hammoudeh; Won Joong Kim; Beatrice D. Simo-Kengne
  16. An Economic Analysis of the Use of Water Hyacinth for Phytoremediation and Biogas Production in Dianchi Lake, China By Zanxin Wang; Jin Wan
  17. Shocks Abroad, Pain at Home? Bank-Firm Level Evidence on the International Transmission of Financial Shocks By Steven Ongena; Jose Luis Peydro; Neeltje van Horen
  18. Evaluating the Pilot Implementation of Payment for Forest Environmental Services in Lam Dong, Vietnam By Nguyen Thi Y Ly

  1. By: Popov, Vladimir
    Abstract: Uzbekistan is not usually considered an economic success story, but in fact it is: its GDP increased since 1989 more than in any other post-communist country, except for China, Vietnam and Turkmenistan. The success of Uzbekistan is very much similar to the Chinese – gradual economic reforms with the preservation of the capacity of state institutions, good macroeconomic policy and export oriented industrial policy. What makes Uzbekistan unique is that no other former Soviet republic managed to follow this route. There are countries with healthy state finances and low inflation (most FSU states), there are some countries with reasonable state capacity (Baltics, Belarus, Azerbaijan, Turkmenistan, Kazakhstan), but there are no countries that keep undervalued exchange rate together with strong tax stimuli for export of manufactures. Uzbek example shows that such a policy pays off.
    Keywords: Transition, Growth, Export orientation, Industrial policy, Uzbekistan
    JEL: O1 O14 O5 O57 P5 P52
    Date: 2013–07–30
  2. By: Diana Cheung (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Ysaline Padieu (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper estimates the impact of the New Cooperative Medical Scheme (NCMS) on household saving across income quartiles in rural China. We use data from the China Health and Nutrition Survey for the 2006 wave and we run an ordinary least squares regression. We control for the endogeneity of NCMS participation by using an instrumental variable strategy. We find evidence that NCMS has a negative impact on savings of lower-middle-income participants, while it does not affect the poorest households. The negative effect of NCMS on savings of middle-income participants holds when we use propensity score matching estimations as a robustness check.
    Keywords: Rural China; New Cooperative Medical Scheme; health insurance; Chinese savings and consumption; propensity score matching
    Date: 2013–07
  3. By: Fisher-Vanden, Karen; Hu, Yong; Jefferson, Gary; Rock, Michael; Toman, Michael
    Abstract: Energy intensity has declined significantly in four Chinese industries -- pulp and paper; cement; iron and steel; and aluminum. While previous studies have identified technological change within an industry to be an important influence on energy intensity, few have examined how industry-specific policies and market factors also affect industry-level intensity. This paper employs unique firm-level data from China's most energy-intensive large and medium-size industrial enterprises in each of these four industries over a six-year period from 1999 to 2004. It empirically examines how China's energy-saving programs, liberalization of domestic markets, openness to the world economy, and other policies, contribute to the decline in energy intensity in these industries. The results suggest that rising energy costs are a significant contributor to the decline in energy intensity in all four industries. China's industrial policies targeting scale economies -- for example,"grasping the large, letting go off the small"-- also seem to have contributed to reductions in energy intensity in these four industries. However, the results also suggest that trade openness and technology development led to declines in energy intensity in only one or two of these industries. Finally, the analysis finds that energy intensities vary among firms with different ownership types and regional locations.
    Keywords: Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment,Water and Industry,E-Business
    Date: 2013–07–01
  4. By: Balázs Varga (OTP Fund Management and Corvinus University of Budapest)
    Abstract: This paper estimates Phillips curve relationships for the data of four Central European countries, the Czech Republic, Hungary, Poland and Slovakia, using a sample period from the mid-1990s till 2012. For the estimation Gordon’s triangle model is used with the Kalman filter, where the time-varying NAIRU is described as a latent variable following a random walk, and its deviation from the actual unemployment rate affects inflation, among other factors. The inclusion of inflation expectations is found to be statistically significant, albeit it significantly reduces the size and significance of the unemployment gap coefficient. The results show that so far only the Czech Republic and Hungary exhibit a significant inflation-unemployment trade-off, while the results for Poland and Slovakia do not support such a relationship.
    Keywords: unemployment, Phillips curve, time varying NAIRU, Kalman filter
    JEL: C32 E24
    Date: 2013–06–20
  5. By: Song, Ze; Li, Lianyou; Ma, Chao
    Abstract: We have applied the Exact Affine Stone Index(EASI) implicit Marshallian demand system ,invented by Lewbel and Pendakur (2009),and iterate three stage least squares to analysis Chinese household consumer demand in urban area.Our results show a demand system rank to equal five support the conclusion of Lewbel and Pendakur(2009), and the applicability of the model with or without interaction terms. Heterogeneity demographic characteristics and price effect Chinese household consumer demand system in urban area. From 1995 to 2007, the ratio of food and transportation-communication in total expenditure decrease ,and other expenditure ratio increase.
    Keywords: Engel curves, The EASI Demand System, Chinese Household
    JEL: D11 D12
    Date: 2013–07–18
  6. By: Mao Xianqiang (Institute of Environmental Sciences, Beijing Normal University); Yang Shuqian (Institute of Environmental Sciences, Beijing Normal University); Liu Qin (Institute of Environmental Sciences, Beijing Normal University)
    Abstract: The transportation sector in China has joined the power generation and the steel and iron industries as a major CO2emission contributor. To determine which policy instrument(s) would be effective in reducing CO2emissions, various policy instruments which have been or are likely to be implemented in the near future in China are examined and compared in this study. These instruments include carbon tax, energy tax, fuel tax, clean energy vehicle subsidy, and a reduction on ticket prices. The CIMS model system is employed as the simulation vehicle to predict the emission dynamics of CO2and local air pollutants under business-as-usual and policy scenarios for the transportation sector of China from 2008 to 2050. The 2020 CO2 reduction target is also set according to the national carbon intensity reduction pledge of China. The policy instruments proposed in this research study can all help mitigate the CO2emission intensity of the Chinese transportation industry to different extents and bring about the co- benefits of local air pollutant reduction. Among these policy instruments,energy and fuel taxes, with the tax rates set, are the two most promising instruments for CO2emission intensity reduction to reach the 2020 carbon intensity reduction targets while subsidies are the least promising options. CO2tax could be an effective policy tool, but with the low tax rate considered in China, there is no way that the transportation sector would significantly contribute to achieving a desirable carbon intensity reduction. The CIMS model is applied to simulate and determine how CO2, energy, and fuel taxation can stimulate technology competition and substitution in the transportation sector of China and to ascertain how these taxes will influence energy consumption and pollutant emissions reduction.
    Keywords: pollution, CO2 emission, China
    Date: 2013–03
  7. By: Zhiming Cheng; Russell Smyth; Haining Wang
    Abstract: This study explores the relationship between home ownership and subjective wellbeing in urban China using a nationally representative dataset. Compared with the limited extant literature on this topic for China, we use a more recent dataset, allow for a greater range of ownership forms, consider the source through which ownership was acquired and not only consider whether homeowners have a home loan, but also consider the source of the loan and its effect on subjective wellbeing. We find that not only home ownership, but the property rights one acquires and the source of those property rights matters for subjective wellbeing. Moreover, not only whether one has a home loan, but the type of home loan one has matters for subjective wellbeing. We also identify important differences in the homeownership-subjective wellbeing relationship across genders, generations and between those with a rural and urban household registration.
    Keywords: Subjective wellbeing, housing, China
    Date: 2013–07
  8. By: Haitao Yin (AnTai College of Economics and Management, Shanghai Jiao Tong University)
    Abstract: China suffers a variety of natural disasters every year. The frequency and consequences of these disasters have risen due to climate change, resulting in increased economic losses. This project first examines the existing public system of disaster relief and recovery including both direct government subsidy and public insurance system through extensive documentary study, focus group discussions and in-person interviews. We found that the usefulness of direct government subsidies is limited by the availability of public financial resources. Direct government subsidies are largely reserved for those who do not have the capability for self- relief and recovery. For those who do receive government subsidies, the amount of assistance is only sufficient for basic housing needs instead of restoring the way of life people had before a natural disaster. Public insurance, on the other hand, only applies to rural areas and has a maximum coverage of only about CNY 18,000. As with direct government subsidies, the purpose of public insurance is meeting basic needs, instead of helping people go back to the life they used to have. Furthermore, the premium of the public insurance system is heavily subsidized and not related to risk. This practice has been criticized for watering down economic incentives for proactive risk management and emergency response capacity building (Gurenko and Lester 2004; Heinz Center 2000; Yin, Kunreuther, and White 2011). The limitations of the public approach create a space for private insurance. In this paper, we investigate how China’s insurance industry (as suppliers) and Chinese people (as consumers) view natural disaster insurance. We conducted in-person interviews with insurance companies that are involved in the property insurance market in China. Insurance companies hesitate to offer insurance policy against natural disasters because of institutional barriers (e.g., natural disaster coverage is not considered a separate category, and existing accounting and tax regulations), low demand from consumers and the ambiguity associated with natural disaster. Our analysis of the demand for insurance is based on a field survey, which includes a choice- experiment of insurance selection. We found that people have a low demand for insurance because of three major reasons: a) the perception of “it won’t happen to me”, b) budgetary constraint, and c) a deep distrust in the insurance industry. We found that people tend to avoid insurance offered by small-scale insurance companies and strongly favor government insurance. This suggests that the establishment of natural disaster insurance should be initiated by government in China. We also found that one’s willingness to pay (WTP) for natural disaster insurance would significantly increase if one has high risk perception, and has experienced natural disasters. Our analyses suggest that neither the public nor private approach present an adequate solution to the challenge of financing natural disaster losses in China. Government-business collaboration may provide a viable alternative. Based on our findings, we discuss the roles that government and the private sector should play in a collaborative system.
    Keywords: climate change, China
    Date: 2013–03
  9. By: Martine Audibert (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Yong He (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Jacky Mathonnat (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: We estimate the evolution of healthcare demand under the influence of income growth and population aging with two samples of patients surveyed in the same regions, but with an interval of 18 years in rural China and with mixed logit to deal with heterogeneity. In accordance with theoretical and inductive inferences, it is found that healthcare price effects decreased and became more heterogeneous. Aging impact overweighed income growth impact, resulting in increasing distance effect and patients' preference to proximity. In the face of this demand change, the adjustment of governmental supply should be to promote small and middle-sized healthcare providers. However during this period to cope with urbanization, the Chinese policy consisted of privileging large hospitals. This has led to a higher share of patients, especially the aging patients, to choose self-care and a higher share of poorer patients to suffer from catastrophic health expenditures. This finding carries broad implications for rural health policy-making on, along with income growth, population aging and urbanization, how to provide better coverage of rural areas by enough qualified and multifunctional small and middle-sized healthcare providers in the developing world.
    Keywords: Two-period healthcare demand comparison;mixed logit model;price and distance effects;heterogeneity;insurance;rural China
    Date: 2013–07–18
  10. By: Zhiming Cheng; Russell Smyth; Gong Sun
    Abstract: Using a unique dataset from the Pearl River Delta in China we examine the factors associated with rural-urban migrants’ participation in, and expenditure on, illegal gambling. We find that similar demographic and lifestyle characteristics are associated with participation in, and expenditure on, the illegal lottery. The characteristics which have the largest marginal effects on participation and expenditure are gender, whether one also participates in the legal lottery and playing mah-jong and other card games. The amount of a normal sized bet placed by males is 30 per cent higher than that placed by females, based on the mean value of a normal bet. The corresponding figures for those who participate in the official lottery and those who play mah-jong or card games respectively are 48 per cent and 39 per cent higher. Policy implications and recommendations stemming from the major findings are discussed.
    Keywords: China; rural-urban migrant workers; illegal lottery
    Date: 2013–07
  11. By: Elena Deryugina; Alexey Ponomarenko
    Abstract: The authors estimate a dynamic factor model for the cross-section of monetary and price indicators for Russia.  They extract the common part of the dataset's fluctuations and decompose it into structural shocks.  One of the shocks identified has empirical properties (in terms of impulse response functions) that are fully in line with the theoretically expected relationship between money growth and inflation, confirming that the process identified has the capacity for economic interpretation.  Based on the finding, recent inflationary developments in Russia are decomposed into those that are associated with changes in monetary stance and other shorter-lived shocks.  The analysis in this paper is based on the course material taught in the CCBS course: 'Applied Bayesian Econometrics for central bankers'. 
    Keywords: Money-based, inflation, Russia, structural dynamic factor model
    Date: 2013–04
  12. By: Zsolt Darvas; Balázs Varga
    Abstract: This paper studies inflation persistence with time-varying coefficient autoregressions for twelve central European countries,in comparison with the United States and the euro area. Inflation persistence tends to be higher in times of high inflation. Since the oil price shocks, inflation persistence has declined both in the US and euro-area. In most central and eastern European countries, for which our study covers 1993-2012, inflation persistence has also declined, with the main exceptions of the Czech Republic, Slovakia and Slovenia, where persistence seems to be rather stable.
    Date: 2013–07
  13. By: Wu Dan (Peking University); Xie Xuxuan (Peking University)
    Abstract: China is experiencing severe complex air pollution and huge greenhouse gas (GHG) emissions as a result of its booming economy over the last 30 years. In order to control air pollution, multiple pollutants should be targeted simultaneously. To cope with current international climate change problems, GHG emissions reduction should be considered alongside air pollution control. In the past 30 years conventional air pollution control strategy in China has focused on controlling one pollutant over a period of time, followed by controlling another pollutant in the next period. However, total emissions reduction of a single pollutant does not proportionally improve urban ambient air quality. In this study, single pollutant control strategy (SPC) is defined as an air pollution control strategy that sets pollutant reduction targets one by one. Multiple pollutant control (MPC) is defined as a strategy that sets multiple pollutant reduction targets at the same time. Under SPC polluters choose control technologies with less flexibility, which can lead to higher costs compared to MPC. In this study we show the difference between SPC and MPC, focusing on the coal-fired electricity sector. Our results show that end-of-pipe technology schemes for coal-fired power plants under MPC are more cost-effective than SPC. At plant level, compared to SPC, MPC sacrifices 7% of SO2 removal but provides a 6% and 9% increase in NOX and Hg removal respectively, and costs less than SPC. At sector level, MPC sacrifices 2 million tonnes of SO2 reduction per year but improves PM reduction by 1 million tonnes and increases Hg reduction by 34.5 tonnes per year. These reductions cost 8 billion CNY per year less than SPC. If coal washing were to be added to 20% of the sector’s installed capacity, based on MPC, then more than10 million tonnes of SO2, 56 million tonnes of PM and 55 tonnes of Hg could be further reduced every year, with a total cost of6 billion CNY a year less than SPC. If PM and Hg cause more damage per unit than SO2, then MPC reduces more damage for the same cost or for a reduced total cost. Substituting small units with advanced coal combustion technologies under MPC has the advantage of controlling multiple pollutant emissions as early as possible, especially taking CO2 emissions control into account. Suggestions are given to support China’s pollution control strategy transition. Turning from a SPC strategy to a MPC strategy, the key elements of a pollution control scheme for China’s coal-fired power sector should be: high priority should be given to coal washing; the installation of end-of-pipe technologies should be compared with advanced coal combustion plants for plants of a regular or small size (300MW); plants which have not installed wet FGD should consider other desulfurization facilities because desulfurization facilities with better removal effects for other pollutants (except SO2) are of use; and regulation should be strengthened to ensure the technical performance of installed equipment rather than just pursuing a high installation ratio.
    Keywords: pollution, China
    Date: 2013–02
  14. By: Nguyen, Cuong; Nguyen, Hoa
    Abstract: Using data from Vietnam Household and Living Standard Surveys in 2006 and 2008, the paper estimates the effect of the receipt of international remittances and internal remittances on education, labor and healthcare utilization of children in Vietnam. It shows that there are no statistically significant effects of receipt of remittances on school enrolment of children as well as child labor. However, receiving international remittances helps children increase the number of completed grades by around 2 percent of the average completed grade for children. Both international and internal remittances are positively associated with the number of outpatient health care contacts.
    Keywords: Remittances, children, education, child labor, healthcare, Vietnam.
    JEL: I23 O15 R23
    Date: 2013–05–20
  15. By: Rangan Gupta (Department of Economics, University of Pretoria); Shawkat Hammoudeh (Lebow College of Business, Drexel University, Philadelphia, USA); Won Joong Kim (Department of Economics, Konkuk University, Seoul, Korea); Beatrice D. Simo-Kengne (Department of Economics, University of Pretoria)
    Abstract: We develop models for examining possible predictors of growth of China’s foreign exchange reserves that embrace Chinese and global trade, financial and risk (uncertainty) factors. Specifically, by comparing with other alternative models, we show that the dynamic model averaging (DMA) and dynamic model selection (DMS) models outperform not only linear models (such as random walk, recursive OLS-AR(1) models, recursive OLS with all predictive variables models) but also the Bayesian model averaging (BMA) model for examining possible predictors of growth of those reserves. The DMS is the best overall across all forecast horizons. While some predictors matter more than others over the forecast horizons, there are few that stand the test of time. The US-China interest rate differential has a superior predictive power among the 13 predictors considered, followed by the nominal effective exchange rate and the interest rate spread for most of the forecast horizons. The relative predictive prowess of the oil and copper prices alternates, depending on the commodity cycles. Policy implications are also provided.
    Keywords: BAyesian, state space models, foreign reserve, macroeconomic fundamentals, forecasting
    JEL: C11 C53 F37 F47
    Date: 2013–08
  16. By: Zanxin Wang (School of Development Studies, Yunnan University); Jin Wan (School of Development Studies, Yunnan University)
    Abstract: The excessive growth of water hyacinth is a common environmental problem in tropical regions. The use of water hyacinth to remove nutrients from bodies of water and to produce biogas is a technically feasible way of controlling water hyacinth, but its environmental and economic performance are not well understood. This study collected data from an experimental biogas plant to develop a lifecycle analysis and a cost benefit analysis for the control of water hyacinth in Dianchi Lake, a eutrophic lake in China. A comparison was made between the proposed project and the current approach at Dianchi Lake of disposing of water hyacinth via collection and landfill. The results revealed that the proposed project is economically feasible with a desirable energy gain. The results also showed that the project is not financially feasible but, compared to the current landfill practice, the government would be able to spend less on controlling water hyacinth if they implemented the proposed project. The removal of water hyacinth to produce biogas can also contribute to water quality improvement and GHG emission reduction; however, these values depend on the scale of processing undertaken by the biogas plant. Since both the current approach and the proposed project can remove nutrients from bodies of water, the additional value resulting from the proposed project of an improvement in water quality only becomes possible when the processing scale of the biogas plant is greater than the amount of water hyacinth disposed of by landfill. The proposed project can avoid methane emissions when the processing scale is greater than the amount of water hyacinth currently disposed of via landfill. The internalization of GHG emission reduction alone is not sufficient to make the project financially feasible and therefore other sources of compensation are needed in order to promote the production of biogas from water hyacinth. The proposed project could be a potential microeconomic option, which could respond to China’s macro water pollution control policies, renewable energy development, and energy saving and emissions reduction. However, institutional arrangements are required to coordinate these diverse policies when they are applied to the proposed project.
    Keywords: pollution, waste, China
    Date: 2013–02
  17. By: Steven Ongena; Jose Luis Peydro; Neeltje van Horen
    Abstract: We study the international transmission of shocks from the banking to the real sector during the global financial crisis. For identification, we use matched bank-firm level data, including many small and medium-sized firms, in Eastern Europe and Central Asia. We find that internationally-borrowing domestic and foreign-owned banks contract their credit more during the crisis than domestic banks that are funded only locally. Firms that are dependent on credit and at the same time have a relationship with an internationally-borrowing domestic or a foreign bank (as compared to a locally-funded domestic bank) suffer more in their financing and real performance. Single-bank-relationship firms, small firms and firms with intangible assets suffer most. For credit-independent firms, there are no differential effects. Our findings suggest that financial globalization has intensified the international transmission of financial shocks with substantial real consequences
    Keywords: international transmission; firm real effects; foreign banks; international wholesale funding; credit shock
    JEL: G01 G21 F23 F36
    Date: 2013–07
  18. By: Nguyen Thi Y Ly (Faculty of Economics, University of Agriculture and Forestry (UAF), Vietnam)
    Abstract: This study aims to assess the performance and the short-term impacts of the payment for forest environmental services (PFES) policy in Lam Dong Province, Vietnam. After a two-year pilot implementation (2009-2010), the Vietnam government plans to establish a national legal PFES framework. The paper describes the PFES pilot policy and how this pilot project is being implemented. The study focuses on the economic and environmental impacts of the pilot PFES. Economic effectiveness is estimated in terms of household annual income contribution, improved access to financial resources, and employment improvement. The environmental impact is assessed by proxy variables such as time spent conducting forest protection and conservation, amount of illegal logging, forest removed or burned, and farmers’ and local authorities’ awareness of environmental improvement. By applying the propensity score matching and difference in difference methods, the research found that PFES has contributed to increasing annual household income by about VND 3.9 million/ household per year. It has also generated positive effects on forest environmental services as well as improved the awareness of local farmers and authorities of the value of forests and the need for their protection. However, some problems remain and are associated with the following: forest environmental services have not been fully defined; participation is not completely voluntary; payment relies on a top-down mechanism; and the sustainability of the system is not assured.
    Keywords: forest, Vietnam
    Date: 2013–02

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