nep-tra New Economics Papers
on Transition Economics
Issue of 2013‒10‒18
twenty papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Wage policies of a Russian firm and the financial crisis of 1998: Evidence from personnel data - 1997-2002 By Schaffer M.E.; Dohmen T.J.; Lehmann H.
  2. Banking in Transition Countries By John Bonin; Iftekhar Hasan; Paul Wachtel
  3. Employment Adjustment during the Global Crisis: Differences between State-Owned and Private Enterprises By Almos Telegdy
  4. Unit Values, Unit Labor Costs and Trade Performance in Four Central European Countries By Gabor Bekes; Balazs Murakozy; Zsuzsa Munkacsi; Gabor Oblath
  5. Optimal Exchange Rate Policy in a Growing Semi-Open Economy. By Bacchetta, P.; Benhima, K.; Kalantzis, Y.
  6. Analysis of Stochastic Dominance Ranking of Chinese Income Distributions by Household Attributes By Esfandiar Maasoumi; Almas HESHMATI
  7. Nowcasting Czech GDP in Real Time By Marek Rusnak
  8. Telecommunications externality on migration : evidence from Chinese Villages By Lu, Yi; Xie, Huihua; Xu, Lixin Colin
  9. Transforming subsidiaries into branches - Should we be worrying about it? By Péter Fáykiss; Gabriella Grosz; Gábor Szigel
  10. Technological spillovers and industrial growth in Chinese regions By Wang, Lili; Meijers, Huub; Szirmai, Eddy
  11. Explaining the Czech Interbank Market Risk Premium By Adam Gersl; Jitka Lesanovska
  12. Effects of Fiscal Policy in a Small Open Transition Economy: Case of Croatia By Milan Deskar-Škrbić; Hrvoje Šimović; Tomislav Ćorić
  13. Outcomes of Social Assistance in Central and Eastern Europe: A Pre-transfer Post-transfer Comparison By Avram, Silvia
  14. The Theory of Interhybridity: Socio-political Dimensions and Migration By Aliu, Armando
  15. Intellectual Returnees as Drivers of Indigenous Innovation: Evidence from the Chinese Photovoltaic Industry By Siping Luo; Mary E. Lovely; David Popp
  16. Are Eastern European agricultural markets working? Beware of state-prescribed market interventions! By Glauben, Thomas; Djuric, Ivan; Götz, Linde; Koester, Ulrich; Loy, Jens-Peter; Páll, Zsombor; Perekhozhuk, Oleksandr; Prehn, Sören; Renner, Swetlana
  17. The impact of migration on children left behind in Moldova By Gassmann, Franziska; Siegel, Melissa; Vanore, Michaella; Waidler, Jennifer
  18. In name only: Are free trade zones assisting capitalism or criminals and crony capitalists? By Roger Bate
  19. Currency Shocks to Export Sales of Importers: A Heterogeneous Firms Model and Czech Micro Estimates By Peter Toth
  20. The normal price. The case of the retail price of diesel fuel By Kossov, Vladimir; Kossova, Elena

  1. By: Schaffer M.E.; Dohmen T.J.; Lehmann H. (ROA)
    Abstract: We use a rich personnel data set from a Russian firm for the years 1997 to 2002 to analyze how the firm adjusts wages and employment during this period in which local labor market conditions changed in the aftermath of the financial crisis in 1998. We relate the development of turnover and wages for various employment categories to alternative models of wage and employment determination. We argue that the firms behavior is consistent with the predictions of efficiency wage models of the shirking and turnover type.
    Keywords: Labor Demand; Wage Level and Structure; Wage Differentials; Socialist Systems and Transitional Economies: Factor and Product Markets; Industry Studies; Population;
    JEL: J23 J31 P23
    Date: 2013
  2. By: John Bonin (Department of Economics, Wesleyan University); Iftekhar Hasan (Fordham University, 5 Columbus Circle, 11-22, New York, NY 10019); Paul Wachtel (Stern School of Business, New York University, New York NY 10012)
    Abstract: Modern banking institutions were virtually non-existent in the planned economies of central Europe and the former Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline and turbulence accompanied by repeated bank crises. However, governments in many transition countries learned from these tumultuous experiences and eventually dealt successfully with the accumulated bad loans and lack of strong bank regulation. In addition, rapid progress in bank privatization and consolidation took place in the late 1990s and early 2000s, usually with the participation of foreign banks. By the mid 2000s the banking sectors in many transition countries were dominated by foreign owners and were able to provide a wide range of services. Credit growth resumed, sometimes too rapidly, particularly in the form of lending to households. The global financial crisis put transition banking to test. Countries that had expanded credit rapidly were vulnerable to the macroeconomic shock and there was considerable concern that foreign owners would reduce their funding to transition country subsidiaries. However, the banking sectors turned out to be resilient, a strong indication of the rapid progress in institutional development and regulatory capabilities in the transition countries.
    Keywords: transition banking, bank privatization, foreign banks, bank regulation, credit growth
    Date: 2013–10
  3. By: Almos Telegdy (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: This paper analyses the employment adjustment of state- and privately-owned companies before and during the global crisis. Using Hungarian data, it finds that the net job creation rate is similar across the two ownership types before the crisis, but during the crisis state-owned companies have a net job creation rate larger by 7 percentage points than private enterprises. The effect is caused both by a larger gross job creation rate and by a drop in job destruction associated with state ownership.
    Keywords: Net job creation, Global crisis, State ownership, Hungary
    JEL: F23 L25 L32
    Date: 2013–04
  4. By: Gabor Bekes (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Balazs Murakozy (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Zsuzsa Munkacsi (European University Institute); Gabor Oblath (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: Our paper, relying on product and industry level data, analyses factors behind divergences in aggregate export price changes in four Central European countries, Poland, Hungary, Czech Republic and Slovakia. We focus on exports to Germany, their largest trading partner and observe the period 2000-2010. As our hypothesis is that divergence in changes may be explained by convergence in levels, we construct relative level indices of export unit values (UVs, as proxies of export prices) and unit labor costs (ULCs), based on the COMEXT and EU KLEMS databases, respectively. By merging the relative level indices with trade performance indicators (export volumes, market shares, extensive and intensive margins), we investigate the relation between UVs and ULCs, their changes, as well as their respective impact on trade performance. Our results suggest that (i) there is convergence in the four countries' export UV levels, (ii) changes in UVs were positively correlated with changes in ULCs, (iii) a higher UV increase was associated with lower growth in export volume, (iv) the level of ULC and that of labor productivity does not show convergence, but the level of labor costs and wage shares do. The results indicate that our approach helps understanding factors contributing to changes in UVs, as well as trade performance of countries. However, to reach more general results, the approach should be extended to more countries and markets.
    Keywords: export price indices and unit values; unit labor costs; price level convergence; export performance
    JEL: F14 F16
    Date: 2013–09
  5. By: Bacchetta, P.; Benhima, K.; Kalantzis, Y.
    Abstract: In this paper, we consider an alternative perspective to China's exchange rate policy. We study a semi-open economy where the private sector has no access to international capital markets but the central bank has full access. Moreover, we assume limited financial development generating a large demand for saving instruments by the private sector. We analyze the optimal exchange rate policy by modeling the central bank as a Ramsey planner. Our main result is that in a growth acceleration episode it is optimal to have an initial real depreciation of the currency combined with an accumulation of reserves, which is consistent with the Chinese experience. This depreciation is followed by an appreciation in the long run. We also show that the optimal exchange rate path is close to the one that would result in an economy with full capital mobility and no central bank intervention.
    Keywords: China, exchange rate policy and international reserves.
    JEL: E58 F31 F41
    Date: 2013
  6. By: Esfandiar Maasoumi; Almas HESHMATI
    Abstract: In this paper, we employ stochastic dominance analysis on Chinese Household Nutrition Survey (CHNS) data to investigate the inequality and relative welfare levels in China over time and among population subgroups. We find that from the period of 2000 to 2009, welfare has been continuously improved along with Chinese economic development and growth. Our pairwise comparison of population subgroups shows that there is no dominance relation between subgroups for household type, gender of households head, and age cohorts. While married group and non-child rearing group second order dominate single/divorced group and child rearing group, showing higher level of welfare in the former groups. Also, we find inequality in subgroups with different educational levels and household sizes that the groups with a higher level of education and smaller size of household tend to be better off than their counterparts.
    Date: 2013–08
  7. By: Marek Rusnak
    Abstract: The prominent measure of the current state of the Czech economy, gross domestic product (GDP), is available only with a significant lag of roughly 70 days. In this paper, we employ a Dynamic Factor Model (DFM) to nowcast Czech GDP in real time. Using multiple vintages of historical data and taking into account the publication lags of various monthly indicators, we evaluate the real-time performance of the DFM over the 2005–2012 period. The results suggest that the accuracy of model-based nowcasts is comparable to that of the judgmental nowcasts of the Czech National Bank (CNB). Our results also suggest that foreign variables are crucial for the accuracy of the model, while omitting financial and confidence indicators does not worsen the nowcasting performance. Finally, we show how releases of new data can be viewed through the lens of the dynamic factor model.
    Keywords: Dynamic factor model, GDP, nowcasting, real-time data.
    JEL: C53 C82 E52
    Date: 2013–07
  8. By: Lu, Yi; Xie, Huihua; Xu, Lixin Colin
    Abstract: This paper uses a unique natural experiment in Chinese villages to investigate whether access to telecommunications-- in particular, landline phones -- increases the likelihood of outmigration. By using regional and time variations in the installation of landline phones, the difference-in-differences estimation shows that access to landline phones increases the ratio of out-migrant workers by 2 percentage points, or about 50 percent of the sample mean in China. The results remain robust to a battery of validity checks. Furthermore, landline phones affect outmigration through two channels: information access to job opportunities and timely contact with left-behind family members. The findings underscore the positive migration externality of expanding telecommunications access in rural areas, especially in places where migration potential is large.
    Keywords: E-Business,Population Policies,Access to Finance,ICT Policy and Strategies,Anthropology
    Date: 2013–10–01
  9. By: Péter Fáykiss (Nemzetgazdasági Minisztérium); Gabriella Grosz (Magyar Nemzeti Bank (central bank of Hungary)); Gábor Szigel (Erste Bank)
    Abstract: In recent years, foreign banks’ presence in the form of branches instead of subsidiaries started to gain ground in most of the Central and Eastern European (CEE) countries, including Hungary. Due to the high share of foreign ownership in their banking systems, local authorities in CEE may perceive this trend towards the transformation of subsidiaries into branches as a loss of control over their financial systems. For the time being, we assess the financial stability risks related to this process to be rather moderate. First, no negative anomalies have been identified in respect of the existing branches in the Hungarian market, even though their market share is still small at this point. Furthermore, experience and our model results indicate that large universal banks, which constitute almost three quarters of the Hungarian market, are unlikely to switch to a branch model. Even though host country supervisors do not lose all responsibility for the regulation and supervision of branches, the use of certain regulatory instruments becomes more cumbersome or even impossible in certain cases. Thus, the spread of the branch model may increase the risk of contagion from parent banks in the host countries. Consequently, we think that the status quo appears to be the preferable option for the stability of the Hungarian banking system.
    Keywords: branch, regulation, organisational form, microprudential supervision, macroprudential supervision
    JEL: G21 G28 C21
    Date: 2013
  10. By: Wang, Lili (UNU-MERIT/MGSoG); Meijers, Huub (School of Business and Economics, Maastricht University); Szirmai, Eddy (UNU-MERIT/MGSoG)
    Abstract: This paper focuses on the role of interregional technology spillovers in the process of industrial growth in Chinese regions in the period 1990-2005. Inflows of FDI increased rapidly from 1990 till 1998, slowing down thereafter. Domestic R&D investment accelerated after 1998. Regional industrial growth benefits from both interregional R&D spillovers and after 1998 from international FDI spillovers. However, in contrast to R&D spillovers, FDI spillovers contribute conditionally, mainly in areas where local R&D stocks are high enough. Interestingly, indirect interregional FDI spillover effects are negative. Foreign investment in one region attracts resources from regions with less FDI, thus having a negative influence on growth of industrial output in neighbouring regions.
    Keywords: Technological spillovers, Interregional spillovers, R&D, Foreign direct investment, Industrial growth, Regional growth, Chinese industry
    JEL: F43 O14 O33 R11 R12
    Date: 2013
  11. By: Adam Gersl; Jitka Lesanovska
    Abstract: This paper focuses on the development of the interbank market risk premium in the Czech Republic during the global financial crisis. We explain the significant departure of interbank interest rates from the key monetary policy rate by a combination of different factors, including liquidity risk, counterparty risk, foreign influence, interbank relations, and strategic behavior. The results suggest a relevant role of market factors, and some importance of counterparty risk.
    Keywords: counterparty risk, interbank market, liquidity risk, risk premium.
    JEL: G19 G21
    Date: 2013–07
  12. By: Milan Deskar-Škrbić (Arhivanalitika Ltd.); Hrvoje Šimović (Faculty of Economics and Business, University of Zagreb); Tomislav Ćorić (Faculty of Economics and Business, University of Zagreb)
    Abstract: In this paper we use structural VAR model to analyze dynamic effects of (discretionary) fiscal shocks on economic activity of private sector in Croatia from 2000Q1-2012Q2. Due to the fact that Croatia is a small open transition economy we assume that shocks of foreign origination can have notable effects on its performance. Therefore, original Blanchard-Perotti identification method is extended by introducing variables that represent external (foreign) demand shocks. The results show that the government spending has a positive and statistically significant effect on private aggregate demand and private consumption, and net (indirect) taxes have a negative and statistically significant effect on private consumption and private AD (statistically significant in the first quarter).
    Keywords: fiscal policy, small open economy, Croatia, SVAR
    JEL: E62 C32 H30 H20 H50
    Date: 2013–10–07
  13. By: Avram, Silvia
    Abstract: The poverty reduction potential of national social assistance programs in eight Central and Eastern European countries is examined using data from the EU-SILC. Results indicate that social assistance programs are a marginal component of the social protection system throughout the region. They serve small populations, spend relatively little compared to needs and the benefits they award are largely a top-up for their clients. However, the more extensive and liberal programs achieve higher effectiveness in reducing poverty. Unlike Western Europe, no trade-off between extensiveness and benefit generosity or between generosity and efficiency could be found. Decentralization and discretion are associated with inefficiency and arbitrariness in entitlement decisions rather than improved targeting.
    Date: 2013–10–09
  14. By: Aliu, Armando
    Abstract: The Western Balkans integration within the EU has started a legal process which is the rejection of former communist legal/political approaches and the transformation of former communist institutions. Indeed, the EU agenda has brought vertical/horizontal integration and Europeanization of national institutions (i.e. shifting power to the EU institutions and international authorities). At this point, it is very crucial to emphasize the fact that the Western Balkans as a whole region has currently an image that includes characteristics of both the Soviet socialism and the European democracy. The EU foreign policies and enlargement strategy for Western Balkans have significant effects on four core factors (i.e. Schengen visa regulations, remittances, asylum and migration as an aggregate process). The convergence/divergence of EU member states’ priorities for migration policies regulate and even shape directly the migration dynamics in migrant sender countries. From this standpoint, the research explores how main migration factors are influenced by political and judicial factors such as; rule of law and democracy score, the economic liberation score, political and human rights, civil society score and citizenship rights in Western Balkan countries. The proposal of interhybridity explores how the hybridization of state and non-state actors within home and host countries can solve labor migration-related problems. The economical and sociopolitical labor-migration model of Basu (2009) is overlapping with the multidimensional empirical framework of interhybridity. Indisputably, hybrid model (i.e. collaboration state and non-state actors) has a catalyst role in terms of balancing social problems and civil society needs. Paradigmatically, it is better to perceive the hybrid model as a combination of communicative and strategic action that means the reciprocal recognition within the model is precondition for significant functionality. This will shape social and industrial relations with moral meanings of communication. --
    Keywords: Interhybridity,Migration,Politics,Western Balkans
    JEL: F22 A1 P4 P48 C1 F5 P3 J6 J61 C8 J5 J53
    Date: 2013–01–29
  15. By: Siping Luo; Mary E. Lovely; David Popp
    Abstract: We offer new evidence on indigenous innovation and intellectual returnees by estimating the relationship between patenting by Chinese photovoltaic firms and the presence of corporate leaders with international experience. Our research approach combines data from three sources: the industrial census, international and domestic patent records, and leadership biographical information. Using nonlinear methods, we find robust evidence that returnees positively influence patenting activity and also promote neighboring firm innovation. We find no tendency for export intensive firms to patent more. Controlling for R&D expenditures, we find that firms with returnees in leadership roles have more patents.
    JEL: O30 O31 O32 Q42 Q55
    Date: 2013–10
  16. By: Glauben, Thomas; Djuric, Ivan; Götz, Linde; Koester, Ulrich; Loy, Jens-Peter; Páll, Zsombor; Perekhozhuk, Oleksandr; Prehn, Sören; Renner, Swetlana
    Abstract: Substantial danger exists that politically prescribed market interventions, designed to counter a supposed failure of the markets, will leave markets functioning worse rather than better. This is particularly true of Eastern European transition countries, where institutional regulations function only to a limited extent. Based on the findings of a variety of empirical studies that examine how Eastern European grain, dairy and meat markets are functioning, this policy brief strongly advocates restraint in the introduction of measures to regulate agricultural markets. Such regulations have high macroeconomic costs and may work counter to their objectives, which are designed to have popular appeal. --
    Date: 2013
  17. By: Gassmann, Franziska (UNU-MERIT/MGSoG); Siegel, Melissa (UNU-MERIT/MGSoG); Vanore, Michaella (UNU-MERIT/MGSoG); Waidler, Jennifer (UNU-MERIT/MGSoG)
    Abstract: This paper empirically evaluates the well-being of children "left behind" by migrant household members in Moldova. Using data derived from a nationally-representative, large-scale household survey conducted between September 2011 and February 2012 among 3,255 households (1,801 of which contained children aged 0-17) across Moldova, different dimensions of child well-being are empirically evaluated. Well-being of children in Moldova is divided into eight different dimensions, each of which is comprised of several indicators. Each indicator is examined individually and then aggregated into an index. Well-being outcomes are then compared by age group, primary caregiver, migration status of the household (current migrant, return migrant, or no migration experience), and by who has migrated within the household. It was found that migration in and of itself is not associated with negative outcomes on children's well-being in any of the dimensions analysed, nor does it matter who in the household has migrated. Children living in return migrant households, however, attain higher rates of well-being in specific dimensions like emotional health and material well-being. The age of the child and the material living standards experienced by the household are much stronger predictors of well-being than household migration status in a number of different dimensions. The results suggest that migration does not play a significant role in shaping child well-being outcomes, contrary to the scenarios described in much past research. This paper is the first (to the authors' knowledge) to link migration and multidimensional child poverty.
    Keywords: Moldova, migration, poverty, child poverty, multi-dimensional poverty
    JEL: I32 F22 J61 O15
    Date: 2013
  18. By: Roger Bate
    Abstract: Free trade zones possess many attributes of capitalist economies and can attract foreign companies, foreign investment in domestic companies, industrial production, and wealth generation. However, such zones are also troubling; they can produce several negative results including a strong mafia presence, massive counterfeit operations, tax evasion, money laundering, and even terror financing.
    Keywords: Hezbollah,Free Trade zone,Counterfeit pharmaceuticals,China
    JEL: A F
    Date: 2013–10
  19. By: Peter Toth
    Abstract: To what extent can Czech exporters cushion the impact of currency appreciation shocks by using imported intermediates? We apply a partial equilibrium model with firms that are heterogeneous in their productivities. Producers can serve the domestic market, export final goods, or import inputs. In the model, an exogenous exchange rate shock simultaneously affects the variable costs and revenues associated with exports and imports. The impact of a hypothetical 1% appreciation of the domestic currency on sales is estimated using a panel of 7,356 Czech manufacturing firms observed from 2003 to 2006. We identify the estimates from within-firm variation in trade strategies, which is probably associated with the lifting of trade barriers due to Czech EU membership since 2004. For firms that both export and import, we predict a drop in total sales of 0.2%, a drop in export sales of 0.8%, and a rise in domestic sales of 0.2%.
    Keywords: Exchange rate pass-through, heterogeneous firms, international trade, monopolistic competition, production function, total factor productivity.
    JEL: C23 C26 D22 D24 F12
    Date: 2013–07
  20. By: Kossov, Vladimir; Kossova, Elena
    Abstract: For the large majority of goods, the price dispersion between countries does not exceed 1:10. Diesel fuel stands out, with a dispersion which exceeds 1:100. Given a constant oil price the difference in diesel fuel prices between countries is caused by the different taxes. The average share of taxes in the price determines the normal price. An estimation of the normal price of diesel fuel is made using an econometric model (using 79 countries, 1998-2008 by even years). Of greatest interest to economic policy are normal prices for countries with economies in transition and developing countries. This paper is organized as follows. In the introduction a definition of the term "normal price" and why it is important are presented. The first chapter is devoted to the notion of "price level" both international and national. The normal price is calculated using an econometric model. The estimation of the normal price of goods is determined by the international component and deviation of the normal price by the national one. In the second chapter the results of evaluating the parameters of the econometric model and the values of normal prices are given. In the third chapter price deviations in Russia and Kazakhstan are discussed and it is concluded that they have reached the maximum value, above which mass protests may result.
    Keywords: budget revenue; diesel fuel price; motor fuel tax; mass protests; normal price; oil rent; price level
    JEL: C23 D49 E37 Q48
    Date: 2013–03–20

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