nep-tra New Economics Papers
on Transition Economics
Issue of 2014‒08‒02
seventeen papers chosen by
J. David Brown
United States Census Bureau

  1. Containing housing price inflation in China: is local intervention more effective than central intervention? By Cao, Albert
  2. An empirical investigation of retail rents in Chinese cities By Ke, Qiulin; White, Michael
  3. Urban Economic Openness and IPO Underpricing of Chinese Real Estate Companies By Zheng, Chen; Marcato, Gianluca; Milcheva, Stanimira
  4. The Checks of Czechs: Optimizing the Debt Portfolio of the Czech Government By Melecky, Ales; Melecky, Martin
  5. Cooperation between Russian research organizations and industrial companies: factors and problems By Simachev, Yuri; Kuzyk, Mikhail; Feygina, Vera
  6. Learning dynamics and support for economic reforms : why good news can be bad By van Wijnbergen, Sweder; Willems, Tim
  7. Gone for Good? Subsidies with Export Share Requirements in China: 2002-2013 By Fabrice Defever; Alejandro Riaño
  8. The impact of the business cycle on the construction companies’ sector inselected states By Wolski, Rafal; Zaleczna, Magdalena
  9. Does Rising Import Competition Harm Local Firm Productivity in Less Advanced Economies? Evidence from Vietnam's Manufacturing Sector By Tinh Doan; Son Nguyen; Tuyen Tran; Huong Vu; Steven Lim
  10. Operational scales, sources of finance, and firms’ performance: evidence from Vietnamese longitudinal data By Quan Hoang Vuong
  11. Restitution in Poland – costs and obligations after 25 years of democratic state’s creation By Zaleczna, Magdalena
  12. Property Tax and the Fiscal Independence of local government in Poland By Gluszak, Michal; Marona, Bartlomiej
  13. Construction activity and real estate market trend: evidence from Albania By Ibrahimaj, Delina; Mattarocci, Gianluca
  14. Diversifying the financing sources of real estate in post-crisis Romania By Dan, Popescu Dumitru; Costin, Ciora
  15. Estimation of the Basic New Keynesian Model for the Economy of Romania By Ifrim, Adrian
  16. A New Perspective for Understanding the Real Estate Market in Romania By Anghel, Ion; ; Vlad, Poenaru
  17. Export diversity or focus? What strategy is best for first-time internationalizing SMEs from an emerging market? By Desislava Dikova; Andreja Jaklic; Anze Burger; Aliaz Kuncic

  1. By: Cao, Albert
    Abstract: China’s housing market has had 18 years of rapid price inflation. To prevent deterioration of affordability, from 2005 to 2013 the central government used a combination of administrative interventions and macro-economic measures to contain housing price rises. However, centrally formulated housing policies and intervention measures could not be fully implemented at local levels and thus have only limited short-term successes. From 2013, the central government retreated from direction intervention at the national level and left local governments to intervene to contain renewed rapid price hikes. This paper analysed demand and supply in China’s housing market and evolution of institutional arrangements that increase demand but distort supply using data obtained from fieldwork conducted in 2011 and 2013. It argues that localisation of intervention could be more effective than the one-size-fits-all approach adopted by the central government but reforms on institutional arrangements that prioritise high-end housing market and housing investors rather than owner occupiers are necessary to re-position the housing market to the middle class and ease affordability problems.
    Date: 2014
  2. By: Ke, Qiulin; White, Michael
    Abstract: This paper represents the first systematic attempt to develop an econometric model of retail rent determination in Chinese cities. It investigates rent determination in three major Chinese retail centres – Beijing, Shanghai and Guangzhou – over the period 1999 to 2012. The study was inspired by the conspicuous lack of research on the determinants of retail rents in China, which is surprising given the increased prevalence of international investment activity in retail property in China and as one of the biggest emerging markets, China’s enormous population, and rapid increase in consumer spending. In this paper a theoretical model of retail rent determination is constructed based on the inclusion of broad demand side and supply side influences. Subsequently, this model is estimated for the three markets considered and a preferred specification for each market is derived. Following on from this, a time series cross-sectional methodology is deployed to test the most important common rental influences across the three markets.
    Date: 2014
  3. By: Zheng, Chen; Marcato, Gianluca; Milcheva, Stanimira
    Abstract: This paper examines the empirical impact of trade openness on the short-run underpricing of real estate IPOs in China, on a city level. To our knowledge, this represents the first paper which employs a macroeconomic argument to explain the real estate IPO performance. Our work is based on the Balassa-Samuelson (1964) effect, which suggests a significant impact of trade openness on both direct and indirect real estate markets. Moreover, trade openness was found to increase the firms’ future profitability providing more business opportunities._Since Chinese real estate companies have strong geographic patterns with business focus in a local district – usually at city level – and the extent of openness is significantly heterogeneous, this specific market represents a useful laboratory to examine the macroeconomic effect of trade openness on the real estate IPO underpricing in urban level. The model is estimated using a dataset of primary information on real estate IPOs in China from 1992 until the end of 2013. By using the de facto measure of the trade openness and controlling for other economic and firm-specific variables, we find evidence that the trade openness of a city has a significantly negative impact on the IPO initial return. We explain this result arguing that trade openness increases the issuer and its underwriters’ confidence in the firm’s future performance and hence issuers and underwriters do not need to underprice the shares to guarantee the success of an IPO._
    Date: 2014
  4. By: Melecky, Ales; Melecky, Martin
    Abstract: Sound debt management practices help protect government expenditures on debt servicing from aggregate shocks and prevent the occurrence of debt crises. Building on Giavazzi and Missale (2004), this article examines the optimal allocation of government debt for the Czech Republic. To calibrate conditional expectations of macro variables and to identify unexpected shocks, a vector autoregression (VAR) model for the Czech macroeconomy is estimated. The estimated optimal allocations across short-term debt, inflation-linked debt, long-term debt, and foreign currency debt are then discussed in relation to the actual allocations implemented by the government debt managers in the Czech Republic. We find that the manager of Czech government’s debt allocates too much debt into short-term bills and too little debt into inflation-linked bonds based on the estimated optimal allocations. Deepening the market for inflation-linked bonds and improving government cash management are the core policy recommendations.
    Keywords: Public debt management; Optimal debt allocation; VAR model; Czech Republic, Emerging Market Economies.
    JEL: G11 H63
    Date: 2014–07–15
  5. By: Simachev, Yuri; Kuzyk, Mikhail; Feygina, Vera
    Abstract: The study is focused on the cooperation of Russian companies with research organizations in implementing R&D projects during technological innovation. Taking into account behavioral changes, authors carry out a micro-level analysis based on empirical data of executive survey of over 600 Russian industrial firms (2011—2012) and about 350 research organizations and universities (2012). The authors emphasize the key factors of firms’ demand for outsourcing R&D reveal the main barriers to the development of university-industry cooperation and their particularities for different cooperation actors. The analysis shows that there is a positive relation between the size of a company and R&D outsourcing. As for the factor of age, the highest cooperation activity of Russian firms is observed among enterprises founded over 20 years ago. As far as concernes cooperation activity of research organizations, large ones are significantly more likely to cooperate with business. A common prerequisite for research organizations' R&D cooperation with business is sufficient academic ranking. Business and science evaluate differently various obstacles to effective cooperation. For firms, the main problems are the inflated costs of national R&Ds, insufficient research organizations’ orientation at company needs, and low quality of developments. As for representatives of research organizations, they mention as barriers primarily the lack of companies' receptivity to innovation and inadequate information about promising developments. Businesses are more optimistic about cooperation with science if they already have a relevant experience of interaction. In the case of research organizations we observe a different pattern: most problems seem more significant to organizations conducting R&D in business interests.
    Keywords: innovations; university-industry cooperation; barriers to research and development; firm behavior
    JEL: L20 O31 O32
    Date: 2014–07
  6. By: van Wijnbergen, Sweder; Willems, Tim
    Abstract: Support for economic reforms has often shown puzzling dynamics: many reforms that began successfully lost public support. This paper shows that learning dynamics can rationalize this paradox because the process of revealing reform outcomes is an example of sampling without replacement. This concept challenges the conventional wisdom that one should begin by revealing reform winners. It may also lead to situations in which reforms that enjoy both ex ante and ex post majority support will still not come to completion. The framework can be used to explain why gradual reforms worked well in China (where successes in Special Economic Zones facilitated further reform), whereas this was much less the case for Latin American and Central and Eastern European countries.
    Keywords: Enterprise Development&Reform,Children and Youth,Economic Theory&Research,Knowledge for Development,Public Sector Corruption&Anticorruption Measures
    Date: 2014–07–01
  7. By: Fabrice Defever; Alejandro Riaño
    Abstract: This paper presents a simple model of subsidies with export share requirements (ESR) in a heterogeneous firm environment. A two-country general equilibrium version of the model with a single 100% ESR is calibrated using firm-level data from the 2002 wave of the Business Environment and Enterprise Performance Survey collected by the World Bank for China. The calibrated model is used to gauge the change in subsidies with ESR that is consistent with the fall in the share of 'pure exporters', firms exporting all their output, observed in China, from 25.7% in 2002 to 11.1% in 2013. Our results indicate that a 6.9% reduction in the ad-valorem subsidy rate available to firms that export all their output is consistent with the observed fall in their share of exporting firms. Expenditure in subsidies (as a share of value-added) falls by 66% and welfare in China increases by 1.76% while real income in the rest of the world falls by 0.59%.
    Keywords: Trade Policy, Export Subsidies, Export Share Requirements, China
    JEL: F12 F13 O47
    Date: 2014–07
  8. By: Wolski, Rafal; Zaleczna, Magdalena
    Abstract: The economy is a subject to a periodical changes. They are reflected infinancial situation of households and companies. However, the recenteconomic downturn is particularly acute. After strong growth of activity,in many states related to the real estate boom, there was a suddencessation of the activity of a construction sector. It contributed to aslowdown in an economic growth, or even a lasting economic downturn. Theauthors analyse the conditions of economy, the construction sectors and the state of the residential real estate markets in the Czech Republic, Poland,Slovakia, Hungary, Spain and Ireland to draw a wider picture of an impactof the boom and the slowdown on construction activity. Then on the basis of the database of the financial condition of chosen construction companies from these countries, they look for answers to the question how much these actors havechanged their activity in recent years. The database of constructioncompanies involved in the construction of buildings is established and anassessment of their financial health in the years 2003-2012 allows for therealization of the intended purpose. The analysis should allow torecognize the scale of the impact of the business cycle on constructionactivity in macro and mezzo scales in the chosen states.
    Date: 2014
  9. By: Tinh Doan (University of Waikato); Son Nguyen (VNU University of Economics and Business); Tuyen Tran (VNU University of Economics and Business); Huong Vu (University of Waikato); Steven Lim (University of Waikato)
    Abstract: This paper examines whether rising import penetration has an effect on the productivity of domestic firms. The study uses data on a 10-year unbalanced panel of firms in the manufacturing sector in Vietnam from 2000 to 2009. Panel and instrumental variable methods are used to control for firm heterogeneity and endogeneity of import penetration. We find significantly negative effects of import competition on local firms’ productivity. Further investigation on the basis of firm size and industry technology levels shows that SMEs are more adversely affected, but that industry technology level does not matter.
    Keywords: import penetration; productivity; Vietnam
    JEL: F19 L25 P45
    Date: 2014–07–11
  10. By: Quan Hoang Vuong
    Abstract: This study investigates a longitudinal dataset consisting of financial and operational data from 37 listed companies listed on Vietnamese stock market, covering the period 2004-13. By performing three main types of regression analysis - pooled OLS, fixed-effect and random-effect regressions - the investigation finds mixed results on the relationships between operational scales, sources of finance and firms' performance, depending on the choice of analytical model and use of independent/dependent variables. In most situation, fixed-effect models appear to be preferable, providing for reasonably consistent results. Toward the end, the paper offers some further explanation about the obtained insights, which reflect the nature of a business environment of a transition economy and an emerging market.
    Keywords: Longitudinal data analysis; firm performance; operational scales; sources of finance; transition economy; emerging markets; Vietnam
    JEL: G32 L25 M10 P27
    Date: 2014–07–17
  11. By: Zaleczna, Magdalena
    Abstract: This article presents the problem of restitution in Poland in the political, social and economic context. The author analyses public obligations resulted from breaking property rights during socialist past and attempts of restitution in Poland, indicating the most important flashpoints. The author examines the current negative attitude toward restitution presented by the government and society. A hypothesis constructed by the author focuses on the negative, but not noticed by the society, effects of a lack of the general restitution. Having an outline of the problem the author wants to concentrate on real example of a city Lodz. Local governments have been coping with many different restitution claims for last 25 years. The collected data indicate hidden costs influencing the local economy. The study is based on the legal documents and the results of public opinion polls.
    Date: 2014
  12. By: Gluszak, Michal; Marona, Bartlomiej
    Abstract: In order to provide a sufficient level of public services, a municipality - as a basic unit of local government in Poland - must be supplied with an adequate level of regular revenues. In a long run the level should rise proportionally to the development of the region. The main purpose of this article is to describe a role of recurrent taxes on immovable property in local government revenues in Poland. In the first part of the paper, we address the problem from international perspective, and examine revenues from recurrent taxes on immovable property in OECD countries. In the second part of the paper, we:(i) explore differences in property tax policy at local level, (ii) analyze similarities between local municipality in Poland with the use of cluster analysis,(iii) analyze relations between tax policy and tax revenues.
    Date: 2014
  13. By: Ibrahimaj, Delina; Mattarocci, Gianluca
    Abstract: PurposeThe aim is to identify the main macro-economic drivers of construction in an Eastern European country that is experiencing significant changes in the real estate sector.Design/methodology/approachUsing a proprietary database provided by Bank of Albania, the paper evaluate the relationship between macro-economic determinants and a set of macro-economic drivers using the granger causality test and the impulse response function.FindingsResults show that in Albania, as in other new developed economies, the credit market and the amounts of remittances are the main sources of construction changes. Real estate sector characteristics are more relevant in explaining the construction development in the short and in the long run.Research limitationsThe paper is based only on a detailed dataset on the Albanian economy but results cannot be generalized for all Eastern European countries.Practical implicationsResults obtained are useful for policy market and macro-economists interested to evaluate the dynamics of the construction sector and evaluate the effect of any macro-economic change on the size and growth of the sectorOriginality/valueThe paper is the only one available for the Albanian market and the methodology adopted is never used before for any European country.
    Date: 2014
  14. By: Dan, Popescu Dumitru; Costin, Ciora
    Abstract: The real estate industry from transition countries in Eastern and South-Eastern Europe including Romania were hit harder than any other region in the world by the global recession of 2008–2009 (United Nations, 2010). Economic recovery started in the second half of 2009, but—for most of these economies—the crisis made painfully clear that the transition from a centrally planned to an open market economy has broad new prosperity which is highly sensitive to global economic shocks. Real estate has a crucial role in the global financial markets, with major real estate investors including besides banking the pension funds, sovereign wealth funds, private equity and endowments. However, the global financial crisis has had a major impact on real estate investing.Prior to the financial crisis, the ready availability of capital saw high levels of debt utilized by many real estate investors. As we move out of the crisis, the clear investment priorities are for lower debt levels, effective risk management, conservative investments (e.g. core real estate portfolios), increased professionalism, simpler and more transparent investment structures, reduced return expectations and greater consideration of the impact of increased financial regulations. Real estate continues to be seen as an important, long-term asset class for major investors, as well as an essential element in the economic and social.This paper aims at presenting the trends, structure and financing sources of real estate industry in Romania and their specificities in post-recession period.
    Date: 2014
  15. By: Ifrim, Adrian
    Abstract: In this paper a simple New-Keynesian DSGE model is derived and then estimated for the Romanian economy. Some parameters are calibrated and others are estimated on Romania’s data using Bayesian techniques. The model fit is evaluated and the effects of different types of shock are presented.
    Keywords: New-Keynesian,Romania,Impulse-Response
    JEL: C11 E32 E47
    Date: 2014
  16. By: Anghel, Ion; ; Vlad, Poenaru
    Abstract: The real estate market is influenced by different economic and social factors. Our research considered theory of mononuclear and polynuclear city types in terms of residential market connections with economic overview and data interpretation.Based on analysed data changing in real estate residential prices and market activity is highly correlated with demografic and economic factors but also with the type of the city (mononuclear vs polynuclear).Mononuclear cities (60.000 – 200.000 inhabitants) experienced a uniform decreasing in the average price central vs periferic areas and reduced real estate market activity.Polynuclear cities (200.000 – 2.000.000 inhabitnts) presented non uniform evolution in prices and important real estate market activity.An important conclusion is about the expected evolution of the real estate market; based on our reasearch the polynuclear cities has more chance for future development active real estate market but in mononuclear cities there is an important chance to find economic decreasing and reducind in real estate market activity.
    Date: 2014
  17. By: Desislava Dikova; Andreja Jaklic; Anze Burger; Aliaz Kuncic (Institute for International Business/WU Vienna; Faculty of Social Sciences/University of Ljubliana; Faculty of Social Sciences/University of Ljubliana; Economic Development and Globalization Division/United Nations Economic and Social Commission for Western Asia)
    Abstract: The question how much internationalization is beneficial for emerging-market small and medium enterprises (EM SMEs) remains challenging for both international business (IB) scholars and managers. We explore export strategies of first time exporters and focus on the scope of EM SMEs internationalization activities. We tackle the question whether more focused or more diversified internationalization through exporting is beneficial for EM SMEs. We examine the impact of foreign market (geographic) diversification, product diversification and export intensity on firm performance of an entire population of EM SMEs from an emerging east European economy. In addition, we test whether a complex export strategy - an export strategy of simultaneous product- and geographic export diversification - is beneficial for EM SMEs. We use a panel population data of first time Slovenian exporters in the period 1994-2012. We find that diversified internationalization, both in terms of product- and foreign market diversity, and export intensity significantly improve productivity and sales performance for EM SMEs. Furthermore, EM SMEs with complex export strategies enjoy significantly improved productivity and sales performance.
    Keywords: first-time exporters, export performance, export diversification
    Date: 2014–07

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