nep-tra New Economics Papers
on Transition Economics
Issue of 2014‒09‒29
twelve papers chosen by
J. David Brown
United States Census Bureau

  1. The rise or the fall of the wall? Determinants of low entrepreneurship in East Germany By Kuehn, Zoe
  2. The Spatial Polish Wage Curve with Gender Effects: Evidence from the Polish Labor Survey By Badi Baltagi; Bartlomiej Rokicki
  3. Financial Reform in Australia and China By Alexander Ballantyne; Jonathan Hambur; Ivan Roberts; Michelle Wright
  4. Cross-Hauling and Regional Input-Output Tables: The Case of the Province of Hubei, China By Yongming Huang; Anthony T. Flegg; Timo Tohmo
  6. Capital Account Liberalization and Dynamic Price Discovery: Evidence from Chinese Cross-Listed Stocks By Marc K Chan; Simon Kwok
  7. A household survey of the cost of illness due to air pollution in Beijing, China By Timothy Swanson; Chiara Ravetti; Yana Popp Jin; Mu Quan; Zhang Shiqiu
  8. Competition and Social Identity in the Workplace: Evidence from a Chinese Textile Firm By Takao Kato; Pian Shu
  9. Using Remedies In Russian Merger Control By Anastasiya Redkina
  10. Inequality in the risk of job loss between young and prime-age workers: Can it be explained by human capital or structural factors? By Anna Baranowska-Rataj; Iga Magda
  11. Foreign Market Experience, Learning by Hiring and Firm Export By Jaan Masso; Kärt Rõigas; Priit Vahter
  12. Identifying SIFI Determinants for Global Banks and Insurance Companies: Implications for D-SIFIs in Russia By Maiya Anokhina; Henry Penikas; Victor Petrov

  1. By: Kuehn, Zoe (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: Between 1949 and 1989, communism restricted private entrepreneurship in East Germany, but even after reunification in 1990 entrepreneurship remained low compared to other transition economies. To quantify the determinants of low entrepreneurship in East Germany and its impact on economic outcomes, I set up a two-region model economy with occupational and migration choices. Individuals can become workers or entrepreneurs in East or West Germany. In line with German policy after reunification, in East Germany wages are fixed above labor productivity and there are capital subsidies. Managerial knowhow is a combination of innate talent and entrepreneurial parental background which only West Germans possess. Technological growth increases with the innate talent of entrepreneurs. Counter-factual experiments show that the missing tradition of entrepreneurship, while contributing to technological growth, accounts for almost 10 percentage points of the gap between East and West German GDP per capita. On the other hand, reunification (wage setting policy, migration possibilities, and subsidies) slowed down technological growth and increased the output gap by 7 percentage points.
    Keywords: Entrepreneurship; Growth; Allocation of Talent; Social Mobility; Transition
    JEL: E24 F15 J22
    Date: 2014–07
  2. By: Badi Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Bartlomiej Rokicki (University of Illinois)
    Abstract: This paper reconsiders the Polish wage curve using individual data from the Polish Labor Force Survey (LFS) at the 16 NUTS2 level allowing for spatial spillovers between regions. In addition it estimates the total and gender-specific regional unemployment rate elasticities on individual wages. The paper finds significant spatial unemployment spillovers across Polish regions. In addition, it finds that the results for the Polish wage curve are sensitive to genderspecific regional unemployment rates. This is especially true for women.
    Keywords: Wage Curve; Fixed Effects; Spatial Spillovers; Regional Labor Markets
    JEL: C26 J30 J60
    Date: 2014–08
  3. By: Alexander Ballantyne (Reserve Bank of Australia); Jonathan Hambur (Reserve Bank of Australia); Ivan Roberts (Reserve Bank of Australia); Michelle Wright (Reserve Bank of Australia)
    Abstract: This paper describes the Australian experience of domestic financial deregulation, capital account liberalisation and the float of the exchange rate, and provides a comparison to China's current efforts to reform its own financial system. In doing so, it considers similarities and differences in the circumstances facing the two economies. Australia's financial reforms were essential, in the longer term, for building a stronger economy and more robust financial system, but the paper does not interpret the Australian experience as a prescription for financial reform in China. Indeed, the specific sequencing of deregulation that occurred in Australia might not be optimal in a Chinese context, although it is likely that the reforms themselves, pursued with appropriate caution, would have long-run benefits for the Chinese economy.
    Keywords: financial deregulation; financial development; China; Australia
    JEL: E44 G18 O53 O56
    Date: 2014–09
  4. By: Yongming Huang (Institute for Development of Central China and Center for Industrial Development and Regional Competitiveness, Wuhan University); Anthony T. Flegg (Department of Accounting, Economics, and Finance, University of the West of England); Timo Tohmo (School of Business and Economics, University of Jyväskylä)
    Abstract: Data for the Chinese province of Hubei are used to assess the performance of Kronenberg’s CHARM, a method that takes explicit account of cross-hauling when constructing regional input-output tables. A key determinant of cross-hauling is held to be the heterogeneity of the products of individual sectors, which is estimated using national data. However, contrary to the authors’ earlier findings for Finland, CHARM does not generate reliable estimates of Hubei’s sectoral exports, imports and volume of trade. It is crucial, therefore, especially in relatively small regions, to make adequate allowance for any known divergence between regional and national technology and heterogeneity.
    Keywords: regional input-output, non-survey methhods, CHARM, cross-hauling, China
    JEL: C67 C83 R15
    Date: 2014–07
  5. By: Tiiu Paas; Olga Demidova
    Abstract: The paper focuses on a comparative analysis of people’s attitudes towards immigrants’ role in several aspects of countries’ life depending on individual’s socio-demographic and economic characteristics in Estonia and Russia. The empirical part of the paper relies on the European Social Survey (ESS) fifth round database. The results of the study show that Estonian peoples’ attitudes towards immigrants are, on average, better in all aspects of the country’s life – economy, culture and the country as a living place, compared to Russia. Both economic and non-economic factors explain the observed variation of individual’s opinions about the role of immigrants in countries’ life. Ethnic minorities, religious people and people with higher income are more tolerant to immigrants in both countries. Socio-demographic characteristics such as age, gender and education are valid determinants of people’s attitudes towards immigrants only in Estonia. Better educated people have more positive attitudes towards immigrants compared to less educated people in the case of Estonia but not Russia. The results of the analysis therefore highlight the necessity to take different factors into account for the design of migration and integration policies in the countries with ethnically diverse population.
    Keywords: attitudes towards immigrants, European Social Survey, comparative analysis, Estonia, Russia
    JEL: P2 C31 C35 O40
    Date: 2014
  6. By: Marc K Chan (Economics Discipline Group, University of Technology, Sydney); Simon Kwok (University of Sydney)
    Abstract: We analyze the effects of a recent financial reform that enables cross-market investment between Hong Kong and Shanghai stock exchanges. Using a vector error-correction model, we nd that the reform announcement considerably narrows the equilibrium level of price disparity and strengthens the price comovement of shares that are cross-listed in both markets. First, there is a substantial increase in the number of cross-listed firms with cointegrated share prices, and the estimated equilibrium relationship is in support of the relative law of one price. Second, our model predicts that the price disparity narrows by as much as 40 percent in equilibrium. Third, we nd that both markets adjust in response to a disequilibrium in price disparity, leading to a sizable error-correction activity. The Shanghai market contributes to approximately two-thirds of the price discovery process. Competition and informativeness of trading affect the relative role of price discovery in each market.
    Keywords: Capital account liberalization; co-integration; vector error-correction model; cross-listing; Chinese A-H shares
    JEL: F36 G18 C32
    Date: 2014–08–01
  7. By: Timothy Swanson; Chiara Ravetti; Yana Popp Jin; Mu Quan; Zhang Shiqiu (Centre for International Environmental Studies, IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper examines with a case study of Beijing, China, the health benefits that could be reaped from urban air quality improvements. The study implements a household survey to collect information about the yearly medical expenditures and lost days of work, to estimates the total costs of illness (COI) borne by a typical individual due to airborne diseases. The results of this survey provide a lower bound for the health costs borne by the urban population of Beijing due to air pollution. We find that the average individual COI in our sample is more than 3000 yuan per year, corresponding to almost one month of the average wage (slightly more than 500 US$ per year). This is quite sizeable, considering that it represents just the minimum benchmark for the damages caused by pollution to health. This result indicates that Beijing could benefit quite substantially from reducing air pollution in terms of health costs: if it could completely eliminate pollution, the savings in terms of COI would range in an order of magnitude of 21 million yuan per year only from hospitalized cases.
    Keywords: Cost of Illness, Air pollution, Household survey, Insurance
    JEL: Q53 I13 C83
    Date: 2014–09–12
  8. By: Takao Kato (Department of Economics Colgate University); Pian Shu (Harvard Business School, Technology and Operations Management Unit)
    Abstract: We study the impact of social identity on worker competition by exploiting the exogenous variations in workers' origins and the well-documented social divide between urban resident workers and rural migrant workers in large urban Chinese firms. We analyze data on weekly output, individual characteristics, and coworker composition for all weavers in an urban Chinese textile firm between April 2003 and March 2004. The firm's relative performance incentive scheme rewards a worker for outperforming her coworkers. We find that a worker does not act on the monetary incentives to outperform coworkers who share the same social identity, but does aggressively compete against coworkers with a different social identity. Our results highlight the important role of social identity in overcoming self-interest and enhancing intergroup competitions.
    Date: 2013–07
  9. By: Anastasiya Redkina (National Research University Higher School of Economics)
    Abstract: This article is motivated by a growing interest in the problem of merger control quality assessment. Remedies are one of the instruments of merger control and have a significant influence on the results of it. This paper aims to build and empirically evaluate a discrete choice model of merger remedies implementation in Russian merger control. The database consists of 443 merger cases accepted by the Russian antimonopoly agency between 2008 and 2011. We analyse the agency’s decisions to find which characteristics of merging firms and markets lead the Federal Antimonopoly Service to decide whether to allow conditional acceptance. We find that variables related to high market power lead more frequently to a remedy outcome. Such industries as the energy sector, communications and insurance positively affect the probability of a structural remedy. We do not find significant effects of “non-structural” variables, such as the world leader and the nationality of the firm-buyer
    Keywords: merger control, behavioural and structural remedies, discrete choice models
    JEL: K21 L40 D78
    Date: 2014
  10. By: Anna Baranowska-Rataj (Institute of Statistics and Demography, Warsaw School of Economics); Iga Magda (Institute of Statistics and Demography, Warsaw School of Economics)
    Abstract: In this paper we identify the determinants of the gap in job stability between young and prime-age workers. Using recently developed decomposition techniques and the panel dimension of data from the Polish Labor Force Survey, we examine to what extent age heterogeneity in job stability is shaped by differences in the composition of young and prime-age workers with respect to individual and job-related characteristics, and to what extent it is driven by different effects of those characteristics on the risk of job separation. Our results show that while differences in education and experience between young and prime-age workers are important, these differences explain only one-third of the gap in job stability. A substantial part of the gap is related to the propensity of young people to work in the most volatile segments of the labor market. Young workers are more likely than prime-age workers to work under a fixed-term contract in a small firm in the private sector, and in an industry that has high rates of both job creation and destruction. Because large numbers of young people have a job in this relatively narrow segment of the labor market, their employment opportunities are very sensitive to changing economic conditions. We also find that the public sector offers prime-age workers a higher level of employment protection than the private sector, but that young people who work at state-owned firms are at higher risk of losing their job than their counterparts who are employed by private firms. This asymmetric effect of public sector employment substantially increases the gap in job stability levels between young and prime-age workers in Poland.
    Keywords: youth; job stability; job separations; structural perspective
    JEL: J21 J24 J63
    Date: 2014
  11. By: Jaan Masso; Kärt Rõigas; Priit Vahter
    Abstract: Export experience of managers and other top specialists is among the key drivers of export decisions in firms. We show evidence of this regularity based on employer-employee level data from the manufacturing industry in Estonia. We find that hiring managers and other high-wage employees with prior experience in exporting to a specific geographical region is associated with a higher probability of export entry to that region. However, there is little evidence of significant effects on export intensity. Notably, the relationship between export experience and a firm’s export decisions is usually stronger if the prior export experience is from an exporter that is located nearby in the product space. Our findings suggest that the contribution of prior trade experience of employees and the firm’s productivity as drivers of export market entry are of comparable magnitude.
    Keywords: export experience, export entry, labour mobility, learning-to-export
    JEL: F10 F14 J31
    Date: 2014–09–16
  12. By: Maiya Anokhina (National Research University Higher School of Economics, Moscow); Henry Penikas (National Research University Higher School of Economics, Moscow); Victor Petrov (National Research University Higher School of Economics, Moscow)
    Abstract: The increased role of financial institutions in the economy leads to a need to determine those that are systemically important. The bankruptcy of such institutions creates negative effects for the economy on the global scale. The aim of this article is to identify important financial coefficients that can be used in the methodology of identification of G-SIB and G-SII. Models of binary choice and models of ordered choice are used in this article, several models are highly predictive. Besides this paper has revealed several financial coefficients, that helped to find the probabilities of G-SIF for Russian banks and insurance companies.
    Keywords: Systemic importance; Basel committee, probability of default, financial coefficients; models of ordered choice, models of binary choice, global systemically important banks (G-SIB), insurance company.
    JEL: C70 E58 G21
    Date: 2014–09

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