nep-tra New Economics Papers
on Transition Economics
Issue of 2015‒03‒13
seventeen papers chosen by
J. David Brown
United States Census Bureau

  1. Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation By Filer, Randall K; Hanousek, Jan; Lichard, Tomáš
  2. The Evolution of Conflict Regulation in Private International Law of Russia and Poland By Natalia Yu. Erpyleva
  3. Regional Inflation, Financial Integration and Dollarization By de Haas, R.; Brown, M.; Sokolov, V.
  4. Sovereign Default Risk and State-Owned Bank Fragility in Emerging Markets By Deev, Oleg; Hodula, Martin
  5. Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China By Chang-Tai Hsieh; Zheng (Michael) Song
  6. Decomposing the effect of height on income in China: The role of market and political channels By Eiji Yamamura; Russell Smyth; Yan Zhang
  7. Mechanization outsourcing clusters and division of labor in Chinese agriculture: By Zhang, Xiaobo; Yang, Jin; Reardon, Thomas Anthony
  8. Institutional Approaches to The Development of Solid Waste Treatment and Its Staffing in the Russian Federation By Vasiliy Rud’; Serguey Trukhachev
  9. Do bank loans and local amenities explain Chinese urban house prices By Daisy J. Huang; Charles Ka Yui Leung; Baozhi Qu
  10. The Limits of Lending : Banks and Technology Adoption Across Russia By Bircan, Cagatay; de Haas, R.
  11. Rural household income mobility in transitional China: Evidence from China Household Income Project By Yang, Sui
  12. Assessing the CNH-CNY pricing differential: role of fundamentals, contagion and policy By Michael Funke; Chang Shu; Xiaoqiang Cheng; Sercan Eraslan
  13. Interactions between policy effects, population characteristics and the tax-benefit system: An illustration using child poverty and child related policies in Romania and the Czech Republic By Avram, Silvia; Militaru, Eva
  14. A DSGE Model for China’s Monetary and Macroprudential Policies By Sinclair, Peter; Sun, Lixn
  15. In the shadow of the Gulag: worker discipline under Stalin By Miller, Marcus; Smith, Jennifer C.
  16. Institutional Deficit and Health Outcomes in Post-Communist States By Vladimir A. Kozlov; Dina Y. Balalaeva
  17. Boosting Productivity in Russia: Skills, Education and Innovation By Lilas Demmou; Andreas Wörgötter

  1. By: Filer, Randall K; Hanousek, Jan; Lichard, Tomáš
    Abstract: We develop an estimator of unreported income that relies on much more flexible identifying assumptions than those underlying previous estimators of the shadow economy using household-level data. Assuming only that evading households have a higher consumption-income gap than non-evaders in surveys, an endogenous switching model with unknown sample separation enables the estimation of both the probability of hiding income and the expected amount of unreported income for each household. Using data from Czech and Slovak household budget surveys, we find the size of the shadow economy to be substantially larger than estimated using other techniques. These results are robust under a number of alternative specifications.
    Keywords: consumption-income gap; tax evasion; underreporting
    JEL: H26 O17
    Date: 2015–03
  2. By: Natalia Yu. Erpyleva (National Research University Higher School of Economics)
    Abstract: The present article examines the evolution of conflict regulation in the private international law of Russia and Poland. The author identifies the concept, structure and types of conflict rules, stressing that the conflict of laws is the most important category of private international law. A detailed classification of the types of connecting factor formulas under which connecting factors of bilateral conflict rules are formed is undertaken. The detailed analysis of conflict rules contained in Russian and Polish legislation set forth mainly in the Civil Code of the Russian Federation and the Law of Poland “On Private International Law” is conducted with the help of the comparative and formal-logical methods of research. The author also scrutinizes different conflict rules contained in the Treaty between Russia and Poland on legal assistance and legal relations in civil and criminal matters. The author concludes that modern conflict regulation in Russia and Poland is in accordance with those trends in private international law, which can be seen through the prism of the international dimension.
    Keywords: Private International Law, conflict of laws rules, conflict regulation, connecting factor formulas, domestic legislation, international treaties
    JEL: K33
    Date: 2015
  3. By: de Haas, R. (Tilburg University, Center For Economic Research); Brown, M. (Tilburg University, Center For Economic Research); Sokolov, V.
    Abstract: We exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the domestic currency and financial dollarization. Our results show that regions with higher inflation experience an increase in the dollarization of household deposits and a decrease in the dollarization of loans to households and to firms in non-tradable sectors. The impact of inflation on credit dollarization is weaker in regions with less integrated banking markets. This suggests that the currency-portfolio choices of households and firms may be constrained by the asset-liability management of banks.
    Keywords: Financial dollarization; Financial Integration; regional inflation
    JEL: E31 E42 E44 F36 G21 G22 G24
    Date: 2015
  4. By: Deev, Oleg; Hodula, Martin
    Abstract: In this paper we investigate the interdependence of the sovereign default risk and banking system fragility in two major emerging markets, China and Russia, using credit default swaps as a proxy for default risk. Both countries’ banking industries have strong ties with their governments and public sector, even after a series of significant reforms in the last two decades. Our analysis is built on the case studies of each country’s two biggest banks. We employ bivariate vector autoregressive (VAR) and vector error correction (VECM) framework to analyse the short- and long-run dynamics of the chosen CDS prices. We use Granger causality to describe the direction of the discovered dynamics. We find evidence of a stable long-run relationship between sovereign and bank CDS spreads in the chosen time period. The more stable relationship is found in cases, where biggest state-owned universal banks in emerging markets are closely managed by the government. But the fragility of those banks does not directly affect the state of public finance. However, in cases, where state-owned banks directly participate in large governmental projects, the banking fragility may result in deteriorations of state funds, while raising the risk of sovereign default.
    Keywords: sovereign default risk, bank default risk, CDS, emerging markets, risk transfer, financial stability
    JEL: G18 G21
    Date: 2014–12
  5. By: Chang-Tai Hsieh; Zheng (Michael) Song
    Abstract: Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state also created many new and large firms. We use detailed firm-level data to show that from 1998 to 2007, (i) state-owned firms that were closed were smaller and had low labor and capital productivity; (ii) the labor productivity of state-owned firms converged to that of private firms; (iii) the capital productivity of state-owned firms remained significantly lower than that of private firms; and (iv) total factor productivity (TFP) growth of state-owned firms was faster than that of private firms. We find the reforms of the state sector were responsible for 20 percent of aggregate TFP growth from 1998 to 2007.
    JEL: N15 O0
    Date: 2015–03
  6. By: Eiji Yamamura; Russell Smyth; Yan Zhang
    Abstract: It is well known that height is positively associated with earnings. Based on individual level data, this paper investigates the channels through which height influences income in China. Our first key finding is that taller people are more likely to become members of the Communist Party, resulting in an increase in their income level. We label this the height premium in earnings through the political channel. Second, controlling for the political channel of the height premium, height is positively associated with income in the labor market. We label this the height premium through the market channel. Third, the height premium in earnings through the market channel is larger than that through the political channel.
    Date: 2015–03
  7. By: Zhang, Xiaobo; Yang, Jin; Reardon, Thomas Anthony
    Abstract: Most of the poor in the developing countries are smallholder farmers. Improving their productivity is essential for reducing poverty. Despite small landholdings, a high degree of land fragmentation, and rising labor costs, agricultural production in China has steadily increased. If one treats the farm household as the unit of analysis, it would be difficult to explain the conundrum. When seeing agricultural production from the lens of division of labor, the puzzle can be easily solved. In response to rising labor costs, farmers outsource some power-intensive stages of production, such as harvesting, to specialized mechanization service providers, which are often clustered in a few counties and travel throughout the country to harvest crops at very competitive service charges. Through such an arrangement, smallholder farmers can stay viable in agricultural production.
    Keywords: Agriculture, mechanization, microeconomics, Wages, Economic development, lewis turning point, outsource,
  8. By: Vasiliy Rud’ (Saint-Petersburg Polytechnical University); Serguey Trukhachev (Department of Economics, Lomonosov Moscow State University)
    Abstract: Research, the results of which will be discussed in the present report were obtained in the framework of the Commission under the President of the Russian Federation for Modernization and Technological Development of Russia's Economy. Key issues affecting the management of the flow of all types of waste in Russia are: A huge number of unsorted household waste and unprocessed Extremely high yield landfill business and its criminal Lack of waste treatment business Possibility of selling the energy received from the recycling can not be considered as an incentive for the development of business Building regulations do not provide for the installation of systems for separate collection of household waste Public services and private investors are not able to effectively solve the problem of eliminating the effects of pollution of waste production and consumption with the formation of an efficient, cost-effective and environmentally sound waste management industry. It is necessary to pay more attention to not direct support projects on waste recycling, and introduce restrictive measures for the development of businesses not harmless to the garbage. We need to develop a "roadmap" of joint actions of government and business to create a national market for emissions trading of greenhouse gas emissions on the basis of voluntary commitments by companies to reduce them. As a result of the work done has been formulated for a number of assignments signed by the President of the Russian Federation .
    Keywords: municipal solid management, public-private partnership, institutionalism, project management.
    JEL: D00 D02
    Date: 2015–03
  9. By: Daisy J. Huang; Charles Ka Yui Leung; Baozhi Qu
    Abstract: Based on Chinese city-level data from 1999 to 2012 and controlling for geological, environmental, and social diversity, this study suggests that credit plays a significant role in driving up house prices after the Great Recession, whereas property prices only influence bank lending before 2008. Local amenities such as higher education, green infrastructure, healthcare, and climate also positively affect house prices. Moreover, the impacts of bank loans on housing prices tend to be related to the level of amenities, suggesting an integrated approach (i.e. combining macroeconomic and urban economic variables) of housing market for the future research.
    Date: 2015–03
  10. By: Bircan, Cagatay; de Haas, R. (Tilburg University, Center For Economic Research)
    Abstract: We exploit historical and contemporaneous variation in local credit markets across Russia to identify the impact of credit constraints on firm-level innovation. We find that access to bank credit helps firms to adopt existing products and production processes that are new to them. They introduce these technologies either with the help of suppliers and clients or by acquiring external know-how. We find no evidence that bank credit also stimulates firm innovation through in-house R&D. This suggests that banks can facilitate the discussion of technologies within developing countries but that their role in pushing the technological frontier is limited.
    Keywords: Credit Constraints; firn innovation; technological change
    JEL: D22 G21 O12 O31
    Date: 2015
  11. By: Yang, Sui
    Abstract: Based on China Household Income Project rural data, this paper aims to study the changes of rural household income mobility in transitional China. The results show that with the economic reform and development, income mobility between 2007 and 2009 was mu
    Keywords: income mobility, inequality, rural China
    Date: 2015
  12. By: Michael Funke; Chang Shu; Xiaoqiang Cheng; Sercan Eraslan
    Abstract: Renminbi internationalisation has brought about an active offshore market where the exchange rate frequently diverges from the onshore market. Using extended GARCH models, we explore the role of fundamentals, global factors and policies related to renminbi internationalisation in driving the pricing differential between the onshore and offshore exchange rates. Differences in the liquidity of the two markets play an important role in explaining the level of the differential, while rises in global risk aversion tend to increase the differential's volatility. On the policy front, measures permitting cross-border renminbi outflows have a particularly discernible impact in reducing the volatility of the pricing gap between the two markets.
    Keywords: renminbi exchange rates, China, onshore and offshore markets, GARCH models
    Date: 2015–02
  13. By: Avram, Silvia; Militaru, Eva
    Abstract: We investigate the impact of the Romanian and Czech family policy systems on the income distribution and poverty risk of families with children. We focus on separating out the effects of the policy design itself, size of the benefits and the interaction between policies and population characteristics. We find that interactions between population characteristics, the wider tax benefit system and child related policies are pervasive and large. Both population characteristics and the wider tax-benefit environment can dramatically alter the antipoverty effect of a given set of policies.
    Date: 2015–03–04
  14. By: Sinclair, Peter; Sun, Lixn
    Abstract: This paper develops a calibrated DSGE model for simulating China’s monetary policy and macroprudential policy. The empirical results show, first, that the interest rate is a better instrument for China’s monetary policy than the required reserve ratio when the central bank is solely concerned by the price stability; second, that the loan-to-value (LTV) ratio is a very useful macroprudential tool for China’s financial stability, and the required reserve ratio could be used as an instrument for both objectives. Whether macroprudential policy complements or conflicts with monetary policy depends upon the instruments choices of two policies. Our policy experiments suggest three combination choices of instruments for China’s monetary and macroprudential policies.
    Keywords: DSGE Model, Monetary Policy, Macroprudental Policy, China’s Economy
    JEL: E5 E6 G1
    Date: 2014–05
  15. By: Miller, Marcus (University of Warwick); Smith, Jennifer C. (University of Warwick)
    Abstract: An ‘efficiency wage’ model developed for Western economies is reinterpreted in the context of Stalin’s Russia, with imprisonment – not unemployment – acting as a ‘worker discipline device’. The threat of imprisonment allows the state to pay a lower wage outside the Gulag than otherwise, thereby raising the “surplus” left over for investment: this externality provides a reason for coercion over and above the direct productivity of those in custody. Just how credible the threat of imprisonment was under Stalin is documented using archival data now available; but the enormous scale of random imprisonment involved is, we argue, attributable not to economic factors but to Stalin’s insecurity in the absence of a legitimate process for succession. We develop a model of demand and supply for industrial labour in such a command economy. To get more resources for investment or war, the state depresses the level of real wages; to avoid incentive problems in the wider economy, the harshness of prison conditions can be intensified. This is the logic of coercion we analyse.
    Keywords: Labour discipline, asymmetric information, efficiency wage, Soviet Union, Stalin
    Date: 2015
  16. By: Vladimir A. Kozlov (National Research University Higher School of Economics); Dina Y. Balalaeva (National Research University Higher School of Economics)
    Abstract: In this paper we explore political-economic determinants of health. We draw upon the unique natural experiment of post-communist transitions to show the effect on health (measured as life expectancy and cause-specific mortality) of the interaction between institutions for political (democratic rules) and economic (free market entry) competitiveness. To analyze this relationship empirically, we employ panel regression analysis with country and time fixed effects. We find that, ceteris paribus, political and economic institutions exert cumulative positive impact upon health (even if their separate effects are negative or insignificant). One potential causal pathway is that political-economic liberalization increases certainty and people start investing in their health. Our findings are highly relevant to other countries that experience similar reforms
    Keywords: Democratization, Liberalization, Institutions, Mortality, Stress, Post-communist states
    JEL: P36 I15 J11
    Date: 2015
  17. By: Lilas Demmou; Andreas Wörgötter
    Abstract: The labour market in Russia is very flexible. Firms adjust to economic shocks through wage cuts, working hour reductions and minimisation of non-wage labour costs. Workers react by changing jobs. This results in a high and stable overall employment rate, but also high wage inequality, informality and labour turnover, which limits incentives for firms to invest in human capital and productivity improvements.<P> While educational attainment is very high, the education system needs to be strengthened to respond to the needs of a skill-based economy. School-employer cooperation is low and opportunities for higher education are unequally distributed. Adequate funding for education institutions is not assured everywhere while inefficiencies persist.<P> Private spending on innovation is very low and Russia underperforms in terms of scientific outputs and patents. Support for low-tech innovation and technology adoption, especially among SMEs is narrow because of a bias towards large and high-tech projects, which however are only loosely related to Russian manufacturing capacity. Reform of the public R&D sector is incomplete, notably with respect to strengthening funding on a competitive basis.<P>Stimuler la productivité en Russie : Les compétences, l'éducation et l'innovation<BR>Le marché du travail en Russie est très flexible. Les entreprises s’ajustent face aux chocs économiques grâce à une réduction des salaires, des heures de travail, et des coûts non salariaux. Les travailleurs réagissent en changeant d'emploi. Il en résulte un taux d'emploi global élevé et stable, mais également un niveau élevé des inégalités salariales, de l’emploi informel et du taux de rotation de la main d’oeuvre, ce qui limite les incitations pour les entreprises à investir dans le capital humain et l'amélioration de la productivité. Bien que le niveau de scolarisation soit très élevé, le système d'éducation doit être renforcé pour répondre aux besoins d'une économie fondée sur les compétences. La coopération entre les entreprises et le système éducatif est faible et les opportunités d’accès à l’éducation supérieure sont inégalement réparties. Un financement adéquat des établissements d’enseignement n'est pas assuré sur l’ensemble du territoire alors que des zones d’inefficacités persistent. Les dépenses privées consacrées à l'innovation sont très faibles et les performances de la Russie en termes de production scientifiques et de brevets sont insatisfaisantes. Le soutien aux innovations à faible contenu technologique et à l'adoption des technologies, en particulier dans les PME, est faible en raison d'un biais en faveur des grands projets et des projets high-tech, qui ne sont cependant que faiblement liés aux capacités de production manufacturière russe. La réforme du secteur public de la R&D est incomplète, notamment en ce qui concerne le rôle joué par les financements accordés sur des principes de compétitivité.
    Keywords: human capital, education, innovation, active labour market policies, flexibility, inequality, PISA, VET, life-long learning, labour turnover, skills matching, collective bargaining, trade unions, unemployment benefits, prestations de chômage, adéquation des compétences, convention collective, capital humain, inégalités, PISA, politiques actives du marché du travail, innovations, rotation de la main d’oeuvre, enseignement et formation professionnelle, éducation, syndicats, flexibilité, formation continue
    JEL: I2 J21 J24 J31 J50 J60 O3
    Date: 2015–03–05

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