|
on Transition Economics |
| By: | Cull, Robert; Li, Wei; Sun, Bo (Board of Governors of the Federal Reserve System (U.S.)); Xu, Lixin Colin (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | We examine the role of firms' government connections, defined by government intervention in CEO appointment and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. We demonstrate that government connections are associated with substantially less severe financial constraints (i.e., less reliance on internal cash flows to fund investment), and that the sensitivity of investment to internal cash flows is higher for firms that report greater obstacles to obtaining external funds. We also find that those large non-state firms with weak government connections, likely the engine for innovation in the coming years in China, are especially financially constrained, due perhaps to the formidable hold that their state rivals have on financial resources after the 'grabbing-the-big-and-letting-go-the-small' privatization program in China. Our empirical results suggest that government connections play an important role in explaining Chinese firms' financing conditions, and provide further evidence on the nature of the misallocation of credit by China's dominant state-owned banks. |
| Keywords: | Financial constraints; investment; political connections; firm size; China; capital allocation; invest cash flow sensitivity |
| JEL: | G18 G21 G28 G38 O16 |
| Date: | 2015–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1129&r=tra |
| By: | ZhongXiang Zhang (College of Management and Economics, Tianjin University, Tianjin and School of Economics, Fudan University, Shanghai (China)) |
| Abstract: | Putting a price on carbon is considered a crucial step for China’s endeavor of harnessing the market forces to reduce its energy consumption and carbon emissions. Indeed, aligned with China’s grand experiment with low-carbon provinces and low-carbon cities in six provinces and thirty-six cities, the Chinese central government has approved the seven pilot carbon trading schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China turns to market forces and opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the five pilot trading schemes that have to comply with their emissions obligations by June 2014, and examines a wide range of design, implementation, enforcement and compliance issues related to China’s carbon trading pilots and their first-year performance. The article ends with drawing some lessons learned and discussing the options to evolve regional pilot carbon trading schemes into a nationwide carbon trading scheme. |
| Keywords: | Pilot Carbon Trading Schemes, Low-carbon Development, Environmental Taxes, Market Stabilization Mechanism, Carbon Offsets, Enforcement and Compliance, China |
| JEL: | H23 O13 P28 Q43 Q48 Q52 Q54 Q58 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2015.19&r=tra |
| By: | Guonan Ma |
| Abstract: | â?¢ Chinese monetary policy was excessively tight in 2014 but started loosening in late 2014, in an attempt to cushion growth, facilitate rebalancing, support reform and mitigate financial risk. â?¢ There are three main reasons for this policy shift. First, there is evidence that the Chinese economy has been operating below its potential capacity. Second, among the big five economies, Chinaâ??s monetary policy stance and broader financial condition both tightened the most in the wake of the global financial crisis, likely weighing on domestic growth. Third, a mix of easy monetary policy and neutral fiscal policy would serve China best at the current juncture, because it would support domestic demand and help with the restructuring of China's local government debts, while facilitating a move away from the soft dollar peg. â?¢ Such a warranted shift in monetary policy stance faces the challenges of uncertain potential growth, a more liberalised financial system, an evolving monetary policy framework, the legacy of excess leverage and a politicised policy debate. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:879&r=tra |
| By: | Fuest, Clemens; Liu, Li |
| Abstract: | Does ownership affect the way firms react to corporate taxation? This paper exploits key features of recent corporate tax reforms in China to shed light on the differential impact of taxation on firms under different ownership regimes including private, collectively owned and state owned companies. Employing a difference-in-difference estimation approach, we find that the increase in the deductibility of wage costs in 2006 has led to a sizable increase of wages per worker in private firms and an even larger increase in collective-owned enterprises. In contrast, there is no significant wage response in state owned enterprises. The decrease in the statutory tax rate for domestic firms since 2008 has induced collectivley owned enterprises and private firms to reduce debt while there is no significant response SOEs. Our results also suggest that the 2008 reform has reduced tax induced investment round tripping through Hong Kong, Macao and Taiwan. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15023&r=tra |
| By: | Pothen, Frank; Fink, Kilian |
| Abstract: | We investigate why governments restrict exports of exotic raw materials taking rare earth elements as a case study. Trade restrictions on exotic materials do not have immediate macroeconomic effects. Relocating rare earth intensive industries is found to be the main reason behind China's export barriers. They are part of a more extensive strategy aiming at creating comparative advantages in these sectors and at overcoming path dependencies. Moreover, export barriers serve as a second-best instrument to reduce pollution and to slow down the depletion of exhaustible resources. Growing domestic rare earth consumption renders those increasingly ineffective. Rising reliance on mine-site regulation indicates that this fact is taken into account. Rare earth extraction is dominated by a few large companies; the demand side is dispersed. That speaks against successful lobbying for export restrictions. It appears as if the export barriers are set up to compensate mining firms. |
| Keywords: | Rare Earths,Export Restrictions,Political Economy |
| JEL: | Q37 Q38 D78 P26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15025&r=tra |
| By: | Francesco Bartolucci; Aleksandra Baschina; Giovanni S. F. Bruno; Olga Demidova; Marcello Signorelli (-) |
| Abstract: | A growing economic literature regards the analysis of job satisfaction; however, as for young people the investigations are still scarce. In this paper we analyse job satisfaction among Russian young workers by using the data collected for four items, the first of which concerns the general satisfaction about the job; the other three items concern specific aspects of job satisfaction with respect to work condition, earning, and opportunity for professional growth. The corresponding response variables are categorical with five ordered categories, from “absolutely unsatisfied” to “absolutely satisfied”. The longitudinal dataset also contains personal information about the respondents (gender, age, marital status, number of children, educational level, etc.). We estimate ordered logit models of job satisfaction with individual fixed effects for a panel data of Russian young workers, carrying out separate analyses for the general job satisfaction variable and three variables on specific aspects of job satisfaction. If wages adjusted to fully compensate workplace disamenities, we would expect that differences in job satisfaction across individuals would not be systematically related to wage differentials, ceteris paribus. But this is not the case for our panel: for all but one of the samples considered there is at least one job satisfaction variable with a significantly positive wage effect. We, therefore, interpret this result as a failure of the theory of compensating wage differentials in the Russian youth labour market. There is the interesting exception, though, that compensating wage differentials do seem at work among the older subjects in the panel. Our estimates also show strong gender and location effects. |
| Keywords: | job satisfaction, young people, Russia |
| JEL: | J28 J81 |
| Date: | 2015–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:crj:dpaper:7_2015&r=tra |
| By: | Huai-Long Shi (ECUST); Zhi-Qiang Jiang (ECUST); Wei-Xing Zhou (ECUST) |
| Abstract: | This paper reexamines the profitability of loser, winner and contrarian portfolios in the Chinese stock market using monthly data of all stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange covering the period from January 1997 to December 2012. We find evidence of short-term and long-term contrarian profitability in the whole sample period when the estimation and holding horizons are 1 month or longer than 12 months and the annualized returns of contrarian portfolios increases with the estimation and holding horizons. We perform subperiod analysis and find that the long-term contrarian effect is significant in both bullish and bearish states while the short-term contrarian effect disappears in bullish states. We compare the performance of contrarian portfolios based on different grouping manners in the estimation period and unveil that decile grouping outperforms quintile grouping and tertile grouping, which is more evident and robust in the long run. Generally, loser portfolios and winner portfolios have positive returns and loser portfolios perform much better than winner portfolios. Both loser and winner portfolios in bullish states perform better than those in the whole sample period. In contrast, loser and winner portfolios have smaller returns in bearish states in which loser portfolio returns are significant only in the long term and winner portfolio returns become insignificant. These results are robust to the one-month skipping between the estimation and holding periods and for the two stock exchanges. Our findings show that the Chinese stock market is not efficient in the weak form. These findings also have obvious practical implications for financial practitioners. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1505.00328&r=tra |
| By: | Enrico Marelli; Elena Vakulenko (-) |
| Abstract: | Youth unemployment is a serious problem in many European countries. In the first part of the paper, we consider the aggregate trends in some EU countries and in Russia; we especially investigate the recent period after the global crisis and the Great Recession. We then consider the different types of determinants, including macroeconomic conditions, structural determinants, labour market institutions and regulations. However, the focus of our analysis is on the role played by individual and family determinants such as age, gender, education level, marital status, health, household income, housing conditions. The econometric part of the paper makes use of Eurostat micro-level data EU-SILC for Italy and RLMS-HSE data set for Russia. We use a Heckman probit model to estimate the unemployment risk of young people during the period 2004-2011. Our main research question is to explain the probability of being unemployed for young people in terms of their personal characteristics and compare these outcomes with results for the same model for adults. We take also into account some macro variables, such as living in urban areas or the regional unemployment rate. The results are of interest, since the two countries have quite different labour market institutions, besides having different levels of youth unemployment. However, most of the explanatory variables act in the same direction in both countries and it is interesting to compare the relative size of such effects, which we measure through the average partial effects. |
| Keywords: | youth unemployment, individual determinants of unemployment, regional unemployment, Heckman probit. |
| JEL: | J64 |
| Date: | 2015–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:crj:dpaper:3_2015&r=tra |
| By: | Nguyen Van Phuong |
| Abstract: | Vietnam has been implementing the export-oriented economy, in which the central bank of Vietnam, well-known as the State Bank of Vietnam (SBV), adopted the managed float exchange rate regime in 1990. Therefore, the exchange rate movement plays an important role in stimulating the Vietnamese export activities. By applying the long-run SVAR model, pioneered by Blanchard and Quah (1989), this research examines how the real and nominal shocks impact the nominal and real exchange rate (USD/VND) in Vietnam. Based on monthly data concerning USD/VND exchange rate and, the price levels in Vietnam and the United States from May 1995 to December 2013, our empirical results reveal that: the real shock primarily leads the real and nominal exchange rate (USD/VND) to fluctuate over time. Meanwhile, the nominal shock has a temporary effect on the movement in the real exchange rate in Vietnam. Our research also finds that the long-run Purchasing Power Parity (PPP) does not hold in Vietnam. |
| Keywords: | The State Bank of Vietnam, the exchange rate, unit root test, SVAR. |
| JEL: | E60 E69 |
| Date: | 2015–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2015-1090&r=tra |
| By: | Wang, Li; Menkhoff, Lukas; Schröder, Michael; Xu, Xian |
| Abstract: | This paper shows that politicians' pressure to climb the career ladder increases bank risk exposure in their region. Chinese local politicians are set growth targets in their region that are relative to each other. Growth is stimulated by debt-financed programs which are mainly financed via bank loans. The stronger the performance incentive the riskier the respective local bank exposure becomes. This effect holds primarily for local banks which are under a certain degree of control of local politicians and it has increased with the release of recent stimulus packages requiring local co-financing. |
| Keywords: | Bank Lending,Bank Risk Exposure,Local Politicians,Promotion Incentives |
| JEL: | G21 G23 H74 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15026&r=tra |
| By: | O'Toole, Conor; Morgenroth, Edgar; Ha, Thi Thu Thuy |
| Abstract: | Our research tests the difference in investment efficiency between state-owned enterprises (SOEs) and private firms and then evaluates the effect of privatisation and equitisation policies on the investment efficiency of former state owned enterprises (SOEs). We use a novel dataset from Viet Nam which covers large and non-listed SMEs across the construction, manufacturing, and services sectors. Our methodology uses a structural model to test the relationship between Tobin's Q and capital spending. We find no evidence of investment spending being linked to marginal returns by SOEs across all sectors and size classes. However, former SOEs which have been privatised and equitized with a minority state shareholding display positive links between Q and investment. In fact, the link is stronger for these firms than for private firms.498 |
| Keywords: | investment/manufacturing/Policy/Services |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp498&r=tra |
| By: | Vidakovic, Neven |
| Abstract: | This paper creates a mathematical model in which the banks are faced with two optimization problems. The first optimization problem is how to optimize their behavior in order to maximize profits. The second optimization is how to optimize the structure of liabilities in order to have minimum regulation. The regulatory regime is imposed by the central bank. This paper investigates the behavior of banks when faced with high regulation and provides a theoretical framework for analysis of the impact of high regulation on the choice of the bank’s portfolio structure. The model shows the banks have a learning framework in which the banks learn the central bank’s true model and adjust their credit policies to existing regulatory regime. However this adjustment also creates changes in the choice of credit. |
| Keywords: | credit, central bank regulation, dynamic programming, bayesian learning |
| JEL: | C61 C73 E51 E58 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63929&r=tra |
| By: | Zsombor Cseres-Gergely (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences); Agota Scharle (Budapest Institute); Arpad Foldessy (University College London) |
| Abstract: | The paper measures the impact of a wage subsidy for long term unemployed workers, using a large administrative dataset from Hungary. While such subsidies are often promoted as an efficient way to speed up the recovery of the economy or to increase demand for low skilled workers, existing evidence on their employment effects is somewhat inconclusive, especially in the case of transition economies. We examine employment outcomes in various model specifications. Results show a significant impact for men aged over 50, which is driven by the subgroup of those with lower secondary education. The subsidy for jobseekers with at least secondary education and aged over 50 is cost effective for men. We also present some evidence that this is not merely caused by substitution across various sub-groups of jobseekers. |
| Keywords: | wage-subsidy, evaluation, older workers |
| JEL: | J38 J68 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:has:bworkp:1503&r=tra |