nep-tra New Economics Papers
on Transition Economics
Issue of 2015‒06‒27
sixteen papers chosen by
J. David Brown
United States Census Bureau

  1. A lesson in market contestability : calculating the cost of Chinese state intervention in iron ore price negotiations By Luke Hurst
  2. Science-industry-linkages in China: What drives MNCs to collaborate with Chinese academic partners and what makes them successful By Tagscherer, Ulrike
  3. Self-Protection Investment Exacerbates Air Pollution Exposure Inequality in Urban China By Siqi Zheng; Cong Sun; Matthew E. Kahn
  4. Trade, Migration and Productivity: A Quantitative Analysis of China By Trevor Tombe; Xiaodong Zhu
  5. The Heterogeneous Impact of Pension Income on Elderly Living Arrangements: Evidence from China's New Rural Pension Scheme By Cheng, Lingguo; Liu, Hong; Zhang, Ye; Zhao, Zhong
  6. China?s Carbon Emissions Report 2015 By Zhu Liu
  7. Hayek, local information, and the decentralization of state-owned enterprises in China By Huang,Zhangkai; Li,Lixing; Ma,Guangrong; Xu,L. Colin
  8. Magical transition ? intergenerational educational and occupational mobility in rural China : 1988?2002 By Emran,Shahe; Sun,Yan - EAPCE
  9. Seeing is learning: Vision care for rural and migrant children in China By Zhang, Yanjie; Glauben, Thomas
  10. Identifying Odometer Fraud: Evidence from the Used Car Market in the Czech Republic By Montag, Josef
  11. Regional Effects of Export Tax Rebate on Exporting Firms: Evidences From China By Tan, Yong; An, Liwei; Hu, Cui
  12. The One-Child Policy and Household Savings By Taha Choukhmane; Nicolas Coeurdacier; Keyu Jin
  13. Empirical analysis of foreign direct investments at NUTS 2 region, in European Union and Romania By Antonescu, Daniela
  14. Kosovo's transformation into a market economy By Nezaj, Novitet Xh.
  15. VAT, a tax with great impact on state revenues in Albania By Klaudeta Merollari
  16. Financialisation and the Financial and Economic Crises: The Case of Estonia By Egert Juuse; Rainer Kattel

  1. By: Luke Hurst (East Asian Bureau of Economic Research)
    Abstract: This article analyses the motivation and impact of the 2009 intervention of the China Iron and Steel Association (CISA) in benchmark price negotiations. The impact of the transition from benchmark pricing to a spot market mechanism, which was a consequence of the CISA’s intervention, is examined using a constrained bilateral monopoly model to calculate the financial impact of switching pricing mechanisms on Australian exporters and Chinese importers.
    Keywords: iron ore, China
    JEL: F13 L16 L11
    Date: 2015–04
  2. By: Tagscherer, Ulrike
    Abstract: [Motivation and background ...] The presented report describes and analyzes the results of a survey among 30 foreign invested enterprises in China in 2014. The survey was conducted once before in 2011/2012 and the update in 2014 was specifically designed to create a better understanding of the recent dynamics in innovation in China, especially in the collaboration between MNCS and Chinese universities and research institutes. The main questions the survey wants to answer are: who are the key drivers for collaboration, what are the key success factors and which are the most recent developments in these industry-science-collaborations. The survey also answers the question of what policy makers could do to increase the collaboration and to reinforce spill-over effects into the Chinese science system as well as to create a supportive environment for MCNs R&D activities in China.
    Date: 2015
  3. By: Siqi Zheng; Cong Sun; Matthew E. Kahn
    Abstract: Urban China’s high levels of ambient air pollution both lowers quality of life and raises mortality risk. China’s wealthy have the purchasing power to purchase private products such as air filters that allows them to offset some of the pollution exposure risk. Using a unique data set of Internet purchases, we document that households invest more in masks and air filter products when ambient pollution levels exceed key alert thresholds. Richer people are more likely to invest in air filters, which are much more expensive than masks. Our findings have implications for trends in inequality in human capital accumulation and in quality of life inequality in urban China.
    JEL: Q53 Q55 R21
    Date: 2015–06
  4. By: Trevor Tombe; Xiaodong Zhu
    Abstract: We study how misallocation due to goods- and labour-market frictions affect aggregate productivity in China. Combining unique data with a general equilibrium model of internal and international trade, and migration across regions and sectors, we quantify the magnitude and consequences of trade and migration costs. The costs were high in 2000, but declined afterward. The decline accounts for roughly two-fifths of aggregate labour productivity growth in China between 2000 and 2005. Reductions in internal rather than international costs are particularly important. Despite the decline, migration costs are still high and potential gains from further reform are large.
    Keywords: migration, internal trade, spatial misallocation, gains from trade, aggregate productivity, China
    JEL: F1 F4 R1 O4
    Date: 2015–06–20
  5. By: Cheng, Lingguo (Shanghai University of Finance and Economics); Liu, Hong (Central University of Finance and Economics); Zhang, Ye (Nanjing University); Zhao, Zhong (Renmin University of China)
    Abstract: This paper investigates the impact of pension income on living arrangements of the elderly. Taking advantage of a unique opportunity due to the recent establishment and expansion of the social pension system in rural China, we explicitly address the endogeneity of pension status and income through a fixed-effect model with instrumental variable approach by exploiting exogenous time variation in the program implementation at county level. We find an overall positive effect of pension income on independent living as well as considerable heterogeneity. The elderly with easy access to their adult children, possessing higher financial capacity, in less long-term care and psychological need, and having more education are more likely to live independently after receiving pension income. Our results confirm that independent living is a normal good, but highlight that living arrangement is multidimensional in rural China.
    Keywords: pension income, living arrangements, heterogeneity, China
    JEL: J12 H55 I38
    Date: 2015–06
  6. By: Zhu Liu
    Abstract: In 2012 China was the largest contributor to carbon emissions from fossil fuel burning and from cement production. With 8.50 Gt CO2 in in carbon emissions from fossil burning and cement production in 2012, China was responsible for 25% of global carbon emissions. China?s cumulative emissions from fossil fuel burning and cement production from 1950-2012 were 130 Gt CO2. The magnitude and growing annual rate of growth of China?s carbon emissions make this country the major driver of global carbon emissions and thus a key focus for efforts in emissions mitigation. This report presents independent data on China?s carbon emissions from 1950-2012, and provides a basis to support mitigation efforts and China?s low-carbon development plan.
    Date: 2015–01
  7. By: Huang,Zhangkai; Li,Lixing; Ma,Guangrong; Xu,L. Colin
    Abstract: Hayek argues that local knowledge is a key for understanding whether production should be decentralized. This paper tests Hayek?s predictions by examining the causes of the Chinese government?s decision to decentralize state-owned enterprises. Since the government located closer to a state-owned enterprise has more information over that enterprise, a greater distance between the government and the enterprise should lead to a higher likelihood of decentralization. Moreover, where communication costs and the government?s uncertainty over an enterprise?s performance are greater, the government is more likely to decentralize enterprises so that it can better utilize local information. This paper finds empirical support for these implications.
    Keywords: E-Business,Knowledge Economy,Economic Theory&Research,Debt Markets,Municipal Financial Management
    Date: 2015–06–22
  8. By: Emran,Shahe; Sun,Yan - EAPCE
    Abstract: This paper presents evidence on intergenerational educational and occupational mobility in rural China over a period of 14 years (1988?2002). To understand whether the estimated inter-generational persistence can be driven solely by unobserved heterogeneity, biprobit sensitivity analysis and heteroskedasticity-based identification are implemented. The empirical results show that there have been dramatic improvements in occupational mobility from agriculture to nonfarm occupations; a farmer?s children are not any more likely to become farmers in 2002, although there was significant persistence in occupation choices in 1988. In contrast, the intergenerational mobility in educational attainment has remained largely unchanged for daughters, and it has deteriorated significantly for sons. There is strong evidence of a causal effect of parental education on a son?s schooling in 2002. The paper provides some possible explanations for the dramatic divergence between occupational and educational mobility in rural China from 1988 to 2002.
    Keywords: Education For All,Education and Society,Effective Schools and Teachers,Access&Equity in Basic Education,Primary Education
    Date: 2015–06–22
  9. By: Zhang, Yanjie; Glauben, Thomas
    Abstract: Uncorrected vision is prevalent among rural children and those who migrate from rural areas to urban areas with their parents in China, of which more than 20 per cent are nearsighted. Since 2012 the Rural Education Action Program (REAP) has carried out the largest empirical vision care project ever conducted in China. More than 20,000 children in different parts of China have been screened and about 5,000 pairs of eyeglasses have been dispensed to those who are nearsighted. REAP has been able to create a comprehensive picture of vision care for rural and migrant children in China. The successfully implemented project so far has provided valuable lessons for treating vision problems. First, wearing eyeglasses can remarkably improve children's educational performance and self-confidence. Second, in contrast to widespread opinion in rural China, eyeglasses are by no means harmful to children's eyesight. Third, and in contrast to another myth, specific 'eye exercises' used as a traditional alternative to eyeglasses cannot slow the onset or progression of myopia. Finally, teacher incentives to encourage children to wear eyeglasses will improve rates of eyeglasses usage, help to overcome vision problems and thus lower educational barriers. Based on these findings, researchers of the project are currently working with local governments in rural China to incorporate vision care into the healthcare agenda.
    Date: 2015
  10. By: Montag, Josef
    Abstract: This paper investigates the presence of odometer fraud in the used-car market in the Czech Republic using a unique dataset of 250,000 car-sale ads. Alternative identification techniques are also discussed. However, selection into the market as well as the practice of rounding odometer readings---possibly strategic yet innocent---render the standard statistical tests unusable. A modification of the last-digit test, which was previously used to detect fraud in election and accounting data, is therefore developed and employed. The results suggest that suspicious patterns are more prevalent in the segment of cars imported from abroad. I also show that this methodology can be used at the firm-level, which may be of interest to authorities and market participants.
    Keywords: Used car market, odometer fraud, digit tests.
    JEL: K42 R40
    Date: 2015
  11. By: Tan, Yong; An, Liwei; Hu, Cui
    Abstract: In this paper, we extend the model of Melitz (2003) to separate the direct and indirect impact of an export tax rebate on the intensive margin of firm-level export sales at the sub-national level. The direct impact of the rebate is associated with a reduction of an exporting firm’s variable costs, while the indirect impact manifests itself through higher regional wages as a result of increased demand for local labor. First, the empirical results imply that a 1% rise in the export tax rebate rate increases the export sales among continuing exporters by 0.4% through the direct channel. Second, the same rebate increase reduces export sales among continuing exporters by 0.02% through indirect channel. Both effects are statistically significant, and are consistent with the model's predictions.
    Keywords: Export Tax Rebate, Regional Labor Market, Direct Impact, Indirect Impact
    JEL: D22 F10 F14 L10
    Date: 2015–06–21
  12. By: Taha Choukhmane (Yale University); Nicolas Coeurdacier (Département d'économie); Keyu Jin (London School of Economics and Political Science (LSE))
    Abstract: We investigate how the `one-child policy' has impacted China's household saving rate and human capital in the last three decades. In a life cycle model with endogenous fertility, intergenerational transfers and human capital accumulation, we show how fertility restrictions provide incentives for households to increase their offspring's education and to accumulate financial wealth in expectation of lower support from their children. Our quantitative OLG model calibrated to household level data shows that the policy significantly increased the human capital of the only child generation and can account for a third to 60% of the rise in aggregate savings. Equally important, it can capture much of the distinct shift in the level and shape of the age-saving profile observed from micro-level data estimates. Using the birth of twins (born under the one child policy) as an exogenous deviation from the policy, we provide an empirical out-of-sample check to our quantitative results; estimates on savings and education decisions are decidedly close between model and data.
    Keywords: Life Cycle Savings, Fertility, Human Capital, Intergenerational Transfers
    JEL: E21 D10 D91
    Date: 2014–09
  13. By: Antonescu, Daniela
    Abstract: Foreign Direct Investment (FDI) plays an important role in the development of national and regional economies and it has been considered a force for European Union integration, especially for developing regions. More, the FDI represent a key-tool for sustain development and economic growth at regional/local level. Foreign firms bring new technologies, knowledge and management skills, and local firms can learn from this. Therefore, the presence of foreign firms can improve region’s competitiveness, but fears can also be raised that foreign competitors crowd out local firms, and a net positive effect on the regional economy cannot be taken for granted. The understanding FDI determinants for development regions represent a field of interest both policy makers and investors because they are a particularly driven to market globalization. This study provides an empirical analysis of FDI at regional level (NUTS 2 regions) in European Union and Romania.
    Keywords: regional development, foreign direct investments, economic disparities
    JEL: F1 F15 R0 R3
    Date: 2015–06–19
  14. By: Nezaj, Novitet Xh.
    Abstract: This paper explores the development of Kosovo's transformation into a market economy. The first objective is to explore the transition from a centrally planned to an open market economy in Kosovo and to examine the challenges of this transformation over the years. In addition, the paper provides some insights and some quick snapshots of the legislation regarding competition law under the hybrid system of the UN mission and the national institutions of Kosovo. The second objective is to study institutional capacities and the degree of effectiveness of the institutions. Overall, this paper addresses the transition of legislation from the old approach to the new approach, and the beginnings of the Europeanisation of the market economy in Kosovo.
    Keywords: transition,market economy,competition rules,privatization,constitution,state capacities
    Date: 2015
  15. By: Klaudeta Merollari (Department of Finance-Accounting, Faculty of Economy, Fan S. Noli University, Korçë, Albania)
    Abstract: In an economy in transition that is moving toward a market economy, a question is raised: Will the tax policy reflect the changes? The answer of this question lies in an issue of vital importance for the future of the country that is the attraction of foreign investments, in a time when tax competition is increasing in the regional and global level. The development and prosperity of a country is closely related to the increasing number of investments and economic activities, and besides economic formulas should be taken in consideration also the importance of sensitivity of all collection and contributing tax structures. In this context, we don’t have to forget the very important issue of having not only a modern tax policy but also a modern tax administration. In the modern world the key to success is communication between politics and business, directly and indirectly, as a quite diplomatic process. In theoretical analysis of tax policy one of the requirements that is strongly supported by the IMF is the sustainability of the tax system which means no changes in tax laws. Tax sustainability is affected by the legal framework in order that tax administration consistently applies the tax legislation and its regulations. It should publish information on how to interpret and implement this legislation.
    Keywords: tax system, tax policy, fiscal indicators, state revenues, value added tax
    JEL: A10
    Date: 2015–06
  16. By: Egert Juuse (Tallinn University of Technology (TTU), Estonia); Rainer Kattel (Tallinn University of Technology (TTU), Estonia)
    Abstract: This study on Estonia examines the long-run changes between the financial and the non-financial sectors of the economy, and in particular the effects of financialisation on key variables / categories of the real economy as well as the their contribution to the financial crisis of 2007/08. The first part provides the background historical overview of last 20 years in Estonia with some descriptive statistics on GDP, growth contributions of the main demand aggregates, and the financial balances of the macroeconomic sectors since early 1990s, and it classifies the Estonian development path as following the ‘debt-led consumption’ one. The following chapters examine the effects of financialisation and their extent, accompanied by transition processes, on income distribution, financing of capital stock investments, consumption and current account dynamics in detail. The final parts deal with the elaboration on the causes of the financial and economic crisis as well as the policy response in Estonia.
    Keywords: current account balance, trade balance, income distribution, finance-dominated capitalism, transition economies, financialisation, financial and economic crisis, Estonia.
    JEL: D31 D33 D43 E25 E61 E64 E65 F40 F43 P20 P21 R21
    Date: 2014–12–01

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