nep-tra New Economics Papers
on Transition Economics
Issue of 2015‒08‒13
eighteen papers chosen by
J. David Brown
United States Census Bureau

  1. Has trade openness reduced pollution in China? By Sandra PONCET; Laura HERING; José DE SOUSA
  2. Banking efficiency in the Czech Republic and Slovakia using the DEA Window Analysis. By Iveta Palečková
  3. Global Financial Crisis, Ownership Change, and Corporate Governance Evolution: Firm-Level Evidence from Russia By Iwasaki, Ichiro
  4. The Competitive Earning Incentive for Sons: Evidence from Migration in China By Li, Wenchao; Yi, Junjian
  5. The rouble crisis and the Russian grain export controls By Glauben, Thomas; Götz, Linde; Koester, Ulrich
  6. Exploring pathways of regional technological development in China through patent analysis By Kroll, Henning
  7. Political Risk, Information and Corruption Cycles: Evidence from Russian Regions By Oleg Sidorkin; Dmitriy Vorobyev
  8. Between a rock and a hard place: International market dynamics, domestic politics and Gazprom's strategy By Andrei V. Belyi; Andreas Goldthau
  9. Understanding the Effects of Education on Health: Evidence from China By Huang, Wei
  10. A Comparison of Financial Performance of Czech Credit Unions and European Cooperative Banks By Matej Kuc; Petr Teply
  11. China’s electrical equipment manufacturing in the Global Value Chain: A GVC income analysis based on World Input-Output Database (WIOD) By Yingying Lu
  12. Research on Poverty in Transition Economies: A Meta-analysis on Changes in the Determinants of Poverty By Kumo, Kazuhiro
  13. Emerging Issues in Finance Sector Inclusion, Deepening, and Development in the People’s Republic of China By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  14. State-owned Enterprise Reforms in the TPP Negotiation: Is it a win-win for Vietnam? By LE Thi Anh Nguyet
  15. Subjective well-being across the lifespan in Europe and Central Asia By Bauer,Jan Michael; Levin,Victoria; Munoz Boudet,Ana Maria; Nie,Peng; Sousa-Poza,Alfonso
  16. Extended gravity model of Polish trade. Empirical analysis with panel data methods By Tomasz Brodzicki; Katarzyna Sledziewska; Dorota Ciolek; Stanislaw Uminski
  17. Innovation and internationalization. Evidence for Poland from a firm-level survey By Tomasz Brodzicki
  18. Bound To Lose, Bound To Win? The Financial Crisis and the Informal-Formal Sector Earnings Gap in Serbia By Blunch, Niels-Hugo

  1. By: Sandra PONCET (Université de Paris I); Laura HERING (FERDI); José DE SOUSA (FERDI)
    Abstract: We use recent detailed Chinese data on trade and pollution emissions to assess the environmental consequences of China’s integration into the world economy. We rely on a panel dataset covering 235 Chinese cities over the 2003-2012 period to see whether the environmental repercussions from trade openness depend on whether the latter concerns processing or ordinary activities. In line with our theoretical predictions, we find a negative and signicant effect of trade on emissions that is larger for processing trade and activities undertaken by foreign firms: the environmental gains from either ordinary trade activities or domestic firms are much lower, even though these today represent the main drivers of China’s export and import growth. This result suggests some caution regarding pollution prospects in the context of the declining role of processing trade.
    JEL: F10 F14 O14
    Date: 2015–07
  2. By: Iveta Palečková (Department of Finance and Accounting, School of Business Administration, Silesian University)
    Abstract: The aim of this paper is to apply the Data Envelopment Analysis (DEA) window analysis on the data of the Czech and Slovak commercial banks and to examine the banking efficiency of the Czech Republic and Slovakia during the period 2004-2013. The paper employed an extended DEA approach, specifically DEA window analysis for the efficiency assessment of commercial banks in the Czech Republic and Slovakia. It is based on panel data for the period from 2004 to 2013. In the Czech banking sector, the average efficiency under constant return to scale reached 66-79% and average efficiency under variable return to scale reached 77-90%. The most efficient bank were GE Money Bank and Sberbank. The lowest efficient bank was Československá obchodní banka. The group of large bank (Československá obchodní banka, Česká spořitelna and Komerční banka) was lower efficient than other banks in the banking sector. In Slovakia, the average efficiency under constant return to scale reached 77-91% and average efficiency under variable return to scale reach 83-94%. The most efficient banks were OTP, Postova banka, UniCredit Bank and Istrobanka. The lowest efficient banks were found Privatbanka and Citibank. Whereas during the period 2003-2008 the average efficiency was increasing, during the period 2010-2011 the average efficiency decreased as a result of financial crisis.
    Keywords: data envelopment analysis; window analysis; banking sector; Czech Republic; Slovakia; commercial bank
    JEL: G21 C50
    Date: 2015–07–31
  3. By: Iwasaki, Ichiro
    Abstract: In this paper, using panel data of industrial firms obtained from unique questionnaire surveys conducted all over the Russian Federation in 2005 and 2009, we trace structural change in corporate governance systems before and after the global financial crisis and empirically examine their determinants. We found that, during this period, Russian firms improved the quality of corporate governance across the entire industrial sector. Furthermore, our empirical evidence strongly supports a hypothesis regarding the relationship between outside ownership and board composition as well as that concerning the impact of outside directorship on the audit system. Meanwhile, our estimation results also indicate the possibility that the global financial crisis has brought about asymmetric changes, in the sense that it enhanced the independence of corporate boards, while it deteriorated the independence of the audit system, thus, partially rejecting our prediction with respect to the disciplinary effect of the crisis on the corporate governance system.
    Keywords: global financial crisis, ownership change, evolution of corporate governance, board composition, audit system, Russia
    JEL: D22 G01 G34 M42 P34
    Date: 2015–07
  4. By: Li, Wenchao (National University of Singapore); Yi, Junjian (National University of Singapore)
    Abstract: This paper first finds a clear pattern of child gender difference in family migration in China. Specifically, our estimates show that on average, the first child being a son increases the father's migration probability by 25.2 percent. We hypothesize that the family's competitive earning incentive for sons drives this child gender effect on family migration: parents migrate to earn more money in an attempt to improve their sons' relative standing in response to the ever-rising pressure in China's marriage market. This competitive-earning-incentive hypothesis is then supported by additional empirical evidence. We further find that, facing heavier financial pressure from the marriage market, parents spend less on their sons' education and more on marriage and buying houses and durable goods. This gender difference in resource allocation, together with the absentee-father problem resulting from paternal migration, may unexpectedly adversely affect boys' long-run human capital development in China.
    Keywords: competitive earning incentive, sex ratio, migration
    JEL: J11 J13 O15
    Date: 2015–07
  5. By: Glauben, Thomas; Götz, Linde; Koester, Ulrich
    Abstract: Since 1 February 2015, an additional tax has been levied on Russian wheat exports to reduce the recently strongly rising wheat exports. The aim is to dampen further increases in the already high domestic wheat prices and to stabilise bread prices. However, recent experiences in various countries as Ukraine, Kazakhstan, Serbia, and Russia show that grain export restrictions do little if anything to moderate bread prices. Poor people will also fail to profit from this governmental market intervention. Instead, grain export barriers will disconnect the Russian grain producers from the international markets while necessary investments in the grain sector decline which decreases food security. This form of protectionism by the government is ample cause for serious concern. Considering the current downswing in the Russian economy, the destabilisation of the strategically important grain sector will most certainly not improve the investment climate in Russia.
    Abstract: Seit dem 1. Februar 2015 werden russische Weizenexporte zusätzlich besteuert, um die jüngst stark angestiegenen Weizenexporte zu reduzieren. Ziel ist es, dem weiteren Ansteigen der bereits hohen inländischen Weizenpreise entgegenzuwirken und die Brotpreise zu stabilisieren. Erfahrungen der jüngeren Vergangenheit in verschiedenen Ländern, darunter in der Ukraine, in Kasachstan, Serbien und Russland selbst, zeigen jedoch, dass Getreideexportbeschränkungen nur geringfügig oder gar nicht zur Dämpfung von Brotpreisen beitragen. Auch ärmere Bevölkerungsschichten werden von diesen staatlichen Eingriffen nicht profitieren. Vielmehr führt dies zur Abkopplung der russischen Getreidewirtschaft von den internationalen Märkten, notwendige Investitionen in den Getreidesektor werden abnehmen und damit dem Ziel der Ernährungssicherung entgegenwirken. Man muss mit Sorge auf diese Form des staatlichen Protektionismus blicken. Gerade während der jetzigen Talfahrt der russischen Wirtschaft trägt eine Destabilisierung des strategisch wichtigen Getreidesektors sicherlich nicht zur Verbesserung des Investitionsklimas in Russland bei.
    Date: 2015
  6. By: Kroll, Henning
    Abstract: [Introduction] Over the course of the past two decades, China has evolved from a nation focused on production to a technologically dynamic one with the ambition to catch up with the world's leading economies by 2050 (Schwaag Serger and Breidne 2007; State Council (of the People's Republic of China) 2006). Since 2011, it has become the nation with largest annual patent output in the world (Reuters 2011). At the same time, however, China also remains a huge country in which substantive disparities continue to prevail (Kroll 2010; Liefner and Wei 2013). For a long time, talking about new technological trends and growing capacity in China was almost identical to talking about new devel-opments in Beijing, Guangdong, and Greater Shanghai. At the same time, this meant talking about two separate research systems, a public and an industrial one that were distinct, not only in terms of their legacy and internal logics (Motohashi 2008), but also in terms of their geographical representation (Kroll and Frietsch 2014; Kroll and Schiller 2010). As a result, meaningful knowledge transfer between these two systems only occurred in a limited number of 'islands of innovation', where regionally unique systems of co-operation had developed over the years (Kroll and Liefner 2008; Kroll and Schiller 2010). [...]
    Date: 2015
  7. By: Oleg Sidorkin; Dmitriy Vorobyev
    Abstract: Political budget cycles are a well-established phenomenon in which opportunistic politicians systematically adjust public policies prior to elections in order to attract a higher number of votes. We show that corrupt behavior of politicians also follows certain patterns, which are driven by electoral cycles. Based on Business Environment and Enterprise Performance Survey data, exploiting variation in the dates of surveys and in length and starting date of Russian regional governors' terms, we find that corruption levels, as perceived by firms operating in different regions of Russia, increases closer to the expected expiration date of a regional governor's term. We argue that the Russian political system allows governors to accumulate private information about their likelihood of remaining in office for another term. Therefore, they will know well in advance of elections if they continue in the office for the next term. We suggest that the accumulation of such information may serve as an explanation for the observed pattern of perceived corruption: if a governor gradually learns that he is leaving office once the current term has expired he has increasing incentives to engage in corrupt activities in order to accumulate wealth before he is out of the game. We formalize this idea with a simple theoretical model and test it. We find that in regions where incumbent governors are less likely to remain in office for the next term, corruption increases over their terms, while in regions where governors are more likely to remain in office, perceived corruption follows a decreasing trend.
    Keywords: corruption; political budget cycle; Russia;
    JEL: D73 O17 P26
    Date: 2015–05
  8. By: Andrei V. Belyi; Andreas Goldthau
    Abstract: Gazprom, Russian's prime state owned gas producer, is facing severe pressure stemming from international gas market dynamics, EU regulation and the Ukraine crisis. Slowing gas demand coupled with shifting pricing models and a persisting transit issue pose significant challenges for Gazprom's business going forward. Domestic pressure emerges from competition arising from private companies, mainly Notatek, but also state owned rival Rosneft, and is reinforced by governmental moves toward more market oriented Russian gas sector organization. Gazprom's options include pivoting to alternative markets, notably China; reverting to international legal bodies and market principles to counter EU regulatory pressures; and to depoliticize gas trade in order to generate long term expectations on its prime market - Europe. We pose that neither of these options is likely to fully solve Gazprom's dilemma, whose competitive position will arguably further weaken both domestically and internationally. We believe that Gazprom's best option would be to aim for depoliticizing gas trade, by way of giving up its de facto monopoly on gas exports to Europe.
    Keywords: Energy security, gas markets, Gazprom, European Union, regulation
    Date: 2015–04
  9. By: Huang, Wei (Harvard University)
    Abstract: Using a national representative sample in China from three largest on-going surveys, this study examines the effects of education on health among working-age population and explores the potential mechanisms. Using the exogenous variation in temporal and geographical impacts of Compulsory Schooling Laws (CSLs), it finds an additional year of schooling decreases 2-percentage points in reporting fair or poor health, 1-percentage points for underweight and 1.5-percentage points for smoking, and increases cognition by about 0.16 standard deviation. Further analysis also suggests that nutrition, income, cognition and peer effects are important channels in the education-health nexus, and all of these factors explain almost half of the education's impact. These suggest that CSLs have improved national health significantly in China and the findings help to explain the mixed findings in the literature.
    Keywords: education, health, China
    JEL: I12 I21 I28
    Date: 2015–07
  10. By: Matej Kuc (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic); Petr Teply (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)
    Abstract: Czech credit unions have been yet criticized by both academics and regulatory representatives for its business based on moral hazard and excessive risk taking. This paper empirically assesses financial performance of Czech credit unions in relation with other European cooperative banks in terms of profitability and stability. To do that, we created a unique dataset of 283 cooperative banks from 15 European countries in the 2006–2013 period. System GMM method is employed as a main instrument of our empirical analysis and alternative panel data methods are used as supplementary techniques. Results revealed poor performance of Czech credit unions in terms of both profitability and stability. Moreover, adverse trends in stability measures of Czech credit unions are in sharp contrast to the tendencies in the rest of cooperative banks in our sample. To conclude, we argue that bigger Czech credit unions will face serious financial problems in coming years.
    Keywords: credit union, cooperative banking, financial statements, moral hazard, credit risk, system GMM, Z-score
    JEL: C23 G21 L25
    Date: 2015–06
  11. By: Yingying Lu
    Abstract: This paper empirically analyzes China’s electrical equipment manufacturing industry in the context of global value chain (GVC) by using the GVC income approach (Timmer et al., 2013) and the World Input-Output Database (WIOD). Four major questions are addressed by measuring several different indicators. China is found to have comparative advantage and competitiveness in terms of its large share of value added contribution in the world electrical equipment manufacturing industry. However, such competitiveness is not sustainable for two reasons: (1) China is actually a net value added importer, which limits its dominance and development in this industry; (2) the majority of China’s GVC income comes from capital investment rather than high-skilled or valuable activities, which means the competitiveness is easy to be taken over as physical capital is more “mobile” than human capital. The paper also finds that the global financial crisis (GFC) did have certain impact on the electrical equipment GVCs in general, but the impact is not necessarily negative and big for each economy. For China, the GFC led to a decrease in the average real wage in this industry due to the decreasing high-skilled labor compensation share and the increasing low-skilled one. The analysis also implies that to upgrade the China’s position in the electrical equipment manufacturing GVC may ultimately mean upgrading the agriculture sector such that more labor can be engaged in medium- and high-skilled activities.
    Keywords: Global Value Chain (GVC), Input-Output Analysis, GVC income, China, Electrical Equipment Manufacturing
    JEL: C67 F14 L63
    Date: 2015–07
  12. By: Kumo, Kazuhiro
    Abstract: Research on the increase in poverty in the transitional economies affected by the collapse of socialism began soon after the economic transition began. However, the nature of poverty in the former Soviet Union and Central and Eastern Europe differs, and two phases have been observed: a phase of increasing and stabilising poverty in the 1990s and a phase of declining poverty in the 2000s. Taking into account the possibility that the impact of household size, education level, and urban domicile, which are factors employed in traditional poverty research, may differ depending on the year or the region, this paper attempted a meta-analysis. The results enerally supported the hypothesis. In the 1990s, there was no difference between urban and rural populations in the probability of falling into poverty. After 2000, however, urban domicile became a significant factor in reducing the probability of falling into poverty. In addition, differences were observed between the former Soviet Union and Central and Eastern Europe in the factors affecting the poverty situation. This phenomenon is considered to indicate one of the directions for research in comparative transitional economics in the future. Furthermore, the trend in poverty dynamics seen here can probably also be regarded as indicating steady progress in “transition”.
    JEL: I32 I39 P36 P46
    Date: 2015–07
  13. By: Asian Development Bank (ADB); Asian Development Bank (ADB) (East Asia Department, ADB); Asian Development Bank (ADB) (East Asia Department, ADB); Asian Development Bank (ADB)
    Abstract: Despite its success to date, the People’s Republic of China (PRC) faces some major challenges in finance sector development. Like all success stories, the PRC is finding it increasingly difficult to maintain momentum. The finance industry needs greater involvement from the private sector, including input in decision making. Achieving the desired outcomes will require a careful balance between the pace at which controls are removed and that at which the regulatory and legal infrastructure is strengthened. Long-term success will also require that economic growth be inclusive, with financial services available to all members of society.
    Keywords: People's Republic of China, money matters, public finance, fiscal reform, local government debt, taxation, VAT, implicit guarantees, public expenditures, fiscal debt, public-private partnerships, Third Plenum Initiatives, National Audit Office
    Date: 2015–01
  14. By: LE Thi Anh Nguyet
    Abstract: The potential market distortions caused by state-owned enterprises (SOEs) have attracted significant attention from Trans-Pacific Partnership (TPP) members during the negotiations for this agreement in the 21st century. Particularly, in the TPP meetings, Vietnam, as the only nonmarket economy TPP negotiator, has been the focus of discussions concerning SOE issues and reforms to ensure a level playing field for all business sectors, both domestically and regionally. On one hand, SOE reforms can support TPP member governments in financial management and corporate governance more effectively and transparently. On the other hand, the reforms have also left a substantial burden on implementation by the Vietnamese government and the competitiveness of SOEs. The paper (1) examines the principles of SOE management in the TPP negotiation; (2) analyzes the equitization of SOEs in Vietnam in the light of nondiscrimination and on a commercial basis principle; and (3) evaluates the potential cost and benefit of its nonmarket economy status in TPP negotiation.
    Date: 2015–07
  15. By: Bauer,Jan Michael; Levin,Victoria; Munoz Boudet,Ana Maria; Nie,Peng; Sousa-Poza,Alfonso
    Abstract: This paper uses data from the Integrated Values Survey, the Life in Transition Survey, and the Russia Longitudinal Monitoring Survey to analyze the relation between age and subjective well-being in the Europe and Central Asia region. Although the results generally confirm the findings of previous studies of a U-shaped relation between subjective well-being and age for most of the lifecycle, the paper also finds that well-being declines again after people reach their 60s and 70s, giving rise to an S-shaped relation across the entire lifespan. This pattern generally remains robust for most of the cross-sectional and panel analyses. Hence, despite significant heterogeneity in the pattern of well-being across the lifespan in the Europe and Central Asia region, the paper does not observe high levels of cross-country or cross-cohort variation.
    Keywords: Science Education,Educational Sciences,Youth and Government,Scientific Research&Science Parks,Population&Development
    Date: 2015–07–28
  16. By: Tomasz Brodzicki (University of Gdansk, Faculty of Economics; Institute for Development); Katarzyna Sledziewska (University of Warsaw); Dorota Ciolek (University of Gdansk); Stanislaw Uminski (Institute for Development; Faculty of Economics, University of Gdansk)
    Abstract: The goal of this paper is to investigate the determinants of the intensity of bilateral trade flows of Poland with its trade partners at the general (country level) with the use of trade gravity approach. The analysis is carried out for 234 trade partners of Poland in the period 1999-2013. In the basic version of the trade gravity model we take into account the standard factors suggested by the literature of the subject. In its extended version we control for additional factors including: relative endowments of factors of production, technological gap as measured by TFP and relative patenting performance, quality of institutions, impact of regional and bilateral trade agreements or exchange rate volatility. The impact of the Polish diaspora is also taken into account. In order to investigate the impact of the global crises on trade intensity we construct and introduce a variable depicting the severity of the crises for individual trade partners. In an attempt to obtain unbiased results we utilize semi-mixed effect method using PPML estimator as suggested in recent empirical articles. In most of the cases the coefficients for the traditional gravity determinants are economically sensible and their impact on the dependent variable is statistically significant and robust.
    Keywords: trade gravity, Poland, panel data
    JEL: C23 F10 F14 F15
    Date: 2015–08
  17. By: Tomasz Brodzicki (University of Gdansk, Faculty of Economics; Institute for Development)
    Abstract: Several important studies find that innovation and exporting are inextricably linked at firm-level. Aw et al. (2011) find that the marginal benefit of simultaneous exporting and innovating increases with productivity, with self-selection effect typical for heterogeneous firm literature a la Melitz (2003) driving a large part of the observed complementarity. Altomonte et al. (2013) show that there is a positive, broad, strong and robust correlation between the extent of internationalization of firms and innovation activities in the panel of European manufacturing firms (EFIGE dataset). Apart form several recent studies the literature on the role of firm heterogeneity in Polish trade and the nexus with innovation performance is in its infancy. The goal of this article is to present some initial results of a large survey of Polish exporting and non-exporting firms conducted by the team of the Institute for Development aimed at filling this important gap.
    Keywords: internationalization, innovation activity, firms survey
    JEL: F12 F14 C83
    Date: 2015–08
  18. By: Blunch, Niels-Hugo (Washington and Lee University)
    Abstract: While the informal sector has received widespread attention in academic and policy arenas in recent decades, knowledge gaps and controversies remain. First, while the evidence is starting to emerge, there is still more to learn about the formal-informal sector earnings gap of the former Socialist regimes of Eastern Europe and Central Asia. Second, the widespread debate in both academic and policy circles of what constitutes "the" informal sector has led to substantial controversy and different definitions. Third, our knowledge is scarce regarding the impact of the current financial crisis on labor markets – both formal and informal. By examining the incidence and determinants of the formal-informal sector earnings gap for adult male dependent employees using two identical, nationally representative labor force surveys for Serbia – one just prior to the impact of the recent international financial crisis and one about a year into the crisis – for three alternative measures of informality, this paper adds to our understanding in all three of these dimensions. Among the main results is the finding of a substantively large formal-informal sector gap (favoring the formal sector), which appears to have decreased substantially overall following the crisis. Additional results suggest that formal sector workers are concentrated in better paying industries and occupations and have more education and other favorable characteristics than informal sector workers, and at the same time also have higher returns to their (already favorable) characteristics overall, with education and part-time status consistently among the main drivers of the observed gap.
    Keywords: detailed earnings decomposition, earnings decomposition, labor market segmentation, formal-informal sector earnings gap, international financial crisis, Serbia
    JEL: I24 J31 J42
    Date: 2015–07

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