nep-tra New Economics Papers
on Transition Economics
Issue of 2015‒12‒28
thirteen papers chosen by
J. David Brown
United States Census Bureau

  1. RMBI or RMBR: Is the Renminbi Destined to Become a Global or Regional Currency? By Barry Eichengreen; Domenico Lombardi
  2. Dynamic Elasticities of Tax Revenue: Evidence from the Czech Republic By Tomas Havranek; Zuzana Irsova; Jiri Schwarz
  3. Why so gloomy ? perceptions of economic mobility in Europe and Central Asia By Cancho,Cesar A.; Davalos,Maria Eugenia; Sanchez,Carolina
  4. Regional differences in gender wage gaps in Poland By Aleksandra Majchrowska; Paweł Strawiński
  5. Creativity and entrepreneurial efforts in an emerging economy By Quan Hoang Vuong; Nancy K. Napier; Thu Hang Do; Thu Trang Vuong
  6. Unified Growth Theory Contradicted by the Economic Growth in the Former USSR By Ron W Nielsen
  7. China's Capital Flight: Pre- and Post-Crisis Experiences By Yin-Wong Cheung; Frank Westermann; Sven Steinkamp
  8. Introduction of soft budget constraint to analyze public administration reforms. Some evidence from the Hungarian public administration reform By Rosta, Miklós
  9. Productivity spillovers in the GVC. The case of Poland and the New EU Member States By Jan Hagemejer
  10. Food and nutrition security in the European Union: Overview and case studies By Lara Cockx; Nathalie Francken; Hannah Pieters
  11. Can Poverty be Alleviated in China? By Qin, Cong; Chong, Terence Tai Leung
  12. Labor Market and the Native-Immigrant Wage Gap: Evidence from urban China By LIU Yang; KAWATA Keisuke

  1. By: Barry Eichengreen; Domenico Lombardi
    Abstract: Previous studies have focused on when the renminbi will play a significant role as an international currency, but less attention has been paid to where. We fill this gap by contrasting two answers to the question. One is that the renminbi will assume the role of a global currency similar to the U.S. dollar. Supporters point to China’s widely diversified trade and financial flows and to its institutional initiatives, not just in Asia but around the world. The other is that the renminbi will play a regional role in Asia equivalent to that of the euro in greater Europe. Proponents of this view argue that China has a natural advantage in leveraging regional supply chains and deepening its links with other Asian countries as well as in developing regional institutions. Asia, they argue on these grounds, will become the natural habitat for the renminbi.
    JEL: F0 F02
    Date: 2015–11
  2. By: Tomas Havranek; Zuzana Irsova; Jiri Schwarz
    Abstract: Tax revenue elasticities with respect to tax bases are key parameters for the modeling of public finances. Yet the existing studies estimating these elasticities for post-transition countries disregard the effects of tax reforms on tax revenue, which renders their estimates inconsistent. We use a unique data set from the Czech Republic to account for the effects of reforms and estimate both short- and long-run tax revenue elasticities. Our results suggest that the long-run elasticities are 1.4 for wage tax, 0.9 for value added tax, 1.7 for profit tax, and 1 for social security contributions. The adjustment process for value added tax and social security contributions is fast, but for the remaining two categories it is important to distinguish between the short- and long-run elasticities: the initial response of revenue to changes in the bases is weak. In the case of wage tax it takes half a year for the elasticity to surpass unity.
    Keywords: Elasticity, error correction models, tax base, tax revenue
    JEL: H24 H25 H27
    Date: 2015–11
  3. By: Cancho,Cesar A.; Davalos,Maria Eugenia; Sanchez,Carolina
    Abstract: Despite significant improvements in per capita expenditures and a marked decline in poverty over the 2000s, a large fraction of Eastern Europe and Central Asia's population reports their economic situation in the late 2000s to be worse than in 1989. This paper uses data from the Life in Transition Survey to document the gap between objective and subjective economic mobility and investigate what may drive this apparent disconnection. The paper aims at identifying some of the drivers behind subjective perceptions of economic mobility, focusing on the role of perceptions of fairness and trust in shaping people's perceptions of their upward or downward mobility. The results show that close to half of the households in the region perceive to have experienced downward economic mobility, that is, that their position in the income distribution has deteriorated. The results also show that perceptions of higher inequality, unfairness, and distrust in public institutions are associated with downward subjective economic mobility. The findings from this study confirm that factors beyond objective well-being are associated with the perceptions of mobility observed in Europe and Central Asia and may explain why the region has had such a pessimistic view of economic mobility during the past two decades. Understanding what drives people's perceptions of their living standards and quality of life is important, because regardless of objective measures, perceptions could influence people's behavior, including support for reforms and labor market decisions. For Eastern Europe and Central Asia, a region that has undergone substantive transformations and which is still going through a reform process, accounting for these aspects is critical.
    Keywords: Labor Markets,Economic Theory&Research,Regional Economic Development,Labor Policies,Inequality
    Date: 2015–12–18
  4. By: Aleksandra Majchrowska (University of Lodz; National Bank of Poland,); Paweł Strawiński (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The paper aims to estimate the adjusted gender wage gaps in Poland and in each of the 16 NUTS2 Polish regions using the new harmonised dataset of wages of individuals in 2010. The results show that the total gender wage gap in Poland, estimated with new dataset, amounts to 15.7% and indicate that the previous estimates based on the Polish Labour Force Survey data are upward biased and the estimates based on the Structure of Wages and Salaries data are downward biased. Moreover, the authors show that part of the differences in wages between men and women in Poland is due to differences in the employment structure. Gender wage gap corrected for the segregation bias decreases to 14.3%. There is significant variation among regions – estimates of corrected gender wage gap vary from 24% in Opolskie to 1% in Swietokrzyskie region. The differences in gender wage gap across regions are mainly due to different employment structure by ownership sector and occupational groups.
    Keywords: gender wage gap, Poland, regional labour markets
    JEL: J31 R23 J16
    Date: 2015
  5. By: Quan Hoang Vuong; Nancy K. Napier; Thu Hang Do; Thu Trang Vuong
    Abstract: While much research has focused on entrepreneurship and creativity in developed economies, the notions of both topics are still embryonic in many emerging economies. This paper focuses on entrepreneurs in one such economy, Vietnam, to understand the perceptions of entrepreneurs about the role that innovation and creativity may play in their own entrepreneurial ventures and success. This is important because before reaping benefits from entrepreneurship, entrepreneurs need to decide when and on what conditions they start based on their calculations of required resources and predictions of likely outcomes. The research also sought to understand how "creativity," broadly applied ("innovation" and "creative performance") affects the ways that entrepreneurs think about and anticipate their own success and decisions. In essence, the study suggests that the higher the entrepreur’s creativity is, the more likely she or he is to start a new business and believe success will result. Future research could examine whether history, industry and geographic location matter in entrepreneurs’ perceptions as well as whether transition/emerging economies like Vietnam may have different views altogether about the two key concepts.
    Keywords: Creativity/innovation; entrepreneurship; economic conditions; emerging economy; Vietnam
    JEL: M13 O33 P21 P27
    Date: 2015–12–21
  6. By: Ron W Nielsen
    Abstract: Historical economic growth in countries of the former USSR is analysed. It is shown that Unified Growth Theory is contradicted by the data, which were used, but not analysed, during the formulation of this theory. Unified Growth Theory does not explain the mechanism of economic growth. It explains the mechanism of Malthusian stagnation, which did not exist and it explains the mechanism of the transition from stagnation to growth that did not happen. Unified Growth Theory is full of stories but it is hard to decide which of them are reliable because they are based on unprofessional examination of data. The data show that the economic growth in the former USSR was never stagnant but hyperbolic. Industrial Revolution did not boost the economic growth in the former USSR. Unified Growth Theory needs to be revised or replaced by a reliable theory to reconcile it with data and to avoid creating the unwarranted sense of security about the current economic growth.
    Date: 2015–12
  7. By: Yin-Wong Cheung (City University of Hong Kong); Frank Westermann (Universitaet Osnabrueck); Sven Steinkamp (Universitaet Osnabrueck)
    Abstract: Abstract: We study China’s illicit capital flow and document a change in its pattern. Specifically, we observe that China’s capital flight, especially the one measured by trade misinvoicing, exhibits a weakened response in the post-2007 period to the covered interest disparity, which is a theoretical determinant of capital flight. Further analyses indicate that the post-2007 behavior is influenced by quantitative easing and other factors including exchange rate variability, capital control policy and trade frictions. Our study confirms that China’s capital flight pattern and its determinants are affected by the crisis event. Further, both the canonical and additional explanatory variables have different effects on different measures of capital flight. These results highlight the challenges of managing China’s capital flight, which requires information on the period and the type of capital flight that the policy authorities would like to target.
    Keywords: World Bank Residual Method; Trade Misinvoicing; Quantitative Easing; Capital Controls; Covered Interest Disparity
    JEL: F3 F32 G15
    Date: 2015–12–16
  8. By: Rosta, Miklós
    Abstract: Public management reforms are usually underpinned by arguments that they will make the public administration system more effective and efficient. In practice, however, it is very hard to determine whether a given reform will improve the efficiency and effectiveness of the public administration system in the long run. Here, I shall examine how the concept of the soft budget constraint (SBC) introduced by János Kornai (Kornai 1979, 1986; Kornai, Maskin and Roland 2003) can be applied to this problem. In the following, I shall describe some steps of the Hungarian public administration reforms implemented by the Orbán government from 2010 onward and analyze them, focusing on which measures harden and which ones soften the budget constraint of the actors of the Hungarian public administration system. In the literature of economics, there is some evidence-based knowledge on how to harden/soften the budget constraint, which improves/reduces the effectiveness and hence the efficiency of the given system. My conclusion is that the concept of SBC can significantly contribute to public management studies by deepening our knowledge on what public administration reforms lead to a more efficient and effective public administration system.
    Keywords: Soft budget constraint, public management reforms, Hungary
    JEL: H83
    Date: 2015
  9. By: Jan Hagemejer (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland)
    Abstract: The new EU member states have been experiencing firm internationalization not only through inward foreign direct investment but also through exporting, importation of foreign technology in investment goods and increased use of imported intermediates. We argue that there are important productivity spillovers within the global value chains, i.e. FDI alone does not tell the whole story of the reallocation processes going on in the economies of the NMS. We augment the standard TFP spillover empirical model with modern measures of GVC participation. We show that increased foreign content of exports brings additional productivity gains on top of the ones attributed to exporting. Moreover, we show that in selected cases, participation in the GVC leads to a smaller productivity gap between foreign and domestic firms.
    Keywords: global value chains, productivity, New Member States, productivity spillovers
    JEL: L25 C67 F10 F23 O12
    Date: 2015
  10. By: Lara Cockx; Nathalie Francken; Hannah Pieters
    Abstract: This paper provides a detailed overview of food and nutrition security in the European Union. Micronutrient deficiencies are widespread and overweight and obesity are increasing at an alarming rate. Policy makers are urged to pay particular attention to the poor but also women and children, ethnic minorities and the elderly. The New Member States (NMS) are home to some of the most vulnerable households and prominent challenges in terms of the insufficient availability of fruits and vegetables and the relatively large share of food expenditure in total household budget. The in depth analysis of food demand and food diversity in Romania and Slovakia demonstrates that Romanian households continue to be very sensitive to food price and income shocks and underlines the importance of policies targeted at the generation of incomes as well as rural development.
    JEL: Q18 I32
    Date: 2014–03
  11. By: Qin, Cong; Chong, Terence Tai Leung
    Abstract: The 2000s witnessed the third poverty alleviation wave of China. Compared with its predecessors, the third wave distinguished itself by new interventions and redefined standards for the National Poor Counties. This paper evaluates the effectiveness of the new program using a data set consisting of 1,411 of China’s western and central counties from 2000 to 2010. We combine the propensity score matching method with the difference-in-differences approach, which enables us to avoid selection bias and track the policy impact on variables of interest at each time point. It is found that the non-west local governments were inclined to restrict their economic growth to maintain the special transfer payments disbursed exclusively to the National Poor Counties. It is also shown that the program failed to improve the infrastructure and sanitary conditions in general.
    Keywords: Average treatment effect on treated, Poverty alleviation, Propensity score matching, Receiver operating characteristic curve, The National Poor Counties Average treatment effect on treated, Poverty alleviation, Propensity score matching, Receiver operating characteristic curve, The National Poor Counties
    JEL: H23 H71
    Date: 2015–12–02
  12. By: LIU Yang; KAWATA Keisuke
    Abstract: By developing a model based on recent wage theories, we examine workers' wage determination, considering not only human-capital related factors but also the labor market. We also consider the price level using a city-specific consumer price index. Data come from a national survey in China, while unlike previous studies that examine temporary rural-urban migrants in China, we concentrate on permanent rural migrants who have obtained an urban household registration. We find that considering the effects of the labor market is important in examining workers' wage determination. The decomposition result shows that different effects of market tightness and unemployment benefits are the two primary reasons for the wage differential between the two groups, whereas education does not contribute to the wage gap. As a policy implication, our results indicate that supporting the workers' ability to adapt to the labor markets could reduce wage inequality.
    Date: 2015–12
  13. By: Maryna Tverdostup; Jaan Masso
    Abstract: This paper extends the earlier literature on the effects of return migration by studying selection and labour market performance in terms of the wages of young returnees in particular. The topic is motivated by young people’s various labour market issues and their high exposure to the consequences of the recent financial crisis. We use the Estonian Labour Force Survey data and the Estonian Population and Housing Census 2011 data in combination with the Estonian Tax and Customs Office data on individual payroll taxes. The econometric analysis focuses on the selection to temporary migration and estimation of wage premium to return, along with the decomposition of the returnee-stayer wage gap using the Oaxaca-Blinder approach and an investigation of wage premium dynamics over time after the return. The results generally show higher returns from temporary labour migration for young people relative to older people, and among youth the share of the unexplained fraction of the wage premium is also higher. These results imply a stronger role of experience gained abroad on earnings for youth.
    Keywords: return migration, labour market outcomes, Central and Eastern Europe
    JEL: F22 J31 J61
    Date: 2015

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