nep-tra New Economics Papers
on Transition Economics
Issue of 2016‒02‒17
fifteen papers chosen by
J. David Brown
United States Census Bureau

  1. The Health Implications of Social Pensions: Evidence from China's New Rural Pension Scheme By Cheng, Lingguo; Liu, Hong; Zhang, Ye; Zhao, Zhong
  2. Subjective Well-being in China, 2005-2010: The Role of Relative Income, Gender and Location By Asadullah, Niaz; Xiao, Saizi; Yeoh, Emile Kok-Kheng
  3. Belarus at a crossroads By Marek Dabrowski
  4. Types of Spatial Mobility and the Ethnic Context of Destination Neighbourhoods in Estonia By Mägi, Kadi; Leetmaa, Kadri; Tammaru, Tiit; van Ham, Maarten
  5. Remittances and Expenditure Patterns of the Left Behinds in Rural China By Démurger, Sylvie; Wang, Xiaoqian
  6. The Effect of Doubling the Minimum Wage on Employment: Evidence from Russia By Muravyev, Alexander; Oshchepkov, Aleksey
  7. The Impact of EU-Accession on Regional Business Cycle Synchronization and Sector Specialization By Bierbaumer-Polly, Jürgen; Huber, Peter; Huber, Petr
  8. Does Joining the EU Make You Happy? Evidence from Bulgaria and Romania By Nikolova, Milena; Nikolaev, Boris
  9. Unlock the lock-in! Balance of rights in relation to betterment and compensation in Poland By Havel, Magorzata Barbara
  10. Property rights, collateral and interest rates. Evidence from Vietnam By Hainz, Christa Maria; Danzer, Alexander
  11. Does A Child Quantity-Quality Trade-Off Exist? Evidence from the One-Child Policy in China By Huang, Yue
  12. Regional Determinants of German FDI in the Czech Republic - Evidence from a gravity model approach By Schäffler, Johannes; Hecht, Veronika; Moritz, Michael
  13. Higher Education Expansion and Labor Market Outcomes for Young College Graduates By Ou, Dongshu; Zhao, Zhong
  14. Changing Fortunes during Economic Transition - Low-Wage Persistence before and after German Unification By Nolte, Andre; Gürtzgen, Nicole
  15. Leader Networks and Transaction Costs: A Chinese Experiment in Interjurisdictional Contracting By Chau, Nancy; Qin, Yu; Zhang, Weiwen

  1. 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 estimates the causal effect of income on health outcomes of the elderly and investigates underlying mechanisms by exploiting an income change induced by the launch of China's New Rural Pension scheme (NRPS). Using this policy experiment, we address the endogeneity of pension income by applying a fixed-effect model with instrumental variable correction. The results reveal that pension enrollment and income from the NRPS both have had a beneficial impact on objective measures of physical health, cognitive function, and psychological well-being of the rural elderly, and also reduced mortality over a three-year horizon by 6 percentage points. Evidence further suggests that pension recipients respond to the new pension income in multiple ways: improved nutrition intake, better accessibility to health care, increased informal care, increased leisure activities, and better self-perceived relative economic situation. These in turn act as channels from pension income to health of the Chinese rural elderly.
    Keywords: pension income, health, channels, elderly, China
    JEL: H55 I12 I38 J14
    Date: 2016–01
  2. By: Asadullah, Niaz (University of Malaya); Xiao, Saizi (University of Malaya); Yeoh, Emile Kok-Kheng (University of Malaya)
    Abstract: We use data from two rounds of the Chinese General Social Survey (CGSS) to study the determinants of subjective well-being in China over the period 2005-2010 during which self-reported happiness scores show an increase across all income groups. Ordered probit regression analysis of well-being reveals large influence of gender, rural residency and household income. After controlling for demographic attributes, health, unemployment status, household size, agricultural hukou (household registration identity) and education status, household assets, the influence of past and future income and province dummies, we find that women, urban residents and people with higher income are happier in China. More schooling, better health and being employed are positively and significantly correlated with well-being. Sub-sample s reveals that the rich only care about relative income whereas the effect of absolute income dominates in case of the poorer section. The influence of absolute income is larger among women compared to men and in turn explains why women, despite being poorer, are happier in China, conditional on socio-economic differences. On the other hand, rural residents are poorer than urban residents so that conditional on having the same income, there is no rural-urban happiness gap. Our results suggest that while further decline in poverty will enhance well-being in China, policies that reduce rural-urban and gender inequalities are also likely to boost well-being.
    Keywords: gender, happiness, inequality, poverty, unemployment, well-being
    JEL: O12 I30 I31
    Date: 2016–01
  3. By: Marek Dabrowski
    Abstract: Since the collapse of the Soviet Union in 1991, Belarus has maintained a largely non-market economic system. This did not prevent rapid growth of its economy over a sustained period up to 2011. However, the period of economic growth in Belarus seems to be over. The factors that underpinned Belarus’s growth, mainly the beneficial external environment, have gradually disappeared. As a result, the country is confronted by the need to start the far-reaching programme of market-oriented economic reforms and macroeconomic stabilisation which it tried to avoid for so long. Reform will not be easy, economically and politically. The potential hardship facing Belarus could be at least partly cushioned by external assistance, in the first instance from the International Monetary Fund and the World Bank. However, the IMF has relatively fresh memories of the failure of its 2009-10 Stand-By Arrangement (SBA) with Belarus, which provided substantial balance-of-payments support, but which was derailed by its too-narrow focus on monetary and fiscal quantitative performance criteria, and by insufficient reform commitment on the Belarusian side. Other donors, such as the European Union, might be reluctant to offer assistance as long as Belarus does not improve its poor human rights record and start some political reforms. In this analysis, we describe the characteristics of Belarus’s economic model, explain how the Belarus growth ‘miracle’ was possible, why it cannot be continued, the reforms that are needed and why they might be difficult to implement and, finally, what the chances are, and what the conditions might be, under which Belarus could obtain external support. Europe’s last non-market economy According to the European Bank for Reconstruction and Development’s (EBRD) transition indicators1 Belarus is among the least advanced of the former USSR’s successor states in building a market economy. It is one of three reform laggards, the others being Turkmenistan and Uzbekistan. This assessment relates to both ‘first generation’ reforms such as price, trade and foreign exchange liberalisation and small-scale privatisation (Figures 1-3), and to more sophisticated ‘second generation’ reforms such as large-scale privatisation, governance and enterprise restructuring, and competition policy (Figures 4-6). On average, all post-Soviet countries other than the Baltic states, lag behind central and eastern Europe in the implementation of ‘second generation’ reforms, which makes Belarus even less advanced than Figures 4-6 suggest. Price controls in Belarus have remained extensive, and have been reinforced with each macroeconomic crisis. For example, in 2011 after a major devaluation and its consequent pass-through to domestic prices, administrative price regulation of ‘socially important goods’ reached almost half (49 percent) of the consumer price index (CPI) basket. It subsequently went gradually down to 25 percent in 2014. However, after the devaluation of the Belarusian ruble (BYR) at the end of 2014, a temporary ban on all price increases was imposed (IMF, 2015a; IMF, 2015b) and stayed in force until April 20152. Use of such broad price regulation has led to price distortions, which are particularly evident in the utility sector. Electricity tariffs remain, on average, at the level of about 50 percent of cost recovery. For natural gas, central heating and water supply, the situation is even worse, with tariffs converging to 20 percent of the cost recovery level in early 2015 (IMF, 2015a). It is worth remembering that Belarus is a net importer of energy resources (mainly from Russia) and excessive energy imports contribute to trade and current account deficits. Although in 2001 Belarus formally introduced current-account convertibility of the BYR (as determined by Article VIII of the IMF’s Articles of Agreement), it has never fully respected it. Various forms of foreign-exchange restrictions have remained in place and in times of market strain, for example in 2008-09, 2011 and 2014-15, exchange restrictions were intensified, leading to the re-emergence of a ‘black’ foreign exchange market and multiple exchange rates (see IMF, 2015c). The role of the private sector remains limited. In 2010, according to the most recent EBRD estimate, the private sector’s share of Belarusian GDP amounted to 30 percent only3; probably it has not changed substantially since then. The activities of private firms are administratively restricted in various ways and are often the target of hostile government propaganda. Meanwhile, state-owned enterprises must still meet mandatory production targets, as in the era of the centrally-planned economy. If they fail to do so, their managers put their careers at risk or even face criminal prosecution. Overall, Belarus retains a largely non-market economy, which is business unfriendly (IMF, 2012). Not surprisingly, the Heritage Foundation’s 2015 Index of Economic Freedom (IEF) ranks Belarus 153 among 178 countries, making it one of the ‘repressed’ economies4.
    Date: 2016–01
  4. By: Mägi, Kadi (University of Tartu); Leetmaa, Kadri (University of Tartu); Tammaru, Tiit (University of Tartu); van Ham, Maarten (Delft University of Technology)
    Abstract: Most studies of the ethnic composition of destination neighbourhoods after residential moves do not take into account the types of moves people have made. However, from an individual perspective, different types of moves may result in neighbourhood environments that differ in terms of their ethnic composition from those in which individuals previously lived. We investigate how the ethnic residential context changes for individuals as a result of different types of mobility (immobility, intra-urban mobility, suburbanisation, and long-distance migration) for residents of the segregated post-Soviet city of Tallinn. We compare the extent to which Estonian- and Russian-speakers integrate in residential terms. Using unique longitudinal Census data (2000-2011) we tracked changes in the individual ethnic residential context of both groups. We found that the moving destinations of Estonian- and Russian-speakers diverge. When Estonians move, their new neighbourhood generally possesses a lower percentage of Russian-speakers compared with when Russian-speakers move, as well as compared with their previous neighbourhoods. For Russian-speakers, the percentage of other Russian-speakers in their residential surroundings decreases only for those who move to the surburbs or who move over longer distances to rural villages. By applying a novel approach of tracking the changes in the ethnic residential context of individuals for all mobility types, we were able to demonstrate that the two largest ethnolinguistic groups in Estonia tend to behave as 'parallel populations' and that residential integration in Estonia is therefore slow.
    Keywords: residential mobility, migration, suburbanisation, ethnicity, longitudinal data, Estonia
    JEL: J15 J61 R20 R23
    Date: 2015–12
  5. By: Démurger, Sylvie (CNRS, GATE); Wang, Xiaoqian (GATE, University of Lyon)
    Abstract: This paper investigates how private transfers from internal migration in China affect the expenditure behaviour of families left behind in rural areas. Using data from the Rural-Urban Migration in China (RUMiC) survey, we assess the impact of remittances sent to rural households on consumption-type and investment-type expenditures. We apply propensity score matching to account for the selection of households into receiving remittances, and estimate average treatment effects on the treated. We find that remittances supplement income in rural China and lead to increased consumption rather than increased investment. Moreover, we find evidence of a strong negative impact on education expenditures, which could be detrimental to sustaining investment in human capital in poor rural areas in China.
    Keywords: remittances, labour migration, expenditure behaviour, left-behind, China, propensity score matching
    JEL: O15 J22 R23 D13 O53
    Date: 2016–01
  6. By: Muravyev, Alexander (Higher School of Economics, St. Petersburg branch); Oshchepkov, Aleksey (Higher School of Economics, Moscow)
    Abstract: We take advantage of a natural experiment in the minimum wage setting in Russia to study the employment consequences of large hikes in the minimum wage. In September 2007, the Russian government raised the federal minimum wage from 1,100 to 2,300 Rubles and simultaneously gave the regions the power to set their own minima above the federal threshold. In studying the effect of this reform, we follow the approach proposed by David Card and compare changes in employment rates and other labor market outcomes before and after the hike across regions with different shares of affected workers. We find some evidence of adverse effects of the 2007 hike in the minimum wage on employment. They are mostly visible in lower employment rates among the youth, as well as the increased informalization of employment.
    Keywords: minimum wages, unemployment, informal employment, Russia
    JEL: J38 J23
    Date: 2015–12
  7. By: Bierbaumer-Polly, Jürgen; Huber, Peter; Huber, Petr
    Abstract: According to difference-in-difference estimates business cycle synchronization and similarity in sector structures between acceding and pre-existing regions reduced after Eastern Enlargement. Results for Northern enlargement are more ambiguous. In both enlargements, however, region pairs affected by enlargement with highly synchronized business cycles before enlargement experienced smaller increases in business cycle synchronization and weaker reductions of structural differences relative to similar unaffected region pairs than region pairs with less synchronized business cycles. Similarly, affected regions that were more similar in terms of sector structure before enlargement experienced larger reductions in structural differences and business cycle synchronization than similar unaffected region pairs.
    JEL: F15 E32 R11
    Date: 2015
  8. By: Nikolova, Milena (IZA); Nikolaev, Boris (Emory University)
    Abstract: We examine the effect of joining the European Union on individual life satisfaction in Bulgaria and Romania in the context of the 2007 EU enlargement. Although EU membership is among the most important events in Bulgaria and Romania's modern histories, there is no evidence on how it affected the subjective well-being of ordinary people in the two countries. Using a difference-in-differences strategy and Eurobarometer data, we provide the first evidence that joining the EU increased average life satisfaction in Bulgaria and had a positive but statistically insignificant effect in Romania. One explanation is that trust towards the EU increased only in Bulgaria but not in Romania after both countries joined in 2007. Furthermore, Romania's political war of 2007 may have mired the country's positive life satisfaction experiences related to EU membership. We also show that the younger, the employed, and those with a high-school education were the winners from EU integration. Our results are robust to two placebo tests, in which we use two fake entry dates to the EU, and to an estimation using bootstrapped standard errors. Our findings have implications for EU integration policy and future enlargements.
    Keywords: subjective well-being, happiness, transition economies, EU enlargement, difference-in-differences, European Union
    JEL: I31 I39 P20
    Date: 2016–01
  9. By: Havel, Magorzata Barbara (Department of Landscape Architecture and Spatial Planning, NMBU)
    Abstract: Many Polish cities are faced with a dilemma: to enact their local land-use plans and be exposed to the immediate financial consequences of their adoption, or to protect their budgets against these costs and give up control of the development of the cities. There are very broad compensation rights for value decline due to planning regulations and for areas designated in plans for public roads. At the same time, current planning system policies and instruments in Poland largely neglect how the costs of providing urban infrastructure and services are socialized and how the benefits of development processes are privatized. The use of value capture instruments is very limited. This paper discusses the distribution of rights and liabilities in relation to the two main sides of the property-values effect caused by land-use planning regulations and public works in Poland, in the background of the new planning system and property-rights approach adopted in the country. The article presents the current situation, initially explores a possible ways forward based on varied international experiences, discusses the institutional design of land markets, and indicates the need for planning by Law and property rights.
    Keywords: Betterment and compensation; delineation of property rights; planning system; Poland
    JEL: O18 P25 R52
    Date: 2016–01–29
  10. By: Hainz, Christa Maria; Danzer, Alexander
    Abstract: This paper investigates the causal effect of the quality of property rights on the price of collateralized consumer loans. Identification stems from exogenous variation in the improvement of property rights in Vietnam following recent accelerations of the land titling program as well as political change in provincial leaderships. We exploit a unique data set which comprises the complete loan data of one of the largest private Vietnamese banks, regional level information on the quality of property rights and legal institutions as well as an exact measure of bank competition derived from the complete relevant georeferenced bank data of Vietnam. Our findings clearly indicate that more secure property rights reduce the cost of credit, and these results are very robust to the inclusion of competition in our regression model. Owing to an institutional peculiarity of the Vietnamese banking practice, we support our findings with a falsification exer-cise on employer-insured loans.
    JEL: O16 D23 G21
    Date: 2015
  11. By: Huang, Yue
    Abstract: Evidence on the existence of a trade-off between child quantity and child quality, as suggested by Gary S. Becker, is still inconclusive. This also holds true for empirical studies on China that exploit for identification the country s One-Child Policy (OCP) as an exogenous source of variation in the number of offspring. However, this body of literature suffers from a number of shortcomings, in particular measurement error in the key policy variable (a household s coverage by OCP) and in the outcome variable of interest (schooling choices, i.e. child quality). Using census data for China and a continuous OCP variable that can address these shortcomings, the results provide evidence for the existence of a sizeable quantity-quality trade-off within households with mothers who are Han and have agricultural Hukou.
    JEL: J13 J18 I20
    Date: 2015
  12. By: Schäffler, Johannes; Hecht, Veronika; Moritz, Michael
    Abstract: On the basis of a unique dataset the regional distribution of German multinationals and their Czech affiliates is analysed for both countries. The investigation covers market size and agglomeration features, distance issues, and labour market characteristics. Apart from the vital role of large markets and a low transport distance there are further crucial findings regarding joint foreign direct investment (FDI) projects that can be revealed from a home-host country perspective: the strong position of the common border region, the non-relevance of a relatively high wage gap between the site of the headquarters and the location of the affiliate in coincidence with the great importance of the availability of high-skilled employees in the target country, and differences in the significance of sectoral employment shares.
    JEL: F15 F23 R12
    Date: 2015
  13. By: Ou, Dongshu (Chinese University of Hong Kong); Zhao, Zhong (Renmin University of China)
    Abstract: We examine the causal impact of China's higher education expansion on labor market outcomes for young college graduates using China's 2005 1% Population Sample Survey. Exploiting variation in the expansion of university spots across provinces and high school cohorts and applying a difference-in-differences model, we find that the expansion of higher education in China decreases unemployment rates, especially among males and high school graduates. However, the policy also decreases women's labor force participation and individual earnings in highly-skilled white-collar jobs. We further discuss potential channels affecting the observed outcomes. Our results illustrate the strong demand for a skilled labor force in China and the broad economic benefits of higher education.
    Keywords: higher education expansion, labor force participation, unemployment, wage, difference-in-differences
    JEL: I23 I28 J31 O15
    Date: 2016–01
  14. By: Nolte, Andre; Gürtzgen, Nicole
    Abstract: This paper studies whether the transition from a centrally planned to a market economy offers fundamentally new perspectives for those who, in economic terms, were relatively deprived under the old regime. Previous empirical research on this question has been limited by the availability of suitable representative longitudinal micro-data that tracks individuals' labour market careers across different political and economic regimes. Our study seeks to fill this research gap by looking at the transition of Eastern Germany following German Unification. Using a unique large-scale German administrative data set, we measure individuals' relative economic position by exploiting information on whether individuals were in the bottom of the pre-unification wage distribution. We further approach the question of how workers' low or high-wage status determines their wage and labour market status within and across different regimes. We first demonstrate that unobserved factors are the main drivers of low-wage persistence and are regime-dependent. We further show that, consistent with signalling considerations, economic dependencies across different regimes are only of minor relevance. Genuine state dependence after Unification amounts to relatively large values of about 15 per cent for males and 19 per cent for females. This measure of persistence is heterogeneous across time, indicating a strong adjustment process and the importance of signalling considerations.
    JEL: J31 J64 P21
    Date: 2015
  15. By: Chau, Nancy (Cornell University); Qin, Yu (National University of Singapore); Zhang, Weiwen (Zhejiang University)
    Abstract: Do leader networks promote efficient intergovernmental contracts? We examine a groundbreaking policy in China where subprovincial governments freely traded land conversion quotas, and investigate the role of leader networks on the boundary between jurisdictions that embrace trade versus autarky. Consistent with the presence of Williamsonian transaction costs featuring uncertainty, incomplete contracting, and asset specificity, we find that leader career networks facilitate trade, controlling for institutional similarity and prior trade relations. However, trade gains can be limited if leader networks offer selective coverage. Using data from the Chinese experiment, we find evidence consistent with trade match distortions induced by leader networks.
    Keywords: transaction cost, government leader network, interjurisdictional contracting
    JEL: H11 H77 P35 R52 D23
    Date: 2016–01

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