nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒03‒12
seventeen papers chosen by
J. David Brown
United States Census Bureau

  1. Institutions and Managerial Task Allocation: Evidence from Chinese Entrepreneurs By Guo, Di; Jiang, Kun; Xu, Cheng-Gang
  2. A Comparison of Russian Practices in Industrial Statistics with Un Recommendations: Similarities and Differences in Classifications, Data Items and Indicators By Liudmila Kitrar; Georgy Ostapkovich; Tamara Lipkind; Kateryna Gumeniuk; Liudmila Katorgina
  3. Post-Privatization Ownership and Firm Performance: A Large Meta-Analysis of the Transition Literature By Ichiro Iwasaki; Satoshi Mizobata
  4. Innovation Policy and Economic Actors: State, Market and Enterprise By Satoshi Mizobata
  5. Institutional Difference and FDI Location Choice: Evidence from China By Che, Yi; Du, Julan; Lu, Yi; Tao, Zhigang
  6. China's Decentralized Privatization and Change of Control Rights By Gan, Jie; Guo, Yan; Xu, Cheng-Gang
  7. The merit order effect of Czech renewable energy By Petra Lunackova; Jan Prusa; Karel Janda
  8. Capitalism and Socialism: Review of Kornai's Dynamism, Rivalry, and the Surplus Economy By Xu, Cheng-Gang
  9. Promotion Incentives in the Public Sector: Evidence from Chinese Schools By Karachiwalla, Naureen; Park, Albert
  10. Bank Efficiency, Productivity and Convergence in EU countries: A Weighted Russell Directional Distance Model By Fujii, Hidemichi; Managi, Shunsuke; Matousek, Roman; Rughoo, Aarti
  11. To guide or not to guide? Quantitative monetary policy tools and macroeconomic dynamics in China By Chen, Hongyi; Funke, Michael; Lozev, Ivan; Tsang, Andrew
  12. Nowcasting Slovak GDP by a Small Dynamic Factor Model By Tóth, Peter
  13. New Exporters and Continuing Exporters under Exchange Rate Fluctuations By Tan, Yong; Zhao, Chen
  14. Vulnerability to Poverty: Tajikistan during and after the Global Financial Crisis By Gang, Ira N.; Gatskova, Kseniia; Landon-Lane, John; Yun, Myeong-Su
  15. Cost and Product Advantages: A Firm-level Model for the Chinese Exports and Industry Growth By Jaumandreu, Jordi; Yin, Heng
  16. Cognitive Skills, Noncognitive Skills, and School-to-Work Transitions in Rural China By Glewwe, Paul; Huang, Qiuqiong; Park, Albert
  17. Private equity in China and in Europe: an institutional comparative study By Xieshu Wang

  1. By: Guo, Di; Jiang, Kun; Xu, Cheng-Gang
    Abstract: This study presents theoretical and empirical analyses of time allocation of entrepreneurs as a response to weak property rights protection. Using a nationwide random sampling survey of more than 3,000 entrepreneurs in over 100 cities in China, we find that entrepreneurs, responding to the violation of property rights, spend large proportions of their working time on lobbying activities to protect their businesses at the cost of management time. Moreover, the sensitivity of lobbying time to property rights protection is reduced if the entrepreneur is politically connected or if the firm is larger or older.
    Keywords: Chinese Economy; entrepreneurship; Institution; Property rights; Time allocation
    JEL: L26 M12 O12 P31
    Date: 2017–02
  2. By: Liudmila Kitrar (National Research University Higher School of Economics); Georgy Ostapkovich (National Research University Higher School of Economics); Tamara Lipkind (National Research University Higher School of Economics); Kateryna Gumeniuk (United Nations Industrial Development Organization); Liudmila Katorgina (Federal State Statistic Services)
    Abstract: This study compares Russian state information systems of industry with UN international recommendations. The harmonization of the Russian information system with successful international practices is necessary for measuring the main industrial indicator levels and dynamics in comparison with the information analogues of both cross-border and strategically important countries. This allows the estimation of the efficiency and competitiveness of Russian industry and the best decisions to be made at all levels of governance in Russia including in the technology and innovation policy sphere. The study shows that a significant number of annual, quarterly, monthly and weekly reporting forms within the Russian statistical system in the absence of a single questionnaire for obtaining comprehensive information from an enterprise and unified methodological recommendations do not solve the information gap problem. The available disaggregated information is not sufficient to analyse the quality and effectiveness of industrial policy, especially in comparison with global levels and tendencies of re-industrialization. The state statistical system needs modernization to reduce the reporting burden on enterprises and improve information transparency and comparability at the detailed level.
    Keywords: industrial statistics, statistical unit, economic activities classification
    JEL: C80 C82 C89
    Date: 2017
  3. By: Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University); Satoshi Mizobata (Institute of Economic Research, Kyoto University)
    Abstract: This paper aims to perform a meta-analysis of the relationship between post-privatization ownership and firm performance using a large database of the transition literature. Baseline estimation of a meta-regression model that employs a total of 2894 estimates drawn from 121 previous studies indicated the superior impact of foreign ownership on firm performance in comparison with state and domestic private entities. However, it did not go as far as to comprehensively verify the series of hypotheses concerning the interrelationship between different ownership types. The estimation of an extended meta-regression model that explicitly controls for the idiosyncrasies of transition economies and privatization policies strongly suggested that differences between countries in terms of location, privatization method, and policy implementation speed are the cause of the opaqueness seen in the empirical results of the previous literature. The definite evidence of the harmfulness of the voucher privatization for ex-post firm performance is one of the most noteworthy empirical findings obtained from the meta-analysis in this paper.
    Keywords: post-privatization ownership, firm performance, transition economies, meta-analysis, publication selection bias, Central and Eastern Europe, former Soviet Union
    JEL: D22 G32 G34 L25 P21 P31
    Date: 2017–03
  4. By: Satoshi Mizobata (Institute of Economic Research, Kyoto University)
    Abstract: The paper analyses the contemporary Russian innovation policy and innovation system, and posits that Russia needs to overcome considerable barriers in order for it to become a sound innovative society. After its transformation, Russia changed its innovation policy from government-led to market-led. In the midst of weakened international competitiveness and economic decline, however, its policy has spontaneously changed to one of ‘governmentalization’, showing path-dependent evolution. Throughout the 2000s, the government introduced a succession of innovation modernization programs, but the results appear limited, and the macroeconomic indicators explain how the country continues to be mired by its traditional backwardness, as evidenced by its heavy dependence on energy exports, poor high technology exports, outdated equipment, and other such factors. As a theoretical framework for understanding the innovative society, I apply the ‘market quality theory’, in that market quality determines the content of innovation institutions and barriers they face. Market quality can be measured by institutional arrangements (infrastructure, strength of the ‘rule of game’, and its enforcement), institutional complementarities, and transaction costs. The specificity of the Russian market indirectly characterizes its weakness in market quality, as seen in international rankings such as the Global Competitiveness Index, Corruption Index, and so on. Thus, Russia’s innovation institutions have their specificities and instabilities, and owing to the weak market quality, misuse of institutions, and government failure, its innovation policy has become ‘governmentalized’ instead of following the path of marketization with high quality. Market quality and state/government quality are one and the same. The quality of its state/government is poor owing to its present form of governance and social mistrust. In order to overcome these barriers, I stress on the need for social innovation as a key measure for enhancing the quality of the market/state.
    Keywords: Privatization, innovation, market quality, policy, institution, path-dependent, Russia, government, infrastructure
    JEL: D40 E61 O31 O32 O38 O57 P16
    Date: 2017–02
  5. By: Che, Yi; Du, Julan; Lu, Yi; Tao, Zhigang
    Abstract: Rest upon an extensive data set on Foreign Invested Enterprises (FIEs) in China, we investigate the role of institutional difference in determining the locational choice of foreign direct investment (FDI). Estimation results using firm-level discrete choice model suggest that FIEs from source countries that are more remote institutionally from the Chinese mainland exhibit a higher degree of sensitivity toward regional economic institutions in their choice of FDI location. Furthermore, we find that FIEs coming from countries with better institutions than China are more sensitive to institutional difference. Interestingly, we find that the deterrent effct of institutional distance on FDI entry is mitigated for FIEs coming from countries with more ethnic Chinese in their overall populations.
    Keywords: Institutional Difference; FDI Location Choice; China
    JEL: F23 P16
    Date: 2017–02–26
  6. By: Gan, Jie; Guo, Yan; Xu, Cheng-Gang
    Abstract: A distinct feature of China's privatization is that its design and implementation are decentralized and administered by the local governments. Based on a proprietary survey dataset containing 3,000 firms in over 200 cities, this paper studies how city governments choose among various privatization methods, how these methods transfer control rights, and how they influence privatization outcomes. We find that less political opposition to labor downsizing and greater fiscal capacity prompt cities to choose direct sales to insiders (MBOs) as their privatization method. This method transfers the most control rights to private owners, retains the least government supports and is associated with most hardened budget constraints, restructure most effectively, and achieves the greatest performance improvement.
    Keywords: Chinese Economy; Control Rights; Privatization; Restructuring
    JEL: D22 D23 H19 L29 P31 P39
    Date: 2017–02
  7. By: Petra Lunackova; Jan Prusa; Karel Janda
    Abstract: We assess the impact of photovoltaic power plants and other renewable sources on the electricity supply curve in the Czech Republic. The merit order effect is estimated as the elasticity of electricity spot price with respect to change in supply of electricity from renewable sources. Data for the Czech electricity spot market from 2010 to 2015 are analyzed as this is the period with the steepest increase in a renewable generation capacity. The effect is estimated separately for solar and other renewable sources. We find a significant difference between these two groups. Our results show that based on hourly, daily and weekly data energy produced by Czech solar power plants does not decrease electricity spot price, creating double cost to the end consumer. However, the merit order effect based on averaged daily and weekly data is shown to exist for other renewable sources excluding solar (mainly water and wind). This contributes to the conclusion that the Czech renewables policy that prefers solar to other renewable sources may be considered as suboptimal.
    Keywords: energy subsidies, photovoltaic, renewables, merit order effect
    JEL: Q42 H23 M21
    Date: 2017–03
  8. By: Xu, Cheng-Gang
    Abstract: Understanding the nature of capitalism has been a central theme of economics. The collapse of the East Bloc and the global financial crisis spurred the reemergence of the political economy as a new frontier and the revival of interest in the nature of capitalism. Kornai's book fills an important intellectual gap in understanding the dynamic nature of capitalism by comparing it with its mirror image, socialism. To further develop the themes contained in the book, serious challenges are posted theoretically and empirically, as well as in subjects, such as hybrid capitalism.
    Keywords: Capitalism; growth; innovation; Institution; Socialism; Soft-budget Constraint
    JEL: A10 B10 D02 E02 H11 O11 O12 O30 P10 P20 P30
    Date: 2017–02
  9. By: Karachiwalla, Naureen (IFPRI, International Food Policy Research Institute); Park, Albert (Hong Kong University of Science & Technology)
    Abstract: We provide evidence that promotion incentives influence the effort of public employees by studying China's system of promotions for teachers. Predictions from a tournament model of promotion are tested using retrospective panel data on primary and middle school teachers. Consistent with theory, high wage increases for promotion are associated with better performance, teachers increase effort in years leading up to promotion eligibility, and reduce effort if they are repeatedly passed over for promotion. Evaluation scores are positively associated with teacher time use and with student test scores, diminishing concerns that evaluations are manipulated.
    Keywords: teacher incentives, promotions, China
    JEL: J31 J33 J45 M51
    Date: 2017–02
  10. By: Fujii, Hidemichi; Managi, Shunsuke; Matousek, Roman; Rughoo, Aarti
    Abstract: The objective of this study is three-fold. First we estimate and analyse bank efficiency and productivity changes in the EU28 countries with the application of a novel approach, a weighted Russell directional distance model. Second, we take a disaggregated approach and analyse the contribution of the individual bank inputs on bank efficiency and productivity growth. Third, we test for convergence in EU28 bank productivity as well as in the inefficiency of individual bank inputs. We find that bank efficiency has been undermined by the financial crisis in banks notably from the EU15 countries. We also argue that bank efficiency and productivity in EU countries vary across the banking sector with banks from the ‘old’ EU showing higher efficiency levels. Nonetheless, a noticeable catching up process is observed for banks from the ‘new’ EU countries. Consequently, we do not find evidence of group convergence for bank productivity but there is evidence of convergence in bank efficiency change and technical change among the EU28 countries throughout the period 2005-2014. The driving force seems to be convergent technical change from the old EU Member States’ banks. On the other hand, almost no convergence is detected for the banks’ individual inputs while the transition paths show heightened diversity during the crisis years.
    Keywords: European Union; Bank Efficiency; Convergence
    JEL: F65 G21 O4
    Date: 2017–03
  11. By: Chen, Hongyi; Funke, Michael; Lozev, Ivan; Tsang, Andrew
    Abstract: This paper discusses the macroeconomic effects of China’s informal banking regulatory tool “win-dow guidance,” introduced in 1998. Using an open-economy DSGE model that includes the com-mercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy tool and the implications of quantity-based vs. price-based monetary policy instruments for welfare. The analyses are relevant to the current overhaul of Chinese monetary policy.
    JEL: C61 E32 E44 E52
    Date: 2017–02–27
  12. By: Tóth, Peter
    Abstract: The aim of this paper is to estimate a small dynamic factor model (DFM) for nowcasting GDP growth in Slovakia. The model predicts the developments of real activity based on monthly indicators, such as sales, employment, employers’ health care contributions, export and foreign surveys. The forecast accuracy of the model prevails over naive models that ignore monthly data. This result holds especially on the shortest horizon of one quarter ahead and on the evaluation period including the crisis of 2008-2009. Thus we may conclude that our small DFM is a valuable indicator of business cycle turning points in Slovakia. Further, the model allows for frequent and automatic updates of the GDP forecast each time new monthly data becomes available. This makes it useful for institutions which monitor the developments of monthly indicators of real activity.
    Keywords: dynamic factor model, real activity, short-term forecasting
    JEL: C52 C53 E23 E27
    Date: 2017–02–28
  13. By: Tan, Yong; Zhao, Chen
    Abstract: In this paper we investigate the different behaviors between new and continuing exporters in response to exchange rate shocks. We establish a dynamic model, in which new exporters strategically charge a lower price than continuing exporters in order to increase their current sales and accumulate their consumer base in future periods. The model predicts that new exporters adjust their price more aggressively relative to their continuing counterparts in response to exchange rate fluctuations in order to build future demand stock. Using a transaction-level dataset containing all Chinese exporters over the 2000-2009 period, we find supporting evidence for the model's predictions: new exporters adjust their price 1.5 times more than the continuing exporter. Our findings imply different exchange rate pass-through between new and continuing exporters, and the various ratios of new exporters lead to different degree of exchange rate pass-through across countries at the aggregate level.
    Keywords: New Exporters, Continuing Exporters, Exchange Rate Shocks, Pass-through
    JEL: F14 F31 F33 O19
    Date: 2017–03–02
  14. By: Gang, Ira N.; Gatskova, Kseniia; Landon-Lane, John; Yun, Myeong-Su
    Abstract: We examine vulnerability to poverty in Tajikistan during the global financial crisis, focusing on the roles played by international migration and remittances, using a formal, practical, and easily decomposable vulnerability measure. Our strategy is to estimate a Markov transition probability matrix with the aim of identifying the vulnerability of households to poverty. Importantly, by introducing the index of vulnerability as the weighted probability of a household falling into poverty over a given time horizon, we can use the estimated dynamics to assess the short, medium and long-run vulnerability. We find that during the “recession transition” almost all households were vulnerable to poverty while almost none were during the “recovery period”. Overall, urban households, more educated households and households receiving remittances from international labor migrants were less vulnerable to poverty. While households with a current or very recent migrant did not have a significantly lower measured vulnerability to poverty, those households receiving remittances from migrants had a lower vulnerability to poverty. Our findings stress that the international labor migration from Tajikistan may not be considered as a reliable means of welfare security for the households because external economic shocks and internal political decisions may negatively affect Russian economy and lead to a reduction of remittances flow to Tajikistan.
    Keywords: mobility measurement,vulnerability,poverty,inequality,measurement,Tajikistan
    JEL: J60 D63 I32
    Date: 2017
  15. By: Jaumandreu, Jordi; Yin, Heng
    Abstract: We use data from 70,000 Chinese manufacturing firms, which are both domestic sellers and exporters, to estimate the joint distribution of unobserved productivity (cost advantages) and unobserved demand heterogeneity (product advantages) from 1998 to 2008. Product advantages are negatively correlated with cost advantages (positively correlated with marginal cost). We characterize growth and sketch examples to show that splitting the advantages produces useful analytical insights. The state is not good at developing product advantages. A fraction of firms specialize in low-cost-low-quality exports. Many marginal cost differences across firms come from heterogeneous output-embodied levels of quality and technology, not "price distortions."
    Keywords: cost advantages; demand heterogeneity; product advantages; productivity
    JEL: C33 D24 L11 O30 O47
    Date: 2017–02
  16. By: Glewwe, Paul (University of Minnesota); Huang, Qiuqiong (University of Arkansas, Fayetteville); Park, Albert (Hong Kong University of Science & Technology)
    Abstract: Economists have long recognized the important role of formal schooling and cognitive skills on labor market participation and wages. More recently, increasing attention has turned to the role of personality traits, or noncognitive skills. This study is among the first to examine how both cognitive and noncognitive skills measured in childhood predict educational attainment and early labor market outcomes in a developing country setting. Analyzing longitudinal data on rural children from one of China's poorest provinces, we find that both cognitive and noncognitive skills, measured when children are 9-12, 13-16, and 17-21 years old, are important predictors of whether they remain in school or enter the work force at age 17-21. The predictive power of specific skill variables differ between boys and girls. Conditioning on years of schooling, there is no strong evidence that skills measured in childhood predict wages in the early years of labor market participation.
    Keywords: cognitive skills, noncognitive skills, school-to-work transition, schooling, rural China
    JEL: I25 J16 J24 O53
    Date: 2017–02
  17. By: Xieshu Wang
    Abstract: Investments by funds in the equity of non listed companies represent a particular activity of capitalism of the 21st Century. This study provides an analysis of the development and the characteristics of private equity funds operating in China. It applies the framework of institutional theory using a multi-disciplinary approach and compare Chinese, French and British funds. Our analysis suggests that private equity in China is characterized by a stronger influence of the Chinese state, an extensive impact of guanxi, a more diverse use of information sources, a more limited choice of financial tools and the preference of Chinese entrepreneurs to keep control of their firms. Our econometric study also indicates that the rigidity of labor market, economic openness and taxation on company profits have the greatest impact on the activity of all funds. In comparison with France, the UK and the US, China has stronger coefficients regarding GDP growth, household consumption growth, political stability and infrastructure.
    Keywords: Private equity, China, Europe
    Date: 2016–10

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