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on Transition Economics |
| By: | Alexander Libman (Ludwig-Maximilians-University of Munich and ICSID, National Research University Higher School of Economics); Janis N. Kluge |
| Abstract: | Which incentives have the strongest impact on the size of the shadow economy? Is it about government’s pressure against entrepreneurs operating in this sector, or is it about the benefits of legality? The goal of this paper is to explicitly contrast the role of sticks (court repressiveness) and carrots (financial aid to small and medium-sized firms) as factors determining the size of the shadow economy, using the case of the Russian taxi market. It uses a unique dataset of taxi licensing data from regional transport departments and indicators for taxi market demand to estimate the extent of informal business. When controlling for market demand, it finds a strong and robust positive effect of sanctions on the size of the official market, with higher repressiveness leading to a smaller shadow economy. In contrast, the effect of carrots was insignificant. The results suggest that the effectiveness of carrot policies is compromised when entrepreneurs operate informally to avoid dealing with corrupt bureaucrats and have low trust in the government. |
| Keywords: | shadow economy; bureaucracy; corruption; development policy |
| JEL: | D73 D78 O17 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ost:wpaper:364&r=tra |
| By: | Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Rumen Dobrinsky (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sandor Richter (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Summary Growth in the CESEE economies will strengthen gradually, surpassing on average 3% by 2019. This growth will be driven by consumption and increasing investment, amid a largely supportive international economic environment. Despite a rise in ULCs, competitiveness will not be endangered. Although the size of labour forces in CESEE is stagnating, data indicate an improvement in educational levels of workers. Meanwhile the tightness of labour markets will propel wage growth. The CESEE region as a whole is back on a convergence track, with an average positive growth differential of 1.2 pp vis-à-vis the euro area over the forecast horizon. Downside risks are significant, mostly stemming from political factors. The CESEE countries and Europe more broadly, together with the rest of the world, will be haunted by the spectre of political uncertainty; it is only to be hoped that, once fully roused, the ‘animal spirits’ of economic agents will shrug off the gloom. For the economies of CESEE, the international economic environment appears generally positive. In 2017-2018, GDP growth in the euro area is expected to hover around 1.7%. The international financial markets have stabilised and the current economic mood is improving. Because of the global recovery, the US Fed is expected to increase interest rates further in 2017, while oil prices are likely to rise. In the EU, disbursements from the payments cycle of the European Structural and Investment Funds are only just beginning, indicating higher co-financed investments in the EU‑CEE countries from this year onwards. Over recent quarters, GDP growth throughout almost the entire CESEE region has stabilised in positive territory. The only exception is Belarus, where growth is still in negative territory (albeit less so than was the case in 2015). The country is going through a painful adjustment process triggered by accumulated macroeconomic imbalances and its excessive dependence on Russia. Current wiiw CESEE GDP growth forecasts for 2017-2019 point to growth of around 3% for most of the region, with a slightly upward trend. The EU-CEE sub-region and the Western Balkan economies in particular should manage to attain average GDP growth rates of up to 3% and in some countries, such as Hungary, Romania, Slovakia, Albania and Kosovo, the levels may be even higher. In Turkey, where growth slowed down markedly in 2016 to below 2% (down from around 6% in prior years) on account of the domestic political turmoil and deterioration in foreign relations, we also expect growth to be closer to 3% by the end of the forecast horizon. The CIS-3 economies will record increasing GDP growth rates, rising from more than 1% in 2017 to over 2% in 2019, given the higher oil prices. Over the same forecast period, economic growth in Ukraine is projected to accelerate gradually to 3% by 2018-2019 – barring all-out warfare in Donbas and abortion of the IMF programme. Private consumption and increasing investment will continue to be the main growth drivers over the forecast horizon. After the investment slump in 2016 attributable to the switch from the previous to the current EU (co-) financing period, investment in the EU-CEE economies will recover in the years ahead. Meanwhile the mood among consumers is improving and, due to changing spending patterns in the EU-CEE sub-region, this trend should prove durable. Tightening labour markets are conducive to major wage increases. Despite the general rise in unit labour costs, competitiveness does not seem to be endangered. Most of the latest industrial production figures for the CESEE countries are encouraging; they point to an ongoing improvement in industry structure and, in several cases, to re-industrialisation. Longer-term FDI trends hold particular promise for the Western Balkans. In Romania and Slovakia the prospects for future FDI increases are also quite good, especially in the automotive sector. Although the size of the labour force in CESEE countries is more or less stagnating, a marked improvement in education levels is evident, as a younger and better educated generation enters the work force. This hints at a potential general increase in labour quality across the region’s economies. Nevertheless, heightened uncertainties following the UK referendum on Brexit in June 2016 and the US presidential elections in November have cast a cloud over the improved economic conditions noted above. A number of worrying scenarios are quite conceivable that could ultimately make our forecasts appear upbeat and overoptimistic. Thanks to US President Donald Trump, a rise in global protectionism is possible, which would harm industry in the region. Mr Trump has also questioned post-war European security arrangements, thus causing consternation in some EU-CEE countries. Meanwhile, the growing irritation with the EU-CEE sub-region among some older EU Member States and the fallout from Brexit could possibly pose a threat to west-east fiscal transfers and the free movement of labour in their current forms. In the Western Balkans, any confrontational interventions by Russia and uncertainties as to developments in Turkey could prove quite disruptive, were the influence of the EU and USA in the region to decline. Increasing uncertainties in the CIS and Ukraine are mostly related to future commodity price developments (most importantly oil prices) and heightened geopolitical tensions. Three special sections of the forecast report shed more light on the issue of heightened uncertainties in the EU-CEE, the Western Balkans and the CIS+UA regions. |
| Keywords: | CESEE, economic forecast, Europe, Central and East Europe, Southeast Europe, Western Balkans, new EU Member States, CIS, Belarus, Russia, Ukraine, Kazakhstan, Turkey, growth convergence, political uncertainties, external risks, EU funds, investment, consumption-led growth, unemployment, employment, wage growth, inflation, competitiveness, industrial production |
| JEL: | E20 O47 O52 O57 P24 P27 P33 P52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:fpaper:fc:spring2017&r=tra |
| By: | Jian Gao; Bogang Jun; Alex "Sandy" Pentland; Tao Zhou; CŽsar A. Hidalgo |
| Abstract: | Industrial development is the process by which economies learn how to produce new products and services. But how do economies learn? And who do they learn from? The literature on economic geography and economic development has emphasized two learning channels: inter-industry learning, which involves learning from related industries; and inter-regional learning, which involves learning from neighboring regions. Here we use 25 years of data describing the evolution of China's economy between 1990 and 2015--a period when China multiplied its GDP per capita by a factor of ten--to explore how Chinese provinces diversified their economies. First, we show that the probability that a province will develop a new industry increases with the number of related industries that are already present in that province, a fact that is suggestive of inter-industry learning. Also, we show that the probability that a province will develop an industry increases with the number of neighboring provinces that are developed in that industry, a fact suggestive of inter-regional learning. Moreover, we find that the combination of these two channels exhibit diminishing returns, meaning that the contribution of either of these learning channels is redundant when the other one is present. Finally, we address endogeneity concerns by using the introduction of high-speed rail as an instrument to isolate the effects of inter-regional learning. Our differences-in-differences (DID) analysis reveals that the introduction of high speed-rail increased the industrial similarity of pairs of provinces connected by high-speed rail. Also, industries in provinces that were connected by rail increased their productivity when they were connected by rail to other provinces where that industry was already present. These findings suggest that inter-regional and inter-industry learning played a role in China's great economic expansion. Length: |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1706&r=tra |
| By: | Lim , Ho Yeol (Korea Institute for International Economic Policy); Lee , Hyun-Tai (Korea Institute for International Economic Policy); Kim , Hongwon (Korea Institute for International Economic Policy); Kim , Junyoung (Korea Institute for International Economic Policy); Oh , Yunmi (Korea Institute for International Economic Policy); Choi , Philip Pilsoo (Sejong University) |
| Abstract: | English Abstract: The emergence of China in the international financial order can be analyzed in three aspects: strengthening its position within the IMF system led by the West, establishing a new financial order through multilateral development banks (MDBs) like the AIIB and NDB, and the internationalization of the renminbi (RMB). China has steadily demanded an increase in its share in the IMF. Following the effectuation of the reform plan in 2016, China became the third largest member of the IMF and the RMB is now included in the SDR basket. China also succeeded in launching the AIIB by formulating a consensus on the necessity for launching an alternative multilateral development bank in Asia where the ADB had a monopoly. On the other hand, RMB internationalization is executed based on a set of internal and external goals: stabilizing inflation and the engine for internal reform, and consolidating the international status of China. As a result, RMB settlements accounted for approximately 2% in world trade, while investment accounted for 16.6% in 2015. However, the RMB still accounts for only 0.6% of the global bond market, and only 1.1% of global foreign reserves. As such, although the internationalization of the RMB has achieved some degree of success, it is hardly keeping up with the extent to which China's economic power is growing. For the China-led financial order to take root, China should continue to pursue further reforms and openness regarding free convertibility, capital accounts, and the exchange rate. China, however, is maintaining a cautious approach. Some of the reasons for this are as follow. First, there are concerns about an outbreak of financial crisis through the opening up of China's capital account. Second, there are fears that there will be an increase of non-performing loans and decrease of interest rate in the event of non-interference by China's financial authorities. As China also has tried to maintain a managed floating system and to allow capital opening only on an experimental basis, it will not be easy for it to expand its influence in the international financial market in a short period of time. Moreover, as the recent appreciation of the yuan has weakened, the impetus for internationalization of the RMB has weakened. Korean Abstract: 2016년 들어 AIIB가 운영을 개시하고, 위안화가 IMF의 SDR 통화바스켓에 편입되면서 국제금융질서에서 중국의 위상이 날로 높아지고 있다. 이에 본 연구는 중국 주도의 신금융질서 태동의 의미와 전망, 중국 중심 국제금융기구의 구조와 운영, 위안화 국제화와 통화블록 형성 가능성 등을 분석하였다. 이를 바탕으로 한국의 중장기 정책대응 방향과 함께 기업의 인프라 건설 참여방안, 민간 금융기관의 인프라금융 참여방안, 정부의 정책 지원방향을 제시함으로써 급변하는 국제금융질서에 대한 한국의 대외 입장 정립과 국익 확보에 기여하고자 하였다. |
| Keywords: | AIIB; RMB; China; Korea; Financial Order |
| Date: | 2016–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2016_009&r=tra |
| By: | Jelena Zarkovic Rakic Author-Name: Nicholas-James Clavet Author-Name: Luca Tiberti Author-Name: Marko Vladisavljevic Author-Name: Aleksandra Anic Author-Name: Gorana Krstic Author-Name: Sasa Randelovic |
| Abstract: | Based on the 2013 Serbian Survey of Income and Living Conditions (SILC) and on the Serbian version of the EUROMOD platform, we evaluate the poverty and distributive effects on children of various reform (benefit and employment) strategies concerning the two major social benefit programs in Serbia: child allowance and social monetary assistance. Both the first and second-order effects of the proposed reforms are considered. For the second-round impacts, a structural labour supply model on parents has been estimated. Our results show that a benefit strategy (which also combats fiscal evasion) is preferred to an employment strategy which aims at raising the work incentives by parents |
| Keywords: | child poverty, tax and benefit reforms, labour supply, Serbia |
| JEL: | J22 J13 J18 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:pmmacr:2017-04&r=tra |
| By: | C. Veeramani (Indira Gandhi Institute of Development Research); Lakshmi A (Indira Gandhi Institute of Development Research); Prachi Gupta (Indira Gandhi Institute of Development Research) |
| Abstract: | We decompose India's export performance in manufactured products during 2000-2015 into changes at the intensive and extensive margins. India's performance, along different margins, is compared and contrasted with that of China. The results show that while China outperforms India at both the margins, the gap is particularly wide at the intensive margin. Decomposition of intensive margin along quantity and price margins shows that Chinese products are generally sold cheaper than Indian products. Higher price margin, however, has not translated into high intensive margin for India due to its abysmally low quantity margin. We examine different explanations for China's superior performance relative to India, along different margins, using a gravity model. Our results suggest that China's exchange rate policy was not the prime reason for its export success. Neither do we find that FDI inflows were significant in explaining the export performance gap between them. The results show that China's export relationship bias towards high-income partner countries holds the key in understanding its superior performance. This bias is a natural consequence of China's high degree of specialization in labor-intensive activities. India, by contrast, due to an idiosyncratic pattern of specialization, has failed to exploit its export potential in high income countries. |
| Keywords: | Manufactured exports, extensive margin, intensive margin, India, China, gravity model |
| JEL: | F10 F14 F15 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2017-002&r=tra |
| By: | Kuhn, Lena; Brosig, Stephan; Zhang, Linxiu |
| Abstract: | In order to combat absolute poverty in rural China, the “Rural Minimum Living Standard System” was launched nationally in 2007. The program provides direct monetary transfers to rural households living below the poverty line. A recent research project working with a sample of around 5000 households found that monetary transfers were being misallocated to a considerable extent, which greatly reduced the effectiveness of the program: 89 percent of the recipient households were not eligible according to their (reported) income while 79 percent of households assessed to be eligible according to their reported income were unable to receive the necessary assistance. Qualitative investigations revealed that these misallocations were often caused by a lack of human resources among local administrations within structurally weak regions. Additional financial aid provided by the central government towards the cost of the program's implementation could lead to considerable improvement in targeting, i.e. the identification of households eligible to receive transfers. However, due to an inability to accurately measure and document income, the implementation of a closely supervised system such as those found in central Europe does not appear to be suitable in the near future. In the mid-term, a step by step replacement of social transfers with health and pension benefits should be discussed in order to alleviate the high administrative cost engendered by targeting based on income. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamopb:31e&r=tra |
| By: | Eduardo da Motta e Albuquerque (Cedeplar-UFMG) |
| Abstract: | This paper evaluates contemporary Russia's variety of capitalism. This variety of capitalism - peripheric, state-led, oligarchic and with managed democracy - resulted from a transition based on shock terapies. The choice of the type of transition was conditioned by the nature of the crisis of the command economy in the 1980s. This crisis was a result of inner contradictions of the command economy built between 1929 and 1953. This command economy generated a limited catch up process, industrialized the economy with great human cost, delivering a relatively backward economy with strong military capabilities. This paper reviews four issues: the nature of the economic system between 1929 and 1985, the critical point that ended the command economy in late 1980s, the type of transition and the main features of the variety of capitalism that emerged as a consequence of those processes. |
| Keywords: | Russia, command economy, types of transition, variety of capitalism |
| JEL: | P0 P2 P5 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td541&r=tra |
| By: | Vasilev, Aleksandar |
| Abstract: | In this paper we introduce reciprocity in labor relations and government sector to investigate how well the real wage rigidity that results out of that arrangement ex- plains business cycle fluctuations in Bulgaria. The reciprocity mechanism described in this paper follows Danthine and Kurmann (2010) and is generally consistent with micro-studies, e.g. Lozev et all. (2011) and Paskaleva (2016), while at the same time comes into contrast with models with efficiency wages of no-shirking type that empha- size the importance of aggregate labor market conditions as the main determinant in wage setting, e.g. Vasilev (2017). Rent-sharing considerations, and worker's own past wages turn out to be the most important aspects of how labor contracting happens. In contrast, aggregate economic conditions, as captured by the employment rate, are not found to be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market frame- work featured in the standard RBC model, e.g Vasilev (2009). |
| Keywords: | reciprocity,efficiency wages,general equilibrium,gift exchange,fiscal policy,Bulgaria |
| JEL: | E24 E32 J41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:156164&r=tra |
| By: | Bai-Chen Xie (College of Management and Economics and APEC Sustainable Energy Center, Tianjin University); Jie Gao (College of Management and Economics, Tianjin University); Shuang Zhang (College of Management and Economics and APEC Sustainable Energy Center, Tianjin University); ZhongXiang Zhang (College of Management and Economics and China Academy of Energy, Environmental and Industrial Economics, Tianjin University) |
| Abstract: | China’s unbundling reform in 2002 aimed to introduce competitiveness into the power industry, especially the generation sector, to improve its operational efficiency. Meanwhile, great concern about a range of environmental problems and global climate change increasingly calls for saving energy and abating emissions. Thus, the ability to balance the reduction of carbon emissions with economic benefits may to a great extent determine the competitiveness of power generation sector. This study first adopts the game cross-efficiency approach to evaluate the environmental efficiency of the generation sectors in China’s 30 provinces. It then employs a system generalized method of moments model to explore the determinants of their performance while eliminating the associated endogeneity problem. The results of this first study combining the two methods indicate that efficiency gaps do exist among the regions even though overall efficiency has been improved. Despite the negative correlation between environmental efficiency and the thermal power ratio, the power mix should be adjusted gradually. The average firm size and capacity utilization rates are positive factors boosting the environmental efficiency. The incentive policies for clean energy development should be differentiated across regions according to their power mix and self-sufficiency ratio. |
| Keywords: | Game Cross-efficiency, Data Envelopment Analysis, Generalized Method of Moments, Power Industry, Environmental Efficiency, China |
| JEL: | Q54 Q55 Q58 Q43 Q48 O13 O44 R11 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2017.12&r=tra |
| By: | Vladimir Hlasny |
| Abstract: | Economic inequality across Asia has been growing, but dimensions of this inequality and their development are unclear. This paper evaluates income inequality using household surveys from China, India, Japan, Korea, Russia and Taiwan. These countries may be viewed as jointly representative of Asia’s population, covering countries with various income levels, inequality and demographic profiles. This study assesses income gaps between various demographic groups in regard to households’ residence, administrative region, education, employment status and gender at various income quantiles, using unconditional quantile regressions. Gaps are decomposed into parts due to differentials in household endowments and due to differentials in returns to endowments. Rural/urban income gaps are evident across all evaluated countries, particularly in China, India and Russia, but have been falling in Russia and Taiwan. Inequality between disadvantaged and advantaged regions is high in China and India, followed by Taiwan. This gap stagnated in Taiwan and further deepened in Russia. |
| Keywords: | Economic inequality; unconditional quantile regression; Blinder-Oaxaca decomposition; Asia; Luxembourg Income Study. |
| JEL: | D31 D63 N35 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:lis:liswps:691&r=tra |
| By: | Mogilevskii, Roman; Abdrazakova, Nazgul; Bolotbekova, Aida; Chalbasova, Saule; Dzhumaeva, Shoola; Tilekeyev, Kanat |
| Abstract: | Kyrgyz agriculture experienced substantial reform during the 1990s and early 2000s. Subsequently, the pace of reform slowed and at present the government does not appear to have any clear strategy for further development in the sector. Summarizing the outcomes of these reforms, a certain freedom granted to farmers stands out as one of the main achievements and an important reason for the sector's efficiency. Peasant farms are effectively protected from attempts to administratively regulate crop structure or introduce any other types of market distortions. However, an insufficient level of investments is undermining long-term prospects for development in the sector. Supporting large professional players in the sector is one of the key policy priorities of the government. It is however necessary to provide space for these enterprises to emerge on their own. It is additionally important to ensure that any support policies in favor of such players also provide positive spillovers to the small farmers around them, and do not aim at replacing them mechanically. The list of incomplete policy reforms is very long, especially in the area of natural resource management and provision of other essential public goods. The state of pastures and irrigation systems is alarming and requires government support well above its current level. Understanding the key areas for government intervention and focusing interventions on public goods provision should be the key components of a future agricultural development strategy. |
| Keywords: | farm restructuring,agricultural productivity,irrigation,pasture reform,agricultural policy,Kyrgyzstan,Landwirtschaftliche Umstrukturierung,landwirtschaftliche Produktivität,Bewässerung,Bodenreform,Agrarpolitik,Kirgistan |
| JEL: | P41 P47 Q15 Q18 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamodp:162&r=tra |
| By: | Katarzyna Growiec; Jakub Growiec; Bogumil Kaminski |
| Abstract: | We provide a novel survey dataset of a representative sample of the Polish population (n = 1000), allowing for a detailed quantification of Bourdieu's (1986) definition of social capital as the aggregate of resources accessible to individuals through their social networks. Based on this data, we create an empirical 'map' of four distinct dimensions of social capital: network degree (number of social ties), network centrality, bridging social capital (ties with dissimilar others), and bonding social capital (ties with similar others, primarily with kin). Construction of the 'map' is based on mutual correlations among the four social capital dimensions as well as their diverse links with immediate outcomes – individuals' social trust and willingness to cooperate - and ultimate outcomes: individual incomes, life satisfaction and happiness. |
| Keywords: | social capital, social network structure, social trust, willingness to cooperate, new survey dataset |
| JEL: | D85 J31 Z13 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2016025&r=tra |