nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒06‒18
fifteen papers chosen by
J. David Brown
United States Census Bureau

  1. Total Factor Productivity Convergence in German States since Reunification: Evidence and Explanations By Burda, Michael C; Severgnini, Battista
  2. The Causal Effect of Retirement on Health Services Utilization: Evidence from Urban Vietnam By Dang, Thang
  3. Housing Price and Population Growth across China: The Role of Housing Supply By Wang, Hongbo; Rickman, Dan S.
  4. Detection and Impact of Industrial Subsidies: The Case of Chinese Shipbuilding By Kalouptsidi, Myrto
  5. Kyrgyz Republic; Third Review Under the Three-Year Arrangement Under the Extended Credit Facility, and Request for Modification of Performance Criteria-Press Release; Staff Report By International Monetary Fund
  6. Recovery amid Stabilising Economic Growth By Gabor Hunya; Monika Schwarzhappel
  7. The Heterogeneous Impact of Pension Income on Elderly Living Arrangements: Evidence from China’s New Rural Pension Scheme By Cheng, Lingguo; Liu, Hong; Zhang, Ye; Zhao, Zhong
  8. Romania; 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Romania By International Monetary Fund
  9. Regional Growth Differences in China for 1995-2013: An Empirical Integrative Analysis of their Sources By Wang, Hongbo; Rickman, Dan S.
  10. Romania; Ex-Post Evaluation of Exceptional Access Under the 2013 Stand-By Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Romania By International Monetary Fund
  11. Hungary; 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Hungary By International Monetary Fund
  12. Under cover: detecting the existence of profit-shifting in China By Qian, Xuefeng; Tian, Bifei; Reed, W. Robert; Chen, Ziruo
  13. Bulgaria; Financial System Stability Assessment-Press Release; Staff Report; and Statement by the Executive Director for Bulgaria By International Monetary Fund
  14. Trading with China; Productivity Gains, Job Losses By JaeBin Ahn; Romain A Duval
  15. How does urbanization affect energy and CO2 emission intensities in Vietnam? Evidence from province-level data By Nguyen Quan; Makoto Kakinaka; Koji Kotani

  1. By: Burda, Michael C; Severgnini, Battista
    Abstract: A quarter-century after reunification, labor productivity in the states of eastern Germany continues to lag systematically behind the West. Persistent gaps in total factor productivity (TFP) are the proximate cause; conventional and capital-free measurements confirm a sharp slowdown in TFP growth after 1995. Strikingly, eastern capital intensity, especially in industry, exceeds values in the West, casting doubt on the embodied technology hypothesis. TFP growth is negatively associated with rates of investment expenditures. The stubborn East-West TFP gap is best explained by low concentration of managers, low startup intensity and the distribution of firm size in the East rather than R&D activities.
    Keywords: Development accounting; German reunification; productivity; regional convergence
    JEL: D24 E01 E22 O33 O47
    Date: 2017–06
  2. By: Dang, Thang
    Abstract: Access to medical services is significantly essential for retaining and improving health status for aging population. Whilst retired individuals tend to have more time for the use of health services, there is only inadequate evidence evaluating the causal effect of retirement on health services utilization. To fulfill this gap in the literature especially from developing countries, this paper estimates the causal effect of retirement on the probability and the frequency of doctor visits at public health facilities in urban Vietnam. Employing authorized retirement ages for both men and women in Vietnam as instruments for the probability to be retired, the paper shows that retirement significantly increases some outcomes of outpatient health services for both male and female. In particular, the baseline 2SLS estimates indicate that men who are retired are more likely to have any outpatient medical visit than those who are not retired by about 36.1%. Meanwhile, retirement rises both the likelihood and the frequency of outpatient visits for female by roughly 31% and 1.75 times respectively. However, this paper finds statistically insignificant impacts of retirement on utilization outcomes for inpatient services.
    Keywords: Retirement; Health services utilization; Developing countries
    JEL: C26 I10 J26
    Date: 2017–06–13
  3. By: Wang, Hongbo; Rickman, Dan S.
    Abstract: In this paper, we employ a spatial equilibrium growth model to examine the role of housing supply for differences in housing price and population growth across the provinces, autonomous regions and municipalities of mainland China for 1999-2013. A distinguishing feature of the model used from other spatial equilibrium models is a time-varying and regionally-varying elasticity of housing supply. Regions in the East are found to have had the most inelastic housing supply, while northern regions had the most elastic housing supply. The differences in exogenous housing supply growth are shown to have significantly affected relative regional population growth over the period, suggesting that housing policies can be used to promote growth.
    Keywords: Housing supply; China; Spatial equilibrium
    JEL: R11 R12 R31
    Date: 2017–03–17
  4. By: Kalouptsidi, Myrto
    Abstract: This paper provides a model-based empirical strategy to, (i) detect the presence and gauge the magnitude of government subsidies and (ii) quantify their impact on production reallocation across countries, industry prices, costs and consumer surplus. I construct and estimate an industry model that allows for dynamic agents in both demand and supply and apply my strategy to world shipbuilding, a classic target of industrial policy. I find strong evidence consistent with China having intervened and reducing shipyard costs by 13-20%, corresponding to 1.5 to 4.5 billion US dollars, between 2006 and 2012. The subsidies led to substantial reallocation of ship production across the world, with Japan, in particular, losing significant market share. They also misaligned costs and production, while leading to minor surplus gains for shippers.
    Keywords: China; government subsidies; industry dynamics; shipbuilding
    Date: 2017–06
  5. By: International Monetary Fund
    Abstract: After a difficult start of the year, pressures on the economy are moderating, helped by a stabilizing regional context. Growth, however, is expected to remain lower for longer, making adjustment policies even more important. While the appreciation of the exchange rate, together with the Public Investment Projects rescheduling, has reduced debt vulnerabilities, risks to the debt outlook persist. The authorities are taking additional efforts to adhere to the 2016 fiscal targets, but are asking for a relaxation of the 2017 targets given an improved debt outlook and a still weak economy. Despite declining dollarization, financial sector vulnerabilities remain high.
    Date: 2017–06–02
  6. By: Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Monika Schwarzhappel (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The economic environment for foreign direct investment (FDI) has improved. A cautious upturn in economic activities across the Central, East and Southeast European (CESEE) region is based on expanding private consumption. Investments have started to recover, increasing opportunities for foreign business. Also, the most important foreign markets for CESEE products in Europe and overseas have stabilised, albeit amid increasing uncertainty. The CESEE region has maintained its cost competitiveness, despite surging wages and occasional labour shortages, by benefiting from considerable productivity improvements. FDI inflows to the CESEE countries increased by 45% in 2016, compared with the revised 2015 data. The invested amount of EUR 90 billion is the highest since 2008, marginally surpassing the inflows reported in 2011 and 2012. The 2016 recovery was 23% in the EU’s Central and East European region and almost 150% in the Commonwealth of Independent States (CIS) and Ukraine; meanwhile the Western Balkans and Turkey booked a decline of 25%. The 2016 changes were in just the opposite direction to 2015, when FDI in the Western Balkans and Turkey boomed, while it declined in the other two regions. A special section of this report analyses the position of Austria as investor and investment destination for CESEE countries. A separate section presents new features of greenfield investments in 2016 an increasing number of projects and higher capital investments that increasingly focused on the manufacturing sector. Forecasts for FDI in 2017 point upwards again, because the international environment is positive, although plagued by uncertainties, and also economic growth in most of CESEE is bound to be more robust than in the previous year. The second part of this report contains two sets of tables Tables I cover FDI flow and stock data, FDI flows by components and related income; Tables II provide detailed FDI data by economic activity and by country. The main sources of data are the central banks of the individual Central, East and Southeast European countries. The section ‘Methodological Explanations’ highlights important recent changes in reporting standards and their application in the wiiw FDI Database and wiiw FDI Report. The wiiw FDI Database is available online This online access with a modern query tool supports easy search and download of data. The wiiw FDI Database contains the full set of FDI data with time series starting form 1990 as far as available. Access to wiiw FDI Database
    Keywords: foreign direct investment, balance of payments, FDI by form, income repatriation, statistics, new EU Member States, Central Europe, Southeast Europe, Western Balkans, China, Turkey, CIS, Russia, Ukraine
    JEL: C82 F21 O57 P23
    Date: 2017–06
  7. By: Cheng, Lingguo; Liu, Hong; Zhang, Ye; Zhao, Zhong
    Abstract: This paper investigates the impact of pension income on living arrangements of the elderly. Taking advantage of a unique opportunity due to the recent establishment and expansion of the New Rural Pension Scheme in China, we explicitly address the endogeneity of pension status and pension income through a fixed-effect model with instrumental variable approach by exploiting exogenous time variation in the program implementation at county level. We find an overall positive effect of pension income on independent living as well as considerable heterogeneity. The positive income effects of the NRPS are concentrated among the elderly with adult children living nearby, of higher socio-economic status, and with better health at baseline; for other groups, the effects are insignificant. We also find that more generous programs exhibit larger effects. Our results highlight that living arrangement is multidimensional in rural China.
    Keywords: pension income,living arrangements,heterogeneity,China
    JEL: J12 H55 I38
    Date: 2017
  8. By: International Monetary Fund
    Abstract: Romania strengthened its economy considerably after the global financial crisis. Growth has been solid and unemployment low. Public debt and fiscal and current account imbalances are moderate compared to many emerging markets. Notwithstanding this progress, significant challenges remain and the momentum of progress in policies has waned. Income convergence with the EU has slowed and poverty is among the highest in the EU. Successive tax cuts and wage increases in excess of productivity gains have supported consumption, but investment remains weak. A reorientation of policies to prioritize investment will more sustainably achieve the authorities’ objective of bringing more Romanians into the middle class.
    Keywords: Europe;Romania;
    Date: 2017–05–25
  9. By: Wang, Hongbo; Rickman, Dan S.
    Abstract: An integrative analysis of several regional economic outcome variables in China for the period of 1995-2013 reveal the major sources of regional growth differences in China. Patterns of growth in population, per capita income, gross regional product, housing prices and changes in unemployment rates are identified using principal components analysis. Regression analysis of principal component scores is applied to identify geographic patterns in the sources of the growth. The analysis suggests that shifts in labor supply largely were responsible for the regional growth differences over the period, though shifts in labor demand were nearly equally as important. The results have implications for evaluating the success of regional development policies such as the Western Development Strategy.
    Keywords: Regional growth; China; Western Development Strategy
    JEL: R11 R12 R31
    Date: 2017–03–11
  10. By: International Monetary Fund
    Abstract: A 24-month precautionary Stand-By Arrangement (SBA) was approved in September 2013. The SBA, in an amount of SDR 1,751 million (170 percent of quota), was supported by the European Union and the World Bank and entailed exceptional access given Romania’s cumulative use of Fund resources. It followed on the heels of two previous SBAs, which had considerably reduced external and fiscal imbalances. Since 1991, a total of ten programs have been approved with Romania and, at the time of the 2013 SBA request, Romania was the fourth largest Fund borrower.
    Keywords: Europe;Romania;
    Date: 2017–05–25
  11. By: International Monetary Fund
    Abstract: Hungary has succeeded in achieving several years of high economic growth as well as reduction of debt and other vulnerabilities. However, external and public debt remain high. Growth decelerated in 2016 partly due to slower absorption of EU funds and related investment. The output gap is closing, unemployment has declined to about 4½ percent––partly reflecting a still appreciable public employment scheme, and reflation is gaining traction.
    Keywords: Europe;Hungary;
    Date: 2017–05–12
  12. By: Qian, Xuefeng; Tian, Bifei; Reed, W. Robert; Chen, Ziruo
    Abstract: This paper investigates profit-shifting behaviour among a large sample of multinational corporations (MNCs) in China. While profit-shifting behaviour is difficult to observe directly, it can be inferred from the behaviour of firms. That is the approach taken by Egger, Merlo, and Wamser (Unobserved tax avoidance and the tax elasticity of FDI 2014, henceforth EM&W) in their seminal analysis of tax elasticity of German MNCs. They developed a two-component mixture model that categorized MNCs into tax "avoiders" and "non-avoiders" based upon the estimated elasticities of investment to taxes. The authors of this paper apply their approach to their sample of MNCs in China. Like EM&W they find evidence of two distinct groups of MNCs. One group is responsive to changes in taxes, reducing investment when taxes increase. The other group is unresponsive to taxes, so that investment is not significantly associated with changes in tax rates. The authors show that the characteristics of these groups closely match the "avoiders" and "non-avoiders" of EM&W's sample. Even so, their estimated tax elasticities are much smaller than EM&W. This suggests that the extent of profit-shifting was relatively small during China's period of preferential tax treatment for foreign investors.
    Keywords: MNCs,profit shifting,tax elasticity of investment,finite mixture model,China
    JEL: F23 H32
    Date: 2017
  13. By: International Monetary Fund
    Abstract: Bulgaria’s financial stability was shaken in 2014 by the collapse of the system’s fourth largest bank due to fraud and insider abuse. The failure raised questions about the viability of other banks, which subsequently experienced deposit outflows, and raised concerns about the supervision by the Bulgarian National Bank (BNB). To restore credibility, the authorities—in addition to requesting this Financial Sector Assessment (FSAP)—conducted an asset quality review (AQR) for banks and nonbanks, and initiated reforms to BNB supervision and introduced a new bank resolution function. Following the 2014 bank collapse, the financial system stabilized, reflecting the significant capital and liquidity buffers and the presence of large foreign-owned institutions. Nevertheless, risks remain, including for some banks that showed weakness in the authorities’ AQR and stress test, and for the system because of high nonperforming loans (NPLs). The Currency Board Arrangement (CBA) has contributed to stability, though it constrains the BNB’s ability to provide lender-of-last-resort liquidity in times of financial stress.
    Keywords: Bulgaria;Europe;
    Date: 2017–05–23
  14. By: JaeBin Ahn; Romain A Duval
    Abstract: We analyze the impact on productivity in advanced economies of fast-growing trade with China between the mid-1990s and late-2000s, separately identifying the export and import channels. We use country-sector-level data for 18 advanced economies and, similar to Autor, Dorn, and Hanson (2013), exploit exogenous variation in trade with China in a given country-sector by instrumenting imports from (exports to) China in a given country-sector with the average imports from (exports to) China in the same sector in other advanced economies. Our estimates point to large productivity gains from trading with China—the (exogenous) rise of China in global trade may have increased the level of total factor productivity by about 1.9 percent, or 12.3 percent of the overall increase over the sample period, in the median country-sector. By contrast, using a similar empirical strategy, we find adverse employment effects of Chinese imports in exposed country-industries, consistent with previous studies. Taken together, these findings point to large gains from free trade, while underscoring the scope for a more active policy role in redistributing them, particularly by easing workers’ transition between jobs and industries.
    Date: 2017–05–23
  15. By: Nguyen Quan (The 1st authorã ¯Ministry of Energy, Vietnam); Makoto Kakinaka (Graduate School for International Development and Cooperation, Hiroshima University); Koji Kotani (School of Economics and Management, Kochi University of Technology)
    Abstract: Given the argument that urbanization is closely related to the economic growth with improved the quality of life, the role of urbanization on energy consumption and pollution emission has received attention from regulators and researchers. Recently, Vietnam, as one of the rapid growth emerging countries, has been undergoing a massive urbanization with massive increase in energy consumption and pollution. The purpose of this study is to discuss how urbanization affects energy and CO2 emission intensities in Vietnam by using the province-level data over the period from 2010 to 2013. Our empirical analysis presents clear evidences supportive of the regional disparity of the effect of urbanization. For provinces with the low income level, urbanization would intensify energy and CO2 emission intensities. In contrast, for provinces with the high income level, urbanization would mitigate energy and CO2 emission intensities. This study also discusses related issues for three sectors of the Vietnamese economy: agricultural, industrial, and service sectors.
    Keywords: urbanization, income level, energy and CO2 emission intensities, Vietnam economy
    Date: 2017–06

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