nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒07‒09
seventeen papers chosen by
J. David Brown
United States Census Bureau

  1. Cyclical trend of labor reallocation in Poland: transition and structural change By Stanis³aw Cichocki; Joanna Tyrowicz; Lucas van der Velde
  2. What determines firms' credit to access in the absence of effective economic institutions: Evidence from China By Fu, Tong
  3. Zmiany zasobów ludzkich w Polsce z uwzględnieniem tendencji migracyjnych w latach 2010-2016 By Karbowski, Adam
  4. Структурные или институциональные сдвиги? Попытка измерения на примере банковского сектора By Vernikov, Andrei
  5. Talent workers as entrepreneurs: a new approach to aspirational self-employment By Joanna Tyrowicz; Magdalena Smyk
  6. International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals? By Ahmed, Shaghil; Coulibaly, Brahima; Zlate, Andrei
  7. The challenge of China’s rise as a science and technology powerhouse By Reinhilde Veugelers
  8. The "Construction" of Chinese culture in a globalized world and its importance for Beijing's smart power: Notes and concepts on a narrative shift By Cappelletti, Alessandra
  9. Corporate Debt Overhang in Croatia: Micro Assessment and Macro Implications By Ana Martinis; Igor Ljubaj
  10. Airports and economic performance in China By Stephen Gibbons; Wenjie Wu
  11. When the opportunity knocks: large structural shocks and gender wage gaps By Joanna Tyrowicz; Lucas van der Velde
  12. Financial Development and Capital Flows: An Application By Margaret, Davenport; Guido, Cozzi
  13. How (Not) to Make Women Work? By Karolina Goraus; Joanna Tyrowicz; Lucas van der Velde
  14. Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech National Bank's Approach By Tomas Havranek; Mojmir Hampl
  15. Credit ratings of domestic and global agencies: What drives the differences in China and how are they priced? By Xianfeng Jiang; Frank Packer
  16. Microeconomic mechanisms behind export spillovers from FDI: Evidence from Bulgaria By Ciani, Andrea; Imbruno, Michele
  17. Wage inequality and structural change By Joanna Tyrowicz; Magdalena Smyk

  1. By: Stanis³aw Cichocki (University of Warsaw); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw); Lucas van der Velde (Group for Research in Applied Economics (GRAPE))
    Abstract: Using data from the Polish Labor Force Survey for 1995-2015 we construct measures of worker flows and inquire their cyclical properties as a way to test the predictions of structural change/transition theories regarding the reallocation process that took place in Eastern European and FSU countries. This process has two features: the decline in public sector employment combined with an increase in private sector employment and the reallocation of labor from manufacturing to service sector. We find that labor market adjustments tend to amplify in upturns of the business cycle, while worker flows contribute only a fraction to the changing structure of employment.
    Keywords: wage inequality, structural change, transition, skill biased technological change
    JEL: J21 J62 P31
    Date: 2017
  2. By: Fu, Tong
    Abstract: The existing literature suggests that economic institutions determine the allocation of resources for economic growth. As an important counterexample, although China has one of the world's fastest-growing economies, its legal and financial systems are underdeveloped. With evidence from China, the author confirms that government intervention positively and causally determines firms' access to credit. He further provides evidence that government intervention enables firms' profit through facilitating access to credit. This evidence confirms that the mechanism of government intervention allows firms' access to credit and then enables the firms to obtain relatively large profit. Ultimately, this paper reveals that, in the absence of effective economic institutions, government intervention channels the allocation of capital.
    Keywords: access to credit,government intervention,mediation effect
    JEL: O17 G21 G28 C51
    Date: 2017
  3. By: Karbowski, Adam
    Abstract: The purpose of this chapter is to assess the change tendencies in human resources in Poland as a factor of economic competitiveness in the period 2010-2016. Human resources constitute an important factor of international competitiveness of the national economy. Productivity of human resources and equipment of the economy in human resources translate immediately into the ability of the national economy to innovate and attract foreign direct investments. The relationship between the state of human resources in Poland in the period 2010-2016 and the international competitiveness of the Polish economy in that period constitutes the research problem of the following work. Compared to the previous studies in the series called “Poland. Report on Competitiveness” prepared every year at the World Economy Research Institute of the Warsaw School of Economics (SGH), this year’s report pays more attention to migration tendencies affecting human resources in Poland in the period 2010-2016. The analysis conducted in this chapter covers the most important aspects of changes in human resources in the Polish economy, such as demographic trends, changes in employment and the level of unemployment, growth in wages and salaries and labour productivity. The main focus is on describing the current migration tendencies affecting human resources in Poland.
    Keywords: competitiveness; migrations; Poland
    JEL: E6 J1
    Date: 2017–06
  4. By: Vernikov, Andrei
    Abstract: The paper attempts measuring institutional change, taking the case of the Russian banking industry in 1991-2016. I put forward a set of metrics featuring the actors and the relevance of banking for the economy. At the first stage, the communist-era credit system falls apart, and so do coordination mechanisms between monetary and real sectors of the economy. After the 1998 crisis, evolution goes in the direction of greater government involvement in banks and centralized allocation of financial resources. Structural change has not yet led to a fully different modus operandi of the banking industry. The contribution of this paper is that it tackles the interplay between structural and institutional change in a particular economic sector.
    Keywords: institutional change, structural change, evolutionary analysis, mesoeconomics, banks, Russia, state
    JEL: B25 G21 G28 H82 P20 P34 P52
    Date: 2017–07–01
  5. By: Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw); Magdalena Smyk (Group for Research in Applied Economics (GRAPE))
    Abstract: Using the concept of so-called talent workers (Hsieh et al. 2016), we ask what is the link between wage employment as a talent worker and subsequent establishing of business. Individuals with tertiary education and experience in specific occupations skills are in principle more likely to develop or adopt innovations necessary for the entrepreneurial success. We employ over a decade of individual level data on changes in the labor market status for Poland – a country with high levels of self-employment and analyze transitions to self-employment as opposed to switching jobs. We find that talent workers are more likely to become self-employed than to change a job. We also find that the odds of creating more than one job position are higher among talent workers who switch to self-employment than among other groups of workers who become self-employed. These results are robust to two possibly confounding effects – within sector mobility and higher productivity of workers before entering self-employment.
    Keywords: self-employment, talent workers, labor mobility, wage employment
    JEL: J62 J24 L26
    Date: 2017
  6. By: Ahmed, Shaghil (Board of Governors of the Federal Reserve System); Coulibaly, Brahima (Board of Governors of the Federal Reserve System); Zlate, Andrei (Federal Reserve Bank of Boston)
    Abstract: We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs), covering the so-called taper-tantrum episode of 2013 and seven other episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in relatively early and persisted through this episode. (3) During the taper tantrum, while controlling for the EMEs' economic fundamentals, financial conditions also deteriorated more in those EMEs that had earlier experienced larger private capital inflows and greater exchange rate appreciation. (4) During the EME crises of the 1990s and early 2000s, we find little evidence of investor differentiation across EMEs being explained by differences in their relative vulnerabilities. (5) However, differentiation across EMEs based on fundamentals does not appear to be unique to the 2013 episode; it also occurred during the global financial crisis of 2008 and, subsequently, during financial stress episodes related to the European sovereign crisis in 2011 and China's financial market stresses in 2015.
    Keywords: Emerging market economies; financial spillovers; economic fundamentals; vulnerability index; depreciation pressure; taper tantrum; financial stress.
    JEL: E52 F31 F32 F65
    Date: 2017–06–05
  7. By: Reinhilde Veugelers
    Abstract: China is building up its global competitiveness in knowledge-intensive sectors and its ambition to be a global leader in science and innovation by 2050 seems well within reach. China outperforms the European Union in terms of expenditure on research and development as a share of its GDP, and already produces about the same number of scientific publications, and more PhDs in natural sciences and engineering, than the United States. China aspires to produce and capitalise on home-grown scientific talent, but its growth model for science still involves sending out its increasingly better locally-trained scholars to the best institutes in the world and reaping the benefits when they return in the later stages of their careers, after they have fully developed their capabilities and built their networks. The US remains the favoured destination for Chinese students, which has led to the creation of US-Chinese science and technology networks and connections that are mutually beneficial - enabling China to catch up and helping the US to keep its position at the science frontier. The EU has much less-developed scientific connections to China than the US. The EU should take steps to engage more with China if it is not to miss out in the future multipolar science and technology world.
    Date: 2017–07
  8. By: Cappelletti, Alessandra
    Abstract: The aim of this paper is to unveil the main cultural patterns adopted by the Chinese leadership to project smart power abroad, and to provide a new perspective on the claims by Chinese scholars and politicians who argue that a new paradigm in international relations is being promoted by Beijing. Principles as "inclusiveness", "in-win cooperation", "peaceful rise", "harmonious world" - often raised in relation with China's vision for a new global order and its flagship policy, the Belt and Road Initiative (BRI) - are part of a new narrative which cannot replace, for instance, fundamental issues as a clear regulatory framework needed for enterprises willing to participate in BRI-related infrastructural and energy projects. The lack of a clear legal framework is at the moment one of the most important problem hindering foreign firms' ability to invest and grow within the China-led initiative. The importance of this study rests on the necessity to find new interpretative insights to understand the main driving forces behind China's foreign policy (often not complying with Western-set rules and practices) by assessing the role of Chinese classical culture in the projection of China's smart power. The main cultural patterns and perspectives guiding Chinese policies abroad; the possibility that the Chinese government is introducing a narrative shift in global policy practices; the surfacing of a possible new way for international relations consistently based on an effort to improve international relations and enhance the state of world affairs, or maybe simply of a strategic scheme meant to avoid creating a clearer framework which could guarantee access to the initiative to all interested parts, at the same time limiting Beijing's power to arbitrarily choose partners and directions, will all be objects of reflection.
    Keywords: cultural diplomacy,soft power,smart power,Chinese politics,knowledge construction,cultural narratives,identity
    Date: 2017
  9. By: Ana Martinis (The Croatian National Bank, Croatia); Igor Ljubaj (The Croatian National Bank, Croatia)
    Abstract: High corporate sector leverage has often been highlighted as one of the major impediments to economic recovery. We conduct a debt sustainability analysis for Croatian corporates based on firm-level data. The analysis shows that around one third of the corporate debt in Croatia is unsustainable, thus pointing to sizeable deleveraging needs. By relating the estimated firm-level debt overhang indicator with investment activity, we find that over-indebted firms have reduced their investment to a greater extent than those without debt overhang. This especially holds among exporters and domestically owned private companies, whose higher sensitivity to unsustainable debt probably explains why they are less debt burdened. Our paper contributes to the existing literature by showing that, in the case of Croatia, the estimated firm-level debt sustainability thresholds, unlike the aggregate thresholds, capture the asymmetrically negative effect of debt overhang on investment. The estimated size and impact of the debt overhang in Croatia warrant policy engagement that would include more efficient bankruptcy procedures, swifter balance sheet clean-up supported by specific tax treatments, enhanced restructuring of unsustainably indebted state-owned companies as well as a comprehensive policy strategy for improving business climate and competitiveness.
    Keywords: corporate debt, investment, debt overhang, deleveraging, crisis, Croatia
    JEL: D22 E22 F34 G31
    Date: 2017–06
  10. By: Stephen Gibbons; Wenjie Wu
    Abstract: China's airport construction policy has been successful in boosting manufacturing output, according to research by Stephen Gibbons and Wenjie Wu. Their study also finds that productivity impacts have been greater for private firms in areas with relatively high population and low educational achievement. The researchers address the question of whether opening new airports and expanding airport capacity stimulate economic growth, particularly in developing countries. The evidence they find on the positive impact of airport infrastructure in China suggests that reduced travel times and improved domestic market access help to boost industrial productivity.
    Keywords: airports, infrastructure, productivity, China
    JEL: H54 O21 P25 R41
    Date: 2017–07
  11. By: Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw); Lucas van der Velde (Group for Research in Applied Economics (GRAPE))
    Abstract: Undergoing a large structural shock, labor markets may become less inclusive. We test for this thesis analyzing the behavior of adjusted gender wage gaps in a wide selection of transition countries. We estimate comparable measures of adjusted gender wage gaps for a comprehensive selection of transition countries over a period spanning nearly three decades. We combine these estimates with measures of labor market reallocation in transition economies to uncover the relation between worker flows and the gender wage gap. Results indicate that in periods of reallocation, the adjusted wage gaps increase. Distinguishing between flows according to their contribution to structural transformation reveals the distinctive role paid by separations from the state-owned manufacturing sector, usually leading to greater adjusted gaps. The emerging new sectors in the economy tend to be more inclusive in the short run, associated with a lower adjusted gender gap. In the medium run, the adverse effect of greater separations from the old sector is even more pronounced, while the emergence of the new sector is less relevant.
    Keywords: gender wage gap, transition, non-parametric estimates, worker flows
    JEL: C24 J22 J31 J71
    Date: 2017
  12. By: Margaret, Davenport; Guido, Cozzi
    Abstract: Could China's Property Law Reform of 2007 have induced the housing market value drop that preluded the 2007-2008 subprime crisis? We show how a well-known stylized global model may suggest a positive answer.
    Keywords: Global Imbalances, Financial development, China's Property Reform
    JEL: E44 F21 F32 F4
    Date: 2017–06–30
  13. By: Karolina Goraus (The World Bank; University of Warsaw); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw); Lucas van der Velde (Group for Research in Applied Economics (GRAPE))
    Abstract: Women in developed economies have experienced an unparalleled increase in employment rates, to the point that the gap with respect to men was cut in half. This positive trend has often been attributed to changes in the opportunity costs of working (e.g. access to caring facilities) and not-working (e.g. educational attainment). Meanwhile, the gender employment gaps were stagnant in transition economies. Admittedly, employment equality among genders was initially much higher in transition countries. We exploit this unique evidence from transition and advanced countries, to analyze the distributional nonlinearities in the relationship between the institutional environment and the (adjusted) gender employment gaps. We estimate comparable gender employment gaps on nearly 1600 micro databases from over 40 countries. We relate these estimates to changes in the opportunity costs of working and not-working. Changes in opportunity costs exhibited stronger correlation with gender employment equality where the gap was larger, i.e. advanced economies. We provide some evidence that these results are not explained away by transition-based theories, and argue that the observed patterns reflect a level effect. Currently, advanced and transition economies are at par in terms of gender employment equality. Hence, the existing instruments might not be sufficient to further reduce the gender employment gap.
    Keywords: employment, gender gaps, opportunity cost of working, transition, non-parametric estimates
    JEL: J2 J7
    Date: 2017
  14. By: Tomas Havranek; Mojmir Hampl
    Abstract: In this note we describe the Czech National Bank's approach to incorporating macroprudential considerations into monetary policy decision making: the use of a broader inflation measure that gives substantial weight to house prices and is considered along with headline CPI inflation. We argue that, in terms of theory, the broader inflation gauge is at least as suitable for measuring the value of money as headline CPI inflation is, but we also acknowledge practical problems that arise from the use of the broader index.
    Keywords: Consumer price index, financial stability, house prices, macroprudential policy, monetary policy, owner-occupied housing
    JEL: E31 E44 E50 R30
    Date: 2017–06
  15. By: Xianfeng Jiang; Frank Packer
    Abstract: The market for the credit ratings of Chinese firms is large and growing. We focus our analysis on the firms that have ratings from both domestic and global agencies. Despite the similar symbols, the rating scales of the domestic and global agencies differ: domestic agencies rate firms that are jointly rated higher than global agencies by 6-7 notches on average. Focusing on the rank order of domestic and global credit ratings, we test for differences in the determinants of ratings across global and domestic agencies. We find asset size is weighed more heavily as a positive factor by domestic agencies, and leverage is weighed more heavily as a negative factor by global agencies. Profitability and state-ownership are weighed more positively by global rating agencies. The influence of the variables is generally stable across a variety of robustness checks. In spite of these differences, both domestic and global ratings appear to be priced into the market values of rated bonds.
    Keywords: credit ratings, split ratings, state-owned firms, Chinese bond markets
    JEL: G12 G18 G23 G24
    Date: 2017–06
  16. By: Ciani, Andrea; Imbruno, Michele
    Abstract: This paper studies how the presence of multinational enterprises affects the export performance of Bulgarian manufacturing firms - Export spillovers from FDI. Using export data at the firm/product/destination level for the period 2004-2006, we find positive forward spillover on export value and quantity, related to quality upgrading. Conversely, we find negative (or insignificant) backward and horizontal spillover on export flows, related to quality downgrading. When aggregating data at the firm level and considering that a firm can operate in several sectors, we show that the presence of foreign input suppliers allows domestic firms to export additional varieties of lower quality and upgrade the average quality of existing varieties, whereas the presence of foreign customers generates the opposite effect.
    Keywords: Export spillover,FDI,Multi-product firms,Unit value,Quality
    JEL: F14 F23 F61
    Date: 2017
  17. By: Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw); Magdalena Smyk (Group for Research in Applied Economics (GRAPE))
    Abstract: Income inequality in the context of large structural change has received a lot of attention in the literature, but most studies relied on household post-transfer inequality measures. This study utilizes a novel and fairly comprehensive collection of micro datasets between 1980s and 2010 for both advanced market economies and economies undergoing transition from central planning to market based system. We show that earned income inequality was initially lower in transition economies and immediately upon the change of the economic system surpassed the levels observed in advanced economies. We decompose changes in wage inequality into parts that can be attributed to changes in characteristics (mainly education) and changes in rewards, but did not find any leading factor. Finally, in the context of skill-biased technological change literature we find a very weak link between structural changes and wages in both advanced and post-transition economies. %This holds regardless of whether an economy has underwent a large structural shock or not.
    Keywords: wage inequality, structural change, transition, skill biased technological change
    JEL: E24 D31 N34 O57 P36 P51
    Date: 2017

This nep-tra issue is ©2017 by J. David Brown. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.