nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒08‒27
thirteen papers chosen by
J. David Brown
United States Census Bureau

  1. Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China By Loren Brandt; Jessica Leight; Diego Restuccia; Tasso Adamopoulos
  2. From Soviets to Oligarchs: Inequality and Property in Russia, 1905-2016 By Filip Novokmet; Thomas Piketty; Gabriel Zucman
  3. Lineage-based Heterogeneity and Cooperative Behavior in Rural China By He, Quqiong; Pan, Ying; Sarangi, Sudipta
  4. Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market By Panle Jia Barwick; Shengmao Cao; Shanjun Li
  5. On the Relationship Between Quality and Productivity: Evidence from China's Accession to the WTO By Haichao Fan; Yao Amber Li; Stephen R. Yeaple
  6. The Moscow market in country’s economic space By Gluschenko, Konstantin
  7. How do Tax Incentives A ect Investment and Productivity? Firm-Level Evidence from China By Yongzheng Liu; Jie Mao
  8. Demographics will reverse three multi-decade global trends By Charles Goodhart; Manoj Pradhan
  9. Управление технологическим развитием сельского хозяйства: ресурсы для развития, институциональная среда, государственное регулирование, кадровый потенциал, рынок инноваций, стратегические приоритеты. By Stukach, Victor; Volrova, Inna
  10. Currency Matching and Carry Trade by Non-Financial Corporations By Kátay, Gábor; Péter, Harasztosi
  11. Panel Estimation of the Impact of Foreign Banks Presence on Selected Banking Indicators in Macedonia By Ana Mitreska; Sultanija Bojcheva – Terzijan
  12. Crime, Transition, and Growth By Djumashev, Ratbek; Abdullaev, Bekzod
  13. What drives export market shares? It depends! An empirical analysis using Bayesian Model Averaging By Konstantins Benkovskis; Benjamin Bluhm; Elena Bobeica; Chiara Osbat; Stefan Zeugner

  1. By: Loren Brandt (University of Toronto); Jessica Leight (Williams College); Diego Restuccia (University of Toronto); Tasso Adamopoulos (York University)
    Abstract: We use household-level panel data from China and a quantitative framework to document the extent and consequences of factor misallocation in agriculture. We find that there are substantial frictions in both the land and capital markets linked to land institutions in rural China that disproportionately constrain the more productive farmers. These frictions reduce aggregate agricultural productivity in China by affecting two key margins: (1) the allocation of resources across farmers (misallocation) and (2) the allocation of workers across sectors, in particular the type of farmers who operate in agriculture (selection). We show that selection can substantially amplify the static misallocation effect of distortionary policies by affecting occupational choices that worsen the distribution of productive units in agriculture.
    Date: 2017
  2. By: Filip Novokmet; Thomas Piketty; Gabriel Zucman
    Abstract: This paper combines national accounts, survey, wealth and fiscal data (including recently released tax data on high-income taxpayers) in order to provide consistent series on the accumulation and distribution of income and wealth in Russia from the Soviet period until the present day. We find that official survey-based measures vastly under-estimate the rise of inequality since 1990. According to our benchmark estimates, top income shares are now similar to (or higher than) the levels observed in the United States. We also find that inequality has increased substantially more in Russia than in China and other ex-communist countries in Eastern Europe. We relate this finding to the specific transition strategy followed in Russia. According to our benchmark estimates, the wealth held offshore by rich Russians is about three times larger than official net foreign reserves, and is comparable in magnitude to total household financial assets held in Russia.
    JEL: D31 E01 E21 O52
    Date: 2017–08
  3. By: He, Quqiong; Pan, Ying; Sarangi, Sudipta
    Abstract: This paper investigates how lineages, the commonly found organizations in rural villages of China, affect people’s intra- and cross-lineage cooperative behavior. We use data from the Chinese Household Income Project Survey 2002, which exclusively contains information about the lineage structure in these villages allowing us to classify three levels of lineage-based heterogeneity. Our identification strategy relies on the exogeneity of lineage-based heterogeneity. We find evidence that people in a village with higher lineage-based heterogeneity are less likely to exhibit reciprocity behavior within lineages or contribute to the provision of public goods that are jointly shared across lineages. The estimation results remain robust to the inclusion of various control variables and additional background characteristics. Finally, we examine a number of other economic outcomes and find that more homogeneous villages do better than other types of villages.
    Keywords: Cooperation; Lineage Networks; Reciprocity; Local Public Goods; China
    JEL: D71 H41 O12 O17
    Date: 2017–08
  4. By: Panle Jia Barwick; Shengmao Cao; Shanjun Li
    Abstract: While China has made great strides in transforming its centrally-planned economy to a market-oriented economy, there still exist widespread interregional trade barriers, such as policies and practices that protect local firms against competition from non-local firms. This study documents the presence of local protectionism and quantifies its impacts on market competition and social welfare in the context of China’s automobile market. This market exhibits a salient feature that vehicle models by joint ventures (JVs) and especially state-owned enterprises (SOEs) command much higher market shares in their headquarter province than at the national level. Through spatial discontinuity analysis at provincial borders, falsification tests, and consumer surveys, we first confirm protective policies such as subsidies to local brands as the primary contributing factor. We then set up and estimate a market equilibrium model to quantify the impact of local protection, controlling for other demand and supply factors. Counterfactual simulations show that local protection leads to significant choice distortions, resulting in 18.7 billion yuan of consumer welfare loss, amounting to 40% of total subsidy. Provincial governments face a prisoner’s dilemma: according to our estimates, local protection reduces aggregate social welfare, but the provincial governments have no incentive to unilaterally remove local protection.
    JEL: D04 D6 F15 H2 L1 L5 L62
    Date: 2017–08
  5. By: Haichao Fan; Yao Amber Li; Stephen R. Yeaple
    Abstract: This paper presents an analysis of the effect of China's entry into the WTO on the quality choices of Chinese exporters in terms of their outputs and their inputs. Using highly disaggregated firm-level data, we show that the quality upgrading made possible by China's tariff reductions was concentrated in the least productive Chinese exporters. These firms, which had been laggards in terms of quality prior to the tariff reduction, were the most aggressive in increasing the quality of their exports and their inputs and in redirecting their exports toward high income markets where demand for high quality goods is strong. Our empirical results are consistent with a simple model featuring scale effect and non-Hicks' neutral productivity that disproportionately affects the efficiency with which firms use intermediate inputs. This latter feature does not appear in workhorse models of firm heterogeneity and endogenous quality choice which provide a distorted view of the impact of trade liberalization on quality upgrading.
    JEL: F1 F10 F14 O3
    Date: 2017–08
  6. By: Gluschenko, Konstantin
    Abstract: This paper studies integration of the Moscow market for final goods with markets of all other Russian regions. It considers an aggregated market represented by a minimum food basket. The law of one price serves as a criterion of market integration. It is a base for constructing time series models of the regional costs of the staples basket over 2001–2015 relative to its cost in Moscow. Regional markets are divided into four groups: integrated with the Moscow market, conditionally integrated with it, not integrated but tending towards integration with the Moscow market, and neither integrated nor tending towards integration. Nonlinear time series models with asymptotically decaying trends describe the movement towards integration (price convergence).
    Keywords: market integration, law of one price; price convergence; nonlinear trend; Russian regions
    JEL: C32 L81 P22 R15
    Date: 2017–08–21
  7. By: Yongzheng Liu (School of Finance, Renmin University of China); Jie Mao (Department of Public Finance and Taxation, School of International Trade and Economics, University of International Business and Economics)
    Abstract: China initiated a critical value-added tax reform in 2004. Completed in 2009, it introduced permanent tax credit for firms' investment in fixed assets. We use a quasi-experimental design and a unique firm-level dataset covering all sizes of firms across a broad range of sectors and regions between 2005 and 2012, to test whether the reform promoted firms' investment and productivity. We estimate that on average, the reform raised investment and productivity of the treated firms relative to the control firms by 8.8 percent and 3.7 percent, respectively. We also show that the positive effects tend to be strengthened for firms with financial constraints.
    Date: 2017–08
  8. By: Charles Goodhart; Manoj Pradhan
    Abstract: Between the 1980s and the 2000s, the largest ever positive labour supply shock occurred, resulting from demographic trends and from the inclusion of China and eastern Europe into the World Trade Organization. This led to a shift in manufacturing to Asia, especially China; a stagnation in real wages; a collapse in the power of private sector trade unions; increasing inequality within countries, but less inequality between countries; deflationary pressures; and falling interest rates. This shock is now reversing. As the world ages, real interest rates will rise, inflation and wage growth will pick up and inequality will fall. What is the biggest challenge to our thesis? The hardest prior trend to reverse will be that of low interest rates, which have resulted in a huge and persistent debt overhang, apart from some deleveraging in advanced economy banks. Future problems may now intensify as the demographic structure worsens, growth slows, and there is little stomach for major inflation. Are we in a trap where the debt overhang enforces continuing low interest rates, and those low interest rates encourage yet more debt finance? There is no silver bullet, but we recommend policy measures to switch from debt to equity finance.
    Keywords: demography, global labor supply, ageing, real interest rates, inequality
    JEL: J11 J18 E43 D63 E31 H63
    Date: 2017–08
  9. By: Stukach, Victor; Volrova, Inna
    Abstract: . On the materials of the Siberian region problems of management of technological development of agriculture are considered. The evo-lutionary prerequisites, the reproduction process, organizational and economic problems, the institutional environment, state regulation in the sphere of technological development management are investigated. Innovative policy, resource-target approach in ensuring technological efficiency of production, assessment of technical, technological equipment, personnel potential, technological efficiency of production resources use, infrastructure of innovation market are considered. Strategic priorities, the practice of forsight research in the construction of scenarios for development in the medium and long term are proposed.
    Keywords: Management of technological development of agriculture, innovation policy, technological efficiency of production, strategic priorities, resources for technological development.
    JEL: O13 O15 O25 O31 O32
    Date: 2017–02
  10. By: Kátay, Gábor (European Commission – JRC); Péter, Harasztosi (European Commission – JRC)
    Abstract: The paper investigates firms’ willingness to match the currency composition of their assets and liabilities and their incentives to deviate from perfect matching. Using detailed information at the loan contract level for the Hungarian non-financial corporate sector, the paper provides strong evidence to support the theory that currency matching plays a role in exporters’ debt currency choices. However, natural hedging is not the primary motivation for firms to choose foreign currency: it explains less than 5 per cent of the overall new corporate foreign currency loans contracted by exporters and less than 2 per cent of the aggregate new foreign currency bank loans. Besides hedging, our results suggest that both carry trade and diversification strategies are relevant factors in firms’ currency-of-denomination decisions.
    Keywords: borrowing decisions; currency mismatch; carry trade; financial crisis
    JEL: G01 G11 G32 F31 F34
    Date: 2017–05
  11. By: Ana Mitreska (National Bank of the Republic of Macedonia); Sultanija Bojcheva – Terzijan (National Bank of the Republic of Macedonia)
    Abstract: The latest global financial and economic crisis reignited the debate on the costs and benefits of foreign bank presence. While discussions on the optimal financing model of foreign owned banks are ongoing, the consensus on the benefits of foreign banks presence is not a matter of dispute. Given the large and enduring foreign presence in the Macedonian banking system, we try to empirically test some of the traditional channels of the foreign banks impact on the banking system behaviour. We employ panel estimation method with a pooled mean group estimator. The results do confirm the thesis that foreign banks presence in Macedonia supports the competition in the banking system in the long run, visible through the narrowing of some of the profitability indicators. Yet, what they also suggest is that it happens via rise in the operational costs - commonly result of the new investments of foreign owners in knowledge and technology. On the other hand, the interest income component is positively affected by the change in the foreign banks presence. The findings suggest that the observed trend of falling share of interest income in interest earning assets and falling operational costs, on a long run can be explained by other fundamental factors, rather than the actual dynamics of foreign bank presence. The availability of bank funding is one of those fundamentals, which can explain the adjustment in the interest income, in particular.
    Keywords: foreign banks presence, banking indicators, international investment, panel estimates, pooled mean group estimator
    JEL: C23 F21 G21
    Date: 2017
  12. By: Djumashev, Ratbek; Abdullaev, Bekzod
    Abstract: This paper analyses whether the effect of crime on growth depends on the structural changes caused by transition. The result of the simple model suggests that when the structure of economy changes, the cost of economically motivated crime will also change; thus, affecting the impact of crime on economic performance. Using data for some of the republics of the former Soviet Union, we find support for this conjecture.
    Keywords: growth, crime, transition economies
    JEL: O17 O57 P26 P52
    Date: 2017–08–17
  13. By: Konstantins Benkovskis (Bank of Latvia); Benjamin Bluhm (European Central Bank); Elena Bobeica (European Central Bank); Chiara Osbat (European Central Bank); Stefan Zeugner (European Commission)
    Abstract: What drives external performance of countries? This is a recurring question in academia and policy. The factors underlying export growth are receiving great attention, as countries struggle to grow out of the crisis by increasing exports and as protectionist discourses take foot again. Despite decades of debates, it is still unclear what the drivers of external performance are and, importantly, which ones policy makers can influence. We use Bayesian Model Averaging in a panel setting to investigate the drivers of export market shares of 25 EU countries, considering a wide range of traditional indicators along with novel ones developed within the CompNet. We find that export market share growth is linked to different factors in the old and new EU Member States, with one exception: for both groups, competitive pressures from China have strongly affected export performance since the early 2000s. In the case of the old EU Member States, investment, the quality of institutions and liquidity available to firms also appear to play a role. For the new EU Member States, labour and total factor productivity are particularly important, while inward FDI matters more than domestic investment. Price competitiveness does not seem to play a very important role in either set of countries: relative export prices do show correlation with export performance for the new EU Member States, but only when they are adjusted for quality. Our results point to the importance of considering the "exporting stage" of a country when discussing export-enhancing policies.
    Keywords: export shares, competitiveness, Bayesian Model Averaging
    JEL: C23 C51 F14 O52
    Date: 2017–08–10

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