nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒09‒03
twenty-one papers chosen by
J. David Brown
United States Census Bureau

  1. Nexuses between economic factors and stock returns in China By Khan, Muhammad Kamran; Teng, Jian -Zhou; Parviaz, Javed; Chaudhary, Sunil Kumar
  2. Household Finance in China By Russell Cooper; Guozhong Zhu
  3. What Chinese Workers Value: An Analysis of Job Satisfaction, Job Expectations, and Labor Turnover in China By Nie, Peng; Sousa-Poza, Alfonso
  4. Upgrading the Workshop of the World: Can Automation Spur Economic Development in China? By Naubahar Sharif; Yu Huang
  5. China’s mobility barriers and employment allocations By L Rachel Ngai; Christopher A Pissarides; Jin Wang
  6. Intergenerational Transfers and China’s Social Security Reform By Ayşe İmrohoroğlu; Kai Zhao
  7. Determinants of Urban Land Supply in China: How Do Political Factors Matter? By Hsu, Wen-Tai; Li, Xiaolu; Tang, Yang; Wu, Jing
  8. The Chinese Saving Rate: Long-Term Care Risks, Family Insurance, and Demographics By Ayşe İmrohoroğlu; Kai Zhao
  9. Russia’s Informal Economic Growth: 1960–1990 By Shida, Yoshisada
  10. A Vietnamese co-authorship network in social sciences: some graphical presentation of 2008-2017 Scopus data By Tung Manh Ho; Ha Viet Nguyen; Thu Trang Vuong; Quang-Minh Dam; Hiep Hung Pham; Quan-Hoang Vuong
  11. The Asymmetric Transmission of China's Monetary Policy By Tao Zha; Kaiji Chen
  12. Spillovers from the ECB's non-standard monetary policy measures on south-eastern Europe By Moder, Isabella
  13. Central Eastern and South Eastern European Markets Macro-Fundamental Analysis By Oliver Polyak
  14. Fiscal Federalism, Fiscal Reform, and Economic Growth in China By Alexander F. McQuoid; Yi Ding; Cem Karayalcin
  15. Balancing Development and the Environment in a Changing World: Expressways, GDP, and Pollution in China By Guojun He; Yang Xie; Bing Zhang
  16. Compliance, Efficiency and Instrument Choice: Evidence from air pollution control in China By Thomas Stoerk
  17. Do More Grandchildren Lead to Worse Health Status of Grandparents? Evidence from the China Health and Nutrition Survey By Yun Liang; John Gibson
  18. Are business obstacles different for R&D companies? By Heili Hein; Kadri Männasoo
  19. Learning from abroad: Export versus foreign ownership By Kadri Männasoo; Heili Hein
  20. Impact of Climate Change on Aquaculture in Phu Vang District, Thua Thien Hue Province, Vietnam By Mac Nhu Binh; Le Van An; Nguyen Thi Thanh Thuy; Ngo Thi huong Giang; Ho Thi Thu Hoai; Truong Van Dan
  21. Who has a better chance of getting higher salaries among creative R&D employees? By Heili Hein; Aaro Hazak; Kadri Männasoo

  1. By: Khan, Muhammad Kamran; Teng, Jian -Zhou; Parviaz, Javed; Chaudhary, Sunil Kumar
    Abstract: Economist and stock managers always focus on stock market return. This study investigated short and long run relationship between economic factors and stock returns in China by applying ARDL approach from 01/2000 to 12/2016. Estimated results of bound test for co-integration shows that long run relationships exist among the variables except inflation rate. Results of short and long run ARDL demonstrate that exchange rate and inflation rate have positive effect on stock returns in China while interest rate have negative effect on stock returns. Results indicate that stock returns in China are very sensitive and can be affected positively or negatively with increase and decrease in economic factors. Both local and regional factors in China can directly and indirectly explain Shanghai Stock Exchange stock returns.
    Keywords: stock returns, economic factors, ARDL
    JEL: E4 G10
    Date: 2017–08–05
  2. By: Russell Cooper; Guozhong Zhu
    Abstract: This paper studies household finance in China, focusing on the high savings rate, the low participation rate in the stock market, and the low stock share in household portfolios. These salient features are studied in a lifecycle model in which households receive both income and medical expense shocks and decide on stock market participation and portfolio adjustment. The structural estimation explicitly takes into account important regime changes in China, such as the re-opening of the stock market, the privatization of the housing market and the labor market reforms that changed household income processes. The paper also compares household finance patterns in China to those in the US, and shows that between-country differences in financial choices are driven by both institutional factors (e.g. higher costs associated with stock market participation and a lower consumption floor in China) and preferences (e.g. higher discount factors of Chinese households).
    JEL: E21 G11 P2
    Date: 2017–08
  3. By: Nie, Peng (University of Hohenheim); Sousa-Poza, Alfonso (University of Hohenheim)
    Abstract: This study uses data from the 2012 China Labor Force Dynamics Survey and 2010–2012 China Family Panel Studies to investigate job satisfaction and job expectations, as well as the association between job satisfaction and job turnover by gender among employees aged 16–65. We find not only that job satisfaction levels are relatively low, with only 46% of workers explicitly satisfied, but also that worker expectations differ significantly from what their jobs actually provide. In particular, many jobs are less interesting than expected, which prevents workers from realizing their perceived potential. This expectation gap is thus a strong determinant of job satisfaction. Men and women have similar levels of job satisfaction, yet based on observables, one would expect women's job satisfaction to be lower than it actually is, thereby lending support to the gender-job-satisfaction paradox encountered in Western studies. In contrast to Western research, we find no link between job satisfaction and job change, an observation we attribute to China's unique Confucian-based work ethic.
    Keywords: ob satisfaction, gender, labor turnover, China
    JEL: J16 J17 J28
    Date: 2017–08
  4. By: Naubahar Sharif (Associate Professor, Division of Social Science, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Yu Huang (Division of Social Science, Hong Kong University of Science and Technology)
    Abstract: Naubahar Sharif, HKUST IEMS Faculty Associate, warns that automation is not the panacea for China’s stalling economic development as believed.Industrial upgrading is central for the “Made in China 2025” economic plan, which hopes to push China up the global value chain into intelligent manufacturing. A pilot program, “Replacing Humans with Robots,” launched in 2009 in response to the global economic crisis. Yet results have been mixed. Prof Sharif recommends a deeper look into the micro- and macro-level effects of automation, to figure out how China can maintain its rate of growth while still developing its manufacturing expertise and the skills of its workforce. The study was conducted with postdoctoral fellow Yu Huang.
    Keywords: automation, china, employment, jobs, robots, technology
    Date: 2017–06
  5. By: L Rachel Ngai (Reader in Economics, London School of Economics and Political Science; Institute for Advanced Study, The Hong Kong University of Science and Technology; HKUST Institute for Emerging Market Studies (IEMS)); Christopher A Pissarides (London School of Economics; Institute for Advanced Study, The Hong Kong University of Science and Technology; HKUST Institute for Emerging Market Studies (IEMS)); Jin Wang (Division of Social Science, The Hong Kong University of Science and Technology; HKUST Institute for Emerging Market Studies (IEMS))
    Abstract: China’s hukou system imposes two main barriers to population movements. Agricultural workers get land to cultivate but run the risk of losing it if they migrate. Social transfers (education, health, etc.) are conditional on holding a local hukou. We show that the land policy is a more important barrier on industrialization. This distortion can be corrected by giving property rights to farmers. Social transfers dampen mainly urbanization. We calculate that the two policies together lead to overemployment in agriculture of 6.7 points, under-employment in the urban sector of 6.3 points and have practically no impact on the rural non-agricultural sector.
    Date: 2017–08
  6. By: Ayşe İmrohoroğlu (University of Southern California); Kai Zhao (University of Connecticut)
    Abstract: Most of the studies examining the implications of social security reforms in China use overlapping generations models and abstract from the role of family support. How-ever, in China, family support plays a prominent role in the well-being of the elderly and often substitutes for the lack of government-provided old-age support systems. In this paper, we investigate the impact of social security reform in China in a model with two-sided altruism as well as a pure life-cycle model. We show that the quantitative implications of social security reform are very different across the two models.
    Date: 2017–08
  7. By: Hsu, Wen-Tai (School of Economics, Singapore Management University); Li, Xiaolu (Division of Economics, Nanyang Technological University); Tang, Yang (Division of Economics, Nanyang Technological University); Wu, Jing (Hang Lung Center for Real Estate and Department of Construction Management, Tsinghua University)
    Abstract: This paper explores two political factors for their potential effects on urban land supply in China: corruption, and competition for promotion. We find that standard urban-economic predictions hold in the sense that both population and income increases are strongly significant determinants for the increase in urban land supply. Conditional on these demand-side factors, we find that the usage of two-stage auctions (as a proxy for corruption) is highly correlated with the increase in land supply. The corruption effects are strongest for commercial land, followed by residential land and then industrial land. To shed light on the competition motives among prefectural leaders, we examine how the number of years in office affects land supply, and distinguish among different hypotheses. Our empirical results show robust rising trends in land sales (both in quantity and revenue). These results are consistent with the hypothesis that the impatience and anxiety in later years from not being promoted may contribute to the increase in land sales revenue in later years; they are inconsistent with the hypothesis that prefectural leaders may give up and become more corrupt in later years. We also find that prefectural leaders may aim for larger land sales revenue overall in the first few (around 5) years in office instead of larger revenue in the first couple years.
    Keywords: Land supply; China; Political factors; institution; Monocentric-city model
    Date: 2017–03–01
  8. By: Ayşe İmrohoroğlu (University of Southern California); Kai Zhao (University of Connecticut)
    Abstract: In this paper, we show that a general equilibrium model that properly captures the risks in old age, the role of family insurance, changes in demographics, and the productivity growth rate is capable of generating changes in the national saving rate in China that mimic the data well. Our findings suggest that the combination of the risks faced by the elderly and the deterioration of family insurance due to the one-child policy may account for approximately half of the increase in the saving rate between 1980 and 2010. Changes in the productivity growth rate account for the fluctuations in the saving rate during this period.
    Date: 2017–08
  9. By: Shida, Yoshisada
    Abstract: This paper studies the historical GDP of Russia from perspective informal economy. We re-estimate nominal and real informal GDP in the period 1960–1990, using the expenditure approach and declassified archival materials of household budget surveys. The main findings are as follows. First, previously estimated values of Russia’s nominal GDP were underestimated, on average, by about 12.6% for 1960–1990, due to ignoring informal GDP. Second, after including informal GDP, we find that economic growth is 15–39 percentage points lower during this period, which corresponds to differences in the annual growth rate in the range of 0.24–0.38 percentage points.
    Keywords: informal economy, historical statistics, Russia, USSR
    JEL: N14 O17 N24 N27
    Date: 2017–03
  10. By: Tung Manh Ho; Ha Viet Nguyen; Thu Trang Vuong; Quang-Minh Dam; Hiep Hung Pham; Quan-Hoang Vuong
    Abstract: The application of social network analysis in studying science collaboration has not been used for studying science activities in Vietnam although collaboration is popular among Vietnamese scientists. This paper employs network visualization together with basic network measures to explore characteristics of the network of 412 Vietnamese social scientists whose papers can be found indexed in the Scopus database. Early results show that the network’s connections are very sparse, with only 0.52% density, but the clustering coefficient is very high, 58.64%, suggesting that the dissemination of scientific knowledge and expertise in the network is not very efficient. Secondly, the disparity in the levels of connection among individual researchers in the network indicates that it would easily fall apart if a few highly-connected nodes are removed. Finally, upon zooming in on the two largest components of the network, the study found that their characteristics differ from the whole and both of them are led by the most productive researchers who also have the most connections.
    Keywords: Social network analysis; Science collaboration; Network characteristics; Research output
    JEL: I23 O32
    Date: 2017–08–21
  11. By: Tao Zha (Federal Reserve Bank of Atlanta); Kaiji Chen (Emory University)
    Abstract: China monetary policy, as well as its transmission into the economy, is yet to be understood by researchers and policymakers. We propose a new estimation method and use it to quantify the monetary transmission of China's monetary policy within the endogenous-switching nonlinear SVAR framework. We find strong evidence that contributions of monetary policy shocks to the GDP fluctuation are asymmetric across different states of the economy. The effect of monetary policy on output is supported more by medium and long term bank loans than by short term bank loans. This is especially true for the shortfall state, in which an increase of M2 is channeled disproportionally into MLT loans. These findings highlight the role of M2 growth as a primary instrument and the bank lending channel to investment as a key transmission mechanism for monetary policy. Our analysis shows that China monetary policy has unbalanced effects on consumption and investment.
    Date: 2017
  12. By: Moder, Isabella
    Abstract: This paper is the first to comprehensively assess the impact of the euro area’s non-standard monetary policy measures on south-eastern Europe. By employing bilateral BVAR models, I am able to estimate the response of output and prices for each country, as well as to shed more light on potential shock transmission channels. The results suggest that the ECB’s non-standard monetary policy measures have had pronounced price effects on all south-eastern European countries, and output effects on approximately half of them. While I also find exports to be a relevant transmission channel in most cases, the interbank market rate responds significantly only in a few cases as the region was subject to significant cross-border bank deleveraging after the crisis. Furthermore, the results suggest that the exchange rate regime does not play a role in determining the sign and magnitude of price level and output responses. This is in line with the absence of distinct exchange rate responses in the model output, suggesting that exchange rates did not act as buffers for spillovers of euro area non-standard monetary policy measures on south-eastern Europe. JEL Classification: C11, C32, E52, F42
    Keywords: BVAR, EU integration, international shock transmission, unconventional monetary policy
    Date: 2017–08
  13. By: Oliver Polyak (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: A type of fundamental analysis focusing on broad economic factors that affect the stock market as a whole or industry groups of securities, also known as the macro-fundamental analysis, is the practice of evaluating the overall performance of the economy, its impact on industry groups and finally down to specific companies in the industry groups. As such, macro-fundamental analysis is broadly accepted as a critical tool to analyze and potentially predict the stock price development There has been a lot written about the cointegration and causality links between the macroeconomic factors and stock indices of the Western European markets. On the contrary, not so much has been researched about these links when it comes to the European emerging markets. The aim of this paper is thus to examine such relationships in case of selected Central and South-Eastern European countries, collecting the latest data and using a broader sample of macroeconomic indicators. Our findings reveal several pairwise short-run causal impacts between studied macroeconomic indicators and stock indices. Moreover, according to our results, all CEE&SEE stock markets under consideration may potentially be in violation of market efficiency.
    Date: 2017–08
  14. By: Alexander F. McQuoid (United States Naval Academy); Yi Ding (Tianjin Precious Metal Exchange); Cem Karayalcin (Florida International University)
    Abstract: Though it has been recognized that political institutions and state capacity play an important role in determining economic outcomes, for most non-Western economies we still do not have granular enough historical knowledge as to how. Here we study a particular historical episode in the case of China, which, after a period of fiscal decentralization that has been credited with leading to historically unprecedented growth rates but significant fiscal decline, recentralized the collection of tax revenues. The economic and political consequences of this new Tax Sharing System (TSS) have been debated extensively given the interest on fiscal decentralization and its interaction with political institutions and economic outcomes. The central question in this debate has been whether the TSS constitutes a significant departure from decentralization with adverse effects on fiscal federalism or whether the recentralization under the TSS corrects for the overshooting in decentralization with beneficial economic outcomes. Our approach exploits the staggered introduction of the TSS across regions and over time to causally identify the policy impact on economic outcomes. After showing traditional proxies of fiscal federalism provide unstable estimates and contradictory conclusions, we utilize a difference-in-difference approach, and find that the TSS increased per capita GDP growth rates by 17%.
    Date: 2017–09
  15. By: Guojun He (Division of Social Sciencee, Division of Environment, and Department of Economics, The Hong Kong University of Science and Technology); Yang Xie (Department of Economic, University of California, Riverside); Bing Zhang (Center for Environmental Management and Policy Analysis, School of Environment, Nanjing University)
    Abstract: When productivity changes, how would an economy rebalance economic production and environmental preservation? We develop a conceptual framework to analyze the question, and predict that a productivity shock can have heterogeneous impacts on environmental quality and income. Exploiting a quasi-experiment provided by the dramatic expansion of China’s national expressway system, we find empirical evidence that is consistent with the model’s predictions: expressway access increases both pollution and GDP in initially poor counties, decreases pollution and GDP in initially rich counties, and decreases pollution while increasing GDP in counties with moderate levels of initial income. These findings cannot be fully explained by alternative theories such as the pollution haven hypothesis and home market effect.
    Date: 2017–08
  16. By: Thomas Stoerk
    Abstract: This research evaluates China's main air pollution control policy. In 2005, China decided on a 10% SO2 emissions reduction goal as part of the 11th Five-Year Plan (2006-2010). I study the effect of this policy on pollution outcomes, using both the offcial, misreporting-prone indicator and independent NASA SO2 satellite data in a differences-in-differences strategy that exploits variation in target stringency at the province level. I find that results from the offcial and the satellite data differ initially when the Chinese government lacked the ability to effectively monitor SO2 pollution. Ultimately, however, the policy worked and reduced air pollution by 11%. The regulated provincial governments react through rhetorical compliance, measured by a unique dataset of quantified political statements, and by shutting down small, ineffcient thermal units. Rhetorical compliance increases, especially before the government gained the ability to monitor SO2 in 2008. Real compliance sets in through the shutdown of small, ineffcient thermal units. Next, I compute detailed marginal abatement cost curves for SO2 for each province in China, thus illustrating the large heterogeneity in abatement cost across provinces. I use those curves to construct the counterfactual cost-effcient allocation of SO2 reduction targets across provinces. Using this benchmark, I find that the cost-effcient allocation would increase effciency by 49% at the margin, by lowering marginal abatement cost from 658e/tSO2 to 338e/tSO2. This finding is robust to inclusion of a back-of-the-envelope measure for the marginal benefits of abatement. I conclude that a market-based allocation of SO2 reduction targets would have doubled the effciency of China's main air pollution control policy. Contrary to the US experience, I find that a mandate on scrubbers would reap most of those effciency gains.
    Date: 2017–08
  17. By: Yun Liang (University of Waikato); John Gibson (University of Waikato)
    Abstract: China is rapidly aging and the social security system provides insufficient pension coverage. Consequently, almost 80 percent of elderly people depend on their children or other relatives for financial support. We use China Health and Nutrition Survey data to test if more grandchildren adversely affects elder health. This could occur because grandparents and grandchildren compete for financial support from the working adults in a family and because grandparents often have to care for young grandchildren and may neglect their own health. Since the number of grandchildren is a choice variable, we use exogenous variation in fertility for two generations under local implementation of the one child policy. We also take advantage of the panel data to deal with unobservable factors. The health of the elderly appears to be adversely affected by the number of grandchildren, especially for grandmothers and especially in urban areas.
    Keywords: elderly; grandchildren; health; one-child policy; China
    JEL: I12 J14
    Date: 2017–08–27
  18. By: Heili Hein; Kadri Männasoo
    Abstract: Investment in research and development (R&D) is often long-term, making R&D companies extremely sensitive to their environment. Using data from the Business Environment and Enterprise Performance Survey rounds IV (2007-2009) and V (2012-2014), we examine the differences in how severe R&D and non-R&D manufacturing companies in Central and Eastern Europe perceive business obstacles to be. Overall, R&D companies were relatively more troubled by various institutional and regulatory obstacles in their business environment than were non-R&D companies, whose main business concern was the tax rate. Over both rounds of the survey, R&D companies perceived labour and trade regulations as more severe obstacles than non-R&D companies did. During the post-crisis period, R&D companies were also relatively more concerned about political instability, courts and corruption.
    Date: 2017–08–31
  19. By: Kadri Männasoo; Heili Hein
    Abstract: Companies engaged in innovation and research and development (R&D) are often engaged in business on an international scale and their success is critically dependent on international R&D networking and the ability to absorb new knowledge. Foreign ownership, joint ventures and trade are among the channels that enable companies to learn from abroad. This brief analysis aims to describe these learning patterns and look for associations between R&D engagement and foreign interactions. Using data from eleven Central and Eastern European countries for the years 2007-2009 and 2012-2014 reveals that exporting is the only foreign channel that has a clear positive relationship with R&D engagement.
    Date: 2017–08–31
  20. By: Mac Nhu Binh; Le Van An; Nguyen Thi Thanh Thuy; Ngo Thi huong Giang; Ho Thi Thu Hoai; Truong Van Dan
    Abstract: Climate change is a major global concern that greatly affects people, including their source of living. In 2010, the Asian Development Bank reported that Vietnam is one of the five countries most severely affected by climate change. About 70 percent of the country's total population lives along coastal areas and in islands. This study aimed to (1) evaluate the impacts of climate change on aquaculture in Phu Vang district (Thua Thien Hue province, Vietnam), and (2) develop a climate change adaptation model for aquaculture. Data on impact of climate change to aquaculture production were gathered through participatory rural appraisal tools, while spatial changes in water quality were determined through Geographic Information System (GIS). Experimental polyculture models were set up in the five study-site communes to determine the aquaculture practices that could be disseminated to small farmers. It was found out that Phu Vang had suffered heavy losses from climate change brought about by a combination of droughts and prolonged heat waves, and cold weather that lasted longer. Floods and typhoons have likewise occurred with stronger intensities, and tide amplitude has changed drastically. All these affected agricultural activities, especially aquaculture, which is considered as one of the most vulnerable sectors to climate change impacts. As a result, many households shifted from intensive to extensive culture, and some even left their ponds for other jobs. The limited understanding and capacity of people on climate change aggravated the situation, affecting their ability to respond and mitigate negative impacts. Water quality, specifically for aquaculture, was also affected as a result of rising temperature, prolonged droughts, rainfall, flooding, and salinization, which in turn reduced productivity and yield. Meanwhile, polyculture models of aquaculture implemented for this study brought high economic returns, and could be promising to replicate in various communes of Phu Vang district. The following are the primary recommendations to mitigate climate change impact in aquaculture and to facilitate sustainable livelihood for coastal people: capacitate communities and government in climate change adaptation and mitigation; expand promising aquaculture practices, area, infrastructure, and marketing of produce; and implement policies to mitigate damages of climate change to aquaculture and the community as a whole.
    Keywords: climate change, aquaculture, Vietnam
    Date: 2017
  21. By: Heili Hein; Aaro Hazak; Kadri Männasoo
    Abstract: It is a known fact from previous studies that on average, women earn less than men. Although the size of the gender pay gap differs from country to country, this statement is true almost everywhere. This brief study aims to contribute to the discussion on the gender pay gap by examining the earnings of a specific demographic – Estonian creative R&D employees. Not surprisingly, we discovered that gender is an important and statistically significant driver of salary levels with women being less likely than men to receive higher levels of salaries. In addition, we find that age is a further statistically significant determinant of salary levels. The effect of age on earnings forms an inverse-U-shape with younger and older employees having a lower likelihood of earning higher salaries compared to their middle-aged colleagues.
    Date: 2017–08–31

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