nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒09‒17
sixteen papers chosen by
J. David Brown
United States Census Bureau

  1. Crimea and punishment: the impact of sanctions on Russian and European economies By Kholodilin, Konstantin A.; Netšunajev, Aleksei
  2. Trade Scopes across Destinations: Evidence from Chinese Firm By Miao, Zhuang; Li, Yifan
  3. Random walks and market efficiency in Chinese and Indian equity markets By Oleg Malafeyev; Achal Awasthi; Kaustubh S. Kambekar
  4. Formal and informal household savings: how does trust in financial institutions influence the choice of saving instruments? By Beckmann, Elisabeth; Mare, Davide Salvatore
  5. Industrial Organization of China’s Steel Industry and the Restructuring of the Asia-Pacific Iron Ore Market By Xiaochun Huang; Akira Tanaka
  6. The value of air quality in Chinese cities: Evidence from labor and property market outcomes By Xuan Huang; Bruno Lanz
  7. Automation and inequality in China By Yixiao Zhou; Rod Tyers
  8. Structural Change in Mass-Procurement Systems: China’s Iron and Steel Industry and the Global Iron Ore Market By Akira Tanaka; Xiaochun Huang
  9. Globalization and State Capitalism: Assessing Vietnam’s Accession to the WTO By Leonardo Baccini; Giammario Impullitti; Edmund J. Malesky
  10. The impact of non-cognitive skills and risk preferences on rural-to-urban migration: Evidence from Ukraine By S. H. Ayhan; K. Gatskova; H. Lehmann
  11. Economic Inequality and Happiness: A quantitative study among the elderly in Rural Vietnam By Quang Tran, Tuyen; Viet Nguyen, Cuong; Van Vu, Huong
  12. On the Effectiveness of Central Bank Intervention in the Foreign Exchange Market: The Case of Slovakia, 1999-2007 By Juraj Zeman; Biswajit Banerjee; Ludovit Odor; William O. Riiska Jr.
  13. Remittances in Ukraine Using Household Data By Iuliia Kuntsevych
  14. Firm Efficiency, Foreign Ownership and CEO Gender in Corrupt Environments By Jan Hanousek; Anastasiya Shamshur; Jiri Tresl
  15. TV and entrepreneurship By Slavtchev, Viktor; Wyrwich, Michael
  16. Transition gap in self-rated health By Obrizan, Maksym

  1. By: Kholodilin, Konstantin A.; Netšunajev, Aleksei
    Abstract: The conflict between Russia and Ukraine that started in March 2014 led to bilateral economic sanctions being imposed on each other by Russia and Western countries, including the members of the euro area. The paper investigates the impact of the sanctions on the real side of the economies of Russia and the euro area. The effects of sanctions are analysed with a structural vector autoregression. To pin down the effect we are interested in, we include in the model an index that measures the intensity of the sanctions. The sanction shock is identified and separated from the oil price shock by narrative sign restrictions. We find a very high probability that Russian GDP declined as a result of the sanctions. In contrast to that, the effects of the sanctions on the euro area are limited to real effective exchange rate adjustments
    Keywords: political conflict; sanctions; economic growth; Russia; euro area; structural vector autoregression
    JEL: C32 F51
    Date: 2017–09–11
  2. By: Miao, Zhuang; Li, Yifan
    Abstract: Abstract We examine how Chinese exporters adjust their number of exported varieties with respect to different characteristics of destination countries and varying trade cost. Using the Chinese firm-level customs data from the years 2001 and 2006, we show that: (i) firms export fewer varieties (indexed by HS6 code) to the destinations which are with higher exchange rate volatility, farther from China, or impose higher import-tariff rate; (ii) in response to the tariff reduction process by the destination countries after China entering to the WTO in 2001, the high productivity firms expanded the export scope while the low productivity firms reduced it.With a theoretical framework which considers firms' optimization decision involving both production and export varieties, we explain all our empirical findings, highlighting the relation between the exchange rate volatility and the number of export varieties.
    Keywords: Multiproduct firm; Product scope; Exchange rate volatility; Transportation distance; Tariff Reduction;
    JEL: F12 F14 F31
    Date: 2017–03–15
  3. By: Oleg Malafeyev; Achal Awasthi; Kaustubh S. Kambekar
    Abstract: Hypothesis of Market Efficiency is an important concept for the investors across the globe holding diversified portfolios. With the world economy getting more integrated day by day, more people are investing in global emerging markets. This means that it is pertinent to understand the efficiency of these markets. This paper tests for market efficiency by studying the impact of global financial crisis of 2008 and the recent Chinese crisis of 2015 on stock market efficiency in emerging stock markets of China and India. The data for last 20 years was collected from both Bombay Stock Exchange (BSE200) and the Shanghai Stock Exchange Composite Index and divided into four sub-periods, i.e. before financial crisis period (period-I), during recession (period-II), after recession and before Chinese Crisis (periodIII) and from the start of Chinese crisis till date (period- IV). Daily returns for the SSE and BSE were examined and tested for randomness using a combination of auto correlation tests, runs tests and unit root tests (Augmented Dickey-Fuller) for the entire sample period and the four sub-periods. The evidence from all these tests supports that both the Indian and Chinese stock markets do not exhibit weak form of market efficiency. They do not follow random walk overall and in the first three periods (1996 till the 2015) implying that recession did not impact the markets to a great extent, although the efficiency in percentage terms seems to be increasing after the global financial crisis of 2008.
    Date: 2017–09
  4. By: Beckmann, Elisabeth; Mare, Davide Salvatore
    Abstract: We investigate whether trust in different financial institutions influences the choice of saving instruments. Is trust a significant determinant of household saving behavior? How does trust in different financial institutions affect the composition of household savings? Using unique survey data for ten emerging market economies in Central, Eastern and Southeastern Europe, we show that trust in the financial system increases the probability of holding formal savings and the diversification among formal saving instruments. Trust in the financial system and in foreign banks are significantly associated with holding contractual and capital market saving instruments. Trust in the safety of deposit has the largest positive effect on bank savings. Trust in domestic banks increases the likelihood of holding formal savings the most and trust in foreign banks decreases holdings of informal savings the most.
    Keywords: Household finance; Formal savings; Informal savings; Trust in banks; Trust in the financial system.
    JEL: D12 D14 G11 O16 P34
    Date: 2017–08–01
  5. By: Xiaochun Huang; Akira Tanaka
    Abstract: The iron ore trading system underwent a transformation in 2010. Until then,long-term contracts dominated the trade and the FOB price was determinedthroughnegotiationsbetween supplierand buyer, with the agreed price applied the following year. This system was changed in 2010 to aquarterly index-linked pricingin which the CFR price was applied. Some studies have suggested that the intervention of the Chinese government was the reason for this change, but this study concludesthat it was thebargaining betweensuppliersand purchasers thatresulted in this transformation.
    Keywords: Long-term contract, spot trading, iron ore price index, the Big Three, China Iron and Steel Association(CISA), dispersed industrial organization, state intervention
    Date: 2017–08
  6. By: Xuan Huang; Bruno Lanz
    Abstract: Using a dual-market sorting model of workers' location decisions, this paper studies the capitalization of air pollution in wages and property prices across Chinese cities. To account for endogeneity of air pollution in the determination of wages and property prices, we exploit quasi-experimental variations in air quality induced by a policy subsidizing coal-based winter heating in northern China, and document a discontinuity in average air quality for cities located north and south of the policy boundary. Using data for all 288 Chinese cities in 2011, we estimate an equilibrium relationship between wages and house prices for the entire system of Chinese cities, and specify a regression discontinuity design to quantify how variation in air quality induced by the policy affects this relationship locally. Our preferred estimates of the elasticity of wages and house prices with respect to PM10 concentration are 0.53 and -0.71 respectively. At the average of our sample, the willingness to pay for a marginal reduction in PM10 concentration is CNY 261.28 (about USD 40.50), with a significant share reflected in labor market outcomes.
    Keywords: Hedonic model; Air pollution; Labor market; House prices; Local public goods; Regression discontinuity
    JEL: H41 J31 R31 Q53
    Date: 2017–09
  7. By: Yixiao Zhou; Rod Tyers
    Abstract: In transitional economies like China, comparatively low real wages imply sub-OECD labor and skill shares of value added and comparatively high capital shares. Despite rapid real wage growth, however, rather than converge toward the OECD, China’s low-skill labor share has been falling, due to structural and technical change. Here this dependence is quantified using an elemental national model with three households. Since 1994, a third of the total change in the Gini coefficient is estimated to be due to structural change and the rest to mainly skill-biased technical change. Widely anticipated further twists away from low-skill labor toward capital are then examined, assuming downward rigidity of low-skill wages and transfers that sustain low-skill welfare via taxes on capital income. The potential is identified for unemployment to rise extraordinarily, with negative effects mitigated if the population declines or if the share twists are accompanied by very strong total factor productivity growth.
    Keywords: Automation, income distribution, tax, transfers, general equilibrium, China
    JEL: D33 D58 O33 O53
    Date: 2017–09
  8. By: Akira Tanaka; Xiaochun Huang
    Abstract: This paper was originally presented at the 1stWorld Congress on Business History/ This study aims to describe historical trends in the “mass-procurement system” for iron ore, which for many years has been the largest non-fuel natural resource in terms of trade value. Wefocus on China because it reflects globaltrendsmost comprehensively. Throughmodern history, all large steel producers have established their own iron ore mass-procurement systems. We can classify thesesystemsinto three major modes:“captive mine”,“long-term contract (LTC)”,and “spot trading.” We found that in China, traditional state-owned steel companies such as Anshan Iron and Steel (Ansteel)adopted the captive-mine mode from the prewar period, like the Americans. On the other hand, the newly established leadingcompany Baoshan Iron and Steel (Baosteel) introduced the LTC mode, following the innovationof this mode by Japanese companies in the 1980s. Then, in the early twenty-first century, China’smass-procurement system for iron ore further diversifiedwhich establishedthe spot-trading mode as the third mass-procurement system. As a result, many steel companies tended to create a portfolio of sourcing modes.
    Keywords: Iron ore, China, Steel industry, Outsourcing
    JEL: F50 N55 N65 N85 Q37
    Date: 2017–08
  9. By: Leonardo Baccini; Giammario Impullitti; Edmund J. Malesky
    Abstract: What do state-owned enterprises (SOEs) do? How do they respond to market incentives? Can we expect substantial efficiency gains from trade liberalization in economies with a strong presence of SOEs? Using a new dataset of Vietnamese firms we document a set of empirical regularities distinguishing SOEs from private firms. We embed some of these features characterizing SOEs operations in a model of trade with firm heterogeneity and show that they can hinder the selection effects of openness and tame the aggregate productivity gains from trade. We empirically test these predictions analyzing the response of Vietnamese firms to the 2007 WTO accession. Our result show that WTO accession is associated with higher probability of exit, lower markups, and substantial increases in productivity for private firms but not for SOEs. Domestic barriers to entry and preferential access to credit are key drivers of the different response of SOEs to trade liberalization. Our estimates suggest that the overall productivity gains would have been about 66% larger in a counterfactual Vietnamese economy without SOEs.
    Keywords: State Capitalism, State-Owned Enterprises, Trade Liberalization, Heterogeneous Firms, Gains from Trade, WTO, Vietnam.
    Date: 2017
  10. By: S. H. Ayhan; K. Gatskova; H. Lehmann
    Abstract: This paper provides evidence on the impacts of non-cognitive skills and attitudes towards risk on the decision to migrate from rural to urban areas. Our analysis is based on a unique four-wave panel of Ukrainian Longitudinal Monitoring Survey for the period between 2003 and 2012. Adopting the Five Factor Model of personality structure, and using it in the evaluation of non-cognitive skills, our results suggest that such personality traits as openness to new experience and the willingness to take risks increase the probability of migration. On the other hand, the non-cognitive skills conscientiousness and extraversion are found to be negatively associated with the propensity to migrate. The effects are statistically and quantitatively significant, and mainly driven by movements from rural areas into cities. Our results are robust to several sensitivity checks, including tests for reverse causality.
    JEL: J61 D03 D81 R23
    Date: 2017–09
  11. By: Quang Tran, Tuyen; Viet Nguyen, Cuong; Van Vu, Huong
    Abstract: By combining data from the 2011 Vietnam National Aging Survey and the 2011 Rural, Agricultural and Fishery Census, we examined whether expenditure inequality has any effect on happiness or life satisfaction among the elderly in rural Vietnam. We find that individuals who live in the communes with high inequality tend to self-report as being less happy, even after controlling for various individual and household attributes. The results are robust to the choice of inequality measures and the specification of econometric models. We also find that older rural people who are farmers or poor are more sensitive to inequality. Given that these people tend to be less happy than others, the result shows the risk that inequality further lowers their subjective well-being. The result supports the view that rural Vietnam is a less mobile society.
    Keywords: Elderly, Expenditure inequality, Social mobility, Subjective well-being, Rural Vietnam
    JEL: I3 I31 I32 I38
    Date: 2015–09–18
  12. By: Juraj Zeman (National Bank of Slovakia); Biswajit Banerjee (Bank of Slovenia); Ludovit Odor (EU Independent Fiscal Institution); William O. Riiska Jr. (Hutchin Hill Capital)
    Abstract: Based on intra-day high-frequency data, this paper investigates the effect of sterilized interventions on the Slovak koruna/euro exchange rate for different time windows during a period that coincides with Slovakia’s preparation for EU accession and euro adoption. Results confirm a significant relationship between intervention and exchange rate change. The maximum effect of intervention is reflected in the exchange rate change within a couple of hours and the effect over longer time windows weakens only gradually. The initial impact of sales interventions is stronger than that of purchase interventions.
    Keywords: Foreign exchange market intervention, koruna/euro exchange rate, monetary policy framework, ERM II participation, Slovakia
    JEL: E44 E58 F31 G15
    Date: 2017–09
  13. By: Iuliia Kuntsevych
    Abstract: This paper analyzes remittances sent by Ukrainian emigrants to their country of origin. It explores the main factors in uencing the probability of obtaining remittances from abroad as well as the amount of remittances. We investigate how theplanned future usage of remittances a ects the likelihood of receiving them. The results of a survey of households in Ukraine were used to investigate the main defining factors for obtaining financial in ows from abroad, in addition to exploring the expenditures financed by remittances. Although the results of our analysis show that few factors have a significant in uence on the probability of obtaining remittances and on their size, this topic warrants further investigation. The findings are important for policymakers as the Ukrainian government might design and implement policies that increase the development potential of remittances, while eliminating their negative side effects.
    Keywords: remittances; remittance behavior; Ukraine,; international migration;
    JEL: F22 F24 O19
    Date: 2017–06
  14. By: Jan Hanousek; Anastasiya Shamshur; Jiri Tresl
    Abstract: We study the effects of corruption on firm efficiency using a unique dataset of private firms from 14 Central and Eastern European countries from 2000 to 2013. We find that an environment characterized by a high level of corruption has an adverse effect on firm efficiency. This effect is stronger for firms with a lower propensity to behave corruptly, such as foreign-controlled firms and firms managed by female CEOs, while local firms and firms with male CEOs are not disadvantaged. We also find that an environment characterized by considerable heterogeneity in the perception of corruption is associated with an increase in firm efficiency. This effect is particularly strong for foreign-controlled firms from low corruption countries, while no effect is observed for firms managed by a female CEO.
    Keywords: efficiency; corruption; ownership structure; foreign ownership; CEO gender; firms; panel data; stochastic frontier; Europe
    JEL: C33 D24 G32 L60 L80 M21
    Date: 2017–06
  15. By: Slavtchev, Viktor; Wyrwich, Michael
    Abstract: We empirically analyse whether television (TV) can influence entrepreneurial identity and incidence. To identify causal effects, we utilise a quasi-natural experiment setting. During the division of Germany after WWII into West Germany with a free-market economy and the socialistic East Germany with centrally-planned economy, some East German regions had access to West German public TV that - differently from the East German TV - transmitted images, values, attitudes and view of life compatible with the free-market economy principles and supportive of entrepreneurship. We show that during the 40 years of socialistic regime in East Germany entrepreneurship was highly regulated and virtually impossible and that the prevalent formal and informal institutions broke the traditional ties linking entrepreneurship to the characteristics of individuals so that there were hardly any differences in the levels and development of entrepreneurship between East German regions with and without West German TV signal. Using both, regional and individual level data, we show then that, for the period after the Unification in 1990 which made starting an own business in East Germany, possible again, entrepreneurship incidence is higher among the residents of East German regions that had access to West German public TV, indicating that TV can, while transmitting specific images, values, attitudes and view of life, directly impact on the entrepreneurial mindset of individuals. Moreover, we find that young individuals born after 1980 in East German households that had access to West German TV are also more entrepreneurial. These findings point to second-order effects due to inter-personal and inter-generational transmission, a mechanism that can cause persistent differences in the entrepreneurship incidence across (geographically defined) population groups.
    Keywords: entrepreneurship,TV,culture,occupational choice,institutions
    JEL: D02 D03 J24 L26 M13 O30 P20 P30 Z10
    Date: 2017
  16. By: Obrizan, Maksym
    Abstract: Previous literature has shown substantially lower levels of self-reported health in transition countries compared to developed and developing countries. The current paper provides the most recent estimates of the size of the transition gap in self-rated health by using up to 241,698 observations from the World Values Survey (WVS) and the European Values Study (EVS) collected between 1989 and 2014. During the earlier transition period of 1989–2007 transition countries were 0.088 to 0.127 lower on a 0 to 1 scale (from ‘Very poor’ to ‘Very good’ self-rated health). The transition gap remains in place in the second period after the Asian crisis (0.069 to 0.094 lower self-rated health) and even after the Global financial crisis of 2008 (0.062 to 0.105 lower self-rated health). Judging from these estimates the process of transition is far from completion at least based on a subjective evaluation of health, which is one of the key determinants of human development. It is also plausible that poor self-perceived health may ‘justify’ abnormally high health-care utilization and an excessive (and expensive) network of physicians and hospital beds per capita still characterizing transition countries.
    Keywords: Self-rated health, transition countries, World Values Survey, European Values Study
    JEL: I15 N34 P46
    Date: 2017–09–05

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