nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒10‒08
twenty-one papers chosen by
J. David Brown
United States Census Bureau

  1. From Soviets to Oligarchs: Inequality and Property in Russia, 1905-2016 By Filip Novokmet; Thomas Piketty; Gabriel Zucman
  2. Capital Accumulation, Private Property and Rising Inequality in China, 1978-2015 By Thomas Piketty; Li Yang; Gabriel Zucman
  3. Happiness Convergence in Transition Countries By Guriev, Sergei; Melnikov, Nikita
  4. Macroeconomic Determinants of Income Inequality in Bulgaria By Silviya Bratoeva-Manoleva
  5. Wage Dynamics in Bulgaria: Co-movement and Causality By Hristina Manolova; Aleksandar Vasilev
  6. Ukraine’s unfinished reform agenda By Marek Dabrowski
  7. "Greenwashing and Its Impact on Consumer Confidence – Case Study of Slovak Republic" By Jana Kliestikova
  8. "Formalizing the investment selection process of the Development Bank of Kazakhstan" By Dulat Shukayev
  9. Does EU membership prevent crowding out of public health care? Evidence from 28 transition countries By Obrizan, Maksym
  10. Government support and firm financial performance: New evidence from a transitional economy By Nguyen Trong, Co; Vu Van, Huong; Bartolacci, Francesca
  11. Концентрација и конкуренција у банковном сектору Србије By Bukvić, Rajko
  12. War and Well-Being in Transition: Russo-Georgian Conflict as a Natural Experiment By Gunes Gokmen; Evgeny Yakovlev
  13. The Externalities of Corruption: Evidence from Entrepreneurial Activity in China By Giannetti, Mariassunta; Liao, Guanmin; You, Jiaxing; Yu, Xiaoyun
  14. Imports and Intellectual Property Rights on Innovation in China By Chu, Angus C.; Shen, Guobing; Zhang, Xun
  15. Environmental sustainability of Bulgarian agricultural Farms – assessment, state, factors By Bachev, Hrabrin
  16. The human capital and development. The Romanian case study By Elena Pelinescu
  17. Words vs. actions: International variation in the propensity to fulfil investment pledges in China By Abigail S. Hornstein
  18. Enhancing advanced skills to better meet labour market demand in the Slovak Republic By Gabriel Machlica; Ján Toman; Martin Haluš; Dávid Martinák
  19. Access to finance in the Western Balkans By Moder, Isabella; Bonifai, Niccolò
  20. The return to higher education: evidence from Romania By Oancea, Bogdan; Pospisil, Richard; Dragoescu, Raluca
  21. Do government transfers reduce poverty in China?: Micro evidence from five regions By Ben Westmore

  1. By: Filip Novokmet (Paris School of Economics); Thomas Piketty (Paris School of Economics); Gabriel Zucman (University of California at Berkeley)
    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.
    Date: 2017–07
  2. By: Thomas Piketty (Paris School of Economics); Li Yang (World Bank); Gabriel Zucman (University of California at Berkeley)
    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 China over the 1978-2015 period. We find that the aggregate national wealth-income ratio has increased from 350% in 1978 to 700% in 2015. This can be accounted for by a combination of high saving and investment rates and a gradual rise in relative asset prices, reflecting changes in the legal system of property. The share of public property in national wealth has declined from about 70% in 1978 to 30% in 2015, which is still a lot higher than in rich countries (close to 0% or negative). Next, we provide sharp upward revision of official inequality estimates. The top 10% income share rose from 27% to 41% of national income between 1978 and 2015, while the bottom 50% share dropped from 27% to 15%. China’s inequality levels used to be close to Nordic countries and are now approaching U.S. levels.
    Date: 2017–04
  3. By: Guriev, Sergei; Melnikov, Nikita
    Abstract: The "transition happiness gap" has been one of the most robust findings in the life satisfaction literature. Until very recently, scholars using various datasets on life satisfaction have shown that residents of post-communist countries were significantly less satisfied with their lives than their counterparts in non-transition countries (controlling for income and other correlates of life satisfaction). The literature has explained this finding by the great macroeconomic instability of 1990s, by a substantial decrease in the quality and accessibility of public goods, by the major increase in inequality, and by the rapid depreciation of pre-transition human capital. All these factors were expected to subside over time --- at least after the post-Great-Recession recovery. In this paper, we consider two most recent datasets -- the third wave of the Life in Transition Survey (administered in 2015-16) and the 2010-2016 waves of the annual Gallup World Poll. We find that by 2016 the transition happiness gap had closed. This "happiness convergence" has taken place both due to a "happiness recovery" in post-communist countries after the Great Recession and due to a decrease in life satisfaction in comparator countries in recent years. We also find that the convergence in life satisfaction was primarily driven by middle-income young educated individuals, regardless of gender.
    Date: 2017–10
  4. By: Silviya Bratoeva-Manoleva (University of Economics – Varna, Department of Economics)
    Abstract: Income inequality in Bulgaria increased noticeably over the period 1990-2015. This paper aims to identify the main macroeconomic determinants of income inequality. We find that GDP growth and structural changes in Bulgarian economy are among the determinants which deepen income inequality. The statistically significant negative estimate of the government expenditures on social protection means that an increase in social transfers mitigate income inequality. The empirical results show that inflation, foreign direct investment and education are statistically insignificant in affecting income inequality.
    Keywords: income inequality, OLS regression, transition economies
    JEL: D31 C32 P24
    Date: 2017–09
  5. By: Hristina Manolova (American University in Bulgaria); Aleksandar Vasilev (American University in Bulgaria)
    Abstract: Motivated by recent debates on the possible role of wages as an income policy tool, in this study we examine the dynamic inter-relationship between wages in Bulgaria, mainly in the context of its EU accession. Relative to the WDN studies on the other EU member states, the novelty in this paper is the inclusion of the minimum wage as a possible conditional determinant of the other two wages. We demonstrate that minimum wage increases do not cause changes in average wages in either the government or the private sector. Using variety of econometric tests, we also demonstrate the leadership of private sector wage over public compensation and recommend the implementation of policy measures aimed at labor productivity growth.
    Keywords: public sector wages, private sector wages, minimum wages, causality
    JEL: C32 E62 J3 J4
    Date: 2017–09
  6. By: Marek Dabrowski
    Abstract: Compared to previous attempts, especially those following the Orange Revolution in 2004, the current reform round in Ukraine (since 2014) has proved more successful. Some politically difficult decisions have been taken, such as the elimination of gas subsidies and the restructuring of the banking system. But reform remains incomplete in many important areas, such as local and regional self-government, public administration, the judiciary, law enforcement agencies, the energy sector and infrastructure, the pension system, privatisation and land ownership. Since near-disaster in February 2015, Ukraine’s macroeconomic situation has stabilised. The economy stopped declining in 2016. However, macroeconomic stability remains fragile and the recovery of 2016-17 looks rather weak given the scale of the previous decline. The window of political opportunity created by regime change and the mobilisation against external aggression in 2014-15 has not been used effectively as a springboard for reforming the dysfunctional Ukrainian economy and state. The window of opportunity now seems to be closing as Ukraine approaches a new electoral cycle in 2018-19. The external players, in particular, the International Monetary Fund, the European Union and the United States, have provided Ukraine with a substantial balance-of-payments and budgetary support, along with technical assistance. In addition, the EU opened its markets to Ukrainian exports and granted visa-free travel to Ukrainian citizens. However, the macroeconomic assumptions behind the IMF programmes have been too optimistic, and the IMF and the EU have not always set the right reform priorities.
    Date: 2017–09
  7. By: Jana Kliestikova ("Faculty of Operation and Economics of Transport and Communications, University of Zilina, Slovak Republic" Author-2-Name: Margareta Nadanyiova Author-2-Workplace-Name: "Faculty of Operation and Economics of Transport and Communications, University of Zilina, Slovak Republic")
    Abstract: "Objective – This paper is focused on the topic of greenwashing and its impact on consumer confidence in specific conditions of Slovak republic. Nowadays, consumer confidence is mainly recognized as economic indicator measuring the interpretation of the current economic environment by consumers and their expectations for the future. In presented paper, we analyse greenwashing as a possible source of discontent. Greenwashing is a negative phenomenon of green marketing activities realised in the scope of corporate social responsibility. Methodology/Technique – First, green characteristics of Slovak consumers are analysed in context of Hofstede cultural dimensions of Slovak republic. Subsequently, there is evaluated realised questionnaire survey dedicated to the analysis of greenwashing impact on consumer confidence. Then, the relationship between greenwashing and consumer confidence in Slovak market, is detected. Findings – Results showed that attitude of authority has an impact on consumer confidence and the greenwashing has not got an impact on buying behavior of Slovak consumers. Novelty – It has a vital importance to analyze socio-cultural profile of the nation and in accordance with obtained results highlight the importance of environmental education of the society. "
    Keywords: Green Marketing; Greenwashing; Corporate Social Responsibility; Consumer Confidence.
    JEL: D11 E21 M31
    Date: 2017–03–05
  8. By: Dulat Shukayev (NJSC, Kazakhstan Author-2-Name: Zhanar Lamasheva Author-2-Workplace-Name: NJSC, Kazakhstan Author-3-Name: Almira Ayapbergenova Author-3-Workplace-Name: NJSC, Kazakhstan Author-4-Name: Bimurat Z. Author-4-Workplace-Name: NJSC, Kazakhstan)
    Abstract: "Objective – This article presents a functional diagram for implementing the investment program of the Development Bank of Kazakhstan and builds an outline of the pre-investment evaluation process. Methodology/Technique – A stepwise algorithm is created to conduct a preliminary appraisal of business proposals, and the criteria for assessing the borrower's condition are identified. Key criteria used in the investment performance analysis are discussed. The article develops a computer simulation approach to analysis and decision-making with respect to investment programs, with consideration of analytically non-formalisable stochastic distributions of parameters and processes. The paper also proposes a new method for optimizing the allocation of funds, given various priorities and risks, taking into account the instability and possible ill-conditioning of the optimization problem. Findings – The article formalizes the main stages of Development Bank's pre-investment activities in support of the government's innovative industrial development policy in the country's economy Novelty – Presented models and algorithms of the functional tasks for implementation of investment activities are sufficiently general to be relevant, not only for implementing the government's strategy in this direction, but also for the business interests of any bank or investment entity."
    Keywords: "Investment Selection Process; Development Bank of Kazakhstan; Investment Activities; Business Proposals; Optimizing."
    JEL: G11 G21
    Date: 2017–02–27
  9. By: Obrizan, Maksym
    Abstract: This paper investigates changes in public health care use in 28 transition countries in the aftermath of the global financial crisis using data on more than 60 thousand households from “Life in Transition” surveys II and III conducted by the European Bank for Reconstruction and Development in 2010 and 2016. A difference-in-difference model with robust standard errors clustered at a country level is applied to two sets of transition countries defined by their membership status in the European Union. While there was no difference in public health care use between the two groups in 2010 the share of households using the public health care system dropped by a remarkable 22.2% points between 2010 and 2016 in non-EU transition countries compared to new EU members. There is also some evidence of crowding out of public health care with private out-of-pocket expenditures in non-EU members. These findings represent a serious policy concern in terms of falling access to health care in non-EU transition countries. If one believes in equity benefits from access to public health care for all compared to private out-of-pocket expenditures these results also demonstrates a clear benefit of EU membership.
    Keywords: public-private health care, mixed financing, transition countries, difference-in-difference
    JEL: H44 I1 O57
    Date: 2017–08–18
  10. By: Nguyen Trong, Co; Vu Van, Huong; Bartolacci, Francesca
    Abstract: Using a panel dataset of five waves of private manufacturing SMEs surveys in the period 2007-15, this paper contributes to literature by considering for the first time the effects of government support on firms’ financial performance in Vietnam. Interestingly, contrary to the many findings of previous studies, we find that government assistance affect firms’ financial performance after controlling for heterogeneity, unobservable factors and dynamic endogeneity. This finding supports for the viewpoints of institutional theory. Also, the study shows that technical supports from government such as export promotion, human resource training and technology programmes have insignificant linkages with firm financial performance, but financial supports play an important role, suggesting that supporting measures as tax exemptions, soft loans and investment incentives promote financial efficiency and are vital for the development of Vietnamese private SMEs.
    Keywords: Government support, innovation, firm financial performance, SMEs, Vietnam
    JEL: D22 G3
    Date: 2017–10–03
  11. By: Bukvić, Rajko
    Abstract: English. The paper analyzes the degree of concentration and competition in Serbian banking sector on the basis of bank financial statements for year 2016. It uses the traditional concentration indicators (CRn and HH indices), as well as the relatively rarely used Linda indices. The concentration degree is calculated based on three variables: total assets, capital and bank operating income. It was demonstrated that in the case of the relatively large number of banks in Serbia, the existing concentration degree is low, which provides suitable conditions for the development of healthy competition among them. Serbian. У чланку се анализирају степен концентрације и конкуренција у банковном сектору у Србији, на основу финансијских извештаја банака за 2016. годину. Коришћени су како традиционални показатељи концентрације (CRn и HH индекси), тако и релативно мало коришћени индекси Линда. Степен концентрације провераван је на основу три величине: укупни активи, капитал и оперативни приходи банака. Показано је да је међу релативно великим бројем банака у Србији постојећи степен концентрације низак, што ствара услове за развој здраве конкуренције међу њима.
    Keywords: Concentration, competition, banking sector, Serbia, indices Linda Концентрација, конкуренција, банковни сектор, Србија, индекси Линда
    JEL: C18 D40 G21 L13 L40
    Date: 2017
  12. By: Gunes Gokmen (New Economic School and the Center for the Study of Diversity and Social Interactions, Moscow); Evgeny Yakovlev (New Economic School, Moscow)
    Abstract: This paper assesses the effect of the Russo-Georgian conflict of 2008 on the well-being of minorities in Russia. Using the Russian Longitudinal Monitoring Survey (RLMS), we first provide evidence that, on impact, the well-being of Georgian nationals suffered negatively from the conflict of 2008, both in comparison to their own well-being across time and to the well-being of the Russian majority. We also show that this negative effect of conflict does not have a long-term legacy that goes beyond 2008. Additionally, we demonstrate that the conflict has no direct effect on the livelihoods or the labor market outcomes of Georgian nationals. Therefore, we attribute the negative effect of conflict on well-being to more indirect channels such as fear, altruism, or sympathy. We also analyze the spillover effects of the Russo-Georgian conflict on other minorities that live in Russia. We find that while the well-being of migrant minorities who have recently moved to Russia is negatively affected, there is no effect on local minorities who have been living in Russia for at least ten years.
    Keywords: Well-being, happiness, transition, conflict, minorities
    JEL: I31 N44 P2
    Date: 2017–09
  13. By: Giannetti, Mariassunta; Liao, Guanmin; You, Jiaxing; Yu, Xiaoyun
    Abstract: We show that corruption affects negatively the performance of small entrepreneurial firms, which compete with corrupted industry peers. We exploit the Chinese anti-corruption campaign to establish causality and identify the channels through which corruption causes negative externalities. Small firms have lower sales growth in industries with high corruption, arguably because demand is diverted to the largest firms in their industries, which spend more in corrupting officials. Small firms also have higher financing costs in industries with high corruption and therefore invest less. Furthermore, corruption decreases the efficiency of labor and capital allocation and deters firm entry.
    Keywords: capital and labor allocation; China; corporate governance; Corruption
    JEL: D22 D62 G30 L20 O12 P26
    Date: 2017–10
  14. By: Chu, Angus C.; Shen, Guobing; Zhang, Xun
    Abstract: In an open-economy R&D-based growth model with two intermediate production sectors, we find that strengthening intellectual property rights (IPR) has a positive effect on innovation in the sector that uses domestic inputs but both positive and negative effects on innovation in the sector that uses foreign inputs. We test these results using an empirical analysis of matching samples that combine Chinese provincial IPR data with industrial enterprises database and customs database.
    Keywords: Intellectual property rights; imports; knowledge spillovers; innovation
    JEL: F43 O31 O34
    Date: 2017–09
  15. By: Bachev, Hrabrin
    Abstract: The issue of assessment of diverse aspects of sustainability of agricultural farms is among the most topical in the last decades. In Bulgaria there are no comprehensive studies on environmental sustainability of farms in general or different types. This article applies a holistic framework for assessing environmental sustainability of Bulgarian farms. Initially the multiprinciple, multictiteria and mulriindicator framework for assessing environmental sustainability of farm in the country is outlined. After that a level of environmental sustainability of Bulgarian farms is evaluated in general and of farms different juridical type, size, production specialization, and ecological and administrative location. Sustainability assessment is based on a first large-scale survey on environmental aspects of sustainability of agricultural farms in the country carried out in 2016. Third, relations between environmental and socio-economic and integral sustainability of Bulgarian farms are specified. Finally, factors for improving environmental and overall sustainability of agricultural farms in the country are identified. Our study has found out that environmental sustainability of Bulgarian farms is at a good level. Nevertheless due to an inferior level of governance and economic sustainability the integral sustainability of Bulgarian farms is lower and the improvement of the latter two is critical for maintaining overall sustainability of Bulgarian farms at current stage of development.
    Keywords: environmental sustainability, assessment, factors, agricultural farms, Bulgaria
    JEL: Q0 Q01 Q1 Q12 Q13 Q15 Q16 Q18 Q5 Q51 Q52 Q53 Q54 Q56 Q57
    Date: 2017–09
  16. By: Elena Pelinescu (Institute for Economic Forecasting, Romanian Academy)
    Abstract: The human capital is the main driver of development and economic growth. This paper is focused on human capital and tries to show how the human capital, as an important economic factor contributes to the growth of the economy. Romer (1969) identified a positive relation between the initial level of literacy and its rate of growth and the increase of income per capita. Benhabib, and Spiegel (1994) showed that the growth rate of total factor productivity depends on the human capital stock level. Wilson and Briscoe (2004) in a literature review of relation between human capital and economic performance at macroeconomic level highlighted that the increases in economic growth across the EU are associated with increases in both education and training. This paper is focused on the relation between human capital and development in Romania and uses econometric techniques to highlight the role of human capital in increasing the country’s wealth.
    Keywords: human capital, development, inovation
    JEL: E24 J24 O15 O31
    Date: 2017–09
  17. By: Abigail S. Hornstein (Department of Economics, Wesleyan University)
    Abstract: We examine whether companies from certain countries are more likely to fulfil investment pledges. Using data on contracted and utilized FDI in China, we find that firms fulfil an average of 59% of their pledges within two years. The propensity to fulfil pledges is lower for firms from countries with greater uncertainty avoidance, power distance, and egalitarianism; higher if the source country is more traditional; and is unaffected by popular attitudes towards China. Prior literature has found that these cultural characteristics are associated with higher levels of utilized FDI. We extend this to show that announcements of planned corporate activity may be more reliable for firms from countries with certain cultures.
    Keywords: Foreign direct investment (FDI), China, Culture, Institutions, Policy
    JEL: F21 F23 G18 G31 Z13
    Date: 2017–07
  18. By: Gabriel Machlica (OECD); Ján Toman (OECD); Martin Haluš (OECD); Dávid Martinák (OECD)
    Abstract: Changing labour market demand and moving up the global value chain requires high-skilled workers. However, the share of adults with high skill levels in the Slovak Republic is one of the lowest in the OECD. Improving the education system would raise quality and better align students’ skills with new labour market needs and help them face further changes in the work environment. The contribution of the tertiary education system to skills improvement is one of the lowest in the OECD. It has to open itself more to the outside world: by easing the conditions for foreign professors and researchers to teach at Slovak universities, promoting internationally respected research and intensifying the cooperation with the business sector. Another challenge is to secure an adequate supply of skilled workers in the face of rapid population ageing and increasing emigration of young high-skilled workers. Ageing of the population will not only lead to shrinking labour supply, but a growing part of the workforce will need to be retrained. Bolstering the supply of skills requires lifelong learning and attracting skilled migrants, including returning Slovaks. This Working Paper relates to the 2017 OECD Economic Survey of the Slovak Republic ( y-slovak-republic.htm).
    Keywords: brain drain, Skills, tertiary education, vocational education
    JEL: F22 I23 I25 I28 J48
    Date: 2017–10–04
  19. By: Moder, Isabella; Bonifai, Niccolò
    Abstract: Limited access to finance is one of the main obstacles for firms located in the Western Balkans and hampers economic growth as well as the transmission of monetary policy. The aim of this paper is to undertake an in-depth analysis of access to finance constraints in this region, where countries as EU candidates or potential candidates have a prospect of joining the European Union. Besides touching upon macroeconomic and banking sector indicators that influence access to finance, this paper empirically assesses firm-level factors that determine whether a firm operating in the Western Balkans is credit-constrained, both in actual and perceived terms. In line with the literature, the results suggest that size, age, location, being audited, having outstanding loans and expectations about future performance matter for actual credit availability. The econometric analysis is complemented by a review of the Western Balkan countries’ Economic Reform Programmes, which indicate that financing constraints are tackled by most national authorities through specific policy measures, mostly for small and medium-sized enterprises. JEL Classification: E22, G30, O16
    Keywords: economic development, financing constraints, SMEs
    Date: 2017–09
  20. By: Oancea, Bogdan; Pospisil, Richard; Dragoescu, Raluca
    Abstract: Education is one of the most important components of the human capital, and an important determinant of the personal income. Estimating the rate of return to education is a main topic of economic research. In this paper we analyzed the rate of return to higher education in Romania using the well-known Mincer equation. Besides the educational level and the number of years of experience on the labor market we also used a series of socio-demographic variables such as gender, civil status, the area of residence. We were interested mainly in calculating the rate of return to higher education, therefore we computed this rate for bachelor, master and doctoral degrees separately. We also investigated the rate of return to higher education on technical, science, economics, law, medicine, and arts fields. Our results showed that the rate of return to higher education has a greater value than most of the developed countries of EU and the field of higher education that brings the highest rate of return is medicine
    Keywords: Mincer equation; higher education; returns to education
    JEL: J31
    Date: 2017–09–06
  21. By: Ben Westmore (OECD)
    Abstract: This paper estimates urban and rural poverty rates across five Chinese administrative regions (Shanghai, Liaoning, Guangdong, Henan and Gansu) in 2014 using representative household level data from the China Family Panel Studies survey. The types of government transfer payments that households in poverty received and the ability for such payments to lift households from poverty are also assessed. Consistent with official estimates, the results highlight substantial disparities in poverty rates between administrative regions. Smaller differences exist between urban and rural locations within the same administrative region. In 2014, the most common types of government transfer received by households in poverty were agricultural subsidies or social assistance - principally the dibao. Regarding the latter, the results suggest some improvement in payment targeting in rural areas, but most dibao recipients had income above the poverty line (as defined in this paper) in 2014. Furthermore, across all administrative regions, the vast majority of households living below the defined poverty line did not receive social assistance at that time.
    Keywords: China, development, poverty, social assistance policies
    JEL: I30 I32 I38 O53 R20 R28
    Date: 2017–10–04

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