nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒11‒12
twelve papers chosen by
J. David Brown
United States Census Bureau

  1. Total factor productivity growth in Central and Eastern Europe before, during and after the Global Financial Crisis By Natalja Levenko; Kaspar Oja; Karsten Staehr
  2. Income Inequality and Oligarchs in Russian Regions: A Note By Jarko Fidrmuc; Lidwina Gundacker
  3. Russia's 1999–2000 election cycle and the politics-banking interface By Schoors, Koen; Weill, Laurent
  4. Effect of Banking Sector Resolution on Competition and Stability By Anna Kruglova; Yulia Ushakova
  5. Structural Adjustments and International Trade: Theory and Evidence from China By Hanwei Huang; Jiandong Ju; Vivian Z. Yue
  6. Financial Crises, Bank Lending, and Trade Credit:Evidence from Chinese Enterprises By Yajing Liu; Kenya Fujiwara
  7. Do Border Effects Alter Regional Development: Evidence from China By Partridge, Mark D.; Yang, Benjian; Chen, Anping
  8. К вопросу о долгосрочной взаимосвязи реального потребления домохозяйств с реальным доходом в РФ By Polbin, Andrey; Fokin, Nikita
  9. Decline and Restructuring of a State-owned Enterprise Group in the Vietnamese Iron and Steel Industry (Japanese) By KAWABATA Nozomu
  10. Composite Development Index of Visegrad Group Regions By Ingrid Majerová
  11. Supplier search and re-matching in global sourcing: Theory and evidence from China By Defever, Fabrice; Fischer, Christian; Suedekum, Jens
  12. What Drives Spatial Clusters of Entrepreneurship in China? Evidence from Economic Census Data By Zheng, Liang; Zhao, Zhong

  1. By: Natalja Levenko; Kaspar Oja; Karsten Staehr
    Abstract: This paper conducts growth accounting for 11 EU countries from Central and Eastern Europe for the years 1996–2016. Its contributions include the estimation of new capital stock series, adjustment for the utilisation of the capital stock and a time-varying elasticity of output to capital. Before the crisis, growth in total factor productivity (TFP) was the main contributor to output growth in Slovenia, Hungary and Slovakia, while capital deepening was more important in the Czech Republic, Croatia and Poland. During the global financial crisis the contributions of TFP and capital growth differed markedly across the countries, reflecting the very diverse dynamics of the crisis. After the crisis the contribution of TFP growth has been negligible in all of the sample countries coinciding with generally weak output growth. The results are generally robust to changes in estimation methods and parametrisations, but some assumptions are critical for the results.
    Keywords: growth accounting, capital stock, perpetual inventory method, total factor productivity, global financial crisis, Central and Eastern Europe
    JEL: F43 O47
    Date: 2017–11–09
  2. By: Jarko Fidrmuc; Lidwina Gundacker
    Abstract: We trace the rise of the so called oligarchs in post-Soviet Russia and examine their relationship to income distribution in Russia. When Russia moved to a market economy in the 1990s a new business elite evolved. Russia’s distinctive path towards market economy, among other factors, gave rise to the oligarchs who now control large parts of the economy and have a strong standing within politics and society. Using a unique regional data set on the locations of oligarchs’ businesses across the Russian regions, we test Acemoglu’s (2008) proposition that oligarchic societies experience extreme income inequality. Our results show significantly higher levels of income inequality in regions with a higher presence of oligarchs.
    Keywords: Russia, oligarchs, entrepreneurship, privatization, inequality
    JEL: L22 D43 P25 P31
    Date: 2017
  3. By: Schoors, Koen; Weill, Laurent
    Abstract: We investigate whether lending by the dominant Russian state bank, Sberbank, contributed to Vla-dimir Putin’s ascent to power during the presidential elections of March 2000. Our hypothesis is that Sberbank corporate loans could have been used as incentives for managers at private firms to mobilize employees to vote for the incumbent regime. In line with our proposed voter mobilization mechanism, we find that the regional growth of Sberbank corporate loans in the months before the presidential election is related to the regional increase in votes for Putin and to the regional increase in voter turnout between the Duma election of December 1999 and the presidential election of March 2000. The effect of Sberbank firm lending on Putin votes was most pronounced in regions where the governor was affiliated with the regime and in regions with extensive private employ-ment. The effect was less apparent in regions with many single-company towns, where voter intim-idation is sufficient to get the required result. Additional robustness checks and placebo regressions confirm the main findings. Our results support the view that additional Sberbank corporate loans granted prior to the March 2000 presidential election facilitated Putin’s early electoral success.
    JEL: G21 P34
    Date: 2017–11–01
  4. By: Anna Kruglova (Bank of Russia, Russian Federation); Yulia Ushakova (Bank of Russia, Russian Federation)
    Abstract: We assess the effect of the banking sector resolution policy conducted by the Bank of Russia on competition and stability in the banking sector. We use the rate spread to measure competition and volatility in loan portfolio growth, set against volatility in growth of the banking sector’s aggregate loan portfolio, to measure the system’s stability. Our findings are as follows: After the launch of the banking sector resolution, a significant break in competition, as measured by the rate spread, was observed only in household deposits maturing in one to three years and household and corporate loans maturing in more than three years. This kind of structural break, however, is associated with macroeconomic factors rather than the Bank of Russia’s banking sector resolution. Other banking markets failed to see any significant change in competition after the launch of the banking sector resolution. After the launch of the Bank of Russia’s banking sector resolution, growth in corporate and retail lending showed a decline in volatility. This decline was observed both in a cluster of banks characterised by relatively low overdue debt, and in banks characterised by relatively high levels. Thereby, the reduction in the number of banks resulting from the Bank of Russia’s banking sector resolution had no considerable negative effect of competition in the period under review. At the same time, lower volatility in lending growth boosted banking system stability. We estimate that banking sector stability has grown by 4% in retail lending and 41% in corporate lending
    Keywords: Russian banking sector, banking licence, banking sector resolution, competition, banking sector stability
    JEL: G28 G21 E43
    Date: 2017–07
  5. By: Hanwei Huang; Jiandong Ju; Vivian Z. Yue
    Abstract: This paper studies how changes in factor endowment, technology, and trade costs jointly determine the structural adjustments, which are defined as changes in distributions of production and exports. We document the structural adjustments in Chinese manufacturing firms from 1999 to 2007 and find that production became more capital-intensive while exports did not. We structurally estimate a Ricardian and Heckscher-Ohlin model with heterogeneous firms to explain this seemingly puzzling pattern. Counterfactual simulations show that capital deepening made Chinese production more capital-intensive, but technology changes that biased toward the labor-intensive sectors and trade liberalizations provided a counterbalancing force.
    Keywords: structural adjustments, comparative advantage, heterogeneous firm
    JEL: F12 L16
    Date: 2017–11
  6. By: Yajing Liu (Graduate School of Economics, Kobe University); Kenya Fujiwara (Graduate School of Business Administration, Kobe University)
    Abstract: Using Chinese firm-level data from 2006~2014?which includes the period of the recent financial crisis?we test whether firms, particularly small and medium enterprises (SMEs) that are financially constrained, are more likely to use or depend on trade credit. We also compare enterprises by ownership structure to determine which type of enterprises use trade credit more than bank loans. We then study the effect of the financial crisis of 2008 to observe whether firms increased their use of trade credit right after the crisis. We expect SMEs that are financially constrained to depend more on trade credit during the financial crisis. This may suggest the existence of a substitution relationship between bank loans and trade credit in conditions where enterprises are highly constrained financially or during periods of financial crisis.
    Keywords: Financial Crises, trade credit, bank loans, Chinese industrial enterprises, SMEs
    Date: 2017–10
  7. By: Partridge, Mark D.; Yang, Benjian; Chen, Anping
    Abstract: Market access/potential are main explanations for spatial variation in economic activity. Past research has recently used the quasi-natural experiment of the imposition and removal of Iron Curtain to assess how changes in market access influenced economic outcomes. Rather, we focus on key quantity effects of market access by tracking population changes induced by the creation of a subnational border. We exploit a quasi-natural experiment in China and use a difference-in-difference identification strategy to estimate the effects of introducing a new border when Sichuan province was split into Chongqing and Sichuan in 1997. We find that the new border has negative population effects on Sichuan counties located near the new border. These counties experienced a substantial decline in population growth after 1997 compared to Sichuan counties farther from the border, with the negative effects mainly confined to a band within 50-100 kilometers to the new border. Further investigation with falsification tests found that such border effects are unique to the new border region and are not related to the new Sichuan border region being more rural or to being on any provincial border.
    Keywords: border effects; population changes; difference in difference; market access; agglomeration; China
    JEL: R10
    Date: 2017–10
  8. By: Polbin, Andrey; Fokin, Nikita
    Abstract: The paper is devoted to testing for existence of a long run relationship between consumption and income in Russia. We couldn’t find cointegration between consumption of households and GDP in constant prices. But statistical tests are in favor of cointegration between consumption in constant prices and real income which we define as a ratio of nominal GDP to implicit deflator for consumption. We also estimated a VECM model for real consumption and real income. Our results show high predictability of consumption growth by the error correction mechanism.
    Keywords: Consumption, consumption forecasting, GDP, real income, VECM, cointegration, permanent income hypothesis, ARIMA
    JEL: E21 E27
    Date: 2017–09
  9. By: KAWABATA Nozomu
    Abstract: This paper analyzes the decline and restructuring of VN Steel, a state-owned steel company group in Vietnam. In the gradual transition to a market economy in Vietnam, most large-scale state-owned enterprises (SOEs) have undergone a reform process without privatization. Among them, VN Steel is important as a case where it was urged to rebuild its business as a result of defeat in market competition. This paper analyzes the following points. (1) As a steel company analysis, it reveals how VN Steel lagged behind the investment competition through the production system approach. (2) As SOE analysis, it looks at it from two angles. One is the effects of the curtailment of governmental support and execution of corporate governance reform on VN Steel. The other is the possibility that government support and intervention would be reinforced when the decline leads to a management crisis. Moreover, this paper evaluates the impact of economic reform on not only VN Steel but also the industrial organization of the iron and steel industry. The analysis result shows the following findings. (1) VN Steel has been greatly recessed in the Vietnamese steel market, and is still in the process of restructuring even after the management crisis. (2) The reason for the decline of VN Steel is the halfway and inconsistent policy of the government. On the one hand, the government did not give subsidies to VN Steel for corporate growth. On the other hand, it did not reform the corporate governance of VN Steel rapidly. As a result, VN Steel's corporate behavior has remained characteristic of SOEs. Performance deteriorated due to the appearance of some incomplete factories as a result of quantity-oriented investments and the delay of project execution. After withdrawal of financial support to VN Steel, the government was pulled back to involvement in management reconstruction. (3) In spite of failure in VN Steel's reform at the enterprise level, the government succeeded in developing a competitive environment at the industry level. The reform of the economic institutions with the background of international economic integration promoted the rise of private and foreign-owned enterprises in the steel industry. VN Steel did not prevent that process. The analysis of this paper shows the importance of the problem area of government involvement in SOEs in the declining process. Inconsistent combinations between the curtailment of government support and delays in corporate governance reforms could lead to a business crisis, eventually bringing the government back to involvement in management reconstruction. This paper also shows that it is necessary to evaluate at both the state-owned company level and the industrial level when assessing the impact of international economic integration on the economic reform of a transition economy.
    Date: 2017–11
  10. By: Ingrid Majerová (Department of Economics and Public Administration, School of Business Administration, Silesian University)
    Abstract: The aim of the paper is to measure regional development and construct an index for the Visegrad Group countries at NUTS II level. This index, called the Regional Development Index - the RDI - is created as an extension of the Human Development Index in order to obtain a better composed index at regional level. Twelve socio-economic indicators are selected for this purpose: three economic indicators, three educational indicators, three health variables and three indicators of the standard of living which create four dimensions. These variables are tested for their reliability through the pairwise correlation and the min-max method is used for the construction of the index. The data are compared between 2008 and 2013 and the assumption about worsening the situation in regions after the crisis is set. The results show that the values of the RDI improved in nearly all regions (with the exception of Prague in the Czech Republic and Észok-Magyaroszág in Hungary) in the monitored years. The assumption that regional development was negatively influenced by economic crisis has not been confirmed.
    Keywords: method Min-Max, NUTS 2, Regional Development Index, Visegrad Group countries
    JEL: I15 O15
    Date: 2017–10–26
  11. By: Defever, Fabrice; Fischer, Christian; Suedekum, Jens
    Abstract: In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities.
    Keywords: input sourcing,relational contracts,supplier search
    JEL: F23 D23 L23
    Date: 2017
  12. By: Zheng, Liang (Central University of Finance and Economics); Zhao, Zhong (Renmin University of China)
    Abstract: Since Chinese government initiated economic reform in the late 1970s, entrepreneurship and private sectors have emerged gradually and played an increasingly important role in promoting economic growth. However, entrepreneurship is distributed unevenly in China. Using micro data from 2008 economic census and 2005 population census, this paper explains spatial clusters of entrepreneurship for both manufacturing and services. For both sectors, entrepreneurship (measured by new private firms) tends to emerge in places with more relevant upstream and downstream firms. Moreover, Chinitz's (1961) theories are also supported for manufacturing: small upstream and downstream firms seem to be more important for manufacturing entrepreneurship. For both sectors, entrepreneurship is positively related to city size, the share of young adults and the elderly population, and foreign direct investment. More migrants are also found to promote service entrepreneurship. Our paper is the first to consider both manufacturing and service entrepreneurship in China and should be of interest to both local and national policymakers who plan to encourage entrepreneurship.
    Keywords: new firm formation, entrepreneurship, Marshallian effect, Chinitz effect, China
    JEL: L26 L60 L80 R10 R12
    Date: 2017–10

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