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

  1. Closing the Skills-Jobs Gap: Russia and China Compared By Thomas F. Remington
  2. Resource allocation and productivity across provinces in China By Peng Bin; Xiaolan Chen; Andrea Fracasso; Chiara Tomasi
  3. Becoming an Adult in France, Estonia and Russia By Ekaterina S. Mitrofanova
  4. Religiosity and Life Satisfaction in Russia: Evidence from the Russian Data By Maksym Bryukhanov; Igor Fedotenkov
  5. Training Strategies and Skill Development Amid Weak Institutions: Evidence from Russia By Israel Marques
  6. Republic of Serbia; 2017 Article IV Consultation, Seventh Review Under the Stand-by Arrangement and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Serbia By International Monetary Fund
  7. Structural change, expanding informality and labour productivity growth in Russia By Voskoboynikov, Ilya B.
  8. Forecasting Macedonian Inflation: Evaluation of different models for short-term forecasting By Magdalena Petrovska; Gani Ramadani; Nikola Naumovski; Biljana Jovanovic
  9. A Real-Business-Cycle model with reciprocity in labor relations and a government sector By Aleksandar Vasilev
  10. Does it pay to study abroad? Evidence from Poland By Liwiński, Jacek
  11. Supplier Search and Re-Matching in Global Sourcing: Theory and Evidence from China By Fabrice Defever; Christian Fischer; Jens Suedekum
  12. Leaving Money on the Table? Suboptimal Enrollment in the New Social Pension Program in China By Xi Chen; Lipeng Hu; Jody L. Sindelar
  13. Big-Data-Augmented Approach to Emerging Technologies Identification: Case of Agriculture and Food Sector By Leonid Gokhberg; Ilya Kuzminov; Pavel Bakhtin; Elena Tochilina; Alexander Chulok; Anton Timofeev; Alina Lavrinenko
  14. Montenegro; 2017 Article IV Consultation-Press Release;Staff Report; and Statement by the Executive Director for Montenegro By International Monetary Fund
  15. Are school-provided skills useful at work? Results of the Wiles test By Liwiński, Jacek; Pastore, Francesco
  16. Workers' participation in Czechia and Slovakia By Jan Drahokoupil
  17. Are politically connected firms less constrained in credit markets? By John Rand
  18. Transparency and Responsibility in the Public Administration Institutions. The case of Romania By Vrabie, Catalin; Tirziu, Andreea-Maria
  19. Vulnerability from trade in Vietnam By Emiliano Magrini; Pierluigi Montalbano; L. Alan Winters

  1. By: Thomas F. Remington (National Research University Higher School of Economics)
    Abstract: Around the world employers complain of shortages of skilled workers. Meantime, educational and training institutions often function as “bridges to nowhere.” This has implications for both social and economic development. When VET systems are ineffective, they either turn out individuals with skills that are poorly matched to the demands of the labor market, or replicate existing social divisions between rich and poor. Economic inequality, both cross-sectional and spatial, undermines the ability of educational and skill-forming institutions to equalize opportunities for young people to acquire skills usable in the labor market. This bifurcates society between a low-wage, low-skill, often informal employment sector, and a higher-skill, higher-wage sector. This problem has grown more acute everywhere as a result of automation and globalization. For this reason, experts and policy-makers around the world have called for upgrading the quality and effectiveness of vocational education and training (VET), in particular by encouraging closer cooperation between employers and schools. They seek to adapt elements of the German and other continental systems where apprenticeships are the most common pathway leading from school to jobs. Building firm-school partnerships requires overcoming two sets of collective action dilemmas, however: coordinating the interests of firms around setting professional standards and curricular goals, and establishing cooperation between employers and schools. The paper argues that cooperative arrangements vary along two dimensions: the “breadth” of collaboration by schools and firms, i.e. how many firms and schools pool their efforts to upgrade VET; and the “depth” of commitment, that is, how costly is the joint commitment by firms and schools to VET. The evidence suggests that there is typically a trade-off between deepening and broadening. The paper compares China and Russia --two large, relatively decentralized countries with different economic systems—with respect to current efforts to close the gap between skills and jobs. It draws conclusions about the nature of the circumstances under which reforms are likely to result in greater deepening or broadening of cooperation. The paper argues that the formation of effective institutions for resolving collective dilemmas result from government initiatives mobilizing existing capacities to respond to challenges in the external environment
    Keywords: Vocational Education and Training (VET), Public-Private Partnerships, skills-jobs gap, China, Russia
    JEL: I28 I25 J24
    Date: 2017
  2. By: Peng Bin; Xiaolan Chen; Andrea Fracasso; Chiara Tomasi
    Abstract: The rapid economic development in China has been characterized by levels of income and productivity very heterogeneous across local areas. This work investigates a previously unexplored aspect of such heterogeneity by assessing the degree of within-industry allocative e ciency across provinces in China over the period 1998-2007. Us- ing firm-level data from the surveys conducted by the National Bureau of Statistics on the Chinese manufacturing firms, we measure the degree of resource misallocation by computing the within-industry covariance between size and productivity at the provincial level. The results suggest that within-industry allocative e ciency varies considerably across local areas and that some place-based factors strongly influence resources mobility. Our work sheds some light on the mechanisms at play in the dis- tribution of resources in China and it contributes to the literature investigating the degree of allocative effciency.
    Keywords: Allocative effciency, Resource allocation, Regional disparities, China
    JEL: D24 L25 O47 F41
    Date: 2017
  3. By: Ekaterina S. Mitrofanova (National Research University Higher School of Economics)
    Abstract: The aim of this study is to compare the sociodemographic events marking the transition to adulthood in France, Estonia and Russia: first leaving parents, completion of education, first partnership, first marriage and first childbirth. We used the first waves of the Generations and Gender Survey for these three countries and an advanced method – Sequence Analysis. According to the Second Demographic Transition Theory, we expected a convergence in the sequencing, timing and tempo of the occurrence of target events. The results showed the slow convergence of sequences, but not of timing and tempo. Estonia and Russia are still close in the timing of the occurrence of events, but in tempo Estonia and France are more alike. The ages at which people start families in Estonia and Russia have decreased in younger generations in comparison with older ones, despite our expectation that they would increase. For the youngest generation (1970s), the time between leaving parents and becoming a parent is 5-7 years in France, 4-6 years in Estonia and 2-3 years in Russia. The sociodemographic behaviour of Estonians clearly positions them between Europe and Russia. Thus, the comparison of France, Estonia and Russia only partially confirms the Second Demographic Transition Theory
    Keywords: sequence analysis, transition to adulthood, life course, France, Estonia, Russia.
    JEL: J12 J13 N3 P46
    Date: 2017
  4. By: Maksym Bryukhanov (National Research University Higher School of Economics); Igor Fedotenkov (National Research University Higher School of Economics)
    Abstract: Does religiosity make you happy? Many studies document positive associations between religiosity and various forms of subjective wellbeing. This is also true for general life satisfaction in normal economic conditions and in the case of economic shocks. However, both life satisfaction and religiosity may be correlated with unobserved individual and household traits or unobserved life shocks which can relate to reverse causality. These facts result in endogeneity and make ordinary least square estimates biased. In our study, we employ two methods to avoid possible endogeneity issues – we use fixed effects and instrumental variable estimations. Using Russian Longitudinal Monitoring Survey (RLMS-HSE) data and different econometric models, we document positive associations between religiosity and life satisfaction. In particular, fixed effect and instrumental variable regressions provide evidence for a positive effect of religiosity.
    Keywords: Life satisfaction, religiosity, RLMS-HSE, endogeneity
    JEL: D10 Z12
    Date: 2017
  5. By: Israel Marques (National Research University Higher School of Economics)
    Abstract: How do firms decide between different strategies for acquiring highly skilled workers? Ronald Coase (1937) famously argued that firms face trade-offs between “making” required inputs within the firm and contracting with outside actors to “buy” them. Similar trade-offs abound in deciding between in-plant training and outsourcing to either public or private, third parties. Existing theory on firms’ training strategies is premised on the ability of firms to solve a fundamental commitment problem, which retards cooperation between firms and other actors. Only with a strong civil society – employers’ associations and labor unions –or free, transparent and efficient market mechanisms is cooperation possible. Contemporary Russia presents a puzzle to this work. On the one hand, firms increasingly make costly co-investments with state-run schools and outsource training to private third-parties. On the other hand, civil society and judicial institutions are weak in Russia, making it difficult for firms to punish counterparties, at the same time that its markets have failed to fully make the transition to free and transparent capitalism. This paper argues that absent strong civil society and free, transparent markets, firms can overcome commitment problems and work with third-parties so long as their regional governments have strong state capacity and are politically accountable. The former assures firms that central, regional authorities can monitor school officials and private-third parties to ensure agreements are honored, while the latter creates incentives for regional authorities to do so. These theories are tested on original survey data covering 690 firms in 12 Russian regions
    Keywords: Skill Development, Human Capital, Credible Commitment, Institutional Quality, Firms, Training strategies, Russia
    JEL: D22 J24 I25 L21 L23
    Date: 2017
  6. By: International Monetary Fund
    Abstract: Serbia continues to make good progress in addressing macroeconomic imbalances, supported by the Stand-By Arrangement (SBA), contributing to improved confidence and stronger growth. However, structural challenges remain, and it is important to continue the reform momentum, taking advantage of synergies with the EU accession process.
    Keywords: Europe;Serbia;
    Date: 2017–09–06
  7. By: Voskoboynikov, Ilya B.
    Abstract: Intensive growth, structural change and expanding informality has characterized many developing and emerging economies in recent decades. Yet most empirical investigations into the relationship between structural change and productivity growth overlook informality. This paper includes the informal sector in an analysis of the effects of structural changes in the Russian economy on aggre-gate labour productivity growth. Using a newly developed dataset for 34 industries covering the period 1995–2012 and applying three alternative approaches, aggregate labour productivity growth is decomposed into intra-industry and inter-industry contributions. All three approaches show that the overall contribution of structural change is growth-enhancing, significant and attenuating over time. Labour reallocation from the formal sector to the informal sector tends to reduce growth through the extension of informal activities with low productivity levels. Sectoral labour reallocation effects are found to be highly sensitive to the methods applied.
    JEL: O11 O17 C82 N14
    Date: 2017–11–29
  8. By: Magdalena Petrovska (National Bank of the Republic of Macedonia); Gani Ramadani (National Bank of the Republic of Macedonia); Nikola Naumovski (National Bank of the Republic of Macedonia); Biljana Jovanovic (National Bank of the Republic of Macedonia)
    Abstract: The primary goal of this paper is to describe several models that are currently used at the National Bank of the Republic of Macedonia (NBRM) for short-term forecasting of inflation - Autoregressive integrated moving average models (aggregated and disaggregated approach), three equation structural model and a dynamic factor model. Additionally, we evaluate models’ out-of-sample forecasting performance for the period 2012 q3 to 2016 q2 by using a number of forecast evaluation criteria such as the Root Mean Squared Error, the Mean Absolute Error, the Mean Absolute Percentage Error and the Theil’s U Statistics. Additionally, we constructed several composite forecasts in order to test whether a combination forecast is superior to individual models’ forecasts. Our results point to three important conclusions. First, the forecasting accuracy of the models is highest when they are used for forecasting one quarter ahead i.e. the errors increase as the forecasting horizon increases. Second, the disaggregated ARIMA model has the smallest forecasting errors. Third, majority of the forecast evaluation criteria suggest that composite forecasts are superior in comparison to the individual models.
    Keywords: Inflation, forecasting, forecast evaluation, composite forecast
    JEL: C52 C53 E37
    Date: 2017
  9. By: Aleksandar Vasilev
    Abstract: In this paper we introduce reciprocity in labor relations and government sector to in- vestigate how well the real wage rigidity that results out of that arrangement explains business cycle fluctuations in Bulgaria. The reciprocity mechanism described in this paper follows Danthine and Kurmann (2010) and is generally consistent with micro- studies, e.g. Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). Rent-sharing considerations, and worker’s own past wages turn out to be the most important as- pects of how labor contracting happens. In contrast, aggregate economic conditions, as captured by the employment rate, are not found to be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis-a-vis data, especially along the labor market dimension.
    Keywords: General equilibrium, reciprocity, gift exchange, efficiency wages, unemployment, fiscal policy, Bulgaria.
    JEL: E24 E32 J41
    Date: 2017–11–09
  10. By: Liwiński, Jacek
    Abstract: Purpose: This paper tries to identify the impact of international student mobility on the first wages of tertiary education graduates in Poland. Design/methodology/approach: The author uses data from the nationwide tracer survey of Polish graduates (Graduate Tracer Study 2007) and regresses the hourly net wage rate in the first job after graduating from a higher education institution (HEI) on a rich set of individuals' characteristics. In order to reduce the bias due to selection to international student mobility the author includes a set of variables representing abilities and skills, characteristics of studies and international experience as control variables. The author addresses the possible selection to employment bias by using the Heckman correction with various exclusion restrictions. Findings: After controlling for observed heterogenity the author finds that Polish graduates who studied abroad for at least one month earn on average 18% more on their first job than those who studied in Poland only. However, the author also finds that this wage premium is partly explained by international economic migration after graduation. Studying abroad brings a wage premium only if it is followed by working abroad. Those who perform their first job in Poland do not obtain any wage premium from international student mobility. Originality/value: The main contribution of the paper is that it identifies international economic migration after graduation as another mechanism explaining why those, who studied abroad, earn more.
    Keywords: international student mobility,wages,wage premium,Heckman correction
    JEL: I29 J24 J31
    Date: 2017
  11. By: Fabrice Defever; Christian Fischer; Jens Suedekum
    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: 2017–11
  12. By: Xi Chen; Lipeng Hu; Jody L. Sindelar
    Abstract: China’s recently implemented New Rural Pension Scheme (NRPS), the largest social pension program in the world, was designed to provide financial protection for its rural population and reduce economic inequities. Yet the impact of this program is mitigated if those eligible fail to enroll. This paper examines the extent to which pension-eligible individuals, and their families, make optimal pension decisions. Families are involved in the NRPS decisions because, in most cases, adult children need to enroll as a prerequisite of their parents’ receipt of benefits. We examine the decisions of both those eligible for pension benefits (i.e. over 60 years old) and their adult children. We use the rural sample of the 2012 China Family Panel Study to study determinants of the decision to enroll in NRPS, premiums paid, and time taken to enroll. We find evidence of low and suboptimal pension enrollment by eligible individuals and their families. Suboptimal enrollment takes various forms including failure to switch from the dominated default pension program to NRPS and little evidence that families make mutually beneficial intra-family decisions. For the older cohort, few individual and family characteristics are significant in enrollment decisions, but village characteristics play an important role. For the younger cohort, we find that more individual-level characteristics are significant, including own and children’s education. Village characteristics are important but not as much as for the older cohort.
    JEL: D13 D14 H55 I3
    Date: 2017–11
  13. By: Leonid Gokhberg (National Research University Higher School of Economics); Ilya Kuzminov (National Research University Higher School of Economics); Pavel Bakhtin (National Research University Higher School of Economics); Elena Tochilina (National Research University Higher School of Economics); Alexander Chulok (National Research University Higher School of Economics); Anton Timofeev (National Research University Higher School of Economics); Alina Lavrinenko (National Research University Higher School of Economics)
    Abstract: The paper discloses a new approach to emerging technologies identification, which strongly relies on capacity of big data analysis, namely text mining augmented by syntactic analysis techniques. It discusses the wide context of the task of identifying emerging technologies in a systemic and timely manner, including its place in the methodology of foresight and future-oriented technology analysis, its use in horizon scanning exercises, as well as its relation to the field of technology landscape mapping and tech mining. The concepts of technology, emerging technology, disruptive technology and other related terms are assessed from the semantic point of view. Existing approaches to technology identification and technology landscape mapping (in wide sense, including entity linking and ontology-building for the purposes of effective STI policy) are discussed, and shortcomings of currently available studies on emerging technologies in agriculture and food sector (A&F) are analyzed. The opportunities of the new big-data-augmented methodology are shown in comparison to existing results, both globally and in Russia. As one of the practical results of the study, the integrated ontology of currently emerging technologies in A&F sector is introduced. The directions and possible criteria of further enhancement and refinement of proposed methodology are contemplated, with special attention to use of bigger volumes of data, machine learning and ontology-mining / entity linking techniques for the maximum possible automation of the analytical work in the discussed field. The practical implication of the new approach in terms of its effectiveness and efficiency for evidence-based STI policy and corporate strategic planning are shortly summed up as well
    Keywords: Emerging technologies, foresight, strategic planning, STI policy, Russian Federation, agriculture, food sector, text mining, tech mining, STI landscape mapping, horizon scanning
    JEL: O1 O3
    Date: 2017
  14. By: International Monetary Fund
    Abstract: After a protracted period of consolidation following the global financial crisis, the economy is growing, bolstered by large investment projects. Banking-sector conditions are improving, with credit to the private sector growing, following years of deleveraging. The large cost of constructing the first phase of a highway (one quarter of annual GDP), however, is pushing government debt to high levels. The authorities took significant steps to bolster fiscal sustainability with the 2017 budget and are currently implementing a well-specified fiscal adjustment strategy in line with staff advice. Outlook
    Keywords: Europe;Montenegro;
    Date: 2017–09–14
  15. By: Liwiński, Jacek; Pastore, Francesco
    Abstract: We test for the signalling hypothesis versus human capital theory using the Wiles test (1974) in a country which has experienced a dramatic increase in the supply of skills. For this purpose, we construct a job match index based on the usefulness of the school-provided skills and the relevance of the job performed to the field of study. Then we regress the first earnings of graduates on this index using OLS and Heckit to control for omitted heterogeneity of the employed. The data we use come from a representative tracer survey of Poles who left secondary schools or graduated from HEIs over the period of 1998-2005. We find that only the HEI graduates obtain a wage premium from skills acquired in the course of formal education. This finding is robust to a large number of robustness checks with different indicators of the educational mismatch and instrumental variables.
    Keywords: education,skills,signalling,job matching,wages,Heckman correction
    JEL: J24 J31
    Date: 2017
  16. By: Jan Drahokoupil
    Abstract: This paper reviews the formation of worker participation and its current regulation and practice in Czechia and Slovakia. The formation of worker participation in these countries is traced back to the legacies of state socialism prior to 1989, economic transformations in the 1990s as well as EU accession and the implementation of the EU Directive on Information and Consultation of Employees after 2002. The paper shows that worker participation in Czechia and Slovakia is firmly institutionalized and embedded in both countries’ legal systems. Trade unions are the most important organizations representing workers’ interests, whereas the relevance of works councils and other participation forms remains marginal. However, the actual practice of worker representation and participation is declining due to decreasing union and employer densities and bargaining decentralization; and due to the strong dependence of employment relations in Czechia and Slovakia on labour legislation. To maintain a strong role of worker participation at the plant level, it is essential to overcome power struggles between trade unions and works councils and develop direct initiatives facilitating workplace democracy.
    Keywords: trade unions, works councils, worker participation, Czechia, Slovakia, postsocialism, legal system, labour legislation
    Date: 2017–10–01
  17. By: John Rand
    Abstract: Utilizing a panel of over 2,000 Vietnamese SMEs over a 10-year period, we analyse the importance of being politically connected on both access and cost-of-credit obtained from formal financial institutions. Controlling for unobserved time-invariant firm-level heterogeneity, productivity self-selection concerns, and access to alternative credit markets, we show that political connections decreases the likelihood of being credit-constrained by 4 percentage points. Moreover, politically connected firms accessing credit face lower cost-of-capital than non-connected SMEs not excluded from formal financial markets. However, the impact of political connections is most valuable during periods of financial distress, but less prevalent during business cycle upswings.
    Date: 2017
  18. By: Vrabie, Catalin; Tirziu, Andreea-Maria
    Abstract: An important topic often found in the media, but ambiguously treated is “transparency”. This article will present a blueprint for Romanian municipalities’ Websites done through the transparency concept’s filter. We will see that althoughthe law imposes to municipalities to post specific items on the Internet, they either omit or post a minimum of information just to “follow” the rules, without giving any evidence of interest. Assuming that displaying online more information requested by the law will lead to an increased users’ confidence in the system, we accessed the Website of each municipality in Romania (103) to search for the existence of financial data (budgets, financial indicators, assets etc.). In the end, we have presented a brief report on how the government responds to citizens’ concerns. The results are not very satisfactory, but we consider that such analyses will create a competition between municipalities, in which citizens are the winners.
    Keywords: government; municipality; electronic; transparency; responsibility
    JEL: H83
    Date: 2017–05–19
  19. By: Emiliano Magrini (Food and Agriculture Organization, Rome); Pierluigi Montalbano (Department of Economics, University of Sussex; Department of Economics and Social Sciences, Sapienza University of Rome); L. Alan Winters (Department of Economics, University of Sussex)
    Abstract: This paper assesses vulnerability from trade in Vietnam by presenting an extended version of Ligon and Schechter’s (2003) Vulnerability as low Expected Utility (VEU) measure. It uses the VHLSS panel data covering the period 2002-06. The empirical results show that risk-induced vulnerability and heterogeneity in trade exposure matters in determining household overall vulnerability and that this is not linked to the actual manifestation of shocks. Although it does not represent, by any means, an argument against free trade, this work is relevant for policymaking since it contributes to deepen our knowledge on the subtle links between trade openness and vulnerability providing some insight on the stabilisation needs of trade reforms. These include protecting vulnerable farmers from excessive price volatility, as well as fostering their risk management strategies.
    Keywords: trade openness; vulnerability; poverty; risk; consumption behaviour; Vietnam
    JEL: F14 O12 D12 C31
    Date: 2017–11

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