nep-tra New Economics Papers
on Transition Economics
Issue of 2018‒01‒22
seventeen papers chosen by
J. David Brown
United States Census Bureau

  1. Services Policy Reform and Manufacturing Employment: Evidence from Transition Economies By Matteo Fiorini; Bernard Hoekman; Clément Malgouyres
  2. Homeownership, Mobility, and Unemployment. Evidence from Housing Privatisation By Hana M. Broulíková; Peter Huber; Josef Montag; Petr Sunega
  3. Agglomeration and Firm Wage Inequality: Evidence from China By Chen, Anping; Dai, Tianshi; Partridge, Mark
  4. "Trust and Cooperation at a Confluence of Worlds: An Experiment in Xinjiang, China" By Zhe Zhang; Louis Putterman; Xu Zhang
  5. Управление на аграрната устойчивост в България By Bachev, Hrabrin
  6. Оценка на аграрната устойчивост в България на ниво район, екосистема, подотрасъл и стопанска организация By Bachev, Hrabrin; Ivanov, Bojidar; Toteva, Dessislava; Sokolova, Emilia
  7. Welfare in Slovakia and the EU — an alternative to GDP per capita By Brocek, Frantisek; Lalinsky, Tibor
  8. Georgia; First Review under the Extended Fund Facility and Request for Modification of Performance Criteria-Press Release; and Staff Report By International Monetary Fund
  9. Are School-Provided Skills Useful at Work? Results of the Wiles Test By Liwiński, Jacek; Pastore, Francesco
  10. People’s Republic of China; Financial System Stability Assessment-Press Release and Statement by the Executive Director for People’s Republic of China By International Monetary Fund
  11. The Effect of Air Pollution on Migration: Evidence from China By Shuai Chen; Paulina Oliva; Peng Zhang
  12. People’s Republic of China; Detailed Assessment Report on the Observance of Standards and Codes By International Monetary Fund
  13. Capital Structure and Oligarch Ownership By Chernenko, Demid
  14. Resolving China's Zombies: Tackling Debt and Raising Productivity By W. Raphael Lam; Alfred Schipke; Yuyan Tan; Zhibo Tan
  15. Reassessing the Perimeter of Government Accounts in China By Rui Mano; Phil Stokoe
  16. Diversification, economies of scope, and exports growth of Chinese firms By Mercedes Campi; Marco Due\~nas; Le Li; Huabin Wu
  17. The Rise and Fall of Local Elections in China: Theory and Empirical Evidence on the Autocrat's Trade-off By Monica Martinez-Bravo; Gerard Padró I Miquel; Nancy Qian; Yang Yao

  1. By: Matteo Fiorini (Robert Schuman Centre for Advanced Studies, European University Institute); Bernard Hoekman (Robert Schuman Centre for Advanced Studies, European University Institute); Clément Malgouyres (Banque de France)
    Abstract: Policy reforms targeting the services sectors are a neglected dimension of the process of structural transformation and economic development. The effects of such reforms on employment across industries as a function of their use of services as intermediate inputs are theoretically ambiguous and remain largely understudied. This paper uses sector-level data for 24 transition economies for the 1990-2012 period to assess the impacts of services policy reforms on downstream manufacturing employment. We find a negative effect of services reforms on manufacturing sector employment. This is mostly associated with the process of transition to a market-based economy. Controlling for transition-specific dynamics, the data suggest a neutral effect of progress towards adopting “best practice” policies for upstream services on employment in downstream manufacturing. Furthermore, in line with the extant literature, we confirm that services policy reforms enhance productivity of downstream manufacturing industries. Finally, we find that the negative effects on downstream employment are mitigated in countries with better economic governance and human capital.
    Date: 2017–09
  2. By: Hana M. Broulíková; Peter Huber (WIFO); Josef Montag; Petr Sunega
    Abstract: Homeownership is believed to cause higher unemployment. This is because homeowners face higher mobility costs that limit their job search to local labour markets. Empirical tests of this prediction have yielded mixed results so far, possibly due to the endogeneity of homeownership. This paper documents that the privatisation of public housing in Central and Eastern Europe after the fall of the Iron Curtain resulted in a quasi-experimental assignment of homeownership to individual households. This facilitates a new test of the effects of homeownership on mobility and unemployment. We find only weak evidence that homeowners are less willing to move and no evidence of higher unemployment risks relative to renters.
    Date: 2018–01–08
  3. By: Chen, Anping; Dai, Tianshi; Partridge, Mark
    Abstract: China is experiencing rapid urbanization with the steady emergence of large cities, leading to policy discussions of the role of large cities in its development. While the consensus is that agglomeration plays an important role in economic development and large cities can act as engines of economic growth, there is relatively little empirical knowledge of the effects of agglomeration on inequality. In this study, we apply panel data from a micro firm-level survey and from city-level data to investigate whether there is a causal relationship between agglomeration and establishment wage dispersion in China. Given potential endogeneity of city size, we employ an instrumental variable regression (IV) approach. We find strong evidence that agglomeration has significant effects on wage dispersion in the short- and long-run. The link between agglomeration and wage dispersion is heterogeneous across regions. The spatially varying results appear to be due to different stages of development. Our results are consistent with two-sided sorting models in that it appears that the most productive and least productive firms are moving from inland cities to the coast.
    Keywords: Agglomeration, Wage Dispersion, City Size, Inequality, China
    JEL: R1
    Date: 2017–12–27
  4. By: Zhe Zhang; Louis Putterman; Xu Zhang
    Abstract: We study trust and willingness to cooperate among and between Uyghur and Han college students in Xinjiang, China, where tensions exist between the two ethnic groups. We conduct an incentivized laboratory-style decision-making experiment in which within and between group interactions occur among identifiable participants without traceability of individual decisions. We find that members of each ethnicity show favoritism towards those of their own ethnicity in both trust and cooperation and that communication enhances inter- ethnic cooperation significantly. We also find that Uyghur and Han subjects behave differently in their willingness to cooperate relative to trust, although both trust and trustworthiness positively correlate with willingness to cooperate on the individual level.
    Date: 2018
  5. By: Bachev, Hrabrin
    Abstract: This paper incorporates interdisciplinary New Institutional Economics and assesses the system of governance of agrarian sustainability in Bulgaria. The system of governance of agrarian sustainability is comprehensively analyzed, and the efficiency of institutional environment and diverse market, private, collective, public and hybrid modes assessed. Factors for increasing agrarian sustainability in the country are identified, and directions for improving the governing system suggested.
    Keywords: agrarian governance, sustainability, market, private, collective, public, hybrid modes, Bulgarian agriculture
    JEL: D1 D2 D21 D22 D23 D7 D71 D74 K4 L1 L11 L14 L2 L5 Q1 Q12 Q13 Q15 Q18 Q5
    Date: 2018–01–04
  6. By: Bachev, Hrabrin; Ivanov, Bojidar; Toteva, Dessislava; Sokolova, Emilia
    Abstract: This paper applies interdisciplinary framework and assesses the level of agrarian sustainability in Bulgaria at regional, ecosystem, sectioal and farm levels. Factors for increasing agrarian sustainability are also identified, and directions for improving research, managerial and assessment practices suggested.
    Keywords: agrarian sustainability, assessment, regional, ecosystem, sectioal, farm levels,Bulgaria
    JEL: Q1 Q10 Q15 Q18 Q2 Q3
    Date: 2018–01–04
  7. By: Brocek, Frantisek; Lalinsky, Tibor
    Abstract: GDP per capita is used as the basic measure of economic development and prosperity across the world. However, it is a limited measure of living standards, focussed on capturing changes in economic output per person and neglecting many things central to quality of life. Several alternative approaches to assessing quality of life have been proposed such as the OECD Better Life Index (2017), the UN Human Development Index (HDI), or Gross National Happiness. One notable contribution is the consumption equivalent welfare measure introduced by Jones and Klenow (2016). Our results from using this measure suggest that the quality of life in most EU countries is higher than suggested by GDP per capita relative to the U.S. The primary reasons for this are that, particularly compared to the U.S., countries in the EU tend to have lower income inequality and longer life expectancy. Implementing this measure for Slovakia, our results indicate that relative welfare is approximately 10 percentage points higher in Slovakia than GDP per capita would suggest. In the medium run, consumption equivalent welfare in Slovakia grew faster than income from pre-crisis levels. Improvements in the quality of living in Slovakia over time have been driven by an increase in life expectancy and consumption, as well as consistently low levels of income inequality. Nevertheless, living standards in Slovakia are still low in comparison to advanced EU economies and the U.S. Lower life expectancy, which reflects the quality of health of the population, accounts for most of the difference in welfare in comparison to these advanced economies.
    Keywords: Welfare, Consumption, Inequality, Life Expectancy, Leisure, Slovakia, EU, Convergence
    JEL: I15 I31 O11 O52 O57
    Date: 2017–11–07
  8. By: International Monetary Fund
    Abstract: Recent economic developments. Economic activity has strengthened on the back of stronger growth in main trading partners. Fiscal overperformance and efforts to address structural weaknesses have helped boost confidence. Program status. The 36-month Extended Fund Facility (EFF) approved on April 12 2017, with access of SDR 210.4 million (100 percent of quota), is on track. All end-June 2017 performance criteria (PCs) were met, some with significant margins. All structural benchmarks were also met. Completion of the review will make available the amount of SDR 30 million.
    Date: 2017–12–07
  9. By: Liwiński, Jacek (University of Warsaw); Pastore, Francesco (Università della Campania Luigi Vanvitelli)
    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: 2017–11
  10. By: International Monetary Fund
    Abstract: Since the 2011 FSAP, China’s impressive economic growth has continued, and it is now undertaking a necessary but prolonged economic transformation. China is transitioning from an economic model based on exports and investment to a more sustainable one based on services and consumption. The financial system has facilitated this high growth rate and the consequent sharp decline in poverty rates. The sector now reaches most of the population, as evidenced in financial inclusion measures, and permeates virtually all aspects of economic activity. The economic transformation requires a fundamental change in the role of the financial system. Historically its role was to channel China’s high savings at low cost to strategic sectors. Looking ahead, the policy objective for the financial sector should be to facilitate China’s economic transformation to a more demand-driven system, in which markets play an increasingly dominant role in resource allocation and where consequences of risk-taking are well-understood and accepted.
    Date: 2017–12–06
  11. By: Shuai Chen; Paulina Oliva; Peng Zhang
    Abstract: This paper looks at the effects of air pollution on migration in China using changes in the average strength of thermal inversions over five-year periods as a source of exogenous variation for medium-run air pollution levels. Our findings suggest that air pollution is responsible for large changes in inflows and outflows of migration in China. More specifically, we find that independent changes in air pollution of the magnitude that occurred in China in the course of our study (between 1996 and 2010) are capable of reducing floating migration inflows by 50 percent and of reducing population through net outmigration by 5 percent in a given county. We find that these inflows are primarily driven by well educated people at the beginning of their professional careers, leading to substantial changes in the sociodemographic composition of the population and labor force of Chinese counties. Our results are robust to different specifications, including simple counts of inversions as instruments, different weather controls, and different forms of error variance.
    JEL: O15 Q53 Q56
    Date: 2017–11
  12. By: International Monetary Fund
    Abstract: Detailed Assessment Report on the Observance of Standards and Codes
    Date: 2017–12–06
  13. By: Chernenko, Demid
    Abstract: This study examines the effects of oligarch ownership on corporate capital structures. Using panel data from Ukraine, I find that oligarch-owned companies employ significantly more debt and liabilities than their peers. However, there is no direct relation between oligarch ownership and target capital structure. Whereas the determinants of target leverage are similar across all owners, differences in firm characteristics also have a fairly small effect. I show that larger leverage is due to better access to debt, which results in lower rebalancing costs and faster restructurings of oligarch-owned companies. The findings clearly suggest that oligarchs benefit from the accumulated advantages.
    Keywords: Capital Structure; Leverage; Oligarchs; Influential Ownership; Connected Firms; Cumulative Advantage
    JEL: G32 P31
    Date: 2018
  14. By: W. Raphael Lam; Alfred Schipke; Yuyan Tan; Zhibo Tan
    Abstract: Nonviable “zombie” firms have become a key concern in China. Using novel firm-level industrial survey data, this paper illustrates the central role of zombies and their strong linkages with stateowned enterprises (SOEs) in contributing to debt vulnerabilities and low productivity. As a group, zombie firms and SOEs account for an outsized share of corporate debt, contribute to much of the rise in debt, and face weak fundamentals. Empirical results also show that resolving these weak firms can generate significant gains of 0.7–1.2 percentage points in long-term growth per year. These results also shed light on the ongoing government strategy to tackle these issues by evaluating the effects of different restructuring options. In particular, deleveraging, reducing government subsidies, as well as operational restructuring through divestment and reducing redundancy have significant benefits in restoring corporate performance for zombie firms.
    Date: 2017–11–27
  15. By: Rui Mano; Phil Stokoe
    Abstract: China’s official general government accounts do not include off-budget quasi-fiscal spending unlike the IMF’s augmented government accounts. This paper argues that the broader concept of augmented government remains relevant despite recent positive measures to separate off-budget units from the government. In fact, new avenues to finance public infrastructure, such as Special Construction Funds and Government Guided Funds, have emerged and this paper re-defines the perimeter of augmented government to include them. Finally, concrete steps for improving China’s fiscal accounts are put forward. If these steps are taken, the perimeter of general government would expand relative to official statistics but would likely be narrower than where augmented aggregates place it.
    Date: 2017–12–08
  16. By: Mercedes Campi; Marco Due\~nas; Le Li; Huabin Wu
    Abstract: In the 1990s, China started a process of structural reforms and of trade liberalization, which was followed by the accession to the World Trade Organization (WTO) in 2001. In this paper, we analyze trade patterns of Chinese firms for the period 2000-2006, characterized by a notable increase in exports volumes. Theoretically, in a more open economy, firms are expected to move from the production of a set of less-competitive products towards more internationally competitive ones, which implies specialization. We study several stylized facts on the distribution of Chinese firms trade and growth rates, and we analyze whether firms have diversified or specialized their trade patterns between 2000 and 2006. We show that Chinese export patterns are very heterogeneous, that the volatility of growth rates depends on the level of exports, and that volatility is stronger after trade liberalization. Both, diversification in products and destinations have a positive impact on trade growth, but diversification of destinations has a stronger effect. We conclude that the success of Chinese exports is not only due to an increase in the intensive margin, related to the existence of economies of scale, but also due to an increase in the extensive margin, related to the existence of economies of scope.
    Date: 2018–01
  17. By: Monica Martinez-Bravo; Gerard Padró I Miquel; Nancy Qian; Yang Yao
    Abstract: We propose a simple informational theory to explain why autocratic regimes introduce local elections. Because citizens have better information on local officials than the distant central government, delegation of authority via local elections improves selection and performance of local officials. However, local officials under elections have no incentive to implement unpopular centrally mandated policies. The model makes several predictions: i) elections pose a trade-off between performance and vertical control; ii) elections improve the selection of officials; and iii) an increase in bureaucratic capacity reduces the desirability of elections for the autocrat. To test (i) and (ii), we collect a large village-level panel dataset from rural China. Consistent with the model, we find that elections improve (weaken) the implementation of popular (unpopular) policies, and improve official selection. We provide a large body of qualitative and descriptive evidence to support (iii). In doing so, we shed light on why the Chinese government has systematically undermined village governments twenty years after they were introduced.
    JEL: O1 O2 P16
    Date: 2017–11

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