nep-tra New Economics Papers
on Transition Economics
Issue of 2018‒03‒12
ten papers chosen by
J. David Brown
United States Census Bureau

  1. How Do Firms Adjust to Rises in the Minimum Wage? Survey Evidence fromCentral and Eastern Europe By Katalin Bodnar; Ludmila Fadejeva; Stefania Iordache; Liina Malk; Desislava Paskaleva; Jurga Pesliakaite; Natasa Todorovic Jemec; Peter Toth; Robert Wyszynski
  2. Pricing Carbon Emissions in China By Chang, C-L.; Mai, T.K.; McAleer, M.J.
  3. Job market outcomes of IDPs: the case of Georgia By Karine Torosyan; Norberto Pignatti; Maksym Obrizan
  4. Importance of EU Regional Support Programmes for Firm Performance By Konstantins Benkovskis; Olegs Tkacevs; Naomitsu Yashiro
  5. Republic of Croatia; 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Croatia By International Monetary Fund
  6. Markups and Markets: A New Empirical Framework and Evidence on Exporters from China By Corsetti, G.; Crowley, M.; Han, L.; Song, H.
  7. Doubling Up or Moving Out? The Effect of International Labor Migration on Household Size By Gatskova, Kseniia; Kozlov, Vladimir
  8. The Communist Manifesto: What can we learn today for a country like Vietnam? By Herr, Hansjörg
  9. Restructuring the Chinese Electricity Supply Sector: An assessment of the market pilot in Guangdong Province By Pollitt, M.; Yang, C.; Chen, H.
  10. How do savings of different agents respond to interest rate change? By Michał Gradzewicz

  1. By: Katalin Bodnar (European Central Bank); Ludmila Fadejeva (Bank of Latvia); Stefania Iordache (Banca Nationala a Romaniei,); Liina Malk (Eesti Pank); Desislava Paskaleva (Bulgarian National Bank); Jurga Pesliakaite (Bank of Lithuania); Natasa Todorovic Jemec (Banka Slovenije); Peter Toth (Narodna banka Slovenska,); Robert Wyszynski (Narodowy Bank Polski)
    Abstract: We study the transmission channels for rises in the minimum wage using a unique firm-level dataset from eight Central and Eastern European countries. Representative samples of firms in each country were asked to evaluate the relevance of a wide range of adjustment channels following specific instances of rises in the minimum wage during the recent post-crisis period. The paper adds to the rest of literature by presenting the reactions of firms as a combination of strategies, and evaluates the relative importance of those strategies. Our findings suggest that the most popular adjustment channels are cuts in non-labour costs, rises in product prices, and improvements in productivity. Cuts in employment are less popular and occur mostly through reduced hiring rather than direct layoffs. Our study also provides evidence of potential spillover effects that rises in the minimum wage can have on firms without minimum wage workers.
    Keywords: minimum wage, adjustment channels, firm-level survey
    JEL: D22 E23 J31
    Date: 2017–12–31
  2. By: Chang, C-L.; Mai, T.K.; McAleer, M.J.
    Abstract: The purpose of the paper is to provide a clear mechanism for determining carbon emissions pricing in China as a guide to how carbon emissions might be mitigated to reduce fossil fuel pollution. The Chinese Government has promoted the development of clean energy, including hydroelectric power, wind power, and solar energy generation. In order to involve companies in carbon emissions control, a series of regional and provincial carbon markets have been established since 2013. Since China’s carbon market was established in 2013 and mainly run domestically, and not necessarily using market principles, there has been almost no research on China’s carbon price and volatility. This paper provides an introduction to China’s regional and provincial carbon markets, proposes how to establish a national market for pricing carbon emissions, discusses how and when these markets might be established, how they might perform, and the subsequent prices for China’s regional and national carbon markets. Power generation in manufacturing consumes more than other industries, with more than 40% of total coal consumption. Apart from manufacturing, the northern China heating system also relies on fossil fuels, mainly coal, which causes serious pollution. In order to understand the regional markets well, it is necessary to analyze the energy structure in these regions. Coal is the primary energy source in China, so that provinces that rely heavily on coal receive a greater number of carbon emissions permits from the Chinese Government. In order to establish a national carbon market for China, a detailed analysis of eight important regional markets will be presented. The four largest energy markets, namely Guangdong, Shanghai, Shenzhen and Hubei, traded around 82% of the total volume and 85% of the total value of the seven markets in 2017, as the industry structure of the western area is different from that of the eastern area. The China National Development and Reform Commission has proposed a national carbon market, which can attract investors and companies to participate in carbon emissions trading. This important issue will be investigated in the paper.
    Keywords: Pricing Chinese Carbon Emissions, National Pricing Policy, Energy, Volatility, Energy Finance, Provincial Decisions
    JEL: C22 C58 G12 Q48
    Date: 2018–01–01
  3. By: Karine Torosyan (International School of Economics at Tbilisi State University); Norberto Pignatti (International School of Economics - Tbilisi); Maksym Obrizan (Kyiv School of Economics)
    Abstract: Internally displaced people (IDPs) constitute a serious economic, social and cultural problem for many countries, including countries in transition. Despite the importance of the problem, there are only a handful of previous studies investigating the issue of labor market outcomes of IDPs. We aim to fill this gap in the literature using 13 years of Integrated Household Surveys over 2004 - 2016 from Georgia, which experienced large flows of internal migrants from the early 1990s until now. Our analyses indicate that the labor market outcomes of IDPs are much worse than those of local residents. Specifically, IDPs are 3.9 to 11.2 percentage points less likely to be in the labor force, depending on the period and duration of IDP status. IDPs are also up to 11.6 percentage points more likely to be unemployed, sometimes even after 20 years of forced displacement. Finally, IDPs residing in a locality for more than 5 years receive persistently lower wages than local residents with similar characteristics, with the gap widening over time, reaching some 16 percentage points in the last period under analysis.
    Keywords: conflict, internally displaced people, IDPs, labor market outcomes, transition countries
    JEL: D74 J21 O15 P23 R23
    Date: 2018–03
  4. By: Konstantins Benkovskis (Bank of Latvia); Olegs Tkacevs (Bank of Latvia); Naomitsu Yashiro (OECD)
    Abstract: This paper investigates the effects of EU regional support on firms' productivity, the number of employees and other firm performance indicators. For this purpose, a rich firmlevel dataset for Latvia, a country where investment activities are affected by the availability of EU funding, is used. The paper finds that participation in activities cofunded by the ERDF raises firms' input and output soon after they embark on them, while the effect on labour productivity and TFP appears only with a time lag of three years. However, this positive productivity premium is not homogenous across firms and is more likely to materialise in the case of initially less productive and medium-sized/large firms. Furthermore, statistical significance of positive productivity gains is not particularly robust across different estimation procedures. The study also shows that after controlling for investment expenditures, EU sponsored projects are as efficient as the privately financed ones, irrespective of where private financing comes from.
    Keywords: EU funds, productivity, firm-level data, propensity score matching
    JEL: C14 D22 R11
    Date: 2018–02–23
  5. By: International Monetary Fund
    Abstract: Near-term growth prospects are favorable, supported by strong tourism and private consumption, and a significantly improved fiscal position and external environment. The economy is operating close to potential. Growth is expected to decelerate if enduring structural constraints are not addressed. The largest private company, Agrokor, has been facing a financial crisis and put under caretaker management. The impact of this crisis on the economy has been contained thus far. Risks to the outlook are two sided, with downside risks dominating over the medium term. The pace of structural reform implementation has been slow and additional delays constitute a downside risk.
    Keywords: Europe;Croatia;
    Date: 2018–01–16
  6. By: Corsetti, G.; Crowley, M.; Han, L.; Song, H.
    Abstract: We develop a new empirical framework to analyse destination-specific markup and quantity adjustments to bilateral exchange rates by exporters. The framework offers two methodological innovations. First, we develop an unbiased estimator of the markup elasticity that correctly isolates marginal costs in large unbalanced panels where the set of markets served by firms varies endogenously with currency movements. Second, we exploit Chinese linguistics to process characters recorded in Chinese custom forms to build a novel, general, product classification distinguishing high and low differentiation goods---which we can use to proxy for exporters' market power. Applying this framework to exporters from China over 2000-2014, we document substantial heterogeneity in destination-specific markup elasticities across product classes and firm types. Conditional on a price change, the average markup elasticity for highly differentiated consumption goods is 32%; markup adjustments explain three quarters of incomplete pass through into import prices for these goods. In contrast, the average for low-differentiation intermediates is only 5%, suggesting that pricing for these goods responds to global, rather than local, economic conditions. Markup elasticities are higher for both state-owned and foreign-invested enterprises than for private enterprises, which, on average, pursue aggressively competitive strategies throughout our sample.
    Keywords: Exchange rates, pricing-to-market, product classification, differentiated goods, market power, markup elasticity, trade elasticity, China.
    JEL: F31 F41
    Date: 2018–02–13
  7. By: Gatskova, Kseniia; Kozlov, Vladimir
    Abstract: Previous literature suggests that households may react to wealth fluctuations by increasing or decreasing the number of members sharing the same residence. We use a unique three-wave household panel data from Tajikistan to explore the change in household size as a response to income shifts related to international labor migration. In addition, we analyze the interaction between effects of idiosyncratic income increase resulted from a successful migration episode and the one of an aggregate shock – the global financial crisis – and show how different households adjust their family size during times of financial hardship. The empirical evidence indicates that the successful migration episode two years before the interview was associated with a decrease in family size due to some of the family members’ moving out. At the same time, people were more likely to live in larger households during the crisis year than before and after the crisis. Empirical analysis yields that migrant families were not different from non-migrant families with respect to the doubling up as response to financial crisis, which suggests that labor migration in Tajikistan does not insure against economic shocks in the long run.
    Keywords: migration, remittances, household size, living arrangements, Tajikistan
    JEL: F22 D1 J1
    Date: 2018–01
  8. By: Herr, Hansjörg
    Abstract: Today we can learn from the Communist Manifesto that unregulated markets lead to disastrous economic, social, and political developments, which can endanger the reproduction of the capital system itself. The liberal argument, based on Adam Smith's invisible hand - that markets coordinate the selfish actions of millions of people and lead to the welfare of nations -, is a dangerous dream. The consequence is that politicians should not listen to economists, including foreign advisors who preach the liberal dreams of radical versions of capitalist systems. Especially for developing countries, it is vital that they strive for a regulated version of capitalist development. Marx and Engels had a deep understanding of the functioning of capitalism. They underestimated the possibilities to regulate the capitalist system and also allowed the working class to take part in prosperity. However, there is always the danger that capitalist systems evolve with low levels of regulation with the features of capitalism analysed in the Manifesto.
    Keywords: Marxism,Communist Manifesto,capitalism,development strategy
    JEL: B14 B30 O11
    Date: 2018
  9. By: Pollitt, M.; Yang, C.; Chen, H.
    Abstract: This paper examines power sector reform in China's largest province, Guangdong, following the publication of the No.9 document of the China State Council on 'Deepening Reform of the Power Sector' in March 2015. We look at the operation of the pilot wholesale power market in Guangdong in the light of international experience. We discuss how the power market pilot is working in Guangdong and the extent to which the current market design is in line with successful power markets we see elsewhere. We examine the evidence on whether the market reform has successfully brought new players into the electricity system in Guangdong. We consider the effects of the reform on the operational and investment decisions of firms in the sector. We conclude with several lessons for the Chinese government's ongoing power sector reform programme.
    Keywords: power market reform, international experience, Guangdong, China, industrial electricity price
    JEL: L94
    Date: 2018–02–26
  10. By: Michał Gradzewicz (Narodowy Bank Polski and Warsaw School of Economics)
    Abstract: The theory underlying the relation between savings and interest rates concerns the household sector, but in modern economies the household sector is not the main source of savings in the economy. Using the SVAR methodology, we try to identify the responsiveness of different sectors’ savings to interest rate changes. We focus on Poland and generalize results for other European economies. We found that responsiveness of savings to interest rate is diversified. In most of analyzed countries household savings rise after an interest rate increase, but simultaneously corporate savings fall, indicating negative conditional correlation between households’ and corporates’ savings. Moreover, the direction of responses of general government and foreign savings are diverse (although the former usually declines after an interest rate increase) and does not seem to be correlated with factors like membership in currency union or the level of debt. We also try to check whether “crowding-out” effects exist and conclude it only applies in the case of government savings crowding out household savings.
    Keywords: Savings, Interest rate, Sectoral analysis, SVAR
    JEL: E21 E43 E52 C32
    Date: 2018

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