nep-tra New Economics Papers
on Transition Economics
Issue of 2018‒07‒30
twenty papers chosen by
J. David Brown
United States Census Bureau

  1. Why People Leave Their Rural Hometown:Evidence from 8 Provinces in China By He Zhu
  2. The Regional Innovation System in China: Regional comparison of technology, venture financing, and human capital focusing on Shenzhen By MOTOHASHI Kazuyuki
  3. Monetary Policy Announcements and Market Interest Rates’ Response: Evidence from China By Sun, Rongrong
  4. Explanatory factors behind formalizing non-farm household businesses in Vietnam By Jean-Pierre Cling; Mireille Razafindrakoto; François Roubaud
  5. Requiem for the Interest-Rate Controls in China By Sun, Rongrong
  6. Did China's anti-corruption campaign affect the risk premium on stocks of global luxury goods firms? By Thomas Nitschka
  7. The effect of women directors on innovation activity and performance of corporate firms: Evidence from China By Töpfer, Marina
  8. How (Not) to Make Women Work? By Joanna Tyrowicz; Karolina Goraus; Lucas van der Velde
  9. Importing under trade policy uncertainty: Evidence from China By Michele Imbruno
  10. Real convergence in central, eastern and south-eastern Europe By Żuk, Piotr; Savelin, Li
  11. The Effect of Transportation Benefits on Health and Consumption among the Elderly: Quasi-Experimental Evidence from Urban China By YIN Ting; YIN Zhigang; ZHANG Junchao
  12. Capital Scarcity and Industrial Decline: Evidence from 172 Real Estate Booms in China By Harald Hau; Difei Ouyang
  13. Europe's 2020 - innovation and creative capability of the Baltic Sea Region By Wedemeier, Jan; Kruse, Mirko
  14. Thinking about pension systems for the 21st century: A few remarks based on the Polish example By Marek Góra
  15. Maternal Education, Parental Investment and Non-Cognitive Characteristics in Rural China By Leight, Jessica; Liu, Elaine M.
  16. Former Communist Party Membership and Bribery in the Post-Socialist Countries By Ivlevs, Artjoms; Hinks, Timothy
  17. Overcoming the collective action problems facing Chinese workers: lessons from four protests against Walmart By Li, Chunyun; Liu, Mingwei
  18. The collapse of Real Socialism in Eastern Europe: linking external and internal causes. By Gomes, Luiz
  19. Transaction costs and institutional change of trade litigations in Bulgaria By Shteryo Nozharov; Petya Koralova-Nozharova
  20. Segmentation and informality in Vietnam: A survey of the literature By Jean-Pierre Cling; Mireille Razafindrakoto; François Roubaud

  1. By: He Zhu (Osaka School of International Public Policy, Osaka University)
    Abstract: This paper aim to clarify what motivate people to migrate from rural to urban area in China. The focus of most previous studies of migration are restricted to the wage gap between the origin and destination. However, this study uses the RUMiC (2008) data set that has individual characteristics of migrants and stayers, combined with China Statistical Yearbook data, to explore the decision making process on China’s rural to urban migration. This research provides empirical evidence that migration is a joint decision-making process characterized by the choices of migration and destination. The results also show that the living condition in hometowns pushes people to migrate. For example, the probability of moving decreases by 25% if the consumption of the rural area increases by 20% ( 10,000 RMB).
    Keywords: Internal migration mobility, Decision making, Industry, Nested logistic model
    JEL: J61
    Date: 2018–07
  2. By: MOTOHASHI Kazuyuki
    Abstract: Shenzhen has become a hot spot of innovation in China. In this paper, we characterize Shenzhen's innovation by comparing it with that of Beijing and Shanghai using patent and venture investment data. First, the role of universities and public research institutions is small in Shenzhen's innovation system as compared to Beijing and Shanghai. In contrast, private high-tech firms, such as Huawei, ZTE, and Tencent, are leading the innovation scene in Shenzhen. Second, we find that high-tech start-ups are geographically concentrated in the Nanshan district, particularly Yuehai Jiedao, where national-level high-tech zones are located. Recently, the number of start-ups has been increasing, and local, big firms, such as ZTE, are providing the human resources for such start-up firms. Third, inventor-disambiguated information based on patent data allows us to look at interorganizational talent movements. We find that such movements tend to occur within short distances, such as within the same district (e.g., Nanshan district). To sum up, Shenzhen has truly become a hot spot of high-tech entrepreneurship and innovation, but the dynamics are very much regionally bound. Therefore, it is important to become a local player in order to take advantage of innovation movements in Shenzhen by means of minority investment by corporate venture capital into local start-up firms.
    Date: 2018–07
  3. By: Sun, Rongrong
    Abstract: This paper uses the event study to estimate the impact of various monetary policy announcements on market interest rates in China over the 2002-2017 period. I find that financial markets understand the quantitative signals better: the market response to an announced adjustment of the regulated retail interest rate and the required reserve ratio is positive and significant at all maturities of bond rates, but smaller at the long end of the yield curve. However, the market barely responds to announced changes in the qualitative policy stance index, which contains limited vague information and is easily anticipated. Two newly introduced central bank lending rates do not appear to be sufficient to replace the retail interest rate and the reserve ratio in guiding market rates in the post-deregulation era. My results suggest that the PBC adopts a publicly announced short-term interest-rate operating target regime, similar to the Fed’s federal funds rate target.
    Keywords: announcement effect, event study, monetary policy, monetary transmission, China
    JEL: E52 E58
    Date: 2018–04
  4. By: Jean-Pierre Cling (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique); Mireille Razafindrakoto (LEDa - Université Paris Dauphine (Paris 9)); François Roubaud (LEDa - Université Paris Dauphine (Paris 9))
    Abstract: This article sets out to investigate the reasons why some household businesses decide to register and become formal (while others do not) in order to shed light on the origins of informality. We use qualitative as well as quantitative data on household businesses (HB) derived from first-hand representative surveys implemented in Hanoi and Ho Chi Minh city. The study reveals that although most of the informal businesses operate ‘illegally', this is more due to unclear registration legislation than the mark of a deliberate intention to evade the economic regulations.Among the different factors which influence the registration decisions, the reason for setting up the business appears to be a determining one: the more it is a real choice (businesses set up to be independent or to follow a family tradition) and the less a constraint (set up for lack of an job alternative), the more the HB is more inclined to be registered. Furthermore, the analysis highlights that incentives do prove decisive insofar as the probability of having a formal business is greater among HB heads who consider that registration provides at least partial protection from corruption. Besides, access to information, the market and large business orders also drive the informal entrepreneurs to register. These results stress the need for clarification of the legal framework as well as incentive policies in order to address the issue of informality.
    Abstract: Cet article se propose d'analyser les raisons pour lesquelles certaines unités de production (household businesses, HB) décident de s'enregistrer et de devenir formelles (et pourquoi d'autres ne le font pas) afin d'éclairer les origines de l'informalité. Nous mobilisons des données aussi bien quantitatives que qualitatives sur les HB, issues d'enquêtes représentatives et de première main conduite par nos soins à Hanoï et Ho Chi Minh ville. L'étude révèle que bien que la plupart des unités informelles opère "illégalement", ce trait procède plus d'une législation floue et méconnue que d'une volonté délibérée d'échapper aux régulations publiques. Parmi les différents facteurs qui jouent sur la décision de s'enregistrer, le motif qui a conduit à s'établir à son compte est déterminant : plus il s'agit d'un véritable choix (volonté d'échapper au salariat ou par tradition familiale) et moins il résulte d'une contrainte (manque d'alternative d'emploi), et plus le chef d'unité sera enclin à s'enregistrer. De plus, l'analyse met en évidence le rôle des incitations dans la probabilité de devenir formel. Ainsi, ceux qui considèrent que l'enregistrement protège (au moins partiellement) de la corruption sont plus nombreux à régulariser leur situation. Enfin, l'accès à l'information, aux marchés et aux commandes des grandes entreprises favorisent l'enregistrement. Ces résultats soulignent le besoin de clarification de la législation des entreprises ainsi que l'importance de politiques incitatives pour s'attaquer à la question de l'informalité.
    Keywords: Informal Sector,Vietnam,Registration,Corruption,Incentives
    Date: 2017–12–14
  5. By: Sun, Rongrong
    Abstract: This paper reviews the retail interest-rate-control deregulation in China over the 1993-2015 period and provides a preliminary assessment of the PBC's replacement monetary framework. I show that the interest-rate controls triggered the development of deposit substitutes that banks used to circumvent the restrictions, which in turn drove deposits out of commercial banks.This gave rise to concerns about deterioration of bank profits and build-up of financial frangibility, which have pushed up the PBC's deregulation acceleration over the post-2012 period. I quantify the distortionary effects of these controls: disintermediation, a rising shadow banking system and financial repression. Despite the official lift-off of the controls, the retail interest rates are still subject to the PBC’s window guidance and other pricing mechanism guidance. The interest-rate corridor does not function well in confining money market rates. This suggests that the PBC adopt a target money market rate system.
    Keywords: interest-rate control, deregulation, China, financial repression, interest-rate corridor
    JEL: E52 E58
    Date: 2018–06
  6. By: Thomas Nitschka
    Abstract: Media reports suggest that the recent Chinese anti-corruption campaign adversely influenced business prospects of globally operating luxury goods firms. This paper empirically tests this hypothesis. This paper finds that risk-adjusted returns on stock portfolios consisting of luxury goods firms with high exposure to China shifted persistently downward around the launch of the anti-corruption campaign. Risk-adjusted returns tend to co-vary with the intensity of the campaign. The evidence suggests that the Chinese anti-corruption campaign constituted negative cash-flow news about the affected global luxury goods firms. These findings neither pertain to luxury goods firms with low exposure to China nor to firms from other industries.
    Keywords: Asset pricing, financial markets, political risk
    JEL: G15 G18
    Date: 2018
  7. By: Töpfer, Marina
    Abstract: This paper elaborates whether women bringing their diversity, cross-cultural awareness and transformational leadership skills to corporate boards offer strategic advantages for firms. In the analysis the effect of women in the board room on innovation activity and corporate firm performance as well as the joint consequences of female directors and innovation activity on the firm's success are examined. The latter may be particularly important in the context of gender diversity as more gender-diverse boards allow for higher levels of creativity and hence innovation. In order to account for endogeneity issues, different model specifications are employed (two-way fixed effects models and linear dynamic panel data models). Unconditional quantile regressions are used in order to go beyond the mean. The analysis is conducted using Chinese firm-level data from 2006-2015. The results suggest positive effects of gender diversity in corporate boards and patenting activities on firm performance. Women directors are found to have statistically significant effects on both input-(positive) and output-oriented (negative) innovation activity.
    Keywords: Women Directors,Innovation Activity,Firm Performance,Gender-diverse Boards,Unconditional Quantile Regression
    JEL: G30 J16
    Date: 2018
  8. By: Joanna Tyrowicz (Institute for Labour Law and Industrial Relations in the European Union IAAEU), Trier University); Karolina Goraus (University of Warsaw); Lucas van der Velde (Warsaw School of Economics)
    Abstract: Women in developed economies have experienced an unparalleled increase in employment rates, to the point that the gap with respect to men was cut in half. This positive trend has often been attributed to changes in the opportunity costs of working (e.g. access to caring facilities) and the opportunity costs of not-working (notably, relative growth in wages in positions more frequently occupied by women, improved educational attainment). Meanwhile, the gender employment gaps were stagnant in transition economies. Admittedly, employment equality among genders was initially much higher in transition countries. We exploit this unique evidence from transition and advanced countries, to analyze the relationship between the institutional environment and the (adjusted) gender employment gaps. We estimate comparable gender employment gaps on nearly 1500 micro databases from over 40 countries. Changes in both types of the opportunity costs exhibited strong correlation with gender employment equality where the gap was larger, i.e. advanced economies. We provide some evidence that these results are not explained away by transition-related phenomena. We argue that the observed divergence in time trends reflects a level effect: the lower the gender employment gap, the lower the strength of the relationship between gender employment equality and the opportunity costs of working. An implication from our study is that the existing instruments might be insufficient to further reduce the gender employment gap.
    Keywords: employment, gender gaps, opportunity cost of working, transition, non-parametric estimates
    JEL: J2 J7
    Date: 2018–06
  9. By: Michele Imbruno (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper empirically explores imports' adjustment to reductions in trade policy uncertainty (TPU) considering that firms may face large sunk costs to purchase foreign goods. We investigate how product-level Chinese imports react to tariff binding connected to China's accession to WTO, through distinguishing both country-related margins and firm-related margins. Our main results suggest that a decline in TPU allows the access to a greater variety of foreign goods, associated also with a higher quality. At the same time, tariff binding leads more Chinese producers and trade intermediaries to start importing, allowing more firms and consumers to enjoy potential gains from imports. Finally, we document heterogeneous TPU effects across firms with different ownership, and products with different end use, revealing interesting insights in a context of global value chains.
    Keywords: Trade policy uncertainty, Import behaviour, World Trade Organization, Tariff binding, China
    Date: 2018–06–26
  10. By: Żuk, Piotr; Savelin, Li
    Abstract: This paper analyses real income convergence in central, eastern and south-eastern Europe (CESEE) to the most advanced EU economies between 2000 and 2016. The relevance of this topic stems both from the far-reaching implications of real income convergence for economic welfare and the importance of convergence for economic and monetary integration with, and within the European Union. The paper establishes stylised facts of convergence, analyses the drivers of economic growth and identifies factors that might explain the differences between fast- and slow-converging economies in the region. The results show that the most successful CESEE economies in terms of the pace of convergence share common characteristics such as, inter alia, a strong improvement in institutional quality and human capital, more outward-oriented economic policies, favourable demographic developments and the quick reallocation of labour from agriculture into other sectors. Looking ahead, accelerating and sustaining convergence in the region will require further efforts to enhance institutional quality and innovation, reinvigorate investment, and address the adverse impact of population ageing. JEL Classification: E01, F15, O11, O43, O47, O52, O57
    Keywords: central, eastern and south-eastern Europe, economic growth, EU accession, middle-income trap, real convergence, Western Balkans
    Date: 2018–07
  11. By: YIN Ting; YIN Zhigang; ZHANG Junchao
    Abstract: This study estimates the causal effect of transportation subsidies or similar benefits on the health of elderly people. We exploit a discontinuity in the probability of receiving transportation benefits induced by an age-based policy to take into account the endogeneity of treatment status. Our baseline IV results indicate that receiving public transportation benefits significantly improves elderly people's health condition by approximately 10 percentage points. The results are robust under different specifications and placebo tests. Further tests on possible channels show that the health effect is driven by increasing food consumption and health care utilization, but not by the amount of exercise done.
    Date: 2018–06
  12. By: Harald Hau (University of Geneva, Swiss Finance Institute, Centre for Economic Policy Research (CEPR), and CESifo (Center for Economic Studies and Ifo Institute)); Difei Ouyang (University of Geneva)
    Abstract: In geographically segmented credit markets, local real estate booms can divert capital away from manufacturing firms, create capital scarcity, increase local real interest rates, lower real wages, and cause underinvestment and relative decline in the industrial sector. Using exogenous variation in the administrative land supply across 172 Chinese cities, we show that the predicted variation in real estate prices does indeed cause substantially higher capital costs for manufactoring firms, reduce their bank lending, lower their capital intensity and labor productivity, weaken firms’ financial performance, and reduce their TFP growth by economically significant magnitudes. This evidence highlights macroeconomic stability concerns associated with real estate booms.
    Keywords: Factor price externalities, reverse Balassa-Samuelson-effect, firm growth
    JEL: D22 D24 R31
    Date: 2018–05
  13. By: Wedemeier, Jan; Kruse, Mirko
    Abstract: The ongoing structural change towards the service and knowledge societies, innovations, and the increasing integration of markets will have considerable influence on the European Union, particularly on the Eastern members of EU. In March 2010, the European Commission released the Europe-2020 strategy, which shall push the EU to be the smartest and most competitive region in the world. Among the European Union members, the Baltic Sea countries are effective in bringing up innovative cluster solutions, cooperation between science and business. Innovations are crucial for further economic development and prosperity. However, the innovation headline indicators are ambitiously defined targets of the Europe-2020 strategy. The paper at hand analyses and highlights the innovation and creative capability within the Europe 2020 strategy framework.
    Keywords: innovation,Baltic Sea Region,Europe 2020,creative sector
    JEL: O3 R11 R12 Z1
    Date: 2018
  14. By: Marek Góra
    Abstract: The end of 2018 will mark the 20th anniversary of the introduction of Poland’s current pension system. It has been subjected to constant modifications, in general dictated by either ideological or ad hoc goals, but it has resisted destruction, and in essence is working as it was designed. The need for its introduction, misleadingly called a reform, was dictated by a long-term shift in the age structure of the population. In essence, the earlier system was replaced by the current one. The essence of this switch is a shift from the quasi-tax financing suited to the population structure by age of the past, to quasi-savings financing suited to the structure in the 21st century. This text is not an overview of the 20-year history of the current system; it is a critical examination of the functioning of Poland’s pension system against the backdrop of the universal challenges that pension systems are facing in the 21st century. The text barely touches on many fundamental questions. A full discussion of them would require a longer discourse, for which there is no space here.
    Keywords: pension systems, demographic transition, NDC/FDC, tax-financing, savings-financing, political economy, Polish pension system
    JEL: H55 J18
    Date: 2018–07–24
  15. By: Leight, Jessica (American University); Liu, Elaine M. (University of Houston)
    Abstract: The importance of non-cognitive skills in determining long-term human capital and labor market outcomes is widely acknowledged, but relatively little is known about how educational investments by parents may respond to children’s non-cognitive characteristics. This paper evaluates the parental response to non-cognitive variation across siblings in rural Gansu province, China, employing a household fixed effects specification; the non-cognitive measures of interest are defined as the inverse of both externalizing challenges (behavioral problems and aggression) and internalizing challenges (anxiety and withdrawal). The results suggest that there is significant heterogeneity with respect to maternal education. More educated mothers appear to compensate for differences between their children, investing more in a child who exhibits greater non-cognitive deficits, while less educated mothers reinforce these differences. Most importantly, there is evidence that these compensatory investments are associated with the narrowing of non-cognitive deficits over time for children of more educated mothers, while there is no comparable pattern in households with less educated mothers.
    Keywords: non-cognitive characteristics, parental investment, intrahousehold allocation
    JEL: I24 O15 D13
    Date: 2018–06
  16. By: Ivlevs, Artjoms (University of the West of England, Bristol); Hinks, Timothy (University of the West of England, Bristol)
    Abstract: We study the effect of former Communist party membership on paying bribes to public officials and motivations for bribery, 25 years after the fall of communist rule. Data come from a large representative survey, conducted in post-socialist countries in 2015/16. To deal with endogeneity, we instrument party membership with information on whether family members were affected by the Second World War. Instrumental variable results suggest that links to the former Communist party increase the likelihood of paying bribes today; this result applies to the former party members as well as their children and relatives. Among bribe payers, people with the party links are more likely to offer bribes as well as think that bribe payments are expected. Overall, our findings suggest that the proclivity to corruption of the former Communist party members has been transmitted through family and thus sustained over time, contributing to corruption decades after the demise of the Socialist bloc.
    Keywords: corruption, Communist party, political elite, post-socialist countries, path dependency
    JEL: D73 P37
    Date: 2018–06
  17. By: Li, Chunyun; Liu, Mingwei
    Abstract: In contrast to various structural accounts of collective inaction or short-lived contention of Chinese workers, the authors take an agency-centered approach to explain how the few sustained labor protests during closure bargaining develop against long odds. They suggest that workers’ capacity to resolve collective action problems is essential to understanding why a few contending workers are able to sustain protests whereas many others fail to do so. They argue that workplace representatives and external labor activists are crucial for helping Chinese workers resolve the collective action problems that prevent the formation of sustained labor protests. Their comparative analysis of four protests against Walmart store closures—including one unusually long, one relatively sustained, and two short-lived—shows how presence and strategic capacity of workplace representatives and external labor activists shape protest duration. The authors conclude by discussing lessons learned from these cases of closure bargaining for future development of labor contention in China.
    Keywords: workplace representatives; collective bargaining; labor NGOs; sustain protest; strategic capacity
    JEL: J50
    Date: 2018–06–18
  18. By: Gomes, Luiz
    Abstract: The objective of this work is to critically discuss the collapse of Real Socialism in Eastern Europe through a perspective that brings together external and internal causes. The method employed for this is historical prospecting based on data and literature on the subject. The results indicate that the economic, social, and political contradictions of Real Socialism were the main causes for the end of this social regime. To achieve its objective, this work is divided into sections, which are organized according to a chronological order.
    Keywords: Eastern Europe, Economic History, Reforms, Socialism, Stalinism.
    JEL: P2
    Date: 2018–06–29
  19. By: Shteryo Nozharov; Petya Koralova-Nozharova
    Abstract: The methods of new institutional economics for identifying the transaction costs of trade litigations in Bulgaria are used in the current paper. For the needs of the research, an indicative model, measuring this type of costs on microeconomic level, is applied in the study. The main purpose of the model is to forecast the rational behavior of trade litigation parties in accordance with the transaction costs in the process of enforcing the execution of the signed commercial contract. The application of the model is related to the more accurate measurement of the transaction costs on microeconomic level, which fact could lead to better prediction and management of these costs in order market efficiency and economic growth to be achieved. In addition, it is made an attempt to be analysed the efficiency of the institutional change of the commercial justice system and the impact of the reform of the judicial system over the economic turnover. The augmentation or lack of reduction of the transaction costs in trade litigations would mean inefficiency of the reform of the judicial system. JEL Codes: O43, P48, D23, K12
    Date: 2018–07
  20. By: Jean-Pierre Cling (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique); Mireille Razafindrakoto (LEDa - Université Paris Dauphine (Paris 9)); François Roubaud (LEDa - Université Paris Dauphine (Paris 9))
    Abstract: Labour market segmentation is usually defined as the division of the labour markets into separate submarkets or segments, distinguished by different characteristics and behavioural rules (incomes, contracts, etc.). The economic debate on the segmentation issue has been focusing in developed countries, and especially in Europe, on contractual segmentation and dualism. However, in developing countries such as Vietnam which is the focus of this study, wage work is marginal and the approach to labour market segmentation is necessarily slightly different. Indeed, most workers are engaged in the informal economy and many of them are self-employed in their own household business. Starting with an analysis of the main characteristics of the national labour market, this paper presents a survey of the literature on informality and labour market segmentation in Vietnam (section 2). Section 3 describes the institutional background related to firm registration and social protection in Vietnam, and analyses the reasons for informality in relationship with the institutional framework. Section 4 describes the reforms being put in place and employment strategies related to the informal economy. Policy recommendations are proposed in the last section.
    Abstract: La segmentation sur le marché du travail est usuellement définie comme la coexistence de deux segments ou secteurs qui se distinguent par leurs caractéristiques et les comportements qui y prévalent (niveau de revenus, contrats, etc.). Le débat économique sur la segmentation s'est focalisé dans les pays développés, et en particulier en Europe, sur le dualisme résultant des contrats. Cependant, dans les pays en développement comme le Vietnam, les emplois salariés étant marginaux, la segmentation sur le marché du travail doit nécessairement être appréhendée de manière différente. La majorité des emplois relève de l'économie informelle et une grande partie est constituée d'auto-emploi dans des entreprises individuelles. Partant d'une analyse des principales caractéristiques du marché du travail national, ce document présente ensuite une revue de la littérature sur l'informalité et la segmentation sur le marché du travail au Vietnam (section 2). La section 3 décrit le cadre institutionnel en matière d'enregistrement et de protection sociale au Vietnam, et analyse les raisons de l'informalité. La section 4 examine les réformes qui ont été mises en place et les stratégies en termes d'emploi touchant l'économie informelle. Enfin, des recommandations politiques sont proposées dans la dernière section.
    Keywords: segmentation,Labour market,Informality,Vietnam,Informel,marché du travail
    Date: 2017–12–01

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