nep-tra New Economics Papers
on Transition Economics
Issue of 2018‒08‒20
twenty-two papers chosen by
J. David Brown
United States Census Bureau

  1. The Value of Political Connections in the Post-Transition Period: Evidence from the Czech Republic By Miroslav Palansky
  2. Energy Price Reform in China By Zhang, ZhongXiang
  3. Life satisfaction and diet in transition: Evidence from the Russian Longitudinal Monitoring Survey By Sonya K Huffman, Iowa State University,; Marian Rizov, University of Lincoln,
  4. Getting Incentives Right: The economic and social determinants of migrants’ well-being during the global financial crisis By Alexander M. Danzer; Barbara Dietz
  5. Czech Republic; 2018 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for the Czech Republic By International Monetary Fund
  6. Republic of Moldova; Third Reviews under the Extended Credit Facility and Extended Fund Facility Arrangements and Request for Modification of Performance Criteria – Press Release; Staff Report; and Statement by the Executive Director for the Republic of Moldova By International Monetary Fund
  7. Air Pollution and Mental Health: Evidence from China By Shuai Chen; Paulina Oliva; Peng Zhang
  8. 16+1, a New Issue in China-EU Relations? By Iulia Monica, Oehler-Șincai
  9. How (Not) to Make Women Work? By Tyrowicz, Joanna; van der Velde, Lucas; Goraus-Tanska, Karolina
  10. Mongolia; Fourth Review under the Extended Fund Facility Arrangement and Request for Modification of Performance Criteria – Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Mongolia By International Monetary Fund
  11. Who remits and why? Evidence on internal migrant remittances from Vietnam and Thailand By Sharma, Rasadhika; Grote, Ulrike
  12. Methodological Issues of Assessing Investment Risks in Projects Weakening the Dependence of the Russian Economy on Natural Resources and Providing a Transition to Low-Carbon Development By Golub, Alexander (Голуб, Александр)
  13. The 2008–2017 Decade in the Russian Banking Sector: Trends and Factors By Alexey Simanovskiy; Alexander Morozov; Andrey Sinyakov; Alexey Porshakov; Maria Pomelnikova; Yulia Ushakova; Vladimir Markelov; Mikhail Bezdudniy
  14. Temporal and Spatial Dependence of Inter-Regional Risk Sharing: Evidence from Russia By Jarko Fidrmuc; Moritz Degler
  15. Republic of Lithuania; 2018 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for the Republic of Lithuania By International Monetary Fund
  16. The People's Republic of China; Financial Sector Assessment Program; Systemic Oversight of Financial Market Infrastructures - Technical Note By International Monetary Fund
  17. Productivity of Slovenian Firms By Polona Domadenik; Bojan Ivanc; Denis Marinšek
  18. Inequality in China – Trends, Drivers and Policy Remedies By Sonali Jain-Chandra; Niny Khor; Rui Mano; Johanna Schauer; Philippe Wingender; Juzhong Zhuang
  19. Contemporary Trends in the Development of Industry in the World and Serbia By Petrović, Dragan; Bukvić, Rajko
  20. Georgia; 2018 Article IV Consultation, Second Review under the Extended Fund Facility Arrangement, and Request for Modification of a Quantitative Performance Criterion – Press Releases; Staff Report; and Statement by the Executive Director for Georgia By International Monetary Fund
  21. The Morbidity Cost of Air Pollution: Evidence from Consumer Spending in China By Panle Jia Barwick; Shanjun Li; Deyu Rao; Nahim Bin Zahur
  22. The People's Republic of China; Financial Sector Assessment Program; Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)-Technical Note By International Monetary Fund

  1. By: Miroslav Palansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper analyzes a novel data set on all corporate political donations made in a post-transition country, the Czech Republic, between 1995 and 2014. Using these donations as a proxy for political connections, I assess the relationship between being connected to a political party and the financial performance of the connected firms. In line with the theoretical predictions, I find that firms successfully use political connections to gain advantage over their non-connected peers. The results show that connected firms perform significantly better in the years around the establishment of a connection, and that the effect is stronger for firms that work closely with the public sector. Furthermore, I present evidence that firms that donations seem to represent actual measures of the level of connectedness, and firms that have contributed more outperform other connected firms. I then develop a dynamic approach to match connected firms with their non-connected but otherwise similar peers and conservatively estimate that being politically connected is associated with 20 to 30 % higher profitability than that of non-connected firms. I also find that non-connected firms that receive public money perform similarly to connected firms, suggesting that other sources of connections, such as personal ties, have played a significant role during the post-transition period in the Czech Republic.
    Keywords: political connections, political donations, firm performance, rent-seeking
    JEL: D72 H7 D22
    Date: 2018–08
  2. By: Zhang, ZhongXiang
    Abstract: The Chinese leadership has determined to assign the market a decisive role in allocating resources. To have the market to play that role, getting the energy prices right is crucial because this sends clear signals to both producers and consumers of energy. While the overall trend of China’s energy pricing reform since 1984 has been moving away from the prices set by the central government in the centrally planned economy and towards a more market-oriented pricing mechanism, the pace and scale of the reform differ across energy types. This article discusses the evolution of price reforms for coal, petroleum products, natural gas, electricity and renewable power in China, and provides some analysis of these energy price reforms, in order to have the market to play a decisive role in allocating resources and help China’s transition to a low-carbon economy.
    Keywords: Resource /Energy Economics and Policy
    Date: 2018–06–07
  3. By: Sonya K Huffman, Iowa State University,; Marian Rizov, University of Lincoln,
    Abstract: This paper develops a theoretical framework and provides empirical evidence on the impacts of diet and lifestyles on life satisfaction in Russia using 1995-2005 data from the Russian Longitudinal Monitoring Survey. Our results suggest that diet measured as calories, fat, protein, and diversity of food consumption has a statistically significant effect on life satisfaction levels of the Russian population. In addition, living in a region with higher per capita income increases population’s life satisfaction. While living in a rural area, having health problems, and having young children affect individual life satisfaction in Russia in a negative and statistically significantly way. Life satisfaction is also positively correlated with education and income, and negatively with unemployment. Better understanding of the drivers of life satisfaction and more generally of subjective wellbeing in Russia can assist in the government decision-making processes, including the allocation of scarce resources and the design of public health policies.
    Keywords: Food Consumption/Nutrition/Food Safety, Health Economics and Policy, Institutional and Behavioral Economics
    Date: 2018–04–09
  4. By: Alexander M. Danzer (KU Eichstätt-Ingolstadt); Barbara Dietz
    Abstract: This paper investigates the economic and social determinants affecting the well-being of temporary migrants before, during and after the financial crisis. Exploiting unique panel data which cover migration spells from Tajikistan between 2001 and 2011, we find that migrants earn less but stay longer in the destination during the crisis; at the same time, they become more exposed to illegal work relations, harassment and deportation through the Russian authorities. Especially illegal employment has negative second order effects on wages. Despite the similarities in the demographics and jobs of migrant workers, we find substantial heterogeneity in how the financial crisis affects their well-being. Migrants who experience wage losses during the crisis rationally stop migrating.
    Keywords: Global financial crisis, migration, migrants’ well-being
    JEL: O15 F22
    Date: 2018–01
  5. By: International Monetary Fund
    Abstract: The economy has been doing very well, with high growth and the lowest unemployment rate in the EU. So far, there are no major macroeconomic imbalances: wages have been increasing rapidly, but inflation remains close to the target; credit growth is broadly in line with the growth of nominal GDP; the banking system is well capitalized and funded; fiscal policy has been conservative; and the economy runs a small surplus with the rest of the world. But the economy is already hitting the limits of supply, and the labor force is expected to continue to shrink while the population ages.
    Date: 2018–06–26
  6. By: International Monetary Fund
    Abstract: The economy strengthened in 2017. Higher-than-expected GDP growth was driven by strong domestic demand and a positive external environment. Inflation slowed, driven by regulated and food prices, prudent policies and exchange rate appreciation, to below the target of the National Bank of Moldova (NBM).
    Date: 2018–07–05
  7. By: Shuai Chen; Paulina Oliva; Peng Zhang
    Abstract: A large body of literature estimates the effect of air pollution on health. However, most of these studies have focused on physical health, while the effect on mental health is limited. Using the China Family Panel Studies (CFPS) covering 12,615 urban residents during 2014 – 2015, we find significantly positive effect of air pollution – instrumented by thermal inversions – on mental illness. Specifically, a one-standard-deviation (18.04 μg/m3) increase in average PM2.5 concentrations in the past month increases the probability of having a score that is associated with severe mental illness by 6.67 percentage points, or 0.33 standard deviations. Based on average health expenditures associated with mental illness and rates of treatment among those with symptoms, we calculate that these effects induce a total annual cost of USD 22.88 billion in health expenditures only. This cost is on a similar scale to pollution costs stemming from mortality, labor productivity, and dementia.
    JEL: I15 I18 O53 Q51 Q53
    Date: 2018–06
  8. By: Iulia Monica, Oehler-Șincai
    Abstract: The present paper investigates the positions of individual member states, European institutions and organizations towards the 16+1 cooperation framework. At the institutional level, the European Commission’s Joint communication on elements for a new EU strategy on China of June 2016, the reports and joint statements of the European Economic and Social Committee and China Economic and Social Council (May 2016 and June 2017) and European Parliament publications underline: the absence of a common EU-level strategy on recent large scale Chinese initiatives and some member states pursue individual economic interests, which do not correspond to those of the EU as a whole; 16+1 format as “controversial”, as its arrangements are “in conflict with the EU law” which leads to the “erosion of EU norms”; the necessity to “cooperate with the Commission, the EEAS and other Member States to help ensure that relevant aspects to the EU are in line with EU law, rules and policies, and that the overall outcome is beneficial for the EU as a whole”. We analyze the concerns and make specific proposals so that the 16+1 format might cease to be an issue in China-EU relations.
    Keywords: China, Central and Eastern Europe CEE, 16+1, European Commission, European Parliament, European External Action Service EEAS, China-Europe Land-Sea Express Passage.
    JEL: F00 F01 F02 F50 F53
    Date: 2018
  9. By: Tyrowicz, Joanna (University of Warsaw); van der Velde, Lucas (GRAPE); Goraus-Tanska, Karolina (University of Warsaw)
    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 ob-served 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
  10. By: International Monetary Fund
    Abstract: A three-year arrangement for Mongolia under the Extended Fund Facility (EFF) was approved on May 24, 2017, in an amount equivalent to SDR 314.5054 million (435 percent of quota, or about $425 million). The arrangement is part of a $5.5 billion multi-donor financing package that supports the authorities’ Economic Recovery Plan. The extended arrangement is subject to quarterly reviews.
    Date: 2018–07–05
  11. By: Sharma, Rasadhika; Grote, Ulrike
    Abstract: The paper analyses determinants and motivations of internal migrant remittances based on a unique data set that combines a household survey from three provinces in Vietnam and Thailand with a migrant tracing survey that was conducted in Ho Chi Minh City and the Greater Bangkok area. Using the Heckman model, we find that human capital, stronger family ties and better living conditions positively influence the migrant’s decision to remit. In terms of the amount remitted, migrants engaged in the service sector remit lower shares of their income and remittances decrease as the household wealth increases. Furthermore, we explore the behavioral side of remittances by constructing proxy groups that represent each strand of migrant’s motivation for remitting. We examine the relationship of these proxy groups and remittances to conclude that exchange or loan repayment motive underpinned by altruism is the strongest motivation in our case.
    Keywords: Remittances, Altruism, Self-interest, Heckman model, Thailand, Vietnam
    JEL: F24 J61 O53 D90
    Date: 2018–08
  12. By: Golub, Alexander (Голуб, Александр) (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The work analyzes the role of rental incomes in the Russian economy demonstrates the cointegration of GDP growth and oil prices in the previous 15 years. On the example of a comparative assessment of low-carbon and carbon-intensive technologies, the methodology for evaluating investment projects based on the application of the real options method is illustrated.
    Date: 2018–07
  13. By: Alexey Simanovskiy (Bank of Russia, Russian Federation); Alexander Morozov (Bank of Russia, Russian Federation); Andrey Sinyakov (Bank of Russia, Russian Federation); Alexey Porshakov (Bank of Russia, Russian Federation); Maria Pomelnikova (Bank of Russia, Russian Federation); Yulia Ushakova (Bank of Russia, Russian Federation); Vladimir Markelov (Bank of Russia, Russian Federation); Mikhail Bezdudniy (Bank of Russia, Russian Federation)
    Abstract: The report examines changes in the Russian banking sector over the period of 2008–2017 and the impact of these changes on the stability of banks and interbank competition. It identifies specific aspects of banks in different clusters and analyses the main business models. The report outlines challenges currently faced by the banking system.
    Keywords: bank assets and liabilities, bank business model, competition, efficiency, concentration, stability, captive credit institutions
    Date: 2018–06
  14. By: Jarko Fidrmuc (Zeppelin University Friedrichshafen); Moritz Degler
    Abstract: We present an analysis of interregional consumption risk sharing in Russia between 1999 and 2009 using novel estimation methods. In addition to standard fixed effects panel estimations, we use system and difference GMM estimators to reflect time dynamic properties and possible endogeneity between output and consumption. Furthermore, we apply spatial models that control for spatial dependence across regions. The results show that regional consumption deviations from the national average are highly persistent in time and space. Nevertheless, regional consumption risk sharing in Russia is relatively high with 70 to 90 per cent of idiosyncratic risk being smoothed. Finally, fiscal policy and the degree of financial development appear to contribute to the consumption smoothing.
    Keywords: Russia, financial development, risk sharing, spatial models, GMM
    JEL: E32 E21 R12 P25
    Date: 2018–07
  15. By: International Monetary Fund
    Abstract: Lithuania's economic performance has been impressive, but the country now risks falling into the middle-income trap. The economy is growing at a healthy pace, and external and internal imbalances have been corrected. Nevertheless, significant mediumterm challenges have yet to be addressed. These include tackling adverse demographics, transitioning from a low-wage to high-productivity growth model and addressing high income inequality. Addressing these challenges will require ambitious structural reforms.
    Keywords: Europe;Lithuania;
    Date: 2018–06–25
  16. By: International Monetary Fund
    Abstract: Financial Sector Assessment Program; Systemic Oversight of Financial Market Infrastructures - Technical Note
    Date: 2018–06–26
  17. By: Polona Domadenik; Bojan Ivanc; Denis Marinšek
    Abstract: We analyse productivity differences across non-financial Slovenian firms over the period 1994-2015. In particular, we investigate the impact of different factors (including size, ownership, investment activity and industry characteristics) on firms' total factor productivity (TFP), competitiveness and internationalisation. Large corporates appear to have the highest level of TFP, more than 50% above the average, and show stronger TFP growth. Exporting firms also show higher TFP growth than other firms, particularly after the recent crisis. Using a complete database of R&D subsidies over 1998-2015, the paper identifies R&Dintensive firms and investigates the impact of R&D investment on productivity and profitability. It is found that subsidies did not significantly increase firm-level productivity, once size, industry and year effects are taken into account. This could be because, during the recession (2009-2015), subsidies were granted to firms in difficulties.
    JEL: D22 D24 L25
    Date: 2018–03
  18. By: Sonali Jain-Chandra; Niny Khor; Rui Mano; Johanna Schauer; Philippe Wingender; Juzhong Zhuang
    Abstract: China has experienced rapid economic growth over the past two decades and is on the brink of eradicating poverty. However, income inequality increased sharply from the early 1980s and rendered China among the most unequal countries in the world. This trend has started to reverse as China has experienced a modest decline in inequality since 2008. This paper identifies various drivers behind these trends – including structural changes such as urbanization and aging and, more recently, policy initiatives to combat it. It finds that policies will need to play an important role in curbing inequality in the future, as projected structural trends will put further strain on equity considerations. In particular, fiscal policy reforms have the potential to enhance inclusiveness and equity, both on the tax and expenditure side.
    Keywords: Asia and Pacific;China;Fiscal policy;Income inequality;structural change, Personal Income and Wealth Distribution, General
    Date: 2018–06–05
  19. By: Petrović, Dragan; Bukvić, Rajko
    Abstract: The authors offer a view on the current state of industry and contemporary tendencies in its development in Serbia and the world. Particularly, this academic paper analyzes the state of Serbian industry, which collapsed at the beginning of the last decade of the 20th century, after having gone through three waves of industrialization. Serbian economy and industry have not recovered from deindustrialization even after two decades of unsteady development in the current century. Lastly, it presents some possibilities to revitalize the industry and achieve its harmonious development.
    Keywords: manufacturing, Serbia, transition, crisis, re-industrialization
    JEL: N60 N64 O14 O25 P27
    Date: 2018
  20. By: International Monetary Fund
    Abstract: Georgia continues to make progress in addressing macroeconomic imbalances, supported by its Extended Fund Facility (EFF) arrangement. Since the 2016 Article IV consultation, growth has picked up, the fiscal deficit has been contained, the banking sector has been stable, and the external position has strengthened. However, structural challenges hinder growth, calling for maintaining the reform momentum.
    Date: 2018–06–28
  21. By: Panle Jia Barwick; Shanjun Li; Deyu Rao; Nahim Bin Zahur
    Abstract: Developing and fast-growing economies have some of the worse air pollution in the world, but there is a lack of systematic evidence on the health especially morbidity impact of air pollution in these countries. Based on the universe of credit and debit card transactions in China from 2013 to 2015, this paper provides to our knowledge the first analysis of the morbidity cost of PM2.5 for the entire population of a developing country. To address potential endogeneity in pollution exposure, we construct an instrumental variable by modeling the spatial spillovers of PM2.5 due to long-range transport. We propose a flexible distributed-lag model that incorporates the IV approach to capture the dynamic response to past pollution exposure. Our analysis shows that PM2.5 has a significant impact on healthcare spending in both the short and medium terms that survives an array of robustness checks. The annual reduction in national healthcare spending from complying with the World Health Organization’s annual standard of 10 mg/m3 would amount to $42 billion, or nearly 7% of China’s total healthcare spending in 2015. In contrast to the common perception that the morbidity impact is modest relative to the mortality impact, our estimated morbidity cost of air pollution is about two-thirds of the mortality cost from the recent literature.
    JEL: I15 Q51 Q53
    Date: 2018–06
  22. By: International Monetary Fund
    Abstract: Financial Sector Assessment Program; Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)-Technical Note
    Date: 2018–06–26

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