nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒01‒14
ten papers chosen by
J. David Brown
United States Census Bureau

  1. Are Habits Important for the Propagation of Business Cycle Fluctuations in Bulgaria? By Aleksandar Vasilev
  2. Technological change and total factor productivity growth: evidence from China's telecommunications industry By Lin, Xuchen; Lu, Ting-Jie; Chen, Xia
  3. The Role of Public Pensions in Income Inequality among Elderly Households in China 1988–2013 By Li, Jinjing; Wang, Xinmei; Yuan, Chang; Xu, Jing
  4. Endowment Structure, Industry dynamics and Vertical Production Structure in China-Theory and Evidence By Jim H. Shen; Leilei Shen; Jun Zhang
  5. Does Trilemma Speak Chinese? By Georgios Magkonis; Simon Rudkin
  7. The mainstream economics interpretation of the local state and central-local relations in Post-Mao China: a critical review By Alexandre De Podest· Gomes
  8. A Progressive Consumption Tax - an Important Instrument for Stabilizing Business Cycles, or just an Exotic Idea? By Aleksandar Vasilev
  9. Slicing up inflation: analysis and forecasting of Lithuanian inflation components By Julius Stakenas
  10. Working Longer in China: Implicit Tax or Subsidy? By Xu, Jing; Wang, Xinmei

  1. By: Aleksandar Vasilev (Lincoln International Business School, UK)
    Abstract: We introduce internal consumption habits into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We investigate the quantitative importance of the presence of internal consumption habits motive for the propagation cyclical uctuations in Bulgaria. Allowing for habits in consumption improves the model performance against data, and in addition this extended setup dominates the standard RBC model framework without habits, e.g., Vasilev (2009).
    Keywords: Business fluctuations, consumption habits, Bulgaria
    JEL: E32 E22 E37
    Date: 2018–09
  2. By: Lin, Xuchen; Lu, Ting-Jie; Chen, Xia
    Abstract: The fast-growing telecommunications industry in China has been experiencing dramatic technological change and substantial productivity growth. The actual productivity growth pattern in the sector, however, need to be empirically examined. In this paper, using input and output data at the provincial level, we employ DEA-based Malmquist productivity index to estimate productivity change, technological change, and relative efficiency change in China's telecommunications industry for the period spanning the years from 2011 to 2015. The results show that based on our sample, the productivity improved by 22.9% per annum, which was exclusively due to an average of 25.5% technological progress in the industry production function, while the average efficiency change is slightly negative. Our results also indicate that regions with relatively low levels of telecommunications (and economic) development have a greater chance and ability of enhancing telecommunications productivity growth through technological catch-up. In addition, we find that the industry experienced significantly higher productivity growth and technological progress in the later sample period between 2013 and 2015 than in the early period between 2011 and 2013.
    Keywords: Telecommunications,Productivity,Technological change,Data envelopment analysis,Malmquist index
    Date: 2018
  3. By: Li, Jinjing; Wang, Xinmei; Yuan, Chang; Xu, Jing
    Abstract: Using data from the Chinese Household Income Project surveys for 1988, 1995, 2002 and 2013, we investigate the role of public pensions in income inequality among households with elderly members across two decades of pension policy reforms. We examine the distribution and role of public pensions at a national level. We analyse the evolution of the contribution of public pensions to national income inequality across a much more extended time period than earlier studies, which have generally focused on regional changes over short periods. Our findings suggest that public pensions have become the most important source of income for households with elderly members on average in China, but the distribution of pension income is highly unequal, with a Gini coefficient of 0.74 in 2013. Public pension income has been the largest source of income inequality for elderly households since 2002 and contributed to more than half of total income inequality in the most recent year of the survey. This finding is robust against variations in the income inequality measures used. Additionally, our analysis suggests unequal distribution of pension benefits is the primary driver of pensioners’ income inequality. Among several hypothetical policy changes, ensuring a minimum pension benefit for all existing pensioners seems to be the most fiscally effective option in reducing income inequality, with a 0.8% reduction in the Gini coefficient for a 1% increase in public pension expenditure.
    Keywords: income inequality, public pension, Gini decomposition
    JEL: H55 C53 C54
    Date: 2018–12
  4. By: Jim H. Shen; Leilei Shen; Jun Zhang (Department of Economics, SOAS University of London, UK)
    Abstract: This paper proposes a theoretical model and shows that the comparative advantage of China’s factor endowment allows firms specializing in the midstream stage to gain at least as much as firms that specialize in the two ends of the supply chain (capital-intensive stage and labour-intensive stage) in terms of labour productivity and profitability, if and only if they have at least as much viability and use intermediate level of capital intensity. The empirical results are consistent with the theory’s predictions. Our findings on China’s industry supply chain production patterns provide a new angle on the division of gains in the vertical production network driven by the endowment structure. This could have far-reaching implications for the industrial development of other middle-income countries.
    Keywords: Comparative Advantage, Factor Endowment Structure, labour-intensive, capital-intensive, industry chains, viability, labour productivity
    JEL: F12 F23 L14
    Date: 2018–12
  5. By: Georgios Magkonis (University of Portsmouth); Simon Rudkin (Swansea University)
    Abstract: Based on the limitations imposed by the trilemma, this paper examines the trade-offs faced by the Chinese economy. Taking into account the role of accumulation of foreign reserves we examine how binding the constraints are for the Chinese monetary authorities. Using a Panel VAR with dynamic and static interdependencies as well as cross-sectional heterogeneities, we examine the monetary spillovers from China to a series of Asian economies. In this way, we measure the degree to which the Chinese trilemma constraints are exported to other countries. Consistent with previous research, our empirical evidence suggests that China's trilemma configurations are unique as China manages to achieve exchange rate stability, along with moderate financial liberalization, without losing its monetary autonomy. Furthermore, there are no significant spillovers to regional economies. Overall, trilemma does speak Chinese, but only for a short period.
    Keywords: Trilemma, international reserves, Panel VAR
    JEL: F36 F41 O53
    Date: 2019–01–09
  6. By: Ekaterina Pyltsyna (National Research University Higher School of Economics)
    Abstract: This study investigated the change of government spending multiplier when switching from managed exchange rate regime to the floating exchange rate regime for emerging countries. It was found that on-impact multiplier in floating exchange rate regime is smaller by 0.5 than the one in the managed exchange rate regime. In addition, it was found that the openness of the economy affects values of government spending multipliers. Also, for the first time, micro-founded government spending multiplier was estimated for Russia. The study was conducted with the use of panel SVAR and DSGE models.
    Keywords: fiscal multiplier, government expenditures, exchange rate regime change, panel SVAR, DSGE, emerging countries, Russia.
    JEL: E62 E63
    Date: 2018
  7. By: Alexandre De Podest· Gomes (Department of Economics, SOAS University of London, UK)
    Abstract: Decentralization and the role of local governments have long been touted as key factors in the Chinese economic miracle. This paper intends to critically assess the chief theories advanced by mainstream economics in its attempt to make sense of these aspects of Chinaís growth story. Firstly the theoretical underpinnings of fiscal federalism, new institutional economics, and market-preserving federalism approaches will be presented, as these theories offer the bedrock for most of the applied insights in which China is framed through the lenses of the central-local relations debate. Secondly, the idea of ëmarket-preserving federalism, Chinese-styleí will be critically appraised, highlighting its shortcomings. Thirdly, the paper proceeds by bringing in the mainstream response to these problems, relying on the notion of political incentives and career concerns faced by local cadres. It will be argued that the continual adherence to some core tenets dear to the new institutional economics literature in all previous explanations prevents this broad camp of knowledge to properly grasp the complex dynamics of Chinaís decentralization drive and the role of local governments in the process. Finally, and in closing, an alternative approach will be offered.
    Keywords: Decentralization; Central-local relations; local state; federalism; political incentives; career concerns
    JEL: D72 H70 H77 O43 P26 P30 P48
    Date: 2018–11
  8. By: Aleksandar Vasilev (Lincoln International Business School, UK)
    Abstract: We introduce progressive consumption taxation into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We investigate the quantitative importance of the presence of of progressive taxation of consumption expenditures for the stabilization of cyclical uctuations in Bulgaria. We find the quantitative effect of such a tax to be very small, and thus not important for either business cycle stabilization, or public finance issues.
    Keywords: business cycles, progressive consumption taxation, Bulgaria
    JEL: E24 E32
    Date: 2018–12
  9. By: Julius Stakenas (Bank of Lithuania)
    Abstract: In this paper we model five Lithuanian HICP subcomponents in a medium scale Bayesian VAR framework. We deal with the parameter proliferation problem by setting the appropriate amount of shrinkage determined in the out-of-sample forecasting exercise. The main body of the paper consists of displaying the model’s performance in two applications: forecasting and analysis of inflation determinants. We find the model’s forecasts to be competitive against the univariate statistical models, particularly in the cases of predicting processed food and energy goods inflation. What is more, exercises based on conditional forecasting show that these two indices make the best use of accurate conditional information in terms of improving predicting accuracy. In the decomposition of the drivers of HICP components, we demonstrate that both, domestic and foreign factors can be prevalent inflation determinants in certain time periods. We also find some evidence on employees’ bargaining power playing a role in determining the Lithuanian consumer price inflation.
    Keywords: HICP subindices, Bayesian VAR, Bayesian shrinkage, inflation forecasting, structural decomposition
    JEL: C32 C53 E37
    Date: 2018–12–28
  10. By: Xu, Jing; Wang, Xinmei
    Abstract: Using the conventional concept of implicit tax, we investigate pension incentives to retire for private sector employees in China. The social security pension consists of pay-as-you-go defined benefit (DB) and defined contribution (DC) systems. Based on Chinese official parameters and the revised OECD models, our studies conclude that the DB system discourages people from working more, but the DC system offers considerably greater incentives at the expense of financial sustainability. If the annuity factors in the DC scheme were linked to the probability of retirees’ mortality, then both constant incentives to work longer and financial sustainability could be achieved.
    Keywords: implicit tax, incentives, pension wealth, social security pension, working longer
    JEL: C53 C54 H55
    Date: 2018–12

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