nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒04‒22
nineteen papers chosen by
J. David Brown
United States Census Bureau

  1. Evaluating the effectiveness of the rural minimum living standard guarantee (Dibao) programme in China By Nanak Kakwani; Shi Li; Xiaobing Wang; Mengbing Zhu
  2. The Effects of Foreign Direct Investment on Regional Innovation Capacity in China By Paul J.J. Welfens; Tian Xiong
  3. Модель реального обменного курса рубля с марковскими переключениями режимов By Polbin, Andrey; Shumilov, Andrei; Bedin, Andrey; Kulikov, Alexander
  4. Welfare effects of land market liberalization scenarios in Ukraine: Evidence-based economic perspective By Kvartiuk, Vasyl; Herzfeld, Thomas
  5. Chinese acquisitions abroad: are they different? By Clemens Fuest; Felix Hugger; Samina Sultan; Jing Xing
  6. Sustainability of agro-ecosystems in Bulgaria By Bachev, Hrabrin; Ivanov, Bodjidar; Toteva, Dessislava
  7. Growth and Inflation Regimes in Greater Tumen Initiative Area By Bataa, Erdenebat
  8. Russian Defense Innovation in the 2010s By Kashin, Vasily
  9. How China’s Defense Innovation System Is Advancing the Country’s Military Technological Rise By Cheung, Tai Ming
  11. The Curious Case of the Missing Defaults By Reinhart, Carmen
  12. Sustainability of agricultural sub-sectors in Bulgaria By Bachev, Hrabrin; Ivanov, Bodjidar; Toteva, Dessislava
  13. Drivers of farmers’ willingness to adopt extensive farming practices in a globally important bird area By Mikołaj Czajkowski; Katarzyna Zagórska; Natalia Letki; Piotr Tryjanowski; Adam Wąs
  14. Financial Constraints and Firm Tax Evasion By James Alm; Yongzheng Liu; Kewei Zhang
  15. Go east: On the impact of the Transiberian Railway on economic development in Eastern Russia By Seiffert, Sebastian
  16. A Forensic Examination of China's National Accounts By Wei Chen; Xilu Chen; Chang-Tai Hsieh; Zheng Song
  17. Boosting social entrepreneurship and social enterprise development in Lithuania: In depth-policy review By OECD
  18. Firm-level Investment Under Imperfect Capital Markets in Ukraine By Oleksandr Shcherbakov
  19. New Frontiers of Chinese Defense Innovation: Artificial Intelligence and Quantum Technologies By Kania, Elsa B.

  1. By: Nanak Kakwani; Shi Li; Xiaobing Wang; Mengbing Zhu
    Abstract: China’s rural minimum living standard guarantee programme (Dibao) is the largest social safety-net programme in the world. Given the scale and the popularity of rural Dibao, rigorous evaluation is needed to demonstrate the extent to which the programme meets its intended objective of reducing poverty. This paper develops new methods and uses data from the 2013 Chinese Household Income Project (CHIP2013) to examine the targeting performance of the rural Dibao programme. The paper has found that the rural Dibao programme suffers from very low targeting accuracy, high exclusion error, and inclusion error, and yields a significant negative social rate of return. It discusses possible causes and argues that the fundamental mechanism has to be redesigned to increase the effectiveness of the programme. The paper makes some recommendations to reform Dibao that will significantly improve targeting and reduce the cost of running the programme, thereby helping China to achieve its goal of eradicating extreme poverty by 2020.
    Date: 2018
  2. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Tian Xiong (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: Foreign direct investment (FDI) has been widely considered as an essential channel contributing to a host countries’ innovation development through knowledge and skill spillover effects. In recent years, China has become the second biggest FDI recipient in the world and continues to promote its domestic innovation ability. Here, the question of how FDI affect the growth of regional innovation in China is posed. By applying an alternative knowledge production function (KPF), we investigate the effects of FDI on the development of self-innovation capacities in 31 Chinese provinces using a fixed-effects specification panel data analysis covering the period from 2000 to 2015. Our findings on the contribution of FDI to the growth of different kinds of patent applications in different regions are mixed. Significant results were mainly found for invention patents in the eastern region. Concluding, we suggest potential policy implementations.
    Keywords: Regional Innovation Capacity, Patent, Foreign Direct Investment, China
    JEL: O33 O34 F21 R11
    Date: 2018–06
  3. By: Polbin, Andrey; Shumilov, Andrei; Bedin, Andrey; Kulikov, Alexander
    Abstract: In this paper we analyze the relationship between the real Russian ruble exchange rate and real oil prices using the error correction model with Markov regime switching, which allows for changes in exchange rate policy. We find that during the period 1999-2018 real exchange rate dynamics was characterized by two clearly distinguishable regimes, one with fast and the other with slow adjustment to long-term equilibrium in response to oil price shocks. Further model testing shows that long-term relationship between real exchange rate and oil price is invariant to regime change. We also find that, despite adoption of a floating exchange rate policy in 2014, inflexible real exchange rate regime has been periodically identified in recent years. This could be due to the new budget rule, according to which Russian Ministry of Finance in February 2017 started purchasing foreign currencies in amount of excess oil and gas earnings of the federal budget.
    Keywords: real effective exchange rate; Russia; oil prices; Markov regime switching model; error correction model
    JEL: C22 C51 E52 F31 F41
    Date: 2019
  4. By: Kvartiuk, Vasyl; Herzfeld, Thomas
    Abstract: [Introduction] When Ukraine adopted the 2002 Land Code, it chose to follow a liberal path of agricultural land relations, but failed to create the necessary conditions for the land market to function fully. The moratorium on land sales, implemented directly after the adoption of the Land Code, prohibited 6.92 million owners of land shares (16 % of the population) from fully exercising their property rights. Initially intended as a temporary measure, the moratorium has, to date, been extended eight times. As such, many landowners have passed away without ever being able to fully exercise their property rights. Economic losses caused by the prohibition of land sales are considerable. First, inability to transfer land from less to more efficient producers contributes to a situation where tenancy insecurity substantially reduces incentives to invest in technologies improving land use productivity. As a result, growth of the agricultural sector is substantially lower than it could have been with a free land market. Second, current management of land lease contracts incurs high transaction costs, which could be lowered if land users were able to buy plots. Third, one quarter of Ukrainian agricultural land is still owned by the government. Privatization of 10.5 million ha could generate substantial financial resources for newly reformed local governments. In addition, land sales market has a potential to expand respective tax base and improve the collection of land tax. Resources from privatization and improved tax revenues could substantially help restore the dilapidated rural infrastructure. In sum, due to gains in agricultural production and land privatization, Ukrainian experts estimate that liberalization could lead to a 3-9 % increase in the annual growth rate of the GDP.
    Date: 2019
  5. By: Clemens Fuest; Felix Hugger; Samina Sultan; Jing Xing
    Abstract: In recent years Chinese acquisitions abroad have increased significantly. This paper uses a large dataset on cross-border M&A deals to investigate whether Chinese foreign acquisitions differ from acquisitions coming from other countries. We find that Chinese acquirers buy targets with lower profitability, larger size, higher debt levels, and more patents. However, private and state-owned Chinese investors differ in preferences for location in offshore financial centers, industry diversification, natural resources and technology. Chinese state-owned acquirers are similar to government-led acquirers from other countries in pursuing target firms in the resource extraction industry. Policy initiatives like the Belt and Road Initiative and Made in China 2025 influence investment patterns of Chinese state-owned acquirers but not those of private investors. Surprisingly, for acquisition prices, we find that Chinese investors pay less for firms with similar observable characteristics than investors from other countries.
    Keywords: cross-border M&A, China, government acquirers
    JEL: G34 G38 F02
    Date: 2019
  6. By: Bachev, Hrabrin; Ivanov, Bodjidar; Toteva, Dessislava
    Abstract: Ecosystem approach has been increasingly incorporated in the management and evaluation of sustainability levels. Despite huge progress in the theory and practice of this new area, still there is no consensus on how to assess the sustainability of agro-ecosystems due to diverse understandings, approaches, methods, employed data, etc. In Bulgaria there are practically no deep studies on sustainability level of diverse agro-eco-systems. This paper tries to fill the blank and assesses the sustainability level of agro-ecosystems of different type in Bulgaria. First a holistic hierarchical framework for assessing integral, economic, social and ecological sustainability of agro-ecosystems in Bulgaria is suggested including 17 principles, 35 criteria, and 46 indicators and reference values. After that, an assessment is made on overall and aspects sustainability of large (agro)ecosystems in North-Central, South-Eastern, South-Central and South-Western geographic regions, and particular main and specific types of agro-ecosystems of the country - mountainous, plain-mountainous, plain, riparian (Struma, Maritza, Yantra), southern Black Sea, mountainous area with natural constraints, non-mountainous area with natural constraints, protected areas and reserves, Western Thracian Plain, Middle Danube Plain, Dupnitsa and Sandansko-Petrich Valley, Sredna Gora Mountains and Western Rila Mountains. The assessment is based on first-hand information collected though in-depth interviews with the managers of “typical” farms in the respective ago-ecosystems. The study has found out that there is a considerable differentiation in the level of integral sustainability in agricultural ecosystems of different types. Furthermore, there are substantial variations in the levels of economic, social and ecological sustainability of agro-ecosystems of different type, and the critical indicators enhancing or deterring overall and particular sustainability of individual agro-ecosystems. Results of the integral agrarian sustainability level of this study, based on the micro agro-ecosystem (farm) data, are similar to the previous assessment based on the aggregate sectoral (statistical, etc.) data. There are large differences in the impact of socio-economic, institutional, behavioral, international, natural, etc. factors and individual public policy instruments on the sustainability of farming enterprises of different types and agro-ecosystems. Having in mind the importance of holistic assessments of this kind for improving agrarian sustainability, farm management and agrarian policies, they are to be expended and their precision and representation increased.
    Keywords: agro-ecosystem, sustainability, assessment, economic, social, ecological, Bulgaria agro-ecosystem, sustainability, assessment, economic, social, ecological, Bulgaria
    JEL: Q1 Q12 Q15 Q18 Q2 Q3
    Date: 2019–04–15
  7. By: Bataa, Erdenebat
    Abstract: This paper tests for multiple structural breaks in the mean, seasonality, dynamics and conditional volatility of Greater Tumen Initiative Countries’ (GTI) growth and inflation, while also accounting for outliers. It finds a drop in the level of Chinese growth rate in the third quarter of 2011 and of inflation rate in 1998. There are more volatility regimes than the growth regimes and most GTI countries are currently enjoying historically low volatility of their growth and inflation. Two exceptions are the increased growth volatility for Japan since 2006 and inflation volatility for Russia since 2012. There is an increased importance of seasonality in GTI and especially in Chinese inflation volatility, constituting at least a half of the total volatility.
    Keywords: China slowdown, multiple structural breaks, seasonality, Greater Tumen Initiative, growth and volatility regimes, growth and inflation.
    JEL: C18 C22 E31 E32
    Date: 2019–04–16
  8. By: Kashin, Vasily
    Abstract: Innovation in the Russian defense industry has drawn significant international attention since Russian President Vladimir Putin’s state of the nation address of March 1, 2018. While the first part of the address covered the usual ground of planned economic policies, the second part was an extended presentation of Russian defense industry achievements. What Putin left outwas as important as what he highlighted, and provides a clear picture of Russia’s prioritization of radical over incremental innovation, sometimes to the detriment of current battlefield readiness. This research brief discusses Russia’s successes and failures in modernizing its weapons systems since 2000.
    Keywords: Social and Behavioral Sciences, Russia, defense innovation, Putin, radical innovation
    Date: 2018–05–30
  9. By: Cheung, Tai Ming
    Abstract: The preceding brief in the series provided an analytical framework for examining a country’s defense innovation system and the factors that shape innovation outcomes. This brief applies the framework to examine the factors at work in the Chinese defense innovation system. There are many reasons explaining the successful transformation of the Chinese defense innovation system from an ossified dinosaur in the 1990s to an increasingly credible military technological competitor on the global stage at the end of the 2010s. China’s approach to defense innovation has undergone considerable evolution since it launched a full-fledged modernization of its defense science, technology, and industrial (DSTI) system in the late 1990s. Some of these changes mirror what has taken place within the civilian sector, but there is also much that is different because of the specific dynamics of the defense arena.
    Keywords: Social and Behavioral Sciences, defense innovation, China, science and technology
    Date: 2018–05–30
  10. By: Dziewanowska , Katarzyna
    Abstract: Effective education at the tertiary level is one of the key conditions for the development of modern economies; it also has a substantial impact on social development. Nowadays, higher education institutions all over the world are facing numerous challenges, some of them global (e.g. funding), others local (e.g. demographic trends). Universities are seeking new ways of dealing with the challenges; however, they often resort to methods that seem to do more harm than good by moving the emphasis from long-term objectives to short-term ones. In marketing literature, a new concept of Service-Dominant Logic (SDL) is proposed as an alternative approach to traditional and outdated marketing theories applied to the higher education sector. Its foundational premise of value co-creation seems to be of particular relevance here as it assumes that various groups of actors jointly create the academic experience. This paper focuses on the higher education sector in Poland and investigates the attitudes of Polish students towards value co-creation and their consequences for the academic experience. The study leads to the identification of value co-creation styles among students reflected by five segments: Maximalists, Minimalists, the Scrupulous, the Networking-Oriented and the Intellectuals and presents their detailed characteristics.
    Keywords: Education, Value, Co-Creation, Higher Education, Poland, Students
    Date: 2018–08–14
  11. By: Reinhart, Carmen (Harvard Kennedy School)
    Abstract: In a recent paper on the long coincident behavior of international capital flows, commodity prices, and interest rates in global financial centers, Reinhart, Reinhart, and Trebesch (2016 and 2017) discovered the curious case of missing defaults. Despite the drying up of global capital flows and a sharp fall in commodity prices from 2012 to 2016, sovereign defaults in emerging market and developing economies did not spike higher as predicted by the record of the prior two hundred years. An important new dimension in the latest global capital flow cycle is the surge in Chinese loans to developing countries, notably low-income commodity producers since the early 2000s. A key driver of China's overseas lending boom is its significantly larger global footprint, which expanded at a record clip and helped stabilize global trade especially since the global financial crisis. Furthermore, Chinese official ambition to become a global power led to large official flows to support development projects and other purposes. The key question for policy makers and investors is whether these missing defaults are deferred or defused. There is also evidence to suggest that many developing borrowers are already encountering problems in servicing their recent debts to China (sovereign defaults are mismeasured). This analysis aims to shed light into what is currently one of the most opaque issues in global finance. For researchers a key question is whether this new source of support changes the empirical determinants of global capital flows.
    Date: 2019–01
  12. By: Bachev, Hrabrin; Ivanov, Bodjidar; Toteva, Dessislava
    Abstract: In Bulgaria, like in most countries, the comprehensive assessments on agrarian sustainability are mostly at sectoral or farm levels while there is practically no in-depth study on sustainability at sub-sector (industry) level. This paper tries to fill the gap and assess the sustainability of different sub-sectors in Bulgarian agriculture. First a holistic hierarchical framework for assessing integral, economic, social and ecological sustainability of Bulgarian agriculture is suggested including 17 principles, 35 criteria, and 46 indicators and reference values. After that, an assessment is made on the overall and aspects sustainability of major crop, livestock and mixed subsectors of Bulgarian agriculture. The assessment is based on first-hand information collected though in-depth interviews with the managers of “typical” farms in analysed industries. The study has found out that there is a considerable differentiation in the level of integral and aspects sustainability in individual sub-sectors in Bulgaria, with mixed livestock-breeding, mixed crop-growing, and perennial crops sub-sectors having the highest integral sustainability, while pigs, poultry and rabbits; vegetables, flowers and mushrooms, and mixed livestock-crops subsectors the lowest one. There are also substantial variations in the levels of economic, social and ecological sustainability of different agricultural sub-sectors and individual indicators with the highest and lowest values showing (critical) factors enhancing and deterring particular or overall sustainability of evaluated agro-industries. Results on the integral agrarian sustainability level of this study based on the micro sub-sector (farm) data are similar to the previous assessment based on the aggregate sectoral (statistical, etc.) data.
    Keywords: sub-sectors, agriculture, sustainability, economic, social, ecological, Bulgaria
    JEL: Q12 Q13 Q18 Q2 Q20
    Date: 2019–04–15
  13. By: Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Katarzyna Zagórska (Faculty of Economic Sciences, University of Warsaw); Natalia Letki (Faculty of Political Science and International Studies, University of Warsaw); Piotr Tryjanowski (Poznań University of Life Sciences, Institute of Zoology); Adam Wąs (Warsaw University of Life Sciences, Faculty of Economic Sciences)
    Abstract: Agri-environmental schemes have become an integral tool of land use management policies in ecologically valuable river valleys, that are commonly recognized as very important bird habitats. When high adoption of extensive agricultural practices is not only a political goal, but also a necessary condition for conservation of vulnerable ecosystems, understanding of farmers’ preferences is utterly important. Therefore, we use the case of Biebrza Marshes – a wetland complex and one of the largest wildlife refuges in Europe, which is located in northeastern Poland – and employ stated preference methods to investigate farmers’ preferences for adopting several agricultural practices, such as precision fertilization, crop diversification, catch crops, peatland protection, extensive use of meadows, and the reduction of livestock stocking density. Farmers’ willingness to participate in selected practices is explained using farms’ and farmers’ characteristics, subjectively and objectively measured farmers’ environmental knowledge, as well as by experimentally controlled information treatments about environmental benefits of agri-environmental contracts. The results provide new insights into the sources of farmers’ preference heterogeneity and show how different motivations relate to participation in agri-environmental schemes. Based on the results and consultations with local stakeholders, we make recommendations for a more efficient design and targeting of land use management instruments, including future agri-environmental schemes.
    Keywords: agri-environmental schemes, farmers’ preferences, choice experiments, agrobiodiversity protection, agri-environment, payments for ecosystem services
    JEL: Q18 Q12
    Date: 2019
  14. By: James Alm (Tulane University); Yongzheng Liu (Renmin University of China); Kewei Zhang (Renmin University of China)
    Abstract: Most analyses of tax evasion examine individual behavior, not firm behavior, given obvious and recognized data issues. We use data from the Business Environment and Enterprise Performance Survey to examine tax evasion at the firm level, focusing on a novel determinant of firm tax evasion: the financial constraints (or credit constraints) faced by the firm. Our empirical results indicate across a range of alternative specifications that more financially constrained firms are more likely to be involved in tax evasion activities, largely because evasion helps them deal with financing issues created by financial and credit constraints. We further show that the effects of financial constraints are heterogeneous across firm ownership, firm age, and firm size. Lastly, we present some suggestive evidence on the possible channels through which the impact of financial constraints on firm tax evasion may operate, including a reduction of information disclosure through the banking system, an increase in the use of cash for transactions, and an increase in bribe activities in exchange for tax evasion opportunities.
    Keywords: Tax evasion; financial constraints; firm-level data.
    JEL: E26 G2 H26
    Date: 2019–04
  15. By: Seiffert, Sebastian
    Abstract: This paper addresses the question whether or not large-scale infrastructure investments have a causal effect of local economic development. By using a novel instrumental variable approach based on historical trade and travel routes across the Russian East, I am able to identify a causal and negative effect of remoteness to the Transsiberian Railway on local economic activity as measured by nocturnal lights emission.
    Keywords: Transport Costs,Railway,Russia,Nightlights,Regional Economics,Development
    JEL: O11 O18 R11 R40
    Date: 2019
  16. By: Wei Chen; Xilu Chen; Chang-Tai Hsieh; Zheng Song
    Abstract: China’s national accounts are based on data collected by local governments. However, since local governments are rewarded for meeting growth and investment targets, they have an incentive to skew local statistics. China’s National Bureau of Statistics (NBS) adjusts the data provided by local governments to calculate GDP at the national level. The adjustments made by the NBS average 5% of GDP since the mid-2000s. On the production side, the discrepancy between local and aggregate GDP is entirely driven by the gap between local and national estimates of industrial output. On the expenditure side, the gap is in investment. Local statistics increasingly misrepresent the true numbers after 2008, but there was no corresponding change in the adjustment made by the NBS. Using publicly available data, we provide revised estimates of local and national GDP by re-estimating output of industrial, construction, wholesale and retail firms using data on value-added taxes. We also use several local economic indicators that are less likely to be manipulated by local governments to estimate local and aggregate GDP. The estimates also suggest that the adjustments by the NBS were insufficient after 2008. Relative to the official numbers, we estimate that GDP growth from 2010-2016 is 1.8 percentage points lower and the investment and savings rate in 2016 is 7 percentage points lower.
    JEL: E01
    Date: 2019–04
  17. By: OECD
    Abstract: This review provides an in-depth analysis of the Lithuanian policy ecosystem in place for social entrepreneurship and social enterprises. It identifies the country’s key strengths and challenges and provides policy recommendations to support the development of a stronger policy ecosystem for social entrepreneurship and social enterprises. Key policy issues analysed include: raising awareness and clarifying the conceptual framework (Chapter 2); coordinating policy and legal frameworks (Chapter 3); enhancing the role of social enterprises in public procurement (Chapter 4); promoting social impact measurement and reporting (Chapter 5); and improving their access to finance (Chapter 6).
    Keywords: local development, policy ecosystem, social economy, social enterprises, social entrepreneurship, social impact, social innovation
    JEL: L31 L33
    Date: 2019–04–18
  18. By: Oleksandr Shcherbakov
    Abstract: This paper develops and estimates a model of firm-level fixed capital investment when firms face borrowing constraints. Dynamically optimal investment functions are derived for the firms with and without financial constraints. These policy functions are then used to construct the likelihood of observing each of the investment regimes in the data. Structural parameters are estimated using data from the Ukrainian manufacturing sector in 1993–1998. I provide empirical evidence of the role of market and ownership structure for firm-level investment behavior. I also discuss the effects of international trade exposure and involvement in non-monetary transactions on the probability of facing financial constraints and the resulting fixed capital accumulation path. Estimation results are used to illustrate the welfare implications of financial constraints in the Ukrainian manufacturing sector.
    Keywords: Econometric and statistical methods; Economic models; Firm dynamics
    JEL: C61 C63 D24 G31
    Date: 2019
  19. By: Kania, Elsa B.
    Abstract: Will the Chinese military succeed in advancing new frontiers of defense innovation? China has already emerged as a powerhouse in artificial intelligence and quantum technologies. The continued advances in these dual-use technologies may be leveraged for military applications pursuant to a national strategy of military-civil fusion. At this point, the trajectory of technological developments is uncertain, and considerable challenges remain to the actualization of deeper fusion of China’s defense and commercial sectors. However, if successful, China’s ambitions to lead in these strategic technologies could enable it to pioneer new paradigms of military power.
    Keywords: Social and Behavioral Sciences, China, defense innovation, artificial intelligence, AI, quantum technology, dual use, military-civil fusion
    Date: 2018–05–30

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