nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒06‒17
29 papers chosen by
J. David Brown
United States Census Bureau

  1. Wealth inequality in Central and Eastern Europe: evidence from joined household survey and rich lists’ data By Michal Brzezinski; Katarzyna Sałach; Marcin Wroński
  2. Non-Performing Loans in Central and Southeast Europe By Alexandra Bykova; Olga Pindyuk
  3. Grouping of the EU candidate countries and eastern partnership countries according to the degree of self-sufficiency in basic food products By Jankowska, Anna
  4. Risk-taking channel – does it operate in the Polish banking sector? By Tomasz Chmielewski; Tomasz Łyziak; Ewa Stanisławska
  5. Material and import intensity in the agriculture of the European Union - input-output analysis By Baer-Nawrocka, Agnieszka; Mrówczyńska-Kamińska, Aldona
  6. Republic of Armenia; 2019 Article IV Consultation and Request for a Stand-By Arrangement-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Armenia By International Monetary Fund
  7. Foreign Investments Mostly Robust Despite Global Downturn; Shift into Services. FDI in Central, East and Southeast Europe By Amat Adarov; Mahdi Ghodsi; Gabor Hunya; Olga Pindyuk
  8. Reassessing the Role of State-Owned Enterprises in Central, Eastern and Southeastern Europe By Christine J. Richmond; Dora Benedek; Peter Dohlman; Francisco J Parodi; James Roaf; Rima Turk; Sebastian Weber
  9. Monthly Report No. 12/2018 By Amat Adarov; Mario Holzner; Olga Pindyuk; Goran Vuksic
  10. Technological eco-innovations related to resopportunities and bariers By Dybikowska, Adrianna; Graczyk, Magdalena
  11. Newspaper-based economic uncertainty indices for Poland By Marcin Hołda
  12. Target setting and Allocative Inefficiency in Lending: Evidence from Two Chinese Banks By Yiming Cao; Raymond Fisman; Hui Lin; Yongxiang Wang
  13. Differentiation of income distribution of farmers’ households in the Polish macro-regions By Jedrzejczak, Alina; Pekasiewicz, Dorota
  14. Efficiency of Polish agriculture between 1998 and 2015 By Józwiak, Wojciech
  15. Factors stimulating farmers in applying for the measure "setting up of young farmers" in the Wielkopolskie voivodeship" By Kiryluk-Dryjska, Ewa; Beba, Patrycja; Wojcieszak, Monika Małgorzata
  16. Will the Polish pension system go bankrupt? By Jakub Sawulski; Iga Magda; Piotr Lewandowski
  17. Factions, Local Accountability, and Long-Term Development: Theory and Evidence By Hanming Fang; Linke Hou; Mingxing Liu; Lixin Colin Xu; Pengfei Zhang
  18. Gender Pay Gap Patterns in Domestic and Foreign-Owned Firms By Iga Magda; Katarzyna Sa³ach
  19. Impact of social comparison on DSM in Poland By Bernadeta Gołębiowska; Anna Bartczak; Wiktor Budziński
  20. Russia’s macroeconomy—a closer look at growth, investment, and uncertainty By Becker, Torbjörn
  21. US-China Rivalry: The Macro Policy Choices By Rod Tyers; Yixiao Zhou
  22. China and the world trade organisation: towards a better fit By Petros C. Mavroidis; André Sapir
  23. Cyclical fluctuations in the production of Polish agriculture By Jędruchniewicz, Andrzej
  24. Preparing for the next MFF: Where did the money go in the past? By Daniel Gros; Roberto Musmeci
  25. The influence of loans agriculture on net profit of cooperative banks in Poland By Juszczyk, Sławomir
  26. Effects of R&D subsidies on regional economic dynamics: Evidence from Chinese provinces By Jonathan Eberle; Philipp Boeing
  27. China's Investment in ASEAN: Paradigm Shift or Hot Air? By Guanie Lim
  28. Bulgaria; Technical Assistance Report-Bank Supervision By International Monetary Fund
  29. Republic of Armenia; Fiscal Transparency Evaluation By International Monetary Fund

  1. By: Michal Brzezinski (Faculty of Economic Sciences, University of Warsaw); Katarzyna Sałach (Faculty of Economic Sciences, University of Warsaw); Marcin Wroński (Warsaw School of Economics)
    Abstract: We study how the problem of the ‘missing rich’, the underrepresentation of the wealthiest in household surveys, affects wealth inequality estimates for the post-socialist countries of Central and Eastern Europe (CEE). The survey data from the second wave of the Household Finance and Consumption Survey (HFCS) are joined with the data from the national rich lists for Estonia, Hungary, Latvia, Poland and Slovakia. Pareto distribution is fitted to the joined survey and rich lists’ data to impute the missing observations for the largest wealth values. We provide the first estimates of the top-corrected wealth inequality for the CEE region in 2013/2014. Despite a short period of wealth accumulation during the post-1989 market economy period, our adjustment procedure reveals that wealth inequality in the Baltic countries is comparable to that of Germany (one of the most wealth unequal countries in Europe), while in Poland and Hungary it has reached levels observed in France or Spain. We discuss possible explanations of these findings with reference to the speed and range of privatization processes, extent of income inequality, and the role of inheritances and wealth taxes in the region.
    Keywords: wealth inequality, missing rich, Pareto distribution, rich lists, Forbes, Household Finance and Consumption Survey, transition countries, Central and Eastern Europe
    JEL: D31 D63 C46 P36
    Date: 2019
  2. By: Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Exploring the determinants of credit risk has gained importance in the aftermath of the global financial crisis, which caused a sharp increase in non-performing loans (NPLs) in Central, East and Southeast Europe. In this note we first analyse the post-crisis trends in NPLs comparing five Southeast European countries with their peers in Central and Eastern Europe. Second, we estimate the effect of key macroeconomic drivers on NPL development in the region. We distinguish between total household loans, non-secured consumer loans, housing loans and loans to non-financial corporations, and investigate separately their corresponding determinants. On average across the five Southeast European countries examined (Bosnia and Herzegovina, Croatia, Montenegro, Serbia, and Slovenia), after the crisis asset quality of corporate loans deteriorated more strongly than that of household loans. We find that GDP growth has a negative and statistically significant impact on NPLs for all types of loans. However, the impact on corporate loan quality is much greater than for households, and in particular for consumer loans (housing loans’ NPLs show a stronger negative relationship with GDP growth). We therefore conclude that the consumer loan quality is less susceptible to the business cycle than either corporate or housing lending. One possible explanation for this is that the amounts involved are smaller, and can often be serviced in times of difficulty by friends or relatives. This probably included relatives living abroad, given that outward migration from the Western Balkans is so high, and remittances inflows so large. We find that various other macroeconomic indicators have an impact on asset quality. Rises in consumer and producer price inflation are associated with higher NPL ratios for all types of loans, but changes in real interest rates affect corporates more than households. This may be because corporates have a greater share of floating rate loans. Interestingly, higher unemployment also appears to affect corporate asset quality more strongly than that of households this may again be related to the possibility of friends or relatives helping out with loan repayments for smaller consumer loans. Finally, we also find that periods of elevated loan growth are followed eventually by higher NPL levels.
    Keywords: Southeast Europe, non-performing loans, credit cycle, financial crisis, unsecured household loans
    JEL: G01 G21
    Date: 2019–06
  3. By: Jankowska, Anna
    Abstract: The article compares the European Union (EU) candidate countries (CC) and the Eastern Partnership countries (EPC) in terms of their self-sufficiency in basic food products by analysing the average consumption of these products between 1992 and 2013. The countries were grouped according to their self-sufficiency ratios by Ward’s method of cluster analysis. Studies have shown that in the first group of countries in 1992-1999 and 2000-2013 there were primarily Albania, Armenia, Bosnia and Herzegovina, Georgia and Macedonia, and they had the lowest self-sufficiency ratios for most products compared to the second and the third group of countries. In both periods, in the second group there were Azerbaijan and Turkey, which have the highest self-sufficiency ratio for fruit, and in the third group there were mainly Belarus, Moldova, Serbia and Ukraine. These countries were characterised by surplus in the production of most foods. Research showed that in the second period under consideration, Montenegro moved to a group of countries with a lower level of self-sufficiency. Studies proved that during the period under investigation the increase in the self-sufficiency of these countries resulted from greater production, lesser loss during production and lower consumption of the products under analysis.
    Keywords: Agricultural and Food Policy, International Development, Research Methods/ Statistical Methods
    Date: 2018
  4. By: Tomasz Chmielewski (Narodowy Bank Polski); Tomasz Łyziak (Narodowy Bank Polski); Ewa Stanisławska (Narodowy Bank Polski)
    Abstract: The aim of this paper is to test whether the risk-taking channel of monetary policy transmission mechanism is active in Poland, an emerging market economy. Based on confidential bank-level data we construct novel measures of risk taken by banks. These measures do not require access to loan-level data, nor rely on data from surveys among credit officers. We find some evidence of the risk-taking behaviour of Polish banks, however, only in the segment of large loans to non-financial corporations we are able to conclude that increased risk of new loans represent supply-side phenomenon. We show that the loosening of monetary policy has different effects depending on the initial level of interest rates – the lower the interest rate is, the larger the increase in risk that is generated by the lowering of interest rate. This response is different across banks, with stronger reaction displayed by banks that are large, with low liquidity and with deposits being the most important funding source. Our results contribute to ongoing discussion on consequences of conducting monetary policy in the low interest rate environment as currently observed in many advanced and emerging economies.
    Keywords: risk-taking channel, monetary policy, low interest rates
    JEL: E44 E52 G21
    Date: 2019
  5. By: Baer-Nawrocka, Agnieszka; Mrówczyńska-Kamińska, Aldona
    Abstract: The main aim of the paper was to assess the measures of direct material and import intensity in the agriculture of the European Union countries. The analysis took place against the backdrop of the importance of agricultural sector in the national economies of the analyzed countries and the level of their development. The research materials covered the input-output tables for respective European Union countries for 1995, 2005, 2014. The analyses demonstrated that there was an increase in material intensity in all EU-15 countries and in Latvia, Lithuania and the Czech Republic. The remaining EU-13 countries noted a relative stability of the measure or its drop (Slovakia and Bulgaria). At the same time, changes in the structure of material supply were found in the new Member States, mainly due to the increase the role of agriculture-related services and the declining role of agriculture. The groups of these countries also differ in terms of import intensity measures of indirect consumption of agriculture. The conducted analysis allowed to check if well-known tendencies in agricultural economics are still valid, as well as to indicate new processes taking place in agriculture of the most developed EU countries.
    Keywords: Agribusiness, Agricultural Finance, International Development
    Date: 2019
  6. By: International Monetary Fund
    Abstract: Since the 2014–16 regional economic slowdown, economic activity has recovered, while policies have remained broadly in line with staff’s advice. Supported by the upgraded fiscal rule, fiscal consolidation remains on track, and public debt has started to decline. Inflation is under control, the financial system remains stable, and pressures on the exchange rate have been limited. Nonetheless, important challenges remain. Importantly, the still-weak business climate and corruption constrain the economy’s capacity to grow sufficiently rapidly to tangibly reduce poverty and unemployment. Moreover, the economy continues to be vulnerable to external shocks; public debt, while declining, is relatively elevated; and enhancing revenue mobilization remains a critical priority. Recognizing these challenges, the new government has pledged to revitalize efforts to fight corruption, improve competition, strengthen revenue administration, and build resilience to shocks. It has requested a new Fund-supported program to help achieve these objectives and move Armenia toward a more dynamic market economy.
    Date: 2019–06–05
  7. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Foreign direct investment (FDI) inflows to Central, East and Southeast Europe (CESEE) declined by 13% in 2018. The decline was almost exclusively on account of lower inflows into Russia, which halved compared with 2017. Inflows to the new EU Member States (EU-CEE11) were largely unchanged from the previous year, despite strong economic growth. By contrast, inflows into the Western Balkans rose by 28%, thanks in particular to rising investor interest in Serbia and North Macedonia. Turkey received a bit more FDI than in 2017, but the overall amount is still very low relative to the size of the economy. The decline in FDI to Russia in 2018 was particularly striking. Russia is becoming more and more inward looking, due to the exchange of sanctions with the West and (related) import-substitution economic policies. Efforts to stimulate the return of capital from abroad do not seem to be working FDI outflows were three times greater than inflows in 2018. Services accounted for the bulk of FDI in most countries in CESEE last year. In particular, producer-related business activities such as ICT, business process outsourcing and shared service centres expanded across the region. Services are not capital intensive, and thus are barely reflected in FDI data. However, the increasing share of services in announced greenfield FDI projects, and of commercial services in total exports, both point to a growing importance for foreign investors in these sectors. Germany and the US are the most important ultimate sources of FDI in CESEE. The share of Austrian outward FDI in CESEE is shrinking, at the expense of Asia and the US. Tax havens, the Netherlands, Cyprus and Luxembourg in particular are among the largest immediate investors but not among the important ultimate investing countries. Several trends shaping the future of FDI that are given special attention in this study. First, we find that the link between FDI inflows and GDP growth has become less strong since the crisis. Second, FDI inflows and participation in global value chains are strongly and positively correlated. Third, using a gravity model we highlight several CESEE countries attracting FDI at a level above their potential, particularly Montenegro and Bulgaria. By contrast, Belarus and Moldova could attract more FDI if business conditions improve. Finally, we note that business sentiment has a significant impact on greenfield investment decisions. Given that economic confidence across EU-CEE11 countries appears to be declining, we expect lower FDI inflows in 2019, which could lead to lower GDP growth. This is owing to faltering global and European economic activity, and restrictive policies in the US, Russia and China. Tax reform in the US will likely continue to have a particularly important negative impact on global FDI activity. The wiiw FDI Database is available online This online access with a modern query tool supports easy search and download of data. The wiiw FDI Database contains the full set of FDI data with time series starting form 1990 as far as available. Access to wiiw FDI Database
    Keywords: foreign direct investment, balance of payments, business sentiment, FDI by form, income repatriation, ultimate investing country, statistics, new EU Member States, Central Europe, Southeast Europe, Western Balkans, Austria, China, Turkey, CIS, Russia, Ukraine
    JEL: C82 F21 O57 P23
    Date: 2019–06
  8. By: Christine J. Richmond; Dora Benedek; Peter Dohlman; Francisco J Parodi; James Roaf; Rima Turk; Sebastian Weber
    Abstract: The Central, Eastern, and South Eastern European (CESEE) region is ripe for a reassessment of the role of the state in economic activity. The rapid income convergence with Western Europe of the early 2000s was not always equally shared across society, and it has now slowed dramatically in many countries of the region.
    Keywords: Business enterprises;Central and Eastern Europe;Public enterprises;
  9. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Goran Vuksic (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Graph of the month Openness of CESEE economies, 2017 Opinion corner What can be expected from the Strategy for the adoption of the euro in Croatia? by Goran Vukšić European financial markets ten years after the global crisis by Amat Adarov As of end-2018, while Europe is generally enjoying robust economic growth, the outlook is clouded with downside risks emanating from macroeconomic and political challenges. In some countries high non-performing loans remain an issue, while in others ample liquidity on account of years of ultra-easy monetary policy reinforced potentially unsustainable dynamics in certain asset markets. This highlights the need to accelerate reforms focusing on the resilience and sustainability of European financial market architecture – still largely dominated by banks – in line with the Banking Union and the Capital Markets Union initiatives. The process of financialisation in Central, East and Southeast Europe by Mario Holzner Financialisation has been particularly strong in the three small Baltic states, followed by countries from CEE and, at a certain distance, by economies of SEE and the CIS. This pattern can be observed in the deregulation indicator as well as in different indicators of foreign financial inflows. However, an important distinction can be made with regard to the structure of inward FDI stocks in the CESEE region. Deleveraging in CESEE continues by Olga Pindyuk The quantitative easing launched by the ECB was supposed to provide liquidity to the banking sector in order to make it easier and cheaper for banks to extend loans to companies and households. By now it has mostly failed to achieve this goal as foreign banks in CESEE have not restored their pre-crisis positions. Financial institutions in many countries of the region have carried on liquidity hoarding and restrained credit expansion, while both non-financial corporations and households have continued deleveraging despite low interest rates on loans. Monthly and quarterly statistics for Central, East and Southeast Europe
    Keywords: economic openness, euro adoption, Stability and Growth Pact, financial markets, non-performing loans, banking union, capital markets union, financial deregulation, capital inflows, asset prices, level of indebtedness, deleveraging, liquidity hoarding, saving ratio
    Date: 2018–12
  10. By: Dybikowska, Adrianna; Graczyk, Magdalena
    Abstract: Functioning of modern agriculture and farms is dominated by increasing demand for energy. Meeting this demand is, however, a strategic problem which affects energy, food and environmental safety as well as operating costs of commercial farms and rural households. This paper discusses the problems of implementation of eco-innovation on the example of renewable energy sources in the Polish farm sector. The paper analyses energy intensity and structure of energy consumption in the Polish agricultural sector. It discusses the structure of energy consumption, taking into account rural areas, in Poland and Europe as well as analyzes energy costs in various types of agricultural production. Moreover, the paper assesses the potential of renewable energy sources in the Polish agriculture and presents barriers connected to their use.
    Keywords: Agribusiness, Farm Management, Resource /Energy Economics and Policy
    Date: 2019
  11. By: Marcin Hołda (Narodowy Bank Polski)
    Abstract: Using text mining and web scraping techniques, we develop newspaper-based economic uncertainty measures for Poland. We build ‘general’ economic and economic-policy uncertainty indices, as well as category-specific ones designed to capture e.g. the economic uncertainty related to fiscal policy or to stockmarket movements. Several types of evidence suggest that these indices do proxy for changes in economic uncertainty in Poland. In particular, our measures spike around uncertainty-laden events or periods, such as the initial phase of Poland’s post-communist economic transition, the global financial crisis or the European debt crisis that followed. Our indices also exhibit correlation with a variety of other indicators of economic uncertainty, such as financial-market data and results of corporate surveys. The newspaper-based indices behave similarly to uncertainty indicators developed using other textual data and are strongly correlated with relevant economic uncertainty indicators developed by other researchers.
    Keywords: economic uncertainty, index, macroeconomic policy, text mining, web scraping
    JEL: C82 D80 E66
    Date: 2019
  12. By: Yiming Cao (Boston University); Raymond Fisman (Boston University and NBER); Hui Lin (Nanjing University); Yongxiang Wang (University of Southern California)
    Abstract: We study the consequences of month-end lending incentives for Chinese bank managers. Using data from two banks, one state-owned and the other partially privatized, we show a clear increase in lending in the final days of each month, resulting from both more loan issuance and higher value per loan. We estimate that daily lending is 92 percent higher in the last 5 days of each month as a result of loan targets, with only a small amount plausibly attributable to shifting loans forward from the following month. End-of-month loans are 1.6 percentage points (12 percent) more likely to be classified as bad in the years following issuance relative to mid-month loans. Our work highlights the distortionary effects of target-setting on capital allocation, in a context in which such concerns have risen to particular prominence in recent years.
    Keywords: Capital allocation; incentive design; Chinese banking
    JEL: G21 M52
    Date: 2018–10
  13. By: Jedrzejczak, Alina; Pekasiewicz, Dorota
    Abstract: Income distribution analysis can be conducted from the point of view of the comparisons between different geographical regions, family types or socio-economic groups it can also be carried out to assess the effects of an economic policy over time. The paper presents the results of a research on income distribution of Polish farmers which allowed us to formulate several conclusions concerning the differentiation of income inequality, poverty and wealth for the households of farmers in different macro-regions. The analysis uses the Gini inequality index and selected poverty and wealth indicators. The basis for the calculations was micro data coming from the Household Budget Survey conducted by the Central Statistical Office of Poland for 2015. The results of the research showed that the highest income inequality among the farmers’ households was observed in the northern region. Also this region was characterised by the highest percentage of households considered affluent. But the lowest Gini inequality coefficient was observed for the south-western region, where there were no farmers’ households exceeding the richness threshold.
    Keywords: Agribusiness, Consumer/Household Economics, Farm Management
    Date: 2018
  14. By: Józwiak, Wojciech
    Abstract: In several years leading up to and in the year of the accession, Polish agriculture has seen a rapid growth in the agricultural production efficiency, followed by its slow decline. The article identifies the reasons for this phenomenon. In the first of these subperiods, there was considerable economic freedom and an increase in support for farms, granted mainly by the domestic funds. In the years after 2004, the situation changed. The amounts of aid funds increased, so did the environmental and consumer health and animal welfare requirements to be met by farmers being beneficiaries of subsidies. In addition, larger farms also reduced their economic activity due to the degression in subsidy rates. It is also probable that some agricultural producers have been mainly focused on using subsidies and this phenomenon was accompanied by a decrease in interest in improving the agricultural production efficiency. Some arguments contained in the article were based on estimates. They are rationally substantiated, but according to the author, the article should be considered as preliminary analysis of the topic.
    Keywords: Agricultural and Food Policy, Agricultural Finance, International Development, Production Economics
    Date: 2018
  15. By: Kiryluk-Dryjska, Ewa; Beba, Patrycja; Wojcieszak, Monika Małgorzata
    Abstract: The aim of the study was to determine synthetic indicators of development of agriculture and rural areas diversifying farmers’ activity in applying for support under the measure “Setting up of young farmers” under the RDP 2007-2013 in gminas of Wielkopolskie Voivodeship. The research covered 207 rural and urban-rural gminas. The synthetic indicators characterising agriculture and rural areas were identified for each gmina. The presented research results show that the frequency of application for the EU funds under the analysed measure has higher values on areas dominated by intensive farming and favourable demographic structure. It is lower, though, for gminas with well-developed entrepreneurship and organic farming.
    Keywords: Community/Rural/Urban Development, Farm Management
    Date: 2018
  16. By: Jakub Sawulski; Iga Magda; Piotr Lewandowski
    Abstract: How will the rapid ageing of the population affect pension expenditure in Poland? Jakub Sawulski, Iga Magda and Piotr Lewandowski show that pension expenditure will remain at a level similar to now until 2060. The most important factor preventing an increase in pension expenditure will be a drop in the level of pension benefits. The average replacement rate (the ratio between a person’s first pension and their last salary) will fall by more than double in Poland, which will be the largest fall among all EU countries.
    Keywords: pension system, pensions, public finance
    JEL: H50 H55
    Date: 2019–05
  17. By: Hanming Fang (Department of Economics, University of Pennsylvania); Linke Hou (Shandong University); Mingxing Liu (Peking University); Lixin Colin Xu (World Bank); Pengfei Zhang (Peking University)
    Abstract: We develop a theoretical model of how factional affiliation and local accountability can shape the policy choices of local officials who are concerned about political survivals, and subsequently affect the long-term local development. We provide empirical evidence in support of the theoretical predictions using county-level variations in development performance in Fujian Province in China. When the Communist armies took over Fujian Province from the Nationalist control circa 1949, communist cadres from two different army factions were assigned as county leaders. For decades the Fujian Provincial Standing Committee of the Communist Party was dominated by members from one particular faction, which we refer to as the strong faction. Counties also differed in terms of whether a local guerrilla presence had existed prior to the Communist takeover. We argue that county leaders from the strong faction were less likely to pursue policies friendly to local development because their political survival more heavily relied on their loyalty to the provincial leader than on the grassroots support from local residents. By contrast, the political survival of county leaders from the weak faction largely depended on local grassroots support, which they could best secure if they focused on local development. In addition, a guerrilla presence in a county further improved development performance either by intensifying the local accountability of the county leader, or by better facilitating the provision of local public goods beneficial to development. We find consistent and robust evidence supporting these assumptions. Being affiliated with weak factions and having local accountability are both associated with sizable long-term benefits that are evident in terms of a county’s growth and level of private-sector development, its citizens’ education levels, and their survival rates during the Great Chinese Famine. We also find that being affiliated with the strong faction and adopting pro-local policies are associated with higher likelihood of a local leader’s political survival.
    Keywords: Local Accountability; Factional Politics; Political Survival; Development Performance; Famine
    JEL: O1 O43 H70 D72
    Date: 2019–05–29
  18. By: Iga Magda; Katarzyna Sa³ach
    Abstract: We investigate differences in gender wage gaps between foreign-owned and domestically-owned firms in Poland, a country that has experienced large FDI inflows over the past three decades. We show that according to standard estimates of adjusted gender wage gaps, these differences are much larger in the foreign-owned companies than in the domestic firms. However, we also find that these estimates cannot be trusted because the domestically-owned firms have considerably higher levels of gender segregation. Using a non parametric matching and decomposition technique (Nopo 2008) we find that gender wage gaps in domestically-owned firms are only slightly smaller than those in foreign-owned companies. Women tend to segregate into low-paid jobs in the domestic sector, whereas foreign-owned companies have much larger within-firm differences in earnings. In sum, we find that the nature of gender wage gaps and the factors that underlie them differ between domestic and foreign-owned companies.
    Keywords: gender wage gaps, domestic ownership, foreign ownership, FDI
    JEL: F23 J16 J31 J71
    Date: 2019–06
  19. By: Bernadeta Gołębiowska (Faculty of Economic Sciences, University of Warsaw); Anna Bartczak (Faculty of Economic Sciences, University of Warsaw); Wiktor Budziński (Faculty of Economic Sciences, University of Warsaw)
    Abstract: Poland’s energy strategy prioritizes long-term energy security, energy efficiency, reducing greenhouse gas emissions. The country’s progress toward sustainable development requires in-depth analyses of possible solutions. In our study we investigate consumers’ preferences for Demand Side Management programs for electricity usage in Poland. We apply a discrete Choice Experiment framework for various electricity contracts implying the external control of electricity usage. The main objective of the study is to investigate the value of potential disutility of Polish households from the energy management. Additionally, we elaborate on the effect of social comparison between households’ electricity use on the acceptance of new electricity contracts. The results suggest that people require substantial compensations to accept the external control of electricity in extreme cases and in weekdays during certain hours. Turning to the social comparison, we were expecting that people with a higher electricity usage per person in a household will require lower compensations, however we observe the opposite result. The respondents who were informed that they use more electricity than an average person in his administrative district seem to feel higher discomfort from the external electricity control. This suggest that the effect of social comparison might be overbalanced by the differences in perceived utility from electricity usage.
    Keywords: choice experiment; demand side management; electricity, social comparison, willingness to accept
    JEL: C25 D19 D91 Q41 Q48
    Date: 2019
  20. By: Becker, Torbjörn (Stockholm Institute of Transition Economics)
    Abstract: This paper looks at economic growth and its fundamental determinants in Russia over the last decades. It starts by showing that, contrary to the views of some political commentators, growth is highly important for the popularity of president Putin. Furthermore, regular models of growth are relevant to Russia and other transition countries over the last two decades and one important determinant of growth is investments in physical capital. This in turn is correlated with FDI, which is also key for Russia’s strategy to modernize and diversify its economy away from oil, gas and minerals extraction. However, FDI is negatively impacted by the policy uncertainty that Russia generates both by domestic and foreign policy. Reforming institutions on paper will not be enough to reverse the trend of declining FDI but has to be accompanied by a regime that refrains from policy actions at home and abroad that add to the significant macroeconomic volatility that is already created by large swings in international oil prices.
    Keywords: Russia; Putin; macroeconomics; growth; investments; FDI; volatility
    JEL: E60 F40 O52
    Date: 2019–06–14
  21. By: Rod Tyers (Business School, University of Western Australia and Research School of Economics, Centre for Applied Macroeconomic Analysis (CAMA), Australian National University); Yixiao Zhou (School of Economics and Finance, Curtin Business School, Curtin University)
    Abstract: Stylized representations of recent US and Chinese tax reforms, tariffs against imports and alternative Chinese monetary targeting are examined using a calibrated global macro model that embodies both trade and financial interdependencies. For both countries, unilateral capital tax relief and bilateral tariffs are shown to be “beggar thy neighbor” in consequence with tariffs most advantageous for the US if revenue finances consumption tax relief. China is nonetheless a net loser when these policies are implemented unilaterally by the US, irrespective of its policy response, though a currency float is shown to cushion the effects on its GDP in the short run. Equilibria in normal form non-cooperative tariff games exhibit spill-overs that are substantial but insufficient to deter dominant strategies. The US imposes tariffs while China liberalizes, sustaining fiscal balance via consumption tax relief in the US and expenditure restraint in China.
    Keywords: Trade policy, macroeconomic policy, general equilibrium analysis, numerical theory, China
    JEL: F13 F41 F47
    Date: 2019
  22. By: Petros C. Mavroidis; André Sapir
    Abstract: China’s accession to the World Trade Organisation in 2001 was hailed as the natural conclusion of a long march that started with the reforms of Deng Xiaoping in the 1970s. However, China’s participation in the WTO has been anything but smooth. Its self-proclaimed socialist market economy system has alienated its trading partners. Two diametrically opposite approaches have been proposed to deal with the emerging problems. One is to demand that China changes its economic regime. The other is to stay idle and accept that the WTO must accommodate different economic regimes, no matter how idiosyncratic. In this paper, we argue that there is a more promising third way. In our view, the problems posed by China arise from the fact that, while in the past the GATT/WTO had to address the accession of socialist countries or of big trading nations, it never had to deal with a big, socialist country like China. In order to retain its principles while accommodating China, the WTO needs to translate some of its implicit legal understanding into explicit treaty language. We advance specific proposals to this effect.
    Date: 2019–06
  23. By: Jędruchniewicz, Andrzej
    Abstract: The main objective of the study is the quantitative characteristics of the business cycle in agriculture in Poland in 1991-2016. The first part of the article is devoted to the theory of cyclical fluctuations in the agriculture. The second part includes an empirical analysis. The investigation of the agricultural business cycle is based on the year-to-year dynamics of the gross value added and final output. On the basis of the added value it was possible to identify four full cycles: (1) 1996-2000; (2) 2001-2006; (3) 2007-2012; (4) 2013-2015. Using the final output, it was considered that also in this case, four cycles can be determined: (1) up to 2000; (2) 2001-2006; (3) 2007-2010; (4) 2011-2015. The cycles’ duration was usually 3-6 years. However, the phases most frequently lasted from 2 to 4 years. On the basis of the analysis, it was also concluded that the amplitude of the entire cycle of gross value added as well as of its individual phases was always, in absolute terms, higher than the amplitude of the final production cycle and phases. The highest absolute amplitude was observed for the cycle of gross value added in 2013-2015.
    Keywords: Agricultural Finance, Farm Management
    Date: 2018
  24. By: Daniel Gros (Centre for European Policy Studies); Roberto Musmeci (Centre for European Policy Studies)
    Abstract: This paper presents the state of play of the preparations for the next Multiannual Financial Framework (MFF) of the EU for the period 2021-2027. It then turns to an analysis of the allocation of regional support funding over the last two MFFs, using a standard growth model to interpret the results. It finds that: First, the distribution of Cohesion spending across regions (as proportion of regional GDP) can be explained to a large extent by a few variables, namely income per capita, unemployment and the importance of agriculture. However, there are also important differences across different clusters of regions. Regions in Southern Europe received less funding than those in Central and Eastern Europe even accounting for differences in these determinants. Second, regions in Southern Europe have a relatively high capital/output ratio and thus a lower productivity of capital. Moreover, their investment rates do not seem to be affected by the Structural Funds they receive. These results suggest the need for a change in emphasis from infrastructure investment to measures that improve overall allocation of resources.
    Keywords: Fiscal transfers, Structural Funds, Cohesion Policy
    JEL: C53 H50 O11 R11
    Date: 2019
  25. By: Juszczyk, Sławomir
    Abstract: The aim of the research was to determine whether and to what extent loans for agriculture, i.e. loans for farms and preferential loans affected the level of net profit of cooperative banks in Poland in 2015-2017. The research determined, e.g. that loans for farms are important for generating net profit for small, medium and large cooperative banks. However, the values of the regression coefficient for this variable were relatively low with a slight increasing tendency. The variable defining preferential loans for agriculture appeared only in two models out of nine constructed and with a negative sign. This concerned small and medium-sized cooperative banks. For large cooperative banks, preferential loans for agriculture were not of key importance in generating net profit. Therefore, it can be indicated that preferential loans do not bring financial benefits for cooperative banks. However, cooperative banks support these loans due to their mission towards their members and the environment, related to the development of agriculture as well as rural areas. Regardless of this, it will be necessary to reconstruct the financial revenues of servicing preferential loans.
    Keywords: Agribusiness, Financial Economics
    Date: 2018
  26. By: Jonathan Eberle (Department of Economic Geography and Location Research, Philipps University Marburg); Philipp Boeing (ZEW - Leibniz Centre for European Economic Research, Mannheim and Peking University, China Center for Economic Research (CCER), Beijing)
    Abstract: We investigate the impact of research and development (R&D) subsidies on R&D inputs of large- and medium-sized firms and on additional innovation and economic activities in Chinese provinces. A panel vector autoregressive (VAR) model and corresponding impulse response function (IRF) analysis allow us to differentiate between direct and indirect effects, which add up to total effects. We find that an increase of R&D subsidies significantly decreases private R&D investments, although there is a significant positive effect on the R&D personnel employed in firms. We interpret these findings as a partial crowding-out effect because public funds substitute some private funds while total R&D inputs still increase. Complementarily, we find a positive secondary effect on the provincial patent activity, our measure of technological progress. Interestingly, we also find potentially unintended effects of R&D subsidies on increases in the investment rate in physical capital and residential buildings. Although R&D subsidies fail to incentivize private R&D expenditures, firms increase total R&D inputs, and provincial economies benefit from secondary effects on technological progress and capital deepening.
    Keywords: China, R&D subsidies, regional economic growth, panel VAR, impulse response functions
    JEL: C33 R11 R58 O38 O47
    Date: 2019–06
  27. By: Guanie Lim (Nanyang Centre for Public Administration, Nanyang Technological University, Singapore)
    Abstract: This paper focuses on China fs outward foreign direct investment (FDI), arguably one of the most prominent forms of enew f capital entering the Association of South East Asian Nations (ASEAN) in recent times, not least since the Belt and Road Initiative (BRI) was announced by Chinese President Xi Jinping in 2013. Despite initial warmth and hopes for Chinese capital to uplift the economies of the region, recent years have witnessed some high profile pushback against China by some ASEAN members. Key concerns include but are not limited to new, often project-related concerns as well as old, if unspoken, fears that eChina is buying the world f through a spate of edebt trap diplomacy f. This paper aims to shed light on this issue, focusing on China fs outward FDI into ASEAN. Through an analysis of statistical information, it shows that Chinese FDI in ASEAN economies is considerably esmaller f than what popular rhetoric suggests. Firstly, Chinese outward FDI, while increasing in value, is not more significant than the region fs traditional investors, mainly Japan and ASEAN itself. Secondly, the quality of Chinese outward FDI is considerably less sophisticated and sustainable than what is commonly expected. Much of it is directed towards tertiary industries such as real estate activities, which contain a rather speculative element.
    Date: 2019–06
  28. By: International Monetary Fund
    Abstract: This mission reviewed the formalization and implementation of a comprehensive SREP that includes an explicit and detailed supervisory Pillar 2 capital requirement. The BNB SREP is based on EU-wide common procedures, processes and methodologies, and the draft SREP Manual includes recently proposed changes to the Guidelines issued by the European Banking Authority (EBA). This report therefore focuses on its actual implementation into appropriate and proportionate supervisory assessments and into focused actions and planning. During the SREP process in 2016 and 2017, the BNB has not identified the need to impose additional capital requirements as per Pillar 2. This assessment has been communicated in all EU-colleges but has not for all banks been summarized in a standardized SREP framework.
    Date: 2019–05–21
  29. By: International Monetary Fund
    Abstract: Armenia’s fiscal transparency practices have benefitted from public financial management reforms over the last decade, and several planned reforms will bring further progress. Fiscal forecasts and budgets have become more forward looking and policy oriented, with the introduction of a medium-term expenditure framework (MTEF), improved fiscal objectives, and a performance budgeting system. Fiscal risk disclosure, though fragmented, has gradually improved, in particular, in macrofiscal risk assessment, and a PPP law is being drafted. The accrual accounting reform will significantly improve the coverage and quality of the budget execution reports and fiscal statistics that already provide timely and frequent information about the financial position of the government.
    Date: 2019–05–15

This nep-tra issue is ©2019 by J. David Brown. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.