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on Transition Economics |
| By: | Roland, Gerard; Yang, David Y. |
| Abstract: | Beliefs about whether effort pays off govern some of the most fundamental choices individuals make. This paper uses China’s Cultural Revolution to understand how these beliefs can be affected, how they impact behavior, and how they are transmitted across generations. During the Cultural Revolution, China’s college admission system based on entrance exams was suspended for a decade until 1976, effectively depriving an entire generation of young people of the opportunity to access higher education (the “lost generation”). Using data from a nationally representative survey, we compare cohorts who graduated from high school just before and after the college entrance exam was resumed. We find that members of the “lost generation” who missed out on college because they were born just a year or two too early believe that effort pays off to a much lesser degree, even 40 years into their adulthood. However, they invested more in their children’s education, and transmitted less of their changed beliefs to the next generation, suggesting attempts to safeguard their children from sharing their misfortunes. |
| JEL: | Z1 I23 O53 P26 P48 |
| Date: | 2019–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:011&r=all |
| By: | Karas, Alexei; Pyle, William; Schoors, Koen |
| Abstract: | Using evidence from Russia, we explore the effect of the introduction of deposit insurance on bank risk. Drawing on within-bank variation in the ratio of firm deposits to total household and firm deposits, so as to capture the magnitude of the decrease in market discipline after the introduction of deposit insurance, we demonstrate for private, domestic banks that larger declines in market discipline generate larger increases in traditional measures of risk. These results hold in a difference-in-difference setting in which state and foreign-owned banks, whose deposit insurance regime does not change, serve as a control. |
| JEL: | E65 G21 G28 P34 |
| Date: | 2019–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2019_010&r=all |
| By: | Filipe R. Campante; Davin Chor; Bingjing Li |
| Abstract: | We study how adverse economic shocks influence political outcomes in authoritarian regimes in strong states, by examining the 2013-2015 export slowdown in China. We exploit detailed customs data and the variation they reveal about Chinese prefectures’ underlying exposure to the global trade slowdown, in order to implement a shift-share instrumental variables strategy. Prefectures that experienced a more severe export slowdown witnessed a significant increase in incidents of labor strikes. This was accompanied by a heightened emphasis in such prefectures on upholding domestic stability, as evidenced from: (i) textual analysis measures we constructed from official annual work reports using machine-learning algorithms; and (ii) data we gathered on local fiscal expenditures channelled towards public security uses and social spending. The central government was subsequently more likely to replace the party secretary in prefectures that saw a high level of “excess strikes”, above what could be predicted from the observed export slowdown, suggesting that local leaders were held to account on yardsticks related to political stability. |
| JEL: | D73 D74 F10 F14 F16 H10 J52 P26 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25925&r=all |
| By: | Maciej Ber\k{e}sewicz; Dagmara Nikulin |
| Abstract: | In this study we used company level administrative data from the National Labour Inspectorate and The Polish Social Insurance Institution in order to estimate the prevalence of informal employment in Poland. Since the selection mechanism is non-ignorable we employed a generalization of Heckman's sample selection model assuming non-Gaussian correlation of errors and clustering by incorporation of random effects. We found that 5.7% (4.6%, 7.1%; 95% CI) of registered enterprises in Poland, to some extent, take advantage of the informal labour force. Our study exemplifies a new approach to measuring informal employment, which can be implemented in other countries. It also contributes to the existing literature by providing, to the best of our knowledge, the first estimates of informal employment at the level of companies based solely on administrative data. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1906.10957&r=all |
| By: | Sophia Chen (International Monetary Fund); Lev Ratnovski (European Central Bank and International Monetary Fund); Pi-Han Tsai (Zhejiang University) |
| Abstract: | We estimate credit and fiscal multipliers in China, using subnational political cycles as a source of exogenous variation. The tenure of the provincial party secretary, interacted with the credit and fiscal expenditure used in other provinces, instruments for provincial credit and government expenditure growth. We find a fiscal multiplier of 0.75 in 2001-2008, which increased to 1.2 in 2010-2015, consistent with higher multipliers in a slower economy. At the same time, a credit multiplier of 0.2 in 2001-2008 declined to close to zero in 2010-2015, consistent with credit saturation and credit misallocation. Our results suggest that credit expansion cannot further support economic growth in China. The flip side is that lower credit growth is also unlikely to disrupt output growth. Fiscal policy is powerful, and can cushion the macroeconomic adjustment to lower credit intensity. |
| Keywords: | Credit Growth, Fiscal Stimulus, Macroprudential Policy, Multipliers, China |
| JEL: | E63 G21 H20 R12 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2019_005&r=all |
| By: | Kuznetsov, Aleksei (Eurasian Development Bank); Berdigulova, Aigul (Eurasian Development Bank) |
| Abstract: | For the second consecutive year, Armenia remains the fastest-growing EAEU economy. In 2018, it grew by 5.2% after 7.5% the year before. The main factors behind the slowdown in its economic activity were the more moderate growth of household consumption than in 2017 and a decline of consumption in the public sector. The EDB projects Armenian GDP growth to accelerate somewhat in 2019, assisted by increasing investment activity as the extraction industry gradually adapts to the new requirements, a recovery in agricultural output, and Government policy that supports investment, exports, and improving social conditions. In the medium term, GDP will trend towards its potential rate, that we estimate at some 5% per annum. During 2018, inflation remained below the 4% CBRA target; in December 2018 it was 1.8% YoY. The main factor behind inflation trends in 2018 was food price volatility after a lower harvest. According to our estimates, inflation will accelerate to 2.8% in 2019, driven by increasing domestic demand as wages and lending grow. By the end of 2021 inflation will approach the CBRA target (4%). Given the economic background, the CBRA did not change its refinancing rate (6%) in 2018 and thus maintained a stimulative monetary policy. Interest rates on loans and deposits decreased during the year. According to our base scenario projection, as inflation gradually accelerates and approaches the CBRA target level, the CBRA will begin a series of rate rises that we expect to have a neutral impact on economic growth and inflation. In 2018, amid economic activity growth, the government pursued a tight fiscal policy to maintain debt and fiscal sustainability. In the medium term, the focus of fiscal policy will remain the same. |
| Keywords: | macroeconomy; forecasting; Eurasia; EAEU countries; economic growth; monetary policy |
| JEL: | E17 E52 E66 O11 |
| Date: | 2019–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eabrwp:2019_002&r=all |
| By: | International Monetary Fund |
| Abstract: | • China has undertaken a number of initiatives since 2002 that have contributed positively to its understanding of ML/TF risk, although some important gaps remain. Its framework for domestic AML/CFT cooperation and coordination is well established. • China’s decentralized financial intelligence unit (FIU) arrangement consisting of China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC), Anti-Money Laundering Bureau (AMLB), and 36 People’s Bank of China (PBC) provincial branches has high potential to produce financial intelligence that supports the operational needs of competent authorities, but its current functioning results in incomplete access by all parts of the FIU to all data, fragmented analysis and disseminations, and limits the development of a holistic view. Therefore, major improvements are needed. |
| Date: | 2019–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/173&r=all |
| By: | Nikolov, Plamen; Adelman, Alan |
| Abstract: | Aging populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects, as adult children who make income contributions to their parents could adjust their behavior in response to changes in their parents’ income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of adult children to transfer income to elderly parents in the context of a large middle-income country, and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both middle- and high-income countries. |
| Keywords: | life cycle,retirement,pension,inter vivos transfers,middle-income countries,developing countries,China,crowd-out effect,aging |
| JEL: | D64 O15 O16 J14 J22 H55 R2 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:357&r=all |
| By: | ZHANG Geng; ZHANG Yingqin |
| Abstract: | It is a great interest of scholars and corporate managers that how to establish overseas subsidiaries and adopt an optimal organizational structure when a multinational company is in the process of internationalization. As a representative emerging market country, Chinese multinational corporations have their own specific characteristics in the management of overseas subsidiaries. This paper analyzes the impact of the international organization structure of Chinese multinational corporations on business performance. It defines the international organization structure of multinational corporations, analyzes the characteristics of different international organization structures. And it selects the data of the top 200 listed companies in China ranked by overseas income for empirical analysis. It is found that if the organizational structure of Chinese multinational corporations is more centralized, the performance of parent company's business performance will be better. And the accumulation of parent company's international experience will promote the impact of “centralized” organizational structure on performance. In the further research, it is found that technology-oriented internationalization and government holding are main reasons for the differences in the performance between Chinese multinationals and developed countries’ multinationals. So, Chinese enterprises could consider adopting a “centralized” organizational structure to managing overseas subsidiaries and continuously enrich their international experience for management. |
| Keywords: | Organizational structure; Overseas subsidiaries; Operating performance; International experience. |
| Date: | 2019–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002443&r=all |
| By: | Kuznetsov, Aleksei (Eurasian Development Bank); Berdigulova, Aigul (Eurasian Development Bank) |
| Abstract: | In 2018, Kazakh GDP grew by 4.1%, supported by increased oil production and a favorable price situation in the world energy market. Revival of credit activity fostered expansion in consumer and investment demand. Separate sectors’ contribution to overall economic growth changed during the year. In the 1st half of 2018, the GDP increase was driven by high rates of growth in oil production and the manufacturing sectors. In the 2nd half of 2018, industry reduced its contribution to GDP growth while trade turnover and construction activity growth accelerated. Inflation was 5.3% YoY in 2018, within the National Bank’s target range (5–7%). The decrease in motor fuel prices after the upgrade of major oil refineries was completed, as well as the reduction in electricity and heat tariffs for households, did much to slow down inflation. As inflation slowed in 2018, the National Bank reduced its base interest rate repeatedly, to reach 9.25% at the end of the year (compared to 10.25% a year before). The Kazakh tenge exchange rate vs. the U.S. dollar and euro decreased in 2018. Trends in the Kazakh currency were in line with those of developing economies’ currencies, i. e. a weakening as the U. S. Federal Reserve System increased its rate and the world’s economic and political risks overall grew. Kazakhstan’s consolidated budget posted a surplus in 2018, the first time since 2015. The factors behind the budget improvement included the State’s increasing incomes amid a relatively favorable external environment and economic growth, as well as decreased public spending on reviving the banking system compared to 2017. In 2019, we expect economic growth to slow down to 3.3% as oil production declines due to planned oilfield repair works. Next year, we forecast GDP growth at 3.5%. Inflation in 2019–2021 is projected to be within the National Bank’s target range (4–6%) and to gradually approach its lower limit by the end of the projection period, as the interest rate on interbank loans in tenge is kept near its neutral level, which we estimate at 7.5–8%. |
| Keywords: | macroeconomy; forecasting; Eurasia; EAEU countries; economic growth; monetary policy |
| JEL: | E17 E52 E66 O11 |
| Date: | 2019–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eabrwp:2019_004&r=all |
| By: | Deng, Kent; Shen, Jim Huangnan |
| Abstract: | This paper provides a full picture of how Maoist economy actually performed. We argue that Mao’s China neither undertook a structural change towards industrialisation nor generated a sustainable growth from 1949 to 1978.2 With fatal shortcomings of a planned economic system imported from the Soviet Union – the ‘principle-agent’ problem and information asymmetry for the bureaucracy, and disincentives for producers – China’s economy remained not only deliberately unbalanced but also predominantly rural until the 1980s. More importantly, the Maoist economy was not designed to enrich and empower the masses in society. Instead, all key consumer goods including food, clothing and housing were strictly rationed. The material life of ordinary citizens in China saw no improvement. This paper aims to reveal the harsh reality of the Maoist economy with solid evidence and theoretical explanation. |
| Keywords: | Maoist economy; structural change; disincentives; information asymmetry; price distortion; material life |
| JEL: | N00 N55 O40 O53 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101127&r=all |
| By: | Kuznetsov, Aleksei (Eurasian Development Bank); Berdigulova, Aigul (Eurasian Development Bank) |
| Abstract: | In 2018, the EDB member countries faced a number of challenges to regional macroeconomic stability. The main risks resulted from the global economic slowdown, growing protectionist trends in world trade and increased volatility in developing markets. Higher geopolitical tensions also had an impact on the regional macroeconomic situation. Despite the growing external challenges, the macroeconomic situation remained stable in the region, with most EDB countries’ fiscal policies aimed at achieving more sustainable economic growth and a balanced monetary policy. The favorable oil price during most of 2018 was another factor behind the improvement in the region’s economy. All the EDB member countries recorded positive growth rates in 2018, which we estimate at 2.0% overall. Inflation reached a record low and will stay within the central banks’ target ranges for 2018. The EDB member countries’ mutual trade grew by 12.5% versus January to September 2017. The 2017 and 2018 economic growth in the region was significantly assisted by eased monetary policies. Yet the recovery cycle is ending, while the inflationary risks are high. These factors combine to limit monetary policy’s ability to continue stimulating the economy. With the external risks mounting, it is increasingly important to find new sources of sustainable growth, in particular, by means of reforms intended to raise the economies’ efficiency and improve the investment climate. In the special report the team of authors gives recommendations concerning economic policy measures that might help overcome an economy’s structural and institutional limitations, taking Armenia as an example. Analysis of the structural gaps existing in Armenia allows us to identify the areas of reform that are being successful – as well as those which are lagging. In 2018, some member-states’ authorities initiated structural reforms. The Government of the Russian Federation announced a package of structural changes intended to stimulate sustainable growth of investment activity and pursue long-term social objectives. In Kazakhstan, presidential initiatives announced in the spring and fall of 2018 are largely intended to enhance the population’s welfare by improving the business environment and developing human capital. Such reforms may help improve the quality of Kazakhstan’s economic growth in the long run by making it more sustainable and based on an inclusive model of economic development. |
| Keywords: | macroeconomy; forecasting; Eurasia; EAEU countries; economic growth; monetary policy |
| JEL: | E17 E52 E66 O11 |
| Date: | 2018–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eabrwp:2018_004&r=all |
| By: | Maria Laura Alzua; Soyolmaa Batbekh; Altantsetseg Batchuluun; Bayarmaa Dalkhjav; Jose Galdo |
| Abstract: | Because of its high incidence and potential threat to social cohesion, youth unemployment is a global concern. This study uses a randomized controlled trial to analyze the effectiveness of a demand-driven vocational training program for disadvantaged youth in Mongolia. Mongolia, a transitional country whose economic structure shifted from a communist, centrally planned economy to a free-market economy over a relatively short period, offers a new setting in which to test the effectiveness of standard active labor market policies. This study reports positive and statistically significant short-term effects of vocational training on monthly earnings, skills matching, and self-employment. Substantial heterogeneity emerges as relatively older, richer, and better-educated individuals drive these positive effects. A second intervention that randomly assigns participants to receive repetitive weekly newsletters with information on market returns to vocational training shows positive impacts on the length of exposure to and successful completion of the program. These positive effects, however, are only observed at the intensive margin and do not lead to higher employment or earnings outcomes. |
| Keywords: | vocational training programs, labor market, randomized controlled trial, employment, earnings, job quality |
| JEL: | J18 J08 J24 J38 C93 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:piercr:2019-11&r=all |
| By: | Vipul Bhatt; Mouhua Liao; Min Qiang Zhao |
| Abstract: | This paper examines the role played by government policy regarding factors of pro- duction in shaping the dynamics of a growing economy. Using land as an example of an important productive factor, we develop a quantitative model with endogenous land price policy regimes to rationalize the following three economic reforms in China: introduction of non-SOEs (state-owned enterprises); reform of SOEs characterized by their retreat from the competitive manufacturing sector and the establishment of state monopolies in factor markets around 2000; and a regime switch from dual-track land pricing to land price discrimination by use. We calibrate our model to key economic indicators for China and quantify the e ects of these reforms. Our calibrated mo- del can match several stylized facts for China after 2000 such as widening disparity in land prices by use, rapid growth in housing price, land revenue, and government expenditures on public goods, and the steep decline in labor share for income. |
| Keywords: | Dual-track Pricing, Land Price Discrimination, State Monopoly, Land Market Reforms. |
| JEL: | Q15 R38 H71 E25 O18 |
| Date: | 2019–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:wyi:wpaper:002433&r=all |
| By: | Yin-Wong Cheung (City University of Hong Kong); Sven Steinkamp (Osnabrueck University); Frank Westermann (Osnabrueck University) |
| Abstract: | We analyze current account imbalances through the lens of the two largest surplus countries; China and Germany. We observe two striking patterns visible since the 2007/8 Global Financial Crisis. First, while China has been gradually reducing its current account surplus, Germany’s surplus has continued to increase throughout and after the crisis. Second, for these two countries, there is a remarkable reversal in the patterns of exchange rate misalignment: China’s currency has turned from being undervalued to overvalued, Germany’s currency has erased its level of overvaluation and become undervalued. Our empirical analyses show that the current account balances of these two countries are quite well explained by currency misalignment, common economic factors, and country-specific factors. Furthermore, we highlight the global financial crisis effects and, for Germany, the importance of differentiating balances against euro and non-euro countries. |
| Keywords: | Currency Misalignment, Current Account Surplus, Global Imbalances, Global Financial Crisis |
| JEL: | F15 F31 F32 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2019_010&r=all |
| By: | International Monetary Fund |
| Abstract: | Recent economic developments. Economic performance remained robust in 2018: growth reached 4.7 percent, supported by external demand; inflation stayed below the three percent target, the fiscal deficit remained in line with program commitments, and the current account improved. Tighter lending standards helped decelerate credit growth towards more sustainable levels. The banking sector remains well capitalized, liquid, and profitable. Dollarization remains elevated. In early 2019, growth conditions were favorable, with average inflation slightly above the target reflecting increased excises. |
| Date: | 2019–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/171&r=all |
| By: | Artur Kovalchuk (Kyiv School of Economics); Charles Kenny (Center for Global Development); Mallika Snyder (Center for Global Development) |
| Abstract: | This paper examines the impact of Ukraine’s ambitious procurement reform on outcomes amongst a set of procurements that used competitive tendering. The ProZorro system placed all of the country’s government procurement online, introduced an auction approach as the default procurement method, and extended transparency. The reform was introduced with a dramatic increase in the proportion of government procurement that was conducted competitively. This paper examines the impact of ProZorro and reform on contracts that were procured competitively both prior to and after the introduction of the new system. It finds some evidence of impact of the new system on increasing the number of bidders, cost savings, and reduced contracting times. |
| Keywords: | E-procurement, Transparency, Competition |
| JEL: | H57 D73 |
| Date: | 2019–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:511&r=all |