nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒09‒09
twenty papers chosen by
J. David Brown
United States Census Bureau

  1. Patterns of Economic Growth in Dependent Market Economies: The Case of Central Eastern Europe By Krisztina Soreg
  2. China's Monetary Policy and the Loan Market: How Strong is the Credit Channel in China? By Max Breitenlechner; Riikka Nuutilainen
  3. The Relation between Minimum Wage and Unemployment across the Economic Cycle in Countries of the Visegrad Group By Bo?ena Kade?ábková; Emílie Ja?ová
  5. Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China By Plamen Nikolov; Alan Adelman
  6. Housing Prices, Inter-generational Co-residence, and “Excess” Savings by the Young: Evidence using Chinese Data By Mark Rosenzweig; Junsen Zhang
  7. The Effect of Financial Inclusion on Household Welfare in China By Mallick, Debdulal; Zhang, Quanda
  8. National institutional systems’ hybridisation through interdependence. The case of EU-Russia gas relations By Mehdi Abbas; Catherine Locatelli
  9. Factors determining enterprise location choice in Russia By Natalia Davidson; Oleg Mariev
  10. Do Pension Benefits Accelerate Cognitive Decline? Evidence from Rural China By Nikolov, Plamen; Adelman, Alan
  11. War and economy. Putin and Sun Tzu By Jacques Fontanel
  12. Problems of State Debt Management in Georgia By Lela Bakhtadze; Keti Tskhadadze
  13. Services Liberalization and Export Diversity: Theory and Evidence from Chinese Firms By Bai, Zhuoran; Meng, Shuang; Miao, Zhuang; Zhang, Yan
  14. Employee Turnover Impact on the Profitability of the Banks- The case of the Albanian Banking System By Irida Vejsiu
  15. Trade relations and Export Orientation Prospects of Georgian Economy on EU market By Lela Bakhtadze; Teimuraz Sartania
  16. From insurgency to movement: an embryonic counterhegemonic labor movement in South China By Li, Chunyun
  17. Social Confusion and Corruption: Investigating the Causes and Effects of a Breakdown of Ethics By Suzuki, Taku; Mizobata, Satoshi
  18. Global Value Chains and the Innovation of the Chinese Mobile Phone Industry By Yuqing Xing
  19. Geographic spread of currency trading: the renminbi and other EM currencies By Yin-Wong Cheun; Robert N McCauley
  20. Dollarization in Montenegro: evidence after two decades of experience By Maja Bacovic

  1. By: Krisztina Soreg (University of Sopron, Alexandre Lamfalussy Faculty of Economics)
    Abstract: The development pattern of certain Central Eastern European Countries has always represented a special case within Europe?s overall economic growth as well as social progress. Current paper examines the main growth tendencies of the so-called dependent market economies (DMEs) and also provides an extended definition for latter model. In frames of the comparative analysis, the research is based on investigating the relationship between the presence and activity of TNCs and MNCs through their FDI inflow contribution to the destination countries, the performance of the main investor economies and trading countries and also the GDP growth of the DMEs. According to the evidence, in certain countries ? e.g. Hungary ? a dual economic structure has emerged strongly relying on the multinational sector successfully being integrated into the world economy and a weak domestic sector that is in most cases, not capable of selling its goods and services in a global market. The lack of high value added production and the constant reliance on cheap labour force may further deepen the diverging tendency compared to the developed economies. Our main hypothesis assumes that integrated peripheries ? due to certain asymmetric interdependencies ? are not likely to produce significant long-term economic convergence to the centre economies with the current conditions of global capitalism and a strongly FDI based growth path they have developed.
    Keywords: dependent market economies, economic growth, development economics, Central Eastern European Countries, varieties of capitalism
    JEL: F10 O11 P12
    Date: 2019–07
  2. By: Max Breitenlechner (University of Innsbruck); Riikka Nuutilainen (Bank of Finland)
    Abstract: We study the credit channel of Chinese monetary policy in a structural vector autoregressive framework. Using combinations of zero and sign restrictions, we identify monetary policy shocks linked to supply and demand responses in the loan market. Our results show that policy shocks coinciding with loan supply effects account for roughly 10 percent of output dynamics after two years, while loan demand effects represent up to 7 percent of output dynamics depending on the policy measure. The credit channel thus constitutes an important and economically relevant transmission channel for monetary policy in China. Monetary policy in China also accounts for a relatively high share of business cycle dynamics.
    Keywords: China, Monetary Policy, Transmission Effects, Structural Vector Autoregression, Zero and Sign Restrictions
    JEL: C32 E44 E52
    Date: 2019–08–22
  3. By: Bo?ena Kade?ábková (University of economics in Prague); Emílie Ja?ová (Institute for Forcast)
    Abstract: The aim of the present article is to clarify existence and nature of the relation between minimum wage and selected unemployment indicators in countries of the Visegrad group, with the use of an empirical analysis. The obtained figures of correlation coefficients related to the Czech Republic, Hungary and Poland showed that the positive influence was predominant over the negative one, meaning rise of the minimum wage was followed by unemployment growth. In accordance with similar studies in the world we have proved that a contradictory effect of the relationship between minimum wage changes and selected unemployment indicators was also relevant for V4 countries.
    Keywords: Minimum wage, unemployment, unemployment rate, previous occupations of the unemployed, correlation coefficient
    JEL: E24 E32 E37
    Date: 2019–07
  4. By: Rogneda Groznykh (Ural Federal University); Igor Drapkin (Ural Federal University); Oleg Mariev (Ural Federal University)
    Abstract: The research is devoted to analysis of various regional factors that attract foreign direct investment. Taking into account that foreign direct investment can give a possibility to solve different social and economic problems, the main objective of the study is to reveal factors that promote foreign direct investment to regions of Russia. In the research two types of regions are considered: mining and non-mining. It is proposed that mining regions in Russia attract more foreign direct investment compared to non-mining ones. Therefore we provide econometric estimation on the database for 83 Russian regions for period from 2001 to 2017 using fixed-effects regression estimation. According to the results of the research a range of recommendations can be developed in order to enlarge foreign direct investment inflows.
    Keywords: foreign direct investment inflows, Russian regions, mining region, education, roads density, railway density
    JEL: F21
    Date: 2019–07
  5. By: Plamen Nikolov; Alan Adelman
    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, pensions, inter vivos transfers, middle-income countries, developing countries, China, crowd-out effect, aging
    JEL: D64 O15 O16 J14 J22 H55 R20
    Date: 2019–08
  6. By: Mark Rosenzweig; Junsen Zhang
    Abstract: In many countries of the world the co-residence of young adults aged 25-34 with their parents is not uncommon and in some countries the savings rates of these age groups exceed those of the middle-aged contrary to the standard model of life-cycle savings. In this paper we examine the role of housing prices in affecting the living arrangements of adult family members and their individual savings rates by age. Using unique data from China that enable the re-construction of whole families and identify individual savings regardless of who within the family co-resides in the same household, and exploiting the Chinese government rules determining the supply of land for residential housing, we find that increases in housing prices significantly increase inter-generational co-residence and elevate the savings rates of the young relative to the middle-aged, conditional on income, in part due to the subsidies to the young from sharing housing with parents. Based on our estimates of the effects of housing prices on co-residence and the effects of co-residence on individual savings, we find that the savings rates of the young in China would be 21% lower if housing prices were at the same ratio to disposable incomes as that observed in the United States.
    JEL: J12 R31
    Date: 2019–08
  7. By: Mallick, Debdulal; Zhang, Quanda
    Abstract: Financial inclusion is one of the key factors contributing to household welfare. We explore this effect in China utilizing a unique household survey panel data. Financial inclusion is measured by owning a transaction account at formal financial institutions. We employ an innovative method of heteroscedasticity-based identification recently developed by Klein and Vella (2009a; 2010) to identify the causal effect of financial inclusion. We find that welfare effects of financial inclusion varied across urban and rural areas and income groups. Financial inclusion significantly increased overall consumption, but the impact was greater among urban than rural households. The effect was stronger in the case of food consumption. Financial inclusion also decreased consumption inequality but only among urban households. The uneven effect of financial inclusion across level of urbanization and commodity types have important policy implications for promoting financial inclusion not only in China but also in other developing countries.
    Keywords: Financial inclusion; Consumption; Inequality; Welfare
    JEL: D12 D14 G21 I31
    Date: 2019–08
  8. By: Mehdi Abbas (Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Catherine Locatelli (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: The interdependencies between the EU and its external natural gas suppliers and Russia question the transformative impact of interdependence linked to hybridization processes. Our approach combines theories of institutional change, and French Regulation Theory. These approaches lead to a new look to characterize the way in which the confrontation of two regulatory systems (EU and Russia) is resolved today. The importance of the European market leads however to an adaptation of the Russian governance model for gas exchanges. But it also implies a transformation of the European model. The competitive norm acts as a lever to bring about hybridization of regulations in the Russian gas sector and EU energy policy.
    Keywords: Institutional hybridization,natural gas exchanges,relationship between EU and Russia,institutional change
    Date: 2019
  9. By: Natalia Davidson (Graduate School of Economics and Management, Ural Federal University); Oleg Mariev (Graduate School of Economics and Management, Ural Federal University)
    Abstract: This paper studies determinants of enterprise location decisions in Russia, such as agglomeration levels, home market potential, transport infrastructure and institutional environment. Results confirm that agglomeration levels and home market potential affect foreign firms? location choice and probability that national firms will work in a city. Urbanization economies and home market potential positively affect location choice; localization economies have an inverted U shape. Estimation shows that foreign enterprises are interested in large demand. Under assumption that there are more innovations in diversified cities and cities with favourable business climate, strategic asset seeking might be present. The study confirms negative impact of regional business environment risks on foreign firms? location choice. Results will be useful for regional policy aimed at business development and attracting foreign direct investment.
    Keywords: enterprise location choice, cities, agglomeration economies, home market potential, business environment, foreign direct investment, Russia
    JEL: O12 R12 F21
    Date: 2019–07
  10. By: Nikolov, Plamen (State University of New York); Adelman, Alan (State University of New York)
    Abstract: Higher life expectancy and rapidly aging populations have led to the introduction of pension programs in developing countries in the last two decades. Using the introduction of a new public policy in China, we estimate the effects of pension benefits on individual cognition, measured by episodic memory and intact mental status, among individuals ages 60 and above. We find large and significant negative effects of the provision of pension benefits on cognitive functioning among the elderly. We find the largest effect of the program on delayed recall, a measure implicated in neurobiological research as an important predictor of the onset of dementia. We show that the program leads to more negative impacts among the female sample. Our findings support the mental retirement hypothesis that decreased mental activity results in atrophy of cognitive skills. We show that retirement plays a significant role in explaining cognitive decline at older ages.
    Keywords: life-cycle, cognitive functioning, cognition, aging, health, mental retirement, middle-income countries, developing countries, China
    JEL: J14 H55 H75 J26 J24 D91 O12 N35 O10
    Date: 2019–08
  11. By: Jacques Fontanel (CESICE - Centre d'études sur la sécurité internationale et les coopérations européennes - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes)
    Abstract: The annexation of Crimea to Russia has been the subject of economic retaliation measures mainly by NATO members. Putin has used the lessons of Sun Tzu to achieve a result that, on the side of Russia, is globally positive; since the question of the return of Crimea to Ukraine is hardly mentioned anymore. In this context, we realize that Russia has suffered some negative effects on its growth, but it has considerably improved the conditions of its national security and its patrimony and heritage.
    Keywords: economic war,war,economic weapons,strategy
    Date: 2019–09–13
  12. By: Lela Bakhtadze (Ivane Javakhishvili Tbilisi State University); Keti Tskhadadze (Ivane Javakhishvili Tbilisi State University)
    Abstract: One of the topical problems of modernity is the investigation of the reasons, which had caused origin of the state debt, its assessment criteria and indicators. The article has investigated reasons causing both the permanent growth of domestic and external debts of developing and post socialist countries and their debt crisis. The article analyzes economic, social and political developments resulting the permanent growth of domestic and external debt in developing and post socialist countries.There are set out conclusions for regulation of financial, foreign exchange, foreign and trade relations. The article suggests concrete efforts aimed to overcome debt crisis. For this reason we suggest to use universal recognized methods and mechanisms, which will support to overcome the debt crisis.
    Keywords: State Domestic Debt, State External Debt, State Debt Management, Debt Crisis, Debt Burden.
    JEL: F34 H63 H79
    Date: 2019–07
  13. By: Bai, Zhuoran; Meng, Shuang; Miao, Zhuang; Zhang, Yan
    Abstract: During the last decades, we observe a liberalization trend in the services sector globally. Using the Chinese exporting firm data, this paper studies how multi-product firms adjust their export strategies in response to the services trade liberalization across export destination countries. Our study finds a highly significant positive relation between the services trade liberalization in the destination countries and each firm's export diversify, which is measured as the product scope, the Herfindahl-Hirschman style index, or the value skewness across varieties,export product switch. Our empirical analysis further finds that firms increase the relatedness of their exporting varieties towards the OECD countries, but reduce it towards the non-OECD countries. With a conventional multi-product firm model, we explore the mechanisms behind all our empirical findings.
    Keywords: Services trade Liberalization; Export Diversity; Chinese Data
    JEL: F13 F14
    Date: 2019–08–01
  14. By: Irida Vejsiu (Societe Generale Albania Bank)
    Abstract: This research study has been focused on the impact the employee turnover can have for the banks in Albania. High rates of the voluntary turnover among the banking employees can affect the business results. The negative impact might be higher when the turnover has been among the highly professional employees covering key areas of expertise. The research methodology used has been the case study. The data have been collected from statistical documents and archives and 75 % of the banks operating in the market have been included in the study. The study found an increasing trend in the employee turnover over the last three years for most of the banks, however when it comes to the profitability it has not been evidenced a clear trend for the banks, there is a lot of fluctuations on their net profit. Somehow due to this fluctuation the regression model built to test the connection among the turnover and banks profitability come out to have no statistical importance.
    Keywords: Employee?s turnover, Banking, Profitability, Albanian Banking System
    JEL: J63 J24 J30
    Date: 2019–07
  15. By: Lela Bakhtadze (Ivane Javakhishvili Tbilisi State University; Department of International Economics and Economic Teaching History); Teimuraz Sartania (Ivane Javakhishvili Tbilisi State University / PhD Student)
    Abstract: On the basis of country`s economic increase, analysis of employment and export potential, in the article, there are revealed the challenges of global economy and evaluated the competitiveness of economy of Georgia. There are studied the reasons causing negative balance of foreign trade. On the basis of generalization of increase theories oriented on the export, there are assessed the significance of offer the manufacture of new export products and service relating the export products and the intensity of their sell, extension of export geography and increase of export potential of the country. Besides, there is confirmed the state`s role in increase of production`s efficiency by rational distribution of resources. There are worked out the references regarding the acceleration and improvement of trade and economic relations between the Georgia and EU during the process of integration in EU.
    Keywords: trade relations, economic growth, export potential, competitiveness, export-oriented growth.
    JEL: F00
    Date: 2019–07
  16. By: Li, Chunyun
    Abstract: This paper provides a new analysis of Chinese labor politics. Most scholars suggest that there is no labor movement in China because Chinese labor protests are apolitical, cellular, and short-lived, and thus inconsistent with the properties of social movements identified in the political process model. In contrast, the author draws on Gramsci’s ideas regarding counterhegemonic movements and on ethnographic and archival research to demonstrate that the activities of movement-oriented labor NGOs (MLNGOs) coupled with associated labor protests since 2011 constituted the embryo of a counterhegemonic labor movement. MLNGOs have reworked the hegemonic labor law system to undermine the regime’s legal atomization of workers, nurtured worker leaders as organic intellectuals of migrant workers to temporarily substitute for impotent workplace unions, and developed alternative organizational networks of labor organizing that challenged monopolistic union bureaucracy. This incipient counterhegemonic movement persisted several years after state repression in late 2015 but was curtailed by another wave of repression in January 2019. The very severity of state repression suggests that a counterhegemonic movement has been formed.
    JEL: N0 R14 J01
    Date: 2019–08–27
  17. By: Suzuki, Taku; Mizobata, Satoshi
    Abstract: While studies of transitions to market economies have long focused on the issue of corruption, the perspectives from which their analyses have been based have diverged. Accordingly, this paper employs a systematic review through testing 14 hypotheses from the perspectives of political and economic causes, as well as culture and values, based on 558 works from the literature on the subject. Its findings make it clear that the liberalization and privatization of ownership both expand and contract corruption; the effects of culture and values also should not be overlooked, while mostly rejecting the so-called "greasing-the-wheels" hypothesis.
    Keywords: corruption, systems, economic growth, democracy, tradition, systematic review
    JEL: C00 O17 P24 P26
    Date: 2019–09
  18. By: Yuqing Xing (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: Global Value chains (GVC) provide a new channel of innovation for firms participating in value chains or utilizing the value chain strategy to grow. Upgrading to high value added segments of GVCs step by step is a linear model of innovation. Our analysis on the Chinese firms involved in the value chain of the iPhone shows that the Chinese mobile industry has climbed up ladders of the iPhone value chain and performed relatively sophisticated tasks beyond simple assembly. In addition, by examining foreign value added and technology embedded in the smartphones of OPPO, Xiaomi and Huawei, we argue the Chinese smartphone vendors primarily follow a non-linear model of innovation, jumping directly to brand development before acquiring sufficient technology capacity. They have been focusing on incremental innovations and product differentiation by taking advantage of available technology platforms. The value chain strategy enabled them to overcome technology deficiency effectively and opened a short-cut to catch-up foreign rivals and evolve into leading smartphone makers in both domestic and foreign markets.
    Date: 2019–08
  19. By: Yin-Wong Cheun; Robert N McCauley
    Abstract: This paper studies the ongoing diffusion of renminbi trading across the globe, the first such research of an international currency. It analyses the distribution in offshore renminbi trading in 2013 and 2016, using comprehensive data from the Triennial Central Bank Survey of Foreign Exchange and Over-the-Counter Derivatives Market Activity. In 2013, Asian centres favoured by the policy of renminbi internationalisation had big shares in global renminbi trading. In the following three years, renminbi trading seemed to converge to the spatial pattern of all currencies, with a half-life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other major emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall the renminbi's internationalisation is tracing an arc from the influence of administrative measures to the working of market forces.
    Keywords: international currency, FX turnover, renminbi internationalisation, international financial centre
    JEL: C24 F31 F33 G15 G18
    Date: 2019–08
  20. By: Maja Bacovic (University of Montenegro, Faculty of Economics)
    Abstract: Montenegro has started transition process from centrally planned to market oriented economy in late nineties of the XX century. Being still part of the Federal Republic of Yugoslavia, official currency was dinar in that period. Dinar, inherited currency from the Social Federal Republic of Yugoslavia, was not convertible currency (except for short period from 1990-1992), after which then actual monetary policy resulted in hyperinflation during 1992-1993. Afterword, although it was only legal tender until 1999, dinar was not used as currency in full capacity and in all transactions, but often replaced with Deutsche mark (DM), although unofficially. As result of such practice, in 1999, Montenegro introduced ?double currency? regime, officially allowing use of both, dinar and DM as legal tenders. In November 2000, dollarization regime has officially become implemented in Montenegro, introducing DM and later EURO (since January 2002) as only legal tender in Montenegro. Two decades later, we may summarize effects of such choice, and see whether decision to implement dollarization instead to issue national currency (perper was the one which was proposed) or remain using dinar was appropriate. We will make comparisons of selected indicators with Serbia, as it has decided to use dinar as national currency. Although there are many differences between Montenegrin and Serbian economy, both have many elements in common, which make reasonable to make comparisons. In addition, we did empirical analysis and analyzed economic performance of European countries that belongs to different monetary regimes, for period from 2000-2016.
    Keywords: Dollarization, EURO, National currency
    JEL: E50 E00
    Date: 2019–07

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