nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒12‒09
twelve papers chosen by
J. David Brown
United States Census Bureau

  1. Who patents, how much is real invention and how relevant? A snapshot of firms and their inventions based on the 2016 SIPO China Patent Survey By Margit Molnar; Hui Xu
  2. Reevaluating Distributional Consequences of the Transition to Market Economy in Poland: New Results from Combined Household Survey and Tax Return Data By Brzeziński, Michał; Myck, Michal; Najsztub, Mateusz
  3. Globalization and state capitalism: assessing Vietnam's accession to the WTO By Baccini, Leonardo; Impullitti, Giammario; Malesky, Edmund J.
  4. Anti-Corruption Reforms and Microfinancing: Evidence from Households' Fintech Borrowing By Zhang, Yifei
  5. Estimation of Price and Income Elasticity of Residential Water Demand in the Czech Republic over Three Decades By Milan Ščasný; Šarlota Smutná
  6. Minimum Wage Increase and Firm Profitability: Evidence from Poland By Mykola Babiak; Olena Chorna
  7. Renewable Energy Financial Modelling: A China Case Study By Karel Janda; Binyi Zhang
  8. The Czech Exchange Rate Floor: Depreciation without Inflation? By Jaromír Baxa; Tomáš Šestořád
  9. Estimating Energy Price Elasticities When Salience is High: Residential Natural Gas Demand in Ukraine By Anna Alberini; Olha Khymych; Milan Scasny
  10. Czech BEERs with PEERs: Tackling the Uncertainty By Jaromir Baxa; Pavel Jancovic
  11. Sectoral Impacts of International Labour Migration and Population Ageing in the Czech Republic By Martin Stepanek
  12. The Effect of Higher Capital Requirements on Bank Lending: The Capital Surplus Matters By Dominika Kolcunová; Simona Malovaná

  1. By: Margit Molnar; Hui Xu
    Abstract: China has surpassed the United States in patent applications and has become world leader. Strong patenting activity, however, did not lead to strong productivity growth. The delinking of patenting activity from productivity growth could be explained by quality and relevance issues. Although the number of patents has been soaring, few are genuine inventions. Relatively low utilisation rates of patents point to a low degree of relevance. This paper uses a representative survey of Chinese patenting firms to provide a detailed picture of the patenting landscape along the dimensions of geographical areas, detailed industrial sectors, traditional and modern industries as defined by the Chinese government, firm age, size and ownership. It also overviews government subsidies across firms. Transport equipment makers hold most patents per firm, followed by electronics manufacturers. State-owned firms spend more on R&D per patent, but hold fewer patents per researcher than private or foreign-invested firms. High patenting performance and government support are not necessarily linked to high utilisation of patents. Smaller, younger and private firms expect a higher return on their patents and so do exterior design patent holders. Furthermore, the paper examines what drives patenting activity. Higher R&D spending by the firm and higher share of researchers in its workforce tend to be associated with higher patents per employee. Smaller and older firms tend to patent more, and government support also appears to matter. Exterior design patents are associated with different firm characteristics: R&D intensity is lower and government support matters less. Most firms consider IPR protection insufficient and the share of firms having experienced patent infringement is the greatest among the largest firms. Many of them do not do anything once their rights are infringed as they do not expect effective remedy. Instead of patenting, which may not provide sufficient protection from imitators, they adopt other strategies like reaping the first mover advantage to market their goods or sign confidentiality agreements with their staff or contracts on commercial secrets. This Working Paper relates to the 2019 Economic Survey of China ( mic-snapshot/).
    Keywords: Chinese patenting, firm-level analysis, government subsidies, invention patents, IPR
    JEL: O31 O34 O38
    Date: 2019–12–10
  2. By: Brzeziński, Michał (University of Warsaw); Myck, Michal (Centre for Economic Analysis, CenEA); Najsztub, Mateusz (Centre for Economic Analysis, CenEA)
    Abstract: We use Pareto imputation, survey reweighting, and microsimulation methods applied to combined household survey and tax return data to reevaluate distributional consequences of the post-socialist transition in Poland. Our approach results in the first estimates of top-corrected inequality trends for real equivalized disposable incomes over the years 1994-2015. We find that the top-corrected Gini coefficient grew by 14-26% more compared to the unadjusted survey-based estimates. This implies that over the last three decades Poland has become one of the most unequal European countries among those for which top-corrected inequality estimates exist. The highest-income earners benefited the most during the post-socialist transformation: the annual rate of income growth for the top 5% of the population exceeded 3.5%, while the median income grew by about 2.5%.
    Keywords: income inequality, Gini index, top income shares, tax record, survey data, Pareto distribution, Poland
    JEL: D31 D63 C46 P36
    Date: 2019–10
  3. By: Baccini, Leonardo; Impullitti, Giammario; Malesky, Edmund J.
    Abstract: What do state-owned enterprises (SOEs) do? How do they respond to market incentives? Can we expect substantial efficiency gains from trade liberalization in economies with a strong presence of SOEs? Using a new dataset of Vietnamese firms we document a set of empirical regularities distinguishing SOEs from private _rms. Then we empirically study the effect of the 2007 WTO accession on selection, competition, and productivity. Our results show that WTO entry is associated with higher probability of exit, lower firm profitability, and substantial increases in productivity for private firms but not for SOEs. Our estimates suggest that the overall productivity gains would have been about 40% larger in a counterfactual Vietnamese economy without SOEs. We highlight some economic mechanisms possibly driving these findings through the lenses of a model of trade with heterogeneous private and state-owned firms. The model suggests that political/regulatory barriers to entry and access to credit are key drivers of the different response of SOEs to trade liberalization. Further empirical tests broadly validate these insights.
    Keywords: state-owned enterprises; state capitalism; heterogeneous firms; gains from trade; WTO; Vietnam
    JEL: F12 F13 F14 P31 P33
    Date: 2019–01
  4. By: Zhang, Yifei
    Abstract: Despite a surging literature in investigating different impacts of corruption and/or anti-corruption from firms’ perspective, it is still unclear whether and how corruption and/or anti-corruption affect households’ borrowing behaviour. In this paper, we focus on a Chinese online peer-to-peer lending market and analyse the impact of the recent China’s anti-corruption campaign on households’ borrowing costs. We employ a Difference-in-Differences (DID) estimation strategy and investigate three exogenous shocks regarding the movement: 1) the 2012 Eight Point Policy announcement; 2) multiple rounds of the Central Inspection Team Campaigns during 2013 and 2014; 3) and the anti-corruption rules for military-related personnel in early 2015. Our results show that equilibrium interest rates of borrowers pertaining to Non-SOEs dropped significantly comparing to that of SOEs and/or government agencies in the wake of the first two events. Borrowers affiliating with military-related institutions were also worsened after the military specific anti-corruption campaign. Finally, we examine the two possible economic channels. Suggestive evidences show that both a rise of interest risk premium for SOEs borrowers and a better outlook of Non-SOEs after the anti-corruption reform could account for the observed favour of the borrowing costs towards Non-SOEs borrowers. These findings are consistent with previous studies regarding the effects of anti-corruptions from firms’ aspects such as Lin et al., (2016) and Griffin et al., (2016). This study also complements the P2P literature by demonstrating the importance of online borrowers’ occupations / job affiliations.
    Keywords: Peer-to-Peer Crowdfunding; Corruption; Household Debt;
    JEL: D14 D73
    Date: 2019–11–11
  5. By: Milan Ščasný (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 21, 110 00, Prague, Czech Republic); Šarlota Smutná (Charles University Environment Centre, José Martího 407/2, 162 00, Prague, Czech Republic)
    Abstract: Literature on residential water demand is rich, however, there are few estimates of price and income elasticities for Central and Eastern Europe and for countries undergoing economic or political transitions. To cover this gap, we estimate residential water demand in the Czech Republic – which has undergone deep structural, institutional and economic changes over the last three decades. Specifically, we analyse residential water demand from 1993-2016, when the price of water almost tripled, water consumption decreased by a third, and families became considerably richer. Controlling for price endogeneity, our estimates of price and income elasticity indicate low responsiveness of households. The estimate of income elasticity is about +0.16 and robust across all model specifications, and the effect of income is decreasing with household wealth. Price elasticity is low on average, about -0.22, which is on the low end of existing estimates of demand elasticity. While Czech households were more responsive to price changes during the 1990s period of economic transformation, in particular when household incomes were not increasing much, with the implied price elasticity of about -0.50, households became completely price irresponsive during the economic boom in the 2000s, even when the price of water was increasing considerably.
    Keywords: Residential demand, water consumption, 2SLS, price elasticity, income elasticity
    JEL: D12 C33 C36
    Date: 2019–06
  6. By: Mykola Babiak (CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences, Politickych veznu 7, 111 21 Prague, Czech Republic); Olena Chorna (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 11000, Prague 1, Czech Republic)
    Abstract: In this paper, we investigate how the increase in minimum wages affect firm profitability. We focus on the firm-level panel data in Poland, where minimum wage growth remained stable and averaged around 4 percent between 2003 and 2007 butaccelerated to 20 percent in 2008. Implementing a difference-in-difference approach in this quasi-experimental setting, we find that the minimum wage increase contributed positively to average wages and negatively to firm profitability. Intuitively, the increased labor costs due to a higher wage floor directly reduce profits in the absence of labor demand adjustments. We formally test and confirm validity of theseempirical predictions in a simple theoretical model of a profit maximizing firm.
    Keywords: Minimum wage, firm profitability, difference-in-difference
    JEL: C21 J23 L25
    Date: 2019–06
  7. By: Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic; Department of Banking and Insurance, Faculty of Finance and Accounting, University of Economics, Prague, Namesti Winstona Churchilla 4, 130 67 Prague, Czech Republic); Binyi Zhang (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: In this paper, we analyse the dynamic relationship among the Chinese renewable energy stock prices, the U.S renewable energy stock prices, oil prices and technology stock prices. We apply a four-variable Lag Augmented Vector Autoregressive (LA-VAR) model to study the return interactions among the variables. Moreover, we also use Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models to study the dynamic conditional volatility of the Chinese renewable energy stock prices. The empirical results indicate that both return and conditional volatility of the Chinese renewable energy stock prices can be explained by past movements of the U.S renewable energy stock prices and technology stock prices. In addition, we find significant evidence to support the existence of the GARCH effects in the Chinese renewable energy stock prices. However, only weak statistical evidence reveals the significance of the leverage effects in the Chinese renewable energy stock market.
    Keywords: Renewable energy, Financial modeling, China
    JEL: Q20 G15
    Date: 2019–05
  8. By: Jaromír Baxa (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic; Academy of Sciences of the Czech Republic, Institute of Information Theory and Automation, Pod Vodárenskou věží 4, 182 08, Prague, Czech Republic); Tomáš Šestořád (Academy of Sciences of the Czech Republic, Institute of Information Theory and Automation, Pod Vodárenskou věží 4, 182 08, Prague, Czech Republic; Czech National Bank, Macroeconomic Forecasting Division, Na Příkopě 28, 115 03 Prague 1, Czech Republic)
    Abstract: After the introduction of an exchange rate commitment and an immediate 7% depreciation of the Czech koruna of in 2013, output growth resumed but inflation remained low. Consequently, the Czech National Bank did not return policy to normal for more than three years. Using a time-varying parameter VAR model with stochastic volatility, we show that this was not surprising. The exchange rate pass-through to prices had been rather low and gradually decreasing since the early 2000s, suggesting limited potential effects of the exchange rate commitment on inflation. On the other hand, the pass-through to output growth increased. These results hold even when the period of the exchange rate floor and the zero lower bound is excluded from the sample, and they are robust to other sensitivity checks. Our results are consistent either with a flattened Phillips curve, or rising quality of the Czech exports and participation in global value chains, or a small effect of the exchange rate commitment on inflation expectations when not paired with temporary price-level targeting. Moreover, we highlight the usefulness of models accounting for time variation of parameters for policy analysis.
    Keywords: Exchange rate commitment, exchange rate pass-through, time-varying parameters, VAR, zero lower bound
    JEL: C32 E52 F41
    Date: 2019–05
  9. By: Anna Alberini (AREC, University of Maryland, College Park, MD 20742, United States); Olha Khymych (nstitute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Milan Scasny (Charles University Environment Centre, José Martího 407/2, 162 00, Prague, Czech Republic)
    Abstract: Despite its importance for policy purposes (including climate policy and the energy transition), evidence about the price elasticity of natural gas demand in the residential sector is very limited and based on inference from situations with modest variation in prices. We focus on a locale and time when price changes were extreme and presumably salient to consumers, namely Ukraine between 2013 and 2017. We exploit the tariff reforms and detailed micro-level household consumption records to estimate the price elasticity of the demand for natural gas. To isolate behavior, attention is restricted to those households that made no structural energy-efficiency upgrades to their homes, and thus kept the stock of gas-using capital fixed. We further examine the short-run elasticity by restricting the sample to a few months before and after the tariff changes. Our results suggest that under extreme price changes, households are capable of reducing consumption, even without installing insulation or making any other structural modifications to their homes. The price elasticity is about -0.16. Wealthier households, people living in multifamily buildings, and heavy users have more inelastic demands. Households reduced consumption even when they received “subsidies,†namely lump-sum government assistance, suggesting that when the price signal is sufficiently strong, lump-sum transfers have only a minimal effect on consumption. We also find some evidence that the stronger the salience, the stronger the responsiveness to price, although this effect is modest and may partly overlap with that of income or baseline consumption. Our data also suggest that the consumers with the lowest uptake of energy efficiency improvements might be those who—by necessity or through skills—are the most productive at reducing energy use through behaviors.
    Keywords: Residential gas demand, energy transition, short-run price elasticity, tariff reforms, salience, fuel poverty
    JEL: D12 Q41 Q48 H31
    Date: 2019–03
  10. By: Jaromir Baxa (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic; The Czech Academy of Sciences, Institute of Information Theory and Automation, Pod Vodarenskou Vezi 4, 182 00, Prague, Czech Republic); Pavel Jancovic (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: The alternative specifications of the behavioural equilibrium exchange rate models (the BEERs) and their permanent counterparts (the PEERs) often deliver diverse estimates of the equilibrium exchange rate. In the case of the Czech koruna against the euro exchange rate, the discrepancy among the estimated BEERs often exceeds 10 %, and it had been wide before the introduction of the exchange rate commitment in November 2013 as well. Thus, the BEERs do not provide reliable guidance about the equilibrium exchange rate and the size of the equilibrium. To tackle the model uncertainty, we propose to learn about the BEERs and PEERs from the model combination to retain the information of all individual models. From a policy perspective, our results provide weak support to claims that the Czech koruna had been slightly overvalued before the introduction of the commitment in 2013. However, the koruna became increasingly undervalued since the mid of 2015, and this timing overlaps with the need to support the exchange rate commitment by the exchange rate interventions.
    Keywords: Equilibrium exchange rate, BEER, PEER, exchange rate commitment, model averaging
    JEL: F31 O24 E58 C52
    Date: 2019–10
  11. By: Martin Stepanek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: This study assesses macroeconomic and sectoral impacts of demographic changes in the Czech Republic, as a result of population ageing and international migration. To do so, it develops a unique dynamic Overlapping Generations Computable General Equilibrium (OLG-CGE) model with detailed representation of individuals of different ages, educational attainment and occupations, as well as interrelations among industrial sectors in producing intermediate and final outputs. The numeric simulations show that the Czech economy will face a substantial reduction in its effective labour supply and changes in sectoral demand patterns, leading to an increase in unit labour costs and consequent shift towards more capitalbased production, price increase for the consumers, and a long-term decrease in demand particularly for agricultural products. While international migration may alleviate the pressure, the annual net immigration would need to increase by at least 8 thousand individuals on average in the 2020-2035 period and by 17 thousand individuals in the 2036-2050 period to offset the negative effects in the long term.
    Keywords: OLG, CGE, migration, labour force, economic impact
    JEL: C68 E27 J11
    Date: 2019–06
  12. By: Dominika Kolcunová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic; Czech National Bank, Na Prikope 28, 115 03 Prague 1, Czech Republic); Simona Malovaná (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic; Czech National Bank, Na Prikope 28, 115 03 Prague 1, Czech Republic)
    Abstract: This paper studies the impact of higher additional capital requirements on loan growth to private sector of banks in the Czech Republic. The empirical results indicate that there is a negative effect of higher additional capital requirements on loan growth of banks with relatively low capital surplus. In addition, the results confirm that the relationship between capital surplus and loan growth is important also in the period of stable capital requirements, i.e. it does not serve only as an intermediate channel of higher additional capital requirements.
    Keywords: Bank lending, banks’ capital surplus, regulatory capital requirements
    JEL: C22 E32 G21 G28
    Date: 2019–04

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