nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒12‒23
seventeen papers chosen by
J. David Brown
United States Census Bureau

  1. Between communism and capitalism: long-term inequality in Poland, 1892-2015 By Bukowski, Pawel; Novokmet, Filip
  2. Does stock market capitalization cause GDP? A causality study for Central and Eastern European countries By Prats Albentosa, María Asuncíon; Sandoval, Beatriz
  3. Regarding the possibilities of connections between the transfer of technologies, knowledge and production of knowledge and information in the area of development and managerial skills? enhancement By Miroslava Szarková; Benita Belá?ová
  4. Ukraine; Technical Assistance Report-Public Investment Management Assessment By International Monetary Fund
  5. Studying the banking industrys stability trought market concentration indices By Pushkareva, Lyudmila; Kuzmin, Evgeny Anatol'evich; Chunikhin, Sergey
  6. Ukraine; Technical Assistance Report-Fiscal Decentralization and Legal Framework for Fiscal Risk Management and Medium-term Budgeting By International Monetary Fund
  7. Monetary policy shocks and peer-to-peer lending in China By Funke, Michael; Li, Xiang; Tsang, Andrew
  8. Ukraine; Technical Assistance Report-Enhancing the Medium-Term Budget Framework and Preparing Expenditure Baseline By International Monetary Fund
  9. Ukraine; Technical Assistance Report-Distributed Profit Tax; Voluntary Disclosure of Assets; and BEPs Implementation By International Monetary Fund
  10. Convergence and growth decomposition: an analysis on Lithuania By Mariarosaria Comunale; Anh Dinh Minh Nguyen; Soroosh Soofi-Siavash
  11. Idiosyncratic shocks: estimation and the impact on aggregate fluctuations By Svetlana Popova
  12. Where Have All the Children Gone? An Empirical Study of Child Abandonment and Abduction in China By Xiaojia Bao; Sebastian Galiani; Kai Li; Cheryl Long
  13. Firms' Efficiency, Exits and Government procurement contracts By Evguenia Bessonova
  14. State aid and investment: case of Slovakia By Michal Fabuš; Marek Csabay
  15. China’s Productivity Convergence and Growth Potential—A Stocktaking and Sectoral Approach By Min Zhu; Longmei Zhang; Daoju Peng
  16. The relative price of investment goods, the price level, and the "slope puzzle" By Sen Zhang; Yangyang Ji; Tianye Lin
  17. Assessing Macro-Financial Risks of Household Debt in China By Fei Han; Emilia M Jurzyk; Wei Guo; Yun He; Nadia Rendak

  1. By: Bukowski, Pawel; Novokmet, Filip
    Abstract: How has Polish inequality evolved between communism and capitalism to reach one of the highest levels in Europe today? To address this question, we construct the first consistent series on the long-term distribution of income in Poland by combining tax, household survey and national accounts data. We document a U-shaped evolution of inequalities from the end of the 19th century until today: (i) inequality was high before WWII; (ii) abruptly fell after the introduction of communism in 1947 and stagnated at low levels during the whole communist period; (iii) experienced a sharp rise with the return to capitalism in 1989. Between 1989 and 2015 the top 10% income share increased from 23% to 35% and the top 1% income share from 4% to 13%. We find that official survey-based measures strongly under-estimate the rise of inequality since 1989. Our new estimates show that frequently quoted Poland’s transition success has largely benefited top income groups. We find that inequality was high in the first half of the 20th century due to strong concentration of capital income at the top of the distribution. The secular fall after WW2 was largely to a combination of capital income shocks from war destructions with communist policies both eliminating private ownership and forcing wage compression. The rise of inequality after the return to capitalism in the early 1990s was induced both by the rise of top labour and capital incomes. However, the strong rise in inequality in the 2000s was driven solely by the increase in top capital incomes, which is likely related to current globalization forces. Yet overall, the unique Polish inequality history speaks about the central role of policies and institutions in shaping inequality in the long run.
    JEL: D31 E01 J30 N34
    Date: 2019–12
  2. By: Prats Albentosa, María Asuncíon; Sandoval, Beatriz
    Abstract: This paper analyses the relationship between stock market capitalization and real GDP in ten Central and Eastern European countries (CEECs) that joined the European Union in 2004 and 2007, with the objective of determining if the financial markets have played a role as a driver of the economic development in these countries or vice versa. The methodology is based on the application of three different measures of causality between the relevant variables, in order to determine the existence and the direction of causality. Using a cointegrated Vector Autoregressive model (VAR), the authors study the relationship between the relevant variables through the following tests: Granger causality test, Toda-Yamamoto approach and Frequency Domain approach. The results obtained suggest evidence of the existence of this relationship, in both directions, in a significant number of this group of countries, and especially in those there is a long-term relationship.
    Keywords: stock market development,economic growth,Granger causality,Toda-Yamamoto,Frequency Domain
    JEL: C32 F43 G15
    Date: 2019
  3. By: Miroslava Szarková (University of Economics in Bratislava, Faculty of Business Management, Department of Management); Benita Belá?ová (University of Economics in Bratislava)
    Abstract: The quality and level of managers? managerial skills significantly influences the competitiveness of the company. They present a qualitative, acquired entity in educational process, which has to be constantly developed within educational programmes and improved within social interactions. In the recent period, a massive input of information and communication technologies, mostly social media, which enable an effective connection of the transfer of technologies and knowledge with the production of knowledge and information in the educational process of managers, can be observed in the process of managerial skills? improvement and development. The article deals with the knowledge and information about the possibilities of managerial skills? development using information communication technologies in companies acting in the Slovak Republic. It compares the results of the monitoring obtained within the project APVV SK-CZ -0108-09 with the results of the research, which was carried out in 2018-2019 within the project VEGA 1/0309/18.
    Keywords: Managerial skills, information communication technologies, social media, social networks, education of managers
    JEL: I25 M21
    Date: 2019–10
  4. By: International Monetary Fund
    Abstract: Ukraine’s public capital stock has been on a declining path over the last 20 years. Having started the period at a relatively high level (99 percent of GDP in 1996), it now ranks amongst the lowest of its comparator countries (56 percent in 2013). Evidence as to the reasons for the deterioration point to significant and persistent weaknesses in the institutional framework surrounding public investment management, inefficient allocation of resources to productive public investment and high levels of perceived corruption. Ukraine currently has an efficiency gap of around 32 percent, which ranks it below average amongst emerging market countries and other comparators. Persistent under-investment, the currently high stock of debt, and ongoing institutional weaknesses, coupled with effects of the conflict in the East could see this gap continuing to grow, absent concerted efforts to reverse recent trends.
    Date: 2019–12–04
  5. By: Pushkareva, Lyudmila; Kuzmin, Evgeny Anatol'evich; Chunikhin, Sergey
    Abstract: The optimal market structure is one of the fundamental issues of economic theory. At that, companies’ efficiency in the market is associated with resource availability as a whole and finance resources, in particular. The structure of the banking market in terms of commercial loans determines a number of parameters of the economic system, such as its stability, growth potential, entrepreneurial activity, the state of commodity markets, the competitiveness of companies, etc. A comparative analysis of countries in terms of the ratio of commercial loans to GDP allows us to identify promising markets and strategic avenues for the development of the global banking industry and investment policy. However, a lack of regular and timely statistical reviews often impedes the identification. With the view to performing a comparative analysis for the EA/ЕU macroregion, the authors attempt to establish the types of the banking market in Russia based on a fuzzy rank approach using the probability theory. Using the data for 2009–2018, the authors assess bank concentration in Russia by a number of indicators. During the period under review, the volume of commercial banking lending in Russia experienced a steady increase. At the same time, there is a clear downward trend in the number of banks; several local “breakdowns” happen once every two years, i.e. the compression rate is reducing. Within the framework of the accepted gradation, the values of concentration indices taken separately do not allow arriving at a firm conclusion, since they indicate contradictory statuses of the sectoral market type. The integrated approach proposed in the paper helped find that, despite a relatively large number of participants in the Russian banking market, it should be primarily identified with a monopoly. At that, the values of the Herfindahl-Hirschman Index (HHI) and standard concentration fall within the oligopoly boundaries. This indicates the fuzzy nature of the sectoral market. The empirical results obtained are of use when analyzing competition, developing antimonopoly regulation measures, adjusting the banking sector development strategy and investment policy.
    Keywords: sectoral concentration; competition; stability; banking industry; commercial lending; economic growth; Russia; EA/ЕU macroregion
    JEL: D40 G21 M20
    Date: 2019
  6. By: International Monetary Fund
    Abstract: In the aftermath of Euromaidan revolution early 2014, the public demand for local selfgovernment and devolution of power, brought fiscal decentralization to the top of the reform agenda. As a result, a decentralization reform was introduced in late 2014, which helped to improve subnational government’s financial capacity, self-sufficiency, and flexibility. The reform resulted in an overall improvement of subnational government finances. Compared with 2014, own revenues of subnational governments increased, while current expenditure declined. This created additional space for capital expenditure, which almost doubled as a percent of GDP, from 2014 to 2016. Overall subnational governments recorded a combined surplus of 1.0 and 0.7 percent of GDP in 2015 and 2016, respectively. Despite these significant reforms and positive fiscal outcomes, Ukraine’s subnational finance system is still facing important challenges, which are described below, together with proposed measures to address them.
    Keywords: Fiscal policy;Treasury management;Tax policy;National budgets;Public finance;ISCR,CR,subnational,SNG,local budget,MTBF,expenditure responsibility
    Date: 2019–11–25
  7. By: Funke, Michael; Li, Xiang; Tsang, Andrew
    Abstract: This paper studies monetary policy transmission in China’s peer-to-peer lending market. Using spectral measures of causality, we explore the impacts of Chinese monetary policy shocks on China’s P2P market interest rates and lending amounts. The estimation results indicate significant spectral Granger causality from monetary policy surprises to P2P lending rates for borrowers, but not the reverse. Unlike the lending channel for traditional banks, monetary policy shocks do not Granger-cause the credit amount in the P2P lending market.
    JEL: E52 E43 G23 C22
    Date: 2019–12–05
  8. By: International Monetary Fund
    Abstract: Ukraine has made good progress over the past three years in implementing reforms to strengthen medium-term budget planning and improve the quality of public spending. Following amendments to the Budget Code in late 2018, a medium-term budget framework (MTBF) has been adopted. A Budget Declaration, covering 2020 to 2022 was submitted to Cabinet, outlining medium-term fiscal prospects and expenditure ceilings for key spending units. To strengthen accountability and spending outcomes, multi-year performance targets for programs were included in the Budget Declaration and spending reviews have been initiated in five ministries. Still, there are several technical aspects of MTBF implementation that, if not handled carefully, have the potential to undermine the effectiveness of these important reforms.
    Keywords: Fiscal policy;Price indexes;Budget estimates;Fiscal space;Budgetary process;ISCR,CR,medium-term,budget process,baseline,MTBF,KSU
    Date: 2019–11–25
  9. By: International Monetary Fund
    Abstract: The mission examined the latest proposal to substitute the current Corporate Profit Tax (CPT) for a Distributed Profit Tax (DPT), in Ukraine also referred to as the Exit Capital Tax (ECT). The mission did not find any new elements to change the position expressed in FAD’s previous technical report on tax policy (May 2017): the proposal is bad tax policy, detrimental for Ukraine on several fronts.
    Keywords: Tax revenue;Tax evasion;Tax incentives;Tax exemptions;Tax assessments;ISCR,CR,related party,DPT,BEPS,SFS,tax treaty
    Date: 2019–11–25
  10. By: Mariarosaria Comunale (Bank of Lithuania); Anh Dinh Minh Nguyen (Bank of Lithuania, ECB); Soroosh Soofi-Siavash (Bank of Lithuania)
    Abstract: We study the behaviour of Lithuania relative to other 25 EU countries, looking specifically at convergence in terms of GDP per capita and its growth accounting components: capital accumulation, labour and its subcomponents, i.e. participation and employment, and the Total Factor Productivity (TFP). We find that Lithuanian Real GDP per capita shows indeed a convergence path similar to the other Baltic States and they all belong to the second club (includes part of the periphery and the other new member states). The convergence paths of labour or capital accumulation do not seem significantly different compared to the ones of other EU members. The Lithuanian transition path in TFP has become plateau after the crisis but this is seemingly not a divergence factor. Two components show noticeable changes in behaviour after 2010: the growth in total factor productivity (TFP) considerably slows down, and the employment-population ratio appears to increase accounting for around one third of the annual GDP growth in Lithuania. In addition, we explore several transition scenarios for Lithuania to the EU-25 average.
    Keywords: Lithuania, convergence, economic integration, GDP per capita, TFP, capital, labour
    JEL: O47 F15 F45
    Date: 2019–12–13
  11. By: Svetlana Popova (Bank of Russia, Russian Federation)
    Abstract: Recently, economic granularity has been the focus of researchers' attention. Latest empirical works evaluate the granularity of various economies in terms of whether shocks to individual companies can affect volatility of macroeconomic variables. Studies of developed countries show that a large part of aggregate fluctuations arises from idiosyncratic shocks to companies because of their size or close linkages between them. Using the microdata of Russian firms on sales over the period from 1999 to 2017, we test the hypothesis that the Russian economy is granular. Here we found that idiosyncratic shocks contribute significantly to total sales volatility. It was also revealed that the effect of linkages is more important in aggregate volatility estimation, but not for the top-100 largest firms. These findings are important for understanding business cycle drivers and for estimation the impact of macroeconomic policies.
    Keywords: firm-level dynamics, granular residuals, idiosyncratic shocks, aggregate fluctuations, industrial production.
    JEL: D20 E32 L14
    Date: 2019–09
  12. By: Xiaojia Bao; Sebastian Galiani; Kai Li; Cheryl Long
    Abstract: In the past 40 years, a large number of children have been abandoned by their families or have been abducted in China. We argue that the implementation of the one-child policy has significantly increased both child abandonment and child abduction and that, furthermore, the cultural preference for sons in China has shaped unique gender-based patterns whereby a majority of the children who are abandoned are girls and a majority of the children who are abducted are boys. We provide empirical evidence for the following findings: (1) Stricter one-child policy implementation leads to more child abandonment locally and more child abduction in neighboring regions; (2) A stronger son-preference bias in a given region intensifies both the local effects and spatial spillover effects of the region's one-child policy on child abandonment and abduction; and (3) With the gradual relaxation of the one-child policy after 2002, both child abandonment and child abduction have dropped significantly. This paper is the first to provide empirical evidence on the unintended consequences of the one-child policy in terms of child trafficking in China.
    JEL: J12
    Date: 2019–11
  13. By: Evguenia Bessonova (Bank of Russia, Russian Federation)
    Abstract: This study provides evidence that productivity growth trends in Russia are similar to those in other countries where technology leaders enjoy productivity growth with a gap increasing between them and other companies. The survival analysis suggests that the most efficient firms quit the market at a faster rate than firms in other efficiency groups in the Russian economy. Survival functions of the least efficient firm do not always differ significantly from those of other companies. Results based on public procurement data provide evidence that additional financing from government contracts helps both the most and the least efficient firms to survive and shelters them from competitive pressure. In the short run, the positive effect of winning government procurement contracts for leaders seems to be only observed in their home regions, providing indirect evidence that the public procurement system does not support all types of firms with growth potential but only those affiliated with local authorities. Intervention in the mechanism of market selection through the system of public procurement could have a strong negative effect on economic growth as it provides incentives for inefficient firms without growth potential to stay in the market longer.
    Keywords: TFP growth, efficiency, productivity gap, government procurement contracts, firms’ exits.
    JEL: D24 H57 L52
    Date: 2019–10
  14. By: Michal Fabuš (School of Economics and Management of Public Administration in Bratislava); Marek Csabay (Pan-European University)
    Abstract: State investment incentives are detrimental to the quality of the business environment and create unequal starting conditions for entrepreneurs to implement investment plans. In some cases, however, it is necessary to regulate the allocation of inward investment to regions within one country and thus decrease the disparities. Investment incentives are instruments that in general might violate market principles and thus are regulated within the EU internal market. Despite being aware of this fact most economists and politicians advocate these kinds of measures as necessary and relatively cheap in order to push the economy forward or win international big private equity investments. Investment aid is regional aid to stimulate investment in disadvantaged regions and to create new jobs in the Slovak Republic. Beneficiaries of this assistance may be natural and legal persons authorized to carry on business in the territory of the Slovak Republic and whose investment activities and projects meet the conditions of Act no. 561/2007 Z.z. on Investment Assistance and on Amendments to Certain Acts. This paper will focus on how investment incentive attracts foreign investment in the Slovak Republic and based on the data from 2002 to 2017 we will analyze their effectiveness on the created jobs. Despite the possible support from the Slovak government not all foreign investors areapplying for investment incentives, either are in contact with the government during their investment phase.
    Keywords: investments incentives,stare aid,foreign direct investmnets,economic growth
    Date: 2018–12–30
  15. By: Min Zhu; Longmei Zhang; Daoju Peng
    Abstract: China’s growth potential has become a hotly debated topic as the economy has reached an income level susceptible to the “middle-income trap” and financial vulnerabilities are mounting after years of rapid credit expansion. However, the existing literature has largely focused on macro level aggregates, which are ill suited to understanding China’s significant structural transformation and its impact on economic growth. To fill the gap, this paper takes a deep dive into China’s convergence progress in 38 industrial sectors and 11 services sectors, examines past sectoral transitions, and predicts future shifts. We find that China’s productivity convergence remains at an early stage, with the industrial sector more advanced than services. Large variations exist among subsectors, with high-tech industrial sectors, in particular the ICT sector, lagging low-tech sectors. Going forward, ample room remains for further convergence, but the shrinking distance to the frontier, the structural shift from industry to services, and demographic changes will put sustained downward pressure on growth, which could slow to 5 percent by 2025 and 4 percent by 2030. Digitalization, SOE reform, and services sector opening up could be three major forces boosting future growth, while the risks of a financial crisis and a reversal in global integration in trade and technology could slow the pace of convergence.
    Date: 2019–11–27
  16. By: Sen Zhang (China Economics and Management Academy, Central University of Finance and Economics, Beijing, China); Yangyang Ji (China Economics and Management Academy, Central University of Finance and Economics, Beijing, China); Tianye Lin (China Economics and Management Academy, Central University of Finance and Economics, Beijing, China)
    Abstract: The application of Blanchard and Quah's (1989) method to Chinese data always obtains counterintuitive responses of output and the price level to demand and supply shocks, referred to in the literature as the "slope puzzle." Empirical findings of this paper reveal that the low-frequency movement in the price level causes this puzzle, which arises from the relative price of investment goods, and the friction in China's financial market drives this movement.
    Date: 2019
  17. By: Fei Han; Emilia M Jurzyk; Wei Guo; Yun He; Nadia Rendak
    Abstract: High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household indebtedness could boost consumption in the short term, while reducing it in the medium-to-long term. By stress testing households’ debt repayment capacity, we find that low-income households are most vulnerable to adverse income shocks which could lead to signficant defaults. Containing these risks would call for a strengthening of systemic risk assessment and macroprudential policies of the household sector. Other policies include improving the credit registry system and establishing a well-functioning personal insolvency framework.
    Date: 2019–11–27

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.