nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒01‒20
fourteen papers chosen by
J. David Brown
United States Census Bureau

  1. The phenomena of after socialist institutional transformation: China and Russia comparison By Martynov, Arkady
  2. The Effect of Tightness on Wages at the Regional Level in Three Central European Countries By Lajos Tamás Szabó
  3. Deregulation as a Source of China’s Economic Growth By Shiyuan Pan; Kai Xu; Kai Zhao
  4. What makes a productive Russian firm? A comparative analysis using firm-level data By Lenka Wildnerova; Hansjörg Blöchliger
  5. Public-Private Partnerships Investment in Energy as New Determinant of CO2 Emissions: The Role of Technological Innovations in China By Shahbaz, Muhammad; Raghutla, Chandrashekar; Song, Malin; Zameer, Hashim; Jiao, Zhilun
  6. Knowledge Spillovers Within China’s System of Research Institutes By Renai Jiang; Daniel Tortorice; Zhaohui Xuan
  7. Population Aging, Credit Market Frictions, and Chinese Economic Growth By Michael Dotsey; Wenli Li; Fang Yang
  8. The Concept of Inheritance by Right of Representation: A Comparative Analysis of Civil Law in Russia and France By Natalia V. Rostovtseva
  9. Have China’s Unconverted Research Institutes Been Left Behind By Renai Jiang; Daniel Tortorice; Zhaohui Xuan
  10. Trade Liberalization, Input Intermediaries and Firm Productivity: Evidence from China By Fabrice Defever; Michele Imbruno; Richard Kneller
  11. Income Inequality and Subjective Wellbeing: Panel Data Evidence from China By Zhang, Quanda; Awaworyi Churchill, Sefa
  12. Republic of Georgia; Fifth Review Under the Extended Arrangement, Requests for Waivers of Nonobservance of Performance Criteria, Modification of Performance Criteria, and an Extension of the Arrangement and Rephasing of Access By International Monetary Fund
  13. Explaining the Shadow Economy in Europe: Size, Causes and Policy Options By Ben Kelmanson; Koralai Kirabaeva; Leandro Medina; Borislava Mircheva; Jason Weiss
  14. Environmental Innovation in European Transition Countries By Raul Caruso; Antonella Biscione; Annunziata de Felice

  1. By: Martynov, Arkady
    Abstract: The author presents an approach to the comparison of fundamental institutional changes in China and Russia attributed to the after socialist countries. Proceeding from the analysis, the trend of the institutional divergence between China and Russia considered in the nineties later changed to the trend of convergence. A unifying feature of the both economies concludes in the prevailing institutions of state capitalism in combination with the at-tributes of socialized market. In the current moment, there are discrepancies with respect to fundamental institu-tional changes between two countries, which may result in the emergence of new divergence trend.
    Keywords: after socialist countries, state capitalism, socialized market, convergence, divergence
    JEL: O57 P00 P52
    Date: 2019–11–27
  2. By: Lajos Tamás Szabó (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: In this paper, I examine the effect of tightness on wages in three Central European countries. The estimation is relevant for at least three reasons. Firstly, it is a novel exercise to check the implication of the Mortansen–Pissarides model on Central European data. Secondly, from the central bank’s perspective it is important to know the effect of tightness on wages, since these are the major determinants of cost-push inflation. Thirdly, the magnitude of the spillover effect from tightness to wages can help determine the efficiency of a targeted development policy. My contribution is directly identifying the effect of tightness on wages from regional heterogeneity. I examine the effect of tightness on wages in Hungary, Slovakia and Poland using panel IV method on district level data. The direct effects are similar in the three countries, i.e. there is a positive link between tightness and wages. The magnitudes are somewhat different in Poland then in Hungary and Slovakia. There is spatial spillover effect in Hungary but this indirect effect is missing in Poland and Slovakia.
    Keywords: local labour markets, labour market tightness, wage equation.
    JEL: J31 J61 J63 J64
    Date: 2019
  3. By: Shiyuan Pan (Zhejiang University); Kai Xu (Zhejiang University); Kai Zhao (University of Connecticut)
    Abstract: We develop a two-sector growth model of vertical structure in which the up-stream sector features Cournot competition and produces intermediate goods that are used in the downstream sector for the production of final goods. In such a ver-tical structure, we show that deregulation and increased market competition in the upstream sector does not only increase its own productivity, but also has a substan-tial spill-over effect on the productivity of the downstream sector through affecting factor prices. We calibrate the model to the Chinese economy and use the calibrated model to quantitatively evaluate the extent to which deregulation in the upstream market in China from 1998 to 2007 accounts for the rapid economic growth over the same period. Our quantitative experiments suggest that deregulation in the up-stream market in China from 1998 to 2007 can account for a significant fraction of China’s economic growth during this period partly due to the significant spillover effect it has on the downstream sector. In addition, our model can also match sev-eral relevant observations in China during the same period including high and rising returns to capital, declining markups.
    Keywords: Deregulation; Economic Growth; Vertical Structure
    JEL: E20 O41
    Date: 2020–01
  4. By: Lenka Wildnerova; Hansjörg Blöchliger
    Abstract: Productivity in Russia has fallen steadily over the past 15 years. This paper explores micro-level data to understand the contribution of individual firms to aggregate productivity. Overall, firm-level data corroborate the decline in aggregate productivity and a widening productivity gap against several European countries. They also show that the gap between “the best” and “the rest” has widened in Russia, similar to other countries. Russian markets are quite concentrated, i.e. dominated by few large firms. Larger firms tend to be more productive, but firms at the productivity frontier have become smaller and younger over time, suggesting that more support for young and innovative firms could help raise productivity. Foreign ownership is associated with higher productivity, and there is evidence that foreign firms generate positive productivity spillovers for domestic firms. Service firms belong to the most productive, yet the service sector remains underdeveloped. Mining is also very productive but less than in other countries. Differences in productivity across regions are large, even controlling for many other determinants, suggesting a lack of capital and labour mobility and knowledge transfer across regional borders.
    Keywords: entry and exit of firms, firm-level productivity, foreign ownership, industrial organisation, privatisation, productivity gap, regional productivity differences, Russian economy
    JEL: D24 L16 O43
    Date: 2019–12–23
  5. By: Shahbaz, Muhammad; Raghutla, Chandrashekar; Song, Malin; Zameer, Hashim; Jiao, Zhilun
    Abstract: This paper explores the relationship between ‘public-private partnerships investment in energy sector and carbon emissions’ considering the vital role of technological innovations in carbon emissions function for China. In doing so, we apply bootstrapping autoregressive distributed lag modeling (BARDL) for examining the cointegration between carbon emissions and its determinants. The empirical results reveal that public-private partnerships investment in energy impedes environmental quality by increasing carbon emissions. On contrary, technological innovations have negative effect on carbon emissions. The relationship between economic growth and carbon emissions is inverted-U shaped i.e. environmental Kuznets curve hypothesis. Exports are positively linked with carbon emissions. Foreign direct investment impedes environmental quality by stimulating CO2 emissions. The empirical findings provide new insights for policy makers to direct public-private partnerships investment in energy for the betterment of environmental quality in China.
    Keywords: Public-Private Partnerships Investment, Energy, CO2 Emissions, Technological Innovation, China
    JEL: Q5
    Date: 2019–11–02
  6. By: Renai Jiang (School of Economics and Finance, Xian Jiaotong University); Daniel Tortorice (Department of Economics, College of the Holy Cross); Zhaohui Xuan (Chinese Academy of Science and Technology for Development)
    Abstract: We use a novel, fifteen-year panel dataset on China’s system of research institutes to examine the determinates of knowledge production, the role external factors play in increasing research productivity, and the extent to which distance mitigates these spillovers. We find robust evidence that knowledge inputs like R&D personnel increase patenting and publication. External R&D spending in the institute’s province and the institute’s industry knowledge stock spill over into increased knowledge production. We find that being located on average farther from institutes engaged in similar research reduces the impact of these spillovers. These results have important policy implications as China attempts to increase economic activity away from the coast and aims to improve the productivity of its research institute sector.
    Keywords: China, R&D, Research Policy, Knowledge Spillovers
    JEL: O31 O32 O33 L2
    Date: 2019–12
  7. By: Michael Dotsey; Wenli Li; Fang Yang
    Abstract: We build a unified framework to quantitatively examine population aging and credit market frictions in contributing to Chinese economic growth between 1977 and 2014. We find that demographic changes together with endogenous human capital accumulation account for a large part of the rise in per capita output growth, especially after 2007, as well as some of the rise in savings. Credit pol-icy changes initially alleviate the capital misallocation between private and public firms and lead to significant increases in both savings and output growth. Later, they distort capital allocation. While contributing to further increase in savings, the distortion slows down economic growth. Among factors that we consider, increased life expectancy and financial development in the form of reduced inter-mediation cost are the most important in driving the dynamics of savings and growth.
    Keywords: Aging; Credit policy; Household saving; Output growth; China
    JEL: E21 J11 J13 L52
    Date: 2019–12–20
  8. By: Natalia V. Rostovtseva (National Research University Higher School of Economics)
    Abstract: This paper examines one of the most important concepts of intestate succession – inheritance by right of representation. The following analysis is based on civil law in Russia and France. The paper provides an overview of the meaning and the role of the right of representation, determines those who can inherit by right of representation under the Russian and French civil codes as well as the grounds for succession; examines the limitations on inheritance by right of representation under civil law in both states; identifies the legal nature of the rights of the representing heirs. Specific attention is paid to the issue of representation of the parent who is the commorient of the decedent. As a result of the comparative study, the author makes proposals on the improvement of the concept of inheritance by right of representation in Russia and France
    Keywords: inheritance by right of representation, intestate succession, the time of opening of an inheritance, commorients, renunciation of inheritance.
    JEL: Z
    Date: 2019
  9. By: Renai Jiang (School of Economics and Finance, Xian Jiaotong University); Daniel Tortorice (Department of Economics, College of the Holy Cross); Zhaohui Xuan (Chinese Academy of Science and Technology for Development)
    Abstract: Beginning in 1999, the Chinese government initiated a substantial restructuring of its roughly 4,000 research institutes. While many were given specific classifications to designate their institute objectives, many were left unconverted. We use a novel, fifteen-year panel dataset on China’s system of research institutes to examine if unconverted institutes were disadvantaged relative to their converted counterparts. Unconverted institutes had a higher risk of exiting the research institute system and lower productivity growth than converted research institutes. However, their revenue growth kept pace with converted institutes and they continued to patent at similar rates. Finally, their publication of scientific papers declined relative to converted institutes. We conclude that the restructuring program has not left the unconverted institutes behind.
    Keywords: China, R&D, Research Policy, Patenting, Research Institutes
    JEL: O31 O32 O38
    Date: 2019–12
  10. By: Fabrice Defever; Michele Imbruno; Richard Kneller
    Abstract: We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise.
    Keywords: firm heterogeneity, trade liberalization, intermediate inputs, productivity, intermediaries, China
    JEL: F12 F13
    Date: 2019
  11. By: Zhang, Quanda; Awaworyi Churchill, Sefa
    Abstract: Using four waves of longitudinal data from the China Family Panel Studies (CFPS), we examine the effects of income inequality on subjective wellbeing (SWB). We take a dual approach in measuring income inequality, and thus, we examine the effects of inequality using province-level Gini coefficient as well as between-group inequality or identity-related inequality defined as the income gap between migrants without urban household registration identity (hukou) and urban residents. We find negative effects of both province-level income inequality and between-group income inequality on SWB, measured by life satisfaction. Our results also show that the effects of income inequality on SWB is stronger for rural hukou residents compared to urban hukou residents. These findings are robust to alternative ways of measuring SWB and income inequality. In addition, we find evidence suggesting that neighbourhood trust is an important channel through which income inequality operates to reduce SWB. We suggest policies that promote trust in communities with high inequality with a view of addressing the negative effects of inequality on SWB.
    Keywords: Subjective wellbeing, Identity, Inequality, hukou, Life satisfaction, China
    JEL: D63 I31
    Date: 2019–12–11
  12. By: International Monetary Fund
    Abstract: GDP growth remains on track to reach 4.6 percent despite the ban on direct flights from Russia. The current account deficit reached a historic low. Inflation accelerated to 6.9 percent in October reflecting higher food prices and nominal depreciation. The National Bank of Georgia used FX sales and higher policy rates to address rising inflationary pressures. Strong revenue growth has more than offset higher-than-envisaged capital spending, and the 2019 fiscal deficit is likely to be lower than projected at the Fourth Review.
  13. By: Ben Kelmanson; Koralai Kirabaeva; Leandro Medina; Borislava Mircheva; Jason Weiss
    Abstract: This paper examines the drivers, and reestimates the size of shadow economies in Europe, with a focus on the emerging economies, and recommends policies to increase formality. The size of shadow economies declined across Europe in recent years but remains significant, especially in Eastern Europe. In the emerging European economies, the key determinants of shadow economy size are regulatory quality, government effectiveness, and human capital. The paper argues that a comprehensive package of reforms, focused on country-specific drivers, is needed to successfully combat the shadow economy. The menu of policies most relevant for Europe’s emerging economies include: reducing regulatory and administrative burdens, promoting transparency and improving government effectiveness, as well as improving tax compliance, automating procedures, and promoting electronic payments.
    Date: 2019–12–13
  14. By: Raul Caruso (European Center of Peace Science, Integration and Cooperation CESPIC; Catholic University 'Our Lady of Good Counsel'); Antonella Biscione (European Center of Peace Science, Integration and Cooperation CESPIC; Catholic University 'Our Lady of Good Counsel'); Annunziata de Felice (Department of Law, University of Bari Aldo Moro)
    Abstract: This paper explores the demand-pull, technology-push and regulation factors influencing the environmental innovation strategies. We focus on a subset of manufacturing firms of a group of European Transition Countries. The data available to investigate the driving factors that lead to eco-innovate are taken from the Community Innovation Survey data (CIS 2014). The data is a cross-section covering the three-year period between 2012 and 2014. We employ a multivariate probit model to observe the effect of several drivers on eco-innovation, captured by means of different measures. Empirical findings highlight that: (i) some drivers are common to some types of eco-innovation; (ii) regulation does have a positive impact on all drivers. The latter provides a clear-cut implication for policy-making. Broadly speaking, in transition economies public policies and invectives appear to trigger environmental innovation much more than demand-pull factors.
    Keywords: environmental innovation, European Transition countries, demand-pull, technology-push, regulation
    JEL: Q55 Q58 L6
    Date: 2020–01

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