nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒02‒03
sixteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Success and failure of renewable energy policies in the EU: A comparative study of Bulgaria and Poland By Adachi, Misato
  3. The Impact of Intranational Trade Barriers on Exports: Evidence from a Nationwide VAT Rebate Reform in China By Jie Bai; Jiahua Liu
  4. Cooperative Agricultural Farms in Bulgaria (1890 -1989) By Marinova, Tsvetelina; Nenovsky, Nikolay
  5. Results of SME Investment Activities: A Comparative Analysis among Enterprises Using and Not Using EU Subsidies in Poland By Piątkowski, Marcin J.
  6. The Economic Impact of Distributing Financial Products on Third-Party Online Platforms By Claire Yurong Hong; Xiaomeng Lu; Jun Pan
  7. Relocating or Redefined: A New Perspective on Urbanization in China By Li Gan; Qing He; Ruichao Si; Daichun Yi
  8. China's First Workforce Skill Taxonomy By Weipan Xu; Xiaozhen Qin; Xun Li; Haohui"Caron" Chen; Morgan Frank; Alex Rutherford; Andrew Reeson; Iyad Rahwan
  10. Productivity convergence trends within Russian industries: firm-level evidence By Evguenia Bessonova; Anna Tsvetkova
  11. Detecting Earnings Management. An analysis of Credit Institutions’ (Banks) trading in Hungary By Endre Beretka
  12. Which Countries Have Benefited the Most from China’s Belt and Road Initiative? By Albert Park
  13. Lie of the Weak: Inconsistent Corporate Social Responsibility Activities of Chinese Zombie Firms By Shaozhen Han; Guoming Li; Michel Lubrano; Zhou Xun
  14. Connecting the Emerging Markets: China's Growing Role in Global Digital Infrastructure By Yujia He
  15. Quantifying Quality Specialization Across Space: Skills, Sorting, and Agglomeration By Chang, Pao-Li; Lu, Angdi; Yi, Xin
  16. The puzzle of falling happiness despite rising income in rural China: ten hypotheses By John Knight; Bianjing Ma; Ramani Gunatilaka

  1. By: Adachi, Misato
    Abstract: The development of renewable energy sources is central to the goal of gaining independence from conventional fossil fuels and achieving a sustainable energy supply. As these technologies are not yetfully developed and due to multi-dimensional selection environments cannotalwayscompete with conventional energy sources in the market, renewable energy sources initially require temporary protective space. Although some research has identified important factors with regard to the development of renewable technologies, there have not been any clear empirical studies, especially focusing on the new Member Statesof the European Union. Bulgaria and Poland in particular showed divergent results with regard to the deployment of the renewables. One, Bulgaria, achieved an outstanding increase in the share of energycoming from renewablessince its target was set in 2009, while another, Poland, has seen a sluggish result with regard to its policies. The aim of this paper is to identifythe factors leading to the successful promotion of renewable energy in the new Member States by using a comparative study of the cases of Bulgaria and Poland. The comparative study is conducted based on the three protective spaces advocated by Smith & Raven (2012). As a result, two main factors can be seen as the determinants of the success of renewable energy policies; "mprovement of connection to grid networks in shielding process" and "schemes for a transition from a niche space to a socio-technical regime in an energy industry structure in empowering process." Additionally, the delay of effective renewable energy policy implementation, which in the case of Poland, led to a failure of policy.
    Keywords: Bulgaria,Empowering,EU,Evolutionary theory,New Member States,Nurturing,Protective space,Poland,Renewable energy policy,Shielding
    Date: 2020
  2. By: Tudor C. ?ICL?U (Faculty of Political, Administrative and Communication Sciences, Department of Public Administration and Management , Babe?-Bolyai University)
    Abstract: Public sector reform has been one of the defining features of the public policy landscape for the past thirty years (Pollitt, Bouckaert, 2011), as governments continuously struggle to govern effectively in an increasing turbulent environment. Internal and external pressures for lean, efficient, innovative but at the same time democratic ways in solving public policy issues, means governments are in a position of constant struggle to both deliver on their responsibilities while constantly changing for the better. The case of Romania is particularly interesting, as a former communist state, reform has been even more of a priority then for a western country. In this paper I am looking at the evolution of the public sector reform in Romania, starting from the initiation of the EU integration process (year 2000 as a starting point) until present times. As in most cases, we see a hybrid development with substantial leaps forward sometimes followed by a period of stagnation or even regress. I used the NPM/NWS/NPG theoretical frame proposed by Pollitt and Bouckaert (2011) as general guidance in analyzing public sector reform. Compared to other Central and Eastern European countries, Romania can be considered a slow reformer, with some exceptions (fighting corruption for example). The paper is mostly theoretical and best serves as a general overview on where Romanian public sector reform is at present.
    Keywords: public management reform, new public management, neo weberian state, new public governance, administrative reform
    JEL: H83
    Date: 2019–06
  3. By: Jie Bai; Jiahua Liu
    Abstract: It is well known that various forms of non-tariff trade barriers exist within a country. Empirically, it is difficult to measure these barriers as they can take many forms. We take advantage of a nationwide VAT rebate policy reform in China as a natural experiment to identify the existence of these intranational barriers due to local protectionism and study the impact on exports and exporting firms. As a result of shifting tax rebate burden, the reform leads to a greater incentive of the provincial governments to block the domestic flow of non-local goods to local export intermediaries. We develop an open-economy heterogenous firm model that incorporates multiple domestic regions and multiple exporting technologies, including the intermediary sector. Consistent with the model's predictions, we find that rising local protectionism leads to a reduction in interprovincial trade, more "inward-looking" sourcing behavior of local intermediaries, and a reduction in manufacturing exports. Analysis using micro firm-level data further shows that private companies with greater baseline reliance on export intermediaries are more adversely affected.
    JEL: F14 F15 O14
    Date: 2019–12
  4. By: Marinova, Tsvetelina; Nenovsky, Nikolay
    Abstract: In this paper we have proposed an institutional reconstruction of the Bulgarian agricultural cooperatives’ history. The aim was to find the theoretical explanation of the complete deprivation of individuality of the agricultural cooperatives in the years of communism and their rejection respectively during the post-communist period. We consider that a relevant explanation was the accumulation of two institutional processes which were related to the nationalization of the cooperative sector and the cooperative idea. The first one may be referred to as being inertial and related to the specificities of the Bulgarian lagging behind and peripheral capitalism from the beginning of 20th century. That capitalism had a state character. The second institutional process occurred mainly in the wake of WWII. It was related to the large scale and actually mechanical application (despite some nominal specificities) of the Soviet model of agriculture and of the communist ideas of the place of that sector in the planned and all people’s economy. It must be underscored that the ideas of the agricultural cooperatives and the organization of agriculture coming from Russia and later from the USSR also played a definite role for shaping up the general understanding of cooperatives in Bulgaria.
    Keywords: agricultural cooperatives, communism, Soviet agrarian model, Bulgaria, institutional reconstruction
    JEL: N53 P13
    Date: 2020–01–15
  5. By: Piątkowski, Marcin J.
    Abstract: The need to pay some attention to the issues of investment processes undertaken in enterprises and explore this topic is a direct result of the important role that enterprises play in the economy — with particular emphasis on the SMEs. From the company’s point of view, it is crucial to obtain economic effects as a result of the implemented investment. The aim of the study was to analyze the results of tangible investments in enterprises in Małopolska province in Poland, in two groups of entities — those that implemented investments using EU subsidies and those that financed investments from other sources without using EU aid. This is a unique research in the field of analysis and presentation of investment data in enterprises, especially in relation to companies using EU funds. There is no comparative assessment of investments in enterprises on this topic in the scientific literature (concerning EU subsidies). For this reason, comparing the effects of investment activities between the two groups of enterprises studied — using and not using EU subsidies — fills the research gap in this regard. The study was based on the critical analysis of domestic and foreign literature, and quantitative and qualitative analyses of the results of a survey among 160 enterprises using the CSAQ method, additionally extended by interviews with selected respondents. Data presentation uses a descriptive approach in combination with statistical analysis. A multiple linear regression model (MLR) was also used to verify hypotheses. Research results show that undertaking investment activities contributes to obtaining favorable results in enterprises, regardless of the source of investment financing. The source of financing the investment is not important for the results achieved in the enterprise. However, representatives of companies who received EU subsidies assess their market position higher after investment relative to companies that used other sources of financing for this purpose. Entities that have received EU subsidies have a stronger perception of investment as an important factor determining the company’s development. In addition, variables were identified using the MLR model that affect the assessment of the financial position of enterprises in both groups of entities. This article supplements the knowledge on the economic effects of investments implemented by enterprises in the SME sector in Poland in a situation where these entities used and did not benefit from EU subsidies during 2007–2015.
    Keywords: investments; enterprises; SMEs; subsidies for SMEs; EU aid; European funds; investment financing; economic effects; projects; Małopolska region; Poland; multiple linear regression model (MLR)
    JEL: C01 C12 C14 C30 L0 L2 L21 L26 M0 M1 M10 M11 M12 M14 M15 M16 M20
    Date: 2020
  6. By: Claire Yurong Hong; Xiaomeng Lu; Jun Pan
    Abstract: The emergence of third-party online platforms in intermediating financial products has been a new and exciting development in FinTech. In China, the platforms are allowed to distribute mutual funds since 2012, and have quickly grown into a formidable presence. Examining the economic impact of this new distributional channel, we use the staggered entrance of mutual funds onto the platforms to identify the casual effect of online platforms on the behaviors of fund investors and fund managers. We find that, post-platform, fund flows become markedly more sensitive to fund performance. The net flow to the top 10% performing funds more than triples their pre-platform level, and this pattern of increased performance sensitivity is further confirmed using private data from Howbuy, a top-five platform in China. Consistent with the added incentive of becoming a top ranking performer in the era of large-scale platforms, we find that fund managers increase their risk taking to enhance the probability of getting into the top rank. Meanwhile, the organization structure of large fund families weakens as the introduction of platforms levels the playing field for all funds.
    JEL: G0 G10 G15 G2 G20 G23
    Date: 2019–12
  7. By: Li Gan; Qing He; Ruichao Si; Daichun Yi
    Abstract: China's fast economic growth over the past 40 years has been accompanied by an increasingly rapid rate of urbanization, from about 20% in the early 1980s to 60% in 2018. In addition to natural population growth, rural-urban migration is generally believed to be a dominant driving force. Motivated by a recent finding of a high housing vacancy rate in urban China, however, we find that a large share of urban population growth comes from community reclassification. These redefined migrants (from communities which were reclassified from rural to urban) accounted for 33.4% of total urban population growth from 2010 to 2015. Households in reclassified communities share similar characteristics with those from rural villages, particularly in their ownership of housing. Furthermore, we provide evidence that at the prefecture level, the size of redefined migrants is significantly related to residential land supply, and to the proportion of households holding vacant housing units, but not to the change of night-time light. These results suggest that an inaccurate account of urbanization is an important factor for the oversupply of residential housing units in China.
    JEL: O18 R31 R52
    Date: 2019–12
  8. By: Weipan Xu; Xiaozhen Qin; Xun Li; Haohui"Caron" Chen; Morgan Frank; Alex Rutherford; Andrew Reeson; Iyad Rahwan
    Abstract: China is the world's second largest economy. After four decades of economic miracles, China's economy is transitioning into an advanced, knowledge-based economy. Yet, we still lack a detailed understanding of the skills that underly the Chinese labor force, and the development and spatial distribution of these skills. For example, the US standardized skill taxonomy O*NET played an important role in understanding the dynamics of manufacturing and knowledge-based work, as well as potential risks from automation and outsourcing. Here, we use Machine Learning techniques to bridge this gap, creating China's first workforce skill taxonomy, and map it to O*NET. This enables us to reveal workforce skill polarization into social-cognitive skills and sensory-physical skills, and to explore the China's regional inequality in light of workforce skills, and compare it to traditional metrics such as education. We build an online tool for the public and policy makers to explore the skill taxonomy: We will also make the taxonomy dataset publicly available for other researchers upon publication.
    Date: 2020–01
  9. By: Cristian GHINEA (Bucharest University of Economic Studies, Faculty of Administration and Public Management, Bucharest, Romania)
    Abstract: The aim of this paper is to analyze the management system of EU funds in Romania, as it has evolved in the two financial exercises from the EU accession 2007 - 2013, respectively 2014 – 2020, with a clear accent on the evolution of the central public administration system. Romania has started its first financial exercise with a diluted decision-making system, with Managing Authorities spread across the line ministries. It evolved, rather following crises and harsh political decisions than clear and coherent plan, towards a system in which the Managing Authorities are subordinated to two ministries: Ministry for EU Funding and Development Ministry.
    Keywords: EU Funds, Managing Authorities, Management System, public administration
    JEL: H83
    Date: 2019–06
  10. By: Evguenia Bessonova; Anna Tsvetkova
    Abstract: The paper focuses on trends in the convergence of labour and multifactor productivity in Russia. Using firm-level data for the 2011-2016 period, we obtain the following result: low-productivity firms grow faster than high-productivity ones. Despite this, the initial gap between the most and the least productive firms in the Russian economy is so wide that it is hardly possible to overcome in the short term. Moreover, we find that this gap has increased over the 2011-2016 period, suggesting divergence in productivity levels of Russian firms. To verify the divergence within narrowly defined industries, we also use the stochastic frontier analysis. Our estimates confirm divergence in most industries.
    Keywords: productivity gap, beta-convergence, sigma-convergence, stochastic frontier analysis.
    JEL: D24 E22 O47
    Date: 2019–10
  11. By: Endre Beretka (The Hague University of Applied Sciences, Den Haag, The Netherlands)
    Abstract: This paper examines evidence of Earnings Management (EM) in annual financial reports of foreign and domestic credit institutions’ trading in Hungary, an ex-communist country and a Central European economy, by applying an alternative approach, the Distribution of the Ratios method. Analyses were performed with 14 banking specific ratios for the period of 1999-2015, by applying Burgstahler and Dichev (1997), Degeorge et al. (1991) models, Kolmogorov-Smirnov, Monte-Carlo, Benchmark and Distributional tests. Primary findings confirm that the Distribution of the Ratios method demonstrates that apart from significant evidence of EM presence, managers do not always manipulate the same variables, or one area of the financial statements, but at their discretion, choose different areas to engage EM and in different periods, and Credit Institutions engaged in EM in the period Prior to and After the 2008 financial crisis. Additional Benchmark Analysis results present weak evidence of EM and should be read with caution; however, Benchmark comparison should not be excluded from research.
    Keywords: Earnings Management, Credit Institutions, Distributional Test, Ratios
    Date: 2019–11
  12. By: Albert Park (Director, HKUST Institute for Emerging Market Studies; Chair Professor, Department of Economics, Division of Social Science and Division of Public Policy, Hong Kong University of Science and Technology)
    Abstract: Analysis of project-level data on China’s outbound FDI and construction projects finds that the Belt and Road Initiative (BRI) has led to a large increase in China’s outbound FDI in Belt and Road (B&R) countries compared to non-B&R countries, especially for greenfield FDI projects and in the energy sector. The importance of economic fundamentals in allocating Chinese investment to different countries has declined substantially under the BRI, raising concerns that the expected returns to such investments has declined. The importance of governance quality in explaining China’s outbound FDI increased significantly under the BRI, dispelling concerns that under the BRI China targets investments toward corrupt, poorly governed countries
    Keywords: Belt and Road, China, Financial Development, Firms, Jobs
    Date: 2019–09
  13. By: Shaozhen Han (Northwest University (Xi'an)); Guoming Li (JUFE - Jiangxi University of Finance and Economics); Michel Lubrano (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, JUFE - Jiangxi University of Finance and Economics); Zhou Xun (JUFE - Jiangxi University of Finance and Economics)
    Abstract: This study investigates the differences between zombie firms and non-zombie firms in corporate social responsibility activities such as reporting, disclosure and fulfillment. Using Chinese listing company data collected from 2009 to 2016, we apply a three stage model with a double Heckman correction to deal with potential self-selection/endogeneity bias and to measure the differences consistently. We found that zombie firms are less willing to release standalone corporate social responsibility reports than non-zombie firms. Among companies that release standalone corporate social responsibility reports, the corporate social responsibility disclosure of zombie firms is at least not worse than non-zombie firms, but the corporate social responsibility fulfillment is significantly lower. We conclude from this gap between disclosure and fulfillment to the hypocritical behavior of zombie firms, due to the absence of control in corporate social responsibility. We suggest that government should enhance supervision over zombie firms' corporate social responsibility activities and subsidies towards them in order to lower their economic damage. Supplementary analyses provide some clues concerning the heterogeneity of inconsistence in term of external support characteristics, ownership and censorship which require further studies.
    Keywords: corporate social responsibility,zombie firms,reports,disclosure,fulfillment,hypocrisy
    Date: 2020–01
  14. By: Yujia He (Assistant Professor at the Patterson School of Diplomacy and International Commerce,; University of Kentucky)
    Abstract: Rising demand for international communications drive cable capacity growth, yet financing and political risks remain major obstacles. Chinese investments help finance cable systems in multiple emerging market regions. Emerging economies need to develop robust domestic regulations and international coordination to reduce political risks, protect cable infrastructure, and manage cyber risks.
    Keywords: China, Global Economy
    Date: 2019–04
  15. By: Chang, Pao-Li (School of Economics, Singapore Management University); Lu, Angdi (School of Economics, Singapore Management University); Yi, Xin (School of Economics, Singapore Management University)
    Abstract: We quantify the supply-side determinants of quality specialization across space. Specifically, we complement the quality specialization literature in international trade and study how larger cities specialize in higher-quality goods within a country. In our general equilibrium model, firms in larger cities produce goods with higher quality, because agglomeration benefits accrue more to skilled workers who are also more efficient in upgrading quality. Two channels are at work in our model. The first channel is through the treatment effect of agglomeration, such that firms become more productive if they locate in a larger city. The second channel works through sorting, in that more pro-ductive firms receive higher agglomeration benefits and endogenously sort into larger cities. These two effects are further mitigated by the increasing skill premium with respect to city size, though the latter is dominated in the spatial equilibrium. Using firm-level data from China, we structurally estimate the model and find that product quality is on average 23% higher in big cities than that of small cities. We further find that agglomeration forces account for half of the quality difference in big cities while sorting of firms accounts for another half. A counterfactual policy to relax land use regulation in housing production raises the quality of goods produced in big cities by 5.5% and (in-direct) welfare of all residents by 6.2% through reallocation of economic activities across space.
    Keywords: Agglomeration; Quality Upgrading; Firm Heterogeneity; Sorting
    JEL: D22 F12 R12 R32
    Date: 2019–11–28
  16. By: John Knight; Bianjing Ma; Ramani Gunatilaka
    Abstract: With economic development can come social, attitudinal and cultural change, for good or ill or both We pose an unexplored question: why has happiness fallen in rural China whereas rural income has risen rapidly? Two rich data sets are analysed, the rural surveys of the China Household Income Project (CHIP) relating to 2002 and 2013. Our main methods are happiness regressions and decomposition methodology. Several approaches are adopted and no fewer than ten hypotheses are tested. One approach is to examine the variables that are found to be important in happiness functions and to consider their contributions to the fall in the mean happiness score of rural people. Another approach is to analyse the effect on rural happiness of the vast rural-urban migration that took place over this period. This is followed up by introducing tests of the role that changing attitudes might have played.
    Date: 2020–01–22

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