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

  1. Fiscal Rules for the Western Balkans By Kikoni,Edith; Madzarevic-Sujster,Sanja; Irwin,Tim; Jooste,Charl
  2. RUSMOD -- A Tool for Distributional Analysis in the Russian Federation By Matytsin,Mikhail; Popova,Daria; Freije-Rodriguez,Samuel
  3. Management Capabilities and Performance of Firms in the Russian Federation By Grover,Arti Goswami; Torre,Ivan
  4. The vanishing interest income of Chinese banks By Kauko, Karlo
  5. Social Market Economy as an Alternative to the Washington Consensus in the Western Balkans By Matoshi, Ruzhdi; Mulaj, Isa
  6. Keeping up with the Novaks? Income distribution as a determinant of household debt in CESEE By Hake, Mariya; Poyntner, Philipp
  7. Territorial inequalities and convergence – techniques and analysis methods By Antonescu, Daniela
  8. Taking Another Look at Policy Research on China's Accession to the World Trade Organization By Ianchovichina,Elena; Martin,William J.
  9. Asymmetric exchange rates pass-through: New evidence from Vietnam By Ho, Sy-Hoa; Hafrad, Idir
  10. Pollution Regulations, Air Quality, and the Local Economy By Chen, Ying
  11. Informal Employment and Worker's Well-Being in the Russian Federation By Kim,Yeon Soo; Matytsin,Mikhail; Freije-Rodriguez,Samuel
  12. The gender pay gap in Hungary: new results with a new methodology By Olga Takacs; Janos Vincze
  13. The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model By Van Nguyen, Phuong

  1. By: Kikoni,Edith; Madzarevic-Sujster,Sanja; Irwin,Tim; Jooste,Charl
    Abstract: Policy toward fiscal rules is an important issue in the countries of the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia). According to a rough estimate, the countries with rules (all but North Macedonia) have complied with their debt and overall-deficit rules a little more than half the time. An online survey, conducted for this paper, suggests that public understanding of the rules is limited, which may reduce the political pressure for compliance. To get debt down to prudent levels, Albania and Montenegro will need a strong commitment to complying with their fiscal rules and will often have to do more than their deficit rules require. The following principles should guide future policy toward fiscal rules: more emphasis should be given to ensuring that fiscal rules are widely understood and enjoy the support of a broad range of stakeholders; policy toward the rules should be consistent with accession to the European Union, but the rules should be simpler than the European Union's and the debt limits lower; limits in rules should not be mistaken for targets; and public financial management should be improved to support the implementation of rules.
    Keywords: Macroeconomics and Economic Growth,Economic Policy, Institutions and Governance,Fiscal&Monetary Policy,Macro-Fiscal Policy,Public Sector Economics,Public Finance Decentralization and Poverty Reduction,Economic Adjustment and Lending,Public Financial Management,Inflation
    Date: 2019–08–20
  2. By: Matytsin,Mikhail; Popova,Daria; Freije-Rodriguez,Samuel
    Abstract: The purpose of this paper is to introduce applications of RUSMOD -- a microsimulation model for fiscal incidence analysis in the Russian Federation. RUSMOD combines household survey micro-data and fiscal policy rules to simulate the Russian tax-benefit system: the size and distribution of taxes collected and benefits paid, and the impact of the system on different population groups. Microsimulation models, such as RUSMOD, are habitually used in developed countries, and can be versatile budgetary policy tools. Using this model, the current tax-benefit system in Russia is examined. The impact of the system is measured across the income distribution, age groups, family types, localities, as well as across time. One of the applications of RUSMOD this paper aims to assess is the role of the tax-benefit system in explaining the incidence of informal employment in Russia. The paper investigates whether the existing system creates disincentives for formalization in terms of reducing disposable incomes and increasing poverty and inequality, and whether a hypothetical tax reform would be able to reduce the opportunity costs of formalization for informal workers, improve distributional outcomes, and increase fiscal revenues.
    Date: 2019–09–03
  3. By: Grover,Arti Goswami; Torre,Ivan
    Abstract: Using the management and operational practices survey in the Russian Federation, this paper finds that an average Russian manufacturing firm adopts 43 percent of the structured management practices (a score of 0.43), a value that is far from the frontier (for example, the United States scores 0.62). This average mask the wide heterogeneity in practices, where a large share of firms adopt few structured management practices and only 3.5 percent of them have a score over 0.75. Consistent with the findings in other countries, better managed firms in Russia show stronger firm performance, measured as gross revenue per employee, value added per employee, total factor productivity, and employment growth. Improving the management score from the 10th to the 90th percentile is associated with an increase in sales per worker by 87 percent, value added per worker by 30 percent, and total factor productivity by 13.5 percent. What drives better management capabilities? Russian firms are similar to those in other countries, such that exporters and firms with foreign linkages are better managed. Switching from operating purely in the domestic market to being globally linked is associated with a significant increase in management capabilities. However, unlike the results in other countries, management capabilities in Russia are not associated with firm age, implying that firms do not learn to be better managed over their life cycle. This result points to the possibility of inefficient allocation of resources, such that learning and selection mechanism does not weed out the badly managed firms, perhaps due to the lack of pro-competitive forces.
    Date: 2019–09–04
  4. By: Kauko, Karlo
    Abstract: Chinese banks likely have more non-performing loans (NPLs) than officially reported. As hidden NPLs earn no interest income, loan quality problems may erode the gross interest income of banks. Using stochastic frontier analysis, we estimate the interest income of a hypothetical profit-maximising Chinese bank with no credit quality problems. Taking the deviation of actual interest income from the calculated efficient income, we then attempt to reveal the amount of hidden NPLs in Chinese banks. Our results uncover a substantial weakening in the quality of Chinese bank loan portfolios in 2016. Big banks are found to have the largest reservoirs of hidden NPLs. Dependence on interbank funding also seems to be a determinant in the size of hidden NPL portfolios.
    JEL: G21 O53
    Date: 2020–02–05
  5. By: Matoshi, Ruzhdi; Mulaj, Isa
    Abstract: Nearly three decades after the beginning of transition from communism to democracy and open market economy in Central and Eastern Europe (CEE), the Washington Consensus in general received the mark as a failure. While the experience from the CEE apart from common results showed considerable variations, the package of reforms is questioned even in the long-term perspective, especially for producing high social costs. Recent mass emigrations from the Western Balkans due to poor economic conditions and from the Middle East, have brought to attention the credibility of exporting or imposing the American type of democracy, and with it, the Washington Consensus as a model of economic transformation and development. But is there an alternative? It already existed even before the systemic changes in CEE began, and can be more preferable even now to the countries that have to undergo a considerable economic transformation. That is the social market economy, which still can be applied in some countries that have lagged behind in transition. This paper explores the perspective of introducing and implementing such a model in the Western Balkan countries, with a reference to the role by the state, taxes, income distribution, and business development.
    Keywords: Washington Consensus, Social Market Economy, Western Balkans, economic reforms
    JEL: B41 F02 P16 P51
    Date: 2019–12
  6. By: Hake, Mariya; Poyntner, Philipp
    Abstract: This paper constitutes an initial attempt to shed light on the role of income distribution in household debt and financial market access in Central, Eastern and Southeastern Europe (CESEE). Using household-level data from the OeNB’s Euro Survey for the period 2009-2018, we address the question whether interpersonal comparisons (“keeping up with the CESEE Joneses" i.e. "the Novaks”) affect the probability of having and planning a loan. Applying multilevel probit modeling to take into account the hierarchical structure of the data, our results support the notion that higher income inequality is negatively correlated with the probability of having a loan at the bottom of the distribution, and positively at the top. We show this impact for almost all components of household debt, but evidence is strongest for mortgage, car and foreign currency loans. Interpersonal comparisons turn out to drive loan intentions, however, mainly on the very top of the income distribution.
    JEL: G0 D1 D3
    Date: 2020–02–11
  7. By: Antonescu, Daniela
    Abstract: The subject proposed in the present research paper is frequently debated and analysed, both at political level and at theoretical and practical level, the opinions and beliefs of the experts being sometimes contrary, but mostly reaching a common denominator: the cohesion and regional development represents for the Member States and for Romania an opportunity for supporting national economy re-launch, diminishing development inequalities and achieving economic and social convergence at territorial level. Therefore, the presentation of theories, techniques and methods for evaluating and interpreting the convergence process can be a useful approach, both for the academic environment and for the stakeholders.
    Keywords: territorial convergence, regional development, economic and social inequalities
    JEL: R1 R10 R12 R15
    Date: 2020–02–05
  8. By: Ianchovichina,Elena; Martin,William J.
    Abstract: Recent work on China's accession to the World Trade Organizations pays little attention to the wave of reforms in China in the 1980s and 1990s. These reforms created the preconditions for accession and strongly influenced its outcomes. The preeminence of processing trade at the time of accession sharply reduced the impact of accession-related tariff reductions on exports and set the stage for China's increases in domestic value added and reduction in China's involvement in global production sharing since that time. The assessment in this paper, based on export data and simulation results on the ex ante accession-related effects on export volumes in the literature, finds that the accession must have increased China's real export growth by at most 6 percentage points between 1997 and 2005. This effect is substantial, but not as large as suggested by the difference between the pre- and post-accession export growth rates in the four years before and after accession. This is because the influence of cyclical fluctuations related to the Asian financial crisis and the U.S. dot-com crash dampened export growth in the period before accession in 2001 and accelerated it afterward.
    Date: 2019–07–01
  9. By: Ho, Sy-Hoa; Hafrad, Idir
    Abstract: Exchange rate pass-through always deserves interest of policy makers and economists. In this paper, we study the measure of exchange rate pass-through on consumer price for Vietnam by using Nonlinear Autoregressive Dynamic Lag in the period from 2000Q4 to 2018Q2. Our findings can be summarized as follow: (i) we demonstrates the existence of asymmetric effect of exchange rate to domestic price in both short run and long run; (ii) the exchange rate pass-through is high; (iii) impact of exchange rate depreciation on domestic price is stronger than appreciation; (iv) the exchange rate pass-through is higher in the long-run than in the short run; (v) foreign competitor price plays an important role for domestic price movement.
    Keywords: Exchange rate pass-through; Asymmetric exchange rate; ARDL models; NARDL models
    JEL: C22 E52
    Date: 2020–02–15
  10. By: Chen, Ying
    Abstract: Air quality is an important amenity that affects the labor supply to a local economy while regulations aiming at improving it can be costly and consequently reduce the local labor demand. This article studies how air quality and its regulation respectively and jointly affect the local economy through these two channels by exploiting China's first national air pollution regulation and migration reform as natural experiments. I propose an instrumental variable for local pollution levels by applying rich remote-sensing data to the engineering considerations of power plant construction. The estimation results suggest that heavy air pollution has driven out high-skilled workers when migration costs fall, while the regulation to curb pollution has led to a reduction in manufacturing employment in targeted locations and sectors. Additional results show relatively slower firm and wage growth in more regulated prefectures and sectors, and a modest local employment reallocation from heavy-to light-polluting industries.
    Keywords: Environmental regulations, Air pollution, Local economic growth
    JEL: J61 Q52 Q53 R11
    Date: 2020–02
  11. By: Kim,Yeon Soo; Matytsin,Mikhail; Freije-Rodriguez,Samuel
    Abstract: This paper finds that informal workers are more likely to have inferior work conditions, but do not necessarily report worse subjective well-being. Starting with lower wages, but also with less regularity of hours and paid vacation, informal workers have higher incidence of envelope payments than formal workers but not of hazardous or unstable jobs. After controlling for work conditions, informal workers do not have statistically significantly lower job satisfaction and under no specification are informal workers more likely to self-assess worse health than formal workers. Finally, there is some association between informal employment and household poverty and life satisfaction, but it is not robust to changes in econometric specification or sample composition. The authors conclude that the evidence indicates that informal employment in the Russian Federation is mostly a problem of labor productivity and the design of the social protection system, but worsening wages and some association between informality and household poverty indicate that informality may also be a social equity problem.
    Keywords: Employment and Unemployment,Rural Labor Markets,Labor Markets,Health Care Services Industry
    Date: 2019–08–20
  12. By: Olga Takacs (Corvinus University of Budapest and Center for Economic and Regional Studies, Institute of Economics); Janos Vincze (Corvinus University of Budapest and Center for Economic and Regional Studies, Institute of Economics)
    Abstract: We estimate the gender pay gap with the traditional OLS based Blinder-Oaxaca decomposition, and with an extension using Random Forest (RF) regressions on Hungarian data for the years 2008-2016. Random Forests perform better as predictors out-of-sample and yield consistently lower estimates for the unexplained pay gap than OLS. Then we analyse the unexplained gaps obtained from the RF regressions with a CART (Classification and Regression Tree) analysis. It seems that sectoral and educational factors are most consistently involved, but some other factors like firm size, age or tenure are also important. There are indications that medium educational levels and small firm size together, in certain industries, are most conducive to small (or even negative unexplained gaps), while high educational achievement in certain other industries (including manufacturing) are responsible for the highest gaps. In the first years of our sample period it was true in particular for middle aged and older women. This seems to be in accordance with the idea that educated women may have had problems with accumulating human capital.
    Keywords: gender pay gap, Hungary, Oaxaca-Blinder decomposition, Random Forest Regression, CART
    JEL: J16 J31 C14
    Date: 2019–12
  13. By: Van Nguyen, Phuong
    Abstract: The primary purpose of this paper is to investigate the sources of the business cycle fluctuations in Vietnam. To this end, we develop a small open economy New Keynesian Dynamic Stochastic General Equilibrium (SOE-NK-DSGE) model. Accordingly, this model includes various features, such as habit consumption, staggered price, price indexation, incomplete exchange-rate pass-through, the failures of the law of one price and the uncovered interest rate parity. It is then estimated by using the Bayesian technique and Vietnamese data 1999Q1 − 2017Q1. Based on the estimated model, this paper analyzes the sources of the business cycle fluctuations in this emerging economy. Indeed, this research paper is the first attempt on developing and estimating the SOE-NK-DSGE model with the Bayesian technique for Vietnam.
    Keywords: International macroeconomics; international spillover; Vietnamese economy; New Keynesian DSGE model; Bayesian estimation
    JEL: E12 E31 E32 E47 E52 F41 F43
    Date: 2020–02

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