nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒04‒13
sixteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Regional Convergence in Russia: Estimating a Neoclassical Growth Model By Lehmann, Hartmut; Oshchepkov, Aleksey; Silvagni, Maria Giulia
  2. North Korea: The last transition economy? By Vincent Koen; Jinwoan Beom
  3. Trans-Eurasian Container Traffic: a Belt and Road Success Story By Vinokurov, Evgeny
  4. Technical Progress and Induced Innovation in China: A Variable Profit Function Approach By Wong, Gary; Fleisher, Belton M.; Zhao, Min Qiang; McGuire, William H.
  5. Economic Incentives and the Quality of Return Migrant Scholars: The Impact of China's Thousand Young Talents Program By Jia, Ning; Fleisher, Belton M.
  6. The Important Role of Equivalence Scales: Household Size, Composition, and Poverty Dynamics in Russia By Abanokova, Kseniya; Dang, Hai-Anh; Lokshin, Michael
  7. Innovation, Wages, and Polarization in China By Fleisher, Belton; McGuire, William; Su, Yaqin; Zhao, Min Qiang
  8. Linear and Nonlinear Growth Determinants: The Case of Mongolia and its Connection to China By Chu, Amanda M.Y.; Lv, Zhihui; Wagner, Niklas F.; Wong, Wing-Keung
  9. Short- and Long-Run Effects of a Sizable Child Subsidy: Evidence from Russia By Sorvachev, Ilia; Yakovlev, Evgeny
  10. Evolution of agrarian research and development in Bulgaria during country’s EU Membership By Bachev, Hrabrin
  11. Financial Inclusion and Economic Growth: The Role of Governance in Selected MENA Countries By Emara, Noha; El Said, Ayah
  12. Provincial Trade, Financial Friction and Misallocation in China By Kwon, Ohyun; Fleisher, Belton; McGuire, William; Zhao, Min Qiang
  13. Wage Gains from Foreign Ownership: Evidence from Linked Employer-Employee Data By Köllő, János; Boza, István; Balázsi, László
  14. Piata muncii din România sub presiune. Cererea si oferta de forta de munca By CHIVU, LUMINITA; GEORGESCU, GEORGE
  15. Life Satisfaction, Subjective Wealth, and Adaptation to Vulnerability in the Russian Federation during 2002-2017 By Dang, Hai-Anh; Abanokova, Kseniya; Lokshin, Michael
  16. Do Vertical Spillovers Differ by Investors' Productivity? Theory and Evidence from Vietnam By Ni, Bin; Kato, Hayato

  1. By: Lehmann, Hartmut (University of Bologna); Oshchepkov, Aleksey (NRU HSE, Moscow); Silvagni, Maria Giulia (University of Bologna)
    Abstract: In this paper, we study convergence in per capita gross regional products across Russian regions in the period from 1996 to 2017. To this purpose, we estimate growth equations, which are directly derived from a neoclassical growth model, augmented with human capital and migration. To our knowledge, this is the first paper that explicitly applies a neoclassical model to analyze the regional convergence process in the Russian case. We also take into account possible spatial effects and do a series of other robustness checks. Our main estimates establish a convergence rate of around 2% per year. While we fail to find any role of human capital for regional economic growth, we find that interregional migration and interdependencies of the growth experience of Russian regions contribute to economic convergence between them.
    Keywords: migration, regional economics, economic growth, convergence, Russia
    JEL: O47 R11 P2
    Date: 2020–03
  2. By: Vincent Koen; Jinwoan Beom
    Abstract: The North Korean economy has been a statistical black hole for decades but is undergoing substantial transformations. Rapid post-war industrialisation was not sustained beyond the mid-1960s and South Korea’s economy far outpaced North Korea’s during the next three decades, during which trend growth declined and turned negative as Soviet support ended and the terms of trade with China became less friendly. Today, GDP in North Korea is reportedly lower than in 1990, notwithstanding a larger population, and gross national income per capita is probably down to only a tiny fraction of South Korea’s.
    Keywords: central planning, China, construction, corruption, defence, development, digitalisation, energy, exchange rates, food, health, international sanctions, marketisation, monetary reform, natural disasters, North Korea, pollution, rail, Russia, smuggling, South Korea, Soviet, special economic zones, tourism, trade, transition, transport
    JEL: N15 N35 N45 N55 N65 N75 O21 O53 P21 P22 P23 P24 P26 P27 P28 P31 P52 Z32
    Date: 2020–04–08
  3. By: Vinokurov, Evgeny
    Abstract: Countries in Northern and Central Eurasia, including its largest economies, Russia and Kazakhstan, were among early believers in the value of the Belt and Road Initiative. Over the last years, they increasingly embraced various aspects of the BRI, most importantly additional investment and rising volumes of trans-Eurasian traffic. The latter, apart from being a lucrative business on its own, should eventually lead to better internal connectivity between inner-Eurasian regions. In this article I provide data and estimates for the spectacular growth of the volumes of trans-Eurasian container transit. Then I move to explain the underlying reasons and prospects. Finally, there are important remarks on the issue of financing, the role of China, and the role of international financial institutions.
    Keywords: Belt and Road Initiative; Central Asia; transport corridors; Russia; international financial institutions
    JEL: F15 F21 F34 R41
    Date: 2020–02
  4. By: Wong, Gary (University of Macau); Fleisher, Belton M. (Ohio State University); Zhao, Min Qiang (Xiamen University); McGuire, William H. (University of Washington Tacoma)
    Abstract: We propose a new methodology to estimate empirically the input price-induced technical change and total factor productivity (TFP) growth in China. Our primary goal is to test Hicks' induced innovation hypothesis by examining whether technical change in China has been induced by sharp increase in input prices that have accompanied its rapid economic growth. Utilizing the idea of a firm's two-stage optimization problem, we develop a new parametric form of the variable profit function wherein the derived input demand and output supply functions can be easily constrained to be regular, and the functional structure is parsimonious in the number of parameters. Applying this methodology to Chinese time series data for 1986–2015, we find that not only is wage-induced innovation significant and quantitatively important, but also that it substantially buffers a long-term decline in TFP growth that would otherwise be quite substantial. We conclude that China's economic growth is predominantly driven by wage-induced innovation along with massive injection of heavily subsidized physical inputs in public works and huge investment in industrial sectors.
    Keywords: induced innovation, total factor productivity, variable profit functions, China
    JEL: D22 D24 O30 O53
    Date: 2020–02
  5. By: Jia, Ning (Central University of Finance and Economics); Fleisher, Belton M. (Ohio State University)
    Abstract: We study the effect of the Thousand Young Talents Program (TYTP) on the academic quality of return migrant scientists to China. Using a unique dataset of the top Chinese mathematics departments' new hires, we find that the program leads to considerable increases in measures of their educational background and research productivity. The effects are concentrated in the elite C9 league, where the proportion of hires who received PhD degrees from top-50 overseas mathematics departments increased nearly four times after the initiation of the program. The data also reveal large and statistically significant increases in weighted pre-hire publications and weighted citations to pre-hire publications under the program. However, it appears that research output of previously hired faculty members declined after the introduction of TYTP hires, suggesting minimal or even negative impact of TYTP on faculty colleagues' academic achievements.
    Keywords: migration, scientific research, R&D policy
    JEL: J61 O31 O38
    Date: 2020–03
  6. By: Abanokova, Kseniya (Higher School of Economics, National Research University); Dang, Hai-Anh (World Bank); Lokshin, Michael (World Bank and Higher School of Economics, Moscow)
    Abstract: Hardly any literature exists on the relationship between equivalence scales and poverty dynamics for transitional countries. We offer a new study on the impacts of equivalence scale adjustments on poverty dynamics for Russia, using the equivalence scales constructed from subjective wealth and more than 20 waves of household panel survey data from the Russia Longitudinal Monitoring Survey. Our analysis suggests that the equivalence scale elasticity is sensitive to household demographic composition. The adjustments for the equivalence of scales result in lower estimates of poverty lines. We decompose poverty into chronic and transient components and find that chronic poverty is positively related to the adult scale parameter. Chronic poverty, however, is less sensitive to the child scale factor compared to the adult scale factor. Interestingly, the direction of income mobility might change depending on the specific scale parameters that are employed. Our results are robust to different measures of chronic poverty, income expectations, reference groups, functional forms, and various other specifications.
    Keywords: poverty, poverty dynamics, equivalence scale, Russia, panel survey
    JEL: I30 J10 O15
    Date: 2020–03
  7. By: Fleisher, Belton; McGuire, William; Su, Yaqin; Zhao, Min Qiang
    Abstract: Using data from CHIPS 1995-2013, we find polarization of employment from middle-income Skilled jobs to work in the Unskilled and Self-Employment job categories. This redistribution of employment is consistent with the automation of routine noncognitive tasks in the skilled sector as analyzed in a number of papers on advanced economies and some work on the Chinese economy. While the Unskilled and Self-Employment jobs remain below median income, the redistribution of employment has not been associated with a commensurate polarization of labor income. We find no evidence of polarization of either employment or income at the upper end of the job-skill spectrum.
    Keywords: polarization; innovation; wage growth; China
    JEL: J31
    Date: 2018–05–31
  8. By: Chu, Amanda M.Y.; Lv, Zhihui; Wagner, Niklas F.; Wong, Wing-Keung
    Abstract: We investigate growth determinants for Mongolia as a small emerging economy considering China as its large neighbor. Our causality analysis during January 1992 to August 2017 reveals significant linear and nonlinear relationships in growth explanation. China’s GDP and coal prices, together with some of their linear and nonlinear lagged components, predict Mongolia’s GDP, where a one percent increase in China’s GDP relates to an increase in Mongolia of 1.5 percent. Current exchange rates and the nonlinear components of lagged levels of consumer prices also explain growth. Our results underline the role of macroeconomic drivers of growth in emerging economies.
    Keywords: gross domestic product (GDP); economic growth; energy prices; coal prices; consumer prices; foreign direct investment (FDI); exchange rates; cointegration; multivariate Granger causality; nonlinear Granger causality;
    JEL: C53 E52 F42
    Date: 2020–03–20
  9. By: Sorvachev, Ilia (University of Wisconsin-Madison); Yakovlev, Evgeny (New Economic School, Moscow)
    Abstract: This paper utilizes a large-scale natural experiment aimed at increasing fertility in Russia. Motivated by a decade-long decrease in fertility and population, the Russian government introduced a sequence of sizable child subsidies (called Maternity Capitals) in 2007 and 2012. We find that the Maternity Capital resulted in a significant increase in fertility both in the short run and in the long run, and has already resulted in an increase in completed fertility for a large cohort of Russian women. The subsidy is conditional and can be used mainly to buy housing. We find that fertility grew faster in regions with a shortage of housing and with a higher ratio of subsidy to housing prices. We also find that the subsidy has a substantial general equilibrium effect. It affected the housing market and family stability. Finally, we show that this government intervention comes at a substantial cost: the government's willingness to pay for an additional birth induced by the program equals approximately 50,000 dollars.
    Keywords: fertility, maternity capital, housing
    JEL: J1 H1 I1
    Date: 2020–02
  10. By: Bachev, Hrabrin
    Abstract: Despite the great theoretical and practical significance, in Bulgaria there are no comprehensive analysis of the state and evolution of agrarian research and development (ARD) activities. The goal of this paper is to analyze the state and evolution of ARD in Bulgaria during the period after country’s EU accession in 2007, identify major trends in that area, make a comparison with other EU states, specify main problems, and suggest conclusions for improvement of policies during next programing period. The analysis has found out that in years of EU membership the expenditures for ARD significantly decreased absolutely and relatively as a share in the total expenditures for R&D, which indicates diminishing importance, and deteriorating financial, personnel and material potential of agrarian knowledge and innovation sector. The most important sector for ARD in the country is the government in which more than 80% of overall expenditures for ARD are invested, as distribution of expenditures and organization of R&D in major sectors differ considerably from other EU member states. ARD in the country mainly are funded by the state budget, and the importance of budget financing relatedly increases during the period, unlike trends in other EU countries.
    Keywords: research and development, agriculture, sectors, funding, AKIS, Bulgaria
    JEL: O1 O13 O14 O3 O32 O38 Q1 Q16 Q18
    Date: 2019
  11. By: Emara, Noha; El Said, Ayah
    Abstract: Financial inclusion, whether in terms of adoption or usage, is one of the main, but challenging priorities in the MENA region. The paper empirically investigates the relationship between financial inclusion and economic growth in selected MENA countries. A system GMM dynamic panel model technique is employed on yearly data for the period 1965-2016, using a number of measures of financial inclusion covering the households and the firms access to finance. Particularly, the study uses indicators such as the number of bank accounts (per 1000 adult population), bank accounts for corporates/enterprises, and the number of bank branches and ATMS (per 100,000 people), percentage of firms using banks to finance investments, the percentage of firms using bank loans to finance working capital, and the percentage of firms using banks to finance investments. The results of the study indicate that financial inclusion positively impacts GDP per capita growth in the selected countries. Financial inclusion measured by the household’s financial access index has a positive and statistically significant impact on economic growth in the MENA region, but requires supervisory and regulatory regimes with backing of the rule of law, judicial independence, contract enforcement, control of corruption, and political stability. The effect firms’ access to finance is only significant in the presence of strong institutions. The results were insignificant for the general financial inclusion measure.
    Keywords: Financial Inclusion; Governance; Economic Growth; MENA; Financial Development
    JEL: C23 G21 O43
    Date: 2019–10–17
  12. By: Kwon, Ohyun (School of Economics); Fleisher, Belton (Department of Economics); McGuire, William (Department of Economics); Zhao, Min Qiang (The Wang Yanan Institute for Studies in Economics)
    Abstract: We study the implications of financial-market imperfections on labor and capital misallocation in China. Financial friction stems from private sectors’ credit constraints that limit the efficient use of capital relative to state firms. Our model can jointly explain labor flows out of and capital flows into Chinese provinces with high capital market distortion. To formally test our model hypotheses, we develop a measure of regional financial friction based on our model such that underlying financial friction can be inferred from differences-in-differences in the market shares of private and state sectors and their marginal rental rates of capital. Our regression results confirm that our measure of financial friction has robust power in explaining interprovincial capital and labor flows. Our structural analysis shows that improving financial frictions results in an aggregate 3.9% welfare gain in China that is rather heterogeneously distributed across provinces.
    Keywords: financial friction; regional capital flows; Chinese economy
    JEL: F21 F22 O15 P23 R13
    Date: 2020–03–30
  13. By: Köllő, János (Institute of Economics, Budapest); Boza, István (Central European University, Budapest); Balázsi, László (Central European University, Budapest)
    Abstract: We compare wages in multinational enterprises (MNEs) versus domestic firms, the earnings of domestic firm workers with past, future and no MNE experience, and estimate how the presence of ex-MNE peers affects the earnings of domestic firm employees. The analysis relies on monthly panel data covering half of the Hungarian population and their employers in 2003-2011. We identify the returns to MNE experience from changes of ownership, wages paid by new firms of different ownership, and the movement of workers between enterprises. We find high contemporaneous and lagged returns to MNE experience and significant spillover effects. Foreign acquisition has a moderate wage impact but there is a wide gap between new MNEs and domestic firms. The findings suggest that MNE experience is valued in the high-wage segment of the local economy, connected with the MNEs via worker turnover.
    Keywords: wage differentials, foreign direct investment, Hungary, multinational enterprises, wage spillover
    JEL: F23 J31 J62
    Date: 2020–03
  14. By: CHIVU, LUMINITA (National Institute of Economic Research - Romanian Academy); GEORGESCU, GEORGE (National Institute of Economic Research - Romanian Academy)
    Abstract: The labour market in Romania is under the pressure of divergent factors, at the intersection of the labour demand and supply determinants. This paper is focusing on quantitative and qualitative analysis of the labour market in Romania, trying to identify its imbalances and to find ways for their mitigation considering the main trends, including the European labour market developments. From the perspective of the labour supply, despite massive emigration, is found that Romania still has an important human potential including an unused workforce reserve, but the performances of the education and training should improve for increasing the quality of competences and skills needed on the labour market. Looking at the demand for labour force, although under the circumstances of the lack of information for an accurate assessment, starting with 2012, as a general trend, the number of jobs created exceeded the number of job vacancies, the new created companies, with a higher degree of technology and more competitive, having significantly contributed to the increase in the employment rate. However, imbalances between the labour demand and supply have emerged and are growing, likely to become a severe obstacle hindering the development of Romania in the medium and long term.
    Keywords: demographic trends, population aging, emigration, demographic and economic dependency ratio, labour market demand and supply, labour market tensions, internal mobility, labour shortages
    JEL: E60 F22 F66 I20 J08 J10 J21 J23 J61
    Date: 2020–03
  15. By: Dang, Hai-Anh (World Bank); Abanokova, Kseniya (Higher School of Economics, National Research University); Lokshin, Michael (World Bank and Higher School of Economics, Moscow)
    Abstract: We offer the first study on vulnerability adaptation to subjective well-being, using rich panel data over the past two decades for Russia. We found no adaption to vulnerability for life satisfaction and subjective wealth, with longer vulnerability spells being associated with more negative subjective welfare. Similar results hold for other outcomes including satisfaction with own economic conditions, work contract, job, pay, and career. Some evidence indicates that despite little differences between urban and rural areas with life satisfaction, rural areas exhibit a stronger lack of adaptation for subjective wealth, particularly for longer durations of vulnerability. Higher education levels generally exhibit a stronger lack of adaptation. The lack of adaptation to vulnerability is, however, similar at different education levels for subjective wealth. We also find a U-shaped relationship between age and durations of vulnerability and disability to have the most negative impacts on life satisfaction and subjective wealth.
    Keywords: vulnerability, adaptation, satisfaction, subjective wealth, gender, panel data, Russia
    JEL: D6 I3 O1
    Date: 2020–03
  16. By: Ni, Bin; Kato, Hayato
    Abstract: Developing countries are eager to host foreign direct investment to receive positive technology spillovers to their local firms. However, what types of foreign firms are desirable for the host country to achieve spillovers best? We address this question using firm-level panel data from Vietnam to investigate whether foreign Asian investors in downstream sectors with different productivity affects the productivity of local Vietnamese firms in upstream sectors differently. Using endogenous structural breaks, we divide Asian investors into low-, middle-, and high-productivity groups. The results suggest that the presence of the middle group has the strongest positive spillover effect. The differential spillover effects can be explained by a simple model with vertical linkages and productivity-enhancing investment by local suppliers. The theoretical mechanism is also empirically confirmed.
    Keywords: FDI spillovers; Heterogeneous productivity; Firm-level data; Endogenous structural break; Vertical Cournot model
    JEL: D22 F21
    Date: 2020–03–27

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