nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒08‒31
nine papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. From workers to capitalists in less than two generations: A study of Chinese urban elite transformation between 1988 and 2013 By Li Yang; Filip Novokmet; Branko Milanovic
  2. The Wage Premium of Communist Party Membership: Evidence from China By Plamen Nikolov; Hongjian Wang; Kevin Acker
  3. The Employment Effect of Inward FDI in China: What Do We Learn from the History? By Hao Wang; Yuemei Ji; Qi Luo
  4. Labor Force Participation of Married Woman in Russia By Salim Turdaliev
  5. Fiscal Decentralization and Interregional Capital Misallocation: Evidence from China By Zheng Li; Jorge Martinez-Vazquez
  6. Growing up under Mao and Deng : On the ideological determinants of corporate policies By Hao, Liang; Rong, Wang; Haikun, Zhu
  7. Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015 By Pawel Bukowski; Filip Novokmet
  8. Factors Affecting the Competitive Capacity of Commercial Banks: A Critical Analysis in an Emerging Economy By Dao, Kieu Oanh; Kieu, Le; Tu, Pham Thuy; Nguyen, V.C.
  9. How to Organize Research in Central Banks: The Czech National Bank's Experience By Simona Malovana

  1. By: Li Yang (PSE - Paris School of Economics, WIL - World Inequality Lab); Filip Novokmet (University of Bonn); Branko Milanovic (New York University - NYU - New York University [New York] - NYU - NYU System)
    Abstract: Economic and social transformation of China during the past 40 years is without precedent in human history. While the economic transformation was extensively studied, social transformation was not. In this paper, we use for the first time harmonized household surveys covering the period 1988-2013 to study the changes in the characteristics the richest 5 percent of China's urban population. We find that the elite changed from being composed of high government officials, clerical staff, and workers in 1988 to professionals and small and large business owners in 2013. The educational level of the elite increased substantially. Membership in CCP has a positive (albeit small) effect on one's income but is particularly valuable to large business owners.
    Keywords: China,elites,income share,class,top incomes
    Date: 2019
  2. By: Plamen Nikolov; Hongjian Wang; Kevin Acker
    Abstract: Social status and political connections could confer large economic benefits to an individual. Previous studies focused on China examine the relationship between Communist party membership and earnings and find a positive correlation. However, this correlation may be partly or totally spurious, thereby generating upwards-biased estimates of the importance of political party membership. Using data from three surveys spanning more than three decades, we estimate the causal effect of Chinese party membership on monthly earnings in in China. We find that, on average, membership in the Communist party of China increases monthly earnings and we find evidence that the wage premium has grown in recent years. We explore for potential mechanisms and we find suggestive evidence that improvements in one's social network, acquisition of job-related qualifications and improvement in one's social rank and life satisfaction likely play an important role. (JEL D31, J31, P2)
    Date: 2020–07
  3. By: Hao Wang; Yuemei Ji; Qi Luo
    Abstract: This study investigates the long-term influence of colonial legacy on the nexus between inward foreign direct investment (FDI) and labor market. We construct a panel dataset containing 285 Chinese cities 2011 to 2017 along with detailed information about Chinese modern history during 1842-1955). Our results show that the inward FDI has a positive effect on employment and such an effect is more pronounced in the regions with colonial influence than their counterparts. Further, we find that the experience of Western colonization strengthens the positive effect of inward FDI on employment whereas the experience of Japanese colonization weakens or even overturns this positive effect. These findings are robust to controlling for the endogeneity between inward FDI and employment as well as employing alternative measures for the colonization.
    Keywords: colonial legacy, foreign direct investment, employment, Chinese modern history
    JEL: N01 F21 J23
    Date: 2020
  4. By: Salim Turdaliev (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Women make up a little over half the world’s population, but their contribution to the labor force is far below its potential, with serious macroeconomic consequences. Despite a recent progress, labor markets across the globe remain divided along gender lines, and female LFP remains lower than the participation of their male counterparts. This paper assesses the determinants of labor force participation of married woman in Russia, using data obtained from Russian Longitudinal Monitoring Survey (RLMS). The study employs two-step Heckman selection model whose major function is to give unbiased estimators of the parameters of the wage function, which could serve to estimate parameters of a structural equation of participation. Two types of proxies (the presence of children and household income characteristics) that affect the married female’s opportunity cost of working but do not generate sample selection mechanisms are used in order to overcome the identification problem in the first-stage wage equation. The estimated semi-elasticity of married female participation to wage is equal to 0.24. The findings of the study also indicate that such factors as gender, age, the presence of dependent children, educational attainment, location and the religious affiliation are the significant determinants of the LFP. The income of the other household members, and race of the respondent, on the other hand, proved to be insignificant determinants of labor supply. As a result, the empirical evidence provided by this project can be useful in future assessments of current social security and employment policies implemented in transition economies.
    Keywords: female labour supply, economic transition, Russian labour market
    JEL: J21 J22 J31
    Date: 2020–08
  5. By: Zheng Li (Department of Economics, Georgia State University, USA); Jorge Martinez-Vazquez (International Center for Public Policy, Georgia State University, USA)
    Abstract: Misallocation of factors of production has been recently viewed as a promising explanation accounting for the large difference in total factor productivity (TFP) across countries. This paper differs from previous studies by concentrating on interregional capital misallocation and by focusing on the role of fiscal decentralization in shaping misallocation. Using a city-level panel data set, we measure intra-provincial and inter-municipal capital misallocation in China over 2003-18. The empirical results based on provincial-level panel data suggest that fiscal decentralization can lower inter-municipal capital misallocation while revenue decentralization performs better than expenditure decentralization. We further find that this positive effect is more significant and much larger when the market rather than government intervention is driving the flow of capital. The results are robust to subsample regressions, IV estimations, spatial autoregressions and alternative measurement of interregional misallocation. Our study complements the literature on the causes of misallocation and enriches the understanding of the consequences of fiscal decentralization, especially in terms of economic growth and interregional inequality.
    Date: 2020–08
  6. By: Hao, Liang; Rong, Wang; Haikun, Zhu
    Abstract: Economic activities have always been organized around certain ideologies, yet little is known about how ideology shapes corporate behavior and how it is different from other political forces. We investigate the impact of politicians’ ideology on corporate policies by exploring a unique setting of ideological change in China from Mao’s ideology to Deng’s around 1978. Using textual analysis based on keywords in People’s Daily, we find a discontinuity in ideological exposure among people who later became city mayors. Those who were at least 18 years old in 1978 and had joined the Chinese Communist Party (CCP) are more likely to have adopted Mao’s ideology, and those who did not join by 1978, due to age limit, but joined soon thereafter were more likely to have adopted Deng’s ideology. This ideological difference has had an enduring effect on contemporary firm and city policies. Firms in cities governed by mayors with Mao’s ideology have made more social contributions, lowered within-firm pay inequality, and pursued less internationalization than those with Deng’s. These effects are stronger in firms with political connections, less state ownership, and more government subsidies as well as in regions that are more market-oriented and not “revolutionary bases.” Our results are robust to OLS regressions with various pair fixed effects besides regression discontinuity. We further find that corporate policies promoted by Mao’s ideology are associated with slower firm growth but greater stakeholder engagement.
    JEL: G30 M14 P16
    Date: 2020–08–27
  7. By: Pawel Bukowski (LSE - London School of Economics and Political Science); Filip Novokmet (PSE - Paris School of Economics, University of Bonn, WIL - World Inequality Lab)
    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 distri-bution 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 fromwar destructions with communist policies both eliminating private ownership and forc-ing 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.
    Keywords: Communism,Capitalism,Inequality,Poland,capital income,distribution,concentration,market liberalisation,privatisation,top incomes
    Date: 2019
  8. By: Dao, Kieu Oanh; Kieu, Le; Tu, Pham Thuy; Nguyen, V.C.
    Abstract: This research was conducted to investigate the factors influencing the commercial bank’s competitive capacity in an emerging country. Data were collected from the domestic-owned commercial banks and foreign-owned commercial banks listed on Vietnam’s Stock Exchange over the period of nine years from 2010 to 2018. Three statistic approaches were employed to address econometrics issues and to improve the accuracy of the regression coefficients: Pooled Ordinary Least Square (Pooled OLS), Random Effects Model (REM), and Fixed Effects Model (FEM). To correct the diagnostics and endogeneity in the model, the study uses Generalized Least Square (GLS) and Generalized Method of Moments (GMM). In order to account for the degree of competitive capacity we use Lerner index. Results demonstrate that the impact of bank-specific characteristics on market power in banks is statistically significant, and there are substantial distinguishments of economic consideration among these factors. In addition, a bank with a higher level of competitive capacity in the previous year will outstandingly generate competitive capacity in the current year. Another possibility, a greater level foreign investment into the banks in the host country could further encourage competitive capacity in the banking system. Finally, economic growth rate has no impact on competitive capacity at a significant level of 5% while a positive effect from inflation on bank’s market power could be found.
    Date: 2020–07–06
  9. By: Simona Malovana
    Abstract: This paper describes the Czech National Bank's experience with the implementation of a new research model, which was motivated by a weakened link between research outputs and their application. The changes implemented in 2017 represented a next step in the evolution of the Czech National Bank's research process and have helped increase the relevance of research outputs and the flexibility of the whole process. The paper also summarizes the remaining challenges under the new research model and describes the implementation of project management in the financial research area.
    Keywords: Central banking, Czech National Bank, challenges, project management, research model
    JEL: A1 A3
    Date: 2020–07

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