nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒09‒07
nine papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Estimating the Effect of the One-Child Policy on Chinese Household Savings: Evidence from an Oaxaca Decomposition By Zhongchen Song; Tom Coupé; W. Robert Reed
  2. Air Pollution Quotas and the Dynamics of Internal Skilled Migration in Chinese Cities By Yu, Bo; Lee, Wang-Sheng; Rafiq, Shuddhasattwa
  3. China's Productivity Slowdown and Future Growth Potential By Brandt,Loren; Litwack,John; Mileva,Elitza Alexandrova; Wang,Luhang; Zhang,Yifan-000568579; Zhao,Luan
  4. Technical gap, trade partners and product mix evolution: how trading with China affects global CO2 emissions By Banie Naser Outchiri; Jie He
  5. On the Effects of Monetary Policy in Vietnam: Evidence from a Trilemma Analysis By Hoang, Viet-Ngu; Nguyen, Duc Khuong; Pham, Tuan Anh
  6. Window Dressing in the Public Sector: A Case Study of China’s Compulsory Education Promotion Program By Hanming Fang; Chang Liu; Li-An Zhou
  7. Trade Facilitation, R&D Innovation, and Export Sophistication of Manufacturing Industries: Evidence from Russia and Central-Eastern European Countries By Yuanhong, Hu
  8. The Multiple Perception of Innovation: The Case of Micro and Small Enterprises in the Region of Eastern Macedonia and Thrace By Vlados, Charis; Chatzinikolaou, Dimos
  9. Are the Losers of Communism the Winners of Capitalism? The Effects of Conformism in the GDR on Transition Success By Max Deter

  1. By: Zhongchen Song; Tom Coupé (University of Canterbury); W. Robert Reed (University of Canterbury)
    Abstract: Researchers have long puzzled over China’s high household savings rate. Some have hypothesized that the explanation lies with China’s One-Child Policy (OCP). According to this hypothesis, faced with fewer children to support them in their old age, Chinese parents increased their savings to finance retirement. Previous research relied on empirical studies of the relationship between children and saving behavior. However, all of these studies based their analysis on data after the OCP was implemented. Their implicit counterfactual for China without an OCP was households with multiple children living in an OCP environment. In contrast, we compare Chinese people with people from regions that do not have restrictive population policies. These regions share many cultural, demographic and economic characteristics with China that suggest they can be used as a counterfactual for China. This approach enables us to employ a Blinder-Oaxaca decomposition procedure to identify the different channels by which children could affect savings. Our results suggest that the OCP decreased households’ proclivity to save. The estimated effects are generally small, in the range of one to two percentage points. We find no evidence to indicate that the OCP can explain China’s high saving rate. An implication of our findings is that they suggest that the recent relaxation of the OCP cannot be counted upon to substantially boost Chinese consumption.
    Keywords: China, One-Child Policy, Savings rate, Demographics, Blinder-Oaxaca decomposition
    JEL: D14 E21 J13 J18 O10
    Date: 2020–08–01
  2. By: Yu, Bo (Deakin University); Lee, Wang-Sheng (Deakin University); Rafiq, Shuddhasattwa (Deakin University)
    Abstract: This paper examines the role of a sulphur dioxide (SO2) emissions quota introduced as part of China's 11th Five-Year Plan on internal movements of high-skilled labour across Chinese prefecture cities. Using data on migration flows calculated through changes in Hukou status, this study suggests that a 1,000 tons increase in the SO2 emissions reduction quota leads on average to approximately a 1.5 percentage points increase in high-skilled net outmigration. Compared to the largest prefectures, this regulation effect is twice as large in the smaller regulated prefectures. A possible mechanism could be that the implementation of SO2 quotas decreases relative labour demand in polluting industries in the regulated cities in the short term, thereby resulting in sectoral transitions from dirty-to-clean industries as well as skilled net outmigration flows. However, this net outmigration trend fades in the long term due to stabilisation in air quality. Our findings help contribute to a broader understanding of the effects of environmental policies on internal labour migration and labour force dynamics.
    Keywords: air pollution, China, emissions quota, environmental policy, internal migration, sulphur dioxide
    JEL: J61 O15 Q53 Q58
    Date: 2020–07
  3. By: Brandt,Loren; Litwack,John; Mileva,Elitza Alexandrova; Wang,Luhang; Zhang,Yifan-000568579; Zhao,Luan
    Abstract: China?s economy grew by an impressive 10 percent per year over four decades. Productivity improvements within sectors and gains from resource reallocation between sectors and ownership groups drove that expansion. However, productivity growth has declined markedly in recent years. This paper extends previous macro and firm-level studies to show that domestic factors and policies contributed to the slowdown. The analysis finds that limited market entry and exit and lack of resource allocation to more productive firms were associated with slower manufacturing total factor productivity growth. Earlier reforms led to state-owned enterprises catching up to private sector productivity levels in manufacturing, but convergence stalled after 2007. Furthermore, the allocation of a larger share of credit and investment to infrastructure and housing led to lower returns to capital, a rapid buildup in debt, and higher risks to growth. China?s growth potential remains high, but its long-term growth prospects depend on reversing the recent decline in total factor productivity growth.
    Keywords: Macroeconomics and Economic Growth,Economic Policy, Institutions and Governance,Construction Industry,General Manufacturing,Pulp&Paper Industry,Textiles, Apparel&Leather Industry,Common Carriers Industry,Business Cycles and Stabilization Policies,Plastics&Rubber Industry,Food&Beverage Industry,Labor Markets,International Trade and Trade Rules,Urban Governance and Management,Urban Housing and Land Settlements,Municipal Management and Reform,Urban Housing
    Date: 2020–06–24
  4. By: Banie Naser Outchiri (Université de Sherbrooke); Jie He (Université de Sherbrooke)
    Abstract: Based on a highly disaggregated database (1033 products, 181 partners) that we have built in physical terms, we investigate the drivers of China’s environmental trade cost (measured by CO2 emissions) from 1995 to 2014. To do this, we first used the “material balance” method to estimate China’s environmental trade cost. Then, we applied a new procedure to identify the drivers of China’s environmental trade cost that contributes to a better understanding of the trade’s role in environmental issues. Finally, we employed additive index decomposition analysis to estimate the contribution of each driver and their statistical accuracy. The results show that China faces a significant environmental cost as a result of its trade integration. Over the period, China’s environmental trade cost first was constant and relatively low from 1995 to 2001, then increased sharply from 2001 to 2008 before falling in 2009 and restarting unstable growth between 2010 and 2014. The decomposition results show that the increase in China’s environmental trade cost is explained by the fact that China’s technical catch-up is no longer able to offset the foreign demand effect and the product mix effect of exports. This is mainly due to the sharp increase in foreign demand for Chinese products and the fact that China’s export structure is becoming dirty mainly due to China-North trade patterns. There are some evidences that dirty production has slowly shifted from rich countries (especially North) to China, and clean production has moved in the opposite way. This has become more important after China’s entry into the World Trade Organization (WTO) in 2001, more specifically since 2004. Therefore, our results are better explained by the pollution haven hypothesis.
    Keywords: Carbon intensity, Emissions embodied in trade, Product level physical database, Material balance method, Index decomposition analysis.
    JEL: F18 O13 Q56 Q54
    Date: 2020–08
  5. By: Hoang, Viet-Ngu; Nguyen, Duc Khuong; Pham, Tuan Anh
    Abstract: During and after the 2008-2009 global financial crisis, the growth cycle of Vietnam’s economy has shifted from an average annual growth rate of 7%-8% to an average annual growth rate of 5%-6% with a high level of macroeconomic instability and uncertainty from 2009 till 2016. Related studies have speculated that the operations of monetary policies during this period were not effective in recovering the economic growth and stabilizing the overall price level and total output level. This paper provides the first empirical examination of this speculation using the Trilemma framework. Our empirical results show that the State Bank of Vietnam has had adopted a set of policies aiming at maintaining exchange rate stability and interest rate independence while easing the restrictions on capital inflows. The combination of these three monetary policy approaches is found to violate the rule of Trilemma. Consequently, exchange rate and interest rate policies became less effective and failed to stabilize the economy in response to the global economic recession.
    Keywords: Vietnamese economy; Trilemma; monetary policy; economic recession; macroeconomic conditions.
    JEL: F31 F33 F36
    Date: 2019–11
  6. By: Hanming Fang; Chang Liu; Li-An Zhou
    Abstract: We examine window dressing phenomenon in the public sector by studying the strategic responses of Chinese local officials to the compulsory education promotion program launched by the central government in the 1990s. According to this program, the Chinese counties should receive inspections on whether the compulsory educational targets were achieved on pre-scheduled time by provincial governments; and failing to pass the inspection would have severe negative career consequences for the county leaders. We find that county-level educational expenditures saw a sustained increase before the inspection, but a sharp drop immediately after the inspection. Local officials who were more likely to be inspected within their tenures window-dressed more aggressively. As a result, middle school enrollment rates declined significantly after the inspection, and rural girls bore the blunt of the decline in school enrollment.
    JEL: D73 H11 H41 P26
    Date: 2020–07
  7. By: Yuanhong, Hu
    Abstract: This paper calculates the trade facilitation index and manufacturing export sophistication of Russia and Central and Eastern European countries from 2003 to 2017, and examines the impact of trade facilitation and R&D innovation on manufacturing export sophistication. The study found that the export sophistication of labor-intensive industries continues to decrease, the export sophistication of capital and technology-intensive industries continues to increase, while the export sophistication of traditional resource-based heavy industries is stable. In addition, trade facilitation and R&D innovation have significantly contributed to the export sophistication of Russia, Central and Eastern European countries, especially the manufacturing industry after the 2009 financial crisis. For Central European and European Union member states, the impact of trade facilitation and R&D innovation on export sophistication is significantly greater than that of Eastern European and non-EU member states. The promotion of heavy, heterogeneous, medium and high-tech industries is obviously stronger than that of light, homogeneous and low-tech industries. In addition, the moderating role of trade dependence cannot be ignored. Trade facilitation and R&D innovation have a significant non-linear impact on export sophistication.
    Keywords: Trade Facilitation,Export Sophistication,R&D Innovation,Manufacturing,Russia,Central and Eastern Europe
    JEL: F14 F41 F43
    Date: 2020
  8. By: Vlados, Charis (Democritus University of Thrace, Department of Economics); Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics)
    Abstract: This paper explores how innovation is perceived, on the one hand, by the scientific literature and, on the other, by the everyday practice of small and micro enterprises operating in the less developed socioeconomic system of the Greek region of Eastern Macedonia and Thrace. Our aim is to find out whether there are different perceptions of innovation from two different "worlds", the theoretical and the practical. For this, we conducted an introductory and qualitative field research on a sample of small and micro enterprises in the region of Eastern Macedonia and Thrace. We found there is a notable distance in the perception of innovation between the scientific theory and the everyday practice of micro and small enterprises in this less developed region in Greece.
    Keywords: Innovation multiplicity; Innovation definitions; Micro and small enterprises; Region of Eastern Macedonia and Thrace
    JEL: O39 R11
    Date: 2019
  9. By: Max Deter
    Abstract: Following the fall of the Iron Curtain it was important for the acceptance of the new economic and political system that the former Communist elites did not maintain their privileges, and that protesters, who helped to overturn the old system, improved their situation. With newly available panel data on East Germany’s socialist past, the German Democratic Republic, we analyze how former Communist elites, dissidents, and the “silent majority” were affected by the transition from socialism into today’s market-based democracy. Applying random effects models, the results reveal that the transition reduced economic outcomes for former Communist elites in terms of life satisfaction, income, and employment. The transition had a positive impact on political dissidents and victims of repression. The transition success of the “silent majority” depended on the inner support of the system, that is, low support of the GDR predicts better outcomes in capitalism. Individual preferences for economic liberalism, risk, and trust in others can partly explain selection into Communist elites and dissidents, as well as differences in outcomes of the change from socialism to capitalism for these two groups.
    Keywords: East Germany, Communist elites, political resistance, autocracy, labor market, life satisfaction
    JEL: H10 N44 P20 D31
    Date: 2020

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