nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒10‒05
seven papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Uneven Economic Overheating in a Transforming Party-State During the Global Crisis: The Case of China By Maria Csanádi; Ferenc Gyuris
  2. Opening up the black box: Interacting subspheres through enterprise entry and exit in China By Maria Csanádi; Ferenc Gyuris; Wanjun Wang
  3. Population Ageing and the Impact of Later Retirement on the Pension System in China: An Applied Dynamic General Equilibrium Analysis By Xuejin Zuo; Xiujian Peng; Xin Yang; Philip Adams; Meifeng Wang
  5. The Big Sell: Privatizing East Germany’s Economy By Lukas Mergele; Moritz Hennicke; Moritz Lubczyk
  6. Returns to Education in the Russian Federation : Some New Estimates By Melianova,Ekaterina; Parandekar,Suhas D.; Patrinos,Harry Anthony; Volgin,Artem

  1. By: Maria Csanádi (Institute of Economics, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4, Hungary); Ferenc Gyuris (Department of Regional Science, Eötvös Loránd University , 1117 Budapest, Hungary, Pázmány Péter stny. 1/C.,)
    Abstract: We scrutinize the systemic consequences of state intervention triggered by external shocks in the transforming Chinese economy before and after the global crisis. We interpret investment dynamics using a comparative party-state model concept framework. We identify the overinvestment as an outcome of the dynamics of party-state power formed by relations of dependence and interest promotion between party, state and economic decision-makers and of emerging structural motivations inside of this network. Due to the structural and operational characteristics of the party-state network, which are self-similar in time, space and at various aggregation levels, overinvestment and economic overheating can also be detected on the provincial level. This local phenomena is intensified by the specific decentralized pattern of power distribution of the Chinese party-state system. Thus, local intensity of overheating is further increased by major state interventions reacting to external shocks. Overheating is further amplified during economic transformation by market actors adapting to network priorities. Investment swings in both heating and cooling periods hide different forms of behavior in enterprises with different ownership types.
    Keywords: China; crisis; overheating; overinvestment; party-state; system transformation; enterprise behaviour
    JEL: P12 P16 P2 P26 P31
    Date: 2020–09
  2. By: Maria Csanádi (Institute of Economics, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4, Hungary); Ferenc Gyuris (Department of Regional Science, Eötvös Loránd University (ELTE), 1117 Budapest, Hungary, Pázmány Péter stny. 1/C.,); Wanjun Wang (Nanjing University of Finance and Economics, Nanjing, China.)
    Abstract: In this paper, we scrutinize in the transforming party-state system of China the subtle dynamics of enterprise adaptation to state interventions, which react to hardening external and internal constraints. We use a comparative systemic framework that interprets adaptation in the context of system dynamics and transformation (Csanádi, 2006). We analyze a firm-level database of the Chinese industry from 1998 to 2013 with more than 3.8 million entities. Enterprise sensitivity and adaptation is measured by entries and exits. Taking a systemic approach, we distinguish enterprises that belong to either the party-state network or to the market as two economic sub-spheres defined by our analytical framework. Using the dynamics of entries and exits of industrial enterprises in each of these two spheres, we measure their expansion and contraction as well as that of the speed of both. Different speed allows for the quantification of the dynamics of economic transformation. Our results reveal that increasing frequency of entries and exits, both within and between the two spheres, are interconnected with state interventions reacting to booming and cooling periods of system-specific overinvestment and hardening and softening external constraints (Csanádi, 2015; Csanádi and Gyuris, forthcoming). Similarly, we reveal a strong connection between enterprise entries and exits and the occasional changes in the acceleration and slowdown of transformation dynamics through alternating periods of retreat and expansion of the network. We confirm the retreat of the network between 1998 and 2009 in terms of number of enterprises, employment, and sales revenues. However, we find that state interventions reacting to the 2008-2009 global crisis as well as Xi Jinping’s anticorruption campaign in 2012-2013 halted the retreat of the network in terms of various statistical indicators. Interventions also changed the moderate annual decline of state-owned capital share among enterprises belonging to the network (a clear trend until 2008), for they led to a “hidden expansion” of the state ownership through a relatively fast increase of its capital share from the early 2010s. Thus, transformation is not continuous, as halts and slowdowns during this process occur in major periods of state intervention. Neither is the advancement of transformation uniform. Regarding the number, employment, and sales revenue of enterprises, the retreat of the network and the expansion of the market sphere have substantially been more advanced than in case of the allocation of resources, which is selective and biased towards state-owned and large enterprises (Csanádi, 1997; Csanádi and Liu, 2012). These along with the resulting politically rational economic behavior of enterprises are essential characteristics of the party-state system.
    Keywords: China, system transformation, power network, local power, enterprise behavior, crisis, anti-corruption campaign, state intervention
    JEL: P12 P16 P2 P26 P31
    Date: 2020–09
  3. By: Xuejin Zuo; Xiujian Peng; Xin Yang; Philip Adams; Meifeng Wang
    Abstract: China's population is rapidly ageing because of the sustained low fertility and increasing life expectancy. At the end of 2019, the elderly 65 and older accounted for 12.6 percent of the total population, compared to around seven percent in 2000. It will continue to increase to 31 percent in 2050. Rapid ageing imposes a big challenge to sustainable growth. The Chinese government is considering increasing the retirement age as a remedy to the challenge of population ageing. Using a dynamic general equilibrium model of the Chinese economy, this paper explores the implications of raising the retirement age on economic growth and pension sustainability in China over the period of 2020 to 2100. In the baseline scenario, we assume that China maintains its current retirement age. The simulation results reveal that growth in the labour force would turn negative because of population ageing. Thus China has to rely on technology improvement and capital stock increases to support its economic growth. Without reforming the current pension system, China's pension account will accumulate huge debts. The debt plus the interest obligation will put high pressure on the general government budget. By the end of this century, the general government budget deficit will reach to 22 percent of GDP. In the policy scenario, we assume that China will gradually increase the retirement age from 58 to 65 years old starting from 2020. The simulation results show that increasing the retirement age is a powerful policy in the short to medium term. It will boost China's economic growth and reduce the pension fund deficit significantly because it will not only increase the labour force but also reduce the number of pensioners by delaying them access to the pension fund. However, the effectiveness of the policy depends on how much the labour force participation rate for people aged 58 to 65 can be increased.
    Keywords: Population ageing, retirement age, labour force participation, pension, economic growth, CGE model
    JEL: J11 J26 C68
    Date: 2020–04
  4. By: Svetlana V. Mareeva (National Research University Higher School of Economics); Ekaterina D. Slobodenyuk (National Research University Higher School of Economics)
    Abstract: The article focuses on individual income mobility among Russians in the years 2009–2017, as measured objectively and subjectively. As in previous periods of post-Soviet development, income mobility in Russia remains high. In comparison to member countries of the Organisation for Economic Co-operation and Development (OECD), income mobility in Russia is higher, while the level of persistent well-being is lower. Subjective assessments of one’s income situation are even more volatile than objective positions on an income scale, with persistent subjective well-being almost non-existent. Furthermore, subjective mobility does not correlate closely with its objective counterpart. Persistent well-being in terms of objective and subjective income is determined by a combination of class and non-class factors, including, above all, labor market position, dependency burden, and health status
    Keywords: Russia, income mobility, subjective mobility, immobility, sticky floor, sticky ceiling, income, social inequality, social disadvantage.
    JEL: Z
    Date: 2020
  5. By: Lukas Mergele; Moritz Hennicke; Moritz Lubczyk
    Abstract: The end of communism in the 1990s probably is the most fundamental restructuring of institutions witnessed in recent history. At its core was the large-scale redistribution of previously state-owned companies. We construct a unique firm-level dataset to study this redistribution in East Germany where the entire state-owned economy was either privatized or liquidated within less than five years. We examine whether the privatization authority followed its mandate to privatize competitive firms using initial labor productivity to indicate firms’ competitiveness. Our results highlight that firms with higher baseline productivity are more likely to be privatized, yield higher sales prices, are more often acquired by West German investors, and are more likely to remain in business even 20 years after leaving public ownership. The privatization agency plausibly contributed to these outcomes by rating and prioritizing productive firms
    Keywords: Privatization; labor productivity; German reunification
    JEL: D24 G38 H11 L33 P31
    Date: 2020–09
  6. By: Melianova,Ekaterina; Parandekar,Suhas D.; Patrinos,Harry Anthony; Volgin,Artem
    Abstract: This paper presents new estimates of the returns to education in the Russian Federation using data from 1994 to 2018. Although the returns to schooling increased for a time, they are now much lower than the global average. Private returns to education are three times greater for higher education compared with vocational education, and the returns to education for females are higher than for males. Returns for females show an inverse U-shaped curve over the past two decades. Female education is a policy priority and there is a need to investigate the labor market relevance of vocational education. Higher education may have reached an expansion limit, and it may be necessary to investigate options for increasing the productivity of schooling.
    Keywords: Educational Sciences,Tertiary Education,Economics of Education,Vocational Education&Technical Training,Labor Markets,Rural Labor Markets
    Date: 2020–09–08
  7. By: Stanislav Avdeev (National Research University Higher School of Economics)
    Abstract: Although many papers estimate returns to education, little causal evidence has been found for low- and middle-income countries. This paper estimates the causal effect of one year of university education on wages and employment in Russia. In 2011, the Bologna reform shortened the university study period by one year and reduced the content of the curricula but did not change the quality of admitted students. I exploit this reform as a natural experiment and use a difference-in-differences design. I find no adverse effect of a one-year reduction on wages and on the probability of being employed. This suggests that the reform lowered the opportunity costs of education but did not affect the accumulation of specific skills relevant for the labour market.
    Keywords: difference-in-differences, returns to education, human capital, higher education, employment, wages, Bologna reform, Russia
    JEL: I23 I26 J24
    Date: 2020

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