nep-tra New Economics Papers
on Transition Economics
Issue of 2020‒11‒09
fifteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. CAREER TRAJECTORIES OF REGIONAL OFFICIALS: RUSSIA AND CHINA BEFORE AND AFTER 2012 By Thomas F. Remington; Andrei A. Yakovlev; Elena Ovchinnikova; Alexander Chasovsky
  2. Small and medium-sized entrepreneurship in Russia and regions in 2019–2020 By Barinova Vera; Zemtsov Tsepan; Tsareva Yulia
  3. Moving Out of China? Evidence from Japanese Multinational Firms By Changyuan LUO; Chunxiao SI; ZHANG Hongyong
  4. Incomes of the population and assessment of financial situation By Burdyak Alexandra; Grishina Elena; Eliseeva Marina; Lyashok Viktor; Maleva Tatiana; Mkrtchian Nikita; Florinskaya Yulia; Khasanova Ramilya
  5. The public sector and privatization in Russia in 2019 By Malginov Georgiy; Radygin Alexandr
  6. Using Fuzzy Approach to Model Skill Shortage in Vietnam’s Labor Market in the Context of Industry 4.0 By Tien Ha Duong, My; Van Nguyen, Diep; Thanh Nguyen, Phong
  7. Assessing Ukraine's Role in European Value Chains: A Gravity Equation-cum-Economic Complexity Analysis Approach By Matte Hartog; Frank Neffke
  8. The transportation complex in Russia in 2019 By Borzhyh K.; Ponomarev Yuri
  9. Interest Rate Pegging, Fluctuations, and Fiscal Policy in China By Bing Tong; Guang Yang
  10. How Has China’s Economy Performed under the COVID-19 Shock? By Hunter L. Clark; Jeffrey B. Dawson; Maxim L. Pinkovskiy
  11. Russia’s banking sector in 2019 By Zubov Sergey
  12. The dynamics and pattern of economic growth in Russia in 2019 By Izryadnova Olga; Kaukin Andrey; Miller Evgenia
  13. Global challenges and national responses By Mau Vladimir
  14. Russia’s Fiscal Policy in 2019 By Arlashkin Igor; Barbashova Natalia; Belev Sergey; Deryugin Alexander; Sokolov Ilya; Tishchenko Tatiana
  15. Russia’s Monetary Policy in 2018 By Bozhechkova Alexandra; Trunin Pavel; Knobel Alexander

  1. By: Thomas F. Remington (National Research University Higher School of Economics); Andrei A. Yakovlev (National Research University Higher School of Economics); Elena Ovchinnikova (National Research University Higher School of Economics); Alexander Chasovsky (National Research University Higher School of Economics)
    Abstract: Authoritarian leaders rely on regional officials for both political support and the fulfillment of their policy objectives. Central leaders face trade-offs between using institutionalized rules for choosing regional officials such as regular rotation and performance incentives, and building a stable base of personal support from loyalists. This paper analyzes appointments of regional officials in Russia and China before and after 2012. We hypothesize that, as a consequence of the centralization and personalization of state power in both regimes over the past decade, Russia’s system for appointing regional officials has become somewhat more regularized while in China under Xi it has become somewhat less regularized. Our analysis uses a comprehensive original set of biographical data on all top regional officials from 2002 through 2019 in China and from 2000 through 2019 in Russia. We discern clear differences between the pre- and post-2012 period for China and less marked differences for pre- and post-2012 Russia
    Keywords: bureaucracy under authoritarian government; regional officials; career mobility; Russia; China
    JEL: P21 H83 P27
    Date: 2020
  2. By: Barinova Vera (Gaidar Institute for Economic Policy); Zemtsov Tsepan (Gaidar Institute for Economic Policy); Tsareva Yulia (Gaidar Institute for Economic Policy)
    Abstract: Government funding of the respective activities of small and medium-sized enterprises (SME) under the national project “Small and medium-sized entrepreneurship and support of entrepreneurial initiatives†increased in 2018-2020. However, in 2019, the number of SMEs subjects decreased by 118 thousand compared to 2018, and the number of people employed in the sector fell to 18.8 million, i.e. decreased by almost half a million people (the goal of the national project for 2024 is 25 million people). The share of the SME sector in GDP decreased to 20 percent in 2018 (the goal of the national project for 2024 is 32.5 percent). Generally, negative trends in the development of the sector, associated with an increase in the VAT rate, the introduction of online cash registers and almost zero growth in household incomes were observed in Russia in 2019. In 2020, near-zero economic growth and the coronavirus pandemic, which has already led to a significant drop in demand, especially in the restaurant business, tourism and entertainment, will negatively affect the development of the SME sector. A more significant reduction in performance of the sector’s activity is expected compared to 2019. However, the conditions for the development of entrepreneurship and, accordingly, the indicated trends vary significantly across Russia’s regions.
    Keywords: Russian economy, small businesses, medium-sized enterprises
    JEL: C53 E37 L21 L52
    Date: 2020
  3. By: Changyuan LUO; Chunxiao SI; ZHANG Hongyong
    Abstract: Against the background of the decline in foreign direct investment in China and the rest of the world, this study examines the firm-level and macroeconomic factors that affect foreign divestment in China. It employs a unique dataset of Japanese multinational enterprises (MNEs) from 1995 to 2016 and survival analysis. Foreign divestment involves a dissolution or withdrawal and a reduction in control share. The study resulted in the following findings. First, affiliate firm size, Japanese capital share, profitability, labor productivity, and export proportion to Japan are all negatively associated with divestment. The probability of divestment increases with the size of the parent firm and experience in the Chinese market but decrease with business relatedness between affiliate and parent firms, entry threshold, and market concentration. Second, an affiliate's firm size and profitability as well as market competition are the main determinants of a dissolution or withdrawal (more extreme methods of divestment). Meanwhile, an affiliate's capital structure and productivity are the main determinants of a reduction in control share (a relatively moderate method of divestment). Third, larger parent firms are likely to make spatial adjustments in their production across regions in China and to adjust their activities from manufacturing to services. We also examine the heterogeneous effects of foreign divestment by region, industry, and period. Based on this study, China would benefit from monitoring and reacting to the dynamic trend of foreign capital withdrawal and creating a favorable business environment for MNEs.
    Date: 2020–10
  4. By: Burdyak Alexandra (RANEPA); Grishina Elena (RANEPA); Eliseeva Marina (RANEPA); Lyashok Viktor (RANEPA); Maleva Tatiana (RANEPA); Mkrtchian Nikita (RANEPA); Florinskaya Yulia (RANEPA); Khasanova Ramilya (RANEPA)
    Abstract: Despite a small growth of the real disposable cash income of the population seen in 2018–2019, so far there has been no recovery to the cash income of the population seen in 2013 in the wake of their decrease seen in 2014-2016. The real disposable cash income in 2019 came to barely 92.5 percent of the 2013 level. Also there was no recovery growth of the average amount of allocated pensions: in 2019 they came to 96.2 percent in real terms of the 2013 level. For comparison, the real wage recovered relative to the 2013 level even in 2018, and in 2019 it amounted to 106.6 percent against the 2013 level.
    Keywords: Russian economy, households, labor market, social sentiment, internal migration, long-term migration, external labor migration
    JEL: D14 J01 J61 J62 F22 J11
    Date: 2020
  5. By: Malginov Georgiy (Gaidar Institute for Economic Policy); Radygin Alexandr (Gaidar Institute for Economic Policy)
    Abstract: From 2016, statistical data began to be published in the framework of the System of Public Property Management Efficiency Estimates (hereinafter – System of Estimates). It was approved by Decree of the RF Government No 72 dated January 29, 2015, to replace the public sector monitoring data, collected and released by the Federal State Statistics Service (Rosstat) since the early 2000s in accordance with RF Government Decree No 1 dated January 4, 1999 (as amended on December 30, 2002). The System of Estimates contains data on the number of federal state unitary enterprises (FSUEs) and joint-stock companies (JSCs) with RF stakes in their capital, which had been previously published, as a rule, in the government privatization programs for the next period (from 2011 – for three-year period, and prior to 2011 – for one-year period). Such data can also be found in the newly adopted forecast plan (program) of federal property privatization (FPP), as well as in the Main Directions of Federal Property Privatization for 2020–2022 approved by RF Government Directive No 3260-r dated December 31, 2019.
    Keywords: Russian economy, public sector, privatization
    JEL: K11 H82 L32 L33
    Date: 2020
  6. By: Tien Ha Duong, My; Van Nguyen, Diep; Thanh Nguyen, Phong
    Abstract: Human resources development is one of the main issues in the socio-economic development strategy and the transform of any region in the context of Industry 4.0. However, Vietnamese human resources have been poorly evaluated in the areas of quality, lack of dynamism, and creativity. Therefore, this paper presents a fuzzy logic approach to ranking seven skills shortage in Vietnam’s Labor Market, namely lifelong learning, adaptive capacity, information technology capacity, creativity and innovation capacity, problem-solving capacity, foreign language competency, and organizing and managing competency. The results showed that the problem-solving skill has the largest gap between an enterprise’s requirements and the actual response of employees.
    Keywords: fuzzy logic; industry 4.0; human resources; skill shortage; Vietnam
    JEL: B16 F6 J01 O14
    Date: 2019–11–02
  7. By: Matte Hartog (Center for International Development at Harvard University); Frank Neffke (Center for International Development at Harvard University)
    Abstract: We analyze Ukraine's opportunities to participate in European value chains, using traditional gravity models, combined with tools from Economic Complexity Analysis to study international trade (exports) and Foreign Direct Investment (FDI). This toolbox is shown to be predictive of the growth and entry of new exports to the EU's Single Market, as well as foreign direct investments from the Single Market in Ukraine. We find that Ukraine has suffered from a decline of trade with Russia, which has led not only to a quantitative but also a qualitative deterioration in Ukrainian exports. Connecting to western European value chains is in principle possible, with several opportunities in the automotive, information technology and other sectors. However, such a shift may lead to a spatial restructuring of the Ukrainian economy and a mismatch between the geographical supply of and demand for labor.
    Keywords: economic complexity, value chains, foreign direct investment
    Date: 2020–10
  8. By: Borzhyh K. (RANEPA); Ponomarev Yuri (Gaidar Institute for Economic Policy)
    Abstract: The transportation complex and its development, in particular the development of transportation infrastructure, is one of the most important factors of economic growth. Investments in infrastructure invariably have a huge impact on long-term economic growth. A lack of proper infrastructure development can give rise to bottlenecks, imbalances and a significant increase in the cost of doing business.[1] The transportation and logistics complex and related activities play a significant role in the functioning of Russia’s national economy. According to data released by Rosstat, the transportation industry’s share in GDP in 2017 and 2018 was 7.0% and 6.5%, respectively, and at year-end 2019, it was 6.6%. According to the estimates released by the RF Ministry of Economic Development, from 2016 onwards the transportation sector has been making a positive input into GDP growth: 0.09 percentage points in 2016, 0.01 percentage points in 2017, and 0.19 percentage points in 2018; in Q1 and Q2 2019, 0.21 and 0.19 percentage points, respectively; and by year-end 2019, the annual input of the transportation industry into GDP growth is forecast be 0.12 percentage points. Through the existing inter-industry links, the transportation complex influences almost every sector of the national economy.
    Keywords: Russian economy, foreign trade, customs regulation
    JEL: L91 L92 L93 L99
    Date: 2020
  9. By: Bing Tong (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Guang Yang (School of Economics, Nankai University)
    Abstract: This paper proves in a New Keynesian model that interest rate pegging can explain the unusual business cycle fluctuations in China. It is traditional wisdom that when the nominal interest rate is inflexible, there is no unique equilibrium in macroeconomic models. We prove that a unique equilibrium exists if the nominal rate is pegged for a limited period, after which it switches to a flexible rate regime. The peg alters the propagation of external shocks, magnifies volatility of endogenous variables, and leads to instability of the economy. Besides, the model becomes more unstable when the peg duration extends, and when the pegged rate deviates from steady state. At the same time, fiscal multiplier increases under the peg, indicating fiscal policy may be more effective in mitigating economic fluctuations when monetary policy is restricted by interest rate pegging.
    Keywords: New Keynesian model, Chinese economy, Interest rate peg, Fiscal policy, Rational expectation
    JEL: E31 E32 E43 E62
    Date: 2020–05
  10. By: Hunter L. Clark; Jeffrey B. Dawson; Maxim L. Pinkovskiy
    Abstract: China’s economy was the first to be hit by the COVID-19 outbreak, the first to be locked down, and the first to begin an economic recovery. We examine the impact of the COVID-19 crisis on China’s GDP growth using a set of alternative growth indicators. Our analysis finds that China’s official GDP growth figures over the first three quarters of this year have been broadly in line with alternative indicators and that growth presently is staging a strong rebound and providing a boost to the global economy. However, this rebound faces potential headwinds in the forms of high levels of debt, declining return to capital accumulation, and a shrinking working-age population in China.
    Keywords: China; COVID-19
    JEL: E2 F00
    Date: 2020–10–23
  11. By: Zubov Sergey (RANEPA)
    Abstract: At 2019-end, Russian banking sector numbered 442 lending institutions. Over the year the number of operational lending institutions decreased by 42 (in 2018 – down by 77). Seven years ago in early 2013 the number of operational institutions exceeded one thousand (1094). Consequently, the Central Bank of Russia consistently has been conducting the bank resolution process. As of January 1, 2020, 373 lending institutions’ profit hit RUB 2,196.4 billion and losses of 69 banks amounted to RUB 159.6 billion. On the whole, the share of loss-making institutions over the year went down from 29 to 16 percent.
    Keywords: Russian economy, banking sector, profit, capital, corporate loans, retail lending
    JEL: E41 E51 G28 G21 G24
    Date: 2020
  12. By: Izryadnova Olga (Gaidar Institute for Economic Policy); Kaukin Andrey (Gaidar Institute for Economic Policy); Miller Evgenia (Gaidar Institute for Economic Policy)
    Abstract: Unlike the previous two years when the domestic market’s weakness was made up for by growth in the foreign trade balance and net exports, in 2019 the development of the Russian economy took place amid a simultaneous decline of the growth rates of overall domestic demand and foreign trade. In 2019, GDP growth rates calculated as per the methods of the system of national accounts (SNA) amounted to 101.3 percent, a decrease of 1.2 percentage point as compared with the index value of the previous year. For the first time in the past decade, in 2019 the economic situation became complicated owing to a 2.1 percent decrease in exports’ volumes as per the SNA methods in comparable prices relative to the previous year’s index value. Consequently, in 2019 net exports’ contribution to GDP as per SNA methods fell to 2.5 percent against 3.6 percent a year before.
    Keywords: Russian economy, production, external and internal demand, GDP structure
    JEL: G28
    Date: 2020
  13. By: Mau Vladimir (RANEPA)
    Abstract: We are witnessing the formation of a new paradigm that will dominate the socio-economic policy of the foreseeable future. This could be seen in 2019, but in 2020 led to a sharp acceleration of transformation processes. With all the differences of individual countries and regions, one can see common challenges, the answers to which will form the contours of this new paradigm. And for all the specific tasks that Russia has to solve, its development is an organic part of the global agenda and depends on the ability to find answers to common challenges. Thirty years ago, the peoples of many developed and developing countries lived with the hope of a speedy advance of a new bright world – a world without threats and confrontations, a free and dynamically developing world.
    Keywords: Russian economy, economic growth, economic crisis, economic policy
    JEL: P16 P26 P48
    Date: 2020
  14. By: Arlashkin Igor (Gaidar Institute for Economic Policy); Barbashova Natalia (Gaidar Institute for Economic Policy); Belev Sergey (Gaidar Institute for Economic Policy); Deryugin Alexander (Gaidar Institute for Economic Policy); Sokolov Ilya (Gaidar Institute for Economic Policy); Tishchenko Tatiana (Gaidar Institute for Economic Policy)
    Abstract: In 2019, revenues of the budgetary system of Russia according to the fresher data released by the Ministry of Finance of Russia in shares of GDP against the previous year remained flat amounting to 35.8 percent of GDP (Table 7), meanwhile in absolute terms they have increased by RUB 1,860 billion. Solely 39.4 percent of the revenues increment of the enlarged government budget (RUB 732.8 billion) have been secured by the federal budget and 62.4 percent (RUB 1,160.8 billion) by the increment of the consolidated budget of the RF subjects receipts. However, in the overall volume of the revenue part of the enlarged government budget a share of federal and subnational levels budget in 2019 against 2018 has changed insignificantly: a share of the federal budget has contracted from 52.1 to 51.5 percent and a share of the consolidated budget of the RF subjects has gone up from 33.2 to 34.6 percent. Dynamics of oil and gas revenues of the enlarged government budget is negative: contraction of receipts in 2019 in comparison with the previous year constituted 1.1 percentage points of GDP or RUB 770 billion, meanwhile non-oil and gas revenues went up in 2019 to the maximum for the 5-year period level coming to 28.3 percent of GDP up by 1.1 percentage points of GDP against the previous year.
    Keywords: Russian economy, intergovernmental relations, fiscal policy, budgetary system
    JEL: H77
    Date: 2020
  15. By: Bozhechkova Alexandra (Gaidar Institute for Economic Policy); Trunin Pavel (Gaidar Institute for Economic Policy); Knobel Alexander (Gaidar Institute for Economic Policy)
    Abstract: In 2019, a sharp and largely unexpected slowdown in inflation led to a significant easing of monetary policy. Over the course of that year, the Bank of Russia reduced its key rate five times: four times by 0.25 percentage points on June 14, July 26, September 6, and December 13; and by 0.5 percentage points at a meeting of its Board of Directors on October 25. As a result, the key rate declined from 7.75% to 6.25% per annum, thus approaching, according to the estimates of the RF Central Bank,[1] its neutral level.[2] Over the course of 2019, the movement pattern of the key rate was shaped, on the one hand, by the rising inflation risks in the H2 2018 and early 2019 caused by the raise of the VAT rate at the beginning of 2019, a decline of the world market for energy prices, and an increase in inflationary expectations. As a result, in January-May 2019, the regulator did not ease its monetary policy, keeping the key rate unchanged. At the same time, the RF Central Bank’s rhetoric regarding future decisions began to somewhat relax in March-April 2019, as the inflation index passed a local peak (5.3% in March 2019 compared to March 2018). It was only in June 2019 that the Bank of Russia switched over to actually reducing the key rate.
    Keywords: Russian economy, monetary policy, money market, exchange rate, inflation, balance of payments
    JEL: E31 E43 E44 E51 E52 E58
    Date: 2020

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