nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒01‒25
eight papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Political conflict, social inequality and electoral cleavages in Central-Eastern Europe, 1990-2018 By Attila Lindner; Filip Novokmet; Thomas Piketty; Tomasz Zawisza
  2. EU start-up calculator: impact of COVID-19 on aggregate employment: Scenario analysis for Bulgaria, Croatia, Czechia, Luxemburg, Netherlands, Poland, Romania, Slovakia and Slovenia By Cristiana Benedetti Fasil; Petr Sedlacek; Vincent Sterk
  3. Research on the Online Consumption Effect of China’s Urbanization under Population Aging Background By Xuyang Li; Tongping Li; Hui Li; Junmei Qi; Linjie Hu
  4. Structural Panel Bayesian VAR with Multivariate Time-varying Volatility to jointly deal with Structural Changes, Policy Regime Shifts, and Endogeneity Issues By Pacifico, Antonio
  5. Enhancing administrative and fiscal decentralisation in the Czech Republic By Urban Sila; Christine de la Maisonneuve
  6. Impact of Remittances on Natural Rate of Dollarization—Trends in Caucasus and Central Asia By Rocio Gondo; Altynai Aidarova; Manmohan Singh
  7. Long-Lasting Effects of Communist Indoctrination in School: Evidence from Poland By Joan Costa-i-Font; Jorge García-Hombrados; Anna Nicińska
  8. An empirical behavioral model of households’ deposit dollarization By Ramis Khabibullin; Alexey Ponomarenko

  1. By: Attila Lindner (UCL - University College of London [London]); Filip Novokmet (University of Bonn, WIL - World Inequality Lab); Thomas Piketty (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab); Tomasz Zawisza (Institute for Fiscal Studies)
    Abstract: This paper analyses the electoral cleavages in three Central European countries countries-the Czech Republic, Hungary and Poland-since the fall of communism until today. In all three countries, the left has seen a prolonged decline in support. On the other hand, the "populist" parties increased their support and recently attained power in each country. We relate this to specific trajectories of post-communist transition. Former communist parties in Hungary and Poland transformed themselves into socialdemocratic parties. These parties' pro-market policies prevented them from establishing themselves predominantly among a lower-income electorate. Meanwhile, the liberal right in the Czech Republic and Poland became representative of both high-income and high-educated voters. This has opened up space for populist parties and influenced their character, assuming more 'nativist' outlook in Poland and Hungary and more 'centrist' in the Czech Republic.
    Date: 2020–11
  2. By: Cristiana Benedetti Fasil (European Commission – JRC); Petr Sedlacek (University of Oxford, UK, CFM-LSE & CEPR); Vincent Sterk (University College London, UK, CFM-UCL & CEPR)
    Abstract: Early data show that the COVID-19 pandemic has affected particularly strongly start-up business activity. This may have dramatic and lasting effects on aggregate employment which persist as the cohort of new firms age. To assess such an impact, we developed the EU start-up calculator. A first application targeted to Austria, Belgium, Germany, Hungary, Italy and Spain is discussed in Benedetti Fasil, SedláÄ ek and Sterk (2020a) and a second focusing Denmark, Estonia, Finland, France, Latvia, Lithuania, Portugal and Sweden is presented in Benedetti Fasil, SedláÄ ek and Sterk (2020b). The EU start-up calculator is an empirical tool that allows to conduct scenario analysis to compute the impact that the disruption of start-up activity has on aggregate employment on EU Member States and their economic sectors. In this paper, we simulate the effects of a strong (i.e. of magnitude equivalent to the Great Recession of 2008 and 2009) but short-lived (i.e. lasting one-year) crisis in Bulgaria, Croatia, Czechia, Luxemburg, the Netherlands, Poland, Romania, Slovakia and Slovenia. This shock generates important and persistent job losses in all the countries ranging between 0.25 (Luxemburg) and 6.9% (Slovakia) of negative deviation from the employment trend in 2020 and results in a computed potential cumulative loss of jobs for the period 2020-2030 ranging from 5,600 (Luxemburg) to 2179,000 (Poland). The potential negative impact is particularly high in Bulgaria, Croatia, Poland, Romania and Slovakia as well as in the service sector, which are characterized by a high firm turnover and a reliance on start-ups and young firms for job creation. We also find that in most countries the deterioration of the survival rate of young firms plays an important role in driving employment, seconded by the number of new entrants. As a consequence, policies aimed at supporting young firms and incentivizing the creation of new ones may significantly mitigate the medium-term effect of the pandemic. In fact, when we simulate bounce-back scenarios where the number of firms entering the economy rapidly increases in 2021, in every country the outlook is significantly improved, the recovery is faster and the aggregate job loss is lower.
    Keywords: COVID-19, start-ups, employment
    Date: 2020–12
  3. By: Xuyang Li; Tongping Li; Hui Li; Junmei Qi (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine); Linjie Hu
    Abstract: With the development of e-commerce, online consumption-a new sustainable consumption mode-has rapidly developed. Online shopping has become an important consumption method for Chinese residents, and the era of online consumption has arrived. Urbanization is an important foundation for the development of online consumption, and its impact on online consumption is becoming increasingly important. In addition, with the decline of fertility in China, the proportion of the elderly population is increasing. As the macro background of the current economic operation of China, population aging has long been a concern of the government. However, the existing research on urbanization, population aging and online consumption is insufficient. In this context, this study is of great significance to promote the sustainable development of the online consumption mode and enrich the theory of resident consumption in the era of the network economy. In this paper, by adopting the system generalized method of moments (GMM), we conducted an empirical analysis of the relationship between urbanization, population aging, and online consumption, based on panel data from 31 provinces in China from 2007 to 2017. Furthermore, we examined the regional heterogeneity of urbanization's online consumption effect. The results reveal that, first, urbanization has a positive relationship with online consumption. Second, urbanization's online consumption effect has regional differences, with the largest positive effect being in the western area of China, the second in the eastern area of China and the smallest in the central area of China. Third, aging inhibits the development of online consumption. Specifically, it mainly includes two aspects. On the one hand, aging has a direct negative impact on online consumption. On the other hand, aging has a moderating effect on urbanization's online consumption effect, which weakens the impact of urbanization. The rising of urban residents' income has significant explanatory power to the change of online consumption in the eastern and western regions. Therefore, the policy implications are as follows: promoting the strategic transformation of urbanization, giving full play to the online consumption effect of urbanization; adjusting and improving population policy to cope with the population aging; constantly raising people's income level and enhancing consumption potential.
    Keywords: population aging,moderating effect,online consumption,urbanization
    Date: 2019–08
  4. By: Pacifico, Antonio
    Abstract: This paper improves a standard Structural Panel Bayesian Vector Autoregression model in order to jointly deal with issues of endogeneity, because of omitted factors and unobserved heterogeneity, and volatility, because of policy regime shifts and structural changes. Bayesian methods are used to select the best model solution for examining if international spillovers come from multivariate volatility, time variation, or contemporaneous relationship. An empirical application among Central-Eastern and Western Europe economies is conducted to describe the performance of the methodology, with particular emphasis on the Great recession and post-crisis periods. Findings from evidence-based forecasting are also addressed to evaluate the impact of an ongoing pandemic crisis on the global economy.
    Keywords: Structural Panel VAR; Bayesian Methods; Multivariate Volatility; Policy Regime Shifts Endogeneity Issues; Central-Eastern and Western Europe.
    JEL: C1 C5 E6
    Date: 2020
  5. By: Urban Sila; Christine de la Maisonneuve
    Abstract: There is considerable regional variation in incomes and poverty in the Czech Republic and gaps have grown over time. With the highest number of municipalities per head in the OECD, subnational government is very fragmented and the resulting lack of capacity at the local level reduces the quality of public services and impedes the uptake of effective development projects. This paper discusses various policy options to address the challenges faced by Czech subnational governments and proposes reforms to enhance their effectiveness. Mergers of municipalities would be an obvious way towards greater integration, but this may be politically difficult. Mandating inter-municipal co-operation over a legally defined set of public services can be an alternative way of improving efficiency and the quality of service delivery. Tweaking the tax sharing system to disincentivise small size of municipalities and to make subnational governments more autonomous could be steps towards higher efficiency. Improving and consolidating the delivery of education and health services at the local level is also needed in the context of demographic change.
    Keywords: administrative fragmentation, decentralisation, local government, municipal cooperation, municipal mergers, public services
    JEL: E62 H70 H71 H72 H77 I18 I28 R1
    Date: 2021–01–21
  6. By: Rocio Gondo; Altynai Aidarova; Manmohan Singh
    Abstract: This paper discusses migration and remittances trends, and calculates the natural (or benchmark) level of dollarization in Caucasus, Central Asia and others in the region. This natural level of dollarization is conceptually linked to the currency allocation in a portfolio of deposits to maximize welfare, in line with Ize and Levy Yeyati (2003). The fall in remittances due to the economic slowdown since the spread of COVID-19 affects the macroeconomic fundamentals that determine demand for foreign currency deposits. We calculate the natural dollarization level by integrating structural macroeconomic characteristics. We show that despite the reduction in deposit dollarization, there is still a gap with respect to the natural level of dollarization, especially in a scenario of (persistent) lower remittance inflows.
    Keywords: Remittances;Dollarization;Currencies;Exchange rates;Income;WP,remittance,deposit dollarization
    Date: 2020–09–11
  7. By: Joan Costa-i-Font; Jorge García-Hombrados; Anna Nicińska
    Abstract: Education can serve skill formation and socialisation goals both of which are conducive to desirable economic outcomes. However, the political manipulation of the school curricula can give rise to indoctrination effects with counterproductive welfare consequences on its pupils. This paper studies the effects of communist indoctrination on human capital accumulation and labour market outcomes in Poland. We document that the reduction of Marxist-Leninist indoctrination in school curriculum after 1954 exerted long-lasting beneficial effects. Unlike in East Germany, the school reform after the fall of communism in Poland had negligible effects on human capital and labour market outcomes. Our results are in contrast, explained by the ideological content of the school curriculum in the Polish education system.
    Keywords: education systems, communist education, education reforms, school curriculum, later life outcomes, human capital attainment, labour market participation
    JEL: I28
    Date: 2020
  8. By: Ramis Khabibullin (Bank of Russia, Russian Federation); Alexey Ponomarenko (Bank of Russia, Russian Federation)
    Abstract: We use the behavioral concept to endogenously model the evolution of the link between households’ deposit dollarization and exchange rate developments in Russia. We estimate the model empirically and show that the reaction of households to exchange rate appreciation weakens when exchange rate developments become more volatile. The proposed model outperforms the contemporary nonlinear time series models in forecasting the changes in dollarization during the Bank of Russia’s transition to a flexible exchange rate regime.
    Keywords: Dollarization, behavioral finance, variational Bayes, Russia
    JEL: C11 D84 E44 G17
    Date: 2020–12

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