nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒02‒01
eight papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Welfare Effects of FDI: A Quantitative Analysis By Balazs Zelity
  2. Growth, development, and structural change at the firm-level: The example of the PR China By Torsten Heinrich; Jangho Yang; Shuanping Dai
  3. Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data By ; Kaiji Chen; Patrick C. Higgins; Daniel F. Waggoner; Tao Zha
  4. Human capital dynamics in China: Evidence from a club convergence approach By Valerio Mendoza, Octasiano; Borsi, Mihály Tamás; Comim, Flavio
  5. Boosting SMEs’ internationalisation in Poland By Antoine Goujard; Pierre Guérin
  6. A study of social policies based on the example of the Bulgarian hotels on the Black Sea coast By Georgieva, Daniela; Georgieva, Teodora
  7. Foreign Direct Investment in Emerging Markets: Evidence from Russia since the 2000s By Mahir Suleymanov
  8. Estimating the Neutral Interest Rate in the Kyrgyz Republic By Iulia Ruxandra Teodoru; Asel Toktonalieva

  1. By: Balazs Zelity (Department of Economics, Wesleyan University)
    Abstract: Foreign direct investment can increase productivity and wages. However, it is also often accompanied by primary income deficits as foreign-owned firms repatriate their profits. The welfare effects of FDI are thus ambiguous. A particularly illustrative example of this phenomenon are the Visegr´ad 4 (V4) countries (Czech Republic, Hungary, Poland, Slovakia). This paper investigates whether FDI can be beneficial in the presence of profit repatriation using a general equilibrium model calibrated to the V4 economies. Counterfactual simulations suggest that the benefits of FDI outweigh the costs for these countries. On average, a 1% increase in the number of foreign firms is associated with a 0.17% increase in welfare. However, incentivising foreign firms to reinvest more of their profits domestically is, ceteris paribus, welfare-improving. A 10-percentage-point increase in the profit repatriation rate is associated with a 1.06% welfare gain on average.
    Keywords: foreign direct investment, primary income flows, profit repatriation
    JEL: F21 F23 F36 F40 E60
    Date: 2021–01
  2. By: Torsten Heinrich; Jangho Yang; Shuanping Dai
    Abstract: Understanding the microeconomic details of technological catch-up processes offers great potential for informing both innovation economics and development policy. We study the economic transition of the PR China from an agrarian country to a high-tech economy as one example for such a case. It is clear from past literature that rapidly rising productivity levels played a crucial role. However, the distribution of labor productivity in Chinese firms has not been comprehensively investigated and it remains an open question if this can be used to guide economic development. We analyze labor productivity and the dynamic change of labor productivity in firm-level data for the years 1998-2013 from the Chinese Industrial Enterprise Database. We demonstrate that both variables are conveniently modeled as L\'evy alpha-stable distributions, provide parameter estimates and analyze dynamic changes to this distribution. We find that the productivity gains were not due to super-star firms, but due to a systematic shift of the entire distribution with otherwise mostly unchanged characteristics. We also found an emerging right-skew in the distribution of labor productivity change. While there are significant differences between the 31 provinces and autonomous regions of the P.R. China, we also show that there are systematic relations between micro-level and province-level variables. We conclude with some implications of these findings for development policy.
    Date: 2020–12
  3. By: ; Kaiji Chen; Patrick C. Higgins; Daniel F. Waggoner; Tao Zha
    Abstract: We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same time weakened the impacts of monetary stimulus on bank credit to non-SOEs in sectors other than infrastructure.
    Keywords: infrastructure investment; monetary policy transmission; fiscal shocks; policy interaction; credit reallocation; LGFVs
    JEL: E5 E02 C3 C13
    Date: 2020–08–27
  4. By: Valerio Mendoza, Octasiano; Borsi, Mihály Tamás; Comim, Flavio
    Abstract: This paper investigates the evolution of human capital in China for 31 provinces over the period of 1985-2016 from a club convergence perspective. Per capita human capital stocks, estimated using the Jorgenson-Fraumeni lifetime income approach, are for the first time examined within a non-linear latent factor framework that allows to model a wide range of transition dynamics for each province along the path to convergence. The study finds no overall convergence between provinces in China, however, the results strongly support the existence of multiple convergence clubs. While a small group of provinces are converging toward the highest levels of human capital, most of the other provinces are failing to catch up and form separate clusters that converge to lower equilibria. These regional patterns provide new evidence on the increasing human capital gap between Chinese provinces, posing a significant challenge to a more inclusive and harmonious human, and economic development.
    Keywords: Human capital; Club convergence; Dynamic factor model; Asia; China
    JEL: C33 C53 I25 O15 R11
    Date: 2021–01–08
  5. By: Antoine Goujard; Pierre Guérin
    Abstract: The rapid internationalisation of the Polish economy has helped develop competitive export-led manufacturing and services sectors fostering robust growth and productivity performance. However, the benefits of this development have been unequal. Many small and medium-sized enterprises (SMEs), some regions and social groups have lagged behind. Poland’s integration into world trade has largely focussed on downstream activities of value chains and relatively labour-intensive products that incorporate little domestic value added. The coronavirus (COVID-19) crisis has put additional pressures on SMEs. A broad range of well-coordinated policies is required to boost SMEs’ internationalisation and their productivity, while easing labour reallocation during the ongoing recovery. Providing stronger support for training programmes in smaller firms and within small firms’ networks would help them upgrade the skills of their workforce, notably for their managers, and ease new technology adoption and internationalisation. Streamlining regulations on start-ups and limiting regulatory and tax barriers to firm expansion would raise firm entry and growth. Strengthening post-insolvency second chance policies for honest entrepreneurs would ease resource reallocation and the adaptation of SMEs to an uncertain and rapidly changing international environment. Improving transport and digital infrastructure would lower trade costs and raise productivity. Ensuring that innovation policies adapt to smaller firms would boost their innovativeness and ease their integration in national and international value chains.
    Keywords: Digitalisation, Global Value Chains (GVCs), Poland, Productivity, SMEs
    JEL: F1 F2 F6 L1 O3
    Date: 2021–01–27
  6. By: Georgieva, Daniela; Georgieva, Teodora
    Abstract: Research background: The implications of globalisation for social policy have been highly debated at the specialised literature. Social policies as an element of corporate responsibility reports (CSR) is neglected compared to environmental information. This can have a negative effect on the sustainability and development of industries directly dependent on their staff. Such sector in Bulgaria is the tourism where at the national level, the main challenge is the adequate parallel development of human resources as they underlie tourist product construction and development. Purpose of the article: The main aim of the study is to analyse factors that impact on the disclosed staff-related social policies at the financial statements of hotel enterprises in the territory of Varna and Burgas Black Sea regions in Bulgaria. The factors under analyses are the size of the organisation, available external audit control, available foreign participation in the capital, applicable accounting standards, accounted result (profit or loss); enterprise category. Methods: The adopted research methods are logical, deductive and comparative methods, methods of analysis and synthesis. To verify the author hypotheses the IBM – SPSS Statistics software is used. Findings & Value added: The results of the study show that comparatively high percentage of the enterprises do not publish staff-related information. This could lead to harmful effects to globalisation based on asymmetry in the data, problems with recruitment of qualified staff, unjustified economic decisions by data users. From all factors, under review, the strongest calculated statistic relationship is between the external audit control and staff-related disclosures.
    Keywords: Disclosures; Social Policy; Staff; Hotel Enterprises; Factors; Financial Statements
    JEL: M14 M48 M49
    Date: 2020
  7. By: Mahir Suleymanov (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: This paper aims to analyze the role of FDI inflow in the Russian economy and determine the degree of impact on the economic growth rate. The empirical research captures 2000-2019 years specifying by quarterly time-series. Although, in general, it is considered that the FDI can transmit technology and development to the host country, but this paper shows that in the case of Russia, the role of FDI inflow into the country has an endogenous component, which does not exert a robust impact on the economic growth.
    Keywords: Foreign Direct Investment, economic growth, transition economies, Endogeneity
    JEL: F21 F43
    Date: 2021–01
  8. By: Iulia Ruxandra Teodoru; Asel Toktonalieva
    Abstract: This paper estimates the neutral interest rate in the Kyrgyz Republic using a range of methodologies. Results indicate that the real neutral rate is about 4 percent based on an average of models and 3.7 percent based on a Quarterly Projection Model. This is higher than in many emerging markets and is likely explained by higher public debt and an elevated risk premium, low creditor rights and contractual enforcement, and low domestic savings. The use of an estimate of the neutral interest rate provides useful guidance to monetary policy and enhances transparency and independence of the central bank. Our estimate provides a quantitative benchmark for the monetary policy stance in the context of a central bank that is building analytical capacity, integrating additional insights in its decision-making process, and working to improve its communication. Strengthening the monetary transmission mechanism will be critical to enhance the effectiveness of monetary policy, including by allowing more exchange rate flexibility to support the transition to a full-fledged inflation targeting regime, and reducing excess liquidity to enhance the credit channel, reducing dollarization and high interest rate spreads that adversely affect the transmission of the policy rate to the economy.
    Keywords: Inflation;Real interest rates;Central bank policy rate;Output gap;Exchange rates;WP,interest rate
    Date: 2020–06–05

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