nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒03‒29
sixteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Spatial market efficiency of grain markets in the post-Soviet countries and implications for global food security By Svanidze, Miranda
  2. The effects of child benefit on household saving By Barbara Liberda; Katarzyna Sałach; Marek Pęczkowski
  3. Reducing regional disparities for inclusive growth in Bulgaria By Mikkel Hermansen
  4. Electricity poverty reduction and progress towards the sustainable development goal 7: Vietnam, 2008-2018 By Minh Ha-Duong; Nguyen Son
  5. The two-pronged middle class: the old bourgeoisie, new state-engineered middle class and democratic development By Lankina, Tomila V.; Libman, Alexander
  6. Causes of the spatially uneven outflow of Warsaw inhabitants to the city’s suburbs: an economic analysis of the problem By Honorata Bogusz
  7. The Determinants of Democracy Revisited: An Instrumental Variable Bayesian Model Averaging Approach By Sajad Rahimian
  8. The Development of Ski Areas in Romania. What Environmental, Political, and Economic Logic? By Sorina Cernaianu; Claude Sobry
  9. Productivity-Enhancing Reallocation during the Great Recession:Evidence from Lithuania By Linas Tarasonis; Jose Garcia-Louzao
  10. Natural real rates of interest across Euro area countries: Are R-stars getting closer together? By Tomas Reichenbachas; Linas Jurkšas; Rokas Kaminskas
  11. An analysis of investments and their drivers in Lithuania By Mariarosaria Comunale
  12. Electoral Manipulation and Regime Support: Survey Evidence from Russia By David Szakonyi; Ora John Reuter
  13. Looking In The Rear-View Mirror: A Thirty-Five Year Retrospective On The Russian Automotive Industry By Igor Gurkov; Michael J. Morley
  14. Decarbonising Azerbaijan's Transport System: Charting the Way Forward By ITF
  15. Gauging the Effect of Influential Observations on Measures of Relative Forecast Accuracy in a Post-COVID-19 Era: Application to Nowcasting Euro Area GDP Growth By Boriss Siliverstovs
  16. A First Glance at the Minimum Wage Incidence in Lithuania using Social Security Data By Linas Tarasonis; Jose Garcia-Louzao

  1. By: Svanidze, Miranda
    Abstract: This doctoral thesis studies the spatial market efficiency of wheat markets in selected post-Soviet countries; particularly in Russia, the largest wheat exporting country in the world, and in the grain import-dependent countries of Central Asia and the South Caucasus. Increased grain production in the Black Sea region, and in Russia specifically, is crucial for meeting increasing global agricultural demand and global food security. Grain production in Russia could be boosted by increasing grain production efficiency and also by re-cultivating formerly abandoned agricultural land. However, to increase Russia's role in global wheat supply, additional grain production potential has to coincide with improving the country's grain export perspectives. On the other hand, the realization of Russia's export capacity largely depends on the performance of its regional grain markets domestically. Using price transmission and panel data analyses in a comparative context, this study finds the wheat market of Russia segmented, with the primary wheat export region poorly integrated into the domestic market. This thesis also demonstrates that regional wheat market integration in Russia is relatively low and heterogeneous and trade costs are relatively high compared to the USA, mostly due to large distances between grain producing regions. In addition, by including the USA as benchmark country, a comparative approach enables a more comprehensive assessment of the spatial market efficiency of the wheat market in Russia. The results also provide evidence on the dissimilarity of the underlying fundamental mechanism of market integration between Russia and the USA. In Russia, the physical trade of wheat mainly fosters market integration at the interregional level, whereas in the USA, in addition to physical trade, information flows induced by commodity futures markets play a major role in the regional grain market integration. (...)
    Keywords: Crop Production/Industries, Food Security and Poverty, International Relations/Trade
    Date: 2020
  2. By: Barbara Liberda (Faculty of Economic Sciences, University of Warsaw); Katarzyna Sałach (Faculty of Economic Sciences, University of Warsaw); Marek Pęczkowski
    Abstract: In 2016, a new child benefit was introduced in Poland: a universal benefit for the second and subsequent children in a family and means tested for the first child. Substantial transfers of the new child benefit were granted 60% of households with children. The generous child benefit, equal to 10% of monthly median households’ income, caused an unexpected positive income shock for families with children. In this paper, we investigate how the new child benefit affects the household decisions to consume or save the child's income. Applying the difference-in-differences method and Polish Household Budget Survey data for the years 2012-2018, we find a positive effect of the child benefit on household saving. Our estimates indicate that families obtaining the child benefit (treatment group) increased the saving rate by 8 percentage points after the child benefit reform in 2016. Over time, the control group (not obtaining the child benefit) raised the saving rate by 2.9 percentage points.
    Keywords: households, income, child benefit, saving
    JEL: D14 G51 I38 P36
    Date: 2021
  3. By: Mikkel Hermansen
    Abstract: Regions with large cities are driving growth in Bulgaria, while many rural regions suffer from depopulation and rapid ageing. Improving living standards across all regions will require better coverage and access to public services, notably in health and long-term care. Policy action to integrate the Roma, around one-tenth of the population most of which live in poverty and socially excluded neighbourhoods, would help to tackle labour shortages in the medium term in addition to improving well-being. Investments in infrastructure and housing reform are needed to boost mobility and strengthen linkages to national and international supply chains. This would also benefit agriculture that accounts for almost a third of employment in lagging regions and has undergone a rapid restructuring, polarising and distorting the sector towards low-value added products. While the coronavirus outbreak has hit the tourism industry hard, the diverse Bulgarian landscape offers opportunities for developing profitable experience-based tourism, when international travel resumes.
    Keywords: agriculture, Bulgaria, health care, housing markets, infrastructure, regions, Roma, tourism
    JEL: H71 H75 I18 J15 J61 O18 Q18 R10 R31 R58 Z32
    Date: 2021–03–25
  4. By: Minh Ha-Duong (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Université Paris-Saclay - AgroParisTech - EHESS - École des hautes études en sciences sociales - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Nguyen Son (NEU - National Economics University (Ha Noi, Vietnam), ABIES Doctoral School - ABIES Doctoral School)
    Abstract: We estimate the reduction of electricity poverty in Vietnam from 2008 to 2018 using national household surveys. We find that in 2018, the fraction of households with access to electricity was over 98%, the median level of electricity usage was 139 kWh per month per household, and the electricity bill weighted less than 6% of income for 92% of households. The macroeconomic inequality in electricity consumption was lower than income inequality. In 2014, the fraction of households declaring unsatisfied electricity needs was below three per cent. This indicator indicates that Vietnam has mostly reached the Sustainable Development Goal 7 Affordable and clean energy for all (SDG7). We find that the electricity subsidy mechanism contributes more to alleviating poverty (SDG1) than to SDG7. While there remains households who cannot afford to turn on fans or air conditioner during a heatwave, the engineering, economic and socio-political perspectives converge to indicate that electricity poverty was not an acute social issue in 2018.
    Keywords: Electricity poverty,Vietnam,Sustainable Development Goals
    Date: 2021–03–05
  5. By: Lankina, Tomila V.; Libman, Alexander
    Abstract: We contribute to research on the democratic role of middle classes. Our paper distinguishes between middle classes emerging autonomously during gradual capitalist development, and those fabricated rapidly as part of state-led modernization. To make the case for a conceptual distinction between these groups within one national setting, we employ author-assembled historical district data, survey and archival materials for pre-Revolutionary Russia and its feudal estates. Our analysis reveals that the bourgeois estate of meshchane covaries with post-communist democratic competitiveness and media freedoms, our proxies of regional democratic variations. We propose two causal pathways explaining the puzzling persistence of social structure despite the Bolsheviks’ leveling ideology and post-communist autocratic consolidation: processes at the juncture of familial channels of human capital transmission and the revolutionaries’ modernization drive; and entrepreneurial value transmission outside of state policy. Our findings help refine recent work on political regime orientations of public sector-dependent societies subjected to authoritarian modernization.
    Keywords: legacies; middle-class; value transmission; Russia; revolution; communism; social structure; authoritarian modernization; bourgeoisie; estates
    JEL: R14 J01
    Date: 2021–03–18
  6. By: Honorata Bogusz (Faculty of Economic Sciences, University of Warsaw, Labfam, Data Science Lab WNE UW)
    Abstract: In this article I provide a quantitative analysis of suburban migration patterns in Warsaw, Poland. Basing this analysis on the extended gravity model of migration, an econometric panel model was built to identify key pulling factors for migrants who move from Warsaw to its suburbs. The role of residential lot prices and the resulting possible endogeneity are also discussed. It was confirmed that migrants choose boroughs of greater population density that have higher average relative income and more amenities, but at a smaller distance to Warsaw’s city center and with lower residential lot prices relative to those in Warsaw.
    Keywords: gravity model of migration, suburbanization, Mundlak terms, Correlated Random Effects
    JEL: R23 P25 C23 C51
    Date: 2021
  7. By: Sajad Rahimian
    Abstract: Identifying the real causes of democracy is an ongoing debate. We contribute to the literature by examining the robustness of a comprehensive list of 42 potential determinants of democracy. We take a step forward and employ Instrumental Variable Bayesian Model Averaging (IVBMA) method to tackle endogeneity explicitly. Using the data of 111 countries, our IVBMA results mark arable land as the most persistent predictor of democracy with a posterior inclusion probability (PIP) of 0.961. Youth population (PIP: 0.893), life expectancy (PIP: 0.839), and GDP per capita (PIP: 0.758) are the next critical independent variables. In a subsample of 80 developing countries, in addition to arable land (PIP: 0.919), state fragility proves to be a significant determinant of democracy (PIP: 0.779).
    Date: 2021–03
  8. By: Sorina Cernaianu (URePSSS - Unité de Recherche Pluridisciplinaire Sport, Santé, Société (URePSSS) - ULR 7369 - ULR 4488 - UA - Université d'Artois - Université de Lille - ULCO - Université du Littoral Côte d'Opale); Claude Sobry (URePSSS - Unité de Recherche Pluridisciplinaire Sport, Santé, Société (URePSSS) - ULR 7369 - ULR 4488 - UA - Université d'Artois - Université de Lille - ULCO - Université du Littoral Côte d'Opale)
    Abstract: In the last years, Romania has made major efforts to develop the skiing areas and some important projects have been implemented in the Carpathian Mountains. This research highlights the low efficiency of ski slopes and ski areas concerning the functionality during the winter season, even though a number of investments have been made. Some examples of bad practices regarding the development of skiing infrastructure in link with the potential impact on the environment are presented. The status of ski slopes, slope conditions, and snow depth were collected daily, during the 2016–2017 and 2017–2018 winter seasons, from a Romanian website specialized in snow cover information. A statistical analysis based on the collected data has been done. The 225 ski slopes studied have been opened, on average, less than 62 days and more than 20% of them have not even been opened. Only 17.8% of the slopes complied with the "100-day rule" during the first season and 21.3% of them during the second one, which does not ensure profitability. In conclusion, too many ski slopes have been created without considering the actual snow conditions. The investors wasted capital that is unprofitable and needlessly, affecting the environmental sustainability.
    Keywords: winter sport tourism,ski slopes,ski areas,sustainability,investment,public policies,development impacts,climate change,Romania
    Date: 2020
  9. By: Linas Tarasonis (Bank of Lithuania, Vilnius University); Jose Garcia-Louzao (Bank of Lithuania)
    Abstract: This paper studies the impact of the Great Recession on the relationship between reallocation and productivity dynamics in Lithuania. Using detailed microlevel data, we first document the aggregate contribution of firm exit and employment reallocation to productivity growth. Next, we estimate firm-level regressions to confirm the findings and to perform a heterogeneity analysis. This analysis shows that productivity shielded firms from exit, and that this relationship became stronger during the Great Recession. Moreover, we demonstrate that more productive firms experienced on average lower employment losses, and that this effect was even stronger during the economic slump. Taken together, our results suggest that reallocation was productivityenhancing during the Great Recession. However, the analysis also indicates that reallocation intensity varied with sector's dependence on external financing or international trade as well as market concentration.
    Keywords: firm dynamics, job reallocation, productivity, Great Recession
    JEL: E24 E32 L11 J23
    Date: 2021–03–19
  10. By: Tomas Reichenbachas (Bank of Lithuania); Linas Jurkšas (Bank of Lithuania); Rokas Kaminskas (Bank of Lithuania)
    Abstract: Using two different methodologies, we estimate time-varying natural real rates of interest for a majority of euro area (EA) countries, including Lithuania. We find that natural real rates have been declining, particularly since 2008, albeit to different extent across EA countries. Lower rates could (at least partly) be explained by lower productivity and population growth. In line with previous literature, we find evidence of a substantial dispersion of the natural interest rate across EA economies. This became especially evident during the financial crisis of 2008-2009 and the sovereign debt crisis of 2010-2012, while estimates of natural rates tend to converge during "calm" periods. Estimates of natural rates for Lithuania were significantly above the estimates of core EA countries over 2002-2008, but this has changed after the crisis. From 2011 the estimates of natural rates for Lithuania tend to be close to the average for EA countries.
    Keywords: LEuro area, natural rate of interest, common monetary policy, fragmentation
    JEL: C32 E32 E43 E52
    Date: 2021–03–10
  11. By: Mariarosaria Comunale (Bank of Lithuania)
    Abstract: The article analyzes recent developments in investments in Lithuania using a broad set of possible drivers, including EU funds. We apply a Bayesian VAR setup with data from 1997Q1 to 2019Q4. We also examine and compare business vs. government investments and different types of investments, especially innovative investments. We find that total investments are basically driven by the data on business investments. The main outcomes are mostly in line with the literature, but we do see some crucial differences across types. Key results include: (1) a small role for lending rates as compared to other factors, largely limited to the global financial crisis; (2) the crucial role of demand-side variables, i.e. foreign demand or private consumption; (3) pro-cyclicality in government investments and a positive correlation with business investments; (4) the importance of uncertainty for some sectors, that positively drives only the more innovative/intangible investments; and (5) despite the fact that EU funds do feed investments, there is a crowding-out in the short run for business-related investments, while there is some positive contribution to public investments.
    Keywords: : investment, uncertainty, EU funds, foreign demand, innovation
    JEL: E32 D24 D61 C32
    Date: 2020–10–21
  12. By: David Szakonyi (George Washington University); Ora John Reuter (University of Wisconsin-Milwaukee & Higher School of Economics)
    Abstract: Does electoral fraud stabilize authoritarian rule or undermine it? The answer to this question rests, in part, on how voters evaluate regime candidates who engage in fraud. Using a survey experiment conducted after the 2016 elections in Russia, we find that voters withdraw their support from ruling party candidates who commit electoral fraud. This effect is especially large among strong supporters of the regime. Core regime supporters are more likely to have ex ante beliefs that elections are free and fair. Revealing that fraud has occurred significantly reduces their propensity to support the regime. These findings illustrate that fraud is costly for autocrats not just because it may ignite protest, but also because it can undermine the regime’s core base of electoral support. Because many of its strongest supporters expect free and fair elections, the regime has strong incentives to conceal or otherwise limit its use of electoral fraud.
    Date: 2020
  13. By: Igor Gurkov (National Research University Higher School of Economics); Michael J. Morley (University of Limerick (Limerick, Ireland))
    Abstract: Drawing on foundational arguments from the literature on emerging market institutional strategies, and employing a realist historical analysis, we present a retrospective on the Russian automotive industry. We begin by tracing the origins of the sector and synthesizing salient post World War II developments. We then recount the subsequent expansionary decade of the 1960s, followed by the stagnation of the late 1980s, culminating in the eventual collapse of socialism and the breakup of the USSR. Attracted by both the rapid growth in the local market, and the preferential tax rates that accompanied investments, we then document the swift expansion of production facilities in Russia by major global manufacturers in the 2000s. We show how eventually an ensuing sharp halt in local market growth, and an accompanying rise in spare production capacity, saw most manufacturers pursue institutional strategies aimed at obtaining new tax concessions and leveraging intra-industry cooperation, rather than divesting their recently established production facilities. Overall, our retrospective, in particular, calls attention to how global manufacturers were able not only to acquire and rejuvenate existing production facilities or install new greenfield ones, but also to exercise their agency in shaping the broader policy framework and in fashioning new sectoral institutions designed to buttress and sustain the industry.
    Keywords: Russian automotive industry, foreign direct investment, institutional strategy, historical analysis, intra-industry cooperation, transition economy.
    JEL: F23 J23
    Date: 2021
  14. By: ITF
    Abstract: This paper reviews opportunities and challenges for mitigating greenhouse gas emissions from Azerbaijan’s transport sector. It provides an overview of Azerbaijan’s transport system and reviews the country’s existing policies and future plans for reducing CO2 emissions from transport. The paper also provides an overview of the data on transport activity and emissions available for Azerbaijan, and the tools used by government agencies for assessing them. Finally, it proposes options for further action in the context of ITF’s “Decarbonising Transport in Emerging Economies” (DTEE) project.
    Date: 2020–12–24
  15. By: Boriss Siliverstovs (Latvijas Banka)
    Abstract: The previous research already emphasised the importance of investigating the predictive ability of econometric models separately during expansions and recessions (Chauvet and Potter (2013), Siliverstovs (2020), Siliverstovs and Wochner (2020)). Using the data for the pre-COVID period, it has been shown that ignoring asymmetries in a model's forecasting accuracy across the business cycle phases typically leads to a biased judgement of the model's predictive ability in each phase. In this study, we discuss the implications of data challenges posed by the COVID-19 pandemic on econometric model estimates and forecasts. Given the dramatic swings in GDP growth rates across a wide range of countries during the coronavirus pandemic, one can expect that the asymmetries in the models' predictive ability observed during the pre-COVID period will be further exacerbated in the post-COVID era. In such situations, recursive measures that dissect the models' forecasting ability observation by observation allow to gain detailed insights into the underlying causes of one model's domination over the others. In this paper, we suggest a novel metric referred to as the recursive relative mean squared forecast error (based on rearranged observations) or R2MSFE(+R). We show how this new metric paired with the cumulated sum of squared forecast error difference (CSSFED) of Welch and Goyal (2008) highlights significant differences in the relative forecasting ability of the dynamic factor model and naive univariate benchmark models in expansions and recessions that are typically concealed when only point estimates of relative forecast accuracy are reported.
    Keywords: COVID-19, nowcasting, GDP, euro area
    JEL: C22 C52 C53
    Date: 2021–02–02
  16. By: Linas Tarasonis (Bank of Lithuania, Vilnius University); Jose Garcia-Louzao (Bank of Lithuania)
    Abstract: This document explores the incidence of the minimum wage in Lithuania. The descriptive analysis exploits high-frequency data on monthly labor income coming from Social Security records between July 2013 and July 2020 to characterize (i) the evolution of the monthly minimum wage, (ii) the percentage of workers who earn the minimum wage, (iii) the bite of the minimum wage in the wage distribution, and (iv) the heterogeneity of the findings with respect to gender and age. The evidence shows that the minimum wage was raised 7 times with an average (real) increase of 7.3% and, on average, less than 10% of the workers earn at most the minimum wage but low-pay incidence is around 20%. In terms of the impact of the wage distribution, the minimum wage relative to the average wage in the economy fluctuates between 45 and 50 percent. Females and young workers exhibit a larger low-pay incidence and minimum wage bite.
    Keywords: Minimum Wage Legislation, Labor Market Regulation
    JEL: J38 J48
    Date: 2020–11–09

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