nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒07‒19
thirteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Steady State Growth of Vietnam Economy By Ly Dai Hung
  2. Poverty in Russia: A Bird's-Eye View of Trends and Dynamics in the Past Quarter of Century By Abanokova, Kseniya; Dang, Hai-Anh H.
  3. The Growth-at-Risk (GaR) Framework: Implication For Ukraine By Anastasiya Ivanova; Alona Shmygel; Ihor Lubchuk
  4. Central, East and Southeast European Countries in the Global Value Chain Network By Amat Adarov
  5. Entry and Exit of Informal Firms and Development By Brian McCaig; Nina Pavcnik
  6. Dynamics of farm performance and policy impacts: Case studies: Case Studies By Johannes Sauer; Will Chancellor; Phillip Mennig; Jesús Antón
  7. Broadband speed and firm entry in digitally intensive sectors: The case of Croatia By Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska
  8. Fine....I'll do it myself: lessons from self-employment grants in a long recession period By Srhoj, Stjepan; Zilic, Ivan
  9. The Motor Vehicles Industry in Slovakia, 2005–2015 By Biswajit Banerjee; Juraj Zeman
  10. Do Elections Accelerate the COVID-19 Pandemic? Evidence from a Natural Experiment By Ján Palguta; Levínský, René; Škoda, Samuel
  11. Fates of indebted households during the Corona crisis: Survey results from Slovakia By Andrej Cupák; Martin Cesnak; Ján Klacso; Martin Å uster
  12. The Effect of Tourism Activity on Housing Affordability By Mikulić, Josip; Vizek, Maruska; Stojcic, Nebojsa; Payne, James E.; Čeh Časni, Anita; Barbić, Tajana
  13. Role of the Media in the Inflation Expectation Formation Process By Tetiana Yukhymenko

  1. By: Ly Dai Hung (Vietnam Institute of Economics, Hanoi, Vietnam)
    Abstract: The paper estimates the steady state economic growth rate of Vietnam, defined as the equilibirum that the economy converge without new shocks. The method employs a bayesian structural vector autoregressive model (BSVAR) which captures the Triffin policy trilemma at international financial integration. On a quarterly sample over Q2/2008-Q4/2019, the evidence records that the steady state growth based on Minnesota prior is 6.13%. This result is robust by normal-diffuse prior, normal-wishart prior and timely average method. For policy implication, the Vietnam government's objective of annual growth rate at 7.0% over 2021-2030 can only be attained for economic expansion periods.
    Keywords: Economic Growth,Vector Autoregression,Vietnam Economy
    Date: 2021–06
  2. By: Abanokova, Kseniya; Dang, Hai-Anh H.
    Abstract: Hardly any recent study exists that broadly reviews poverty trends over time for Russia. Analyzing the Russian Longitudinal Monitoring Surveys between 1994 and 2019, we offer an updated review of poverty trends and dynamics for the country over the past quarter of century. We find that poverty has been steadily decreasing, with most of the poor having a transient rather than a chronic nature. The bottom 20 percent of the income distribution averages an annual growth rate of 5 percent, which compares favorably with that of 3.3 percent for the whole population. Income growth, particularly the shares that are attributed to labor incomes and public transfers, have important roles in reducing poverty. Our findings are relevant to poverty and social protection policies.
    Keywords: poverty,poverty dynamics,income growth,income mobility,RLMS,Russia
    JEL: C15 D31 I31 O10 O57
    Date: 2021
  3. By: Anastasiya Ivanova (National Bank of Ukraine); Alona Shmygel (National Bank of Ukraine); Ihor Lubchuk (National Bank of Ukraine)
    Abstract: Using data for the Ukrainian economy, we applied and adapted the growth-at-risk (GaR) framework to examine the association between financial conditions, credit and sectors' activity, and external conditions and the probability distribution of GDP growth in Ukraine. We applied CSA and PCA approaches to construct indices of these partitions. We further derived GDP growth distributions and explored their behavior under different scenarios. Results from the model with PCA indices suggest that the relationships between financial conditions as well as external conditions indices and economic activity are inverse regardless of quantile of GDP distribution. Moreover, we found that the financial conditions index has the largest effect on the GDP growth on the lower quantiles, which could generate significant downside risk to the economy.
    Keywords: Quantile regression; economic growth; GDP; principal component analysis; GDP growth distribution
    JEL: C31 C53 E17
    Date: 2021–07–01
  4. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The policy brief examines the position of Central, East and Southeast European (CESEE) countries in the global value chain (GVC) network. Effective integration in global value chains has been recognised as one of the important ingredients of economic development. The analysis uses the multi-country input-output database recently developed by the Vienna Institute for International Economic Studies, covering the period of 2005-2018, to construct and examine the topology of the GVC network focusing on the CESEE region. We show that the CESEE segment of the GVC network has a core-periphery structure with several sectoral clusters forming the closely intertwined core centred around Russia's mining, petroleum and metals industries, as well as the value-added linkages formed by Central European countries with Germany's automotive sector. While these specialisation patterns have intensified over time, the advanced CESEE countries have also managed to diversify their participation in regional value chains. At the same time, a large part of the CESEE region, particularly, the Western Balkans, remains only marginally integrated in the GVC network, calling for additional policy efforts to boost their competitiveness and unlock the potential for a more intensive participation in cross-border production sharing in the region.
    Keywords: global value chains; CESEE countries; network analysis
    JEL: F10 F14 F15
    Date: 2021–07
  5. By: Brian McCaig; Nina Pavcnik
    Abstract: Non-farm informal businesses comprise the majority of the firm distribution in developing countries. We document novel stylized facts about entry and exit of informal, non-farm firms using nationally representative panel data over 15 years and across regions with varying levels of local economic development in Vietnam. First, we find that informal businesses exhibit rates of entry and exit around 14-18% annually. Entry and exit rates are similar and highly correlated at a point in time, within industries, and within regions. They both decline over time and across space with economic development. Second, although market selection influences which firms survive, entry and exit has little net effect on aggregate (revenue) productivity or hiring of workers outside the household. This owes to overlapping labor productivity of entering and exiting firms and low subsequent productivity growth and hiring among the surviving entrants. Nonetheless, entry and exit are associated with large changes in individual income. Third, the large overlap in revenue of entering and exiting informal businesses and the high correlation between entry and exit rates are related to the education of owners and their economic activities before and after operating an informal business. Informal business owners are less educated on average than wage workers in the formal sector, but more educated than agricultural workers. The transitions in and out of operating an informal business reflect the underlying structure of economic activities of the working age population, with education gaps also playing a role. The most common transition into non-farm businesses is to and from self-employment in agriculture. The likelihood of this transition declines with economic development, highlighting the role of net entry from agriculture into informal non-farm businesses in structural change.
    JEL: J46 L2 O17 O53
    Date: 2021–07
  6. By: Johannes Sauer (Technical University of Munich); Will Chancellor (Australian Bureau of Agricultural and Resource Economics and Sciences); Phillip Mennig (Technical University of Munich); Jesús Antón (OECD)
    Abstract: This paper provides detailed farm level data evidence on the dynamics of farm performance from case studies covering crop farms in Australia, France, Italy and the United Kingdom (England and Wales), and dairy farms in the Czech Republic, Denmark and Norway, with different recent sample periods of five to thirty years. An increase in productivity over time is common to all countries and most crop farm classes, but productivity dynamics vary significantly. In Australia, strong productivity growth among the most productive crop farms has led to an increase in the gap between the highest and lowest performing farms; whereas in France, Italy and the United Kingdom, productivity growth was weak among the most productive crop farms and the lowest performing farms closed the productivity gap. Productivity also increased among dairy farms, with an increasing gap between the most and the least productive farm classes in the three sample countries. The impact of policy changes on performance dynamics is analysed for decoupled payments in France and England, and dairy payments in the Czech Republic. The main findings across countries and policy implications are discussed in OECD Food, Agriculture and Fisheries Paper N°164.
    Keywords: Agricultural policy, Agriculture, Decoupling, Drivers of performance, Environmental sustainability, Farm structure, Innovation, Productivity, Technical change
    JEL: D24 O31 O33 Q12 Q18
    Date: 2021–07–13
  7. By: Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska
    Abstract: We explore how improvements in digital infrastructure contribute to digital transformation of the Croatian economy. More specifically, we investigate under what conditions improvements in broadband speed are conductive for firm entry in digitally intensive sectors at the local level (cities and municipalities; LGUs) during the period 2014–2017. The results of the benchmark random effects panel data model suggest a 10 percent increase in broadband speed increases the number of new digitally intensive firms by 0.68. Two-way interactions between explanatory variables suggest improvements in broadband infrastructure yield the greatest number of new firm entries in densely populated LGUs, and in LGUs with a higher quality of human capital and greater public investment in physical infrastructure. Using the spatial Durbin panel method, we find improvements in broadband infrastructure exhibit positive firm entry effects both within and between cities and municipalities.
    Keywords: firm entry; digitally intensive sectors; broadband speed; digital transformation; Croatia; spatial spillovers
    JEL: D22 L26 M13 O33
    Date: 2021–07
  8. By: Srhoj, Stjepan; Zilic, Ivan
    Abstract: This paper evaluates the effect of a self-employment grant scheme for unemployed individuals-designed to ease the first 12 months of business operation-on firm growth, survival, and labor market reintegration in Croatia in the 2010-2017 period. Grants offered a moderate amount of finances (up to 50% of average annual gross salary) and absorbed only 5% of funds allocated to active labor market policies (ALMPs), but accounted for 10% of new firms opened throughout the years. We contribute to the literature on self-employment grants with several novel findings. Exploiting the longitudinal structure of the unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. The policy is particularly effective for individuals who would have otherwise had labor market opportunities (men, more educated, prime-age workers, previously employed), individuals who became unemployed after inactivity and lost their job due to a firm's closure-which demonstrates that self-employment subsidies can be effective in ameliorating unemployment. However, the policy was not effective for longer unemployed individuals. At the firm level, we find descriptive evidence that limited liability firms opened via a grant have lower growth potential and worse survival profile, while unlimited liability firms-even though a sizable portion of them closes after a required 12-month grant period-have a more favorable survival profile. Finally, we also find that the effectiveness of these grants has increased throughout the years, indicating toward the direction of institutional learning.
    Keywords: evaluation; firm performance; self-employment grant; unemployment
    JEL: R14 J01 N0
    Date: 2021–06–19
  9. By: Biswajit Banerjee; Juraj Zeman (National Bank of Slovakia)
    Abstract: This note examines the evolution of the Slovak motor vehicles sector during 2005–2015, drawing on the latest update (December 2018) of OECD’s Inter-Country Input-Output (ICIO) model database. The review takes a global value chain (GVC) approach and looks at the linkages from the gross production and value added perspectives. The overall contribution of the motor vehicles sector to Slovakia’s gross production and domestic value added increased twofold during the reference period. There was an ongoing change in the structure of the GVC linkages. The reliance on domestically-sourced inputs increased over the years. The (indirect) value added created in the production of domestically-sourced inputs gradually approached the level of the (direct) value added generated within the motor vehicles sector. Subsequent to the global financial crisis, the share of intermediate goods in exports, the forward linkage of the GVC, and the upstreamness of the production process were all on a rising trend. The sourcing pattern of imports of intermediate inputs and the market for exports steadily shifted away from the euro area towards non-EU countries. It is estimated that a hypothetical 10 percent negative shock to global final demand for motor vehicles would lower Slovak GDP growth by 1 percentage point.
    JEL: D57 F14 F23 L62
    Date: 2021–03
  10. By: Ján Palguta; Levínský, René; Škoda, Samuel
    Abstract: Elections define representative democracies, but also produce spikes in physical mobility if voters need to travel to electoral rooms. In this paper, we examine whether large-scale, in-person elections propagate the spread of COVID-19. We exploit a natural experiment from the Czech Republic which biannually renews mandates in 1/3 of Senate constituencies rotating according to the 1995 election law. We show that in the second and third weeks after the 2020 elections (held on October 9-10), new COVID-19 infections grow significantly faster in voting compared to non-voting constituencies. A temporarily-related peak in hospital admissions and essentially no changes in test positivity rates suggest that the acceleration is not merely due to increased testing. The acceleration is absent in population above 65, consistently with strategic risk-avoidance by older voters. Our results have implications for postal voting reforms or postponing of large-scale, in-person (electoral) events during viral outbreaks.
    Keywords: election,COVID-19,natural experiment,event study
    JEL: D70 D72 H0 H12 H75 I10 I18
    Date: 2021
  11. By: Andrej Cupák (National Bank of Slovakia); Martin Cesnak (National Bank of Slovakia); Ján Klacso (National Bank of Slovakia); Martin Å uster (National Bank of Slovakia)
    Abstract: A satisfactorily small share of households expects serious difficulties in resuming their debt instalments after a payment moratorium is lifted. As documented across six waves of a survey administered by the National Bank of Slovakia on indebted households, the payment moratorium programme was very important. Many households have suffered negative income or employment shocks, and the moratorium conserved household liquidity during the crisis. Loan payment deferral was used mainly at the beginning, and gradually households preferred individual agreements with their banks. The Covid-19 crisis disproportionately affected households that were highly indebted already before the crisis, working in sensitive sectors, less educated, or with large drops in income. As a result of the crisis, vulnerable households plan to keep higher financial buffers to cope with future risks, as well as better diversifying their income activities to less vulnerable sectors.
    JEL: C20 E44 G18
    Date: 2021–06
  12. By: Mikulić, Josip; Vizek, Maruska; Stojcic, Nebojsa; Payne, James E.; Čeh Časni, Anita; Barbić, Tajana
    Abstract: Although researchers have confirmed the impact of tourism on housing prices in many destinations affected with overtourism, they do not consider housing affordability in relation to the population’s income levels. This study explores the relationship between tourism activity and housing affordability, using a sample of Croatian municipalities. Specifically, the study investigates how tourist accommodation, concentration, seasonality and overall vulnerability to tourism influence housing affordability in this emerging tourism-driven European country. The results obtained reveal tourism intensification’s deteriorating effect on local residents’ abilities to afford housing. The findings indicate a particularly strong tourism seasonality impact, suggesting the presence of common negative externalities, such as employment fluctuations, difficulties in maintaining economic status, and revenue instabilities, in localities prone to seasonal tourism fluctuations.
    Keywords: tourism intensity; housing affordability; dynamic panel model; Croatia
    JEL: L83 R2 R31
    Date: 2021–01
  13. By: Tetiana Yukhymenko (National Bank of Ukraine)
    Abstract: This research highlights the role played by the media in the inflation expectations formation process of different types of respondents in Ukraine. Using a large news corpus and machine learning techniques I constructed news-based measures transforming text into quantitative indicators, which reflect news topics relevant to inflation expectations. As such, I found evidence that the different news topics have an impact on inflation expectations and can explain part of their variance. Thus, my results can help understand inflation expectations, especially as anchoring inflation expectations remains a key challenge for central banks.
    Keywords: Inflation expectations; natural language processing; textual data; machine learning
    JEL: C55 C82 D84 E31 E58
    Date: 2021–06–30

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