nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒08‒30
eleven papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. United in diversity: Labor markets in the CEE countries By Michal Bencik
  2. Market power and long-term gas contracts: the case of Gazprom in Central and Eastern European Gas Markets By Chi Kong Chyong; David Reiner; Dhruvak Aggarwal
  3. Impact of Covid-19 pandemic on mortality in Russian regions By Druzhinin, Pavel; Molchanova, Ekaterina; Podlevskih, Yulia
  4. Fates of indebted households during the Corona crisis: Survey results from Slovakia By Alexander Karsay
  5. Labor Market Hardships and Preferences for Public Sector Employment and Employers: Evidence from Russia By Olivia Jin; William Pyle
  6. A new poverty indicator for Europe: the extended headcount ratio By Goedemé, Tim; Decerf, Benoit; Van den Bosch, Karel
  7. Choose the school, choose the performance. New evidence on the determinants of student performance in eight European countries By Luca Bonacini; Irene Bfrunetti; Giovanni Gallo
  8. Analysis of the Impact of Borrower-Based Measures By Martin Cesnak; Jan Klacso; Roman Vasil
  9. Wealth, Assets and Life Satisfaction: A Metadata Instrumental-Variable Approach By Zuzana Brokesova; Andrej Cupak; Anthony Lepinteur; Marian Rizov
  10. Assessing real estate prices in Slovakia – a structural approach By Martin Cesnak; Jan Klacso
  11. The Economics of Walking About and Predicting Unemployment By David G. Blanchflower; Alex Bryson

  1. By: Michal Bencik (National Bank of Slovakia)
    Abstract: We study supply side factors of the labor market in the Czech Republic, Hungary, Poland and Slovakia. Common economic history of these Central European economies suggests that long run relationships should have resembling patterns. While we find that while for the Czech Republic and Hungary there exists a long run relation of equilibrium unemployment rate to real wages, capital stock and terms of trade; such relationship does not hold for Poland and Slovakia. Instead labor market trends are better described by the relationship of equilibrium real wages. This finding uncovers structural differences within the Visegrad countries. These differences relate to the extent, in which labor supply can adapt to shocks. In practice this would suggest that it was more efficient for Slovakia to conduct supply driven policies, as flexible employment contracts or industrial policies, to stabilize labor market conditions. On the contrary, the more efficient tool for the Czech Republic are wage oriented demand driven policies.
    JEL: E24 J31
    Date: 2021–06
  2. By: Chi Kong Chyong (EPRG, CJBS, University of Cambridge); David Reiner (EPRG, CJBS, University of Cambridge); Dhruvak Aggarwal (EPRG, University of Cambridge)
    Keywords: Gazprom, European Commission, Market Power, Natural Gas, Security of Supply, Competition, Long-term contracts, Swap deals
    JEL: L95 L42 D47 D42 C63 P28
    Date: 2021–05
  3. By: Druzhinin, Pavel; Molchanova, Ekaterina; Podlevskih, Yulia
    Abstract: For many years the Department MFRD of IE KarRC RAS, together with scientists of PetrSU, UWF and medical institutions, have been conducting comprehensive research at the intersection of economics, demography, medicine and ecology. Studies were supported by 10 RFBR and RGNF grants. This article examines the impact of the COVID-19 pandemic on mortality in Russian regions. The purpose of the study is to identify the factors that during the pandemic have contributed to a significant mortality increase in Russian regions. The work assessed the impact of socio-economic, demographic, medical and geographical indicators at different stages of the pandemic on the level of morbidity and mortality, taking into account the characteristics of regions. It is shown that in general, the increase in mortality has been facilitated by a higher shares of retirees and urban population, the location of the region in the center of the country and a drop in citizens' incomes in 2020 (compared to 2019). The first (spring) wave of the pandemic in Russia was relatively low, largely due to the imposed strict restrictions. Therefore, only in some months did the lower availability of hospital beds of the population of the region contribute to the increase in mortality. The highest increase in the mortality rate was in the regions of the Central Federal District. During the summer period, the incidence decreased and restrictions were relaxed, but increased mobility of citizens led to an increase in mortality in the Volga Federal District regions, through which the main roads and railways pass. By the end of summer, the availability of doctors and beds in the region became significant factors influencing the increase in mortality, in addition to the three main indicators. In the fall, the second wave began, during this period the increase in mortality depended on the location of the region, the proportion of the urban population and the availability of doctors in the region. In some months, the level of income of the population and its change in 2020 had a significant impact. In December, the situation in the Volga Federal District and the Siberian Federal District stabilized, while mortality in the Southern regions of the country began to grow. The research was carried out by scientists of the IE KarRC RAS and RIH and can be used in the field of regional medical and demographic policy to increase the effectiveness of management decisions and preserve the public health of the nation.
    Keywords: demography; mortality; public health; socio-economic factors; modelling; region; pandemic; COVID-19
    JEL: I15
    Date: 2021–03–10
  4. By: Alexander Karsay (National Bank of Slovakia)
    Abstract: The study presents main structural and cyclical drivers most likely driving unemployment rate developments in the period of the recent labour market expansion in Slovakia in 2014 – 2019. It presents estimates of the impact of individual drivers on structural unemployment rate using panel regression methods. The contributions of drivers to unemployment developments are presented for V4 countries. We also provide a hint as to likely future drivers of unemployment in the Slovak Republic in coming years. The 2014 – 2019 period in Slovakia was characterised by both a structural and cyclical decline in unemployment. The structural decline was driven by active labour market policies, demography, workforce mobility, to some extent higher quality of human capital and labour productivity. The current pandemic crisis causes an upward adjustment of unemployment unwinding previous imbalance. This is accompanied by efforts to increase efficiency of production processes due to general automation drive as well as potential lagged impacts of dynamic growth of labour costs. These factors could potentially offset other opposite structural forces, namely demography and potential output growth.
    Date: 2021–06
  5. By: Olivia Jin; William Pyle
    Abstract: A growing literature connects labor market hardships to stronger preferences for government welfare and redistribution programs. Potential preference shifts with respect to other types of state involvement in the economy, however, have gone unexplored. We draw on both longitudinal and pseudo-panel data from Russia to explore how labor market hardships relate to preferences for public sector employment and employers. In fixed effects specifications, we demonstrate that feelings of job insecurity, experiences with wage arrears, and spells of unemployment all increase the attractiveness of work in the public sector. Pseudo-panel data provide only mixed evidence as to whether such effects endure over the longer run.
    Keywords: economic shocks, personal experience, public employment, political preferences
    JEL: H10 J45 J60 P35
    Date: 2021
  6. By: Goedemé, Tim; Decerf, Benoit; Van den Bosch, Karel
    Abstract: The methodology currently used to measure poverty in the European Union faces some important limitations. Importantly, capturing the major aspects of poverty is done using a dashboard of indicators, which often tell conflicting stories. We propose a new income-based measure of poverty for Europe that captures in a consistent way the level of relative poverty, the intensity of poverty, poverty with a threshold anchored in time and a pan-European perspective of poverty in a single indicator. To do so, we work with a recently developed poverty index, the Extended Headcount ratio (EHC), and derive the relevant poverty lines to apply the index to poverty in Europe. We show empirically that our measure consistently captures the aspects typically monitored using a variety of indicators, and yield rankings that seem more aligned with intuitions than those obtained by these individual indicators. According to our measure, Eastern Europe is much poorer than Southern Europe, which, in turn, is much poorer than North-Western Europe. The evolution of our measure over time correlates most strongly with the at-risk-of-poverty rate in North-Western Europe and correlates most strongly with at-risk-of-poverty with the threshold anchored in time in Southern and Eastern Europe.
    Keywords: Poverty, Europe, at-risk-of-poverty, Europe 2020 poverty reduction target, extended headcount ratio, social indicators, EU-SILC
    Date: 2020–11
  7. By: Luca Bonacini; Irene Bfrunetti; Giovanni Gallo
    Abstract: This study aims to identify the main determinants of student performance in reading and maths across eight European Union countries (Austria, Croatia, Germany, Hungary, Italy, Portugal, Slovakia, and Slovenia). Based on student-level data from the OECD’s PISA 2018 survey and by means of the application of efficient algorithms, we highlight that the number of books at home and a variable combining the type and location of their school represent the most important predictors of student performance in all of the analysed countries, while other school characteristics are rarely relevant. Econometric results show that students attending vocational schools perform significantly worse than those in general schools, except in Portugal. Considering only general school students, the differences between big and small cities are not statistically significant, while among students in vocational schools, those in a small city tend to perform better than those in a big city. Through the Gelbach decomposition method, which allows measuring the relative importance of observable characteristics in explaining a gap, we show that the differences in test scores between big and small cities depend on school characteristics, while the differences between general and vocational schools are mainly explained by family social status.
    Keywords: Gelbach decomposition, Education inequalities, Machine learning, PISA, Schooling tracking, Student performance.
    JEL: I21 I24 J24
    Date: 2021–08
  8. By: Martin Cesnak (National Bank of Slovakia); Jan Klacso (National Bank of Slovakia); Roman Vasil (National Bank of Slovakia)
    Abstract: The National Bank of Slovakia has been actively implementing borrower-based measures since 2014. In this paper we provide a cost-benefit analysis of these measures. DSTI measures affected mainly the riskiest borrowers with at most secondary education and lower income. Exemptions from DTI limits are provided mainly to borrowers with a higher volume of loans and higher education. LTV limits affected mainly younger borrowers up to 35 years old. The impact of respective measures was affected by front-loading, by the gradual tightening of the limits and by other legislative changes. The highest impact is estimated in 2019, when the volume of newly granted loans was lowered by 17% due to the measures. The estimated impact on residential real estate prices is relatively mild. The current coronavirus pandemic is the first period when systemic risks could have materialized after the implementation of the measures. Due to the possible loan payment deferral the number of loans defaulted has remained relatively low, therefore LTV measures have not been able to limit credit losses. On the other hand, DSTI measures have helped to mitigate credit risk. Households affected the most by the pandemic were those with an already high debt burden even before the outbreak of the crisis. These households have used loan payment deferral to a larger extent.
    JEL: C58 D61 G21 G28
    Date: 2021–08
  9. By: Zuzana Brokesova (University of Economics in Bratislava); Andrej Cupak (National Bank of Slovakia); Anthony Lepinteur (University of Luxembourg); Marian Rizov (University of Lincoln)
    Abstract: We analyse the relationship between wealth/assets and life satisfaction. Using the Household Finance and Consumption Survey microdata from Slovakia in 2017, we first show that real assets (being the major component of household wealth) and life satisfaction are positively correlated. We address endogeneity concerns thanks to the metadata of the survey: we use the interviewers ’ratings of the respondents’ quality of dwellings to instrument the value of real assets. We show that the 2SLS estimate is positive and higher than the baseline OLS estimate, confirming that real assets are measured with error in survey data. Finally, we use the paradata to show that living next to a neighbour with better house quality significantly decreases one’s happiness. Our results suggest that around half of the total effect of real assets on life satisfaction is relative.
    JEL: I30 D60 G51 C26
    Date: 2021–07
  10. By: Martin Cesnak (National Bank of Slovakia); Jan Klacso (National Bank of Slovakia)
    Abstract: In this paper, we apply the borrowing capacity approach and the intrinsic value approach to assess property prices in Slovakia. We estimate the maximum attainable house price for a given household. It means that we apply downpayment, DSTI or DTI parameters in line with the macroprudential limits implemented by the NBS. We consider the possible top-up in the form of a consumer loan for households not having enough own capital. Finally, we make use of an internal database of NBS of individual retail loan data that gives us a better picture of the average income of borrowers. Results based on the SBC approach point to a possible overvaluation during the pre-crisis period in 2007 and 2008. After the crisis, lowering interest rates and increasing income led to a robust increase of affordability. Since 2014, the implementation of borrower-based measures decreased the affordability, at least for households with not enough own capital. Based on the results, borrower-based measures could under some circumstances ease the upward pressure on house prices even in an environment of historically low interest rates, unemployment and increasing income.
    JEL: G12 G18 E37
    Date: 2021–06
  11. By: David G. Blanchflower (Bruce V. Rauner ’78 Professor of Economics, Dartmouth College, Hanover, NH 03755-3514. Adam Smith School of Business, University of Glasgow and NBER); Alex Bryson (Professor of Quantitative Social Science, UCL Social Research Institute, University College London, 20 Bedford Way, London WC1H 0AL)
    Abstract: Unemployment is notoriously difficult to predict. In previous studies, once country fixed effects are added to panel estimates, few variables predict changes in unemployment rates. Using panel data for 29 European countries - Austria; Belgium; Bulgaria; Croatia; Cyprus; Czechia; Denmark; Estonia; Finland; France; Germany; Greece; Hungary; Ireland; Italy; Latvia; Lithuania; Luxembourg; Malta; Netherlands; Poland; Portugal; Romania; Slovakia; Slovenia; Spain; Sweden; Turkey and the UK - over 439 months between January 1985 and July 2021 in an unbalanced country*month panel of just over 10000 observations, we predict changes in the unemployment rate 12 months in advance based on individuals’ fears of unemployment, their perceptions of the economic situation and their own household financial situation. Fear of unemployment predicts subsequent changes in unemployment 12 months later in the presence of country fixed effects and lagged unemployment. Individuals’ perceptions of the economic situation in the country and their own household finances also predict unemployment 12 months later. Business sentiment (industry fear of unemployment) is also predictive of unemployment 12 months later. The findings underscore the importance of the “economics of walking about”. The implication is that these social survey data are informative in predicting economic downturns and should be used more extensively in forecasting. We also generate a 29 country-level annual panel on life satisfaction from 1985-2020 from the World Database of Happiness and show that the consumer level fear of unemployment variable lowers wellbeing over and above the negative impact of the unemployment rate itself. Qualitative survey metrics were able to predict the Great Recession and the economic slowdown in Europe just prior to the COVID pandemic.
    Keywords: unemployment, fear, sentiment, social attitudes, life satisfaction, recession, COVID
    JEL: J60 J64 J68
    Date: 2021–08–01

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