nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒10‒04
thirteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. To Grow or Not to Grow: Belarus and Lithuania By Thorvaldur Gylfason; Eduard Hochreiter
  2. The Political Economy of Russian Energy Policy: Evolution and Performance After Market Transition By Dai Yamawaki
  3. Effects of internal rural-urban migration on rural non-farm enterprises: Evidence from Thailand and Vietnam By Grabrucker, Katharina
  4. Minimum wage reform and firms’ performance – evidence from North Macedonia By Biljana Jovanovic; Nikola Naumovski
  5. FDI and Onshore Employment Dynamics : Evidence from German Firms with Affiliates in the Czech Republic By Körner, Konstantin; Moritz, Michael; Schäffler, Johannes
  6. What we pay in the shadow: Labor tax evasion, minimum wage hike and employment By Nicolas Gavoille; Anna Zasova
  7. The Impact of Delay: Evidence from Formal Out-of-Court Restructuring By Srhoj, Stjepan; Kovač, Dejan; Shapiro, Jacob N.; Filer, Randall K.
  8. Combining knowledge bases for system innovation in regions: Insights from an East German case study By Friedrich, Christoph; Feser, Daniel
  9. Assessment of a social discount rate and financial hurdle rates for energy system modelling in Viet Nam By Brendan Coleman
  10. Sovereign Debt and Supersanctions in Emerging Markets: Evidence from Four Southeast European Countries, 1878-1913 By Andreea-Alexandra Maerean; Maja Pedersen; Paul Sharp
  11. The impact of Covid-19 Pandemic on Romania’s business environment. By ANDREI, Dalina
  12. Estimating business and financial cycles in Slovenia By Lenarčič, Črt
  13. An Economic Response to COVID-19 By Nurdaulet Abilov; Alisher Tolepbergen; Aizhan Bolatbayeva; Zarina Adilkhanova; Erlan Konebayev; Zhandos Ybrayev

  1. By: Thorvaldur Gylfason; Eduard Hochreiter (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: We compare the economic growth performance of Belarus and Lithuania since the collapse of the Soviet Union in 1991. Our interest in this country pair is driven by the two countries´ interwoven histories as well as by the fact that Belarus remains autocratic and strongly tied to Russia, while Lithuania has reinvented itself as a democratic market economy fully integrated into the EU. Our aim is to better understand the extent to which the growth differential between the two countries can be traced to increased efficiency, i.e., total factor productivity, in the use of capital and other resources via, inter alia, better institutions (intensive growth) as opposed to sheer accumulation of capital (extensive growth), the hallmark of Soviet economic growth. To this end, we compare the development of some key determinants of growth in the two countries since the 1990s. A simple growth accounting model suggests that advances in education at all levels, good governance, and institutional reforms have played a more significant role in raising economic output and efficiency in Lithuania than in Belarus, which remains marred by problems related to weak governance as well as autocratic rule. Further, as in Estonia and Latvia, the EU perspective has made a significant contribution to growth in Lithuania. The Russian connection has done less for Belarus. Finally, we touch upon the impact of the corona virus on the economies of the two countries.
    Keywords: Economic growth, Belarus, Lithuania, Governance, Transition economies, Education, Economic reforms, Exports, Inflation, Labour markets, Corona virus
    JEL: O11 O16 O19
    Date: 2021–09
  2. By: Dai Yamawaki (Institute of Economic Research, Kyoto University)
    Abstract: The present study examines the transformation of Russian energy policy ad its performance after market transition. On the basis of historical policy review, it reveals that environmental conservation in energy industry has been repeatedly specified in Russian energy policy after the 1990s whilst its focus has still descended to quantitative expansion of hydrocarbons. In this context, this paper explains this situation from the perspective of coordination mechanism such as market and government. Despite a series of liberal policies during market transition, it becomes clear that Russian energy market has not been completely liberalised in terms of price and privatisation and retained control of the government, whilst the process of energy policy formation and implementation has been highly politicised, especially since the 2000s. This paper also derives some characteristics of Russia in those circumstances, such as an existence of strong state monopoly, recognition of energy as public goods, and environmental incompatibility with the existing growth model, which are raised as propositions given to Russian energy policy and challenges to be overcome for its future sustainable growth.
    Keywords: Russia, energy policy, market, government, transition
    JEL: P28 P52 Q32
    Date: 2021–09
  3. By: Grabrucker, Katharina
    Abstract: Migration is a phenomenon of increasing global relevance as year by year a growing number of individuals is leaving their home driven by the pursuit to improve the well-being of their households through additional income. While the drivers of international migration and its effect on the left-behind households have been well researched, less focus has been put on the effects of internal, rural-urban migration (and its concomitant remittances). This paper analyses the net effects of remittances from internal, rural-urban migrants on selfemployment and on investments of the left-behind households by using a rich household level panel data set from Thailand and Vietnam. The findings indicate that individuals from households receiving remittances from internal, rural-urban migrants are less likely to be self-employed - both in Thailand and Vietnam. The channels through which remittances affect the labor supply of the receiving households cannot be determined with certainty, yet one of the potential reasons might be that left-behind household members need to compensate for the lost labor of the migrant who was previously engaged in farm activities. Moreover, the results show for some specifications lower investments of migrant households into farm and non-farm assets, while the expenditure on consumption is higher compared to households without migrants. This might be an indication that non-farm activities are less important for rural left-behind households, while remittances might be directly used to increase the consumption level - which might have been low before the migration.
    Keywords: Internal migration,Remittances,Rural non-farm enterprises,Thailand,Vietnam
    JEL: D22 F24 O15 Q12 R23
    Date: 2021
  4. By: Biljana Jovanovic (National Bank of the Republic of North Macedonia); Nikola Naumovski (National Bank of the Republic of North Macedonia)
    Abstract: Minimum wage is an important redistributive tool and an important element of the employment strategies and social policies for overcoming poverty and reducing inequality. Even though the social dimension of the minimum wage concept is unquestionable, it also provokes frequent debates and discussions about the likely impact on firms’ financial conditions and consequently, firms’ profitability and performance. This research paper aims to investigate the economic impact of minimum wage increase on firms’ average wages, number of employees, profitability and productivity in the case of North Macedonia. The analysis is conducted by using firm level data set and difference-in-difference (DD) estimation method. Our results showed that the increase in minimum wages didn’t affect firms’ profitability significantly and this result is robust to the changes in the sample and method of estimation. In addition we found that most likely Macedonian firms did absorb higher labour costs by increase in productivity and, in some sectors, with decline in employment.
    Keywords: Inflation, minimum wage, adjustment channels, firms’ performance
    JEL: J31 J38 L25
    Date: 2021
  5. By: Körner, Konstantin; Moritz, Michael (Institute for Employment Research (IAB), Nuremberg, Germany); Schäffler, Johannes
    Abstract: "In this paper, we revisit questions about the onshore employment effects of firms that conduct foreign direct investment (FDI) in countries with substantially lower average wages. Our results derive from the use of rich administrative records on the universe of employees in German multinational enterprises (MNEs) that were active in the Czech Republic in 2010. Compared with former studies, the unique dataset in this study includes a much higher fraction of small and medium-sized firms and leads to strikingly different results for service MNEs. Applying coarsened exact matching for firms and an event-study design, we show that the domestic employment growth of MNEs decreases relative to that of non-MNEs and that the affected workers are those with low or medium educational attainment in the manufacturing sector and with medium or high educational attainment in the service sector. Regarding workers’ tasks, our results do not show that FDI affects routine jobs beyond a worker’s skill level." (Author's abstract, IAB-Doku) ((en))
    Keywords: Bundesrepublik Deutschland ; Tschechische Republik ; Ausland ; Auslandsinvestitionen ; Auswirkungen ; Beschäftigungseffekte ; Dienstleistungsbereich ; Inländer ; multinationale Unternehmen ; Niedriglohnland ; outsourcing ; qualifikationsspezifische Faktoren ; Arbeitskräftenachfrage ; verarbeitendes Gewerbe ; 1990-2009
    JEL: F23 J23 F66
    Date: 2021–05–10
  6. By: Nicolas Gavoille; Anna Zasova
    Abstract: The interactions between minimum wage policy and tax evasion remain largely unknown. We study firm-level employment effects of a large and biting minimum wage increase in Latvia conditional on labor tax compliance. The Latvian labor market is characterized by the prevalence of envelope wages, i.e. unreported cash-in-hand complements to the official wage. We apply machine learning to classify firms between compliant and tax-evading using a unique combination of administrative and survey data. We then show that firms engaged in labor tax evasion are insensitive to the minimum wage shock. Our results suggest that these firms use wage underreporting as an adjustment margin, converting (part of) the envelope into legal wage. Increasing minimum wage contributes to tax rule enforcement, but this comes at the cost of negative employment consequences for compliant firms.
    Keywords: Minimum wage; Employment; Tax evasion
    JEL: J08 H26 E26
    Date: 2021–09–21
  7. By: Srhoj, Stjepan; Kovač, Dejan; Shapiro, Jacob N.; Filer, Randall K.
    Abstract: Bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in such procedures impact the economic performance of participating firms in the context of Croatia, which introduced a "pre-bankruptcy settlement" (PBS) process in the wake of the Great Recession of 2007 - 2009. Local institutions left over from the communist era provide annual financial statements for both sides of more than 180,000 debtor-creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delays entry into the standard bankruptcy procedure, leads to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We also track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures to rapidly resolve uncertainty about firms' future prospects.
    Keywords: bankruptcy, insolvency, liquidation, restructuring
    JEL: D02 G33 G34 L38 P37
    Date: 2021–08
  8. By: Friedrich, Christoph; Feser, Daniel
    Abstract: A growing number of economic geography scholars have discussed the spatial dimensions of sustainability innovation in socio-technical systems to overcome societal, economic, and ecological problems. This research usually focuses on businesses in the knowledge economy and success factors. However, sustainability innovation involves the collaboration of upstreaming process stages and open innovation processes with a broad range of different actors. Innovation intermediaries, such as universities and research institutes, are needed to support and accelerate the transfer of knowledge. Nevertheless, little is known about the influence of the cognitive and institutional diversity of actors on the configuration of knowledge bases required for sustainability innovation. This article presents insights from 16 semi-structured expert interviews conducted in a regional innovation system (RIS) in East Germany. We investigate four innovation intermediaries in the region of Eberswalde in cooperation with the Eberswalde University for Sustainable Development. The analytical framework links the concept of differentiated knowledge bases to sustainability transitions and sustainability-oriented knowledge transfer. Our results show that, first, in the Eberswalde region, the relevant actors involved in regional knowledge transfer predominantly focus on synthetic knowledge bases, such as experience-based knowledge of local area settings. Second, symbolic knowledge bases are crucial and often prerequisites for intermediary organizations to recombine knowledge bases and support the capability to innovate in regional knowledge transfer. Symbolic knowledge contains, in particular, the ability to translate scientific findings to a language that can be understood by the various actors in knowledge transfer. Third, organizational innovation complements social innovation to support innovation on a systemic level and foster change processes.
    Keywords: Knowledge bases,system innovation,knowledge transfer,innovation intermediation,sustainability transition
    JEL: D02 D80 O12 P48 Q56 R11
    Date: 2021
  9. By: Brendan Coleman (OECD)
    Abstract: Viet Nam’s sustained economic development is driving increasing demand for electricity with generation capacity predicted to nearly double over the next decade. With the majority of economic hydropower resources utilised, delays in coal power pipelines, and increasing energy insecurity, Viet Nam has pivoted its electricity sector development plans to further prioritize the deployment of wind and solar generation. A clean energy transition such as this can deliver multiple social and economic benefits related to cost reductions, improved energy security, and public health.This working paper was prepared to support least-cost energy sector planning in Viet Nam particularly for the upcoming Viet Nam Energy Outlook 2021 (VEO21) being prepared in partnership between Viet Nam’s Ministry of Industry and Trade (MOIT) and the Danish Energy Agency (DEA). This working paper discusses the use of discounting in energy models and the potential impact discount rate selection may have on a model’s cost-optimised technology selections. The paper also analyses the clean energy finance environment in Viet Nam to identify opportunities for policy levers to reduce the prevailing cost of capital and how these cost implications can be tested in the VEO21 modelling exercise. The main outputs of this working paper are two sets of model inputs, an estimate for an appropriate social discount rate and secondly a set of high and low financial hurdle rates for renewable energy technologies for use in sensitivity or scenario analysis.
    Keywords: Clean Energy, Cost of Capital, Discount Rates, Energy Planning, Hurdle Rates, Viet Nam
    JEL: O21 Q01 Q48 G18
    Date: 2021–09–29
  10. By: Andreea-Alexandra Maerean (European Commission (DG Economic and Financial Affairs)); Maja Pedersen (University of Southern Denmark); Paul Sharp (University of Southern Denmark)
    Abstract: Do emerging markets need to sacrifice economic sovereignty in order to borrow more cheaply on the international capital markets? To explore this, we exploit a natural experiment following the Treaty of Berlin in 1878 when four Balkan states - Bulgaria, Greece, Romania, and Serbia - received full or de facto independence. Using a novel dataset of monthly bond prices from the Berlin and London stock exchanges, we find that a sacrifice of national sovereignty or ‘supersanctions’ was one way for these emerging markets to receive more favourable borrowing conditions. Romania never submitted to such measures, however, but was usually able to borrow more cheaply than her neighbours.
    Keywords: Bulgaria, creditworthiness, emerging markets, Greece, Romania, Serbia, sovereign debt
    JEL: E4 E5 G1 N2
    Date: 2021–09
  11. By: ANDREI, Dalina
    Abstract: Our paper tries to have an image on companies in Romania through the official statistical data of the National Office of the Romanian Trade Register (ONRC) regarding the authorized individuals and legal entities active in Romania, then some more data and opinions vis-à-vis provided by National Institute of Statistics(INSSE) and finally several surveys conducted by consulting companies in the same area of studying. We’ll even attempt to ‘draw’ a kind of behavioural ‘portrait of Romanian business people’ to find then how much these subjects saw themselves affected by the current Covid-19 health crisis. Basically, this latest is supposed to have a major impact on the international business environment. More about what is here happening beyond company registrations, insolvencies and other company related events and legislation is needed. Existing descriptions in the press and literature need improvements either. We will equally take into account, in the text below, the responsibility of companies' shareholders face to: expectations, businesses financing options, difficulties and difficult periods facing solutions, plans and strategies for near future. The impact of some measures taken by government authorities to support the business and entrepreneurs will also be taken into account.
    Keywords: new companies formation, entrepreneurship,Covid19 economic impact, romanian business environment
    JEL: I14 I15 M1 M13 M2
    Date: 2021–01–10
  12. By: Lenarčič, Črt
    Abstract: In this paper we utilize a multivariate STSM model in order to estimate trend and cyclical components on a set of business and financial economic variables for Slovenia. The results show that financial cycles are somewhat longer compared to business cycles. Comparing the standard deviations of financial and business cycles give inconclusive results on average, but excluding particular macroeconomic variables that are by definition more volatile, we see that also standard deviations of financial cycles tend to be larger. From the economic policy implications point of view the results might not come as a surprise, but are utterly important for additionally implementing financial stability goals alongside the monetary policy mandate, as financial cycles seem to be longer and deeper compared to business cycles.
    Keywords: Unobserved components models, financial cycles, housing cycles, business cycles, model-based filters
    JEL: C32 E32 E44
    Date: 2021–10
  13. By: Nurdaulet Abilov (NAC Analytica, Nazarbayev University); Alisher Tolepbergen (NAC Analytica, Nazarbayev University); Aizhan Bolatbayeva (NAC Analytica, Nazarbayev University); Zarina Adilkhanova (NAC Analytica, Nazarbayev University); Erlan Konebayev (NAC Analytica, Nazarbayev University); Zhandos Ybrayev
    Abstract: Current report presents economic analyses and policy recommendations for Kazakhstan based on the research and models of NAC Analytica (Nazarbayev University) in close coordination with the academics of the Economics Department (Nazarbayev University). The main objective of the report is the formulation of economic policy in response to the pandemic COVID-19 that has infected over 3 million people over the world and poses a substantial risk to the economy of Kazakhstan and of the rest of the world. Hence, there is an impeccable need for designing informed fiscal, monetary and social policy responses to combat in an effective manner a negative impact of the pandemic on the economy.
    Keywords: COVID-19; Fiscal policy; Forecasts; Pandemic; Kazakhstan
    JEL: E17 E32 E37 E61 E62
    Date: 2020–04

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