nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒11‒08
nine papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Do Cohesion Funds foster regional trade integration? A structural gravity analysis for the EU regions By Yevgeniya Shevtsova; Jorge Diaz-Lanchas; Damiaan Persyn; Giovanni Mandras
  2. A Real-Business-Cycle model with robots: Lessons for Bulgaria By Vasilev, Aleksandar
  3. The best practices and potential of smallholders’ participation in short value chains in the Western Balkans and Turkey By Suzana Djordjevic Milosevic; Judith Möllers; Federica Di Marcantonio; Pavel Ciaian; NESEVIC Danica; THIMO Etleva; VUKCEVIC ZORIC Andja; ALI KOÇ Ahmet; BUZAROVSKI Darko; TASEV Ivan; DAMNJANOVIC Aleksandar; MARKOVIC Predrag
  4. "Wild" Tariff Schemes: Evidence from the Republic of Georgia By Anna Alberini; Levan Bezhanishvili; Milan Scasny
  5. How quantitatively important are shocks to consumption and income tax rates for business cycle fluctuations? Lessons from Bulgaria (1999-2020) By Vasilev, Aleksandar
  6. Ethnicity and risk sharing network formation: Evidence from rural Viet Nam By Quynh Hoang; Camille Saint Macary; Laure Pasquier-Doumer
  7. Agricultural markets in Ukraine: current situation and market outlook until 2030 By NYKOLYUK Olga; PYVOVAR Petro; CHMIL Alla; BOGONOS Mariia; TOPOLNYCKYI Pavlo; CHEBAN Iryna; FELLMANN Thomas
  9. A Conflict of State-led Initiative and Economic Rationality: Focusing on the State Language and Lingua Franca in Uzbekistan By Masahiro Tokunaga; Ravshan Shomurodov; Okiliddin Alimov

  1. By: Yevgeniya Shevtsova (European Commission - JRC); Jorge Diaz-Lanchas (Universidad Pontifica Comillas); Damiaan Persyn (University of Göttingen); Giovanni Mandras (European Commission - JRC)
    Abstract: This paper uses a structural gravity model to explore the regional trade and welfare impact of the EU Cohesion Policy Transport Infrastructure Investment programme estimated using a novel dataset of the Generalised Transport Costs for the EU regions at the NUTS2 level. The results indicate that on average additional investment in transport infrastructure can increase NUTS2 total regional exports by 0.40% and regional real GDP 1.13%. Central and Eastern European Regions enjoy the highest exports and GDP gains, while few Western European regions experience a negligible decrease in wages, which may occur as a result of factor price convergence.
    Keywords: structural gravity, trade policy, general equilibrium analysis.
    JEL: F13 F14 F15 R13
    Date: 2021–10
  2. By: Vasilev, Aleksandar
    Abstract: Robots are introduced into a real-business-cycle setup augmented with a detailed government sector. Robots are modeled as an imperfect substitute for labor services. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of the presence of robots in the economy is investigated for business cycle fluctuations in Bulgaria. In the presence of robots, wages increase, but employment falls after a technology shock. However, for plausible parameter values, the effect is predicted to be quite small.
    Keywords: business cycles,robots
    JEL: E32 E24
    Date: 2021
  3. By: Suzana Djordjevic Milosevic (Singidunum University); Judith Möllers (Leibniz Institute of Agricultural Development in Transition Economies); Federica Di Marcantonio (European Commission - JRC); Pavel Ciaian (European Commission - JRC); NESEVIC Danica; THIMO Etleva; VUKCEVIC ZORIC Andja; ALI KOÇ Ahmet; BUZAROVSKI Darko; TASEV Ivan; DAMNJANOVIC Aleksandar; MARKOVIC Predrag
    Abstract: The overall objective of this report is to identify and conduct analysis of short food supply chains (SFSCs) among small farmers in the Western Balkans and Turkey. The report’s analyses are based on the primary data collected from 397 smallholder farmers through semi-structured interviews in all Western Balkan countries/territories (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia) and Turkey. The report analyses shed light on several issues related to smallholders and SFSCs, such as types of sales channels used by small farmers for selling their products; the level of information about and knowledge of the SFSC; contractual arrangements applied; the use of food safety and quality standards; best practices of and barriers to small farmers’ participation in SFSCs; the role of SFSCs in promoting environmentally friendly farming practices; the role of SFSCs in promoting the economic viability of small farms; and the role of agricultural policy in supporting small farmers’ access to SFSCs. Based on these analyses, the report also derives policy recommendations. Overall, the report concludes that SFSCs are an attractive way of adding value to primary food production and improving small farmers’ livelihoods in the Western Balkans and Turkey. Key policy measures that could boost small farmers’ participation in short value chains are improvement of advisory services; provision of investment support targeted to small farmers and SFSCs; better access to finance; and enhanced support for cooperation and bottom-up initiatives for partnerships.
    Keywords: Western Balkans, Turkey, smallholders, short food supply chains, agrifood sector
    JEL: Q13 Q18
    Date: 2021–10
  4. By: Anna Alberini (AREC, University of Maryland, College Park & Charles University, Prague, Czech Republic); Levan Bezhanishvili (Charles University, Prague, Czech Republic); Milan Scasny (Charles University, Institute of Economic Studies at Faculty of Social Sciences & The Environment Center)
    Abstract: Consumers often struggle to grasp complicated pricing plans, including increasing block rate (IBR) schemes, which have been used for decades by utilities in many parts of the world. The assumption that they encourage conservation has, however, recently been challenged (Ito, 2014). We take advantage of the unique IBR tariffs for electricity in the Republic of Georgia - where "overage" is penalized more heavily than in conventional IBR - to ask whether consumers respond to price, and to which price specifically. Based on the data from several waves of the Georgia Household Budget Survey, we find evidence of "notches," namely missing probability mass on the right of the lowest block cutoff and a spike in the frequency of monthly consumption to the left of it. This is in contrast with the "bunching" pattern predicted by Borenstein (2009) when demand is not completely inelastic, and with the empirical evidence in Borenstein (2009) and Ito (2014). During our study period (2012-2019), the tariffs were revised - both downwards and upwards - to a different extent in different blocks and at different times across the regions of the country. We devise difference-in-difference study designs that exploit such natural experiments, finding that consumption did increase when the tariffs were reduced and fell when they were raised. Ours is one of the few studies that exploits quasi experimental conditions to examine whether the response to price changes is symmetric. We find that it is, in that the implied price elasticity of electricity demand is in both cases -0.3. Finally, we fit an electricity demand function, which results in an even stronger price elasticity (-0.5). Households seem to respond to the actual, average price (here equal to the marginal price) rather than to expected price. Our estimates of the price elasticity bode well for a carbon tax, an energy tax, or simple tariff increases to help curb imports of gas-fired electricity from neighboring countries.
    Keywords: residential electricity demand, price elasticity, increasing block rates, tariff schemes, asymmetric response to price changes
    JEL: D12 Q41 Q48
    Date: 2021–10
  5. By: Vasilev, Aleksandar
    Abstract: This paper analyzes the macroeconomic effects of fluctuations in the marginal tax rates of consumption and income. To this end, stochastic tax rates are introduced as in Braun (1992), into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of the presence of stochastic taxation is investigated for the stabilization of cyclical fluctuations in Bulgaria. The quantitative effect of such shocks to the marginal tax rates is found to be very small, and thus not important for either business cycle stabilization, or public finance issues.
    Keywords: business cycles,stochastic consumption and income taxes
    JEL: E32
    Date: 2021
  6. By: Quynh Hoang (DIAL - Développement, institutions et analyses de long terme, IRD - Institut de Recherche pour le Développement); Camille Saint Macary (DIAL - Développement, institutions et analyses de long terme, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, IRD - Institut de Recherche pour le Développement); Laure Pasquier-Doumer (DIAL - Développement, institutions et analyses de long terme, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, IRD - Institut de Recherche pour le Développement)
    Abstract: Ethnic inequality remains a persistent challenge for Viet Nam. This paper aims at better understanding this ethnic gap through exploring the formation of risk sharing networks in rural areas. It first investigates the differences in risk sharing networks between the ethnic minorities and the Kinh majority, in terms of size and similarity attributes of the networks. Second, it relies on the concept of ethnic homophily in link formation to explain the mechanisms leading to those differences. In particular, it disentangles the effect of demographic and local distribution of ethnic groups on risk-sharing network formation from cultural and social distance between ethnic groups, while controlling for the disparities in the geographical environment. Results show that ethnic minorities have smaller and less diversified networks than the majority. This is partly explained by differences in wealth and in the geographical environment. But ethnicity also plays a direct role in risk-sharing network formation through the combination of preferences to form a link with people from the same ethnic group (in breeding homophily) and the relative size of ethnic groups conditioning the opportunities to form a link (baseline homophily). In breeding homophily is found to be stronger among the Kinh majority, leading to the exclusion of ethnic minorities from Kinh networks, which are supposed to be more efficient to cope with covariant risk because they are more diversified in the occupation and location of their members. This evidence suggests that inequalities among ethnic groups in Viet Nam are partly rooted in the cultural and social distances between them.
    Abstract: Les inégalités inter-ethniques demeurent un problème préoccupant au Viet Nam. Dans cet article, nous cherchons à mieux comprendre l'origine de ce phénomène en explorant la formation de réseaux de solidarité dans les zones rurales. Nous examinons d'abord quelles sont les différences de composition de ces réseaux entre les minorités ethniques et la majorité Kinh. Nous montrons que les minorités ethniques ont des réseaux plus petits et moins diversifiés que la majorité. Nous explorons ensuite les mécanismes à l'origine de ces différences, en nous appuyant sur le concept d'homophilie. Plus précisément, nous distinguons l'effet de la répartition démographique et locale des groupes ethniques de l'effet de la distance culturelle et sociale entre groupes ethniques, ou autrement dit des préférences à former un lien avec des personnes du même groupe ethnique. Nous montrons que les différences de composition des réseaux de solidarité s'expliquent en partie par les écarts de richesse entre les groupes ethniques et des 2 environnements géographiques différents. Mais l'ethnicité joue toutefois un rôle direct dans la formation de ces réseaux à travers un effet combiné de préférences à se lier avec des personnes de la même ethnie et de composition démographique différenciées selon les groupes ethniques. Les préférences à se lier avec des personnes du même groupe ethnique sont plus fortes chez les Kinh majoritaires, ce qui entraîne l'exclusion des minorités ethniques des réseaux Kinh, supposés être plus efficaces pour faire face à des risques covariants car ils sont plus diversifiés dans l'occupation et la localisation de leurs membres. Ces résultats suggèrent que les inégalités entre les groupes ethniques au Viet Nam sont en partie enracinées dans les distances culturelles et sociales qui les séparent.
    Keywords: Réseau de solidarité,homophilie,inégalités inter-ethniques,homophily,ethnic gap,Viet Nam,Risk-sharing network,Vietnam
    Date: 2021–10–01
  7. By: NYKOLYUK Olga; PYVOVAR Petro; CHMIL Alla; BOGONOS Mariia (European Commission - JRC); TOPOLNYCKYI Pavlo; CHEBAN Iryna; FELLMANN Thomas (European Commission - JRC)
    Abstract: This report presents the current situation and an outlook for the major Ukrainian agricultural commodity markets until 2030 along with the update of the Ukraine country model in AGMEMOD. AGMEMOD is a system of partial equilibrium, medium-term, dynamic, multi-market and multi-country econometric models that is applied for generating projections for agricultural commodity markets of the EU and neighbour countries. In the current work, the database and the behavioural functions representing market agents of the Ukraine country model have been updated. The outlook results for 2030 show that while the quantity of wheat produced in Ukraine will increase only marginally, maize is expected to become the dominant cereal. Adaptation to climate change is the main driving force behind this trend. Domestic soya beans, rapeseed and sunflower seeds production will continue growing, along with the quantities of oilseed oils and meals. Cattle and swine farming is expected to follow its ongoing structural change that shows the replacement of self-subsistent producers (rural households) by specialised farms. However, the specialised larger producers will not compensate the loss in animal numbers from the rural households and, therefore, production quantities of beef and pork are likely to slow down in the next decade. Conversely, poultry meat and eggs production are projected to grow. As the COVID-19 pandemic has been ongoing since early 2020, this report also analyses its impacts on the Ukrainian agriculture. The analysis demonstrates medium to long term resilience of the Ukrainian agricultural commodities production and export to this crisis. Overall, the current report shows that AGMEMOD provides relevant results and enables a structured discussion about key development trends, changes and causes of changes in production and trade of agri-food commodities.
    Keywords: Agricultural markets, Ukraine
    Date: 2021–10
  8. By: Ergo Themas; Maryna Tverdostup
    Abstract: Purchasing a car is one of the decisions that may have a sizeable negative impact on an individual or family budget if all costs associated with owning a car are not properly considered. With car leasing being easily accessible, car buyers may underestimate all the costs beyond the leasing payments when choosing a car and select a vehicle above their own budget. This paper conducts an online field experiment in a specially designed bot in the Facebook Messenger application in Estonia, to investigate whether disclosing the complete personalized total cost of ownership (TCO) leads to a better calibrated choice of cars for a test drive. The study documents that introducing better information into real-life car choices does not have a positive effect on the correspondence between cost of car and individual budget. Quite the opposite, subjects deviate from their budget even more when a personalized TCO (for one month or five years) is disclosed, and in particular, subjects generally tend to choose cars above their budget. While previous studies on car buyer behaviour with different cost information have been carried out as lab experiments with hypothetical car buyers, our study contributes to the literature by conducting a field experiment with real car buyers, finding a substantial gap with the results obtained in the lab setting.
    Keywords: Consumer behaviour; Online field experiment; Rational decision-making; Total cost of ownership
    Date: 2021
  9. By: Masahiro Tokunaga (Faculty of Business and Commerce, Kansai University); Ravshan Shomurodov (Faculty of Banking, Tashkent Institute of Finance); Okiliddin Alimov (Faculty of Japanese Studies, Tashkent State Institute of Oriental Studies)
    Abstract: To untangle the root of contradictions across linguistic development in post-Soviet Uzbekistan, we explicitly introduce linguistic factors into the transaction cost theory of new institutional economics and the concepts of institutional connectivity and complementarity proposed by comparative institutional analysis in an attempt to construct a theoretical framework for comprehending the dilemma between the state-led initiative and economic rationality regarding linguistic issues in the post-Soviet space. In light of these theoretical considerations, we propose three types of conceptual institutional settings and examine a case study of Uzbekistan that lacks robustness of institutional complementarity for implementing the effective language policies.
    Keywords: transaction costs, institutional complementarity, state language, lingua franca, Uzbekistan
    JEL: P21 P52 Z13
    Date: 2021–10

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