nep-tra New Economics Papers
on Transition Economics
Issue of 2021‒12‒20
ten papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. The gender employment gap: the effects of extended maternity leave policy in Viet Nam By Tu Thi Ngoc Le; Ngoc Thi Bich Pham
  2. Foreign Ownership and Labor Tax Evasion: Evidence from Latvia By Nicolas Gavoille; Anna Zasova
  3. Minimum wage spike and income underreporting: a back-of-the-envelope-wage analysis By Nicolas Gavoille; Anna Zasova
  4. Role of Individual Characteristics and Policies in Driving Labor Informality in Vietnam By Mr. Giovanni Ganelli; Anh Thi Ngoc Nguyen; Ms. Era Dabla-Norris
  5. The effect of globalization on wage inequality: an application to the European Union before the Great Recession By Ribeiro, Ana Paula; Carvalho, Vitor; Ferreira, Mariana
  6. Entrepreneurial Ecosystems and Regional Persistence of High Growth Firms: A 'Broken Clock' Critique By Coad, Alex; Srhoj, Stjepan
  7. The Outflow of High-ability Students from Regular Schools and Its Long-term Impact on Those Left Behind By Miroslava Federicova
  8. The Assessment of COVID-19 Effect on European Union Industrial Sector By Tudorache, Maria-Daniela; Nae, Maria Tamara; Jianu, Ionut
  9. Million Dollar Baby: Should Parental Benefits Depend on Wages When the Payroll Tax Evasion is Present? By Vitalijs Jascisens; Anna Zasova
  10. Rising Political Populism and Outmigration of Youth as International Students By Murat Demirci

  1. By: Tu Thi Ngoc Le; Ngoc Thi Bich Pham
    Abstract: This study seeks to determine the effect on the gender employment gap and women's employment of the extension of maternity leave from four months to six months in Viet Nam's 2012 Labor Code. To identify this effect, labour market outcomes of groups of women and men are compared. We use the national representative Viet Nam Household Living Standards Survey for 2008-16, with the difference-in-differences approach. The objective of this study is to provide evidence of the relationship between extensions of maternity leave and the gender employment gap in Viet Nam.
    Keywords: Gender gap, Women's work, Female labour force participation, Maternity
    Date: 2021
  2. By: Nicolas Gavoille (Stockholm School of Economics in Riga (SSE Riga)and Baltic International Centre for Economic Policy Studies (BICEPS)); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: This paper shows that in a context of widespread labor tax evasion, employees of foreign-owned firms receive less undeclared cash payments than employees of domestic firms. The empirical analysis relies on a combination of administrative and survey data and implements an expenditure-based underreporting analysis a la Pissarides and Weber (1989). This provides an alternative explanation for the wage premium for employees of foreign-owned firms observed in similar environments.
    Date: 2021–11
  3. By: Nicolas Gavoille (Stockholm School of Economics in Riga (SSE Riga)and Baltic International Centre for Economic Policy Studies (BICEPS)); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: The labor markets of many transition countries are characterized by two features: a spike at the minimum wage in wage distribution and widespread use of so-called envelope wages, i.e., non-declared cash coming in addition to the official wage. In this paper, we present a body of suggestive evidence highlighting the prevalence of wage underreporting among minimum wage earners. We study two minimum wage hikes implemented in Latvia in 2014 and 2015, and show that (i) minimum wage employees are more likely to survive these minimum wage hikes than employees earning slightly more, and (ii) minimum wage employees are more likely to switch to part-time work within the same firm than their peers earning slightly more. These effects are present in the sample of small (more prone to tax evasion) firms and are not found in the sample of big (less prone to tax evasion) firms. In addition, we show that minimum wage earners switching from employment in a small to a big firm enjoy a significantly larger wage gain than employees earning slightly more. Taken together, these results are consistent with tax evaders being overrepresented among minimum wage earners and are hard to rationalize otherwise.
    Date: 2021–11
  4. By: Mr. Giovanni Ganelli; Anh Thi Ngoc Nguyen; Ms. Era Dabla-Norris
    Abstract: Using data from the Vietnam Labor Force Survey, this paper takes a granular look at the most salient drivers of labor informality in Vietnam by examining: (i) the nature of labor informality and transitions from formal to informal employment status and the role of worker characteristics; (ii) the empirical likelihood of being in informal employment and the policy determinants of informality using within-in country variation in the business climate and governance; and (iii) whether different policy reforms have a differential impact on workers. Our analysis sheds light on how individual characteristics and policy impediments contribute to high levels of informality and points to the need for a comprehensive agenda to tackle informality.
    Keywords: informality;Vietnam;Labor Force Survey;labor market segmentation;structural reforms;economic governance;PCI.;WP;wage worker;wage premium;FDI firm;wage employment;earnings gap;work experience
    Date: 2020–12–11
  5. By: Ribeiro, Ana Paula; Carvalho, Vitor; Ferreira, Mariana
    Abstract: This paper aims at relating globalization with wage inequality, explaining if and how this relation is expected to hold differently for different-income countries. We intend to contribute to the literature with an empirical analysis for the countries of the European Union, before the Great Recession, by building and testing a panel data model on two distinct groups: the countries from the “North” (higher GDP per capita) and those from the “South” (lower GDP per capita). We found that trade has the effect of enhancing inequality in the “North” countries (confirming the Hecksher-Ohlin-Stopler-Samuelson mechanism), though we could not significantly conclude on its effect in the “South” group. Foreign Direct Investment inflows have the effect of diminishing inequality in the “North”, while FDI outflows have the same effect in the “South”. These results are not predicted by Feenstra-Hanson theory. We also tested for the effect of technology on inequality and, while we found mixed evidence on how the share of High Tech Exports affects inequality, Gross Expenditure on Research and Development, when significant, increases inequality in the “North” group of countries. By using a composite globalization index, we conclude that trade is dominant over FDI in affecting inequality. Moreover, when we tested for the non-economic aspects of globalization, we found that both political and social dimensions cause wage inequality to increase.
    Keywords: wage inequality; globalization; European Union
    JEL: F15 F63 O15
    Date: 2020–10
  6. By: Coad, Alex; Srhoj, Stjepan
    Abstract: The Entrepreneurial Ecosystems (EE) approach makes specific predictions regarding how EE inputs are converted into high-growth firms (HGFs) as an output. A simulation model draws out our hypothesis of regional persistence in HGF shares. Based on intuitions that EEs are persistent, we investigate whether regional HGF shares are persistent, using census data for 2 European countries taken separately (Croatia for 2004-2019, and Slovenia for 2008-2014). Overall, there is no clear persistence in regional HGF shares - regions with large HGF shares in one period are not necessarily likely to have large HGF shares in the following period. This is a puzzle for EE theory. In fact, there seems to be more persistence in industry-level HGF shares than for regional HGF shares. We formulate a 'broken clock' critique - just as a broken clock is correct twice a day, EE recommendations may sometimes be correct, but are fundamentally flawed as long as time-changing outcomes (HGF shares) are predicted using time-invariant variables (such as local universities, institutions and infrastructure).
    Keywords: High-Growth Firms,Persistence,Regional Persistence,Entrepreneurial Ecosystems,Clusters,Sectoral Systems of Innovation
    JEL: L25
    Date: 2021
  7. By: Miroslava Federicova
    Abstract: Early tracking school systems, which stream student by ability, are considered a trigger of widening inequality in education. However, more homogenous class composition resulting from ability tracking seem to improve efficiency of teaching and learning. Literature on peer effects shows contradictory findings about these two counteracting effects. This paper contributes to the discussion of the efficacy of ability tracking by examining the effects of the outflow of high-ability students after primary education on the long-term educational outcomes and behaviour of their peers who remain in regular classes. Exploiting a 2009 school reform in Slovakia which postponed tracking by one year, we show that the outflow of high-performing peers results in a weak negative longrun effect on non-tracked student’s math scores and late arrivals at school, and more persistent negative effects on out-of-school study time.
    Keywords: early-tracking school system; peer effects; gender effects; Slovak school reform;
    JEL: I21 I24 I28
    Date: 2021–11
  8. By: Tudorache, Maria-Daniela; Nae, Maria Tamara; Jianu, Ionut
    Abstract: In this paper, we estimated the impact of COVID-19 shock on the industrial production and on the confidence in industry at European Union level, using Panel EGLS method - weighted by Cross-section SUR option. The negative impact we found on both indicators is quite high and may severely affect the economy, in the absence of political support and in the case of prolonging COVID-19 crisis or starting another lockdown waves. The largest drops of industrial production were found in Italy, Slovakia, Romania and Hungary, while Latvia, Malta, Finland and the Netherlands were less vulnerable to the COVID- 19 shock. Through this paper, we also identified a high similarity between the dynamics of industrial production and the industrial confidence index. The outlooks are still exposed to uncertainty, but these have been improved in the latest months.
    Keywords: industrial production,crisis,coronavirus,COVID-19,confidence
    JEL: C23 I15 L16
    Date: 2021
  9. By: Vitalijs Jascisens (HSE University); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: This paper explores the effect of tying social security benefits to declared wages on firm-worker collusion and strategic income reporting before the benefit entitlement. We use administrative data from Latvia covering the entire working population over a 15-year period from 1996 to 2010 to study generous parental benefits, which depend on the reported wage in the time period before the childbirth. Our analysis delivers three principal results. First, we observe a sharp increase in the wage during the time period taken into account to calculate parental benefits, and interpret the obtained result as a collusive legalization of previously unreported income with an aim to increase the future benefit. Depending on the specification, we conclude that during this period the wage on average increases by 5.4%-7.5%. Second, obtained effects are highly heterogeneous. We find that the wage growth is much higher in small firms, where it is presumably easier to sustain collusion between employees and employers. Finally, we demonstrate that legalization of wages is temporary and lasts only until the end of the period taken into account to calculate parental benefits.
    Date: 2021–11
  10. By: Murat Demirci (Department of Economics, Koç University)
    Abstract: Populism is on the rise, and democratic rights are deteriorating in many countries as a result of authoritarian policies adopted by populist leaders. This study analyzes how rising political populism in developing countries affects whether their citizens pursue higher education abroad. Applying the Synthetic Control Method, student migration patterns from Hungary, Ukraine, Venezuela, and Indonesia are explored as cases constituting early examples of populism. The estimates show that the rise of populism in these countries increases the number of citizens who attend universities in foreign countries. Limited evidence for worsening higher education options in the origin countries suggests that more students start pursuing foreign education to increase their chances of living abroad after graduation.
    Keywords: International Students, Outmigration of Skilled People, Political Populism, Synthetic Control Method.
    JEL: F22 I23 J24 O15
    Date: 2021–12

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