nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒04‒11
eight papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Russia’s Invasion of Ukraine: Assessment of the Humanitarian, Economic and Financial Impact in the Short and Medium Term By Vasily Astrov; Mahdi Ghodsi; Richard Grieveson; Mario Holzner; Michael Landesmann; Olga Pindyuk; Robert Stehrer; Maryna Tverdostup
  2. The ripple effects of large-scale transport infrastructure investment By Damiaan Persyn; Javier Barbero; Jorge Díaz-Lanchas; Patrizio Lecca; Giovanni Mandras; Simone Salotti
  3. Failure of Gold, Bitcoin and Ethereum as safe havens during the Ukraine-Russia war By Alhonita YATIE
  4. Fertility and Savings: The Effect of China’s Two-Child Policy on Household Savings By Scott R. Baker; Efraim Benmelech; Zhishu Yang; Qi Zhang
  5. Serial Entrepreneurship in China By Loren Brandt; Ruochen Dai; Gueorgui Kambourov; Kjetil Storesletten; Xiaobo Zhang
  6. Impact of Tourism on Poverty Reduction: Evidence from an Emerging Tourism Market By , Le Thanh Tung
  7. Trade Liberalization, Collective Bargaining and Workers: Wages and Working Conditions By Bastien Alvarez; Gianluca Orefice; Farid Toubal
  8. From low to high inflation: Implications for emerging market and developing economies By Jongrim Ha; M. Ayhan Kose; Franziska Ohnsorge

  1. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The Russian invasion of Ukraine has triggered a humanitarian, economic, financial and political crisis that will reverberate across Europe. In this Policy Note we analyse the short- and medium-term implications of the conflict. We find that the most severe economic and financial impact will be in Ukraine and Russia. Much of Ukraine is already devastated by the war, with around 19m people and over half of the country’s GDP in the regions currently directly affected. Meanwhile we estimate that Russian GDP will contract by 7-8% this year, and inflation will accelerate to close to 30% by the end of 2022. For the rest of Europe, the impact will be felt via various channels, with the most significant so far being inflation on the back of high energy prices. If the EU were to ban imports of energy from Russia, or if Russia itself limits or stops gas exports to the EU, the trade impacts would be much more significant. The medium- and long-term outlook for Ukraine, Russia and the rest of Europe has been changed radically by the events of the last few weeks. For Ukraine, if one part of the country is occupied and the other part remains independent, economic outcomes will be very divergent, but the non-occupied part would see many refugees return, would receive massive Western financial support and could look forward to greater integration with the EU. For Russia, the economy will lose its access to Western technological transfer, and this cannot be fully compensated by China; an already meagre medium-term growth outlook has now deteriorated further. Meanwhile there are four main areas of structural change and lasting impact for the EU and Europe more broadly the EU will get more serious about defence, the green transition will gather pace, broader Eurasian economic integration will be unwound, and the EU accession prospects for countries in Southeast Europe could (and should) improve.
    Keywords: Ukraine, Russia, EU, US, sanctions, energy, CEE
    JEL: F51 E31
    Date: 2022–03
  2. By: Damiaan Persyn (University of Gottingen); Javier Barbero (European Commission - JRC); Jorge Díaz-Lanchas (Universidad Pontificia Comillas); Patrizio Lecca (PBL); Giovanni Mandras (European Commission - JRC); Simone Salotti (European Commission - JRC)
    Abstract: We analyse the general equilibrium effects of an asymmetric decrease in transport costs, combining a large scale spatial dynamic general equilibrium model for 267 European NUTS 2 regions with a detailed transport model at the level of individual road segments. As a case study we consider the impact of the road infrastructure investments in Central and Eastern Europe in the context of the EU cohesion policy programme. Our analysis suggests that the decrease in transportation costs benefits the regions targeted by the policy via substantial increases in GDP and exports compared to the baseline, and small increases in population. The geographic information embedded in the transport model leads to relatively large predicted benefits in peripheral countries such as Greece and Finland who hardly receive funds, but whose trade links cross Central and Eastern Europe and thus profit from the investments there. The richer, Western European non-targeted regions also enjoy a higher GDP after the investment in the East, but these effects are smaller. Thus, the policy reduces interregional disparities. There are rippled patterns in the predicted spillovers of the policy. In non-targeted countries, regions trading more intensely with regions where the investment is taking place on average benefit more compared to other regions within the same country, but also compared to neighbouring regions across an international border. Using regression analysis we uncover that regions which import intermediate inputs from Central and Eastern Europe enjoy the largest spillovers. These regions become more competitive and expand exports locally, at the detriment of other regions in the same country.
    Keywords: transport infrastructure; economic geography; computable general equilibrium modelling.
    JEL: C68 R11 R13 R15 R41
    Date: 2022–02
  3. By: Alhonita YATIE
    Abstract: This paper studies the impact of fear, uncertainty and market volatility caused by the Ukraine-Russia war on crypto-assets returns (Bitcoin and Ethereum) and Gold returns. We use the searches on Wikipedia trends as proxies of uncertainty and fear and two volatility indices: S&P500 VIX and the Russian VIX (RVIX). The results show that Bitcoin, Ethereum and Gold failed as safe havens during this war.
    Keywords: War, Russia, Ukraine, crypto-assets, Gold, Safe haven
    JEL: H56 G32 G12 G15
    Date: 2022
  4. By: Scott R. Baker; Efraim Benmelech; Zhishu Yang; Qi Zhang
    Abstract: China’s high household savings rate has attracted great academic interest but remains a puzzle. Potential explanations include demographic, policy, and financial causes. Yet a lack of reliable microlevel data on household finances makes it difficult to assess the relative importance of each factor. This paper uses individual income and spending transactions linked to demographic characteristics and financial information on loan applications and credit availability from a large Chinese bank in Inner Mongolia. We match a large subset of bank customers to administrative records covering marriage and births and obtain a unique view into consumption and saving patterns around important life events. Our results point toward identifying income growth, financial instability, and credit access, rather than such directives as the one-child policy, as the primary causes of high levels of savings among Chinese households.
    JEL: D14 D31 E21 G51
    Date: 2022–03
  5. By: Loren Brandt; Ruochen Dai; Gueorgui Kambourov; Kjetil Storesletten; Xiaobo Zhang
    Abstract: This paper studies entrepreneurship and the creation of new firms in China through the lens of serial entrepreneurs, i.e. entrepreneurs who establish more than one firm, and their differences with non-serial entrepreneurs. Drawing on data on the universe of all firms in China, we document key facts about serial entrepreneurship in China since the early 1990s and develop a theoretical framework to rationalize the role of endowments, ability, and capital market frictions in their behavior. We also examine the key determinants of the sectoral choice for serial entrepreneurs' second firms. Quantitatively, serial entrepreneurs are more productive, raise more capital, and operate larger firms than non-serial entrepreneurs. Moreover, serial entrepreneurs with greater liquidity and whose firms have relatively similar productivity are more likely to operate these firms concurrently rather than sequentially. We also find that less productive serial entrepreneurs are more likely to switch sectors when establishing new firms, with the choice of sector influenced by considerations of risk diversification, upstream and downstream linkages, and sectoral complementarities.
    Keywords: Serial Entrepreneurship; Entrepreneurship; Capital Distortions; Sector Choice
    JEL: D22 D24 E22 E44 L25 L26 O11 O14 O16 O40 O53 P25 R12 D21
    Date: 2022–03–23
  6. By: , Le Thanh Tung
    Abstract: There are few studies focusing on the effect of tourism on poverty in the emerging tourism markets, however, there is no empirical evidence in Vietnam. Our paper is the first one that aims to investigate the impact of tourism on poverty with a new database collected from 61 provinces in Vietnam over the period 2010–2018. The empirical result strongly shows that tourism has a negative and significant impact on poverty in all estimated models. It means that a higher in tourism revenue can lead to a lower poverty rate in the provinces. Besides, labour force and education are found to have a negative and significant effect on poverty. Although foreign direct investment has a negative impact on poverty, however, the coefficients are not significant. Finally, we have some conclusions and implications for policymakers to sustainably reduce the poverty rate of households in the future.
    Date: 2020–06–08
  7. By: Bastien Alvarez; Gianluca Orefice; Farid Toubal
    Abstract: Using large scale data on Eastern European workers, we show significant and sizable deteriorations of their wages and working conditions in regions that faced large tariff liberalization and strong erosion of collective bargaining over the process of accession to the European Union. Import tariffs liberalization reduces workers' wages. The deterioration of working conditions is mostly driven by increased labor demand due to the improvement of Eastern countries' international market access. The erosion of collective bargaining worsens wages and working conditions.
    Keywords: Trade Liberalization;Working Conditions;Wages;Labor Market Institutions;Eastern Europe;E.U. Enlargement
    JEL: F15 F16 J30 J51 J81
    Date: 2022–04
  8. By: Jongrim Ha; M. Ayhan Kose; Franziska Ohnsorge
    Abstract: Recent energy and food price surges, in the wake of Russia’s invasion of Ukraine, have exacerbated inflation pressures that are unusually high by the standards of the past two decades. High and rising inflation has prompted many emerging market and developing economy (EMDE) central banks and some advanced-economy central banks to increase interest rates. Inflation is expected to ease back towards targets over the medium-term as recent shocks unwind, but the 1970s experience is a reminder of the material risks to this outlook. As inflation remains elevated, the risk is growing that, to bring inflation back to target, advanced economies need to undertake a much more forceful monetary policy response than currently anticipated. If this risk materializes, it would imply additional increases in borrowing costs for EMDEs, which are already struggling to cope with elevated inflation at home before the recovery from the pandemic is complete. EMDEs need to focus on calibrating their policies with macroeconomic stability in mind, communicating their plans clearly, and preserving and building their credibility.
    Keywords: Global Inflation, Commodity Price, War in Ukraine, Global Recession, Great Inflation, Monetary Policy Tightening
    JEL: E31 E32 E37 Q43
    Date: 2022–04

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