nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒04‒18
ten papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. A Real-Business-Cycle Model with Financial Liberalization: Lessons for Bulgaria (1999-2020) By Aleksandar Vasilev
  2. Internationalizing Like China By Clayton, Christopher; Santos, Amanda Dos; Maggiori, Matteo; Schreger, Jesse
  3. Energy Supply Security in Germany Can Be Guaranteed even without Natural Gas from Russia By Franziska Holz; Robin Sogalla; Christian von Hirschhausen; Claudia Kemfert
  4. Trends and Drivers of Inequality: Recent Evidence from Vietnam By Dang, Trang Huyen; Nguyen, Cuong Viet; Phung, Tung Duc
  5. Fifteen Years of Polish Agriculture in the European Union By Kapusta, Franciszek
  6. Economic complexity and environmental pollution: Evidence from the former socialist transition countries By Bucher, Florian; Scheu, Lucas; Schröpf, Benedikt
  7. The private sector advances in China- The evolving ownership structures of the largest companies in the Xi Jinping era By Tianlei Huang; Nicolas Véron
  8. Cutting Russia’s Fossil Fuel Exports: Short-Term Pain for Long-Term Gain By Chepeliev, Maksym; Thomas Hertel; Dominique van der Mensbrugghe
  9. Fiscal Policies, Inequality, and Poverty in Croatia By Nga Thi Viet Nguyen; Ivica Rubil
  10. For God, Tsar and Fatherland? The Political Influence of Church By Ekaterina Travova

  1. By: Aleksandar Vasilev (Lincoln International Business School, UK.)
    Abstract: Financial openness is introduced 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 financial openness is investigated for the stabilization of cyclical fluctuations in Bulgaria. The computational experiment performed in this paper reveals that greater financial openness increases the impact of technology shocks on output, investment, consumption, labor hours, and net exports. This amplification effect is due to the following mechanism: openness provides a cheap access to foreign funds. Unfortunately, the new results come at odds with a major empirical observation, i.e. that consumption and net exports are strongly pro-cyclical; the model, however, produces a countercyclical consumption, as well as net exports. Thus, such a setup is not yet ready to be used for policy analysis.
    Keywords: business cycles, progressive capital taxation, Bulgaria
    JEL: E24 E32
    Date: 2022–04
  2. By: Clayton, Christopher; Santos, Amanda Dos; Maggiori, Matteo; Schreger, Jesse
    Abstract: We empirically characterize how China is internationalizing the Renminbi by selectively opening up its domestic bond market and propose a dynamic reputation model to understand China's internationalization strategy. While previously closed to foreign investors, China has recently allowed major increases in foreign investment in its domestic bond market. China carefully controlled the entrance of foreign investors into its market, first allowing in relatively stable long-term investors like central banks before allowing in flightier investors like mutual funds. Foreign investors increasingly treat Renminbi denominated assets as a substitute for safe developed-market government bonds. Our framework explains these patterns as the result of a government strategy to build its reputation as an international currency issuer while minimizing the cost of potential capital flight as it gains credibility. We analyze optimal two-way liberalization: gradually letting more domestic capital flow abroad as foreigners increase their participation in domestic markets.
    Date: 2022–03–11
  3. By: Franziska Holz; Robin Sogalla; Christian von Hirschhausen; Claudia Kemfert
    Abstract: The Russian war on Ukraine and Germany’s dependence on Russian gas require a rethink of German energy supplies. While there is a heated debate about an immediate energy embargo, Russia could also stop its supplies at any time. To date, Germany has purchased around 55 percent of its natural gas from Russia. DIW Berlin has developed scenarios for how the German energy system could become independent of these imports as quickly as possible in the European context: On the supply side, deliveries from other natural gas exporting countries could compensate for some of the Russian exports. Security of supply would be significantly strengthened if the pipeline and storage infrastructure were used more efficiently. On the demand side, there is a short-term savings potential of 19 to 26 percent of current natural gas demand. In the medium term, a push towards renewable heat supply and higher energy efficiency is particularly necessary. If the energy-saving potential is exploited to the maximum and supplies from other natural gas supplier countries are expanded as far as technically possible at the same time, Germany’s supply of natural gas will be secure in 2022 and in the coming winter 2022/2023, even without Russian imports.
    Date: 2022
  4. By: Dang, Trang Huyen; Nguyen, Cuong Viet; Phung, Tung Duc
    Abstract: This study provides evidence on the trends and drivers of inequality in Vietnam using Vietnam Household Living Standard Surveys. We find that inequality, regardless of the choice of welfare indicators and inequality measurements, has been stable in Vietnam. Inequality in income or expenditure is remarkably lower than inequality in assets. In 2016, the Gini coefficient of per capita expenditure and per capita income was 0.35 and 0.39, respectively, while the Gini coefficient in electricity consumption and housing value was 0.42 and 0.62, respectively. Using the decomposition analysis, we find that inequality between provinces accounts for 22% of the total inequality, while inequality between ethnic groups accounts for 15% of the total inequality. The regression analysis shows that inequality tends to be higher in provinces with higher initial income and poverty. This implies that high-income people are more likely to benefit from economic growth, especially in better-off provinces.
    Keywords: Economic integration,poverty,inequality,Vietnam
    JEL: F14 F15 I31 I32
    Date: 2022
  5. By: Kapusta, Franciszek
    Abstract: The aim of the study was to characterize: a) financial aid paid to farmers under the Common Agricultural Policy and sources of funds from 2004-2018; b) changes in agriculture in terms of: factors of production, cultivation area and production of the main crops in total and per capita, livestock farming and production of the main animal products in total and per capita, productivity (land, labor, and fixed assets), marketability and profitability (land, labor, and fixed assets), self-sufficiency in the production and consumption of: cereals, potatoes, cow’s milk, hen eggs, as well as meat and offal. The period of 2001-2003 was adopted as the base period for comparisons, i.e., three years before Poland’s accession to the European Union, while the last period was 2016-2018, due to the availability of verified statistical information; c) position of Polish agriculture in the EU from 2004-2005 (EU-25), as well as 2010 and 2019 (EU-28). The analysis showed positive changes in all the discussed issues, except for land management, whose exclusion from agricultural production requires urgent state interference to reduce the pace of this process. The position of Polish agriculture in the EU generally ranks proportionally to land resources or higher. However, it is weaker in the case of animal production compared with crop production. Trade turnover in agri-food products and a positive trade balance are systematically growing.
    Keywords: Agricultural and Food Policy
    Date: 2021–12–23
  6. By: Bucher, Florian; Scheu, Lucas; Schröpf, Benedikt
    Abstract: This study examines the link between economic complexity and environmental quality by exploiting the similar starting points of the former socialist transition countries after the fall of the iron curtain. We refer to the extended theories of the Environmental Kuznets Curve (EKC), stating that environmental pollution follows an inverted u-shaped course with respect to economic complexity. Using comprehensive data of 27 countries for the period 1995-2017, our results show that the EKC can be found for countries whose complexity rose over time. Additionally, since the results for production-based and consumption-based CO2 emissions are similar, we can discard emissions offshoring as a major explaining factor. Consequently, our findings suggest that more complex products are the drivers of the EKC. However, as the turning point is associated with high levels of pollution, our estimates imply that complexity may even exacerbate environmental issues in the short and middle run in less developed countries.
    Keywords: Economic Complexity,Environmental Kuznets Curve,Former Socialist States
    JEL: O44 P28
    Date: 2022
  7. By: Tianlei Huang; Nicolas Véron
    Abstract: This paper documents recent structural changes in China’s corporate landscape, based on company level data, providing a complementary perspective to that of official Chinese statistics. We classify China’s largest companies by revenue since 2004 (based on Fortune Global 500 rankings), and largest listed companies by market capitalisation since 2010, into state and private-sector categories, using a conservative definition of the private sector. Among the largest companies by revenue, the private...
    Date: 2022–04
  8. By: Chepeliev, Maksym; Thomas Hertel; Dominique van der Mensbrugghe
    Abstract: In response to the invasion of Ukraine, most OECD countries have announced punishing sanctions against Russia. In addition to targeting financial markets and service sectors, some countries have begun to impose restrictions on exports of Russia’s fossil fuels. In this paper, we analyze a scenario whereby most OECD countries put major restrictions on Russia’s energy exports. Results suggest that the short-term implications are likely to be non-trivial for EU – Russia’s largest energy export destination. Households’ real income could drop by 0.7-1.7 percent (relative to the reference case) with energy prices growing by as much as 11 percent. But after the initial adjustment period, the cost of such restrictions for the EU is expected to be more modest over the longer run (0.04 percent slowdown in the annual growth rate of real income over the 2022-2030 period), even as they lead to substantial environmental co-benefits through reductions in CO2 (6.6 percent in 2030) and air pollutant emissions (2.8-5.9 percent in 2030). Such emission reductions would take the EU more than halfway to its Green Deal mitigation target, reducing the necessary carbon price by around 40 EUR per tCO2. Adverse impacts on the Russian economy would be overwhelming and, in relative terms, 10 time larger than that for EU. By 2030 the cumulative reduction in Russian real income would exceed 1.1 trillion USD, while lost revenue from fossil fuel exports would be almost 1.4 trillion USD.
    Date: 2022
  9. By: Nga Thi Viet Nguyen (The World Bank); Ivica Rubil (The Institute of Economics, Zagreb)
    Abstract: In a fiscally expansionary context, policy makers in Croatia must keep in mind the redistributive role of fiscal policies, particularly their impact on inequality and poverty. This paper uses both household survey data and national accounts to estimate how in 2018 the Croatian fiscal system affected income distribution and poverty. Moreover, it assesses the individual and the combined effects of interventions like direct and indirect taxes and social spending. The analysis found that in 2018 the fiscal system helped to reduce inequality but also increased poverty. All fiscal interventions except indirect taxes (VAT and excises) reduced inequality. However, indirect taxes not only widened the income gap between rich and poor but also increased poverty—only direct transfers had poverty-reducing effects. Direct taxes (personal income tax [PIT] and property taxes) had no impact on poverty in 2018. A series of reforms introduced between 2018 and 2021 helped reduce poverty slightly, mainly because the VAT on some food items was lowered. However, these reforms pushed up inequality, mostly because PIT reforms reduced the tax burden for those with high incomes.
    Keywords: fiscal policy, fiscal incidence, social spending, inequality, poverty, taxes, Croatia
    JEL: H22 I38 D31
    Date: 2021–10
  10. By: Ekaterina Travova
    Abstract: This paper investigates the influence of the Orthodox Church network in Post-Soviet Russia on individual political preferences and election results. I use the numbers of monks and nuns from Orthodox monasteries operated in the Russian Empire before the Revolution as historical religious markers to construct a Bartik-style instrument (1991). I find that a denser Church network increases the average local approval rating for the current president and the share of votes cast for the government candidate in presidential elections. Further analysis of mechanisms shows that, today, the extending Church network is increasingly less able to attract people to attend church and to substantially increase the share of practicing believers. However, it does affect the political preferences of those who, regardless of their faith in God, self-identify as Orthodox. The potential channel for persuasion is media.
    Keywords: Orthodoxy; Church; Approval; Election; National Identity; Media;
    JEL: D83 N33 N34 P16 Z12 Z13
    Date: 2022–03

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