nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒04‒25
nine papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Deciphering the Greek economic diplomacy towards the Western Balkans: actors, processes, challenges By Panagiotou, Ritsa; Tzifakis, Nikolaos
  2. Corporate Disclosure, Compliance and Consequences: Evidence from Russia By Banerjee, Suman; Estrin, Saul; Pal, Sarmistha
  3. The case of financial and banking integration of Central, Eastern and South Eastern European countries: A gravity model approach By Léonore Raguideau-Hannotin
  4. Political motives of excess leverage in state-owned firms By Oleksandr Talavera; Shuxing Yin; Mao Zhang
  5. Governance, foreign aid, and Chinese foreign direct investment By Fon, Roger; Alon, Ilan
  6. Will Chinese Twenty-four Solar Terms Affect Stock Return: Evidence from Shanghai Index of China By Zhou Tianbao; Li Xinghao; Zhao Junguang
  7. What is the effect of EU's fuel-tax cuts on Russia's oil income? By Johan Gars; Daniel Spiro; Henrik Wachtmeister
  8. Return to skills and urban size: Evidence from the skill requirements of Hungarian firms By László Czaller; Zoltán Hermann
  9. The impact of spatial clustering of occupation on commuting time and employment status By Tamás Bakó; Judit Kálmán

  1. By: Panagiotou, Ritsa; Tzifakis, Nikolaos
    Abstract: From the mid-1990s and for over a decade Greece developed a very important and dynamic trade and investment relationship with most Western Balkan countries. The economic crisis in 2009 broke this momentum and led to massive declines in both trade and FDI. While trade transactions rebounded after 2016 and almost reached pre-crisis levels, the decline of Greek FDI has shown no signs of recovering, its most definitive sign being the departure of many Greek banks from the region. The objective of this project is to delve into the intricacies of Greek economic diplomacy, focusing on its conduct in the Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia) and exploring paths that could improve economic and business practices in the region. It does so by mapping out the multi-layered dimensions of Greek economic relations with the Western Balkans, highlighting problems and challenges that have emerged over the years, identifying key actors and stakeholders in the process, and making policy recommendations based on an evaluation of all the above.
    Keywords: Hellenic Observatory
    JEL: N0
    Date: 2022–03
  2. By: Banerjee, Suman (Stevens Institute of Technology); Estrin, Saul (London School of Economics); Pal, Sarmistha (University of Surrey)
    Abstract: Does the introduction of corporate transparency and disclosure rules in emerging economies affect compliance, and therefore earnings quality and firm performance? We explore these questions for an important emerging economy, Russia, using a natural experiment, the 2002 introduction of Russian corporate governance code. We exploit the exogenous variation in voluntary disclosure and find a significant increase in corporate disclosure among the domestic Russian firms over the period 2003-07 when firms gradually adopted some but not all disclosure rules. The immediate effect of the introduction was a drop in reported earnings. Market valuation, however, only improved for domestic firms after 2007, when all domestic firms had complied. However, cross-listed firms, which were already satisfying international standards, remained largely unaffected. Though average compliance by domestic firms was only 53%, average firm value of treated domestic firms, relative to cross-listed ones, went up by about 10%. Results are robust, confirm external validity and offer important policy implications for other emerging/transition economies.
    Keywords: increased disclosure, processing cost of information, market valuation, reported earnings, cost of capital, domestic vs. cross-listed firms, 2002 Russian Corporate Governance Code, difference-in-difference model, Russia
    JEL: G3 K29 O38
    Date: 2022–02
  3. By: Léonore Raguideau-Hannotin
    Abstract: The motivation of this article is to understand the determinants of banking integration of non-Euro CESEE EU Members. One stylized fact for these economies is the building up of external financial vulnerabilities since the beginning of the Transition period, with a large weight of cross-border banking, particularly with the European Union. In relation with the literature on the impact of gross financial flows on financial stability, we therefore estimate the long-term historical, geographical and cultural determinants of cross-border banking claims with a bilateral financial gravity model. We then analyze the impact of domestic (pull), foreign (push) and global factors using the gravity framework. Our results first show that cross-border banking in these economies is significantly driven by geographical proximity and common historical links, particularly with EU Member States. Second, we find that banking sector health variables are more significant as push factors, while structural banking system variables are more significant as pull factors. These results provide evidence in favor of an impact of European banking systems on financial liabilities in this region, in relation with the very high level of EU ownership of banking assets. Finally, US global liquidity factor matters more than exchange rate stability, which points towards policy dilemma effect in the region.
    Keywords: Gravity model, cross-border banking, Central Eastern and South Eastern European countries, European Union, push factors, pull factors, global factors, EU, CESEE
    JEL: F34 F36 C23 O52
    Date: 2022
  4. By: Oleksandr Talavera (University of Birmingham); Shuxing Yin (University of Sheffield); Mao Zhang (University of St Andrews)
    Abstract: This study explores the political motives of excess leverage in state-owned firms. To measure the excess leverage, we follow Gao et al. (2013) to estimate how state firms would behave if they were non-state firms. Using a panel of Chinese firms, we find that, on average, state firms take excess leverage (i.e., overleveraged) compared to otherwise similar non-state firms. Examining the determinants of such leverage difference, our results suggest that the excess leverage of state-owned firms positively relates to regional unemployment pressure and economic pressure faced by municipal politicians. Such effects are more pronounced in local state-owned firms. Our paper provides evidence that government control leads to significant political influence over the real decisions of firms.
    Keywords: excess leverage, state-owned firms, political motives, unemployment and economic pressure
    JEL: G30 G32 G34
    Date: 2022–03
  5. By: Fon, Roger; Alon, Ilan
    Abstract: This article examines how Chinese foreign aid interacts with the quality of the host country's governance in shaping Chinese state-owned enterprises' (CSOEs') foreign direct investment (FDI) in Africa. By analyzing the firm-level greenfield FDI data of CSOEs between 2003 and 2014 and distinguishing between China's official development assistance and less concessional forms of Chinese foreign aid, we reveal two main findings. First, the quality of the host country's governance negatively affects CSOEs' FDI. Second, other official aid and loans from China negatively moderate the relationship between the quality of the host country's governance and FDI by CSOEs. Specifically, the tendency for CSOEs to invest in locations with weak governance increases when their investments are integrated with less concessional forms of Chinese foreign aid in the form of other official flows and loans. Our results are robust to alternative measures of the governance and different methodological approaches. The article challenges the traditional notion of institutional theory which assumes a positive relationship between governance quality and FDI attraction.
    Keywords: foreign aid; foreign direct investment; governance; international political economy; state-owned enterprises; Wiley deal
    JEL: F3 G3
    Date: 2022–03–01
  6. By: Zhou Tianbao; Li Xinghao; Zhao Junguang
    Abstract: In this article, readers will see the impact on Chinese stock index brought by twenty-four solar terms, a unique division of annual season in Chinese tradition. Based on the data in the past 26 years, the study focused on whether the daily return (revenue) of Shanghai Index shows significant value and special feature on and after each solar term.On several solar terms did the index return result large mean value and high probability of extreme value occurrence such as on solar term No.1 and No.3 while on solar term No.2 and solar term No.4, the results were completely the opposite.The study also found that the volatility of index return during those solar terms in the beginning of the year were more active than the rest of them. Index return 10 days and 15days after solar term No.6 and solar term No.8 displayed high final return and large volatility whereas in any cases, the index went very steady after solar term No.18.The study also proposed that it is almost impossible to make numeric prediction with the current technical analysis tools, the effective way in stock analysis to collect more feature and characteristics based on historical data, identifying if the similar situation is happening when similar feature of stock shows up in the future.
    Date: 2022–03
  7. By: Johan Gars; Daniel Spiro; Henrik Wachtmeister
    Abstract: Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.
    Date: 2022–04
  8. By: László Czaller (Agglomeration and Social Networks Lendület Research Group, Budapest, H-1097, Hungary and Institute of Economics, Centre for Economic and Regional Studies, H-1097, Hungary); Zoltán Hermann (Institute of Economics, Centre for Economic and Regional Studies, Budapest, H-1097, Hungary andInstitute of Economics, Corvinus University, Budapest, HU-1093, Hungary)
    Abstract: While most empirical studies document that cognitive and social skills are strong predictors of individual earnings, their impact is not homogenous in space. We argue that dense urban settings utilize cognitive and social skills more intensively than rural areas, therefore the labour market return to these skills is higher in cities. Using data from a representative survey recording the skills requirements of Hungarian firms, we show that social skills are rewarded more in dense urban areas. Surprisingly, this pattern is not observed for cognitive skills. We use instrumental variables strategy to correct for measurement errors in skills, and to deal with the endogeneity of agglomeration. Our results are robust to alternative agglomeration measures and a large set of controls, however, returns to skills vary considerably across worker groups and industries.
    Keywords: agglomeration, cognitive and social skills, wages, urban labour markets
    JEL: J24 J31 R12
    Date: 2022–02
  9. By: Tamás Bakó (Institute of Economics, Centre for Economic and Regional Studies,Budapest, Hungary andBudapest Metropolitan University, Hungary); Judit Kálmán (Institute of Economics, Centre for Economic and Regional Studies,Budapest, Hungary andCorvinus University Budapest, Hungary)
    Abstract: In this study we reveal the impact of spatial clustering of occupations on the probability of employment and commuting time, with particular emphasis on differences between genders and household types. Based on Hungarian 2011 census data our research confirmed previous results of some USA studies according to which women work in less spatially clustered occupations compared to men. Our most important result is that more clustered the occupation, the longer the commuting time, and the lower the probability of employment. The effect of occupational clustering on commuting time is larger for women regardless of household type and for those living in a relationship compared to singles. Our further result is that the greater the occupational diversity of the place of residence, the shorter the commuting time and higher the probability of employment, and the occupational diversity of the place of residence modifies the effect of occupational clustering on commuting time.
    Keywords: Commuting time, occupations, employment probabilities
    JEL: R12 J22
    Date: 2022–03

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