nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒08‒08
eight papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Challenges and opportunities to develop Kazakhstani logistics projects within the BRI By Brauweiler, Hans-Christian; Yerimpasheva, Aida
  2. The Russia-Ukraine War and Food Security in Morocco By Abdelaaziz Ait Ali; Uri Dadush; Fatima Ezzahra Mengoub; Isabelle Tsakok
  3. Optimal tariff versus optimal sanction: The case of European gas imports from Russia By Gros, Daniel
  4. Spatial Disparity of Skill Premium in China: The Role of Financial Intermediation Development By Lai, Tat-kei; Wang, Luhang
  5. ICT, Human Capital, and Productivity in Chinese Cities By Qing Li; Yanrui Wu
  6. Guanxi and networking: The hidden business matrix of the Chinese economy By Haube, Markus; Horak, Sven
  7. Entrepreneurs or Employees: What Chinese Citizens Encouraged to Become by Social Attitudes? By Xu, Tao; Zhu, Weiwei
  8. Spillover Effects of Foreign and Domestic Exporting Firms on Export Decisions of Local Manufacturing Firms: Evidence from Viet Nam By Quang Hoan Truong; Van Chung Dong

  1. By: Brauweiler, Hans-Christian; Yerimpasheva, Aida
    Abstract: The BRI initiative presents a colossal opportunity for landlocked Kazakhstan to become a central logistics hub. However, this prospect is overshadowed by geopolitical risks that have escalated since the beginning of 2022. The Ukrainian crisis increased geopolitical tensions on the Eurasian continent and worldwide. Furthermore, it disrupted respectively delayed logistics, as the borders both between Russian Federation and Belarussia on one side and many nations in Europe were practically closed, air traffic has to take huge diversions, increasing time and costs for the freight. A full-scale crisis has global consequences for states and people. Western companies have stopped their activities in Russia. Western countries have imposed unprecedentedly harsh sanctions on Russia. Supply chains can be broken. Chinese companies are concerned that their goods may be stopped at the border between Russia and the countries of Central and Eastern Europe. Because of close economic and political ties with the Russian Federation and membership in the Eurasian Economic Union (EAEU), Kazakhstan is concerned with secondary sanctions. Actually, there is already some impact, as Russian Banks in Kazakhstan have to cope with difficulties in international payments, which rebounds to their (innocent, kazakh and international expatriate) customers. Companies face a particular business risk that can be referred to as "geopolitical risk." Geopolitical risks are becoming the main problem for the further development of the Eurasian region.
    Keywords: logistics,hub,geopolitical risks,projects,EAEU,BRI,SREB,cooperation,transport logistics complex
    Date: 2022
  2. By: Abdelaaziz Ait Ali; Uri Dadush; Fatima Ezzahra Mengoub; Isabelle Tsakok
    Abstract: Following on the heels of the COVID-19 pandemic and severe drought in North Africa, the Russian invasion of Ukraine – large exporters of food and, in the case of Russia, energy— may inflict increased hunger on the food insecure in Morocco – despite mitigating measures by the government. Morocco is so far successfully shielding its large poor and vulnerable population by subsidizing essential commodities. With memories of the violent protests during the 2007/08 food and fuel crisis still fresh, government support is necessary to maintain social stability. Such support measures are costly even in a typical year. In 2022, the legacy of the pandemic, a combination of drought, soaring cereal and oil prices, global inflation, and economic slowdown will test the 'government's ability to keep fiscal deficits within sustainable bounds. Looking to the longer term, the high costs of government subsidies highlight the need for a sustainable strategy to deal with food security. Morocco's New Development Model (April 2021) promises to progress towards this goal by re-orienting public investment and creating incentives to improve efficiency and resilience in rain-fed agriculture and add value throughout the agri-food sector, not just in irrigated agriculture. The food and fuel crises triggered by the war raise the stakes for reforming the agri-food system throughout Africa, not only in Morocco. The African Continental Free Trade Agreement (AfCFTA) presents a unique opportunity to develop a vast and reliable regional market including food that is less exposed to the vagaries of the political, security, and economic environment outside the region.
    Date: 2022–04
  3. By: Gros, Daniel
    Abstract: Europe has set itself the aim of reducing its dependency on Russian gas imports. This paper provides an economic analysis of a tariff on imports of natural gas into the EU which would help achieve this goal. The starting point is Gazprom’s monopoly on exports of gas from Russia and pricing power on the European market. Standard trade theory implies that a tariff on Russian gas imports would be beneficial for Europe even on purely economic grounds because it would lower the demand curve Gazprom faces and induce it to lower prices. The standard linear model used here takes into account the availability of Liquified natural gas (LNG) supplies and confirms the general rule that it pays to levy a tariff on imports from a foreign monopoly. It yields the following numerical results: - Only one half of the tariff would result in higher prices for European consumers and the tariff revenue would be more than sufficient to compensate them for this loss. - The tariff, which maximises Europe’s welfare, would be close to one third of the price at which Europe would stop importing from Russia. This would cut Gazprom’s net revenues by approximately half. - If the tariff is used as a sanctions weapon to reduce revenues for Russia, the tariff should be higher (around 60 %) and would cut Gazprom’s revenues to one fourth of the free trade level. The overall conclusion is thus that an EU import tariff on Russian gas would have a major impact on Russia’s earning from gas exports and would certainly improve the European terms of trade.
    Date: 2022–05
  4. By: Lai, Tat-kei; Wang, Luhang
    Abstract: In China, the relative wages of high-skilled and low-skilled workers display huge variation across different regions. We examine whether financial intermediation development can explain such variation. Conceptually, better-developed financial intermediation helps financially-constrained firms raise new capital, which is usually skilled-biased, resulting in an increased demand for skilled labor and skill premium. Using a cross-section of workers from the 1% Population Survey of 2005, we find consistent evidence; besides, the relationship is stronger among workers in industries with higher capital-skill complementarity and in non-state-owned enterprises. Overall, our results suggest that the financial market plays a role in explaining skill premium in China.
    JEL: J24 J31 O11
    Date: 2022–07–13
  5. By: Qing Li (Department of Economics and Finance, SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study uses a rich city-level dataset to analyse the relationship between information and communication technology (ICT) and productivity performance in China during 2003-2016. It is shown that ICT positively contributes to Chinese cities’ productivity in conjunction with other growth determinants, such as human capital, foreign direct investment, infrastructure development, financial market development, and research and development investment. An identifiable amplified effect is detected when ICT exceeds certain threshold in Chinese cities. This threshold level is reached in over a half of Chinese cities particularly cities in coastal regions. Finally, ICT is found to substitute human capital in China’s context. Since the average education level in Chinese cities is low, the finding is in line with the argument that ICT only improves productivity of high-skilled workers but worsens that of the low-skilled ones.
    Keywords: ICT, human capital, productivity, China
    JEL: O47 O33 R10
    Date: 2022
  6. By: Haube, Markus; Horak, Sven
    Abstract: China's economic structures, business dynamics and individual management decisions are not determined by the country's formal institutional arrangements alone. China's society, its politics and business are rather governed by powerful informal mechanisms that complement and sometimes overrule the ordering principles outlined in the formal sector. Network structures and guanxi, in particular, create hidden microcosms that exist beyond, or rather parallel to, markets and hierarchies and have a profound impact on the structures and dynamics of China's economy and its business sector. This phenomenon exists since the early days of China's civilisation and continues to shape the China of today (Bian, 2018; Fei, 1992; Yang, 1994). This contribution endeavours the following: (i) to outline the mechanics of guanxi relations and networks in Chinese society; (ii) to highlight the impact of guanxi relations and networks on Chinese business and management; and (iii) to discuss China's guanxi relations and networks in international comparison. In order to do so, this contribution integrates different streams of literature (economic and sociological network literature, management and organization studies, Chinese and East Asian area studies) into a comprehensive analysis shedding light on the various forms and dimensions in which guanxi relations and networks shape the way business is conducted in China.
    Date: 2022
  7. By: Xu, Tao; Zhu, Weiwei
    Abstract: The traditional way of the "troika" cannot support sustainable development for China, and future economic growth should be pushed by entrepreneurship, which can be the key to innovation. The paper analyses the importance and necessity of entrepreneurship in the context of China and its current situation systematically, and methodically studies whether it is entrepreneurs or employees that social attitudes encourage citizens to become. Using Chinese General Social Survey data, the paper explores the essentiality of social attitudes from three perspectives: social equity, social happiness and social trust that can reflect the social atmosphere, and examines the influential factors in terms of personal characteristics through an empirical approach. The paper finds that citizens' feelings and perceptions of social equity and social happiness have a significant positive impact on encouraging them to be entrepreneurs, with positive factors such as income, social security and children, and negative factors such as education, political identity and hukou. The effect can be more significant for urban citizens than rural ones; men and women are affected differently by the same factors in their choice to become employees or entrepreneurs.
    Keywords: Entrepreneurship; Social Attitude; Equity; Happiness; Social Atmosphere; Chinese General Social Survey
    JEL: J1 J12 J13 J16 M1 M13 M14 M2 O1 O3 O4
    Date: 2022–06–20
  8. By: Quang Hoan Truong (Institute for Southeast Asian Studies, Vietnam Academy of Social Sciences (VASS)); Van Chung Dong (Institute for Southeast Asian Studies, Vietnam Academy of Social Sciences (VASS))
    Abstract: Our paper investigates the spillover effects generated by foreign and domestic exporting firms on export decisions of local manufacturing firms in Viet Nam – a developing economy – over 2010–18. In the export participation, we find positive spillover effects from foreign and domestic exporting firms on domestic firms’ export participation, while negative spillover effects are detected with the backward channel. Estimation shows the positive forward spillover effects from domestic exporting firms on domestic counterparts’ export participation; on the contrary, the forward spillover effects generated by foreign direct investment exporting firms are negative. In addition, we discover the opposite spillover effects from foreign direct investment and domestic exporting firms on the probability of export exit of domestic firms, with the negative impact under the horizontal channel and the positive one under the backward channel. There are also effects of firms’ characteristics such as labour productivity, wage, firm size, and capital intensity on the export participation and export exit of domestic firms. From empirical evidence, the paper provides policy implications to strengthen linkages between foreign and domestic exporting firms with local firms in Viet Nam.
    Keywords: Spillover Effects; export status; foreign and domestic exporting firms; Viet Nam
    JEL: F15 F23
    Date: 2021–12–15

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