nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒08‒15
twelve papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Sanction-proof or sanction-hit: How can the EU make Putin’s evil war even more costly By Akhvlediani, Tinatin; De Groen, Willem Pieter
  2. Introducing a price cap on Russian gas: A game theoretic analysis By Ehrhart, Karl-Martin; Schlecht, Ingmar
  3. Manufacturing productivity and firm ownership in a transition economy: Analytical issues and evidence from Vietnam By Prema-chandra Athukorala; Hai Thanh Nguyen
  4. The Effect of the War on Human Capital in Ukraine and the Path for Rebuilding By Gorodnichenko, Yuriy; Kudlyak, Marianna; Sahin, Aysegül
  5. Reconstruction of the Social Cash Transfers System in Poland and Household Well-being: 2015 - 2018 Evidence By Adam Szulc
  6. Local value chains in European MNEs By Thomas, Catherine
  7. The Chinese belt and road initiative between economics and geopolitics: Consequences for Armenia By Wrobel, Ralph
  8. Spillover Effects from External Shocks on Bank Credit Risk: Evidence from Cointegration Analysis for Albania By Esida Gila-Gourgoura; Eftychia Nikolaidou
  9. Manufacturing exports and institutional qualities: The case of central Asian countries By Taguchi, Hiroyuki
  10. Kosovo: The Challenges of Building the Growth Model By Marion Hémar; Laura MARIE
  11. North Macedonia: Identifying a development model for the future By Jules PORTE
  12. How does intrahousehold bargaining power impact labor supply? European cross-country evidence (2004-2019) By Belloc, Ignacio; Molina, José Alberto; Velilla, Jorge

  1. By: Akhvlediani, Tinatin; De Groen, Willem Pieter
    Abstract: After President Vladimir Putin madly went ahead with the full-scale invasion of Ukraine, it is clear that sanctions will no longer have a deterring effect on the outbreak of war. However, imposing sanctions can still make this war very costly for Putin and perhaps make him and his inner circle reconsider continuation of the war and find a negotiated solution. The EU, together with its allies, has shown impressive unity in imposing severe sanctions against Russia, yet some options remain open for the EU to further exploit its economic leverage over Putin’s regime. This Policy Insight reviews the EU’s imposed sanctions against Russia and looks at the possibilities to increase their effectiveness, drawing upon lessons learned in the past.
    Date: 2022–03
  2. By: Ehrhart, Karl-Martin; Schlecht, Ingmar
    Keywords: gas market,Russia,European Union,game theory,external price cap
    JEL: F13 Q40
    Date: 2022
  3. By: Prema-chandra Athukorala; Hai Thanh Nguyen
    Abstract: This paper contributes to the fledgling literature on firm ownership and manufacturing productivity in transition economies by drawing on the experience of Vietnam. The empirical analysis uses a new a new establishment-level panel dataset over the period 2006-2017. The findings indicate that the transformation of the ownership structure under trade and investment policy reforms has contributed significantly to improving the productivity of the manufacturing sector, with both fully owned subsidiaries of multinational enterprises (MNEs) and MNE joint ventures with domestic private sector firms playing a pivotal role. Productivity of fully-owned MNE subsidiaries is significantly higher than that of MNE joint ventures, supporting the view that relaxing ownership restrictions on foreign direct investment have been instrumental in improving manufacturing productivity. Both state-owned enterprises (SOEs) and MNE-SOE joint ventures are at the bottom of the productivity ranking, suggesting that the MNE-SOE joint ventures are not immune to productivity-retarding factors affecting SOEs.
    Keywords: transition economies, Vietnam, manufacturing, multinational enterprises (MNEs), State owned enterprises (SOEs)
    JEL: F23 O14 P24 P23
    Date: 2022
  4. By: Gorodnichenko, Yuriy (University of California, Berkeley); Kudlyak, Marianna (Federal Reserve Bank of San Francisco); Sahin, Aysegül (University of Texas at Austin)
    Abstract: In February 2022, Russia launched a full-scale invasion of Ukraine. The ensuing war has a devastating destructing impact in Ukraine. This article focuses on the humanitarian cost of war. The article develops a framework for the analysis of the effect of a war on country’s human capital. We then identify the following key directions for rebuilding and further developing human capital in Ukraine: quantity and quality of schooling for children, quality of higher education, training and retraining programs for adults, assistance for people with disabilities, post-deployment re-integration into the civilian sector, population growth and fertility, and promotion of self-motivating mechanisms.
    Keywords: human capital, growth, schooling, skills of the future, health, war, displacement
    JEL: I2 J24 O4
    Date: 2022–06
  5. By: Adam Szulc
    Abstract: In this study, the impact of social benefits on poverty, and economic activity in Poland is examined. In 2016 a huge programme of cash transfers, referred to as Family 500+, was introduced. It was intended to support families with children, especially the poorest ones, and to foster fertility. The impact of the transfers is examined through the observation of changes in monetary and multidimensional poverty following the reconstruction of the social benefits system. Changes in the recipients’ behaviour are also investigated using estimates of regression models and treatment effects. The Family 500+ programme appeared to be successful as an anti-poverty tool and also resulted in average well-being increases for the whole population. However, it was also followed by the reduction of the economic activity of some recipients, especially in 2016 and 2017. The abovementioned trends partly reversed in 2018. As some income data in lower parts of the distribution seem to be flawed, income imputations, based on regression on income correlates, are employed
    Keywords: family benefits, monetary and multidimensional poverty, data imputation
    JEL: D1 I3 H8
    Date: 2022–04
  6. By: Thomas, Catherine
    Abstract: Ghemawat’s work in international business strategy demonstrates that Multinational Enterprises (MNEs) create value both by overcoming and by exploiting the price differences that exist at country borders. This paper evaluates the investment strategies of MNEs with subsidiaries in the 10 Central and Eastern Europe countries (CEEs) that had joined the European Union by 2007 through the lens of this insight. The data show that subsidiaries’ activities vary with the parent MNE’s home location. The CEE subsidiaries of Western European MNEs are more likely to be producing output that can be traded across country borders, particularly when their output differs from the main product of their parent company. The findings suggest Western European MNEs tend to invest in CEE countries to fragment value chains across the region, exploiting factor cost arbitrage opportunity in a semiglobalized world.
    Keywords: multinational firms; global value chains; EU enlargement
    JEL: J50
    Date: 2022–06–24
  7. By: Wrobel, Ralph
    Abstract: Armenia has already signed some agreements with China to participate in the BRI project while no concrete measures are financed by the initiative. But what are the economic advantages and disadvantages of the BRI? While funding of some for Western financiers unattractive projects by China is a good chance for some participating countries a resulting "debt trap" is dangerous for them. Additionally, it can be shown easily that China's investments have mostly some geopolitical aspects which make the projects more advantageous for China than for the participating countries themselves. Especially, when in the BRI participating countries cannot pay back their debts a transfer of natural resources respective of infrastructure like ports ore pipelines to China may be the consequence. Therefore, Armenia is in a dilemma between strengthening cooperation with China and benefitting from that, on the one hand, and the risk of losing economic as well as political independence, on the other hand.
    Keywords: Belt and Road Initiative,Armenia,Geopolitics,Debt-Trap
    Date: 2022
  8. By: Esida Gila-Gourgoura (School of Economics, University of Cape Town); Eftychia Nikolaidou (School of Economics, University of Cape Town)
    Abstract: Over the last fifteen years, the presence of European banking groups in the banking systems of Western Balkan countries, has negatively affected their financial stability through external economic/financial shocks. Albania is an example of a Western Balkan country, with a significant foreign capital presence in its banking system, including Italian capital. Furthermore, Albania is economically linked to Italy through trade channels and remittances arriving from Albanian immigrants in Italy. Given that Italy has been one of the main protagonists of the European debt crisis (2010-2012), the chance of negative spillover effects from the Italian debt crisis, transmitted to the Albanian banking system through banking and trade channels, is high. Despite this, no previous studies have attempted to incorporate these potential effects in the empirical analysis. Employing the ARDL approach to cointegration (and the VECM framework as a complementary method), this paper investigates the determinants of credit risk in the Albanian banking sector paying particular attention to the spillover effects from external shocks. Empirical findings suggest that the Italian debt crisis has a positive impact on bank credit risk in Albania over the period 1999Q1–2019Q4. Moreover, it is concluded that other country-specific factors such as the real effective exchange rate and the capital to assets ratio positively affect credit risk in Albania.
    Date: 2022
  9. By: Taguchi, Hiroyuki
    Abstract: This paper evaluates the export values of manufactured goods for the Central Asian countries by using a gravity trade model, and investigates the roles of institutional qualities in manufacturing exports based on the World Governance Indicators. The findings of this study are summarized as follows. With Kazakhstan being a benchmark country, the remaining four Central Asian countries have downward deviations in manufacturing exports and institutional qualities. Then the institutional qualities such as control of corruption, government effectiveness and rule of law are identified to be the major factors to explain the differences in the manufacturing exports’ performances.
    Keywords: Central Asia; manufacturing exports; institutional qualities; World Governance Indicators; gravity trade model
    JEL: F14
    Date: 2022
  10. By: Marion Hémar; Laura MARIE
    Abstract: A small country in the Western Balkans, Kosovo unilaterally declared its independence from Serbia in 2008. It has since strengthened its independence and built its sovereignty, resulting in a gradual withdrawal of international peacekeeping missions. It has also managed to build strong democratic institutions, despite major political instability.Donor assistance has focused on strengthening institutions and good governance in order to foster convergence towards European Union standards
    Keywords: Balkans occidentaux
    JEL: E
    Date: 2022–06–21
  11. By: Jules PORTE
    Abstract: North Macedonia is a small, landlocked country in the Balkans that gained independence in 1991 and has a turbulent history bound up with its pursuit of regional and international recognition. The country is now looking toward the European Union and has been a candidate for accession since 2005. Its economic growth is steady but not strong enough to initiate a significant convergence process. Therefore, a new development model is now needed, but the country’s structural constraints and the difficulty in identifying sectors of growth present challenges.
    Keywords: Balkans occidentaux
    JEL: E
    Date: 2022–06–21
  12. By: Belloc, Ignacio; Molina, José Alberto; Velilla, Jorge
    Abstract: This paper analyzes how intrahousehold bargaining power impacts labor supply, for seventeen European countries. To that end, we estimate a collective model using the European Union Statistics on Income and Living Conditions for the period 2004-2019, and we study the validity of several potential distribution factors; that is to say, variables that impact labor supply only through intrahousehold bargaining power. Results show some degree of heterogeneity in the responses of labor supply to intrahousehold bargaining power. Spouses' education and the age gap operate as distribution factors in central European countries, such as Austria, Belgium, France, Luxembourg, and Switzerland. On the other hand, in the Mediterranean South countries, the share of unearned income of the wife operates as a distribution factor in Italy, Portugal, and Spain, and in countries of Eastern Europe (Czech Republic, Hungary, Latvia, and Lithuania), the sex ratio, wives' non-labor income share, spouses' age and education gap, and the fertility rate all operate as distribution factors. In northern economies, such as Denmark and Estonia, we find evidence for share of unearned income, age gap, and fertility rate, while in islands, such as Ireland and the United Kingdom, the sex ratio, the share of unearned income, the age and education gap, and the fertility rate are suitable bargaining power variables. The results are consistent with theoretical sharing rules, and distribution factors that empower a given spouse are mainly positively correlated with increases in the share of income they attract from intrahousehold bargaining.
    Keywords: household labor supply,collective model,distribution factors,EU-SILC
    JEL: D13 J22
    Date: 2022

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