nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒09‒12
fifteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Rallying around the EU Flag: Russia's Invasion of Ukraine and Attitudes toward European Integration By Nils Steiner; Ruxanda Berlinschi; Etienne Farvaque; Jan Fidrmuc; Philipp Harms; Alexander Mihailov; Michael Neugart; Piotr Stanek
  2. Has the Russian Invasion of Ukraine Reinforced Anti-Globalization Sentiment in Austria? By Gutmann, Jerg; Pitlik, Hans; Fronaschütz, Andrea
  3. Decomposing the Grey Economy in Bulgaria - A General-Equilibrium Analysis By Aleksandar Vasilev
  4. The economic effects of political disintegration: lessons from Serbia and Montenegro By Monastiriotis, Vassilis; Zilic, Ivan
  5. Households’ euroization in the Republic of North Macedonia: Is it close or far from the optimal levels? By Tanja Jakimova; Milan Eliskovski; Artina Bedzeti Baftijari
  6. Sandwiched women: Health behavior, health, and life satisfaction By Kartseva, Marina; Peresetsky, Anatoly
  7. Challenges of impact measurement in an emergent social economy. An exploratory research in Romania By Cristina BARNA; Adina REBELEANU
  8. Structural change and inequality in general equilibrium By Krzysztof Makarski; Joanna Tyrowicz; Jan Lutynski
  9. Mental Health and Stress Level of Ukrainians Seeking Psychological Help Online By Anastasiya-Mariya Asanov Noha; Igor Asanov; Guido Buenstorf
  10. The Ararat Fiscal Strategy Model: A Structural Framework for Fiscal Policy Analysis in Armenia By Luis-Felipe Zanna; Mr. Martin Fukac; Garik Petrosyan; Daniel Baksa; Victoria Babajanyan; Eduard Hakobyan; Arshaluys Harutyunyan; Narek Karapetyan; Babken Pashinyan
  11. Returns to Education in the Public and Private Sectors: Europe and Central Asia By Patrinos, Harry; Montenegro, Claudio
  12. Limits of Externally Backed Institutional Reform and Development in Azerbaijan By Nahmadova, Firuza
  13. Brexit and the Fintech Revolution in Europe - Lessons from the Bulgarian Digital Finance Cluster By Deyan Radev; Georgi Penev
  14. The Impact of Digitalization and Patent on Economic Growth in Romania By Bakari, Sayef
  15. Phillips Curve in Self-management Socialism of Yugoslavia By Aliu, Florin; Mulaj, Isa; Matoshi, Ruzhdi

  1. By: Nils Steiner; Ruxanda Berlinschi; Etienne Farvaque; Jan Fidrmuc; Philipp Harms; Alexander Mihailov; Michael Neugart; Piotr Stanek
    Abstract: This paper uses a survey among students at European universities to explore whether Russia’s invasion of Ukraine has affected attitudes toward European integration. Some respondents completed the survey just before Russia’s assault on February 24, 2022, and some did so just afterwards, thus delivering a quasi-experimental design situation, which we exploit. Our results suggest that the ominous news about the Russian attack increased the participants’ interest in EU politics, consolidated their attachment to the EU, and made them more mindful and appreciative of the benefits of deeper European integration. In effect, the war so close to the EU Eastern border provoked a rally around the supranational EU flag, with convergence of public opinion toward shared European values.
    Keywords: European integration, EU attitudes, external threat, rally around the flag, Ukraine, Russia
    JEL: F02 F50 H77 N44 Z18
    Date: 2022
  2. By: Gutmann, Jerg; Pitlik, Hans; Fronaschütz, Andrea
    Abstract: The Russian invasion of Ukraine has caused disruptions in international trade and highlighted the dependency of small open economies in Europe on imports, especially of energy. These events may have changed Europeans' attitude towards globalization. We study two waves of representative population surveys conducted in Austria, one right before the Russian invasion and the other two months later. Our unique dataset allows us to assess changes in the Austrian public's attitudes towards globalization and import dependency as a short-term reaction to economic turbulences and geopolitical upheaval at the onset of war in Europe. We show that two months after the invasion, anti-globalization sentiment in general has not spread, but that people have become more concerned about strategic external dependencies, especially in energy imports, suggesting that citizens' attitudes regarding globalization are differentiated.
    Keywords: Austria,crisis,conflict,globalization attitudes,war
    JEL: F13 F51 F52 N40
    Date: 2022
  3. By: Aleksandar Vasilev (Lincoln International Business School, UK)
    Abstract: This paper attempts to assess the size of the grey economy, and provide a decomposition by evasion type. The modelling approach utilizes a standard micro-founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism and a government sector. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2018). A computational experiment performed within this setup estimates that on average, the size of total evasion is a bit more than one-fourth of output, an estimate which is in line with the figures provided in both Philip (2014) and the European Commission (2014). Two-thirds of the model-predicted evasion is a combined result of income- and social security evasion, while the rest is due to VAT evasion.
    Keywords: tax evasion, general equilibrium, Bulgaria
    JEL: D58 E26 H26 K42
    Date: 2022–08
  4. By: Monastiriotis, Vassilis; Zilic, Ivan
    Abstract: Is there an economic premium from state independence? We shed light on this question by analysing the unique historical case of the peaceful separation of Serbia and Montenegro in 2006 – the last fully recognised internationally state-disintegration on European soil. Using the synthetic control approach, we find that independence for the seceding country (Montenegro) had a sizeable but seemingly transitory positive effect, boosting GDP per capita in the period immediately following independence, but with gains slowly evaporating in the longer period – which we attribute partly to increased vulnerability of the newly independent state to fluctuations in the international economic environment. In contrast, for Serbia we find no evidence of an independence dividend. We postulate that, at least in part, this asymmetry of effects may be linked to divergences in economic sentiment between the seceding entity and the one ‘left behind’.
    Keywords: secession; independance; political disintegration; synthetic control; Western Balkans
    JEL: F15 O52 N14
    Date: 2020–12–01
  5. By: Tanja Jakimova (National Bank of the Republic of North Macedonia); Milan Eliskovski (National Bank of the Republic of North Macedonia); Artina Bedzeti Baftijari (National Bank of the Republic of North Macedonia)
    Abstract: The paper deals with the challenges stemming from the phenomenon of unofficial euroization in the Republic of North Macedonia. It tries to identify the main drivers of the households` deposit euroization in the Republic of North Macedonia and contributes to the literature by providing an empirical measure of optimal level of euroization. With focus on the households` deposits, it is an additional attempt to empirically estimate the optimal level of euroisation in Republic of North Macedonia, following an already published IMF study on this issue. Looking ahead, persistence in stability-oriented macroeconomic policies and measures for promotion the use of local currency could further support the de-euroization trend in the Republic of North Macedonia.
    Keywords: euroization, local currency, financial stability, monetary policy, prudential policy, Republic of North Macedonia
    JEL: C32 E47 E58
    Date: 2022
  6. By: Kartseva, Marina; Peresetsky, Anatoly
    Abstract: In this paper, we use unique nationally representative data from the 25th wave of Russia Longitudinal Monitoring survey, (RLMS-HSE) for 2016. Based on the survey data, we investigate the impact of sandwich generation caregiving on the health behavior of Russian women—their health behavior, self-assessed health and life satisfaction. We found that sandwich generation caregiving reduces the likelihood of medical examinations, and regular meals, the effect is especially pronounced for working women. A small reduction in alcohol consumption is observed. The likelihood of smoking is reduced (especially for women under 50). The likelihood of being overweight increases, the proportion of chronic diseases decreases, and self-assessed health improves (these effects are especially pronounced for women who are non-pensioners). The proportion of depression decreases. These effects may be the result of an inattentive attitude to one's health and a consciousness of the social significance of fulfilling one's duty. The latter also affects the decreasing number of sandwich generation givers (SGC) dissatisfied with life in general.
    Keywords: sandwich generation; sandwich caregiving; Russia; female caregivers; health; health behavior; life satisfaction; informal care
    JEL: I12 I31 J14 J16
    Date: 2022–01
  7. By: Cristina BARNA (Faculty of Management, The National University of Political Studies and Public Administration (Romania)); Adina REBELEANU (Faculty of Sociology and Social Work, Babes-Bolyai University, Cluj-Napoca (Romania))
    Abstract: The social impact measurement theory and practice is an early emergent field in Romania, despite all the recent significant advances and of the maturation of the topic at the international level. However, even if the size and dynamics of the social economy sector are not yet comparable with European countries with tradition in the sector, Romania faces a trend of discovery, re-discovery, and development of the social economy, present in a diversity of organizations and fields and models of classic or highly innovative social enterprises. Advancing social impact measurement in Romania becomes imperative for public authorities and also the whole society to understand how much positive social change can be attributed to the social economy organizations. The main objective of this paper is to test the effectiveness of the impact indicators proposed by the Ministry of Labor and Social Justice (MLSJ) in the indicative guidelines, which were elaborated after the adoption of the Methodological Norms for applying the Law of the Social Economy by Government Decision no. 585, on 10 August 2016, and which represents the first official regulatory attempt of impact measurement. Applicative research will be carried out in two social economy organizations active in the social services field (Heart of Child Foundation from Galati county, and Charitable Foundation Sf. Daniel from Cluj county, Romania) for analysing the current metrics used in measuring the social impact in the last three years (2017 – 2019), and the relevance of the indicators proposed in the indicative ministerial framework for their organizations. After reviewing various international approaches and frameworks of impact measuring, testing the indicative impact indicators proposed by the MLSJ, and having in-depth interviews with the managers of the analysed social enterprises, the article concludes with a set of recommendations for the development of a more effective impact measurement framework.
    Keywords: social impact, impact measurement, social enterprise, social services, social and solidarity economy, Romania
    JEL: L31 B55
    Date: 2021–07
  8. By: Krzysztof Makarski (Group for Research in Applied Economics (GRAPE); Warsaw School of Economics); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw; Institute of Labor Economics (IZA)); Jan Lutynski (Group for Research in Applied Economics (GRAPE))
    Abstract: We study the evolution of wealth inequality in an economy undergoing structural change. Economic intuition hints that structural change should imply increased income inequality, at least transiently. Economic intuition is more ambiguous for the effects on wealth inequality. On the one hand, increased dispersion in incomes implies increased dispersion in the ability to accumulate wealth across individuals. On the other hand, workers experience greater uncertainty, which may push them to more precautionary savings, which works towards equalizing wealth distribution. The net effect of these two opposing forces is essentially an empirical question. We build an overlapping generations model which features heterogeneous sectors and workers. Using this model, we quantify the role of demographics and the structural change in the evolution of wealth inequality in Poland as of 1990.
    Keywords: structural change, demographic change, inequality
    JEL: L16 E20 D63
    Date: 2022
  9. By: Anastasiya-Mariya Asanov Noha (University of Kassel); Igor Asanov (University of Kassel); Guido Buenstorf (University of Kassel)
    Abstract: We screen the mental well-being and psychological distress of 1165 refugees, migrants, internally displaced, and non-displaced people from Ukraine who seek psychological help online in Ukraine and across 24 countries of the European Union. We see that more than half of the respondents exhibit low levels of mental well-being and high psychological distress, with 81% being at risk of depression and 57% having severe psychological distress. Refugees and internally displaced people in our sample show a particularly high risk of depression and severe psychological distress. Nevertheless, the majority of Ukrainians seeking psychological help still work, study, or volunteer, and those who do have relatively alleviated mental levels of well-being.
    Date: 2022
  10. By: Luis-Felipe Zanna; Mr. Martin Fukac; Garik Petrosyan; Daniel Baksa; Victoria Babajanyan; Eduard Hakobyan; Arshaluys Harutyunyan; Narek Karapetyan; Babken Pashinyan
    Abstract: This paper presents an overview of the Ararat Fiscal Strategy Model (AFSM), which is a structural, New-Keynesian, DSGE, small open economy model with a rich fiscal block that includes several expenditure and revenue instruments, and types of debt. The AFSM is now a formal part of the Ministry of Finance analytical toolkit to do macroeconomic fiscal policy scenario analysis, which feeds into policy discussions, budget planning, and the Medium-Term Expenditure Framework. The model was applied to assses the macroeconomic impact of the “first wave” of the Covid-19 pandemic on the Armenian economy, including the mitigating effects of policy responses. AFSM simulations revealed a potential severe impact in 2020, with declines in GDP and consumption of 12.9 and 11.7 percent, respectively, and a cumulative loss of GDP of 38 percent for the period 2020-2023. They also highlighted a significant fiscal outlook deterioration that would increase public debt-to-GDP ratios by 18.8 percentage points over 2020-23. The package of counter-cyclical fiscal measures of 3.6 percent of GDP, however, was estimated to cushion the 2020 GDP decline by almost 2 percentage points, as well as protect jobs. A second AFSM application related to the 2018 public investment under-execution showed the importance of improving the efficiency of public investment to have positive macroeconomic and fiscal effects.
    Keywords: Structural model; DSGE model; fiscal rules; scenario analysis; financial programming; Armenia; Covid-19; AFSM simulation; shock decomposition; fiscal policy multiplier; AFSM application; overview of the Ararat Fiscal Strategy Model; Consumption; Public investment spending; Current spending; Global
    Date: 2022–06–10
  11. By: Patrinos, Harry; Montenegro, Claudio
    Abstract: The returns to schooling are estimated for 28 European and Central Asian countries using the Mincerian function. Our results show that while the public sector pays on average more than the private sector, the effect of education on earnings is stronger in the private sector. However, the returns to tertiary education are higher in the private sector.
    Keywords: returns to education; wage differentials; public–private; Europe
    JEL: I21 J31
    Date: 2022–08–09
  12. By: Nahmadova, Firuza
    Abstract: Since Azerbaijan opened itself to international markets, many regional and international actors have shown interest in its development and governance. Not only do international actors secure the oil and gas resources, they also have a stake in how the country is governed and attempt to shape its institutional framework. Regardless of the reasons that lead to these initiatives, international organizations, such as the UN or the IMF, have shown support for specific sets of reforms and institutional changes throughout the years. For example, USAID’s Country Development Cooperation Strategy 2011-2020 for Azerbaijan states three main interests: security, energy, and internal reform. As the UN and Asian Development Bank have published their most recent roadmap for institutional change in Azerbaijan, several questions arise: how likely are these to succeed, are the proposed reforms viable and relevant to the specific context of Azerbaijan, and how do they compare with previous initiatives. This paper discusses the traditional view of institutional reforms supported by international organizations in developing countries, then comparing it to the experience and evidence of success and failure in Azerbaijan.
    Keywords: Azerbaijan, Reforms, Institutions, World Bank, USAID
    JEL: H7 H77 O2
    Date: 2022–07
  13. By: Deyan Radev (Faculty of Economics and Business Administration at Sofia University); Georgi Penev (Bulgarian Fintech Association, Sofia, Bulgaria)
    Abstract: This paper provides insights into the drivers of the resilience of the Fintech sector in Emerging Europe by analyzing the performance of 128 Bulgarian Fintech companies in the period 2000-2021. Our results show that larger and better capitalized Fintech companies which outsource their non-core activities and focus on their main competitive strengths tend to have higher operating income and profit. We also find substantial positive real-economy effects as these companies hire actively on the labor market to maintain their growth. The results are primarily driven by the post-Brexit period of 2016-2019. These results have important managerial and policy implications and provide interesting directions for future research.
    Keywords: Brexit, fintech, regional clusters, resilience, emerging markets
    JEL: G01 R00 R11 P25
    Date: 2022–08
  14. By: Bakari, Sayef
    Abstract: The study aims to investigate the impact of patent and digitalization on economic growth in Romania. Our data was retrieved from the World Development Indicators database (World Bank 2021) from the period 1990-2020. Empirical fundings indicated that digitalization and patent have a positive effect on economic growth. From these perspectives, the Romanian authorities should take seriously the patent and the potential of digitalization which can help the economy to be modernized, diversified, and robust to create new jobs and to find new markets and new strategic partners, and new opportunities.
    Keywords: Digitalization; Patent; Economic Growth; Romania.
    JEL: O31 O32 O33 O34 O38 O47 O52
    Date: 2022
  15. By: Aliu, Florin; Mulaj, Isa; Matoshi, Ruzhdi
    Abstract: Inflation and unemployment were two of the main issues that plagued the Socialist Federal Republic of Yugoslavia (SFRY) from 1965 to her disintegration. Economic history has taught us that uncontrolled inflation is a characteristic of the countries with a lack of democracy but SFRY was more economically liberal and decentralized than any other communist country. Using the World Bank annual data from 1965 to 1990 for unemployment and inflation, the OLS (Ordinary Least Squares) findings demonstrate that unemployment is significant and positively affects the inflation rate, which stands against the theoretical paradigms known as the Phillips curve. The impulse response function (IRF) indicates that the positive shock of unemployment positively affects inflation in the short run. The Johansen test reports that unemployment and inflation were integrated into the short-run confirming the expectations-augmented Phillips curve. Moreover, contrary to theoretical expectations is the co-integration in the long run where the relationship between inflation and unemployment rate turned into an upward steeper slope. To this end, the results help the scholars to be informed on the historical relationship between inflation and unemployment in the context of SFRY, a formerly communist country with a differentiated economic model. The relevance of our findings goes beyond economic concepts by understanding them as one of the main factors contributing to the bloody disintegration of the SFRY.
    Keywords: SFRY, self-management socialism, inflation, unemployment, Phillips curve
    JEL: E24 J64 N14 P21 P24
    Date: 2021–10–30

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