nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒10‒10
thirteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Environmental Politics in Authoritarian Regimes: Waste Management in the Russian Regions By Olga Masyutina; Ekaterina Paustyan; Grigory Yakovlev
  2. Unable to innovate or just bad circumstances? Comparing the innovation system of a state-led and market-based economy By Ann Hipp; Udo Ludwig; Jutta Günther
  3. Choosing a Taylor Rule with Limited Data Availability: The Benchmark Approach By Anton Grui; Jeffrey Liebman; Sergiy Nikolaychuk; Alex Nikolsko-Rzhevskyy
  4. Rural tourism and territorial development in Romania By Sima, Elena
  5. Inequality in an OLG economy with endogenous structural change By Krzysztof Makarski; Joanna Tyrowicz
  6. Charitable Giving by the Poor A Field Experiment in Kyrgyzstan By Adena, Maja; Hakimov, Rustamdjan; Huck, Steffen
  7. Endogenous Monetary Policy Credibility in Ukraine By Kateryna Savolchuk; Anton Grui
  8. Defining gas price limits and gas saving targets for a large-scale gas supply interruption By Neuhoff, K.
  9. Keep calm and trade on: China's decisive role in agricultural markets under turmoil By Kuhn, Lena; Jaghdani, Tinoush Jamali; Prehn, Sören; Sun, Zhanli; Glauben, Thomas
  10. Digitalising the economy in Slovenia By Lucia Russo; Jens-Christian Høj; Martin Borowiecki
  11. Recourse and (strategic) mortgage defaults: Evidence from changes in housing market laws By Alin Marius Andries; Anca Copaciu; Radu Popa; Razvan Vlahu
  12. The Start of Yugoslavia's Disintegration: Where Borders Cut Commuting Spheres By Hoffstadt, Martin
  13. Breaking Bad: A Disaggregated Analysis of Inflation Inertia By Mr. Serhan Cevik

  1. By: Olga Masyutina; Ekaterina Paustyan; Grigory Yakovlev
    Abstract: Russian regions display a significant variation in terms of waste management efforts. This is puzzling considering the importance of waste management for all regional governments and the urgency of the problem for the Russian public as reflected in opinion polls. We study whether more authoritarian regional governments in Russia are better able to solve the problem of waste management. Using a regional panel data set for the period of 2012-2019, we find that our measure of the degree of authoritarianism - the share of votes for the United Russia party in parliamentary elections - has a strong positive effect on the share of recycled waste in the Russian regions. This result indicates that more authoritarian regions tend to recycle more household waste than less authoritarian regions. This finding is consistent with the theory of environmental authoritarianism that suggests that authoritarian governments are better able to tackle environmental challenges.
    Keywords: Environmental authoritarianism, waste recycling, Russia, subnational politics
    JEL: Q53 Q58 R58
    Date: 2022–05
  2. By: Ann Hipp; Udo Ludwig; Jutta Günther
    Abstract: State socialism failed due to its inner contradictions. Despite huge investments in R&D-intensive industries, the soviet-type economy collapsed in 1989 in Eastern Germany, and the market-based system in the Western part prevailed. We compare the two parallel existing innovation systems in Germany to shed light on the success and failure of the state-led innovation system. Based on newly created indicators from archive data we show in a natural experiment setting that modernization efforts in relation to GDP was much bigger in the socialist as compared to the market economy in the last decades.These achievements, however, could not fully unfold in favor of economic growth due to obstacles related to the setting of research priorities, innovation incentives, and knowledge flow.
    Keywords: Comparative economic systems, natural experiment, innovation system, Germany
    JEL: O11 O31 N94
    Date: 2021–12
  3. By: Anton Grui (National Bank of Ukraine); Jeffrey Liebman (Lehigh College of Business); Sergiy Nikolaychuk (National Bank of Ukraine); Alex Nikolsko-Rzhevskyy (Lehigh College of Business)
    Abstract: In this paper, authors propose and test a new methodology that aims to select the best performing monetary policy rule when macroeconomic data are very limited, as is often the case for developing countries. The methodology is based on calculating economic losses during the periods when a country implicitly followed an assumed rule and when its central bank exercised discretion. For countries with short data spans where such analysis is not possible, authors propose adopting the rules that historically worked well for their peers. As an intermediate step, authors develop a novel approach to the calculation of the equilibrium real interest rate for developing countries that accounts for their substantial risk premia and the expected real appreciation of the domestic currency. The methodology is then applied to Czechia, Hungary, Poland, and Ukraine to construct the optimal policy rate path and contrast it with the actual one.
    Keywords: Taylor rules, monetary policy, real-time data, discretion
    JEL: E52 E58
    Date: 2022–03
  4. By: Sima, Elena
    Abstract: Rural tourism in Romania has significant potential. The Romanian effort to develop and promote tourism in the rural area has been completed by the support provided by the European Union funds. In this context, the objective of this paper is to highlight the territorial development of the rural tourism market after the Romania's accession to the European Union. The methodology used is based on the synthesis of information from articles and studies published in specialty journals, in Government documents as well as in other development strategies on tourism and rural space. The results reconfirm that the supply of tourist accommodation in rural areas has shown a general upward trend, despite a slight decline during the global financial crisis, and the investments in rural tourism activity have a great advantage, i.e. job creation and maintaining the local (rural) labour, revitalization of rural localities, mainly those from the less-favoured and remote rural areas.
    Keywords: rural development, rural tourism, competitiveness, regions, Romania.
    JEL: L83 Q1 R10 Z13
    Date: 2020–11–19
  5. 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))
    Abstract: We study the evolution of income and wealth inequality in an economy undergoing endogenous structural change with imperfect labor mobility. Our economy features two sectors: services and manufacturing. With faster TFP growth in manufacturing, labor reallocates from manufacturing to services. This reallocation is slower due to labor mobility frictions, which in turn, raises relative wages in services. As a result, income inequality is higher. Moreover, we study the impact of structural change on wealth inequality. Its economic intuition is more ambiguous. On the one hand, increased income dispersion implies increased dispersion in the ability to accumulate wealth across individuals. On the other hand, younger workers who hold the least assets are the most mobile across sectors. Their incomes are improved, which boosts their savings, which works towards equalizing wealth distribution. The consequence of these changes can by only verified with a computational model. To this end we construct and an overlapping generations model with two sectors: manufacturing and services. Our model also features heterogeneous individuals. With our model we are able to show how structural change affected the evolution of income and wealth inequality in Poland as of 1990.
    Keywords: structural change, inequality
    JEL: L16 E20 D63
    Date: 2022
  6. By: Adena, Maja (WZB Berlin); Hakimov, Rustamdjan (University of Lausanne and WZB Berlin); Huck, Steffen (WZB Berlin and UCL)
    Abstract: In a large-scale natural field experiment, we partnered with a micro-lending company in Kyrgyzstan that asked over 180,000 of its clients for donations to social projects as a form of corporate philanthropy. In a 2x2 design, we explored two main (pre-registered) hypotheses about giving by the poor. First, based on a conjecture that poor are more price sensitive than the rich and in contrast to previous studies, we hypothesize that matching incentives induce crowding in of out- of-pocket donations. Second, we hypothesize that our population cares about their proximity to the charitable project. We find evidence in favor of the former hypothesis but not the latter. Previous studies of charitable giving focus on middle- or high-income earners in Western countries, neglecting the poor, although the lowest income groups are often shown to contribute substantial shares of their income to charitable causes. Our results challenge the evidence in the extant literature but are in line with our theoretical model. The implications for fundraising managers are that the optimal design of fundraising campaigns crucially depends on the targeted groups, and that donation matching is successful in stimulating participation in poorer populations.
    Keywords: charitable giving; field experiments; matching donations;
    JEL: C93 D64 D12
    Date: 2022–07–07
  7. By: Kateryna Savolchuk (National Bank of Ukraine); Anton Grui (National Bank of Ukraine)
    Abstract: In this paper, authors introduce endogenous monetary policy credibility into a semi-structural New Keynesian model. The model is estimated based on data for Ukraine, which de facto adopted inflation-targeting at the end of 2015. Authors model credibility as a nonlinear function of two gaps – actual and expected deviations of inflation from its target. Credibility is asymmetric as above-target inflation reduces it more than below-target. Authors show how low policy credibility can make economic stabilization more costly, and expansionary policy – counterproductive. It can also generate the price puzzle. Furthermore, we estimate the historical path of monetary policy credibility in Ukraine.
    Keywords: New Keynesian model, monetary policy credibility, inflation expectations
    JEL: C51 E52 E58
    Date: 2022–06
  8. By: Neuhoff, K.
    Abstract: Should deliveries of Russian gas by pipeline be interrupted for an extended period of time, then gas prices could explode to up to several hundred Euros per MWh due to scarcity of supply. This risk is already reflected in future and spot gas prices and has caused much of the current extremely high gas price levels and volatility. Any additional price increase after a potential large-scale gas supply interruption would likely trigger even more government interventions in EU’s energy markets, with the objective to limit costs for households and other consumers. To avoid such ad-hoc measures, the EU Commission has proposed in the REPowerEU communication to agree already now, ahead of any potential large-scale interruption, on a coordinated European response to a large-scale gas supply interruption. We explore how the proposed measures, which include binding national gas saving targets and limits to the gas price in the case of large-scale gas supply interruptions, would impact supply and demand after an interruption. We also assess how the level of the price limit would impact the supply and demand balance after an interruption and the price formation prior to it.
    Keywords: Price cap, Security of Supply, Gas saving, Consumer welfare
    JEL: D30 D47 D61 L95
    Date: 2022–09–13
  9. By: Kuhn, Lena; Jaghdani, Tinoush Jamali; Prehn, Sören; Sun, Zhanli; Glauben, Thomas
    Abstract: International agricultural trade is key to improving global food security. It ensures access to more diversified foods (e.g. Krivonos and Kuhn 2019 ), acts as a safety net against local production shortfalls (Glauben et al. 2022) and helps make use of regional climatic or resource-related production advantages. While local production and short supply chains can reduce transport costs, they do not necessarily equate to resilient food systems or lower carbon footprints (Stein and Santini 2022). Currently, though, international agricultural trade is facing supply chain disruptions and rising world market prices resulting from the ongoing Covid-19 pandemic, increasing global food demand and extreme weather events. Both are threatening already strained food security, in particular in import-dependent, low-income regions. Geopolitical risks, such as the China- US trade war and Russia's invasion of Ukraine, are further rattling the food market. As the world's largest consumer of agricultural goods, China's trade strategies influence world markets, with ripple-down effects for consumers around the world, particularly in the Global South. This policy brief aims at shedding light on China's current market actions, and the likely short- and mid-term developments and their impacts. We argue for moderation in response to short-term shocks. Excessive mobility and trade restrictions as well as extreme stockpiling should be avoided. These harm the trade system's overall capacity to resist further and more serious global challenges related to population growth and climate change.
    Date: 2022
  10. By: Lucia Russo; Jens-Christian Høj; Martin Borowiecki
    Abstract: This paper discusses key priorities and policy recommendations to accelerate Slovenia’s digital transformation. The government’s ambitious digitalisation strategy (Digital Slovenia 2030 Strategy) aims at putting Slovenia among the five most digitalised countries in Europe. Achieving this objective would foster productivity growth and help offsetting the negative effects of a declining labour force. While Slovenia performs well in several areas of the digital transformation, further efforts are needed to achieve the government’s ambitious objective. These include reducing the urban-rural gap in high-speed broadband access, supporting the digital transformation of businesses, fostering digital innovation, improving digital government, upgrading ICT-related skills and attracting foreign ICT specialists.
    Keywords: connectivity, digital transformation, labour market, productivity, skills, Slovenia
    JEL: I25 J24 L96 O33 O38 O43 O52 J31
    Date: 2022–09–27
  11. By: Alin Marius Andries; Anca Copaciu; Radu Popa; Razvan Vlahu
    Abstract: We study the impact of changes in recourse legislation on mortgage defaults. Romania provides us with an ideal experimental setting to identify this impact. Using a large dataset of mortgage loans granted between 2003 and 2016, we exploit an exogenous variation in Romanian recourse policy and analyze the behavior of borrowers with mortgages issued under a recourse regime after a change in policy limited lender recourse. We find robust evidence that eliminating penalties for default raises the delinquency probability of existing borrowers, particularly those traditionally considered least likely to default. Our findings highlight the ex-post effects of a switch from a creditor-friendly to a debtor-friendly recourse policy. Broadly, our results point to the importance of assessing borrowers’ default incentives before introducing recourselegislation with retroactive applicability.
    Keywords: Mortgage market; Recourse; Mortgage default; Moral hazard; Negative equity
    JEL: G21 G28 K11 R20 R30
    Date: 2021–10
  12. By: Hoffstadt, Martin
    Abstract: Borders are often associated with low economic activity. A popular explanation for this phenomenon argues that borders cut market access. But as a growing amount of literature demonstrates that border effects persist after the removal of formal barriers, the forces behind low economic activity near borders remain unclear. This paper develops a new methodology to measure the market access of 16,596 settlements in the Socialist Federal Republic of Yugoslavia in 1965, right before the hardening of Yugoslavia’s federal borders. Based on elevation, rivers, roads and the Dijkstra algorithm, this methodology identifies 4,682 settlements whose commuting spheres crossed Yugoslavia’s federal borders. Using panel data for the 1948-1991 period, a difference-in-differences estimation identifies that the settlements that lost access to their nearest town due to hardened federal borders experienced strong decline in population growth following the reforms. Robustness checks demonstrate that depopulation occurred when settlements lost access to towns of significant size. This effect appears regardless of ethnicity and history. Instead, depopulation occurred in the absence of a nearby alternative town in the same federal unit.
    Keywords: federal borders; market access; population growth; Yugoslavia
    JEL: H77 N44
    Date: 2022–09
  13. By: Mr. Serhan Cevik
    Abstract: The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper contributes to the literature by providing a granular investigation of inflation persistence at the city level in Lithuania during the period 2000–2021, as well as a comparison of inflation persistence at the country level vis-àvis the eurozone over the same period. Using disaggregate monthly data collected in five major cities, the empirical analysis finds a mixed and ambiguous picture of inflation persistence. While the headline inflation does not appear to exhibit a high degree of persistence, most consumption categories have significant persistence. As a result, shocks may not remain transitory and instead have persistent effects that could spillover across subcomponents depending on the size of the shock.
    Date: 2022–09–02

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