nep-tra New Economics Papers
on Transition Economics
Issue of 2022‒11‒07
fifteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. The impact of the war on Russian imports: a synthetic control method approach By Borin, Alessandro; Conteduca, Francesco Paolo; Mancini, Michele
  2. On the Design of Effective Sanctions: The Case of Bans on Exports to Russia By Ricardo Hausmann; Ulrich Schetter; Muhammed A. Yildirim
  3. How realistic is Belt and Road Initiative for Kyrgyzstan and Central Asian Countries? By Akmoldoev, Kiyalbek
  4. Economic Integration, Industrial Structure, and Catch-up Growth : Firm-Level Evidence from Poland By Bastos,Paulo S. R.; Lovo,Stefania; Varela,Gonzalo J.; Hagemejer,Jan
  5. What Are the Benefits of Government Assistance with Household Energy Bills ? Evidence from Ukraine By Alberini,Anna; Umapathi,Nithin
  6. Distributional Impacts of Taxes and Benefits in Post-Soviet Countries By Fuchs Tarlovsky,Alan; Matytsin,Mikhail; Nozaki,Natsuko Kiso; Popova,Daria
  7. FDI, Market Power, and Markups : Evidence from Vietnam By Yue Li; Kuo,Ryan Chia; Pinzon Latorre,Mauricio Alejandro; Albertson,Mark Peter
  8. Forced Displacement, Exposure to Conflict and Long-run Education and Income Inequality :Evidence from Croatia and Bosnia and Herzegovina By Kovac,Dejan; Efendic,Adnan; Shapiro,Jacob N.
  9. Skill-bias and Wage Inequality in the EU New Member States: Empirical Investigation By Jan Pintera
  10. A Back-of-the-Envelope Analysis of House Prices: Czech Republic, 2013-2021 By Roman Sustek
  11. Effectiveness of Government Support for the Private Sector during the COVID-19 Crisis : Evidence from ElSalvador and Georgia By Karalashvili,Nona; Tamkoc,Mehmet Nazim
  12. Belt and Road Initiative as an innovative platform for technology transfer: Opportunities for Armenia By Margaryan, Atom S.; Terzyan, Haroutyun T.; Grigoryan, Emil A.
  13. Mass Messaging and Health Risk Reduction : Evidence from COVID-19 Text Messages in Tajikistan By Seitz,William Hutchins
  14. An analysis of farm support measures in the Republic of Moldova By Möllers, Judith; Herzfeld, Thomas; Batereanu, Lucia; Arapi-Gjini, Arjola
  15. Financial Incentives, Fertility, and Son Preference in Armenia By Pinto,Maria Florencia; Posadas,Josefina; Shapira,Gil

  1. By: Borin, Alessandro; Conteduca, Francesco Paolo; Mancini, Michele
    Abstract: In response to the invasion of Ukraine, the EU and most other advanced economies imposed extensive sanctions on Russia, intending to harm its production capabilities and hinder its economic activities by restricting its access to international trade and financial markets. Using the synthetic control method, this paper finds that the war and following sanctions reduced aggregate exports to Russia by half between March-July, with the effects being stronger for sanctioning countries (-56%) than for non-sanctioning ones (-32%). The war has disproportionately affected exports to Russia in automotive and electronics.
    Keywords: Synthetic Control,Russia,Sanctions,International trade,War
    JEL: F51 C54 F13
    Date: 2022
  2. By: Ricardo Hausmann (Center for International Development at Harvard University); Ulrich Schetter (Center for International Development at Harvard University); Muhammed A. Yildirim (Center for International Development at Harvard University)
    Abstract: We analyze the effects of bans on exports at the level of 5000 products and show how our results can inform economic sanctions against Russia after its invasion of Ukraine. We begin with characterizing export restrictions imposed by the EU and the US until mid-May 2022. We then propose a theoretically-grounded criterion for targeting export bans at the 6-digit HS level. Our results show that the cost to Russia are highly convex in the market share of the sanctioning parties, i.e., there are large benefits from coordinating export bans among a broad coalition of countries. Applying our results to Russia, we find that sanctions imposed by the EU and the US are not systematically related to our arguments once we condition on Russia’s total imports of a product from participating countries. Quantitative evaluations of the export bans show (i) that they are very effective with the costs to Russia typically being by a factor of ∼100 larger than the costs to the sanctioners. (ii) Improved coordination of the sanctions and targeting sanctions based on our criterion allows to increase the costs to Russia by about 60% with little to no extra cost to the sanctioners. (iii) There is scope for increasing the cost to Russia further by expanding the set of sanctioned products.
    Keywords: Export Ban, Input-Output Linkages, Quantitative Trade Model, Russia, Sanctions, Ukraine
    Date: 2022–09
  3. By: Akmoldoev, Kiyalbek
    Abstract: Due to the geographical location of the Central Asian countries and Kyrgyzstan, which do not have direct access to the sea, there is a dependence on the transport route via Kazakhstan, Russia, and Belarus to trade goods with the European market. The Chinese BRI project would offer an alternative for Central Asian countries to connect economically with European, Middle Eastern and West Asian countries. However, turning away from Russia and toward China holds potential for conflict. Therefore, the main objective of this article is to analyze the BRI projects in Central Asia and predict how realistic it is to implement them without the "permission" of the Russian Federation. In doing so, it takes a closer look at the strategic interest for China in Central Asia and how the BRI project in Kyrgyzstan is performing. The SWOT analysis points to a win-win situation, which, however, comes with a warning to be cautious. Particular attention should be paid to financial dependence on China, which could be due to a debt trap.
    Keywords: Belt and Road Initiative,Kyrgyzstan,Geopolitics,Debt-Trap,Silk Road Route
    Date: 2022
  4. By: Bastos,Paulo S. R.; Lovo,Stefania; Varela,Gonzalo J.; Hagemejer,Jan
    Abstract: This paper examines if and how deeper economic integration with high-income nations impactsindustrial performance. It exploits Poland’s accession to the European Union in 2004 as a source of variation in thedegree of market integration with Germany. Using data on Polish manufacturing firms over 1995–2013, the paper findsthat EU accession was followed by significant within-firm growth in output and productivity, notably in industries inwhich Germany was more specialized at the moment of accession. Increased flows of German investment to thesesectors played an important role in shaping these effects.
    Date: 2022–03–29
  5. By: Alberini,Anna; Umapathi,Nithin
    Abstract: In April 2015, the Government of Ukraine abruptly raised the tariffs of natural gas to residential customers, which were previously well below the cost of acquiring gas and delivering it to households. The tariff increase—700 percent—caused considerable distress to the population and led the government to scale up its existing energy assistance program, the housing and utilities subsidy program. This paper examines the welfare effect of the program and potential redesigns of the program. Using several waves of Ukraine’s Household Budget Survey, the analysis finds that electricity, gas, and fuels account for a considerable share of household income. After the tariff hike, the average household that did not receive the housing and utilities subsidy spends 11 percent of its income on electricity, gas, and fuels, implying that it meets the definition of “fuel poor.” The average share for households that do receive the subsidy is 6–8 percent. The housing and utilities subsidy cuts the rate of fuel poverty in half. It also brings considerable consumer surplus gains of 6–7 percent of income. This comes at a high price tag for the government, as the budget for the housing and utilities subsidy is 1–2.5 percent of gross domestic product. Considerable savings would be achieved with only a small loss of consumer surplus if the housing and utilities subsidy was cut in half. Linking the subsidy solely to income would also attain considerable savings, but at a high loss of welfare. The housing and utilities subsidy could also be paired with social tariffs, or an energy efficiency subsidy, with major savings for the government.
    Keywords: Oil Refining&Gas Industry,Energy Demand,Energy and Mining,Energy and Environment,Inequality,Energy Policies&Economics,Municipal Management and Reform,Urban Governance and Management,Urban Housing,Urban Housing and Land Settlements
    Date: 2021–05–21
  6. By: Fuchs Tarlovsky,Alan; Matytsin,Mikhail; Nozaki,Natsuko Kiso; Popova,Daria
    Abstract: This study compares the distributional impacts of the main tax and social spendingprograms in eight countries of the former Soviet Union (Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, the RussianFederation, Tajikistan, and Ukraine) by applying a state-of-the-art fiscal incidence analysis based on theCommitment to Equity methodology. The region is highly interesting due to a unique combination of strong elementsof path dependency (socialist legacies) with radical liberalization and welfare state retrenchment. The studyexamines the actual outcomes in terms of inequality and poverty and assesses the extent to which these outcomes canbe attributed to various welfare state policies in these countries. It examines the extent to which taxes and socialspending are progressive (whether the average transfer declines with income) and equalizing (whether they reduceinequality). In contrast to the majority of fiscal incidence studies, which are typically limited to the assessment ofthe impact of direct taxes and transfers, the study estimates the cumulative impact of the tax-benefit system asa whole, including direct and indirect taxes, cash transfers, and transfers in kind such as public educationand health care.
    Keywords: Inequality,Economic Adjustment and Lending,Macro-Fiscal Policy,Public Sector Economics,Public Finance Decentralization and Poverty Reduction,Disability,Access of Poor to Social Services,Services & Transfers to Poor,Economic Assistance,Educational Sciences
    Date: 2021–10–06
  7. By: Yue Li; Kuo,Ryan Chia; Pinzon Latorre,Mauricio Alejandro; Albertson,Mark Peter
    Abstract: To date, the impact of foreign direct investment on market power and consumer welfare indeveloping countries has been relatively understudied. Utilizing a firm survey dataset from Vietnam, this paperfirst calculates firm-level markups for manufacturing firms and then analyzes the impact of foreign direct investmentand foreign ownership on firm markups. Overall, the findings show that increases in the presence of foreign firms in agiven industry are associated with decreases in markups in that industry, despite foreign firms individually charginghigher markups on average than their domestic competitors. The findings further show that while the markups of bothforeign- and domestic-owned private firms tend to decrease with greater foreign direct investment, state-ownedenterprises may be relatively insulated from foreign direct investment driven competitive pressures. These results arerobust to the inclusion or exclusion of potential outliers and the potential non-random selection of firms acquired byforeign investors.
    Date: 2022–04–06
  8. By: Kovac,Dejan; Efendic,Adnan; Shapiro,Jacob N.
    Abstract: This paper investigates the long-term relationship between conflict-related migration andindividual socioeconomic inequality. Looking at the post-conflict environments of Bosnia and Herzegovina (BiH)and Croatia, the two former Yugoslav states most heavily impacted by the conflicts of the early 1990s, the paperfocuses on differences in educational performance and income between four groups: migrants, internally displaced persons,refugees, and those who did not move two decades after the conflicts. For BiH, the analysis leverages amunicipality-representative survey (n = 6, 021) that captured self-reported education and income outcomes as wellas migration histories. For Croatia, outcomes are measured using an anonymized education registry that capturedoutcomes for over half a million individuals over time. This allows an assessment of convergence between differentcategories of migrants. In both countries, individuals with greater exposure to conflict had systematically worseeducational performance. External migrants now living in BiH have better educational and economic outcomes than those whodid not migrate, but these advantages are smaller for individuals who were forced to move. In Croatia, those who moved during the conflict have worse educational outcomes,but there is a steady convergence between refugees and non-migrants. This research suggests that policies intendedto address migration-related discrepancies should be targeted on the basis of individual and family experiencescaused by conflict.
    Date: 2022–04–26
  9. By: Jan Pintera (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: We use the individual-level data on income and education level from the EU-SILC database to investigate the trends in income distribution and wage polarization in the EU New Member States. We do not confirm the existence of job polarization in wages and employment that has been observed in the United States or other developed countries. Rather, we document decreasing inequality, particularly in Czechia, Poland, Hungary and Slovakia. Also, our estimates of the elasticity of substitution between low and high skill labour are higher than often found in other countries. These results imply a different impact of globalization on the labour markets in the EU New Member States than in other countries. However, it remains unclear whether these differences are temporary or will prevail in the future.
    Keywords: Labor Markets, Technological Change, Polarization, Skills
    JEL: J30 J31 O14 O31 O33
    Date: 2022–10
  10. By: Roman Sustek
    Abstract: A simple practical method for quantitative analysis of house prices is proposed. Similar to consumer theory, housing demand is decomposed into changes in income and a relative price. The latter includes implicit costs of mortgage finance, determined by monetary policy and future disposable income growth and inflation expectations. The method is applied to the 63% increase in real house prices in Czechia, 2013-2021. The income effect accounts for 32% of the increase, implicit mortgage costs for another 20%. Most of the latter hinges on income growth expectations, reflecting the robust 2013-2020 economic recovery. Going forward, the paper explores hypothetical scenarios in light of the recent increase in mortgage rates to 5.33%. As an example, at long-term inflation expectations of 6%, a dire scenario of zero expected future growth in real disposable income leads to a decline in real house prices of 13%. However, if real income growth expectations remained unchanged from the boom period of 2013-2020, the increase in mortgage rates, at inflation expectations of 6%, would lead to only a modest drop in house prices. Across the various scenarios, the risks for house prices are nonetheless skewed downwards.
    Keywords: House prices; decomposition; affordability; mortgage costs; monetary policy;
    JEL: E52 G21 G59 R21
    Date: 2022–10
  11. By: Karalashvili,Nona; Tamkoc,Mehmet Nazim
    Abstract: This paper estimates the effectiveness of government support to the private sectorduring the COVID-19 pandemic in El Salvador and Georgia using firm-level data collected before and during thepandemic. The two countries are selected because eligibility criteria for support involved pre-pandemic features offirms, as opposed to more prevalent criteria directly linked to firms’ experiences during the pandemic and that greatlyexacerbate concerns about selection bias in estimation. Four outcome variables are studied relating to firms’ workforce,hours of operations, and expectations. Matching and panel estimation techniques are used on full and restrictedsamples, with the latter aimed at reducing selection bias. Government support appears to have helped firms avoid areduction in operations in El Salvador, mainly through cash transfers, which also helped in terms of permanent workers,with the latter effect counteracted by wage subsidies. Smaller firms in Georgia appear to have benefited more fromgovernment support, mostly through fiscal relief, which was partially counteracted by wage subsidies that benefitedlarger firms more. The finding that smaller firms have benefited more helps raise confidence in the analysis asstrong negative selection bias is expected in this context. Manufacturers of textiles and garments in El Salvador andhotels and restaurants in Georgia appear to have benefited from government support, but the patterns in other sectorsare mixed and country-specific, highlighting potential complexities of attempting to target sectors.
    Date: 2022–03–22
  12. By: Margaryan, Atom S.; Terzyan, Haroutyun T.; Grigoryan, Emil A.
    Abstract: One of the pillars of the Belt and Road Initiative is the deepening of cooperation between member countries, especially in the field of science and innovation. But, is there any historical evidence of the concept of the Great Silk Road as a region of technology transfer, first? Secondly, what are the priorities and development directions of the initiative in the mentioned context? Third, what development guidelines should be set for the participating countries (Washington, Beijing, etc.). And finally, is there really a connection between infrastructure development and innovation activity? To answer the last question, a correlation and econometric analysis has been performed, the results of which indicate positive effects.
    Keywords: The Great Silk Road,Belt and Road Initiative,Innovation,Patent Activity,TechnologyTransfer
    Date: 2022
  13. By: Seitz,William Hutchins
    Abstract: Can mass public health messages change behavior during a crisis? This paper assesses the impact of a COVID-19 focused text-messaging campaign launched in May 2020 with the Ministry of Health and Social Protection of Tajikistan to encourage compliance with risk reduction measures. The initiative sent a series of informational messages to about 5.5 million mobile phone subscribers and reached at least one member of more than 90 percent of the country’s households. An individual fixed effects estimator is used to measure changes in reported behavior after a respondent lists text messages as a primary source of information about COVID-19, or alternatively when reporting an official text message in the past week. Listing text messaging as a primary source of information increased the number of reported behaviors by 0.15 units (p = 0.000) and receiving an official text message in the past week increased the number by 0.47 units (p = 0.000). These effects were driven by more positive responses for wearing masks, reducing visits with friends and relatives, reducing travel, practicing safer greetings (such as fewer handshakes), and safety-related changes at work. The results suggest that text messaging–based public health messaging was a cost-effective means of increasing awareness in a large and geographically dispersed audience during the COVID-19 pandemic and that the program led to an increase in self-reported risk reducing behaviors.
    Keywords: Health Care Services Industry,Telecommunications Infrastructure,Public Health Promotion,ICT Applications
    Date: 2021–08–23
  14. By: Möllers, Judith; Herzfeld, Thomas; Batereanu, Lucia; Arapi-Gjini, Arjola
    Abstract: In the Republic of Moldova, agricultural policies aim to increase the compettveness of its farming sector, ensure the sustainable management of its natural resources and improve the living standards in rural areas. The state is an important player, allocatng fnancial resources for supportng agriculture and carrying out investment projects in this feld. A post-investment subsidy program incentvises agricultural producers to modernise their farms and producton. Farmers who have made investments in developing producton and post-harvest infrastructure could beneft from subsidies for these investments and fnancial resources allocated by the Agency for Interventon and Payments in Agriculture. However, it is not clear how benefcial these subsidies are for agricultural producers and whether the goals formulated by policies are met. A critcal challenge of policy assessment is the lack of regular surveys gathering farm-level data in Moldova. Another challenge is that the impact of some investments can only be quantfed with a delay of several years. This report results from an impact assessment study analysing the efectveness of existng policy measures. A survey of 800 farms was carried out to realise this assessment, which provided informaton about the actvity and investments made over several years. The team of researchers analysed the collected data to evaluate the policy measures covered by the survey. The study highlights essental facilitators and barriers to the farms' agricultural investment and business actvity. The impact assessment underlined that the investment subsidies had measurable positve efects on labour, farm producton and economic success. At the same tme, it indicated directons for improving and rebalancing policy instruments to increase the compettveness and sustainability of the agricultural sector of the Republic of Moldova.
    Keywords: Agribusiness, Agricultural and Food Policy, Agricultural Finance, Farm Management
    Date: 2022
  15. By: Pinto,Maria Florencia; Posadas,Josefina; Shapira,Gil
    Abstract: Armenia experienced dramatic demographic changes in the past three decades: the share of adults age 65 and over nearly doubled, the total fertility rate reduced by more than 30 percent, and the male-to-female sex ratio at birth increased to one of the world’s highest. Like other middle-income countries concerned with the implications of an aging population for long-term growth and fiscal sustainability, Armenia introduced financial incentives to promote fertility. This paper estimates the effect of the 2009 reform of the universal Childbirth Benefit Program, which increased the amounts of lump sum transfers conditional on birth. The analysis relies on a quasi-experimental strategy exploiting the timing of the policy change and eligibility rule—women get a larger transfer for third and higher-order births. The findings show that the annual probability of an additional birth among women with at least two other children increased between 1.4 and 1.6 percentage points in the five years following the policy change. These effects are equivalent to 58 and 64 percent of the pre-reform birth probability for women who had at least two children. Given the previously demonstrated relationship between fertility level and sex ratio in societies with strong son preference, the reform may potentially alleviate the sex imbalance without directly targeting it. Parents who already have at least one son and are less likely to engage in sex selection and more likely to have additional births; however, the findings do not indicate a significant increase in the likelihood of having daughters.
    Keywords: Educational Sciences,Demographics,Health Care Services Industry,Adolescent Health
    Date: 2021–06–22

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