nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒01‒02
twelve papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Systems of Innovation in Central and Eastern European countries: Path of Economic Transition and Differences in Institutions By Mariia Shkolnykova; Lasse Steffens; Jan Wedemeier
  2. Enforcing 'Equal Pay for Equal Work' in the EU: what would it take? By DE POLI Silvia; MAIER Sofia
  3. Populists and Fiscal Policy: The Case of Poland By Maciej Wysocki; Cezary Wojcik; Andreas Freytag
  4. Competition Law Enforcement in Post-Socialist EU Member States: The Legacy of Authoritarian Legal Culture, Semantic Dissonance and Skewed Agencification By Jasminka Pecotić Kaufman
  5. Uzbekistan: Achieving a multidimensional transition By Sylvain Bellefontaine
  6. Perceived income positions and attitudes towards EU inequality: A cross-country survey experiment By Bublitz, Elisabeth; Wang, Hequn; Jäger, Julian; Beblo, Miriam; Lohmann, Henning
  7. New Estimate of the Elasticity of Marginal Utility of Consumption for Europe: Implications for the Social Discount Rate By Milan Scasny; Matej Opatrny
  8. Job quality gaps between migrant and native gig workers: evidence from Poland By Zuzanna Kowalik; Piotr Lewandowski; Paweł Kaczmarczyk
  9. Analysing ICTs Potential for Rural Women’s Empowerment in Central Asia through the Capability Approach By Serebryakova, Evgeniya
  10. Gas Price Caps and Electricity Production Effects in the Context of the Russo-Ukrainian War: Modeling and New Policy Reforms By Werner Roeger; Paul J. J. Welfens
  11. What drives bank lending policy? The evidence from bank lending survey for Poland By Ewa Wróbel
  12. The performance of politically connected firms in South East Europe: state capture or business capture? By Bartlett, Will

  1. By: Mariia Shkolnykova; Lasse Steffens; Jan Wedemeier
    Abstract: Against the background of the current political developments in Central and Eastern European (CEE) countries, like Ukraine, Poland, and Romania, the question arises what role the transformation of the economy and the resulting innovation linkages have played in these countries. This paper addresses this issue by exploring the impact of economic and institutional dimensions on the development of CEE countries, thereby explicitly distinguishing between European Union (EU) members and non-members. First of all, the performance development of the Gross Domestic Product (GDP) of the CEE countries and Western European countries is observed. In a further analysis step, the development of EU members is compared with that of CEE countries that are non-members of the EU. This paper estimates the impact of such factors as innovation, institutions, and political practices on the economic development of 37 European countries for the period from 2000 until 2020 by using a panel regression. The results of the analysis show that institutions matter, especially for non-EU-member CEE countries. Stable institutions—such as freedom of the press, freedom of expression, but also high levels of the Human Development Index—help countries to achieve a higher income development over time. The role of the innovative ability of countries is also decisive for a positive development.
    Keywords: Central and Eastern European Countries, Economic growth, Innovation, Institution, GDP
    JEL: O40 O47 R11
    Date: 2022–11
  2. By: DE POLI Silvia (European Commission - JRC); MAIER Sofia (European Commission - JRC)
    Abstract: The European Parliament has recently approved new binding pay transparency measures to promote ``Equal Pay for Equal Work'', a EU founding principle which is at the heart of the European Pillar of Social Rights Action Plan towards 2030. Using harmonized microdata for the EU 27 countries and a novel estimation approach -based on blocking with regression adjustments- we provide new comparable estimates of the gap in gross hourly wages between women and men performing similar work. This gap ranges from about 6% in Germany to 18% in Estonia. We also shed new light on the (heterogeneous) distributional consequences of a hypothetical enforcement of equal pay for equal work, simulating an upward shift in women's gross hourly wage. The strongest impact on the distribution of labour earnings would take place in countries with high gender pay gaps for equal work and small gender gaps in employment and hours worked (mainly Central and Eastern European countries), whereas only marginal effects are identified in countries with large gaps in hours worked and gender segregation in the type of work done (Western European countries), and also in countries with large employment gaps (Southern European countries). We also identify income poverty-reducing and inequality-increasing effects. The latter is driven by a composition effect (under-representation of employed women in low-income households), which is only partly offset by the tax-benefit system.
    Keywords: equal pay
    Date: 2022–11
  3. By: Maciej Wysocki (SGH Warsaw School of Economics); Cezary Wojcik (SGH Warsaw School of Economics, Center for Leadership, and CESifo); Andreas Freytag (Friedrich-Schiller-University Jena, University of Stellenbosch, CESifo, and STIAS)
    Abstract: The past decade has witnessed an increase in populist movements across the world. Some of those movements have gained strong political support and formed populist governments promising new sets of economic and fiscal policies. This raises the pertinent policy question: how do such populist governments influence fiscal policy outcomes? We approach this question by looking at the case of Poland which according to several recent studies has experienced the highest level of populist rhetorics in recent years. Indeed, when the new populist government took power, between 2015-2019, Poland experienced a major social and fiscal policy shifts: the new government decreased the statutory retirement age despite sever aging problem and launched one of the biggest social programs in Europe which resulted in sharp increase in political support for the government. In the paper we provide some first evidence of the impact of such policies on fiscal outcomes. Our analysis reveals that fiscal sustainability parameters have significantly deteriorated sharply after 2015 when the new government undertook populist policies, despite the fact that current (observable) deficit and debt levels remained stable. Specifically, our estimates suggest that just after a year since the introduction of the new fiscal program, the strength of reaction of the primary balance to a change of the public debt decreased by nearly 50% in 2017 and the parameter turned negative and statistically insignificant thereafter which means that from 2018 fiscal policy lacked long-term sustainability. Overall, our estimations show that in the period of 2016-2019 fiscal sustainability parameters were the lowest since Poland joined the EU in 2004. While our analysis has several limitations, the case of the populist government in Poland provides some early evidence that populists do have negative impact on long-term fiscal sustainability.
    Keywords: fiscal sustainability, fiscal and social policy, populism
    JEL: C22 E60 H63
    Date: 2022–12–07
  4. By: Jasminka Pecotić Kaufman (Faculty of Economics and Business, University of Zagreb)
    Abstract: This paper argues that more than thirty years after democratic and economic transition, the legacy of authoritarian legal culture in post-socialist EU Member States limits the effectiveness of competition law enforcement. Concentrating on Croatia but mindful of the experience of other Central and East European countries that acceded to the EU in 2004 and 2007, we show examples of post-accession case law illustrative of excessive judicial formalism and disassociation between the legal norm and its socio-economic context in judicial interpretation. Also, we explain how the excessively stringent legal standard of proof for cartel agreements, established by Croatian courts post-accession, indicates an incomplete semantic alignment with EU competition rules. Furthermore, we discuss the difference in legal cultures between the judiciary and the competition authority by using the notion of “skewed agencification” and show how slow reception of EU competition law standards by the judiciary adversely impacts the enforcement of competition rules.
    Keywords: competition law, legal culture, judiciary, post-socialist countries, Central and Eastern Europe, Croatia
    JEL: K21 K40 K42 L4
    Date: 2022–12–12
  5. By: Sylvain Bellefontaine
    Abstract: Relatively sound macroeconomic fundamentals, coupled with government measures and financial support from donors, have allowed Uzbekistan to withstand the shock of the health crisis. Despite a marked deterioration in the regional situation for the last year, the country shows internal political stability. At the same time, President Shavkat Mirziyoyev’s “New Uzbekistan Strategy” is continuing the post-Soviet economic transition formally initiated in 2017. However, the uncertainties generated by the international environment seems to hamper the implementation of reforms and the transformation from a planned economy to a market economy. The objective of this publication is to present the major macroeconomic trends in the country.
    Keywords: Ouzbékistan
    JEL: E
    Date: 2022–11–17
  6. By: Bublitz, Elisabeth; Wang, Hequn; Jäger, Julian; Beblo, Miriam; Lohmann, Henning
    Abstract: We examine the relationship between perceived income positions and attitudes towards inequality at a supranational-level. Conducting a survey in four EU Member States (Germany, Italy, Poland, and Sweden), we confirm that their citizens misperceive their own income position in the EU. Once we account for these misperceptions, we find that those with a lower income rank assess EU income differences as more unjust and are more supportive of an EU minimum wage. When we inform a randomized subsample about their actual income position in the EU, those who learn to be richer than they initially thought assess EU income differences as less unjust. Respondents in Italy, Poland, and to a lesser extent Sweden drive these results whereas income misperceptions of German respondents have opposing effects.
    Keywords: Income,Misperceptions,Inequality,EU Minimum Wage,European Union,Survey Experiment
    JEL: D31 D63 F55
    Date: 2022
  7. By: Milan Scasny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Matej Opatrny (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: We provide the first estimate of the elasticity of marginal utility of consumption, µ, for Europe and for thirty individual European countries, using the income-tax individual-level data. Specifically, we rely on the absolute equal-sacrifice approach and CRRA utility function to elicit the revealed preferences of income tax payers on their acceptance of the tax schedule. Our central estimate of µ equals to 1.42. With few exceptional cases, µ´s for European countries exceed unity, ranging between 1.2 and 1.90. We further discuss the implications of our estimate of µ for the social discount rate and Social Cost of Carbon. We conclude that the social discount rate might be slightly higher than traditionally assumed, implying lower magnitude of Social Cost of Carbon, at least for Europe.
    Keywords: elasticity of marginal utility of consumption; equal-sacrifice approach; income tax schedules; marginal tax rate; social discount rate
    JEL: D60 D61 H24 R13
    Date: 2022–12
  8. By: Zuzanna Kowalik; Piotr Lewandowski; Paweł Kaczmarczyk
    Abstract: The gig economy has grown worldwide, opening labour markets but raising concerns about precariousness. Using a tailored, quantitative survey in Poland, we study taxi and delivery platform drivers' working conditions and job quality. We focus on the gaps between natives and migrants, who constitute about a third of gig workers. Poland is a New Immigration Destination where networks and institutions to support migrants are weak. We find that migrants take up gig jobs due to a lack of income or other job opportunities much more often than natives, who mostly do it for autonomy. Migrants’ job quality is noticeably lower in terms of contractual terms of employment, working hours, work-life balance, multidimensional deprivation, and job satisfaction. Migrants who started a gig job immediately after arriving in Poland are particularly deprived. They also cluster on taxi platforms which offer inferior working conditions. The gig economy can be an arrival infrastructure, but its poor working conditions may exacerbate the labour market vulnerabilities of migrants and hinder mobility to better jobs.
    Keywords: gig jobs, platform economy, job quality, immigrant workers
    JEL: J28 J61 J21
    Date: 2022–12
  9. By: Serebryakova, Evgeniya
    Abstract: The role of ICTs for women’s empowerment in the development context is increasingly being discussed in the field of Information and Communication Technologies for Development (ICT4D). Studies have been conducted investigating the empowering potential of ICTs. Yet research on the Central Asian region is lacking, in particular regarding the most vulnerable group of people in the region: rural women. This paper aims to shed light on this gap by conducting an exploratory analysis using an adapted version of Kleine’s Choice Framework, which is based on Amartya Sen’s capability approach, using secondary data sources. Through a focus on the countries of Kazakhstan, Kyrgyzstan, and Tajikistan, the adapted version of the Choice Framework is used as a mapping tool to identify the barriers and opportunities that ICTs can have for rural women’s empowerment in the region. The findings show that a lack of access and infrastructure of ICTs remains the biggest barrier in the region, with the exception of Kazakhstan. Where ICTs are being used, this is likely to take place through mobile phones, reflecting a common tendency throughout developing countries. Additionally, the local context regarding traditional gender roles, and social norms constrains women’s agency, in combination with an increasingly oppressive political environment. This combination of factors means that ICTs do not currently appear to present an empowering tool for rural women in the region.
    Date: 2022–11–18
  10. By: Werner Roeger (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Paul J. J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: The merit-order approach in the electricity market, which is in widespread use across the EU27 and the UK, has proven to be somewhat economically problematic in the context of the Russo- Ukrainian war. The massively increased gas prices since summer 2022 – in the context of Russian supply cuts to the EU – has led to an abnormally high electricity price: Using the merit order approach, the price of electricity increases enormously if, as is often the case, gas is the last type of energy still realized in power generation; this leads to artificial increases in returns for all other types of energy providers whose output is used in power generation. Gas price increases by Russia or Russian supply cuts to the EU can increase the price of electricity and also the rate of inflation, as well as depress real income. The electricity price shock can be countered by switching – temporarily – to a modified regulation of the electricity market for a few years with a gas price subsidy in the electricity market. In a macroeconomic analysis, we identify both the output losses and adverse distributional effects of a gas price hike and find that a gas price subsidy is superior in stabilizing output and employment compared to a transfer; it also at least partially addresses certain distributional issues by reducing windfall profits in the electricity market. The study advocates a combination of gas price subsidies only in the electricity market and targeted transfers to households to meet both efficiency and distributional targets. The macro-analysis findings presented herein should be considered carefully, as they could minimize the welfare losses in the EU and the UK. As regards the expansion of renewable energy-based electricity, it is shown herein that the cost-differential between gas-fired power stations and renewable electricity is critical – large cost differentials imply barriers for an expansion of electricity generation from renewables unless there is a price regulation of electricity. There is the potential of an inefficient adjustment path due to nonlinearities. With a proposed narrow gas price cap for the electricity market only, the associated initial deficit related to necessary subsidies is, of course, much smaller than in the case of a general gas price cap.
    Keywords: Power sector, Russo-Ukrainian war, gas prices, macro modeling, subsidy policy, transfers, DSGE model
    JEL: D58 L51 L52 Q41 E64 Q48
    Date: 2022–09
  11. By: Ewa Wróbel (Narodowy Bank Polski)
    Abstract: Based on aggregate data from the lending survey for Poland and using a series of structural vector autoregressive models, we show that credit market sentiments, bank capital position and quality of banks’ balance sheets are the most important drivers of bank lending standards, terms and conditions for the corporate sector. Also, we demonstrate that albeit with some delay, monetary policy shocks affect bank lending policy and additionally have some bearing on credit market sentiments, quality of bank balance sheets and competition. Innovations to the business sector activity and to demand for credit play a minor role for bank lending policy.
    Keywords: bank credit, lending standards, terms and conditions, structural vector autoregressive model
    JEL: E44 E51 G21
    Date: 2022
  12. By: Bartlett, Will
    Abstract: This paper investigates the effects of the political connectedness of private sector firms in South East Europe on their business performance. This question is relevant to contemporary ideas about the importance of “state capture” in the region, and the paper provides a new perspective on the nature and consequences of this phenomenon. On the basis of evidence from empirical survey data as well as case study evidence, the paper concludes that political connections tend to undermine the business performance of the connected firms, with a potential negative impact on the economic development of the countries concerned. It is argued that this process is better described as “business capture” rather than “state capture”. The terminology is important as it indicates the directions in which policy might be directed to effectively manage this issue and improve the competitiveness of economies in the region. The average overall negative effect on business performance measured by employment growth is substantial but is found to be statistically significant only the services sector and in countries of the Western Balkans. The EU member states of the region appear to be relatively immune from the negative effects of business capture.
    Keywords: politically connected firms; state capture; Southeast Europe
    JEL: L81 R14 J01
    Date: 2021–09–01

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