nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒03‒06
nine papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Sanctions and misallocation. How sanctioned firms won and Russia lost By Nigmatulina, Dzhamilya
  2. Prudent populists? The short-term macroeconomic impact of populist policies in Poland By Michał Brzeziński; Katarzyna Sałach-Dróżdż
  3. Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe By Lorenzo Caliendo; Luca David Opromolla; Fernando Parro; Alessandro Sforza
  4. Analysis of the Impact of Orthogonalized Brent Oil Price Shocks on the Returns of Dependent Industries in Times of the Russian War By Tim Friedhoff; Cam-Duc Au; Philippe Krahnhof
  5. The impact of alternative childcare policies on mothers' employment in selected EU countries By Edlira Narazania; Ana Agundez Garcia; Michael Christl; Francesco Figari
  6. Rapid Economic Growth but Rising Poverty Segregation: Will Vietnam Meet the SDGs for Equitable Development? By Dang, Hai-Anh H.; Dhongde, Shatakshee; Do, Minh; Nguyen, Cuong Viet; Pimhidzai, Obert
  7. Evaluating monetary policy effectiveness in North Macedonia: Evidence from a Bayesian FAVAR Framework By Magdalena Petrovska; Jasna Tonovska; Miso Nikolov; Рртан Сулејмани
  8. The True Cost of War By Artuc, Erhan; Gomez-Parra, Nicolas; Onder, Harun
  9. Productive or Extractive Periphery? Russian Poland and Timber Exports to Germany in the Late Nineteenth and Early Twentieth Centuries By Jawad Daheur

  1. By: Nigmatulina, Dzhamilya
    Abstract: Using a unique natural experiment of staggered firm-level sanctions against Russia in 2014-2020 and the data on over 900, 000 Russian firms, I estimate the effect of sanctions on targeted firms and on the aggregate economy. Surprisingly, sanctioned firms on average gained 38% more capital inputs after sanctions relative to the industry trends. The effect is in part driven by sanctioned state-owned firms, getting 60% more capital relative to non-sanctioned firms. Using additional data on subsidies and government contracts, I find that this result is explained by the government protection of targeted firms, that more than compensated for a negative sanctions shock. However, the sanctioned firms were already too large and had too much capital prior to sanctions. I use a heterogeneous firm framework to show that the distortions between sanctioned and non-sanctioned firms, which existed before the sanctions, got exacerbated after the joint effect of sanctions and government protection. I combine the causal estimates with the quantitative frame-work and estimate that on the aggregate, the Russian TFP dropped at least by 0.33% reaching 3% in relevant sectors.
    Keywords: misallocation; macro development; state-ownership; poltical connections; SOEs; sanctions; Russia
    JEL: D60 F37 F51 O10 O11 O12 O40
    Date: 2022–11–23
  2. By: Michał Brzeziński (University of Warsaw, Faculty of Economic Science); Katarzyna Sałach-Dróżdż (University of Warsaw, Faculty of Economic Science)
    Abstract: Recent research shows that populist governments in general depress countries’ economic growth and fail to improve income distribution. We study the short-term macroeconomic consequences of populist policies implemented in Poland since 2015. Using the augmented synthetic control method, we find that the populists boosted the GDP per capita by almost 8% between 2016 and 2019. We do not find any effect of populism on inflation and estimate only small labor market impacts. The populists improved tax revenue collection and reduced public debt. A generous child benefit program and other redistributive policies introduced by the populists significantly reduced overall poverty and almost eradicated absolute child poverty. Our results imply that anti-establishment populists may be macroeconomically prudent, at least in the short run.
    Keywords: populism, economic growth, public finance, income distribution, Poland
    JEL: E60 N10 P16 P17
    Date: 2022
  3. By: Lorenzo Caliendo; Luca David Opromolla; Fernando Parro; Alessandro Sforza
    Abstract: European countries experienced a large increase in labor supply due to the influx of Ukrainian refugees after the 2022 Russia invasion. We study its dynamic effects in a spatial model with forward-looking households of different skills, trade, and endogenous capital accumulation. We find that real GDP increases in Europe in the long term, with large distributional effects across countries and skill groups. In the short run, an increase in the supply of labor strains the use of capital structures that takes time to build. Over time, countries that build capital structures increase output, resulting in potential long run benefits.
    Date: 2023
  4. By: Tim Friedhoff (Masaryk University, Faculty of Economics and Administration, Department of Finance); Cam-Duc Au (Masaryk University, Faculty of Economics and Administration, Department of Finance); Philippe Krahnhof (Isf – Institute for Strategic Finance of FOM Hochschule)
    Abstract: It has already been literarily proven that the past shows a statistical correlation between crude oil prices and certain industries that are influenced by its volatility. In this context, the Russian war in particular leads to reassessable reactions of these industries. In this paper, we investigate this influence during the war period and compare the results with pre-war calculations for 533 companies from 12 industries. Therefore, we use a recursive SVAR model, based on which we illustrate our results graphically with the impulse-response function. We find that the shock responses of industries to Brent volatilities during the war period have a high explanatory power, but we find different results for the individual industries. While oil-producing industries react positively to positive shocks (more so during the war period), the impact on oil-producing industries is rather small, but negative. Oil & Gas Drilling shows an increase of 10% and Tires & Rubber Products a decrease of 8%. Also other industries show surprising results.
    Keywords: Oil price shock, Oil industries, SVAR model, Impulse response function
    JEL: C22 Q11
    Date: 2023–02
  5. By: Edlira Narazania (JRC Sevilla); Ana Agundez Garcia (JRC Sevilla); Michael Christl (JRC Sevilla); Francesco Figari (University of Eastern Piedmont)
    Abstract: This paper contributes to the debate on the revision of the Barcelona targets on childcare, as promoted by the European Commission in 2022, that aims to provide childcare for children below the age of 3. Using EUROLAB, a structural model of labour supply that can also accounts for labour demand constraints, we estimate female labour market participation reactions to alternative scenarios of formal childcare policies in European countries with very low child care provision for children below 3. We quantify the potential increases in the labour supply of mothers (at the extensive and intensive margins) in the case of fulfilling potential new targets of childcare provision (40%, 50%, 60% and 65%). Achieving these targets would lead to significantly increased labour supply of mothers especially in countries like Hungary and Poland where the current share of formal childcare and/or female labour participation is low. In countries like Portugal, that are far beyond the existing childcare target, changes in labour supply incentives are instead expected to be moderate. We further show that when accounting for labour demand, the expected final employment effects will be less pronounced, but still positive.
    Keywords: Labour market equilibrium, labour supply, labour demand, structural models, discrete choice, childcare
    JEL: J20 J22 J23 J13
    Date: 2023–02
  6. By: Dang, Hai-Anh H.; Dhongde, Shatakshee; Do, Minh; Nguyen, Cuong Viet; Pimhidzai, Obert
    Abstract: Vietnam is widely regarded as a success story for its impressive economic growth and poverty reduction in the last few decades. Yet, recent evidence indicates that the country's economic growth has not been uniform. Compiling and analyzing new extensive province-level data from the Vietnam Household Living Standards Surveys (VHLSSs) for every alternate year between 2002 and 2020 and other data sources, we find within-province inequality to be much larger than between-province inequality. Furthermore, this inequality gap is rising over time. Despite the country's fast poverty reduction, the poor were increasingly segregated in certain provinces. We find beneficial impact of economic growth on poverty reduction, but this can depend on inequality levels. We also find greater inequality to have negative impact on economic growth and poverty reduction. Our results suggest that policy makers in Vietnam should focus on reducing spatial disparities and income inequality in order to attain sustainable economic development.
    Keywords: poverty, inequality, pro-poor growth, convergence, household surveys, Vietnam
    JEL: C15 D31 I31 O10 O57
    Date: 2023
  7. By: Magdalena Petrovska (National Bank of the Republic of North Macedonia); Jasna Tonovska (Faculty of Economics – Ss. Cyril and Methodius University in Skopje); Miso Nikolov (IUTE Credit Macedonia); Рртан Сулејмани (National Bank of the Republic of North Macedonia)
    Abstract: This paper has adopted a Bayesian FAVAR approach to examine the monetary transmission mechanism in North Macedonia. The model is based on a broad data set that encompasses 140 monthly time series spanning between January 2010 and January 2019. In particular, the impact of policy on bank portfolio variables, and the impact of policy on economic activity variables have been evaluated. Our findings show that monetary tightening, causes a fall in output, inflation rate, employment, bank lending, the stock of government securities held by banks, and equity prices. On the other hand, it increases short-term money market rates, lending rates, deposits, and only in the immediate aftermath of the key policy rate rise, the share of non-performing loans in the loan portfolio. The study is expected to provide useful input to monetary policy implementation in North Macedonia. The study as well enriches the literature in this domain by discussing the challenges facing monetary authorities of small open economies with fixed exchange rate regimes in understanding how their policy instruments work through the economy.
    Keywords: Monetary transmission mechanism, FAVAR, Bayesian estimation, Monetary policy
    JEL: E52 E47
    Date: 2023
  8. By: Artuc, Erhan (World Bank); Gomez-Parra, Nicolas (Inter-American Development Bank); Onder, Harun (World Bank)
    Abstract: Measuring the economic impact of a war is a daunting task. Common indicators like casualties, infrastructure damages, and gross domestic product effects provide useful benchmarks, but they fail to capture the complex welfare effects of wars. This paper proposes a new method to estimate the welfare impact of conflicts and remedy common data constraints in conflict-affected environments. The method first estimates how agents regard spatial welfare differentials by voting with their feet, using pre-conflict data. Then, it infers a lower-bound estimate for the conflict-driven welfare shock from partially observed post-conflict migration patterns. A case study of the conflict in Eastern Ukraine between 2014 and 2019 shows a large lower-bound welfare loss for Donetsk residents equivalent to between 7.3 and 24.8 percent of life-time income depending on agents' time preferences.
    Keywords: conflict, revealed-preferences, internally displaced people
    JEL: D74 J61
    Date: 2023–01
  9. By: Jawad Daheur (CERCEC - Centre d'études des mondes russe, caucasien et centre-européen - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Researchers have long puzzled over the clearly paradoxical nature of Russian Poland's trading pattern from the point of view of the centre-periphery model. Located on the Western edge of the Russian Empire, this territory formed a periphery under the tight political domination of Saint Petersburg but, at the same time, it was a quickly developing zone, supplying the Russian heartland with manufactured goods. Challenging the idea of a full redirection of the regional economy towards the Russian market, the article reassesses the territory's foreign trade and shows that extractive activity for Western markets had not completely disappeared. There is certainly at least one notable exception to the standard view: the timber trade, which appears to have followed a separate path compared with other rural goods and was associated with huge social and environmental costs. Made possible both by the increasing pressure from German capital and a series of political decisions by Russian rule, these massive exports were part of a new dynamic, parallel and opposite to this territory's industrialisation: the advance of a resource frontier that made Russian Poland a timber reserve for a Germany that had become the leading industrial power on the continent.
    Date: 2022

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