nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒04‒03
fourteen papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. The indirect effect of the Russian-Ukrainian war through international linkages: early evidence from the stock market By Marcus Biermann; Elsa Leromain
  2. Wage Functions in China and Eastern Europe : A Large-Scale Comparative Meta Analysis By HORIE, Norio; IWASAKI, Ichiro; KUPETS, Olga; MA, Xinxin; MIZOBATA, Satoshi; SATOGAMI, Mihoko
  3. The Economic Costs of the Russia-Ukraine War: A Synthetic Control Study of (Lost) Entrepreneurship By David Audretsch; Paul P. Momtaz; Hanna Motuzenko; Silvio Vismara
  4. Foreign Affiliates versus Domestic Firms in the Information and Communication Services Sector in Central and Eastern Europe By Svilena Mihaylova
  5. Energy Price Shocks and the Demand for Energy-Efficient Housing: Evidence from Russia's Invasion of Ukraine By Braakmann, Nils; Dursun, Bahadir; Pickard, Harry
  6. Parallel processes and divergent outcomes: the transformation of the economies of former Socialist countries By Alexander Chepurenko; Miklos Szanyi
  7. Children and Female Employment in Mongolia By Elena Nikolova; Jakub Polansky
  8. An Empirical Approximation of the Effects of Trade Sanctions with an Application to Russia By Jean Imbs; Laurent Pauwels
  9. Complex Systems of Secrecy: The Offshore Networks of Oligarchs By Ho-Chun Herbert Chang; Brooke Harrington; Feng Fu; Daniel Rockmore
  10. Voting under Debtor Distress By Jakub Grossmann; Stepan Jurajda
  11. Parental Allowance Increase and Labour Supply: Evidence from a Czech Reform By Jakub Grossmann; Filip Pertold; Michal Soltes
  12. A note on bride kidnapping and labour supply behaviour of Kyrgyz women By Arabsheibani, G. Reza; Kudebayeva, Alma; Mussurov, Altay
  13. Do International Tourist Arrivals Change Residents' Attitudes Towards Immigration? A Longitudinal Study of 28 European Countries By Ivlevs, Artjoms; Smith, Ian
  14. Growth Constraints and Structural Diversification for Kyrgyzstan Economy: Policy Analysis of Key Reforms and its Implications By Das, Gouranga G.; Ginting, Edimon; Horridge, Mark; Yamano, Takashi

  1. By: Marcus Biermann; Elsa Leromain
    Abstract: We study how firms' international linkages to Russia and Ukraine have affected investors' expectations following the outbreak of the Russian-Ukrainian war. We perform an event study around the Russian invasion into Ukraine on February 24, 2022. We find that having trade linkages to Russia in the top decile is associated with a decrease in the cumulative return by 2.16 percentage points and having an affiliate in Russia with a decrease by 3.12 percentage points. Having an affiliate in Ukraine has, however, no effect on firms' stock market returns. The total impact of trade linkages on the aggregate stock market performance of third countries was on average 0.8 percentage points and of multinational linkages was on average 0.73 percentage points. The losses were largest in European countries.
    Keywords: Russia-Ukraine war, trade linkages, multinationals, stock market, event study
    Date: 2023–01–26
  2. By: HORIE, Norio; IWASAKI, Ichiro; KUPETS, Olga; MA, Xinxin; MIZOBATA, Satoshi; SATOGAMI, Mihoko
    Abstract: This paper conducts a meta-analysis using 6453 estimates reported in 216 research works to compare the wage function in China and Eastern Europe. The results indicate that the wage systems in both China and Eastern Europe were structured consistently with economic theories. Nevertheless, it is also revealed that the shape of their wage functions has changed dynamically in recent decades. In fact, both China and Eastern Europe have experienced a flattening of their wage-experience profiles over time. At the same time, China and Eastern Europe have showed quite contrasting changes in the wage effects of education and gender.
    Keywords: wage function, research synthesis, meta-regression analysis, publication selection bias, China, Eastern Europe
    JEL: D31 I26 J16 J31 P23 P36
    Date: 2023–03
  3. By: David Audretsch; Paul P. Momtaz; Hanna Motuzenko; Silvio Vismara
    Abstract: This synthetic control study quantifies the economic costs of the Russo-Ukrainian war in terms of foregone entrepreneurial activity in both countries since the invasion of Crimea in 2014. Relative to its synthetic counterfactual, Ukraine's number of self-employed dropped by 675, 000, corresponding to a relative loss of 20%. The number of Ukrainian SMEs temporarily dropped by 71, 000 (14%) and recovered within five years of the conflict. In contrast, Russia had lost more than 1.4 million SMEs (42%) five years into the conflict. The disappearance of Russian SMEs is driven by both fewer new businesses created and more existing business closures.
    Date: 2023–03
  4. By: Svilena Mihaylova (University of Economics Ð Varna)
    Abstract: Given the important role of foreign direct investment in Central and Eastern Europe, the paper explores the performance of foreign affiliates versus domestic firms in the information and communication services sector in eleven countries in the region. Based on Eurostat data for the period 2010-2020, the paper conducts descriptive and comparative analysis of foreign-owned and domestic firms in terms of size, productivity and profitability, as well as their dynamics over time. The results reveal that, on average, foreign-owned firms in the sector tend to be bigger and perform better than their local counterparts, but in the same time there are significant variations across countries.
    Keywords: Firm performance; Foreign direct investment; Multinational enterprises
    JEL: L25 F21 F23
    Date: 2023–03
  5. By: Braakmann, Nils (Newcastle University); Dursun, Bahadir (Newcastle University); Pickard, Harry (Newcastle University)
    Abstract: How do private consumers adapt to changes to energy prices, in particular do they invest in energy-saving measures? We study this question in the context of the rapid rise in energy prices caused by the Russian invasion of Ukraine in February 2022 and the demand for energy efficiency in the UK housing market. We find that the housing market barely reacted to a 60% increase in the price of energy. This finding holds in multiple contexts and across various robustness checks. Supplementary survey evidence suggests that people believe the energy price increases are temporary, not permanent.
    Keywords: gas prices, energy efficiency, property markets
    JEL: Q35 Q41 Q51 R31
    Date: 2023–02
  6. By: Alexander Chepurenko (National research university Higher School of Economics); Miklos Szanyi
    Abstract: The paper deals with the problems of diverging developmental trajectories of former Socialist economies of the Central and South-Eastern European countries as well as of the former USSR republics. The purpose is exploring the developmental trends of three groups of economies – ECE, Balkans and some of the CIS – which started from seemingly same initial base, but later showed some specifics both regarding the socio-economic orders and the dynamics of internal developments. The paper argues that over the 30 years of post-Socialist development, these countries moved over certain periods of adaptation and mimicry (mostly importing or imitating institutions of the established market economies and democracies), the later stage of evaluating of the experience and developing of some hybrid socio-economic models, and the contemporary stage of what is called ‘dependent’, or ‘periphery’ capitalisms in ECE and Balkan countries vs. ‘backslide transition’ in Russia and some other CIS countries. Thus, the outcomes of the systemic transition are shown as problematic, fragile and different. The paper refers these divergences to a set of differing preconditions as well as institutional traps which occurred during the systemic change itself, and shows both commonalities as well as specifics of post-Socialist socio-economic development also within each of the three sub-groups of countries. The paper bases on the desk research of the relevant literature and own investigations.
    Keywords: transition, post-Socialist economies, Central and Eastern Europe, systemic comparison
    JEL: P20 P21 P30 P51
    Date: 2021–10
  7. By: Elena Nikolova (Zayed University (College of Interdisciplinary Studies), IOS Regensburg and Global Labor Organization); Jakub Polansky
    Abstract: Although a large body of literature has argued that motherhood has a profound and longlasting negative effect on the employment and earnings of women, there is little evidence focusing on the post-communist region. This paper exploits the latest round of the EBRDWorld Bank Life in Transition Survey (LiTS) and of the Mongolian National Statistics Office Household Socio-Economic Survey (HSES) to examine the correlation between the presence of children of different age categories in a family and female employment in Mongolia in 2016. We examine the availability of childcare, social norms and attitudes towards women, as well as household decision-making as potential explanations. We find that small children decrease the probability of female employment relative to women with no small children. In particular, women with two children aged one to six years are 21.5 percentage points less likely to be employed. Our results also suggest that cultural biases against women may be – at least partially – responsible for the low female employment levels which we uncovered. These results are unlikely to be driven by omitted variable bias.
    Keywords: children, female employment, Mongolia, women
    JEL: J16 J13 J20
    Date: 2022–01
  8. By: Jean Imbs; Laurent Pauwels
    Abstract: We propose a data-based approximation of the effects of trade sanctions. We validate the approximation by comparing it with exact responses simulated from a canonical multi-country multi-sector model. The approximation is palatable for a broad range of elasticities of substitution, except for extremely low ones. It is based on a decomposition of high order trade according to destination or inputs markets and can readily be computed on the basis of international input-output data. As such it provides a practical shortcut to evaluating the consequences of trade sanctions without having to make difficult calibration choices. We implement our approximation to evaluate the consequences of trade sanctions between Europe and Russia. Our approximated effects are within the range of existing estimates, but they mask vast asymmetries. First, the effects of sanctions are about fifteen times larger on Russia than on Europe. Second, the effects within Europe are enormously asymmetric, with much larger consequences on ex-“satellite†countries of the Soviet Union than on large Western European economies. We then adapt our approach to show that the most affected European countries do not typically have access to substitute markets and are in fact highly dependent on Russia. We show that this extreme dependence on Russia is at least partly explained by the existence of specific energy transporting infrastructure (pipelines) that appear to constrain tightly the production of electricity in those heavily affected East European economies. These findings illustrate the practical potentiality of our approximation in a variety of different contexts.
    Keywords: European Energy Imports, Russian Sanctions, Economic Consequences of Sanctions, Global Value Chain
    JEL: F14 F42 F51
    Date: 2023–03
  9. By: Ho-Chun Herbert Chang; Brooke Harrington; Feng Fu; Daniel Rockmore
    Abstract: Following the invasion of Ukraine, the US, UK, and EU governments--among others--sanctioned oligarchs close to Putin. This approach has come under scrutiny, as evidence has emerged of the oligarchs' successful evasion of these punishments. To address this problem, we analyze the role of an overlooked but highly influential group: the secretive professional intermediaries who create and administer the oligarchs' offshore financial empires. Drawing on the Offshore Leaks Database provided by the International Consortium of Investigative Journalists (ICIJ), we examine the ties linking offshore expert advisors (lawyers, accountants, and other wealth management professionals) to ultra-high-net-worth individuals from four countries: Russia, China, the United States, and Hong Kong. We find that resulting nation-level "oligarch networks" share a scale-free structure characterized by heterogeneity of heavy-tailed degree distributions of wealth managers; however, network topologies diverge across clients from democratic versus autocratic regimes. While generally robust, scale-free networks are fragile when targeted by attacks on highly-connected nodes. Our "knock-out" experiments pinpoint this vulnerability to the small group of wealth managers themselves, suggesting that sanctioning these professional intermediaries may be more effective and efficient in disrupting dark finance flows than sanctions on their wealthy clients. This vulnerability is especially pronounced amongst Russian oligarchs, who concentrate their offshore business in a handful of boutique wealth management firms. The distinctive patterns we identify suggest a new approach to sanctions, focused on expert intermediaries to disrupt the finances and alliances of their wealthy clients. More generally, our research contributes to the larger body of work on complexity science and the structures of secrecy.
    Date: 2023–03
  10. By: Jakub Grossmann; Stepan Jurajda
    Abstract: There is growing evidence on the role of economic conditions in the recent successes of populist and extremist parties. However, little is known about the role of over-indebtedness, even though debtor distress has grown in Europe following the financial crisis. We study the unique case of the Czech Republic, where by 2017, nearly one in ten citizens had been served at least one debtor distress warrant even though the country consistently features low unemployment. Our municipality-level difference-in-differences analysis asks about the voting consequences of a rise in debtor distress following a 2001 deregulation of consumer-debt collection. We find that debtor distress has a positive effect on support for (new) extreme right and populist parties, but a negative effect on a (traditional) extreme-left party. The effects of debtor distress we uncover are robust to whether and how we control for economic hardship; the effects of debtor distress and economic hardship are of similar magnitude, but operate in opposing directions across the political spectrum.
    Keywords: Debtor distress; distress warrants; populist parties; extremist parties; the Czech Republic;
    JEL: D72 D18 G51
    Date: 2023–02
  11. By: Jakub Grossmann; Filip Pertold; Michal Soltes
    Abstract: We study the effect of a CZK 80, 000 (36%) increase in parental allowance, a universal basic income-type benefit, on the labor supply of parents in the Czech Republic. Drawing a parental allowance does not preclude labor market activity, which allows us to study the income effect. After the reform, mothers substantially prolonged the average period they drew an allowance. The labor market participation of mothers of young children decreased by 6 percentage points (15%). The estimated effect corresponds to a non-labor income labor supply elasticity at the extensive margin of about -0.5. The effect is particularly strong among mothers with their first child (10 p.p. or 28%) and among university-educated mothers (16 p.p. or 36%). We observe a virtually identical reduction in hours worked. We found no effect on the labor supply of fathers.
    Keywords: Parental allowance; Maternal labor supply; Income effect of social policy; Czech Republic;
    Date: 2023–02
  12. By: Arabsheibani, G. Reza; Kudebayeva, Alma; Mussurov, Altay
    Abstract: Using data from the 2011 and 2016 Life in Kyrgyzstan surveys, we examine Kyrgyz women's labour supply elasticities at the extensive margin. We use Heckman's two-step approach to predict earnings for the non-participating women and then use these predictions to estimate the participation equation. We find that women's labour supply decision is not influenced by their earnings. We also show that there exists a significant gap in employment propensities among ethnic Kyrgyz women in consensual or arranged marriages compared to women in kidnapped-based marriages. This finding suggests that the practice of bride abduction adversely affects women's probability of employment and might have negative consequences on their economic well-being.
    Keywords: bride kidnapping; Kyrgyzstan; labour supply; women
    JEL: J01 J16 J22
    Date: 2021–12–01
  13. By: Ivlevs, Artjoms (University of the West of England, Bristol); Smith, Ian (University of the West of England, Bristol)
    Abstract: Can international tourist arrivals change residents' attitudes towards immigrants and immigration? We discuss possible underlying mechanisms and provide the first evidence on this question using data from the European Social Survey (2002-2019; n=333, 505). We find that, as tourist arrivals grow, residents become more positive towards immigration in Eastern Europe. In Western Europe, the relationship tends to turn from positive to negative at relatively high levels of tourism. The instrumental variable analysis suggests that incoming tourism has a positive causal effect on attitudes towards immigration in both Western and Eastern Europe. Overall, our study reveals an overlooked dimension of the tourism-migration nexus and highlights the role that international tourism may play in shaping attitudes towards immigration and, through these attitudes, immigration policy and flows, immigrant integration and more open and inclusive societies in tourism-receiving countries.
    Keywords: tourism, attitudes towards immigration, inclusion, Europe, instrumental variable analysis
    JEL: J61 L83
    Date: 2023–02
  14. By: Das, Gouranga G.; Ginting, Edimon; Horridge, Mark; Yamano, Takashi
    Abstract: Kyrgyzstan economy have undergone transition from a different economic system in the 1990s until now. For stimulating a diversified long-run growth in Kyrgyzstan, the region needs to overcome spatial fragmentation by integrating the regions for economic development translating into national growth, and wider welfare gains. For sustained basis and shared prosperity, several policies are necessary for reforming basic services, human development, connectivity via infrastructure, industrial as well as agricultural performance, and a conducive business environment. In this paper, we assess the potential impacts of selected structural reform measures using a newly developed comparative-static forecasting model tailored to suit Kyrgyzstan economy--a computable general equilibrium (CGE) model (KGZORANI)-with a detailed Input-Output table for 34 sectors, and SAM of the national economy as of 2015. Economy is disaggregated into 9 regions. The reform initiatives are designed for enhancement of productivity and efficiency in agriculture, services such as trade, tourism, and transport, logistics, some manufacturing for industrialization, as well as power and energy sector like electricity, and global integration via trade and FDI. Policy reform simulation demonstrates that regional and global integration via improvement in transport and logistics will facilitate modern E-commerce, and boost productivity with real GDP growth. Given the dependence on agriculture and tourism, this kind of diversification is conducive for becoming non-susceptible to external vulnerability. Thus, structural reform facilitates growth across the oblasts (7 regions and 2 cities) in Kyrgyzstan and moves the economy by another 1.41 percentage points annually over the baseline path to 2030.
    Keywords: Computable General Equilibrium Models, Growth Diagnostics, Productivity effects, FDI, Trade, Structural Transformation, Economic Reforms, Regional Cooperation, Central Asia
    Date: 2023

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