nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒04‒10
eleven papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Inflation expectations in the wake of the war in Ukraine By Afunts, Geghetsik; Cato, Misina; Schmidt, Tobias
  2. International Firm Performance and Proximity to Rare Disaster Risk By Chongyu Wang; Rose Neng Lai; Martin Hoesli
  3. The complex regional effects of macro-institutional shocks: Evidence from EU economic integration over three decades By Mitze, Timo; Breidenbach, Philipp
  4. Control of Emerging-Market Target, Abnormal Stock Return: Evidence in Vietnam By Quyen Van; Vy Tran
  5. Geopolitics in the Baltic Sea region: The "Zeitenwende" in the context of critical maritime infrastructure, escalation threats and the German willingness to lead By Swistek, Göran; Paul, Michael
  6. The Impact of Minimum Wages on Employment: Evidence from a Lower Middle-Income Country By Nguyen, Cuong Viet
  7. Consumed in China: Rebalancing China's demand and Chinese imports By Simola, Heli
  8. Subnational government in the Western Balkans By Andrew Davies; Monika Kurian; Isabelle Chatry; Maria Varinia Michalun; Thomas Prorok
  9. The Impact of Investments on Economic Growth: Evidence from Tajikistan By Mubinzhon, Abduvaliev
  10. The effects of market integration on pollution: an analysis of EU enlargements By Konstantin Sommer; Henri L.F. de Groot; Franc Klaassen
  11. Which Energy Solidarity Union? By Nicoli, Francesco; Burgoon, Brian; van der Duin, David

  1. By: Afunts, Geghetsik; Cato, Misina; Schmidt, Tobias
    Abstract: Russia's invasion of Ukraine is posing a range of new challenges to the global economy, including affecting the inflation expectations of individuals. In this paper, we aim to quantify the effect of the invasion on short- and long-term inflation expectations of individuals in Germany. We use microdata from the Bundesbank Online Panel - Households (BOP-HH), for the period from February 15th to March 29th, 2022. Treating the unanticipated start of the war in Ukraine on the 24 th of February 2022 as a natural experiment, we find that both short- and long-term inflation expectations increased as an immediate result of the invasion. Long-term inflation expectations increased by around 0.4 percentage points, while the impact on short-term inflation expectations was more than twice as large - around one percentage point. Looking into the possible mechanisms of this increase, we suggest that it can be partially attributed to individuals' fears of soaring energy prices and increasing pessimism about economic trends in general. Our results indicate that large economic shocks can have a substantial impact on both short and long-term inflation expectations.
    Keywords: inflation expectations, Russian invasion of Ukraine, survey, natural experiment
    JEL: D84 D12 E3
    Date: 2023
  2. By: Chongyu Wang (The University of Hong Kong); Rose Neng Lai (University of Macau); Martin Hoesli (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School)
    Abstract: Treating the Russian invasion of Ukraine as a rare disaster event and defining proximity as both physical distance and political closeness, we analyze investors’ response to disaster risk by examining the performance of commercial real estate investments in countries of proximity to the event. We find that proximity to the war matters, but the impact of the disaster is not uniform across different property types. Firms with green and less obsolete properties are less likely to experience negative abnormal returns. Our findings highlight the differences in equity risk premia even within the same industry facing the same disaster. We also find support for the eminence of reducing reliance on brown fuel.
    Keywords: Disaster Risk, International Firm Performance, Equity Risk Premia, Russia’s Invasion of Ukraine, Sanction, Real Estate, Green Building
    Date: 2023–02
  3. By: Mitze, Timo; Breidenbach, Philipp
    Abstract: We use four subsequent EU enlargement waves over three decades (1980s, 1990s, 2000s) to assess the regional effects of macro-institutional changes. Our focus is set on EU internal border regions which are specifically exposed to international integration, but it remains unclear how they benefit from this exposure. Treatment effects for different outcomes (per capita GDP, labor productivity, employment, population, night light emissions) are estimated by comparing the performance of EU internal border regions to overall regional development trends in the EU. We find significant border effects that build up over time and decay with spatial distance to the enlargement border. While per capita GDP, labor productivity levels and night light emissions develop positively on average, negative effects are found for the employment rate in border regions. However, effects can be specific to enlargement waves and country groups considered: Border regions in established member countries mainly gain from EU enlargement in terms of increasing their GDP per capita and labor productivity levels but face lower employment rates and population decline. However, border regions in new member countries, particularly in 2004 and 2007, most significantly gain through population and employment increases. This complex pattern of effects makes a straight 'winner-loser' categorization difficult and poses challenges to policy support for EU border regions.
    Keywords: Economic integration, EU enlargement, internal border regions, regional development, treatment effect estimation
    JEL: C23 F15 O47 R11
    Date: 2023
  4. By: Quyen Van; Vy Tran
    Abstract: Joining with the upward trend of Global Foreign direct investment and FDI in emerging economies and emerging Asian economies, FDI to Vietnam, especially M&As have increased significantly in both numbers and value of deals from 1995 to 2015...
    Date: 2023–02
  5. By: Swistek, Göran; Paul, Michael
    Abstract: Due to its strategic immensity and opportunities for covert action, the maritime domain has become the most prominent arena of modern-day great power rivalry. In the shadow of this confrontation and the Russian war of aggression against Ukraine, the Baltic Sea is now the focus of geopolitical interest and conflict. An expression of this is the increase in hybrid activities, from acts of sabotage to the use of unidentified drones. For the Western states of the Baltic Sea region in particular, all of this highlights their dependence on fossil resources, critical maritime infrastructure, and secure trade routes. In response to the war against Ukraine and Russian naval activity in the Baltic Sea, littoral states have placed their militaries on heightened readiness. In the midst of this crisis situation, NATO allies and future allies remain locked in an unnecessary dispute over force dispositions, new structures and leadership roles. As a result, there is little sign of the German "Zeitenwende" in the Baltic Sea region.
    Keywords: Ostseeraum, Geopolitik, kritische maritime Infrastruktur, Großmachtrivalität, Russland, Nato, Seeverbindungen, power rivalry, Baltic Sea region, Russian war of aggression against Ukraine, critical maritime infrastructure, "Zeitenwende", NATO
    Date: 2023
  6. By: Nguyen, Cuong Viet
    Abstract: In this study, we examine the impact of minimum wages in Vietnam using individual-level data from the 2012-2020 annual Labor Force Surveys. During this period, the average real minimum wage increased by around 4% per year. Overall, we do not find significant effects from minimum wages on employment and monthly wages. However, we find a considerable negative effect on workers' total working hours. Working hours per week are reduced by 0.38% for a 1% increase in the minimum wage. Since total wages remain unchanged, a reduction in working hours results in an increase in hourly income. A 1% increase in the minimum wage leads to a 0.32% increase in hourly wages. Interestingly, for workers earning below minimum wage, we find a positive effect from minimum wages on their monthly income. A 1% increase in the minimum wage increases monthly income of workers earning below minimum wage by 0.83%.
    Keywords: minimum wages, employment, labor productivity, impact evaluation, Vietnam
    JEL: J31 J50 O12
    Date: 2023
  7. By: Simola, Heli
    Abstract: The share of private consumption has long been small in the Chinese GDP. The share started to increase in the past decade, but the trend reversed with the covid-19 pandemic. Now as the Chinese economy reopens and recovers from covid restrictions, the share of consumption could return to a growing trend. This resumption of a longer-term trend could have important implications for global trade. Our simulations, which are based on recent international input-output data, suggest that the current shift in China's demand structure is likely to increase import demand for sectors such as the food industry, agriculture, textiles, and travel services. Sectors facing a demand slowdown include base metals, non-metallic minerals, and machinery and equipment.
    Keywords: China, imports, rebalancing, input-output
    Date: 2023
  8. By: Andrew Davies; Monika Kurian; Isabelle Chatry; Maria Varinia Michalun; Thomas Prorok
    Abstract: Subnational governments play a significant role in ensuring good public governance. The way that they are organised and function has a direct impact on the economic and social well-being of citizens and public trust in government. This report presents the system of multi-level government in the six Western Balkan economies, comparing them both with one another and in the context of broader international trends in multi-level governance. The report covers territorial and institutional organisation, competences of local governments, human resources and accountability, public financial management and vertical and horizontal co-ordination, in each case identifying key characteristics and recent trends.
    Keywords: albania, bosnia and herzegovina, decentralisation, kosovo, montenegro, multi-level governance, north macedonia, public governance, serbia, subnational government, western balkans
    Date: 2023–03–27
  9. By: Mubinzhon, Abduvaliev
    Abstract: The aim of this paper is to assess the effect of foreign direct investment on economic growth in Tajikistan. Using annual time series data for 2005 to 2021, the study reveals a relationship between foreign direct investment and per capita GDP growth in Tajikistan. Based on the analysis of the Vector Error Correction Model (VECM), it has been found that these variables have a long-term relationship. The residuals of the regressions showed no auto-correlation in the post-estimation diagnostic tests performed to determine the validity of the VECM model. Furthermore, our findings suggest that improving the institutional quality of the country complements the improvement of the investment climate and results in significant increases in foreign direct investment inflows.
    Keywords: foreign direct investments, economic growth, Tajikistan
    JEL: F21
    Date: 2023–03–10
  10. By: Konstantin Sommer (University of Amsterdam); Henri L.F. de Groot (Vrije Universiteit Amsterdam); Franc Klaassen (University of Amsterdam)
    Abstract: We study the effects of market integration on manufacturing emission intensities of CO2, SOx, and NOx. For this, we analyze the 2004 and 2007 EU enlargements in a sectoral panel with data on almost all EU member states from 1995 to 2015. We pay close attention to relevant channels of trade, regulation, and efficiency. Overall, the enlargements have resulted in a reduction of emission intensities in new member states: new regulations, which accession countries needed to adopt, have lowered pollution intensities strongly; induced improvements in productivity have further reduced them; and trade integration into the EU has had insignificant effects on emission intensities. We also do not find evidence of within-EU pollution haven effects and thus of leakage from old to new member states. For old members, trade integration, if anything, increased emission intensities, but productivity improvements have also contributed to cleaner manufacturing sectors here.
    Keywords: Market Integration, EU Enlargement, Carbon Leakage, Pollution Havens, Emission Intensity
    JEL: F15 F64 Q56
    Date: 2022–06–15
  11. By: Nicoli, Francesco; Burgoon, Brian; van der Duin, David
    Abstract: The Russian invasion of Ukraine caught the European Union (EU) off-balance. Many European member-states were, on the onset of the war, heavily reliant on energy supplies provided by Russia. Against this background, some have proposed a unified approach for the creation of EU-wide strategic energy reserves, which would ensure a buffer against future energy shocks, but also provide temporary relief to the participating countries should some of them experience temporary issues with their energy supply. However, the political feasibility of such programmes remain disputed, as any EU-wide approach to energy will entail both additional financial costs and a share of responsibilities and sovereignty on the matter. Furthermore, any such policy design is inherently multidimensional, differing over scope, governance, source of financing among other dimensions. To determine public support for energy security cooperation, we conduct the first conjoint experiment ever fielded on public support for alternative energy union design. We field a pre-registered, randomized conjoint experiment on a highly representative sample of the French, German, Italian, Dutch and Spanish population in November 2022. This multidimensional conjoint experiment allows us to determine the causal link between policy features of potential energy solidarity pacts, and public support or opposition to such policy. Our results show that policy packages meeting the most support require higher levels of ambition, joint EU-level governance, joint purchases and procurement, and progressive taxation as a form of financing. All in all, our results not only show that there is considerable cross-border support for energy solidarity, but also that citizens in different western European countries have generally converging preferences regarding the actual design of such policy, indicating that a compromise policy is feasible and publicly supported. Furthermore, our results support ongoing research on the nature of European solidarity at times of crisis, suggesting that European citizens are willing to support the creation of joint institutions and policies to face issues of common concern, and therefore indicating that major crises open important windows of opportunity to re-shape EU-level policies and institutions.
    Date: 2023–02–20

This nep-tra issue is ©2023 by Maksym Obrizan. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.