nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒05‒22
nine papers chosen by
Maksym Obrizan
Kyiv School of Economics

  1. Ossified Democracy as an Economic Problem and Policies for Reclaiming its Performance By Vladimir Benacek; Pavol Fric
  2. Time for Change in EU Economic Policy By Kurt Bayer
  3. Assessment of generation adequacy taking into account the dependence of the European power system on natural gas By Maike Spilger; Dennis Schneider; Christoph Weber
  4. Powering Up Cleaner Choices: A Study on the Heterogenous Effects of Social Norm-Based Electricity Pricing on Dirty Fuel Purchases By Salim Turdaliev
  5. Board Generational Diversity in Emerging Markets By IWASAKI, Ichiro; MA, Xinxin; MIZOBATA, Satoshi
  6. Transmission of risks between energy and agricultural commodities: Frequency time-varying VAR, asymmetry and portfolio management By Furuoka, Fumitaka; Yaya, OlaOluwa S; Ling, Piu Kiew; Al-Faryan, Mamdouh Abdulaziz Saleh; Islam, M. Nazmul
  7. Trade diversion and labor market adjustment: Vietnam and the U.S.-China trade war By Karin Mayr-Dorn; Gaia Narciso; Duc Anh Dang; Hien Phan
  8. Nutrient deficiencies and compositional variability in fertilizers : The case of the Mekong Delta in Vietnam By MANO, Yukichi; ARIMOTO, Yutaka; Nguyen, Duy Can; Do, Van Hoang; KOJIN, Emi; Nguyen, Thiet; TSUKADA, Kazunari; Vo, Hong Tu
  9. The strange case of Romania’s Nicolae Ceaușescu: when the liquidation of sovereign debt results in country total damaging By Georgescu, George

  1. By: Vladimir Benacek (Charles University, Faculty of Social Sciences, IPS, Prague, Czechia); Pavol Fric (Comenius University, Bratislava, Slovakia & Charles University, Faculty of Social Sciences, ISS, Prague, Czechia)
    Abstract: This paper analyses the erosion of democracy in the countries of Central and Eastern Europe from the perspective of political economy. We posit that the coinciding effects of political marketing and the state financing of parties represent a peculiar mix of liberal and étatist principles that have turned political regimes in the region into ossified democracies. Our theoretical analysis based on the economics of democracy of Anthony Downs revealed that voters are discriminated against as political consumers, which constrains their ability to function as sovereign principals in collective action. The dominance of political parties in the markets for both political and public goods is the leading cause of democracy´s ossification and its susceptibility to corruption. We propose attenuating this decline through mandatory political tax designations, which re-establish the lost link between political markets and the markets in public goods and make the top-down dominance of the hierarchies in power subject to the bottom-up control of citizens motivated to engage in collective action. Economics of democracy is a heterogeneous fusion of market and command economy.
    Keywords: public goods; democracy; collective action; political markets; financing of parties
    JEL: D73 D78 H4
    Date: 2023–04
  2. By: Kurt Bayer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: For a number of years it has become obvious to an increasing number of observers that the economic policy framework of the EU and the euro area is no longer ‘fit for purpose’. This effectiveness gap in economic governance has become even more visible during recent multiple crises (ranging from the financial crisis, the Covid-19 pandemic and the ever more manifest climate emergency, to the energy and inflation crises reinforced by the Russian invasion of Ukraine). The EU reacted to all of these crises with a large array of instruments, in more or less effective ways. However, going forward the EU needs an effective ex ante framework geared towards the objective of improving the well-being of its citizens with adequate instruments, across the whole geographical area of the EU, rather than the current focus on individual member states.
    Keywords: EU forward looking strategy: concentration on internal market and EU area as a whole
    JEL: E61 E62 E63
    Date: 2023–05
  3. By: Maike Spilger; Dennis Schneider; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Reductions in gas supply following the Russian invasion of Ukraine have affected the security of supply of the European power system along with other stress factors like low availability of French nuclear reactors. Consequently, more sophisticated approaches to investigate generation adequacy and to anticipate risks in security of supply are needed. Especially a thorough assessment of generation adequacy taking into account both the variability of renewable infeed and the availability of thermal power plants based on a probabilistic approach has been missing so far. In this paper, we apply a novel integrative approach to analyze generation adequacy in a case study for Central Western Europe during the winter half year 2022/2023. The approach makes use of a multivariate probabilistic framework built on publicly available data. For assessing generation adequacy, stochastic distributions are fitted to the data and Monte Carlo simulations are performed to identify future threats to generation adequacy. Results show that based on data available at the end of September 2022, generation adequacy (GA) was at risk in several core European countries, yet that the European interconnected power grid contributed to a strong risk reduction.
    Keywords: Security of Supply, Generation Adequacy, Probabilistic, Monte Carlo, Energy System Modeling
    Date: 2023–03
  4. By: Salim Turdaliev (Institute of Economic Studies, Faculty of Social Sciences, Charles University)
    Abstract: This paper examines the heterogeneous effects of the experimental introduction of increasing-block-tariffs (IBT) for residential electricity on the propensity to purchase dirty fuels using panel household data (RLMS-HSE) in a number of regions of Russia. The study demonstrates that despite the design of the IBT being based on prescribed social norms and accounting for various household and dwelling characteristics, the adverse effects of this policy (in the form of increased propensity to purchase dirty fuels) are still more pronounced among households with higher base energy consumption, those receiving subsidies for utilities, and those in a vulnerable social position where the household head's primary occupation is childcare or housekeeping. Additionally, the paper finds that households headed by females are actually 20% less likely to purchase dirty fuels due to the introduction of IBT. The findings suggest that policymakers should fine-tune the calculation of social norms to minimize the negative impacts of IBT. Furthermore, the study's results may be relevant and useful for policymakers in other developing and transition economies that aim to implement various energy reforms, including IBT.
    Keywords: residential electricity pricing, increasing-block-tariffs, heterogeneous treatment effects, social norms, dirty fuels, post-Soviet economy, Russia, natural experiment
    JEL: Q41 Q48 L98 L94
    Date: 2023–04
  5. By: IWASAKI, Ichiro; MA, Xinxin; MIZOBATA, Satoshi
    Abstract: To identify the determinants of the generational diversity of board membership in emerging market firms, we conducted an empirical analysis using state-level social inequality indices and data on 14, 598 listed/unlisted firms from 20 Eastern European countries and China. We found that, in these emerging markets, social inequality strongly inhibits the generational diversity of board membership, regardless of the gender of board members. The results also reveal that four firm attributes—board size, CEO duality, state ownership, and the presence of foreign investors from non-advanced economies as firm owners—significantly affect the age composition of board directors in line with our expectations. Two other firm attributes—ownership concentration and firm ownership by foreign investors from advanced economies—are also found to have a significant impact on board generational diversity; however, the direction of their impact contradicts our predictions. Supplementary estimations carried out by introducing various sample restrictions produce similar results, thus confirming the statistical robustness of our findings.
    Keywords: board generational diversity, social inequality, emerging markets, Eastern Europe, China
    JEL: D22 G32 J44 K22 L22 P34
    Date: 2023–04
  6. By: Furuoka, Fumitaka; Yaya, OlaOluwa S; Ling, Piu Kiew; Al-Faryan, Mamdouh Abdulaziz Saleh; Islam, M. Nazmul
    Abstract: This paper examines energy and agricultural commodities' short-run and long-run connectedness by using the Time-varying parameter vector autoregressions (TVP-VAR). It applies the frequency version of the TVP-VAR model, which is a modified version of the dynamic TVP-VAR model. The frequency decomposition definition also decomposes into short-run and long-run connectedness. We further the analysis by investigating the effect of asymmetry in returns on connectedness. It also examines how portfolio management strategies would lead to a maximization of profits with minimal risks. Empirical evidence indicates that only 32.52% and 31.38% of connectedness in oil and gas, respectively, are transmitted to agricultural commodities, which suggests their weak tendencies in influencing agricultural commodities; the total connectedness index hovers around 40-60% in the 2018-2019 period; however, it dropped below 40% in 2020-2021 when the COVID-19 pandemic contributed to disintegrate the connectedness between energy and agricultural commodities but increased further during the 2022 Russia-Ukraine saga. The findings also indicate that corn, wheat, and flour are net transmitters of risks to oil and natural gas in the long and short-run, and wheat-flour pairwise connectedness is the strongest in the connectedness. Asymmetry is also pronounced in the network of connectedness. Portfolio analyses indicate that investors require a low proportion of energy in a portfolio of energy-agricultural commodities to achieve an optimum profit. The findings will offer exciting insights into the connectedness of agricultural and energy commodities, particularly during periods of high price uncertainty.
    Keywords: Agricultural commodity; Asymmetry; Frequency TVP-VAR; Optimal weight; Risk
    JEL: C22
    Date: 2023–02–03
  7. By: Karin Mayr-Dorn (JKU Linz); Gaia Narciso (Trinity College Dublin); Duc Anh Dang (NCIF); Hien Phan (NCIF)
    Abstract: This paper investigates the effects of the U.S.-China trade war on trade diversion and the labor market outcomes in a third country, Vietnam. We exploit variation in Vietnamese exports following the unexpected and exogenous U.S. tariff hikes on Chinese imports and find that Vietnamese workers and districts more exposed to the trade war display higher employment, longer working hours, and higher wages as a result of the U.S.-China trade war. The effects are mainly driven by women and non-college-educated individuals. Our findings reveal that bilateral trade policies can have substantial spillover effects on trade flows and labor markets in third countries.
    Keywords: trade diversion, trade war
    JEL: F14 F16 R23
    Date: 2023–04
  8. By: MANO, Yukichi; ARIMOTO, Yutaka; Nguyen, Duy Can; Do, Van Hoang; KOJIN, Emi; Nguyen, Thiet; TSUKADA, Kazunari; Vo, Hong Tu
    Abstract: Quality control in fertilizer markets is critical to food security by facilitating fertilizer application and increasing agricultural productivity. With the active proliferation of new fertilizer producers, Vietnam has also faced this problem, but public and market initiatives have recently been taken to address the issue This paper evaluates the quality of 141 randomly sampled fertilizers in the Mekong Delta, the country’s central rice producing area. We intentionally sampled unbranded products to focus on the most vulnerable market segment. On average, our sample contains the labeled nutrient content. However, the quality variability is high, and half of the sample has at least one nutrient content below the legal requirement. We also find that nitrogen is over-concentrated and phosphate is diluted. These findings suggest that the quality of fertilizers in Vietnam, even unbranded ones, is reliable on average, but efforts are needed to stabilize quality variability. In addition, over-concentration of nitrogen may warrant policy attention as farmers may inadvertently over-apply nitrogen and harm the environment.
    Keywords: low-quality fertilizer, experience goods, Vietnam
    JEL: L15 L51 Q16 Q18
    Date: 2023–04
  9. By: Georgescu, George
    Abstract: The study focuses on 1980s sovereign debt crisis in Romania under the impact of internal and external factors, intending to provide a more realistic image of this dramatic episode. The global economy faced a severe economic and financial crisis at the beginning of the 1980s, when more than 30 developing countries entered default or restructured the sovereign debt. In the case of Romania, the impact of the crisis triggered in 1981-1982 has proved extremely hard worsened by the domestic vulnerabilities accumulated in the previous decade and the external shock coming from the major changes in the global economic, financial and geopolitical context at the end of 1979. The FED monetary policy at that time (twenty percent funds rate in order to fight inflation), has led to the explosive rise in interest rates of the outstanding loans contracted from international commercial banks, to which Romania was highly indebted. The decision of simple-minded Nicolae Ceaușescu to liquidate the foreign debt and other errors concerning the crisis management had a destructive impact on the country, which degenerated in a system crisis ended with its implosion in December 1989. Some lessons from this crisis could be learned for the current indebtedness situation of Romania, amid international circumstances characterized by two-digit inflation, high interest rates and government bond yields, energy crisis, climate changes, Ukraine war, global geopolitical tensions.
    Keywords: foreign debt crisis; oil crisis shocks; IMF; FED monetary policy; inflation; interest rates; sovereign debt restructuring; Romania
    JEL: B22 E44 E62 F34 H63 N44
    Date: 2023–04

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