nep-tra New Economics Papers
on Transition Economics
Issue of 2023‒10‒09
eleven papers chosen by
Maksym Obrizan, Kyiv School of Economics

  1. If You Do Not Change Your Behavior: Preventive Repression in Lithuania under Soviet Rule By Nazrullaeva, Eugenia; Harrison, Mark
  2. The economic impact of Russia’s invasion of Ukraine on European countries – a SVAR approach By Jonas M. Bruhin; Rolf Scheufele; Yannic Stucki
  3. The Price of Empire: Unrest Location and Sovereign Risk in Tsarist Russia By Christopher A. Hartwell; Paul M. Vaaler
  4. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  5. Implications of the Russian Invasion on the Logistical Competition for Corn Shipments from the United States and Ukraine By Wilson, William W.; Bullock, David W.; Lakkakula, Prithviraj
  6. Wage Inequality in Bulgaria: Decomposition by Economic Sectors, Occupational Groups and Districts By Svilena Mihaylova
  7. How authoritarian regimes counter international sanctions pressure By von Soest, Christian
  8. Gender Differences in Returns to Beauty By Kimberly Scharf; Oleksandr Talavera; Linh Vi
  9. Balancing Natural Resources and Human and Social Capital: Pathways to Economic Diversification in Mongolia By Thorvaldur Gylfason; Jean-Pascal N. Nganou
  10. Institutional structure of the agricultural utilization of sludge from wastewater treatment plants in Bulgaria By Bachev, Hrabrin
  11. The Impact of Foreign Capital Inflows on Poverty in Vietnam: An Empirical Investigation By MT Musakwa; N.M. Odhiambo

  1. By: Nazrullaeva, Eugenia (School of Public Policy, London School of Economics and Political Science; CAGE, University of Warwick); Harrison, Mark (Department of Economics and CAGE, University of Warwick; CEPR)
    Abstract: Who is targeted by preventive repression and why? In the Soviet Union, the KGB applied a form of low-intensity preventive policing, called profilaktika. Citizens found to be engaging in politically and socially disruptive misdemeanors were invited to discuss their behavior and to receive a warning. Using novel data from Lithuania, a former Soviet republic, in the late 1950s and the 1970s, we study the profile and behaviors of the citizens who became subjects of interest to the KGB. We use topic modeling to investigate the operational focuses of profilaktika. We find that profilaktika began as a way of managing specific threats or “known risks†that arose from the experience of postwar Sovietization. The proportion of “unknown risks†– people without risk factors in their background or personal records – increased by the 1970s. These people were targeted because of their anti-Soviet behaviour, which the KGB attributed to “contagious†foreign influences and the spread of harmful values.
    Keywords: coercion, communism, preventive repression, security, social norms, surveillance, Soviet Union JEL Classification: N44, P37
    Date: 2023
  2. By: Jonas M. Bruhin; Rolf Scheufele; Yannic Stucki
    Abstract: We quantify the economic impact of Russia’s invasion of Ukraine on Germany, the United Kingdom, France, Italy and Switzerland using data on historical geopolitical events. Applying a structural VAR approach based on sign and narrative sign restrictions, we find that the war has exerted a notable drag on real activity and has pushed inflation up considerably. For example, a counterfactual exercise suggests that in Germany, GDP would have been 0.7 percent higher and the CPI 0.4 percent lower in 2022Q4 if Russia had neither attacked nor threatened Ukraine. The negative consequences of the war are likely to be far greater in the medium-to-long term, especially with regard to the real economy.
    Keywords: Geopolitical risk, structural VAR, narrative sign restriction, war in Ukraine, Russia, Europe
    JEL: C1 E32 H56
    Date: 2023–08–02
  3. By: Christopher A. Hartwell; Paul M. Vaaler
    Abstract: Research on politically motivated unrest and sovereign risk overlooks whether and how unrest location matters for sovereign risk in geographically extensive states. Intuitively, political violence in the capital or nearby would seem to directly threaten the state's ability to pay its debts. However, it is possible that the effect on a government could be more pronounced the farther away the violence is, connected to the longer-term costs of suppressing rebellion. We use Tsarist Russia to assess these differences in risk effects when unrest occurs in Russian homeland territories versus more remote imperial territories. Our analysis of unrest events across the Russian imperium from 1820 to 1914 suggests that unrest increases risk more in imperial territories. Echoing current events, we find that unrest in Ukraine increases risk most. The price of empire included higher costs in projecting force to repress unrest and retain the confidence of the foreign investors financing those costs.
    Date: 2023–09
  4. By: Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
    Abstract: This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.
    JEL: D22 D24 J08 O4
    Date: 2023–08
  5. By: Wilson, William W.; Bullock, David W.; Lakkakula, Prithviraj
    Abstract: The Russian invasion of Ukraine disrupted the grain flows from that region and worldwide. These changes are critical due to the war’s influence on logistical costs, routes and capacities. As a result of the invasion, Ukraine has evolved from having some of the lowest logistical costs in the world to having the highest logistical cost. Logistics are critical for international competitiveness in commodities, and due to the invasion, these functions have been severely affected. Essential features for a logistical competition include internal logistical functions and costs, quality, port capacity and ocean shipping costs, each compounded by seasonal demands. This paper’s purpose is to analyze the effects of the Russian invasion on the logistical functions and the costs for corn exports from Ukraine and its competitors using an optimized Monte Carlo simulation model. The findings indicate that before the invasion, Ukraine had logistical advantages for shipments to the European Union (EU) and was highly competitive in Indonesia and China; the United States had a logistical cost advantage over Ukraine to serve China, South Korea (from the U.S. Gulf) and Japan (from the Pacific Northwest (PNW)). The changes due to the invasion are substantial. Most important is the radical increase in shipping costs from Ukraine, reduced port capacity and export supplies. However, concurrent with the invasion were changes in some critical trade and marketing policies, thus influencing the international competition for corn.
    Keywords: Crop Production/Industries, International Development, International Relations/Trade
    Date: 2023–09–22
  6. By: Svilena Mihaylova (University of Economics Ð Varna)
    Abstract: Given the pronounced income disparities in the Bulgarian economy, the paper explores wage inequality across economic sectors, occupational groups and districts in the country between 2008 and 2021. Using the between-group component of the Theil's T Statistic, the analysis reveals an overall upward trend in the evolution of wage inequality across sectors, occupational groups and districts. The largest positive contributor to inter-sectoral wage inequality is the highest paid information and communication sector. In terms of the wage disparities between occupational categories, the group of the managers has the largest weight. Finally, at a district level, the capital is the greatest positive contributor to between-district wage inequality, due to offering the highest average wage, accounting for around one third of the employment in the country and boasting a concentration of the highest-paid economic activities.
    Keywords: income distribution, wage inequality, regional disparities
    JEL: E24 J31 R12
    Date: 2023–09
  7. By: von Soest, Christian
    Abstract: Based on current literature, this paper analyses the nature and effects of external pressure imposed on authoritarian regimes. Around three-quarters of all countries under United Nations, United States, and European Union sanctions are authoritarian, and 'democracy sanctions' that aim at improving democratic and human rights in targeted countries constitute the biggest sanctions category. Yet, authoritarian regimes represent particularly problematic targets as they can more easily shield themselves from external pressure than their democratic counterparts can. Authoritarians have a tighter grip on the public discourse and the struggle over the meaning of sanctions. They often even use them to their own advantage, denouncing sanction senders as 'imperialist' and blaming them for their economic woes. The paper presents trends in the application of sanctions pressure against authoritarian regimes, reviews mechanisms of how economic and diplomatic restrictions work, and examines authoritarian targets' attempts to engage in pressure proofing.
    Keywords: Authoritarian regimes, external pressure, sanctions, rally-round-the-flag effect, pressure proofing
    Date: 2023
  8. By: Kimberly Scharf (University of Nottingham); Oleksandr Talavera (University of Birmingham); Linh Vi (Aston University)
    Abstract: We employ a sample of nearly 40, 000 gender-targeted online job vacancies in Vietnam from February 2019 to July 2020 to investigate gender differences in returns to physical attractiveness. In particular, we compare the monthly offered wage in matched vacancies with and without beauty preferences of the same characteristics among job ads directed at men and women separately. We find evidence that better-looking women enjoy a wage premium of 3.7 percentage points, whereas better-looking men do not. Further analysis shows that the gender differences in returns to beauty are mainly driven by gender role attitudes and the perceived lack of fit rather than productivity-enhancing effect or employers' negligence in job postings.
    Keywords: FinTech; physical attractiveness, online vacancies, gender, beauty premium
    JEL: J16 J23 J24 J71
    Date: 2023–09
  9. By: Thorvaldur Gylfason; Jean-Pascal N. Nganou
    Abstract: Economic diversification has gained significant attention as a crucial factor for sustainable development worldwide. This paper addresses the risks associated with extreme specialisation and explores the potential benefits of economic diversification for Mongolia. By comparing Mongolia with its designated aspirational and structural peers, the paper aims to shed light on strategies that can foster economic and societal diversification in the country. Although Mongolia possesses favourable levels of human capital compared with its peers, its unusually high ratio of natural capital to human capital highlights the necessity of reducing reliance on natural resources and promoting human capital-intensive economic activities. The paper examines the implications of declining demand for Mongolia's key minerals, primarily coal, resulting from climate change concerns and evolving investor preferences towards sustainability, China's coal consumption reduction goals, and the enduring impact of the COVID-19 pandemic. Through this analysis, the paper offers insights into pathways for Mongolia to diversify its economy and enhance the well-being of its people by striking a balance between natural resources and human and social capital.
    Keywords: Economic growth, Economic diversification, Natural resources, Human capital, Social capital, Governance, Democracy, Transition
    JEL: O11 O13 O15
    Date: 2023–09
  10. By: Bachev, Hrabrin
    Abstract: The process of turning wastewater treatment plant sludge from "waste into good (product)" is conditioned by various social, economic, technological, agronomic, personal, etc. factors, an important place among them is occupied by the institutional structure in which the related agents carry out their activities and relationships. Institutional Environment and Institutions of Governance provide opportunities and set constraints for agents in the chain, structure and determine their behavior and activity, and ultimately (pre)determine the effectiveness and the degree of use of sludge in agriculture. In this study, the interdisciplinary methodology of the New Institutional Economics is adopted and an analysis and assessment of the institutional structure of WTP sludge utilization in Bulgarian agriculture is made. The study found that over the last two decades, the institutional structure (regulatory framework, public, private, market and hybrid forms) of sludge utilization in Bulgarian agriculture has significantly improved. As a result, great progress has been observed in the agricultural use of sludge in the country. At the same time, uneven and unsustainable development of this process was found in the different regions of the country. Therefore, all factors limiting the behavior of the associated agents and leading to these fluctuations in sludge utilization are to be identified. In view of their relevance, interdisciplinary studies and evaluations of the institutional structure and factors of sludge utilization in agriculture have to be expanded and enriched. However, for this, it is necessary to collect a new type of micro and macro information from all interested parties, including through the official system of agro-statistics in the country and the EU. In view of the leading role of public intervention in this area, a new national strategy for the utilization of WTP sludge is to be developed, reflecting modern conditions and social priorities, and special measures be taken to support the interested parties, including farmers with tools of CAP. Trends in the development of the institutional structure and the utilization of sludge in other EU countries must also be studied to assess where Bulgaria is and where efforts are to be focused in the future.
    Keywords: sludge, wastewater treatment plants, utilization, agriculture, institutional environment, institutions of governance, Bulgaria
    JEL: Q12 Q13 Q15 Q16 Q18 Q2 Q4 Q5 R0
    Date: 2023
  11. By: MT Musakwa (University of South Africa); N.M. Odhiambo (University of South Africa)
    Abstract: This study investigates the impact of foreign capital inflows on poverty in Vietnam, using annual time series data from 1990 to 2018. The study was motivated by the need to establish if burgeoning foreign capital inflows in Vietnam can support the poverty alleviation agenda. Foreign direct investment (FDI) and external debt were used as proxies for foreign capital inflows; and infant mortality rate, Human Development Index (HDI) and household consumption expenditure were used as poverty proxies. Using the autoregressive distributed lag (ARDL) approach, the study found foreign direct investment to reduce poverty in the short run and long run when household consumption expenditure was used as a poverty measure. However, the study found FDI to worsen poverty in the short run when infant mortality rate and HDI were used as poverty proxies. The study found external debt to have poverty mitigating effect in the short run regardless of the poverty measure used and in the long run only when household consumption expenditure was used as a poverty measure.
    Date: 2021–10

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.