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on Transition Economics |
| By: | Dang, Hai-Anh H. |
| Abstract: | Viet Nam's goal for high-income status by 2045 requires roughly 5.5% annual growth in income per capita, versus 5% historically. We offer thoughts on whether artificial intelligence (AI) can supply the missing margin. Reviewing the growing AI literature, we find that appropriate policies are instrumental. Viet Nam has several advantages, including scoring a high score above what its income predicts on government AI readiness and its AI diffusion rate is rising faster than in any other low-income or middle-income economy. Borrowing results from existing cross-country evidence on digital adoption, we construct three tentative growth scenarios on AI adoption. Broad and deep adoption could help the country reach its goal earlier than the baseline without any adoption. Realizing that dividend depends on four priorities: teachers first, electricity and Vietnamese-language data, an open-source latecomer strategy reaching millions of small firms, and institutions that pay for talent. These findings can be relevant to other developing countries. |
| Keywords: | AI, middle-income, growth, poverty, inequality, Viet Nam |
| JEL: | H00 I3 O1 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1811 |
| By: | Daniel Suva (Institute of Economic Studies, Faculty of Social Sciences, Charles University) |
| Abstract: | This paper revisits the empirical evidence on multinational profit shifting using a unique confidential administrative dataset from the General Financial Directorate of the Czech Republic, which includes firm-level Country-by-Country Reporting from every international enterprise operating in Czechia. The analysis reveals a shift in the selection of profit-shifting destinations in recent years. Between 2016 and 2023, the share of global profits shifted into European profit centres decreased from 78.7% to 40.9%, while Caribbean destinations rose in importance. Additionally, our results affirm the emerging pattern in contemporary literature, in which micro-level datasets systematically yield more conservative estimates of the magnitude of profit shifting than previous macro-level studies. Lastly, the exceptional level of granularity in our data enables us to confirm the extreme nonlinearity of the semi-elastic relationship between booked corporate profits and effective tax rates, with both logarithmic and cubic specifications emerging as the most suitable functional forms, each performing best under different conditions - cubic model capturing the proportional responses more effectively across the full distribution, while logarithmic specification better accommodates localized curvature and asymmetries at extreme tax rate ranges. |
| Keywords: | profit shifting; multinational enterprises; corporate taxation; administrative data |
| JEL: | F23 H26 H32 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_27 |
| By: | Amann, Marvin (IfW Kiel, ifo Institute); Gorodnichenko, Yuriy (University of California, Berkeley); Talavera, Oleksandr (University of Birmingham) |
| Abstract: | Why is war so economically costly? Our answer is that modern war lowers output not only by destroying productive factors, but also by making the surviving economy work less efficiently. Using uniquely comprehensive firm-level data collected during Russia's full-scale invasion of Ukraine in 2022, we document a dramatic collapse in allocative productivity in Ukraine. To sharpen identification and explore key mechanisms (including the role of war intensity, internal displacement, reallocation, and macroeconomic instability), we exploit spatial heterogeneity across Ukrainian districts and comparisons with Russian aggression in 2014 and the 2008 Global Financial Crisis. Our key policy implication is that restoring allocative efficiency--and preparing institutional arrangements that facilitate rapid reallocation in times of stress--is critical for sustaining economic capacity, defense, and national security. |
| Keywords: | geoeconomics, defense, misallocation, productivity, war, Ukraine |
| JEL: | F51 F52 D24 H56 D61 O47 O52 R12 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18895 |
| By: | Anita Baudysova (Institute of Economic Studies, Faculty of Social Sciences, Charles University); Dominik Telupil (PAQ Research); Kristina Zindulkova (Institute of Economic Studies, Faculty of Social Sciences, Charles University) |
| Abstract: | The extension of the EU Emissions Trading System to buildings, road transport, and small industry (EU ETS 2) introduces carbon pricing in sectors previously exempt from EU-wide emissions pricing while generating revenues for climate and social policies. However, higher energy prices are expected to disproportionately affect vulnerable households, particularly in Central and Eastern Europe. This paper examines the distributional impacts of ETS2 on households in Czechia, considering differences by income, heating source, and municipality size, and evaluates the potential of existing tax and welfare instruments to mitigate these impacts. Using Household Budget Survey and EU-SILC data, household-level expenditure increases under an allowance price of €55/tCO2 (2025 prices) are modeled, assuming direct effects only, full price pass-through and no behavioural responses. We confirm the regressive burden of ETS2, ranging from 1.58% of disposable income for the lowest income decile to 0.50% for the highest, even though higher-income households face the largest absolute cost increases. The heating source emerges as a major, yet often overlooked, determinant of household vulnerability, with substantially higher costs for households relying on coal and natural gas. The main contribution consists in the model of direct compensation linked to existing policy instruments, namely an increased taxpayer credit, a higher energy allowance, and automatic pension indexation. All measures have progressive distributional effects, with the combined package compensating 4.6 million households at an estimated annual fiscal cost of 13 billion CZK, approximately half of Czechia´s projected annual ETS2 revenues. The findings demonstrate the importance of accounting for heating technologies and spatial differences in assessing ETS2 impacts and show that realistic compensation mechanisms can substantially reduce adverse distributional effects while remaining fiscally feasible. |
| Keywords: | EU ETS 2, carbon pricing, transport, heating, impact on households, direct compensation, HBS |
| JEL: | Q58 H23 D12 I38 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_26 |
| By: | Pawel Chrostek; Lucas van der Velde (Group for Research in Applied Economics (GRAPE); Warsaw School Economics); Tomasz Zawisza; Piotr Żoch (Group for Research in Applied Economics (GRAPE); Wydział Nauk Ekonomicznych Uniwersytet Warszawski) |
| Abstract: | This paper analyzes earnings dynamics and inequality in Poland from 2000 to 2020 using administrative tax data as part of the Global Repository of Income Dynamics (GRID). Income grew substantially, but inequality was no higher in 2020 than in 2000, having risen through 2006 and fallen thereafter. Earnings changes exhibit pronounced deviations from normality: cyclical skewness, persistent excess kurtosis, and a hockey-stick-shaped dispersion profile across permanent income, steepest at the bottom, flat in the middle, and rising again at the top. We relate percentile-level changes in earnings and earnings growth to the minimum wage, unemployment, and GDP. Minimum-wage growth is strongly associated with gains at the bottom of the cross-sectional distribution and higher unemployment with downward shifts throughout both distributions, while associations with GDP are less stable across specifications. Poland's macroeconomic conditions are related to the location and lower tail of the cross-sectional distribution and to the cyclical asymmetry of earnings changes, while the level of individual earnings risk resembles that of mature European economies. |
| Keywords: | earnings dynamics, income inequality, earnings risk, administrative data, Poland |
| JEL: | D31 E24 E32 J31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:fme:wpaper:120 |
| By: | Vittoria Dicandia; Silvia Vannutelli |
| Abstract: | We study how firms and workers adjust when previously restricted migrants gain full and portable work rights in a labor market with substantial informality. We exploit the 2007 EU accession of Bulgaria and Romania, which granted unrestricted work rights to Italy's largest migrant group. Using matched employer–employee administrative data and an IV-DID design, we find that firms suddenly and persistently shift employment composition toward EU07 workers, compressing the native employment share without reducing native hiring or increasing separations. We don't detect any significant change in wages for either natives or EU07 workers. For migrants, this null effect reflects offsetting compositional shifts as newly observed and incumbent EU07 workers enter the formal workforce with different wage trajectories. Consistent with a shift in bargaining power toward workers, EU07 migrants experienced significant gains in job mobility and job security. Overall, the evidence suggests that removing legal restrictions reshaped firms’ personnel choices and altered migrants’ employment relationships, improving their outside options, bargaining position, and access to more secure jobs. |
| JEL: | J61 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35493 |
| By: | Ivan Dichovski (London School of Economics and Political Science, Department of Economic History); Stefan Nikolić (Loughborough University, Loughborough Business School) |
| Abstract: | Can railways promote development in late-developing agrarian economies? This article examines Bulgaria between 1880 and 1910 using newly collected settlement-level data on population growth and agricultural productivity. We employ an inconsequential-units instrumental variable strategy based on least-cost paths. Railway access increased annual population growth by 0.6 percentage points and raised grain and cash-crop productivity by around 12 and 109 kilograms per decare of sown land, respectively. Productivity gains were larger in settlements farther from major export ports, consistent with railways promoting development by facilitating agricultural commercialisation and improving access to foreign markets. |
| Keywords: | Railways, Development, Bulgaria, Growth, Agriculture, Market Access |
| JEL: | N1 N7 N9 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:hes:wpaper:0310 |
| By: | Dang, Hai-Anh H.; Do, Minh N. N.; Le, Duy-Anh |
| Abstract: | Viet Nam's timely reduction of 63 province-level units to 34 renders its number of provinces typical of countries of its size. International evidence, however, shows that savings and development gains are neither automatic nor evenly shared. Reclassifying 2002-2020 household data onto the new map leaves national measures of poverty and inequality unchanged but moves part of measured inequality from between provinces to within them. Administrative poverty rates also reveal large differences among areas now sharing one provincial budget. This essay offers tentative policy suggestions such as keeping poorer places visible, allocating resources according to need, protecting access to benefits and public services, and connecting lagging areas to jobs and markets. |
| Keywords: | administrative consolidation, provincial mergers, decentralization, poverty, inequality, modifiable areal unit problem, Viet Nam |
| JEL: | D6 H1 I3 O1 R5 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1812 |
| By: | Dániel Horn (Corvinus University of Budapest; ELTE Centre for Economic and Regional Studies); Rita Pető (ELTE Centre for Economic and Regional Studies) |
| Abstract: | Maternal job loss may deepen educational inequality by disrupting children’s schooling at critical transition points. Using linked Hungarian administrative and educational data, we compare children whose mothers experience sustained non-employment after grade 6 with those whose mothers experience it only after grade 10. Maternal job loss increases school dropout by 4.3 percentage points, relative to a mean of 6.7 percent. Its average effect on maturity-track enrollment is largely associated with increased dropout rather than track reallocation among enrolled students. The larger adverse effects observed in the top baseline maternal earnings tertile provide suggestive support for a financial mechanism, while the smaller maturity-track effects among children of more-educated mothers are consistent with a compensatory role for parental resources. |
| Keywords: | maternal job loss; school dropout; secondary-school track choice; parental education; intergenerational mobility; linked administrative data; difference-in-differences; Hungary |
| JEL: | I21 I24 J13 J62 J64 C21 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:has:discpr:2610 |
| By: | Kónya, István; Krekó, Judit |
| Abstract: | This paper examines how foreign direct investment affects the labor share through productivity differences between foreign- and domestically owned firms. We develop a search-and-matching model in which more productive foreign firms acquire domestic firms. Foreign ownership raises productivity and wages, but incomplete pass-through of the productivity advantage to workers reduces the labor share. Using European industry-level data, we find that greater foreign employment penetration is associated with lower labor shares and that the foreign productivity premium substantially exceeds the foreign wage premium. Hungarian administrative firm data show the same pattern: foreign-owned firms have higher productivity and labor costs but lower labor shares. Event-study estimates around foreign acquisitions are less precise but are consistent with this mechanism at longer horizons. Our results show how economies with a large foreign-owned sector can combine relatively high wages with relatively low labor shares and highlight persistent foreign–domestic productivity differences as a potential explanation for labor-share differences across Europe. |
| Keywords: | foreign direct investment; foreign ownership; labor share; labor productivity |
| JEL: | E25 F21 F23 J31 J42 |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:cvh:coecwp:2026/04 |
| By: | Kerler, Philipp; Petrović, Valentina |
| Abstract: | Economic grievances are central in explaining the rise of right-wing illiberalism. Grievances allow challenger parties to rally around scapegoating outsider groups, such as ethnic minorities, immigrants, or foreigners. Some research argues that continuing decline allows illiberal parties to consolidate power by entrenching and polarizing around such cleavages. However, when illiberal parties are in power and economic decline continues, we argue that, absent cultural cleavages, retrospective economic voting prevails. Zooming in on the case of Trstenik, a Serbian town with a significant industrial legacy, strongly affected by deindustrialization, we leverage data from a novel survey and semi-structured interviews in a mixed-methods approach. We document clear patterns of existing grievances and blame on the government. However, positive, hopeful interpretations also exist among affected individuals. We show that support for the illiberal right-wing incumbent Serbian Progressive Party (SNS) is positively associated with positive interpretations and negatively associated with grievances. Our study contributes an important qualifying account to current debates about the economic roots of right-wing illiberalism by highlighting the importance of scope conditions. |
| Date: | 2026–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:6rkx7_v2 |
| By: | David Zehner |
| Abstract: | This paper assesses the economic consequences of targeted Western sanctions on Belarus following the 2020 post-election crackdown. This study analyses aggregate exports alongside a specific focus on potash, a vital state revenue engine where Belarus commands 20% of global production, making it a sensitive global commodity. Utilising a Difference-in-Differences (DiD) framework and complemented by Synthetic Control Methods (SCM), the study evaluates bilateral trade flows from 2015 to 2021. The results reveal a structural asymmetry, where the initial economic shock caused a 48.5% contraction in Belarus’s aggregate exports relative to a post-Soviet control group, and potash exports remained insulated, yielding an insignificant coefficient of 0.000 relative to global peers. This divergence suggests that while comprehensive measures disrupted aggregate trade, targeted sectoral sanctions faced enforcement limits. This study contributes to literature on sanction circumvention in integrated regional markets. |
| Keywords: | sanction effectiveness, trade circumvention, Belarus, potash sector, Difference-in-Differences |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:mtk:febawb:152 |
| By: | Sebastian Koenigs (OECD); Javier Terrero-Davila (OECD) |
| Abstract: | Income mobility is often invoked as a counterweight to slow income growth and high inequality, yet conclusions on who benefits from mobility depend on the part of the income distribution examined and the metric used. Drawing on harmonised administrative records from Austria, Belgium, Estonia and Spain, we combine relative and absolute mobility metrics to study disposable income dynamics for working-age individuals along the distribution between 2017 and 2022. Those at the bottom experience markedly different income growth across countries, while those at the top experience homogeneous declines. Rank persistence varies substantially across countries, from 0.64 in Estonia to 0.79 in Spain, but top incomes are highly persistent everywhere, largely insulated from country-specific mobility dynamics. Mobility gaps by age, gender, education and place of residence also change in sign and magnitude depending on people’s starting point in the distribution. We show that different metrics can give conflicting assessments of where mobility is more favourable for those at the bottom, and that these differences are largely explained by countries' levels of inequality and aggregate income growth: more unequal or higher-growth countries need more progressive income growth to deliver comparable positional mobility and narrowing of absolute income gaps. |
| Keywords: | Income mobility; income inequality; income growth; administrative records |
| JEL: | D31 D63 H24 I30 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2026-698 |
| By: | Steare, Thomas; Rose-Clarke, Kelly; Araya, Mesele; Cueto, Santiago; Dang, Hai-Anh H.; Ellanki, Revathi; Evans-Lacko, Sara; Hammerton, Gemma; Lewis, Gemma; Yadete, Workneh; Patalay, Praveetha |
| Abstract: | Objective Adolescents’ social relationships might partly explain the increased risk of mental health problems in adolescents living in poorer economic circumstances. There are few studies in low- and middle-income countries where most of the world’s adolescents live. We investigated whether adolescents’ relationships with their parents and peers mediated the association between their economic circumstances and emotional symptoms in Ethiopia, India, Peru and Vietnam. Method We analyzed longitudinal data of 3, 529 adolescents from the Young Lives study (1, 741 female [49.3%]). Household consumption expenditure and adolescents’ subjective assessment of household wealth were measured at age 15. The mediators – adolescents’ positive relations with their parents and peers – were measured at age 19. The outcome – emotional symptoms, characterized by low mood and anxiety – was measured at age 22. Mediation was assessed through counterfactual g-computation formula, adjusting for baseline and intermediate confounders. Results We found no evidence that adolescents’ positive relations with their parents or peers mediated the association between economic circumstances and emotional symptoms in any country. Living in poorer economic circumstances was typically associated with more severe emotional symptoms. Conclusion Adolescents’ parent and peer relationships might not mediate the effects of poorer economic circumstances on emotional symptoms in these countries, contrasting with previous studies that highlight an important role in high-income countries. Further research is needed that addresses our study limitations and to also explore other potential mechanisms, including different aspects of social relationships, that might influence mental health outcomes for adolescents living in poverty across different settings. |
| Keywords: | poverty;inequalities;mediation;social relationships |
| JEL: | N0 |
| Date: | 2026–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137030 |