Showing papers in "Comparative Economic Studies in 2007"
671 citations
TL;DR: In this paper, the authors studied the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries and showed that house prices can be explained well by the underlying conventional fundamentals and some transition specific factors, in particular institutional development of housing markets and housing finance and quality effects.
Abstract: This paper studies the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, housing credit and demographic factors, have driven the observed house prices in CEE. We show that house prices in CEE can be explained well by the underlying conventional fundamentals and some transition specific factors, in particular institutional development of housing markets and housing finance and quality effects.
296 citations
214 citations
TL;DR: In this article, it is argued that the former can be best explained as adverse supply shock caused mostly by a change in relative prices after their deregulation due to distortions in industrial structure and trade patterns accumulated during the period of central planning, and by the collapse of state institutions during transition period, while the speed of liberalisation, to the extent it was endogenous, determined by political economy factors, had an adverse effect on performance.
Abstract: This paper starts by separating the transformational recession (reduction of output in most transition economies in the first half of the 1990s) from the process of economic growth (recovery from the transformational recession) in 28 transition economies (including China, Vietnam and Mongolia). It is argued that the former (the collapse of output during transition) can be best explained as adverse supply shock caused mostly by a change in relative prices after their deregulation due to distortions in industrial structure and trade patterns accumulated during the period of central planning, and by the collapse of state institutions during transition period, while the speed of liberalisation, to the extent it was endogenous, that is, determined by political economy factors, had an adverse effect on performance. In contrast, at the recovery stage the ongoing liberalisation starts to affect growth positively, whereas the impact of pre-transition distortions disappears. Institutional capacity and reasonable macroeconomic policy, however, continue to be important prerequisites for successful performance.
170 citations
TL;DR: In this paper, the authors examined the evolution of contract farming and explored the incentives to engage in contract farming, preferred contract forms and contract performance from the perspective of both Chinese farmers and contracting firms.
Abstract: Contract farming in China has grown rapidly over the past 10 years. This paper examines the evolution of contract farming, and explores the incentives to engage in contract farming, preferred contract forms and contract performance from the perspective of both Chinese farmers and contracting firms. Firm and household perceptions of contracting are assessed using data obtained from village- and firm-level surveys. Farmers identify price stability and market access as the key advantages to contracts, while firms consider improved product quality as the primary incentive to use contracts.
97 citations
87 citations
TL;DR: In this article, the effects of foreign direct investment (FDI) inflows on exports in 12 Central and Eastern European (CEE) economies for the period between 1996 and 2004 were investigated.
Abstract: We estimate the effects of foreign direct investment (FDI) inflows on exports in 12 Central and Eastern European (CEE) economies for the period between 1996 and 2004. We separate the effects of FDI into supply capacity-increasing effects and FDI-specific effects. The supply capacity-increasing effects arise when FDI inflows increase the host country's production capacity, which, in turn, increase export supply potential. The FDI-specific effects arise because the multinational company may have superior knowledge and technology, better information about export markets, or better contact to the supply chain of the parent firm than do local firms. Our empirical results indicate that, for all countries in our sample, FDI has increased domestic supply capacity and hence exports. However, FDI-specific effects on exports are observed only in the new member states of the European Union.
85 citations
77 citations
TL;DR: In this article, a data set of banks' bilateral foreign assets and liabilities provided by the Bank for International Settlements is used to answer the question: "Has the introduction of the Euro fostered financial integration in Europe?"
Abstract: Has the introduction of the Euro fostered financial integration in Europe? We answer this question using a data set of banks’ bilateral foreign assets and liabilities provided by the Bank for International Settlements. The data cover the pre-Euro period (1995–1998) and the post-Euro period (1999–2005). We use information from 10 OECD reporting countries and all OECD recipient countries. Gravity regressions show a positive and significant impact of the Euro on bilateral financial linkages. This effect is stronger and more robust for banks’ foreign assets than for their foreign liabilities.
54 citations
TL;DR: The banking sectors of the transition countries have progressed remarkably in the last 15 years as mentioned in this paper, and banking in most transition countries has largely shaken off the traumas of the Transition era.
Abstract: The banking sectors of the transition countries have progressed remarkably in the last 15 years. In fact, banking in most transition countries has largely shaken off the traumas of the transition era. At the start of the 21st century banks in these countries look very much like banks elsewhere. That is, they are by no means problem free but they are struggling with the same issues as banks in other emerging market countries. There have been a surprisingly large number of studies that have told us about the performance of these banks but we know very little about their risk taking behaviour and how the banking environment influences it.
47 citations
TL;DR: In this paper, the authors compared the efficiency of banks from Western European countries and Central and Eastern European (CEE) countries to assess the performance gap between both groups of banks, and concluded that there is a gap in bank efficiency between CEE and Western Europe, and this gap was reduced between 1996 and 2000 for most CEE countries.
Abstract: This paper aims at comparing the efficiency of banks from Western European countries and Central and Eastern European (CEE) countries to assess the performance gap between both groups of banks. We measure cost efficiency on a sample of 955 banks from 17 European countries with the stochastic frontier approach. We conclude the following: (a) there is a gap in bank efficiency between CEE and Western European countries, (b) this gap was reduced between 1996 and 2000 for most CEE countries, and (c) this gap is partly explained by differences in environment, but not by differences in risk preferences.
TL;DR: The emerging literature on credit growth in transition economies has documented that lending to the private sector has recently grown dynamically in a number of transition economies, including macroeconomic stabilization, comprehensive reforms and privatization in the financial sector, the introduction of market institutions and legal reforms as discussed by the authors.
Abstract: The emerging literature on credit growth in transition economies has documented that lending to the private sector has recently grown dynamically in a number of transition economies.2 This can be attributed to a number of factors, including macroeconomic stabilization, comprehensive reforms and privatization in the financial sector, the introduction of market institutions and legal reforms. However, given the size of the recent boom in bank lending in Central and Eastern Europe (CEE) some commentators have questioned whether the growth rates recorded in these countries can be viewed as sustainable in the medium to long run.
TL;DR: This paper found that voters in new democracies do not reward election-year deficit spending, raising questions about explanations focusing on the use of election year deficits to gain votes, and suggested that the increase in election year expenditures and deficits may reflect other motives such as attempts to shore up a fragile democracy.
Abstract: We review research on political budget cycles across countries, including recent findings that they are a phenomenon of new democracies and are statistically insignificant in old, established democracies. We then consider what may account for this and review several hypotheses. Recent empirical work also finds that voters in new democracies do not reward election-year deficit spending, raising questions about explanations focusing on the use of election-year deficits to gain votes. This suggests that the increase in election-year expenditures and deficits in new democracies may reflect other motives. Specifically, it is suggested that they may reflect attempts to shore up a fragile democracy.
TL;DR: This paper reviewed the evolution of China and Russia's tax-financed public sector and found that China's fiscal budget was consistently smaller than in Russia, and their fiscal decentralisation was consistently greater.
Abstract: We review the fiscal evolution of China and Russia and how the process of creating a separate tax-financed public sector in the two countries differed. China's fiscal budget was consistently smaller than in Russia, and their fiscal decentralisation was consistently greater. In China, local governments that were allowed to keep marginal increases in local tax revenue had incentives to pursue growth-supporting policies, but the absence of financial markets and barriers to investment resulted in protectionism and inefficient use of capital. Interregional fiscal transfers from the centre provided modest fiscal equalisation in China, but not in Russia. Russia's status as a petro-state makes efficient management of the public sector particularly difficult. Rising world energy prices and resource rents have generated growing federal budget surpluses, and fiscal recentralisation has been associated with expanding state control in other areas.
TL;DR: In this article, the authors provided the first systematic analysis of the gender unemployment gap using primary data from the Czech Republic and secondary data from a few other transition economies, using a method that allows them to pinpoint which transition probabilities between labour market states are driving the difference.
Abstract: Post-communist labour markets provide a remarkable laboratory for analysing gender differences in labour dynamics and unemployment in particular, since unemployment rates rose from zero to double digit levels in a very short time. While there is much evidence explaining the wage gap between men and women, we provide the first systematic analysis of the gender unemployment gap. Using primary data from the Czech Republic and secondary data from a few other transition economies, we apply a method that allows us to pinpoint which transition probabilities between labour market states are driving the difference. The remarkable finding is that the lion's share of the gender gap in the unemployment rates in the Czech Republic, East Germany, Poland and Russia during early transition is explained by one and the same flow: women's lower probability of finding a job from unemployment. This result holds for the Czech Republic even after controlling for demographic, regional and cyclical factors that may affect gender differences in unemployment.
TL;DR: This article examined changed preschool enrolment in Kyrgyzstan and found that access plays the most important role in attendance, despite an apparent excess capacity in preschools at the national level, despite economic and cultural factors also have a significant impact on household decisions to send a child to preschool.
Abstract: Preschool can contribute importantly to human capital development, especially among poor children. In socialist countries, preschool enrolment rates have declined since transition. We examine changed preschool enrolment in Kyrgyzstan. We evaluate demand- and supply-side explanations for changing enrolments, and use household survey data to develop a simple, logit model of preschool attendance. We find that access plays the most important role in attendance, despite an apparent excess capacity in preschools at the national level. However, economic and cultural factors also have a significant impact on household decisions to send a child to preschool.
TL;DR: In this article, the authors developed an empirical specification that models this employment growth, by drawing on both the economics and international business literature, and then estimated using firm-level data from four emerging markets.
Abstract: Many foreign investment operations into emerging markets are small, and are likely to have only a limited impact on the local economy. However, host governments often expect transfer of advanced technology from multinational enterprises (MNEs) operating in these markets to local firms by way of inter-firm mobility of skilled labourers. The extent of such transfers would be limited, among other factors, by the size of the pool of skilled labourers that can potentially be mobile between MNEs and local firms. This, in turn, is determined by employment growth at the MNEs. We develop an empirical specification that models this employment growth, by drawing on both the economics and international business literature. This model is then estimated using firm-level data from four emerging markets. We find that wholly owned foreign direct investment operations have higher employment growth, while local industry and institutional characteristics moderate the growth effect. This suggests that policies encouraging foreign investors to set up in form of joint ventures may not actually raise the benefits for the host economy.
TL;DR: The authors distinguish between two different versions of the Washington Consensus: the Washington consensus proper to denote the original set of policies initiated by the father of the term and the Washingtonconsensus as a neoliberal manifesto to represent the policies identified with the term "neoliberalism".
Abstract: Williamson proposed the term ‘Washington Consensus’ to refer to the lowest common denominator of policy advice being addressed by the Washington based institutions. Owing to the considerable confusion about the term, I distinguish between two different versions of the term: the Washington Consensus proper to denote the original set of policies initiated by the father of the term and the Washington Consensus as a neoliberal manifesto to represent the policies identified with the term ‘neoliberalism’. It is demonstrated that the Shock Therapy process had some common elements with both versions of the Washington Consensus; however, there were also important differences due in large measure to the differing circumstances in transition economies and Latin American economies.
TL;DR: In this paper, the authors explored the dynamics of the transaction sector in the Bulgarian economy using the measuring strategy developed by Wallis and North in 1986 and showed an increase in transaction sector from about 37% to more than 52% of GDP.
Abstract: The paper explores the dynamics of the transaction sector in the Bulgarian economy. We use the measuring strategy developed by Wallis and North in 1986. The calculations show an increase in the transaction sector in the country within the period 1997–2003 from about 37% to more than 52% of GDP. Although this is below the size reported for other industrialised and transition economies, it indicates a fundamental institutional change within a short period of time.
TL;DR: Wang et al. as discussed by the authors viewed the Chinese economy as a speeding car and identified three types of development that could crash the car: (1) a hardware failure, which is the breakdown of an economic mechanism (analogous to the collapse of the chassis of the car), for example, a banking crisis, and (2) a software failure which is a flaw in governance that creates social disorders, such as the state not being able to meet the rising social expectations about its performance because many of the key regulatory institutions are absent or ineffective.
Abstract: Viewing the Chinese economy as a speeding car, there are three types of development that could crash the car: (1) a hardware failure, which is the breakdown of an economic mechanism (analogous to the collapse of the chassis of the car), for example, a banking crisis; (2) a software failure, which is a flaw in governance that creates social disorders (analogous to a fight among the people inside the car), for example, the state not being able to meet the rising social expectations about its performance because many of the key regulatory institutions are absent or ineffective; and (3) a power supply failure, which is the loss of economic viability (analogous to the car running out of gas or having its ignition key pulled out), for example, an environmental collapse or an export collapse. The fact that China has recently declared that its most important task is to build a Harmonious Society (described as a democratic society under the rule of law and living in harmony with nature) suggests that improvements in governance and protection of the environment are among the most serious challenges to achieving sustainable development. The greatest inadequacy of the Harmonious Society vision is the absence of an objective to build a harmonious world because a harmonious society cannot endure in China unless there is also a harmonious world, and vice versa. The large amount of structural adjustments in the developed countries generated by rapid globalisation and technological innovations has made the international atmosphere ripe for trade protectionism; and environmental degradation has made conflict over the global environmental commons more likely. China's quest for a harmonious society requires it to help provide global public goods, particularly the strengthening of the multilateral free-trade system, and the protection of the global environmental commons. Specifically, China should work actively for the success of the Doha Round and for an international research consortium to develop clean coal technology.
TL;DR: In this article, the authors argue that the contrasting experiences of China and Russia can in part be explained by the different roles that governments have played in the transition process of these countries, and they carry broader lessons for the role of the government in large-scale complex reforms.
Abstract: The different economic performance of transitioning Asia versus Central and Eastern Europe and the FSU (CEEFSU) has been arguably the most salient fact of transition. Particularly remarkable has been the contrast between China and Russia. This paper argues that the contrasting experiences of China and Russia can in part be explained by the different roles that governments have played in the transition process of these countries. China gave priority to administrative reform, aligned bureaucratic incentives at all levels with growth and development objectives, and enhanced enterprise and local autonomy while preserving the capacity of the centre to exercise control. This approach transformed government bodies into real owners of the reform process and led to privatisation over time that was largely welfare enhancing. Russia, on the contrary gave priority to economic over state restructuring. Major reforms including mass privatisation were implemented in an environment of a weak state, which did not have the capacity to protect its ownership rights and coordinate reforms. As a result, privatisation was a wasteful process associated with asset stripping and consequently with lack of legitimacy of newly established property rights. These contrasting experiences carry broader lessons for the role of the government in large-scale complex reforms.
TL;DR: In this paper, the Organization for Economic Cooperation Development (OECD) approach (adjusted) is applied to estimate the size of the non-observed economy (NOE) in Bosnia and Herzegovina for the year 2001.
Abstract: In this paper the Organization for Economic Cooperation Development (OECD) approach (adjusted) is applied to estimate the size of the non-observed economy (NOE) in Bosnia and Herzegovina for the year 2001. The method proposed attempts to identify the structure of the NOE according to the reasons behind the unrecorded value added (statistical, illegal and economic). The NOE was estimated for each of the Bosnian entities separately according to sector of activity. A definition of the shadow economy is proposed based on SNA93. A comparison with alternative estimates of shadow economies in Central and Eastern European countries is provided.
TL;DR: In this paper, trade specialisation in Russia was examined at the sectoral level over the transition period, and trade based on inter-and intra-industry trade was empirically distinguished using the Aquino and Grubel-Lloyd (GL) indices.
Abstract: This paper considers trade specialisation in Russia, examining changes in trade patterns at the sectoral level over the transition period. Trade based on inter-industry specialisation and intra-industry trade (IIT) are empirically distinguished using the Aquino and Grubel–Lloyd (GL) indices. The Aquino index is applied to measure the degree of inter-industry specialisation by sector, while the GL index is used to establish the level of IIT between industries. The empirical results support recent trade theory, which predicts an increasing level of IIT with liberalisation processes. They also suggest how inter- and intra-industry trade coexist. The econometric estimation of the factor content of Russia's exports (specialisation in resource-intensive products) supports the index analysis.