Market Reforms Research Articles

Adjustments in VAT rates and business innovation: Empirical insights from China

China aims to alleviate corporate financial pressures and encourage high-quality economic development through initiatives such as value-added tax (VAT) rate reform. This study employs the difference-in-difference (DID) approach to investigate the effect of the 2017 VAT rate reform on corporate innovation, taking the reform as a quasi-natural experiment. We find that the VAT rate reform has significantly promoted firm innovation and that increasing profitability serves as the primary channel. The innovation-promoting effects of the VAT rate reform are most prominently seen in a number of different types of businesses: those with lower intermediate input ratios, those operating in less monopolistic industry environments, state-owned enterprises, non-exporting businesses, entities with limited financial resources, and companies located in non-eastern China. This study makes a case for tax reforms in other nations as well as a reference for China's market-oriented reform and further VAT reform.

Relations between central and regional executive authorities in the context of preparation for radical market reforms in Russia at the end of 1991

The paper examines the features of interaction between the central government and the regions within the RSFSR (oblasts, krais), the status of which implied direct subordination of the regional authorities to the central government, at the final stage of the Soviet Union. A detailed analysis of the first steps in creating the institute of presidential representatives, as well as the problems that hampered its functioning, is carried out. The results obtained are correlated with the main tasks of «shock therapy» to assess the conditions for implementing radical market reforms. The formulation of the problem and revision of the existing scientific concepts based on the inclusion of sources that have not been previously introduced into scientific circulation predetermine the scientific novelty of the work. An appeal to the office documentation of government bodies made it possible to identify a vast discrepancy between law enforcement practice and the legislation in force during the period under study in matters of organizing the work of the executive vertical. The regions within the RSFSR were excluded from the unified management system, and the policy of the leadership of the territories and regions turned out to be inconsistent with the general state course. An attempt to overcome this problem by creating an institution of presidential representatives by the end of 1991 did not yield significant results, since it did not receive the necessary personnel, organizational and resource support. It did not allow the country's leadership to overcome the trends of destruction of a unified economic space and increased social tension. Under these conditions, the success of the government's stabilization and reform efforts turned out to be unattainable in the short term.

Optimization method for renewable energy investment planning in the electricity carbon coupling market environment considering economy

China is developing rapidly in renewable energy development, electricity market reform, and carbon market construction, using market mechanisms for efficient planning and investment. The electricity and carbon markets are interrelated for market entities. This context has led to a dual-level optimization model for renewable energy investment planning, considering cost recovery and new power system goals. The model includes deriving electricity carbon coupling quotations for conventional units based on dynamic carbon emission characteristics and proposing an electricity spot market mechanism influenced by carbon quota trading. The model’s upper level maximizes renewable energy investment capacity, determining its size and location, while the lower level simulates electricity spot and voluntary emission reduction market trading to guide investment decisions. The model transformed into a mixed integer linear programming problem for optimal solutions was validated numerically, examining various factors affecting optimal renewable energy investment capacity.

Labour market reforms, institutional complementarity and the insider–outsider wage gap

Abstract This article provides long-term evidence on how wage differentials between permanent and temporary workers are shaped by institutions that play a key role in labour market dualism, i.e. industrial relations, employment protection legislation and unemployment benefits. A two-step multilevel approach with fixed effects is employed using EU-SILC data for 25 European countries spanning up to 17 years (waves 2004–2020, N = 397) to estimate the moderating effects of several institutions and their interactions on the wage gap by contract type and across the whole wage distribution. The results show that more insider-oriented institutions tend to widen wage differentials and that the impact of institutional reforms on the wage gap varies greatly with the given institutional context. Overall, policy trends towards flexibilization risk widening insider–outsider divides due to accumulating labour market risks for temporary workers, thus increasing labour market segmentation by contract type.

Flexible labor, innovation regimes and the erosion of the Japanese model: Evidence from the Basic Survey on Wage Structure

Due to labor market reforms around 2003–4, Japan has a growing group of ‘non-regular’ workers who are easy to fire, and have poor carrier perspectives. This marks a break with the traditional Japanese model of life-time employment that allowed for intensive in-company training and commitment of personnel. Drawing from a national wage structure survey, we find indications that employment of non-regular workers has a negative impact on productivity (proxied by wages), this negative impact being largest under innovation regimes that require a high cumulativeness of knowledge. Our findings are consistent with neo-Schumpeterian research in Europe which concluded that certain labor market rigidities, while being undesirable from a neoclassical perspective, can be useful to innovation. Our paper confirms the impression from earlier research that structural reforms of labor markets along supply-side lines are likely to be one of the reasons for a substantial decline of productivity growth in major OECD countries since about 2004/05.

Energy, economic, and environmental impacts of electricity market-oriented reform and the carbon emissions trading: A recursive dynamic CGE model in China

Electricity market-oriented reform and carbon emissions trading, as the main policies implemented in China's power sector, have a profound impact on China's green and low-carbon transition by promoting resource allocation efficiency and internalizing external environmental costs, respectively. Therefore, this paper constructed a dynamic recursive CGE model to measure the energy, economic, and environmental impacts of carbon emissions trading and electricity market-oriented reform from electricity market structure and pricing mechanism. The results show that the two policies have a synergistic effect on industrial structure optimization, energy consumption structure optimization, and carbon emission reduction. Specifically, the share of value-added of the tertiary sector, the growth rate of coal consumption, the share of thermal power consumption, and carbon emissions in 2030 are reduced by 5.70 %, 18.29 %, 2.55 %, and 2.838 trillion tons, respectively, compared with the scenario without carbon emissions trading and electricity market-oriented reform. However, imperfectly competitive market structures outperform perfectly competitive market structures in energy consumption structure and carbon emission reduction. Electricity price regulation is also more beneficial to GDP growth and increase in residential disposable income compared to price liberalization. To this end, returning emission trading scheme revenues to residents can effectively mitigate the adverse impacts caused by market-oriented reforms.

Financial sector development and industrialization: lessons and prospects for Ethiopia

ABSTRACT A functional and efficient financial sector is essential for the industrial advancement of a nation. In the context of Ethiopia’s rapidly growing economy, this study examines the limitations imposed by its underdeveloped financial sector on the country’s economic advancement and explores viable policy interventions. Characterized by state-owned bank dominance, a scarcity of non-bank financial institutions, and deficient infrastructure, Ethiopia’s financial system perpetuates widespread financial exclusion. This exclusion hinders industrial transformation, stifles local business growth, and narrows financing avenues for foreign entities. Insights from China’s shift toward market-oriented financial reforms and Kenya’s fintech innovations suggest a path for Ethiopia involving clear, gradual reforms. Strategic steps could include diversifying financial institutions, improving financial infrastructure, advancing mobile payment solutions, and adopting more versatile financing methods to address the financial challenges of industrialization.

Transformation of the Ukrainian Stock Market: A Data Properties View

This paper investigates the evolution of the Ukrainian stock market through an analysis of various data properties, including persistence, volatility, normality, and resistance to anomalies for the case of daily returns from the PFTS stock index spanning 1995–2022. Segmented into sub-periods, it aims to test the hypothesis that the market’s efficiency has increased over time. To do this different statistical techniques and methods are used, including R/S analysis, ANOVA analysis, regression analysis with dummy variables, t-tests, and others. The findings present a mixed picture: while volatility and persistence demonstrate a general decreasing trend, indicating a potential shift towards a more efficient market, normality tests reveal no discernible differences between analyzed periods. Similarly, the analysis of anomalies shows no specific trends in the market’s resilience to the day-of-the-week effect. Overall, the results suggest a lack of systematic changes in data properties in the Ukrainian stock market over time, possibly due to the country’s volatile conditions, including two revolutions, economic crises, the annexation of territories, and a Russian invasion leading to the largest war in Europe since WWII. The limited impact of reforms and changes justifies the need for continued market reform and evolution post-war.

Internal migrants, skill complementarity and wage premium for local workers: a micro econometric analysis of Chinese households

China’s rapid urbanization has been driven by large-scale internal migrants, and it is worth exploring the impact of internal migrants on local labor markets. Based on data from China’s population census, population sample survey and urban household survey, this study empirically tests the wage premium effect of internal migrants on local labor, and further investigates the mechanisms of wage premium from skill complementarity, as well as the policy adjustment effect of labor market reforms. The results show that: (1) The wage premium effect originating from migrants is significant, and gradually decreases over time and with the increase of local worker wages. (2) The wage premium effect is more prominent in large cities, mega and super-sized cities, which can be explained by economic agglomeration and division of labor induced by skill complementarities. (3) Labor market-oriented reforms contribute to enhancing the wage premium effect, with marginal effects of 3.71% and 3.64%.

The Role of Corruption, FDI, and Unemployment in ASEAN-5 Economic Growth

Corruption is a global issue that remains unresolved to this day. It can lead to a decrease in investment and inefficiency in government spending allocation, impacting economic growth. Therefore, controlling corruption is a crucial issue that cannot be underestimated. This study uses panel data from 2012 to 2022 in ASEAN-5 countries (Indonesia, Malaysia, Vietnam, Laos, and Thailand). The method used is panel data regression with a fixed-effect model (FEM). The results indicate that foreign direct investment (FDI) has a significant positive effect on economic growth, while the corruption perception index and unemployment have no significant impact in the ASEAN-5 countries. This study suggests that promoting FDI is key to ASEAN-5's economic growth. Additionally, addressing corruption and unemployment through governance and labor market reforms is also crucial for sustainable development in the region.

IPO suspensions and labor employment decisions: Evidence from China

The Chinese regulator occasionally suspends all initial public offerings (IPOs) to maintain stability in the capital markets and facilitate capital market reform. These suspensions temporarily prevent firms that have obtained IPO approval from going public. We hypothesize that this suspension-induced listing delay influences firms’ labor employment decisions. Consistent with this argument, we find that a suspension-induced listing delay is associated with an increase in labor costs, both in terms of total and average employee payments. This positive relationship is more pronounced for human capital-intensive firms and non-state-owned enterprises. We also find that there is an increase in employment and employee turnover for firms facing suspension-induced listing delays. Moreover, IPO suspensions result in lower labor productivity and firm performance. Overall, our results indicate that government policy uncertainty leads firms to incur high labor costs and reduces capital allocation efficiency.

Dynamic interaction between permanent and temporary employment across manufacturing labor markets in the Mexican states: A structural panel VAR approach

México’s implementation of several labor market reforms aimed to stimulate the flexibilization of labor relationships have brought long-standing concerns among scholars and governmental authorities about a displacement process of permanent by temporary jobs. In this regard, this manuscript aims to respond whether the dynamic interaction between permanent and temporary employment across Mexican states describe a substitution or complementary relationship. By means of implementing a structural panel vector autoregressive model, our estimation results demonstrate that a combination of both types of interaction, substitutive and complementary ones, prevail across manufacturing labor markets at state level. Moreover, a marked heterogeneity among estimated dynamic responses suggests that incentivizing permanent employment would induce stronger substitution effects on its temporary counterpart than, for example, substitution of permanent job positions arising when incentivizing temporary employment.

Design of distributed trading mechanism for prosumers considering the psychological gap effect in community electricity markets

With the large-scale customer-side development of distributed energy and continuous advancements in power market reform, the market-oriented trading of distributed power generation with the participation of prosumers has gradually become an important solution to promote the consumption of distributed energy. In addition, prosumers exhibit obvious bounded rationality characteristics; therefore, the design of efficient and reasonable trading mechanisms determines the efficiency of the market. From this perspective, a distributed electricity market trading mechanism based on the Stackelberg game is proposed for the community electricity trading market, with multiple prosumers participating in the distribution side. Firstly, the trading architecture of the community electricity market was established under the distribution network level. Secondly, the pricing strategy of the distribution network operator and the quantitative strategy of community prosumers were analysed; on this basis, the characteristics of the bounded rationality of prosumers were considered, and the impact of the psychological gap effect of prosumers on their energy utility was introduced into the objective function of prosumers. This facilitated the construction of a Stackelberg game model in which distribution network operators lead and community prosumers follow. Thirdly, the Stackelberg equilibrium was proven to exist and be unique, which was then solved by the distributed algorithm – combining the evolutionary algorithm and quadratic programming – which improves the solution efficiency and effectively protects the privacy of prosumers. Finally, the effectiveness and feasibility of the proposed trading mechanism were verified through numerical examples.

The Role of Trade Unions in the Privatization of Auxiliary Jobs in the Croatian Public Sector

The aim of this article is to show the unconstitutional role of public sector trade unions in the restructuring of the Croatian public sector. The Constitutional Court of the Republic of Croatia rejected all referendum proposals of the trade unions that blocked the process of restructuring the public sector, pointing out to them that such blanket bans may restrict or prevent changes without which there will be no progress in the implementation of the necessary economic, social, political and administrative reforms, and thus no progress of society itself. The public sector unions have proven to be major opponents of all market reforms that Croatian society and the state should implement. The paper also analyzes the importance of the new public administration that creates the conditions for the implementation of Article 49 of the Constitution of the Republic of Croatia: " Entrepreneurial and market freedom are the basis of the economic structure of the Republic of Croatia.". A SWOT analysis of the privatization of auxiliary technical professions is also presented.

A lost land of opportunity? The geography of intergenerational educational mobility in China

AbstractDespite the significant political, economic and geographical diversity in China, there is limited research on spatial differences in intergenerational mobility in China. This research aims to fill this gap by exploring the spatial and temporal dimensions of intergenerational educational mobility in China. The data used for the analysis is the 2010–2018 China Family Panel Studies (CFPS), a nationally representative longitudinal general social survey. The analysis incorporates both relative and absolute mobility measures to provide a comprehensive description of intergenerational educational mobility. The results reveal substantial regional differences in intergenerational educational mobility across various economic zones in China, with a rising geographic inequality over time. The southwest and northeast regions stand out as the areas where the educational prospects of the young generation have become not only bleaker but dependent more on their parents. Additionally, this study presents the first education Great Gatsby Curve for China, highlighting the strong relationship between intergenerational mobility and education inequality at the regional level, particularly after China's market reform. The findings highlight the need for regionally targeted policies and levelling up agendas to promote educational opportunities in low‐mobility regions.

Measurement and Influencing Factors of Regional Economic Resilience in China

The COVID-19 outbreak in 2020 has underscored the paramount importance of regional economies’ capacities to withstand and adapt to external shocks. Enhancing regional economic resilience and mitigating the adverse impacts on both the economy and society have emerged as critical imperatives for ensuring the sustainable development and transformation of the national economy. This paper employs an improved counterfactual method to measure the economic resilience index across 31 Chinese provinces and cities from 2001 to 2021, coupled with empirical analysis using a dynamic panel model to identify the influencing factors of regional economic resilience. Building upon this foundation, the study delves into the heterogeneous effects of various factors and different degrees of marketization on economic resilience across different regions. Research Findings: (1) There has been a significant improvement in the economic resilience levels of China’s 31 provinces, with differences in economic resilience between regions far exceeding those in economic development levels, indicating substantial internal regional disparities. (2) Factors such as the marketization index, industrial structure, level of informatization, labor force size, labor quality, innovation capacity, and degree of government intervention all impact regional economic resilience and exhibit regional heterogeneity. Policy Recommendations: (1) It is crucial to address regional disparities while formulating regional development strategies and enhancing regional economic resilience. (2) Regions should accelerate market-oriented reforms, promote rational labor mobility, strengthen investment in human capital, foster innovation, and adjust the degree of intervention.

Who adjusts? Exchange rate regimes and finance versus labor under IMF programs

AbstractWho adjusts under International Monetary Fund (IMF) programs and why? In this paper, I demonstrate that labor groups adjust when there is a fixed exchange rate regime and international financial groups are strong enough to defend the peg. In that case, the Fund substitutes currency devaluation with lowering labor costs via labor market reform. Lower wages are used to increase competitiveness and support exports. In other words, the Fund makes labor ‘cheaper’ through its labor market reform when money cannot be made ‘cheaper’ due to strong international financial interests. To test this theory, I use a mixed-method approach. I complement the case comparison of Latvia and Hungary in 2008–two very similar cases except for their exchange rate regime and the influence of international finance on their economy–with a large-N study using a global sample of IMF borrowers over the years 1989 and 2014. The paper shows that international organizations such as the IMF might amplify the voice of the strong (financial interests) while making the ‘weak’ (labor groups) weaker via their conditionality.

Chinese Economic Outlook: Unemployment Changes and Sector Shifts

A vivid image of the future of the Chinese economy proves essential in navigating the complex future of the Chinese economy. Under the impacts of the prolonged quarantine in China and the nation’s strong recovery in the high-tech sector following large financial market reforms, the future of the Chinese economy becomes increasingly uncertain with the likeliness of a period of expansion as well as development to redistribute sectors within the Chinese economy. With seemingly contradictory trends of development, such forecasts become increasingly urgent. In this study, through the statistical exploitation of the unemployment rate of China, coupled with policy and economic analysis of the nation, this paper sought to determine the future of the Chinese economy through both structural perspectives and its overall trend, shedding light on some of the ambiguity of the future. Although the forecast of unemployment proved to be flat under the exploitation of two different models following manipulation and testing of the data, news, and policy generated other insights from which a more accurate and specific conclusion regarding the Chinese economy can be derived. Finally, the research explores in detail the implications of the alternations in the Chinese economy.

A Critique of the Discursive Turn of Australian Multicultural Policy in the Globalisation Era

This article examines the changing discourses of Australian multicultural policy from the late 1990s until now and discusses their ideological significance under the twin-frames of globalization and Australian political culture. By systematically analyzing the series of policy papers launched by successive governments, it becomes clear that the multicultural policy has completed a discursive turn, deviating from its progressive trajectory of cultural diversity and substantive equality to suit the neo-conservative agenda of national unity and economic productivity. While the strengthened national identity based on the civic model corresponds with the surging tide of social conservatism, the shrinking government funding in this policy area and the utilitarian perception of cultural diversity are tied up with market-oriented reforms, indicating the government's shifting interests from minimizing the existing cultural barriers to maximizing cultural dividends through diversity management strategies.

The Second-Round Effects of the Agriculture Value Chain on Farmers’ Land Transfer-In: Evidence from the 2019 Land Economy Survey Data of Eleven Provinces in China

In the context of the separation of three rights of land and agricultural modernization, this paper is based on the land economic survey data from eleven provinces in China in 2019, covering the eastern, middle, and western regions of China. Based on the value chain theory and its “second-round effect”, which pertains to the multi-round effects of value chain distribution theory, various research methods such as Probit, Tobit, the two-part model, SFA, PSM, and the intermediary effect model are employed to analyze the direct impact of the agriculture value chain (AVC) on farmers’ land factor inputs and the income effects caused by them, which are the “second-round effect” of the AVC on land factor inputs. The research results show the following: Firstly, the AVC has a significant positive impact on the behavior and area of farmers’ land transferring-in, which helps guide farmers towards large-scale land operation. Secondly, the AVC significantly improves farmers’ production efficiency and promotes land transfer through differences in production efficiency, representing the “second-round effect” mechanism of the AVC on land factor inputs. Moreover, the AVC will increase farmers’ net land production income by 48.74%, which is the “second-round effect” of the AVC on farmers’ agricultural income and also the motivation for farmers’ land factor inputs. Finally, the expansion of land area and the improvement of production efficiency jointly increase farmers’ agricultural income, among which production efficiency plays a partial intermediary effect in increasing agricultural income if farmers join the AVC. This paper believes that we should further promote the market-oriented reform of land factors, support the innovation of the benefit linkage mechanism of the AVC, and promote appropriate areas of land operation by farmers, thereby achieving common prosperity and promoting agricultural modernization in China.