nep-sea New Economics Papers
on South East Asia
Issue of 2005‒05‒29
five papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods By Koichi Hamada; Asahi Noguchi
  2. Using Experimental Economics to Measure Social Capital And Predict Financial Decisions By Dean S. Karlan
  3. Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies By Koichi Hamada; Shyam Sunder
  4. Demographic Determinants of Savings: Estimating and Interpreting the Aggregate Association in Asia By T. Paul Schultz
  5. Trade, Foreign Firms, and Economic Policy in Indonesian and Thai Manufacturing By William E. James; Eric D. Ramstetter

  1. By: Koichi Hamada (Economic Growth Center, Yale University); Asahi Noguchi (Senshu University)
    Abstract: This paper examines the role of misleading economic ideas that most likely promoted the economic disasters of the two deflationary periods in Japanese economic history. Misleading ideas deepened the depression during the interwar years, and erroneous thinking prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interests of political agents as well as of voters, we highlight the role of ideas in policy making, in particular, in the field of macro-economy where the incidence of a particular policy is not clear to the public. Using two significant examples, this paper illustrates the role of preconceived ideas, in contrast to economic interests, that dominantly influenced economic policy making.
    Keywords: Preconceived ideas, perception on economic mechanism, vested interests, great depression, deflation in contemporary Japan
    JEL: B2 F4 N2
    Date: 2005–03
  2. By: Dean S. Karlan (Economic Growth Center, Yale University and Princeton University)
    Abstract: Questions remain as to whether results from experimental economics games are generalizable to real decisions in non-laboratory settings. Furthermore, important questions persist about whether social capital can help solve seemingly missing credit markets. I conduct two experiments, a Trust game and a Public Goods game, and a survey to measure social capital. I then examine whether behavior in the games predicts repayment of loans to a Peruvian group lending microfinance program. Since the structure of these loans relies heavily on social capital to enforce repayment, this is a relevant and important test of the games, as well as of other measures of social capital. I find that individuals identified as "trustworthy" by the Trust game are in fact less likely to default on their loans. I do not find similar support for the Trust game as a measure of trust.
    Keywords: trust game, experimental economics, microfinance
    JEL: B4 C9 D8 O1
    Date: 2005–04
  3. By: Koichi Hamada (Economic Growth Center, Yale University); Shyam Sunder (School of Management, Yale University)
    Abstract: This paper studies the role of transfers among groups within a country as well as among countries in a two level game of nternational trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a transfer process uses up additional resources. The difficulty of making transfers renders it less likely that a nation would find it individually rational to participate as a member of an international institution. Costly transfers render the internal and international adjustment difficult, and serve as a barrier to trade liberalization. Costly international transfers harden the resistance against trade liberalization in the (potentially) recipient country and soften it in the (potentially) donor country.
    Keywords: International trade, tariff negotiation, asymmetric Information, transfer, WTO, common agency, two-level game
    JEL: F13 H21 H71 H77
    Date: 2005–05
  4. By: T. Paul Schultz (Economic Growth Center, Yale University)
    Abstract: Life cycle savings is proposed as one explanation for much of the increase in savings and economic growth in Asia. The association between the age composition of a nation's population and its savings rate, observed within 16 Asian countries from 1952 to 1992, is re-estimated here to be less than a quarter the size reported in a seminal study, which assumed lagged savings is exogenous. Specification tests as well as common sense imply, moreover, that lagged savings is likely to be endogenous, and when estimated accordingly there remains no significant dependence of savings on the age composition, measured in several ways. Research should consider lifetime savings as a substitute for children, and model the causes for the decline in fertility which changes the age compositions and could thereby account for savings and growth in Asia.
    Keywords: Life Cycle Savings, Aging, Asian Growth, Demographic Transition
    JEL: D91 J11 O11 O53
    Date: 2004–12
  5. By: William E. James (Nathan Associates, Inc.); Eric D. Ramstetter (International Centre for the Study of East Asian Development and Kyushu University)
    Abstract: This paper first examines the rapid growth and changing composition of manufactured exports in Indonesia and Thailand, highlighting the rapid growth of office and computer machinery and electric machinery, somewhat slower growth of non-electric and transportation machinery, as well as the low growth of previously large exports of textiles apparel. Second, the important contributions of foreign multinational enterprises (MNEs) to export growth in the machinery industries, particularly in electric, office, and computing machinery, are documented. Third, the paper describes trade policies in all these industries in some detail, emphasizing how low protection was a key facilitator of rapid export growth in the MNEs that dominated the electric, office, and computing machinery industry, while high protection reduced incentives to export among MNEs in the transportation machinery industry.
    JEL: F13 F14 F23
    Date: 2005–05

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