nep-sea New Economics Papers
on South East Asia
Issue of 2006‒05‒13
twenty papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Stabilization of Effective Exchange Rates Under Common Currency Basket Systems By Eiji Ogawa; Junko Shimizu
  2. The Effects of Japanese Economic Performance on Indonesia By Hakan Berument; Bengisu Vural; Baþak Ceylan
  3. The Post MFA Performance of Developing Asia By John Whalley
  4. Chronic and Transient Poverty: Measurement and Estimation, with Evidence from China By Jean-Yves Duclos; Abdelkrim Araar; John Giles
  5. Challenging Party Hegemony: Identity Work in China’s Emerging Virreal Places By Karsten Giese
  6. Production costs of pears and apples in Xinjiang (China) By Sergio Marchesini; Huliyeti Hasimu; Maurizio Canavari
  7. Farm Technology and Technical Efficiency: Evidence from Four Regions in China By Chen, Zhuo; Huffman, Wallace; Rozelle, Scott
  8. The LDP at 50: The Rise, Power Resources, and Perspectives of Japan’s Dominant Party By Patrick Köllner
  9. Evaluating fiscal equalization in Indonesia By Suharnoko Sjahrir, Bambang; Kaiser, Kai; Kadjatmiko; Hofman, Bert
  10. Macroeconomic Integration in Asia Pacific: Common Stochastic Trends and Business Cycle Coherence By Enzo Weber
  11. Thailand ' s growth path : from recovery to prosperity By Richter, Kaspar
  12. Recent and prospective adoption of genetically modified cotton : a global computable general equilibrium analysis of economic impacts By Jackson, Lee Ann; Valenzuela, Ernesto; Anderson, Kym
  13. Is There a Unit Root in East-Asian Short-Term Interest Rates? By Chew Lian Chua; Sandy Suardi
  14. Towards a Dynamic Model of the Interplay Between International Institutions By Howard Loewen
  15. Culture and Collective Action – Japan, Germany and the United States after September 11, 2001 By Dirk Nabers
  16. The Academic Achievement Gap in Grades 3 to 8 By Charles T. Clotfelter; Helen F. Ladd; Jacob L. Vigdor
  17. Testing for Structural Breaks in the Korean Economy 1980-2005: An Application of the Innovational Outlier and Additive Outlier Models By Harvie, Charles; Pahlavani, Mosayeb
  18. Getting girls into school : evidence from a scholarship program in Cambodia By Schady, Norbert; Filmer, Deon
  19. The Foreign Exchange Rate Exposure of Nations By Horst Entorf; Jochen Moebert; Katja Sonderhof
  20. Factionalism in Political Parties: An Analytical Framework for Comparative Studies By Patrick Köllner; Matthias Basedau

  1. By: Eiji Ogawa; Junko Shimizu
    Abstract: We investigate the extent to which a common currency basket peg would stabilize effective exchange rates of East Asian currencies. We use an AMU (Asian Monetary Unit), which is a weighted average of ASEAN10 plus 3 (Japan, China, and Korea) currencies, as a common currency basket to investigate the stabilization effects. We compare our results with another result on stabilization effects of the common G3 currency (the US dollar, the Japanese yen, and the euro) basket in the East Asian countries (Williamson (2005)). We obtained the following results: first, the AMU peg system would be more effective in reducing fluctuations of the effective exchange rates as more countries applied the AMU peg system in East Asia. Second, the AMU peg system would more effectively stabilize the effective exchange rates than a common G-3 currency basket peg system for four (Indonesia, the Philippines, South Korea and Thailand) of the seven countries. The results suggest that the AMU basket peg would be useful for the East Asian countries whose trade weights on Japan are relatively higher than others.
    JEL: E6 F3 F4
    Date: 2006–05
  2. By: Hakan Berument; Bengisu Vural; Baþak Ceylan
    Date: 2006
  3. By: John Whalley
    Abstract: This paper assesses the impact thus far that the termination of trade restrictions under the Multi Fibre Arrangement (MFA) which up to the end of 2004 applied to exports of clothing and textiles in key OECD markets has had on Asian suppliers. The speculation prior to MFA termination had been that large increases of Chinese exports would ensue, and at the expense of other Asian suppliers. Using data from US, EU Chinese and other sources, the picture that emerges is only small impacts on aggregate US and EU imports of clothing and textiles, and equally only small impacts on aggregate Chinese exports of clothing and textiles. There are, however, large changes in the country pattern of trade, and also within more narrowly defined product categories. There are large increases in shipments from China to both the US and the EU, and for the US proportionally more so in textiles than in clothing. But the US accounts for only 20% of China's exports of clothing and textiles, and exports to Japan (comparable in size to the US) hardly change, and to Hong Kong fall sharply. There are also large price falls for shipments to the US and to certain EU countries (Germany). The shares of other Asian suppliers in US markets generally hold up well, with the largest falls occurring in preferentially treated non Asian suppliers such as Mexico. In EU markets, with the exception of India, all non Chinese Asian suppliers experience falls in their market share.
    JEL: F00 F13 O24
    Date: 2006–05
  4. By: Jean-Yves Duclos; Abdelkrim Araar; John Giles
    Abstract: The paper contributes to the measurement of poverty and vulnerability in three ways. First, we propose a new approach to separating poverty into chronic and transient components. Second, we provide corrections for the statistical biases introduced when using a small number of periods to estimate the importance of vulnerability and transient poverty. Third, we apply these tools to the measurement of chronic and transient poverty in China using a rich panel data set that extends over approximately 17 years. We find that alternative measurement techniques yield significantly different estimates of the relative importance of chronic and transient poverty, and that precision of estimates is enhanced with simple statistical corrections.
    Keywords: Poverty dynamics, Transient poverty, Chronic poverty, Permanent poverty, China
    JEL: C15 D31 D63 I32
    Date: 2006
  5. By: Karsten Giese (GIGA Institute of Asian Affairs)
    Abstract: The Chinese Communist Party has chosen to base the legitimacy of its rule on its performance as leading national power. Since national identity is based on shared imaginations of and directly tied to territory – hence place, this paper analyses both heterodox models for identification on the national and potentially competing place-based collective identities on the local level. This analysis, based on communication within a number of popular communication forums and on observation of behavior in the physical reality of today’s urban China, shows that communication within the virtual and behavior in the real world are not separated realities but form a new virreal spatial continuum consisting of imagined places both online and offline. I argue that ties to place are stronger and identities constructed on shared imaginations of place are more salient the more direct the experience of place is – be the place real, virtual or virreal. Hence in China challenges to one-party rule will probably accrue from competing localized collective identities rather than from heterodox explore the variety and complexity of functional antagonisms in the social subsystems.
    Keywords: China, Internet, political power, collective identity, nationalism, place, bulletin, board system, online communication, online community
    Date: 2006–01
  6. By: Sergio Marchesini (Department of Agricultural Economics and Engineering, Alma Mater Studiorum - University of Bologna); Huliyeti Hasimu (Xinjiang Agricultural University); Maurizio Canavari (Department of Agricultural Economics and Engineering, Alma Mater Studiorum - University of Bologna)
    Abstract: China is the most important pear producing country in the world, and one of the most important as far as it concerns apples. Nevertheless, its international role is not so relevant: traded volume in relation to production is relatively small yet growing fast. Xinjiang is a large and mainly deserted region in northwest China that covers one-sixth of China's land. However, thanks to abundant water resources, good lighting conditions and altitude, this area represents an ideal setting for pomefruit production, and has in fact a very long tradition. Unfortunately, due to a disadvantaged location and a poor economy this province do not attract enough capitals, passing unnoticed despite of its valuable resources. Economic analysis are therefore necessary to assess to which extent this market turns out to be approachable. The aim of this paper is to describe in detail the situation of the fruit growing industry in Xinjiang, as far as it concerns two important pomefruit varieties: Xiang Li pear, a local and very appreciated variety, and Fuji apple. After locating the most vocated producing areas for both species and identifying the productive standards, we then proceed on counting up the production costs, using a well-established methodology adapted to the particular situation. The target of the analysis are small and mid-size farms, since they represent the vast majority of the orchards of the area. The costs aggregates are: base orchard management cost (BOMC), farm full cost (FFC) and total production cost (TPC). These aggregates group together costs related to similar productive factors. The picture of the situation outlined by this survey is that of a marginal area, where however fruit growing, compared to other agricultural activities, grants a good income. It also emerges that fruit growers in Xinjiang (and in China), are hardly coming out of a situation of general backwardness, striving to adapt to a larger business mainly through exportation to other provinces. Farms are however mainly familiar and small, and only a few big local enterprises seem to possess the right requirements to give local production the right impetus to reach successfully outside markets.
    Keywords: Xiang Li fragrant pear, Fuji apple, Production cost, China, Fruit growing
    JEL: Q11 Q13 Q17
    Date: 2005
  7. By: Chen, Zhuo; Huffman, Wallace; Rozelle, Scott
    Abstract: In this paper we fit stochastic frontier production functions to data for Chinese farms grouped into each of four regions—North, Northeast, East, and Southwest—over 1995-1999. These frontier production functions are shown to have statistically different structures, and the marginal product information shows overuse of chemical inputs in the East and capital services in the North. Labor also has a low marginal product. Next, we use the data and the production parameters to create technical efficiency scores for each of the farms and then standardize them. Standardized technical efficiency is shown to have the same structure across regions and to be related to the age of the farmer, land fragmentation, and the village migration rate, controlling for year dummies and village or regional fixed effects.
    Keywords: Household farm; Labor migration; Land fragmentation; Stochastic production frontier; Technical efficiency
    JEL: C2 L2 O1 P2
    Date: 2006–05–01
  8. By: Patrick Köllner (GIGA Institute of Asian Affairs)
    Abstract: Japan’s ruling party is a prime example of a dominant party. While dominant parties in other democracies around the world have lost their grip on power or have even disappeared altogether, the LDP is still going strong. What explains the success of the party? How did the LDP acquire its dominant position and how did it manage to cling to it? In an attempt to answer these questions, this paper discusses the rise, the power (re-)sources and the perspectives of Japan’s dominant party.
    Keywords: Liberal Democratic Party, Japan, dominant party, party competition, electoral system
    Date: 2005–09
  9. By: Suharnoko Sjahrir, Bambang; Kaiser, Kai; Kadjatmiko; Hofman, Bert
    Abstract: This paper presents a methodology to evaluate fiscal decentralization focusing on the potential mis-targeting of intergovernmental fiscal equalization transfers. The approach builds on an explicit comparison and the summary measurement of different (horizontal) allocation distributions across states or localities. Whereas formula-based fiscal transfers have the merit of being transparent and promoting revenue predictability in fiscal decentralization, in practice, two challenges emerge: (1) What are the appropriate formula designs given the sub-national data constraints evident in most decentralizing developing countries? and (2) How costly in terms of mis-targeting to the presumed expenditure needs and fiscal capacity are deviations from these types of benchmark formulas (for example, due to historical factors or the need to meet establishment costs such as civil service wages)? The authors illustrate this approach by assessing Indonesia ' s evolving intergovernmental fiscal system instituted in the 2001 Big Bang decentralization. The discussion comes against Indonesia ' s recent policy decision to fully fund sub-national civil servant wages as part of the base general allocation grant (DAU) transfers, raising questions about both incentive effects for local governments and potential mis-targeting. The authors identify potential efficiency losses from the DAU ' s horizontal misallocation from half a dozen alternative scenarios found in the policy dialogue, ranging from 9 to 30 percent-on the order of US$ 3.9 billion-of the overall annual size of this large intergovernmental transfer. The scale of these tradeoffs highlights the importance of intergovernmental transfers in more general debates in public finance for decentralized countries.
    Keywords: Economic Theory & Research,Public Sector Management and Reform,Fiscal Adjustment,Regional Governance,Urban Governance and Management
    Date: 2006–05–01
  10. By: Enzo Weber
    Abstract: This paper addresses the question of macroeconomic integration in the Asian Pacific region. Economically, the analysis is based on the notions of stochastic long-run convergence and business cycle coherence. The econometric procedure consists of tests for cointegration, the examination of vector error correction models, several variants of common cycle tests and forecast error variance decompositions. Results in favour of cyclical synchrony can be partly established, and are even exceeded by the broad evidence for equilibrium relations. In these domains, several leading countries are identified.
    Keywords: Real Convergence, Cointegration, Common Cycles, Asia Pacific
    JEL: E32 F15 C32
    Date: 2006–05
  11. By: Richter, Kaspar
    Abstract: Thailand is one of the most successful developing countries. After decades of rapid growth, the economy rebounded quickly from the 1997-98 Asian crisis and is set to continue its expansion into the future. Nevertheless, there are doubts about the resilience of the Thai economy. The country appears to be on a lower growth projectory now than before the crisis. What growth can Thailand realistically expect? And what can the government do to sustain such growth into the future? Using a new methodology for identifying binding constraints to growth (Rodrik 2004 and Hausmann and others 2005), the author argues that Thailand ' s challenge is to maintain growth levels of 4 to 5 percent over the medium term. To achieve this goal, Thailand needs to continue its efforts of improving business infrastructure, trade integration, and skills, as well as intensifying its governance reforms.
    Keywords: Economic Theory & Research,Economic Growth,Pro-Poor Growth and Inequality,Investment and Investment Climate,Inequality
    Date: 2006–05–01
  12. By: Jackson, Lee Ann; Valenzuela, Ernesto; Anderson, Kym
    Abstract: The authors provide estimates of the economic impact of initial adoption of genetically modified (GM) cotton and of its potential impacts beyond the few countries where it is currently common. They use the latest version of the Global Trade Analysis Project (GTAP) database and model. The results suggest that by following the lead of China and South Africa, adoption of GM cotton varieties by other developing countries-especially in Sub-Saharan Africa-could provide even larger proportionate gains to farmer and national welfare than in those first-adopting countries. Furthermore, the estimated gains are shown to exceed those from a successful campaign under the World Trade Organization ' s Doha Development Agenda to reduce and remove cotton subsidies and import tariffs globally.
    Keywords: Crops & Crop Management Systems,Environmental Economics & Policies,Economic Theory & Research,Textiles, Apparel & Leather Industry,Livestock & Animal Husbandry
    Date: 2006–05–01
  13. By: Chew Lian Chua (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Sandy Suardi (School of Economics, The University of Queensland)
    Abstract: This paper tests for the presence of nonlinear dynamics in selected Asian short rates and employs a regime varying unit root test to detect non-stationarity for distinct regimes. Nonlinearities in the form of Markov-switching dynamics are found in all short rates sample. The mean-reverting behaviour of interest rates is dependent on both the level and volatility of interest rates. The occasional random walk and mean-reverting dynamics of short rates are attributed to the macroeconomic fundamentals, exchange rate regimes and monetary policy objectives in these economies.
    Date: 2005–09
  14. By: Howard Loewen (GIGA Institute of Asian Studies)
    Abstract: International institutions increasingly affect each other’s development, maintenance and effectiveness. Research so far has merely focused on the issue of effectiveness and broader consequences. The paper argues firstly that theoretical progress could be promoted by integrating variables explaining the formation and maintenance of international institutions into a dynamic model of institutional interplay. Secondly, research ought to be extended to institutions governing issue areas like trade, finance, and security as well as their respective interactions. Thirdly, East Asia is a highly interesting region regarding regime interaction, since regional cooperation is slowly but steadily evolving in different issue areas as a reaction to institutional operations on the global level of governance.
    Keywords: Institutional Interplay, institutional interaction, global governance, international institutions, Regime Theory, international political economy, East Asia
    JEL: F02
    Date: 2006–02
  15. By: Dirk Nabers (GIGA Institute of Asian Affairs)
    Abstract: In order to provide a lens to the issue of international security cooperation after 11 September 2001, this paper will examine the question of how collective action in international relations becomes possible. The author maintains that it is possible to understand, if not explain, a fair amount of inter-state collective action by analyzing the culture of the international system. Using discourse analysis as a tool, the analysis addresses the underlying ideas, norms and identities that constitute the relationship between the United States and Japan on the one hand and Germany and the United States on the other hand as it evolved since September 2001. As a result, the paper argues that even if the terrorist attacks on New York and Washington have led to strong pressure on states like the United States, Germany and Japan to form a collective identity, rivalling identities have yet not given way.
    Keywords: collective action, culture, constructivism, discourse analysis, terrorism, Japan, Germany, United States
    Date: 2005–09
  16. By: Charles T. Clotfelter; Helen F. Ladd; Jacob L. Vigdor
    Abstract: Using data for North Carolina public school students in grades 3 to 8, we examine achievement gaps between white students and students from other racial and ethnic groups. We focus on successive cohorts of students who stay in the state's public schools for all six years, and study both differences in means and in quantiles. Our results on achievement gaps between black and white students are consistent with those from other longitudinal studies: the gaps are sizable, are robust to controls for measures of socioeconomic status, and show no monotonic trend between 3rd and 8th grade. In contrast, both Hispanic and Asian students tend to gain on whites as they progress through these grades. Looking beyond simple mean differences, we find that the racial gaps between low-performing students have tended to shrink as students progress through school, while racial gaps between high-performing students have widened. Racial gaps differ widely across geographic areas within the state; very few of the districts or groups of districts that we examined have managed simultaneously to close the black-white gap and raise the relative test scores of black students.
    JEL: I21 J15
    Date: 2006–05
  17. By: Harvie, Charles (University of Wollongong); Pahlavani, Mosayeb (University of Wollongong)
    Abstract: This paper employs quarterly time series data to endogenously determine the timing of structural breaks for various macroeconomic variables in Korean economy. The Innovational Outlier (IO) as well as Additive Outlier models (Perron, 1997) are then used to test for non-stationarity of the Korean macroeconomic data. After accounting for the single most significant structural break, the results from the (AO) model clearly indicate that the null of at least one unit root cannot be rejected for all of the series under investigation. This finding is consistent with our finding based on the conventional unit root test. However, by applying the IO procedure in the presence of a structural break we find the interesting result that two of the variables under investigation become stationary. The timing of structural breaks for key macroeconomic data under the IO and AO approaches appear to be quite different. Using the IO approach seven of the ten macroeconomic variables focused upon have important structural breaks corresponding with the timing of the Asian financial crisis of 1997. On the other hand, using the AO approach, only one of the ten variables appears to have a structural break related to the Asian financial crisis, while the remaining nine variables have quite diverse structural breaks that depend on key policy changes or other factors contributing to economic turbulence.
    Keywords: structural break, unit root test, and Korean economy
    JEL: C12 C22 C52
    Date: 2006
  18. By: Schady, Norbert; Filmer, Deon
    Abstract: Increasing the schooling attainment of girls is a challenge in much of the developing world. The authors evaluate the impact of a program that gives scholarships to girls making the transition between the last year of primary school and the first year of secondary school in Cambodia. They show that the scholarship program had a large, positive effect on the school enrollment and attendance of girls. Their preferred set of estimates suggests program effects on enrollment and attendance at program schools of 30 to 43 percentage points. Scholarship recipients were also more likely to be enrolled at any scchool (not just program schools) by a margin of 22 to 33 percentage points. The impact of the Japan Fund for Poverty Reduction (JFPR) program appears to have been largest among girls with the lowest socioeconomic status at baseline. The results are robust to a variety of controls for observable differences between scholarship recipients and nonrecipients, to unobserved heterogeneity across girls, and to selective attrition out of the sample.
    Keywords: Primary Education,Education For All,Teaching and Learning,Gender and Education,Gender and Development
    Date: 2006–05–01
  19. By: Horst Entorf (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Jochen Moebert (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Katja Sonderhof (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))
    Abstract: Following the well-known approach by Adler and Dumas (1984), we evaluate the foreign exchange rate exposure of nations. Results based on data from 27 countries show that national foreign exchange rate exposures are significantly related to the current balance variables of corresponding economies.
    Keywords: Exchange rate exposure, international trade, current balance.
    JEL: G15 F31
    Date: 2006–04
  20. By: Patrick Köllner (GIGA Institute of Asian Affairs); Matthias Basedau (GIGA Institute of African Affairs)
    Abstract: Factionalism can affect the stability and institutionalization of parties and party systems and it can impact on the efficiency and legitimacy of political parties and political systems as a whole. Nevertheless, factionalism has only received scant attention in the comparative literature on political parties. As this paper shows, there is no dearth of conceptual approaches and hypotheses which can readily be used to advance the systematic analysis of factionalism. We survey the relevant literature and offer a comprehensive analytical framework to stimulate comparatively oriented and nuanced studies of the causes, characteristics and consequences of intra-party groups.
    Keywords: political parties, factionalism, party organization, electoral systems, party finance
    Date: 2005–12

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