nep-sea New Economics Papers
on South East Asia
Issue of 2006‒11‒18
43 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Do Endowments Matter for Vertical Intra-Industry Trade with Emergent Countries? Empirical Evidence for Spain By J. Milgram-Baleix; Ana I. Moro-Egido
  2. Longevity and Aggregate Savings By Eytan Sheshinski
  3. When Health Care Insurance Does Not Make A Difference – The Case of Health Care ‘Made in China’ By Hendrik P. van Dalen
  4. Mortality and survivor's consumption By Michael Grimm
  5. Health Shocks, Village Elections, and Long-Term Income: Evidence from Rural China By Li Gan; Lixin Colin Xu; Yang Yao
  6. Balance-of-Payment-Constrained Growth: The Case of China, 1979-2002 By Yongbok Jeon
  7. An essay on economic reforms and social change in China By Lindbeck, Assar
  8. Set Inference for Semiparametric Discrete Games By Kyoo il Kim
  9. Protection for Sale Under Monopolistic Competition: An Empirical Investigation By Pao-Li Chang; Myoung-jae Lee
  10. Semiparametric Estimation of Signaling Games By Kyoo il Kim
  11. Uniform Convergence Rate of the SNP Density Estimator and Testing for Similarity of Two Unknown Densities By Kyoo il Kim
  12. On the Magnet Effect of Foreign Direct Investment By Pao-Li Chang; Chia-Hui Lu
  13. The Coevolution of Economic and Political Development By Fali Huang
  14. The Transition from Relational to Legal Contract Enforcement By Fali Huang
  15. What Matter for Child Development? By Fali Huang
  16. On Joint Modelling and Testing for Local and Global Spatial Externalities By Zhenlin Yang
  17. Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises By Roman Kraeussl
  19. International Dimensions of China`s Long Boom: Trends, Prospects and Implications By Thomas Rawski; Loren Brandt; Xiaodong Zhu
  21. Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course? By Hans Genberg
  22. From Cholera Outbreaks to Pandemics: The Role of Poverty and Inequality By Nejat Anbarci; Monica Escaleras; Charles Register
  23. Theory of a Flowchart Approach to Industrial Cluster Policy By Kuchiki, Akifumi
  24. Stunted and Distorted Industrialization in Myanmar By Kudo, Toshihiro
  25. Key Factors to Successful Community Development: The Korean Experience By Choe, Chang Soo
  26. The Impact of United States Sanctions on the Myanmar Garment Industry By Kudo, Toshihiro
  27. Transformation of the Rice Marketing System and Myanmar's Transition to a Market Economy By Okamoto, Ikuko
  28. Trade and Business Cycle Correlations in Asia-Pacific By Kumakura, Masanaga
  29. Organizational Capability of Local Societies in Rural Development: A Comparative Study of Microfinance Organizations in Thailand and the Philippines By Shigetomi, Shinichi
  30. Interindustrial Structure in the Asia-Pacific Region: Growth and Integration, by Using 2000 AIO Table By Bo, Meng; Sato, Hajime; Nakamura, Jun; Okamoto, Nobuhiro; Kuwamori, Hiroshi; Inomata, Satoshi; å­Ÿ, 渤; ä½è—¤, 創; 中æ‘, ç´”; 岡本, 信広; 桑森, å•“; 猪俣, 哲å²
  31. Business Cycles of Non-mono-cultural Developing Economies: The Case of ASEAN Countries By Kodama, Masahiro
  32. Winner-Take-All Contention of Innovation under Globalization: A Simulation Analysis and East Asia's Empirics By Ishido, Hikari; Okamoto, Yusuke
  33. The Degree of Competition in the Thai Banking Industry before and after the East Asian Crisis By Kubo, Koji
  34. Trade Credits under Imperfect Enforcement: A Theory with a Test on Chinese Experience By Yanagawa, Noriyuki; Ito, Seiro; Watanabe, Mariko
  35. The Garment Industry in Cambodia: Its Role in Poverty Reduction through Export-Oriented Development By Yamagata, Tatsufumi
  36. Agricultural Policies and Development of Myanmar's Agricultural Sector: An Overview By Fujita, Koichi; Okamoto, Ikuko
  37. Explaining the Persistence of State-ownership in China By Imai, Kenichi
  38. Negative Bubbles and Unpredictability of Financial Markets: The Asian Currency Crisis in 1997 By Kuchiki, Akifumi
  39. Myanmar's Economic Relations with China: Can China Support the Myanmar Economy? By Kudo, Toshihiro
  40. Financial Cooperation in East Asia By Kunimune, Kozo
  41. Bringing Non-governmental Actors into the Policymaking Process: The Case of Local Development Policy in Thailand By Shigetomi, Shinichi
  42. Integration under 'One Country, Two Systems' - The Case of Mainland China and Hong Kong- By Takeuchi, Takayuki
  43. An Asian Triangle of Growth and Cluster-to-Cluster Linkages By Kuchiki, Akifumi

  1. By: J. Milgram-Baleix (Universidad de Granada); Ana I. Moro-Egido (Universidad de Granada)
    Abstract: In this paper, we study the nature of Spanish intra-industry trade and find that intra-industry trade with CEEC, Asian and Mediterranean countries has increased considerably since the middle of the Nineties. The second aim of the paper is to study if the comparative advantage argument also explains the vertical intra-industry trade between countries with different income levels. To this end we build physical, technological and human capital stocks for a large sample of countries. Results obtained with the panel techniques support the idea of a neo Ricardian explanation of vertical intra-industry trade rather than the neo-Hecksher-Ohlin explanation for intra-industry trade with emergent countries. Furthermore, our results suggest that the variables considered, mostly country-specific better explain vertical intra-industry trade than horizontal intra-industry trade. Results obtained with the Heckman method support the idea that intra-industry trade is more likely to occur with emergent countries with higher income per capita and with OECD countries that have a more similar level of income to that of Spain. Differences in endowments play an important role to determine the volume of intra-industry trade rather than the probability of intra-industry trade to occur. An additional contribution of this paper is to demonstrate that panel approach allows for more robust conclusions than OLS estimations when explaining intra-industry trade. The Heckman procedure to account for the zero flows also represents a major improvement respect to the standard approach
    Keywords: Intra-industry trade; Comparative Advantage, Spain, Vertical Differentiation, Panel data, Truncated models.
    JEL: F11 F12 F14 C23 C24
    Date: 2006
  2. By: Eytan Sheshinski
    Abstract: For the last fifty years, countries in Asia and elsewhere witnessed a surge in aggregate savings per capita. Some empirical studies attribute this trend to the increases in life longevity of the populations of these countries. It has been argued that the rise in savings is short-run, eventually to be dissipated by the dissaving of the elderly, whose proportion in the population rises along with longevity. This paper examines whether these conclusions are supported by economic theory. A model of life cycle decisions with uncertain survival is used to derive individuals’ consumption and chosen retirement age response to changes in longevity from which changes in individual savings are derived. Conditions on the age-profile of improvements in survival probabilities are shown to be necessary in order to predict the direction of this response. Population theory (e.g. Coale, 1952) is used to derive the state-state population age density function, enabling the aggregation of individual response functions and a comparative steady-state analysis. Under certain conditions, increased longevity is shown to increase aggregate savings per capita. These conclusions pertain to an economy with a competitive annuity market. The absence of such market compels individuals to leave unintended bequests, whose size depends on the (random) age of death. While an increase in longevity raises individual savings for given endowments, it is shown that the effect on expected steady-state aggregate savings, taking into account the endogenous ergodic distribution of endowments, cannot be determined a-priori.
    Keywords: longevity, annuities, life cycle savings, retirement age, steady-state, aggregate savings
    JEL: D10 D60 E20 H00
    Date: 2006
  3. By: Hendrik P. van Dalen (Erasmus Universiteit Rotterdam)
    Abstract: Does medical insurance affect health care demand and in the end contribute to improvements in the health status? Evidence for China for the year 2004, by means of the China Health and Nutrition Survey (CHNS), shows that health insurance does not affect health care demand in a significant manner. Counterfactuals suggest that full insurance coverage of the Chinese population will not radically change the health care decisions and may even enlarge the perverse effects of today’s health care system: insured persons are more likely to fall back on self-care when they are injured or ill than on the care of a local clinic. This effect is particularly strong in urban areas. In case of a severe injury hospital consultation is preferred to local clinic or self-care by most people, but still a substantial percentage (20 percent) resorts to self-care or ignores the illness. The high level of out-of-pocket expenses paid by both insured and uninsured patients lies at t! he root of this problem. Insurance does not offer real protection against unpredictable high health care expenditures and can lead people into a position of long-term poverty or serious liquidity problems.
    Keywords: health insurance; poverty; China; health care; market failure
    JEL: D12 H51 I11 I18 P36
    Date: 2006–10–11
  4. By: Michael Grimm (University of Göttingen, Department of Economics, DIW and DIAL)
    Abstract: The empirical evidence shows that in developing countries illness shocks can have a severe impact on household income. Few studies have so fare examined the effects of mortality. The major difference between illness and mortality shocks is that a death of a household member does not only induce direct costs such as medical and funeral costs and possibly a loss in income, but that also the number of consumption units in the household is reduced. Using data for Indonesia, I show that the economic costs related to the death of children and older persons seem to be fully compensated by the decrease of consumption units. In contrast, when prime-age adults die, survivors face additional costs and, in consequence, implement coping strategies. It is shown that these are quite efficient and it seems that in terms of consumption households even over-compensate their loss, although they may face a higher vulnerability in the longer term. The results suggest that the implementation of general formal safety nets can give priority to the insurance of other types of risks, such as unemployment, illness or natural disasters. _________________________________ Des études empiriques montrent que dans les pays en voie de développement des chocs sanitaires peuvent avoir des effets sévères sur le revenu des ménages. Peu d’analyses ont jusqu’à présent analysé l’impact de la mortalité. La différence majeure entre une période de maladie et la mortalité est qu’un décès d’un membre du ménage n’implique pas seulement des coûts directs comme des coûts funéraires et peut-être une perte de revenu, mais que le nombre des unités de consommation dans le ménage est également réduit. Utilisant des données de l’Indonésie, je montre que les coûts économiques reliés à un décès d’un enfant et d’une personne âgée semblent entièrement compensés par la réduction des unités de consommation. A l´inverse, si des adultes en âge d’activité décèdent, les survivants font face à des coûts supplémentaires et, en conséquence, instaurent des stratégies pour surmonter les difficultés engendrées par ces décès. Il est montré que ces stratégies sont très efficaces et il semble qu’en termes de consommation les ménages surcompensent eux-mêmes leur perte, il est cependant possible qu’ils fassent alors face à une plus forte vulnérabilité dans le long terme. Les résultats suggèrent que l’instauration des filets de sécurité peut donner priorité à l’assurance d’autres types de risques, comme le chômage, la maladie ou des catastrophes naturelles.
    Keywords: Mortality, consumption smoothing, risk, micro-model of consumption growth,Indonesia, Mortalité, lissage de consommation, risque, modèle micro-économique de la croissance de consommation, Indonésie.
    JEL: D12 I12 J12 O12
    Date: 2006–07
  5. By: Li Gan; Lixin Colin Xu; Yang Yao
    Abstract: Using a sample of households in 48 Chinese villages for the period 1986-2002, this paper studies the dynamic effects of major health shocks on household income and the role played by village elections in mitigating these effects. Our results show that in the first 15 years after a shock, a shock-hit household on average falls short of its normal income trajectory by 11.8% and its recovery would take 19 years. Based on the premise that shock-hit families impose negative externalities on richer families by borrowing from them, our political economy model predicts that the outcome of village elections would differ from that of a standard median voter model in that the elected village leaders tend to adopt pro-poor policies. Our empirical study finds that villages are more likely to establish a healthcare plan after the election is introduced. In addition, village elections reduce the probability of a household to borrow by 16.7% when one of its working adults is seriously sick. As a result, they reduce more than half of the negative effect of a health shock on household income.
    JEL: I12 O15 Z13
    Date: 2006–11
  6. By: Yongbok Jeon
    Abstract: The aim of this study is to empirically test the validity of Thirlwall’s Law in China during the reform period of 1979-2002. For the income elasticity of import demand, an aggregate import demand function for the Chinese economy is estimated using ARDL-UECM model and the bounds test. This study finds (1) that for 1979-2002, the Chinese economy has grown on average as fast as Thirlwall’s Law predicts, the average actual growth rate and predicted growth rate were, respectively, 9.25 and 8.55, which are statistically identical; (2) that the growth of GDP and of exports are cointegrated. Both (1) and (2) provide strong support for Thirlwall’s Law in China during the reform period after 1978. The supportive result of Thirlwall’s Law implies the relevance of demand-side approach to economic growth in China.
    Keywords: Chinese economy, balance-of-payment constrained growth, aggregate import function, trade multiplier, bounds test for cointegration
    JEL: F14 F43 O53
    Date: 2006–06
  7. By: Lindbeck, Assar
    Abstract: The author applies a systems-oriented " holistic " approach to China ' s radical economic reforms during the past quarter of a century. He characterizes China ' s economic reforms in terms of a multidimensional classification of economic systems. When looking at the economic consequences of China ' s change of economic system, he deals with both the impressive growth performance and its economic costs. The author also studies the consequences of the economic reforms for the previous social arrangements in the country, which were tied to individual work units-agriculture communes, collective firms, and state-owned enterprises. He continues with the social development during the reform period, reflecting a complex mix of social advances, mainly in terms of poverty reduction, and regresses for large population groups in terms of income security and human services, such as education and, in particular, health care. Next, the author discusses China ' s future policy options in the social field, whereby he draws heavily on relevant experiences in industrial countries over the years. The future options are classified into three broad categories: policies influencing the level and distribution of factor income, income transfers including social insurance, and the provision of human services.
    Keywords: Economic Theory & Research,Banks & Banking Reform,Investment and Investment Climate,Privatization,Economic Systems
    Date: 2006–11–01
  8. By: Kyoo il Kim (School of Economics and Social Sciences, Singapore Management University)
    Abstract: We consider estimation and inference of parameters in discrete games allowing for multiple equilibria, without using an equilibrium selection rule. We do a set inference while a game model can contain infinite dimensional parameters. Examples can include signaling games with discrete types where the type distribution is nonparametrically specified and entry-exit games with partially linear payoffs functions. A consistent set estimator and a confidence interval of a function of parameters are provided in this paper. We note that achieving a consistent point estimation often requires an information reduction. Due to this less use of information, we may end up a point estimator with a larger variance and have a wider confidence interval than those of the set estimator using the full information in the model. This finding justifies the use of the set inference even though we can achieve a consistent point estimation. It is an interesting future research to compare these two alternatives: CI from the point estimation with the usage of less information vs. CI from the set estimation with the usage of the full information.
    Keywords: Semiparametric Estimation, Set Inference, Infinite Dimensional Parameters, Inequality Moment Conditions, Signaling Game with Discrete Types
    JEL: C13 C14 C35 C62 C73
    Date: 2006–09
  9. By: Pao-Li Chang (School of Economics and Social Sciences, Singapore Management University); Myoung-jae Lee (Korea University, Seoul, Korea)
    Abstract: This paper proposes a general empirical framework to estimate the protection-for-sale model, where the protection regime shifts according to a sector's market structure (perfectly or monop-olistically competitive). We base the protection structure on Grossman and Helpman (1994) for the subset of perfectly competitive sectors and on Chang (2005) for the subset of monop- olistically competitive sectors. The two protection regimes are simultaneously estimated with joint constraints. The results of the J-test consistently reject the homogeneous (perfect compe- tition) protection-for-sale model often adopted in previous literature and suggest a direction of improvement toward the proposed heterogeneous protection structure model.
    Keywords: endogenous trade policy; campaign contribution; monopolistic competition; intrain- dustry trade; import penetration
    JEL: F12 F13
    Date: 2006–08
  10. By: Kyoo il Kim (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper studies an econometric modeling of a signaling game with two players where one player has one of two types. In particular, we develop an estimation strategy that identifies the payoffs structure and the distribution of types from data of observed actions. We can achieve uniqueness of equilibrium using a refinement, which enables us to identify the parameters of interest. In the game, we consider non-strategic public signals about the types. Because the mixing distribution of these signals is nonparametrically specified, we propose to estimate the model using a sieve conditional MLE. We achieve the consistency and the asymptotic normality of the structural parameters estimates. As an alternative, we allow for the possibility of multiple equilibria, without using an equilibrium selection rule. As a consequence, we adopt a set inference allowing for multiplicity of equilibria.
    Keywords: Semiparametric Estimation, Signaling Game, Set Inference, Infinite Dimensional Parame- ters, Sieve Simultaneous Conditional MLE
    JEL: C13 C14 C35 C62 C73
    Date: 2006–09
  11. By: Kyoo il Kim (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper studies the uniform convergence rate of the turncated SNP (semi-nonparametric) density estimator. Using the uniform convergence rate result we obtain, we propose a test statistic testing the equivalence of two unknown densities where two densities are estimated using the SNP estimator and supports of densities are possibly unbounded.
    Keywords: SNP Density Estimator, Uniform Convergence Rate, Comparison of Two Densities
    JEL: C12 C14 C16
    Date: 2006–09
  12. By: Pao-Li Chang (School of Economics and Social Sciences, Singapore Management University); Chia-Hui Lu (Academia Sinica, Taiwan)
    Abstract: We extend Antras and Helpman (2004) on firm heterogeneity and organizational choice to a dynamic setting with FDI uncertainty, in which the probability of investment failure decreases with the host country's infrastructure level and increases with the technological complexity facing each firm. Moreover, it decreases over time as the accumulated mass of firms succeeding in FDI increases. We show that a minimum level of infrastructure is required to trigger a first wave of industrial migration. We then formalize the often noted "magnet effect" of FDI-the first wave of industrial migration generates positive externality (information spillover) for subsequent investors, which stimulates a second wave of industrial migration. The process continues until the power of the "magnet" reaches its steady-state level. In contrast with the predictions in Antras and Helpman (2004), we show that firms with intermediate productivity levels are the ones migrate first, while the most productive and the least productive firms tend to stay behind. This non-monotonic relationship between firms' productivity and their FDI propensities is consistent with the patterns of Taiwanese firms undertaking FDI in China.
    Date: 2006–09
  13. By: Fali Huang (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper establishes a simple model of long run economic and political development, which is driven by the inherent technical features of different production factors, and political conflicts among factor owners on how to divide the outputs. The main capital form in economy evolves from land to physical capital and then to human capital, which enables their respective owners (landlords, capitalists, and workers) to gain political powers in the same sequence, shaping the political development path from monarchy to elite ruling and finally to full suffrage. When it is too costly for any group of factor owners to repress others, political compromise is reached and economic progress is not blocked; otherwise, the political conflicts may lead to economic stagnation.
    Keywords: Economic Development, Political Development, Class Structure, Land, Physical Capital, Human Capital, Monarchy, Suffrage Extension.
    JEL: O10 O40 P16 N10
    Date: 2006–08
  14. By: Fali Huang (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper studies the transition of contract enforcement institutions. The preva- lence of relational contracts, low legal quality, strong cultural preference for personalistic relationships, low social mobility, and highly unequal endowment form a cluster of mutually reinforcing institutions that hinder economic development. The cultural element per se does not necessarily reduce social welfare though it may slow down the legal development, while the real problem lies in endowment inequality and low social mobility. Thus a more equal distribution of resources may be the ultimate key to unravel the above interlocking institutions. These results are generally consistent with the empirical evidence.
    Keywords: relational contract, legal contract enforcement, institutions, endowment inequality, economic development
    JEL: O1 K49 C72
    Date: 2006–06
  15. By: Fali Huang (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper estimates production functions of child cognitive and social development using a panel data of nine-year old children each with over two hundred home and school inputs as well as family background variables. A tree regression method is used to conduct estimation under various specifications. A small subset of inputs is found consistently important in explaining variances of child development results, including the number of books a child has at various ages and how often a mother reads to child by age five, while the effects of race and maternal employment are negligible when detailed inputs are controlled.
    Keywords: child development, tree regression method, panel data inequality, economic development
    JEL: I20 J13 C40
    Date: 2006–05
  16. By: Zhenlin Yang (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper concerns the joint modeling, estimation and testing for local and global spatial externalities. Spatial externalities have become in recent years a standard notion of economic research activities in relation to social interactions, spatial spillovers and dependence, etc., and have received an increasing attention by econometricians and applied researchers. While conceptually the principle underlying the spatial dependence is straightforward, the precise way in which this dependence should be included in a regression model is complex. Following the taxonomy of Anselin (2003, International Regional Science Review 26, 153-166), a general model is proposed, which takes into account jointly local and global externalities in both modelled and unmodelled effects. The proposed model encompasses all the models discussed in Anselin (2003). Robust methods of estimation and testing are developed based on Gaussian quasi-likelihood. Large and small sample properties of the proposed methods are investigated.
    Keywords: Asymptotic property, Finite sample property, Quasi-likelihood, Spatial regression models, Robustness, Tests of spatial externalities.
    JEL: C1 C2 C5
    Date: 2006–10
  17. By: Roman Kraeussl (Center for Financial Studies, Frankfurt am Main, Germany)
    Abstract: The experience in the period during and after the Asian crisis of 1997-98 has provoked an extensive debate about the credit rating agencies’ evaluation of sovereign risk in emerging markets lending. This study analyzes the role of credit rating agencies in international financial markets, particularly whether sovereign credit ratings have an impact on the financial stability in emerging market economies. The event study and panel regression results indicate that credit rating agencies have substantial influence on the size and volatility of emerging markets lending. The empirical results are signifi¬cantly stronger in the case of government’s downgrades and negative imminent sover¬eign credit rating actions such as credit watches and rating outlooks than positive ad¬justments by the credit rating agencies while by the market participants’ anticipated sovereign credit rating changes have a smaller impact on financial markets in emerg¬ing economies.
    Keywords: Sovereign Risk, Credit Ratings, Financial Crises
    JEL: E44 E47 G15
  18. By: Thomas Rawski
    Abstract: Recent years have brought major changes in many dimensions of China’s large and dynamic economy. Issues of employment and unemployment, labor compensation, wage differentials, working conditions, migration, job mobility, and employment security figure prominently in these developments. This essay reviews recent developments in the Chinese labor scene, focusing successively on demographics, employment, unemployment, migration, productivity, wages, and distribution. The paper concludes with speculation about possible policy responses to China’s growing problems of unemployment and excess labor supply.
    Date: 2005–06
  19. By: Thomas Rawski; Loren Brandt; Xiaodong Zhu
    Date: 2006–10
  20. By: Thomas Rawski
    Date: 2006–10
  21. By: Hans Genberg (Hong Kong Monetary Authority)
    Abstract: Financial integration in Ease Asia is actively being pursued and will in due course lead to substantial mobility of capital between economies in the region. Plans for monetary cooperation as a prelude to monetary integration and ultimately monetary unification are also proposed. These plans often suggest that central banks should adopt some form of common exchange rate policy in the transition period towards full monetary union. This paper argues that this is a dangerous path in the context of highly integrated financial markets. An alternative approach is proposed where independent central banks coordinate their monetary policies through the adoption of common objectives and by building an appropriate institutional framework. When this coordination process has progressed to the point where interest rate developments are similar across the region, and if in the meantime the required institutional infrastructure has been build, the next step towards monetary unification can be taken among those central banks that so desire. The claim is that this transition path is likely to be robust and will limit the risk of currency crises.
    Keywords: Regional and International Currency Arrangements
    JEL: F41 F15 F33
    Date: 2006–05
  22. By: Nejat Anbarci (Department of Economics, Florida International University); Monica Escaleras (Department of Economics, Florida Atlantic University); Charles Register (Department of Economics, Florida Atlantic University)
    Abstract: Cholera and other diarrheal diseases are the second leading cause of death among the poor globally. The tragedy of this statistic is that it need not be the case. Unlike many afflictions, the impact of cholera can be greatly reduced, if not eliminated, through the collective action of clean water services. This begs the question of why such collective action is absent in much of the world. To address this, we first develop a theoretical model which indicates that the required collective action is an increasing function of both a country’s level of income and income equality. We test these predictions by analyzing 1,032 annual observations arising from 17 relatively poor countries between the years 1980 and 2002. The countries come from the Americas, Africa, and Asia. In the first part of the analysis, we find that the collective action of providing clean water is, as predicted, an increasing function of income and equality. Following this, we find that both the numbers of cases and deaths resulting from a given cholera outbreak are strongly and negatively related to the collective action.
    Keywords: Cholera, diarrheal diseases, pandemics, per capita income, inequality
    JEL: D31 H41 I10
    Date: 2005–08
  23. By: Kuchiki, Akifumi
    Abstract: A flowchart approach to industrial cluster policy emphasizes the importance ofthe ordering of policy measures. The flow of policy implementation is to establish an industrial zone, to invite an anchor company, and to promote its related companies to invest in the industrial zone. This article delineated "a flowchart approach to industrial cluster policy" by proposing sufficient conditions for forming industrial clusters typical in the manufacturing industry in Asia to enhance regional economic growth. The typical industrial cluster policy was theorized by defining an industrial zone as "quasi-public goods", and it was shown that the policy enhances economic growth under a production function of "increasing returns to scale" of an anchor company. Critical amounts of the production of "scale economies" that are used by the related companies to decide whether or not to invest in clusters were also shown.
    Keywords: Flowchart approach, industrial cluster policy, sufficient conditions, regional economic growth, quasi-public goods, increasing returns to scale, scale economies, Industrial policy, Economics, Industrial estates, Economic development, Economic growth
    JEL: O14 R12 R58
    Date: 2006–10
  24. By: Kudo, Toshihiro
    Abstract: More than 15 years have passed since Myanmar embarked on its transition from a centrally planned economy to a market-oriented one. The purpose of this paper is to provide a bird-eye's view of industrial changes from the 1990s up to 2005. The industrial sector showed a preliminary development in the first half of the 1990s due to an "open door" policy and liberalization measures. However, a brief period of growth failed to effect any changes in the economic fundamentals. The industrial sector still suffers from poor power supplies, limited access to imported raw materials and machinery, exchange rate instability, limited credit, and frequent changes of government regulation. Public ownership is still high in key infrastructure sectors, and has failed to provide sufficient services to private industries. What the government must do first is to get the fundamentals right.
    Keywords: Myanmar (Burma), Transitional economy, Industry, Industrialization, Industrial policy, Transition to market economy
    JEL: L60 O14 P20
    Date: 2006–10
  25. By: Choe, Chang Soo
    Abstract: The Saemaul Undong of the Republic of Korea has been world-widely recognized as a successful model of rural community development. The Saemaul Undong was a pure Korean way of community development program which was initiated by the political will of the top national leadership in order to escape from poverty. There are several key factors to the success of the Saemaul Undong. First, the national government's guidance and support for the movement played a very important role in the whole period of the movement. Second, there was a wide range of people's participation in the implementation process. Third, the Saemaul Undong could make a big success by nurturing community leadership which was selected by rural residents themselves. Finally, as a movement for the spiritual reform, the Saemaul Undong imbued the people with the spirits of diligence, the self-reliance, and cooperation.
    Keywords: Rural Development, Saemaul Undong, Government Intervention, Community development, South Korea
    JEL: O20 O53 R58
    Date: 2006–10
  26. By: Kudo, Toshihiro
    Abstract: The United States imposed trade sanctions against the military regime in Myanmar in July 2003. The import ban damaged the garment industry in particular. This industry exported nearly half of its products to the United States, and more than eighty percent of United States imports from Myanmar had been clothes. The garment industry was probably the main target of the sanctions. Nevertheless, the impact on the garment industry and its workers has not been accurately evaluated or closely examined. The purpose of this paper is to evaluate the impact of the sanctions and to further understand the present situation. This is done using several sources of information, including the author's field and questionnaire surveys. This paper also describes the process of selection and polarization underway in the garment industry, an industry that now has more severe competition fueled by the sanctions. Through such a process, the impact was inflicted disproportionately on small and medium-sized domestic firms and their workers.
    Keywords: Myanmar (Burma), United States, Sanction, Garment industry, Apparel industry, Economic sanctions
    JEL: F19 L60 O14
    Date: 2006–10
  27. By: Okamoto, Ikuko
    Abstract: Creating a rice marketing system has been one of the central policy issues in Myanmar's move to a market economy since the end of the 1980s. Two liberalizations of rice marketing were implemented in 1987 and 2003. This paper examines the essential aspects of the liberalizations and the subsequent transformation of Myanmar's rice marketing sector. It attempts to bring into clearer focus the rationale of the government's rice marketing reforms which is to maintain a stable supply of rice at a low price to consumers. Under this rationale, however, the state rice marketing sector continued to lose efficiency while the private sector was allowed to develop on condition that it did not jeopardize the rationale of stable supply at low price. The paper concludes that the prospect for the future development of the private rice marketing sector is dim since a change in the rice market's rationale is unlikely. Private rice exporting is unlikely to be permitted, while the domestic market is approaching the saturation point. Thus, there is little momentum for the private rice sector to undertake any substantial expansion of investment.
    Keywords: Myanmar, Rice, Marketing system, Liberalization, Marketing, Transition to market economy
    JEL: P39 Q13 Q18
    Date: 2006–10
  28. By: Kumakura, Masanaga
    Abstract: Recent empirical studies challenge the traditional theory of optimum currency areas by arguing that a monetary union enhances trade and business cycle co-movements among its member countries sufficiently as to obviate the need for national monetary policy. This paper examines the empirical relationship between trade and business cycle correlations among thirteen Asia-Pacific countries, paying particular attention to the structural characteristics of their economies and other issues not explored fully in the literature. According to our result, although trade is relevant to the business cycles of individual countries, the main determinant of their international correlations is not the geographical structure of their trade but what they produce and export --more specifically the extent to which their output and exports are concentrated on electronic products.
    Keywords: Business cycles, Optimum currency area, Trade, Electronics, Trade problem, Monetary policy, Asia, Oceania
    JEL: F15 F33 F40
    Date: 2006–10
  29. By: Shigetomi, Shinichi
    Abstract: The importance of organizing local people for development work is widely recognized. Both governmental and non-governmental agencies have implemented various projects that have needed and encouraged collective action by people. Often, however, such projects malfunction after the outside agencies retreat from the project site, suggesting that making organizations is not the same as making a system of making organizations. The latter is essential to make rural organizations self-reliant and sustainable. This paper assumes that such a system exists in local societies and focuses on the capacity of local societies for creating and managing organizations for development. It reveals that (1) such capability differs according to the locality, (2) the difference depends on the structure of the organizations that coordinate people's social relations, and (3) the local administrative bodies define, at least partly, the organizational capability of local societies. We compare two rural societies, one in Thailand and the other in the Philippines, which show clear contrasts in both the form of microfinance organizations and the way of making these organizations.
    Keywords: Local organization, Rural society, Rural development, Microfinance, Local administration, Thailand, Philippines
    JEL: O18 O53 Q00 Z13
    Date: 2006–02
  30. By: Bo, Meng; Sato, Hajime; Nakamura, Jun; Okamoto, Nobuhiro; Kuwamori, Hiroshi; Inomata, Satoshi; å­Ÿ, 渤; ä½è—¤, 創; 中æ‘, ç´”; 岡本, 信広; 桑森, å•“; 猪俣, 哲å²
    Abstract: Over the past 20 years Asian countries have achieved a certain degree of economic growth and at the same time deepened spatial interdependence. In January 2006, IDE completed the 2000 Asian International Input-Output Table, which covers eight major East Asian countries/regions as well as Japan and the United States. Given the dynamic changes in the economies of East Asia, this paper attempts to summarize the characteristics and their patterns of change in industrial structures and trade structures of the countries/regions in the Asia-Pacific region from the three viewpoints of time, space, and industry, by using the AIO table for 1985, 1990, 1995, and 2000.
    Keywords: Industrial structure, Input-output tables, East Asian economy, Regional integration, International economic integration, Asia, Indonesia, Malaysia, Philippines, Singapore, Thailand, China, Taiwan, South Korea, Japan, United States
    JEL: C67 D57 F40
    Date: 2006–03
  31. By: Kodama, Masahiro
    Abstract: Based on analyses of actual data, we reveal that many Asian developing economies own economic structural features of “non-mono-cultural economy†and the “large primary good sectorâ€, which have not been discussed in developing economies RBC literature. We also examine the input-output tables to develop a model reflecting actual developing economies' structures. Referring to the analyses, we construct RBC models of ASEAN countries. Based on the model, we find that approximately half of GDP volatility is attributable to domestic productivity shocks, and the remaining half is attributable to price shocks.
    Keywords: Business Cycles, Developing Economies, Economic development, Input-output tables, Asia, Southeast Asia, Thailand, Malaysia, Indonesia, Philippines
    JEL: D58 E32 F41 O53
    Date: 2006–03
  32. By: Ishido, Hikari; Okamoto, Yusuke
    Abstract: This paper sets out to examine how innovation enhances export competitiveness: The proposition that export volume becomes enhanced as more productivity-enhancing innovation is captured by the exporting economy is the focus of this study. From a Schumpeterian perspective, innovation can be characterized by continuous creation and subsequent diffusion of newer technologies on the basis of the exporters' existing capital stock. Then we highlight the theoretical possibility that concentration of innovative activities in a small group of “winner†economies would lead to larger shares of “winner†economies' exports of innovation-active commodities than those commodities for which technology involved is already mature. The world's export data corroborates this theoretical prediction overall, and a focus upon East Asia has revealed the region's increasing resort to technology-intensive commodity sectors, which has presumably been enabled through attracting technology-bearing inward foreign direct investment. Considering the overall gains from innovation, acceleration of full “cycle†of innovation and imitation might be a desirable option.
    Keywords: Concentration and diffusion of innovation, Industrialization, Technological innovations, Globalization, International trade, International competition, Exports, East Asia, Southeast Asia
    JEL: F12 L25 O31 O33
    Date: 2006–03
  33. By: Kubo, Koji
    Abstract: This paper analyzes the influence of the East Asian crisis and the subsequent reforms on the oligopolistic nature of the Thai banking industry. Since the crisis, there have been substantial changes in competitive environment, including a decline in the family ownership of banks as well as the arrival of new entrants. How did these changes affect a banking industry in which the six largest local banks accounted for over 70 percent of market share? The estimated Lerner index from Bresnahan's [1989] conjectural variation model indicates the possibility of a decline in the degree of competition.
    Keywords: Thai banking industry, Degree of competition, Lerner index, Banks, Financial crises, Thailand
    JEL: L13 G21
    Date: 2006–03
  34. By: Yanagawa, Noriyuki; Ito, Seiro; Watanabe, Mariko
    Abstract: It is widely recognized that trade credit is an important financial mechanism, particularly in developing economies and transition economies where institutions are weak. This paper documents theoretical analysis and empirical accounts on what facilitates an effective supply of trade credit based on original surveys conducted in P.R. of China. Our theory predicts that trade volume and trade credit are increasing function of cash held by the buyer and enforcement technology of the seller. Furthermore, if the state sector’s enforcement technology is high, it has positive external effect to expand the volumes of trade credit and trades in the whole economy. From the data, we found that government made active commitment in enforcement of trade credit contract and the government owned firms are main supplier and receivers of trade credit, which suggest that enforcement by government and state sector were effective against presumptions in the previous literatures.
    Keywords: Law and finance, Economic growth, Incomplete contract, Enforcement, Trade policy, Credit, China
    JEL: G2 K0 O5 P31 Q5
    Date: 2006–06
  35. By: Yamagata, Tatsufumi
    Abstract: Cambodia’s export-oriented garment industry has contributed greatly to poverty reduction in the country through employment of the poor. This paper provides a statistical verification of this contribution based on firm-level data from 164 sampled companies collected in 2003. Its main conclusions confirm the substantial impact that employment in the garment industry has had on poverty reduction in Cambodia. Firstly, entry-level workers receive wages far above the poverty line. Secondly, females make up the predominant share of the main category jobs in the industry. Thirdly, barriers to employment and to promotions up to certain job categories are not high in terms of education and experience. Another important finding is that a typical sample firm exhibited high profitability, although there was wide variation in profitability among firms. This average of high profitability could be a good predictor of Cambodia’s viability in the intensified competition since the phase out of the Multi-Fiber Arrangement (MFA) at the beginning of 2005. A point of note is that Cambodia’s pattern of industrial development led by a labor-intensive industry is similar to that of neighboring countries in East Asia which earlier went through the initial stage of industrial development, except that Cambodia has lacked a strong government industrial promotion policy which characterized the earlier group.
    Keywords: Cambodia, Export-oriented industrialization, Garments, Poverty reduction, Apparel industry, Exports
    JEL: J30 J31 L67 O53
    Date: 2006–06
  36. By: Fujita, Koichi; Okamoto, Ikuko
    Abstract: This paper reviews the development of the agricultural sector in Myanmar after the transition to an open economy in 1988 and analyzes the nature as well as the performance of the agricultural sector. The avoidance of social unrest and the maintenance of control by the regime are identified as the two key factors that have determined the nature of agricultural policy after 1988. A major consequence of agricultural policy has been a clear difference in development paths among the major crops. Production of crops that had a potential for development showed sluggish growth due to policy constraints, whereas there has been a self-sustaining increase in the output of those crops that have fallen outside the remit of agricultural policy.
    Keywords: Agriculture, Transition, Myanmar, Agricultural policy, Agricultural development
    JEL: P20 Q11 Q17 Q18
    Date: 2006–06
  37. By: Imai, Kenichi
    Abstract: In the recent decade China witnessed an upsurge of privatization of small and medium state-owned enterprises (SOEs). In contrast to the consequent sharp reduction in the number of firms, however, the estimated share of broadly-defined SOEs that includes limited liabilities companies controlled by the State has shown virtually no sign of decline. We explain the backgrounds of this seemingly paradoxical persistence of state-ownership by looking into two distinctive types of large SOEs: traditional SOEs that remain dominant in oligopolistic industries and manager-controlled SOEs surviving in competitive industries. The two types exemplify several factors constraining further progress of SOE reform such as, financing the costs of restructuring, redefining the role of the State as the single dominant shareholder, and balancing the interests of the State and managers as entrepreneurs. Sorting these issues out will take time, which means that instabilities associated with state corporate ownership will remain in place in the foreseeable future in China.
    Keywords: State-owned enterprise, Corporate governance, China’s economic reform, Public enterprises, Small and medium-scale enterprises, Industrial management, China
    JEL: L29 L32 P26
    Date: 2006–06
  38. By: Kuchiki, Akifumi
    Abstract: We obtain the three following conclusions. First, business cycles depend on prices of stocks and primary commodities such as crude oil. Second, stock prices and oil prices generate psychological cycles with different periods. Third, there exist cases of “negative bubble†under certain conditions. Integrating the above results, we can find a role of a government in financial market in developing countries.
    Keywords: Cycles, Unpredictability, Negative bubbles, Governments, Financial market, Money, Financial crises, Asia
    JEL: G18 O16
    Date: 2006–06
  39. By: Kudo, Toshihiro
    Abstract: Against the background of closer diplomatic, political and security ties between Myanmar and China since 1988, their economic relations have also grown stronger throughout the 1990s and up to 2005. China is now a major supplier of consumer and capital goods to Myanmar, in particular through border trade. China also provides a large amount of economic cooperation in the areas of infrastructure, energy and state-owned economic enterprises. Nevertheless, Myanmar’s trade with China has failed to have a substantial impact on its broad-based economic and industrial development. China’s economic cooperation apparently supports the present regime, but its effects on the whole economy will be limited with an unfavorable macroeconomic environment and distorted incentives structure. As a conclusion, strengthened economic ties with China will be instrumental in regime survival, but will not be a powerful force affecting the process of economic development in Myanmar.
    Keywords: Myanmar (Burma), China, trade, border trade, economic cooperation, energy, oil and gas, International economic relations, International trade, International cooperation
    JEL: F14 P28 Q41
    Date: 2006–07
  40. By: Kunimune, Kozo
    Abstract: This paper addresses the rationale for financial cooperation in East Asia. It begins by giving a brief review of developments after the Asian currency crisis, and argues that enhancing regional financial cooperation both quantitatively and qualitatively will require: (1) upgrading surveillance capabilities in the region, and (2) creating a clear division of labor between regional institutions and the IMF. It also mentions the issue of membership and the background forces that have led to the duplication of similar forums in East Asia. Although the concern over crisis management is the central issue in East Asian financial cooperation, other issues such as exchange rate policy coordination and fostering regional capital markets are discussed as well.
    Keywords: International Financial Cooperation, IMF, International finance, International cooperation, East Asia, Southeast Asia
    JEL: F36 O19 O53
    Date: 2006–08
  41. By: Shigetomi, Shinichi
    Abstract: During the past two decades in Thailand, non-governmental actors, such as NGOs, intellectuals, and people's organizations, have found widening opportunities to participate in policy formation and in the implementation of local development. The government has facilitated the formation of civil society forums, in the expectation of influencing local-level governance. The last two national five-year development plans were formulated after taking into account the voices of people in the provinces. Even though they may seem petty, some state funds are now transmitted through non-governmental institutions for policy implementation at the grassroots level. These changes have their origin in a reformation of rural development administration in early 1980s. This reformation in due course led to policies that have allowed the participation of non-governmental actors. Meanwhile, rural people have proved their ability to engage in participatory development by forming various local organizations, while NGOs have grown to be proficient facilitators of local development. This paper describes the process whereby three leading actors, namely the government, local people, and the NGOs, have interacted to bring about a more participatory system of local development administration.
    Keywords: Social movements, Local development, Thailand, NGOs, Non-governmental organizations, Civil society, Decision making, Rural development
    JEL: O20 R10
    Date: 2006–08
  42. By: Takeuchi, Takayuki
    Abstract: Ever since the handover of the territory in 1997, Hong Kong has had its own unique law and itsown economic system and international legal personality, and has not been integrated withMainland China. The Basic Law guarantees the uniqueness of the Hong Kong SAR until 2047. But close economic ties between Hong Kong and the Mainland will promote closer economic integration. The Basic Law limits only a customs union and the introduction of a single currency, but not the formation of a Free Trade Agreement (hereafter FTA) and monetary union. FTA has already been realized in the form of the Closer Economic Partnership Arrangement (hereafter CEPA). The Hong Kong SAR government, including the bureaucrat as well as the Chief Executive Tung Chee Hwa, was opposed to, and hesitant towards, the formation of a regional trade agreement with the Mainland, but the business community made them to adopt a positive attitude towards the CEPA. It is unclear how much integration can been deepened, but it can be argued that the current policy of the Hong Kong SAR is too supportive of business, and an excessive degree of economic integration may threaten the uniqueness of Hong Kong. But if Hong Kong achieves democracy and enjoys complete autonomy, it will be easy for economic integration to co-exist with the ‘One Country, Two Systems’ approach, in the interests of the business community and of the citizens of the SAR.
    Keywords: Hong Kong, China, Integration, Politic, FTA, Economic systems, Economic policy
    JEL: F15 H77 K00 N45 P16
    Date: 2006–08
  43. By: Kuchiki, Akifumi
    Abstract: It is expected that an Asian triangle of growth will be formed in the coming few decades. China, India and ASEAN surround the Asian triangle, which is home to many industrial clusters. Multinational corporations will link these clusters together. Regional integration will help them in this task by lowering the barriers of national borders. This paper explains the necessity of regional integration for cluster-to-cluster linkages in the Asian triangle of growth.
    Keywords: Asian Triangle of growth, Regional integration, Cluster-to-cluster linkages, Economic growth, International economic integration, Industrial policy, ASEAN, Asia, China, India, Southeast Asia
    JEL: F23 F59 R12 R58
    Date: 2006–08

This nep-sea issue is ©2006 by Kavita Iyengar. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.