nep-sea New Economics Papers
on South East Asia
Issue of 2006‒12‒09
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Villages where China’s Ethnic Minorities Live By Bjorn Gustafsson; Ding Sai
  2. Employment Effects of Privatisation and Foreign Acquisition of Chinese State-Owned Enterprises By Yundan Gong; Holger Görg; Sara Maioli
  3. Multinational Enterprises and Manufacturing for Export in Developing Asian Countries: Emerging Patterns and Opportunities for Latecomers By Prema-chandra Athukorala
  4. The Long Run Health and Economic Consequences of Famine on Survivors: Evidence from China’s Great Famine By Xin Meng; Nancy Qian
  5. The nature of the decision-making process for central banks' interventions in the FX market: Evidence from the Bank of Japan. By Michel Beine; Oscar Bernal; Jean-Yves Gnabo; Christelle Lecourt
  6. Upgrading Japan's Innovation System to Sustain Economic Growth By Randall Jones; Tadashi Yokoyama
  7. Strengthening the Integration of Japan in the World Economy to Benefit more Fully from Globalisation By Randall Jones; Taesik Yoon
  8. The Role of Interest Rates in Business Cycle Fluctuations in Emerging Market Countries: The Case of Thailand By Ivan Tchakarov; Selim Elekdag
  9. Financial Crisis, Effective Policy Rules and Bounded Rationality in a New Keynesian Framework By Ali Al-Eyd; Stephen Hall
  10. Resource Curse in Reverse: The Coffee Crisis and Armed Conflict in Colombia. By Oeindrila Dube; Juan F. Vargas
  11. The Cost Factor in Patent Systems By Francois, Didier; van Pottelsberghe, Bruno
  12. Parametric estimation for partially hidden diffusion processes sampled at discrete times By Stefano Iacus; Masayuki Uchida; Nakahiro Yoshida

  1. By: Bjorn Gustafsson (University of Göteborg and IZA Bonn); Ding Sai (Chinese Academy of Social Sciences)
    Abstract: This paper investigates how ethnic minorities in rural China are faring compared with the ethnic majority. The village is the unit of analysis and large surveys for 2002 are used. Minority villages in northeast China are found to have a somewhat better economic situation than the average majority village, but minority villages in the southwest are clearly faring worse. Industrialisation, inputs in agricultural production, stock of human capital of the labour force, wage level on the local labour market as well as indicators of path dependency are all found to affect the economic situation of a village. Location is the single most important circumstance working against a favourable economic situation for minority villages in the north- and particularly the southwest. Low village income results in long-distance migration for many ethnic minorities, but for some minorities their ethnicity hinders migration.
    Keywords: China, ethnic minorities, income, wealth, migration
    JEL: J15 O12 P32
    Date: 2006–11
  2. By: Yundan Gong (University of Nottingham); Holger Görg (GEP, University of Nottingham and IZA Bonn); Sara Maioli (University of Newcastle)
    Abstract: This paper investigates the effects of domestic privatisation or foreign acquisition of Chinese State Owned Enterprises (SOEs) on employment growth, using firm level data for China and a combination of propensity score matching and difference-in-differences in order to identify the causal effect. Our results suggest that, controlling for output growth there is some evidence that domestic privatisation leads to contemporaneous reductions in employment growth compared to firms that did not undergo an ownership change. By contrast, there is some evidence that foreign acquisitions show higher employment growth in the post acquisition period than non-acquired SOEs.
    Keywords: privatisation, foreign acquisition, employment growth, difference-in-differences
    JEL: P2 F2
    Date: 2006–11
  3. By: Prema-chandra Athukorala
    Abstract: This paper examines the role of multinational enterprises (MNEs) is the expansion of manufacturing exports from developing countries, in the light of the Asia experience. First a typology of MNE-export nexus is developed in the context changes in patterns of international production over the past two decades. The typology is then applied to empirical evidence from newly industrialized countries (NICs) and latecomer exporting countries in Asia. The evidence suggests that the share of MNEs in manufactured exports from all these countries has recorded a significant increase from about the mid 1970s and the entry of MNEs is virtually essential for the export success of latecomers.
    Keywords: multinational enterprises, manufacturing exports, Asia, newly industrialized countries
    Date: 2006–12
  4. By: Xin Meng (Australian National University and IZA Bonn); Nancy Qian (Brown University)
    Abstract: In the past century, more people have perished from famine than from the two World Wars combined. Many more were exposed to famine and survived. Yet we know almost nothing about the long run impact of famine on these survivors. This paper addresses this question by estimating the effect of childhood exposure to China’s Great Famine on adult health and labor market outcomes of survivors. It resolves two major empirical difficulties: 1) data limitation in measures of famine intensity; and 2) the potential joint determination of famine occurrences and survivors’ outcomes. As a measure of famine intensity, we use regional cohort size of the surviving population in a place and time when there is little migration. We then exploit a novel source of plausibly exogenous variation in famine intensity to estimate the causal effect of childhood exposure to famine on adult health, educational attainment and labor supply. The results show that exposure to famine had significant adverse effects on adult health and work capacity. The magnitude of the effect is negatively correlated with age at the onset of the famine. For example, for those who were one year old at the onset of the famine, exposure on average reduced height by 2.08% (3.34cm), weight by 6.03% (3.38kg), weight-for-height by 4% (0.01 kg/cm), upper arm circumference by 3.95% (0.99cm) and labor supply by 6.93% (3.28 hrs/week). The results also suggest that famine exposure decreased educational attainment by 3% (0.19 years); and that selection for survival decreased withinregion inequality in famine stricken regions.
    Keywords: health, education, famine, China
    JEL: I10 I2 J1
    Date: 2006–11
  5. By: Michel Beine (DULBEA, Free University of Brussels,University of Luxemburg and CESifo.); Oscar Bernal (DULBEA, Free University of Brussels); Jean-Yves Gnabo (University of Namur); Christelle Lecourt (University of Namur)
    Abstract: Intervening in the FX market implies a complex decision process for central banks. Monetary authorities have to decide whether to intervene or not, and if so, when and how. Since the successive steps of this procedure are likely to be highly interdependent, we adopt a nested logit approach to capture their relationships and to characterize the prominent features of the various steps of the intervention decision. Our findings shed some light on the determinants of central bank interventions, on the so-called secrecy puzzle and on the identification of the variables influencing the detection of foreign exchange transactions by market traders.
    Keywords: Central bank interventions; Exchange rates market; Secrecy puzzle; Nested logit
    JEL: E58 F31 G15
    Date: 2006–11
  6. By: Randall Jones; Tadashi Yokoyama
    Abstract: Increasing productivity growth through innovation is a key to raising living standards. Although R&D intensity in Japan is the third highest in the OECD area, the benefits do not appear to have been commensurate with the level of investment. The innovation system, which developed during the catchingup process, is largely input-driven and focused on incremental innovation based on closed and stable corporate and employment systems. However, this approach is less appropriate in the current global environment that favours risk-taking and a more open system relying on external linkages. To improve the innovation system, a broad-based strategy is needed, including a reform of framework conditions in the product and labour markets to strengthen competition and mobility, enhance international R&D links and improve the environment for venture business. Education and public research should be upgraded through stronger competition. The effectiveness of science and technology policy should be increased by strengthening its link to economic framework policies. This Working Paper relates to the 2006 OECD Economic Survey of Japan ( <P>Améliorer le système d'innovation pour assurer une croissance économique durable <BR>Accroître la productivité grâce à l'innovation est l'un des principaux moyens d'élever le niveau de vie. Alors que le Japon se place au troisième rang des pays de l'OCDE pour ce qui est de l'intensité de R-D, les résultats obtenus ne paraissent pas à la hauteur des investissements. Le système d'innovation, qui s'est développé au cours du processus de rattrapage, est orienté dans une large mesure par l'investissement et met l'accent sur les innovations progressives fondées sur des structures d'entreprise et d'emploi fermées et stables. Or, cette approche est moins adaptée à l?environnement mondial actuel, qui favorise la prise de risque et des systèmes plus ouverts fondés sur des liens externes. Pour améliorer le système d'innovation, il importe de mettre en oeuvre une vaste stratégie consistant notamment à réformer les conditions cadres qui régissent les marchés de produits et du travail, afin de renforcer la concurrence et la mobilité, de favoriser les relations internationales en matière de R-D et d'améliorer l'environnement des entreprises innovantes. Il faudrait par ailleurs rendre l'éducation et la recherche publique plus performantes grâce à une concurrence plus intense. Il y aurait lieu également d'accroître l'efficacité de la politique scientifique et technologique en renforçant ses liens avec les politiques économiques générales. Ce Document de travail se rapporte à l'Étude économique du Japon 2006 (
    Keywords: innovation, innovation
    JEL: I2 O31 O33 O34 O38 O39 O53
    Date: 2006–11–29
  7. By: Randall Jones; Taesik Yoon
    Abstract: Globalisation through international trade, foreign direct investment (FDI) and international movements of labour is a key force driving economic growth. However, Japan is an outlier among OECD countries, with the lowest levels of import penetration, stock of inward FDI relative to GDP and foreign workers as a share of employment, reflecting the legacy of policies during its post-war development. Policy reforms would help Japan make greater use of goods, services, capital, technology and human resources from abroad. Given the close links among trade, investment and labour flows, it is important to pursue a comprehensive approach, including; i) reducing barriers to FDI and imports, particularly in agriculture, through multilateral trade negotiations and regional trade agreements; ii) relaxing product market regulations, notably in the service sector; iii) fully opening the M&A market to foreign firms; and iv) easing controls on the inflow of foreign workers, including those in non-technical occupations. This Working Paper relates to the 2006 Economic Survey of Japan ( <P>Renforcer l'intégration du Japon dans l'économie mondiale afin de profiter plus pleinement de la mondialisation <BR>La mondialisation qui s'opère par le biais du commerce international, de l'investissement direct étranger (IDE) et des flux internationaux de ressources humaines est un moteur essentiel de la croissance économique. Cependant, le Japon est un cas à part parmi les pays de l'OCDE, se classant au dernier rang du point de vue de la pénétration des importations, de la part de l'IDE dans le PIB et de la proportion de travailleurs étrangers dans l'emploi, autant d'héritages des politiques menées au cours de son développement après la guerre. Des réformes aideraient le Japon à mieux exploiter les ressources que constituent les biens, les services, les capitaux, la technologie et la main-d'oeuvre de provenance étrangère. Compte tenu des liens étroits qui unissent les flux d'échanges, d'investissement et de main-d'oeuvre, il importe d'adopter une approche globale consistant à i) réduire les obstacles à l'IDE et aux importations, en particulier dans l'agriculture, par le biais de négociations commerciales multilatérales et d'accords commerciaux régionaux, ii) assouplir la réglementation des marchés de produits, notamment dans le secteur des services, iii) ouvrir complètement le marché des fusions-acquisitions aux entreprises étrangères ; et iv) assouplir les contrôles sur l'entrée de travailleurs étrangers, notamment dans les professions non techniques. Ce Document de travail se rapporte à l'Étude économique du Japon 2006 (
    Keywords: globalisation, international trade, Japan, Japon, foreign direct investment, investissement direct étranger, trade liberalisation, regional trade agreements, accords commerciaux régionaux, mondialisation
    JEL: F1 F21 F22 F23
    Date: 2006–11–29
  8. By: Ivan Tchakarov; Selim Elekdag
    Abstract: Emerging market countries have enjoyed an exceptionally favorable economic environment throughout 2004, 2005, and early 2006. In particular, accommodative U.S. monetary policy in recent years has helped create an environment of low interest rates in international capital markets. However, if world interest rates were to take a sudden upward course, this would lead to less hospitable financing conditions for emerging market countries. The purpose of this paper is to measure the effects of world interest rate shocks on real activity in Thailand. The analysis incorporates balance sheet related credit market frictions into the IMF’s Global Economy Model (GEM) and finds that Thailand would best minimize the adverse effects of rising world interest rates if it were to follow a flexible exchange rate regime.
    Keywords: Interest rates , Thailand , Business cycles , Emerging markets , Exchange rate regimes , International trade , Economic models ,
    Date: 2006–05–10
  9. By: Ali Al-Eyd; Stephen Hall
    Abstract: This paper extends a standard open-economy New Keynesian model to examine the efficiency of alternative monetary policy rules (both fixed and nonlinear) during a period of financial crisis. A third-generation “balance sheet effect” is made operational through an endogenous risk premium which impacts on investment. Special attention is given to alternative expectations structures and our findings under both rational expectations and adaptive learning establish the Taylor rule as the dominant policy. Moreover, under adaptive learning, we find additional policy traction and less instrument variability in rules augmented with the exchange rate. Building on the nonlinear policy rule framework, we illustrate the debate stemming from the Asian crisis regarding the prescription of monetary policy in the presence of liability dollarization. Interestingly, under rational expectations, “Traditionalist” (or IMF-prescribed) policy is most effective at mitigating exchange rate variability, while “Revisionist” policy is most effective at mitigating real output variability. All rules in this study, however, advocate a sharp initial interest rate response to the crisis.
    Date: 2006–04
  10. By: Oeindrila Dube (Kennedy School of Government, Harvard Uinversity); Juan F. Vargas (Department of Economics, Royal Holloway, University of London and IQSS, Harvard University.)
    Abstract: Between 1998 and 2003 production increases in Brazil and Vietnam drove down the price of coffee by 73 percent in global markets, triggering the "international coffee crisis". We examine the effect of this exogenous price fall on Colombia's civil war, exploring whether politically-motivated violencee presented different dynamics in the coffee-growing regions relative to the non-coffee regions, during the pre-crisis and crisis periods. Using a difference-in-difference framework, we find causal evidnece that the steep decline in coffee prices substantially increased both the incidence and intensity of Colombia's civil war. We also propose a simple model linking the price shock to violence and empirically examine the relative importance of three potential mechanisms. While crop substitution from coffee to coca explains very little of the variation, a disproportionate increase in poverty in coffee areas is associated with greater violence, as is a lower index of institutional development.
    Keywords: Colombia, Civil War, Coffee Crisis, Difference-in-Differences
    JEL: D74 Q1
    Date: 2006–12
  11. By: Francois, Didier; van Pottelsberghe, Bruno
    Abstract: The objective of this paper is to assess whether and to what extent the cost of patenting affects the demand for patents. The empirical analysis, which focuses on the patent systems of the USA, Japan, and Europe during the year 2003, leads to the following methodological and empirical observations: i) after the grant, the translation, validation and transaction costs induced by an effective protection in several European countries witness a highly fragmented and very expensive European market for intellectual property; ii) for a proper international comparison, the size of the market and the average number of claims must be accounted for; iii) when the cost per claim per capita (the 3C-index) is considered, a negative linear relationship appears between the cost of patenting and the number of claims that are filed; iv) for a patent designating 13 European countries, the 3C-index is about 10 (2) times higher than in the US (Japanese) system (for process and translation costs up to the grant); v) The European market being more than twice as large as the US market in terms of inhabitants, the 3C-index suggests that there would be a clear justification for higher nominal examination fees at the EPO, that would ensure a rigorous granting process.
    Keywords: cost elasticity; cost per claim per capita; patent systems; patents
    JEL: O34 P14 P51
    Date: 2006–11
  12. By: Stefano Iacus (Department of Economics, Business and Statistics, University of Milan, IT); Masayuki Uchida (Departement of Mathematical Sciences, Faculty of Mathematics, Kyushu University, Ropponmatsu, Fukuoka 810-8560, Japan); Nakahiro Yoshida (Graduate School of Mathematical Sciences, University of Tokyo, 3-8-1 Komaba, Meguro-ku, Tokyo 153-8914 Japan)
    Abstract: A one dimensional diffusion process $X=\{X_t, 0\leq t \leq T\}$ is observed only when its path lies over some threshold $\tau$. On the basis of the observable part of the trajectory, the problem is to estimate finite dimensional parameter in both drift and diffusion coefficient under a discrete sampling scheme. It is assumed that the sampling occurs at regularly spaced times intervals of length $h_n$ such that $h_n\cdot n =T$. The asymptotic is considered as $T\to\infty$, $n\to\infty$, $n h_n^2\to 0$. Consistency and asymptotic normality for estimators of parameters in both drift and diffusion coefficient is proved.
    Keywords: discrete observations, partially observed systems, diffusion processes,
    Date: 2006–11–12

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