nep-sea New Economics Papers
on South East Asia
Issue of 2007‒01‒23
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Network Externalities and Durable Goods Consumption: A Test Using Televisions in Rural China By Zhao Rong; Peter Thompson
  2. Determinants of the Profitability of Japanese Manufacturing Affiliates in China and Other Regions: Does Localization of Procurement, Sales, and Management Matter? By ITO Keiko; FUKAO Kyoji
  3. Senzen chugoku ni okeru bukka, chingin: suikei to bunseki [in Japanese]. By Fumio Makino
  4. Attitudes of the Youth towards Entrepreneurs and Entrepreneurship: A Cross-cultural Comparison of India and China By Goel Abhishek; Vohra Neharika; Zhang Liyan; Arora Bhupinder
  5. A Tale of Three Countries: Italian, Spanish and Swiss Manufacturing Operations in China By Valeria Gattai
  6. The Economic Impact of the South-North Water Transfer Project in China: A Computable General Equilibrium Analysis By Maria Berrittella; Katrin Rehdanz; Richard S.J. Tol
  7. Outsourcing Tariff Evasion: A New Explanation for Entrepot Trade By Raymond Fisman; Peter Moustakerski; Shang-Jin Wei
  8. The Emergence of a New ‘Socialist’ Market Labour Regime in China By Jutta Hebel; Günter Schucher
  9. Emerging Asia’s growth and integration - how autonomous are business cycles? By Rasmus Rüffer; Marcelo Sánchez; Jian-Guang Shen
  10. The Industrial Organization of the Japanese Bar: Levels and Determinants of Attorney Income By Nakazato, Minoru; Ramseyer, J. Mark; Rasmusen, Eric
  11. Political Parties in Post-Suharto Indonesia: Between politik aliran and ’Philippinisation’ By Andreas Ufen
  12. Globalization and Country-Specific Service Links By Stephen S. Golub; Ronald W. Jones; Henryk Kierzkowski
  13. Accelerated Internationalisation by Emerging Multinationals: the Case of hite Goods Sector By Federico BONAGLIA; Andrea GOLDSTEIN; John MATHEWS
  14. POLÍTICA MONETARIA Y CAMBIARIA Y ESTABILIDAD DEL TIPO DE CAMBIO EN ALGUNOS PAÍSES EMERGENTES: Hungría, Chile, China, Perú y Brasil By Gloria Alonso; Pilar Esguerra; Luz Adriana Flórez; Franz Hamann; Munir Jalil; Luisa Silva

  1. By: Zhao Rong (Department of Economics, Florida International University); Peter Thompson (Department of Economics, Florida International University)
    Abstract: We document the existence of a network externality in the purchase of color television sets in rural China in which increases in ownership reduce the propensity of non-owners to purchase. We construct a model of the timing of a durable good in the presence of an externality, and test its key implications using Chinese household survey data.
    Keywords: Durables, network externalities, rural china.
    JEL: D12 R21
    Date: 2007–01
  2. By: ITO Keiko; FUKAO Kyoji
    Abstract: Does localization of procurements, sales, and management contribute to the profitability of overseas affiliates? This study examines this question by analyzing the performance of Japanese multinationals' manufacturing affiliates in China using a comprehensive affiliate-level dataset for the period from 1989 to 2002 collected by the Ministry of Economy, Trade and Industry (METI). We find that even though foreign multinationals often seem to enter China for the local market potential, affiliates with a higher local sales ratio tend to be less profitable - a pattern that is conspicuously different from that observed for Japanese affiliates in other regions such as the USA or the ASEAN-4, where local sales orientation has a positive impact on profitability. On the other hand, we find that Japanese affiliates' profitability was positively associated with their local procurement ratio. Using the coefficients of the profit function estimated from data on all Japanese manufacturing affiliates around the world, we can calculate the effect of localization (local sales and local procurements) on profitability by country, controlling for the level of GDP and per-capita GDP. In the case of China, the localization effects are positive following the country's accession to the WTO, suggesting that both local procurement and sales expansion contribute to higher profitability in China.
  3. By: Fumio Makino
    Date: 2006–12
  4. By: Goel Abhishek; Vohra Neharika; Zhang Liyan; Arora Bhupinder
    Abstract: This study argues that social support is an important enabler in entrepreneurial activity in a country or a region. One untested assumption in policy making on entrepreneurship development has been that all regions are equally desirous of entrepreneurial activity and one policy could address issues in all regions. It was argued that societal attitudes towards entrepreneurs and entrepreneurship are important determinants for future entrepreneurial activity. These attitudes would be impacted by the family background of an individual and entrepreneurial development in the region an individual comes from. It was hypothesized that more positive attitude would be seen in (i) people form entrepreneurial backgrounds, and (ii) entrepreneurially more developed regions. These hypotheses were tested on more than 5,000 respondents in India and China. The results for family background’s influence on attitudes found strong support in both India and China. Regional development showed stronger influence on attitude in India than in China. The findings and implications for studying attitudes and policy making are discussed.
    Keywords: Attitudes, Entrepreneurs, Entrepreneurship, Cross-cultural, India, China
    Date: 2007–01–15
  5. By: Valeria Gattai (Bocconi University and ISESAO)
    Abstract: In this paper we investigate the choice of FDI versus joint-venture, made by Italian, Spanish and Swiss multinationals in China, as shaped by the risk of Dissipation of Intangible Assets. Probit estimates, based on an entirely new firm-level dataset, constructed by the author, show that FDI is more likely to emerge when know-how easily spills over - namely for firms endowed with more Intangible Assets or belonging to high tech sectors - in line with the theoretical expectations.
    Keywords: Intangible Assets, Internalisation, FDI, Joint-venture, China
    JEL: F23 C25 O53
    Date: 2006–12
  6. By: Maria Berrittella (University of Palermo); Katrin Rehdanz (Hamburg University); Richard S.J. Tol (Economic and Social Research Institute)
    Abstract: Water resources are unevenly spread in China. Especially the basins of the Yellow, Hui and Hai rivers in the North are rather dry. To increase the supply of water in these basins, the South-to-North Water Transfer project (SNWT) was launched. Using a computable general equilibrium model this study estimates the impact of the project on the economy of China and the rest of the world. We contrast three alternative groups of scenarios. All are directly concerned with the South-to-North water transfer project to increase water supply. In the first group of scenarios additional supply implies productivity gains. We call it the “non-market” solution. The second group of scenarios is called “market solution”. The market price for water adjusts such that supply and demand are equated again. In the third group of simulations the economic implications of China’s capital investment in infrastructure for the water South-North water transfer project is analyzed. Finally, the investment is combined with the increased capacity of water. If an increase in water supply in China leads to an increase in productivity of their water-intensive goods and services (non-market solution) this would result in a huge positive welfare effect from increased production and export. The effect on China’s welfare would still be positive, if a market for water would exist (market solution), but the world as a whole would lose. The negative effect for the rest of the world is largely explained by a deterioration of its terms-of-trade. Well functioning water markets in China are unlikely to exist.
    Keywords: Computable General Equilibrium, South-North Water Transfer Project, Water Policy, Water Scarcity
    JEL: D58 R13 Q25 Q28
    Date: 2006–12
  7. By: Raymond Fisman; Peter Moustakerski; Shang-Jin Wei
    Abstract: Traditional explanations for indirect trade through an entrepot have focused on savings in transport costs and on the role of specialized agents in processing and distribution. We provide an alternative perspective based on the possibility that entrepots may facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, even though there is no legal tax advantage to sending goods via Hong Kong SAR. We undertake a number of extensions to rule out plausible alternative hypotheses based on existing explanations for entrepot trade.
    JEL: F1 O10 O17
    Date: 2007–01
  8. By: Jutta Hebel (Institute of Rural Development, Georg August University Göttingen); Günter Schucher (GIGA Institute of Asian Affairs)
    Abstract: China’s transition to a market economy has been a process of basic institutional changes and institution building. The institutional change from a socialist labour regime (SLR) as one of the backbones upholding the traditional leninist system to a new ‘socialist’ market labour regime (SMLR) became particularly important for the success of economic and political reforms. This analysis is based on the analytical framework of regimes and makes use of the idea of path dependence. An ensemble of institutions, mutually interconnected and influencing each other, forms the regime and shapes its trajectory. Six institutions are identified to constitute the employment regime: (1) the system of social control, (2) the production system, (3) the system of industrial relations, (4) the welfare system, (5) the family order, and (6) the educational system. The SMLR is still characterised by its socialist past and differs from other varieties of transformation labour regimes and bears little resemblance to labour regimes in Western market economies.
    Keywords: China, institutional change, transition, labour market, employment regime, path dependence theory, ASEAN, Mercosur, CMA
    JEL: B52 J08 J40 P36
    Date: 2006–12
  9. By: Rasmus Rüffer (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marcelo Sánchez (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jian-Guang Shen (International Monetary Fund, 700 19th Street, N.W., Washington, D.C. 20431, USA.)
    Abstract: Against the background of the rapid integration of emerging Asia into the global economy, this paper investigates the role of domestic and external factors in driving individual emerging economies in Asia. We estimate VAR models for ten countries over the period 1979Q1-2003Q4, controlling for external factors, and use sign restrictions to identify structural domestic shocks. Variance decompositions indicate that Asian emerging economies are to a large part driven by external developments, and even more so employing a more recent sample. We analyse to what extent structural domestic shocks exhibit a regional dimension by comparing shocks across countries using correlation and principal component analysis. The extent of regional co-movement between structural shocks is relatively limited. While the principal components analysis indicates a moderate increase in co-movement over time, the correlation analysis finds a decline. This may reflect a broadening of regional integration at the expense of bilateral economic ties. JEL Classification: F15, F02, F41.
    Keywords: Economic integration, international business cycles, structural shocks, sign restrictions.
    Date: 2007–01
  10. By: Nakazato, Minoru; Ramseyer, J. Mark; Rasmusen, Eric
    Abstract: Using micro-level data on attorney incomes in 2004, we reconstruct the industrial organization of the Japanese legal services industry. These data suggest a somewhat bifurcated bar, with two sources of unusually high income: talent in Tokyo, and scarcity elsewhere. The most talented would-be lawyers (those with the highest opportunity costs) pass the bar-exam equivalent on one of their first tries or abandon the effort. If they pass, they tend to opt for careers in Tokyo that involve complex litigation and business transactions. This work places a premium on their talent, and from it they earn appropriately high incomes. The less talented face lower opportunity costs, and willingly spend many years studying for the exam. If they eventually pass, they disproportionately forego the many amenities available to professional families in Tokyo and opt instead for careers in the under-lawyered provinces. There, they earn scarcity and monopoly rents not available in the far more competitive Tokyo market.
    Keywords: lawyers; Japan
    JEL: K40
    Date: 2006–09–17
  11. By: Andreas Ufen (GIGA Institute of Asian Affairs)
    Abstract: Surprisingly, the outcome of the 1999 and 2004 elections in Indonesia and the resultant constellation of political parties are reminiscent of the first Indonesian parliamentary democracy of the 1950s. The dynamics of party politics is still marked by aliran (‘streams’), i.e. some of the biggest political parties still have a mass base and are embedded in specific milieus. But politik aliran has lost a lot of its significance and re-emerged in a quite different form after the fall of Suharto in 1998. Starting with this observation, it is argued that parties are still socially rooted, so a modified aliran approach still has its analytical value. However, one can also witness a weakening of aliran (dealiranisasi) and a concomitant ‘Philippinisation’, which is indicated by the rise of presidential or presidentialised parties, growing intra-party authoritarianism, the prevalence of ‘money politics’, the lack of meaningful political platforms, weak loyalties towards parties, cartels with shifting coalitions and the upsurge of new local elites.
    Keywords: political parties, post-Suharto Indonesia, Philippinisation, politik aliran
    Date: 2006–12
  12. By: Stephen S. Golub (Swarthmore College); Ronald W. Jones (University of Rochester); Henryk Kierzkowski (Graduate Institute of International Studies, Geneva)
    Abstract: The Jones-Kierzkowski model of global fragmentation of production draws attention to the cost and efficiency of “service links” connecting “production blocks” in different countries. Country-specific service links include transport and telecommunications infrastructure and the overall business climate. Mobile factors of production, most prominently foreign direct investment (FDI), can shop around for countries with the most functional and inexpensive service links along with low labor costs. Those countries with favorable business climates and well-functioning service links are able to attract FDI and other mobile inputs, and participate in international production networks. We provide evidence that successful exporters of manufactures, notably in East Asia, have relatively favorable service links. A cross-section analysis of manufactured exports and of FDI in manufacturing confirms the importance of service link infrastructure.
    Keywords: Conflicting claims, Division rules, Operators, Minimal rights, Maximal claims, Duality, Convexity.
    JEL: C79 D63 D74
    Date: 2007–01
  13. By: Federico BONAGLIA (OECD Development Centre, Paris - France); Andrea GOLDSTEIN (OECD Development Centre, Paris - France); John MATHEWS (MacquarieGraduate School of Management, Sydney - Australia)
    Abstract: The emergence of a "second wave" of developing-country multinational enterprises (MNEs) in a variety of industries is one of the characterizing features of globalization. These new MNEs did not delay their internationalisation until they were large, as did most of their predecessors, and often become global as a result of direct firm-to-firm contracting. Many grow large as they internationalise conversely, they internationalise in order to grow large. This is a striking pattern which, if confirmed, indicates that enterprises from developing countries have pursued distinctive approaches to internationalisation. It is a further interesting hypothesis to investigate to what extent such firms, born as suppliers of established incumbents, have leveraged on their "latecomer" status to accelerate their internationalisation. This paper documents how emerging MNEs may follow quite different patterns to reach, or at least approach, global competitiveness. In particular, it investigates how three latecomer MNEs pursued global growth through accelerated internationalisation combined with strategic and organizational innovation. Haier (China), Mabe (Mexico) and Arcelik (Turkey) emerged as Dragon Multinationals in the large home appliances (so-called "white goods") industry. This is a producer-driven global value chain, characterized by mature technology and rapid delocalization to developing countries, where not only input costs are lower, but demand growth rates are higher - giving a decided latecomer advantage to these MNEs. Haier, Mabe and Arçelik leveraged their strategic partnership with established MNEs to upgrade their operations, evolving from the production of simple goods, into new product lines developed through their own design, branding and marketing capabilities. The recipe of their success has been the ability to treat global competition as an opportunity to build capabilities, move into more profitable industry segments, and adopt strategies that turn latecomer status into a source of competitive advantage. At the same time, their experiences show that there are many strategies and trajectories for going global.
    Date: 2006–10
  14. By: Gloria Alonso; Pilar Esguerra; Luz Adriana Flórez; Franz Hamann; Munir Jalil; Luisa Silva
    Abstract: Este documento resume las principales conclusiones del ejercicio realizado con el objetivo de analizar la forma cómo algunos países emergentes, con diversos esquemas de política monetaria, manejan su política cambiaria. La pregunta que suscitó este análisis fue: ¿Cómo han logrado los países analizados mantener un determinado nivel de la tasa de cambio durante un período de tiempo más o menos prolongado? Cada uno de los países analizados aporta algo a este interrogante: en el caso de Hungría, las autoridades han logrado defender con éxito un determinado nivel de la tasa de cambio aún en la presencia de fuertes ataques especulativos. En el caso de la China, sus peculiaridades de organización política e institucional, además de su tamaño, son parte de la explicación. En el caso de Perú y Brasil, sus notorios avances a una disminución de la vulnerabilidad fiscal y externa parecen haber contribuido a una mayor estabilidad cambiaria.
    Keywords: Macroeconomía, Inflación, Tasa de cambio, Balanza de pagos, Vulnerabilidad Externa, Política Monetaria y Política Cambiaria. Classification JEL:E42; E52; E61; E63.

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