nep-sea New Economics Papers
on South East Asia
Issue of 2007‒05‒26
seven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Migration and Elastic Labour in Economic Development: Southeast Asia before World War II By Giovanni Caggiano; Gregg Huff
  2. How Sustainable are Sustainable Development Programs? The Case of the Sloping Land Conversion Program in China By Andreas Kontoleon; Pauline Grosjean
  3. China in Light of the Performance of Central and East European Economies By Jan Svejnar
  4. Assessing China's Exchange Rate Regime By Jeffrey A. Frankel; Shang-Jin Wei
  5. On the Distributional Effect of Carbon Tax in Developing Countries: The Case of Indonesia By Arief Anshory Yusuf; Budy P. Resosudarmo
  6. Bilateral Trade and Per Capita Income Convergence of Selected South Asian countries and among their ‘Major Trade Partners’ By Bashir Ahmad Fida; Ahmed Nawaz Hakro
  7. Why Does Poverty Persist in the Philippines? Facts, Fancies, and Policies By Arsenio M. Balisacan

  1. By: Giovanni Caggiano; Gregg Huff
    Abstract: Between 1880 and 1939, Burma, Malaya and Thailand received inflows of migrants from India and China comparable in size to European immigration in the New World. This article examines the forces that lay behind this migration to Southeast Asia and asks if experience there bears out Lewis' unlimited labor supply hypothesis. We find that it does and, furthermore, that immigration created a highly integrated labor market stretching from South India to Southeastern China. Emigration from India and China and elastic labor supply are identified as important components of Asian globalization before the Second World War.
  2. By: Andreas Kontoleon (Department of Land Economy, University of Cambridge, UK); Pauline Grosjean (LERNA, University of Toulouse and European Bank for Reconstruction and Development, France)
    Abstract: This paper undertakes a direct comprehensive assessment of the long-run sustainability of one the world’s largest sustainable development programs, the Slopping Land Conversion Program (SLCP) in China under different plausible post-SLCP scenarios. The analysis is based on farmer contingent behavior post-program land and labor decisions as well as choice experiment data. Our econometric results highlight the main obstacles to the program’s sustainability, which include specific shortfalls in program implementation as well as certain institutional constraints such as tenure insecurity, poor land renting rights, limited access to credit and limited land management rights.
    Keywords: sustainable development programs, sustainability, recursive probit, choice modeling, Asia, China
    JEL: Q2 Q4 R4
    Date: 2007
  3. By: Jan Svejnar (University of Michigan, CERGE-EI, CEPR and IZA)
    Abstract: While China shared many systemic, initial conditions with the transition economies of Central-East Europe (CEE) and the Commonwealth of Independent States (CIS), it had a more agricultural economy and a more stable political-economic system than many CEE and CIS countries. Unlike most of the CEE and CIS economies, China adopted a strategy of gradual economic transformation that maintained the existing system and created new economic activities on top of it. This enabled China to avoid the transformation depression observed in CEE and CIS, and allowed it to generate high rates of economic growth that have now lasted for almost three decades. At the time of this study, the CEE and CIS economies have also completed a decade or more of respectable economic growth, demonstrating that numerous forms of the transition process can generate long term economic growth. In retrospect, the tradeoff for avoiding an initial depression appears to be the willingness to maintain most of the existing economic and political system rather than embarking on a rapid but incomplete economic and political transformation. With a rising economic instability and political pressure, countries such as Poland and the Soviet Union (CIS) had little choice but to proceed relatively fast. Others, such as East Germany and Czechoslovakia, could have retained the centrally planned system, but they abandoned it and communism rapidly for political reasons. Looking forward, the current situation is an optimistic one, with China, CIS and CEE belonging to the fastest growing regions of the world. It will be interesting to see whether all or only some of these models will turn out to be successful in the long run.
    Keywords: China, transition economies, economic performance
    JEL: O1 P2 N1
    Date: 2007–05
  4. By: Jeffrey A. Frankel; Shang-Jin Wei
    Abstract: This paper examines two related issues: (a) the implicit methodology used by the U.S. Treasury in determining whether China and America's other trading partners manipulate their exchange rates, and (b) the nature of the Chinese exchange rate regime since July 2005. On the first issue, we investigate the roles of economic variables consistent with the IMF definition of manipulation - the partners' overall current account/GDP, its reserve changes, and the real overvaluation of its currency - but also some variables suggestive of American domestic political considerations -- the bilateral trade balance, US unemployment, and an election year dummy. The econometric results suggest that the Treasury verdicts are driven heavily by the US bilateral deficit, though other variables also turn out to be quite important. On the issue of China's de facto exchange rate regime, we apply the technique introduced by Frankel and Wei (1994) to estimate implicit basket weights, adding several refinements. Within 2005, the de facto regime remained a peg to the dollar. However, there was a modest but steady increase in flexibility subsequently. We test whether US pressure has promoted RMB flexibility. We also test whether the recent appreciation against the dollar is due to a trend appreciation against the reference basket or a declining weight on the dollar in the reference basket, and suggest that they have different policy implications.
    JEL: F3 F59 O1
    Date: 2007–05
  5. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University); Budy P. Resosudarmo (Australian National University)
    Abstract: This paper analyses the distributional impact of carbon tax in Indonesia, one of the largest carbon emitter developing countries. Using a Computable General Equilibrium (CGE) model with disaggregated households, the result suggests that in contrast to most studies from industrialised countries, the introduction of carbon tax in Indonesia is not necessarily regressive. Its structural change and resource reallocation effect, following the carbon tax, is in favor of factors endowed more proportionately by rural, and lower income households. In addition, the expenditure of lower income households, especially in rural area, are less sensitive to the prices of energy-related commodities. Revenue-recycling through uniform reduction in commodity tax rate may reduce the adverse aggregate output effect, whereas uniform lumpsum transfers may enhance the progressivity. This study demonstrates an example, that encouraging developing countries to reduce carbon emission, may not only increase the efficiency of carbon abatement globally, but also have desirable distributional implication in the developing countries themselves.
    Keywords: Carbon Tax, Climate Change, Distribution, CGE, Indonesia
    JEL: D30 D58 Q40 Q48 Q54 Q56 Q58
    Date: 2007–05
  6. By: Bashir Ahmad Fida; Ahmed Nawaz Hakro
    Abstract: This study determines the existence and magnitude of bilateral convergence of per capita income of ‘selected’ South Asian countries and among their ‘major trade partners’1. Bilateral convergence is characterized by reduction in income differentials within the group of trading partners. Three approaches; intra-trade convergence, bilateral trade convergence, and difference approach (fixed and common forms) have been used. The results of fixed effect model- trade increases between the groups, per capita income differential decreases. Results of bilateral convergence approach demonstrate that bilateral trade ratio does not seem to affect the bilateral income difference significantly in any direction. Under difference in difference approach convergence rates-sigma convergence of per capita income convergence both pre-post liberalization periods has converged. However, convergence occurred only in post liberalization period for Asian economies. The panel data of sigma convergence by using fixed effect model demonstrate that convergence rate has been accelerated in Asian economies. However, the rate of convergence process has been decelerated over the postliberalization period in whole sample countries.
  7. By: Arsenio M. Balisacan (Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA))
    Abstract: Proposals peddled to address the poverty problem are plenty-and keep growing. At one end of the spectrum are proposals contending that the root of the problem is simply the lack of a respectable economic growth. Putting the economy on a high-growth path is prescribed as all that is needed to lick the poverty problem. At the other end are proposals asserting that the poverty problem is nothing but a concrete manifestation of gross economic and social inequities. Redistributing wealth and opportunities is viewed as the key to winning the war on poverty. A variant of such proposals holds that economic growth does not at all benefit the poor. Focusing on growth rather than on redistributive reforms is seen to exacerbate inequities, which could lead to further erosion of peace and social stability. Between these extremes are views that consider economic growth as a necessary condition for poverty reduction and recognize that reform measures have to be put in place to enhance the participation of the poor in growth processes. How do these proposals/views stand in relation to evidence and policy research? What are facts and what are fancies? Given the country's fiscal bind, what policy levers can be expected to generate high returns in terms of poverty reduction? This paper attempts to answer these questions by examining the Philippine experience in poverty reduction from an "international" perspective. The next two sections characterize the nature, pattern, and proximate determinants of poverty reduction during the past 20 years. The fourth section examines the economy-population-poverty nexus, specifically the quantitative significance of the country's continued rapid population growth to long-term income growth and poverty reduction.
    Keywords: poverty, income growth, economic growth, population, agriculture, Philippines
    JEL: I3 O15 O53 Q1
    Date: 2007–04

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