nep-sea New Economics Papers
on South East Asia
Issue of 2007‒06‒23
nine papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Transforming the developmental welfare states in East Asia By Huck-ju Kwon
  2. Pension Reform in China: The Need for a New Approach By Vivek B. Arora; Steven Vincent Dunaway
  3. The effect of Strategic Sale of Banks: Evidence from Indonesia By Rasyad A. Parinduri; Yohanes E. Riyanto
  4. Optimal exchange rate policy in a low interest rate environment By Pavasuthipaisit, Robert
  5. Asia Rising: A Sectoral Perspective By Nikola Spatafora; Florence Jaumotte
  6. Child Support Awards in Britain: An analysis of data from the Families and Children Study By Stephen Morris
  7. Does Culture Influence Asset Managers? Views and Behavior? By Beckmann, Daniela; Menkhoff, Lukas; Suto, Megumi
  8. Small price change response to a large devaluation in a menu cost model By Bruchez, Pierre-Alain
  9. School Systems and Efficiency and Equity of Education By Jung Hur; Kang Changhui

  1. By: Huck-ju Kwon
    Abstract: This article attempts to explain changes and continuity in the developmental welfare states in Korea and Taiwan Province of China (hereafter Taiwan) within the East Asian context. It first elaborates two strands of welfare developmentalism (selective vs. inclusive), and establishes that the welfare state in those countries fell into the selective category of developmental welfare states before the Asian economic crisis of 1997. Secondly, this paper argues that the policy reform toward an inclusive welfare state in Korea and Taiwan was triggered by the need for structural reform in the economy. Lastly, this paper argues that the idea of an inclusive developmental welfare state should be explored in the wider context of economic and social development.
    Keywords: Developmental Welfare State, Social Policy, Korea, Taiwan, East Asia
    JEL: O10 I38 D78
    Date: 2007–07
  2. By: Vivek B. Arora; Steven Vincent Dunaway
    Abstract: The rapid aging of China's population over the next few decades makes it important for a new pension system with broad and adequate coverage to be put in place quickly. Pension reforms, first initiated in 1997, have become bogged down in difficulties over dealing with the "legacy costs" associated with the relatively more generous benefits provided under the old system. This paper argues that a way forward is to separate the legacy problem from the problem of setting up a new pension system, and it suggests concrete proposals for setting up such a new system which would cover both urban and rural workers.
    Date: 2007–05–07
  3. By: Rasyad A. Parinduri (Singapore Center for Applied and Policy Economics (SCAPE) Department of Economics, National University of Singapore); Yohanes E. Riyanto (Department of Economics, National University of Singapore)
    Abstract: We examine the effect of strategic sale—the sale of banks to strategic foreign investors—on banks’ performance. The Government of Indonesia implemented such a policy as a part of bank restructuring in the aftermath of the 1998 banking crisis. Using difference-in-difference models, we find that strategic sale leads to 12%-15% cost reduction. These results are robust to the use of other estimators such as difference-in-difference matching-estimators and stochastic-frontier analysis, to that of other performance measures such as return on assets and net interest margin, and also to that of different types of samples. These suggest that strategic sale could play an important role in restructuring troubled banks in developing countries.
    Keywords: banking crisis, recapitalized banks, the sale of assets, difference- in-difference models, matching estimator
    JEL: C21 C23 G21 G28
    Date: 2007–05
  4. By: Pavasuthipaisit, Robert
    Abstract: This paper examines optimal exchange policy when nominal interest rates are unusually low, as experienced by several Asian economies and Japan since July 2006. The paper finds that in such environments, it is optimal to create a nominal depreciation to offset contractionary disturbances. However, the limited scope of monetary policy easing may compromise the ability of the central bank to create a nominal depreciation especially if the central bank makes decisions on monetary policy making on a discretionary basis. In order to successfully create a nominal depreciation, the central bank needs to rely on the expectations channel, by making a credible promise to keep its currency weak going forward. Finally, trade liberalization, by enhancing the role of the exchange rate channel on the transmission mechanism, may allow the central bank to achieve lower average inflation.
    Keywords: Zero lower bound; liquidity trap; exchange rate policy; open-economy macroeconomics.
    JEL: E58 E52 F41
    Date: 2007–05
  5. By: Nikola Spatafora; Florence Jaumotte
    Abstract: This paper undertakes a cross-country analysis of productivity growth at both the aggregate and sectoral level. It finds that Asia's remarkable output growth over the past 40 years reflected both high investment, and rapid productivity increases. These factors were in turn supported by the region's relatively strong institutional and policy environment, which encouraged resource shifts from low- to high-productivity sectors. Looking ahead, sustaining rapid growth requires meeting a number of key challenges: (i) implementing reforms to boost productivity in the increasingly important, but currently lagging, service sectors; (ii) providing policy support for continuing the shift of resources from agriculture to industry and services; (iii) strengthening policy frameworks in late-developing countries.
    Date: 2007–06–08
  6. By: Stephen Morris
    Abstract: This paper examines the extent to which mothers that care for children where the father is non-resident have an award or agreement for child support in place. Data from the Families and Children Study are used to explore not only whether mothers have an award or order but the type of award they have. Results show that mothers without awards are significantly disadvantaged. Moreover, awards were less commonplace where there were fewer children, where mothers claimed Income Support, were from an Asian background and where contact between the non-resident father and his children was infrequent. Private agreements, in contrast to a CSA award or no award, were more likely where mothers had recently separated, when there was frequent contact between the non-resident father and his children, and where children were younger; they were less common among those living in social housing.
    Keywords: child support, child support awards, non-resident fathers, parents with care
    JEL: I39 J12 J13 J18
    Date: 2007–04
  7. By: Beckmann, Daniela; Menkhoff, Lukas; Suto, Megumi
    Abstract: This research enters new ground by presenting comparative survey evidence on asset managers' views and behavior in the United States, Germany, Japan and Thailand. Relying on Hofstede's four cultural dimensions, we find that cultural differences are most helpful in understanding country differences which cannot be explained by pure economic reasoning. In short, controlling for various determinants, the dimension of more Individualism predicts less herding behavior, more Power Distance leads to older and comparatively less experienced managers in the upper hierarchy, Masculinity brings men into top positions and to higher volumes of assets under personal responsibility, and Uncertainty Avoidance is related to higher safety margins against the tracking error allowed and relatively more research effort. These consequences, i.e. the culturally different importance of herding, age, experience, gender, tracking error and research effort, clearly affect investment behavior, although in a complex way.
    Keywords: Asset Managers, Individualism, Power Distance, Masculinity Uncertainty Avoidance
    JEL: G23 G14 G15 Z10
    Date: 2007–06
  8. By: Bruchez, Pierre-Alain
    Abstract: In an empirical paper based on five large devaluation episodes in Argentina, Brazil, Korea, Mexico and Thailand, Burstein and al. (2005a) find a very slow adjustment in the prices of non-tradable goods and services after large devaluations. Burnstein and al. (2005b) develop a quantitative general-equilibrium model that can account for this phenomenon. I consider an alternative, simpler model and explore under which conditions moderate menu costs can explain the muted response of the prices of non-tradables. The key new element in this alternative model is a nominal friction in wage-setting (generated by menu costs for changing wages). I find, for example, that although my model is based on menu costs, it is able to deliver not only constant prices of non-tradables, but also small price changes (in reality these prices do change, albeit by far less than the exchange rate). I also discuss the existence of multiple equilibria and the role of central-bank credibility.
    Keywords: large devaluation; exchange rate; pass-through; sticky prices; sticky wages
    JEL: F31
    Date: 2007–04–03
  9. By: Jung Hur (Department of Economics, National University of Singapore); Kang Changhui (Department of Economics, National University of Singapore)
    Abstract: How students should be allocated to schools to achieve educational goals is one of important debates on the construction of school systems. Promoters of comprehensive and selective school systems fail to reach a consensus on implications of each system for efficiency and equity of education. This paper examines impacts of different systems of student allocation on educational goals, using a simple economic model. It argues that how a selective system is designed matters a great deal in a comparison between comprehensive and selective systems: different designs of a selective system can yield widely different educational implications compared with those from a comprehensive system. A judicious use of a selective system can at times achieve educational goals better than a comprehensive system. Given our finding that different households prefer different school systems, we suggest that by offering multiple subsystems, the educational planner can enhance educational attainments of households beyond those achieved by a single national system.
    Keywords: Education, Comprehensive and Selective School Systems
    JEL: D11 I20
    Date: 2007

This nep-sea issue is ©2007 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.