nep-sea New Economics Papers
on South East Asia
Issue of 2009‒09‒26
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Iron and Steel Industry in Asia: Development and Restructuring By Sato, Hajime
  2. Globalization, Productivity and Plant Exit - Evidence from Japan - By INUI Tomohiko; Rechard KNELLER; MATSUURA Toshiyuki; Danny McGWAN
  3. Developing Indicators for Regional Economic Integration and Cooperation By Capannelli, Giovanni; Lee, Jong-Wha; Petri, Peter
  4. Climate Change Economics and Policy in the Asia Pacific By Frank Jotzo
  5. Emerging Asia: Decoupling or Recoupling By Kim, Soyoung; Lee, Jong-Wha; Park, Cyn-Young
  6. Islam and Democracy: Malaysia after 50 Years By Eduard J. Bomhoff
  8. Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia By Hayakawa, Kazunobu; Matsuura, Toshiyuki
  9. Trade Sustainability in the Forestry Domain: Evidence from Malaysia using Johansen and Bound Test Method By F.A., Emmy; A.H., Baharom; Radam, Alias; Yacob, Mohd Rusli
  10. Agglomeration versus Fragmentation:A Comparison of East Asia and Europe By Hayakawa, Kazunobu; JI, Zheng; Obashi, Ayako
  11. Trade Cycles in a Re-export Economy: The Case of Singapore By CHOY Keen Meng
  12. Spatial networks, labor supply, and income dynamics: Evidence from Indonesian villages By Yamauchi, Futoshi; Muto, Megumi; Chowdhury, Shyamal; Dewina, Reno; Sumaryanto, Sony
  13. Price-taking Strategy Versus Dynamic Programming in Oligopoly By HUANG Weihong
  14. Migration and Institutional Development By Baochun Peng
  15. A Centered Index of Spatial Concentration: Axiomatic Approach with an Application to Population and Capital Cities By Campante, Filipe R.; Do, Quoc-Anh

  1. By: Sato, Hajime
    Abstract: The paper examines the development and restructuring of the iron and steel industry in Asian countries. Studying countries that have integrated steelworks with large blast furnaces (South Korea, Taiwan, China and India) and countries without (Thailand, Indonesia and Malaysia), the paper shows the difference in the development processes across the countries and across time, and points to the diversity of the development experience of these countries. The paper argues that significant differences in steel production technologies in terms of initial investment and minimum-efficient scale, the changing role of the state, and shifting demand structures in the domestic steel markets of each country have been the important factors that led to the differences in the development path of the steel industry in each country.
    Keywords: Steel, Industrial Development, Asia, Iron
    JEL: L52 L61 N65 O14
    Date: 2009–08
  2. By: INUI Tomohiko; Rechard KNELLER; MATSUURA Toshiyuki; Danny McGWAN
    Abstract: During the 1980s and 1990s, Japanese manufacturers began to relocate production from sites in Japan to low-wage East Asian countries such as China, Malaysia and Thailand. Imports of manufacturing goods increased substantially over the same period. This rapid rise in imports, and proliferation of globalization, has led to concerns among policymakers that firms and plants may close. The media portray foreign multinationals as closing down productive Japanese plants and relocating them elsewhere in Asia. We find that this is not the case. Equally, the plants that are closed are below average productivity and the exit component contributes a very small fraction to productivity growth (using both the GR and FHK methods). In short, plant exit has not been the reason for Japan's low productivity growth in the 1990s. Instead a lack of productivity growth within plants is identified as being the main cause.
    Date: 2009–09
  3. By: Capannelli, Giovanni (Asian Development Bank); Lee, Jong-Wha (Asian Development Bank); Petri, Peter (Brandeis International Business School)
    Abstract: We develop indicators to measure the degree of economic integration and cooperation among East Asian economies and compare these with similar measures for other regions. Our indicators cover regional integration in trade, investment, financial assets, and people-to-people exchange. We also analyze measures of regional cooperation such as the density of free trade agreements and official policy dialogues. We find that in various Asian groupings, and especially in a group of 16 integrating Asian economies, interdependence in trade, direct investment, financial flows, and other forms of economic and social exchange has increased significantly over time, and now approaches that in the European Union. Nonetheless, Asia’s official cooperation remains weak and formal regional institutions remain relatively underdeveloped. To provide insight into the causes of this discrepancy, we also develop quantitative measures of political and cultural similarity of nations, and find that Asian countries have relatively low levels of political and cultural proximity compared to regions such as Europe. The diversity of political interests and cultural values may have hindered more intense cooperation among Asian economies in the past. But if regional economic and social interactions continue to grow, requirements for joint decision-making are also likely to expand, leading to stronger frameworks of official cooperation.
    Keywords: Regional integration; economic cooperation; East Asia
    JEL: F15 F36
    Date: 2009–09–01
  4. By: Frank Jotzo (Research School of Pacific and Asian Studies, the Australian National University, Australia)
    Abstract: The Asia-Pacific region is the major source of global growth in greenhouse gas emissions. Strong action is needed in Asian countries, particularly China and India, to reduce these global emissions. Driven by the desire to limit energy consumption, some Asian countries already have domestic policies to limit greenhouse gas emission. But much more ambitious policies are needed to turn emission trends around. This research report examines the implications of international efforts to mitigate the impacts of human activity on climate in the Asia-Pacific region.
    Date: 2009–01
  5. By: Kim, Soyoung (Korea University); Lee, Jong-Wha (Asian Development Bank); Park, Cyn-Young (Asian Development Bank)
    Abstract: In this paper, we investigate the degree of real economic interdependence between emerging Asia and major industrial countries to shed light on the heated debate over the “decoupling” of emerging Asia. We first document the evolution of macroeconomic interdependence for emerging Asian economies through changing trade and financial linkages at both the regional and global levels. Then, by employing a panel vector autoregression (VAR) model, we estimate the degree of real economic interdependence before and after the 1997/98 Asian financial crisis. Empirical findings show that real economic interdependence increased significantly in the post-crisis period, suggesting “recoupling”, rather than decoupling, in recent years. Output shocks from major industrial countries have a significant positive effect on emerging Asian economies. More interestingly, the reverse is also true. Output shocks from emerging Asia (and the People’s Republic of China [PRC]) have a significant positive effect on output in major industrial countries. The result suggests that macroeconomic interdependence between emerging Asia and industrial countries has become “bi-directional,” defying the traditional notion of the “North–South relationship” as one of “uni-directional" dependence.
    Keywords: Regional integration; decoupling; macroeconomic interdependence; trade and financial market linkages; VAR
    JEL: E32 F15 F36 F42
    Date: 2009–06–01
  6. By: Eduard J. Bomhoff (Nottingham University Business School - Malaysia Campus)
    Abstract: This paper describes and analyzes outcomes of the first World Values Survey for Malaysia, an upper-middle income country that was not yet included in the four previous Surveys. I look at results for tolerance, interest in democracy and other survey questions, and find that the Malaysian Chinese are more satisfied with their life than the Singapore Chinese. Dissatisfaction with the political culture in Malaysia is strongest for the rural poor, both Chinese and Malay. The paper also discusses some political developments in Malaysia up to the March 2008 election.
    Date: 2009–07
  7. By: Chor Foon Tang; Hooi Hooi Lean
    Abstract: This study examines how much of the variance in economic growth can be explained by various categories of domestic and foreign savings in Malaysia. The bounds testing approach to cointegration and the generalised forecast error variance decomposition technique was used to achieve the objective of this study. The cointegration test results demonstrate that the relationship between economic growth and savings in Malaysia are stable and coalescing in the long run. The variance decomposition finding indicates that economic growth in Malaysia is dominated by domestic savings such as private and public savings. However, the effect of foreign savings on economic growth is relatively insignificant.
    Keywords: Cointegration; Disaggregate savings; Growth; Generalised variance decomposition; Malaysia
    JEL: C22 E21
    Date: 2009–03–02
  8. By: Hayakawa, Kazunobu; Matsuura, Toshiyuki
    Abstract: In this paper we statistically test the validity of the mechanics of complex VFDI in Japanese machinery FDI to East Asia; we do this by estimating a multiple-spatial lag model. From the theoretical point of view, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries which have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in the MNEs with higher productivity. These results have an important implication for the policies of developing countries in attracting FDI.
    Keywords: Third-country Effects, Complex VFDI, Spatial Lag Model, East Asia, Foreign Investments
    JEL: F21 F23
    Date: 2009–08
  9. By: F.A., Emmy; A.H., Baharom; Radam, Alias; Yacob, Mohd Rusli
    Abstract: This study was undertaken to explore the relationship between export and import, in the category of Forestry domain for Malaysia, which includes sub domain (1) industrial roundwood;(2) wood pulp; (3) wood fuel; (4) paper and paper board; (5) sawn wood; (6) recovered paper and (7) wood base panel. To test the robustness, Johansen (1991) cointegration method and ARDL approach were employed and the period of the study covers annual data from 1961 to 2007. The results clearly show that the export and import of forestry domain is highly cointegrated. This shows trade is indeed sustainable in the domain of forestry and a sign of good trade policies adapted and implemented by the relevant authorities Bi-directional granger causality could also be detected based on VECM (vector-error correction model) method. Imports seem to positively and significantly affect exports, both in the long run and short run, vice versa. The results are robust when we employed the Bounds test as well.
    Keywords: Johansen cointegration test; forestry trade; VECM; ARDL
    JEL: F18
    Date: 2009–09–17
  10. By: Hayakawa, Kazunobu; JI, Zheng; Obashi, Ayako
    Abstract: Inspired by the observed contrasting patterns of industrial distribution in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships among countries within a region for the electric machinery industry by use of spatial econometric analysis. The results indicate that, while production in the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.
    Keywords: Agglomeration, Fragmentation, East Asia, Europe, Local industry, Electric industries
    JEL: N64 N65 R11 R12
    Date: 2009–08
  11. By: CHOY Keen Meng (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore; Nanyang Technological University, Singapore)
    Abstract: Singapore was traditionally a “re-export economy” by virtue of her historical role as an entrepôt for Southeast Asia. This paper highlights the continued dependence of her modern economy on external demand and imported inputs. Unit root, cointegration and exogeneity tests reveal the existence of common stochastic trends driving global output on the one hand, and Singapore’s trade cycles on the other. An impulse response analysis confirms that exports co-move with re-exports and imports in the short run. Furthermore, innovation accounting shows that growth in the world economy is the most important contributor to Singapore’s trade expansion in the long run.
    Date: 2009–05
  12. By: Yamauchi, Futoshi; Muto, Megumi; Chowdhury, Shyamal; Dewina, Reno; Sumaryanto, Sony
    Abstract: "This paper uses household panel and village census data from Indonesia to examine the impact of spatial connectivity (road) development on household income growth and nonagricultural labor supply. The empirical results show that the impacts of improvements in local road quality (which positively correlate with transportation speed) on income growth and the transition to nonagricultural labor markets depend on the distance to economic centers and the household education level. In particular, postprimary education significantly increases the benefit from local spatial connectivity improvement in remote areas and promotes labor transition to nonagricultural sectors. Education and local road quality are complementary, mutually increasing income growth and nonagricultural labor income in remote areas. The gain from improvements in local connectivity (measured by average road quality) depends on village remoteness and initial household-level endowments." from authors' abstract
    Keywords: income growth, Spatial connectivity, Rural economy, Education, Social protection, Human capital,
    Date: 2009
  13. By: HUANG Weihong (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore; Nanyang Technological University, Singapore)
    Abstract: In a quantity-competed duopoly, one firm is a naive price-taker (who responses only to the last period’s price) while the other has all the market information so as be able to optimize its profit stream (either discounted or un-discounted) dynamically over a finite or infinite horizon. With a traditional linear economy, we are able to derive algebraically the optimal policies of all periods for the dynamic optimizer. A counter-intuitive phenomenon is then observed: regardless of the planning horizon and the discounted factor, there exists a relative profitability range of initial prices, starting with which the price-taker make higher profit than the dynamic optimizer. Furthermore, with the increase in the planning horizon, the price-taker’s relative profitability range increases accordingly and finally covers the entire economically meaningful range.
    Keywords: Economics; dynamic programming; Bellman’s optimality principle; applied OR; duopoly
    Date: 2009–04
  14. By: Baochun Peng (Nottingham University Business School - Malaysia Campus)
    Abstract: This paper argues that migration could trigger institutional development in the sending country. It is shown that the existence of rent-seeking institutions not only hinders the adoption of a more efficient technology, it also reinforces itself; while the possibility of migrating to a more advanced economy could trigger both institutional change and adoption of the more efficient technology in the sending country. Moreover, the institution-enhancement effect of migration becomes more likely as the difference in the rewards to productive activities in the two economies becomes greater. Some preliminary historical evidences are also presented.
    Keywords: Migration; Institution; Rent seeking; Allocation of talent; Democratization
    Date: 2009–08
  15. By: Campante, Filipe R. (Harvard University); Do, Quoc-Anh (Singapore Management University)
    Abstract: We construct an axiomatic index of spatial concentration around a center or capital point of interest, a concept with wide applicability from urban economics, economic geography and trade, to political economy and industrial organization. We propose basic axioms (decomposability and monotonicity) and refinement axioms (order preservation, convexity, and local monotonicity) for how the index should respond to changes in the underlying distribution. We obtain a unique class of functions satisfying all these properties, defined over any n-dimensional Euclidian space: the sum of a decreasing, isoelastic function of individual distances to the capital point of interest, with specific boundaries for the elasticity coefficient that depend on n. We apply our index to measure the concentration of population around capital cities across countries and US states, and also in US metropolitan areas. We show its advantages over alternative measures, and explore its correlations with many economic and political variables of interest.
    JEL: C43 F10 R23
    Date: 2009–01

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