nep-sea New Economics Papers
on South East Asia
Issue of 2010‒12‒18
24 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. At Different Speeds: Policy Complementarities and the Recovery from the Asian Crisis By Bruno Rocha
  2. Organizing the Wider East Asia Region By Dent, Christopher M.
  3. Assessing the Performance of Inflation Targeting in East Asian economies By Hiroyuki Taguchi; Chizuru Kato
  4. EU-Asia Free Trade Areas? Economic and Policy Considerations By Plummer, Michael G.
  5. Asia’s Post-Global Financial Crisis Adjustment: A Model-Based Dynamic Scenario Analysis By Masahiro Kawai; Fan Zhai
  6. Recent trends in Asian integration and Japanese participation By Kagami, Mitsuhiro
  7. Regional Judicial Institutions and Economic Cooperation: Lessons for Asia? By Voeten, Erik
  8. Myanmar migrant laborers in Ranong, Thailand By Fujita, Koichi; Endo, Tamaki; Okamoto, Ikuko; Nakanishi, Yoshihiro; Yamada, Miwa
  9. Savings-led growth theories: A time series analysis for Malaysia using the bootstrapping and time-varying causality techniques By Tang, Chor Foon
  10. Institutional Parameters of a Region-Wide Economic Agreement in Asia: Examination of Trans-Pacific Partnership and ASEAN+α Free Trade Agreement Approaches By Hamanaka, Shintaro
  11. Revisiting the health-income nexus in Malaysia: ARDL cointegration and Rao's F-test for causality By Tang, Chor Foon
  12. Cyber-networks, physical coalitions and missing links : imagining and realizing dissent in Malaysia 1998-2008 By Khoo, Boo Teik
  13. Institutional Design of Regional Integration: Balancing Delegation and Representation By Hix, Simon
  14. Fixed investment, household consumption, and economic growth : a structural vector error correction model (SVECM) study of Malaysia By Abdul Karim, Zulkefly; Abdul Karim, Bakri; Ahmad, Riayati
  15. The impact of CDS trading on the bond market: evidence from Asia By Ilhyock Shim; Haibin Zhu
  16. Asian Century: A Comparative Analysis of Growth in China, India and other Asian Economies By Kaushik Basu
  17. Labor and Grassroots Civic Interests In Regional Institutions By Nesadurai, Helen E.S.
  18. Why issue bonds offshore? By Susan Black; Anella Munro
  19. The Awakening Chinese Economy: Macro and Terms of Trade Impacts on 10 Major Asia-Pacific Countries By Mai, Yin Hua; Adams, Philip; Dixon, Peter; Menon, Jayant
  20. A Gaussian Test for Cointegration By Tilak Abeysinghe; Gulasekaran Rajaguru
  21. What is the Nature and Social Norm within the Context of In-Group Favouritism? By Harris, D.; Herrmann, B.; Kontoleon, A.
  22. Smuggling and import duties in Myanmar By Kubo, Koji; Nu Nu Lwin
  23. The urban middle class in the instability of new democracies By Kawanaka, Takeshi
  24. The Extreme-Value Dependence Between the Chinese and Other International Stock Markets By David E. Giles

  1. By: Bruno Rocha
    Abstract: This paper begins with a short review and discussion of the literature on policy complementarities and their implications in terms of (sustainable) growth strategies and the possible emergence of a new policymaking paradigm. Then, it provides a descriptive analysis of the effect on economic growth of complementarities in structural policies in the specific context of the post-Asian crisis recovery. The study resulted in the computation of a reform-level indicator and of a complementarity indicator RC for the economies most affected by the Asian crisis—Indonesia, Republic of Korea, Malaysia, and Thailand. [ADB Institute Research Paper Series No. 74]
    Keywords: complementarity, structural reforms, growth, recovery, Asian crisis
    Date: 2010
  2. By: Dent, Christopher M. (Department of East Asian Studies and White Rose East Asia Centre (WREAC))
    Abstract: Regionalism and regional integration in East Asia has developed dynamically at various levels over the past two decades. In the world system, East Asia‘s degree of regional economic coherence is second only to the European Union‘s. In addition to deepening micro-level regionalisation, new regional frameworks and organisations have emerged, centred on an East Asian collective of nations and economies. This paper examines the development of new regional institutions involving the whole East Asia region, focusing on four ‗supra-structure institutions‘: ASEAN Plus Three, East Asia Summit, Asia-Europe Meeting, and Asia-Pacific Economic Co-operation forum; and two ‗supporting institutions‘: Pacific Basin Economic Council and Pacific Economic Cooperation Council. Particular attention is made to what likely future regional institutional architecture centred on East Asia may emerge over forthcoming years, and the following core arguments are made. Owing to issues of ‗variable geography‘, the constituent membership of an East Asian region is open to contestation and East Asia‘s patterns of regional economic coherence are to some extent in a constant state of flux. The formation of an East Asian regional community will also depend on an alignment of national interests, development-related imperatives and ideological factors, and primacy will come to the regional institution that develops the most effective instruments of regional co-operation and integration. The paper argues that this will probably be ASEAN Plus Three, which has the most realistic prospects of advancing regional economic integration. Each regional institution should functionally specialise, the larger grouping of EAS, ASEM and APEC concentrating for example on developing their multilateral utility regarding global governance issues. Finally, fostering a more functionally effective partnership between Japan and People‘s Republic of China is vital to the future prospects of East Asia‘s regional community-building.
    Keywords: East Asia; Asia-Pacific; regionalism; regional integration; regionalisation; variable geography
    JEL: F50 F53
    Date: 2010–11–01
  3. By: Hiroyuki Taguchi; Chizuru Kato (Policy Research Institute)
    Abstract: This paper aims at assessing the performance of the inflation targeting framework from the quantitative perspective of the money and inflation relationship, focusing on the four East Asian economies, i.e. Korea, Indonesia, Thailand and the Philippines, who adopted the inflation targeting framework soon after the 1997-98 Asian currency crisis. Our estimation results told us that the inflation targeting framework in the sample economies, except for the Philippines, has functioned well as an anchor to curb inflation, in the sense that the framework speeds up price adjustment against money supply compared with their previous regime of pegged exchange rates. We interpret the speeding-up of price adjustment under inflation targeting framework in such a way that the framework may have been able to curb inflation through stabilizing inflationary expectations. We also found that the well-functioning inflation targeting framework was consistent with another estimation outcome: that of enhanced monetary autonomy under the post-crisis floating exchange rate regime.
    Keywords: inflation targeting framework, East Asian emerging market economy, money-inflation relationship, co-integration test, error correction estimation
    JEL: E52 F33 C23
    Date: 2010
  4. By: Plummer, Michael G. (Asian Development Bank Institute)
    Abstract: This paper analyzes key aspects of the changing economic relationship between the European Union (EU) and Asia, and explores the potential economic ramifications of deeper EU-Asian economic cooperation. The author investigates the possible costs to the EU of remaining “disengaged” from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. His empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. He also presents two CGE models that estimate the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial-equilibrium) approach, he argues that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. It is therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia.
    Keywords: asia eu economic cooperation; asia eu trade; free trade areas
    JEL: F13 F15
    Date: 2010–12–06
  5. By: Masahiro Kawai; Fan Zhai (Asian Development Bank Institute)
    Abstract: Using a dynamic global general equilibrium model, the paper assesses the short- and medium-term impacts of the global financial crisis on Asian economies and the implications of post-crisis adjustment in emerging East Asia (EEA) for the world economy. The analysis suggests that EEA is unlikely to be severely damaged permanently by the global financial crisis, and a worldwide fiscal stimulus could play an important role in stabilizing the global economy in crisis. EEA’s efforts at strengthening regional demand, in conjunction with adopting a more flexible exchange rate regime, will promote more balanced regional growth and facilitate an orderly global rebalancing. However, despite the growing size of EEA in the global economy, the region’s growth rebalancing has only modest spillover effects on the rest of the world. EEA can contribute to global growth, but it alone cannot become the sole engine driving post-crisis growth in the world economy.
    Keywords: dynamic global general equilibrium model, global financial crisis, Asia, emerging East Asia
    JEL: C68 E62 F32 F47
    Date: 2010
  6. By: Kagami, Mitsuhiro
    Abstract: In East Asia, de facto integration is taking place because Free Trade Agreements (FTAs) and Economic Partnership Agreements (EPAs) are flourishing in the region. ASEAN aims to form an ASEAN Economic Community (AEC) by 2015 with the completion of the ASEAN Free Trade Area (AFTA). Surrounding countries have been competing with each other to forge FTAs or EPAs with ASEAN, including China, Japan, Korea, Australia and New Zealand, and India. As a result, ASEAN has become a trading hub in East Asia. Bilateral FTAs/EPAs are also partly in place among 16 countries (ASEAN + 6). These economic ties in trade, services and investment are accelerating this region’s development as the world’s largest production base and biggest consumption market, helping to turn around the global recession in the aftermath of the so-called Lehman Shock. However, some problems also need to be pointed out in the East Asian integration such as the spaghetti bowl effect, severe competition, labor issues, environmental destruction and power struggles.
    Keywords: Asia, Southeast Asia, East Asia, Australia & New Zealand, India, International economic integration, International economic relations, International trade, AEC, AFTA, ACFTA (ASEAN-China Free Trade Area), AKFTA (ASEAN- Korea Free Trade Area), AJCEP (ASEAN-Japan Comprehensive Economic Partnership), AANZFTA (ASEAN-Australia New Zealand Free Trade Area), AIFTA (ASEAN-India Free Trade Area), ASEAN + 3, ASEAN + 6, Spaghetti bowl effect
    JEL: F15
    Date: 2010–09
  7. By: Voeten, Erik (Edmund A. Walsh School of Foreign Service and Government Department)
    Abstract: Why is Asia lagging behind other regions in creating regional judicial institutions? What lessons from the operation of such institutions elsewhere could be valuable to Asian regional economic integration? I show that Asian states are not unusually averse to refer inter-state disputes over trade, investment, and territory to global judicial institutions. Moreover, Asian states are not unique in their reluctance to resolve regional inter-state disputes through judicial means: Regional judicial institutions elsewhere have also rarely been used to resolve inter-state disputes. The most valuable lesson for Asia from experiences elsewhere is the role that regional courts can play in resolving disputes between administrative agencies and private parties about the implementation of international law. While Asia lacks an extensive set of regional laws and regulations that create rights and obligations for private parties, there is a broad body of international law that already applies in many Asian countries. National administrative agencies or courts may not always be well-equipped to interpret this law. I suggest the creation of a regional judicial institution that contributes to the uniform application of this law and that may help signal the commitment of states to their international obligations. The proposed institution provides incentives for harmonization without creating new obligations, thus recognizing the diversity among Asian states.
    Keywords: regional judicial institutions; regional economic integration; Asia
    JEL: F50 F51 F53
    Date: 2010–11–01
  8. By: Fujita, Koichi; Endo, Tamaki; Okamoto, Ikuko; Nakanishi, Yoshihiro; Yamada, Miwa
    Abstract: Thailand is the major destination for migrants in mainland Southeast Asia, and Myanmar (Burmese) migrants account for the dominant share. This paper sheds light on the actual working conditions and the life of Myanmar migrants in Thailand, based on our intensive survey in Ranong in southern Thailand in 2009. We found a wide range of serious problems that Myanmar migrants face in everyday life: very harsh working conditions, low income, heavy indebtedness, risk of being human-trafficking victims, harassment by the police and military (especially of sex workers), high risk of illness including malaria and HIV/AIDS and limited access to affordable medical facilities, and a poor educational environment for their children.
    Keywords: Myanmar, Thailand, Migrant labor, Migration, Household
    JEL: E24 E26 J61 R23 E22
    Date: 2010
  9. By: Tang, Chor Foon
    Abstract: The purpose of this study is to empirically investigate the vindication of savings-led growth hypothesis for the Malaysian economy with the long run TYDL version of Granger causality – Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996). This study used the quarterly sample from 1970:Q1 to 2008:Q4. The recursive regression procedure will also incorporate into the TYDL causality test to measure the stability of the savings-led growth hypothesis in the long run. Our empirical results support that the savings-led growth hypothesis is long run phenomenon and stable over time. Therefore, the Malaysian dataset supports the endogenous growth theory.
    Keywords: Causality; Malaysia; Recursive regression; Savings-growth; Stability
    JEL: O16 E21 C21
    Date: 2010
  10. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: The future creation of a region-wide economic agreement in Asia has become the hot issue among trade policymakers in the region. The APEC 2010 Summit Statement clearly states that the members should pursue a Free Trade Area of the Asia-Pacific (FTAAP), building on various ongoing regional cooperation formworks including ASEAN+3 or +6 and the Trans-Pacific Partnership (TPP). This paper considers the path or sequencing towards a future region-wide economic agreement in Asia, both theoretically and empirically. It attempts to streamline the policy arguments on the sequencing issues by clarifying the pros and cons of various approaches. The paper first presents two possible approaches to a region-wide economic agreement: the consolidation approach and the expansion approach. It then reviews political economy theories on the evolution of economic agreements with regard to four key issues to highlight the differences between the two approaches: (i) negotiation timing, (ii) negotiation format, (iii) broader–deeper trade-off, and (iv) the participation process. The final section of the paper analyzes and considers three existing economic agreements—ASEAN+ free trade agreements, the TPP, and the Asia–Pacific Trade Agreement—that have the potential to be the basis of a future region-wide economic agreement.
    Keywords: Trans-Pacific Partnership Agreement (TPP); Free Trade Area of the Asia-Pacific (FTAAP); ASEAN+3 FTA; ASEAN+6 FTA; Consolidation Approach; Expansion Approach
    JEL: F15 F53 F59
    Date: 2010–11–01
  11. By: Tang, Chor Foon
    Abstract: This study re-visits the health-income nexus for Malaysia using alternative econometric techniques which addressed on the small sample problem. This study covers the annual sample period of 1970 to 2009. Based on the appealing small sample properties, we applied the bounds testing approach to cointegration and the system-wise Rao’s F-test with bootstrap simulation procedure in this study. The bounds test suggests that health care expenditure and real income are moving together in the long-run. In addition, the long-run income elasticity is also estimate using four long-run estimators, namely OLS, DOLS, FMOLS, and ARDL. Interestingly, the entire long-run estimators suggest that the long-run income elasticity is more than unity. Therefore, our findings support the health care luxury hypothesis in Malaysia. From policy view point, the system-wise Rao’s F-test reveals strong unilateral causality running from real income to health care expenditure in Malaysia.
    Keywords: Cointegration; Causality; Health-income nexus; Malaysia; Rao’s F-test
    JEL: C22 I10
    Date: 2010
  12. By: Khoo, Boo Teik
    Abstract: From September 1998 to March 2008, dissident cyber-networks in Malaysia developed connections with physical coalitions that contributed to the Opposition’s historic gains in the 12th General Election of March 2008. To succeed in entrenching a ‘two-coalition system’, however, the component parties of the Opposition coalition (Pakatan Rakyat) must establish its ‘missing links’, namely, extensive and deep organizational networks in society that would permit the coalition to move from imagining and realizing dissent to institutionalizing it meaningfully.
    Keywords: Malaysia, Internal politics, Elections, Network, Internet, Malaysian politics, 2008 General Election, Opposition coalitions, Malaysiakini, Malaysia Today, Raja Petra Kamaruddin, Anwar Ibrahim, Cyber-networks
    Date: 2010–08
  13. By: Hix, Simon (London School of Economics and Political Science)
    Abstract: Regional economic integration is both a deregulatory project, involving the removal of barriers to the movement of goods and services, as well as a re-regulatory project, involving the adoption of common economic, social, and environmental standards to enable the market to function. The removal of trade barriers can be achieved by bilateral or multilateral agreements. However, the adoption of common rules requires the delegation of agenda-setting and enforcement to a supranational body to resolve policy coordination problems and enable states to credibly commit to implement market integration. The lesson from the experience of the European Union is that such delegation, if designed carefully, need not threaten national sovereignty, which is clearly a fear in East Asia. A supranational executive can be tightly controlled by the governments if (i) unanimity is required for any decision to delegate in a particular policy area, (ii) the governments are equally represented in the executive body, and (iii) there are high decision-making thresholds and checks and balances for the adoption of policy proposals by the supranational body. Such a design requires a certain degree of preference convergence among the governments to enable the initial delegation decision to take place by unanimous agreement. It also requires the establishment of an equitable system of representation and decision-making, which allows each state a fair chance to influence policy outcomes. Preferences may not yet have converged sufficiently in East Asia, but a system of representation can be designed which would allow states to be represented equitably in a supranational decision-making structure in the region, as the ASEAN+3 states have started to do in the Chiang Mai Initiative Multilateralization framework.
    Keywords: regional integration; East Asia; Association of South East Asian Nations; ASEAN+3; Chiang Mai Initiative Multilateralization
    JEL: F50 F53
    Date: 2010–11–01
  14. By: Abdul Karim, Zulkefly; Abdul Karim, Bakri; Ahmad, Riayati
    Abstract: This paper examines the dynamic linkages between economic growth, fixed investment, and household consumption in Malaysia by using a structural vector error correction model (SVECM) approach. The empirical results revealed that household consumption and fixed investment are only significantly influenced output growth in the short run. This finding tends to support the alternative view of growth hypothesis, namely fixed investment-led growth, and household consumption-led growth in the short run. In the long run, there is no significant effect of fixed investment and household consumption on growth. However, in the long run, there is a permanent effect of economic growth on household consumption and investment. This empirical finding signals that a demand side policy (for example, fiscal and monetary policy) by affecting the household consumption and investment is ineffective to stimulate the economic growth in the long run.
    Keywords: Economic growth; fixed investment; consumption; SVECM
    JEL: E22 C22 E00 E21
    Date: 2010–10–01
  15. By: Ilhyock Shim; Haibin Zhu
    Abstract: This paper investigates the impact of CDS trading on the development of the bond market in Asia. In general, CDS trading has lowered the cost of issuing bonds and enhanced the liquidity in the bond market. The positive impact is stronger for smaller firms, non-financial firms and those firms with higher liquidity in the CDS market. These empirical findings support the diversification and information hypotheses in the literature. Nevertheless, CDS trading has also introduced a new source of risk. There is strong evidence that, at the peak of the recent global financial crisis, those firms included in CDS indices faced higher bond yield spreads than those not included.
    Keywords: credit default swaps, bond spreads, bond liquidity, CDS index, Asia
    Date: 2010–12
  16. By: Kaushik Basu
    Abstract: The paper argues that if the Chinese economy had failed, mainstream economics would have described this as completely predictable, given the extent and nature of involvement of the Chinese state in the functioning of markets and the economy. The fact that China has succeeded therefore should lead us to question our textbook doctrines of development. Much of this paper is presented as a comparative study of India, China and, briefly, other Asian nations.
    Keywords: asian nations, development, markets, growth, GDP, entrepreneurship, Japan, korea, India, China, chinese economy, economics,
    Date: 2010
  17. By: Nesadurai, Helen E.S. (Monash University)
    Abstract: here is a vibrant regional civil society in Asia with numerous civil society organizations (CSOs) advancing a range of economic, political and social causes using three key strategies, namely regional advocacy, civil society parallel summits, and civil society partnerships with states and regional institutions. Although regional institutions have become more willing to engage with non-elite or grassroots civil society and labor groups, business networks are still privileged in institutional processes. Consequently, regional institutions fail to tap the information and knowledge resources of CSOs to enhance the quality of regional institutional governance, defined as the effectiveness of governance institutions as well as their accountability to stakeholders. The paper outlines three interrelated strategies to correct this deficit. First, regional institutions should provide and safeguard a regional ―public sphere‖ in which officials and a variety of CSOs, not just those sharing official views, can engage each other in reasoned discussion. Second, regional institutions should develop more formalized or regularized mechanisms (as opposed to ad hoc or informal measures) through which CSOs can submit research reports, position papers, and comments on the various items on the regional institutional agenda, particularly on new agreements. The Asian Development Bank‘s NGO and Civil Society Center offers one institutional model. Third, regional institutions should establish formal accountability mechanisms such as a formal complaints procedure through which stakeholders and their CSO representatives can bring claims against regional institutions as well as internal and independent evaluation mechanisms.
    Keywords: civil society; non-governmental organizations (NGOs); regional institutions; governance; accountability
    JEL: F15 F23 F53
    Date: 2010–11–01
  18. By: Susan Black; Anella Munro
    Abstract: This paper asks why Asia-Pacific residents issue debt in offshore markets and considers the implications for domestic debt markets. We use unit record data for bond issuance by non-government residents of Australia, Hong Kong, Korea, Japan and Singapore to link the decision to issue offshore to potential benefits. The results suggest that residents of smaller markets issue bonds offshore to arbitrage price differentials; to access foreign investors; and to issue larger, lower-rated or longer-maturity bonds. These bond characteristics tend to be correlated with offshore bond market size. The results support the notions that (i) deviations from covered interest parity are actively arbitraged by residents of minor currency areas, as well as by internationally active borrowers, as established in the literature; and (ii) issuers benefit from the liquidity and diversification of larger "complete" offshore markets. Against the potential benefits to borrowers, we consider the risks for both borrowers and the domestic market, and lessons from the ongoing financial crisis such as the benefits of funding diversification.
    Keywords: offshore bonds, interest rate parity, local currency debt
    Date: 2010–12
  19. By: Mai, Yin Hua (Centre of Policy Studies and IMPACT Project); Adams, Philip (Centre of Policy Studies and IMPACT Project); Dixon, Peter (Centre of Policy Studies and IMPACT Project); Menon, Jayant (Asian Development Bank)
    Abstract: This paper analyzes the impact that terms of trade (TOT) are likely to have on the growth of the People’s Republic of China’s (PRC) neighboring countries. Two scenarios employing a dynamic computable general equilibrium framework are considered: (i) a convergence scenario, where historical trends are projected; and (ii) a baseline scenario, where technological progress in the PRC is placed in line with that of the United States (US). The results show that the PRC’s technological convergence leads to increased world prices for mining products, and lower world prices for manufactures, especially those exported extensively by the PRC. On the whole, however, the effects on the growth and TOT of the PRC’s neighboring countries are relatively small. The modelling framework used in this study explicitly captures the various offsetting effects that dampen the impact on TOT and contribute to the small impact on growth. In addition, the additional capital required to finance the PRC’s growth comes predominantly from domestic savings, placing little pressure on the global supply of capital. Thus, an awakening PRC is unlikely to make a dramatic entrance despite the country’s overall positive impact on the region – although there is nothing to fear, there is also only little to gain.
    Keywords: computable general equilibrium; multicountry models; People’s Republic of China; terms of trade
    JEL: C68 F17 F47
    Date: 2010–11–01
  20. By: Tilak Abeysinghe; Gulasekaran Rajaguru (Singapore Centre for Applied and Policy Economics)
    Abstract: We use a mixed-frequency regression technique to develop a test for cointegration under the null of stationarity of the deviations from a long-run relationship. What is noteworthy about this MA unit root test, based on a variance-difference, is that, instead of having to deal with non-standard distributions, it takes the testing back to the normal distribution and offers a way to increase power without having to increase the sample size substantially. Monte Carlo simulations show minimal size distortions even when the AR root is close to unity and that the test offers substantial gains in power against near-null alternatives in moderate size samples. An empirical exercise illustrates the relative usefulness of the test further.
    Keywords: Null of stationarity, MA unit root, mixed-frequency regression, variance difference, normal distribution, power.
    JEL: C12 C22
    Date: 2010
  21. By: Harris, D.; Herrmann, B.; Kontoleon, A.
    Abstract: In-group favouritism behaviour is observed everywhere around the world and previous research has shown that this behaviour is also easily triggered in a laboratory in various contexts. However, little is known about why different magnitudes of in-group favouritism are observed across societies. In this paper, we use a new allocation experiment to examine the nature of social norms within the context of in-group favouritism behaviour. In this experiment, a decision-maker has to decide only once how to allocate a fixed amount of resource between each of the three members of her own group and each of the three members of the out-group, whilst the decision- maker's own payo is not aected by her decision. Three treatments are implemented: in the first treatment, only the members of the in-group can punish the decision-maker. In the second treatment, only the members of the out-group can punish the decision-maker. Finally, in the third treatment, only an independent third-party observer can punish the decision-maker. The aim of these treatments is to test whether there is a prevailing social norm which dominates the behavioural standard within the context of in-group favouritism and whether this mechanism varies across dierent subject pools, namely Thailand and the UK.<br><br> Compared to a baseline treatment with no punishment opportunity, we observed that among the Thai subjects in-group favouritism significantly increased once the in-group members were given the opportunity to punish the decision-maker. The threat of punishment from a third-party punisher also increased in-group favouritism in Thailand. However, when only the out-group members had the opportunity to punish, no change in in-group favouritism behaviour was observed. On the contrary, within the British subject pool, when the out-group members had the opportunity to punish the decision-maker, we observed a decline in in-group favouritism as well as a marked shift towards an equitable outcome. The threats of punishments from the in-group members and the third-party, on the other hand, did not have any impact on in-group favouritism behaviour in the UK. The results suggest that within the Thai subject pool, there appears to be a prevailing `in-group bias norm' which is strongly enforced within and outside the group. Within the UK subject pool, however, it is less clear what the prevailing norm is. Whilst the threat of punishment from the out-group members who directly lose out from favouritism behaviour appeared to significantly reduce this behaviour, an uninvolved third-party was not willing to incur a cost to punish this behaviour. This interesting result indicates two possible explanations: first, in-group favouritism, in contrast to selfish or opportunistic behaviour, may not considered as a strong enough violation of a social norm; and second, the norm of egalitarianism within the context of favouritism may still be `evolving'.
    Keywords: Social Norms, In-group Favouritism, Group Behaviour, In-group Punishment, Out-group Punishment, Third-party Punishment, Experimental Design
    JEL: D73 C92
    Date: 2010–12–13
  22. By: Kubo, Koji; Nu Nu Lwin
    Abstract: This paper examines the effects of import duties on smuggling in Myanmar. Following Fisman and Wei (2004), the reporting discrepancies between Myanmar’s imports records and corresponding exports recorded by trading partners are regarded as indicative of smuggling. The paper studies whether reporting discrepancies differ across trading partners as well as across time. Our main findings are first, that the hike in import duties in June 2004 helped to widen the reporting discrepancies, which suggests smuggling for tax evasion purposes and second, that reporting discrepancies differ considerably across trading partners: land borders appear to be particularly attractive venues for smugglers.
    Keywords: Myanmar, Imports, Tariff, Smuggling, Myanmar (Burma), Tax evasion, Border trade
    JEL: F14 H26 K42 O17
    Date: 2010–10
  23. By: Kawanaka, Takeshi
    Abstract: The recent revolts of the middle class in the national capitals of the Philippines and Thailand have raised a new question about democratic consolidation. Why would the urban middle class, which is expected to stabilize democracy, expel the democratically elected leaders through extra-constitutional action? This article seeks to explain such middle class deviation from democratic institutions through an examination of urban primacy and the change in the winning coalition. The authoritarian regime previously in power tended to give considerable favor to the primate city to prevent it revolting against the ruler, because it could have become a menace to his power. But after democratization the new administration shifts policy orientation from an urban to rural bias because it needs to garner support from rural voters to win elections. Such a shift dissatisfies the middle class in the primate city. In this article I take up the Philippines as a case study to examine this theory.
    Keywords: Philippines, Middle classes, Internal politics, Urban societies, Democracy, Institutions, Urban primacy, Coalition, Middle class
    Date: 2010–11
  24. By: David E. Giles (Department of Economics, University of Victoria)
    Abstract: Extreme value theory (EVT) measures the behavior of extreme observations on a random variable. EVT in risk management, an approach to modeling and measuring risks under rare events, has taken on a prominent role in recent years. This paper contributes to the literature in two respects by analyzing an interesting international financial data set. First, we apply conditional EVT to examine the Value at Risk (VAR) and the Expected Shortfall (ES) for the Chinese and several representative international stock market indices: Hang Seng (Hong Kong), TSEC (Taiwan), Nikkei 225 (Japan), Kospi (Korea), BSE (India), STI (Singapore), S&P 500 (US), SPTSE (Canada), IPC (Mexico), CAC 40 (France), DAX 30 (Germany), FTSE100 (UK) index. We find that China has the highest VaR and ES for negative daily stock returns. Second, we examine the extreme dependence between these stock markets, and we find that the Chinese market is asymptotically independent of the other stock markets considered.
    Keywords: Extreme value analysis, peaks-over-threshold, value at risk, expected shortfall, asymptotic dependence, Chinese equity market
    JEL: C13 C16 G15
    Date: 2010–12–09

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