nep-sea New Economics Papers
on South East Asia
Issue of 2012‒03‒08
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Influence of age of child on differences in life satisfaction of males and females: A comparative study among East Asian countries By Yamamura, Eiji
  2. The Institutions-Growth Nexus: Stages of Development By Nawaz, Saima
  3. Lessons of the European Crisis for Regional Monetary and Financial Integration in East Asia By Ulrich Volz
  4. Asia’s Wicked Environmental Problems By Howes, Stephen; Wyrwoll, Paul
  5. Subsidy and export: Malaysian case By Abu Mansor, Shazali; Abdul Karim, Bakri
  6. An Assessment of Malaysian Monetary Policy during the Global Financial Crisis of 2008-09 By Selim Elekdag; Harun Alp; Subir Lall
  7. Explaining intention to use the Islamic credit card: an extension of the TRA model By Hanudin, Amin
  8. A growing pain: an experimental approach to discover the most acceptable strategy for lifting fuel subsidy scheme in Indonesia By Pradiptyo, Rimawan; Sahadewo, Gumilang Aryo
  9. Agriculture public spending and growth in Indonesia By Armas, Enrique Blanco; Osorio, Camilo Gomez; Moreno-Dodson, Blanca; Abriningrum, Dwi Endah
  10. Determinants of Banking System Fragility: A Regional Perspective By Degryse, H.A.; Elahi, M.A.; Penas, M.F.
  11. Should Aid Reward Performance? Evidence from a Field Experiment on Health and Education in Indonesia By Benjamin A. Olken; Junko Onishi; Susan Wong
  12. The effects of agricultural domestic and trade liberalization on food security: Lessons from Mexico By Antonio Yunez-Naude
  13. Assessing the Economic Impacts of Climate Change. An Updated CGE Point of View By Francesco Bosello; Fabio Eboli; Roberta Pierfederici

  1. By: Yamamura, Eiji
    Abstract: Using individual-level data for China, Korea, and Japan for 2006, this research examines how life satisfaction for married males and females in East Asian countries is influenced by the age of their children. Our results show that the life satisfaction of males is barely affected by a child of the relationship, whereas the life satisfaction of females with a young child is lower than that of females who do not have a child. This result holds for countries at different development stages. There is also a gender differential regarding the effect of young children on life satisfaction. Furthermore, the more developed the country, the greater this difference becomes.
    Keywords: Life satisfaction; child; East Asian countries; Ordered probit
    JEL: J13 J19 D19 J16
    Date: 2012–02–23
  2. By: Nawaz, Saima
    Abstract: The objective of this study is to analyze the impact of institutions on the economic growth and examine whether the ultimate impact differs at various stages of development among 24 Asian countries over the period 1996-2008 using a dynamic panel data analysis model based on the SYS-GMM estimation procedure. The overall analysis of this study shows that institutions indeed are important in determining the long-run economic growth. However, the impact of the institutions on economic growth varies across the regions and depends upon the existence level of development. This study concludes that the institutions are more effective in developed region as compared to developing region. More specially, control over corruption, rule of law and regulatory quality are highly effective in promoting long rum economic growth in East Asia than South Asia. Different countries require different set of institutions to promote long run economic growth.
    Keywords: Institutions; Economic Growth; Stages of Development
    JEL: E02 O43
    Date: 2011–12–01
  3. By: Ulrich Volz (Asian Development Bank Institute (ADBI))
    Abstract: The debt crisis in several member states of the euro area has raised doubts on the viability of European Economic and Monetary Union (EMU) and the future of the euro. While the launch of the euro in 1999 stirred a lot of interest in regional monetary integration and even monetary unification in various parts of the world, including East Asia, the current crisis has had the opposite effect, even raising expectations of a breakup of the euro area. Indeed, the crisis has highlighted the problems and tensions that will inevitably arise within a monetary union when imbalances build up and become unsustainable. This note discusses the causes of the current European crisis and the challenges that EMU countries face in solving it. Based on this analysis, it derives five lessons for regional financial and monetary cooperation and integration in East Asia.
    Keywords: European Crisis, regional cooperation, Monetary cooperation
    JEL: E42 F33 F36 G01
    Date: 2012–02
  4. By: Howes, Stephen (Asian Development Bank Institute); Wyrwoll, Paul (Asian Development Bank Institute)
    Abstract: The developing economies of Asia are confronted by serious environmental problems that threaten to undermine future growth, food security, and regional stability. This study considers four major environmental challenges that policymakers across developing Asia will need to address towards 2030: water management, air pollution, deforestation and land degradation, and climate change. We argue that these challenges, each unique in their own way, all exhibit the characteristics of “wicked problems”. As developed in the planning literature, and now applied much more broadly, wicked problems are dynamic, complex, encompass many issues and stakeholders, and evade straightforward, lasting solutions.
    Keywords: asia environmental problems; food security; water management; air pollution; deforestation; land degradation; climate change; wicked problems
    JEL: O10 O44 O53 Q28 Q53 Q56 Q58
    Date: 2012–03–01
  5. By: Abu Mansor, Shazali; Abdul Karim, Bakri
    Abstract: This paper examines the long-run relationship between subsidies and export for the case of Malaysia using annual data from 1976 to 2010 and cointegration test. The results show that the subsidies significantly influence export in the long-run. This support the argument by the non-neo-classical economists’ propagation that export promotion requires a pro-active government role in the economy. This study has shed some lights that subsidy may not be detrimental to an economy.
    Keywords: Subsidies; Export; Cointegration
    JEL: F40 H25 C22
    Date: 2011–12–06
  6. By: Selim Elekdag; Harun Alp; Subir Lall
    Abstract: Malaysia was hit hard by the global financial crisis of 2008-09. Anticipating the downturn that would follow the episode of extreme financial turbulence, Bank Negara Malaysia (BNM) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 150 basis points. Against this backdrop, this paper tries to quantify how much deeper the recession would have been without the BNM’s monetary policy response. Taking the most intense year of the crisis as our baseline (2008:Q4-2009:Q3), counterfactual simulations indicate that rather the actual outcome of a -2.9 percent contraction, growth would have been -3.4 percent if the BNM had not implemented countercyclical and discretionary interest rate cuts. Furthermore, had a fixed exchange rate regime been in place, simulations indicate that output would have contracted by -5.5 percent over the same four-quarter period. In other words, exchange rate flexibility and the interest rate cuts implemented by the BNM helped substantially soften the impact of the global financial crisis on the Malaysian economy. These counterfactual experiments are based on a structural model estimated using Malaysian data.
    Date: 2012–01–30
  7. By: Hanudin, Amin
    Abstract: Abstract Purpose – The Islamic credit card is a type of banking product offered by Islamic banks. Given the importance to the Islamic credit card to Islamic banks, the study is aimed at identifying the factors determining the Malaysian bank customers’ behavioral intention to use the Islamic credit card. Design/methodology/approach – Drawing upon the Theory of Reasoned Action (the TRA model), this study proposes a modified model to examine the acceptance factors of attitude, subjective norm and perceived financial cost within the Islamic credit card context. The study used multiple regression model in order to examine the impacts of these explanatory variables on the intention to use the Islamic credit card. The model is tested using survey data from 257 respondents. Findings – The results reveal that attitude, subjective norm and perceived financial cost significantly influence the Islamic credit card intention to use. Of these, attitude was first ranked factor explaining intention to use the Islamic credit card. Research limitations/implications – The research suffers from two limitations. The first limitation is related to the generalization of finding whilst the second limitation is related to the limited measures employed in the current work. Despite these limitations, this research is significantly contributed to the body of knowledge in the area of Islamic credit card, at least at exploratory level. Practical implications – Information gathered from the study will serve as a basis for more future works in the area of Islamic credit card. The theory developed in the current study’s model could also be generalized into other contexts of Islamic banking products and services. Practically, branch managers of Islamic banking institutions could of prime importance to extend the findings of the study for the better future planning of their Islamic credit card offerings. Originality/value – Importantly, the study extends the applicability of the TRA model into Islamic credit card context. Few studies have conducted over the years under this context in Malaysia.
    Keywords: Islamic credit card; personal finance; Islamic bank; Malaysia
    JEL: D11 C42
    Date: 2012–01–01
  8. By: Pradiptyo, Rimawan; Sahadewo, Gumilang Aryo
    Abstract: Fuel subsidy has been the biggest quandaries in Indonesian economy, as it has been creating a huge opportunity costs to the economy. The subsidy is implemented to a consumer good (i.e. fuels) as oppose to targeted recipients, creating distortion in the efficient resource allocation. It was estimated about 70% of the subsidy were received by 40% of top income households (World Bank, 2007). Although the budget plan for the subsidy in 2011 was Rp129.7 trillion or 10% of the GoI annual budget, the actual subsidy was Rp160.7 trillion (13.3% of the GoI annual budget). Indeed, no individual prefers to lose the subsidy that has been received for many years, however the Government of Indonesia (GoI) cannot maintain the subsidy policy on fuel price any longer without creating extra budgetary burden. This study use experimental approach to seek the most acceptable exit strategy of eliminating fuel subsidy scheme in Indonesia based on households’ perspective. 335 subjects participated in the experiment, ranging from those who do not own motor vehicle, those who have motor cycle(s) and those who have car(s). During the experiment, subjects were given several pair-wise choices and chose the most acceptable policy from each pair-wise policy choices. The results show that the combination of gradual elimination and earmarked reallocation scheme were the most desirable. Subject with very low and low-income background tend to be more receptive for sudden elimination of the subsidy in comparison to their counterpart from medium and high-income backgrounds.
    Keywords: Fuel subsidy; experimental economics; analytical hierarchy process (AHP); preference relation; reallocation of resources
    JEL: D03 D12 Q48 C91
    Date: 2012–03–03
  9. By: Armas, Enrique Blanco; Osorio, Camilo Gomez; Moreno-Dodson, Blanca; Abriningrum, Dwi Endah
    Abstract: This paper analyzes the trends and evolution of public spending in the agriculture sector in Indonesia, as well as the impact of public spending on agricultural growth. It finds that, in line with empirical work undertaken in other countries, public spending on agriculture and irrigation during the period 1976-2006 had a positive impact on agricultural growth, while public spending on fertilizer subsidies had the opposite effect. The composition of spending patterns in Indonesia over the past decade can partly explain why significant increases in public spending for agriculture have not resulted in a commensurate increase of agricultural production. The paper is structured as follows. Section I presents analytical and empirical findings about the impact of overall public spending on growth, with a particular focus on Indonesia, followed by an analysis of the government's role in agriculture. More precisely, it discusses how public spending can contribute to higher productivity and faster growth in the sector. The section draws lessons from the empirical literature and country examples worldwide, exploring the implications of some of these findings in the Indonesia context. Section II presents the results of an empirical analysis of the impact of agriculture public spending on agriculture gross domestic product per capita growth in Indonesia, using time series analysis with both ordinary least squares and generalized method of moments econometric techniques. Section III analyzes in detail agriculture public spending trends in Indonesia over the period 2000-08, highlighting that a large and increasing share of the spending is being allocated to subsidies (fertilizer, credit, seeds) and to fund transfers to farmers and farmers'groups.
    Keywords: Economic Theory&Research,Public Sector Economics,Agricultural Research,Rural Development Knowledge&Information Systems,Agribusiness
    Date: 2012–02–01
  10. By: Degryse, H.A.; Elahi, M.A.; Penas, M.F. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Banking systems are fragile not only within one country but also within and across regions. We study the role of regional banking system characteristics for regional banking system fragility. We find that regional banking system fragility reduces when banks in the region jointly hold more liquid assets, are better capitalized, and when regional banking systems are more competitive. For Asia and Latin-America, a greater presence of foreign banks also reduces regional banking fragility. We further investigate the possibility of contagion within and across regions. Within region banking contagion is important in all regions but it is substantially lower in the developed regions compared to emerging market regions. For cross-regional contagion, we find that the contagion effects of Europe and the US on Asia and Latin America are significantly higher compared to the effect of Asia and Latin America among themselves. Finally, the impact of cross-regional contagion is attenuated when the host region has a more liquid and more capitalized banking sector.
    Keywords: Banking system stability;cross-regional contagion;financial integration.
    JEL: G15 G20 G29
    Date: 2012
  11. By: Benjamin A. Olken; Junko Onishi; Susan Wong
    Abstract: This paper reports an experiment in over 3,000 Indonesian villages designed to test the role of performance incentives in improving the efficacy of aid programs. Villages in a randomly-chosen one-third of subdistricts received a block grant to improve 12 maternal and child health and education indicators, with the size of the subsequent year’s block grant depending on performance relative to other villages in the subdistrict. Villages in remaining subdistricts were randomly assigned to either an otherwise identical block grant program with no financial link to performance, or to a pure control group. We find that the incentivized villages performed better on health than the non-incentivized villages, particularly in less developed areas, but found no impact of incentives on education. We find no evidence of negative spillovers from the incentives to untargeted outcomes, and no evidence that villagers manipulated scores. The relative performance design was crucial in ensuring that incentives did not result in a net transfer of funds toward richer areas. Incentives led to what appear to be more efficient spending of block grants, and led to an increase in labor from health providers, who are partially paid fee-for-service, but not teachers. On net, between 50-75% of the total impact of the block grant program on health indicators can be attributed to the performance incentives.
    JEL: I15 I25 O38
    Date: 2012–03
  12. By: Antonio Yunez-Naude (El Colegio de Mexico)
    Abstract: The paper is dedicated to examine the implications of agricultural trade liberalization within the North American Free Trade Agreement (NAFTA) for food security in Mexico. Since NAFTA implementation has almost 20 years of existence, the Mexican experience is relevant to draw lessons for other emerging economies in South East Asia involved in regional free trade agreements. Taking into consideration agricultural heterogeneity in Mexico at both production and regional levels, the main objective of the paper is to evaluate empirically the effect of NAFTA and domestic reforms on Mexico´s agricultural prices, production, trade and food security with special attention to Mexico´s non-competitive crops under NAFTA: grains and oilseeds and maize (the major food staple of Mexico). The study shows that some of the official expectations about the effects of NAFTA have not been realized: e.g. domestic production of maize has increased. In order to explain unexpected trends, I propose that particular reactions of subsistence household farmers to market-price changes and subsidies to commercial farmers producing staples explain unforeseen trends. With respect to food security during NAFTA, I find that per capita food consumption in Mexico has increased, partially at the expense of “import dependency” and “self-sufficiency”. However, what causes concern is that income inequality and poverty prevails, meaning that food security has not been granted for all Mexicans. I conclude that food production and security can increase in Mexico by “reforming the reforms” in a market oriented and globalized context by a long run effective policy design that favors the provision of public goods and that integrates social policies with productive policies for rural households with a competitive potential.
    Keywords: agriculture, trade, food security, maize.
    JEL: Q18 F13
    Date: 2012–01
  13. By: Francesco Bosello (Fondazione Eni Enrico Mattei, University of Milan and Euro-Mediterranean Center for Climate Change); Fabio Eboli (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change); Roberta Pierfederici (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change)
    Abstract: The present research describes a climate change integrated impact assessment exercise, whose economic evaluation is based on a CGE approach and modeling effort. Input to the CGE model comes from a wide although still partial set of up-to-date bottom-up impact studies. Estimates indicate that a temperature increase of 1.92°C compared to pre-industrial levels in 2050 could lead to global GDP losses of approximately 0.5% compared to a hypothetical scenario where no climate change is assumed to occur. Northern Europe is expected to benefit from the evaluated temperature increase (+0.18%), while Southern and Eastern Europe are expected to suffer from the climate change scenario under analysis (-0.15% and -0.21% respectively). Most vulnerable countries are the less developed regions, such as South Asia, South-East Asia, North Africa and Sub-Saharan Africa. In these regions the most exposed sector is agriculture, and the impact on crop productivity is by far the most important source of damages. It is worth noting that the general equilibrium estimates tend to be lower, in absolute terms, than the bottom-up, partial equilibrium estimates. The difference is to be attributed to the effect of market-driven adaptation. This partly reduces the direct impacts of temperature increases, leading to lower damage estimates. Nonetheless these remain positive and substantive in some regions. Accordingly, market-driven adaptation cannot be the solution to the climate change problem.
    Keywords: Computable General Equilibrium Modeling, Impact Assessment, Climate Change
    JEL: C68 Q51 Q54
    Date: 2012–02

This nep-sea issue is ©2012 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.